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1 Strategic Management in Sainsbury’s Plc Contents Introduction ............................................................................................................................... 2 Company Profile: J Sainsbury Plc ............................................................................................... 2 TASK 1 - Strategic Analysis ......................................................................................................... 2 SWOT Analysis........................................................................................................................ 2 PESTEL Analysis ...................................................................................................................... 4 Porters Five Forces Framework ............................................................................................. 5 TASK 2 - Strategy Formulation ................................................................................................... 6 Ansoff’s matrix ....................................................................................................................... 6 BCG Matrix ............................................................................................................................. 7 TASK 3 - Strategy Implementation ............................................................................................. 9 Conclusion ................................................................................................................................ 11 References ............................................................................................................................... 13

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Strategic Management in Sainsbury’s Plc

Contents

Introduction ............................................................................................................................... 2

Company Profile: J Sainsbury Plc ............................................................................................... 2

TASK 1 - Strategic Analysis ......................................................................................................... 2

SWOT Analysis........................................................................................................................ 2

PESTEL Analysis ...................................................................................................................... 4

Porters Five Forces Framework ............................................................................................. 5

TASK 2 - Strategy Formulation ................................................................................................... 6

Ansoff’s matrix ....................................................................................................................... 6

BCG Matrix ............................................................................................................................. 7

TASK 3 - Strategy Implementation ............................................................................................. 9

Conclusion ................................................................................................................................ 11

References ............................................................................................................................... 13

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Introduction

Strategic management is the process by which organizations manages its resources with

respect to changes in external environment and thereby attain long term sustainable

growth, reports Glover, Ronning and Reynolds (2013). So the strategic direction of any

organization is to achieve its organizational objectives by effectively utilising the

organizational resources. Strategy formulation in a big corporation is carried out in different

levels such as corporate level, business level, operational level, marketing level etc, observes

Gill (2011).

Corporate level strategy deals with the overall corporate strategy of the company while

business level strategy deals with the strategy of a specific business unit. An important

factor to consider while employing strategic management in organizations is the impact

strategic decisions have on business performance and profitability of the organization

(Glover, Ronning and Reynolds, 2013). In this report the strategic management in Sainsbury

Plc is analysed.

Company Profile: J Sainsbury Plc

J Sainsbury Plc is one of the leading retailers in UK. In terms of market share Sainsbury’s is

the second largest retailer in UK second to Tesco. Asda and Morrisons make up the two

remaining spots as the big four retailers of UK (Duncan, 2015). The products and services of

Sainsbury’s range from groceries to smartphone services to financial services. Retail stores

of Sainsbury’s are mainly available in formats such as supermarkets, convenience stores and

superstores. Bells stores, Jackson stores, JB Beaumont, Sainsbury’s online and Sainsbury’s

bank are some of the other concerns of Sainsbury’s group (Johnson, Yip and Hensmans,

2012).

Sainsbury’s serves over 16 million customers/week and has a market share of 17% in UK

retail market. In 2014, Sainsbury posted a net profit of £614 million on revenue of £23.6B.

The main product categories of Sainsbury are grocery, clothing, consumer electronics, fuel

etc. Sainsbury is renowned for providing value for money brands. Nectar cards are the

loyalty scheme of Sainsbury and this card has over 10 million active customers, reports

Johnson, Yip and Hensmans (2012).

TASK 1 - Strategic Analysis

SWOT Analysis

SWOT Analysis is a tool used for analysing the strengths, weaknesses, opportunities and

threats associated with a firm. Strengths and weaknesses are related to the internal

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environment of the organization while opportunities and threats are associated with

external environment of the organization, reports Friesner (2011).

Strengths

Brand value: Customers have very high value for Sainsbury brand due to the reputation and

history of the organization. Due to this Sainsbury is considered as one of the most trusted

retail brand in UK (Johnson, Yip and Hensmans, 2012).

