UK Retail Industry Analysis

This report analyzes the competitive landscape of the UK retail industry, focusing on two major players, Sainsbury and Asda. It examines their strategic management practices, market share, and competitive advantages. The report includes a detailed comparison of their business strategies, including the use of models such as Porter's Five Forces and Ansoff's Matrix. Additionally, it discusses the challenges faced by both companies, such as technological changes for Sainsbury and high employee turnover for Asda. The conclusion offers recommendations for both organizations to enhance their market positions.

UK Retail industry

Table of Contents
INTRODUCTION...........................................................................................................................1
Brief Overview for the Sainsbury and Asda....................................................................................3
The Sainsbury ........................................................................................................................3
Blue ocean .............................................................................................................................5
Generic strategies...................................................................................................................5
Porters five force model.........................................................................................................7
Ansoff's matrix.....................................................................................................................10
Core competencies................................................................................................................12
Conclusion.....................................................................................................................................14
REFERENCES .............................................................................................................................15

INTRODUCTION
In this report we will compare two organisations to identify their
competitive advantages and the strategic management on the basis of their
performances and market share. The two organisations taken into
consideration are The Sainsbury and the Asda. Both the organisations are
established and operated in the UK and are the part of the retail industry or
market. The study includes the brief overview of the Sainsbury and the Asda
determining their purposes, objectives and the industry they are related
with.
Reatil industry of Uk plays significant role in the economy development
of the nation. In the year 2016 it has generated 358 billion revenues. It has
approx 290315 bricks and retail outlets in the country. Total VAT registered
retailers in the UK are 192000. It is the sector which has employed 2.8
million population. 1/3 proportion spending of consumers are done in retail
products. It contributes well in the development of the nation, in the year
2016 this industry had 5% contribution in total GDP. From 2015, in the year
2016 3.4% growth has been seen in this sector.
1

Illustration 1: Industry analsyes 2016-2017
Source: (Market value of grocery retail in the United Kingdom (UK) from 2007 to 2017 (in
billion GBP), 2017)
Sainsbury
The mission of the company is to expand its operations world wide,
vision of the cited firm is to provide satisfactory products to consumers so
that sales revenues can be increased. Objective of the company is to
increase 35% sales till the end of 2019.
Sainsbury takes time to time feedback from its consumers, it is its
business strategy that helps in analysing business issues and by this way it
takes actions to meet with the consumer's expectation. It improves
availability of its products so that more people can buy its quality products.
Currently company is facing changes in technologies strategic issue due to
which operations of the firm is getting affected. Sales of the Sainsbury has
been grown by 1.9% in the year 2016. But market share of the company has
been fall, Sainsbury has slipped to 15.8 from 16%.
2

Asda
It is another major retail firm of United Kingdom, company's mission is
to become global leader in the field of retail. Its vision is to gain loyalty of
consumers. It works for the objective of profit maximization. One of the
major strategic issues faced by the Asda is high employee turnover. It has
competitive position in the market and it sets pricing of retail products. Sales
of the Asda has been grown by 1.8%. Market share of the company has been
slipped to 15.4 from 15.6%.
The report also identify the strategic issues and problems faced by
both the organisations and their implications. Furthermore, the comparative
analysis for identifying the core competencies and abilities as well as the
strategic actions of the two organisation has been included in the following
report (HillJones and Schilling,2014).
Brief Overview for the Sainsbury and Asda.
The Sainsbury
It is the second biggest chains of supermarkets within the United
Kingdom that covers around 17% of shares in the supermarket industry of
the nation. The Sainsbury was established in the year 1869 by John James
Sainsbury in London. During the year 1922 it achieved the position of the
biggest grocery retailer across the UK. The J Sainsbury plc is divided in three
segments : Sainsbury's Bank, Sainsbury's Argos and the Sainsbury's retail
firm. The Sainsbury is mainly a retail company that operated in the
supermarket industry within the UK. The main competitors of the Sainsbury
are the Tesco and Asda (Peppard and Ward,2016).
It has been identified that Sainsbury market share has been increased
from 2013 to 2017. Spending of consumers have been increased in the retail
industry. That has made the cited firm leading retailer in Great Britain. In the
year 2016 its market share has reached to 9.7%. Company has taken
decision of bringing innovation in its products and services. This strategic
3

