Driving Growth in Retail: A Case Study of Sainsbury's Business Environment Analysis

Introduction

Understanding the business environment is mandatory for the multinational corporations to analyse the external environment to run the organisational operational activities. The organisations in the recent era of globalisation aim at analysing the market condition and external environment to expand their business by utilising technological advancement and legal framework. The study is appropriate to analyse the business environment where the retail firm Sainsbury’s is efficient to operate. The company’s mission and visions as well as strategic planning will also be evaluated for better understanding. The company Sainsbury’s is the second largest super market chain in the UK with 16% market share of the super market and retail industry of the country. The company is efficient to create values for the customers by providing all the retail products at affordable price where the products are good in quality and quantity. The major products of the company are super market, hypermarket and discounted store items, including the necessities of the people, groceries, food products and beverages, daily utilise, home appliance, furniture, kitchen appliances as well as clothing and accessories, technical products etc. where the customers can make effective purchase decision for the products of Sainsbury’s (Sainsbury’s, 2020a).

The vision of the company is to be the most trusted retailer, where the people who love to work and shop. As per the organisation, the customers are at the heart of the business and the business success and future growth is based on the anticipated planning and strategies of the organisation. The company focuses on the values which are health and wellbeing, sustainable sourcing, environment, social community development and managing the colleagues at the workplace. The there are over 1500 shops in the UK and the company operates across the UK to serve the people with high quality products at lower price. There are more than 116400 colleagues working in the company, where they are efficient to manage their customers and ensure organisational values in long run. In the previous year, the company was successful to generate total revenue £29.007 billion and net income at £29 million. As per the external environmental analysis, PESTL analysis is effective to identify the UK environment where the company Sainsbury’s operates (Sainsbury’s, 2020b).

Political:

The political environment of the UK is stable where the companies are expanding their business with government collaboration and efficient business structure. After Brexit the economy was aging behind, but over the time with government help, it is sustaining in the world economy. The company is hereby efficient to utilise the trade unions in the UK and mange their operations successfully (Izogo, 2017).

Economic:

The national income of the UK is increasing over the period approximately 1.9% and the inflation rate is under 2%, where the government is successful to reduce the inflation rate, which is the main aim of the government. The economy is growing with increasing personal income and purchasing power parity among the individuals. Thus the economy is favourable of the business and the entrepreneurs to run their operations successfully.

Social:

There is social development in the UK where the literary rate is 99% and the society is developing at a rapid rate. The charitable and social development program as well as the government subsidy to the charity homes is effective to develop the social communities across the globe. People are educated and willing to gather latest information through online activities.

Technological:

There is technological advancement in the economy, where the firm’s technical infrastructure as well as innovation of the software engineers is effective for the organisations to run their business efficiently. The people also adopt the latest technology for better performance and activities in the society.

Legal:

The legal framework of the organisation is strong where employment rules, non-discrimination practice as well as wage payment rules are fruitful for the entrepreneurs to hire the employees legally and develop proper employment agreement for long run commitment. Additionally, the copyright actions, intellectual property rights and documentation of the company are also there to support the business and these are beneficial for Sainsbury’s to run their business legally.

Environment:

Environmental activities further influence the business entrepreneurs to act responsibly and provide green environmental footprint for the benefits of the social communities as a whole. The multinational corporations try to strengthen green supply chain, focus on waste management program and protect the natural resources for better performance in the market (Ramanathan et al., 2017). The structure and initiative of environmental protection also influence the organisation Sainsbury’s to act sustainably and secure future development.

Competitive structure of the market

The retail market of the UK as well as across the globe is highly competitive due to the presence of the efficient retail supermarket chains across the international markets. Sainsbury’s is one of the famous retail markets where the company is operating in the circumstances of intense competition. The retail market of the UK is attractive due to its efficiency and contribution in the UK economy. The retail sector accounts for 5% gross value added in the UK and 14% if all the non-financial sector investment is made by the large retailers in the economy. The retailers purchase around £180 billion worth of goods for resale, which supports £47 billion of output from other sectors (Sainsbury’s, 2020c). The company Sainsbury’s is operating in the retail sector and it is successful to ain 15.3% market share in the UK economy. The competitive forces can be determined through the Porter’s five forces model, where as per the model, the five forces are such as threat of new entrants, threat of substitute products, competitive rivalry, bargaining power of the customers and bargaining power of the suppliers (Statista, 2020). The forces can be analysed further,

Threat of new entrants:

The threat of new entrants is low, for the organisation Sainsbury’s, as the company is strong and efficient to run their business through the discount stores, super market chain and physical store expansion. The company has high market share, where it is hard for the new entrants to enter into the market and establish their firm initially, which initially reduces the threat of the new entrants in the market.

