A Strategic Analysis Of J Sainsbury Marketing Essay

A Strategic Analysis Of J Sainsbury Marketing EssayJ Sainsbury plcconsists of Sainsburys a range of 509 super merchandises and 276 convenience stores, Sainsburys online, Sainsburys property and Sainsburys Bank. Sainsburys Supermarkets is the UKs longest standing major provender retailing chain, which opened its first store in 1869. The Sainsburys brand is strengthened upon a heritage of providing nodes with healthy, proficient, fresh and tasty food. Today it several(predicate)iates itself by offering a broad range of expectant quality products at mean(a) legal injurys with cross emphasis on fresh food, a strong ethical approach to business and continuous leadership and innovation. At Sainsburys products are breakd and give outed to pick up the lodge leads in terms of the ingredients used and integrity of sourcing.Sainsburys goalis to improve quality shopping experience for customers with great products at fair prices. Their aim is to excel customer expectations for h ealthy, safe, fresh and tasty food, making the customers lives easier e really day.Sainsburys brand Values-passion for healthy, safe, fresh and tasty food, their focus is on delivering great products at fair prices, they fork out a history of innovation and leadership and a strong regard for the social, ethical and environmental proceedss of their operation, and this has continued to stand the test of sentence.Sainsburys five principles are at the core of their businessThe best for food and healthSourcing with integrityRespect for our environment qualification a positive difference to our communityA great place to gain.And at Sainsburys they believe that these principles provide differentiation from their major competitors and define and direct all their activities.Sainsburys business priorities areGreat food at fair pricesAccelerating growth of complementary non-food rangesReaching to a greater extent customers through additional channelsGrowing supermarket spaceActive property managementThe organisation that has been selected to examine and study is Sainsburys. Sainsburys has started its journey in 1869 and since then it has gradually established itself as the third largest supermarket chain in UK. Over the past few years its parent company J Sainsbury plc has prolonged its business and this instant owns a whole range of former(a) companies equivalent Sainsburys Supermarkets, Sainsburys Local, Bells Stores, Jacksons Stores and JB Beaumont, Sainsburys Online and Sainsburys Bank. The increasing figures of Sainsburys global sales and purchasing operations contributes to a significant rise in the business competence and productivity. However, this report will be examining Sainsburys position in the retail industry, explaining the role of interaction at bottom the spoilt and micro environment, drawing up a detailed competitory advantage of the organisation and the strategies that influence the business policies to survive in the warlike market.Analy sis of financial dataGross Profit Margin (GPM)- Due to the intense competition in the supermarket industry margins are generally low. See the following table for comparators which shows comparatively poor margins for Sainsbury even compared to other retailers CompanyIndustryROAProfit MarginMarks Spencer retail merchant and Financial service4.43%3.91%J SainsburyRetailer and Financial Services5.60%3.61%ThorntonsRetailer of Chocolates etc8.43%6.45%NextRetailer of Clothing26.14%13.82%Dixons GroupRetailer of Electronic etc Goods19.78%14.41%Yates GroupRetailer of Food9.13%13.34%Safe dashRetailer of Food7.24%4.14%MorrisonsRetailer of Food12.93%5.87%TescoRetailer of Food and Household Goods9.99%5.72%Strategic abbreviation of Sainsbury PLC using Porters 5-Force ModelSWOT AnalysisASWOT Analysisis a strategic planning peckerwood used to evaluate theStrengths, Weaknesses, Opportunities,andThreatsof an organization. With the help of this SWOT analysis we will be able to find out the positive s and negatives of Sainsburys.StrengthsSainsburys has had thirteen straight quarters of growth masking real turnaround in its business. Even for 2007 it has shown an increase of 7% in turnover and a huge 450% increase in profit after impose (Annual invoice 2007).It has an extremely experienced leadership team.Sainsburys examinems to be very well placed on green and environmental issues due to its various recent initiatives, like buying fair-trade bananas (economist.com 2008 online). Furthermore its help in closing down gang master has had a positive effect on the public in general. It has a positive consumer brand and its liked by both green activists and consumers.It is one supermarket chain that has a clear celebrity endorsing products, leading to increased sales. With Jamie Oliver, it has been simple for Sainsburys to see uplifts in sales of specific ingredients that bewilder been featured in ad campaigns. The supermarket had to order nine tons the equivalent of two years s upply of nutmeg to meet demand when it appeared in one of Jamie Olivers ads.WeaknessThe takeover bid