1. Introduction

The grocery market of the UK has seen swift growth and competition over the last three decades (Statista, 2019a). For example, its value was 193 billion in 2019 (Statista, 2019b). The market contains large players like Morrisons, Asda, Aldi, Tesco and Sainsbury, which is one of the biggest supermarket chains in the UK. Though the company was formed in 1896, it has more than 2000 retail outlets across the globe (Sainsbury, 2020). Since the beginning of the 2000s, the country has been facing strategic issues. The purpose of this report is to perform a detailed strategic analysis of Sainsbury. It is divided into three main sections. The first section briefly overviews the industry analysis, while the second section discusses Sainsbury’s current strategies in detail and proposes strategies for the future. The third section discusses the implementation of the proposed strategies. Conclusions are given at the end of the report.

2. Strategic Analysis

2.1. Industry Size

The grocery industry of the UK has witnessed a steady increase since the start of the 1990’s, especially after Aldi brought in the trend of discounted stores (Rice, 2019). In 2016-2018, the industry faced a slight recession. However, in 2019, supermarkets re-surfaced with higher discount policies and Customer Relationship Management (CRM) strategies to reach 193.6 million pounds (Statista, 2019a). Nevertheless, the market is expected to collapse badly after April due to the recent surge of coronavirus lockdown (Burt et al., 2020).

2.2. Industry Structure

According to Ellickson (2005), the structure of the supermarket industry is naturally oligopolistic because of its large size and key firms operating side-by-side on an almost similar pattern to satisfy customers (Ellickson, 2005). Some key firms of UK grocery retail industry are Tesco, Asda, Sainsbury, Morrisons, and Aldi. These stores offer a wide variety of daily-use products at retail prices, so a large number of customers visit them regularly, which in turn enables them to earn a high profit.

2.3. Industry Growth and Shares of Competitors

The UK supermarket industry has been growing over the last 15 years. The value of the sector has grown from 120 billion GBP in 2004 to 193.6 billion in 2019 (Wunsch, 2020), as shown in figure-1.

Figure-1: Growth of UK Supermarket Sector; Source Wunsch (2020)

The market shares of competitors have also changed over time. For example, Asda’s share surpassed the percentage of Sainsbury in the first quarter of 2019 (Statista, 2019c), as shown in figure-2. Likewise, Morisons surpassed the share of Aldi in 2019, and it has maintained its position since then (see figure-2). Tesco and Sainsbury, however, have held the largest share (43.1%) in the UK retail market throughout the period.

Figure-2: Market Share of Competitors in UK Supermarket Sector, Source Statista (2020a).

From figure-2, a close competition can be seen between Asda and Sainsbury, and Morrison and Aldi. Particularly, Sainsbury has been facing intense competition from Tesco and Asda, who compete with Sainsbury on the basis of operational strategies, discount offers, and CRM strategies (BBC, 2019). In 2014, Tesco faced the scandal of accounting strategies that temporarily harmed its brand image (Gupta, 2016). However, the brand came back stronger to give even stricter competition to Sainsbury as a competitor. As of 2020, the market shares of competitors are shown in figure-3.

Figure-3: Market Shares of Competitors; Adapted from Statista (2020a)

It should be noticed that to beat the competition, Sainsbury and Asda planned a merger in 2019, which was aimed to cut costs of thousands of salary packages. By the result of the merger decision, Sainsbury would cut hundreds of jobs to streamline operations (BBC, 2019). Wood (2019) criticized the merger mentioning that it would increase the price but reduce the quality and variety of products in their stores. The market watchdogs blocked the merger decision because it could create duopoly resulting in increased price and decreased quality of goods (Southey, 2019).

2.4. Analysis of Competitors

As the closest competitors of Sainsbury are Tesco and Asda, their strengths and weaknesses are shown in table-1.

