Marketing Strategy : Sainsbury’s Case Study
Task:Each student will write a strategic analysis report of NOT more than 2500 words. The report should demonstrate that the student has thoroughly researched their topic. Students should use examples of business practice from the scholarly journals papers, conferences, books and professional magazines to support their arguments. The strategic analysis will be on a local company. The report consists of two parts and should cover the following requirements
Part 1 (External analysis)
- Business background
- What industry is it?
- General environment analysis (economic, physical, sociocultural, global, technological, political/legal and demographic – and work out what the important facts are).
- The industry environment ((i.e., supplier power, buyer power, potential entrants, substitute products and rivalry among competitors) and explain briefly what is significant for each).
- Competitive environment (Is there a strategic group that you need to take account of? What is the rivalry like in this group? What capabilities do the relevant firms have? What strategies do they follow? What threats do they represent?)
- Opportunities and threats
Part 2 (Internal analysis and proposal)
- The firm’s resources, tangible and intangible
- Capabilities identification (explain the capabilities carefully to indicate what the firm really does.)
- Core competency analysis (For each capability, indicate which of the four tests for a core competency it meets).
- Propose a suitable information system solution that meets the chosen company needs
- Evaluate the proposed system and provide your recommendations
Various tools are used to make comprehensive plans for formulating a favourable business environment for an organisation to operate in. It is particularly made so to achieve the objective of marketing set by the organisation. It helps in providing a blueprint to attain the objective of marketing set by the company. In simple words it can be said that a marketing strategy is nothing but building block of business plan to spread into the industry. Formulating a marketing strategy helps the company in concentrating its scarce resources in the best possible manner for increasing its popularity and sales in the industry. In this sainsbury case study various marketing strategies will be taken under for formulating a favourable business environment. Using the format given below will help you in drafting the sainsbury case study assignment in a descent way
Part 1: External Analysis
Company Overview: The company Sainsbury’s deals with appliances and electronics and has a position of a discount retailer. The company operates in New Zealand and Australia with the support of a low-cost model. The core business of the company is dealings with appliance and electronics to the consumers. Sales from digital content such as books, music and videos I also generated by the company (Glass et al., 2018). Consulting services along with information technology is provided to the government, business organisation and education clients all over Australia. The company has a coverage of national outlet with several stores across Australia that are primarily located in shopping centres and sites that are stand alone. The location of the stores of Sainsbury’s is mostly located in the key states of the countries such as Victoria, Queensland and New South Wales. A new Store format was introduced by Sainsbury’s in April 2016 in the Sydney International Airport.
Industry Overview: The sector of consumer electronics in Australia is a developed one and has been able to acquire large amount of success. The growth rate of consumer electronics in the country is still high import the terms of value and volume. The key driver for the growth of the sector in Australia is the constant innovation being made by the companies rising despite of some seemingly saturated categories in consumer appliances and electronics. Additionally, the shopping habits of the Australian consumer have also been evolving. Those days are gone when solely having a strategy of brick and mortar would be enough for the retailer to make profits in the sector of consumer supermarkets goods. The Australian market of consumer supermarkets goods industry is specifically split between consumers who are price conscious and have been demanding goods of high quality with relatively lower prices and the customers who are willing to purchase by paying a premium amount for the product that has additional features (Strengers et al., 2017).
The channel of Supermarket retailers is very competitive with both private and public companies having a similar range of brands and products in the key areas of the country. In a market where goods and products are generally driven by technology that is ever evolving, knowing who the target consumers are becomes of vital importance to the retailers present in the market and what are they doing to keep their interest engaged.
Macro environmental Analysis
Political and Legal: As the company operates in more than a dozen of countries it is obvious that it is exposed to various kinds of political system risks. For achieving success in a retail sector that is so dynamic across different countries for diversifying the risk of political environment, the company should evaluate the political stability of the countries it is operating and along with analysis of the level of corruption in the functioning locations. Interference of the Government and Bureaucracy in the retail sector must also be analysed along with the verification of favoured trading partners.
It is necessary for the company to analyse the legal framework of the various countries that it is doing business in. It must be ensured that the company is robust enough for protecting its very own intellectual property rights. It is essential for the business organisation to carefully analyse the scopes, advantages and drawbacks before entering new markets which may lead to the theft of business secret of the organisation (IBIS World, 2018). Thus, to maintain it's over all competitive edge, the company should take care of it legal stability in the industry. Every contract made in the market must be legally enforced and the wage legislation must also be diligently executed (Larsen et al., 2017). Protection of data and protection of intellectual property must especially be taken care of.
Economic: The macroeconomic the macroeconomic factors such as rate of inflation, rate of interest, rate of savings, and determination of the aggregate demand of the economic cycle along with aggregate investment made and the rate of foreign exchange must be evaluated. The company should be using the economic factors of the countries such as economic indicators of the industry, growth and inflation rate along with the date of consumer spending for forecasting the growth trajectory of the company in the industry. The stability of currency value in the Australia along with exchange rates, quality of infrastructure, comparative advantage of host country, cost of labour, rate of unemployment and discretionary income are the economic factors one must closely analyse in the industry of consumer supermarkets goods (CHEN et al., 2017; IBIS World, 2018).
