Category: Sainsbury

Outline

This research proposal on the subject of customer needs and obligations related to Sainsbury Plc. As an advisor in the managerial field, through this report, I intend to put forth suggestions and advice on how the organization could undertake research to better understand the customer needs, rights and responsibilities. This report clearly defines the organization and its services and products. What has been aimed at here is to provide advice on the adoptable research methods for identifying the rights and responsibilities of customers and providing recommendations on strategy or method to research on customer needs. The strategic importance of the research together with the relevance of the suggested research method is also included in this report.

Introduction

The topic of customer needs and responsibilities is of immense importance in the business field. In order to make accurate decisions about the business strategies and policies for attaining customer satisfaction, business firms have to identify the views and perceptions of the customers. This report deals with the research on identifying the customer needs and responsibilities. The organization on which the report is focused is Sainsbury. Sainsbury’s supermarket group is a competent player in the U K supermarket industry. In order to attain market growth with sustained profitability, it needs to change its attitude towards the customers. For this purpose identification of the needs and responsibilities of customers is essential for the organization.

Organization

Sainsbury occupies the third largest position in the retail marketing industry. Sainsbury has the mission of providing quality branded food and non-food products through its self-servicing supermarket system. Customer satisfaction is ensured by the group by providing quality branded consumer products at a lower rate. Sainsbury is required to adopt changes in its attitude towards the customers by suitably amending the business policy and strategy to ensure growth in the market share with profitability under the present business and industrial conditions. Sainsbury aims to achieve a favorable position in the market with its quality branded products and attractive customer services. Supermarkets are designed to supply a range of consumer products at the most competitive rates.

Research methods

There are many methods by which a study can be conducted to gather primary data. If the population that has to be studied is quite small it can be included in its entirety. In most cases, only a sample of the population is taken for study. “Usually, the population is too large for the researcher to attempt to survey all of its members. A small, but carefully chosen sample can be used to represent the population. The sample reflects the characteristics of the population from which it is drawn.” (Sampling methods 2009).

There are many types of sampling that can be used in a study namely random sampling, systematic sampling, stratified (and random) sampling, convenience sampling, judgment sampling, and quota sampling. The method used in this study with regard to a survey of customers is stratified random sampling. This is a “method of sampling, which involves the division of a population into smaller groups, known as strata. In stratified random sampling, the strata are formed based on their members sharing a specific attribute or characteristic.” (Stratified random sampling 2009).

Data Gathering or data generation techniques

The primary and secondary data collection approach is adopted for this research. In the primary data collection, a survey among different customer groups shall be conducted with a specially prepared questionnaire. (See appendix). Secondary data relating to the subject is collected from various academic journals and books available on the internet. The research reports of various research scholars are also considered for this research.

The major sources of data would include the company’s website, newspapers, business journal as well as sources. The secondary data collection is done by way of using internet resources. Various sites relating to the customer needs and responsibilities in the context of the Sainsbury organization are visited for collecting the data for the research. The following are some of the keywords that are used for collecting data from internet sources for this research.

Key Words

The data and information relating to the rights of the customers shall be collected by using the following keywords: – Definition of Customer, Define customer rights, Customer responsibility, “Define the rights and responsibilities of customers”, “Who is the customer?”, “Customer rights and responsibilities.” (Wiegers 1999).

Customer rights and responsibilities +Sainsbury. (Braue 2008).

Boolean operators

Boolean operators might improve the search results from the internet. For getting the most accurate information from the internet the search words are placed in quotations. The keywords for the research are connected with plus (+) signs. The words that have to be excluded from the search results are shown with the minus (-) sign.

Analysis of customer questionnaires

All categories of customers of the organization were included as per the demands of stratified random sampling methods. The maximum period of dealing with the company was one year and nearly 50% of customers belong to that category.

Data Analysis

The data collected from the customer survey should be discussed thoroughly in order to find out the consequences of customer needs and responsibilities in different business situations.

Trustworthiness of the method

The survey method is an appropriate primary data collection technique. It helps to collect detailed information regarding the topic with adequate accuracy and reliability. This method has certain disadvantages in terms of requirements of scarce resources of cost and time.

Importance, goals, and objectives

Explanation on the importance of the research strategies are valid and relevant to make efficient use of available resources. In order to identify the rights and responsibilities of customers, it is better to conduct a survey among the different groups of customers. The decision-making in the organization requires detailed information about the customer’s needs and responsibilities. Primary data related to the subjects should help to derive accurate information relating to the customer rights and responsibilities in the context of a business organization. Up to date and relevant data can be collected through this method.

It will help collect quantitative data regarding the customer rights and responsibilities in the context of Sainsbury business. “Primary research yields new, up-to-date, relevant and specific information. However, it is expensive and time-consuming, and requires considerable expertise.” (Thachapilly 2009).

Time Frame for the research:

Conclusion and recommendations

Sainsbury can adopt a survey method for collecting information regarding the customer rights and responsibilities. For this purpose, stratified random sampling could be adopted by dividing the customers into several groups representing different needs and interests. The secondary data for the research should be collected from internet sources by searching with keywords. It will help to get accurate data on the topic of discussion. The research should help Sainsbury to derive adequate information regarding the customer needs and responsibilities in the changed business conditions. The idea is that the information thus gathered should be of strategic help to the management for taking adequate business decisions. Appendix:

Customer Survey Questionnaire

A questionnaire-based customer survey is conducted as a part of the research. In this interview, consumers of different age groups are involved.

Questionnaire

• Nationality:
  • Specify the nationality
• The Age group:
  • <21
  • 21-31
  • 31-41
  • 41-51
  • 51-60
  • >60
• Main Profession:
  • Business
  • Banking
  • IT professionals
  • Others
• Average Annual Income:
  • $ 50000 – 200000
  • $ 200000 – 400000
  • $ 400000 – 600000
  • $ 600000
• What is the Primary reason for Choosing Sainsbury?
  • Economical pricing
  • Attractive customer service
  • Convenience
  • Others
• The views regarding customer rights?
  • Strongly disagree
  • Disagree
  • Neither agree nor disagree
  • Agree
  • Strongly agree
• The views regarding the customer responsibilities?
  • Strongly disagree
  • Disagree
  • Neither agree nor disagree
  • Agree
  • Strongly agree
• Is Sainsbury is better considering the customer needs and responsibilities?
  • Strongly disagree
  • Disagree
  • Neither agree nor disagree
  • Agree
  • Strongly agree
• Is the attitude of Sainsbury towards customer needs and responsibilities better compared to other organisation?
  • Strongly disagree
  • Disagree
  • Neither agree nor disagree
  • Agree
  • Strongly agree
• How satisfied are you with the products of Sainsbury?
  • Highly satisfied
  • Satisfied
  • Not satisfied
• Comment on the Pricing of Sainsbury
  • Low priced
  • Reasonably priced
  • Expensive
  • Very expensive
• Are you satisfied with the services of Sainsbury?
  • Highly satisfied
  • Satisfied
  • Not satisfied.

References

Braue, David 2008, Applications: Sainsbury’s scrutinises buying habits to woo customers, Silicon.Com: Driving Business Through Technology. Web.

Sampling methods 2009, Statpac. Web.

Stratified random sampling: what does stratified random sampling means 2009, Investopedia: A Forbes Digital Company. Web.

Thachapilly, Gopinathan 2009, Market research- importance, goals and methods: marketing research focuses on customers, competitors and conditions: market research approach and methods, Suite101. The genuine Article. Literally. Web.

Wiegers, Karl E 1999, Customer rights and responsibilities. Web.

Introduction

Sainsbury PLC owns the Sainsbury’s supermarkets Ltd (Sainsbury’s), which is ranked the second largest retail store in the UK supermarket sector, with a market share of 17.7%, behind leaders Tesco, which enjoys a market share of 29.2% (Ruddick 2014). Since establishing its supermarket store in 1869 in London, the company has expanded to 455 stores serving an estimated 18 million shoppers weekly and employing 148,000 workers (Ruddick 2014). As competition is stiff, recently, Sainsbury implemented a diversification strategy, which has seen the company invest in the textile, banking, and insurance sectors. Besides Tesco, other competitors in the UK supermarket sector include Asda, with a market share of 17.5%, Aldi, Morrison’s, and Co-op, among others (Ruddick 2014).

The recent global recession did not have a huge impact on Sainsbury’s performance (Telegraph 2009). Its market share continues to grow, even overtaking Asda, which had the second-largest market share in 2003 (Ruddick 2014). However, in the recent past, Sainsbury’s reportedly lost some of its customers as shoppers switched to other supermarkets such as Waitrose and Aldi (Sandler 2009). Nevertheless, Sainsbury PLC is one of the leading players in the retail (food) industry with interests in the financial sector.

Besides the supermarket, the parent company runs the Sainsbury’s Bank, the Sainsbury’s Online, the Jacksons and Bell stores, and the Sainsbury’s Local (Sandler 2009). Through its different business categories, Sainsbury’s aims to enhance its competitiveness, increase its profits, and expand into new markets. This paper analyzes Sainsbury’s market share and market position within the UK in the current economic climate. The paper also discusses Sainsbury’s competitiveness based on Porter’s Value Chain and Resource-Based View analyses.

Company Profile

Sainsbury PLC specializes in grocery (food products) and related services. Its business portfolio comprises of three main segments: (1) retail, which consists of online, supermarkets, and convenience stores; (2) banking services (50% stake in Sainsbury’s bank); and (3) property investments. The company has 440 convenience stores and 570 supermarkets spread across the UK (Sandler, 2009). Sainsbury’s has invested in the banking industry (Sainsbury’s Bank) and the property sector. The firm also earns revenue from its expansion to overseas markets.

Financial Analysis

Operational Analysis

Sainsbury’s has performed exceptionally well during the recovery phase and the economic recession. Since 2007, Sainsbury’s sales revenues have continued to grow and currently stand at £20,383m compared to M&S’s net sales of £9,062.10m (Wrigley 1998). The last two decades have been turbulent for players in this industry, but Salisbury showed improved performance over the last few years. In 2013, Salisbury posted an 11.3% increase in profits compared to the previous year (Wrigley 1998). However, these profits are moderate compared to Tesco’s 28% increase, Morrison’s 7%, and M&S’s 29.4% decrease in profits (Wrigley 1998). In 2012/13, its pre-tax profit grew by 11.3%, while the sales grew by 4.5% (Wrigley 1998). The Sainsbury’s Bank generated £4m over the same period, compared to the £3m obtained in the 2010/11 period (Wrigley 1998). The two joint investments in the property market added a total of £12m in profits for the company compared to M&S’s £6.4m over the same period.