	Strengths/Opportunities	Weaknesses/Threats
Tesco	Strong financial resources; revenue of 52 Billion GBP in 2019 (Wunsch, 2019) Market leadership “Fresh and easy” stores are symbolized for quality and fairness (Fatricia, 2010)	Scandal: Exploited workers in India show Tesco’s violation to basic HR norms (Smith, 2008) Needs to find opportunity in increased online sales in the UK by the end of 2020 (Butler, 2019).
Asda	A simple yet competitive brand that has established a position in the presence of tough competitors like Sainsbury and Lidl Low operating costs of stores (García, 2015)	Growing competition Changing the expectation of customers from retail stores

Table-1: Strengths and Weaknesses of Top 2 Competitors

2.5. Analysis of Consumer Habits and Trends

The demands and habits of customers of the UK retail industry have been changing dynamically. To meet the varied needs of different customer segments, a single chain like Tesco runs five types of stores including hypermarkets, discount stores, fresh and easy stores, superstores and regular stores (Reynolds, et al., 2005). For example, OECD (2010) mentions that increased trade has promoted competition in the UK, which has also increased the consumption of “imported products.” Due to the presence of sellers selling imported goods on e-commerce portals, customers are tempted to buy imported products (Mai, et al., 2012).

Another trend is purchasing regular grocery products through online channels. This trend, however, can be attributed to the growing efficiency of online sellers who satisfy customers with a prompt response and secure payment systems (Ramachandran & Karthick, 2011). Lastly, UK consumers have also followed the trend of purchasing discounted products (Netsuite, 2016), due to growing inflation and increased competition to capture market share.

2.6. Organizational Purpose

The vision of Sainsbury is to become the world’s most reliable retailer where people would look forward to work and shop. Sainsbury plans to achieve it by keeping customers at the centre of its strategic planning (Sainsbury, 2020). The store invests and plans with colleagues and stakeholders to determine the best possible shopping experience at the store (Sainsbury, 2020). Correspondingly, the mission of Sainsbury is to provide high-quality products to the customers bonded with the service quality and efficiency (Sainsbury, 2020).

According to Sainsbury (2020), the brand has several strategic business units (SBUs), as shown below:

• Groceries
• Bank
• Tu
• Argos
• Habitat
• Energy

Moreover, it has different departments like general merchandise and clothing, marketing, HR, central retail, and finance and procurement (Sainsbury, n.d.).

2.7. Analysis of Financial Performance and Profitability

The turnovers of Sainsbury, Tesco, Asda and Morrisons are compared in the figure below:

Figure-4: Turn Over of Sainsbury and Competitors, 2017-2019

The chart above shows that turnovers of all these brands have increased slightly from 2016-2019.

However, the profit of Sainsbury has decreased as compared to Tesco and Morrisons, as evident from the figure below.

Figure-5: Profit of Sainsbury and Competitors, 2017-2019

Likewise, in 2019, the profit margin of Sainsbury was significant, i.e. 0.13% as compared to those of Tesco (2.05%) and Morrisons (1.75%), which shows that Sainsbury has strategic issues.

2.8. Analysis of Internal Environment

2.8.1. VRIN Framework

Resources	Valuable?	Rare?	Imitable?	Reliable?	Competitive implications
Brand image	Yes	Yes	Yes	Yes	Sustained competition
Innovation in business strategies	Yes	No	Yes	Yes	Sustained competition
E-commerce	Yes	No	Yes	Yes	Sustained competition
Supply chain management	Yes	Yes	Yes	Yes	Competitive advantage
Customer Relationship Management	Yes	Yes	Yes	Yes	Competitive advantage

Table-2: VRIN Analysis

2.8.2. SWOT Analysis

The SWOT analysis of Sainsbury is shown in table-3.

Strengths Old and reliable brand with strong brand identity (Sainsburyarchive, 2019) Gives leverage to regular customers; discount offers to increase customer satisfaction (E-Reward, 2020) The brand uses Nectar, a reliable smartcard service in the UK, to create loyalty programs for customers and satisfy them by giving additional benefits (Sainsbury’s PLC, 2018).

