Situation review of J Sainsbury PLC
J Sainsbury plc is a huge UK based food retailer with interest in financial services. Its chain of supermarkets has survived the challenges of competitive retail business since 1869, which makes it the longest standing major food retailing chain in UK. With the heritage of providing customers with healthy, safe, fresh and tasty food it has indeed come a long way from a small store from Drury lane to the current headquarter in Holborn, London. Currently it is serving over 18 million customers just in a week and have a market share of a staggering 16%. Along with its 502 supermarkets it has over the course of time diversified its business to 290 Sainsbury's convenience stores, an internet-based home delivery shopping service and Sainsbury's Bank. The internet-based home delivery shopping is available noticeably to about 88 percent of the UK households. They clearly identified five areas to focus on in order to maintain their superiority in the retail business which were a) Great food at fair prices b) Accelerating the growth of complementary non-food ranges c) Reaching more customers through additional channels d) Growing supermarket space e) Active property management.
In order to perform the situation review as a Marketing Consultant I have decided to conduct a SWOT analysis of J Sainsbury Plc. The reason behind my selection of SWOT analysis is that it has been used for a long time and is a trusted tool of strategic and marketing analysis. Its importance in reviewing the situation of a company is massive as it suggests ways in which the organisation can profit from strengths and opportunities and shield itself from weaknesses and threats (Adams, 2005). After the explanation of every SWOT elements of J Sainsbury Plc I've also mentioned the likely effect of such elements to their competitive advantages and brand. However it is a method that has to be used very carefully because if not thought or investigated properly the results will not provide the actual picture.
- Sainsbury's as a brand: Brand of Sainsbury's stands it out amongst the crowd of other supermarkets. The goodwill that has been built over 140 years of service in its business is represented by its brand and that has several benefits like customer loyalty, brand familiarisation, increase and maintenance of customer belief etc. If Sainsbury's want to increase its outlets the cost involved for advertisement for the local areas will be far less than that for a smaller organisation with a lesser known brand. Having such a strong brand is definitely continue to enhance its competitive advantage as other new competitors will have a hard time building up such a good brand as it needs a lot of time and effort.
- Use of effective Marketing Strategy: Sainsbury's like any other large company has to use effective marketing strategy. It has been doing so very well and which is why it stood up the test of time. Sainsbury's use of Jamie Oliver one of Britain's most high profile chefs who famously launched campaigns regarding healthy eating in different sections of the community in its advertisements can be considered as a very good marketing move. It was like using a renowned dentist to promote toothpaste as it adds to the customers the trust for healthy food for good price. The positive effects of the campaign were apparent as shown in the growth of the sales in Sainsbury's. With its effective marketing strategy Sainsbury is far likely to attract more customers and increase their competitiveness and enhancement of their already powerful and attractive brand.
- Human Resource Policy: There is equal opportunities policy in Sainsbury on different functions like recruitment, promotional, training and development etc. Their policy basically focuses on keeping their staff motivated and providing them with proper training. These kinds of policies have enhanced the reputation of Sainsbury as a very good employer.
- Conveniently located: Due to its huge network of outlets there is always a Sainsbury nearby. This is a very good advantage to have which backs up the effects of the brand. Even if Sainsbury had built up a good brand most people will be only be interested in going to buy groceries and daily necessities if there is a Sainsbury close by. Groceries and daily necessities are prime products of Sainsbury and in order to boost their sales location is of prime importance.
- Reliability and trust: Sainsbury have built up over the years, a sense of the trust and reliability among customers. Customers believe on Sainsbury that it would not compromise on health and safety issues. They also trust Sainsbury on providing very competitive prices for the products if not the cheapest.
- Environment Friendly: Sainsbury has always been environmentally aware while performing its business. Some of Sainsbury's efforts are mentioned below:
There are several strengths of Sainsbury that needs be highlighted when performing a situation review which are analysed below:
Having a good HR policy will only have positive results in terms of their competitiveness and brand as people will be more inclined towards joining with their team and most importantly staying with them.
Like I mentioned convenience is a key to a retailer's success and its wide spread outlet helps them to provide customers with opportunity to stay loyal to them.
When there is trust among customers about your product and services they will continue to remain your customers. Extra care is taken by Sainsbury and this will in future continue to boost their image.
- It uses environment friendly till printers.
- It gave away eco-friendly loo rolls as promotional offers.
- It opened environment-friendly store in Dartmouth, Devon which was built with recycled materials and will help in reducing its energy bills.
- It signed a landmark deal that has enabled the creation of a new £8 million wind project at Lochhead in Scotland, due to be completed in Summer 2009. The Power Purchase Agreement (PPA) means that Sainsbury's will purchase energy direct from A7 Lochhead Ltd. for the next ten years.
