Corporate Strategy of J Sainsbury Plc - Research Paper Example

Corporate Strategy Table of Contents J Sainsbury Plc 3 Corporate Objectives and Goals 4 Situational Audit 5 PESTLE Analysis 6 Porter’s Five Forces Model 8 SWOT Analysis 11 Conclusion 12 References 13 Bibliography 15 Introduction It has been rightly observed by the experts of the business fraternity that the only constant thing in the present world is the word ‘change’ itself. The massive developments in the field of information technology and that of the communication process have had major influence over the terms and the tricks of the trade. The globalization has made the world increasingly smaller. With internet as its best, the geographical borders of the countries have almost ceased to exist making the market truly transnational in nature. The reach of the consumers has increased many folds and the entire world need is within the distance of clicks of the computer mouse. In such changing times, the onus lies upon the business organization to initiate appropriate strategies that would ensure the sustainable growth and development of the company. In simple words, the strategies of the business firms hold optimum importance in the changing world of today with competition within the industry at its all time high. The discipline of strategic management considers the various aspects of a business organization and corporate strategy is significant among them. Corporate strategy actually encapsulates the various decisions and the procedures followed by the companies to survive as well as expand. J Sainsbury Plc J Sainsbury Plc is one of the leading retain chain of the United Kingdom. The organization was incepted in the year of 1869 and is celebrating 140th year of foundation in the ongoing season. With the glorious past of selling own branded products since 1882 and employing women since 1914, the company has many ups and down in the history of it. The company has the heritage of providing healthy, safe and tasty foods to the customers and is now the longest serving super market major of the United Kingdom. This giant retail chain hold more than 16 % share of the market and serves almost 18.5 millions of customers per week. The group has more than 30,000 products in its shelves and also has been providing complimentary non - food products and services in many of the stores. The group has rightly identified its course of action aligning itself with the ongoing technological innovation. It offers online shopping and the benefits of home delivery to at least 90 % of the households of the United Kingdom. The company also has duly emphasised upon the research and development and has always strived to innovate products with the changing needs of the consumers. The technology of food products used by the company has been one of the most sophisticated within the industry. J Sainsbury Plc has more than 500 supermarkets and around 300 convenience stores under the brand. The goal of the company is to provide quality shopping experience to the esteemed customers of the company in fair prices. The company is truly aggressive as it aim to exceed the customer expectations in terms of food and related products and also hopes to make their life easier (J Sainsbury, n.d.). Corporate Objectives and Goals In order to understand and analyse the corporate strategy of J Sainsbury Plc, at the outset the goals and the objectives of the companies should be studied at due length as because it is the objectives of the company that guides the formulation of the strategies. As discussed in the Annual Report for the year 2009, the corporate strategies of the company are undermined below: Great Food at Fair Prices – The organization expects to carry on the legacy and leadership in the industry of food items and the allied products. The organization understands the importance of innovation in the present world and also vows to provide its product at fair prices. Accelerating the Growth of Complementary Non-Food Ranges and Services –The company also hopes to excel in the non – food products and services but for the purpose of doing so, it does not expect to forego the twin principles of value and quality. The organization essentially believes that the non-food items should also be treated as front line products so that the esteemed customers get an enriching shopping experience. Reaching More Customers through Additional Channels – The company is all set to acquire greater proportion of market share and to do so, the organization has utilized the online technique of shopping so that it could reach large number of populace at once. Also, the leading supermarket chain to open more than 300 convenience stores for the same purpose. Growing Supermarket Space – The company is virtually keeping no stones unturned to increase the store space. It is initiating every possible measure so that the customers find the stores at ease and the stores have larger space. Enhancement of store space would help both the ranges of products, food items as well as non-food items. Active Property Management – The company is also initiating required measures to own assets as it provides for the operational flexibility and opportunities of potential development in the long run. (J Sainsbury, 2009). Situational Audit The strategic analysis of the company is done with the help of the various models that encapsulates the various internal and the external factors that the company is undergoing. Porter’s Five Factor Model, the PESTLE Analysis and SWOT analysis are few of the widely used tools for the purpose. PESTLE Analysis The PEST analysis or the PESTLE analysis is one of the most used models for the purpose of external audit of any organization. The broad spectrum of PESTLE analysis comprise of the factors like Political, Economical, Social, Technological, Environmental and legal (Purdue University, n.d.). The PESTLE analysis can take the following form with respect