Weaknesses In 2015, Sainsbury’s first-half underlying pretax profit fell 9 percent to 251 million pounds. The company reported its first loss in a decade in 2015 (BBC, 2015) The loss in 2015 was attributed to a price war between supermarkets and changing consumer trends like preferring convenience stores over supermarkets and increased spending on hoteling than cooking inside home (BBC, 2015). Intense pressure from competitors like Asda which nearly brought the store to merger decision (Davey, 2019a). The decreasing sales share of Sainsbury shows its weak market position (Statista, 2019c). In 2019, the shares of Sainsbury decreased by 37% as compared to the value of its share in 2018 (Davey, 2019a) The demand for clothes of Sainsbury reduced significantly in 2019 (Davey, 2019)

Opportunities Using online sale portal and increase the market share (Ellis-Chadwick & Doherty, 2007)

Threats Losing market share to competitors in the coming years Covid-19 has enforced lockdown of Sainsbury store in some parts of the UK that has threatened loss of store sales.

Table-3: SWOT Analysis

The profit downfall onwards 2015 shows that despite Sainsbury’s constant monitoring over organizational goals, the company failed to keep an eye on the changing trend of market entrants, i.e. to become simpler and easier to access (e.g. Asda and Aldi) (Aluko & Knight, 2017). Sainsbury also tried to collaborate with NGOs to improve sustainable practice and increase communication with customers. Unfortunately, the idea did not work for the brand and Sainsbury continued to suffer from professional competition (Rohwer & Topic, 2019).

Sainsbury has adopted advanced technology to increase sales and number of customers. For example, the “brand match” technology in nectar cards of Sainsbury, is a way to speed up customer shopping with ease and reliability (Caines, 2012).

2.9. External Environment

2.9.1. PESTLE Analysis

Political	Store location in Britain is managed through zoning procedures in general land use planning policy (Sainsbury.UK, 2020). The government regulates working of grocery stores through market watchdogs. Sainsbury was badly affected by Brexit as the profit plunged, and the customers stopped spending a huge amount on groceries (Eley, 2019).
Economic	The UK household disposable income is £29400, that grows at a rate of 1.4% every year (Mann, 2019). The purchasing power of consumers in the UK expected to decrease because of Covid-19 (CEBR, 2020). It is expected that the global economy might witness a severe recession.
Social	An ageing population is near 12 million (Age UK, 2019). Consumers are adopting comfortable lifestyles The increase in disposable income, over the last few years, has changed the consumerism to become more active towards household items, lifestyle products and technology-oriented gadgets (Gilleard, 2015) Customers have become more conscious towards prices and demand responsible business operations that save time for “change, exchange, return” and satisfy the customer with one visit (Voinea & Filip, 2011).
Technology	Retail markets are adopting new technologies like artificial intelligence and till-free stores
Environmental	Players in retail market are indulged in various sustainability projects, such as healthcare and education system development (Jones, et al., 2008), to cater to demands of sustainability
Legal	The Food Hygiene Regulations 2006 includes such as food hygiene, registration of premises, cleanliness, provision of equipment and facilities, and temperature control (Croner , 2020).

Table-4: PESTLE Analysis

2.9.2. Porter’s Five Forces

High Industrial rivalry	Established brands operate in the UK retail industry Baby boomer market entrants like Asda are also well-established in the market now (Leanza, 2011) The competitive policies are constantly changing to meet the new market environment (Xu, 2018).
Moderate-to-high Bargaining power of customers	Customers have several options to choose from Discounted stores have also increased customer’s power
High Bargaining power of suppliers	Stores are dependent on suppliers for inventory Retail store performance is greatly dependent on the performance of suppliers.
Low Threat of new market entrant	Already established players in the market Capital requirements for opening a super competitive market (Wood, et al., 2017)
Low-to-Moderate Threat of substitutes	Supermarkets substitutes (like departmental stores) cannot match the variety of items offered by supermarkets

Table-5: Porter’s Five Forces Analysis

The stated organizational purpose and the actual business operations of Sainsbury match to some extent. However, since the past five years, Sainsbury is facing difficulties to manage market position and business profit that yield the demand for business strategy reformation and adhere to the changing needs of customers.

