Strategic Evaluation of Sainsbury's Plc - Case Study Example

Running head: strategic evaluation of sainsburys plc 14th November Introduction One of the mostcompetitive companies in the UK supermarket sector is Sainsbury’s. Being the third largest supermarket after Tesco and Asda, Sainsbury’s which was founded by John James Sainsbury in 1869 has a wide product portfolio that has seen its revenue grow remarkably. The company, which is headquartered in Holborn, London, has 3 main divisions which include Sainsbury’s Supermarkets, Sainsbury’s bank, and Sainsbury’s convenience Stores Ltd (Kidwell, 2009). The paper will discuss Sainsbury’s various strategies that includes environmental context, SWORT Analysis, Pestle analysis, Porter’s five forces, POLC analysis and the theme that has critical importance for future strategy of Sainsbury’s Strategic profile and environmental context analysis of Sainsbury’s Sainsbury’s vision The vision of Sainsbury’s is to become the most trusted retailer where the employees love to work and where consumers like to their shopping. This is depicted by the favorable working atmosphere that has been created by the company under the leadership of David Tyler and Mike Coupe, the Chairman and the Chief Executive Officer respectively. Sainsbury’s strategies Due to the competition that is existing between Sainsbury’s and the competitors the management has come up with a strategy that will make the supermarket to effectively compete with others like Tesco and Asda. One of the strategies that Sainsbury’s has adopted is to make sure that they will know their customers better and thus the staffs will be working toward this. Customer satisfaction is one of the strategies which are embraced so that Sainsbury’s can be different from competitors (John, 2010). To keep our customers loyal Sainsbury’s has decided to offer different products and services at lower prices (Samii, 2004). Another strategy that is used by Sainsbury’s is the use of online marketing where the staffs get shoppers through online way and thus the prices are cut to ensure customers flock in Sainsbury’s premises (Daffy, 2011). Sainsbury’s objectives Sainsbury’s objectives To make sure that the customer’s lives are made easier through the services and product that are provided at fair prices (Jardine, 1999) To make sure that all the products and services which are provided to the shoppers are of high quality Achieving highest standards of quality Ensuring that it generates high profit that will be sufficient enough for the continuation of growth and expansion beyond United Kingdom (James, 2012) Sainsbury’s assets and finances In 1990 the company revenue stood at £6.9 billion comparing with 2010 when it was £21.4 billion. In 2005 to 2006 profit was reduced where the profit that was generated was £300 to £500 million (Spiceland et al, 2009). This was based on the fact that self serving measures were not introduced and stiff competition also existed. Most of the years have shown a pre-tax profit which is worth £500 to £700 million and thus indicating a profit more than £300 to £500 million (Hargreaves, 2009). Sainsbury’s has Non Current Assets for example property, plant and equipment which are worth £8, 203 million, and intangible assets which are worth £286 millions in 2014 (Hargreaves, 2009). Sainsbury has investment assets which record a net worth value of £404 millions currently, others are inventories, trade and other receivables, cash in hand, among others are worth £1,005 million, £433 million, £1,592 million respectively. Sainsbury’s internal environment Sainsbury’s has employed 157,000 staffs who are termed as colleagues. The managing directors of Sainsbury was James Sainsbury between 1896 and 1928, in 1928 to 1938 the managing director was John Benjamin Sainsbury. Later in 1938 to 1956 two managing directors were in charge of the company where they operated both. The two managing directors were Alan Sainsbury and Robert Sainsbury later in 1956 to 1969 Robert Sainsbury was named as the managing director of Sainsbury Company (Ford, 2005). The Chief Executives Officers of the company is Mike Coupe currently. The laid out management from the top to the lowest makes Sainsbury to be competitive with other company and thus delegation of duties is easier. In 2009 up to date David Tyler was the chosen chairman and thus top management has been able to work with him for many years. Sainsbury’s external environment Sainsbury’s faces stiff competition from key competitors such as Tesco, Safeway and Asda. Sainsbury’s is the third food distributer in United Kingdom. The four companies are known to have dominated the market with 70% market share of United Kingdom household products. Tesco market share from 2012 to 2013 stood at 30.2% but currently its market share of United Kingdom household has dropped up to 28.8%. On the other hand, Asda has improved its market share from 17.1% to 17.2% in 2014. Tesco as per today is the largest supermarket in United Kingdom and thus it is a major competitor of Sainsbury’s supermarket (Butler, 2007). Sainsbury’s supermarket has a market share of 16% though they are competitive with others since they focus on the price of their products. Sainsbury’s SWORT Analysis Strengths -Sainsbury’s has strong management -Sainsbury’s is able to manufacture unique products -Due to strong management the company has a high growth rate of profit -Sainsbury’s is well established in the market -Sainsbury’s has strategic plan for pricing power Weaknesses -Sainsbury’s is located in united kingdom and thus it has not expanded to other parts worldwide -Varying taste and preference’s of customers makes Sainsbury’s not to offer the services and products the customer need on daily basis Opportunities -Sainsbury’s has an online marketing strategy -The use of advanced technology to advertise their product make it possible to get sustainable profit -Expansion to other locations makes Sainsbury’s to attract a lot of customers -The unique products makes the customers to flock in the supermarket Threats -Stiff competition from the rivals -Change of product and services prices of competitors which make it impossible to have fixed prices Sainsbury’s Pestle analysis Political factors The government and customers owe Sainsbury’s a lot of debts which make the company to steadily lower the profits that is generated on monthly basis. This makes the company to experience a lot of pressure while stocking and paying the employees due to debts which are not paid in time. Economic factors Unemployment and inflation of food and other products affects the company negatively. This means the high prices of food and other services will make it impossible to generate high profit since there will be a reduction in buying rate thus decreasing the sales of the company. If unemployment rate is reduced then profit will be increased. Social factors Due to customers needs and preferences of having all the product and services in one roof and since the management has worked on that it makes Sainsbury’s to fetch a lot of profit and attracts more customers. Technological factors Since Sainsbury’s has adopted online methods of shopping and advertisement the supermarket is able to make positive results from it. This is due to the fact that high level of customers’ awareness is attained. Environmental factors Sainsbury’s has come up with a strategy that will ensure the environment is not polluted. This involves reducing wastage by recycling and eliminating plastic bags. Legislative factors Working licenses are costly and thus the government has outlined the policies to be followed. Sainsbury’s pays tax on monthly and yearly basis. Such legislative requirements must be met for business operations to continue. Sainsbury’s Porter’s five forces Competitive rivalry – Sainsbury’s operations are undertaken in a very competitive market. As more companies enter the non food sector, the competition is becoming stiff. With a market share of more than 15%, Sainsbury’s faces stiff competition from the 3 supermarket chains namely Morrison’s, Tesco and Asda. Barriers for entry- In the food retail sector, barriers are high due to various aspects. First, in UK retail outlets requires high investment to establish. Additionally, due to advancement of the UK food sector, it is difficult for new entrants to establish their businesses. Threats of Substitute-Based on the view of the food retail as a necessity by consumers, Sainsbury’s experience low threat of substitute. With the new innovations in the food sector, shopping has become an interesting experience thus making it difficult to substitute. Buyer power- Based on large number of competitors selling similar products in the food sector, buyer power in high for Sainsbury’s. Supplier power- By reducing its sales, Sainsbury’s would make the suppliers to be very strong since the customers will shift their loyalties to other companies. With the positive relationship that Sainsbury’s has created with its suppliers, there is continuity in the supply of products that are highly demanded by the consumers. Sainsbury’s POLC (Planning, Organizing, Leading and controlling) analysis Planning The supermarket is guided by its vision and mission in its planning process. The company vision as noted earlier is to become the most trusted retailer where the employees love to work and where consumers like to their shopping. The mission is to be customer first choice for food and maintaining brands of outstanding quality. Organizing Sainsbury’s has well organization design that makes it easier for the employees to perform their duties. The company has also strong social networks that create strong linkage among the stakeholders. Leading Under the effective leadership of David Tyler and Mike Coupe, Sainsbury’s has achieved high sales as well as an expansive market segment for the last 7 years. Decision making process is all inclusive thus creating an aspect of motivation within the firm. Controlling The company has emulated various strategies to maintain strong human resources. This includes in-house training and promotion among