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Strategic Issues And Options For Sainsbury Add in library

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Question:

Evaluates the strategic issues and options facing of   Sainsbury organization?
 
 

Answer:

Introduction:

To start with the topic we must understand a very basic key word associated that is Strategy. Strategy is a long term approach or vision to achieve organizational profit and success. In today’s 21st century every business is on the verge of expanding itself in the market rapidly to sustain their business operations and set plans to map out an extra competitive edge with others to grow and make profits. A strategy provides focus, direction, alignment and company structure (Searchcio.techtarget.com, 2015).

A Strategic Management process is a combination of series of strategy formulation, strategy implementation and evaluation of strategy. The formulation part consists a company’s goals and mission which define the basic objective of the company (Sadler, 2003). To achieve a company’s goals they need to understand internal and external factors affecting the sustainability if the firm. They can formulate such strategies using SWOT analysis Pringle, H. and Field, P. (2008). .

A company can develop scope and circumstances depending on their strategies. Such strategies involve gaining more market share, increasing profitability, completing a project under budget. Creating strategy for a company is a three stage process :

  • Identifying strategic options
  • Analyzing the context
  • Evaluation and selection of best option.

Sometimes it is also the size and impact of these strategic issues which creates necessity of a strategic plan to be in action . (Csun.edu, 2015)

  • Start by engaging commitment
  • Purpose guides everything
  • Analyze the organization in its context 
  • Decide strategies
  • Evaluate plan execution.

Generating strategic options would help to identify some major alternative options that would be necessary as a backup plan for an organization (Balancedscorecard.org, 2015). It is also important to make decisions on strategies chose the best alternative for the market. A company should use systematic methods to evaluate necessary courses of actions and develop them (David, 2005).

Company Profile:

Sainsbury is the UK based third largest super market which having 16.9% share in the UK supermarket sector. It is founded on 1869 by John James and Mary Ann Sainsbury. The first shop of Sainsbury in Drury Lane, London. In 1922 Sainsbury becomes the largest grocery retail. Sainsbury are interested in financial sectors also.

They have Sainsbury’s bank in UK. They are interested in property business also .Sainsbury supermarkets have more than 145000 employees including Sava centre where 60% of employees are part timer and 40% employees are full timer and at least 62% of employees are women. More than 23000 products are offered by Sainsbury supermarket where 40% of products are its own brand. Additionally a extensive range of grocery product t and quality of food, on the premises many store offer baked bread, coffee shop, fish and meat counters, petrol station and restaurants.

This supermarket severs more than 11 million people in a week at June 2002. It has 463 stores throughout the UK. Around 60% stores are located in the main area of town center or central part of town. Previously many of stores are built in unsafe places. The main aim of Sainsbury is to earn profit so it belongs to a private sector. If Sainsbury not earning profit it will not be able to makes happy to its shareholder and can’t able to improves its service and products. If Sainsbury not able to get back money then it’s difficult to improve and develop its services and difficult to invest in upcoming technologies.

 

Strategic Issues and Options for Sainsbury:

Sainsbury is a UK based company so they can develop the strategy of aligning its business with other countries like India, China, etc that are constantly developing themselves and that can help Sainsbury to develop a chain network for its business. India is mostly preferred because it has one of the emerging markets and this will help to attract investors. Outcome for this strategy will be Sainsbury as a company can provide jobs to the local people that will help to increase the brand name of the company.

Another option is that of market penetration strategy. Sainsbury can use this to increase their revenue in the market. This strategy will help to attract more customers from its competitors. This strategy can be used to develop its products in the UK market. This will also help to increase their margin of profit.

The third option that Sainsbury can introduce is of Market Development. Here Sainsbury should develop a strategy where they can sell their products in different markets. Sainsbury can increase the number of retail stores in places like Scotland or Ireland. This issue will help to develop their customer services.

Market position of Sainsbury:

According to the latest share data from Kantar World panel, Sainsbury was the one and only supermarket among the top four markets to increase its market share in the past 12 weeks. We know that Waitrose and discounters continued to be strong in terms of its growth, Sainsbury increased its market share from 16.4% which was in the previous year to 16.5% in the upcoming 12 weeks which was dated 18 August. It was also seen that the sales increased 4.9% during that particular period.

