Applied Corporate Strategy Organization

External analysis as well as business environment of organization

Business environment is predominately is collection of various factors both internal and external which helps the organizations to take effective decision and affects its operations.

• Political factor: Political unrest situation crate threat to firm as it creates problem in sustaining in market for longer duration whereas political support, free trade agreement works as opportunity to firm because this encourages globalisation of Sainsbury. Hence the political instability is threat to firm. On the other hand, there, firm have the major level of the Brexit uncertainties as the serious consequences for Sainsbury's, among other English supermarket chains. Leaving the European Union could make it much more difficult for supermarkets to affordably import products from abroad. So, the Brexit uncertainty is threat for firm
• Economic factor: High employment rate is opportunity to company whereas high tax rates are threat to Sainsbury. On the other hand, there the serios level of implication can be there due to the increase level of cost of fuel and raw material. the employee has the higher level of expectation of salaries in company in term of experience and better understanding is threat for firm
• Social factor: Culture sometimes work as threat because due to which Sainsbury fails to meet desires of wide range of consumers. As per the aspect of socials factored there changing level of social trends of the company terms to be an extremely important for the Sainsbury to track for supermarket chains. On the other hand, the company discounting theme for the loyal customer is succeed to be the opportunity of firm is proving the level of satisfaction which have impacted in the product.
• Technological factor: Technologies are opportunity to business new technique raise productivity that enhances profitability of Sainsbury. Sainsbury's have the option in the selling online food along with collecting their purchases from the respective level of local stores as per the urgent requirement. On the other hand, the company have the negative level of impact due Advancements in the technology the overall cost of production of the product. This have the threat to the firm.
• Legal factor: Change in employment law are threat to business because it influences entire operation of company. On the other hand, the company have the negative impact due to threw laying down of government rules in order to have the stoppage in promoting the its High-fat, salt and sugar foods to the children below 16 years of age. This leaves a less room for Sainsbury's to do its promotion.
• Environmental factor: CSR responsibility is fulfilling by business this is opportunity for firm because it raises productivity of Sainsbury. The company have the major level of emphasis of the supporting the UN sustainability goals along with working to have the reduction of the carbon emissions and with reducing the food waste in perfect manner. Thus, Sainsbury can focus on healthier food items as opportunity which company should exploit is increasing its online channels. As now customers have become technology-oriented thus company has the opportunity to invest within new sales and online channels. Want to get Assignment help? Talk Our Expert Now!

Opportunities

• The biggest opportunity which is available to Sainsbury is international expansion. Due to the merger of Sainsbury and Asda, Sainsbury has the opportunity to expand its operations in the different international market.
• The second opportunity which is available to Sainsbury is investing heavily within technological advancements. With the growing awareness of customers towards innovative products, Sainsbury has the chance to invest within research and development and thus came up with more innovative products.
• Third opportunity being available to Sainsbury is growth in the villages (Ribeiro, 2018). As merger of Sainsbury with Asda has bought a high number of opportunities for the company among which one is expanding its supply chain in villages. Sainsbury along with Asda can grow its business in the rural areas and villages.
• Fourth opportunity being available to company is increasing its revenue ratio and gain economic uptick. Sainsbury has the chance to increase its cash flow by increasing its innovative products as well as making use of the merger with Asda.
• Fifth opportunity which will help Sainsbury to grow and develop its business is the changing behaviour of people towards their health. As customers have now become highly conscious as well as concern toward their health and wants healthy and ready to eat food. Thus, Sainsbury can focus on healthier food items.
• Sixth opportunity which company should exploit is increasing its online channels. As now customers have become technology-oriented thus company has the opportunity to invest within new sales and online channels.

Threats

• Th biggest threat which might affect the functioning as well as operations of Sainsbury is the strong presence of various competitors like TESCO, Argos etc. Due to their high brand image and recognition, Sainsbury might face downfall and will be a challenge for company to sustain its competitive advantage.
• Another threat which might hinder the market position of company is its operations in different countries. Due to its presence in various location, it remain exposed to changing legal policies and this changing policies and rules might affect the company negatively.
• Third threat that will affect the functioning of Sainsbury is the increasing demand for innovative and differentiated products. The growing need of customers for innovation might become a threat for company as it would have to increase its innovation and automation level. Fourth threat is rising power of the suppliers (Romano, 2016).
• Due to great number of suppliers, company might face a threat of paying the higher margins to various local distributors. Fifth threat is the chaos between employees and management. Due to the merger of Sainsbury with Asda, the might be the chances of threat between employees as well as management for various aspects and this will be a great threat for Sainsbury.
• Sixth threat is the rising power of consumers towards online channels. Due to this growing power, Sainsbury would have to invest heavily in increasing its sales channels.