to the J Sainsbury. Political – The political condition of the markets at which J Sainsbury operates are mostly stable which is definitely a major advantage for the company. The increasing effect of globalization have opened whole lot of opportunities in front of the company as it can venture into many of the emerging nations of the world which can increase the customer base for the company. Economic – The economic factor of the PESTLE analysis essentially takes ongoing financial slowdown in to the focus. The credit crunch has affected almost all of the economies of the world and many of the countries are in to the grip of financial recession. As a result, the general public has lesser purchasing power and would spend the amount only upon the essential items. This would invariably hamper the revenue of this reputed retail chain. Aldo, Sainsbury has a dedicated financial service wing in place and because of the global meltdown it is also bound to take a hit. Social – The social factor encapsulates the features that take in to account the status of the company within the society. Predominantly, Sainsbury is quite well placed among the society with 140 years of experience. But the recent allegation against the company to fix up prices with the other three retail majors might hurt the customers and create a negative impact among the society as a whole (Rigby, 2008). The learned society of the United Kingdom has shifted towards the healthy food habits thanks to the mass advertisements by the government against the increasing obesity among the society. This has created a major opportunity for the company to innovate newer and healthy products that would cater the changing needs of the target group of customers. Technological – The company has taken appropriate measures to align itself with the recently developed technological innovations. The company came up with the facilities like online shopping and internet based shopping to attract greater share of the market and to create value for the customers. The esteemed customers of this reputed retail chain could easily shop sitting at their home and the store would provide them with the home delivery service. Environmental – J Sainsbury Plc has a dedicated approach towards the environmental factors. The company has been sharing corporate social responsibility with sheer pride since long. It has declared propaganda in the fields of animal welfare, waste management and the emerging issue of carbon footprint. The company, as it informs the outside world through the Corporate Social Responsibility report, also has whole hearted approach to make the best foods that are essentially healthy and to source ethically and with integrity. The company has been initiating numerous measures to make positive change towards the community at which it operates and also wants to be treated as the preferred employer and a great place to work at (J Sainsbury, n.d.) Legal – The fact should be admitted that in the industry of food and the allied items, there are increasing legal formalities and regulations that are to be adhered. The company should take every possible measure to maintain such needs so that it can operate freely in the eyes of the law. Also, with respect to the financial wing of the J Sainsbury Plc, the regulations are to be maintained at the truest sense and it should not indulge in any of the unwanted high risk transactions at this post – credit crunch period. Porter’s Five Forces Model The other important model that holds optimum importance to analyse the corporate strategy of any organization is the Five Force Factor Model as prescribed by Mr. Porter. According to the model, there are five important factors that are crucial to judge the external environment of an organization. The factors include bargaining power of the buyers, bargaining power of the suppliers, threat of new entrants, threat of substitutes and the rivalry among the competitors (Purdue University, n.d.). The model is discussed below in light with J Sainsbury Plc: Bargaining power of the buyers – The bargaining power of buyers implies the power of the consumers of the organization. In the case of J Sainsbury Plc, it is the valued customers. The higher is the bargaining power of the customers; it is more risky for the company. In such cases, it is the customers that dictate and the company has to oblige to retain the market share. To reduce the bargaining power of the customers, Sainsbury should try and sale to a wide spectrum of customers and the consumer base should never be concentrated. Still, as there are many companies in the market that sales similar products like that of Sainsbury, it is fact that the consumers hold strong bargaining power. Bargaining power of the suppliers – It is prudent for the organization to reduce the bargaining power of the suppliers as much as possible for the simple reason that with more bargaining powers, the suppliers would tend to control the decisions of the company. The suppliers of Sainsbury include big names like that of Unilever, Cadbury and P&G. The company should have a distributed supplier base and should not focus on any of the particular supplier for all its need. This would reduce the bargaining power and lesser the bargaining power of the suppliers, better for Sainsbury. Threat of new entrants – The industry to which Sainsbury caters has high entry loads and therefore the threat from the new entrants is not so significant. It takes years to develop a brand and also many regulations are to be adhered to enter in to the market of retail chain along with heavy investments that is required (Doyle, 2002). Still, there are many competitors prevailing in the market and the management of Sainsbury should undertake every possible measure to retain the employee force that has been trained and developed for the specific jobs as there are increasing trends among the employees to shift to other companies for better