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Sainsbury Slipped Down In UK Supermarket Education Essay

This report is based on the “Fall of Sainsbury supermarket in U.K market: A critical evaluation “. In this research we will basically see the core reason's for the fall of Sainsbury in the U.K market. In today's market Sainsbury is getting a tough competition from its competitors, because of changing customer demand. Now days because of the hectic life and busy scheduling, people want something which is very easy, fast and affordable to get. Supermarkets providing daily needed products such as food, clothing, cosmetics, toiletries etc provide an advantage to UK population. There are many other supermarkets in UK that provide similar products to this population such as Morrison, Tesco, Asda, Iceland etc. These all market provides various kind of cuisine's in the UK market. In the research we are going to see the important or the core reasons because of which the Sainsbury has lost its market position and is looking how to improve on it. Sainsbury can increase their sales on products by adopting proper marketing strategies. Hence, marketing plays the key role in the impact of convenience foods over customers.


In this report, we have collected information for research by using secondary data. We have done a qualitative research to get the insights and facts about the subject. Research design has been used in the starting of the report to understand the exploratory research. And later on our report consists of Conclusive research to get qualitative data. Our report consists of various tools to explain our research such as Porter's five force rule, SWOT Analysis for critical evaluation which we might support or reject in the end of our research hypothesis.


Literature review:

The most important reason for the fall of Sainsbury from top supermarket in UK market to number three, is as stated by their CEO (J. King 2004) "We have not stayed as sharp on pricing as we should have done.” (http://www.allbusiness.com/retail-trade/food-stores/4256669-1.html). Similarly on cutting the price by their competitors has given them an upscale alternative from others. Sainsbury lost its top market position from Tesco in 1995 and dropped even further to number three in 2004. As stated by (J.King,2003 ) "The recent figures have been very disappointing and have illustrated just how good the others are - and just how difficult it is to keep pace with them."


Costs offered by Sainsbury to its customers over the years were higher as compared to other supermarkets e.g. Asda.


Year ended

Turnover (£m)

Profit before tax (£m)

Net profit (£m)

Basic eps (p)

26 Mar 2005¹

15,409

15

61³

3.5

27 Mar 2004¹

17,141

610

396

20.7

29 Mar 2003¹

17,079

667

454

23.7

30 Mar 2002¹

17,162

571

364

19.1

31 Mar 2001¹

17,244

437

276

14.5

1 Apr 2000¹

16,271

509

349

18.3

3 Apr 1999²

16,433

888

598

31.4

7 Mar 1998¹

14,500

719

487

26.1

8 Mar 1997¹

13,395

609

403

22.0

9 Mar 1996¹

12,672

712

488

26.8

11 Mar 1995¹

11,357

809

536

29.8

12 Mar 1994¹

10,583

369

142

8.0

13 Mar 1993¹

9,686

733

503

28.5

14 Mar 1992¹

8,696

628

438

25.7

16 Mar 1991¹

7,813

518

355

23.6

17 Mar 1990¹

6,930

451

314

20.8


In March 2000, the market position of Sainsbury was been demoted to third place in UK grocery market because of decline in the performance as compared to its competitors. The up gradation of Sainsbury which included distribution and I.T equipment that cost almost 38 billion pounds which was been wasted by Sir Peter Davies. This was a key failure in the Sainsbury market position. There has been poor management in Sainsbury for quite a while that has affected the market position. It is because of their poor management and laziness and not adopting to the change in the environment and the change in the way customers want the basic needs.


One of the reason because of which Sainsbury has failed its market position was the chairman's decision to acquire huge number of shares despite of the companies poor performance in the previous year is which had failed to get an award and the company had to face problems from hands of parties and lawyers.


The most important reason in downfall of Sainsbury is their poor customer services. The customers were not been provided quality products at higher rate. The other supermarkets like Tesco provided their customers with greater customer service and good quality and pricing of the product. Sainsbury was been accused of not promoting itself sufficiently and on the other hand many other similar customer initiative were been led by Tesco. It has also failed to develop unique products and services that were been provided by Tesco. It was also unresponsive in growing market. Sainsbury was slow moving in development of targeted store types, which could reach different consumers at different times. Sainsbury was slow to launch its reward card nationally and its strategy appeared to be very unclear with many conflicting statements regarding its intentions. Although when it has launched it made an initial advertising, which helped them stay longer time in the market with a short-term rise. There were also many technical problems with Sainsbury, which had affected their market. Sainsbury was not good with the total marketing tool called as loyalty cards, which shows a long-term relationship of the customers to the company. This loyalty card helps the organisation to know more about the customers and their shopping habits so that they can tailor new offers accordingly. This was been done very efficiently by Tesco and Sainsbury lacked this approach.


