Business Analysis Report: Sainsbury's Strategic Direction and Analysis

This report provides a comprehensive strategic analysis of Sainsbury's, a major UK supermarket chain. It begins with an introduction to strategic direction and planning, emphasizing their importance for organizations. The report then delves into a PESTLE analysis, examining the political, economic, social, technological, legal, and environmental factors impacting Sainsbury's. It assesses the effects of Brexit, economic conditions, social trends, technological advancements, legal regulations, and environmental concerns on the company. Following this, a Porter's Five Forces analysis evaluates the competitive landscape, including the threats of new entrants, bargaining power of suppliers and buyers, threats from substitutes, and rivalry among existing players. The report also presents Sainsbury's mission and vision statements, core values, and the significance of internal analysis. It identifies Sainsbury's strategic competencies and capabilities, highlighting strengths like innovative strategies, diversified products, financial stability, and a skilled workforce, while also acknowledging weaknesses such as low profit margins and brand switching. The report concludes by discussing potential strategies for Sainsbury's to defend its core business in a competitive market, ensuring its long-term sustainability and success.

ASSIGNMENT
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
PESTLE Analysis of Sainsbury...................................................................................................3
Porter’s five force analysis of Sainsbury.....................................................................................5
TASK 2............................................................................................................................................6
Mission and vision statement of the company.............................................................................6
Strategic competencies and capabilities......................................................................................7
Rationale of how the company creates, delivers and captures value within industry.................8
Task 3...............................................................................................................................................9
Discuss the possible strategies that the company could follow to defend its core business........9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Strategic direction includes future actions and plans that are required to be taken by the
organization order to work for achievement of future vision of the organization. Strategic
planning is important for organizations as it helps them in provision of sense of direction and
outline measurable goals (Hermansyah, Sainsbury and Krass, 2017). It also helps organizations
in taking day to day decisions. This assignment will focus on Sainsbury which is second largest
supermarket chain of UK. It was founded in 1869 and its headquarter is in London, United
Kingdom. Sainsbury have more than 1400 shops and have more than 116,000 employees
working for them. This assignment will lay emphasis on analysis of external environment of
Sainsbury, mission and vision statement, strategic competencies and capabilities of the company,
and strategies that the company could follow to defend its core business.
TASK 1
PESTLE Analysis of Sainsbury
PESTLE analysis can be defined as macro environmental factors framework that can be
used by organizations like Sainsbury for analysis of all kinds of external factors that can impact
overall performance of an organization (Rodríguez, Paredes and Yi, 2016). It is one of the best
tools that can be used by organizations in order to analyse future strategic directions for the
company to move forward. Close analysis of external business environment analysis can help
Sainsbury to gain competitive advantage and bring required or necessary changes within their
organizational strategies. PESTLE analysis includes factors such as: political Economic,
Sociocultural, Technological, Legal, and Environmental factors that can affect an organization
like Sainsbury in many different ways both positively and negatively.
Political Factors: Political factors have a great influence on overall performance of an
organization like Sainsbury. One of the main and biggest political factors that affects
organization like Sainsbury in a negative manner is imminent Brexit. That means UK will no
longer remain part of EU because of which import rate will increase (Moore, McDonald and
Bartlett, 2017). This will result in increase in product rates due to which chances of loosing
customers will increase and customers will get attracted towards competitive products that will
be offered to them at lower prices. Current government and customers debts are also impacting
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customers attitude towards the organization because of which Sainsbury is experiencing great
pressure.
Economic Factors: Market in which Sainsbury operates, economic conditions of the market are
also important to be focused on. From past few years fuel cost is rising slowly but continuously
because of transportations of goods into or around the country has become difficult because their
profit marking on sales of their goods is quite low which is impacting their overall profitability
(Malgas, Khatle and Mason, 2017). This is one of the main factors because of which they are
bound to increase their product prices. This will further result in loosing lower income customers
as increasing prices of the products will push their lower income customers away. Change in
minimum wage that should be paid to workers and increasing expectations of employees for
higher salary expectations is also impacting Sainsbury and their overall profit margin.