other benefits. Theme that has critical importance for future strategy of Sainsbury One of the notable aspects that will make Sainsbury’s to attain a competitive edge is its adoption of participatory planning. This involves making the stakeholders part and parcel of the company operations. It is worth to note that stakeholders must be provided with an opportunity to set up objectives and priorities. This implies that an organization such as Sainsbury’s must utilize the vast amount of information and knowledge that is held by the stakeholders to find sustainable and effective solution to challenges facing it (Shiller, 2003). On his studies on stakeholders’ importance and influence, Juri (2010) argues that by undertaking the stakeholder’s analysis, a firm is in a position to identify the degree of their importance thus effectively meeting their needs. Sainsbury’s key stakeholders include employees, shareholders, suppliers, government and the communities. The section below discusses some of the major ways the store engages its stakeholders. Staffing Sainsbury’s Company has employed more than 150,000 employees who are highly valued by the management. For example, the workers are referred to as colleagues making them to feel part and parcel of the organization. As a way of maintaining a motivated workforce, the colleagues are provided with various extrinsic motivating factors. These include percentage discount on the store’s products, discount on the Sainsbury’s Bank products, and easier access to discount in other outlets. It is vital to note that while majority of the employees are not members of the unions, and they are not restricted to join, Sainsbury’s maintains positive strong relationship with the Union of Shop, Distributive and Allied Workers USDAW, one of the unions that represents the colleagues (Kotzab and Teller, 2011). Other association that the employees are involved in includes Sainsburys Staff Association that was established in 1947 and Sainsburys Veterans Association that was founded by 8 employees in 1947. Based on its efforts to maintain strong connection with its employees, Sainsbury’s has been locally and globally recognized making it to win various awards such as the 2013 Employer of the Year given during the Oracle Retail Week Awards (Hugh, 2013). Other benefits that have made the supermarket to be valued by the employees include allowing them to make investment in shares, provision of public transport tickets, contribution to pension schemes, and grants for purchasing bicycles. As a way of making the colleagues to be productive and increase the company profitability level, Sainsbury’s does not overlook in-house and outside training. For instance, in 2010, the supermarket established 7 food colleges that provide training on fishmongery, bread making, and butchery (Baker, 2012).With more than 21,000 employees having undergone the training, Sainsbury’s has greatly improved the skills of its workers an aspect that has made it to improve its performance. In reference to communication, the store has established MySainsburys, a website that allows the colleagues to access their benefits, communicate with each other as well as to provide their contribution and feedback on the way the company is running. The establishment of Youth Forum, that focuses on employees aged 25 years and below has also enhanced sharing of life experiences and problems among the colleagues thus making their level of concentration to be high resulting to higher productivity. In future such skilled and motivated workforce will greatly impact of the Sainsbury’s performance in the market. Shareholders Notable aspect that has made Sainsbury’s to expand in the UK market is its strategy of engaging the shareholders. Even though the store was founded by John Sainsbury and Mary Ann, who were couple, the family has sold significant percentage of its ownership to individual investors and the public. For example, in 2005 Sainsbury family sold 35% of their stake to the investors. Other notable shareholders include Lord Sainsbury who owns 5.83%, Qatari royal family with 26.14% ownership, and Lord Sainsbury of Preston Candover possessing 3% of the company shares. This indicates that shareholders have a significant impact on the Sainsbury’s operations. Sainsbury’s on its part has effectively engaged the shareholders in the local as well as foreign operations. For example, the company has established a shareholders centre that allows shareholders to find the information about Sainsbury’s ordinary shares. In addition, the shareholders are provided with an opportunity to get solution of their questions while still providing their opinions on the company activities. Sainsbury’s has also provided the shareholders with a chance to manage their shares online (Freeman and Reed, 2010). Through Computershare Investor Services Company, Sainsbury’s registrars, shareholders are given the avenue to undertake online services such as changing names, replacing lost shares, and amalgating duplicate accounts among others services. The future