Corporate Strategy Analysis: Sainsbury's Opportunities and Threats

This report provides a detailed analysis of Sainsbury's corporate strategy, focusing on its external and internal environments. The analysis begins with an examination of the business environment using PESTLE analysis, identifying political, economic, social, technological, legal, and environmental factors that impact Sainsbury's operations. The report then assesses the attractiveness of the industry using Porter's Five Forces model, evaluating the bargaining power of buyers and suppliers, the threat of new entrants and substitutes, and the rivalry among competitors. Furthermore, the report delves into Sainsbury's internal resources and key competencies, identifying its strengths and weaknesses. It employs the VRIO framework to evaluate the value, rareness, imitability, and organization of its resources to determine core competencies. The report also evaluates a recent strategy implemented by Sainsbury's using the SAFe criteria, providing a comprehensive overview of the company's strategic positioning and decision-making processes.

Applied Corporate Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
Main Body.......................................................................................................................................1
1.Carry out external analysis to identify a set of Opportunities and Threats and assess industry
attractiveness...............................................................................................................................1
2.Analyse the resources and key competences of the organisation and identify core
competences ...............................................................................................................................4
3. Choose one strategy that the company implemented recently and evaluate it using SAFe
criteria.........................................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Corporate Strategy encompasses the strategic plan of the organisation which defines
goals and objectives and ways of achieving them within strategic management. It is organisations
wide strategy that directs and controls all business activities (Bharadwaj and et.al ., 2013). It is
an effective way allocate company's resources, establish business expectations and improves
company's competitive position. Chosen organisation in the report is Sainsbury. It is the second
largest chain of supermarkets in United kingdom. It was founded by Johnes James Sainsbury
started with a shop and now became the largest retailer of groceries. The report will focus on
external analysis of the business environment and identifying set of opportunities and threats. It
also analyses the key competencies of the organisation and atlast choosing the most appropriate
strategy that the company recently adopted and evaluating it through Safe criteria.
Main Body
1.Carry out external analysis to identify a set of Opportunities and Threats and assess industry
attractiveness.
Business Environment consists of all internal and external factors such as employees,
customers, suppliers, owners, government, technology, social trends, market trends which affects
function of the company directly and indirectly.
Business Environment assist the company in identifying business opportunities and
threats and helps in proper planning thereby improving the overall growth, performance and
profitability of business. In order to determine the opportunities and threats for company.
PESTLE analysis is carried out for the company which operates in UK.
 Political factors- Sainsbury's company is based in UK and its performance is highly
influenced and benefited by the political factors in the country. Currently in UK there is
a high government debts and consumer debts. This has a great impact upon customer
attitudes and therefore business conditions suffers great pressure. This would be a threat
to the company to compete against such forces and produce quality and economic value
products. On the other hand with the reduction in corporation tax by government allows
Sainsbury's to save huge amount of money because of lower rate of corporation tax
(Blackburn, Hart and Wainwright, 2013).
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 Economic factors- This factor includes intrest rate, inflation rate, level of employment
which affects demand, cost and profitability for company. Because of economic
slowdown and growing unemployment and inflation in food prices will be an
opportunity and threat to the company. As a result of high unemployment, it would be
easier for the company to find employees at a lower cost, this will allow company to
reduce the price of products and targets more customers. But with economic slowdown ,
consumers spending power will be less and would concentrate on low priced products,
this will reduce profit margins for the company but with lower labour cost company can
lower the price of products and increase its profit margins.
 Social factors- With the increasing focus of government for the companies to produce
healthier products, Sainsbury's should concentrate on providing products which are
socially accepted in current market. This would be an opportunity for company. But
with increase in changing demand company needs to conduct high research and requires
more finance in order to provide product according customers demand. This proves as an
threat for the company to survive in such complex environment (Chang, 2016).
 Technological factors- With the rise in technology. Company has to use upgraded
technology in order to simplify the tasks. In order to keep up Sainsbury all over the
country are using upgraded technology such as computerised stock controlling, self
check outs and many more. Online shopping facility is a great technological opportunity
for company to maximise profit but at the same time it posses a threat of investing huge
finance in such technologies and have to remain updated in constantly meeting customer
needs.
 Legal factors – Laws and regulations are greatly affecting the performance of
companies in UK. There is new law imposed by the government such as imposing tax
advertisement of high fat products which will restrict marketing and promotional efforts.
This has been a great threat for the company in order to reduce marketing and
promotional efforts for such fatty products. Sainsbury has adopted to this tax by
modifying its products and compiled with legislative requirements. This enabled them to
reduce fat calories for its products as well as targets more health conscious people
(Goffee and Scase, 2015.).
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 Environmental factors- With the increase in concern of protecting environment, there
is great preassure on companies to behave in socially responsible manner. There is a
threat for the company if doesn't produce goods by minimising the wastage and reducing
carbon prints. This will not allow them to maximise profits and attract larger customer
base. Sainsbury has taken initiative to covert the issue into opportunity by adopting
Reduce, Reuse, Recycle approach to manage waste, packaging and recycling. This will
allow them to reduce their operation carbon foot prints and attains maximum
productivity.
