The following report provides a detailed evaluation of strategic positions and strategic capabilities of Sainsbury- A supermarket chain located in UK. Analysis of strategic position helps to observe and understand the current strategic roadmap of the firm. Particularly, when an organization considers developing a new strategy, understanding of its current position helps to decide what strategies should be further developed for the betterment of the organization. Moreover, the business environment in all sectors has become dynamic; thereby, the marketers often have to find out the current and future challenges that may appear due to this changing business environment. An evaluation of current strategic poisons helps the organization to identify its weakness and the area that need to be developed to gain business advantages or the competitive advantages. Thus, conducting a research on strategic positions or strategic capabilities helps Sainsbury to understand how it can proceed further overcoming the possible market challenges.
The purpose of the report is to evaluate the current strategic position and capabilities of Sainsbury and develop a suitable strategic option for the organization. Thus, to conduct the evaluation of current strategic positions of Sainsbury, both external and internal environment of the firm, strategic capabilities, purpose and organizational culture have been analyzed with different strategic analysis tools. Similarly, in order to develop a suitable strategic option for Sainsbury, strategic framework such as Ansoff matrix has been applied.
Establishing the base and sustainability of their competitive advantages in its present market or markets
As put forward by Minkenberg (2015) UK’s supermarket industry developed from a conventional grocery retailing as well as expanded into financial services, consumer electronics, fueling property investment clothing, groceries and some other relevant sections. The demands in each department are increasingly growing and this has been one of the factors for a growing competition in the sector. On the other side, Pollitt (2017)added that besides the demands of essential commodities are high, the number of retail or supermarket chains are increasing, which is making the environment competitive. Thus, the existing organizations like Sainsbury need to identify its current strategic positions to sustain in the market and create scope for competitive business advantages. The following strategic frameworks help to identify Sainsbury’s position in the market.
Political: Occurrence of Brexit slightly changed UK’s business environment. Particularly, in 2016, Britain voted to leave EU with a purpose, which was predicted to cause both political as well as economical upheaval and uncertainty for United Kingdom. However, people voted in favor of leaving EU; thereby, UK could renegotiate its different trade agreements, which is supposed to add an element of uncertainty to global trade. Arguably, Ramiah, Pham and Moosa, (2017) mentioned that after the occurrence of Brexit, political uncertainty further damages consumers’ confidence. Uncertainty in the political environment compelled the retail industry to respond to the situation. For example, David McCorquadale, the head of Retail KPMG mentioned that several CEOs of retail organizations, including Sainsbury in UK have been concerned about not to be in favor of any party for the fear for alienating their brands in such a troublesome landscape (Gemmell, Kneller and Sanz (2016). Thereby, it can be ascertained that supermarket organizations like Sainsbury are living in the uncertainty about whether the business receive any backup from the government or not.
Economical: After long years of economic recession, UK’s economy has been observing a vigorous recovery since 2015; Malik and Meldrum (2016) arguably mentioned that the nation is performing better than world’s leading economies. According to National Statistic of UK, in spite of the Brexit, the economy increased at rate around 2% of GDP in 2016, which is boosted by private consumption and strong backup of supermarkets (Martin et al. 2016). As the nation is not going to be member of EU, the large supermarkets chain such as Sainsbury is going to observe a significant lack in its inventory because several suppliers from EU nations might not continue the relation with the supermarket giants. Thereby, Wright (2016) mentioned that the growth in 2017 and 2018 is supposed to slow. As the result of leaving EU, British Government announced that it would borrow GBP 112 billion, which is higher than initially planned. Thereby, Coulter and Hancké (2016) opined that public debt is supposed to grow and represent around 90% of GDP in 2017. However, the current economic context is creating a significant challenge for Sainsbury, as it is unlikely that all EU people are presently legally working in UK might have to return, it will be difficult for Sainsbury to recruit unskilled roles in its supply chain and distribution centre. The current GDP structure caused by recent political environment has been presented below:
Social: It is certain that UK is densely populated with 64.1 million citizens, which is probably the major advantage of UK’s supermarket organizations (Thomas et al. 2015). As the market is large, the opportunities for acquiring new customers are always there. Even though Brexit has affected nation economy, the standard of living in UK did not go down. People in UK still embrace innovation in every field. Due to the increasing trends in the nation, retail industry in UK has been changing rapidly. Melis et al. (2015) mentioned that changing market environment in UK generates new market opportunities for retailers. However, Rhodes (2015) argued that changing marketing environment could be challenging for the retailers, as due to economic instability, the retailers may not be able to continue with short-term investments. The retail giant like Sainsbury is accustomed to make large investment to gain the long-term profits but the changing market environment appears to be a challenge to Sainsbury. This is because the market is pushing the retailer to make additional short-term investment.
Technological: Technological advancement in UK is helping the retailers in UK like always. Due to the high education rate (89.2%), the experimentation of technology in business has always been successful. However, Kurnia et al. (2015) conducted a research and discovered that almost 25% of the retailers including Tesco and ASDA mentioned that they are highly disappointed in their ROI from the technology project. Pantano and Priporas (2016), mentioned that digital adoption makes it difficult to build a face to face relationship with the customers. On the other side, CEO of Morrison mentioned that they have the strategy of implementation of technology such as augmented and virtual reality (Esbjerg et al. 2016.). Additionally, a study of Kim (2016) reveals that almost AR technology could have a strong impact on retail, while 22% of retailers mentioned the same about VR.