Effectiveness of marketing: Sainsbury has been credited for employing highly effective

marketing campaigns. Some examples of marketing activities of Sainsbury are Sainsbury

Active Kids program and healthy eating campaign led by celebrity chef Jamie Oliver (Kasim

and Ismail, 2012).

Human Resource: Through equal opportunity program Sainsbury provides equal

opportunities to employees in recruitment, training and promotions. This has helped

Sainsbury in developing a very talented and efficient workforce (Global Analysis Report,

2014).

Product line: Sainsbury has developed a much diversified product line catering to the

specific needs of specific customer segments. These special products developed by

Sainsbury for Chinese and Indian customers are an example of this (Duncan, 2015).

Weaknesses

Low international expansion: Sainsbury has failed to expand their operations into new

international markets. This has negatively influenced the growth prospects of the company

in comparison with main competitors such as Tesco, Asdaetc (Global Analysis Report, 2014).

Low self-service opportunities: Sainsbury do not promote customer self-service in their

stores. As customer demand for self-service tills are increasing, this has become a big

weakness for Sainsbury (Johnson, Yip and Hensmans, 2012).

Opportunities

International growth: The international growth opportunity available for Sainsbury’s is a big

opportunity for the company (Duncan, 2015).

Growth in other areas: Sainsbury has attained high growth in financial services through

Sainsbury’s Bank. This means that the growth opportunities available for Sainsbury in this

segment are high (Johnson, Yip and Hensmans, 2012).

Technology: Sainsbury has partnered with Vodafone to launch mobile network services. As a

new service area, mobile network service provides a high growth area for Sainsbury (Global

Analysis Report, 2014).

Threats

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Emergence of Discounters: Discounters such as Aldi and Lidl have achieved high growth in

UK retail market. The continued growth of these companies is highly threatening to

Sainsbury (Duncan, 2015).

High competition: Competitors such as Tesco and Asda are investing heavily in UK business.

This means that competition in UK retail industry is increasing (Duncan, 2015).

Green consumerism: Customers are increasingly becoming conscious of green products. This

means that Sainsbury needs to introduce green offerings to customers (Global Analysis

Report, 2014).

Foreign acquisition: Some of the main players in UK retail industry such as Asda are acquired

by international companies. Sainsbury needs to be aware of this especially as their brand

image is linked to being an authentic British retailer (Global Analysis Report, 2014).

PESTEL Analysis

Pestel analysis deals with analysis of political, economic, social, technological, ecological and

legal factors influencing the performance of an organization (Gordon, 2012).

Political: The main political factor that influences the performance of Sainsbury is the

political state of UK. UK is in a political turmoil especially due to the independence

referendum threat posed by Scotland over UK (Duncan, 2015). This means that UK is

politically unstable. However, conservative party has regained power in UK which indicates

stability in government. These factors will influence the working of Sainsbury.

Economic: UK is still recovering from recession. The Eurozone crisis also has negatively

influenced the economic state of UK. This means that UK customers have less spending

power due to adverse economic state. This will also influence Sainsbury (Duncan, 2015).

Social: Online shopping behaviour among UK customers is on the rise. Customers are also

using Click and Collect services in large numbers (Wallop, 2013). This means that these

changes in customer buying behaviour will ultimately influence Sainsbury.

Technological: Retailers are becoming more reliant on data analytics and prediction

modelling technologies for forecasting and managing product inventory. Sainsbury has

increased their investment in these technologies (Cameron and Green, 2015). This means

that future developments in data analytical technologies will influence Sainsbury.

Environmental: Environmental issues are main concern for modern business organizations.

As a big retailer Sainsbury needs to comply with environmental standards and carbon

emission standards (Cameron and Green, 2015). Sainsbury has adopted strategies to reduce

carbon footprint in their supply chain.

Legal: Legal factors that influence the operations of Sainsbury are governmental legislations

and policies. Governmental policies in matters such as competition, pricing, supplier

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relations etc. have negative influence on Sainsbury (Cameron and Green, 2015).

