Sainsburys - Model of Success in Corporate Entrepreneurship - Essay Example

? Sainsbury’s: A model of success in corporate entrepreneurship BY YOU YOUR SCHOOL INFO HERE HERE Sainsbury’s: A model of success in corporate entrepreneurship 1. Introduction Sainsbury’s is the third-largest supermarket chain in the United Kingdom, competing with large organisations such as Tesco, ASDA and Morrison’s. The market environment in which Sainsbury’s operates is highly competitive, with the majority of rivalry between competitors occurring in relation to marketing and promotion in order to build a solid brand reputation and gain consumer market loyalty in key target markets. It is an oligopolistic market structure, one in which there are limited competitors dominating the market, thus creating dependencies on differentiation and market positioning in order to distinguish one business model from another competitive model. Businesses that operate in oligopolistic market structures often have similar product offerings (Boyes and Melvin 2005), thus the intangibles of service and product must be developed to create a perception in the minds of target consumers that Sainsbury’s is innovative and original in order to gain market loyalty and, subsequently, brand equity that translates into multiple business opportunities. Sainsbury’s should be considered to be a success story in corporate entrepreneurship, defined as: “a process that goes on inside an existing firm leading to new business ventures, the development of new products, services or processes and the renewal of strategies and competitive postures. CE should be seen as the sum of a company’s innovation, venturing and renewal efforts” (Faems, Van Looy and Debackere 2005, p.240). Sainsbury’s promotional slogan, “Try Something New Today”, has positioned the organisation as an innovative business model, highlighting the company’s focus on creating ingenuity in service delivery and product focus. The organisation’s successful use of corporate entrepreneurship is reflected in branding strategy development through marketing, establishment of corporate social responsibility as a differentiation tool between competitors, and making effective use of brand equity to expand the company into a variety of different non-food offerings to improve revenue growth. What creates CE success at Sainsbury’s is the company’s executive-level focus on building human capital advantages through transformational leadership design that translates into an effective operational model that is well-supported by a dedicated and motivated corporate culture. This report describes the elements of Sainsbury’s business model that contribute to successful corporate entrepreneurship. 2. CE success factors at Sainsbury’s It is not just the development of different innovations in the service and product models used at Sainsbury’s that contribute to success in corporate entrepreneurship. It is the methodology by which the organisation is able to establish inter-dependencies throughout the value network to provide support for attaining market innovation. Sainsbury’s maintains a corporate governance system that can be considered a best practice model in leadership, a governance board that works directly with executives and managers to discuss elements of strategic development and strategic direction (Sainsbury 2012). Unlike other governance systems in large organisations, Sainsbury’s corporate governance board provides strategic support under Stewardship Theory, one which believes that managers and executives have the competency and psycho-social characteristics required to provide effective leadership and operational guidance (Leblanc and Gillies 2005; Turnbull 2000). How does governance translate into effective corporate entrepreneurship? The governance board at Sainsbury’s meets annually, consulting with a variety of internal teams that have been assigned specific tasks related to strategic direction. For instance, the company maintains what it refers to as a brand steering group, a Board-managed subcommittee that performs external market analyses and provides talent toward the goal of establishing a positive brand personality and reputation with key target consumers (Sainsbury 2011). Alignment of the business associated with strategic direction starts at governance, with innovative solutions for competitive business positioning being coordinated under transformational leadership philosophy. This is a leadership model in which vision and mission are regularly imparted on the organisational environment, using coaching, mentoring and teaching as tools to build more effective and competent human capital (Fairholm 2009). It is this decentralised business philosophy that focuses on team networking and strategic alignment that contributes the foundation and support networks for innovative service delivery and product conceptions. Having established how the governance and transformational leadership dimensions at Sainsbury contribute to alignment between strategic intention and operational structure, the specific elements of what constitutes success in corporate entrepreneurship can be evaluated. The model utilised for analysis most relevant for Sainsbury’s CE ventures was proposed by Covin and Slevin (1991), which illustrates a network of inter-dependencies both internal and external that assist in achieving innovative outcomes and more positive organisational performance. Figure 1: A model of CE Source: Covin and Slevin (1991). A Strategic