Sainsbury: External Environment Audit - Case Study Example

External Environment Audit Political, Economic, Social, Technological, Legal and Environmental (PESTLE) analysis: Political factors Economic factors Sainsbury’s have rich data as regards customers’ behaviour through the Nectar loyalty scheme. They combine this with listening and engaging customers, across a broad range of channels, to create real insight which creates an admirable opportunity to the company. The Live Well for Less campaign launched in 2012 offers a great opportunity to Sainsbury’s market share expansion. Over the last three years inflation has increased faster than wages, putting pressure on customers and affecting consumer confidence. This economic environment presents a big threat to Sainsbury’s sales growth. An increase in petrol prices to over £1.30 per litre changed customer behaviour making delivering profitable sales growth more challenging than ever. This is an economic threat indicating a further decline in food sales volumes. Social factors Technological factors Sainsbury’s recognised that, more than ever, customers were looking for reasons to celebrate, and they helped them do so at the Royal Wedding, Halloween and Christmas, an opportunity that helped the company to drive market outperformance. More frequent shopping by consumers presents a real opportunity to Sainsbury’s to press ahead with their convenience growth plans. Sainsbury’s marketing research told them that customers were looking for real value: quality without compromise at good prices, therefore, the research gives the company an opportunity to grow its market share. Investment in the supply chain ensures Sainsbury’s are frequently the quickest to market on key fresh lines. This is a marketing opportunity open to the company. Legal factors Environmental factors In 2011 City & Guilds formally accredited the high standards of training in their Bakery College and six food colleges offering them a cutting-edge opportunity as regards their staff. Sainsbury’s marketing research told them that customers were looking for real value: quality without compromise at good prices, therefore, the research gives the company an opportunity to grow its market share. The good climate allowed farmers to produce fresh vegetables and potatoes. This is a great business opportunity to ensure the company delivers fresh, healthy, nutritious food to the table. Sainsbury’s determined that customers were shopping more frequently and locally to reduce food waste. The company had the opportunity to press ahead with their convenience growth plans. The PESTLE analysis postulates an upsetting impact on the business strategy as well as corporate objectives. Sainsbury is required to focus on new ways of capturing and controlling a large market share through new initiatives such as the Live Well for Less promotion, which was initiated in 2012. Sainsbury’s has to offer customers real value: quality with no compromise at good prices. The company has to push further on with their convenience growth plans and take part at the Royal Wedding, Halloween and Christmas, to drive market outperformance. These strategies are, however, undertaken in a tough economic environment of high inflation and increased petrol prices. Swot Analysis SWOT Matrix Strengths Sainsbury’s has been in operation for over 140 years. Over this period the company has maintained positive operations performance driven by increasing profits and earnings per share as well as dividend payout. Sainsbury’s is therefore able to attract potential investors and grow its asset base. Sainsbury’s wide area coverage by over 1,000 stores, including 440 convenience stores and a large employee staff of 150,000 employees offers strength in that the company is able to capture, maintain and serve adequately a big customer base. Weaknesses There is a probable dissatisfaction of customers due to unsatisfactory products value. This may weaken Sainsbury’s market penetration as well as aptitude to increase and maintain a significant market share. From recent company statistics fuel sales growth is not increasing. This may kill the fuel sales aptitude and hamper the company’s desire to diversify its operations. Opportunities Sainsbury’s participation in charity events and developing closer links with farmers enhances its cooperative social responsibility role thus win over customers’ confidence. Therefore, the company is likely to boost its customer base. Sainsbury’s upbeat market campaigns, convenience growth plans and investment in supply chain not only offers a real opportunity to maintain the market share it has at the moment but also opens room for capturing a larger market share by spreading to vast areas. Threats There is reduced consumer confidence and purchasing power propagated by a harsh economic environment as a result of increasing inflation at a higher rate than wage increases and increase in petrol prices to over £1.30 per litre. Sainsbury’s is faced by a likely reduction in sales volumes thus decrease in revenues. There is a significant shift towards cooking more meals from scratch. This threatens Sainsbury’s business strategy as its market niche is at risk. SWOT matrix is a graphical illustration of the SWOT structure. SWOT is an acronym that stands for Strengths-Weaknesses-Opportunities-Threats. The apparatus is used to analyze the competitive point of Sainsbury’s. Strengths and weaknesses are internal company factors that it