These efforts mean that customers will have in the back of their mind that Sainsbury is doing its part in the great cause of saving the environment. The reputation has been slowly building in this regard and will continue to grow further.
This strength of Sainsbury means that it will increase its customer base, retain its customer by spoiling them with choice and attract new suppliers as well, boosting its competitive advantage and brand name in the process.
- Lack of international expansion: Sainsbury has always been a brand that is famous only in Britain. It hasn't ventured into the international market that much as yet. In other words it has not been adventurous enough. Its main rival Tesco has been more successful in this regard than them which will hamper their growth and market domination.
- No self-service: In today's world time is money. The service should be up to the standard at the same time it should be time efficient. Due to which self-service system has proven to be very effective over the years. However, there are no self-service systems like self-checkout counters in most of the Sainsbury's stores. Providing time efficient service in every way is a key to any company's success and Sainsbury has not fully integrated this theory in their practice which will have negative effects in their competitive advantage and brand.
- Implementation problem: There have been many such cases in Sainsbury where they have been found short on the implementation of the pre-determined plans. It can be considered as one of their major weakness.
This weakness will definitely haunt them as with more international coverage its rival will be more powerful and have more flexibility which means they'll gain more competitive advantage and a better brand name.
There is no point of planning if it were not be implemented. It will affect adversely to their morale and brand doing a world of good to that of their competitors.
Every organisation in order to survive and compete in a market has to keep a close eye on any opportunity of growth, expansion, diversification, merger etc. Opportunities are something if not grabbed at the right moment the value of it later will be significantly diminished or elapsed.
On the current situation I have tried to categorise some of the opportunities that lay in front of J Sainsbury, which are as follows:
- Growth: Sainsbury has been involved in other projects as well like its investments in property, banking, environmental issues etc. These kinds of alternative business present great opportunities for future growth.
- Suppliers and Partners:
- Technology: This is a modern age of technology where every company has to find ways to upgrade their services using technology. Sainsbury has had bad experiences for not planning technology better when they had to buy back £1.8b worth of technology outsourcing deal with Accenture. However there are huge opportunities in front of Sainsbury in the future for further development in technology.
- Previously overlooked Market Segments:
- Social Patterns: Understanding of the changing social patterns is a challenge as well as opportunity for Sainsbury. Understanding the need of the current society is vital.
Growth is vital for any company's competitiveness and for Sainsbury its no different.
Food for Britain (FFB) is Sainsbury's partner and supplier. FFB helps its clients access new opportunities abroad through a network of nine international offices, associates in developing markets and a range of London-based services.
Maintaining a good supply chain will help Sainsbury to be cost effective and hence competitive.
Technology is one of the key aspects in today's IT age to stay competitive.
I've mentioned earlier that Sainsbury has not ventured into many international markets. This thus provides it with great opportunities for future to go forward towards those markets which were not considered fruitful.
Markets changes with the economy and previously overlooked markets need to be analysed now and then which might prove very helpful to edge ahead of your competitor.
Threats are other external factor that needs to be give considerable attention in order better prepare the company to face them in a proper way. It is one of the major component on determining the company's performance and situation. There will definitely be some underlying threats for every kind of industry and the company must take appropriate measures to deal with them. Threats however cannot always be identified beforehand so awareness of the environment is the key.
Some of both the underlying/imminent and possible threats of J Sainsbury's are explained below:
- Entrance of new competitors: Sainsbury needs like any other company watch out for entrance of any new competitors.
- Too much environment friendly: Huge investments have made in environmental and green issues without immediate benefits. There is a threat of doing it a bit too much.
- Technological Changes: Technology is changing all the time and it is a massive threat to Sainsbury as well.
- Expansion of Competitors: Expansion of its competitors like Tesco have to be monitored carefully as their expansion is a clear threat to Sainsbury's market coverage.
- Foreign company takeover: We can say that Sainsbury represents the British people. It lacks of international expansion also means that most of their customers are British. However there was a takeover bid by the Qataris Private equity firm which can have serious implications as its customers who are predominantly British will gravitate towards other British companies at the prospect of Sainsbury's being governed by a foreign firm.
This is a serious threat and emerging competitions should be monitored.
Actually a balance has to be maintained and cost should be controlled to remain competitive.
This threat if not addressed properly can harm gravely to the competitiveness of Sainsbury and its brand name as well.
This is also a significant threat as it will diminish the competitive advantage and brand name built by Sainsbury on British people.
Explanation of various marketing strategies and how they can be used by J Sainsbury Plc to achieve competitive advantages and long term growth.
