Understanding international business: Sainsbury - Essay Example

Understanding International Business: Sainsbury Sainsbury is a leading supermarket chain in the United Kingdom controlling a market share of 17%. It was established in 1869 as a retail shop in Drury Lane, London. By 1922, the company had grown to become one of the largest grocery stores in the UK. In 1928, Sainsbury operated over 120 stores spread across London and its satellite towns. Based on current records the company has a chain of over 500 supermarkets and 275 convenience stores (Gond, Grubnic, Herzig, & Moon, p205, 2012). The paper will analyze Sainsbury as a company using the SWOT model. It will focus mainly on the factors influencing Sainsbury foreign expansion plan. Sainsbury is led by a highly competent and experienced management team. The company Chief Executive Officer, Justin King, is acknowledged for his immense contribution to the growth of the company. Prior to King’s appointment, Sainsbury had been lagging behind and had been overtaken by most of its competitors. The management focused on restoring the company past glory when it used to dominate the UK retail industry. The pace at which the company was transformed has been rapid. Since taking charge of the company in 2004, it has experienced market share growth and a continued increase in sale revenue. Statistics shows that the company profitability has increased by over 400% in after tax profit (Jones, Wynn, Comfort, & Hillier, p250, 2012). Moreover, the company is projected to continue growing in the coming years and expand into other markets. Therefore, this is considered as one the key strength of Sainsbury. Diversification is the process of producing new products for new markets. There are negative effects of diversification especially when the company’s core competencies lie in a single production line. According to Rayton, Dodge, & D'Analeze, (2012), as much as most companies concentrate on growth, it is important to incorporate the withdrawal strategy options from particular product or markets. Sainsbury has joined the banking and insurance industry through its acquisition of Sainsbury Bank from its partner Lloyds Bank. Its intention is to capture the low-risk revenues from other industries. As a result, the company share value has risen sharply compared to its competitors. It also has invested in telecommunication and property market; this presents the company with a greater prospect of future growth. Moreover, this has helped cushion Sainsbury from the economic shockwaves in the retail sector. On the other hand, Sainsbury huge online presence also provides a great opportunity. Sainsbury commitment to social responsibility is identified as one its key strengths. The company is committed to reducing its carbon emission by adopting renewable sources of energy in its factories. In 2014, Sainsbury managed to cut down its operational carbon emission by over 60% (Sullivan, &Gouldson, p739, 2013). It has also reduced its plastic waste through recycling and cutting down plastic packaging. Over the years, Sainsbury has continued to work in proximity to farmers across the country in its attempt to restore biodiversity. The company is also committed to the protection of the natural resources. Apart from promoting environmental conservation, Sainsbury has invested in various community projects. It is estimated that it has donated over 350 million Euros to charity (Hughes, &Kitson, p723, 2012). These initiatives have endeared Sainsbury to the public. Moreover, the initiatives have had a positive impact on the company brand, and it has received admiration from green activists across the world. Sainsbury was founded as a family business by James Sainsbury. It majorly focused on groceries, and other farm produces. Sainsbury has gained loyal followers who were fascinated by its ideals and focus on healthy eating. Over the years, the founder’s family shareholding has continued to decline due to dilution of their ownership by other investors. Most recently, the company received a takeover bid from Qatar Private Equity that bought off 26% of the company. According to Sullivan, &Gouldson, (2013), this would have serious implication for the company growth. Most the Sainsbury customers may lose confidence in the company products. Sainsbury customers may perceive that the company under foreign ownership may desert its ideals in favor of foreign values advocated by the owners. As a result, the company sale revenue may decline as the consumers shift to other retail businesses that are locally owned. Therefore, this is considered as a major weakness of Sainsbury. Sainsbury recognizes the importance of investing in the research and development in its attempt to expand into the foreign market. In 2012, the company committed over 1 million Euros as a grant to agricultural research groups to fund