a)

INTRODUCTION
Sainsbury's is the second largest chain of supermarkets in the United Kingdom with a
share of the UK supermarket sector of 16.9%. Founded in 1869 by John James Sainsbury
with a shop in Drury Lane, London, the company became the largest grocery retailer in 1922,
was an early adopter of self-service retailing in the UK, and had its heyday during the 1980s.
In 1995, Tesco overtook Sainsbury's to become the market leader, and Asda became the
second largest in 2003, demoting Sainsbury's to third place for most of the subsequent period
until 2014, when Sainsbury's regained 2nd place. The holding company, J Sainsbury plc, is
split into three divisions, Sainsbury's Supermarkets Ltd, Sainsbury's Convenience Stores Ltd
(Sainsbury's Local), and Sainsbury's Bank. The group's head office is in the Sainsbury's Store
Support Centre in Holborn Circus, City of London. The group also has interests in property.

PESTLE analysis of Sainsbury's

Political factors
Sainsbury's is a company which is based in the UK and Ireland thus Sainsbury's performance
is highly influenced by the political factors in this country. An increased globalization could
pose as both an opportunity and a challenge to Sainsbury's. It is a challenge in such that it
would have to compete against unknown forces and to find the sources of the products with
economical and quality values. The corporation tax is at 28% unlike a few years ago when it
was 30%. This means that Sainsbury's along with other big organisations would save a huge
sum of money because of this lower rate of corporation tax.

Economical factors
The rising cost of fuels is one of the biggest economical factors that might be affecting
Sainsbury's. This rise in cost means that it affects the supply chain of Sainsbury's causing the
product prices to increase. The global food crisis which is ongoing would also result in
Sainsbury's having to increase the cost of their products.

Social factors
As explained in the opportunities part of the SWOT analysis, the increasing social trend in
healthier foods is a great opportunity for Sainsbury's. It is the social trend like this that
Sainsbury's would have to look out for in order to keep up with the consumers.

Technological
The correct use of correct technologies is an absolute must for retailers like Sainsbury's.
Being a big retailer, there are many things which are just not possible to be done manually.
Examples of this include the checkout system and the inventory management. In order to
keep up, Sainsbury's all over the country are having to constantly upgrade their technologies
such as introducing self checkouts, upgrading to more efficiently scanning checkouts,
computerised stock controlling etc. Having technologies such as the computerised checkouts
means that there is a lesser margin for human errors and less paperwork.

Environmental
The reduction of carbon footprint is has been given a lot of emphasis to big companies.
Companies like Sainsbury's can contribute a lot to the reduction of carbon footprint thus
Sainsbury's have to prove that they are not causing a lot of impact on the environment. To do
this Sainsbury's would have to put in more towards the green issue.

Legal
Sainsbury's is well bounded by many legal issues such as the national minimum wage policy,
alcohol selling age legislations, discrimination and fair treatment legislations etc. For the
wellbeing of the organisation, Sainsbury's would have to be pursuing these legislations;
failing to do so might follow many types of consequences. Sainsbury's have to maintain
different types of legal laws which include, consumer laws, competition laws, employment
laws and health and safety laws.

SWOT analysis
The SWOT analysis for Sainsburys could be performed and this would focus on:
Strengths
Strong brand name
A large number of employees
Strong presence across the UK
Solid customer base
Good reputation

Weaknesses
Many competitors in the market
Loyalty schemes introduced are not
implemented appropriately so the
major benefits of the scheme remain

uncertain
More focus on management strategy
and better customer service could be

recommended
Sainsburys should conduct thorough
market research to introduce cheaper
products than other supermarkets

Opportunities
Large consumer

base

Threats
especially
Competition from other companies

during Christmas and festivals

Sainsburys is already one of the main

such as Tesco and Asda

Price of Sainsburys products may be

higher than competitors

Importance of building long term

competitors and major retail store in

the UK
Opportunities in terms of online
marketing and financial services are
abundant

b)
Porter's five forces analysis of Sainsbury's

customer relationships as customers

may be driven away by competitors

Bargaining Power of Suppliers

Supplier power is an important part of the Porters five forces model. Bargaining power of
suppliers in the Sainsbury's would be relatively very high. Supplier power of smaller
suppliers would be smaller than big suppliers because of their sales volumes on dependence
on these supermarkets. In other hand big company like Unilever, Cadbury etc. not mainly
depend on one particular supermarket. But if this brand product are not sale by Sainsbury's
consumer will shift to another market so sales are down and also loss its customers. UK
based suppliers are also threatened by the growing ability of large retailers to source their
products from abroad at cheaper deals. The relationship with sellers can have similar effects
in constraining the strategic freedom of the company and in influencing its margins. One of
the advantages of Sainsbury's that they can dictate the price they pay the supplier. If the
supplier does not reduce the price, they will be left with a much smaller market for their
produce.

The Threat of Substitutes

General substitution is able to reduce demand for a particular product, as there is a threat of
consumers switching to the alternatives' Porter M. (1980). The threat of substitutes in the
food retail industry is a low one simply because consumers view it as a necessity, especially
in the developed world and increasingly in the emerging markets. Tesco, Asda , Morisons ,
Iceland , Poundland are the main substitute for the Sainsbury's. some small retailer also sale
good quality product in low price In this case Sainsbury's are trying to acquire existing smallscale operations and opening Metro and Express stores in local towns and city centers.

Bargaining Power of buyers

Porter theorized that the more products that become standardized or undifferentiated, the
lower the switching cost, and hence, more power is yielded to buyers' Porter M. (1980).
Buyer power is high in the Sainsbury's, simply due to the presence of so many competitors
selling the same products. Sainsbury's policy like famous loyalty card - Club card attracts the
customer and significantly increases the profitability of Sainsbury's business. Nowadays,
customer needs good customer service, low price products, better choices, constant flow of

in-store promotions all this strategy is provided by the Sainsbury's. Buyer power also acts to
force prices down. If beans are too expensive in Tesco, buyers will exercise their power and
move to Sainsbury.

Treat of new entrants

The costs of entering in to retail market need the low budget so it is relatively easy for new
entrants. Sainsbury's may have cornered the market for certain goods; the new supermarket
will not be able to find cheap, reliable suppliers. Sainsbury's also has the advantage of
economies of scale. The amount it pays suppliers, per-item, is a lot less than the corner shop.
It achieves this, partly, through buying large volumes of goods. A small supermarket chain
can only buy a relatively small volume of goods, at greater expense. The UK grocery market
is primary dominated by few competitors, including three major brands of Tesco, Asda, and
Sainsbury's and a small chains of Somerfield, Waitrose and Budgens. This is also evident in
huge investments done by large chains, such as Sainsbury's, in advanced technology for
checkouts and stock control systems that impact new entrants and the existing ones.

Determinants of Rivalry among Existing

This force describes the intensity of competition between existing players (companies) in an
industry. High competitive pressure results in pressure on prices, margins, and hence, on
profitability for every single company in the industry. The retail market is extremely
competitive with a very crowded market. Nowadays lots of companies are trying to get into
non food sectors further intensifying the competition. Sainsbury's has a market share of
14.9% in 2007, and its increasing since its restructuring program that started in 2004 (Annual
Report 2007). This is a positive trend but it is behind the Tesco. Showing that there is
considerable distance to cover. Tesco, Asda, and Morrison's are the other three big
supermarket chains in the UK retail sector. All of them have a different competitive
advantage over their competitors. This highly competitive in retail market has fostered an
accelerated level of development, resulting in a situation Sainsbury's have had to be
innovative to maintain and build market share.
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c)