3. Existing and Proposed Strategies

3.1. Existing Strategies

The corporate strategies of Sainsbury are evident from its business priorities, which are explained below:

• Differentiation of food and services through quality, value and services: Sainsbury tries meeting customer needs with innovation-based practices; e.g. vegan cupcakes ‘Oggs’ to replace meat for vegetarian customers (Futurefood, 2020). Through innovation, Sainsbury aims to diversify its offerings.
• Increasing customer’s knowledge about the brand: The brand tries to give easy access to customers for its financial services. So, Sainsbury website is equipped with financial services information and reports to facilitate customers’ need to know about financial policies of Sainsbury (Sainsbury, 2019).
• Investing in digital technology for improving customer service and increasing customer satisfaction. Therefore, Sainsbury launched the scan and pay system at stores in order to give an instant and reliable system of payment to customers (Sainsbury, 2018)
• Strengthening the balance sheet: Since the time Sainsbury has been under pressure of losing market share, it has prioritized sales optimization to strengthen its balance sheet.

From Porter’s generic strategies, Sainsbury has been following to take cost-leadership, since the last five years. For example, in 2015, it reported to cut 150m Pounds from its stores (BBC, 2015). In 2017, the seasonal loss enforced the company to close down most of its Argos selling counters as a part of cost-cutting strategies (Davey, 2017). Likewise, it has “concession partners” like Sushi Gourmet, Timpsons and Specsavers who help the brand to do cost-cutting and earn high profit. The brand has also planned not inject any more capital after 35 million pounds in 2019-20 (Davey, 2019b). However, it also tries to differentiate from time-to-time, for example, by offering plant-based meals (Barr, 2018).

The Sainsbury group has also followed ‘conglomerate diversification’ strategy from the Ansoff matrix, which is evident from the company’s entering into bank sector and property market.

3.1.1. Functional Strategies

To strengthen the balance sheet by optimizing sales, Sainsbury’s stores have devised the following functional strategies:

• Growth of general merchandise and clothing: So, it reduced prices for 1000 own-branded products, including meat and fish products (Davey, 2019a). Moreover, the brand intends to add 400 new stores, cut prices of daily essentials, and invest in online technology to increase sales (Davey, 2019a). It is apparent that this strategy is followed by its ‘general merchandise and clothing department’ of Sainsbury (“General Merchandise and Clothing”, n.d.).
• Collaborate with different brands/services to enhance customer turnout: Argos is an example of Sainsbury’s collaboration with the brand in 284 stores to attract more customers. Argos is a reliable online retailer brand, and its presence benefits Sainsbury to increase merchandise and share the burden of the supply chain (Sainsbury Report, 2019). Another example of collaborative partnership is the partnership with “Deliveroo” to supply pizzas to customers (Reuters, 2019). The ‘Central Retail’ and ‘Marketing and Communication’ departments seem to be responsible for these strategies (“Central Retail”, n.d.; “Marketing and Communications”, n.d.).
• Strengthen supply chain to increase sales (Sainsbury Report, 2019). So, it launched a fast-track delivery system, which locates customer’s home through Google location services, and delivers ordered groceries in the shortest possible time (Sainsbury Report, 2019). Moreover, the brand has also launched the smart app to facilitate customers for not bothering to stand in checkout queues and pay via app instantly (Smithers, 2019). The ‘logistics department’ works with suppliers, so it seems to follow the strategy of strengthening the supply chain (“Central Logistics”, n.d.).

3.2. Proposed Strategies

3.2.1. Corporate Strategies

As mentioned above, Sainsbury’s current strategies are ‘cost-leadership’ and ‘conglomerate diversification’ at the corporate level. So, it is proposed that Sainsbury adopts ‘differentiation’ strategy, from Porter’s generic strategies, at the corporate level. Differentiation strategy helps business brands to stand out from competitors. Obitz (2019) conducted an analysis of supermarket industry of the UK. The author proposed that differentiation on the basis of superior quality is not feasible for players in the sector, because the profit margin on grocery items is usually too less. However, the author suggested differentiation on the basis of launching ‘innovative products/services’ (Obitz, 2019, pp. 46). Johnson et al. (2017) also mention that brands having a conglomerate structure should be innovative across all product lines and services to stand out from competitors. Sainsbury can also differentiate by giving customer superior quality service as compared to the competitors. So, from the Ansoff matrix, Sainsbury should emphasize on launching new products and services.

