a) INTRODUCTION
Sainsbury's is the second largest chain of supermarkets in the United Kingdom with a share of the UK supermarket sector of 16.9%. ounded in 1!69 by "ohn "ames Sainsbury with a shop in #rury $ane $ondon the company became the largest grocery retailer in 19&& was an early adopter of selfser(ice retailing in the UK and had its heyday during the 19!)s. *n 199+ ,esco o(ertook Sainsbury's to become the market leader and -sda became the second largest in &)) demoting Sainsbury's to third place for most of the subse/uent period until &)10 when Sainsbury's regained &nd place. ,he holding company " Sainsbury plc is split into three di(isions Sainsbury's Supermarkets $td Sainsbury's on(enience Stores $td 2Sainsbury's $ocal3 and Sainsbury's 4ank. ,he group's head office is in the Sainsbury's Store Support entre in 5olborn ircus ity of $ondon. ,he group also has interests in property.
PESTLE analysis of Sainsbury's Sainsbury's Political factors
Sainsbury's is a company which is based in the UK and *reland thus Sainsbury's performance is highly influenced by the political factors in this country. -n increased globaliation could pose as both an opportunity and a challenge to Sainsbury's. *t is a challenge in such that it would ha(e to compete against unknown forces and to find the sources of the products with economical and /uality (alues. ,he corporation ta7 is at &!% unlike a few years ago when it was )%. ,his means that Sainsbury's along with other big organisations would sa(e a huge sum of money because of this lower rate of corporation ta7.
Economical factors
,he rising cost of fuels is one of the biggest economical factors that might be affecting Sainsbury's. ,his rise in cost means that it affects the supply chain of Sainsbury's causing the product prices to increase. ,he global food crisis which is ongoing would also result in Sainsbury's ha(ing to increase the cost of their products.
Social factors
-s e7plained in the opportunities part of the S8, analysis the increasing social trend in healthier foods is a great opportunity for Sainsbury's. *t is the social trend like this that Sainsbury's would ha(e to look out for in order to keep up with the consumers.
Technological
,he correct use of correct technologies is an absolute must for retailers like Sainsbury's. 4eing a big retailer there are many things which are :ust not possible to be done manually. ;7amples of this include the checkout system and the in(entory management. *n order to keep up Sainsbury's all o(er the country are ha(ing to constantly upgrade their technologies such as introducing self checkouts upgrading to more efficiently scanning checkouts computerised stock controlling etc. 5a(ing technologies such as the computerised checkouts means that there is a lesser margin for human errors and less paperwork.
Environmental
,he reduction of carbon footprint is has been gi(en a lot of emphasis to big companies. ompanies like Sainsbury's can contribute a lot to the reduction of carbon footprint thus Sainsbury's ha(e to pro(e that they are not causing a lot of impact on the en(ironment. ,o do this Sainsbury's would ha(e to put in more towards the green issue.
Legal
Sainsbury's is well bounded by many legal issues such as the national minimum wage policy alcohol selling age legislations discrimination and fair treatment legislations etc. or the wellbeing of the organisation Sainsbury's would ha(e to be pursuing these legislations< failing to do so might follow many types of conse/uences. Sainsbury's ha(e to maintain different types of legal laws which include consumer laws competition laws employment laws and health and safety laws.
