INTRODUCTION :
The food and drink retail sector represents the largest industry in the UK. Sainsbury is one of the world leading retail supermarket. And third biggest supermarket of the united kingdom. Sainsbury was founded in 1869 by John James and Mary Ann Sainsbury. It was done business very successful so another branches are opened in other market streets .In 1882 they produced the first Sainsbury brand product. Sainsbury’s serves 16 million customers each week in 455 supermarkets and 301 convenience stores across the country. The company employs 148,000 colleagues committed to delivering. It consists of Sainsbury’s Supermarkets, Sainsbury’s Local, Bells Stores, Jacksons Stores and JB Beaumont, Sainsbury’s Online and Sainsbury’s Bank. Aim of Sainsbury to exceed customer expectations for healthy, safe, fresh and tasty food, making their lives easier everyday. marketing strategy is a process of strategically analyzing environmental, competitive and business factors affecting business units and forecasting future trends in business.
In this assignment I have provided PEST and SWOT analysis, marketing mix and porter’s five forces of the current business environment of Sainsbury.
INFLUENCE OF MACROENVIORNMENT MARKETING DECISION MAKING
AsMicklethwait and Wooldridge
(1996) commented: ‘For most of this century, planning was regarded as the very kernel of management thought: indeed it often had a department devoted to it. Planning – a neat, definite, military concept – was adapted and required into what seemed to be an even more precise science’. Planning assures contribution to organizational stability and growth and that the organization remains relevant and responsive to the needs of its community. The above explanation is a good starting point towards understating what a marketing strategy. Macro environment include economical, political, social and technological factor. This factor directly influenced the marketing decision making. The four main factors in the PEST analysis are difficult to ignore in any organisational analysis. The political factor involves the impact of local, national and international political decisions. Economic factors like fluctuations, like tax increases, are equally important.Sociological factors include a growing immigrant community and an ageing population. New technologies can have an enormous impact. For instance, online shopping is a major factor in Sainsbury’s recent success. This assignment will look at the planning strategies in place at Sainsbury and attempt to explain a marketing plan Sainsbury which it may already be using but which is unavailable since it is sensitive information.
Sainsbury use new technology in marketing strategy .Sainsbury take order online and telephonic. They sale the product online. Sainsbury is a very successful company that follows a very simple business model of trying to keep product prices down. Sainsbury’s launched Supply Something New, an innovative scheme to make it easier for small and medium-sized suppliers to gain access to Sainsbury’s and make locally produced food available to more customers.
MACRO – ENVIORNMENT ANALYSIS FOR SAINSBURY’S
PEST ANALYSIS
The macro environment plays animportant role in the sector of business. The macro social, technical and economic environmental factors are effect on the retailer industry so it also affect on Sainsbury. A PEST analysis tries to create an overall picture of the main external impacts on an organization.
Political factors
The political factors can be local,national or international. Many governments can be involved
- The Government of United Kingdom is decreased corporation tax So big companies like Sainsbury save money.
- As the EU expands to more Eastern European countries, the opportunities to add new destinations to the roster increases resulting in increased destinations and possibly more customers.
- Increasing globalization, presents a challenge to Sainsbury’s. The challenge will be to compete against unknown forces.
- The government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs.
Economic factors
Economic
factors have large impacts. Fluctuations in the stock market, or tax increases, can seriously affect the bottom line of a company like Sainsbury.
In recession period inflation rate was increased due to this factor rising the purchasing cost for the Sainsbury’s. This may be impact on the margin of the organisation.
increasing global food crisis so prices of food’s also increased.
Rising of the fuel prices, its effect on supply chain of Sainsbury’s leading to an overall situation of increasing prices.
The credit crunch might decrease the purchasing power of consumers and though they will still buy the essentials they may be more cautious. They may also spend less on luxury items.