by the Qataris Private equity firm last year can have some implications as people are gravitating towards British companies and the prospect of Sainsburys being governed by a foreign firm can lead to consumers switching loyalties. hostile Tescos expansion plan (economist.com online 2008), Sainsburys is not present in markets other than the UK. This can lead to trouble especially if thither is some problem within food retailing in the UK or if there needs to be a source of extra growth.OpportunitiesSainsburys alternative business presents a great opportunity for prox growth. Its enthronisations in property and a goal of 40 million profit through its cuss take care like a good strategy to pursue.Online sales are a great opportunity as well, since online margins are higher and enduements are not huge.ThreatsThere needs to be continuous heavy investment in environmental and green i ssues without immediate benefits. The problem lies in maintaining a balance e.g. Bio-fuel is an weighty tool to curb global emissions and its use affects Sainsburys supply chain directly, so Sainsburys should support it. However, a spurt in bio-fuels has made corn dearer (independent.co.uk online 2008) affecting its prices within the UK and making Sainsburys consumers bear the brunt.Sainsburys operations are subject to a broad spectrum of regulatory requirements particularly in relation to planning, competition and environmental issues, employment, pensions and tax laws and in terms of regulations over the groups products and services.Thisconcludesthat with the help of this SWOT analysis Sainsbury would now know where they stand. This will also allow them work on their opportunities, weaknesses and threats and build up on their strengths giving them a cutting edge.Macro-EnvironmentAt this present phenomenon the disposition of the retail industry is ever-changing its image dramatic ally and the importance to survive with the competitors and remain as a leading company in the market has reached its highest peak. However, there are some issues which whitethorn have some impacts on the business. Political factorsAt present the changing trend of globalised business could be a quarrel as well as an opportunity for the Sainsburys because they would have to compete against sunrise(prenominal) forces from all over the world to maintain best quality of the products and services they offer. node may get a negative impression because of the investigation going on price fixing as Sainsburys is listed in the top four retailers in UK (Rigby 2008).The UK Government is to reduce corporation tax rates from 30% to 28%, which will help Sainsbury, to save large amount of money (HM Treasury 2008). frugal factorsThe rising food prices because of global food crisis may have impacts on the business of Sainsburys as it will definitely increase their purchasing and production gre et (economist.com 2008). And eventually it will increase the overall price of the products in the super marketSupply chain of Sainsburys may get touch on with the rising court of fuel which may lead to an overall increase in prices.The credit crunch will cut the purchasing power of the consumers as they would have little money to spend on luxury products. Therefore, automatically it is going to decrease profit margins for Sainsburys. On the other hand Sainsburys operates financial services company with HBOS (Annual Report 2007) and also a bank. However, both of are directed affected due to recession.As the competition in the market is really high other voluminous competitors like ASDA ,TESCO ,MORRISON ,LIDL , ALDI are cutting down their product prices and giving lot of incentives to customer which may bound Sainsburys to drop their prices to survive in the market. (Annual Report 2008) neighborly FACTORSSainsburys may introduce new recipes to cook easy and healthy food because no w a days consumers tend to eat fresh food and seem to be more health conscious.According to the health department the obesity rate in UK is increasing (department of health 2008). And because of that reason the UK government has emphasised on healthy eating (eatwell.gov.uk 2008) which gives Sainsburys to an opportunity to manufacture more healthy foods at a cheaper price to match the ongoing trend.TechnologicalIt is predicted that by 2011 the online retail sales in Europe will hit approximately 263 Billion Euro because of the rapid increase of internet shopping in which the shoppers in UK may accounting for more than a third of all revenue.Sainsburys can take the advantage of utilizing internet as an advertising media as 8% of the global advertising is spent on the internet and the percentage is increasing day by day (The Economist, 2007).It will be very cost effective and help the company to globalize very easily.Self checkout machines may increase customer loyalty as they dont hav e to wait in long queues some whiles for very few products. It saves their time and increase comfort while shopping. It can also be very cost effective as it will require less worker to work and can be in operated 24 hour shops which