Sainsburys Business Strategy - Case Study Example

Sainsbury’s Business Strategy a) Porter’s Generics Strategies on Sainsbury Porter’s Generic strategies present appropriate method through which a firm can position itself effectively in the market so as to gain a competitive advantage over its competitors. That would enable a company to shift away and stay ahead of its competitors in specific areas that account for the overall performance of the business (Cope 2004). Cost leadership In order to realize a lead in the respect of cost leadership, the company can increase its profits through reduced operating costs while maintaining the average industry prices. In the same way, Sainsbury can effectively increase its market share through charging of lower prices in the market while managing the same profits due to the reduced costs of operations. It is also imperative to realize that Sainsbury has effectively adopted the full use of online technology as a cheaper way of selling its products. Online shopping has become a very popular retail shopping method that greatly helps the large retailers to reduce their operating costs (2012). As a general characteristic of companies that achieve cost leadership strategies, Sainsbury has developed a very efficient supply chain management in its operations. Its efficient logistics services also ensure that supplies and materials arrive to their destination at the appropriate time. In that regard, a lot of wastage is normally reduced in unnecessary delays and lost revenue (2012). Differentiation strategy In the case of Sainsbury, the challenge normally abounds due to the low switching cost realized in the industry (2003). In this regard, Sainsbury is always on the constant search for ways and means to make its operation different from those of its competitors in order to gain advantage in the market (Johnson & Whittington 2011). Unlike most market players, Sainsbury has been at the forefront in advocating and promoting active lifestyles and healthy dietary habits. Another most effective marketing strategy that has helped in differentiating the products of Sainsbury involve the innovative concept of putting the traffic light label on the front part of all the products of Sainsbury (Hopwood 2010). Such differentiation strategies have greatly enabled the company to effectively acquire a bigger share of the market for its products (Boswell 1999). Sainsbury is nevertheless stuck in its bid to realize its objectives in terms of cost leadership and differentiation. In the process of reducing the cost of operations so as to be a cost leader in the market, the company is confronted with the need to differentiate its products in the market. Well, these two priorities certainly differ in operations and it creates a challenge in the implementation of these two goals. In the process, implementing the two objectives is always met with a lot of challenges in this respect. Focus strategy Organizations that use the focus strategies are known to focus much of their attention on specific market niches after studying and understanding the operations of such markets. Such companies often recognize the particular dynamics in the market which necessitates the supply of specific products or services to suite such markets. By servicing the needs of the customers in such market segments in an efficient and proper manner, organizations are able to drive away the competitors from such markets. Competitors often feel much unprepared to satisfy the particular needs of the customers in the given market segment. Sainsbury has also been promoting healthy living through proper nutrition. Indeed, the growth of Sainsbury’s market share in the recent past is partly attributed to its strategies on the promotion of healthy living in terms of dietary change and exercise (Loveday 1998). b) The value chain of Sainsbury incorporates aspects of inbound and outbound logistics, operations management marketing and sales. The company uses its economies of scale as a bargaining power for low logistics costs and maintains a highly upgraded ordering system. In terms of operations management, the company has invested heavily in modern IT systems. In an increasingly challenging financial environment, the need to have adequate financial back up is one of the greatest concerns for most organizations. In this respect, organizations are always looking for opportunities upon which to back their operations in order to survive in the complex financial environment that has created a lot of uncertainties in the market. Sainsbury has therefore taken the concept of real estate management with a lot of concern and is greatly increasing its land bank. As active property managers, land owners are developing a liking for the company given the manner it manages the real estate facilities. Compared to its competitors in the industry, Sainsbury is effectively managing its operations in a manner that has effectively enabled the company to maintain a 16 % market share. One of the competitors Morrison’s has also developed certain stores called “stores of the future” which are intended to address the need for healthy foods. On the other hand, Tesco has developed Tesco’s finest to satisfy clients in the healthy dietary segment. The supermarket industry is becoming very competitive those days. Customer satisfaction is becoming a great challenge in the face of changing customer needs and emerging realities in the market. Tesco as Sainsbury’s competitor has managed to develop a proper and efficient supply chain process which certainly brings the right products to the shelf (Seth & Randall 2011). However, presently, Sainsbury is facing a series of problems associated with its supply chain. The financial position of Sainsbury does not attract most investors compared to its competitors like Tesco. The drop in the profits of Sainsbury was mostly caused by its recent acquisition of an elaborate IT facility that made the company spent a lot of resources in its operations. It is however hoped that the efficient IT system will greatly help in enhancing the operations of the company in the long run. Without doubt, it can be stated that compared to its competitors in the industry, Sainsbury is not really in a very bad position given the manner