Profitability Analysis

Sainsbury’s grocery and convenience stores have greatly contributed to the firm’s growth and expansion. It was operating profit increased by 15.1% in 2006, and, over the past three years, its profits have grown at a steady rate of 5.98% per year (J Sainsbury’s PLC 2014). In 2006, a rise in food prices increased Sainsbury’s sales, but an inflation rate of 1.6% in food prices affected this growth (J Sainsbury’s PLC 2014). It’s profit margin grew to 3.26% compared to Tesco’s 6.2% due to the large volume of frozen food products (eggs and peas) and non-food products (T-shirts) sold by Sainsbury’s. Sainsbury’s profits from overseas sales last year were £540m compared to Tesco’s £709m, but Sainsbury’s profits in this segment are expected to grow over time (Ruddick 2014).

Porter’s Value Chain Analysis

Porter’s value chain provides a framework for analyzing a firm’s competitiveness in the market. The framework is based on five forces that influence the profit potential of a firm operating in a given industry. According to Ghoshal, Mintzberg, and Quinn (1999), competitive forces determine the nature of competition in a given industry. These forces include; new industry players, suppliers, buyers, product substitutes, and business rivalry (Ghoshal, Mintzberg, Quinn 1999). Firms utilize these forces to create sustainable competitive advantages in a specific market segment.

Competition is stiff in the UK supermarket sector (food retail industry). Although Sainsbury’s commands a strong position in the industry, it faces stiff competition from other supermarkets like Tesco, Asda, and Morrison’s, among others. In this section, the financial position and performance of the major players in the supermarket sector will be analyzed to identify Sainsbury’s strategic options in the future. The analysis will cover the industry players, the market concentration and structure, the pricing and non-price competition, and the current strategies employed by the players.

The Main Players in the Sector

The major supermarkets that specialize in the UK’s grocery market include; Tesco, Sainsbury’s, Morrison’s, and Asda (Creedy 2009). Currently, of the ‘Big Four,’ Tesco enjoys the largest market share of 29.2% compared to Sainsbury’s 17.7%, Asda’s 17.5%, and Morrison’s 9.6% market share (Creedy 2009). Sainsbury’s overtook Asda, whose market share shrunk from 17.9% in December 2013 to the current 17.5% (Creedy 2009). Thus, currently, Sainsbury’s are the second-largest supermarket in the UK while Asda comes third. WM Morrison’s takes fourth place completing the list of UK’s ‘Big Four’ supermarkets. Previously, Morrison’s commanded a small market share, but the acquisition of Safeway, another industry player, contributed to its growth. In the 1990s, both Sainsbury’s and Tesco controlled an equal market share. Sainsbury’s lost some of its customers to other players such as Waitrose and Aldi (DEFRA 2006). However, in recent years, Sainsbury’s has grown to become a competitive player in the sector.

Other firms that operate in the UK supermarket sector are Aldi and Lidl. Unlike the ‘Big Four,’ these two firms sell their products at a discounted price to customers. Currently, these firms control 1.6% and 1.3% of the UK market for Lidl and Aldi, respectively (Mintel 2009). Because competition is stiff in the food retail sector, some players such as Marks & Spencer (M&S) and Waitrose have specialized in the “quality market sector” (Mintel 2009, Para. 6). These premium-positioned supermarkets are currently ranked sixth and seventh behind the ‘Big Four’. They both control about 3% of the UK market, which is comparatively less than the total market share controlled by the ‘Big Four’ (Mintel 2009).

Business Rivalry

Over the past two decades, the concentration of players in the supermarket sector has grown significantly. The number of retail stores in the UK compared is higher to other European countries (DEFRA 2006). A large number of grocery stores in the UK was caused by various mergers involving the ‘Big Four’ industry players. The leading supermarkets also established new stores (convenience stores) in the market, which increased the concentration. In the 1990s, there was a marked growth in the number of stores in the UK, as each player sought to expand its market coverage (DEFRA 2006).

The high market concentration can also be attributed to the regulatory policies. The 2013 Competition Commission (CC) legislation established a distinction between the convenience stores and the retail sector. This allowed the ‘Big Four’ to invest in the convenience store market with Sainsbury’s establishing the Sainsbury Local. This practice further increased the number of convenience stores in the UK retail industry.

The UK food retail market is segmented into various categories. The major categories include; “convenience stores, large grocery retailers, hard discounters or Limited Assortment Discounters (LADs), and the specialist grocery retailers” (CC 2013, Para. 4). The grocery retail sector is structured in terms of the number of stores (convenience and retail stores). Overall, convenience stores in the UK market outnumber the supermarkets, but their sales volume is comparatively less than the sales made by the supermarkets (DEFRA 2006). The large grocery supermarkets make up 5% of all outlets and account for over 70% of grocery sales in the UK (CC 2013). Sales via the internet account for only 2% of sales (DEFRA 2006).

Entry of New Players

One of the porter’s competitive forces is the entry of new players. New entrants into the UK supermarket industry present a threat to current firms in this market. Three factors influence the entry of new players in the UK retail market. These are; the land-use restrictions, the economies of scale, and strong brands. In the UK, the government restricts the construction and development of retail stores and supermarkets through the Department of Environment (Wrigley 1998). This affects the capacity of new entrants to expand to new areas or establish new developments. Moreover, in the UK, large firms take advantage of the economies scale to expand their operations by reducing costs and enhancing their distribution channels. The ‘Big Four’ create and sustain competitive advantages through economies of scale. Thus, economies of scale hinder the entry of new firms into the UK market. Besides, the supermarkets have created strong brands through aggressive marketing campaigns. Thus, a new entrant will have to invest more on brand development.

The major players in the UK food retail industry also use price as an incentive to attract more customers. The pricing practices may affect the performance of new entrants who may not use price to win over customers. Thus, the pricing practices of the ‘Big Four’ can prevent a new entrant from competing effectively in this market. Besides price competition, the distribution channels can also prevent new entrants into this market.

The complex distribution channels employed by the UK firms, such as Morrison’s, which has an integrated supply chain, enhance their economies of scale and give them cost advantages over new entrants (CC 2013). The distribution chain helps reduce the supply and distribution costs, which gives a firm a competitive advantage. Tesco enjoys a more significant cost advantage than Sainsbury’s, Morrison’s and Asda. On the other hand, the small retailers have higher purchasing costs, which affect their competitiveness in this market (CC 2013).

Suppliers and Distributors

The large supermarkets have entered into agreements with suppliers, which allow the retail stores to exercise greater control over them (Lynch 2003). For instance, much of Tesco’s turnover in 2002 was attributed to favorable purchase terms given by Today group (a supplier) (Lynch 2003). As the number of players in the supermarket sector continues to grow, large firms will have the power to influence the suppliers’ purchase terms and thus, improve the profit margins without increasing the prices.

Moreover, the ‘Big Four’ have developed their own brands, which has accorded them greater bargaining power over suppliers (Mintel 2009). However, this has created anti-competitive practices with some firms dictating unreasonable terms, which suppliers are compelled to agree with (Lynch 2003). All major retailers, including Sainsbury’s, have control over supplier pricing because of the large size of the retailers.

Buyers

The customers have less bargaining power against the ‘Big Four’ as they lack a collective bargaining capacity. Moreover, consumers have a limited control over food prices while the retailers have a greater influence on consumer prices. Nevertheless, low costs associated with switching between retailers means that customers can choose from a broad range of options. Sainsbury’s and other supermarkets use loyalty cards to loyal customers, as a way of retaining them.

The buyer’s bargaining power influences prices of common consumer products. The economic conditions have made customers to be increasingly price sensitive. According to Desmond and Stone (2007) grocery retail customers fall into two categories; price sensitive buyers and time-constrained buyers. However, on average, purchase decisions are more influenced by time constraints than price. Individually, buyers have less buying power, but the media channels give buyers a strong bargaining power (Mintel 2009). On their part, firms use corporate social responsibility to counteract this collective power and enhance their reputation.

Product Substitutes

Product substitution allows consumers to purchase goods at a low price. In the UK context, the switching costs result in loss of customers, as buyers switch to products sold by a competitor firm. Mintel (2009) observes that customers are switching from grocery shopping to online ordering of products. In light of this, Sainsbury’s has invested in websites and Sainsbury’s Online to enhance their competitiveness.

Based on Porter’s Five Forces, competition in the UK grocery market is very high. Firms compete through provision of product substitutes, control of supplier and buyer bargaining power, mergers and acquisitions, and anti-competitive practices. Sainsbury’s loyalty cards, online segment, supplier partnerships, and economies of scale are the sources of competitive advantage for Sainsbury’s.

Resource-Based View (RBV) Analysis

The resource-based view framework evaluates a firm’s resources as a basis for determining its competitive advantage. The RBV model holds that firms should exploit internal resources to gain a competitive advantage and achieve improved organizational performance. A firm’s internal resources are of two types: tangible and intangible (Hooley, Broderick, Moller 1998). The tangible assets comprise of assets like buildings, equipment, and other physical resources while intangible assets comprise of brand reputation, which give a firm a sustainable competitive advantage.

As aforementioned, Sainsbury’s products comprise of three categories; the retail outlets (convenience stores, Sainsbury’s supermarkets, and convenience stores), Sainsbury bank, and the property investments. Currently, Sainsbury has about 440 convenience stores and 570 supermarkets (Creedy 2009). These are tangible assets that can give the firm a competitive advantage, as they increase the supermarket’s market presence.

Moreover, Sainsbury’s plans to open 100 convenience stores yearly for the next five years to bring the total to 800 stores. In 2009, Sainsbury’s opened 13 new retail stores, two replacement stores and 20 supermarket extensions (Creedy 2009). It also acquired 24 stores, two from Co-operative and 22 from Somerfield stores. Also, in 2013, Sainsbury completed the acquisition of Bisector Ltd (Town Center stores), HMV Group PLC, and Global Media Vault Ltd (Creedy 2009). The new acquisitions are another source of competitive advantage for Sainsbury’s.

Sainsbury’s PLC has investments in various sectors. It has invested in the property, financial, and non-food products sectors, through joint ventures. The property investments help Sainsbury PLC to generate more profit, which supplement its sales revenue. As indicated, the firm’s joint venture investments in the property earned the company £12m in profits in the 2011/12 financial period, which is comparatively higher than the £6.4m earned by M&S in the same period. Another source of Sainsbury’s competitive advantage is the Sainsbury’s Bank. In January 2014, Sainsbury PLC completed the acquisition of Sainsbury’s Bank PLC by purchasing the 50% stake that was owned by other companies. During the 2010/11 period, Sainsbury’s Bank generated £4m compared to the £3m obtained the previous year (CC 2013).

Besides assets, Salisbury’s strong brands are another source of competitive advantage. Sainsbury’s product categories including the “Sainsbury’s basic, Sainsbury’s organic (SO), Sainsbury’s be good to yourself, and Sainsbury’s taste the difference” are popular with the customers (Creedy 2009). Moreover, its products are highly rated compared to those sold by its competitors. For example, Sainsbury’s yoghurt (0% fat) costs £0.49 compared to Tesco’s yoghurt (2% fat), which costs £0.79. Health conscious customers would purchase Sainsbury’s milk products. Thus, strong brands give the company a competitive advantage over its rivals in the food retail sector.