Social factors: For retail sector organizations social factors are also important to be focused on
as it can affect their customer satisfaction, overall sales and profitability. Today most of the
customers prefer to shop at one stop i.e. they require all the products and all kinds of available
choices under one roof. Sainsbury has also introduced non food product items which has largely
helped them to attract a greater number of customers. There is another change in social trend i.e.
people today are becoming health conscious and prefer to avoid fast food or food that are
unhealthy for an individual (Evans, DePuy and Gupta, 2017). They prefer having healthy food
items such as salad etc. Focus on this social chance and adopting it as a long-term strategy can
help Sainsbury to gain competitive advantage and sustain within the market in which they
operate.
Technological Factors: Advancement in technology is increasing importance of technology
adaptation within an organization in order to gain competitive advantage. Today a greater
number of customers are focusing on online shopping and introduction of Sainsbury’s e-
commerce websites is helping them to attract a greater number of customers. These e-commerce
websites are also helping them to attract technology friendly customers. However in order to
attract more number of customers they can focus on improving their user experience. They can
also focus on implementing analytical tools and technologies which will further help them to
analyse their type of customers, their needs and requirement in a better manner which will
further help them to increase their overall sales (Warden, Han and Nzawou, 2018). Sainsbury can
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focus on organizing social media marketing campaigns as well which will further help them to
promote their products and services within their targeted customers.
Legal Factors: Legal factors are also important factors that can affect an organization in many
different ways. Introduction of new sugar tax has affected Sainsbury as it has forced the
organization to reduce sugar content within their products by at least 20 percent. Sainsbury also
need to focus on all kinds of regulatory requirements as denial of any kind of regulatory
requirements can affect their market share. Introduction of new tax on advertisement of fatty
products can also affect Sainsbury. They need to bring changes within their products and comply
with new legislative requirements.
Environmental Factors: nowadays environmental legislation and regulation are becoming strict
which is increasing pressure on the organizations to become socially and environmentally
responsible (Muir, Griffis and Whipple, 2019). Sainsbury has taken an initiative and have
introduced ‘reduce, recycle and reuse strategy’ as an approach towards waste management. This
is also helping them to reduce their carbon foot print. Today more and more number of
customers are becoming environment friendly and prefer organizations that environmentally
responsible. This strategy is also helping them to attract a greater number of customers.
Porter’s five force analysis of Sainsbury
Porters five force model is a strategic management tool which is used by organizations to
understand their current competitive market and is also used for analysis of current market
condition. This model helps in understanding five competitive forces that can influence overall
sustainability of organizations like Sainsbury.
Threat of New Entrants: Threat to new entrant for Sainsbury is quite low as barriers for
entering into retail market is are quite high and large amount of investment is required by new
entrant to enter and sustain within the competitive market (Warden, Han and Nzawou, 2018).
Sainsbury has high economies of scale which further helps them to lower their fixed cost per
unit.
Bargaining Power of Suppliers: It is also lower for Sainsbury as there are many suppliers
available for Sainsbury which givers power to the organizations to get products from suppliers at
lower price which further helps them to increase their overall profit margin. This is mainly
because suppliers provide a fairly standard priced and less differentiated products to their
customers.
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Bargaining Power of Buyers: this force has moderate effect on Sainsbury as buyers have few
numbers of organizations to choose from and they have no control over prices of the products.
Also, product differentiation within this industry is quite high and it is quite difficult for the
customers to product a particular product because of which customers are focused to buy the
product which is required by them from a particular organization.
Threat from Substitute Products: this force also has moderate effect on Sainsbury, this is
mainly because competition in this market is quite high and price differentiation within
competitors’ products is quite lower because of which effect of this factor is quite moderate on
the organization (Warden, Han and Nzawou, 2018). However, there are very a smaller number of
organizations available that produce high quality products to the customers at similar prices. This
reduces its effect on Sainsbury.
