Analyzing Sainsbury's Potential: Foreign Market Analysis in the UAE

This report provides a comprehensive foreign market analysis for Sainsbury's potential expansion into the United Arab Emirates (UAE). It begins with an introduction to the supermarket industry and the rationale for Sainsbury's considering the UAE market, highlighting the country's high per capita income and growth potential. The report then delves into the UAE's market environment, examining political, economic, social, technological, legal, and environmental factors. It uses Porter's Five Forces to analyze the competitive landscape, identifying key risks such as Brexit, economic downturns, high competition, and cultural differences. The report outlines Sainsbury's corporate strategy, including pricing, promotions, and positioning, and suggests ways to improve long-term profitability, such as focusing on developing markets for suppliers, using digital mediums, targeting emerging cities, and building strong relationships with local suppliers. The report concludes that the UAE presents a promising opportunity for Sainsbury's expansion, while acknowledging the associated risks and the importance of adapting its strategies to the local market.

Foreign Market Analysis

1
Contents
Introduction................................................................................................................................1
Background of the company......................................................................................................1
Market environment in UAE......................................................................................................1
Major source of risk facing the firm..........................................................................................2
Corporate strategy......................................................................................................................3
Some of the ways to improve long term profitability................................................................3
Conclusion..................................................................................................................................3
REFERENCES...........................................................................................................................4

2
Introduction
Supermarkets have expanded at much faster rate in different parts of the world. Companies
are finding new markets so as to improve their position in the market. With the emergence of
online mediums, there scope of generating higher revenues have also diminished hence
companies need to generate new revenue sources.1 UAE is one of economies with higher per
capita income, hence it can act as one of the best markets for companies like Sainsbury to do
their expansion in this country. This report will illustrate the environment of UAE to
understand the potential for the firm. It also suggests about all the major sources of risks that
are confronting this expansion. It also provides the overall corporate strategy for promotions,
positioning and pricing.
Background of the company
Sainsbury’s is the third largest chain of Supermarkets in UK having 16.9% share of share in
the sector. It was founded back in the year 1869 and once in 1922, it was the largest retailer
of groceries. Right now it is having 1,415 shops at different locations and has earned revenue
of £28.456 billion in the financial year of 2018.2 It is having employee strength of 186,900.
This company has a great potential to extend its business outside United Kingdom but right
now they have their business in United Kingdom only.
Market environment in UAE
UAE has a great potential of expansion for Sainsbury. This can be understood by analysing
the external factors of UAE.
Political: The political environment of UAE is highly stable. Government policies are
favouring the investments like super markets. Since UAE is moving towards economy that is
not only supported by its Oil and Gas industry, hence such type of business is supported by
the government.3 There are many big companies from all across the globe which is aiming to
1 Daria Battini, Nils Boysen and Simon Emde, ‘Just-in-Time supermarkets for part supply in the automobile
industry’ (2013) 24 (2) Journal of Management Control 209-217.
2 Sainsburys, Our vision (2019) <https://www.about.sainsburys.co.uk/about-us/our-vision>.
3 Yahya Al-Ansaari, Hakim Bederr and Chuanhai Chen, ‘Strategic orientation and business performance: An
empirical study in the UAE context’ (2015) 53 (10) Management Decision 2287-2302.

3
enter into the country hence entering earlier will provide more chance to Sainsbury to make
its strong hold in the market.
Economic: UAE is a financially strong country hence it gives a good environment for the
companies to grow. The taxation on the retail chains is not very high. This is exceptionally
high GDP per capita which is increasing the purchasing power of people. In the recent years
this nation has received the highest amount of FDI in the region.
Social: People of UAE live a very standard life style. They have been attached to their culture
strongly but in the last few years the effect of globalisation can be seen on the society of UAE
as well. This is changing the behaviour of the people for making the purchase. People are
looking for making a purchase at one place hence Sainsbury has huge opportunity in the
market.
Technology: UAE’s technology is being developing and people are getting connected with
the advanced technologies. This is an opportunity for Sainsbury to expand the business in
UAE with the help of technology especially using digital marketing technologies. In future
the condition is going to change further hence ways of doing technological business will also
become easier in the country.
Legal: There is very less legal complexity in the country when it comes to expanding their
business in the nation. The consumer laws have become strong which Sainsbury has to look
into while expanding their business in UAE.4
Environment: Since this country faces hot and humid environment hence the government has
become strict over environmental concerns. The productivity might be on the lower side due
to these climate concerns. Sainsbury will have to look towards their waste management
challenges so as to avoid any environment related compliances.
In order to understand the internal environment porter five force analyses can be beneficial.
Bargaining power of Suppliers: Since there are large numbers of supplier available in the
market hence bargaining power of suppliers is on the lower side. This company maintains a
healthy relation with customers.
4 MH Shayah, ‘Economic diversification by boosting non-oil exports (case of UAE)’ (2015) 3 (7) Journal of
Economics, Business and Management 735-738.

