Strategic Management and Competitive Analysis of Sainsbury's: A Report

Desklib provides past papers and solved assignments for students. This report analyzes Sainsbury's strategic position using Porter's Five Forces.

Strategic management Assessment
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Executive Summary
Strategic management plan is going to be extinguished in this specific study at certain extension.
The key aim of conducting this study is to evaluate the theoretical model of Porter’s generic
strategy into a theoretical approach. Additionally, this study will also encompass with comparing
the competition strategy of Porter’s into the real life practical example in order to determine the
viability and authenticity of the specific model of Porter’s to a far greater extension.
Additionally, the efficiency of different a specific organization like Sainsbury is also going to be
evaluated at certain extension. In order to do so, the performance evaluation of Sainsbury will be
conducted. After analyzing the performance evaluation, it will be very easy to identify different
issues that make negative impact into the working procedure of Sainsbury. Therefore, a recovery
plan and one risk management strategy will be conducted for getting over from those negative
issues without facing much negative effect.
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Table of Contents
Introduction......................................................................................................................................3
Main analysis...................................................................................................................................4
Conclusion.......................................................................................................................................5
Recommendation.............................................................................................................................6
Reference.........................................................................................................................................7
Bibliography....................................................................................................................................8
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Introduction
This specific study has been constructed in order to conduct a strategic management from the
perspective of a well-known industry and an organization. Sainsbury has been considered as the
selected organization as this entire study will be constructed based in Sainsbury at certain
extension. Sainsbury is one of the leading retailers of UK with almost 16.8% market share of
United Kingdom. In addition to that, they are the second largest retailer as their position belongs
just after Tesco. Porter’s five-force model has been evaluated in this entire study to reflect the
effectiveness and usability of Porter’s five-force model. Lastly, a recovery plan in addition with
risk management strategy will also be evaluated in this entire study.
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Main analysis
Porter’s five-force model or porter’s competition model has been used to evaluate the
effectiveness the strategies of different organizations. The current state of any market can be
accessed through the help of porter’s competition model or porter’s five-force model. As an
instance, for evaluating the present industry attractiveness and profitability of Sainsbury’s
market, porter’s competition model is very useful. Porter’s competition analysis or five-force
model has five different parameters, which are bargaining power of buyers, bargaining power of
suppliers, threat from new entrance into the market, threat from substitute products and current
competition rivalry into the market.
Porter’s five-force model helps to identify five different competitive forces, which can help to
shape out every market and industry at certain extension. The key objective of porter’s five-force
model is to modify those competitive forces in such a way that can help any organization
belonging from any market to improve their current position into their market sector (O'Hara et
al., 2017). The possible outcome of different market entry strategy can also be evaluated through
the help of porter’s competition analysis has been described below. A detailed analysis of the
porter’s competition analysis and the way it helps different organizations to get competitive
analysis has been described below:
Power of Suppliers
By applying this competitive force, any organization can evaluate the power of their suppliers at
certain extension. Porter’s five-force model describes that whenever a supplier of any business
sector have positive impact into that organization’s volume and margin, that supplier
encompasses substantial power into the business activities of that organization. Suppliers might
inherit some power if that organization does not have any substitute and if the number of
suppliers from the perspective of that organization is very low (Mathooko and Ogutu, 2015).
Additionally, the industry of suppliers usually has more profit in comparison with the industry of
buyers at certain extension.
On the other hand, the switching costs of suppliers are closely related with the switching cost of
suppliers. Additionally, suppliers can also inherit powers if there are certain demands of their
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deliverable products or services. Lastly, the concentration ration of the firm is closely related
with the concentration of the suppliers at certain extension.
Power of Buyers
Through the help of this specific force, how much pressure a consumer can provide towards a
specific business sector might be evaluated through accessing the power of buyers can be
determined without facing much risk. When a buyer or a group of buyers directly affects the
volumes and margins of an organization, they have substantial power towards the marketing
efforts of that organization (Zhao et al., 2016). However, from the perspective of any
organization, buyers can have power if that organization has a very small number of potential
consumers. Additionally, if an individual consumer or a group of consumers buy large amount of
products or services from an organization, that individual or group of consumers might have
subsequent level of power in context of that organization.