Porter fives forces

This is basically the framework which helps the organization to analyse their competitive position within market and thus helps to determine competitive intensity.

Threat of new entrants

This threat is generally low for Sainsbury as in order to enter the retail industry a high level of investment as well as resources are required which is difficult for the small business. Besides this, for entering the industry a high capital is required which makes this threat mucjh low and weaker for the company (Epstein, 2018). Talking of the risk, it is generally low for the company as there are various barriers for entry. Sainsbury can eliminate this threat by building the economies of scale. Besides this, it can continuously innovate its products as well as services to increase industry attractiveness.

Power of the suppliers

The bargaining power of suppliers for Sainsbury is generally low with the large number of suppliers being present within retail industry. This force is mainly low as due to high number of suppliers they do not have much control over the prices as well as services. As the suppliers are high in number thus organization can easily switch to other suppliers when they charge high prices or are not highly efficient. In order to eliminate this risk, Sainsbury help in building the efficient logistics and supply chain by investing heavily within multiple suppliers (McManners, 2016).

Power of buyers

The bargaining power of the buyers for Sainsbury is generally low due to great product differentiation as well as quality. As there are only few firms from which customers can choose to purchase the quality products as well as services thus this makes their switching cost much low. Due to low switching cost, they do not impose much control over prices and thus makes this force weaker as well as low. In order to tackle this bargaining power of the buyers, Sainsbury can focus on differentiation as well as innovation which will help company to attract customers (Pidun, 2019).

Threat of substitutes

The threat of the substitute product is generally moderate for Sainsbury. Due to high product differentiation, it is difficult for the other firms to develop substitute products of the products of Sainsbury but still there are still some of the substitutes which are available for products and are being sold at low margin. Thus, this makes this force moderate. For mitigating this risk, Sainsbury can mainly focus on providing high quality products to customers which will be difficult to imitate (Wu, 2018).

Rivalry among firms

Due to merger of Sainsbury with Asda, the competition in retail industry has increased and thus has made this rivalry much fierce and powerful. This makes this force high for Sainsbury. Due to merger of these two companies, competitors like TESCO has drive down their prices for attracting the customers. To tackle this force, Sainsbury can build the sustainable differentiation as well as can collaborate with other competitors for increasing market capture (Pyles, 2016). Need Assignment Samples.Talk to our Experts!

Internal analysis of the organization

Strength

The major strength of Sainsbury is its increasing brand awareness. Due to high brand recognition as well as awareness, Sainsbury has made a great position in market and in the hearts of customers. This great brand image has helped the company to expand in wider geographies as well as enlarge the customer base. Second strength of Sainsbury is its recent merger with Asda. The merger of these two organizations have enabled Sainsbury to increase its profit margin as well as enlarge the customer base. Besides this, this merger have helped Sainsbury to gain the high scope over the suppliers and have helped to lower the prices. Third strength of Sainsbury is its high expansion within wider geographies. Sainsbury after the merger with Asda have expanse its operations in various countries as well as locations which has helped this organization to gain the greater economies of scale. Sainsbury have its operations in more than 42 countries that has helped the company to gain competitive advantage (Minár, 2016).

Fourth strength of Sainsbury which has helped this organization to establish a great position in market and increase its profit margin its expansion into various product lines. Sainsbury from simple grocery store have expanded its product line to wide range of the product categories and it deals in more than 6 sectors. This expansion into the various product categories has eventually helped the company to gain competitive advantage. Fifth strength of Sainsbury is its high trained and skilled workforce. The number of employees in Sainsbury after merger with Asda has increased to around 20% and this workforce is highly trained as well as skilled. This trained skills provide a great quality services to the customers and forms the core strength if Sainsbury. Sixth strength of Sainsbury is its innovative promotional strategies. Sainsbury have adopted various innovative and creative promotional strategies for attracting the customers. One of the well-known promotional strategy which has helped it to gain competitive advantage is brand match advertising (Oyewunmi and et.al.,2017).