in which it has grown in operations. Despite the seemingly favorable market conditions for the company, several challenges have always been realized in the course of its operations. One of the greatest challenges has been a dwindling market share coupled with falling profits. These challenges have been raising a lot of concerns for the organization in the face of growing competition posed by the growth of its competitors. Amid the challenges facing the organization, it is important to realize that Sainsbury is expected to cope well in its long run operations as the challenges presently realized are mostly short-run in nature. In its international expansion plans, Salisbury is basically confronted with challenges relating to the presence of large international retail outlets that seem to have effectively captured the international market. In the same way, international expansion requires lot of large capital outlay which the present state of affair at Salisbury might not allow. It is therefore a great challenge on the part of the management in the plans for international expansion. Value Chain Analysis Inbound logistics -The company maintains a highly upgraded ordering system. -Use of economies of scale to reduce costs Operations -Highly efficient Information Technology system to speed up the operations in the shops. Outbound logistics -Efficient supply chain process ensuring that no good misses on the shelves at any time. Since ordering is done in bulk, supply is greatly maintained. Service -The company regards the welfare of the customers greatly. Products are transported to the customer’s premises in cases of need. c) PESTEL Model on Expansion Using the PESTEL framework, several factors come to play in the analysis of the challenges that would come in its expansion plan. On the Political front, the changing regulations in the European Union economic zone and the expansion of this zone can present a challenging environment for the business expansion plans. On Economic perspective, the changing interest rates in different markets and the different economic growth rates realized in different countries can hamper the process of expansion for Sainsbury. The challenge of different cultural and social settings and the changes in migrations can also affect the international expansion plans. The different Legal environments realized across regions in the world would present a challenge for Sainsbury. On social grounds, the population composition in most developed countries is greatly changing thereby changing the demand greatly. Similarly, it is realized that people’s attitude regarding food is greatly changing out issues of health concern and the development of organic foods. The process of going international comes with an emerging dilemma. In the foreign market, the challenge arises as to who shall be the company’s stakeholders. Coordination of activities from a common managerial point also appears to be much difficult and this creates a challenge in its own right. In the context of Sainsbury’s expansion plans, the challenge of regional economic uncertainties is real and emerging. The Scottish government might push ahead with its plans on the increment in tax which could easily increase the rate bills of Sainsbury by 20pc. In the process of going global, Salisbury will certainly be confronted with the challenge of the corporate structure upon which to approach the international market. This is out of the fact that different foreign markets normally exhibit different situations and this might create a greater challenge for a British organization. For instance, venturing into the Eastern market like in China might totally require a shift from the conventional managerial aspects. Choice will have to be made from the various options available which include domestic, transnational, international and other structures which can be adopted. As a decision on the particular corporate structure to be followed, Sainsbury might opt for the global structure which will certainly create the impression of a wholly international affair hence the company will sail through the new markets with ease. In the same way, a transnational structure will enhance global integration which is quite imperative in conducting operations in new markets like China where operations might prove a challenge. If the company opts for an international corporate structure, then it shall have to battle with a sense of weak integration which might become a challenge incase priorities have to be made in the market. Similarly, a multi-domestic corporate structure will pile much pressure on the local management to be responsible for global operations. This might limit the effectiveness of the expansion program due to the challenge of addressing foreign issues while at home. In this regard, the best structure remains the global structure which comes with its opportunities. In conclusion, it is hoped that the much of these challenges will be addressed in the course of time and enable the company to realize its ultimate objectives. References Boswell, J. (1999). J.S. 100: the story of Sainsburys:. London: J. Sainsbury Ltd.. Coe, N. M. (2009). The globalization of retailing. Cheltenham, UK: Edward Elgar. Cope, N. (2004). Retail in the digital age. London: Bowerdean. Hopwood, A. (2010). Accounting for sustainability practical insights. London: Earthscan. Johnson, G., & Whittington, R. (2011). Exploring strategy: Text and cases. (9. ed.). Harlow: Pearson Education Limited. Loveday, M. J. (1998). Sainsburys at Bowthorpe: the impact of a new retailing facility and characteristics of its users. Norwich (County Hall, Martineau Lane, Norwich, NR1 2DH): County Planning Officer. Safeway plc and Asda Group Limited ... Wm Morrison Supermarkets PLC, J, Sainsbury plc and Tesco plc: a report on the mergers in contemplation. (2003). London: Stationery Office. Sainsburys ready to give sport relief a leg up. (2012, March 17). Grocer, 2, 1. Seth, A., & Randall, G. (2011). The grocers: the rise and rise of the supermarket chains (3rd ed.). London: Kogan Page. The Sainsburys recipe for success - Article - IGD.com. (n.d.). IGD - The food & grocery experts - IGD.com. Retrieved April 18, 2012, from http://www.igd.com/index.asp?id=1&fid=1&sid=7&tid=10&cid=999 Read More