Apart from these The Cooperative group also increased its sales by 0.1 % during the 12 weeks. But it was also noticed later on that it began to lose its market share from 6.8% to 6.6% thereon gradually wiseGEEK, (2015). Nielson also figured out that Sainsbury was among the top four having sales 5.1%.  Questions were raised because there was a drop in the market share  from 16.9 pc to 16.5pc within the 12 weeks. And this was for the first time that Sainsbury’s market share fell down so much. It was also analyzed by Deustche Bank that these statistics of Sainsbury would raise questions to know as to see if Sainsbury was performing efficiently to compete with recent investments in price so that it is able to compete in the market. All the big supermarkets are facing decline in their sales which was accumulated by the late falling of Easter.

Sainsbury was one of the grocers which suffered most along with its mid market position in the market when there was first economic downtown in UK.  Sainsbury was considered as a retailer which detrained its brand image in the market. But it was also observes that Sainsbury was one of the successful food retailers in the UK Outsiders, C. (2015). .

Strategic Positioning Of Sainsbury:

Sainsbury adopted competitive positioning strategy in the market because its competitors laid a strong emphasis in terms of market strategies and programs. But considering all the facts Sainsbury has been able to reposition itself in the market as a reliable supermarket and came up with the mission to help people with better availability of products that can keep them well and healthy and serve with tasty food at nominal charges after the recession took place in the year 2007. It was also believed that Sainsbury was the only market that offered quality food at a cheaper price in UK. Due to its low price and low quality of the brand availability it did not avail any pricing strategies as of its competitor. During 2011 horse meat scandal Sainsbury was declared as free from any horse meat mixing and this enabled Sainsbury to strengthen its position in the market. After this there was more rush of customers and this attraction of the customers increased than its competitors and helped Sainsbury to withstand its position from ASDA (17%) in 2014 having 17.5 market shares. Today Sainsbury is a market challenger competing with TESCO and it has positioned as low priced better quality products.

 

SWOT Analysis of Sainsbury:

 Strengths:

There are many strengths of Sainsbury that can be pointed out. First we can use the brand name itself “Sainsbury”. This helps the company to position itself in the market. Sainsbury has given service over 140 years in its business and it provides various advantages such as brand familiarization, customer loyalty, customer belief etc. Sainsbury can also expand its no of outlets because the cost involved will be less. This can also provide competitive edge to the brand itself. Marketing strategies used by Sainsbury is also one of the strengths. The company use a very famous chef Jamie Oliver to launch campaigns and this is also considered as a very competitive move. Also having a good HR policy will help  Sainsbury to attract more customers. One more strength is that it is conveniently located because of its huge network of outlets. Moreover Sainsbury is very environmental friendly and it is doing a great cause by saving the environment. Sainsbury also comes up with wide range of products availability  to meet changing needs of its customers.

Weaknesses:

One of the weakness that Sainsbury is facing is that lack of  international expansion. Being established in Britain it couldn’t venture into international markets because of its main competitor Tesco. There is no availability of self service facility because in todays world time is money. People want faster services in less time. Sainsbury also lacks implementation problem of pre determined plans BusinessNewsDaily.com, (2015). 

Opportunities:

Expansion, Divergence, mergers are among the opportunities that if they are grabbed at the right time they can collapse. Sainsbury is been growing gradually and it is developing in its market and involving itself with investments in banking, property etc. this provides better future growth. Food for Britain is pone the supplier and partner of Sainsbury. It helps its clients to access advance opportunities abroad through its neywork offices. Sainsbury also maintain better supply chain to be efficient in cost cutting. Upgrading its technology is also one of the opportunities that helps in proper planning of its services.

Threats:

Threats are one of the external factors that Sainsbury is facing. Entrance of new competitors is a serious threat to the company and they should be monitored.  Sainsbury being too much environmental friendly have made huge investments in that therefore a a balance must be maintained. Technology changing s also imposing a threat to the company. Sainsbury lacks international expansion so there can be some foreign company takeovers that can dominate the company as a whole. The competitive advantage and the brand name that has been build by Sainsbury over the years. Sainsbury must also take some  necessary steps to save its brand name and image from its competitors globally in the market as a whole.

