Sainsbury's Strategic Management: External and Internal Analysis

This report provides a comprehensive strategic management analysis of Sainsbury's, a prominent UK-based retail company. It begins with an introduction outlining the report's objectives, which include assessing Sainsbury's internal and external environments and evaluating its current strategies. The report then delves into a conceptual framework, highlighting key issues such as low-fare strategies and service quality. A significant portion of the report is dedicated to analyzing Sainsbury's external environment using PEST analysis (Political, Economic, Social, Technological) and Porter's Five Forces model to evaluate the competitive landscape. The internal analysis utilizes resource analysis and value chain analysis to identify the company's strengths and weaknesses. The report concludes by proposing potential strategies and evaluating their effectiveness, offering recommendations for Sainsbury's strategic direction and competitive advantage.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION ..........................................................................................................................1
2.0 CONCEPTUAL FRAME WORK ............................................................................................1
3.0 Analysis of External Environment ............................................................................................1
4.0 Internal Analysis .......................................................................................................................5
5.0 Proposed strategy ....................................................................................................................10
6.0 Strategy evaluation ..................................................................................................................11
CONCLUSION .............................................................................................................................12
REFRENCES.................................................................................................................................13

INTRODUCTION
The management department of an organisation is responsible for all activities that are
helpful in achieving desired goals and objectives (David, 2011). Organisation chosen for this
particular assignment is Sainsbury is the most popular firm which deals in clothing and high
quality food products, technological equipments, house décor items etc. It is located in UK. This
report contents the study about different elements of strategic management. Fundamental issues
and problems are also be discussed. Various theories are compared on the basis of different
criteria related with strategic management.
1.1 Objective of the report:
The objectives and aims are predetermined, given report is based on the four important outcomes
related with strategic management.
 Measuring internal and external environment of Sainsbury.
 To analyse the effectiveness of internal environment.
 Evaluation of SWOT analysis.
 A brief discussion on current strategy of Sainsbury.
 Suggestion and recommendations on different strategies which is used by firm.
2.0 CONCEPTUAL FRAME WORK
2.1 Key issues:
The key problems highlighted in rendering low fare, and less services to its customers
and clients. Organisation use various strategies for getting high range of profit and success. The
selection of right strategy is important for implementing various strategies into action. A best
strategy helps in providing support to low cost business model. Sainsbury have been faced
various issues related with low quality services rather than other retailers (Hitt, Ireland and
Hoskisson, 2012).
3.0 Analysis of External Environment
This report will apply PEST analysis for analysing the external factor of Sainsbury, and for
industrial evaluation porter's five force mode will be used in an effective manner.
3.1 PEST Analysis
It is one of the best way to analysing all external factors related with political,
economical, social and technological factors. It is the most essential frame work for analysing the
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macro environmental factors. It is the major part of advance strategic management. These
elements may effect the sustainability and market position of Sainsbury and its business model
and low price strategy.
3.1.1 Political and legal issues:
political issues are mainly related with the government in which establishing various
labour policies and roles, setting up tax rate, regulation of environment, norms related with
industrial investment. This factor is also concern about the aspect of safety and security. Various
health and safety norms are adopted by the government of UK. Sainsbury have considering
various initiatives and advantages of fair and regular trade through removing unhygienic things
form the food products. This factor mainly affects the sustainability of competitive advantage
(Hill, Jones and Schilling, 2014).
3.1.2 Economical Factors:
This factor consist as the growth and success of firm and their future economic out looks.
This is very uncertain in nature and mostly affects the sales because mostly people are not having
huge amount in cash for invest on luxury goods and services. For the reason of low sales
Sainsbury have been closed their number of outlets and stores this may cause the unemployment.
3.1.3 Sociological factors:
Two major external factors that highly impacted on the generation shift and changing
values in populations. In this cultural aspects are included such as different demographic of
population and pattern of buying and many other elements. In this factor the differential need of
customers according to their fashion trend, health and safety aspects play an essential role. Taste
and preference of people are regularly changed with the arisen of new trend and Mark ans
Spencer has to regularly respond to the new need of buyers for providing satisfaction to them.
3.1.4 Technological factors:
This includes the new and innovative form of new and advance technology, automations,
development ans research. There are two major aspects and derives of technological change are
available : (1) E-commerce and M-commerce (2) Sustainability. It play a vital role in the retail
market for providing high range of products to their customers. For maintaining brand image of
company they focuses on quality aspects (Wheelen and Hunger, 2011).
3.1.5 Legal factors:
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In this various laws and legislations are involved related with safety, health and security
of consumers. For promoting safe and effective working environment Sainsbury take various
legal laws in to proper action.
3.1.6 Environmental factors:
It is most important element of modern scenario. It consist an external environment in
which an organisation perform their all operation activities. In the retail industry, it is the
responsibility of retailer to reduce the cost of raw material in order to earn more profit and
growth.
3.2 Industrial Analysis
Porter's five force model is most significant process for industrial analysis.
(Source: Porter's five force model 2017)
3.2.1 Level of competition:
Competition is very high in the retail sector. The issue is exacerbated through the facts
and norms that organisations are put their affords for diversify into non- core field with the help
of generating additional competition. Sainsbury is assailable in nature because it deals in various
sectors such as clothing, food, home items etc. Tesco, ASDA and Mark and Spencer
are the major competitors of cited company.
3.2.2 Threats of new entrants:
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Illustration 1: Porter's five force model