expansion of Sainsbury’s is an opportunity that can be utilized if Sainsbury’s maintains the current strong relationship with the shareholders. Suppliers Sainsbury’s good relationship with suppliers has made the company to benefit from continuous flow of products in the market. The store makes it easier to becoming a supplier an aspect that makes it to easily access the raw materials. In addition, Sainsbury’s believes in working in partnership. In this regard, the company works closely with farmers in UK and foreign countries. For example, since 2004, Sainsbury’s has been working closely with Woodland Trust one of its eggs suppliers. As far as communication with the suppliers is concerned, the supermarket has established the Sainsbury’s Information Direct (SID), an avenue that allows the suppliers to manage their relationship with the Sainsbury’s (John, 2012). Sainsbury’s can utilize the opportunity of entering emerging markets where raw materials are readily available. The company should there expand its investment in developing countries for example in the African region. Government The support that Sainsbury’s gets from the government is due to its culture of abiding by the laid down business regulations. As a store that deals with wide range of products and employs significant number of workers, Sainsbury’s maintains ethical trading. The company has established Code of Conduct for Ethical Trade that covers employment practices that it expects even the suppliers to follow. The Code of Conduct for Ethical Trade, that consistent with national as well as international laws, is also in line with ETI Base Code. Sainsbury’s has also extensively implemented the Grocery Supply Code of Practice (GSCOP), a 2010 government initiative to regulate competition in the grocery market (Sun, 2010). With the growing competition in the grocery sector, Sainsbury’s image on the government and public will be enhanced due to the company’s value for compliance with the law. Communities Despite the stiff competition that Sainsbury’s face in the market, the store is likely to stay ahead of the rivals in future. This is due to the supermarket’s strong engagement with the communities and the young workers who are trained to become future leaders (Edward and Alexander, 2013). Some of the activities that have made the company to gain communities trust and support include provision of disability friendly trolleys, removal of 1 million units of alcohol from Conegliano Prosecco - one of its own brands, 100% recycled food crate, cycle safe lorry, school games re-union, reduction of sugar from its brands, production of women coffee, skills of a 2020 graduate, usage of 100,000 solar panel to curb carbon emission, and donation of active kids equipment among social responsibilities (Sainsbury’s Corporate Social Responsibility report, 2011). In addition, assisting the community is one of the ways that the supermarket can use to address the risk of stiff competition. Conclusion As an organization with strong management team, Sainsbury’s operations are properly handled while at the same time maintaining quality products that meet the need of the market. Even though the organization operates in a vey competitive industry, it has put in place strategic plan that will make it achieve its goals. Sainsbury’s competitiveness is also a notable strength. With the strong connection it has with the employees, who are referred to as colleagues, the company has become a place where every individual would like to work in. In some firms, employees are not allowed to join unions, but Sainsbury’s maintains strong positive relationship with the unions such as Union of Shop, Distributive and Allied Workers USDAW, Sainsburys Staff Association and Sainsburys Veterans Association. Motivated workforce as a result of flexible benefit scheme and strategic workers plans in another aspect that has made Sainsbury’s to remain competitive in UK and overseas markets. The company has also dedicated shareholders who value the progress of the company. This is depicted by the way Sainsbury family sold some of their stake to investors such as Lord Sainsbury, Qatari royal, and Lord Sainsbury of Preston Candover among others. The extensive implementation of GSCOP, thus benefiting from the government support is another major factor that makes Sainsbury’s to remain competitive. In addition, expansive corporate social responsibilities that Sainsbury’s has initiated in UK and abroad have made it not only to face off its competitors but also to create strong brand awareness and loyalty. References Baker, R. 2012. Sainsbury’s pulls Fresh Kitchen food trial. Marketing Week. Retrieved 12 November 2014. Butler, S. 2007. Sainsburys to revamp depots as sales grow faster than forecast. London: London press. Daffy, C. 2011. Once a Customer, Always a Customer, How to deliver customer service that creates customers for life. Cork: Oak Tree Press. Edward, F and Alexander, M. 2013. Stakeholder management and CSR: questions and answers. 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