Sociocultural: The culture, society and the way of a certain things impact the environment of a business organisation in the retail Industry of consumer and electronics. Shared attitudes and beliefs of the consumers play an essential role in how the marketers of Sainsbury’s understands the consumer of a certain market and how well the design the message of marketing for the consumers of the retailing industry. Socio-cultural factors that must be considered by the company heads are the level of the general population, attitude of the consumer towards the consumer supermarkets goods products and entrepreneurial spirit of the society.
Technological: Across the world, technology is rapidly disrupting various industries. However, on the same time the evolution of Technology is the very reason behind the success of certain industrial sectors. The retail firms have been constantly engaging in adoption of latest technologies to deliver better and quicker customer service.
Global : In the global scenario, Sainsbury’s is facing competition form Tesco, morrisons and Asda, focussing on the consumer oligopoly, striving to deliver customer satisfaction at the most cost-effective prices. All of the supermarket giants aim towards establishing sustainable relationship with the vendors and procurement, so that they are able to maintain their stock fresh and at minimal prices. The discount pricing strategies with regular offer for loyal customers ensure that they have a sustainable customer base.
Demographic: According to IGD Report (2017), the convenience stores constitute to be the larger segment of the repertoire of retail outlets that are being visited by the main shopper of Sainsbury’s. the demographic profile includes customers from all age groups with more than 50% of the customers within 25-40 years of age. The products at the store is targeted for the mass people belonging to different economic sections.
Suppliers’ Power Almost every company in the sector of retailing purchase their raw material from various suppliers. Suppliers have a position of dominance and have the ability of decreasing the margins that Sainsbury’s can be earning in the market. The powerful suppliers in the sector of retailing can use the power of negotiation for extracting higher prices from the business organisation dealing in the sector of retailing. The complete effect of highest supplier power of bargaining is that it reduces the overall value and scopes of profitability in the detail retailing industry. Sainsbury’s can tackle the power of suppliers buy efficiently building a supply chain that consists of numerous suppliers (Addis et al., 2016). By experimenting with the design of product with the use of various materials one can tackle the power of suppliers. When the price of a certain raw material goes high, then the organisation can shift to other without having to deal with the dominant positions of suppliers. With the rising dependency on the local and international suppliers, the power of the suppliers in Australian supermarket industry has been moderate to high (IBIS World, 2018).
Buyers’ Power: The demanding lot of a market is often the buyers. They are always on the lookout for the best of rings that are available on the market which is generally in the form of minimum paint price with good quality of products and services. This look out of the consumers put Sainsbury’s in a position of pressure to make quality products available at the minimum possible price to keep the consumers in the market loyal to its products and services (Zhou et al., 2018). The power of buyers can be tackled by making rapid innovations of new products so as the consumers who are seeking for offers and discounts no more have the space to do so as the company keeps coming up with innovative products which have no substitutes in the market. This can also be dealt with by building a large piece of consumers. By doing so the bargaining power of the consumers will decrease and it will also be providing the company a great opportunity to streamline its process of production and sales (IBIS World, 2018). With the greater number of options to choose from, the power of the buyers has risen over time.
Threat of New Entrants: In the sector of in the sector of retailing, the supermarket industry players experience a low level of threat form the new entrants coming in the market. The new entrance will generally be bringing innovative products and new methods of doing certain things that may pressurize the process of doing business of Sainsbury’s. It will automatically be pressured to reduce its cost, we think its pricing strategy and offer new value proposition to its consumers.
Threat of Substitution: When a new service or products are similar to the customer needs and requirements of existing product the profitability of an industry suffers. For reducing the threat of product substitution, Sainsbury’s must become more service oriented then being product oriented. It must grow and understanding of the basic need and core requirement of its consumers and increase the switching cost for its target consumers. However the supermarket firms enjoy low threat from substituted products.
Competitors’ Rivalry: The rivalry among the existing competitive in an industry is intense in the sector of retailing consumer supermarkets goods. Due to the intense competition there is a decrease of overall profitability and the prices are also driven down in the industry.
The competition in the Australian retail market is getting intense with cost effective strategies from both local and international players, along with the online market portals gradually becoming popular. The retailers have been struggling with the price deflations, with the players operating over economies of scale. The stepping of international retailers like Amazon, Aldi, Costco have become a concern for the market leaders like Sainsburys and Tesco, who were enjoying the early foothold into Australian retail market cannibalising on the sales of local Australian supermarket giants like Wesfarmers and Woolworths. Majority of the players operate on low profit margins to attract a greater number of customers and benefit from economies of scale. All of the retail firms
Opportunities and Threats
Over the past decade, industry has been transforming in a drastic manner, not even giving a chance to the competitors to cope up with the rapid changes in the industry. For this reason, the company must conduct a third-year analysis of technological innovation along with the speed at which technology can disrupt an industry. The factors that must be considered while conducting this analysis are: impact of technology on product offering, rate of technical diffusion, recent innovations, impact of technological advancement in the cost structure of the retailing sector. One of the biggest opportunities of Sainsbury’s is related to being globally present which provides advantage of procuring different materials from various parts and delivering them to the customers, a benefit over its local competitors (Sainsbury’s Plc, 2017).