Threat of substitute products:

The threat of substitute products is high, where there are similar products and services in the market. The availability of the retail products is high where there are a huge variety of products and services in the retail industry of the UK and it further raise the threat of substitute products for the company Sainsbury’s for which it becomes difficult for the company to increase their market share in future (Boroumand and Cartwright, 2018).

Competitive rivalry:

There is intense competition in the retail industry of the UK where the major competitive brands are Tesco, Asda, Aldi, Lidl, Morrison, Wal-Mart and The cooperative, where Tesco is the largest super market chain in the UK and Sainsbury’s is the second largest discounted store in the retail sector of the UK. The company is facing high competitive threats due to active presence of the competitive organisations in the market. There is threat of retaining loyal and long run customers where Sainsbury’s must focus on the strategies to strengthen their customer’s base to sustain in the retail market and secure future sustainable development.

Bargaining power of the customers:

The bargaining power of the customers is moderate, as the customer’s switching cost to other retail brands is low due to presence of huge variety of substitute products in the market. The customers have the chance to switch their brand preferences at lower cost and can make effective purchase decision for other products that further raise the power of the consumers to bargain for the products and services of the company Sainsbury’s. As there is strong customer’s base due to loyal and long run customers in Sainsbury’s, the bargaining power of them is moderate.

Bargaining power of the suppliers:

The bargaining power of the suppliers is moderate to low, as there is strong supply chain and distribution network where the organisation is successful to retain their long term suppliers and develop strong corporate relationship with them. The organisation is also efficient to manage their suppliers in the market by giving them high return on investment to satisfy them and retain them for long run (Sangvikar, Kolte and Pawar, 2019). Though there are other opportunities for the suppliers due to presence of other retail firms, the supplier tare willing to perform efficiently and contribute positively to maximise organisational values of Sainsbury’s.

Hereby, the competitive forces are strong, where the company face high competitive threats of substitute products due to intense competition (Dales, Coe and Hess, 2019). The company needs to develop effective strategic planning to increase their market share in such a strong competitive retail market. The other competitive firms are efficient to perform productively and proficiently in the market to secure future sustainable development in the UK retail market, and thus it is essential for Sainsbury’s to improve their operational activities and serve the customers in a unique way to gain high competitive advantage over other competitive brands.

Stakeholder analysis

The stakeholders of the business are playing crucial role to run the organisational activities efficiently where all the stakeholders try to contribute positively to maximise the organizational objectives. There are two types of stakeholders in the organisations which are internal and external. The internal stakeholders are employees, managers and the owners of the business. The external stakeholders are such as suppliers, social communities, government, customers, distributions and shareholders (Filimonau and Gherbin, 2017). The external stakeholders also contribute efficiently like the internal stakeholders to run the business activities strategically. The organisation Sainsbury’s also has strong stakeholders base where all the people engaged with the corporate are playing efficient role to make the organisation successfully.

The internal stakeholders of Sainsbury’s are strong employee base, management team and the board of directors where all the people try to run the organisational activities strategically. The employees includes the staff members at production sites and warehouse, sales executives, marketing team, front desk staff, store managers and employees at the store of Sainsbury’s who are playing important role to serve the customers in a better and efficient way. On the other hand, the managers are also efficient to manage the workforce and improve the organisational efficiency in long run to maintain organisational values and secure future sustainable development (Johnes, 2019). There are external stakeholders of Sainsbury’s who are also active to contribute positively in the business and the external stakeholders are the strong customer base of the company, government of the UK and local authorities as well as the efficient suppliers and distributors who are proficient to manage the business activities in the market. Additionally, the creditors and the shareholders are also efficient to provide proper capital and manage finance in long run. The leader of Sainsbury’s and the board of directors are collaborative with all the stakeholders and they try to improve their performance for better management (Dales, Coe and Hess, 2019).

Stakeholder’s analysis is effective to identify the organisational practice for managing the internal d external stakeholders of the firm and in this regard, high power of the stakeholders can be ensured though keeping them satisfied, managing closely. In this regard, Sainsbury’s try to manage the stakeholders closely by working together and developing partnership working practice as well as the management team tries to keep all the stakeholders satisfied nu informing them about the organisational activities and important information so that the stakeholders are valued and they are willing to participant actively for achieving future success (Hoang, Barnes and Munroe, 2019). On the other hand, keeping the interest of the stakeholders can also be possible through keeping them informed and consulting with them as well as working together. Sainsbury’s also tries to empower the stakeholders in the business activities to motivate them and increase their interest to perform better. On the other hand, the company is also efficient to create values for all the stakeholders by providing them high return on investment which in turn provides a scope to Sainsbury’s to retain he shareholders, creditors, experienced employees as well as the customers in long run for securing future sustainable development in long run.