Another source of competitive advantage for Sainsbury’s is its location. Currently, Sainsbury serves over 18 million shoppers through its convenience stores and supermarkets that house over 32,000 products (Creedy 2009). The convenience stores are concentrated in London, which makes Sainsbury’s a supermarket of choice for many. Moreover, the design of each store both convenient and similar in all stores, which allows shoppers to locate items with ease.

Sainsbury’s reputation and strong brand give it a competitive advantage over its rivals. In the 1990’s Sainsbury’s market share dropped significantly because the firm priced its products higher than those of its main rivals (Mintel 2009). However, beginning in 2007, a recovery strategy was implemented, which emphasized on quality. This has helped the firm create a good reputation among customers. This strategy was meant to expand its demographic coverage. Salisbury’s also implemented a differentiation strategy, which saw it invest in non-food products, including clothing, and online marketing. Its overseas market also performs well with profits of £540m recorded in 2013. These approaches (online selling, product differentiation and expansion to overseas markets) have ensured that Salisbury’s improves its competitiveness in the UK food retail sector. They have also contributed to Sainsbury’s market share of 17.7% and its current market position (second largest).

Reference List

Creedy, J 2009, Sainsbury’s losses market share to rivals. Web.

Competition Commission [CC] 2013, Inquiry into the UK Grocery Market. Web.

DEFRA 2006, Economic Note on Grocery retailing, Department of Environment, Food and Rural Affairs, London. Web.

Desmond, J & Stone, M 2007, Fundamentals of marketing, Routledge, London. Web.

Ghoshal, S, Mintzberg, H, & Quinn, J 1999, The Strategy process, Prentice Hall, New York. Web.

Hooley, G, Broderick, A & Moller, K 1998, ‘Competitive positioning and the resource-based view of the firm’, Journal of Strategic Marketing, Vol. 6, no. 7, pp. 97 – 115 Web.

J Sainsbury’s PLC 2014, Sainsbury’s About us. Web.

Lynch, R 2003, Corporate Strategy, Prentice Hall, New York. Web.

Mintel 2009, Reality bites: British shoppers bid farewell to posh nosh. Web.

Ruddick, G 2014, Sainsbury’s overtakes Asda for the first time in a decade. Web.

Sandler, K 2009, Sainsbury’s to push into non food products. Web.

Telegraph 2009, Sainsbury’s enjoys profit growth. Web.

Wrigley, N 1998, ‘PPG6 and the contemporary UK food store development dynamic’ British Food Journal, vol. 100, no. 3, pp. 154-161. Web.

Introduction

Modern businesses are seeking opportunities to satisfy their consumers, and the existing markets cover as many customers’ needs as possible. One example of density and demand coverage is the UK grocery market with its numerous contributors and high competition. Although such an amount of the latter is beneficial for consumers, the grocery segment concentration creates a gap among the distributors, and the Sainsbury’s-ASDA merger can deepen the production asymmetry further.

The Trends and Composition of the UK Grocery Market

The UK grocery market composition demonstrates several specific and diverse trends. The retailers cooperate with foreign suppliers, and the market contestants rely on their conditions and prices. Also, the grocery market is a segment of considerable depth, with its approximate spending account being nearly equal to half of the UK retail spend (Wilshaw 2018). While the market unites various grocery retailers, the dominant market share belongs to the “Big Four” – Tesco, Sainsbury’s, ASDA, and Morrison –, that control a total of 67% of the market (Wilshaw 2018).

Moreover, several studies acknowledge the intensification of price competition among UK grocery retailers in recent years (Chakraborty et al. 2014). At the same time, the authors have also observed high market concentration because of several mergers, such as the 2004 Safeway-Morisson merger (Chakraborty et al. 2014). Within the severe competition, the major producers implement such maneuvers as a takeover of independent brands, price dumping, and creation of own-labeled production to reduce costs (Wilshaw 2018). The data demonstrate a high level of concentration in the UK grocery market, which can be destructive for some entities and beneficial for others.

The Opportunities and Threats in the Sector

In the given situation, the sector can maintain both opportunities and threats for consumers and producers. For instance, if the market advances with its concentration, consumers will receive the most acceptable price and quality of products as a result. The opportunities for medium retailers, such as Aldi, are that they can cover a larger market share and thus grow the consumer base (Wilshaw 2018).

The major producers, such as Sainsbury’s, may expect to keep their current positions and also expand overseas. On the contrary, the threats that the market contains for retailers are decreased quality, losses related to altering the price competition, and the possibility of bankruptcy. Therefore, the current market composition may lead bigger companies to benefit and the smaller ones to surrender, which can lead to a larger production gap in the sector.

The Ongoing ASDA Sainsbury’s Merger

The latest merger process between the major companies may also contribute to the grocery market structure in the future. In May 2018, a takeover of ASDA by Sainsbury’s was announced, and the negotiation has been going on until the present (Wilshaw 2018). As the current leader owns approximately 28% of the market today, Sainsbury’s and ASDA own 15% and 14% respectively, the merger can benefit from their 29% share in the sector (Wilshaw 2018, p. 20). Thus, if the companies agree on merging, the created enterprise will become a market leader and probably will have more opportunities for price competition. In either outcome, the risk that the sector’s competition will be affected is high.

Conclusion

To summarize, the UK grocery market demonstrates a specific structure and composition with its high concentration. The “Big Four” companies own a significant share and have more capability to compete than the independent brands. Moreover, price dumping is high in the sector because the companies alter price levels constantly. While a considerable retail gap exists, the possible merger of two major companies can deepen it even more.

Reference List

Chakraborty, R, Dobson, P, Seaton, J & Waterson, M 2014, ‘Market consolidation and pricing developments in grocery retailing: a case study’ The Analysis of Competition Policy and Sectoral Regulation, pp. 3-29.

Wilshaw, R 2018, UK supermarket supply chains: ending the human suffering behind our food, Oxfam GB. Web.

Introduction

The merger of Sainsbury’s with Asda has resulted in a considerable share price rise for both involved parties. According to recent statistics reported by Coatsworth (2018), Sainsbury’s shares surged by 19% after the announcement of the deal. Notably, on April 30, 2018, the company’s share price reached its highest point since 2014 (The Guardian 2018). As Asda, Leyland, and Quinn (2018) state that the value of the company has increased along with the rise in Sainsbury’s share prices.

These achievements seem even more remarkable considering that the share prices of the retailers’ major UK competitors, Tesco and Morrison, have dropped by 2.4% and 4.3% respectively after the merger news (Coatsworth 2018). The positive returns on the M&A announcement indicate that Asda-Sainsbury’s business combination may be promising.

Main body

Overall, the primary reason for changes in the companies’ market prices was an expected success and value of the integrated business. Notably, research evidence verifies the assumption that the return on the announcement for both acquirers and targets largely depends on the perception of the value generated. According to Zhang (2013), such a phenomenon is called an “anticipation effect,” and it implies that forward-looking prices are rooted in “investors’ expectations about the profitability of firms’ future acquisitions” (p. iv).

For instance, Asda and Sainsbury’s will together become one of the largest retailer groups in the UK and will challenge Tesco’s current competitive position. At this point, the combined market share of the two supermarkets is 32% compared to Tesco’s 28% (Leyland & Quinn 2018).

Moreover, the merger will provide Sainsbury’s with access to a massive heft of Asda’s owner, Walmart, through joint purchasing arrangements and, at the same time, Asda may substantially benefit from “own-label expertise” of its new partner (Leyland & Quinn 2018, para. 3). In general, the deal is intended to eliminate existing deficiencies and drawbacks in both enterprises and maximize their competitive advantages.

The discussed changes in market values inform about the significant advantages of M&A deals in the modern business landscape. As stated by Tamosiuniene and Duksaite (2009), the main benefits for buyers in such transactions are linked to a decision to “quickly grow (as opposed to slow growth through their own resources) and to get the access to intangible assets, namely, human capital, structural capital and customer capital” (p. 15).

For example, it is observed that demographic features of customers are disparate in Asda and Sainsbury’s (Leyland & Quinn 2018). Thus, the merger will potentially help attract more diverse consumer groups and substantially broaden the existing customer base. At the same time, when speaking of the main gains associated with M&A from the seller’s perspective, they include an ability to turn equity into cash and to achieve a peak in valuation (Tamosiuniene & Duksaite 2009). Both of these outcomes are observed in the case of Asda.

Conclusion

The enhancement of the structural capital will probably be one of the most significant achievements in the combined Asda-Sainsbury’s business as the organizations will deepen the penetration into the market and expand the coverage, which may consequently result in greater profitability. Nevertheless, the improvements in customer and structural capital are not the only possible advantage of the merger. The value for stockholders may also be generated through the enhancement of the companies’ financial and operational synergies, and so forth (Nguyen 2015). Overall, it is valid to conclude that the Sainsbury and Asda deal may help them access new segments; expand operations, and strengthen their positions across different geographic regions.

Reference List

Coatsworth, D 2018, ‘Everything investors need to know about the merger of Sainsbury’s with Asda’, Shares Magazine. Web.

Leyland, A & Quinn, I 2018, ‘Sainsbury’s Asda £51bn combination play: what we know and what it means’, The Grocer. Web.

Nguyen, TV 2015, Business valuation and pricing in merger and acquisition context, Bachelor’s Thesis, Lahti University of Applied Sciences. Web.

Tamosiuniene, R & Duksaite, E 2009, ‘The importance of mergers and acquisitions in today’s economy’, KSI Transactions on Knowledge Society, vol. 4, no. 3, pp. 11-15.

The Guardian 2018, ‘Sainsbury and Asda agree merger, but MPs warn that jobs are at risk – as it happened’. Web.

Zhang, N 2013, The effects of anticipated future investments on firm value: evidence from mergers and acquisitions, Dissertation, Duke University. Web.

Introduction

The law in most countries requires public companies to publish audited financial statements. These statements are used by various groups in making decisions about their interaction with an entity. Published financial statements provide the potential users with a narrow insight into the financial strengths and weaknesses of a business.

Such a comprehensive view of a business is important as it would influence users’ decisions on whether to continue their association with the business. Ratio analysis is an important tool for analyzing the financial position of a company. The results of ratio analysis provide adequate information for evaluating the performance of a company.

Choice of company and justification for the choice

J Sainsbury PLC and Wm Morrison Supermarkets PLC, based in the United Kingdom, are public limited companies that trade on the London Stock Exchange. Both companies operate in the United Kingdom’s retail industry. J Sainsbury PLC takes about 17.7 percent of the market share in the UK supermarket. Besides, it is the second largest chain of supermarkets in the industry after Tesco. The company has about 1,106 stores.

