Sainsbury Case Study

Introduction Sainsbury’s is now the third most important food retailer in the United Kingdom. In 1995, Tesco overtook the company to become the market leader after more than 20 years of constant growing. It has recently been pushed back by Asda in 2003. Sainsbury’s Supermarkets employ over 145,000 people, including Sava Centre. A large Sainsbury’s Supermarket offers over 23,000 products, 40% of these are Sainsbury’s own brand. The Sainsbury’s supermarkets serve over 11 million customers a week and as at June 2002 had 463 stores throughout the UK. In the year ended March 2003 it reported worldwide group turnover of over ? 17. 4 billion and profits of ? 454 million, with a total of over 170,000 full-time and part- time staff. The enterprise was founded in 1869 from an idea of John James Sainsbury’s and his wife Mary Ann. The first store was opened in Holborn, London and was selling fresh foods and later specialised into packaged groceries. Their strategy was â€Å"Quality perfect, prices lower†. The stores were very innovative by having their own label lines and presenting the products to consumers in a new way. They had marble counters, mosaic floors, as well as staff uniforms. The success was sudden and many other similar stores were created in London. On every shop, there was a high cast iron sign saying ‘J. Sainsbury’s. In 1922, it became the Uk's largest grocery group, and so got incorporated as a private company under the name of ‘J. Sainsbury Limited'. During these times they promoted quality fresh food produced with their own label line which made them extremely successful. The firm kept on growing even though it had to face the recession during the World War 2. Many stores got destroyed during London's bombardment and the decrease of the national income weakened the society. But in 1956, Alan Sainsbury’s became chairman after his father, John Benjamin' Sainsbury’s death. He came up with a new idea of promoting self-service supermarkets in the Uk after a trip to America. Their goal was to match quality of nationally branded goods with lower prices. The company went through its golden times. Innovative ideas and low cost of production gave the company a strong market position when it went public in July 1973. At the time, the family owned 85% of the firm's shares. It was the largest ever flotation on the London Stock Exchange with ? 14. 5 million available shares. The future of the company looked bright and they start replacing their 10 000 sq. ft. high street stores with self-service supermarkets above 20 000 sq. ft. New stores were opening in all England and the company invested in new technology. In 1991, the group was generating major profits and raised ? 489 million in new equity to fund the expansion of the superstores. In 1992, the long time CEO John Sainsbury’s retired and was succeeded by his cousin, David Sainsbury’s. He had different plans for the firm and decided to bring a change in the management style. But wrong decisions such as reluctance to move into non-food retailing or the indecision between quality or value made the company go down. Problems such as increasing infrastructure costs, stronger and consolidated competition from other stores were starting to rise. The firm was not focusing on low prices anymore but more on the store look and supply chain improvements. Their market and share loss to Asda shows quite well that marketing mix is important to customers. Macroenvironment Political factors Political factors are about how and to what extent the government intervenes into the organization. These interactions may include: * Labor law * Environmental law * Tariffs and quotas * Political stability * Tax policy * Trade restrictions For example, the fact of European Union extensions and new countries joining it, has an impact on the variety of products sold in Sainsbury’s. We can now see some foreign products as Polish beers or Cypriot yoghurts sold in the local supermarket. The goal behind this is to attract new customers by giving them the products they are used to buying in their own countries before coming to the UK. For employment legislations, the government encourages large retailers as Sainsbury’s to offer a mix of vacancies from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs, as well as employing students, elderly people and working parents. Sainsbury’s offers thousands of jobs to people in the UK, being a labor-intensive sector and having a great impact on the employment rate by hiring large numbers of students, disabled and elderly people. The wages paid to this category might be the minimum wages, but at least the unemployment rate is slightly reduced. In an industry with a typically high staff turnover, these employees provide a higher level of loyalty and try to give their full abilities at the workplace. Trade restrictions between the UK and the rest of the world greatly affect supermarkets like Sainsbury’s as the buyers are not able to find what they are looking for in stores. All the foods imported must pass a strict control in order for us to see them on the shelves. Political stability around the world may also bring a chaos into our fridge. In the case of demonstrations, protests or more serious political conflicts, we can have delays or even cancellations in the arrivals on products in the country. If we just imagine that Brazil went on strike for a week, where would we be getting our coffees from every