Porters Five Forces Framework

Porters Five Forces Framework is used for analysing the impact different market forces has

on a specific organization (Gordon, 2012).

Threat of new entrants (Low): Threat of new entrants faced by Sainsbury is lowdue to the

high initial investment required in setting up a large scale retail business. For example, no

major new entrant has succeeded in entering UK retail market in the last decade (Cameron

and Green, 2015). This indicates that threat of new entrants is low.

Threat of substitutes (Very high): The threat of substitutes faced by Sainsbury is very high

because many other retailers also provide similar offerings such as those provided by

Sainsbury. Also customers have access to small scale retailers and convenience shops for

purchasing products (Duncan, 2015). These factors indicate that threat of substitutes is very

high for Sainsbury.

Bargaining power of buyers (Very high): As large numbers of substitutes are available,

customers have high bargaining power in retail industry. Buyers also have the bargaining

power to select distribution channels of their choice (Duncan, 2015). Availability of

discounters also provides bargaining power to customers. So customers have high

bargaining power in the case of Sainsbury.

Threat of suppliers (Moderate): Sainsbury has developed long term partnership with

suppliers of the company. This helps Sainsbury in reducing the threat of suppliers. However,

suppliers have high bargaining power in products such as meat, egg and other similar

products (Duncan, 2015). This means that the threat posed by suppliers is moderate in the

case of Sainsbury.

Competitive rivalry (Very high):UK retail industry is one of the most competitive markets at

present. The emergence of Aldi and Lidl has completely opened up the market. Alsi and Lidl

are cannibalizing the market share of all four major retailers which in turn has increased

competition among the top four retailers for dominance in the market. The weak

performance of Tesco in recent years has opened up an opportunity for Sainsbury and Asda

to strengthen their position in UK market (Duncan, 2015). Hence, competitive rivalry in UK

retail market is extremely high.

By analysing the micro and macro environment surrounding Sainsbury, it can be inferred

that UK retail market is in a volatile position with high level of competition. This indicates

that Sainsbury needs to develop strategic management practises to take advantage of the

opportunities available in the market.

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TASK 2 - Strategy Formulation

Alkhafaji (2011) defines strategy formulation as the process by which an organization the

most appropriate strategy for achieving the predefined objectives of the organization.

Strategy formulation involves different steps such as analysis of the existing strategy,

environmental scanning for identifying the market opportunities and threats.

The existing strategy of Sainsbury can be analysed by reviewing the vision, goals and

objectives of Sainsbury. The vision of Sainsbury is to be the most trusted retailer where

people love to shop and work. The goal of Sainsbury is to make the lives of customers easier

by providing great quality products and services at fair prices at all times (Sainsbury, 2015).

From the vision and goal of Sainsbury, it can be inferred that the strategy of Sainsbury is

about providing high value to customers through quality products and services.

Ansoff’s matrix

Ansoff’s matrix is a tool that can be used for analysing the alternate growth strategies

available for an organization. This matrix proposes four generic growth strategies for

organizations (Basu, 2014).

Figure 1: Ansoff’s matrix

Source: Hussain et al. (2013)

Market development: In market development strategy, organization strives to grow by

targeting their existing products in new markets (Basu, 2014). Market development in

Sainsbury is achieved by introducing new stores in Northern Ireland and other areas in UK.

Sainsbury has also developed online retailing channel which has developed into a strong

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market for Sainsbury with record sales of over £1bn in 2013 through online channel, reports

Stones (2013).

Diversification: In diversification strategy, the firm develops new products for new market

segments (Basu, 2014). Sainsbury has used diversification strategy very effectively to

develop a range of products and services that are unrelated to the core business of

company i.e. retailing. Some examples of this diversification are Sainsbury’s Bank,

Sainsbury’s Home Heating service, Sainsbury’s online movie streaming service, Sainsbury’s

real estate business etc. As per the report of Retail Week (2014), by diversifying into diverse

businesses Sainsbury has been able to develop revenue streams that are not reliant on core

business of the firm. Sainsbury has also been able to utilise its superior brand image in

entering new product categories.