The major conflicts of the stakeholders are such as the conflicts of interest among the stakeholders, internal resistance to change among the employees, the conflict of maximising profitability and satisfying the customers and other issues are related to lack of cooperation and communication, misunderstanding and lack of trust. Cutting job to reduce cost, decision making practice, extra work pressure for organisational excellence and introducing new machineries and technology at the workplace are other stakeholder’s conflicts for which the management team face difficulties to lead the stakeholders towards achieving future success. The leader of Sainsbury’s and the mangers try to making the existing conflicts by providing high return on investment so that it would be possible to maintain the creditors and shareholders of the firm (Britton et al., 2019). Additionally, giving monetary and non-monetary incentives to the employees is another strategy to manage the employees and improve their performance. For social communities, the company aim at creating values for them by investing in social developmental project and act responsibly by providing green environmental footprint. Additionally, the organisation Sainsbury’s is also efficient to manage their strong customer base by delivering high quality products at affordable price which further helps the brand to enhance their sales volume and profitability in long run.

Country analysis

It is important to analyse the economic system of one international country, where the company Sainsbury’s has the scope to expand their business efficiently for gaining competitive advantage across the international retail market. The company is operating recently across the UK, which is efficient for the company to secure their future market share and organisational growth, however, it would be necessary for the firm to expand their business in the international nation in order to increase their market share and run their business globally. India in this regard is one of the best developing country and emerging market, where the retail firm can establish their business efficiently. The country’s economic system is favourable for the retail firms across the globe. The economy of India is characterised by developing market economy and it is world’s fifth largest economy by nominal GDP as well as third largest by purchasing owner parity of the customers according to IMF. The GDP growth of the Indian economy is 6.8% in the year of 2018 and it is expected to rise in future. The economy is mixed economy, where the agricultural activities, service and industrial production are contributing positively to increase National Income of the country. The economic system is hereby favourable for the organisations to run their business sustainably (Aguzzoni et al., 2016). 60% of population is engaged in agriculture as well as 27.6% of GDP comes from industrial activities in the Indian economy. The banking and financial sector is also strong including the organised banks such as public and private banking institutions, foreign owned commercial banks and cooperative banks. The money circulation and money supply is also efficient to manage the economic balance of the country. Huge foreign direct investment (FDI) and World trade Organisation (WTO) support the international trade where India is one of the largest economies in expert and import activities across the globe. It is hereby one of the effective emerging markets, where the company Sainsbury’s can expand their business efficiently.

There are certain advantages of such economic system where the organisations can develop their open rules and regulations to lead their organisations towards achieving future success. The ecosystem of Indian economy is strong which further boosts the performance of the companies in long run. Availability of the resources as well as cheap labour is major advantages of doing business in India. The pricing strategy is effective for the new business to start up their business. The Indian economy is successful to attract more foreign direct investment (FDI) which further influences more multinational corporations to invest in Indian market for better activities of the organisations and running the company sustainably (Sangvikar, Kolte and Pawar, 2019). The government rules and regulations are cooperative and influencing the entrepreneurs to develop their business. Additionally, the Indian economy is efficient to enhance the sale volume and profitability of the organisation, due to strong customer base and large market. The company Sainsbury’s would be successful to maximise their profitability and sales volume by utilise strong customers base in India where the purchasing power parity of the consumers is also high and it is increasing over the period of time. The economic system is also favourable where the companies can utilise technological innovation and creativity to run their business in a unique manner.

The major disadvantages of such economic system are such as higher start up cost and taxation, lack of experienced staff, the ecosystem is still not developed; hiring new employees is a big challenge and lack of efficient managers to run the business operations creatively. Though these are the disadvantages the government of the Indian economy influence more FDI for better performance and maximising the economic values. The macroeconomic objective of the government is to maximise the level of National income by ensuring economic growth and social development so that the standard of living of the social communities would be maximised further (Das, 2018). The objective further influences the foreign businesses to invest in the Indian economy and utilise the large market for better performance and successful establishment of the organisation in long run. The government initiatives and the objective would be beneficial for Sainsbury’s to expand their business and utilise the employee’s skill and experience at Indian market and manage their cost of operations to run their business successfully which in turn helps the firm to maximise profitability and ensure better management of the business operational activities in long run.

Reference List

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