morning? Socio-cultural factors Socio-cultural factors are about how new trends and styles emerging in the world around us can affect our economy. Our world is changing and developing every day with people adapting new habits and getting aware of new things going on. These can include: * Career attitudes * Safety emphasis Age distribution * Population growth rate * Community works Sainsbury’s can be so called the modern supermarket, following all the new market trends and rapidly responding to all the new demands consumers might possess. It is operating under a good reputation and always following the responsibility for the society and the surroundings, by organizing charity events, sponsoring games, competitions , etc. The last few decades, the population in the UK has been ageing as there is a low birth rate, so Sainsbury’s in return has been hiring elderly employees to satisfy the unemployment gap in that age section. Elderly buyers are looking to purchase affordable, healthy foods which makes supermarkets take actions. In general, there has been a great shift of people wanting to eat healthy and quickly, thus Sainsbury’s has introduced vegetable packets and healthy meal deals. Consumers are always in a hurry not having time to get home and cook a proper meal, so more frozen, ready meals have been offered to them. An increase in immigration of buyers from the Eastern Europe has made Sainsbury’s introduce new recipes and more variety of goods for that group of customers. That is now why we can see Lithuanian or Romanian products as sausages sold in Sainsbury’s. A large number of people from the Middle East living in the UK have also made a big impact, this is why we now see Halal meat or an enormous variety of spices in our local store. Legal factors * Discrimination Law * Antitrust Law * Employment Law * Consumer Law * Health and Safety Law Legal factors are related to the legal environment in which the company operates. Sainsbury’s is in the boundaries of legal factors in all three fields: locally, nationally and globally. There have been many changes in the laws passed in the UK over the last few years, one of the examples being the age discrimination law. This law says that all people, regardless their age should be treated the same at their workplace and promotions should be allocated regardless the age. The upper age for payment of Statutory Sick Pay has been removed, meaning that people over 65 who are still working are entitled to SSP the same way other employees are. This of course has had a big impact on supermarkets as Sainsbury’s as the management has to be very careful when selecting people filling the vacancies and obeying this law. Another example of a legal factor was when The Food Retailing Commission suggested an enforceable Code of Practice should be set up banning many of the current practices, such as demanding payments from suppliers and changing agreed prices without notice. (Mintel Report, 2004) On the 1st of October 2011, the minimum wage in the UK for an adult(over 21) has been changed from 5. 93 to 6. 08 pounds an hour, promising there will be room for more generous change in the future as the economy recovers from the financial recession. This has hit the Sainsbury’s pockets’. 5 pence an hour for each employee can add up to hundreds of thousands of pounds per week for Sainsbury’s. In January 2010, it has been announced that a new law was going to be issued that all under 21s will have to show an ID card when buying alcohol in the supermarket. There were also rises in the alcohol prices during this campaign to discourage people from drinking. This has given Sainsbury’s a hard time, as less people are able to buy alcoholic drinks either due to age limit or high prices. No one can take a wine bottle through the till without proof of age anymore. ) Economical factors Each government has an important impact on each company. Like other companies, Sainsbury’s was affected by a lot of economical factors as: * Taxation charges * Economic growth * Inflation * Exchange rates * Changes in income Each factor has a different impact on company. For example, the taxation charges force the company to increase the price of products to achieve the desired profit. If the taxation charges are low the price of products is lower and when the taxation charges are high, the price is higher. Another factor is inflation. Inflation changes from year to year and affects more and more the customer. If in 2000 with 100? you bought 100kg of sugar, now in 2011 you can buy only 50kg of sugar. The economic growth can affect your company in a bad manner or in a good manner. For example, now we deal with a crisis period and large companies like Sainsbury’s suffer a lot. The economic growth also has some employment effects. We can see a rise in the number of people employed by Sainsbury’s and this affects the United Kingdom economy. Now in 2011 we deal with a crisis period and appear some changes in population income. The number of companies that went in a bankrupt or are nearly to bankrupt has been increased and this results a large number of unemployed people, which means a decrease in sales. Sainsbury’s also established a bank in 1997, part of Lloyds Banking group. Sainsbury’s Bank offers a lot of services like travel money, car, health and life, pet insurances. Also Sainsbury’s Bank covers loans, savings accounts and has its own credit card and security plans. 