The company employs about 152,000 employees in their stores (J Sainsbury PLC 2014a). On the other hand, Wm Morrison Supermarkets PLC ranks fourth among the top five supermarkets in the UK retail industry with a market share of 11.3%. The company has presence in over 600 locations.

The company engages about 132,000 employees (Wm Morrison Supermarkets PLC 2014a). Retail industry in the United Kingdom is quite competitive and the top players engage in aggressive competition so as to increase their market share. The table presented below shows the recent statistics of market share of the United Kingdom’s retail industry.

The information on the market share can be presented in a pie chart as shown below.

The two companies are a suitable choice for analysis because they are among the top five in the UK retail industry. Besides, the companies have operated in the retail industry since 1800s. This implies that they have experienced and survived the swings in the economy over a long period of time. The paper seeks to carry out a comparative financial analysis of Sainsbury and Morrison Supermarkets for a period of five years, that is, between 2008 and 2012.

Critical analysis of the ratios

Profitability ratios

Source of data – Morningstar, Inc. 2014b; Morningstar, Inc. 2014a; J Sainsbury PLC 2014b; Wm Morrison Supermarkets PLC 2014b

The net profit margin of Sainsbury increased by a small percentage during the five years. The net profit margin increased between 2008 and 2010. However, in 2011 and 2012, the company reported a decline in the value of the ratio. The same trend was observed in the values of return on assets and return on equity.

In the case of Morrisons, The profitability ratios increased between 2008 and 2011. In 2012, the company reported a decline in the value of profitability ratios. Further, it can be noted that the profitability ratios for Morrisons are higher than those of Sainsbury. This implies that Morrison Supermarket is more efficient in managing pricing and the cost of operations.

It also implies that the Morrison Supermarket is more efficient in using assets and shareholders’ fund to generate sales and net profit than Sainsbury (Atrill 2009). Further, both companies reported a decline in profitability in 2012. This may indicate that there was a decline in profitability within the industry. The graph presented below shows the trend of profitability ratio for the two companies.

In the graph above and subsequent graphs, ‘J’ represents line graphs for J Sainsbury PLC while ‘Wm’ represented line graphs for Wm Morrison Supermarkets PLC.

Liquidity ratios

The liquidity ratios for Sainsbury fluctuated during the five year period. The current and quick ratio for the company increased between 2008 and 2009. However, in 2010, the company reported a decline in the liquidity ratios. The values improved in 2011 and later declined in 2012. In the case of Morrison Supermarket, the current and quick ratio declined in 2009, the values later improved in the subsequent years.

The liquidity ratios for Sainsbury PLC are higher than those of Morrison Supermarket. This implies that Sainsbury is more efficient in paying current debt than Morrison Supermarket. The information in the table also reveals that the current and quick ratios for both companies are less than one.

This implies that the current asset of both companies cannot adequately pay the current liabilities (Brigham & Houston 2007; Brigham & Ehrhardt 2009). This can be attributed to the industry in which the companies operate. Companies operating in retail industry often have low liquidity ratios due to the nature of their businesses. The graph presented shows the liquidity ratios for the two companies.

Gearing ratios

The gearing ratios focus on the amount of debt in the capital structure of a company. A high value of gearing ratio implies that a company has a high amount of debt in the capital structure. The financial leverage for Sainsbury ranged between 2.1 and 2.29 during the five year period while the value of debt to equity ratio ranged between 0.43 and 0.50.

It can be observed that there was a general decline in the value of the gearing ratio. In the case of Morrison Supermarket, the financial leverage ranged between 1.69 and 2.01. It can also be observed that the company experienced an increase in the financial leverage over the years. Debt to equity ratio for the company ranged between 0.19 and 0.46. The two companies reported a decline in the value of gearing ratios between 2008 and 2010.

However, in 2011 and 2012, the value of the ratios increased. The trend can be attributed to the economic meltdown that was reported in late 2008. The companies required external funding to finance operations (Brigham & Houston 2007; Brigham & Ehrhardt 2009).

It can also be pointed out that the gearing ratios for Sainsbury are higher than those of Morrison Supermarket. This explains the low profitability of the company. It also increases the risk of the shareholders’ fund (Collier 2009). The graph presented below show the trend of the gearing ratios.

Investment ratios

The investment ratios are used as a measure of valuation of shares of a company. The ratios compare the price of shares and various attributes such as earnings, book value of assets, cash flow and sales (Haber 2004). The investment ratios for Sainsbury declined between 2008 and 2010.

There was a decline in the value of the ratios between 2011 and 2012. In the case of Morrison Supermarkets, the value of the investment ratios increased between 2009 and 2010. There was a decline in the value of the ratios in 2011. In the table, it can be noted that the investment ratios for the two companies are relatively equal.

Therefore, an investor may be indifferent about which company to invest in based on the investment ratios. The price/earnings ratio measures the market value per share in relation to its earnings while price to book ratio measures the stock price of shares of a company in relation to book value of the assets (Holmes, Sugden & Gee 2005). The graph presented below shows the trend of investment ratios over the five years.

Weaknesses of ratios

There are a number of weaknesses of ratios. Therefore, it is necessary to take into account some of these weaknesses when using ratios as the main tool for comparing the financial performance of two companies. First, it is difficult to use a set of industry average ratios when analyzing large companies that have different business segment which fall in different industries. This creates a major challenge when using industry average ratios to compare performance of such companies.

The second weakness is that inflation distorts the financial statements of companies. Thus, using ratios to analyze the performance of a company or a group of companies in different regions may be a challenge (McLaney & Atrill 2008). In such cases, an analyst may need to use personal judgement to evaluate the performance of a business.

The third weakness of ratios is that it is highly distorted by seasonal factors. It is quite difficult to incorporate the impact of seasonal factors when analyzing the financial performance of a business using ratios.

For instance a company may report a sporadic increase in sales of a certain product during a one season such as winter. This will distort the ratios calculated. Therefore, an analyst may be required to have prior knowledge of the seasonal factors that affects a business before using ratios to analyze the financial performance of such a business (Siddiqui 2005).

The fourth weakness of ratio analysis is that the use of different accounting practices hinders the ability to use ratios to analyze the performance of a company using ratios. For instance, when carrying out inventory valuation one company may decide to use FIFO while another company may use weighted average. This may make it difficult to use ratios to compare the two companies. The fifth weakness is that different ratios under the same category may give differing positions on the performance of a company.

Thus, it may be difficult to give a generalized view of the performance of a company. For instance, under profitability ratios, net profit margin may indicate that the profitability of a company is declining over time while return on assets may indicate that the profitability of a company is increasing over time.

This makes it difficult to give a conclusive decision on the performance of a company. Finally, some ratios may be difficult to interpret some ratios as to whether they are good or bad. For instance, high liquidity ratios may be interpreted as good or bad (Vance 2003).

Conclusion and recommendation

The paper carried out a comparative financial analysis of J Sainsbury PLC and Wm Morrison Supermarkets PLC for a period of five years, that is, between 2008 and 2012. Analysis of market share indicates that Sainsbury has a larger market share than Morrison Supermarkets in the UK retail industry.

Further, analysis of profitability indicates that Morrison Supermarket is more profitable than Sainsbury. Based on liquidity, it can be noted that Sainsbury has a better liquidity position than Morrison. Further, the gearing level of Morrison Supermarkets is lower than that of Sainsbury. Finally, the investment ratios for the two companies are fairly equal. Thus, analysis of the two companies shows that they have a fairly equal financial standing.

In terms of market share and liquidity, Sainsbury is superior to Morrison Supermarket. However, in terms of profitability and gearing, it can be pointed out that Morrison Supermarket is superior to Sainsbury. An investor is likely to base his decision on profitability, gearing level and investment ratios.

Thus, Morrison Supermarket will be the most suitable company to invest in. The paper also discussed the various shortcomings of use of ratio analysis. Even though it is a suitable for comparing the financial performance of various companies, a lot of personal judgment is required when using the tool.

References

Atrill, P. 2009, Financial management for decision makers, Prentice Hall, USA.

Brigham, E. & Ehrhardt, M. 2009, Financial management theory and practice, Cengage Learning, USA.

Brigham, E. & Houston, J. 2007, Fundamentals of financial management, Cengage Learning, USA.

Collier, P. 2009, Accounting for managers, John Wiley & Sons Ltd, USA.

Haber, R. 2004, Accounting demystified, American Management Association, New York.

Holmes, G., Sugden, A. & Gee, P. 2005, Interpreting company reports, Prentice Hall, USA.

J. Sainsbury PLC 2014a, About us. Web.

J. Sainsbury PLC 2014b, Annual report and financial statements 2013. Web.

McLaney, E. & Atrill, P. 2008, Financial accounting for decision makers, Prentice Hall, USA.

Morningstar, Inc. 2014a, Sainsbury (J) PLC. Web.

Morningstar, Inc. 2014b, Wm Morrison Supermarkets PLC. Web.

Siddiqui, A. 2005, Managerial economics and financial analysis, New Age International (P) Limited, New Delhi.

Vance, D. 2003, Financial analysis and decision making: Tools and techniques to solve, McGraw-Hill books, United States.

Wm Morrison Supermarkets PLC 2014a, About us. Web.

Wm Morrison Supermarkets PLC 2014b, Financial reports. Web.

The rationale for Selecting Poland as a Target for Investment

The country that will be selected for the expansion of the Sainsbury’s is Poland. From the PESTEL analyses provided in the Appendix, it is apparent that Poland is a better target for the retailer’s expansion than either Estonia or Hungary, even though some elements of the external environment are more attractive in those countries. It is possible to discuss the elements of PESTEL analysis and compare them in the three countries to see that.

Political

When it comes to the political environment, Estonia is probably the best choice of the three countries, for it is business-friendly and has pursued the free market economy for several years. Poland is slightly less attractive in this respect because it is stated to have burdensome taxes on businesses (CIA 2017c). Hungary is the worst choice, for it currently pursues a nationally-oriented economy with high taxes/tariffs especially for retailers, which will put Sainsbury’s at a disadvantage in comparison to domestic retailers (CIA 2017b).

Economic

Estonia is a rather attractive choice thanks to the high GDP per capita, but it is a very small country with a low absolute GDP; also, the growth rate is the slowest among the three countries: by the end of 2016, it grew to 106.01% of its economy in 2013 (1×1.027×1.015×1.017×100%=106.01%) (CIA 2017a). Hungary is more attractive because it has a greater absolute GDP and greater growth rate (in 2016, it grew to 108.84% of its 2013 economy) (CIA 2017b); however, its GDP per capita is lower. Finally, Poland seems the most attractive choice of the three, because it has the greatest GDP (the 6^th greatest in the EU), and, importantly, grows faster than the two other countries (in 2016, it grew to 110.44% of its 2013 economy) (CIA 2017c), even though its income per capita is lower than in the other two countries.