Integration Framework As illustrated by Figure 1, organisational mission and vision lay the foundation for strategic intention, dependent upon internal systems ranging from HRM to budgeting systems, and establishment of a dedicated organisational culture to achieve market goals. Sainsbury establishes vision and mission at the highest levels of governance and executive authority, consistently reiterating strategic objectives downward throughout the organisational hierarchy. Through transformational leadership philosophy, trust and mutually-rewarding relationships are developed between colleagues and management so as to ensure minimal change resistance in employee groups and ensure the organisation is motivated to achieve goals related to corporate vision and mission. Having an understanding of how Sainsbury’s manages to coordinate internal mechanisms to achieve long-term market goals contributes to our understanding of corporate entrepreneurship success in this organisation. The mission and vision of Sainsbury’s is to establish perceptions of innovation in service and product delivery under a consumer-centric business model. After having conducted considerable market research and competitive analyses, Sainsbury recognised opportunities to expand the business model to include a variety of Sainsbury-branded non-food offerings as a means of using established brand equity to open new market opportunities for a very mature brand. In 2011, Sainsbury launched its own, stand-alone clothing line, the Tu clothing line, consisting of contemporary styling and targeted at the youthful female markets (Sainsbury 2011). Sainsbury assessed that no other competitor in this oligopolistic market structure had expanded into non-food deliverables and realised that the business had established the foundation of brand loyalty in a variety of different markets that would support this new innovation under its consumer-centric business model. However, in order to make this new clothing line achieve revenue growth, Sainsbury had to align the organisational culture and operational model to achieve market and sales results. Definitions of what constitutes effective corporate entrepreneurship indicate that it must be aligned with strategic intention which, in turn, translates into the processes and systems required to achieve long-term goals and produce innovations in service, product or promotional conceptions. Sainsbury cannot achieve effective profitability results or gain positive consumer attachments to the new Tu clothing brand without first assessing the human capital components that will contribute to meeting sales goals. A new product line supported by Sainsbury requires labour requirements for fulfilmemt of customer service objectives, tangible in-store support teams designed to promote the new stand-alone brand, and restructuring of the value and supply chain networks to achieve efficiencies and cost controls. These factors required for Sainsbury to achieve consistent marketing-based and sales-based results are what contribute to its successful corporate entrepreneurship focus. Under the model proposed by Covin and Slevin (1991), Sainsbury is able to create internal coalitions who contribute to meeting strategic goals. In this market, Tesco is the only company that maintains co-branding alliances with various clothing manufacturers, however not a stand-alone Tesco-branded variety of merchandise, making them a first mover in this brand expansion category. As a first mover, Tesco has an advantage as it is known that consumer markets are very risk averse and will often favour the innovator or pioneer in a new market category rather than late movers. Consumers do not want to risk switching to another brand and will often compare the late mover to the pioneer with usually negative assessments and criticisms (Kalyanaram and Gurumurthy 2008, p.1). It is for this reason that Sainsbury should be considered a success in corporate entrepreneurship. Simply creating a new clothing line and then launching it into the market without making considerations about the contribution of human capital and operational restructuring would cause the brand to fail to make positive impressions on the consumer market. The new clothing line must be supported by service staff and through promotional development, which requires alignment between strategic intention and internal operational activity. Rather, Sainsbury recognised that there was a gap in the marketplace and then developed a new business model that could support non-food offerings and also effectively promote the product for its innovation in style and flair. Because Sainsbury faces the risks of being compared to Tesco as a first mover, much more emphasis needs to be placed on the marketing function to differentiate the stand-alone brand from competitive clothing lines offered by major competition. Any pre-established brand loyalty providing first mover advantages to Tesco must be deconstructed in order to create incentive for consumers to switch to the Sainsbury Tu clothing brand. This cannot be accomplished without a dedicated corporate culture and effective planning on how to establish a brand personality for the Tu clothing line that will contribute to more lucrative profitability. Sainsbury should also be considered a success story for corporate entrepreneurship in benevolent activity associated with corporate social responsibility imperatives. Sainsbury is continuously awarded by reputable industry experts for its dedication