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Market and company overview of sainsburys

Paper Type: Free Essay Subject: Marketing
Wordcount: 1584 words Published: 1st Jan 2015

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J Sainsbury plc was founded in 1869 by John James and Mary Ann Sainsbury and today operates a total of 872 stores comprising 537 supermarkets and 335 convenience stores.

Main areas of business of J Sainsbury plc are Sainsbury’s supermarkets, Sainsbury’s online, Sainsbury’s property and Sainsbury’s Bank. Sales including VAT in 2010 are £21,421m which is more than £20,383m in 2009. Their share price is 352.30p Goal of Sainsbury’s is to improve customer’s shopping experience at reasonable prices with great products. Also, their aim is to exceed customer expectations for healthy, fresh, safe and tasty food, making the customers lives easier every day. Sainsbury’s is a public limited company because it is worldwide, they sell shares to the stoke market and allow public to buy shares from them and therefore increases the amount of money available to Sainsbury’s.

Chairman:DavidTyler

ChiefExecutive:JustinKing

Chief Financial Officer: Darren Shapland

PESTEL analysis

The constitution and performance of an organisation is not only determined by internal factors but is also strongly subjective by a range of external environmental factors. For any supermarket to continuously survive and growth within the market they must react to any opportunities, challenges or risks. The most common method of analyzing the environment is to identify and explain the key external factors that are likely to affect the performance of a business. This is known as a PESTEL Analysis. It stands for Political, Economic, Socio-Cultural, Technological, Environmental and Legal influences.

Political Factors

Increasing globalization is a challenge as well as an opportunity to Sainsbury’s. Sainsbury’s can go into the markets of emerging companies through joint ventures or partnerships to walk around these new markets, although it does not have any plans on the prospect to do so.

Corporation tax is to decrease from 30% to 28% by UK Government, that will helpful for company and they will invest more money for expansion of their business.

Economic factors-

Nowadays food prices are increasing all over the world; it will increase purchasing cost for Sainsbury’s. That will effect on the margins of the organisation. Also, increasing products price of Sainsbury’s due to rise in fuel costs.

Consumers might purchase less because of credit crunch. They may not spend more money on luxury items which has a more profit margin for Sainsbury’s.

Due more and more competition in the retail sector, Sainsbury’s have to decrease their price of products.

Social factors-

Nowadays there seems to be more importance on fresh, easy style cooking. This serves an opportunity for Sainsbury’s to encourage new recipes and simple eating.

“There has been a huge importance by the government to encourage healthy eating” (eatwell.gov.uk [online]), “primarily due to the increasing level of obesity within the UK” (department of health [online]). Because of that many consumers to move towards healthier food. In new trend, Sainsbury’s can stock up with more healthy food at a cheaper price than other manufacturers.

Technological

For supermarket shopping, the queuing system is not felt comfortable for customers especially for who have to queue up for very few items. For 24 hours Sainsbury’s opening stores, self checkout machines might help to improve sales.

It is not popular yet; RFID (Radio Frequency Identification Device) technology can be used for significant benefits to the supply sequence of Sainsbury’s. This technology will lead to fewer inventories for the supermarket firms leading to a leaner, more profitable organisation.

Environmental factors-

Most of western companies have been reducing carbon footprint and increasing energy efficiency. Sainsbury’s can be affected by ethical issues like sale of organic food and treatment of animals. These issues means they will have to supply to consumers govern by prices. Because of these issues, they will have to balance consumers due to increase in prices.

Legal factors-

Because of inflexible laws on food and drinks, Sainsbury’s will have to concentrate on packaging and labelling policies, that means it will be an additional burden on the company.

Sainsbury’s is also working with banking which means there is more responsibility regarding legal agreement and other risk measures.

Porter’s Five Forces Model:

Worthington, Britton and Rees (2001) define “the analysis to be the structure of an industry and the ability of firms to act strategically depend on the strengths of five forces”:

Competitive rivalry-

Nowadays most of companies are trying to acquire into non food sectors. That’s why retail market is extremely competitive.

Sainsbury’s has a market share of 15.9% that is a positive trend but it is very behind than market leader Tesco has 30.7% in Nov 2009.

Also there are three big supermarkets like Tesco, Asda, and Morrison’s in UK retail sector. These all have different competitive advantages over each other.

Threats of entry-

There are a number of factors in the retail market because of high threats of entry.

To establish any retail industry is very difficult in the UK, they needs more investment and for brand maturity it will take many years.

There is very few possibility for new company to establish themselves because in UK and western world, retail is at an superior stage.

Threats of Substitutes

If there are lots of choice for consumers to select products for lower price for the same purpose, that is happen in supermarket because they have same products for different brand and consumer are looking for particular brand. It is fact everyday the retail market is always trying to innovate new ideas with respect to food products or their business. This makes them exceptionally difficult to substitute.

Internal industry is only most important threat of substitute where one supermarket is agree with other supermarket.

Power of Buyer

In retail sector power of buyer is more because there are many company selling same products. There is only difference in price and consumers need. At present, economic condition is not well that’s why consumers are more concern about price. Because of that all retail company are offering discount like buy one get one free or less price if consumers buy in bulk.

Porter’s Generic strategies:

According to porter there are three generic strategies result: cost Leadership, Focus (Niche) and Differentiation. That is used to complete and maintain competitive advantage by business. Main aim of competitive strategies is how company can achieve most advantageous position. According to Porter, if you don’t follow one of three strategies, you might be in trouble.

The Cost Leadership Strategy

Company who can produce at lower-cost products in an industry can be referred to as cost leadership strategy. The company who makes products at lower cost means they have more margins and selling at standard market price. Sainsbury’s who is focused on quality than cost.

Nowadays Sainsbury’s is using cost leadership strategy for example; they have summer sales at their most of superstores and providing up to 50% discount.

That will help to increase market share and to make profit. Sainsbury require these cost leadership strategy to being successful:

They need more capital to invest in technology to down cost.

Very well-organized storage, transportation and delivery of goods along the supply chain.

Reduce cost compare to their competitors.

There is also one risk to use Cost Leadership Strategy because competitors might copy their strategies. That is why it is important to find out ways of reducing cost and if we handle this than by higher market shares because people are looking for good quality product. That is one reason why Tesco’s is so successful using cost leadership strategy.

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Focus Strategy

Focus strategy specialist on some products but very small market afterward it will become big market. We will have to build up unique product for market. We have to find out area in which there is a least amount of competition. Depending on type of customers and studying area, Sainsbury can use this strategy successfully. Also, they can focus to open more stores to improve their customer base. Sainsbury can offer low cost price (focus cost) to increase sell. Niche market is extremely profitable.

The Differentiation Strategy

These strategies will make our products or services diverse and smarter from competitors.

To differentiate from their competitors Sainsbury can use this strategy.

Sainsbury will need:

Good investigate, expansion and modernization.

The capability to distribute high-quality products or services.

Valuable sales and marketing

Sainsbury can differentiate from their competitors to offering superior product with premium price. Also, we will require developing new products to stay in market.

 

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