Situation analysis of sainsburys
Sainsbury's was established as a partnership in 1869 when John James Sainsbury and his wife Mary Ann opened a store at 173 Drury Lane in Holborn, London. He started as a retailer of fresh foods and later expanded into packaged groceries such as tea and sugar. His trading philosophy, as stated on a sign outside his first shop in Islington, was "Quality perfect, prices lower". Sainsbury’s supermarket is the uk’s longest standing major foods retailing chain. J Sainsbury’s is consist with large chain of the 504 supermarkets and 319 convenience store in u. j Sainsbury’s also provide a service of bank service to the customers of the UK. The Sainsbury’s brand is built upon a heritage of providing customers with healthy, safe, fresh, and safety foods. Today it differentiates itself by offering a broad a range of great quality products at fair prices with particular emphasis on fresh foods, as strong ethical approaches to business and continues leadership and innovation.
Conducting a situation analysis for the above organization
Such is the complexity of operating in rapidly changing market conditions that it makes good sense to carry out a thorough situation analysis at least once a year at the beginning of the planning cycle. A useful framework for performing a situation analysis is the 5 C analysis. Company, Collaborators, Customers, Competitors and Climate are the 5 C’s which an organization has to take into consideration while creating situation analysis. Evaluating the company, collaborators, customers, competitors, and climate is a simple way to get a leg up on Sainsbury’s competitors. Marketing Plan Success can help Sainsbury develop a successful situation analysis, which is the foundation of the strategic planning process.
Situational analysis includes:
Porter’s 5 forces.
Increasing globalization, presents a challenge as well as an opportunity to Sainsbury's.The ongoing investigation of price fixing amongst the big four retailers within the UK can have some negative impact to the industry in general and Sainsbury's in particular, as it is at the forefront of this allegation
The rapidly increasing global food crisis has increased food prices all over the world, which will result in rising purchasing costs for Sainsbury's. The credit crunch can have a two way impact on Sainsbury's as it also runs a financial services company with HBOS. The credit crunch might decrease the purchasing power of consumers and though they will still buy the essentials they may be more cautious.
The Internet phenomenon seems to be ever growing within western countries. It is predicted that by 2011 online retail sales in Europe will have reached Eur263bn, with British shoppers accounting for more than a third of all revenue. The Internet accounts for 8% of global advertising spend and are growing rapidly. If used cleverly, Sainsbury's can leverage the internet to its advantage. Competitors like Tesco use their own online delivery model successfully. However, specialist delivery companies like Ocado (working in partnership with Waitrose) provide an alternative for the outsourcing of non-core work.
Important ethical issues, like sale of organic food and the ethical treatment of animals, clearly effect Sainsbury's on various levels. The growing importance of such issues means that they will have to cater to those consumers as well as to consumers governed by price. This is a sensitive issue as they will have to balance their public stand on environment without losing consumers due to the increase in prices.
With ever stringent laws on food and drinks, Sainsbury's will have to follow more and more packaging and labelling policies to deal with these, which will be an additional financial burden on the company. Due to its interests in financial services, there is ever more legal scrutiny in the operations of Sainsbury bank which means there is more responsibility regarding legal compliance and other risk measures.
Porter’s 5 forces:
The five forces model of porters is an outside in business in unit strategy tool that is used to make an analysis of the attractiveness of an industry structure. The competitiveness forces analysis is made by the identification of 5 fundamental competitive forces:
Entry of competitors
How easy or difficult is it for new entrance to start competing which barriers do exists.
Threats of substitutes:
How easy can a product or service be substituted especially made cheaper?
Bargaining power of buyers:
How strong is the position of buyers? Can they work together in ordering large volumes?
Bargaining power of suppliers:
How strong the position of the seller. Do many potential; suppliers exist or only few potential suppliers monopoly.
Rivalry among the existing players:
Does a strong competition between the existing players exist? Is one player very dominant or are equal in strength and size.
Porters 5 factors are useful for the Sainsbury’s situational analysis. Sainsbury’s has threat from his competitor’s Tesco, Asda, and Morison’s. New products are entering in market with competition. Sainsbury’s also threat from the substitutes because when new products are in the market after sometime another substitute product enters in the market with cheaper price. Increase in the competitions so there is also increase in the bargaining power of buyers because many substitute products are available with the cheaper rate. Sainsbury’s has also power of the bargaining with the suppliers. Sainsbury is now purchasing potatoes from different countries like Russia and Taiwan with cheaper rate. In the market Sainsbury’s has tough competition with another supermarket so there is increase in the cut through competition.