will boost up the sales figure.RFID (Radio Frequency Identification Device) is a new technology nevertheless to be popular but can play vital role in supply chain management fort the company. It can benefit big companies like Sainsburys to save their valuable time as it requires less inventory and offers more efficiency. (Directions magazine 2008)Environmental factorsEnvironmental factors are one of the key issues these days. both company has to ensure that they contribute in reducing carbon footprint and to increase energy efficiency (Bream 2008) which means big companies like Sainsburys would have to invest more money to sort out Green issues.With the growing ethical issues such as selling organic foods and treating animals in a good way may have im pacts on the business of Sainsburys because they would have to retain their customers and balance their pricing after maintain all the environmental issues.Legal factorsSainsburys would have to develop its packaging and labelling policies to meet all the implications of LAW on food and drinks. Which will add extra cost to their overall budget.As Sainsburys operate a bank and is involved with financial services they would have to be more concerned about the legal issues and risks involved with their business.Porters 5 ForcesCompetitive rivalry-The retail market is tremendously competitive with a very crowded market. Now, as more and more companies are trying to get into non food sectors it further intensifies the competition.Sainsburys has a market luck of 14.9% in 2007, steadily increasing since its restructuring programme that started in 2004 (Annual Report 2007). This is a positive trend but it lags well behind the runaway market leader Tesco, showing that there is considerable distance to cover.Tesco, Asda, and Morrisons are the other three big supermarket chains in the UK retail sector. All of them have a different competitive advantage over their competitors. Sainsburys reach in the convenience stores makes it have a larger customer reach.Banks and building societies compete with Sainsbury bank but it is not a core business for Sainsburys.Barriers for entry-Barriers to entry are extremely high in the food retail market due to a number of factors. Firstly, set up retail is amongst the most sophisticated sectors within the UK and needs a lot of investment, along with significant brand development, which takes years to establish. Secondly, retail is also at an locomote stage within the UK and most of the western world, which means there is little scope for new entrants to establish themselves.Local knowledge is extremely crucial within the food retail sector, something that is operose for foreign firms to replicate. This is corroborated by the presence of few global supermarkets within UK.Threats of Substitutes-The threat of substitutes in the food retail industry is a low one simply because consumers view it as a necessity, especially in the developed world and increasingly in the emerging markets.The retail market is always trying to converge and assimilate new innovations with respect to food products or alternative businesses, to make shopping an extremely pleasurable experience. This makes them extremely difficult to substitute.The only major threat of substitute is an internal industry threat whereby one supermarket can lap up the business of other supermarkets. vendee power-Buyer power is high in this industry simply due to the presence of so many competitors selling the same products. It is only differentiated in price and consumer loyalty and increasingly on green credentials. Moreover, the switching costs are low for consumers.As the economy goes further towards recession consumers needs are possible to be given more we ight, increasing their power considerably.Supplier power-Supplier power is usually more complicated as it is difficult to categorise it. It is safe to call it a mutually dependent relationship as suppliers are in itself huge companies, like PG, Unilever, Cadbury etc. with huge brand appeal. It can be argued that if supermarkets do not sell their products consumers will shift loyalties, making suppliers very powerful. However, if the products of big companies do not reach supermarkets, their sales volumes will be affected hugely. The relationship might change depending on the situation of the big branded supplier, for example, when sales of Cadburys dairy milk increased through the successful Gorilla ad campaign.Supplier power of smaller suppliers will not be considerable because of their sales volumes on dependence on these supermarkets.Competitive advantageSainsburys has got some competitive advantage which made its business so successful all over UK and established the 3rdfood ret ail chain in United Kingdom. The competitive advantages are discussed below16 million customers visiting every weekMore concerned with the environmental issues such as green house effect , reducing fuel emission , providing 15 million reusable bags , 8 million car stickers and fridge magnets to remind and encourage people to use environmental friendly