The Changing Business Environment Of Sainsbury Marketing Essay

INTRODUCTION

Sainsbury is a third largest food retailer in the United Kingdom. Sainsbury was founded in 1869 by John James Sainsbury and his wife Mary Ann in London, England and grew rapidly during the Victorian era. It grew to become the largest grocery retailer in 1922, pioneered self service retailing in the UK, and its heyday during the 1980. The founding Sainsbury family still retain approximately 15% of Sainsbury plc shares (as of May 2008), through various trust. The family sold down their stake from 35% in 2005. The largest Sainsbury family shareholders are Lord Sainsbury of Turville with 5.83. Largest overall shareholder is the investment vehicle of the Qatari royal family who now hold 26.145% of the company. The report is analyzing the growth of the company by PESTLE, SWOT and Porters five force analysis.

SAINSBURY STRATEGY

“Sainsbury plc’s present focus is to improve the performance of the core UK supermarket chain. Whilst doing so we will continue to explore and develop growth opportunities in other markets. Through implementing ‘Managing For Value’ we will stretch our ambitions and challenge the conventional wisdom within the Company, thereby unlocking our potential and delivering value.” Source: Sainsbury Web site. Sainsbury’s have in place quality control at many stages of the food retailing business; in the development of new food products, the company’s Food Centre operates a three stage process of quality assurance: Quality Control; Sensory Appraisal; and Development. In Quality Control, new and re-developed products are sampled by product managers and buyers; in Sensory Appraisal, focus groups are used to find out what consumers think about current and new products; and in Development, the Food Centre is interested in identifying trends in food to produce new recipe ideas.

Sainsbury has many strategy planning. Old strategy plan was “Making life taste better” which seems fairly bland on its own but then off course that’s the paint since Sainsbury sells such a wide variety of product to such a group of people.

The company has shown strategy as a part of its semi-annual results which declare yesterday. It also has told that has joined the organization which promotes the electronic communications of the shareholder named eTree, and the young tree of wood charity of preservation Wood Trust for each shareholder who is registered in service will offer. “Till now almost 5 000 shareholders have signed, equivalent approximately to six acres of planting of trees,” she has told.

At the same time the technology played roles in it 123 %-s’ profits during the period. The supermarket has told that its restoration should reach on the move its purpose of 2.5 billion pounds of total of additional sales to 2008. The Total amount of sales has raised on 8.3 % to £9,6 billions.

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It has faced especially healthy, become online, where first half sales have grown by more than 40 %-s’ year in a year, while expansion intends to offer the home delivery shopping 85 % of the British house economy.

Availability of a product of Sainsbury also promoted in favorable turn from problems, which face in run to last Christmas which has left regiments empty.

It has told in its statement: “the Center in system of deliveries was on maintenance of benefit of recent reorganization and delivery of the basic efficiency duties. The reorganized warehouses address with the increased volume compared to last year, giving the improved service to shops with smaller quantity of a resource.”

The company is in the middle of three-year business transformation which saw that it has finished the £1,7 billion, the seven-year agreement making the contract on the party with Accenture and has brought it IT back internal in October of last year.

MACRO ENVIRONMENT

Macro Environment provides information about the environment which can guide strategic direction and helps in making decision making (Saxby, C.L, et al 2002). A successful strategy should result in “a favorable position in an industry” – “Competitive advantage” (Porter, M.E, 2004). Sustainable competitive advantage is achieved by generating or possessing resources that are inimitable, are valued by customer and can be used effectively (Fahy, J. and Smithee, A, 1999). These classifiable capabilities characterize the organization from the competition and lead to the ability which can provide a competitive advantage in the market. These distinctive capabilities of the company will provide a competitive advantage in the market. Environmental scanning helps the organization in providing information about the strengths and weakness of competitors and consumer behavior and helps in preparing marketing strategies to leverage these resources and apply appropriately.

(Saxby et al, 2002) Saxby highlighted the importance of regular scanning due to the dynamic nature of the modern business environment. This is very important because even very minute differences in the environment such as cultural changes, legislative can be the difference between becoming the market leader and insolvency. It is also very important to notice that the environmental changes on one company will be different to that of other company. A threat for one company can be an opportunity for another, environmental scanning helps in observing these threats or opportunities and act on them.

PESTLE ANALYSIS

Political forces: Political forces are referred to policies that are related to government such as the degree of intervention in the economic scale. What product and services does the mentioning country want to provide what extent does it depend in subsidizing organizations? Sainsbury’s is forced by these factors.

Economic forces: The economic changes of any government have impact on local business. These include interest rates, taxation charges, economic growth, inflation and exchange rates. So business influenced by the economical factors has impact nationally as well as globally. Sainsbury’s is automatically gripped by those forces.

Social forces: (Argenti, 1974) It is very important for any business to understand the values and the culture of the society even before starting the business. Changes in social trends can impact on the demand for a firm’s products and the availability of individuals to work. This may also includes the tastes, habits, dislikes, customs, traditions, demographics etc… Sainsbury does totally follow these factors. It is operating effective charities, sponsoring games, arranging social activities, raising fund for Animal welfare, and many more.

Technological forces: New technologies create new products and new processes are created by modern technology. (Galbraith, 1967) Technology is “The systematic application of scientific or other organized knowledge to practical tasks”. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. These developments can benefit consumers as well as organizations providing the products. Internet shopping, bar coding and computer proofed designs are all upgrading to the way .Sainsbury’s do to run their business as a result of better technology. Sainsbury’s is now using the self service counter.