Industry Analysis
Porter's five force model:
Porter's five force model is recognised as one of the essential tool to evaluate or analyse the
external environment which affects the profitability of company. It helps company to understand
the forces which hinder their growth and in achievement of goal in an effective and efficient
way. In order to evaluate the Sainsbury's profitability, manager implies Porter five force model
to know about the competitive force which is affecting their growth.
 Bargaining power of buyer: It states the ability of customer to drive the product's price
down. It influence company by how many customer's are visiting , buying behaviour of
customer, cost of customer in moving from one brand to other etc. In context to
Sainsbury's its bargaining power of buyer is high because it has other strong competitors
in market who provide same product with less price (Jeston, 2014).
 Bargaining power of supplier: It explains the capability of supplier to drive the price
up. In case of threat, if there are more suppliers are available in market then company
will switch to another supplier. There is a low bargaining power of suppliers due to
existence of many suppliers in supermarkets. In relation to Sainsbury's their bargaining
power of supplier is low due to availability of suppliers which can easily be replaced
with other suppliers.
 Threat of new entrants: The probability of new entrants is depend upon the existing
entry barriers and also the reaction of current competitors to new entrants. In case of
Sainsbury's its threat of new entrants is low due to existence of strong players in the
market. As because of the major super market retailers in the segments, threat of new
entrants is comparatively low.
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 Threat of substitutes: This force is totally depend upon the prices of products. If a
product's price increases, consumer moves to alternative product and vice versa. In
relation to Sainsbury's threat of substitutes are high due to price variation and availability
of alternate products in market. Sainsbury faces huge competition from Tesco, decrease
in the price of products may lead company looses its potential customers (Laudon and
Traver, 2016).
 Rivalry among competitors: It describes the number of competitors and their
potentiality available in market. If a competitors are having similar products with low
price then there will be high rivalry. In context to sainsbury's its opposition among
market is high.
2.Analyse the resources and key competences of the organisation and identify core competences
With the analysis of external environment, company needs to analyse its internal
strengths and weakness as way to determine its key core competencies. Understanding resources,
capabilities and competencies are the key elements of business strategies. Company should select
corporate strategy which employs valuable resources and achieves competitive advantages.
Organisation resources and competencies are both valuable as its assist the company in
achieving the competitive advantage. heir are variety of resources such as physical resource,
human and technological resources which allows the respective company to perform its
operations effectively. In order to analyse resources and key competences of the organisation,
strengths and weakness of the respective company are determined (Lawton, 2017).
 Right expansion moves- It is the unique capability of the company to expand its limited
range of products, the brand expanded to the convenience stores and later became super
markets. This is the major strength of the company to expand its product range.
 Innovative Promotion strategies- Respective company uses various innovative
strategies in order to promote its products and increase awareness. This is capability of
the organisation to increase awareness of its products and motivates customers to
purchase it. It adopts various promotion tools according to the category of products, this
uniqueness allow company to target larger customer base and attains maximum
profitability.
 Brand Switching- Sainsbury faces a lot of competition from Tesco and many more
retail companies. There is a risk associated with brand switching. In order to resolve such
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issue company is trying to minimise the cost of its products in order to attract more
customers towards its product. This problem shouldn't be resolved by lowering the cost
of its products instead company should provide products according to customer needs
which will minimise the customers for brand switching.
 Lower Margins- With the growing competition in retail sector, there is an added risk of
online retailers. This has lead to lower the margins of profits. With the increase in online
retailers, customers are preferring to buy from online sites at a reasonable price with
many discounts and offers. This has led sainsbury's to decrease its profit margins and
loses its potential customers (McGrath, 2013).
 Targets larger customer base- Though Sainsbury's caters need of different target
customers. It follows a low cost strategy across all its products categories in order to
attract and retain customers from all income segments. This uniqueness of the respective
company assist in achieving competitive advantage. This model states that organisations
resources must be valuable, rare, imperfectly imitable and non substitutable.
Use of VRIO model to identify core competencies of the organisation
VRIO is an technique for evaluating the company's resources which assist in achieving
competitive advantage. It is a four word acronym which are Value, Rareness, Imitability and
Organisation. It is the tool which analyses firms internal resources and capabilities to analyse
whether it assist the company in achieving competitive advantage.
 Valuable- This states that whether the resources adds value to the company in order to
exploit opportunities and defend threats. Resources within the sainsbury's are physical,
human and technological which bare highly valuable and assist company to innovate its
products according to current trend in market. This specifies that resources are valuable
within the organisation and helps company in achieving competitive advantage and
allows organisation to increase customer value.
 Rare- Resources which are acquired by the Sainsbury's are limited and cant be acquired
by many other companies are considered rare (Rugman and Verbeke, 2017). In context
to the respective company resources within the organisation are not rare but they uses
them in such a way that assist in achieving competitive advantage. As workforce within
the company are not skilled but by providing adequate training, it allows them to meet
customer needs and wants and attains maximum profitability.