The power of buyers can be tackled by making rapid innovations of new products so as the consumers who are seeking for offers and discounts no more have the space to do so as the company keeps coming up with innovative products which have no substitutes in the market. This can also be dealt with by building a large piece of consumers. By doing so the bargaining power of the consumers will decrease and it will also be providing the company a great opportunity to streamline its process of production and sales. With the greater number of options to choose from, the power of the buyers has risen over time.
To manage the threat of new entrants the company must built barriers that will effectively be safeguarding its edge of competence. This can be done by the innovation of new products and services.
An intense competition takes a toll on the business of the organisation. For dealing with such threat it is essential to build sustainable differentiation and make collaborations with the existing competitors for increasing the size of the market rather than competing in small markets.
Part 2: Internal Analysis
Resources of Sainsbury’s: The major resources of Sainsbury’s include their partnership program with various vendors and local suppliers that enables the fast transmission of goods from farms to their distribution hubs or warehouses. Apart from the above-mentioned intangible assets, the company has more than 1400 retail units all across the world, constituting its worldwide network of tangible assets (Sainsbury’s Plc, 2017).
Capabilities of Sainsbury’s: Sainsbury’s maintain superior value proposition through local sourcing of ethical, quality and fresh food. The customised loyalty programs and inimitability of the offers provided at the offline stores serve as the unique capabilities of the firm.
Core Competency of Sainsbury’s
One of the recent additions to the Sainsbury’s business profile is its financial division. Thereafter, the firm is able to analyse its short term and long-term debts, with increase in the latter delivering better facilities over long term growth in both online and offline sectors. The increasing number of business channels helps in diversifying the revenue stream of the company, contributing to its long-term sustainability and minimising the business risks (Sainsbury’s Plc, 2017).
This strategy is fruitful for testing the competence related to providing competitive advantage. The inimitability of the discounts and bonus offers make it difficult for its competitors to emulate the business strategies of Sainsbury’s. the timely review of the customer preference and market statistics provide information regarding its market share and available or potential opportunities.
Proposed Information System Solution for Sainsbury’s
The company needs to develop an integrated information system that will be storing all the information, rather a comprehensive intelligence system, which will provided relevant information regarding customer preference and based on which the intelligence can be developed along with understanding market changes.
Evaluation of Proposed System and Recommendation
The comprehensive IT system will coagulate the offline and online purchases with options for delivering customised offers and loyalty bonuses, targeted towards increasing and retaining customer base of Sainsbury’s.
In this sainsbury case study it is concluded that the marketing strategies will be providing the organisation a competitive advantage and will additional help to develop products and services with potential of making the best possible profit. Additionally, it helps to fix the right rate for goods and services of a business organisation basing on the information that is collected with the help of market research. The business strategy drawn in this sainsbury case study will help in making optimum utilisation of the resources of Sainsbury’s for providing a message of sales to its target market. Also, by this process, departmental coordination is ensured in the company. You can observe that in this sainsbury case study a detailed analysis is being conducted which helped us to arrive at this conclusion. In this sample solution of sainsbury case study a detailed analysis is done by referring to the academic theories which helped us to arrive at an accurate inference.
Addis, J., 2016. Retail sector wrap: One opportunity and plenty of worry. Equity, 30(3), p.6.
CHEN, Y., 2017. Estimation of Stock Price: A Case Study of Sainsbury’s Limited. DEStech Transactions on Social Science, Education and Human Science, (msie).
Glass, M. and Gliozzo, A., 2018. Discovering Implicit Knowledge with Unary Relations. In Proceedings of the 56th Annual Meeting of the Association for Computational Linguistics (Volume 1: Long Papers) (Vol. 1, pp. 1585-1594).
IBIS World, 2018. Supermarkets and Grocery Stores - Australia Market Research Report. [online] Available at: < https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/food-retailing/supermarkets-grocery-stores.html> [Accessed 24 August 2018].
IGD, 2017. Trading with Sainsbury’s. [pdf] Available at : < https://shoppervista.igd.com/Portals/2/Downloads/Trading-with-Sainsburys-infographic.pdf> [Accessed 24 August 2018].
Larsen, A.I., 2017. DELL Technologies (Bachelor's thesis, BI Norwegian Business School). Sainsbury’s Plc, 2017. Annual Report and Financial Statement. [pdf] Available at: https://www.about.sainsburys.co.uk/~/media/Files/S/Sainsburys/documents/reports-and-presentations/2017/annual-report-and-financial-statements-2017.pdf [Accessed 24 August 2018].
Strengers, Y. and Nicholls, L., 2017. Convenience and energy consumption in the smart home of the future: Industry visions from Australia and beyond. Energy Research & Social Science, 32, pp.86-93.
Zhou, N., 2018. Australian retailers resilient as they face down 'Amazon effect’. [online] Available at: https://www.theguardian.com/technology/2018/feb/14/australian-retailers-resilient-as-they-face-down-amazon-effect [Accessed 24 August 2018].