This sample will let you know about the:
- What is strategic analysis?
- Define PESTLE analysis.
In present time, strategic analysis can be defined as an effective process, which may lead the organisation to understand the behaviour of both internal and external business environment, in order to take right decisions in specified time frame. With the help of this, organisations can sustain or expand their business at international level (Formicola and et. al., 2018).
On the other hand, strategic analysis helps in developing a number of strategic plans so that, company could effectively run it's business in a successful manner. Under this report, organisation that has been taken into consideration is J Sainsbury plc (Sainsbury's), which was found in the year of 1869 by John James Sainsbury. It's headquarter is in London, United Kingdom and in April, 2016 Home Retail Group (Argos) was taken over by Sainsbury's in the amount of £1.4 billion. This acquisition was done by Sainsbury's in the Month of September (2016). Away with this, report is going to be enclosed with external analysis, resources and key competences of organisation and lastly, one strategy that the company implemented for business expansion.
Carry out external analysis (business environment and industry) to identify 5 (fifth) Opportunities and 1 (one)Threats and assess industry attractiveness.
In modern time, it has become vital for business organisations to conduct external analysis, so that they could take the right decisions, understand the attractiveness of industry and identify both threats and opportunities. In present context, Sainsbury's that already acquired Argos after winning four-month battle, where the owner agreed with takeover amount £1.4 billion. Sainsbury's has made arrangements purchased Home Retail Group as they have had the thought of developing themselves as a "multi-item, multi-channel" retailer. Sainsbury's will pay a blend of offers and money, with Home Retail investors holding 12% of the consolidated business (Sainsbury's wins battle to buy Argos, 2016). Are you struggling with your assignments, Order assignment help from our experts!
The arrangement got finished in last quarter of this 2016. Along with this, Director David Tyler said he accepted the joined business would be "appealing to clients" and make an incentive for investors of the two organizations. Basically, in the same year, Sainsbury's has faced 11 percent increase in revenues, but pre-tax profits declined around 8.2 percent up-to £503m. Sainsbury's attributed to “investment in the customer offer” as intense competition contributed to a price war that has damaged margins across the sector (James, DeSantis and Saur, 2016).
Political: Due to Brexit (Eviction of United Kingdom), which is one of the major political factor, that affected the whole retailing and other industries. In context to Sainsbury’s, where this political element brought ample number of difficulties for all the retailing supermarkets to afford import products from abroad. This is where, it is said that increase in the cost of foreign products would likely be passed onto the end consumer, this move means Sainsbury’s would require to take ample number of actions so that customer engagement (continuous spending could be effectively be done by them) can be pushed forward as much as possible (PESTLE Analysis of Sainsbury’s, 2019).
Threat: During 2016 this factor, raised attention of foreign companies to operate or expand business in United Kingdom due to open market situation, which resulted rise in competitiveness for Sainsbury’s even when they acquired Argos, because their revenue was the only element that increased but not the profit, and instead of this supermarket sales for the full year fell by 0.6 per cent and later in the next financial year's first month (2017), company was already signalled to see decline in it's sales (Niu, 2018).
Economical: Rising salaries is being considered as one of specific element within economic factor that affected retailing industry where different organisations like Sainsbury’s are performing business. This impacted on both the senses negatively and positively, on business organisation. If it is talked about supermarkets like, Sainsbury’s then this company has directly employed a large number of workers to perform simple tasks such as stocking shelves or manning the checkout. If Sainsbury’s is expected to pay these employees more than ever before, this will seriously increase their expenses, thus reducing overall profit. As mentioned previously, this may be counteracted by an increase in the end price of products, but this would be likely to decrease sales volumes (and thus profitability, indirectly).
Opportunity: Under this, just when Sainsbury's specifically acquired Argos it has helped company in becoming economically stronger from the existing position, which has resulted in gaining competitive advantages and in reaching to new heights as well.
