Driving Success: Analyzing Sainsbury's Value Chain for Competitive Advantage

Introduction:

Value chain is defined as the combination of systems, that an organisation uses for making money. Michael Porter had developed an important strategic management tool to make a clear analysis of value chain of any organisation. Aim of this essay is to use Porter’s Value Chain Model for analysing internal environment of Sainsbury’s, the UK based famous supermarket, by identifying its completeness and distinguishing activities for driving the competitive advantage. This essay will also discuss that how Sainsbury’s, uses Value Chain model to analyse specific activities required for creating firms' value. Finally, the essay will reflect on the usefulness of using the value chain model to understand the internal business environment of Sainsbury’s.

Value chain model:

According to Al-Shammari and Al-Faqir (2017), Porter’s Value Chain Model is the strategic management tool which can be used by a firm for analysing specific activities required for creating competitive advantage and value for the firm. Rather than concentrating on the accounting cost types, Porter’s Value Chain Model mainly on how systems of an organisation work to transform the inputs int outputs for providing the best quality service to consumers. As stated by Bedeley et al. (2018), Porters described the chain of activities that are common to all business and divided these activities into primary and support activities. In case Sainsbury’s, value chain model would assist marketers to analyse the internal environment of the firm to identify the competitive advantage and values of this organisation which makes it different from the other companies in the UK market.

Primary activities:

Porter had classified primary activities into five different categories such as inbound logistics, operation, outbound logistics, marketing and sales and service.

Inbound logistics include the warehousing, receiving and inventory control of the firm’s raw materials (Lincoln and Andrew, 2018). These activities are associated with a relationship with the suppliers of the firm.

Operation is associated with transforming raw materials into final products as well as services (Yun and Yigitcanlar, 2017). This process includes branding, adding labels and packaging of different products. Operation assists the marketers to make the important modification of the inbound logistics to deliver the final products with maintaining the highest quality.

Outbound logistics is the process of delivering or distributing the final products to consumers (Nucciarelli et al. 2017). This additivity is associated with storage of final products, distribution channel and overall delivery process.

Marketing and Sales include the strategies that the firm would apply for market and sell the final products, such as promotion, advertising and pricing (Houdijk et al. 2016.).

Service is the process through which an organisation enhance the value of the product in front of the customers by providing customer service, free maintenance, easy refund, proper repairing and exchange facility.

Supporting activities:

There are additional activities of a firm that assist the marketers to improve the primary activities. These activities are procurement, human resource management, the infrastructure of the firm and technological development.

Procurement is the process through which the firm obtains raw materials or resources by negotiating the prices with vendors and suppliers (Yun and Yigitcanlar, 2017).

Human resource management is one of the most important strategies for any organisation through which firm can hire eligible staffs for the company as well as improve the professional strength of the existing workforce (Ouzrout et al. 2018).

Firm’s infrastructure is associated with its function and support system that allows it to maintain proper balance among all operation that are important for providing the best service as well as product to customers. This includes legal, accounting and administrative functions.

Technological development places an important part in assisting the firm to develops new marketing designs, strategies and manufacturing techniques (Kumar and Rajeev, 2016). It includes software, operating systems, hardware. Electronic equipment and online processes.

Sainsbury’s:

J Sainsbury PLC, operating as Sainsbury’s is one of the famous supermarket chains in the UK that consist of 15.3% shares in the supermarket sector (about.sainsburys.co.uk, 2019). It is founded by John James Sainsbury in 1869 in Dury Lane, London. Sainsbury is the third-largest supermarket chain in the UK following Tesco PLC and Asda. Annual Report 2019 of Sainsbury stated that it has reached £32,412m group sales with £635m profit in the year 2019. The annual report also stated that Sainsbury's has gained 2.2% growth. Nearly 57% of households in the UK benefit from the same day delivery. There are 281 Argos stores in Sainsbury's supermarket.

Sainsbury is one of the most trusted as well as famous retailers in the UK which operates successfully with 13,000 colleagues in stores. Its vision is to prioritise the needs of its customers to provide the best service and product to them for maintaining the strong customers base. J Sainsbury plc, the holding company is divided into three business channel such as Sainsbury’s Supermarket, Sainsbury’s Bank and Sainsbury Argos. This company has been listed on the London Stock Exchange and FTSE 100 Index. Sainsbury's has 608 supermarkets, 820 convenient stores and more than 12000 own-brand products (annualreports.com, 2019).

Marketers of Sainsbury's believe in continuous modifications in its marketing and selling process to cope with the changing market trend. This company focuses on understanding the current market trend in the retail sector to maintain strong brand value and competitive advantage. For this reason, it has installed the Smartshop self-scan facility in more than 100 supermarket shops which would assist the new generation customers to provide reliable as well as quick service. Along with maintaining marketing sustainability, Sainsbury's also focus on managing corporate social responsibility by maintaining a trustworthy relationship with consumers.

Internal environment:

Porter’s Value chain model will assist Sainsbury’s marketers to analyse the internal environment of this company by identifying interrelationships among different primary and secondary activities. Marketers of this company can use the Value Chain Model for identifying the following primary and supporting activities:

Primary activities:

Primary activities are directly associated with producing as well as selling products and services to the customers (Nucciarelli et al. 2017). Analysis of primary activities would assist Sainsbury’s to improve its overall performance.