4
Bargaining power of customers: There are large numbers of options available with the
customers; this is increasing the bargaining power of suppliers. With the increase in the
online retail market, this is further moving towards higher side.
Threat of Competition: This is a major threat to the business as the numbers of companies on
both online and offline mediums are increasing at much faster rate. This threat is going to be
on the higher side in the future.
Threat of substitution: With the increase in the online retail platforms and increasing reach of
technology to the hands of people. The threat of substitution is on the higher side.
Threat of new entrants: With the help of technology it has become easier for the new entrants
to enter into the UAE supermarket sector hence this threat is on the higher side.5
Major source of risk facing the firm
There are several types of risks that are associated with business of Sainsbury when it aims to
expand its business in the market. Sources of risk include:
Brexit: The decisions such as Brexit which is not clear whether it will get implemented or not
has created a sense of risk in the minds of investors in the local market. The risk of business
slowdown and increasing complexity in the business process are some of the risks that are
confronting the business of the company.6
Downfall of European economy: There is continuous decrease in the health of the European
economy which is not a good sign for the growth of the company. In such an environment, it
is essential that Sainsbury finds new source of income.
High competition: It is seen that there is very high risk in the business due to the extensive
amount of competition in the industry. High risk is also evaluated in terms of the fact that UK
market has become cut throat at the same time UAE market is projected to become highly
competitive.7 Companies like Tesco, ASDA etc. have the power to change the trends in the
society for which this company will have to be ready with.
5 Vishal K Gupta et al., ‘Institutional environment for entrepreneurship: evidence from the developmental
states of South Korea and United Arab Emirates’ (2012) 17 (03) Journal of Development Entrepreneurship 125.
6 Richard CK Burdekin, Eric Hughson and Jinlin Gu, ‘A first look at Brexit and global equity markets’ (2018) 25
(2) Applied Economics Letters 136-140.
7 CM Siddique, ‘Impediments to market orientation: An exploratory study of retail SMEs in the United Arab
Emirates’ (2014) 7 (1) Education, Business and Society: Contemporary Middle Eastern Issues 33-56.

5
Cultural differences: It is also seen that there is cultural difference between UK and UAE. If
the company fails to adjust in the cultural variations there is a chance that company will face
risk in expanding their business. Since the people of UAE are highly attached with their
culture hence Sainsbury will have to ensure that they take account of this.8
Corporate strategy
Pricing strategy: This Company believes in giving maximum value for the money to the
customers and hence focuses on enhancing the quality of the products and hence their pricing
is slight on the premium side. They have adopted price discrimination strategy and hence the
products in the kids range are available at lower prices. They have followed the competitive
pricing policy rather than price cutting policy.9
Promotions: Company uses personality marketing for increasing the brand image. They take
use of televisions and radio for promoting the products. At the same time they sales
promotions, packaging and database marketing for enhancing their attractiveness. Nectar
reward card will help the firm in enhancing the brand loyalty as people earn rewards on each
purchase.
Positioning: Company has positioned itself in the premium quality and premium pricing
range. Due to this they target the upper section of the society in which they have been
successful. This is one of the major reasons why expanding in the high GDP per capita
income countries like UAE can be a beneficial destination for the firm.10
Some of the ways to improve long term profitability
In order to improve the long term profitability in the business in the long term following this
needs to be done:
Company needs to focus on the developing markets for supplier’s base. This is because there
are large numbers of low cost suppliers in this region which will enhance company’s profit
margins.11
8 Yasir Yasin Fadol and Maqsood Ahmad Sandhu, ‘The role of trust on the performance of strategic alliances in
a cross-cultural context: A study of the UAE’ (2013) 20 (1) Benchmarking: An International Journal 106-128.
9 Bikramjit Rishi and Harvinder Singh, ‘Determinants of supermarket shopping behaviour in an emerging
market’ (2012) 7 (1) Journal of Business and Retail Management Research 27-38.
10 Omar Baakeel and Abdulaziz Alrashidi, ‘The impact of interest rate on profit among the United Arab Emirates
UAE small and medium companies’ (2012) 4 (5) European Journal of Business and Management 1-6.
11 N Sawan and I Alsaqqa, ‘The advantages and the challenges of adopting IFRS into UAE stock market’ (2013) 8
(19) International Journal of Business and Management 1-23.