research on new farming techniques. Through this, the company aims to double its sales revenue in the UK market as well as the international market by the year 2020 (Mohamed, & Daniel, p30, 2012). The company has also held numerous conferences on research and development that have brought together farmers, agriculturalists, suppliers and other interested stakeholders. The conferences provide a perfect platform for sharing knowledge and ideas. Moreover, the company has been in a position to collaborate with other companies within the industry for the purpose of developing revolutionary ideas in the food market. Over the years, Sainsbury has continued to work in proximity to farmers across the country in its attempt to restore biodiversity (Styles, Schoenberger, & Galvez-Martos, p140, 2012). The company is also committed to the protection of the natural resources and conservation of the environment Sainsbury is operating in a highly competitive industry. The company faces stiff competition from established retail businesses with a huge market presence both in the UK market and international market. Among Sainsbury main competitors include Tesco PLC, Morrison chain of supermarket, Mark and Spencer and ASA group Ltd (Jones, Wynn, Comfort, & Hillier, p250, 2012). Most its main competitors such as Tesco have expanded into foreign markets. Sainsbury only dominates the UK market. According to Lukić, (2012) this can have serious consequences to the company. For instance, an economic meltdown in the UK would severely affect Sainsbury operation. The company has also diversified into other industries that are also competitive. Currently, the UK property market is considered prime specifically due to the ever-rising demand in the housing sector. As a result, this has forced the company to undertake structural changes that are focused on enhancing its core competencies. The international retail market too is highly competitive. Therefore, this poses a huge threat to Sainsbury market expansion plans. Conclusion In short, Sainsbury is one of the leading retail businesses in the UK. The company has established a very strong market position by diversifying into other industries and creation of a strong brand that embody quality, sustainability, and consistency. Its strong focus on research and development has opened up greater opportunities. However, heavy investment in environmental issues required in the food industry poses a huge threat to growth since there are no immediate benefits for such investment (Styles, Schoenberger, & Galvez-Martos, p140, 2012). The paper recommends that the company place greater emphasis on its core competencies in its attempt to expand to a foreign market. References Gond, J. P., Grubnic, S., Herzig, C., & Moon, J. (2012). Configuring management control systems: Theorizing the integration of strategy and sustainability. Management Accounting Research, 23(3), 205-223. Goworek, H., Fisher, T., Cooper, T., Woodward, S., & Hiller, A. (2012). The sustainable clothing market: an evaluation of potential strategies for UK retailers. International Journal of Retail & Distribution Management, 40(12), 935-955. Hughes, A., &Kitson, M. (2012). Pathways to impact and the strategic role of universities: new evidence on the breadth and depth of university knowledge exchange in the UK and the factors constraining its development. Cambridge Journal of Economics, 36(3), 723-750. Jones, P., Wynn, M., Comfort, D., & Hillier, D. (2012).Corporate social responsibility and UK retailers.Issues in Social and Environmental Accounting, 1(2), 243-257. Mohamed, M. E. J. R. I., & Daniel, D. W. (2012). Analysis of retailers’ communication approaches in sustainability and social responsibility reports. International journal of marketing studies, 4(2), p30. Styles, D., Schoenberger, H., & Galvez-Martos, J. L. (2012). Environmental improvement of product supply chains: Proposed best practice techniques, quantitative indicators and benchmarks of excellence for retailers. Journal of environmental management, 110, 135- 150. Rayton, B., Dodge, T., & D'Analeze, G. (2012). The Evidence: Employee Engagement Task Force “Nailing the evidence” workgroup. Lukić, R. (2012). Sustainable development of retail in Serbia.Review of International Comparative Management, 13(4), 574-585. Sullivan, R., &Gouldson, A. (2013). Ten years of corporate action on climate change: What do we have to show for it?.Energy Policy, 60, 733-740. Appendices 1. TESCO is a UK based retailer of grocery and general merchandise. It also one of the largest retail shops in the world. 2. Sainsbury is named after the founder of the company James Sainsbury. 3. The current Chief Executive Officer of Sainsbury is Mike Coup and not Justin King. 4. Currently, Sainsbury is eyeing the Chinese market where it has sent a small team to explore the viability of its expansion plans. Read More