2) Technological factors â€Å"Forces that create new technologies, creating new product and market opportunities† – Kotler P. amp; Armstrong G. , 2008. Principles of Marketing, 12th Edition. Technology for Sainsbury’s is significant because it helps control the population and attracts new and potential customers. With technology, Sainsbury’s can create new sort of products useful for population. Technological process is improving from year to year and helps company to decrease the product ion costs. In these processes are increasingly used machines and robots and because of this many people lose their jobs. By introducing more machines than people can reduce the waste of products and other costs. The products also are more complex with new facilities. In all these years of existence, Sainsbury’s developed some technological strategies of product selling. The Sainsbury’s improvements of product selling are: * Online shopping * Online recruitment * Bar coding * Self service counter Online shopping improves a lot the sales because it helps the consumers to buy directly the product, without going to the store. The customer has more time to choose the product, compare with other products and also compare the price. Sainsbury’s has also an online recruitment service. This service would save the company ? 4million a year in administration costs. It helps you to become an employee of Sainsbury’s by only sending your CV to their Online Recruitment Office and they will choose one. Bar coding it is a very innovative method of sorting the product. The bar coding helps the company to be more ordered and the customer also. For example, some kind of mobile applications that can scan the bar code and shows you the best price for product. Self service counter is another technological process which reduces the workforce costs and with this service the customer can avoid queues. For example, If you are in a hurry or you have only two or three products and you do not want or have time to sit at the queue you can use self service counter for a fast way to pay for products. 3) Environmental factors Environmental factors refer to ecological and environmental aspects such as weather and climate which can affect a company and may change the number of sales in a large company like Sainsbury’s. A company cannot change the environmental factors, but it does have fair amount of control over impact on its performance. For example, if the number of rainy days will increase, maybe the number of raincoats and umbrellas will increase too. That is how environmental factors affect a company and can have good parts and bad parts. Sainsbury’s also adopt an ecological factor which can reduce pollution. Sainsbury’s Recycle offers customer the opportunity to recycle every old mobile phone, digital camera, MP3 or games consoles and finally the customer receives money. Also Sainsbury’s introduced some sort of facilities for customers to reduce the non-renewable materials (such as oil, coal, gas) and use renewable materials (such as forests). These facilities are: * Home insulation – a facility for your house to stop the heat escaping from your house * Solar electricity – Solar Photovoltaic (PV) panels allow you to generate your own electricity * Feed-in tariff – The Feed-in Tariff is a Government initiative that encourages and rewards people for generating their own low carbon energy through a renewable source. Ecogen – Generate electricity with your boiler – An Ecogen Micro Combined Heat and Power (CHP) system replaces your boiler, burning gas to create heat and hot water, and on average it generates about 30% of the electricity a household needs Sainsbury’s drew up a partnership with British Gas and they established their own gas stations. This partnership aims to help the customers to save energy (non-renewable materials like gas) and reduce the costs by introducing Nectar. With Nectar Collector you can collect points on every day shopping and then you can spend points however you want. Microeconomic environment The general discussion in this part is the market research and the structure of Sainsbury’s market. These factors influence what sort of competition the organisation is facing and how does the organisation manipulate the 7Ps. We are going to look at the internal factors like: Product and services, relationship with customers, charities and supplies. Product and Services To be successful, Sainsbury’s operates through an important market research. Their aim is to increase their sales and to do that they take into account the four marketing mix e. . product, price, place and promotion. Sainsbury’s is in the oligopoly category and as not many firms are in this important category they are always trying to gain market share. The product research is one of the key to achieve their goals. Sainsbury’s is well known for their quality and this is important to beat the competitors. They need to focus on what the customer wants before any othe r company does. In today’s society everybody is attracted by a product with a good quality and Sainsbury’s is able to provide permanently high quality goods. During the year 2004 they have invested in their food ranges and have improved/ developed over 3200 products and Sainsbury’s have constant supply of fresh fruits and vegetables on shelves 24 hours. † To be sure that all the goods are fresh they have a special staff to make sure that the products are not expired. Sainsbury’s is one of the first