Market penetration: In market penetration strategy the organization focuses on developing

market share in existing markets of the firm (Basu, 2014). Sainsbury has used this strategy

for increasing its market share in UK market. One of the main market penetration strategy

adopted by Sainsbury is adopting lower-to-mid level pricing strategy in groceries, reports

Chapman (2014). This strategy has enabled Sainsbury in attracting more customers.

Sainsbury has also introduced interactive mobile application and live cooking show to allow

customers to interact with Sainsbury products. This has also helped in attracting more

customers and thereby gaining market share in UK market.

Product development: In product development strategy, the firm develops new products

targeted at existing market (Basu, 2014). The product development strategy was used by

Sainsbury in introducing and developing Sainsbury’s Basics range of products. By developing

own-brand products Sainsbury was able to increase profitability of the firm (Brooks, 2014).

Product development strategy was also used by Sainsbury to introduce new veal range. The

new veal range introduced by Sainsbury included 8 new product types ranging from fillets

and rib chops to roasting joints, observes Glotz (2012). By introducing new veal range ahead

of rivals such as Tesco, Sainsbury was able to attract new customers in existing market.

The above analysis reveals that Sainsbury has utilised all four strategies very effectively over

the year for developing the business of the company. As it was revealed from analysis of

micro and macro environment of Sainsbury that Sainsbury was facing stiff competition from

Asda and Tesco in UK retail market. It was also identified that UK retail market is highly

saturated. This indicates that market penetration strategy is not very effective in this

market. This means that Sainsbury need to focus on developing new markets through

market development and diversification strategies while focussing on existing market

through product development strategy.

BCG Matrix

BCG matrix is a tool formulated by Boston Consulting Group for analysing the various

business units of a firm in terms of the growth potential of the business unit (Joibary and

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Nagaraja, 2011). In the case of Sainsbury, the main business units are retail stores, online

retailing, Sainsbury’s Bank, Sainsbury’s property, Sainsbury’s Energy, Sainsbury’s

Entertainment and Insight to communication (i2c) (Sainsbury, 2015).

Figure 2: BCG Matrix

Source: Joibary and Nagaraja (2011)

As per this matrix, the business units of an organization can be categorised into four based

on their relative market share and growth potential. They are:

Dogs: A business unit is termed dog when it has low market share and low growth potential.

Organizations need to reduce the number of dogs as they drain investment with adequate

return on investment, reports Joibary and Nagaraja (2011). In the case of Sainsbury’s, both

Sainsbury’s Entertainment and Insight to communication are deemed as dogs because of

the low market share and growth rate of these business units (Fernie, Fernie and Moore,

2015). Also, Sainsbury has invested heavily in these businesses but has availed low returns.

This suggests that Sainsbury needs to disinvest from these businesses to reduce losses.

Cash Cow: Cash cow is the business unit which has low growth potential but has large

market share. The importance of cash cow is that this business unit is responsible for a large

sum of revenue of the firm. Also, cash cow business units do not require large investment,

reports Joibary and Nagaraja (2011). In the case of Sainsbury, the retail store business is the

cash cow because the high relative market share of the business and the large revenue

potential of the business unit. Also due to the saturated nature of retail market growth

opportunities in the market is very low (Brinkman, Navarro and Harper, 2014). This indicates

that retail stores business is the cash cow of Sainsbury.

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Question mark: Question mark is the business unit which has high growth rate but low

market share. These business units require high investment and if not properly managed

would turn into dogs (Qiang, 2014). Sainsbury’s property, Sainsbury’s Bank and Sainsbury’s

Energy are Question marks because these businesses are growing at high rates but do not

generate adequate level of revenue for the firm (Ramachandran, Karthick and Kumar, 2011).

