J Sainsbury plc

Report on strategic analysis of the company

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Contents
Introduction................................................................................................................................2
Analysis......................................................................................................................................4
Internal Analysis of J Sainsbury plc.......................................................................................4
External analysis (J Sainsbury plc).........................................................................................4
Strategic analysis........................................................................................................................5
Strategic options.........................................................................................................................6
Market development...............................................................................................................6
Diversification........................................................................................................................6
Market penetration..................................................................................................................7
Product development..............................................................................................................7
Appraisal of the options.............................................................................................................7
Conclusion..................................................................................................................................8
Recommendations......................................................................................................................9
References................................................................................................................................10

Introduction
It is important for businesses to remain dynamic and become successful in todays
competitive environment. There are number of ways in which businesses behaves as they
cannot rely on the traditional management (Wheelen & Hunger 2005). Internationalization of
the corporations and market has developed new opportunities as well as threats. Moreover
there are changes in the local market as well. Because of that there is a high need for adopting
strategic management approaches in national market for new developments and management
of current operations. Within corporations strategies are at three level`s i.e. Corporate,
operational and business level. Strategic management has become an important topic of
discussion among researchers as it helps organizations to achieve long-term competitive
advantage (Wheelen & Hunger 2005).
J Sainsbury Plc is a large group which operates Sainsbury super markets plc and Sainsbury
bank plc. It is the one of the largest group in UK which operates 17.7% of the supermarket
retail stores in UK. The main competitor of the business includes Tesco, Asda, Morisons and
Aldi. Sainsbury operates more than 1,106 super markets and convenience stores and

employees around 158,000 people in its business. On the other hand Sainsbury banking
sector provides all the commercial banking facilities to its customers. Sainsbury values
promote the importance of the customers to business. The customers are considered as heart
of everything at Sainsbury. In this report we are analysing the internal and external analysis
of Sainsbury plc. To assess the strategic position of the organization, this will later help to
formulate the strategic options for the business for long-term business advantage improving
competitive position. This analysis will be based on number of frame works and model.
Findings will then further lead to strategic recommendations for future development.

Analysis
In order to analyse the strategic position of the J Sainsbury plc it's important to analyse the
internal and external environment of the company. This will be done with number of models
such as SWOT analysis and Porters five forces.
Internal Analysis of J Sainsbury plc
J Sainsbury plc is the operates largest retail store in UK which employees more than 158,000
people in its business. It is the one of the largest group in UK which operates 17.7% of the
supermarket retail stores in UK. Sainsbury operates more than 1,106 super markets and
convenience stores. Apart from this J Sainsbury plc is into online retailing, property, banking,
energy and entertainment business. Such wide portfolio of the business is its main strength.
Last year J Sainsbury generated profits of 788 million (Sainsbury finance, 2014). The
company has a strong brand name among their loyal customers. Sainsbury is considered as
expensive brand compared with other competitors prices. Moreover there is not much growth
in business as profits are almost same from last couple of years (Sainsbury finance, 2014).
Another weakness of the group is that there is no new investments.
External analysis (J Sainsbury plc)
J Sainsbury operates in more than one industry including retail, banking, energy and
entertainment. Asda, Tesco and Morison are the largest known competitors of J Sainsbury.
Threat level is high for J Sainsbury as the competitors are more effective and have large
portfolio of businesses. J Sainsbury and Tesco both are in same business categories but Tesco
is a large group with annual revenues of more than 72.4 billion (Tesco finance, 2014).
There is low threat of new entrants, however high threat from the competitors, because of the
price wars (Harry, 2014). J Sainsbury deals in number of products and services and have

achieved a high maturity so there is low threat of substitute product. Sainsbury super market
is the only high profit making business of the group, which deals with number retail products.
Sainsbury have a very sophisticated supply chain and manufactures some of its products
which gives them strong bargain power over suppliers. Moreover price wars with Tesco
increases more threat to the business in-terms of profitability and supplier bargain power.
The pricing strategy of competitors and high availability of the competitors product gives
buyers high bargain powers in retail sector of UK (Harry, 2014).
The largest competitors of J Sainsbury have strong competitive and strategic position as they
have expanded business outside UK and have number of businesses in their portfolio. Which
can be dangerous for the J Sainsbury and threat as competitors have ability to penetrate
Sainsbury`s market. Thus there is high competitive rivalry.

Strategic analysis
J Sainsbury has high competition and business has not shown much growth in last few years
and on the other hand competitors are growing large. This possess a great challenge and
threat for the business for its long term survival. Moreover the groups largest sector have a
low market share when compared to competitors (BBC, 2012).

Source: BBC (2012)

According to BCG matrix analysis the company`s position in retail lies in `Question Mark`,
where companies have low market share and market growth is high (John, 1995). In this case
there J Sainsbury needs to apply generic business strategy for growth in its retail business and
strategy for future development of company.

Strategic options
There are number of strategic options which organization can adopt. Ansoff matrix gives a
model for strategic growth based on the organization's position. The matrix provides the
opportunity to grow the business by expanding a single market as well as opportunity to find
a new market (Gerald et al, 1998). On the other hand Calantone et al (2003) believes that
growth strategies have different risk levels such as diversifying is more risky than increasing
the penetration of a product on an existing market.

Market development
Market development concept is based on the search of new markets for existing products and
services. This involves identifying new customers for the existing products (Saukkonen,
2008). According to kotler (2003) new market development may includes targeting different
geographical markets abroad.
Diversification
In businesses diversification is risky but there are good chances of growth. Diversification
can be in both products or services. Such strategies are good for businesses as if one business
suffers in adverse circumstances, the other may not (Otto & Low, 1998).