SWOT analysis
,he S8, analysis for Sainsbury=s could be performed and this would focus on> Strengths Strong brand name • - large number of employees • Strong presence across the UK • Solid customer base • ?ood reputation •
Weaknesses @any competitors in the market • $oyalty schemes introduced are not •
implemented appropriately so the ma:or benefits of the scheme remain •
uncertain @ore focus on management strategy and better customer ser(ice could be
•
recommended Sainsbury=s should conduct thorough market research to introduce cheaper products than other supermarkets
Opportunities $arge consumer •
•
base
Threats especially ompetition from other companies •
during hristmas and festi(als Sainsbury=s is already one of the main
•
such as ,esco and -sda Arice of Sainsbury=s products may be
•
higher than competitors *mportance of building long term
competitors and ma:or retail store in •
the UK pportunities in terms of online marketing and financial ser(ices are abundant
b) Porter's five forces analysis of Sainsbury's
customer relationships as customers may be dri(en away by competitors
Bargaining Power of Suppliers
Supplier power is an important part of the Aorters fi(e forces model. 4argaining power of suppliers in the Sainsbury's would be relati(ely (ery high. Supplier power of smaller suppliers would be smaller than big suppliers because of their sales (olumes on dependence on these supermarkets. *n other hand big company like Unile(er adbury etc. not mainly depend on one particular supermarket. 4ut if this brand product are not sale by Sainsbury's consumer will shift to another market so sales are down and also loss its customers. UK based suppliers are also threatened by the growing ability of large retailers to source their products from abroad at cheaper deals. ,he relationship with sellers can ha(e similar effects in constraining the strategic freedom of the company and in influencing its margins. ne of the ad(antages of Sainsbury's that they can dictate the price they pay the supplier. *f the supplier does not reduce the price they will be left with a much smaller market for their produce.
The Threat of Substitutes
B?eneral substitution is able to reduce demand for a particular product as there is a threat of consumers switching to the alternati(es' Aorter @. 219!)3. ,he threat of substitutes in the food retail industry is a low one simply because consumers (iew it as a necessity especially in the de(eloped world and increasingly in the emerging markets. ,esco -sda @orisons *celand Aoundland are the main substitute for the Sainsbury's. some small retailer also sale good /uality product in low price *n this case Sainsbury's are trying to ac/uire e7isting small scale operations and opening @etro and ;7press stores in local towns and city centers.
Bargaining Power of buyers
Aorter theoried that the more products that become standardied or undifferentiated the lower the switching cost and hence more power is yielded to buyers' Aorter @. 219!)3. 4uyer power is high in the Sainsbury's simply due to the presence of so many competitors selling the same products. Sainsbury's policy like famous loyalty card lub card attracts the customer and significantly increases the profitability of Sainsbury's business. Cowadays customer needs good customer ser(ice low price products better choices constant flow of
instore promotions all this strategy is pro(ided by the Sainsbury's. 4uyer power also acts to force prices down. *f beans are too e7pensi(e in ,esco buyers will e7ercise their power and mo(e to Sainsbury.
Treat of new entrants
,he costs of entering in to retail market need the low budget so it is relati(ely easy for new entrants. Sainsbury's may ha(e cornered the market for certain goods< the new supermarket will not be able to find cheap reliable suppliers. Sainsbury's also has the ad(antage of economies of scale. ,he amount it pays suppliers peritem is a lot less than the corner shop. *t achie(es this partly through buying large (olumes of goods. - small supermarket chain can only buy a relati(ely small (olume of goods at greater e7pense. ,he UK grocery market is primary dominated by few competitors including three ma:or brands of ,esco -sda and Sainsbury's and a small chains of Somerfield 8aitrose and 4udgens. ,his is also e(ident in huge in(estments done by large chains such as Sainsbury's in ad(anced technology for checkouts and stock control systems that impact new entrants and the e7isting ones.
Determinants of ivalry among E!isting
,his force describes the intensity of competition between e7isting players 2companies3 in an industry. 5igh competiti(e pressure results in pressure on prices margins and hence on profitability for e(ery single company in the industry. ,he retail market is e7tremely competiti(e with a (ery crowded market. Cowadays lots of companies are trying to get into non food sectors further intensifying the competition. Sainsbury's has a market share of 10.9% in &))D and its increasing since its restructuring program that started in &))0 2-nnual Eeport &))D3. ,his is a positi(e trend but it is behind the ,esco. Showing that there is considerable distance to co(er. ,esco -sda and @orrison's are the other three big supermarket chains in the UK retail sector. -ll of them ha(e a different competiti(e ad(antage o(er their competitors. ,his highly competiti(e in retail market has fostered an accelerated le(el of de(elopment resulting in a situation Sainsbury's ha(e had to be inno(ati(e to maintain and build market share. http>FFwww.essay.uk.comFfreeessaysFmarketingFfoodanddrinkretailsector.php
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