Rivalry among the existing players: Competition in this industry is quite higher because of
which effect of this force on Sainsbury increases. Sainsbury need to focus on bringing innovation
within their products and services in order to gain competitive advantage and sustain within the
market. Sainsbury need to work on their products or services in a better manner in order to
sustain their market share as competition in this industry is growing day by day.
Future Scenario
Sainsbury need to focus on differentiating their products and services so that growing
competition will have least effect on them and will also help them to maintain their customer
base. Sainsbury can also conduct a market research in order to understand supply and demand
situation within the industry and prevent over production.
TASK 2
Mission and vision statement of the company
Vision
The vision is to be the most trusted retailer where the propel love to work and shop by putting
the customers at the heart of everything’s and investing in our stores. In addition to that’s the
company want to have development of channels to offer the best possible experience.
Mission
The Sainsbury has the mission to be the consumer first level of performances in terms of food
along with delivering the products with outstanding quality along with greater services at the
levels of captive cost through the implication of faster, simpler and being together.
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Objectives
 To be the key brand attributes offering great quality, values, services along with choice.
 To have the level of improvements in the customer services along with quality of goods.
 To have the reduction in customer complaints by 10%.
 To increase the level of profitability of company by 15% in next six months.
 To the increase in level of profitability by 15% in next 6 months.
Core values
 To have the strengthening relationship with all stakeholders.
 To have building trust along with reducing cost with proper mitigation of risk and
operating cost.
 To have focus on the greatest level of difference to address the more level of global issue.
 To have the proper level of road mapping the opportunities and challenges which are
prevailing in competitive market.
Importance of internal analysis
Internals analysis helps in the incorporating the proper measures which is helpful in providing
effective level of information regarding company strengths, weakness, opportunities and threats.
This is helpful in develop strategic planning objectives to sustain and grow your business.
Strategic competencies and capabilities
For being in the competition and taking external opportunities, it is important for
Sainsbury’s to identify its own strengths and weaknesses (Gürel and Tat, 2017). By analysing
own strengths and weaknesses, it can accomplish its goals and being the market leader. With the
help of SWOT analysis model, it identifies all its capabilities and competencies such as:
Strengths
Innovative strategies: Most of its strategies related to promotion are highly innovative which
can help it out to fight against its competitors. Example of this company of promotion strategy is
brand match promotion in which it sells its each product by comparing it with competitors at
affordable price.
Diversified products: It is stated that Sainsbury’s has moved from its main range food and
beverages into several areas such as: clothing, energy, finance etc.
Financial stability: Financial stability is other main strength which makes it able to invest more
in technologies.
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Skilled workforce: It is analysed that Sainsbury’s have skilled workers which brings innovative
ideas to develop products and services.
Weaknesses
Low profit margin: Retail food sector of UK is growing rapidly. This expansion is increasing
competition which directly affects revenue and profit margins of Sainsbury’s. Now it is trying to
cut down cost which can decrease its profit.
Brand switching: Sainsbury is facing risk from brand switching. But it is also found out that for
this
High prices: It is argued by many analyses that Sainsbury’s prices are higher than companies
who are offering similar features of products and services. So, as per this it can be said that it is
its weakness (SWOT Analysis of Sainsbury’s, 2018).
Opportunities
Business expansion: It is stated that Sainsbury’s have several features and strengths which can
give it opportunity to expand its business in other countries. It has made an effective growth in
villages as well.
Advanced technology: Because of its financial stability, it invests more in advanced technology.
By this it can take advantages of competition.
Threats
Competition: Fierce competition in existing players like Tesco, ASDA, Aldi is one of the main
threat for Sainsbury’s.