On the other hand, whenever a buyer has the potential to switch from using the products of a
specific organization to the products of another organization, the power of the buyers goes up
towards a substantial form (Takata, 2016). Additionally, if the buyer has the knowledge to
integrating backwards, they have substantial amount of power to inflict the strategic decisions of
any organization.
Threat in context of new entrants
It is not very hard for different types of new organizations to enter in an industry, which
automatically increase the cut-throat competition with respect to that specific industry. However,
different barriers of entering into the market can limit the number of new entrants into the
market. New entrants can face several threats while entering into the market if the majority of the
consumers belonging from that specific market are obsessed or loyal towards the major brands
belonging from that specific market sector. Government legislations or restrictions can also
represent some form of threat towards the new entrants of the market at certain extension.
However, when a new entrant of the market has adequate level of brand equity and distribution
access, they can represent substantial amount of threat towards the existing organizations of that
specific market sector.
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Threat from different substitute products
This force of Porter’s competition model is very important at determining the competitive rivalry
of an existing market sector. It is natural that consumer will switch from one product to another
product if they find that the price of similar quality products varies from each other. They will
inevitably choose the less priced products, which is a threat towards the organization whose
product cost more that its substitute products (Kharub and Sharma, 2017). Additionally, current
technological advancement in almost every sector can also be represented as a substitute since
buyers generally like to buy more technologically advanced product in comparison with old
products.
The key issue in this portion of porter’s five-force model can be represented as the core
similarities in between different substitute product. As an instance, if a buyer of coffee thinks the
price of coffee is higher than normal tea and if he thinks that he can manage himself with tea
instead of coffee, he will surely switch from tea to coffee without any hesitation.
Competition rivalry into the market
This is the last element of porter’s competition or five-force model and it help to distinguish the
competitive intensity of different organizations that operated from similar market sector.
Industries that have high competition in between their firms generally have low returns low
returns since the cost of competition in those industries are very high (Adi, 2015). Any market
can become highly competitive if the organizations of an industry have similar sizes and no one
particularly dominant the firm. Sometime it creates such situations when one company can only
grow by stealing consumers from their rivals. Organizations are needed to be dominant and
aggressive while making strategies if they want to earn revenue from a competitive market.
Comparing theory with practice
In order to compare the theory of Porter’s competition model with practice, some practical
examples are needed to be taken into consideration. In this specific section, it can be evaluated
that the competition model of Michel Porter’s does supports the experience of practitioners at
certain extension (Stindt et al., 2017). For conducting this, example of Sainsbury can be taken
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into consideration. A systematic evaluation process among the theory of Porter’s competition
model and its practical implication has been evaluated below:
Power of Suppliers
Sainsbury generally has a brief number of suppliers that provide them raw materials. It is
obvious that if Sainsbury have a limited number of suppliers, they have to depend on their
limited supplier base at greater extension. It can certainly increase the power of suppliers in
context of Sainsbury. However, since Sainsbury has many suppliers, it decreases the power of
their suppliers to a far greater extension (Sánchez, 2017). Thus, it can described that porter’s
competition model is successful at determining the power of suppliers without applying much
difficulty and complexity.
Power of Buyers
Some of the consumers belonging from Sainsbury’s market generally tend to buy a lot of
products altogether. Those consumers might have some power to determine the prices of those
products that belongs from Sainsbury. However, in practical field it has been observed from
different instances that buyers bargaining power cannot be determined by using simple methods
and means (Gould and Desjardins, 2015). This thing describes that Porter’s five-force model
fails at supporting the experience of different practitioners while determining the power of
buyers at certain extension.
Threat from new entrants
Since Sainsbury is a very old and worldwide famous organization, it is obvious that they have
great brand equity, which helps them to gain competitive advantage at certain extension. It is not
possible for any new firm to take the spot of Sainsbury within a short time period. Therefore,
Sainsbury does not have to put much attention towards the threat of new entrants. However, if
another famous company that have good brand image and brand equity enters into the same
market of Sainsbury, it can be a threat from the perspective of Sainsbury (Amara and Tiriveedhi,
2017). This specific incident describes the fact that Porter’s five-force model is successful at
determining the threat of new entrants.