In the retailing sector there is a low threat of new entrance because it is very cost
consuming process. In this a huge amount of capital needed to enter into market, product
maturity, strong brand awareness and attracting customers towards brand or product. With the
strong loyalty of regular customers of Sainsbury potential entrance would be rejected by the
company. The cited company mainly focuses on their high quality aspects for the purpose of
long established and well developed supply chain network (Eden and Ackermann, 2013).
3.2.3 Threats of substitute products:
Innovation is required in each and every market, Sainsbury deals in highly innovative
market. The substitute is high in their clothing industry because in this field copying and
imitating is very easy. Sainsbury is focuses on adopting various innovative tools and techniques
for more effective production in respect to satisfying the needs and demand of customers. In the
food sector Tesco, Asda and Sainsbury are the major competitors of Sainsbury. These all
organisations are taking a step forward towards developing high range of food products with
more ingredients.
3.2.4 Bargaining power of buyers:
Customers are the king of market and in which industry Sainsbury deals the bargaining
power of customers are very high. There are various changes in customers market which are
related with increase and decrease in choices of customers changes in brands and fashions,
modification of products affects the business of Sainsbury. Product oriented strategies are not
effective when their competitors are using strategy customers oriented approach. The cited firm
is mainly focuses on establishing a good and familiar relationship with customers.
3.2.5 Bargaining power of suppliers:
Mostly suppliers of Sainsbury were British. The company had stored their stock in
advance from the UK suppliers. At those times when there was recession in the economy. The
supply was affected of all other business but this company was able to show there powers as they
had already stored their stocks in advance. thus they were having their powers as they were
selling the products at the prices which they feel were suitable.
4.0 Internal Analysis
Internal analysis helps in identifying the strength and weaknesses of Sainsbury in respect of its
capabilities, resources and competitiveness with the help of activities related with value chain
analysis.
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4.1 Resource Analysis
Resources analysis is an important tool of strategic management. It is considered as the
required resources that are provident support in selected strategy. These strategies helps in
attaining competitive advantage at the market place (Slack, 2015). It is an essential term for
identifying the actual strength and weaknesses of the resources that important for Sainsbury in
terms of applying no frill and low pricing strategies to attract large number of customers towards
their firm rather than their competitors.
(Source: Sainsbury 2017)
As per the above graph it has been evaluated that the growing condition of Sainsbury fluctuated.
Some time they found high rate of profit with the proper utilisation of resources. Organisation
having wide range of resources and these are important for increasing growth and success for
company because these are the major aspects who contribute in ever operation of firm.
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Illustration 2: Sainsbury PLC

4.2 Value Chain Analysis
(Source: Value chain analysis 2010)
Value chain
activity
How does Sainsbury create value for customers?
Primary: This is the first and most important step of value chain analysis. These
activities are helpful in decreasing cost in respect to enable the firm to charge
low rates for creating value.
Inbound
logistics
Now a days Sainsbury focused on their new plan of launching consolidation
programme for warehouses. For combining their four major food centres into
one site Sainsbury opened new and big warehouse in Bradford. It also build a
new warehouse in East Midlands which helps in rendering e-commerce
facility to their customers through national distribution centre. This term
having greater control on supply chain. Sainsbury keep all detail about the
input material and final products. Company considered various aspect to starts
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Illustration 3: Value chain analysis