can control whereas opportunities and threats are external factors. These factors are away from the control of Sainsbury’s. (Foong; Brassington & Pettitt 2006) Marketing Objectives According to Riley (2012), marketing is at the heart of all business operations; Sainsbury’s is no exception. Nearly each operational activity or objective can be reversely correlated to marketing. From the SWOT analysis Sainsbury’s marketing objectives could be focused on: There is reduced consumer confidence and purchasing power propagated by a harsh economic environment as a result of increasing inflation at a higher rate than wage increases and increase in petrol prices to over £1.30 per litre. Sainsbury’s has to develop measures to endure this recent tough economic environment. In recent times Sainsbury’s has maintained positive operations performance driven by increasing profits and earnings per share as well as dividend payout. The company should aim to maintain and improve the positive operations performance. There is a significant shift towards cooking more meals from scratch. This threatens Sainsbury’s business strategy as its market niche is at risk. The company therefore needs to initiate more than 3 new products into the business channel in 2013 and 2014 There is a probable dissatisfaction of customers due to unsatisfactory product value. This may weaken Sainsbury’s market penetration as well as aptitude to increase and maintain a significant market share. The company is supposed to aim to attain at least a 95 percent outstanding customer service score every month. Marketing Strategies Marketing entirely concerns letting individuals identify the product or service you tender, and win over them to pay money for or make use of it. The marketing strategy is formed on the whole by Sainsbury’s company objectives. It embraces a description of Sainsbury’s dealing, an explanation of Sainsbury’s products or else services, an outline of Sainsbury’s intended users or clients, along with a definition Sainsbury’s company's task in connection to the business rivalry. To put it in a different way, Sainsbury’s marketing strategy is a review of Sainsbury’s company's products as well as standing on the subject of competition. Marketing strategies are by and large feted on four Ps: pricing strategies, produce strategies, promotional strategies, plus post strategies. Examples of marketing strategies include; networking, advertising and promotions, product design, personal selling and asking for referrals (Dibb et al 2000; Brassington & Pettitt 2006). Asking for referrals Asking for referrals is arguably the easiest of every marketing strategy in business. The approach is also not time-consuming. The most important thing is for Sainsbury’s to take a practical move. In place of thinking that a contented customer will refer somebody to Sainsbury’s, it is prudent for the company to request for that referral. This is attained by telling people who Sainsbury’s ideal clients are and ask for their help in finding these types of clients (Goosnay & Richardson 2008; Kotler 2010). Networking Networking is conceivably the most regularly used strategy by supply chain business operators, though; it is time and again badly carried out. Sainsbury’s needs to appreciate that the largely successful manner to network lies in developing relations as well as giving referrals to other affiliates first. The marketing payback attained using this approach is enormous. On the event they get to be on familiar terms with Sainsbury’s in addition to what Sainsbury’s carries out, the other business persons will talk about the company to others and may perhaps offer Sainsbury’s referrals. Home business organizations are as well grand opportunities to form and play a part in some supportive marketing strategies, such as embracing exceptional Market Days amongst other events something Sainsbury’s should endeavour to engage in (Goosnay & Richardson 2008; Chaffey et al 2006). Marketing Programmes According to Brassington & Pettitt (2006), it is time and again challenging to handle everyday marketing jobs when running a demanding business. Based on the marketing strategies discussed above below are five marketing ideas each of which Sainsbury’s can undertake to boost sales: Call a past shopper to solicit for referrals Email a prospective referral source to convene a meeting Call probable individuals to find out if they are all set to become customers Arrange for a thank you present to be delivered to somebody who a moment ago referred a shopper to Sainsbury’s Develop a schedule for Sainsbury’s upcoming networking occasion References Baines, P & Fill, Ch & Page, K 2008, Marketing, Oxford University Press Brassington, F & Pettitt, S 2006, Principles of Marketing, 4th ed. Prentice Hall Chaffey, D, Ellis-Chadwick, F, Mayer, R. & Johnston, K 2006, Internet marketing: strategy, implementation and practice, 3rd ed. Harlow: FT/Prentice Hall Dibb, S et al 2000, Marketing: Concepts and Strategies, Fourth Edition, Houghton Mifflin Doyle, P 2001, Marketing Management and Strategy, FT Prentice Hall Foong, LM, How to Perform a SWOT Analysis, viewed 22 February 2013 Gosnay, R. & Richardson, N 2008, Develop Your Marketing Skills, Kogan Page Kotler, P & Armstrong, G 2010, Principles of Marketing, 13th ed, Pearson McDonald, M 2007, Marketing Plans: how to prepare them, how to use them, 6th ed, Amsterdam: Elsevier Riley, J 2012, Marketing Objectives. viewed 22 February 2013 Read More