Social factors
Sociological
factors can vary from the impact of immigration, to changes in fashion. Every country has cultural norms, values, beliefs and religion which can affect the organisationdue to the increasing level of obesity within the UK ,consumer shift towards healthier food. This is best opportunity to Sainsbury’s to sell more healthy food or create healthier foods in low price than competitor so as to benefit from this new trend.
- In new trend People have no more time, Sainsbury’s supermarket can offer everything in one place and in less price and it opened 24 hours.
- People shopping pattern are also changed people like to go supermarket than smaller market.
Technological factors
The growth of the economy is closely related to the number of innovations. New technologies have had a great impact. For instance, online shopping has become a major factor in Sainsbury’s recent success.
- Using the new technology Sainsbury’s use new way of marketing like internet, telemarketing and the organisation can advertise their product much faster .
- New till systems new shopping method and new ways of payment make shopping faster and easier.
- One of the downsides of supermarket shopping is the queuing system customers often find themselves in at the checkout. Self checkout machines, employed by Sainsbury’s can help solve this problem
- By using internet people buy the product online so people save time and also save transporting money. Sainsbury’s provide free home delivery services.
ØSWOT(External -Threat, Opportunity) ANALYSIS
SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors and opportunities and threats are external factors.
External Analysis
These are the opportunities and threats faced by a company
Opportunities
Sainsbury’s have great opportunity in online sales, margins are very high in it and not big investment are needed for it. Sainsbury produce own product in low price and attract consumer for buy it, from this way increase their sales. Lots of people buy product from the smaller market, Sainsbury prices are cheaper so people attracted to them. It is also important to mention that in the current economic climate, customers are looking for cheap prices rather than other factors like comfort. Sainsbury’s alternative business presents a great opportunity for future growth. Its investments in property and make good profit from it. The company has a strong brand image, and is associated with good quality, trustworthy goods.
Threat
Sainsbury needs heavy investment for business and benefits not come earlier. The problem lies in maintaining a balance e.g. Bio-fuel is an important tool to curb global emissions and its use affects Sainsbury’s supply chain directly, so Sainsbury’s should support it. However, a spurt in bio-fuels has made corn dearer affecting its prices within the UK and making Sainsbury’s consumers bear the brunt. For the open new branch, Sainsbury need more capital for property, materials and qualified staff. Threat from Tesco, Asda, Morrisons, Pound shop, Iceland etc. they also sale product in cheaper price. So it is necessary for Sainsbury to sale product in low price with good quality. Social factors also affect Sainsbury’s because it western organization.
LIKLEY INFLUENCE ONSainsbury’s FUTURE MARKETING DECISION MAKING
The macro-environment analysis conducted of Sainsbury’s. its future marketing decisions are going to be heavily influenced by its environment. My analysis leads me to believe that Sainsbury’s is most likely to make the following marketing decisions in the near future, as are illustrated below.
It is not difficult to enter in retail supermarket so this is big threat for Sainsbury’s. In this business heavy investment are needed. But at this time investment are not big matters lots of private company are ready to invest in retail business. lots of substitute like Tesco, Asda ,waitrose ,Iceland, Poundland , morrisons, Wilkinson etc. They also sale same product. So it is necessary for Sainsbury’s to maintain the quality of product and maintain the price cheaper .For example, if the new entrant engages in a price war, do Sainsbury’s lower prices to irresistible levels to try to force the new entrant out of the market, or does it sit back knowing that the new entrant cannot possibly operate at such low prices for a long period, and trust that Sainsbury’s customers stay loyal to them. It is advisable for Sainsbury’s to keep its prices low and try to expand to new destinations, thus growing customer base as well. Sainsbury’s expand its branch only in the United Kingdom. So its concentrate to expand its branch in Asia, where good business for retail market. Sainsbury’s will be use maximum of technology. So people can attract them.
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PART B: Using the same organization, discuss how the marketing mix is used by the strategist to gain competitive advantage in its chosen sector.
In order to develop the marketing mix for Sainsbury’s and see how it is implemented towards gaining competitive advantage, we first need to conduct a internal analysis of Sainsbury’s which will help in explaining many of the decisions it has taken towards developing its marketing mix.