Task No. B
A marketing strategy defines objectives and describes the way you're going to satisfy customers in your chosen markets. It does not have to be written down but it is easier to communicate to outsiders, like your bank manager or other investors, when it is. A set of strategies found quite commonly in smaller businesses are growth strategies. One way to look at strategies to grow your business is through the way you will use products and markets or customers.
Current product/current market
Market penetration is a strategy of increasing your share of existing markets. You might achieve this by raising customers' awareness of your products and services or finding new customers. For further information on planning effective marketing communications see the Related Items section below for a link to the Factsheet: Planning marketing communications.
New product/current market
Product development is a strategy for enhancing benefits you deliver to customers by improving your existing products and services or developing new ones.
New product/new market
Diversification is a strategy that usually carries high costs and high risks. It often requires firms to adopt new ways of doing business and so has consequences far beyond simply offering new products/services in a new market. It is therefore usually a strategy to be adopted when other options are not feasible.
Ansoff’s product/ market matrix:
This well-known marketing tool was first published in the Harvard Business Review (1957) in an article called 'Strategies for Diversification'. It is used by marketers who have objectives for growth. Ansoff's matrix offers strategic choices to achieve the objectives. There are four main categories for selection
Market penetration means old products introduced in the new products. Sainsbury’s have to promote the product with new features and providing the product with good quality. Sainsbury’s need to focus on the competitors and on customer needs. For this research Sainsbury’s requires much investment in new market research. Sainsbury’s try to reduce cost of the distribution channel and sale a product with the cheaper than his competitors.
Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products, which can appeal to existing markets. Sainsbury’s develops new products to aim within their existing market, in hope that they will gain more customers and market share.
Market development means expansion of the products in the different markets or countries.
For this Sainsbury’s need to expand his business with the increase in the services like banking, holidays, insurance, credit cards and many other services to the customers. Sainsbury’s establish different pricing policies to attract different customers or create new market segmentation. For this Sainsbury’s has to create new distribution channel for the market development.
Diversification means new product in the new market. In this stage more risk because the business is moving into market, which it has little or no experience? When a business adopt a diversification strategy company must have a clear idea about what it experts to gain from the strategy and an honest assessment of the risks.
Porters generate strategy
Porter has described a category scheme consisting of three general types of strategies that are commonly used by businesses to achieve and maintain competitive advantage. Porter simplifies the scheme by reducing it down to the three best strategies. They are cost leadership, differentiation, and focus. Focus is narrow in scope while both cost leadership and differentiation are relatively broad in market scope.
Cost leadership simply means producing high volume of standardized product with lowest cost. For the successful strategy Sainsbury’s need to control on the cost of the raw material, components, labour, or some other input. Successful implementation of this strategy is to increase in process engineering skills and control on the cost of the production, mass production to reduce labour cost. To achieve cost leadership Sainsbury’s needed to produce a product with the law cost and sell cheaper than their competitors.
Differentiation means making a product different from the competitors. In product, differentiation allowed Sainsbury has to charge a premium price for it. Sainsbury’s hopes that the higher price will more than cover the extras cost incurred in offering the unique product. Because of the product, high price if suppliers increases their prices the firm may be able to pass along the costs to its customers who cannot find substitute product easily. To achieve product differentiation Sainsbury’s need to access to leading scientific research, highly skilled and creative product development team, strong sales team with the ability to successfully communicate the perceived strengths of the products, corporate reputation for quality and innovation.
In this strategy, the firm concentrates on a select a few target markets. It is also called focus strategy or niche strategy. In a focus strategy Sainsbury’s needs to focus to open local Sainsbury’s stores to target more and more people from the market.
Sainsbury’s needs to open local stores in uk busy places where more and more customers are attract.
Porter’s marketing strategy to achieve competitive advantages and long term growth
Sainsbury's aims to be the consumer's first choice for food delivering products of outstanding quality and great service at a competitive cost through working ‘faster, simpler and together’. Sainsbury’s is looking for profit growth through a balance of strong sales growth, further reductions in the cost base, and continuing margin improvements.
The company is committed to achieving industry-leading margins within a dynamic, competitive market and to delivering strong double digit underlying profit growth in each year of its business programmed.
The recommendation marketing strategy of the Sainsbury is as follow
The main strategy of the Sainsbury is the product development is given the best growth in the strategy for the business which gives the fundamental requirement is to enter the new product development. Also this strategy develops the new competencies and requires the business to develop modified products, which can appeal to existing markets. Sainsbury’s develops new product to aim within their existing market, inn hope that they will gain more customers and market share. As the other point the differentiation allowed Sainsbury has to charge a premium price for it. With the help of the higher price Sainsbury’s cover the extra cost incurred in the firm, helps them to pass along the costs to its customers who cannot find substitute product easily.