Social: In modern time, people has developed a number of trends like healthy eating and so on. Trends in relation to healthy diet has changed the perspectives and working of different supermarket chains of retailing industry. Therefore, Sainsbury’s, has also kept it's focus on adapting the current change so that consumers’ demands could effectively gets fulfilled in specified time frame.
Opportunity: If it is talked about 200 of Argos's 845 stores are specifically expected to close this was generally being taken as one of the crucial advantage or opportunity that Sainsbury's in hitting a number of targets (Raymond, 2016).
Technological: Acquisition with Agros, Sainsbury’s has started dealing within online shopping more precisely. This has helped Sainsbury's in reducing the impact of Brexit on company's sales and profit as well through selling products from all over the world then United Kingdom. Away with this, e-Commerce and its usage in the food industry are still in early days; it will be interesting to see how supermarkets get the most out of this growing technology.
Opportunity: Just when acquisition done by Sainsbury's, it has helped company in enabling it operating 250 digital Argos stores within its branches. Major opportunity that came in front was that, it led around 200 digital collection points to open Sainsbury's non-grocery brands in stores this year.
Legal: Changes within rules and regulations is something, which is impacting negatively and positively over supermarkets of retailing industry. Basically, it has been found that employment related rules is something, that a government of any country keeps on making changes, which impacted upon different existing policies made by different organisations like Sainsbury's, which resulted into bringing appropriate modifications so that to benefit employees of different workstations.
Opportunity: Primal opportunity that came in front is at the time when acquisition of Argos, was considered, the United Kingdom's marketing conditions brought ample number of chances for Sainsbury's to negotiate with the owner of Argos, and this led company to raise ample number of benefits for itself.
Environmental: Over the years, this factor has been affecting retail industry in different ways and it has been seen that Sainsbury’s has already kept it's focus on reducing the waste materials like plastic as this would lead the whole atmosphere to reduce the pollution and different crisis as well. Sainsbury’s would also require to look for a number of ways through which they can reduce the waste materials, like delivering a range of incentives to customers who buy foodstuffs loose and bring their own containers and bags (Segura, Morales and Somolinos, 2018). Need Assignment Examples?Talk to our Experts!
Opportunity: Primal opportunity that came in front of this factor is that Sainsbury’s acquisition of Argos has helped firm in conducting business online, which helped them in selling products across the world, in environmental friendly packaging.
Porter's five forces model for industry attractiveness
- Threat of New Entrants: Basically, New Entrants within retail industry focuses on innovation, which affects working of a business organisation like Sainsbury’s. However, threat from new entrants is low for Sainsbury's and also, this force can be reduced through lowering all the reducing costs, pricing strategies, providing new value propositions to customers. Company, has to manage all the number of challenges & building effective barriers in relation to competitive edge. This would lead Sainsbury’s to find a range of industry attractiveness.
- Bargaining Power of Suppliers: In order to understand the industry attractiveness, this is another crucial element of Porter's five forces model, where suppliers within retail industry are holding a dominant position, where they reduce profit margins for Sainsbury's. It is said that, powerful suppliers in Consumer Services sector use their negotiating power to extract higher prices from the firms in Retail field. With the help of building efficient supply chain with multiple suppliers, Sainsbury's could effectively sustain within the market for a longer period of time.
- Bargaining Power of Buyers: With retail industry, targeted market of Supermarket demands high while paying low or minimal price. Therefore, this high force of clients has reduced the interest of customers towards products and services offered by Sainsbury's. In order to improve the same, it will be required by Sainsbury's to increase number of offers and discounts as well.
- Threat from Substitute Products: In present time, retail industry of United Kingdom is already being considered as a sector where, new products and service meets a similar customer needs, which affected customer base of Sainsbury's. Including this, it is also needed by Sainsbury's to sustain within the market for a longer period of time, and this could be done through offering customers with unique and quality based products to customers (Tian and et. al., 2018).
- Rivalry among the existing players: Retail industry of United Kingdom, basically consists of Big Four Supermarkets, as they drive down prices in much effective and in efficient manner. Including this, it is also said that reduction within profitability reduced the Sainsbury's operating power within retail industry but just when, company acquired Argos, it mainly gave ample number of benefits to itself and to retail industry as well.