Valuable:
Human resource: Sainsbury has a large workforce with the employee strength of 15000 people. In order to remain sustainable in the competitive market, Sainsbury provides an excellent customer services by providing employees with training and development programs (Sainsburys.co.uk 2018). Employee turnover rate at Sainsbury is comparatively less (9%), which indicates that human resource of the organization is valuable.
Financial Resource: The overall revenue of Sainsbury in 2017 was around 26,224,000GBP, which is certainly higher than the revenue recorded in 2016 (23,506,000). In addition, the operating expense of the organization was around 1,201,000 GBP (Sainsburys.co.uk 2018). This figure indicates that Sainsbury’s financial position is improving slowly.
Rarity: Although, UK’s retain industry has been competitive in the recent time, Sainsbury maintains rarity in its service. For example, Sainsbury reported a growth up to 72% in electronic goods due to online selling. Uniquely, Sainsbury developed a “Return back” service, for example, if a customer buys a cell phone, he/she can exchange the product when a new version of the product arrives (Sainsburys.co.uk. 2018). This “return back” service increased 11% online sales.
Imitability: Even though Sainsbury has a strong and large workforce, the competitors’ like Tesco develops a more enhanced workforce employing more than 21,000 people in UK (Taefi et al. 2016). Remnant and Adams (2015) argued that Sainsbury gained sustaining brand reputation due to its unique store design attracting thousands of customers daily. Other brands cannot copy the design because it would not be cost effective and other brands retail brads pay a significant attention to products and services.
Organization: Each business function of Sainsbury is highly organized. For example, Sainsbury’s existing supply chain holds the ability to deal with the increasing demands of its store network as well as emerging requirement for direct to consumer deliveries (Sainsburys.co.uk 2018).
Organizational purpose: The major purpose of Sainsbury’s operation is to serve people with the essential commodities incorporating its core value into businesses. The aim is to provide customers with great products at the most reasonable price.
As put forward by Remnant and Adams (2015), Sainsbury remains as one and only supermarket among the top four supermarket chains which has increased its market share in past 12 weeks. Environmental analysis and strategic capabilities analysis presented above indicates that UK’s retail sector has been competitive due to the growing demands, presence of several rivals. Moreover, the economy is yet to be developed at a desired rate. Additionally, each organization in the sector is coming up with unique strategy to gain competitive advantages. Thus, to remain sustainable in UK’s competitive retail sector, Sainsbury has to apply strategic alternatives. Following are some of the strategic options applicable to Sainsbury.
Market Development: As put forward by Pickles, Barrientos and Knorringa (2016), when the existing market is competitive and provides limited opportunities for gaining desired profits, the firms should try a new market with same service. Among the economically developing markets, for example, Asian market is one of the rapidly growing markets with extended market size. Some of the Asian nations such as China, Bangladesh and India is rapidly growing and people are adopting western trends in essential commodities. Thereby, Sainsbury could target China or India to sell its products. People in China and Indian are increasingly embracing technologies; thereby, technological adoption of Sainsbury into a new market could be a significant driver of success. For example, food & beverage giant Starbucks entered India with their existing products and now holding a wide market India (Taecharungroj 2017). In addition, Starbucks gives a unique of experience to the coffee lovers by establishing a fancy outlet and attractive ambience. Likewise, Sainsbury could enter a economically developing nation with its existing products portfolio and services that people the proposed market have never experienced before. Moreover, some economically developed nations in Asian are approaching foreign investors as their urban development projects, to invest in their nations. Here, Sainsbury, as their operational plan, has to make long-term investment for implementing the marketing plan of the proposed market, which is a short-term initiative.
Market Penetration: Market penetration is another significant approach, where the organization can seek to sell more of the same products to the same market but with a different marketing approach (Lan, Lloyd and Morgan 2015). Here, Sainsbury could develop a unique marketing strategy such as launching a new loyalty scheme, to motivate people to select its products. In addition to this, the firm could apply innovation to its existing products; this can be treated as the short-term initiative but it may create a positive impact on sales. In addition, as the economy in UK has observed a slight damage reducing the disposable income of people, Sainsbury could develop a new pricing strategy with unique deals and offers as a short-term initiative to gain profits. On the other side, Alexander (2015) mentioned that to pull the rivals back, the organization could buy a competitors’ company, if the organization has a huge financial resources. This could be risky but eventually, the firm could lead the market in terms of profits and customer base.
Buying a competitor’s company is a long-term intent, which would help to generate market awareness. For example, the software development company Microsoft acquired Nokia to increase their market share and attract customers with a new product of an existing brand that once had a strong influence on market (Dolata 2017). Here, the short-term initiative is to increase the profit margin with an additional product and market awareness and establishing a large customer base is a long-term intent.