To achieve product differentiation Sainsbury’s need to access to leading scientific research, highly skilled and creative product development team, strong sales team with the ability to successfully communicate the perceived strengths of the product, corporate reputation for quality and innovation. Implementing a real and substantial product differentiation may include strengthening its claims of organic food advocacy by offering a complete line of organic products still at an affordable price and promoting healthy living. The UK market is already saturated so that the company’s future goal should to maintain its market in the UK and gain new markets in other countries or regions.
Task No C
The marketing mix is probably the most famous marketing term. Its elements are the basic, tactical components of a marketing plan. Also known as the Four P's, the marketing mix elements are price, place, product and promotion.
Elements of the marketing mix are often referred to as 'the four Ps':
Sainsbury’s are selling more products and many products are his own brands. Sainsbury’s need to evaluate the market condition for the product and availability of their competitors and a substitute product in the market.
Price of the product plays an important role in the market to face the competition from the market. Substitute products are available so customers have option to purchase another product with the lowest price. So Sainsbury’s need to take right decision for each product pricing as per the market current position.
Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet.
Product promotion is important because small changes in the promote and sale of the product can lead to change in the result. Sainsbury’s promote his products with the advertising posters and many other ways so its increase in the selling of the products.
A marketing mix is the set of marketing tools a firm utilizes to pursue its marketing objectives in the target market.
When a store markets its products, it needs to create a successful marketing mix for the product, sold at the right price, in the right place, and using the suitable promotion.
Sainsbury also can enhance their goals and values by using the right marketing mix.
The core concepts applied by the company in its product strategy are availability and affordability. Availability pertains to providing every possible food, grocery and non-food item that customers look for. This involves expanding its product line to cover new products representing new needs. At the Sainsbury’s store, the physical appearance of the product, packaging, and labeling information can influence whether or not the consumers notice the product in store, examine it and then purchase it. Sainsbury should with these elements of marketing mix be able to differentiate their products from those of its competitors.
Affordability pertains to the activity of incorporating generic brands in order to provide the same retail items but at a lower cost.
Sainsbury's pricing strategy is reactive and competitive. Pricing is reactive because the price accorded to its products depends upon the market and industry price. The company places a high premium on affordability in reaching out to majority of the market. Pricing is competitive because the company determines price relative their competitors. Sainsbury can also offer discounts, allowances, payment term and credit terms. If at all some of the Sainsbury’s products are high priced than its competitors then Sainsbury staff should explain to its customers that its products are of high quality and are more prestigious.
Place strategy calls for effective distribution of products through wholesalers and retailers. Sainsbury should use this element of marketing mix to enhance the purchase of the products. Sainsbury can position or reposition its product by locating that product within a store. Sainsbury should place its products which are convenient and readily available. It should involve extensive search as Sainsbury might lose out on its potential consumer. Sainsbury should have its own prestigious outlets as consumers perceive it of high quality. Sainsbury should use this element effectively as it determines the sale of the product or no.
The gist of the promotion activities of the company is differentiating the company as an alternative to its competitors. The focus of its promotions is on the food products so that the company markets the claims that it offers better quality, fresher and healthier products. The company also aligns itself with the trend towards organic food by marketing its claim of being the largest supporter and distributor of organic products.
The final conclusion of the all task is give how these organizations which make the things in better proportion also it give us the basic need to think about the situation. The objective the goal and the values have given the basic look for this subject. While doing the task it can make the think in their own simplicity which give them all the basic need to develop the organization and provides all the detail with their strategic management method. To the point the company has changed a lot in their resources and product. So, we can ensure that the project give us the all need to the work.
Focusing on real and substantial product and service differentiation is the most important strategy that Sainsbury needs in the long-term. The market influences pricing and the only way that the company can become competitive is to participate in the price wars. However, Sainsbury can also strengthen its product strategy as a security net in case of the failure of the pricing strategy. The company should have a product strategy that results to its exceeding the performance of its competitors in this area. Implementing a real and substantial product differentiation may include strengthening its claims of organic food advocacy by offering a complete line of organic products still at an affordable price and promoting healthy living. Expanding outside of the United Kingdom and into other regions where the company does not have representation is another viable strategy particularly in areas where its competitors have not yet expanded to in order to avoid the same difficulties experienced in the UK where the only significant source of competitive advantage is price. Sainsbury can look into emerging market such as Eastern Europe, Latin America and some parts of Asia. The UK market is already saturated so that the company's future goal should to maintain its market in the UK and gain new markets in other countries or regions.
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