So, from the above discussed, it can be said that it needs to focus on development of
products for taking competitive advantages and removing this threat (Tan and Carrillo, 2017).
Rationale of how the company creates, delivers and captures value within industry
One of the main aim of Sainsbury’s is to improves lives of people, respect for environment
and making positive differences to their community and making a great place for working. For
all these, it mainly focuses on sustainability, quality management and analysing customers’
behavior.
Customers’ analysis: It is stated that Sainsbury’s is very concerned for their customers and
believes that Customers are the one who can help them out in accomplishing their goals. They
have bargaining power. For this purpose, it focuses on identifying customers’ behaviour like
their needs related to food materials, prices which they prefer, quality etc. For this purpose, it
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makes an effective use of tools for maintaining quality of products. TQM and six sigma are main
tools which allow it to deliver value to its customers (Landoni and et.al., 2019).
It also provides post sale services to customers and takes feedbacks from them in order to
know effectiveness of products and services. It makes its customers feel valued which increases
loyalty.
Sustainability: It is one of the main strategies which make it able to create, deliver as well
as deliver value within market. People of the UK are becoming more conscious towards their
health. So, it provides them healthy food materials. It is also making use of all those tools and
resources which helps it out to reduce wastes and low carbon footprint.
Early mobile use in stores: It is a common thing to use mobiles in stores for increasing
customers’ experience. But it can be said that Sainsbury’s was the first to use this strategy in an
innovative way. This experimented mobile scan and go in its stores which allows it customers’ to
shop as well as scan items with their smart phone. It is increasing customers’ experiences and
save their time.
Crave worthy content marketing: It is its other main strategy which helps it out to create and
deliver value. As per this strategy, it uses attractive contents which acts as a communication
bridge between its customers and its employees. It also has effective marketing team which also
helps it out in developing this strategy. For giving a real multimedia touch to its content, they
have created a successful portfolio of social media channels (Yang and et.al., 2017).
So, from the above discussed strategies, it can be said that it has capabilities of taking
competitive advantages and deliver value within this industry.
Task 3
Discuss the possible strategies that the company could follow to defend its core business
In order to grow and expand in other markets it is necessary for Sainsbury to develop
effective strategies. This will enable them to achieve goals and objectives. They are able to
attract more customers and generate revenue. Without appropriate strategy it becomes difficult
for organisation to accomplish its mission and vision. Moreover, strategy provide a direction to
firm in which they want to move. Through that short and long term goals are attained which
leads to mission and vision. Apart from that, it requires a proper strategic direction along with
certain tactics. Similarly, Sainsbury can follow different types of strategies as well. They can
develop it with help of several models and concepts available which is defined as :
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Ansoff matrix
The matrix is a framework which enable in developing new strategies. In this there are
four basic type of strategy which can be followed by companies to expand in other markets.
They are mentioned as below :
Market development
Here, the main aim is to expand in new markets by offering existing products and
services to people. It is done by identifying needs of people or target market. This strategy is
followed to increase global presence and to earn more revenue and sales. The market expansion
is most common strategy followed by large organisations. Likewise Sainsbury can also follow it
to enter in new markets. It will help in their growth and development. For example- they can
focus on emerging and developing economies such as India where customer base is large less
competition in retail sector.
Market penetration
In this strategy organisation follows it when they want to increase presence in present
market with existing product. Here, main goal is to increase customer base and retain people. It
is useful in gaining competitive advantage by building a loyal customer base. The company
emphasis on rising sales and profits in their current market. Similarly, Sainsbury can focus on
UK market. In this they can attract people by advertising and promoting products and services. It
will enable them to gain competitive advantage.
Product development
It is a type of strategy adopted by business in which they expand with help of developing
new products in current market. Here, some new features or specifications are added into
products and offered to people. This enable in fulfilling their needs and attracting them.
However, people are usually attracted towards new products. In tis way, Sainsbury can also
develop new products and sustain in market for long term. They can compete with rivals in
effective way.