In order to fulfill the visions of a company by fulfilling the its goals a proper marketing strategy needs to be formulated. Marketing strategies are the corner stones upon which marketing plans can be based. Market strategies include a series of tactics to make a marketing plan more effective in order to achieve marketing goals. Marketing strategies amalgamates the organization's marketing goals, policies, and tactics into an effective unit. Markets change their nature and behaviour constantly so for marketing strategies to become successful it needs not only to be properly planned but should be dynamic and interactive.
Types of strategies
Marketing strategies need to be formulated as per the need of the market situation for any given company. However there are of ways of generalizing some of the common strategies. There are several general marketing strategies that have emerged of which some are presented below:
- 1. The strategies that are based on market dominance - Here there are basically three types of market dominance strategies:
- Close followers
- Late followers
- Horizontal integration
- Vertical integration
Michael Porter described the generic strategies as not firm or industry dependant but general. These strategies were initiated in the early 1980s, and till date it has been widely used. According to Porter for any company go generate profit the attractiveness of the industry itself may be the main factor however even if the industry is doing not very well the company can still make good returns if it holds a good position in the industry. In order to position itself properly in the industry the firm has to leverage its strengths. When these strengths are applied in either broad or narrow scope the following generic strategies are evolved:
- Cost leadership
- Cost leadership: The motto of this type of strategy is to remain cost effective and gain competitive advantage though being able to produce at the lowest cost at a given quality level. With its low cost the company can benefit in two ways. One, it can obtain higher returns against its rival while selling at industrial average and two it can benefit from increased market share while selling below industrial average which it can do without making loss. There are many ways to achieve this kind of leadership some of which are mentioned below:
- Improving the efficiency of processing
- Research in obtaining cheaper raw materials
- Utilising the benefits of outsourcing
- Avoiding various leakages in cost controls.
- Differential Leadership: As its name suggest, this strategy tries to dominate the market by developing products and services which are different and at the same time also appreciated by customers more than other products and services available generally in the market. The customers are hence ready to pay some extra due to the uniqueness of the product. However it needs the following kinds of strengths to achieve success in this strategy:
- Able to invest in research and developments.
- Highly skilled manpower.
- Creativity and insight.
- Proper marketing tools and media.
- Goodwill in regards to quality and innovation.
- No close substitute of product/service available in the market.
- Focus Strategy: This strategy basically focuses on attempting to achieve either cost or differentiation advantage upon a narrow segment of market. The assumption behind this strategy is that when strategies are focussed on a narrow segment of market the actual needs of such a market can be addressed. It tries to achieve as much customer loyalty as it can in order to be competitive. The main drawback of this strategy is that it will lose its bargaining power with the suppliers while focussing on a narrow market and producing less. Other risks might be that a broad-market leader may influence its target market and as its market is limited there will be no flexibility or room for tackling such competitiveness. Having said that, if the focus strategy is based on differentiation advantage due to its uniqueness it will be able to maintain its competitiveness.
- As the brand of Sainsbury is of such worth it can use differential strategy to invest in research and production of its own organic food, special diet food, environment friendly recycle bags and other products.
- Due to its huge coverage of market and large human resources it might be beneficial for them to use differential strategy like opening its own training institute for retailing, health and safety clinics etc.
- As close proximity of its stores is a major strength of Sainsbury it can use focus strategy to increase its sales. For example: opening special vegetarian oriented store in a community which is thickly populated with Gujrati people ( a tribe of Indian people who are mostly vegetarian).
- Due to its strong and long partnership with Food For Britain (FFB) and its operation in a broad scope with good purchasing power it can use cost leadership strategy and reduce its cost of purchase.
- Differential strategy can be used to promote its products as it already has goodwill as environmentally friendly retailer.
- With its possession of good HR system and career security it can use differential strategy and can acquire capable human resource at affordable price.
In light of the marketing strategies propounded by Michael Porter, J Sainsbury Plc can use these strategies to gain competitive advantage and long term goals in the following ways:
Analysis of Current marketing environment for J Sainsbury Plc and Recommendations on how the marketing mix elements may be developed to contribute to enhance their goals and values.
In order to comment on the marketing mix that can be developed by Sainsbury to contribute to enhance their goals and values I've first analysed the current marketing environment of J Sainsbury Plc and then explained further about the marketing mix.
Environment and its factors:
- Globalisation: With rapid increase in globalization Sainsbury like any other company has to face a lot of challenges. The basic challenge is to fight to off the competition to achieve best value for quality supply of its products. Opportunities like entering new markets via joint venture and partnerships etc also arise due to globalisation.
- The price fixing scandal: Sainsbury is one of the four retailers within the UK who are most likely to be affected by this scandal or allegation. Sainsbury has a strong presence in the market and possession of a good public image there is a serious threat of this being hampered by the recent allegations.