INTERNAL ANALYSIS OF EASYJET
ØSWOT (Internal – Strength, Weaknesses) ANALYSIS
STRENGTHS
These are what the company thinks are strong points of its business. By listing or finding out the strengths of the company, a company can be aware of what its best qualities are and what less to focus on in the future or what aspects to solidify. It is one supermarket chain that has a clear celebrity endorsing products, leading to increased sales. Sainsbury’s has had thirteen straight quarters of growth showing 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 tax (Annual Report 2007). It has a positive consumer brand and it’s liked by both green activists and consumers. Another of its strengths is that it has a good business on the internet or on the phone. Sainsbury’s produce own brand product and sale it in very low cost in its product no competitors are available. Another strengths is Sainsbury’s have good qualify staff and new technological innovation in the store e.g. self checkout, New till system.
WEAKNESSES
Weaknesses are internal audits after which a company feels that these points are its weaknesses and they are somehow conspiring to hinder the business in certain negative ways and the rectification of which can have a massively positive effect on business. Sainsbury’s has lots of branch in the UK, But no branch outside the UK. This can lead to trouble especially if there is some problem within food retailing in the UK or if there needs to be a source of extra growth. Loyal customers are feeling that the satisfaction of the products is declining. This may lead to low customer satisfaction and a reduction in customers and credibility in the market, this may lead to customers converting to main competitors such as Tesco, Asda, poundland, morisons etc. Sainsbury’s has a large capital expenditure program mainly due to its huge investment in space for new stores.
Since its expansion is so aggressive, Sainsbury’s has little free cash for any other operations.
Marketing mix of Sainsbury’s
All elements of marketing mix influence the sale of goods and services.
Price
The idea behind the demand curve and the elasticity concept is that buyers are sensitive to price. By changing the price Sainsbury’s affect the attractive of the product. Setting low prices of product for customers is one of the main policies of Sainsbury’s. It has lots of competitors they also sale same product in low price. and quality is also good like Sainsbury’s. So it is necessary for them to sale product in low price. This pricing strategy will help the segment the market. It also encourages customers to buy its product online by offering various incentives like discounts.
Product
Sainsbury’s brand policy can affect the attractiveness of the product. Although the quality of the product is presumably the major reason a consumer buy it. Goal of the Sainsbury’s is that Develop the best product with the resources available. Sainsbury’s manufacture our bands product and put in market with very low prices. Sainsbury’s launched supply Something New, an innovative scheme to make it easier for small and medium-sized suppliers to gain access to Sainsbury’s and make locally produced food available to more customers. The label of Sainsbury’s on the package should also serve a promotional role.
Place
Sainsbury’s use big place for supermarket in marketing and mainly it located near station, garden, resident area and tourist place and also provide big parking place for customer so they do not find any problem during visiting the store. Mainly two method are use Sainsbury’s for marketing (1) customer come in store and buy the product (2) take order online and provide home delivery. the type of distribution channel used by Sainsbury’s is direct distribution
Promotion
Promotion is aimed at selling product and enhancing the image of the company. We define promotion as communication by the firm with its various audiences. promotion is the most visible as well as the most cultural bound of promotion .Sainsbury’s effectively promotes itself through different channels like newspapers and over the internet. the main promotion strategy is advertise the product on television, and in magazines.. Advertising is the paid communication of company message through impersonal media.
COM PETITIVE ADVANTAGE ANALYSIS FOR SAINSBURY’S
Porter’s five forces analysis of Sainsbury’s
Bargaining Power Of Suppliers
Supplier power is an important part of the Porters five forces model. Bargaining power of suppliers in the Sainsbury’s would be relatively very high. Supplier power of smaller suppliers would be smaller than big suppliers because of their sales volumes on dependence on these supermarkets. In other hand big company like Unilever, Cadbury etc. not mainly depend on one particular supermarket. But if this brand product are not sale by Sainsbury’s consumer will shift to another market so sales are down and also loss its customers. UK based suppliers are also threatened by the growing ability of large retailers to source their products from abroad at cheaper deals. The relationship with sellers can have similar effects in constraining the strategic freedom of the company and in influencing its margins. One of the advantage of Sainsbury’s that they can dictate the price they pay the supplier. If the supplier does not reduce the price, they will be left with a much smaller market for their produce.