market dealing with their own products for example; soft drinks and glossaries. Furthermore, it is one of the first supermarkets in the UK to provide its services with a home delivery service. They provide this service to help the older people and to make their customer life easier. Moreover, to improve their sales and make a big growth they have specialised staff trying to take the customers comments and needs. Therefore they can improve the product with most negative comments and vice versa. In Sainsbury’s, the promotion is an important factor to introduce a new product on the market. It has to be advertised to be sure that the customer is aware of it. The concept is to create a message which is directly targeted to the people. To make sure that the new product is going to be very popular they make promotion on it for example during the first month. In addition they make different offers in every period of the year. During the summer it is going to be on the fruits and frozen products while during Christmas they make discounts on every product to influence the customer to buy more. All these advantages allow them to be well differentiated from their competitors. Finally, Sainsbury’s have different types of stores which are providing different types of services. When customers want to buy a small amount of goods they can go to the local Sainsbury’s which providing less goods. For larger amount of foods, the customers can go to the large stores. They have more products and more services around e. g. public transports and car park facilities. Relationship with customers The relationship with the customer is very important and it is a factor creating more popularity for the firm. In every business the customer is seen as the most important ‘key’ for the company to work well. If the customer is not enough satisfied the company will loose its popularity. For Sainsbury’s, it is very important to keep a close relationship with their customers by providing good quality food but at a fair price. The Human Resources department involves the management of people and them different key areas. One of the most important one is the customer service assistance. Employees are trained to give a great service to the customer. For instance; in Sainsbury’s there are the cashiers but customer may also see some employees who help the customers with the selection of goods and packaging. One more key attribute about Sainsbury’s is that they provide good relationship to their customers and have an internet- based services which have deliver efficient home delivery and 93% of UK households are currently using their internet services. Furthermore, after a survey in 2004/05 were they mention capitalist from the sacrifices made by J Sainsbury’s to continue good relationship with their customers. In 2004/05 also reduces prices on 7. 000 products and the typical week’s shopping cost 1. 6 % less than a year ago. Moreover, J Sainsbury’s were named organic supermarket for the third time in 2004/05 period time. And supported Taste of Success in a link which promotes Food education and cooking in Schools and for this activity have participated more than 250. 000 children. Moreover, customers are attracted by a product not only for the price and the quality but also by the package. Even if they don’t think it pass through their mind when they buy the product, the package is one of the most important things and the sales are going to be higher with a coloured and attractive package. Finally, the main aim is to have customers who are dependent on the supermarket. Therefore, Sainsbury’s try to keep regular opening hours and they make sure that the queuing times are not excessive. Moreover, they make sure that the products are always available because when you have to deal with an accustomed customer, you can’t say to him that the product is out of stock because there is a chance that this customer is just coming for one product only. To reduce the cost, Sainsbury’s is always equipped with a store manager. His job is to ensure that the actions are fast with good quality. If all the operations are done effectively then, the costs will be low. Charity J Sainsbury's is one of the big companies which strongly believed that success is not only how to increase the profits of the business and also a different section that works on how to help people that have any kind of problems. For example J Sainsbury's in 2004/05 supported several national charities and donating food and equipment. Moreover in 2005 J Sainsbury’s customers were using coins machines in their stores. The machines take a 7% commission which raised the following sums in 2004/05: Children in Need gave ? 15. 233 also for British Red Cross gave ? 17. 881. Moreover, gave ? 18. 015 for Cancer Research and ? 9. 361 for Unicef. Furthermore, J Sainsbury's gave for British Heart Foundation ? 9. 627 and ? 5. 533 for WWF and for Red Nose Day 05 gave ? 3. 300. In addition, J Sainsbury's have donated 150. 000 thousand pounds to Children Society in support to encourage young people to eat healthy. Also, all J Sainsbury’s stores have charity boxes where customers can donate their change to local charity. However, J Sainsbury’s after all these benefits which helped a lot of people is still continuing to provide help to people with needs. In 2004 J Sainsbury’s collected a total of ? 1. 