Product Development: This is another significant strategic option that organizations often use to differentiate itself with respect to sales and profits. Sainsbury could develop a new product and sell them to the same customers. The organization can extend its products by delivering different variants of the same item. In addition, the company could develop a related product or service but this can only be treated as the short-term initiative because this newly developed product will reach the saturation after a period. Nonetheless, effective implementation may bring long-term profits. For example, the large beverage giant Coca Cola implemented a short-term initiative for developing a new product.
The brand introduced “Nimbu Fresh” cold drink during summer in some nations, which contains refined lemon, salt and purified soda (Kuo and Rice 2015). The product gained a huge popularity as the product is related to people’s habit of consuming lemon and salt water during summer Further, the product turned into a seasonal product; in every summer, the product brings an additional return. So, this was a short-term initiative but further turned into a long-term strategy. However, Bocken, Fil and Prabhu (2016) the implementation of such initiative should not take much time and the investment should be less, as this is a short initiative. This means if the organization makes large investment on such short-term project, the return on investment would be less.
Strategic options discussed above with Ansoff matrix helps to understand Sainsbury could go forward with any of the strategic option to gain a sustainable competitive advantages. Firstly, option for a developing a new market is an effective strategic option to Sainsbury because this option helps to develop market share, increase customer base and increase brand awareness. By implementing this option, the brand can sell the existing products and services to a new market, which can bring a significant return to the brand. As a result, the brand can strengthen its financial resource. However, Toymentseva et al. (2016) argued that the major business risk in market development is the initial investment, which could be risky; the return on investment would be less if the proposed market is surrounded by existing rivals or regional brands. Nonetheless, when it comes to feasibility, it is observed that Sainsbury is capable of delivering its business vision, mission and goals, as the strategic analysis in part 1 indicates that Sainsbury is financially stable. In developing a new market, the firm does not have to investment on R&D to develop new product; thereby, for developing new market, the investment should be on infrastructure development and trade tax and communication.
On the other side, market penetration is also a significant strategic alternative but buying a competitor’s company is a matter of large investment (Barbuto 2016). This acquisition strategy only helps to increase profits but it may not help to increase market awareness and customer loyalty. Moreover, when it comes to validity, this strategic option may not be valid as Sainsbury does not have idea about how its suppliers and customers would respond to the alternative. There could be a disagreement between the suppliers of two brands. Thirdly, the short-term initiative of developing new product could bring a significant return but this strategy lacks consistency and it is not associated with Sainsbury’s mission and goals. This alternative lacks consistency because it may work for a certain period but when the product experiences market saturation, the profit goes down.
The evaluation presented above helps to determine that development of a new market with existing products and services is an appropriate alternative because Sainsbury’s goal is to serve people with the commodities that people essentially need., Sainsbury provides a large range of essential goods. So, if this focus is extended including a new market, it will be easy for the brand to achieve its goals and objectives. Moreover, this alternative is mostly effective because the proposed market has an increasing demand and governments of the markets are welcoming the the foreign investors. So, the findings indicate that Sainsbury can receive a consistent backup from the government when establishing the businesses.
In order to implement the strategic alternative- market development, Sainsbury might have to deal with challenge of gaining detailed information regarding the competitor’s intelligence, well-researched data and financial stability of the market. The first challenge that Sainsbury may observe is that strong competitors’ presence. The retail sector in any market has a strong presence because the retail products are highly essential products (Aguzzoni et al. 2016). For example, if Sainsbury decides to enter Asian country such as in India, the brand has to be aware of the fact that regional retail brands have already acquired the market and become sustainable because the regional brands operate the business by adopting nation’s culture and trends. However, in the case of Sainsbury, entering a new market and understand nation’s culture within a targeted time is a challenge. In addition, it is certain that Asian economy is fragile and it lacks consistency, which means the sometimes, the economy goes up and sometimes it deteriorates. Even though, the economy is developing in the proposed market but the disposable income of people stuck at the same range. Therefore, the brand has to face the issue of pricing; it cannot set a premium pricing as it sets in UK’s market.
In order to deal with the above mentioned challenges, the first thing that Sainsbury could do is, conduct a detailed market a analysis, considering the variables such as customer background, income, culture, trends, governments’ direction, regional response towards branded products and the characteristics of nation’s economy. The customer background analysis helps to learn the average income, affordable abilities and product preferences, which would help to design the products and pricing. The information regarding culture and trends helps the brand to understand what sort of products customers usually look for and the organizations can acquire information about people in the proposed market reach to the foreign brands. The marketing plan for the proposed market must include the communication channels available in the proposed market, which can be used to approach the customers. Chien et al. (2015), conducted a research on Asian market and found that Asian nations like Indian are rapidly embracing technology and innovation. Particularly, in India, digital media channels widely acquire the nations, as even the small and medium sizes firms are implementing technology to create market awareness.
Furthermore, to create a strong market awareness, which is highly required in a new market, Sainsbury needs to pay attention to government’ urban development project such as education development. So, for example, at the time of communicating the services to people, as the promotion in the proposed market through digital media, Sainsbury needs to develop a content of a product in the advertisement in a way create awareness of education. Such initiative helps to gain attention from the government and help to manage the operation smoothly ahead the competitors.
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