Porters Five forces of Sainsbury:

Differentiation strategies were adopted by Sainsbury to target the wide segments of market. This strategy was based on hoe competitor brands in selling and Sainsbury initiated to sell tasty, fresh and better quality products to every class of people in the targeted market. Apart from having it also own private brands like Sainsbury’s Organics and Taste the Differences. Sainsbury also laid emphasis on freshness of its food five forces. (2015).

Competitive rivalry-

Retail industry is growing rapidly in the market thus more no of companies are trying to cater to the food segment. In 2007, Sainsbury had a market share of about 14.9%. Tesco, Morrison and ASDA are the three big supermarkets in UK retail. Sainsbury’s banking sector is been competed against building societies of UK.

Barriers for entry:

It is extremely high for food market because they require lot of investments in the market of UK and it takes years to establish a brand. Retail is one of the sophisticated sectors in UK so developing a brand needs lot of investment.  This indicates there is less scope foe new companies to develop themselves in retail business. Also firms need to have a very good knowledge about the local shops also.

Threat of Substitutes:

Food and retail industry is always in terms of innovation in the market therefore there is a high chance of substituting the products for their customers Smart Insights, (2013). Retail market in UK must try to converge its productions with innovations that would generate a need for substituting the brands.

Buying power :

Buying power is extremely high in this industry because of so many competitors are present and they are also selling the same products. Also we can say that switching costs are low. The economy of UK is heading towards recession therefore it will give more focus to consumers need to gain popularity in the market.

Supplier Power:

Here the supplier power is very complicated and difficult to categories it. MNC’s like Unilever, Cadbury etc have a huge brand name in the market. If products of such big companies do not reach supermarkets then their sales volume will be highly affected.

Value Chain analysis of Sainsbury:

Sainsbury created shareholder value and a competitive advantage over others to understand its activities in a much better way. Sainsbury implemented a series of value chain activities which could generate revenue and profit for the firm.

PESTLE factors of Sainsbury:

Political:

Sainsbury is emerging up with the latest globalization to prove itself as a challenge as well as an opportunity. We have to make it sure that to compete against new forces to maintain efficient quality of products that they offer.

Economic factors:

The increase in prices of food globally lay an emphasis on the overall business of Sainsbury leads to increase in cost of production and purchasing power. This leads to rise in price of the products.  Consumers have less money to spend on luxury products that can cut the profit margins for Sainsbury.

Social Factors:

Sainsbury can develop recent recopies of food that is easy to cook and also healthy for the customers.  Nowadays people tend to eat fresh food as they are highly conscious about their health. Therefore there is an opportunity for Sainsbury to develop more on healthy food products.

Technological:

The advantage of using internet as an advertising media can be adopted by Sainsbury as the company can globalize itself with very less cost and this can boost up its sales also. Sainsbury can also launch self check out machines to support customer loyalty by saving their time of shopping and ease in comfort enhances.

 

BCG Matrix of Sainsbury:

BCG matrix is planning tool of a products or services which is represented graphically. It helps companies to take decision regarding selling or investment. This matrix has four square quadrants, where the y-axis show “the rate of the market growth” and x-axis show “market share”.

Star: It represents in the large market share for a fast growing industry. Here cash can be generated but due to growing industry investment is also required to maintain guide. If star will success then it will become cash cow when the industry will mature. In star Sainsbury are doing very well in the present market. They have a very good opportunity to increase their business. Where it is a private and profit growing organization.

Cash cow: It also represent in a large market share for a slow growing industry. In cash cow investment is less and can generate cash so that it can invest for other business unit. When cash cow fall in moves towards down. Cash cows are the products that business strives for. Investments into supporting infrastructure can improve efficiency and increase cash flow mare. In cash cow quadrant Sainsbury have a very good position or in a well growth situation with a very low opportunities. Here the organization getting very low opportunities still they have a good position.

Question mark: It is having low market share business and discover in high growing industry. It required a large amount of cash for maintaining and gaining the market share. It is generally for upcoming goods and services which have a very good commercial possible. Question mark should not be ignored because if it becomes dog after investing huge and its fail to become stars. The best way to handle question mark situation is to either invest heavily in them or to gain market share or to sell them. It is a high demand and low return which is due to low market shares. In this situation Sainsbury don’t know what to do with the given opportunities. Weather they are invest or not in the given opportunities. It is profitable or not. There are lots of question arise in this situation.

