Strategic Analysis of the Supermarket Sainsbury’s

Table of Contents

Introduction to Sainsbury’s

Sainsbury’s Macro-Environmental Forces
Porter’s Five Forces Analysis
Competitive Rivalry.
Threat of New Entrants
Threat of Substitutes
Bargaining Power of Customers
Bargaining Power of Suppliers

Key Strategic Issues

Sainsbury’s Ability to Sustain Competitive Advantage.
Stakeholder Analysis
Suppliers
Managers
Staff
Customers
The Community.

VRIO Analysis
Value.
Rareness
Imitability.
Organization.

SWOT/TOWS Analysis

Strengths
Weaknesses
Opportunities
Threats
SO
WO
ST
WT

Conclusion.

References

Introduction to Sainsbury’s

The purpose of this study is to conduct a strategic analysis of Sainsbury’s, a UK based supermarket with an objective to dominate the European retail industry. With its establishment in 1869, Sainsbury’s features as a reputable supermarket chain in the UK. By 2020, its annual revenue was around £26,334 million, thereby guaranteeing its role as one of the foremost UK supermarkets within the retailing industry (Sajid et al. 2020). Since inception, the organization has incorporated a self-service method of shopping into the UK supermarket; a strategy that enabled it reinforce its position within the industry till 1991, when it nearly collapsed (Emerson 2016).

Sainsbury’s strategic plan endured a significant amount of challenges, all of which required its mitigation to advance in its efficiency in service delivery. For example, the revival of its arch-competitor, Tesco challenged its expansion efforts in an effort to continue to obtain a substantial position within the UK market (Wrigley 2019). At the same time, its leadership uncertainties endanger its efforts towards continuity, especially with reference to implementation of its strategic plan. With reference to the competition; ASDA also features as an opposition within the UK retailing industry, posing considerable threat to the market supremacy of Sainsbury’s (Karim et al, 2017).

Given this background therefore, a critical understanding of the organisation’s environment will necessitate understanding its operations (Fernie, Fernie, & Moore 2015). The study is divided into three parts, all of which focus on the strategic analysis of Sainsbury’s. in the first part, a key strategic issues affecting Sainsbury’s is identified with the use of the corporate device of the Porter’s 5 Forces of Market Analysis. The second part assesses the organization’s ability to respond to the identified issue with the retain competitive advantage with the use of Stakeholder Analysis and the VRIO Framework. Lastly, a SWOT/TOWS analysis is applied to effectively realise the corporate and strategic position of the organization within the UK retail industry.

Sainsbury’s Macro-Environmental Forces

Sainsbury’s operates both an online and physical chain of UK stores in the retail industry. As a public limited company with as much as 148,000 employees, it is able to deliver retailing services and products to UK customers |(Karim, Huda, & Khan 2017). Accordingly, the organization’s main competitors influence the direction of its internal operations. As at 21015, Sainsbury’s operating income was at a figure of £81 million, while its revenues was £23,775 million (Karim, Huda, & Khan 2017). Despite its reputation within the industry, Tesco Inc. had net income of about £5.766 billion within similar period, thereby revealing presence of a stiff competition which posed a significant challenge to Sainsbury’s (Sajid et al. 2020).

Its diversified investments contributed significantly towards the promotion of its operations, at the same time ensuring that the strategy provided assistance to its management team in an effort to significantly minimise the potential risks which had been present since 2003, after its rebrand in an effort to recuperate from initial decline. In a similar vein, it employed an informed and insightful market analysis, which fostered strategic management (Barratt 2015). Sainsbury’s concentrates on the creation of an efficient leadership structure, which ensures its continuity for successful implementation of its strategies. Its former CEO; Justin King, contributed significantly through the provision of valuable experience to ensure that the organization is able to fully implement its effort at its efforts at strategic (Sajid et al. 2020). Therefore, its investment in a firm leadership is one strategy of the critical factors that ensure its maintenance of a market structure.

Porter’s Five Forces Analysis

As developed by Michael Porter, the Porter’s Five Forces is an external environment tool which incorporates aspects of;

i. Competitive Rivalry
ii. Bargaining Power of Customers
iii. Bargaining Power of Suppliers
iv. Threat of Substitute
v. Threat of New Entrants (Porter, 1985)

Competitive Rivalry

There are three principal players of Tesco, ASDA and Sainsbury’s within the UK retail industry engaged in an intensified competition. Sainsbury’s 17% market share as at January of 2021 indicates that the competition is heavily commanded by the authority of Tesco, who occupies as much as boasts a 28.1% of the market while ASDA holds 15% (Statista, 2021). In an effort to maintain their dominance, both Tesco and ASDA focused on the improvement of their pricing strategy, which reflected in their value in addition to quality desirable service delivery. It is also apparent that both of these brands unlike Sainsbury’s engage in initiatives which have been personalised to broaden their market operational scope through the establishment of new stores, which poses various competitive threats to the success of Sainsbury’s.

Threat of New Entrants

Entrance into the food retail industry has been branded with a considerable amount of potential barriers. Remarkably, the industry constitutes a reputable contribution to the UK revenue, inferring that new entrants will require substantial investment (Wood & Pierson 2015). At the same time, the retail sector has achieved an advanced level in UK, and this automatically translates into less and less opportunities for new entrants, thus; constituting a source of market comfort for Sainsbury’s with its security of its market position (Wood & McCarthy 2014).

Threat of Substitutes

United Kingdom’s food retail industry undergoes feeble and almost non-existent threat of substitutes. This is as a result of the necessary nature of the products offered (Ochieng et al. 2014). Incorporating innovations with the ultimate objective to foster and improve the delivery of quality consumer experience ensures the organization to be able to retain and attraction of both existing and new customers since its products are required for survival. Consequently, Sainsbury’s does not face a fear of a loss of its customers despite its inability to integrate innovative methods of service delivery (Barratt 2015). More importantly, one of the organization’s main objectives is the delivery of quality products at subsidized price to its customers; this further reinforces its position in the minds of its customers.

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