Threat from different substitute products
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There are many products of Sainsbury, which have different substitutes in their current market.
As an instance, Sainsbury can sell a grocery item like frozen food and it is natural that other
small, medium and large retailers also have similar frozen food with different price tags. It is also
possible that the frozen food of Sainsbury costs much more than other frozen foods. It will
obviously decrease the overall sale of frozen food from the perspective of Sainsbury at greater
extension (Hassan and Parves, 2013). Therefore, it can be delivered that the generic strategy of
Porter’s is successful at determining the threats from new entrances at greater and bigger
extension.
Competition rivalry into the market
After analyzing some recent data, it has been come to know the fact that the retail market of
United Kingdom is full of competition. Since there are many organizations that operate their
business from the retail market industry of United Kingdom, the level of competition rivalry in
retail market is very high. Seeing as Sainsbury operate majority of their business from the retail
market of United Kingdom, they faces lots of competition while maintaining their business
activities at certain extension (Kumar et al., 2015). Therefore, Porter’s model of competition is
successful from the perspective of competition rivalry into the market.
Case study approach
Sainsbury is currently conducting their business without facing much difficulty and complexity
due to their systematic approach of solving different problems even before the problem has been
emerged. In current scenario, they have a profit of almost £51 million since they deliver their
products even before the deadline. Additionally, their overall grocery sales have been
exponentially increased by almost 1.2%, which is not bad. All of these things describe the fact
that the leader of Tesco is very successful at implementing different strategic planning into their
different functions since they have increased their sales at a far greater extension. In addition to
that, the leaders and managers belonging from Sainsbury have implemented online business
strategy into their entire business sector since the best way to conduct business in recent context
is by doing it in online manner.
It has been observed from analyzing the recent scenarios of Sainsbury that their productivity has
been increased by greater extension since they have increase the number of their offline stores to
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a greater number. However, a deep analysis describe the fact that Sainsbury has been warned by
a challenging market since their annual profits has been decreased by almost 8.2% by their
annual report (Gerpott and May, 2016). Additionally, their pre-tax profit has been decreased to
£503 million from £548 million, which is huge. Brexit has also makes negative impact into the
operations of Sainsbury at greater extension. The share of Sainsbury has also been decreased by
almost 5 percent.
Recovery Plan
It has been experienced by the management of Sainsbury that their overall profit margins has
been decreased by a huge percentage. Thus, the management of Sainsbury needs to enhance
further their strategic management plan so that in future they can avoid this kind of problem
without facing much problem. In addition to that, they need to move out their focus from the bad
integrations of Brexit so that they can put focus into enhancing the productivity and efficiency of
their entire organization as a whole (Bertozzi et al., 2017). Additionally, they need to modify
their cost related strategies so that they can avoid these types of problem regarding low revenue
earning.
Risk management plan
It has been advised for the management and leadership group of Sainsbury to put much more
focus into their customer relationship management strategy since it has been observed that they
are currently falling behind in this sector. In addition to that, it has been recommended towards
the management group of Sainsbury to put much focus into their continuously decreasing profit
margin otherwise they will face much more risk than they have ever been anticipated.
Additionally, it has also been observed that their entire employment base is not entirely happy by
the management of Sainsbury, which decreases the quality of their products. They need to put
more attention towards this specific risk else, they will be even face greater risks.
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Conclusion
From analyzing this entire study, it can be conclude that Porter’s five-force model is very
effective at determining different competitive advantages in between a market. All of the five
forces of porter’s competitive strategies are very useful at determining the different competitive
advantages of any market. In addition to that, it can also conclude from analyzing the entire
study that the current performance level of Sainsbury is going down to a far greater extension. In
addition to that, it can also conclude that Sainsbury need to move up their pricing strategies in
order to move up further their profit margins.
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Recommendation
It has been recommended for the management group of Sainsbury to motivate their employees so
that they can increase the productivity of their entire organization since without increasing
productivity it is not possible for that organization to cope up with their continuously decreasing
profit margin. Additionally, they need to modify their pricing strategies in order to be
competitive in recent marketplace.
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