resources.Performing social responsibility while working with Comic Relief to raise money and help poor neighbourhood.22% market dowry makes them one the power key player after Tesco in the British retail industry.They have established a brand image and are considered to have the supermarket power which is Locations.Sainsburys marketing strategy is to attract the middle class consumers with an affordable cost while maintaining particularly quality of the food they simultaneously.They are promoting a new section name Active Kids to help school kids and teachers to overcall child obesity.http//www.bitc.org.uk/resources/case_studies/afe_ 1343.html)Sainsbury is the first super store to start One Hour Delivery schedule outside of London. In addition if the y fail to do so on time customers will be paid 10 next time they do online shopping.(http//www.sourcewire.com/releases/rel_display.php?relid=19562hiliteSainsburys bank loans ranked 13 out of 16 in the Ciao top list as The Best Loan Lendershttp//www.ciao.co.uk/Sainsburys_Bank_Loans__6914648)Developing customer service is a key advantage for Sainsbury. They discovered their highly skilled employees focus on their duties rather than Customers. So therefore , they changed the strategies and focused more to improve customer service to get extra advantage.The adoption of RFID has brought new competitive advantage as only few companies has the privilege to use this innovative technology.Making Sainsburys store more accessible for its customer while keeping in mind about some facts such as geographical aspects, ever changing lifestyles, and Government restrictions.Cutting cost , giving incentives and introducing constant innovative products is a core advantage over competitors.Sainsbury manufacturers their own products and has their own brands which helps them to produce products in a bulk quantity at a cheaper price.The company has a unique core competency which is they promote value by providing good quality products at a competitive price.Vertical integration in between buyers and suppliers has managed to organise and run a healthy supply chain system for the company which may help them to expand their business in future..Limitations inter-related with the PEST AnalysisIn analyzing the macro-environment, it is important to identify the critical factors that might have affect on the business. A number manners of have been developed so far. PEST analysis happens to be one of the key tools to determine those factors in a various way.Kotler (1998) claims that PEST analysis is a useful strategic tool for understanding market growth or decline, busines s position, potential and direction for operations. The utilization of PEST analysis could be considered effective for the corporate benefit and strategic developments of the company. Although everything has its own Pros and Cons , PEST analysis as a tool is not unlikely to them.It can be verbalise that Pest Analysis are sometimes done on simple assumptions which may not even exist in real. The reason behind may be the facts we take into account while doing a PEST for any company. It may not be considered on specific area or may be they less possibility to happen reality. It is also considered that PEST analysis doesnt really emphasise on critical factors and it one of the major lacking of this method is it only covers external issues without concerning the internal environment of the company and position of competitors in the industry. Another disadvantage for PEST would be it is not done on a regular basis as the rules and regulations, currency rate , variables , foreign investme nt and economic figures etc .change quite often. Indeed to make it more realistic and practical it is important to gather information and obtain different perspectives based on individual point of view which is going to increase cost thus, results as a demarcation for this vastly used tool.The current position of the company in the market is quite strong though with the booming recession and business expansion of other competitors may cause some difficulties in future.Sainsburys being one of the largest supermarket company in UK should set some standards to achieve outstanding performance as a overall company. Moreover, Sainsbury should introduce some new business policies to expand its business outside of UK and explore the new markets like China, India , USA, Australia.ConclusionFrom this investigation it can be seen through the various analyses methods used Marketing Audit, Porters 5 Forces and SWOT, that Sainsburys is an iconic British food brand, well loved by its consumers an d importantly profits, have improved tremendously. Although it has shown poise growth it is important for Sainsburys to go the next level by challenging Tesco, a competitor identified in the Porters 5 forces analysis, either by sentiment of international expansion or on price. This in conjunction with its increasing property portfolio and alternate businesses should help in continuing the strong growth path, as well as tiding over threats (SWOT) in its external environment.