Weaknesses

The major weakness which has dominated Sainsbury and have somewhat affected its overall operations is brand switching. Due to high brand switching, Sainsbury have faced a lot of risks as well as difficulty which has somewhat affected its overall sales as well as profit margin. This brand switching has been highly challenging for the organization and has posed a high amount of risks. Second weakness of Sainsbury is its low margin. For attracting the customers, to the outlet, company is continuously trying to drive down its cost and thus keeps the prices much lower than competitors which have posed a great impact on its overall profit margin. Due to low profit margin, Sainsbury is facing a high level of brunt in market. Third weakness which has affected the operations as well as functioning of Sainsbury is the less choice among customers. Due to the merger of Sainsbury and Asda, millions of customers are now facing the problems of what to but and from where to buy. This merger has eventually resulted in the less choice among customers and thus have affected sales of Sainsbury products to high extent (Srinivasan, Thenmozhi and Vijayaraghavan, 2019).

Fourth weakness of Sainsbury is its less investment within research and development. With the increasing technology as well as digitalization, the investment of Sainsbury in innovation and research and development is somewhat low and below average due to which their innovation intensity is low. This forms their major weakness. Due to this, it us not able to compete within the market with leading players like TESCO. Fifth weakness of Sainsbury is high rate of attrition. In comparison to its major competitors like TESCO, the attrition as well as turnover rate of Sainsbury is much high, and they need to spend a great amount on providing the effective training as swell as development to the employees. Sixth weakness of the company is its limited ability to forecast the product demand. The management of Sainsbury is not much competent in forecasting the product demands due to which company mainly misses various opportunities. This becomes their major weakness which has affected its functioning and operations to high extent (Winkler, Etter and Castelló, 2017).

Tows matrix

VRIO framework

VRIO framework is basically the framework which helps the organizations to take the effective decisions and uncovers the various resources which provide competitive advantage.

• Local food products are strength of Sainsbury
• Its financial resources are strength of firm
• Patent is strength of firm and employees are also strength of business

Strategy evaluation

The recent strategy which Sainsbury took is the contribution towards environment. In order to increase the customer base as well as gain competitive advantage, the main strategic aim of Sainsbury is to reduce the emission of carbon and offer environmental friendly products and thus gain a great market share there. This main strategic view of Sainsbury to inculcate environmental safety in its core process and thus have made a fiver year plan for increasing the contribution towards sustainability and environmental protection (Bhasin, 2017). Sainsbury have increased its commitment towards protecting the environment by relying on the natural and safe products and have made a sustainability plan which will mainly target on providing environmental friendly products and sustainable manufacturing.

SAF strategy model

This is one of the highly imperative as well as significant model and thus helps the organization to evaluate the various aspects if the strategy. In shorty, this is the model which assists organisations to provide right direction to their strategy and evaluate it for recognizing its feasibility.

Suitability

Suitability is basically the most important as well as significant factor within this model and helps the organization to identify that whether their strategy will help to meet their objectives and goals or not. The major aim of the strategic analysis is that it helps the organizations to have a better understanding and in-depth analysis of the overall environment and the firm. In short, suitability in this model is extent to which the proposed strategy generally fits situation within strategic analysis.

Suitability is mainly assessed as well as analysed in various criteria which are important for the business-like expectation suitability, capability suitability and environmental suitability (Ribeiro, 2018). These three are the main categories in suitability. As the positioning strategy, the Sainsbury have the merger with ASDA. In M&A event is unique because it is outside the day-to-day operation of the business and will require additional effort and, potentially, the addition of dedicated resources to be performed effectively. The merger of these two organizations have enabled Sainsbury to increase its profit margin as well as enlarge the customer base. Besides this, this merger has helped Sainsbury to gain the high scope over the suppliers and have helped to lower the prices. As merger of Sainsbury with Asda has bought a high number of opportunities for the company among which one is expanding its supply chain in villages. Sainsbury along with Asda can grow its business in the rural areas and villages. Besides this, in expectation suitability this strategy will help to meet the expectations of the stakeholders towards environmental safety and will help to provide a safe and competitive to the stakeholders. Within capability suitability, this strategy of Sainsbury is highly capable to meet the environmental standards and will reduce the release of hazardous substance in environment and will make then production process highly optimized. Thus, this strategy meets all the criteria of these three factors and is highly suitable for driving the business.

Acceptability

Acceptability attribute of this model is generally about measuring as well as analysing the returns, risks as well as stakeholder reactions from the specific strategy. Acceptability is mainly related with the expectations of people and thus gives rise to main issue which is acceptable to whom?. Acceptability aspect generally requires the thorough analysis and helps the organization to assess its strategy in depth. Returns in acceptability is mainly measured on basis of benefit which stakeholder expect from strategy. The return calculations is generally performed and measured by the various methods like cos-benefit analysis, real-options analysis, profitability analysis etc (Romano, 2016).