7 million from collogues throughout the company and from customers at various stores which then donated it to the affected populations of the Tsunami in Thailand. Also J Sainsbury’s for one more time revealed their sensitivity for people who need financial support. Last May colleagues have raised ? 3. 000 for charity which helps children in need with shortened life expectancy . Children with illnesses require expensive equipment and J Sainsbury’s brand raised the money and the charity is able to provide some of this equipment. According to the aforementioned, the humanitarian efforts from people that work in J Sainsbury’s give pleasure and happiness in people with needs. Phillip Wardman , online groceries manager at J Sainsbury’s York store dedicates his leisure time to support the Yorkshire Air Ambulance which relies solely on donations from the public. This year he organized a 24- hour bike ride from Edinburg to York covering 210 miles. Moreover, Phillip Wardman said he wanted to do something different for the charity and this certainly was challenge. However, he had been named ‘’Local Hero ‘’ by the York store and he was also awarded by their Chief Executive, Justin King. In my opinion the success for all the kind of businesses is not only to find profit and loss the end of the season and perform accounting procedures . Of course it is essential for all the businesses to find out how well the sales went the previous year but it is also important to think how you can help people who are unable to have the same benefits and the chances as the others. Services J Sainsbury’s brand aim in every day basis is to provide an easy access to customers. At present J Sainsbury’s are experimenting new approaches which can reduce queuing times at checkouts. Moreover, in 34 stores customers can use a hand-held scanner to scan theirs items while they shop at Sainsbury’s. Also, they have introduced self services checkouts in 58 stores nationwide. J Sainsbury’s have been reported to have 600 drivers operating more than 400 vans providing services in 2005/2006 and were serving 38. 000 customers per week. In addition, J Sainsbury’s was the first chain store to sing up to the guide dogs for blind people street charter in 2005. This aims to provide the right support for blind or partially sighted customers. SWOT of Sainsbury’s SWOT analysis is a strategic management method used to assess the strengths, weaknesses, opportunities, as well as threats associated with a project or a business venture. It involves laying down main objectives of a business project in addition to identifying the favorable and unfavorable internal and external factors that may affect the achievement of a given objective. It also helps in identifying suitable areas for development. Identification of SWOTs is essential because subsequent steps in the planning process for achievement of the objective may be derived from it. First, the decision makers, using SWOTs, ought to determine whether the objective is achievable. In the event that the objective is not achievable, the process is repeated after selecting a different objective. The aim of any SWOT analysis is to establish the key internal and external factors affecting the achievement of an objective. The internal factors are strengths and weaknesses, which are dynamics from within an organization while opportunities and threats are forces from outside of an organization are the external factors. These come from within the company's unique value chain. Sainsbury’s is an internationally recognized chain of supermarkets based in the United Kingdom. Its headquarters are situated in London which is a strategic place due to ease of accessibility. It owns J Sainsbury’s plc. : This is the main company of Sainsbury’s Supermarkets Ltd. The main competitors of Sainsbury’s are Tesco and ASDA who overtook it as market leaders. Their other investments are in banking sectors and property management. In 2004, Sainsbury’s performance improved and this has been attributed to Justin King, its current CEO. In our analysis of Sainsbury’s, we focus on their strengths, weaknesses, opportunities and threats. Strengths Strengths are features of a business that are used as a basis for developing competitive advantage. Sainsbury’s has been in market for a substantially long period of time. This is enough to make it popular among its loyal customers, therefore is has used marketing and unique branding techniques to capitalize on the U. K market. Differentiation of products and services offered has been determining factor to Sainsbury’s success because it states what the company stands for. Not only does it serve United Kingdom customers but it also has other chains stores, self selection stores and supermarket across major European countries. The companies’ logo was designed with a conspicuously orange color, which is a key factor in its identity. With its current Chief Executive Officer, Sainsbury’s has seen total transformation symbolized by its growth rate, a high stock turnover and huge profit margins after tax and dividend deductions. Justin King has managed to employ and upraise his current staff and this has been a major step towards facing competition posed by ASDA and Tesco. Furthermore Sainsbury's has been involved in community initiated programs. As a company it appreciates its place in society and it is obliged to give back to the community through social responsibility. This has won the company not only customers approval but also favors from environmental activists who portray