In order to further develop these businesses Sainsbury needs to invest in these businesses.

This means that Sainsbury needs to closely manage these businesses.

Star:Star is the business unit that has high market share and growth potential. These

business units need large sale investment but produce high revenue for the firm. These

businesses need to be developed further in order to maximise profits (Qiang, 2014). The

online retailing business of Sainsbury is one of the most successful in UK retail industry with

revenue over £1bn in 2013 (Stones, 2013). Online retailing business of Sainsbury is the

second largest in UK in terms of market share, reports Rigby (2012). These factors indicate

that the online retailing business of Sainsbury is the star business unit.

TASK 3 - Strategy Implementation

As per the observation of Baroto, Arvand and Ahmad (2014) strategy implementation refers

to the transformation of strategy selected in to organizational action with an intension to

achieve managerial goals and objectives. The success of strategy implementation, often

called as action stage of strategic management depends up on the organizational structure,

leadership style, resource allocation relationship etc.

Organizational structure

In the view of Furrer (2010) structure of the organization plays pivotal role in facilitating as

well as hindering the firms to achieve organizational goals hence Murthy, Mahalakshmi and

Reddy (2013) classifies the types of organizational structure in to functional (grouped with

respect to purposes), divisional (self contained divisions) and matrix (mixture of functional

and divisional) on the basis of the nature and characteristics of pre determined

organizational objectives. Sainsbury plc, the giant retailer in UK functioning as both online as

well as general merchandiser performs operations over 1200 supermarkets and

convenience stores. The organizational structure of Sainsbury is seemed as functional since

the firm operates several divisions such as IT, marketing, purchasing, distributing etc on the

basis of supervision, task allocation and coordination from the employees.

The application of IT infrastructure in Sainsbury has facilitated the firm to drive sales

through offering delightful customer experience. The investments of the firm in IT has

facilitated Sainsbury to improve the functioning of three key areas such as supply chain

management, self-service checkouts and printing of targeted coupons. Caines (2012)

reported that the installation of IT in the supermarkets offered the choices for customers

and also facilitated to reduce the queue up time of customers up to a great extend.

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Therefore it can be observed that the strategy of Sainsbury to serve better for enhancing

customer services has been done up to great extend through the flexibility of organization

structure.

The flexibility in the organization structure of Sainsbury assisted the firm to adopt change

immediately with rest to changing environment, reports Verdu and Gras (2009). Furrer

(2010) report that proper communication flow throughout the hierarchy of organization

restraint the probability of occurrence of conflicts among the workforces up to great extent

and enables to transform the workplace of firm more productive and communicative,

thereby reducing employee turnover rates and absenteeism. While analysing the

organizational structure of Sainsbury, clear and concise flow of communication flows

throughout the departments and organization networks, empowering employees with

adequate level of information, value and beliefs for implementing strategic decisions

relevant to meet customer needs and requirements.

Delegation of authority and leadership style

Measuring the degree of delegation of authority and leadership style, which means the

potentiality of personnel to perform tasks under the coordination of workforces and

departments are necessary prior to strategy implementation, as the firm is highly

responsible on internal as well as external stakeholders for the practical implication of the

same (Sengul, Gimeno and Dial, 2012). The observation of Akter (2012) linked the

enhanced growth rate and higher level of engagement of employees contributing up 15% on

the annual growth of store year by year as the due outcomes of decentralized authority of

Sainsbury. The effective coordination among the departments of Sainsbury facilitated the

firm to respond potentially against with the growing challenges emerging from the fierce

competition, and thereby setting up long term strategy for the success of the firm. Sainsbury

has implemented MIS (Management information system) for effective planning, sound

decision making, monitoring operations of bottom-line, coordinating SCM, distribution,

retailers etc for setting-up the management against with increasing complexity.

