Introduction

The organisation that has been selected to examine and analyse 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 now owns a whole range of other companies like Sainsbury's
Supermarkets, Sainsbury's Local, Bells Stores, Jacksons Stores and JB Beaumont,
Sainsbury's Online and Sainsbury's 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 within the macro and micro environment, drawing
up a detailed competitive advantage of the organisation and the strategies that influence the
business policies to survive in the competitive market.

Macro-Environment:
At this present phenomenon the nature of the retail industry is changing its image
dramatically 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
may have some impacts on the business.
Political factors:
At present the changing trend of globalised business could be a challenge as well as an
opportunity for the Sainsburys because they would have to compete against new forces from
all over the world to maintain best quality of the products and services they offer. Customer
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).
Economical factors:
The 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 cost (economist.com
2008). And eventually it will increase the overall price of the products in the super
market Supply chain of Sainsburys may get affected with the rising cost 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 less 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 big 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)

Social Factors:
Sainsburys may introduce new recipes to cook easy and healthy food because now 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.
Technological:
It 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 have to wait in long
queues sometimes 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 yet 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 factors
Environmental factors are one of the key issues these days. Every 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 impacts on the business of Sainsburys because they would
have to retain their customers and balance their pricing after maintain all the environmental
issues.
Legal factors:
Sainsburys 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 forces analysis - Competitive rivalry

As we all know retail market is remarkably competitive compared to any other market. They
usually have same or similar sort of products that could be found in their competitors
business. For that reason, a large number of big companies are intending to enter non food
market (Rigby and Killgren 2008) as it has become most important for companies to retain
the ability to get in customers reach with better quality of products and services. Sainsburys
convenient stores have helped the company in establishing a larger consumer reach in UK.
There are three big supermarket chains in the UK retail sector that have different competitive
advantage over their competitors. They are Tesco, Asda, and Morrisons. Since 2004 it has
increased its business steadily while reformation program started to take effect in 2007,
Sainsburys had market share of 14.9% (Annual Report 2007).
Porters 5 forces analysis - Barriers for entry
The UK retail industry is at a very advanced stage most likely the western world where
barriers to entry are undoubtedly very high. This basically means there are very little
potentials for new entrants to establish themselves in the market. New entrants may require to
invest huge amount of money in order to survive, competing against the most experienced
retail sector within the UK. On the other hand, local knowledge is remarkably fundamental
within the food retail sectors, which sometimes would be very difficult for foreign firms to
imitate. Perhaps, they also would have to develop a significant brand image in the new
market, which takes years to establish (Doyle 2002).
Porters 5 forces analysis - Threats of Substitutes
One of the major threat of substitutes may arise when one supermarket company takes over
the business of the other companies. For example, because of the recent economic downturn
company like ICELAND was taken over by other companies other than that, there are less
possibilities of threats of substitute in the food retail industry as it has become an essential
part of consumers day to day life especially in the modern world. However, it will be very
difficult to substitute these organisations because now a days with their innovative food
products and other efficient services customers can pleasure the total shopping experience
under one roof. Moreover, as the supermarkets are getting more globalized, the competition
in the market is forcing companies to bring alternative products and services every single day
which makes them more powerful to remain in the market.
Porters 5 forces analysis - Buyer power
As the credit crunch has inconvenient impact on the global economy, consumers has less
money to spend on products. To keep the profit margin stable the supermarket giants are more
tending to give priority to customer needs to increase their buying power (ODoherty 2008).
On top of that too much competition in the retail market has given opportunities to the
customers to choose from alternative options as most of the super market offers almost same
products. The main different between them would be their pricing policy, strategies to gain
customer loyalty and the contribution to emerging sensitive issues such as green credentials.
In addition, the overall business environment in the UK retail industry optimizes the
consumer buying power.

Porters 5 forces analysis - Supplier power

Usually the suppliers power is considered to be low especially in a big retail market within
UK. As we already know the products provided by suppliers are quite similar in features
which gives buyer a chance to negotiate. Sainsburys has a good reputation of being a trusted
brand and most suppliers find it profitable to be involved with their business as they have
large marketing scale. As a result, suppliers has less scope to negotiate too much knowingly
Sainsburys has the privilage to switch to another supplier because of their big brand image.
At some points suppliers may have got some power to negotiate when they can introduce
unique products to the market. Some times also what happens suppliers are by themselves are
huge as a company . for example P&G, Unilever, Cadbury etc in those cases if companies
like Sainsburys dont sell their products may face huge negative effects on their sales figures.

Micro-Environment
In order to evaluate the micro environment of the company basically we would have to look
at different aspects of the operation that the company undertake and the business strategies
they follow to compete with the competitors. The best way to identify those elements is
evaluate companys internal and external factors such as,
Strengths:
One of the key strength for Sainsburys is its management team which is lead by experienced
leaders who set standards. According to an article in Times online the CEO has recently
received honour for his contribution in Sainsburys. (timesonline.co.uk 2008)Recently
Sainsburys has a growth of straight 13 quarters which shows great commitment to their
business (Rigby and Braithwaite 2008). And if we have a look at the 2007 financial year they
had a huge 450% increase in profit (after tax) and 7% in overall turnover. (Annual Report
2007)Sainsburys has a positive impression on its customers when take initiatives against
Gangmaster (Taylor 2008), in purchasing fair-trade bananas (economist.com 2008) and other
environmental issues.
Weakness:
The issue of the takeover bid by Qataris firm last year may have some impacts on the
customer loyalty as they wouldnt like to go to a company which is governed by foreign firms
rather than British authorities. (Arnold and Politi 2008).Sainsburys is only operating its
business within UK, whereas, its biggest rival Tesco is expanding its business all over the
world (economist.com [online] 2008), In that case Sainsbury should expand its business
policies at a more globalized level and plan spreading its business as a backup.
Opportunities:
The strategy of making profit of 40 million through its Banks and investing huge amounts in
properties (Killgren 2008b) may influence the parent company to expand its alternative
businesses to obtain maximum growth. Promoting online sales can result profitable for
Sainsburys as it has huge margin at a lower cost.

Threats:
Long term investments should be made on environmental issues. For example, Sainsbury
should hold up Bio-fuel as it reduces global emission quite efficiently and has direct impacts
on the supply chain of Sainsburys. However, the pricing of it has implications on the overall
cost which the customers may have to bear as well. Some issues such as , planning for
future , competition in the market , employment , pensions , tax , law and their implications ,
green factors may require of more Legal responsibility from the company , if the company
feels to draw deep concerns about these sensitive issues may face difficulties in near future.