Social

From the social environment, Estonia is the least attractive choice of the three simply because its population is too small (1,258,545); also, only 391,000 people live in Tallinn (CIA 2017a). In Hungary, the population is almost 10 million, but in Poland, it is nearly 38.5 million. Also, the capitals of Poland and Hungary have comparable populations, but in Poland, there are several very large cities or urban areas, such as Krakow (CIA 2017c). Thus, Poland is the most attractive choice of the three.

Technological

Both Estonia and Hungary are well-developed technologically, whereas Poland is not. While the infrastructure in Poland has some issues (CIA 2017c; Cienski 2014), it might still be a good idea to invest in Poland and bring innovative technology there that Sainsbury’s local rivals would not be able to have, for Sainsbury’s (n.d.) is stated to focus on innovations.

Legal

Estonia seems to be the most attractive choice of the three in terms of the legal environment thanks to the equal treatment of foreign and domestic businesses (CIA 2017a). Poland might be somewhat worse because there exist elements of Soviet legislation in Polish law; however, the legal environment is still friendly for foreign businesses. Finally, Hungary is the worst choice because of the additional taxes for foreign enterprises (CIA 2017b).

Environmental

Estonia has the best natural environment and keeps up with international standards (CIA 2017a). Hungary and Poland probably suffer from greater pollution, but that might also mean that Sainsbury’s might establish new standards in these countries (although doing so is double-sided because upholding standards takes additional funding in comparison to those who do not uphold standards). Also, Poland and Estonia have access to sea transportation, which is a benefit, whereas Hungary is landlocked (CIA 2017a; CIA 2017b; CIA 2017c).

Summary

On the whole, it can be seen that Poland appears to be the most attractive choice when considering economic, social, and probably also technological and environmental points of view. Estonia would also be rather attractive, but perhaps it is simply too small. Finally, Hungary seems to be the worst choice due to its nationalist economic policy, which levies additional taxes from international businesses.

Critical Analysis of the Opportunities and Threats of the Industrial Environment Using the 5 Forces Model

To understand the industrial environment in which the organization in question will find itself after it enters the market, it is paramount to conduct a thorough analysis of various elements involved in this environment. This can be done using Porter’s Five Forces model (Dobbs 2014). Such an analysis is provided below.

Power of Suppliers

On the whole, it is pointed out that in Poland, the sector of retailers that purchase goods from suppliers is rather weak (PMR 2015). The suppliers of goods are not numerous, and in general, the members of the sector of retailers are stated not to possess any strong mechanisms which could be utilized to exert pressure on those who supply them with merchandise (PMR 2015). Nevertheless, it is stressed that independent store chains are attractive partners for such suppliers, which might provide Sainsbury’s with an additional advantage over its smaller competitors (PMR 2015). In this case, it might also be possible to conclude that Sainsbury’s will have a certain amount of power over its suppliers (at least in the case of a full-scale entry such as having wholly-owned subsidiaries), even though it might be limited.

Power of Buyers

Concerning the power of buyers, it should be highlighted that Poland is a country with a large population, and its major urban areas also house large numbers of people, as is shown in the Appendix. By the U.S. Department of Agriculture (2017), however, the majority of consumers in Poland are still price-sensitive, but there exists a group of clients who are not reluctant to pay greater money for the products of higher quality, and that group is experiencing a stable growth in numbers. This means that, while a large percentage of customers are price-sensitive, there still should be a considerable number of clients, and that Sainsbury’s might be able to rely on clients who are desirous of purchasing high-quality goods even if the prices of these are higher than average.

Competitive Rivalry

When it comes to the degree of competitive rivalry in Poland, it is noteworthy that the main retail outlets in Poland are supermarkets and hypermarkets; these account for approximately 73% of the total value share of the respective market (U.S. Department of Agriculture 2017).

Therefore, it might be possible that Sainsbury’s will be faced with stiff competition when it enters the Polish market. Nevertheless, the supermarkets of Sainsbury’s vary in size, and some of them are small; in this respect, it should be stressed that the supermarket business is peculiar in that the number of clients depends heavily on the location of a particular store; if a location is successful and there are no other supermarkets nearby that are more attractive, or if there are such supermarkets, but they are not in very close proximity, customers may still elect to purchase goods from the given retailer, which presents an opportunity.

Consequently, the amount of competitive rivalry might depend not only on the general situation with supermarkets but also on the local conditions, unless the market is very heavily saturated with such stores. Sainsbury’s should also choose its strategy appropriately to decide in which locations whether large or small stores should be opened (which also depends on the mode of entry; see below).

Also, it should not be forgotten that in certain cases, it might be possible for Sainsbury’s to implement some technological innovations that would provide them with e.g. technological advantages over their rivals, which would be favorable for Sainsbury’s.

Threat of Substitution

Due to the fact that there exists a large number of food and other fast-moving consumer goods retailers in Poland (U.S. Department of Agriculture 2017), it is clear that consumers might be able to easily find substitutes for the goods offered by Sainsbury’s, which means that the threat of substitution for the products of Sainsbury’s is rather high. Nevertheless, as has been noted, the very close proximity of a store to places where people live might be a strong advantage for Sainsbury’s. On the other hand, if Sainsbury’s opens a large store, then people might visit it in situations when goods offered by such stores cannot be found in some other places located in close proximity.

The threat of New Entry

Finally, the threat of new entry remains rather high in the sphere of retailers. The rivals of Sainsbury’s, who are numerous in Poland (U.S. Department of Agriculture 2017), might open a shop not far from an existing location of the store in question, and it will take away a number of the clients of Sainsbury’s. (In this respect, it is better to open large stores with a greater assortment of goods). On the contrary, however, it might be difficult for completely new companies to enter the retail market in Poland, because it includes a large number of enterprises already (U.S. Department of Agriculture 2017).

Summary

On the whole, it can be concluded that both the suppliers and buyers might have a moderate amount of power on Sainsbury’s, but the latter should also have its methods of influence in Poland. A similar situation exists with respect to the competitive rivalry and threat of substitution. When it comes to the threat of new entry, however, the advantage might be on the side of Sainsbury’s. In any case, Sainsbury’s should be rather careful when entering the Polish market.

Analysis of Strengths and Weaknesses of the Internal Environment of Sainsbury’s Using the VRIO Model

To more fully understand the ability of a firm to compete in the market, it is needed to analyze its internal environment and consider whether its resources and capabilities are adequate for addressing the external situation in the market, and thus are the company’s strengths, or if they are not appropriate for dealing with the external conditions, and thus are its weaknesses. To do so, it is possible to employ the VRIO analytical model (Bach & Edwards 2013, pp. 22-23). Such an analysis of Sainsbury’s in Poland is provided below.

Value

The value of the internal resources, capabilities and corporate culture plays an important role in a firm’s competitiveness. When it comes to Sainsbury’s, it should be stressed that the company has considerable technological capabilities (Sainsbury’s n.d.), which may permit it to gain an advantage over the local retailers in Poland, therefore constituting a strength. Also, according to the company’s corporate culture, it makes stress on sustainability and quality, purchasing its products only from highly reliable suppliers (Sainsbury’s n.d.). In Poland, such a policy might be a disadvantage to a particular degree because many consumers there are price-sensitive (U.S. Department of Agriculture 2017).

Nevertheless, high quality should be able to attract clients who are willing to pay greater prices for it, and the numbers of these consumers are growing in Poland (U.S. Department of Agriculture 2017). Thus, in perspective, Sainsbury’s might have several important strengths when it enters the Polish market.

Rarity

The products and services that Sainsbury’s will propose in Poland will probably not be very different from what is already available in Poland with respect to assortment, for there are many supermarkets, hypermarkets and retail stores in that country (U.S. Department of Agriculture 2017); thus, there exists a weakness in what Sainsbury’s may offer. Nevertheless, very high-quality goods might not be widespread (U.S. Department of Agriculture 2017), so if Sainsbury’s focuses on quality, this might become one of their strengths.

Imitability

Unfortunately, when it comes to imitability, it might be possible to assume that Sainsbury’s products will be capable of being imitated by the company’s rivals. If Sainsbury’s is to sell retail products, such as fast-moving consumer goods, even of very high quality, they will have to purchase these from local suppliers, which means that other such firms will also have access to these resources. This constitutes a weakness of Sainsbury’s operations in Poland. However, if Sainsbury’s is able to utilize innovative technologies and other similar resources it has in other countries (Sainsbury’s n.d.), this might provide them with a unique advantage that local companies may not be able to imitate.

Organization

It is possible to state that the organization of Sainsbury’s, as one of the largest supermarket chains in the U.K., is highly effective (Sainsbury’s n.d.). Consequently, it provides this company with a strength in comparison to local Polish supermarkets because Sainsbury’s might be able to import and use the highly effective organizational and management experience and technologies they possess in Poland.

Summary

All in all, it may be summarised that Sainsbury’s has several important strengths in comparison to local Polish supermarkets; these strengths include technological capabilities, as well as organizational and management experience. On the other hand, it also has several weaknesses, such as the probably relatively low value of their quality policy among some of the consumers, or the imitability of the high quality of goods if these still become popular. Therefore, Sainsbury’s should be careful when entering the Polish retail market, focusing on its strengths and finding ways to lower the effect of its weaknesses.

Evaluating the Various Modes of Entry

According to Elsner (2014), there exist several modes of market entry for retailers; the most important of these, starting from those in which the company has the largest degree of control over its foreign operations and finishing with those where it has the smallest amount of control, include: “wholly-owned subsidiaries, mergers and acquisitions, joint ventures, franchising and licensing agreements and minority stakes” (p. 7). These entry modes will be analyzed below.

Wholly Owned Subsidiaries

When speaking about wholly-owned subsidiaries, greenfield investments and acquisitions should be discussed; mergers might also be considered. When it comes to greenfield investments, it is worth stressing that building new retail stores from scratch may be rather costly and highly risky; also, it takes a long time to establish such operations, so the investment will start to pay off only after a considerable amount of time passes (Wood & Demirbag 2012). During this time, the local rivals might be able to at least adopt the strategy of providing high-quality goods; technological advantages of Sainsbury’s may also be imitated, for it would take less time to export or imitate something when compared with building a company from scratch and then exporting via this company. Therefore, a greenfield investment might not be preferred.

On the other hand, a merger or an acquisition is apparently a better solution because they are much faster, and Sainsbury’s may be able to start utilizing its strengths more quickly, and faster establish itself in the market. However, there is also a problem with that, for, during a merger or an acquisition, there might emerge a clash in organizational cultures, management systems, etc. (Elsner 2014), and it is these elements which have been previously identified as comparative strengths of Sainsbury’s, so preserving them should be of great importance when establishing operations in Poland.