Market penetration
Market penetration involves increasing the existing market share. This can be achieved by
increasing number of selling points, finding new customers within existing market and selling
more to established customers. Such strategies requires high marketing and huge capital
(Saukkonen, 2008).
Product development
This growth strategy includes development of new products or services for existing markets.
This involves how new product or services will meet the needs of the target market. There is
a high risk factor involved in new product development. However there is a high chance of
business growth and development.

Appraisal of the options

Calantone et al (2003) believes that growth strategies have different risk levels such as
diversifying is more risky than increasing the penetration of a product on an existing market.
J Sainsbury needs to apply generic business strategy for growth in its retail business and
strategy for future development of company.Ansoff matrix provides strategy for both new and
existing product and services as well as new and existing market for organizations growth
(Gerald et al, 1998).
In case of J Sainsbury the company have good profits and good market share. But when
compared to competitors the market position is not that strong. In this case there J Sainsbury
needs to apply generic business strategy for growth in its retail business and strategy for
future development of company. In generic strategies market penetration is a viable solution
for the business by increasing the market share and targeting more customers. Moreover
diversification is risky but there are good chances of growth. Diversification can be in both
products or services (Otto & Low, 1998). Product diversification is there at Sainsbury`s retail
industry business. However diversification in group`s business can be good developmental
opportunity for the business. Similarly other competitors such as Tesco have high
diversification in business, apart from retail they are into telecom and automobile industry as
well. So J Sainsbury have good option for business diversification, as such strategies are good
for businesses as if one business suffers in adverse circumstances, the other may not (Otto &

Low, 1998). Market development concept is based on the search of new markets for existing
products and services. This involves identifying new customers for the existing products
(Saukkonen, 2008). If we analyse J Sainsbury`s business portfolio it is clear that they have
already identified different markets for their products i.e. Sainsbury online store. On the other
hand kotler (2003) suggest that new market development may includes targeting different
geographical markets abroad. Tesco has developed new markets for their existing products,
but Lyndon (2000) suggest that such options are suggested if the organization have penetrated
the local market. Kotler (2003) suggest that if new market may become more successfulthan
the existing one. Product development turns to be a good growth strategy as it is observed
that TESCO has developed number of its own products to increase market shares (Graham,
2013b). Similarly J Sainsbury has its own line of products but they lack a strategic approach,
competitors new products are developed for the niche market whereas J Sainsbury offer its
own developed products to its existing niche (Graham, 2013b). Gerald et al (1998) suggest
that both external and internal analysis of organization is important to determinewhich
strategy should be more viable for the growth of the business. Sainsbury have adopted some
of the growth strategy suggested by Ansoff matrix however there is still room for growth
such as

Conclusion
From the analysis it is clear that Sainsbury needs a growth strategy otherwise business may
not expand or grow as the competitive rivalry is high. According to BCG matrix analysis the
company`s position in retail lies in `Question Mark`, where companies have low market share
and market growth is high. In this case J Sainsbury needs to apply generic business strategy
for growth in its retail business and strategy for future development of company. Such as new
market development abroad. Business diversification e.g. getting into telecom business and
product development focusing on niche markets.

Recommendations
Based on the analysis following route is recommended for strategic growth.

1. The market competition is increasing and competitors are increasing their market share.
However there is less growth in market share for Sainsbury in all sectors of its business. For
market penetration it is recommended that J Sainsbury should spend more on its marketing
budgets and try to achieve economy of scale by setting up new stores and business locations.
One of the effective strategy for market penetration is by attracting competitors customer
(Kotler, 2003). This could be done by opening stores close to competitors most selling and
busy stores and attract them with more range of products than competitors and improving
customer buying experience.
2. Diversification is risky but there are good chances of growth in the business overall. There
is diversification in the products but on the other hand the business group overall can use
diversification method to increase its business portfolio. It is recommended that Sainsbury
should get in to anther business such as telecom industry, utilizing its brand name and value
to attract customers. There is a high risk in this industry as there are already market giants
offering their specialized services. In this case it is recommended for J Sainsbury to acquire a
telecom company which has already a substantial market share. This will have a direct impact
of organizations revenue.
3. Sainsbury is specialized in its business. For growth strategy it is recommended that the
business should utilize its expertise to enter new markets such as India. There are number of
routes to enter into another country such as joint venture, merger and acquisition. Joint
venture is recommended as there are low risk involved with it. In case of joint venture the
Sainsbury will be able to share its industry expertise with the local company who will share
local market expertise.
4. Targeting niche market is where Sainsbury lacks in its businesses. However

the

entertainment and banking sector of J Sainsbury targets niche markets but still in energy
sector and retail sector, niche strategy is required. So in this case it is recommended that they
should target niche market such similar to what Tesco does.

References
Sainsbury finance . (2014). Financial performance . Available: http://www.jsainsbury.co.uk/investor-centre/financial-performance/financial-summary/#tabbed_section.
Last accessed 25th march 2014.

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(2014).
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annual
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Available:
http://files.thegroup.net/library/tesco/annualreport2013/pdfs/tesco_annual_report_2013.pdf. Last accessed
25th march 2014.
Harry Wallop. (2014). Supermarket price wars: are they real or phoney?. Available:
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http://www.bbc.co.uk/news/business-16817254. Last accessed 27th March 2014.

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Graham Ruddick. (2013 b). Sainsbury's prices rising at more than twice the rate of Tesco,
according
to
industry
data.
Available:
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10226971/Sainsburysprices-rising-at-more-than-twice-the-rate-of-Tesco-according-to-industry-data.html.
Last
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