6
Company needs to look for the digital mediums also that ensure the delivery of products to
the homes from the super markets.
The pricing must be marginal in some of the sections that are of basic use. It will promote
people to come and buy from the supermarket.12
Sainsbury need to look for the emerging cities in the UAE as there is lesser amount of
competition in this region. This is crucial for ensuring long term profitability of the company.
Making string bonds with local suppliers is essential so that they can maintain their quality of
product and also helps the company in fulfilling their instant requirements.
Conclusion
From the above based report, it can be concluded that Sainsbury has a good business in UK
but they need to add new source of income. For this UAE can be an excellent country. This is
because UAE has good environmental condition and supports new investments. Risk such as
competition and downfall in European economy is a major source of risk for Sainsbury.
Pricing strategy of the firm is on the premium side but they also sells kids related products at
lower cost. They have positioned themselves as the company that sells products of high
quality and provides full value for money. It is essential that company makes stronger bonds
with the local suppliers and add suppliers from developing nations.
12 Michael C Ewers and Ryan Dicce, ‘Expatriate labour markets in rapidly globalising cities: reproducing the
migrant division of labour in Abu Dhabi and Dubai.’ (2016) 42 (15) Journal of Ethnic and Migration Studies
2448-2467.

7
Bibliography
Journals
Al-Ansaari Y, Bederr H and Chen C, ‘Strategic orientation and business performance: An
empirical study in the UAE context’ (2015) 53 (10) MD 2287-2302
Baakeel O and Alrashidi A, ‘The impact of interest rate on profit among the United Arab
Emirates UAE small and medium companies’ (2012) 4 (5) EJBM 1-6
Battini D, Boysen N and Emde S, ‘Just-in-Time supermarkets for part supply in the
automobile industry’ (2013) 24 (2) JMC 209-217
Burdekin RCK, Hughson E and Gu J, ‘A first look at Brexit and global equity markets’
(2018) 25 (2) AEL 136-140
Ewers MC and Dicce R, ‘Expatriate labour markets in rapidly globalising cities: reproducing
the migrant division of labour in Abu Dhabi and Dubai.’ (2016) 42 (15) JEMS 2448-2467
Fadol YY and Sandhu MA, ‘The role of trust on the performance of strategic alliances in a
cross-cultural context: A study of the UAE’ (2013) 20 (1) BIJ 106-128
Gupta VK, Yayla, AA, Sikdar, A and Cha, MS, ‘Institutional environment for
entrepreneurship: evidence from the developmental states of South Korea and United Arab
Emirates’ (2012) 17 (03) JDE 125
Rishi B and Singh H, ‘Determinants of supermarket shopping behaviour in an emerging
market’ (2012) 7 (1) JBRMR 27-38
Sawan N and Alsaqqa I, ‘The advantages and the challenges of adopting IFRS into UAE
stock market’ (2013) 8 (19) IJBM 1-23
Shayah MH, ‘Economic diversification by boosting non-oil exports (case of UAE)’ (2015) 3
(7) JEBM 735-738
Siddique CM, ‘Impediments to market orientation: An exploratory study of retail SMEs in
the United Arab Emirates’ (2014) 7 (1) EBSCMEI 33-56
Others

8
Sainsburys, Our vision (2019) <https://www.about.sainsburys.co.uk/about-us/our-vision>.