Joint Ventures

When considering the possibility of Sainsbury’s entering into a joint venture with another retailer, it should be stressed that this form of market entry on its own usually does not permit for establishing long-term operations, instead proposing a temporary relationship between several organizations (Wood & Demirbag 2012). Also, whereas Sainsbury’s might be able to share its comparative advantages with its potential partner, the partner might not be capable of adopting these advantages appropriately. Therefore, it is apparent that taking part in a joint venture should not be recommended for Sainsbury’s as a method of entry into the Polish market.

Franchising and Licensing Agreements

As for licensing agreements, it should be noted that forming one with a local company does not appear to be of high benefit for Sainsbury’s. In this case, Sainsbury’s will probably provide the licensed firm with some technological advantages and organizational secrets, in return gaining a part of the profits and having the licensee sell the products under Sainsbury’s brand name. However, this is often a temporary form of entry (Wood & Demirbag 2012), and later, the licensee might employ the received knowledge (and probably technology) to become a stronger competitor of Sainsbury’s if it chooses to also enter the Polish market using some other methods.

On the other hand, when it comes to franchising, it ought to be stressed that in this case, Sainsbury’s might be able to implement its management expertise and provide the franchisees with the technological privilege that it possesses (Elsner 2014). It also supplies a relatively simple way of expansion, which does not entail very high risks. On the contrary, the disadvantages include the probable inability to effectually implement the management schemes, and the possible heterogeneity of the franchisees.

Minority Stakes

While discussing minority stakes, it should be pointed out that having one in a Polish business might permit Sainsbury’s to cautiously test its ability to operate within the Polish market and make use of its relative strengths in it, as well as to gather some internal intelligence about that market. Besides, if the operation is successful, it might later become possible for Sainsbury’s to acquire the whole business in which it previously had a minority stake (Elsner 2014), thus making a full-scale entry into the Polish market. As for the disadvantages, it should be stressed that Sainsbury’s will not be able to control the whole organization, which may lead to the suboptimal realization of the potential of Sainsbury’s. Also, friction might emerge between Sainsbury’s and the business in which it has the minority stake, which may put a further relationship at risk.

Summary

On the whole, it seems that the methods of entry in which Sainsbury’s will (temporarily) have a relatively small amount of control are more appropriate than costly, full-scale investments such as greenfield investments. In particular, franchising or purchasing a minority stake appears to be the quickest option with the lowest risk, also permitting for probing the market. In addition, a minority stake might permit for easier acquisition of a full-scale business operation in Poland later.

Reference List

Bach, S & Edwards, M 2013, Managing human resources, John Wiley & Sons, Chichester, UK.

CIA 2017a, The world factbook: Estonia. Web.

CIA 2017b, The world factbook: Hungary. Web.

CIA 2017c, The world factbook: Poland. Web.

Cienski, J 2014, ‘Innovation and technology are foundations of Poland’s economic progress‘, Financial Times. Web.

Dobbs, ME 2014, ‘Guidelines for applying Porter’s five forces framework: a set of industry analysis templates’, Competitiveness Review, vol. 24, no. 1, pp. 32-45.

Elsner, S 2014, Retail internationalization: analysis of market entry modes, format transfer and coordination of retail activities, Springer Gabler, Wiesbaden, Germany.

Estonian Investment Agency n.d., Legal framework. Web.

PMR 2015, PMR Insight: wholesale market of groceries and cosmetics in Poland: Porter’s five forces analysis. Web.

Poland: legal environment. 2017. Web.

Sainsbury’s n.d., Sainsbury’s. Web.

Singh, HP 2016, PESTEL analysis of Hungary. Web.

U.S. Department of Agriculture 2017, Poland: retail sector. Web.

U.S. Department of State 2012, Doing business in Estonia: 2012. Country commercial guide for U.S. companies. Web.

Wood, G & Demirbag, M 2012, Handbook of institutional approaches to international business, Edward Elgar Publishing, Cheltenham, UK.

Appendix: PESTLE Analyses of the Countries

PESTLE Analysis of Estonia

Political

Estonia is ruled by democratically elected parliament. It is a member of the EU and part of the European Economic Area (EEA), which allows for free trade between its members. The country, having pursued a free market for many years, is liberal in its international trade policies; being a small country, it supports imports of products from other countries, such as the U.S. (CIA 2017a; U.S. Department of State 2012).

Economic

Estonia is a member of the euro zone; it boasts one of the highest levels of GDP per capita among the countries of Central Europe ($29,500 as per 2016 estimate, in 2016 USD); its GDP is $23.48 billion (as of 2016), with growth rate of 2.7%, 1.5%, and 1.7% in 2014, 2015, and 2016, respectively (CIA 2017a).

Social

The country has a small population of 1,258,545 (as of July 2016 estimate), which decreases by 0.54% yearly (as of 2016) (CIA 2017a). Its capital, Tallinn, housed 391,000 residents in 2015 (CIA 2017a). It has low unemployment rate (6.8% in 2016) and currently lacks the workforce, both professional and non-professional (CIA 2017a). However, 21.3% of population are considered to be below poverty line (CIA 2017a).

Technological

The country is well-developed technologically; machinery and electrical equipment account for 30% (as of 2016) of Estonia’s total exports (CIA 2017a). The country has strongly developed communications (e.g., online voting in elections is very popular) (CIA 2017a). It also has rather strong infrastructure, and good port communications (coastline length = 3,794 km), but has a low degree of completion of Trans-European Transport Network (CIA 2017a; U.S. Department of State 2012).

Legal

The country has a civil law system (CIA 2017a) and adequately protected and enforced property rights (U.S. Department of State 2012). Foreign investors have the same obligations and rights as domestic businesses; there exist agreements for preventing double taxation (Estonian Investment Agency n.d.).

Environmental

The Estonian constitution declares that the natural environment and resources are to be used sustainably, and that it is a duty of every person to preserve the environment (Estonian Investment Agency n.d.). On the whole, the country cares about upholding high environmental standards, and legal regulations for these are constantly upgraded according to international standards (Estonian Investment Agency n.d.).

PESTLE Analysis of Hungary

Political

Hungary is ruled by a democratically elected government, but there has been a rise in the popularity of the right-wing, nationalist parties such as Fidesz and Jobbik. It is a member of the EU and EEA (CIA 2017b; Singh 2016). In the past, reforms were implemented to pursue the free market, but in the recent times, a more nationally-oriented approach has been adopted, which favours domestic businesses, especially in sectors dominated by foreign companies, such as retail and banking (CIA 2017b).

Economic

Hungary is not a member of the euro zone, and it has not high levels of GDP per capita: nearly 2/3 of the mean level of the EU-28 (e.g., $27.200 as of 2016 estimate) (CIA 2017b). Its GDP is $267.6 billion, as of 2016 estimate, in 2016 USD; GDP growth rate was 3.7%, 2.9%, and 2.0% in 2014, 2015, and 2016, respectively (CIA 2017b).

Social

Hungary has a population of 9,874,784 people (as of July 2016 estimate), dropping by 0.24% yearly (as of 2016 estimate) (CIA 2017b). The capital, Budapest, has 1.714 million residents; urban comprises 71.2% of total population (as of 2015) and grows by 0.47% yearly (2010-2015 estimate) (CIA 2017b). 14.9% of population was below the poverty line in 2015, mainly in rural areas (CIA 2017b). It has an abundance of workforce and low unemployment rates (6.6% in 2016) (CIA 2017b).

Technological

The country is highly technologically developed; equipment and machinery account for 53.5% of its exports, and other manufactures comprised 31.2% of its exports in 2012 (CIA 2017b). The country is stated to boast a high level of education in the fields of technology and mathematics, to have produced 13 people who won the Nobel Prize, and to have been home and motherland for a number of world-famous scientists such as Janos Bolyai and John von Neumann (Singh 2016).

Legal

Hungary has a civil law system, which is based on the German system (CIA 2017b); law enforcement is carried out not only by the police, but also by the Border Guards (Singh 2016). Legal environment is not favourable for international businesses, subjecting them to additional taxes (CIA 2017b).

Environmental

The country has a diverse natural environment, but suffers from pollution, especially water pollution (Singh 2016). The current standards in energy efficiency, waste management, and the control of pollution fall below the international expectations, and require considerable investments in order to meet the minimal standards (CIA 2017b). The country is landlocked.

PESTLE Analysis of Poland

Political

Poland is ruled by a democratically elected government, and is a member of the EU and EEA (CIA 2017c). It has consistently implemented the policy of democratisation and economic liberalisation since 1990 (CIA 2017c). However, recently, the country has shifted towards the policies of social support, and there exists a system of taxation which creates a burden for businesses (CIA 2017c).

Economic

Poland is the 6^th largest economy in the EU; it has experienced a consistent economic growth since the 1990s (CIA 2017c). It is not part of the euro zone, but is obliged to join it eventually. It had a GDP per capita of $25,900, $26,800, and $27,700 (in 2016 USD) as of 2014, 2015, and 2016, respectively (CIA 2017c), which is about 2/3 of the mean European level (Cienski 2014). The GDP is $467.4 billion (as of 2016 estimate), and its growth rate is rather high: 3.3%, 3.7%, and 3.1% in 2014, 2015, 2016, but is expected to slow due to the planned social policies implementation (CIA 2017c).

Social

Poland’s population is 38,523,261 (July 2016), decreasing by 0.11% yearly (2016 estimate) (CIA 2017c). The capital, Warsaw, houses 1.722 million people; another large city, Krakow, – 760,000 people (2015); urban population accounts for 60.5% of the total population, and urbanisation rate is -0.1% (2010-2015) (CIA 2017c). 17.6% of population are below the poverty line; unemployment rate is 9.6% (2016).

Technological

Poland is not highly developed when it comes to technology (Cienski 2014). The growth of Polish economy originates in cheap labour rather than in technological development, and further development of technology is paramount (Cienski 2014).

Legal

Poland has a civil law system (CIA 2017c). Its law is based on the Constitution of Poland of 1997; the legal system comprises a mix of the Continental civil law and some elements of the Soviet law, but the changes are implemented by new governments (Poland: legal environment 2017). Legal environment is friendly for foreign enterprises, and ensures impartial proceedings (CIA 2017c; Poland: legal environment 2017).

Environmental

Poland suffers from air pollution and acid rains due to gas emissions from coal-based power plants, and from water pollution and problems with hazardous waste disposal (CIA 2017c). Polish governments, however, have a considerable degree of environmental concern (CIA 2017c). Poland’s coastline length is 440 km (CIA 2017c).

Sainsbury’s was founded in 1869 by John James Sainsbury and his wife Mary Sainsbury. The name came from John James’s surname.

Today the company has grown to become one of the largest supermarkets in UK operating about 1,000 stores, including 440 convenience stores with a labor force of about 150,000 people (J Sainsbury plc / Business strategy & objectives).

The companys business strategies and objectives are based on their strong values and cultures. Their main objectives include providing quality food, general merchandise and clothing, developing complementary channels and services, developing new business, and finally growing space as well as creating property values.