offers. Threat of substitutes – The threat of the substitutes is also quite low for the industry of food and allied items as it is one of the essential elements for living and people have to purchase it. Yet, the company should be in line with the technological changes as the threat in this regard, especially in the distribution channel looms large with constant changes. The internal threat of the industry with many of the big retail chains catering to the same target market is also a major threat. Rivalry among the competitors – The industry, in which J Sainsbury Plc caters, is highly competitive. The major competitors include the big names of Tesco, Asda and Morrison. The company has to bank upon its core competencies and resort to continuous innovation of product and distribution channel to gain the competitive advantage. The non-food segment in which also Sainsbury operates is increasingly becoming a crowded market with many of the leading players getting involved into it (Rigby & Killgren, 2008). SWOT Analysis SWOT analysis deal with both internal as well as external factors. The strengths and the weaknesses are treated as the internal factors where as the opportunities and threats are analysed with the external industry (University of Wilconsin – Stevens Point, 2008). The SWOT analysis of Sainsbury can take the following shape: Strengths – There are many strengths of the company. The company has experienced stable profitability in the recent past and also the management team of the company is viewed as one of the most experienced in the industry. The various social responsibilities that the company undertook also helped the company to achieve newer heights. The highly skilled employees and the fair trade practices are some of the other strengths of the company. Weaknesses – The promotion and place are the two weak links of the company. The distribution channel can be developed further and there has been no such promotional campaign in favour of the company except that of celebrity endorsement. Opportunities – With the changing terms of business and Sainsbury’s dedication towards innovation, there lies a huge opportunity for the company. Also, it has diversified in to the financial services and taken the online mechanism of distribution with die seriousness. All these factors provide great opportunities to the company. Threats – The ongoing financial meltdown has been a major threat to the company. Among the other threats, the lesser diversification in to other markets also possesses serious threat to the company. Conclusion Sainsbury has been a big name in the market of the United Kingdom for long. The company has attained sales revenue (excluding Value Added Tax) of 18,911 million GBP in the financial year of 2008 - 2009 which is at least 5% higher than that of the previous year. The company has also ensured 289 million GBP as profit after tax in the financial year of 2008 – 2009. The above facts clearly depicts that the corporate strategy initiated by the management of the retail major is succinct and effective. The company also has dedicated attachments in the arenas of environment and innovation. With the visionaries like Philip Hampton and Justin King at the helm, such superb performance by the Sainsbury group is not at all astonishing. It can be concluded stating the fact that the corporate strategies initiated by the group had been efficient as well as effective. References Doyle, P. Marketing Management and Strategy. Pearson Education. 2002. J Sainsbury, No Date. Our Key Commitments. Corporate Responsibility. http://www.jsainsburys.co.uk/cr/index.asp?pageid=1 J Sainsbury, No Date. Goals and Values. Corporate Website. http://www.jsainsburys.co.uk/index.asp?pageid=14 J Sainsbury Plc. Annual Report and Financial Statements 2009. London. 2009. Rigby, E. Sainsbury attacks 'scandal' of price inquiry. Financial Times: London. 3 May, 2008. Rigby, E, and Killgren, L. Sainsbury buys back sites to fuel non-food growth. Financial Times: London. 27 March, 2008. Purdue University, No Date. Subject of PEST Analysis. PEST Analysis Template. http://web.ics.purdue.edu/~pbawa/421/PEST%20Template.htm Purdue University, No Date. Industry Analysis: The Five Forces. AICC. http://www.ces.purdue.edu/extmedia/ec/ec-722.pdf University of Wilconsin – Stevens Point, 2008. SWOT Analysis. University Library. http://library.uwsp.edu/admin/Self%20Study/Final%20SWOT%20f.pdf Bibliography Ansoff, H. I. Corporate strategy: an analytic approach to business policy for growth and expansion. McGraw-Hill, 1965 Idaho State University, No Date. SWOT Analysis. Academic Affairs. http://www.isu.edu/acadaff/swot/index.shtml Government of United Kingdom, No Date. Eat Well. Food Standards Agency. http://www.eatwell.gov.uk/ Grant, R.M. Contemporary strategy analysis: concepts, techniques, applications. Wiley-Blackwell, 2002. Lee, S. F. & On Ko, A. S.. 2000. Building balanced scorecard with SWOT analysis, and implementing “Sun Tzu's The Art of Business Management Strategies” on QFD methodology. Managerial Auditing Journal. http://www.qa.au.edu/page2/research/BSCandSWOT.pdf Smith, P. R. & Taylor, J. Marketing communications: an integrated approach. Kogan Page Publishers, 2004. Saddler, P. & Craig, J. C. Strategic management. Kogan Page Publishers, 2003. The Texas A & M University, No Date. Why is SWOT so popular? SWOT Analysis. http://ttap.tamu.edu/Curriculum/F.%20SWOT%20Anlaysis.pdf University of Wilconsin- Madison, No Date. Porter’s Five Forces. How to Use the Tool? http://research3.bus.wisc.edu/file.php/139/Toolkit/Content/Porter_forces_1.pdf University of West Georgia, No Date. Porter’s Five Factor Model of Market Profitability. Market and Sub-Market Analysis. http://74.125.153.132/search?q=cache:RbVQHEcuZqMJ:www.westga.edu/~mktreal/MBA05.ppt+porter%27s+5+factor+site:edu&cd=7&hl=en&ct=clnk&gl=in&client=firefox-a Whittington, R. What is strategy, and does it matter? Cengage Learning EMEA, 2001. Read More