Business Analysis of Sainsbury
The world has become more competitive, dynamic, uncertain and volatile than ever before (Dowling et al, 1999; Kanter, 1991). ‘To be successful, many firms have to compete on the global playing field because the costs associated with the development and marketing of new products are too great to be amortized only over one market, even a large one such as the USA or Europe’ (Bartlett and Ghoshal, 1991). [Gordon G. George and Ditomaso Nancy (1992), p 6-7.] The UK markets are moving at a fast speed trying to build a market share in global markets, with the advent of the EU and free border for International trade, competition has increased tremendously. Companies now need to have sustainable competitive advantages, different marketing mix which hold a great appeal to the customers and marketing opportunities which land them in the right place with the right people. Survival is a big issue when bigger companies are swallowing up the smaller players in the market, there are constant price wars and mass advertising is used as a tool to pull down the competition. Professor Theodore Levitt of Harvard University (1983) argues that improvements in communications and growth in international travel have resulted in the emergence of demographically similar consumer segments across various regions on the globe. The emergence of similar culture and consumer taste can be seen with fast food, rock music and fashion becoming global trends. It is clear that brands that extend beyond national borders must symbolise universal desires and consumer preferences to a specific segment in a number of geographical regions. This applies to supermarkets retail brands such as Sainsbury, Wal-Mart, Tesco, and Carrefour among others. The emergence of these segments has enhanced the opportunities for growth of international companies. Since the consumers are also now realising the extent to which competition has invaded all aspects and segments, they are more knowledgeable about their choices and preferences in terms of price, quality, and value for money and variety. [Kotler Philip (2003), p 30 – 45]
The UK retail segment has always been in the midst of controversial issues regarding company performance, international competition, price wars and change in strategy. Sainsbury is a well-known household name in retail segment. J Sainsbury plc the company that is at the heart of this discussion is the parent company of Sainsbury Supermarkets Ltd; on a more common note it is well known as “Sainsbury’s”. J Sainsbury group also has additional ventures in the property and banking sector, although the revenue earner still remains the supermarkets. In the year 2000, J Sainsbury plc had undertaken a new venture in the DIY store chain but unfortunately had to sell it due to bad performance. The company was first established in the year 1869, from then on the organisation has strived to establish itself through all the changes in the corporate world in fast moving times. Since Sainsbury’s the supermarket chain is the main revenue earner and group company, the paper would be based on their strategic decline and place in the corporate world. ‘As of now the organisation has more than 535 stores, 238 gas stations and 145,000 employees serving 13 million customers per week’, astronomical figures to go by. It one of Britain’s long serving grocery retailers, which has been extremely successful and created brand value in the market. In recent times this position has been slipping due to internal as well as external factors. The following reasons were jointly responsible for the decline –
- Increasing Infrastructure costs
- Stronger and consolidated competition from other stores
- Price wars versus quality and service factors
Sainsbury has faced immense internal problems, one of which was the thinking that the organisation could give up on the ‘price’ factor and concentrate on refurbishing store look and supply chain improvements. Their market and share loss to Asda is proof that price is a key aspect of the marketing mix which is important to customers. TNS’s Edward Garner said: “This is a considerable shake-up at the top of the British supermarket rankings. “Asda’s growth is reflective of the recent success of supermarkets promoting themselves on price promises.” [http://news.bbc.co.uk/1/hi/business/3112689.stm]
When organisations undergo strategic changes they need to consider the implications of the internal as well as external environment. In today’s competitive environment it is virtually impossible to overlook the market conditions and competition, since both have long lasting affect on an organisations performance.