Sainsbury’s Management Structure: Introduction
Established in 1869, Sainsbury’s is one of the leading chains of supermarkets in the UK. In 2015, the company had an annual revenue of £23,775 million, thus making it one of the leading supermarkets in the UK’s retailing industry (Sajid et al. 2015). Since its early days, the company introduced the self-service approach to shopping in the UK supermarkets, a move that reinforced its position in the industry up to 1991, before it almost collapsed (Emerson 2006).
Sainsbury’s strategic plans face several challenges that require mitigation to improve efficiency. For instance, the resurgence of its competitor, Tesco, has challenged the company’s expansion moves to gain a substantial share of the market (Wrigley 2014). Further, leadership uncertainties jeopardise continuity efforts concerning the implementation of the strategic plan. ASDA is another company in the retailing industry that poses a considerable competition to Sainsbury’s.
Therefore, analysing the internal and external environment of the company would foster an understanding of its operations (Fernie, Fernie, & Moore 2015). This paper is a strategic analysis of Sainsbury’s environments. Additionally, the paper reviews the available strategic options that would foster the sustainability and competitiveness of the company in the UK’s retailing sector.
Sainsbury’s Strategy and Internal Environment Appraisal
Sainsbury’s operates a chain of online and physical stores in the UK’s retailing industry. With at least 161,000 employees, the company has managed to deliver its retailing products and services to customers within the limits of the UK, as a public limited company (Karim, Huda, & Khan 2012). The key competitors that influence the internal operations of the company include Tesco and ASDA. Therefore, the Sainsbury’s internal environment requires an analysis to evaluate its influence on the company’s realisation of set objectives and goals.
The operating income realised in 2015 stood at £81 million, and it came from revenues to the tune of £23,775 million. This aspect clearly shows the company’s competitiveness in the industry. Nonetheless, Tesco had a net income of £5.766 billion during the same period, thus revealing the stiff competition that it poses to Sainsbury’s. The company is doing well given that it is on the path of reclaiming its lost glory at the helm of the retailing industry in the UK (Sajid et al. 2015).
The diversified investments embraced by Sainsbury’s Plc. have favoured its operations in the long-term. The strategy assists the company’s management team to minimise potential risks since 2003 when it rebranded to recover from the previous decline. Furthermore, the company engaged in informed and insightful market analysis, which has fostered its strategic management (Barratt 2015).
The company concentrates on creating efficient leadership structures that ensure continuity in the implementation of strategies. The former chief executive, Justin King, provided valuable experience for the company to foster its resurgence before he stepped down in 2014. In this regard, the company believes in firm leadership as one of its strategies as shown by the decade-long impressive results attained by the former CEO.
However, despite Sainsbury’s earlier entry into the market as compared to Tesco and ASDA, it has failed to develop new ideas and strategies that would foster its position in the industry. For this reason, it lost the leading position in the industry after being replaced by Tesco in 1995 before it further fell to the third place in 2003 when ASDA took over the second place. In this light, the lack of innovativeness and continued brand improvement undermined its growth (Chakraborty et al. 2014).
Furthermore, Sainsbury’s has been more reluctant in considering the expansion of its operations internationally as compared to its competitors. Notably, the likes of Tesco have hundreds of stores in Asia, which has facilitated its growth considerably. Therefore, investors are deterred from investing in the company owing to its failure to engage in the strategic expansion of its scope of operations (Barratt 2015).
Therefore, the strategic resources and capabilities that can bolster Sainsbury’s growth entail its diversified investments, leadership strength, and profitable operations. The identified strategic resources have helped the company to minimise risks, invest in resourceful leadership, and foster its financial strength and sustainability. Nevertheless, the need for extending its operations to the global level and innovativeness would ensure that it secures a competitive edge in the industry (Ochieng et al. 2014).
The core stakeholders affected by Sainsbury’s operations entail the shareholders, independent suppliers, customers, and the communities in which it operates. Evidently, the shareholders are happy with the gains achieved by the company so far. The effective supply chain management systems at Sainsbury’s also undermine conflicts with the independent suppliers (Leigh & Waddock 2006). Moreover, the customer and environment-focused services have won the hearts of its clients and surrounding communities thereby reducing cases of conflict.
Moreover, the organisational culture requires the employees to show passion when offering services in a customer-facing atmosphere (Karim, Huda, & Khan 2012). This strategy aims at ensuring customer satisfaction in the retail shops that the company operates in the UK. The approach complements the organisation’s strategy of investing in a variety of areas under one roof to fulfil the diverse and unique market needs.
Sainsbury’s Strategy and External Environment Appraisal
This analysis covers the external environment that influences the performance of Sainsbury’s in the UK’s retail industry. Several macroeconomic factors require an assessment to gauge the degree to which they hinder or support the company’s growth. As such, the incorporation of tools like PESTEL and the Porter’s five forces facilitates the analysis. In this regard, this section will incorporate the Porter’s five forces tool to analyse Sainsbury’s external environment.
Sainsbury’s Supermarkets: Porter’s Five Forces Analysis
Developed by Michael Porter, this external environment analysis tool covers the aspects of competitive rivalry, entry barriers, the threat of substitutes, and the power of buyers.