Analyse the resources and key competences of the organisation and identify core competences (key factors that may give the company its competitive advantage).
VRIO: VRIO analysis of Sainsbury's is used in making a detailed analysis of available resources with a organisation that ultimately lead to gaining of a competitive advantage and help in long run survival. Over some years Sainsbury's has moved from its core range of other areas also such as clothing energy & finance, recent takeover of Argos is leading to increasing of diversity of their portfolios. Sainsbury's, has created a successful brand image by the quality of products which they offer such that its customer are ready to pay slightly high prices also. In context of Sainsbury's a detailed analysis is done below:
Valuable: All the resources are valuable for organisation but in case of Sainsbury's after acquisition of Argos there have been increase in their overall valuable resources possess by this global organisation. Such as four such resources are brand name, global presence, competent workforce and large variety of products.
Rare: There are some resources with every organisation that is rare and not found in every organisation such as in Sainsbury's brand name, large variety of products and competent workforce are resources that are rare for this organisation (Wall and Young, 2016).
Imitability: This aspect of VRIO model is related with is a particular resource is imitable by other similar organisations or not. There are some rare resources that cannot be easily imitated by other competitors in the market. In present case, Sainsbury's posses some resources such as their brand name and large variants of products are two major resources that will help this brand in having a differentiation advantage. It is not easy for present competitors of Sainsbury's to build up such brand image. .
Organisation: All the resources have to be kept organised so that overall functioning is not getting affected. But some resources are so valuable and at the same time rarely found in any organisation need to be focused more as these resources help in long run competitive advantage. Reason behind this is these resources cannot be easily imitated by various competitors also. In case of Sainsbury's, brand name which they carry because of satisfaction level of present customers is something that is helping them in having a competitive advantage.
Choose one strategy that the company implemented recently and evaluate it using SAFE criteria
While expanding business or at the time of gaining competitive advancements, it is needed by business organisations to develop different range of strategies. Through this, a firm could sustain within the market for a longer period of time. In present context, organisation i.e. Sainsbury's has made ample number of decisions in relation to developing strategies so that it could effectively expand it's business at international level.
This is where, one of the primal decision which was taken into consideration by Sainsbury's is acquisition of Argos. This decision, which was considered by Sainsbury's where Suitability, Acceptability and Feasibility (SAF) is specifically taken into consideration and satisfying these three criteria before it can be successful, and because of this, the use of a SAF strategy model is a great way to fairly weigh up all the different range of options. You can ask for "Write my assignment" from our experts!
Suitability: Basically,Sainsbury's was going through ample number of difficulties, which raised various opportunities as well, for the business organisation. This has resulted Sainsbury's to gain ample number of opportunities, where it has kept it's focus on acquiring Argos.
Acceptability: This is being considered as one of the crucial risk, that came in front for Sainsbury's was probability of a strategy’s failure and any financial losses, brand or corporate impacts should also be weighed up. Risk can be measured by the impact on liquidity, sensitivity analysis and stakeholder reactions, to deem how acceptable a strategy is. With the help of this, Sainsbury's could effectively reach to an all new level (Weimer and Vining, 2017).
Feasibility: Feasibility of Sainsbury's strategy that came in front was the specific aptitude, resources along with the abilities as well, which would lead company to actually implement different range of strategies that are directly linked with the key to its success. Considering the situation of the market, Sainsbury's performing break-even analysis, cash-flows and a range of other financial tests as well.
With the help of above mentioned report, it is being concluded that it is vital for a business organisation to keep on conducting analysis of external environment. This helps business companies to sustain within the market and to gain competitive advantages as well for a longer period of time. Considering PESTLE and Porter's five forces model, a company would easily assess industry attractiveness. Along with this, acquiring a business organisation can effectively bring both negative and positive aspects for a business company. Lastly, it is said that decisions that are made by a company while expanding their business, it is needed for firms to analyse the situation, trends and different conditions as well that is being carried by targeted business environment.
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