From these objectives and strategies, one will later observe and see how the company has segmented its market within the country.

Turban Efraim defined customer service in Sainsbury as “a series of activities designed to enhance the level of customer satisfaction, that is, the feeling that a product or service has met the customer expectation” (12).

Sainsbury puts its customers at the heart of everything they do. Massive investments have been done in the stores, labor force as well as into their distribution channels in order to ensure the customers receive the best customer service.

Sainsbury operations are mainly based in the UK, their main office being based in London. Its positioning in the UK gives it a competitive advantage compared to other retail supermarkets within the country.

Today the supermarket has over 785 stores in the UK, consequently, this does only increase its market share but also improves on its customer service because of convenience of the stores. Apart from having a number of stores across the UK, they are mainly located within an easy reach to bus stops as well as nearest malls.

Sainsbury differential advantage arises from one of its marketing strategies, which are product differentiations. Barney & Hesterley defined product differentiation as “the ultimate expression of the creativity of individuals and groups within the firms” (20).

Differentiation involves creating a product or service that enables a firm to stand out from other similar firms in the industry. Differentiation can be achieved through brand image, changing product design and features, improving customer service as well as expanding the company’s network.

From Sainsbury’s point of view, the retail store has successfully differentiated its products as well as the services. The companys network is massive, having covered major cities in the UK.

Also, each customer base has its own products with different features, for example, the youth have special malls for their entertainment, and the kids have toy shops.

The main marketing strategies employed by Sainsbury are market segmentation. Market segmentation can be explained as the division of a market into unique groups of buyers, who require separate products.

Market segmentation can also be referred to as the division of a market into smaller markets having buyers with the same characteristics, where a company will be able to meet its needs successfully hence satisfying its customers.

Markets can be segmented in terms of geographic, demographic, psychographic and behavioral variables.

From the research conducted, Sainsbury has segmented its markets using almost all the variables. For example, the company has stores almost in every city of the UK; its markets have also been segmented using demographic variables.

Segmentation by demographic variables involves the segmentation by the use of demographic factors, such as age, sex family size, family life cycle, income, education, occupation, religion, race and nationality. Sainsbury has also been able to segment its markets according to psychographic variables.

Market segmentation has proved to be very valuable to Sainsbury. Many benefits have resulted from it segmenting these include the following among others; the company has been able to improve on its customer service standards hence increasing the sales volume and eventually profits, the company has also been able to concentrate its resources on the chosen segments as well being able to review developments and anticipate changes in the segments from competitive activities (Supply Chain Management Case Study Sainsbury s Supply Chain Strategies – College Essay – Arghavankayvani).

Sainsbury main customer target is the family unit especially the mother. My reasoning has been derived from the company’s website as well as the advertisements on the TV. The company uses a marketing mix to attract this segment. Marketing mix also known as the 4ps refers to the combination of product, price, promotion and place.

Sainsbury ensures that its products are of high quality, for example, in the food sector, the company has been involved in promoting healthy food eating. In trying to promote this product the company used one of the renowned chefs to be part of its advertising campaign.

The main target of its food products is the family especially the mother, who ensures healthy eating of the family members. Also I analyzed their website and found it to be very informative.

There are various pictures for the various products that are offered at the stores. Also their products are of high quality being produced using the top manufacturing skills.

The prices of the various products have been found to be pocket friendly. As compared to other stores in the UK, for example, Tesco and Asda, Sainsbury prices are quite cheap. The company has been involved in price awareness campaigns, where it educated the customers on various price changes as well as various discounts for new products.

Sainsbury ensures that the products of this target group are easily available, and the costumers are able to get them at their convenience, which has been evident in the expansion programs where many stores have been opened; these stores are mainly located next to bus stops or residential areas.

In trying to make the customers aware of its products, Sainsbury has been involved in many promotion activities, for example, the recent advertisement where they were promoting healthy eating. This advertisement involved the use of one of the top chefs.

The use vouchers or coupons are another marketing promotion strategy used by Sainsbury. The issue of vouchers and coupons to customers increases customer retention as well as increased sales. However, these vouchers at times can be costly up to millions of pounds.

Marketing segmentation can sometimes be very expensive for a company because the company has to come up with various marketing strategies that meet the standards or needs for every segment of the market.

For example, products for the kids have to be promoted using different tactics; for the teenagers promotion has to be done using another mode. We have also seen that Sainsbury vouchers which are worth millions of pounds, at times when the company does not make profits, may give the coupons to its customers.

Sainsbury still has a wide range of opportunities. The Company should consider going international and opening stores in various continents.

Works Cited

Barney, Jay, and William Hesterley. Strategic Management and Competitive Advantage Concepts. New Jersey: Pearson prentice Hall, 2006. Print.

Efraim, Turban. Electronic Commerce: A Managerial Perspective. New Jersey: Prentice Hall, 2002. Print.

“J Sainsbury plc / Business strategy & objectives.”. N.p., n.d. Web.

“Supply Chain Management Case Study Sainsbury s Supply Chain Strategies – College Essay – Arghavankayvani.” Free Term Papers, Research Papers, Essays, Book Notes | StudyMode.com. N.p., n.d. Web.

Executive Summary

The sphere of marketing is unique because it is always possible to implement some changes within a short period and achieve great success. However, a certain attention has to be paid to every detail of a process and the analysis of the steps should be done on a good level. The entry process is not an easy task even if it does not take much time. The point is that a team of professional managers and analytics have to investigate the chosen sphere, compare the possible participants with their opportunities and challenges, and offer the best recommendations regarding the situation under which the case is developed. As soon as the market for entering is identified, it is necessary to conduct a market analysis and understand the peculiarities of market growth, customers’ needs, forecasted demand, possible barriers, and even the role of the competitors that predetermine the quality of a process. The current paper introduces a management consulting report about the intentions of one of the largest UK supermarkets, Sainsbury’s, to enter the Chinese market and offer its groceries to the Chinese people.

Sainsbury’s has to be ready to do much work within a short period to achieve the desirable results and make use of the information gathered. The necessity to meet short deadlines can be easily explained: as soon as the company investigates the market, it is necessary to make some solutions based on the data found. With time, some economic, technological or informative issues can be changed dramatically, and the worth of the data found can be minimal or even equal to zero (Wang, Chen, & Huang, 2011). There is a huge amount of work that has to be done by Sainsbury’s to understand the differences between the UK and Chinese markets and countries, in general (Goetz, 2015). There are the chances to achieve great results and opportunities; still, it is necessary to consider the threats and their impacts on Sainsbury’s in China and even in the United Kingdom.

As one of the largest supermarkets in the United Kingdom, Sainsbury is facing a unique position of expanding into new markets. The market will be different in scope and the geographic location. The company will be looking at the Chinese market, which is significantly different from that of the United Kingdom. An expansion overseas means that many of the current core business activities of the supermarket might change to embrace a new culture and a novel company structure should the company make the move through a joint venture initiative. Unlike many of its current market conditions, China presents new conditions of a growing economy, as well as a large population. Besides, it opens up the possibilities for retailers to save on costs of operations by being near the manufacturing centres for the majority of goods sold in the stores. This project aims to explore the ability of Sainsbury to move into e-commerce targeting the Chinese market, specifically with the Tmall online network of Alibaba Company (Tepper, 2015).

The evaluation of the work that has to be done helps to create a powerful plan according to which it is possible to understand both, Sainsbury’s intentions and Chinese opportunities. The current paper is divided into several logical parts which each of them responds to several functions and has to be certain expectations. The first section introduces the details about the company that has to be mentioned to present a clear picture of the case study and the current Chinese market situation (Sebora, Rubach, & Cantril, 2014). In addition to the background information about Sainsbury’s, its values that have been developed more than a century, the products that have amazed and attracted the British people, and the business strategy that is supported by the Sainsbury’s managers and executives for a long period, this section touches upon the analysis of the whole industry and proves that the sphere of marketing in China and the UK, and the grocery’s market, in particular, may be implemented regarding several social, economic, and even environmental factors.

As soon as the basics are given, the identification of the research methods takes place. There are four main approaches used to organise the management consulting report within the frames of which the expansion of Sainsbury’s business to China and the creation and promotion of an online store on the Tmall web site are possible. Tmall is one of the brightest organisations that develop online shopping from the best perspectives. It has already created a successful payment system that works worldwide. Several companies from China, as well as from other parts of the world, have already got a chance to try the opportunities offered by Tmall. Though some misunderstandings can take place, the current management consulting report about Sainsbury’s and its desire to enter the Chinese market should help to identify and prevent potential problems. The methods are a literature review, the analysis of case studies and a questionnaire survey, and a meta-analysis that helps to combine practical achievements with a theoretical basis. The chosen research programme is a unique chance to clear up what has been already known and implemented and define the perspectives of the activities planned by Sainsbury’s in regards to the Chinese market. The next section is based on the SWOT analysis that helps to introduce successful opportunity quantification. The report introduces the list of threats, opportunities, strengths, and weakness of the company in its intentions to enter a new market. It is necessary to admit that any new market is a scope of new traditions, expectations, demands, rules, and factors that have to be taken into consideration during the implementation process.

As soon as a good plan to enter a new market is created, the evaluation of the experience should be offered to clear up the challenges and mistakes other companies like Costco suffered from. It sounds interesting and effective to open a new store online without spending much time on building “brick and block” constructions (Dangana, Pan, & Goodhew, 2012). However, there may be some invisible obstacles that can frustrate the plans of the company and create some challenges. The section with opportunity resolution and the chapter about feasibility of the study provide an overview of the attempts that can be made to support the idea of expanding Sainsbury’s business to China on a properly explained and supported theoretical basis. The final section of the report contains some points for discussion, as well as the conclusions and recommendations made based on the work offered.

The success of this report is not only the fact that it introduces the analysis of the company in regards to the current Chinese market and the Sainsbury’s chances to succeed in entering. This report contains several ideas or recommendations about what Sainsbury’s can do to prove that the UK grocery is worth the Chinese attention. The cooperation between the UK and China has begun a long time ago. Sainsbury’s is not the first organisation that is going to offer its products and services to the people of China with their traditions and cultural preferences. Therefore, there is a great chance to consider the experience of other companies, take the best explanations and evaluations, and implement the best ideas making use of the values and strategies perfectly introduced by Sainsbury’s in the United Kingdom.

Company Details

Background of the Company

Sainsbury’s is one of the most popular and successful supermarket chains in the United Kingdom during the last century. The story of the company is the story of the century that demonstrates how people can and have to work appreciating personal values, as well as the values of other companies. Sainsbury’s was firstly opened by John James Sainsbury and his amazing wife, Mary Ann Sainsbury, at Drury Lane in London in 1869 (J Sainsbury Plc, 2015a). The family wanted to create a store within the frames of which it was possible to sell good products of high quality. It was not enough for them to promote a selling process. It was necessary to introduce their values and prove that their ideas and intentions were worth attention. The first steps made by the partners were the retailing of fresh food produced at the British farms. What they wanted was the promotion of quality at low prices. The peculiar feature of the company was that its owners were not afraid to reject the labels and did not cooperate with the well-known brands. They introduced their lines and proved that their name, the Sainsbury’s, could be competitive enough within a short period.