Inbound Logistics:

This process is important for the healthy maintenance of storing, receiving and distributing inputs within the firm (Yun and Yigitcanlar, 2017). In this aspect, Sainsbury's needs to maintain a strong relationship with its vendors and suppliers. In this phase, Sainsbury's can face challenges to maintain perfect balance among product develops procedures. Here the marketers of this company need to focus on each important aspect of inbound logistics such as to receive proper raw materials, storing the inputs properly and maintaining the proper internal distribution of the raw materials.

Operations:

Sainsbury’s focuses on processing the inputs or raw materials into final products to lunch the products in the market. For this reason, officials of Sainsbury's supervise all-important operations such as packing, machining, testing and assembling. As stated by Hernandez and Pedersen (2017), the operation process is associated with making proper modification in inbound logistics to transform inputs into outputs. Sainsbury's also focuses on other operations such as maintenance of equipment and repairing of equipment, service operation and manufacturing process that are required for the formation of the final products.

Outbound logistics:

Outbound logistics is associated with the activities, that are involved in delivering final products to consumers by passing through different several intermediaries (Houdijk et al. 2016). Sainsbury's marketers analyse outbound logistics activities such as warehousing, material handling, transporting, order processing, scheduling and delivering the final product to its destination.

Marketing and sales:

Through these activities, Sainsbury's highlights the uniqueness of products in front of customers to convince them to select this company over the other companies. According to Kumar and Rajeev (2016), in this stage marketers need to focus not only in the promotional strategy but also concentrate on the pricing, labelling and product development process . Sainsbury's performs important marketing and sale activities such as arranging sales force, advertising, promoting products, setting the proper market price, channel selection and building a strong relation with distributers as well as channel members.

Services:

Sainsbury’s offers pre-sales and te post-sale service to its customers for maintaining customer loyalty. Service that is provided by Sainsbury's to its customers is post-sale maintenance of products, easy refund, solving customer queries and providing exchange facilities.

Supporting activities:

Firm’s infrastructure:

The infrastructure of any firm is important for gaining string brand and value and competitive advantage in the ever-changing market (Lincol and Andrew, 2018). Sainsbury's focuses on effective management of infrastructural activities such as accounting, financing, legal matters solving, strategy setting and planning of proper management.

Human resource management:

Sainsbury's focuses on improving its human resource activities to enhance its productivity and strength of the workforce. Officials of Sainsbury’s analyse important HR activities such as hiring, training, making workshops, performance management, providing motivation to staffs and providing professional learning classes to the trainee. To gain a competitive advantage, Sainsbury's marketers concentrate on skill enhancement.

Technological development:

Sainsbury's incorporates advanced technologies in sales, production, manufacturing, financing, marketing human resource, customer service and financing. Through installing automation software and supportive operative system, Sainsbury’s provide faster and reliable customer service. It uses the cloud computing service in conducting proper data analysis of its customer and staffs.

Procurement

Through the process of procurement, firms can obtain all important resources that are required for producing end products (Nucciarelli et al. 2017). Sainsbury’s focuses on maintaining strong relations with vendors and suppliers to get all important inputs at the right time. However, due to rising market competition by potential competitors such as Tesco plc, Sainsbury's needs to concentrate more on the quality as well as the price of the inputs so that that the manufacturers can easily manufacture the product without any hassle. Sainsbury’s also needs to consider its procurement processes to optimise operational, outbound and inbound activities.

Reflection on the usefulness of the value chain model:

Value chain model benefits Sainsbury’s on various aspects that are associated with analysing and sensing the internal environment of this company. The usefulness of using Value Chain Model to sense the internal strength of Sainsbury’s are as follows:

Identifying competitive advantage:

Through conducting value chain analysis, Sainsbury’s can execute the competitive advantage of this company. As stated by Ouzrout et al. (2018) value chain model assist the firm to identify the strength, weakness and opportunities in the new as well as exiting the market. This model would assist the marketers if Sainsbury’s to analyse whether all the activities that are conducted for their business can cope with ever-increasing market competition. Moreover, through using the value chain model, marketers of Sainsbury’s would be able to understand areas of improvements for this company that needs to be considered for gaining good market position.

Identify interdependence and interrelationship:

Through using the value chain model, Sainsbury’s can execute the interrelationship and interdependencies among all value chain activities. This would assist marketers to understand whether all the operation is going on systematically. By analysing the interrelationship, Sainsbury’s can get benefits through making joint optimisation and coordination among different operations.

The systematic flow of information and raw materials;

Through value chain analysis, Sainsbury’s can maintain the systematic flow of information regarding all official matters within the workforce. This process brings about new opportunities for the staffs and reduces the threats. Value chain analysis assists marketers to make proper sales and demand for casting (Yun and Yigitcanlar, 2017). Through proper implementation of value chain model, Sainsbury’s improve the flow of products and raw materials into the organisation due to maintaining strong inbound logistics operation. Moreover, through using the model, Sainsbury’s would be able to show high performance by providing a quick response to customer needs.

Formulate effective strategies:

Through using the value chain model, marketers of Sainsbury’s can formylate the effective marketing strategies that would assist this company to improve their productivity as well as brand reputation in the international market. Value chain analysis assist firm to improve their decision-making process (Zamora, 2016). Through using this model Sainsbury’s can form an effective competitive strategy, leadership strategy and marketing processes, that would enhance their chances of getting more competitive advantages.

Conclusion:

From the above-mentioned discussion, it can be concluded that the value chain model of porter is associated with identifying the internal business environment of any firm. Through analysing the different value chain activities, the firm can identify its strength, opportunities and weaknesses. Value chain analysis provides benefits to a firm in several ways, such as setting effective competitive strategies, forming strong relationships with suppliers, understand the interrelation among all operations and making perfect balance among all operation.

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