- Tax rate: Corporation Tax rate is fixed by the government in UK like any other country. It keeps on fluctuating generally upon the need of the industry. Currently UK government has changed the tax rate to 28% from 30%. A huge amount of tax is paid by a company like Sainsbury every year and this change of 2% is a massive cut in the tax rate which means there is more margin in profit.
- Cost of products prices: Food prices have risen dramatically since the increment in global food crisis resulting in the rise in Sainsbury's costs. This will mean that the increased cost will be passed on to the customers and they'll have to pay more. Unpredictable fluctuations in the fuel costs also has made it even harder to plan and control the cost of production and delivery.
- The credit crunch: The mentioning of credit crunch while discussing about the current market situation has been an obligation recently. There are basically two ways in which it'll affect Sainsbury's. One getting finance has become so much difficult as the market has become almost dead and two credit crunch have decreased the purchasing power of consumers. This has created a sense of distrust and suspicion in the market. Sales of luxury items have gone down and even basic products are being bought less. Another section of Sainsbury that has been hit by this is its bank. The Sainsbury bank is not a very established bank and when even the big players in the banking systems are in trouble it has been really difficult time for Sainsbury's bank. • Nowadays there seems to be more emphasis on fresh, easy style cooking. This serves an opportunity for Sainsbury's to encourage new recipes and unfussy
- The Internet sales: In order to stay competitive in today's market, internet sales is a phenomenon that has to function well. The Internet accounts for 8% of global advertising spend and is growing rapidly (The Economist, 2007). Sainsbury's can further develop in this area. It can either develop itself or outsource the internet system to increase its sales.
It is a commonly used marketing term probably the most famous one. It is also known as the Four P's which are product, price, place and promotion. It is the combination of the elements of marketing and what roles each element plays in promoting your products and services and delivering those products and services to your customers. In short the 'marketing mix' is a set of controllable, tactical marketing tools that work together to achieve company's objectives and goals.
The elements of Marketing Mix and how they can be used by Sainsbury:
Product: The product is the first element of marketing mix elements that needs to be explained. The products or services offered to your customer have physical attributes what they do, how they differ from your competitors and what benefits they provide to the customers. The product/service has to maintain quality, features, packaging, guarantees, and after-sales service.
The basic objective of Sainsbury's Supermarkets is stand as the leader of the pack when it comes to consumers choosing their food. They want to deliver products of outstanding quality and great service at a competitive cost through working faster, simpler and together. For that their product has to be given top priority and only quality products will do for that reason. Environmental friendliness should also be considered while deciding on the product. Services like banking should be made efficient and easy to use.
Price: Price is the second most important thing of marketing mix elements. How you price your product or service so that your price remains competitive but allows help to make a good profit. How price plays a role in your marketing strategy with respect to differentiating your products or services from your competitors. The pricing policy including discounts, allowances and credit policies. Your pricing should be based on a realistic assessment of all your costs and take into account what the market will bear and the image you are trying to create.
To stay competitive, price should be competitive as well as it is a prime element in the marketing mix. If the price is either very high or very low in regards to its competitors the long term goals will be hindered.
Place: Place may also be used in your marketing strategy to differentiate you from your competition in the market. Where your business sells its products or services and how it gets those products or services to your customers. By considering good locations, retailers, inventory implications, transport and warehousing you can reach close to your customers. It will obviously give you a competitive advantage.
Place is another important factor that has to be considered by Sainsbury to achieve its long term goal. It has a huge number of outlets around UK and is in close proximity with its customers. It should however always look to build upon it more.
Promotion: Promotion is used to communicate with the customers and express the features and benefits of your products/services to your target customers. Promotions may include advertising, personal selling, public relations, networking, web-based marketing etc. By doing this you will express your product and its features to the customers to attract them to by the products and it will be helpful to earn profit.
Sainsbury has built up its image as a very good retailer in terms of its product quality, environmental friendliness, services etc. Partly its such success in creating such an image goes to its promotion and advertisements, like using Jamie Oliver in its advertisements. There are much rooms for improvements in that area as well.
- Lecture notes provided by our lecturer Dr. Roman Puchkov
- Mica R. Endsley, Daniel J. Garland, 2000, Theoretical Underpinnings of Situation
- Awareness, 2nd Edition, Lawrence Erlbaum Associates, Inc., Mahwah, NJ, 383pp.
- O' Connor J and Galvin E, 1999, Marketing in the Digital Age, 2nd Edition, Prentice Hall.
- Doyle P, 2001, Marketing Management and Strategy, Prentice Hall.
- Official website of Sainsbury, www. Sainsburys.co.uk