the value chain with the proper selection of reliable suppliers and quality
productions.
Operation: Sainsbury has invested in various brands in their stores in respect of meeting
with new and changing needs and preference of customers. In this all activities
are related with the procedure of manufacturing and assembling of new goods
as per the demand of customer’s. Sainsbury adopt smart packaging technology
in to proper practice that are useful in fresh distribution of food products. It
strategy helps in creating high brand image among customers. For better
development of food industry M&S launched new stores in different location
for delivering fresh and high quality products to customer’s. They put more
affords in modernising in their outlets for improving the environment of stores
and create more comfortable environment for shopping.
Outbound
logistics:
The company has large range of channel operations, that helps in providing an
effective and flexible procedure of order or delivery option. Sainsbury focused
on rendering extraordinary and more convenience services to their customers
for providing online services. Sainsbury select multi user warehouse system to
communicate information related with products and services automatically.
Marketing and
sales:
This term is based on the quality and design of good. M&S conduct various
promotional activities to promote their brand at market place for attracting
large number of customers towards their brand. This helps in creating
competitiveness against their competitions. Company spend huge amount in
their promotional campaign process.
Service: M&s is focused on distributing high rang of quality services to their customers
with the help of their outlets, stores and online stores. The company invest a
big amount in increasing their stores for giving fast and convenient services to
potential buyers.
Secondary: These activities are helpful in increasing the primary activities through cutting
the cost and creating more values.
Procurement In this all activities related with purchasing are involved. This activity is not
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about the purchasing of building, more assets etc.
Firm
infrastructure:
In this how the all activities of firm are organised in a well planned manner.
M&S buying goods in bulk this will help them to saving large amount of
money.
Technological
development:
It is very much essential in today's technological environment. M&S use
various technology to decreasing the cost of production in terms of increasing
sales.
Human
resource
management:
This term is related with the activities that involved hiring, recruitment,
selection, developing and compensating. This is an essential term in every
business firm to manage their resource for effective and better production of
goods and services.
VRIO Analysis:
This analysis consist four major aspects valuable, rare, inimitable and organisation wide
supported. It is an important tool in strategic planning. It considered as an internal analysis which
helps an organisation to identify and evaluate valuable resources.
VRIO refers to four different criteria which are:
 V Stands for Value
 R stands for Rarity
 I stands for limitability O stands for Organisation
The valuable of resources:
Organisation are focused on using minimum resources that are available at work place. If
the resources are used in an effective manner than it will create beneficial opportunities for firm.
They can also identify or decrease the effect of a threat (Hodgkinson and Healey, 2011). It can
create value in respect of increasing market share, attaining cost advantage, charge less price etc.
if any resources is not creating value than it is not a source for competitive advantage.
The rarity of resources:
Valuable resources are rare in nature they are not available to all competitors. It can be a
significant source for creating competitive advantage. Rarity is essential because if competitors
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use same resource than there is not any effective advantage of the similar resource. They helps in
creating grant competitive advantage. The resources that are used by only one or two firms that
are known as rare sources. Sainsbury use rare resources to give high competitive advantage to
their competitors.
The imitability of resources:
The resources that are difficult to acquire are known as imitable resources. This also
helps in rending competitive advantage for firm. This resources are more advantageous in nature
and more expensive and available at very high rate for competitors. If resources are easily
available to the company than it will create less advantage.
The value of organisation:
This is final and important term of VRIO analysis. It helps in evaluating the rarity, value
and imitability of resources. The organisation needs to be that much capable to taking the
advantages and benefits of resources. A business can easily exploit their business at the situation
when resources are easily available and imitable (Ackermann and Eden, 2011).
Strength and weaknesses of value chain analysis
The value chain analysis is consists with a series of activities a product or service must pass
through until it serves its final purpose of solving a customer need. It is high-level model of how
business receive raw material as inputs, add value to the raw material through various process
and sell finished products to customers.
There are given below advantages of Value chain analysis of Mark & Spencer, are stated as
follow: -
The nature of value chain analysis is very flexible strategy tool that is look at business,
competitors as well as respective place in over the industry's value system.
The analysis is rely upon to diagnosis and also create commercial advantages on differentiation
and cost. In Mark & Spencer, it also helps to recognise the issues and problems which are
involved in with the promise of making customer value commitments and promises. Because
value chain analysis emphasise attention on the activities required in order to deliver the value
proposition.
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It also supportive in comparing business with rivals as well as their strength and weaknesses. The
value chain analysis can be adaptable for any business organisation i.e. retail, service or
manufacturing, big and small as well.
Disadvantages: -
It is heavily oriented to a manufacturing business that can be off-putting for other types of
business.
The scale and scope of the analysis can be discouraging. It can take a lot of work in order a full
value chain analysis for Mark & Spencer and for main competitions so as managers can identify
and recognise the key differences as well as strategy drivers.
Many people are not experts in the use the value chain analysis.
The analysis also has been pursue by supply chain and operation experts and thus its strategic
impact for understanding, creating and analysing competitive advantage has also been decreased.
5.0 Proposed strategy
TOWS MATRIX
The TWOS matrix are helpful in analysing its internal strengths and the external
opportunities. It is used to develop maxi maxi strategies and policies. They are the greatest
sources which are helpful in success and development of firms.
Example: There main strengths are that their brands are highly recognised by the individuals.
There treats are based on their weak points and it helps in the development of the strategies that
are helpful in minimising the risk and avoids the obstacles that are blocking there way. This can
be achieved with the help of developing strategic alliances which are useful in making the move
from the particular markets (Rothaermel, 2015).
In between the opportunities and threats the strategies which are formulated are helpful in
utilising all the opportunities which are open for business and avoid all threats that are acting as
roadblocks. The firm can have opportunities to outsource their products and services which can
be achieved by analysing the weakness in relation with specific skills which are used at business
organisation.
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