After the success of Sainsbury as being the top supermarket since 1989, was been effected because of the increase in the competition by its competitors like Tesco, Asda and M&S. The Tesco strategy was to cut prices in order to increase the sales. The reason for the success of its competitor like Asda and Tesco was high as they were not only handling price cut but also expanding on homewears. Asda adopted the strategy of high volume non-food strengths and M&S went with the strategy of top-end luxury food.


Although Sainsbury has a better and a stronger brand than Tesco but the brand leadership has to be maintain on a long period of time in order to achieve the leadership in the market, which the Sainsbury has failed to achieve.


However, Tesco has embraced all the concepts allowing it to accelerate in the market share table.


In order to be competitive in grocery market price or service must be mutually exclusive otherwise; it affects the overall cost based and reduces the profit margins. Sainsbury's poor profit performance and always falling share price has reduce their chances to survive in a low price platform because if once the price is reduced it is less easy to return to the previous price as customers always have the option to purchase from whichever stores provides lesser or promotional price.


(http://www.throughtheloop.com/knowledge/brand1.html,

http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=515,

http://www.independent.co.uk/news/business/analysis-and-features/the-bags-full-of-problems-that-face-the-new-king-of-sainsburys-736638.html, http://www.allbusiness.com/retail-trade/food-stores/4256669-html

http://www.zdnet.co.uk/news/systems-management/2005/10/28/sainsburys-scraps-outsourcing-deal-early-39234127/, http://www.cabe.org.uk/case-studies/sainsburys-supermarket-greenwich-peninsula.)


Methodology:

Our research design is exploratory which helps us to get insights and understand it.


The research design is Exploratory over here as the objective is to provide insights understanding. “This kind of research simply allows the marketer to gain a greater understanding of something that the researcher doesn't know enough about.” After that the conclusive research will be carried out to make a decision on the research topic. “Conclusive research tests the hypothesis of the research problem formulated by the exploratory research and draws definite conclusion for implementation.”


Our research contains collection of secondary data. Secondary data is a data that is available to all. The primary data available is collected by number of groups and use it for their own purpose. There are many sources for collecting secondary information like books, journals, websites, magazine etc. There are few advantages and disadvantages of using secondary data over primary data they are as follows:


Advantages:

  • Secondary data saves our time.

  • Secondary data are easily available.

  • It is less expensive as compared to primary data.

Disadvantages:

  • The data gathering has no personal involvement of secondary data.

  • The information that we get from secondary data is not always accurate..

  • And the data that consist information which is been updated can also be expired.

In our research qualitative data analysis has been done to gather information. When we do qualitative analysis it helps us to understand the human behaviours and its attitude regarding a particular topic. Through our content, theme and conversation with the help of words, pictures and audios we can analyse the searched information. “This approach tries to understand and explain a phenomenon, rather than search for external causes or fundamental laws”. (Easterby - Smith, 1991; Remenyi et al., 1998).


In our research we have used management tools like PORTER'S 5 FORCES which deals with the aspects such as threats from new entrants, rivalry, substitutes, power of buyers and suppliers. We have also used SWOT analysis as another tool which is used to know the strengths, weaknesses, opportunities and threat faced by the UK market. Both these analysis help's to understand the research more concise.


Source

(http://www.marketresearchworld.net/index.php?option=content&task=view&id=798&Itemid=)

(http://books.google.com/books?id=37x8afFN0FYC&pg=PA7&lpg=PA7&dq=what+is+conclusive+research&source=web&ots=HfMRlqQ3Hy&sig=bJW5Eof7_Un_pF8uhe4diUggsLA)


Evidence:

Porter's five force analysis and SWOT analysis help to gather information on Sainsbury.


Porter's Five Force Analysis:

  • Competitive rivalry: The retail market is very competitive, with market share of Sainsbury was 14.9% in 2007 and has increased gradually.