The Threat Of Substitutes
‘General substitution is able to reduce demand for a particular product, as there is a threat of consumers switching to the alternatives’ Porter M. (1980). 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. Tesco, Asda , Morisons , Iceland , Poundland are the main substitute for the Sainsbury’s. some small retailer also sale good quality product in low price In this case Sainsbury’s are trying to acquire existing small-scale operations and opening Metro and Express stores in local towns and city centers.
Bargaining Power of buyers
‘Porter theorized that the more products that become standardized or undifferentiated, the lower the switching cost, and hence, more power is yielded to buyers’ Porter M. (1980). Buyer power is high in the Sainsbury’s, simply due to the presence of so many competitors selling the same products. Sainsbury’s policy like famous loyalty card – Club card attract the customer and significantly increases the profitability of Sainsbury’s business. Nowadays, customer needs good customer service, low price products, better choices, constant flow of in-store promotions all this strategy is provided by the Sainsbury’s. Buyer power also acts to force prices down. If beans are too expensive in Tesco, buyers will exercise their power and move to Sainsbury.
Treat of new entrants
The cost of entering in to retail market need the low budget so it is relatively easy for new entrants. Sainsbury’s may have cornered the market for certain goods; the new supermarket will not be able to find cheap, reliable suppliers. Sainsbury’s also has the advantage of economies of scale. The amount it pays suppliers, per-item, is a lot less than the corner shop. It achieves this, partly, through buying large volumes of goods. A small supermarket chain can only buy a relatively small volume of goods, at greater expense. The UK grocery market is primary dominated by few competitors, including three major brands of Tesco, Asda, and Sainsbury’s and a small chains of Somerfield, Waitrose and Budgens. This is also evident in huge investments done by large chains, such as Sainsbury’s, in advanced technology for checkouts and stock control systems that impact new entrants and the existing ones.
Determinants of Rivalry among Existing
This force describes the intensity of competition between existing players (companies) in an industry. High competitive pressure results in pressure on prices, margins, and hence, on profitability for every single company in the industry. The retail market is extremely competitive with a very crowded market. Nowadays lots of companies are trying to get into non food sectors further intensifying the competition. Sainsbury’s has a market share of 14.9% in 2007, and its increasing since its restructuring program that started in 2004 (Annual Report 2007). This is a positive trend but it is behind the Tesco. showing that there is considerable distance to cover. Tesco, Asda, and Morrison’s are the other three big supermarket chains in the UK retail sector. All of them have a different competitive advantage over their competitors. This highly competitive in retail market has fostered an accelerated level of development, resulting in a situation Sainsbury’s have had to be innovative to maintain and build market share.
CONCLUSION
Through the various analyses; Porters 5 Forces, PESTEL and SWOT, we can be see that Sainsbury’s is one of the best British food brand, well loved by its consumers. It had been suffering but since 2004 its image, and importantly profits, have improved continuously. However, it is not affected by outside risks like recession and rising material costs as highlighted in the PEST analysis. In a rapidly changing business environment with a high competitors pressure Sainsbury’s have to adopt new expansion strategies or diversified the existing in order to sustain its leading market position in an already established retailing market. Although it has shown than for the steady growth it is important for Sainsbury’s to go the next level by challenging Tesco, a competitor identified in the Porters 5 forces analysis, either by thinking of expanded the business in Asian countries or sale good quality product in low price. As well as tiding over threats (SWOT) in its external environment. As for the marketing mix, Sainsbury’s has an effective pricing policy, it knows which places are the most suitable for it to sell its product, its promotion strategies are world class and people side of the marketing mix is also taken care of although this could use some working.