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 Imitate- It defines whether the resources available with the organisation are difficult to
imitate by other companies or whether there is a cost disadvantage to a firm trying to
obtain or duplicate resource. Resources available with the Sainsbury such as tools and
technology if copied by another company, will not create value for the organisation. As
Sainsbury practice of online providing goods at a lower rate and the specialised stock
auditing technology if copied by other organisation will deliver maximum value for the
competitors (SchalteggerLüdeke, Freund andHansen2012).
 Organised to capture value- It states that respective company's resources doesn't offer
any advantage to the company if they are not properly organised to capture value from
them. Sainsbury should organise its management systems, company's structure, process
and policies in order to fully realise the potential of its valuable, rare and costly to imitate
resource capabilities.
With the help of VRIO model core competences of the respective organisations are found which
allows them to achieve competitive advantages.
3. Choose one strategy that the company implemented recently and evaluate it using SAFe
criteria
In this complex business dynamic environment it is essential for the company to adopt
effective corporate strategy in order to sustain long term in the market and achieves maximum
profitability and productivity. Company has recently adopted acquistion strategy in which
Sainsbury has acquired Argos which will assist in increasing sales growth thereby increasing
profits and productivity of the company. As because of changing customer expectations, choices,
fast delivery Sainsbury's adopted this strategy. This acquisition strategy greatly assist the
company in achieving higher profits and attracting more customers towards its products.
Respective company believes that with its acquisition of Argos it will boost its sites to 2,000
including concession and click and collect point. This strategic acquistion is a important means
of growth for the company in terms of increasing market share and sales. It offers other
advantages such as easier financing and immediate savings due to high economies of scale.
As the company recently adopted acquistion strategy in order to boot its sales, as away
to check the adopted strategy, it is evaluated using SAFe criteria. It is vary difficult for the
company to actually select and implement the appropriate strategy. So in order to select and
evaluate the chosen strategy it is evaluated with SAFe criteria. It is the useful approach to
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consider the suitability, Accessibility and Feasibility of the strategy. This model greatly helps in
the selection of the appropriate strategy. It is divided into three criteria which are discussed
below-
 Suitability- It is the most important factor in the SAF strategy model. Suitability is
accessed by number of different criteria such as capability of the strategy whether it is
meeting company's strengths effectively. Suitability is also accessed by whether the
strategy helps in overcoming the difficulties of the organisation and allows in achieving
maximum profits (Scholes, 2015). As the respective company has adopted acquistion
strategy , company has acquired with Argos in order to boost its sales and increase its
profitability. With its acquiring of Argos it has started online facility of providing goods
which assist the company to target more customers and to remain competitive in such
complex dynamic business environment.
 Acceptability- Acceptability aspect of SAF strategy model is all about measuring return,
risk and stakeholders reactions from the particular adopted strategy. Returns are
measured based on the benefits that the company stakeholders expect it from the adopted
strategy. Returns can also be measured by a way of cost- benefit analysis, profitability
analysis and shareholder value analysis. Adopted strategy by the company may also lead
them to losses which could be measured by liquidity analysis, stakeholders reactions.
This allows the company to analyse whether the strategy adopted is acceptable to the
stakeholders or not (Shuen, 2018). Company's chosen strategy is acquisition strategy in
which acquistion of Argos it has been analysed that supermarket is expected to report
increase at a 7% in profits as well as 2% increase in its sales. This shows that much of the
profits are generated after the acquistion and in-fact sales of the company has also
increased, targeting more customer base. From this analysis it can be determined that
adopted strategy is greatly acceptable to the customers as well as to the stakeholders.
 Feasibility- This is the last portion of the SAF strategy model which focuses on whether
the chosen strategy is feasible or not. Feasibility is actually measured by the organisations
resources has the aptitudes or the abilities to implement the strategy. Resources available
within the organisation such as physical, human and technological resources should be
appropriate enough to implement the strategy effectively and take the benefits out of it.
Along with this, feasibility of the strategy relates to how much man power, equipment
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and management power the respective company has implement and work according to
the new tactics. With the acquistion strategy adopted by the Sainsbury's is considered
feasible as company has enough resources to implement the strategy properly as well as
skilled manpower allows company to adopt acquistion strategy and work with great
dedication to attain goals and objectives of business (Spender, 2014).
Thus, with the help of SAFe criteria it has been analysed that Sainsbury's adopted strategy is
greatly accessible and feasible and benefiting the company in terms of profitability and
productivity.
CONCLUSION
From the above report it can be concluded that choosing the most effective strategy plays
a crucial role in success of business performance. Company should conduct business
environment analysis in order to determines the political, economic and social condition of the
country. In order to determine company's key competencies internal analysis should be
conducted in order to determine its strengths and weaknesses. Moreover with the help of VRIO
model it assist in determining whether key processes are able to achieve competitive advantage
or not. At last choosing effective strategy is measured by SAFe criteria to determine its
relevancy.
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REFERENCES
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Verbeke, A., 2013. International business strategy. Cambridge University Press.
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