Environmental forces: Environmental forces include the changing of weather and climate. Changes in temperature can impact on many industries including farming, leisure and tourism and insurance as well. With major climate changes occurring due to global warming and with better environmental awareness this external forces is becoming an important issue for Sainsbury’s to consider.

Legal forces: Sainsbury’s is in the boundaries of legal forces locally, nationally, globally. These are very close to the legal enforcements in which firms operate. The introduction of discrimination of age and disability discrimination, legislation, Show ID, etc.

SWOT ANALYSIS

SWOT analysis is done on internal and external environment one of the most important strategic planning process. The environmental factors in the organization are divided into Internal and External factors. Internal factors are further classified as Strengths or Weakness and the external factors are further classified into Opportunities or Threats. Such an analysis of the strategic environment is referred to as SWOT analysis. SWOT analysis provides all the information that is required to match the organizations capabilities to the competitive environment in which it runs. How SWOT analysis fits into environmental scanning is shown as

SWOT Analysis Framework

SWOT ANALYSIS OF SAINSBURY’S:

Strengths

• This is a very strong company with huge traders who are interested and trust worthy to the company. Also it had 509 supermarkets and 276 stores, thus became a Established trader.

• To develop in business every company has to depend on customers. It is said that ‘Customer is God’, as a popular and reputed company Sainsbury’s followed the saying and won its customers trust and developed a good customer base.

• Had a huge chain of Supermarkets with 509 supermarkets, 276 stores and a bank.

• Also it had large volumes of stock so it helps in reducing the cost.

Weakness

• Having huge staffs make them pay more.

• Having 509 supermarkets and 276 stores it is having high maintenance cost.

• Because of heavy stocks if product is failed huge stock will be leftover.

Threats

• As UK is having many supermarkets there is always heavy completion among ASDA, WALMART, TESCO etc…

• Having many discount offers company may lose profits on certain products.

Opportunities

• Having good volumes it is planning for new activities.

• It is a huge success in United Kingdom and now planning to expand into Eastern Europe.

• Also had large customer base and there is scope for huge employment.

PORTER’S 5 FORCES ANALYSIS

Competitive rivalry

• the retail market is extremely competitive with a very crowded market. Now, more and more companies are trying to get into non food sectors (Rigby and Killgren 2008) further intensifying the competition.

• Sainsbury’s has a market share of 14.9% in 2007, steadily increasing since its restructuring program that started in 2004 (Annual Report 2007). This is a positive trend but it lags well behind the runaway market leader Tesco, showing that there is considerable distance to cover.

• Tesco, Asda, and Morrison’s are the other three big supermarket chains in the UK retail sector. All of them have a different competitive advantage over their competitors. Sainsbury’s reach in the convenience stores makes it have a larger customer reach.

• Banks and building societies compete with Sainsbury bank but it is not a core business for Sainsbury’s.

Barriers for entry

• Barriers to entry are extremely high in the food retail market due to a number of factors. Firstly, organized retail is amongst the most sophisticated sectors within the UK and needs a lot of investment, along with significant brand development, which takes years to establish (Doyle 2002). Secondly, retail is also at an advanced stage within the UK and most of the western world, which means there is little scope for new entrants to establish themselves.

• Local knowledge is extremely crucial within the food retail sector, something that is difficult for foreign firms to replicate. This is corroborated by the presence of few global supermarkets within UK.

Threats of Substitutes

• The threat of substitutes in the food retail industry is a low one simply because consumers view it as a necessity, especially in the developed world and increasingly in the emerging markets.

• The retail market is always trying to converge and assimilate new innovations with respect to food products or alternative businesses, to make shopping an extremely pleasurable experience. This makes them extremely difficult to substitute

• The only major threat of substitute is an internal industry threat whereby one supermarket can lap up the business of other supermarkets.

Buyer power

• Buyer power is high in this industry simply due to the presence of so many competitors selling the same products. It is only differentiated in price and consumer loyalty and increasingly on green credentials. Moreover, the switching costs are low for consumers.

• As the economy goes further towards recession (O’Doherty 2008) consumers’ needs are likely to be given more weight, increasing their power considerably.

Supplier power

• Supplier power is usually more complicated as it is difficult to categorize it. It is safe to call it a mutually dependent relationship as suppliers are in itself huge companies, like P&G, Unilever, Cadbury etc. with huge brand appeal. It can be argued that if supermarkets do not sell their products consumers will shift loyalties, making suppliers very powerful. However, if the products of big companies do not reach supermarkets, their sales volumes will be affected hugely. The relationship might change depending on the situation of the big branded supplier, for example, when sales of Cadbury’s dairy milk increased through the successful Gorilla ad campaign (Wiggins and Urry 2007).

• Supplier power of smaller suppliers will not be considerable because of their sales volumes on dependence on these supermarkets.

Conclusion

Here we can see that Sainsbury always use the market mix to develop and implement its strategies by using the market mix. It satisfies the customers by improving the strategies which meet the needs of the customer. It always research on the market to know the interest of a customer who is able to buy its products. It continues to implement the market segmentation to develop its business strategies which shows the development of a business. Sainsbury use the market segmentation to display large variety of products and sell to deferent groups and to achieve large amount of sales overall. It offers a large number of products in a convenient location and opens the store for long hours. It also encourages the customers by easy cash options through debit card and credit card. It also offers the cash back facility to the customers on their purchases.

Recommendation

Sainsbury have to give high quality product and have to care about customer’s satisfactions.

They have to sell product with particular prize for customer.

They have to care about customer loyalty and satisfaction.