it as having a good brand. Another factor that has seen Sainsbury’s through the hard hit times to become strengths is use of advertisements. Advertisement is an art, which should be done skillfully to create a lasting impression in the eyes of customers. Keeping this in mind, Sainsbury’s chain of supermarkets has used celebrities to advertise specific product groups boosting sales. Embracing online advertisement has been a major factor in promoting its products both locally and internationally where interested customers then transact through e-commerce. In summary, the main strengths portrayed in Sainsbury’s SWOT analysis include; reputable management, skilled labor force, advertisement, loyal customers and a strong brand name. Weaknesses Weaknesses are characteristics that place a business at a disadvantage relative to others. The absence of certain strengths may be viewed as a weakness. For example; a weak brand name, high cost structure, lack of patent protection, poor reputation among customers, lack of access to key distribution channels and lack of access to natural resources. In some cases, a weakness may be the flip side of strength. Sainsbury’s has failed to protect its markets against threats and potential new entrants. Being better placed with high competitive advantage, it ought to have utilized the opportunity as the first chain of supermarkets in the U. K to remain a market leader. To implement this it could consider being a price leader of the entire market enjoying economies of scale to the disadvantage of its competitors. By so doing Tesco and ASDA could have found the market too harsh for them to compete therefore reducing their activities. Lack of brand visibility has been a lacking factor in the success of Sainsbury’s. For products to sale they have to be organized and properly arranged on the supermarkets shelves for customers to see and select. Therefore supermarket shelves need to be spacious enough to accommodate oods and allow ease of access incase a customer picks on a given product. In trying to fix the problem of inventory display and shelf space, the results were even more disastrous. The new arrangement format was more confusing to customers. Opportunities Opportunities are external chances to improve performance in a business environment. The external environmental analysis may reveal certain new opportunitie s for profit and growth. Examples of opportunities include; use of new technology, loosening of government regulations, removal of tariffs and trade barriers. Sainsbury’s has great opportunities, which could see it back to the top. They have a great opportunity to win back the trust of their target customers through better customer service. Loyalty program is another great way of safeguarding repeat sales and committed customers. The company also has shares in financial services sector, though there might be new business opportunities to explore. Alternatively, Sainsbury's could use its chain of supermarkets and other business investments to secure its financial future just incase of economic recession or as a prospect for investment. Threats Threats are external elements in the environment that could cause trouble for the business. Changes in the external environmental also may present threats to the firm. Examples of threats include: a change in consumer tastes in favor of competitors products, presence of substitute goods in the market and stringent barriers to trade. Sainsbury’s needs to invest in more environmental programs despite knowing that it will not directly benefit its stakeholders. Economic meltdowns are beyond an organizations control, therefore the shaking world economy is a threat to Sainsbury’s group of businesses. REFERENCES 1. Brassington F. and Petit S. , 2006. Principles of Marketing, 4th ed. 2. Prentice Hall; Pearson Education. 3. Kotler P. nd Armstrong G. , (2008), Principles of Marketing Twelfth Edition 4. Brassington F. and Petit S. , (2009), Principles of Marketing Fourth Edition 5. Katameni,2010. Macro environment and The marketing mix used by Sainsbury’s [online] Available at: [Accessed 19 November 2011] 6. User: ukstudent , 2008. SWOT, PESTEL and Porter's 5 For ces analyses of Sainsbury's [online]. Available at[Accessed 20 November 2011] 7. Mark Tran, 2006. Sainsbury's introduces compostable packaging [online]. Available at;URL:http://www. guardian. co. uk/environment/2006/sep/08/supermarkets. business;[Accessed 20 November 2011] 8. Anonymous, 2011. Products and services[online]. Available at: ;URL:http://www. sainsburysenergy. com/products-and-services. html? bghlinkid=HP1016; [Accessed 22 November 2011] 9. Anonymous, 2011. Save ; Create[online]. Available at: ;URL:http://www. sainsburysenergy. com/save-and-create. html; [Accessed 22 November 2011] 10. Frances B, Stephen P (2006) Principles of Marketing, 4th Edition, Pearson Education Limited Publisher 11. Sainsbury’s (2011) Retrieved from (online) at http://www. sainsburys. co. uk/home. htm [Accessed on:19/11/2011] 12. Sainsbury’s  (2011)  142 years of history,  [online] Available at: http://www. j-sainsbury. co. uk/about-us/sainsburys-story/ [Accessed: 18th Nov 2011]. 13. Race to the top  (2011)  Sainsbury's results,[online] Available at: http://www. racetothetop. org/results/result6/page_1. htm [Accessed: 17th Nov 2011]. 14. Wikipedia  (2011)  Sainsbury's results,  [online] Available at: http://en. wikipedia. org/wiki/Sainsbury's [Accessed: 16th Nov 2011].