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.
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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).
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.
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).
As the closest competitors of Sainsbury are Tesco and Asda, their strengths and weaknesses are shown in table-1.
Table-1: Strengths and Weaknesses of Top 2 Competitors
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.
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:
Moreover, it has different departments like general merchandise and clothing, marketing, HR, central retail, and finance and procurement (Sainsbury, n.d.).
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.
|Brand image||Yes||Yes||Yes||Yes||Sustained competition|
|Innovation in business strategies||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
The SWOT analysis of Sainsbury is shown in table-3.
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).
Table-4: PESTLE Analysis
|High Industrial rivalry||
|Moderate-to-high Bargaining power of customers||
|High Bargaining power of suppliers||
|Low Threat of new market entrant||
|Low-to-Moderate Threat of substitutes||
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.
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.
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.).
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
|Low Annual Growth||Dogs
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)
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
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
|Launching new products and services||October 2020 – February 2021||Central Retail
Marketing and Communication
|Vertical integration (Phase-I)||August 2020 – February 2021||Central Retail
Marketing and Communication
|Vertical integration (Phase-II)||March 2020 – October 2021||Central Retail
Marketing and Communication
|Vertical integration||November 2021 – June 2022||Central Retail
Marketing and Communication
|Training Need Assessment of sales force||August 2020 – September 2020||Marketing and communications
|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
|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
|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
|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
|Training sessions of sales force||October 2022 – March 2023||HR department|
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.
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