  • Barriers for entry: Requires lots of investment, also needs brand development that takes years. Replication of local knowledge is very difficult for foreign firms.

  • Threats of Substitutes: It is low as consumers view it as a necessity, markets always looks after conveying and assimilate newer innovations. Only threat is internal industry.

  • Buyer power: Sainsbury power is very high with number of supermarkets providing same products, differentiated only by price and consumer loyalty. Consumer needs are given more weight because of recession.

  • Supplier power: Difficult to categorise, as they are themselves huge companies. But they require supermarkets to provide their products. Smaller suppliers are not considered as their sales volume depends on these markets.

SWOT Analysis:

  • Strengths: It has extremely experienced leadership team with Justin King. And is well placed on green and environmental issues, like buying of fair-trade bananas. Also its an positive consumer brand liked by both green activities and consumers. Containing strong celebrity endorsing products with celebs like “Jamie Oliver”.

  • Weakness: Takeover by Qataris Private equity firm((Arnold and Politi 2008). Governed by foreign firm can effect consumers loyalty. Sainsbury has not expanded itself in other parts of world unlike Tesco.

  • Opportunities: Alternative business helps in future growth. Its investment in property is has had $40 million profit from its bank seems like an good strategy. Online margins are higher and investment is less.

  • Threats: Bio-fuels consumption which is a very important tool for green environment affects supply chain of Sainsbury directly. Sainsbury operations consist of regulatory requirements in relation to planning, competition and environmental issues, employment, pensions and tax laws and in terms of regulations over the group's products and services.

(http://www.swot-pest-porter.co.uk/index.php?action=vthread&forum=1&topic=5)


Conclusion/Recommendation:

The evidence collected from Porter's Five Force rule and SWOT analysis gives us an positive outcome of our research. From the above research clearly shows us why has Sainsbury slipped its market position from being top to number three. It has faced tough competition from its competitors who have always been improving on every scale, on the other side Sainsbury after enjoying leadership showed laziness in their business strategy. After their realisation about the way they are moving and the change in management and also the change of their chairman has brought a change but still they are not able to get above Tesco and Asda. And they are facing challenges from other newer companies too.


According to research we provide few recommendations's to come out of their failure are as follows:

  • Provide new schemes to the customers and differentiate the products from the competitors. Moreover, make available the products online which will increase the sells of the food products. It will help to attract people and give information about the new products to the consumers.

  • Keep pace with the changing trends and change the products accordingly. The companies should be flexible enough to do the necessary amendments.

  • Use of new technologies should be adapted for better outputs. Advance technology will help to produce products more efficiently and indirectly it will help to meet the demand.

  • Periodical survey should to be carried out to make a note of customers' wants and demands. It will help the companies to make out the demand and increase the sales of those certain products.

  • The companies should set some objectives, goals and follow proper marketing steps to promote their products. Advertising plays a very important role in merchandising a product.

Bibliography:

http://www.coursework.info/AS_and_A_Level/Information___Communication_Technology/Information__Systems___Communication/Background_on_Sainsbury_s_L844008.html#ixzz0lDTIpjxi,


wordnetweb.princeton.edu/perl/webwn


(http://www.allbusiness.com/retail-trade/food-stores/4256669-1.html)


(http://www.throughtheloop.com/knowledge/brand1.html,


http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=515,


http://www.independent.co.uk/news/business/analysis-and-features/the-bags-full-of-problems-that-face-the-new-king-of-sainsburys-736638.html,


http://www.allbusiness.com/retail-trade/food-stores/4256669-1.html,


http://www.zdnet.co.uk/news/systems-management/2005/10/28/sainsburys-scraps-outsourcing-deal-early-39234127/,


http://www.cabe.org.uk/case-studies/sainsburys-supermarket-greenwich-peninsula


(http://www.marketresearchworld.net/index.php?option=content&task=view&id=798&Itemid=)


(http://books.google.com/books?id=37x8afFN0FYC&pg=PA7&lpg=PA7&dq=what+is+conclusive+research&source=web&ots=HfMRlqQ3Hy&sig=bJW5Eof7_Un_pF8uhe4diUggsLA)


(http://www.swot-pest-porter.co.uk/index.php?action=vthread&forum=1&topic=5)


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