decision of the entity has supported the firm in increasing its sales volume.
In the year 2010 demand of the Sainsbury products was decreasing because
company was unable to meet with the expectation of the customers. At that
time cited firm has make changes in its technologies and has improved
quality of products. It has helped the firm in gaining success in the market.
The Asda
The Asda is also a supermarket retailer established in the West
Yorkshire in the year 1965. The Asda is dealing in various products and
services with stores as well online website. The Asda is competing with the
Sainsbury for the leading position in the retail industry, the other rivals of
the company are Tesco and Aldi.
In the year 2016 sales of Asda continue to increase again. Though, its
sales was lower than previous quarter in the thirds quarter. In second
quarter its sales growth was 1.8% and in third it was 1.1%. In order to
maintain its revenues Asda has taken decision of cutting its prices in the
inflation condition. Cited firm has reduced its product's prices. It has helped
the entity in attracting more people towards the brand. Thus, this strategy of
the company has supported in maintaining its competitive position in the UK
retail market.
4

Blue ocean
The Sainsbury needs to focus on developing new markets because it
needs to develop a global presence therefore it follows the blue ocean
strategies. Whereas the Asda is operating its business online and therefore it
needs to hold the market and increase the profit out of it. The Asda focuses
on analysing the existing market and try to increase the sales within the
same.
Generic strategies
Cost leadership strategy – This strategy states that the organisation can
be a leader if they focus on reducing the manufacturing cost. The companies
can achieve a competitive advantage by minimising their cost of production.
The reduction in the cost can increase the profit margin of the organisation.
There are two methods within the cost strategy which are -
 Enhancing the profit by cost reduction.
 Growing the market share by charging low prices for their products.
The Differentiation Strategy – This strategy describes that the
organisation should achieve success and objectives if they bring innovation
and creativity in their products and services. In order to compete in the
market an organisation needs to provide unique product to the customers, It
helps the organisation to attract the customers for choosing their products
and services. The organisations can develop a successful differentiation
strategy by focusing on the three elements such as -
 Innovation, development and good search.
 The effective ability to provide high quality services and
products(Goetsch and Davis,2014).
 The effective marketing and sales.
5

 The Companies need to be quick in the development of products and
services as the competitors can imitate the products in different
market place.
The Focus Strategy – It strategy states that the organisation should focus
or concentrate on a specific market segment or market place. The
Organisations can understand the unique demand or needs of the people
within a particular market. By focusing on a niche market the organisation
can develop a monopolistic market. This helps to avoid tough competition
and the organisation can achieve their targets by increasing the sales This
strategy can further divide in to two parts -
Cost focus – This refers to the focus on the cost of the products. The
manufacturing costs and the price on which they are sold in the market.
Differentiation Focus – The second part is the differentiation focus which
determines that the companies should focus on the innovation or creativity
of their products. The organisation should introduce unique products and
services within the market in order to compete in the market.
The Sainsbury and Asda both develops and follows effective strategies
to grow there businesses and market share within the supermarket industry.
The Sainsbury has no global presence therefore they focus on the quality
driven strategies whereas the Asda is following the Cost leadership
strategies or model in order to reduce the cost and increase the profit
margin (Daspit,Chrisman and Long,2017)
McKinsey 7-S framework
It is the model which concentrates on seven elements, that helps the
firm in gaining success in the market.
 Strategy: It is considered as one of the best tool that supports the firm
in gaining competitive advantage Sainsbury adopt innovation strategy,
it continuously makes changes in its products and implement
innovative ideas so that it can meet with the expectation of
6

consumers. On other hand Asda adopt strategy of providing products
and services to end users at affordable rates.
 Structure: Sainsbury adopts tall organizational structure, that helsp in
maintaining quality in its operations and conducting business in
smooth manner. Asda follows flat structure, it develops strong
relationship with employee so that they perform their work effectively.
 System: Decisions taken by higher authorities in the Sainsbury
whereas in Asda managers involve people in decision making process.
 Shared values: Asda and Sainsbury both share values with their
employees so that healthy culture can be developed.
 Style: Sainsbury managers adopt autocratic leadership style, it
supports in minimizing mistakes. Asda follows participative leadership
style where all people gets equal rights to discuss their issues with
higher authorities.
 Staff: Employees are hired on the bases of their capabilities and skills
in both firms.
 Skills: Both firms treat their employees well, they work to develop
competencies of their workers so that individual can perform well in
the organization.
Porters five force model
Sainsbury
 New entrance: The reduction in the commodity prices will affect the
manufacturing process and profitability of the company. The quality
advantage & the loyal customer base of the Sainsbury will help the
company to sustain its market position. Besides this, it will make it
difficult for other market entrants to easily attract the customers of the
Sainsbury towards them. They have to give high discounts or benefits
to get the customers which may affect their revenue generation. But
7