Diversification
The strategy allows business to enter in ne market with new product. In this purpose is to
expand and grow in other markets. This allows in attracting new customers and increasing sales
and revenue. For that, Sainsbury must identify the needs of people and target market in which
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they want to enter. It will result in their growth and expansion. It is risky as well because it can
lead to failure of expansion in new market.
Porter generic strategy
It is another strategy that can be followed by Sainsbury to gain competitive advantage. It
is divided into four types which is described as :
Cost leadership- The strategy allows firm to gain competitive advantage as lowest cost provider.
Here, they offer products at low cost as compared to rivals. Usually, it is applied by those
companies who goods varies a little bit. Likewise, Sainsbury can also follow this strategy.
Cost focus - It is similar to cost leadership strategy where business gain competitive advantage
by offering products at low cost. But the difference here is they firm only do it specific markets
where customer base in large. However, only one or two market segment is selected in this.
Differentiation focus – the strategy allows company to distinguish their products from
competitors in such a way that they are able to gain competitive advantage. They distinguish is
done on basis of certain criteria such as product quality, features, design, etc. However, firm
keep prices at premium level which shows product high quality. Through this, they are able to
attract people.
Differentiation leadership- It is a strategy same as above one but here the difference is that
company focus only on specific market segment. They distinguish is done on basis of certain
criteria such as product quality, features, design, etc. However, firm keep prices at premium level
which shows product high quality. Through this, they are able to attract people.
BCG matrix – It can be used to identify whether products or services offered are profitable or
not. Through that it is easy to develop strategy. In this there are four segment which are as
follows :
Cash cows- here, firm can become a market leader in the marketplace and generate more cash
than they consume. These are business units or products that have a high market share but low
growth prospects.
Stars- This strategy can be applied by business in order to gain market share. They can become
aa monopoly by generating huge cash from the market. Thus, they can survive in market for long
term by retaining success even when market growth rate is slow.
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Dogs – It shows the market where there is low growth rate and market share. Therefore,
company can identify those market and not invest in it. Through that, they can save cash and
focus on other market where growth rate is high.
Question mark – It is the market where there is high growth but low market share. So,
organisation can develop strategy for offering new products in such market which will allow in
attracting people and growing to large extent.
Thus, these above ae some strategies which can be adopted or followed by Sainsbury to
expand in other markets. Moreover, it depends on their requirement that what type of strategy is
suitable for them and how it will benefit. Besides that, there are many criteria as well which is
taken into consideration in developing strategies. Furthermore, strategy suitability and feasibility
has to be evaluated. It allows in selecting appropriate strategy. Therefore, these all strategies will
allow Sainsbury to increase sales in various markets. They will be able to attract more customers.
For instance – Sainsbury can follow combination of one or more than one strategy. In this they
can follow product development and differentiation focus strategy. With that they will be able to
develop new product and differentiate it on basis of quality. So, people can be easily attracted
through it. Also, they can place it at premium price and gain competitive advantage in UK.
CONCLUSION
From report it is concluded that business environment in retail sector is fluctuating. There
are many external and internal factors affecting it. Also, there is rise in competition among
companies in retail industry. The external factor are political like Brexit, social such as shift
towards healthy and hygiene food, technological factor like e commerce and environmental one
such as change in CSR policies. So, these all are affecting on Sainsbury operations and its
growth and development. However, by internal analysis Sainsbury strength is Diversified
products, Financial stability, weakness is low profit margin, opportunity is business expansion
and threat is rise in competition.
Besides that, it is evaluated there are various types of strategies which can be followed by
Sainsbury for expansion. For instance- Ansoff matrix, porter generic, BCG matrix, etc. In that as
well there are strategies like diversification, cost focus, dogs, stars, etc. these strategies will
allow them to gain competitive advantage and enter in markets. They will increase productivity
and sales.
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REFERENCES
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Online
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