Sainsbury’s Competitive Rivalry
Three dominant players that include Tesco, Sainsbury’s, and ASDA engage in intensified competition in the UK’s retail industry. The 16% market share gained by Sainsbury’s demonstrates the level of competition exerted by Tesco, which boasts a 28.4% market share (Wrigley 2014). Notably, Tesco and ASDA have focused on pricing and value besides the delivery of desirable services. Additionally, the two main competitors engage in initiatives to broaden the scope of their operations by opening new stores, thereby posing a competitive threat to Sainsbury’s.
Sainsbury’s Barriers to Entry
Entering the food retail sector is characterised with considerable barriers to entry. Notably, the sector constitutes one of the most established players in the UK implying that new entrants need massive investments. Furthermore, the retail area has reached an advanced stage in the UK meaning that there are lesser opportunities for new partners, which implies that Sainsbury’s has secured its place considerably (Wood & McCarthy 2014).
Sainsbury’s Threat of Substitutes
The UK’s food retail sector experiences a weak threat of substitutes since the products offered are necessities (Ochieng et al. 2014). The incorporation of innovations that seek to foster consumer experiences retains and attracts new customers since they need the food products for survival. Therefore, the company would not lose its customers since food is a basic necessity (Barratt 2015).
Sainsbury’s Buyers’ Power
The purchasing power in the UK’s retail industry is substantially high since a broad array of competitors offers similar products and services. Owing to the low switching costs and price differences, the purchasing power of buyers affects the industry players unless customer loyalty prevails (Wood & Pierson 2006). Therefore, buyer’s power is high in this sector.
Sainsbury’s Suppliers’ Power
The retail industry depends on numerous suppliers owing to the variety of products and services offered by the retail stores and supermarkets. Therefore, the supplier has the power to determine the acceptable price for the goods that they offer for resale. This assertion implies that the retailers would consider buying since they need to keep their businesses running (Potter, Mason, & Lalwani 2007). In this case, Sainsbury’s position in the industry has an influence in determining the price of the supplies besides the advantages of having its branded products on the shelves.
Sainsbury’s Strategy Analysis: Success Factors and Competitive Positioning
Reviewing the strategic options at Sainsbury’s disposal would facilitate the identification of initiatives for boosting the company’s competitive positioning. Furthermore, pinpointing the factors would allow the company to promote its growth.
Sainsbury’s Success Factors
Several success factors account for the remarkable performance of Sainsbury’s over the last decade. Notably, exemplary leadership has boosted the company’s business performance as it rebranded and successfully handed over its leadership to Justin King, the former CEO. In this regard, the exemplary leadership needs continuity at Sainsbury’s to link the company with its desired ends thereby securing its slot at the top of the retailing industry in the UK. Moreover, the sound leadership has facilitated the realisation of positive financial outcomes denoted by the revenue of £23,775 million in 2015 (Sajid et al. 2015).
Sainsbury’s has also invested in customer satisfaction by focusing on various aspects of the shopping experience. As such, the company has concentrated on the aspects of quality, value, and service to make the shopping experiences satisfying. Notably, besides providing fair prices for the various products and services that it offers to customers, Sainsbury’s also continually seeks the improvement of the quality of its products and customer service. Sainsbury’s has developed its labels and engaged in a brand match to meet the expectations of the customers in a way that secures their loyalty (Chakraborty et al. 2014).
The diversified investments ranging from financial services to property management have fostered the company’s growth besides curtailing risks. The diversified investments have ensured that the company continues to find new ways of fulfilling customer needs as seen by the introduction of Sainsbury’s branded products in the supermarkets. This move fosters customer loyalty and neutralises the power of the sellers thereby streamlining its supply chain aspect of management (Leigh & Waddock 2006). Additionally, the diverse investments increase the revenues collectable by the organisation in a manner that secures its financial performance and sustainability in the long-term.
Sainsbury’s Competitive Positioning
Sainsbury’s has positioned itself as a competitive player in the UK’s retailing industry. The Porter’s five forces analysis revealed the aspects that have enabled the company to secure the second position in the industry. The barriers to entry imply that Sainsbury’s should concentrate on its competitors, ASDA and Tesco, to foster its competitive edge. In this light, the experience that the company has gained over the years in the industry, given that it is the oldest in the UK’s retailing sector, gives it an edge, thereby fostering its competitiveness.
Furthermore, since the food sector lacks substitutes, it suffices to conclude that Sainsbury’s operates an industry that fulfils necessities. Therefore, Sainsbury’s position as a leading provider of foodstuffs in the UK further facilitates its fulfilment of basic customer needs; hence, loyalty can be created easily. Moreover, the competitive position obtained by the company gives it authority when dealing with stakeholders like suppliers (Potter, Mason, & Lalwani 2007).
Conclusion and Recommendations for Sainsbury’s Management
Sainsbury’s should consider several strategies for the sake of regaining its lost position at the helm of the retailing industry in the UK. Firstly, the company needs to develop a policy that seeks to expand its various regions to take a competitive advantage of the emerging markets. Secondly, the company ought to develop policies and structures that seek to improve the customers’ shopping experiences at its physical and online stores.
The essence of the expansion of its operations in new markets stands out in increased revenues aiming to surpass that of its main competitor, Tesco. Furthermore, the relevance of concentrating on customer satisfaction would manifest in increased sales, which attract more customers to its stores. Establishing the identified policy and structure strategies would ensure that Sainsbury’s acquires a competitive advantage in the UK’s retail industry.
Key Sainsbury’s Aims and Objectives
Here we have provided the core aims and objectives of Sainsbury’s, a prominent player in the UK’s retail sector:
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