the entry of the new companies in the market with low cost and high
quality products may affect the functionality of the company. Keeping
a high cost is necessary for the Sainsbury to meet the manufacturing
and transportation expenses of its high quality products.
 Substitutes: This will make the customer's divert towards other brands
which may cause the Sainsbury a major loss of its loyal customer base.
Besides this, the substitution will reduce the market price for that
particular product or service which will make the company to cut cost
the product or service(Sakas,Vlachos and Nasiopoulos,2014). This will
affect the market share as well as the gross profitability of company.
Besides this, many competitors company of Sainsbury has come up
with the substitute product of the retail items manufactured by the
Sainsbury which are low in cost and are of same or more quantity.
 Buyers: Besides this, the local vendors of apparels and footwear's will
also affect the market share of the Sainsbury. To tackle such
conditions & meet the requirements of the customers, company has to
keep on analysing the market trends on regular basis so that they
don't lose their customer's. This may cause the company to either
reduce the stock purchase or increase in selling prices to meet this
expenditure cost.
 Suppliers: This is a critical situation where if company purchase the
raw material at high cost, it has to increase the selling price to
compensate the manufacturing and transportation cost. On the other
hand, if the prices of the product will be high, it will make the customer
reluctant to make purchases that will affect the sales and revenue of
the company. Such conditions are meant to be critically handled by
the Sainsbury.
 Capabilities: The customers are looking for more convenient easy
method to do trade with such retail companies. Also, variation in price
for the same product by different retailers has made customer's more
8

conscience about the cost and item offered by the company which has
made the Sainsbury to keep a regular check on the customer's market
trends as well as the customers demand to keep a sustainable position
in the retail market as well as to gain a better & strong base of loyal
customers. This will also help the customer to choose the best service
provider without any sort of confusion during purchasing of the
goods(Somsuk and Laosirihongthong,2014).
Asda
 Competitors – UK's retail industry is extremely competitive due to
various new entries and companies involving in the market. The Asda
has a strong competition with the companies such as Tesco and
Sainsbury. These competitors introduce new products and services
with various innovative strategies that have a great impact on the
market due to increase in competition.
 Purchasing Power of the Customers – The customers or buyers are the
most important elements for the success of any business or
organisation. The power of the buyers is that they can buy the goods
and services from various options according to their choices. The Asda
tries to offer their customers with the lowest price products and
services to attract the maximum number of buyers.
 Power of suppliers – The companies needs to have a strong and
healthy relationship with the suppliers. The Asda has around 500
suppliers supporting the organisation to provide effective supply of
products.
 Substitutes – The industry has many new companies which are
entering the market with new and innovative products that is a major
threat for the Asda.
9

 Threat from new entrants – The major threat for the Asda is the new
entrants in the industry. The various new companies that enters the
retail industry can decrease the market share of the Asda
Ansoff's matrix
It is technique which is used to make and analyse the situation for new
and existing product in the market of the organisation. It is very effective for
evaluating all the risks which are associated with the products which are
present in the market and the products which company wants to launch in
the existing or new market (Thijsen, Tong and van Leer, 2014). This matrix
contains four segments which are used to analyse the whole situation
whether internal or external. Four segments of matrix are as follows:
 Market penetration- It is the process when company tries increase its
sale of the existing product in the existing market only. By this the
organisation wants to enhance its market share to gain some
competitive advantages among their competitors.
 Market development- In this stage of the matrix the business tries to
launch their existing product in the new market. It is done to attract
new customers towards them. It contains more risks.
 Product development- In this process firm analyse the situation to
launch the new developed product in the existing market. It is riskier.
 Diversification- It is process of matrix in which organisation makes the
new and innovative product and tries to launch ii in the new market
(Vignali, 2014). It contains very high level of risks.
Ansoff matrix in relation with Sainsbury.
It is the company which is making supermarkets and provides their
customers with the products and services which are needed by them. They
make the products which are needed by the customers in their daily life. The
cited company wants to increase market share can be easily achieved by the
analysing the Ansoff Matrix.
10