	Existing Products	New Products
Existing Markets	Market Penetration	New Products and Services New products and services are to be launched at Sainsbury
New Markets	Market Development	Conglomerate Diversification The current strategy is conglomerate diversification

The portfolio analysis of Sainsbury also shows that it should invest in groceries to become a star in the next ten years.

	Low Market Share	High Market Share
High Annual Growth	Question Marks Groceries/Supermarket Tu Strategy: Invest for growth to become a star	Star
Low Annual Growth	Dogs Banks Energy	Cash Cows Habitat

The BCG matrix for Sainsbury’s business units also shows that the brand must invest more in both groceries and its clothing brand ‘Tu’ as growth is projected across both retailing and clothing markets of the UK (Wunsch, 2020; Anon, 2019)

3.2.2. Functional Strategies

The proposed functional strategies are as follows:

• Vertical integration: The brand needs the involvement of ‘central logistics’ department to integrate vertically and backwards. Through vertical integration, Sainsbury should try to manufacture its own brands in various categories of groceries, so that it can launch innovative products easily. Also, it should continue collaborating with different brands and services to enhance customer turnout.
• Moreover, competent organizations always are in the learning curve to adopt new techniques by learning their benefits (Appelbaum & John, 2000). Therefore, Sainsbury is advised to match its business position with capabilities. This process would need the involvement of ‘corporate central’ and ‘marketing and communication’ departments in order to gain a competitive advantage.
• It is important for companies to learn from the industrial environment and keep pace with growing trends. For this purpose, Sainsbury is advised to adopt the ‘industry benchmarking techniques’ to learn from companies who are doing well than Sainsbury. For example, Walmart and Tesco can be benchmarked against the standards of Sainsbury to learn something from them.
• Training staff members to deliver superior quality services

4. Implementation

The following action plan is suggested for Sainsbury from 2020-2023.

Strategic Action	Timeline	Department Involved
Developing ideas for launching new products and services	August 2020 – September 2020	Marketing and communications
Assessing the probability of ideas	September 2020 – September 2020	Marketing and communication Corporate central
Launching new products and services	October 2020 – February 2021	Central Retail Marketing and Communication
Vertical integration (Phase-I)	August 2020 – February 2021	Central Retail Corporate central Marketing and Communication
Vertical integration (Phase-II)	March 2020 – October 2021	Central Retail Corporate central Marketing and Communication
Vertical integration	November 2021 – June 2022	Central Retail Corporate central Marketing and Communication
Training Need Assessment of sales force	August 2020 – September 2020	Marketing and communications HR department
Training sessions of sales force	October 2020 – March 2020	HR department
Developing ideas for launching new products and services	August 2021 – September 2021	Marketing and communications
Assessing the probability of ideas	September 2021 – September 2021	Marketing and communication Corporate central
Launching new products and services	October 2021 – February 2022	Central Retail Marketing and Communication
Training Need Assessment of sales force	August 2021 – September 2021	Marketing and communications HR department
Training sessions of sales force	October 2021 – March 2022	HR department
Developing ideas for launching new products and services	August 2022 – September 2022	Marketing and communications
Assessing the probability of ideas	September 2022 – September 2022	Marketing and communication Corporate central
Launching new products and services	October 2022 – February 2023	Central Retail Marketing and Communication
Training Need Assessment of sales force	August 2022 – September 2022	Marketing and communications HR department
Training sessions of sales force	October 2022 – March 2023	HR department

5. Conclusion

The purpose of this report was to conduct a detailed strategic analysis of Sainsbury. The analysis of industry showed that Tesco is the market leader in the supermarket sector of the UK, while Sainsbury and Asda are market challengers. However, even though it is a market challenger, Sainsbury’s strategic position is weak. The company has followed cost-cutting strategies rigorously over the last few years. It is suggested that the company follows a differentiation strategy which is based on launching new products and services to cater to changing needs to the customers. So, corresponding functional strategies are also suggested in the report, which will support the corporate strategy.