to sustainable business and responsible procurement along the supply chain (Sainsbury 2011). Constructs of socially responsible procurement include sourcing agricultural products from organic growers, using only MSC certified seafood under focused quality standards, and establishing new distribution networks with foreign growers that contribute to urban development in impoverished nations. An independent analyst might not consider corporate social responsibility to be a prime example of corporate entrepreneurship, however it is the dynamics behind how CSR is effectively promoted against the brand personality that contributes to innovation in marketing that positions the business well against major competitors. Sainsbury utilises a variety of press releases and social media (as only two promotional examples) to establish a brand personality that outperforms the brand reputations of Tesco and Morrison’s. Because all of these major competitors offer similar products in the supermarket and hypermarket format, there is little of tangible service and product in the marketing mix that can differentiate the firm from competing business models. Innovation for Sainsbury is inclusive in strategic branding that utilises promotional awareness to gain consumer market interest, thus positioning the organisation on the market as a compassionate, responsible leader. Nearly all major firms have some form of CSR objective, however it the ability of Sainsbury to effectively align multiple internal divisions that will support the branding effort that supplies innovation in service and product deliverables. None of this could be accomplished without effectively aligning strategy, operations, and imparting vision and mission recurrently within the organisational environment to gain motivation and commitment to achieve positioning and differentiation goals. This is where Sainsbury excels in corporate entrepreneurship. When attempting to capitalise on innovations that serve to distinguish the business from competition, no effort can occur within a proverbial vacuum and therefore the business must consider how to provide absolute value in a specific strategic imperative. Human resources must be aligned with people development whilst at the same time performance objectives must be aligned with tangible management activity including controls and performance evaluations. Using the Tu clothing line as the relevant example, Sainsbury must gain employee and management commitment to accepting the risks imposed on the business model in the event that the clothing brand does not achieve long-term market loyalty and provide new revenue opportunities by capturing new markets not currently targeted by the organisation. Sainsbury establishes the appropriate cross-functional team-based structures and social capital trust needed to effectively support a risky, yet innovative business concept. Where other businesses in different industries identify a new market opportunity and believe the innovation speaks for itself, Sainsbury is proactive in establishing the internal systems and processes required, prior to launching a new branded conception, to ensure adequate support and authentication needed to substantiate a new brand philosophy and personality. An independent analyst might not consider branding to be an innovative function associated with corporate entrepreneurship, however one must examine the dimensions of competitive rivalry that occurs in this industry to recognise that innovation in marketing is a substantial success factor for the organisation. “Successful corporate entrepreneurship hinges on a firm's ability to combine structural approaches that focus on efficiencies, processes, and ‘fit’ with strategic approaches that emphasize quality” (Dess, Lumpkin and McKee 1999, p.86). In every detail, Sainsbury fits this model definition of corporate entrepreneurship, being able to establish the systems and support networks (both tangible and social) required to emphasise quality as a positioning tool that strongly differentiates the brand from competitor brand personalities. Through transformational leadership strategies and through establishment of motivational incentives, the governance and management systems at Sainsbury provide an organisational culture that is conducive to meeting branding goals that are critical for maintaining market visibility and gaining consumer preference in important revenue-producing markets. In order to be considered a success in corporate entrepreneurship, the business structure must consist of management support and leadership that will champion the corporate mission (Hayton 2005). In this case, corporate vision rests on recent brand repositioning in this market that has given Sainsbury a new consumer-centric personality in which innovation is the expected outcome of the service interaction between consumer and corporation. Leadership at Sainsbury facilitates and orchestrates team development between individuals with vastly different experiences and knowledge bases to achieve a common goal, a fundamental component of the transformational leadership design (Schlosberg 2006). Employees are granted job role autonomy with minimal management control systems, thus decentralising the business structure so that new innovations and ingenuities can be expressed openly and publicly in a horizontal fashion rather than through top-down command systems. Since CE must be married to strategy development, Sainsbury is considered a success in corporate