Dogs:  It has a weak market share of low growth markets. They neither required huge cash nor generate cash. Number of dogs should be minimized or avoided by an organization. In this situation market is very weak. Sainsbury are can’t able to make profit. It is a low growth market situation where the share value is too low. So earning profit in this situation is just impossible.

Ansoff Matrix of Sainsbury:

Ansoff matrix: It is also well known as Ansoff product or market growth matrix. It’s a market planning tool which helps to determine products or market growth of a business. It also focuses whether the products are existing or new and it’s also focus on market whether it is new or not. It also has four alternatives part of market strategies: market penetration, product development, market development and diversification.

Market penetration

Existing market and existing product: It covers products which is existence and also existent in a existing market. In market penetration involvement of risk in marketing strategies is less because products are familiar to consumers so it established in the market. Market penetration is the situation where Sainsbury can develop a new product in the market. And it is UK based retail organization, so they can totally focus on UK retail.

Product development

Existing market and new product: Here the new products are introduced in an existing market. Development of product differs because it depends on the introduction a new product in an existing market or it may be a modification of an existing product. In product development Sainsbury can develop pre band at some more extend. For develop a new product Sainsbury required advance technologies.

Market development

Existing product and new market: It also known as market extension. Here existence product is selling to new market. It is assumed here that there is a need to venture into a new market because existing market are fully exploited. In Market development Sainsbury can enter into a new segment. Which is totally new territories where they have to handle new users. So, they can franchise in Hong Kong market which is totally a new market.

Diversification

New product and new marketing:  Here a new product is sold in a new market at the same time which depends in the growth of an organization. It is a very risky strategy because two unknowns are involved, new product and new market. Sainsbury can diverse their business to a new segments like beauty product and home. They have business retail sector so, they can diverse it in some of the beauty and home products. They have a business on financial as well as property.

 

Three issues Sainsbury is facing currently in the market:

A main issue was highlighted that Sainsbury would cut costs by 500 euros million over the next three years. This highlighted that the jobs would be at risk. We know that the biggest rival of Sainsbury was TESCO who covered about 75 percent of the supermarkets as well. The upcoming condition would be more critical as suggested by Mr. Coupe.

Another situation was that Sainsbury’s shares rose by 5 percent in the market currently and there was a need of assessing wide range of its products in the market because there was a pressure of heavy price discounters from its competitors as well.

Another important issue faced by Sainsbury is that of customer values and beliefs because ethics plays an important role in determining their work terminology. A campaign was launched in 2014 to support their customers which major competitors did not.

Recommendations:

It is recommended to understand and analyze Sainsbury’s core business activity. It is necessary to analyze where Sainsbury can develop and introduce new additional business that can help its customers and the operations of the business as well. Sainsbury should buy good laptops , as of Dell and Pc World to increase their productivity. For this they can target the working class group who are in need of good business laptops. It is also recommended for Sainsbury to improve stocks and gain popularity of goods.

Conclusion:

Currently Sainsbury’s uses of the organization are huge approaches of quality, which makes a responsibility to maintain this quality at every stages of production of services and goods. Now days the quality of Sainsbury is built from the design stage though the suppliers can choice from the first level of production process till the finished product.  On food product and in quality good, Sainsbury achieve quality control and assurance of quality, which is mention in the following quotation Sainsbury own a title of  “Best Retail Packing For A New Product in European  Seafood Exposition Brussels Seafood Pix d’Elite New product competition.”  Above it is mention that, Sainsbury winning the prize on packaging and for the judge highly complementary for both the quality of product and visual appearance. Food center play a very essential role in innovative and excellence to protect the own level product in Sainsbury supermarket. A very experience team who have a extensive knowledge in food industry which provides them with special quality control, food development in creative way, sensory support and appraisal in supermarket range, choice programmed and product quality. Employee of Sainsbury always tries to give the best quality to their customer because Sainsbury always concern with the creation of quality culture. Sainsbury always encourage their employee to think about the quality of work that he or she has does. There the center of production is always a customer. They follow a long time policy. Sainsbury always concern with requirement of the customer like what they want, when they want, how they want it.

 

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