According to Prince (2012) exploring the leadership style possessed by firm for strategy

implementation is vital. Hence it can be assessed that the participative style\ democratic

style of leadership has facilitated Sainsbury to include the subordinates and workforces in to

decision making process, to make aware of workers about the happenings within the

organization and to make maximum utilization of available resources for better productivity.

Due to decentralization of power and lack of competency in democratic leadership style, the

strategy implementation in Sainsbury may get delayed, reports Bhatti et al. (2012).

Corporate Governance

The board members and other senior managers of Sainsbury’s review the present market

position and shareholder analysis of the company. This provides a detailed understanding of

the anticipation of its stakeholders. Moreover, this review is also significant in case of

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strategic implementation as the organisation is responsible for considering stakeholders

views while strategic decision-making (Baker, 2010). Strategic frameworks such as KPI’s, KRA

etc; is adopted to analyse the market situation.

Portfolio diversity is also an important aspect of corporate strategy. Moreover, Gupta (2011)

argues that diversity of portfolio demands more investment in R&D. In the retailing sector,

product innovation and its placement is considered as main contributors of competitive

advantage. To direct the customers in long-stretch of food items, Sainsbury’s perform to

carry on the innovation and offer the control of providing quality of goods at affordable

prices following ethical, social and environmental standards (Aroq Ltd, 2011). Sainsbury’s

focuses on implementing distinct portfolio, structures of stores for various UK customer

segments. The supermarket operates 3 different store formats, Main-Mission (normal

stores), Mixed-Missions (Smaller and convenience supermarkets) and Main-Plus

(Hypermarket), reports Duncan (2015). Majority of its stores were situated in South-East

England and London. Opening stores in overseas market was important for Sainsbury’s, but

as per Global Analysis Report (2014) report, Sainsbury failed to expand their chain into new

international markets. The supermarket is now investigating the opportunity in foreign

territories as its performance in UK continues to be robust. This growth strategy would

indeed help the company to increase its growth prospectus in comparison with its major

competitors Tesco, ASDA etc (Hall, 2010).

Sainsbury’s charges fair prices as part of its marketing strategy and contribute value and

quality for money. The technological innovations like Self-Checkouts. Online shopping etc;

also enhanced the customer base and revenue of the company as well. In the view of Taylor

(2012), making technology investments in order to support and enable business goals is a

long standing issue for all companies, especially those in retail sector. The IT makeover

integrated in Sainsbury’s IT systems contributed strategic advantage for the firm. Moreover,

this implies that the company has the ability to plan and use resources to achieve strategic

advantage. Thus the corporate strategy is being frequently reviewed by the authorities in

order to detect the risk factors and to make a decision that targets long-term success.

Conclusion

This report evaluated the strategic management adopted by leading UK retailer Sainsbury’s.

Firstly, the strategic analysis of Sainsbury’s was carried out. This was done with the help

SWOT analysis, Pestle analysis and Porter’s Five Forces analysis. These analyses revealed

that Sainsbury’s faced heavy competition in UK retail market especially from Tesco and

Asda. It was also identified that Sainsbury’s had opportunity in online retailing and business

diversification. Based on the analyses, it was inferred that Sainsbury’s neededto adopt

strategic management practices to take advantage of the opportunities in the market and

thereby attain organizational objectives. Strategic formulation for selecting appropriate

strategies for Sainsbury’s was also carried out in this report. Ansoff’s matrix and BCG matrix

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analyses were employed for this purpose. Thus it was identified that Sainsbury’s needed to

focus on developing new markets through diversification and market development. It was

also understood that online retailing was the star business unit of Sainsbury and hence

needed large scale investment for maximizing profit from online retailing. The report also

discussed the steps and processes that need to be adopted for proper implementation of

strategy in Sainsbury’s. It was identified that corporate governance principles, delegatory

leadership and flexible organizational structure was necessary for proper strategy

implementation.

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