The strategy of Sainsbury to increase the contribution towards environment by reducing carbon emission and offering sustainable products will helps to increase the financial performance of company by nearly 38.4%. The major effect of merger with ASDA strategy will have the clear capital structure will be that it will gear up the ownership of company. Besides this, this strategy will help to make a long-lasting relation with stakeholders like suppliers, government as its contribution towards customer expectation will be highly appreciated. Along with this, local community will eventually accept the strategy as this strategy is mainly focussed towards improving the living standards of society and emphasizes on reducing the negative customer impact. Thus, this strategy follows the overall dimensions of acceptability and hence is highly imperative as well as attractive for the entire business. Apart from this, the strategy will also bring a significant and leading change within the various departments and employees of the organization. Thus, at the end this strategy is highly acceptable and will help the organization to achieve competitive advantage as well as establish position in the market (Epstein, 2018).

C-suite and investment committee is Ensuring that the right people and teams are in place by driving a culture of teamworkand discipline. In addtio to that maintaining organization-wide focus and long-term, value-enhancing goals. Bringing objectivity, and “pressure testing” the deal to confirm that it is being done for the right reasons

Business unit leadership is the business unit (BU) operates the acquired business. Thus, its role is critical in the latter stages of the M&A lifecycle. However, it's important to bring in operational knowledge and aptitude early in the M&A process so that the BU can meld its experience with the strategic imperatives in the following ways:

• Identifying areas where an acquisition could have an outsized impact
• Tracking competitors' actions
• Recommending to the IC when it's a good time to act

Corporate development as sserial acquirers have a dedicated corporate development team responsible for spearheading the tactical components of an acquisition. This typically includes:

• Developing and maintaining the M&A pipeline
• Monitoring and homing in on targets
• Comprehensively managing the diligence process to ensure that the transaction doesn't get ahead of the diligence performed

Transaction lead as Companies, however, often underestimate the effort required to integrate an acquisition and do not engage their transaction leads early enough, which can result in unrealized synergies. The earlier a transaction lead is engaged the more thoroughly he or she can understand the specific risks, challenges, and opportunities of the deal.

External advisors- Advisors provide the role of augmenting a company's internal capabilities, providing access to targets, and providing support as needed, throughout the M&A process. Experienced buyers have a deep network of their own, but for many companies newer to the M&A scene, an external advisor can provide great assistance with sourcing and screening potential targets. 

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Feasibility

Feasibility aspect of SAF model is highly remarkable and significant and hence helps in analysing that whether the strategy and its associated ideas are feasible or not. Feasibility attribute is mainly concerned with the overall implementation of strategy and helps organization to assess whether its implementation will be worth or not. The main aim for assessing the financial feasibility is that it assists business to evaluate that whether they have adequate resources and abilities for implementing the strategy. Feasibility mainly relates to various dimensions like quality feasibility, financial feasibility etc (McManners, 2016). The strategy of Sainsbury to contribute towards customer stability with competitive environment is highly feasible. Talking of the financial feasibility, this strategy will increase the fund and cash flow within Sainsbury to more than 32.8% and will be funded by various other organizations due to its effectiveness as well as value for environment. The strategy of Sainsbury to increase the contribution towards environment by reducing carbon emission and offering sustainable products will helps to increase the financial performance of company by nearly 38.4%. The major effect of merger with ASDA strategy will have the clear capital structure will be that it will gear up the ownership of company. Besides this, for increasing the feasibility of this strategy, company will ensure the presence of necessary skills at managerial as well as operative level. Thus, this strategy is highly feasible and will help organization to compete effectively in market and enlarge the customer base (Pidun, 2019).

CONCLUSION

It has been summarized that the business environment plays an important role within organization and thus impacts its functions and operations to high extent. The issues which mainly arises within the business environment helps organizations to exploit the various opportunities as well as helps to manage the threats which might impact its competitiveness in market. Assessing the internal environment helps organization to evaluate its strength as well as weakness which affects their operations and functioning and impacts the decision-making. The most widely known framework which is VRIO helps the organization to identify the various resources which provide them the competitive advantage and helps to establish position within the market. Besides this, the remarkable as well as significant model which is SAF helps the organization to analyze effectiveness of their strategy. This model is mainly based on three dimensions which are suitability, feasibility and acceptability. These three help organization in evaluating whether strategy will help to achieve its goals or not.

Read Also :- Valuation of Investment Products

Impact of External factors of Organization

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