entrepreneurship for being able to blend effective leadership with self-directed working systems that incentivize better performance toward meeting vision goals. It should be recognised, based on all supporting literature on CE and Sainsbury business practices, that current CE practices at Sainsbury actually serve to change the competitive advantages currently held by the organisation over competition. Where competitors such as Morrison’s and Tesco continue to focus on positioning their businesses according to pricing structures or tangible product, Sainsbury considers innovation in customer service excellence and quality as key differentiation strategies. An effective brand personality is one that expresses to consumers perceptions of sincerity, excitement and competence (Aaker 1996). Sainsbury accomplishes market superiority related to brand not only through innovation occurring throughout the entire value network, but through establishment of legitimate human capital strength and talent management that inspires consumers to believe that Sainsbury is an innovator in service and product line diversity. None of this can be accomplished without establishing an entrepreneurial mindset in employee groups and management teams which includes opportunity seeking and strategic renewal. One additional way in which Sainsbury continues to illustrate competent CE philosophy is through establishment of communities of practice that promote more effective knowledge transfer and cooperation among independent work teams. Communities of practice are individuals maintaining tacit or explicit knowledge who come together to problem-solve as well as express challenges and concerns about meeting strategic goals or special innovative projects (Buffington 2003). Corporate entrepreneurship does not simply manifest itself in the tangible structuring of operations and use of leadership strategies that lead to meeting strategic objectives, it is through the methodology by which internal actors facilitate effective knowledge exchanges to ensure alignment between talent management and training imperatives. By creating an inclusive community of practice innovation in the business model, it provides a revolutionary and liberal template for cooperative work groups that are both transformational and also empowering. Under most respected models of psychology and sociology, providing workers with opportunities for social and professional belonging will lead to better self-confidence and desire to meet performance guidelines (Morris and Maisto 2005). Training and development imperatives at Sainsbury are critical components necessary to achieve strategic goals and help employees to recognise their own entrepreneurial potential. Using trusted models of psycho-social connectiveness represents innovation in both leadership and human resources that serves Sainsbury long-term competitive advantages in human capital development. Having an internal structure that supports cross-functional training delivers employees the perceptions that they are valued contributors to the business model, thus aligning human resources with management in a way that facilitates connectedness and effective knowledge exchanges. Unlike competition that does not prescribe to transformational leadership or work toward decentralisation of authority, Sainsbury is a benchmark of CE by guiding and reinforcing entrepreneurial activity among diverse employee units or individuals. 3. Conclusion Sainsbury, based on compiled research, maintains several characteristics that can be considered success dynamics in corporate entrepreneurialism. This includes recognising opportunities to expand the business model to include non-foods offerings to capture new market opportunities, building a solid brand using internalised support and talent management systems, and publicising corporate social responsibility to differentiate and position the business as an innovative market leader. By inspiring and motivating workers under transformational leadership models and governance systems, human capital advantages continue to outperform many competitors that rely too heavily on using product and pricing in their marketing mix. By establishing a risk-embracing culture in which knowledge is effectively transferred inter-departmentally, Sainsbury lays the foundation for best practice corporate entrepreneurship that continue to give the business considerable competitive advantages in this industry market. Sainsbury clearly understands how to successfully align operations with support services to ensure that the business continues to maintain a competent and quality-focused organisation that provides socially responsible rewards to local and international communities. Entrepreneurship related to promotion of brand concept and brand personality means recognising opportunities to exploit publicity as a tool for brand visibility and then translating this into value for consumers using internal talent networks and operational structures which can facilitate better market position. It is the methodology by which Sainsbury effectively aligns strategic objectives with leadership and external market evaluations that make this organisation a leader in CE. References Aaker, D.A. (1996). Measuring brand equity across products and markets, California Management Review, 38(Spring), pp.102-119. Boyes, W. and Melvin, M. (2005). Economics, 6th ed. Houghton Mifflin Company. Buffington, J. (2003). 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