Almost every decade of the 20^th century was characterised by some new achievements of the store. For example, during the war period, in 1914, several women were hired because of the existing shortage of colleagues (J Sainsbury Plc, 2015b). In two years, the founders of the story decided to promote a special training school to help to learn more about the quality of a selling process and the ways of how to attract more customers offering them the products and goods of their brand. Each decade was a symbolic evaluation of the achievements made and the several short-term goals set. Many organisations and their leaders could not even guess what made Sainsbury’s so popular, and the answer was simple enough: Sainsbury’s put its customers at the heart of everything done in the store and made colleagues deliver only the best shopping experience to every person (J Sainsbury Plc, 2015c). In the 2010s, Sainsbury’s became one of the companies that used special geo-exchange technologies with the help of which efficient heating and water supply were possible. Food waste rates have been almost equal to zero since 2012. About 1,200 supermarkets have been opened in the United Kingdom, and more than 161,000 people could find a good job that corresponded to their values.

Sainsbury’s Values

As it has been stated above, one of the strongest aspects of the company is its ability to define the values clearly and follow them precisely. Sainsbury’s offers its customers the possibility to “Live Well for Less”, and this slogan is not only about price. It is about the way of how Sainsbury’s develops the relations with the suppliers, chooses colleagues (not ordinary workers), involves stakeholders, and demonstrates a real commercial advantage of everything done (J Sainsbury Plc, 2015f). The company proves that its intentions to be environmentally friendly, promote positive changes in the community, support sourcing with integrity, and consider the best for food and human health can be justified and supported by millions of people. Its progress is evident so far: Sainsbury’s develops its services not only in fresh food and drinks but also in electronics, apparels, pharmacy, etc.

The success of the company may be also explained by the fact that Sainsbury’s values turn out to be a solid basis for the chosen business strategy and a good opportunity to become competitive on the global level. As the majority of business organisations, Sainsbury’s creates two types of strategies for growth: one of them is a long-term that is to offer its services and products to more countries worldwide introduce its properly defined values to everyone around, and another type is short-term that consists of several ideas that are approved and considered by the leaders and require immediate steps to be taken. Sainsbury’s is the chain of supermarkets that has already gained the fame of high quality of products at low price in the UK; now, it wants to be declared as the best line in the whole world and offers more countries a chance to benefit the British quality.

Sainsbury’s Products

Among a variety of products offered by Sainsbury’s, it is hard to define the one that is the best. Each section is a unique combination of taste, beauty, and quality at reasonable price. Meat and fish are always fresh and look amazing. Frozen products correspond to the quality set by the company. Food cupboard is always properly organised and introduced. The section of bakery turns out to be a real masterpiece created for the customers with loyalty and love. Fruits and vegetables are from the farms treated by the professionals. Sainsbury’s is one of the companies that put the idea of healthy life in the first place; therefore, it is expected to find more products like nuts that are packed in the store, vitamins (some of them are the products of famous pharmaceutical organisations, and some vitamins are manufactured in the store). Sainsbury’s makes a good attempt to combine the products of the same category, introduce several well-known brands, and then offer the products of its brand. People should know that they are free to choose from a variety of products anytime but always can try a new offer of the store. Even the drinks have that crucial aspect that make the customer fall in love with the traditions supported by Sainsbury’s. In addition to the drinks known worldwide, Sainsbury’s promotes its brand, and the reviews left by people prove that all the products are of high quality, fresh always, and tasty that does matter for customers in all countries.

It is hard to resist the beauty of the grocery offered by Sainsbury’s. However, the company does not want to stop on selling food and beverages only. One of the frequently offered services by Sainsbury’s is the possibility to study and choose the work in the organisation. It seems to be reasonable for the company to provide students with the required portion of knowledge, explain the expectations of the company, and be sure the potential colleagues know what they go into. It is not only effective but also cheaper to create the experts on its basis and does not share the developed talent with the other but address it to the development of the company’s values.

The best proof of the product quality is the number of customer transactions – 24 million per week (“Best for food and health”, 2015). Sainsbury’s understands that such numbers require the constant presence of improvements and innovations. It is obligatory to promote healthy eating and even to support an active style of life to explain why Sainsbury’s products are worth recognition.

Industry Analysis in China and UK

Sainsbury’s is a leading company in the grocery’s industry, and it is necessary to analyse the latest achievements in this sphere and compare the conditions under which the company has to work in the UK and may work in China. UK grocery is the richest and most successful example in the world, still, the worth, that is about £177.5 billion per year, impresses a lot (“UK grocery retailing”, 2015). UK grocery is characterised by a variety of channels that make the chosen market possible. The majority of channels are the hypermarkets and superstores like Sainsbury’s, still, they demonstrate the ability to cooperate with other sources like small supermarkets, convenience stores, online purchases, and discounters. The reports offered by Sainsbury’s show that the dynamics of the industry the company is involved in undergo dramatic and rapid changes that cannot be explained sometimes. The company must take several steps to meet the demands and satisfy customers’ needs regarding the conditions available.

In comparison to the situation in the UK grocery industry, China becomes an evident leader and the biggest market for grocery shopping on a global level (Allen, 2012). Chinese grocery has been developing fast during the last five years. Even though prices are usually higher in China, people continue shopping and choosing the best, even the most expensive, products. Another important factor of economic growth is a constantly growing population. The investigations show that the grocery industry in China and UK has different positions, and the Chinese situation is more preferable: in 2011, the Chinese sector was about £607 billion, the US sector was about £572 billion, and the UK sector was nine-steps lower (Allen, 2012). Even the existing bureaucratic challenges inherent to the Chinese society and economy, this country continues developing successful business relations with several countries around the whole globe. The country uses the services of many foreign retailers, as well as it performs the role of a crucial food and service retailer. China creates a powerful competition to the world leader, the United States, and it is hard to predict what country can take the leading positions in the next five years.

At the same time, the Chinese grocery may be easily put under threat because of the efforts, energy, and financial costs spent on its development. The Chinese market must offer appropriate commodities. The evaluation of the current situation of the Chinese grocery sector and the conditions under which Sainsbury’s is developing nowadays proves that the cooperation between the chosen supermarket retailer and the chosen developing country may be characterised by several positive outcomes and benefits for the both.

Business Strategy of the Company

The representatives of Sainsbury’s admit that the current constantly changing grocery industry and the ways of how people shop require the development of new strategies and ideas on how to meet the needs of all customers, not to lose the leading positions, and consider the quality of goods as the main goal to be achieved. All aspects of the Sainsbury’s business strategy is to use all available sources to learn and know better the customers. Considering the importance of the values, the company differs from other representatives of the same industry with its ability to promote best healthy food, underline the worth of its brand, and support the idea of environmentally friendly relations.

The current business strategy of the company is not complicated indeed. First, Sainsbury’s introduce “great products and services at fair prices” (J Sainsbury Plc, 2015e, p.7). This approach means the presence of a powerful value proposition and growth opportunities in a variety of possible non-food products and services. The store has to use its full potential to stay a quality leader in the market and demonstrate that it possesses the best knowledge about its customers. The strategy focuses on the customers and the comfort required. A convenience store network is changed and improved, as well as the groceries online channel undergoes the necessary changes. The customers have to know that the company does everything possible to satisfy them and make their shopping more convenient. They are eager to buy the best quality products at really good prices, and the company uses this factor to succeed. Sainsbury’s differentiates from its competitors by the ability to understand what the customers may want and how they can get it (J Sainsbury Plc, 2015e). Sainsbury’s aims at helping the customers get access to the services and product they may want.

To meet the goals set, the company introduces several institutions to train the colleagues on the necessary level and make them mature enough to cooperate with the customers with different tastes and demands (J Sainsbury Plc, 2015e). It is not an easy task to prove that the offered product or service is better than the others, and every colleague of the store has to know the most appropriate methods of convincing people and introducing food. Therefore, it is a justified step to invest in the right tools to help colleagues to work more effectively.

Research Programme

The choice of research methods is a crucial step that has to be taken while developing an independent management consulting project as it helps to create a working guide and follow it in the process (Gill & Johnson, 2010). Sainsbury’s is the company with the world name, and China is one of the perfectly developing countries in the world. The Sainsbury’s attempts to enter the Chinese grocery market have enough grounds and can be easily understood. The heads of the retail line realise the benefits they can get from the cooperation with China. Still, it is necessary to analyse the opportunities, threats, perspectives, and other issues properly to comprehend the essence of Sainsbury’s development. This study uses a secondary research approach by relying on publication data, official annual report of the company, and sampled opinion from independent publications found online. It embraces a quantitative approach that focuses on the reasoning behind the financial strategy Sainsbury’s takes to prepare it for overseas expansion. The method is ideal for bringing out the online shopping opportunity in the Chinese market and ways of achieving it.

General Evaluation of the Methods

In the report, several research methods will be used. First, a questionnaire survey is made to consider the public opinion about the preferable ways of shopping and products for selling. The attention to the public opinion is a powerful idea to realise whether the Chinese people are ready and eager to use the services and products that are not from China. Another important research method is the analysis of case studies introduced by the company. The analysis of the corporate responsibility activities helps to understand how the organisation chooses the activities and what it expects to get from them. A literature review is one more method that can be used to analyse the company and find out interesting material to rely on. There are many facts about Sainsbury’s offered online and found in different journals and books. The Chinese grocery market can be also investigated using literature analysis and the statistics offered online. Finally, it is possible to use meta-analysis in the report to combine the results of different investigations and studies and find out how certain interventions can influence the work of a company and its further development and promotion in different countries.

Every method mentioned is a good opportunity to focus on several variables of the report: Sainsbury’s as the primary issue for the analysis, the Chinese grocery market as the place where the intervention takes place, the Chinese as the audience involved in research, and Tmall as the method of the process implementation.

Questionnaire Survey

A questionnaire survey is the research method used by many students and business people to find out the further impacts of an offered implementation or change. This method has several advantages and disadvantages that have to be taken into consideration in the process of the company’s analysis. For example, 100 Chinese, who are of different gender, age, status, and occupation, are chosen for the questionnaire survey. They are asked to clear up what kinds of shopping methods they prefer and whether they are ready for online supermarkets lines being improved and enlarged in their country. The results show that more than 80% of the Chinese like to make purchases online and are ready to spend their money on grocery online. It is possible that some of them would like try the UK quality using Sainsbury’s entrance into the Chinese market. The attention to the public opinion is a powerful aspect of the chosen research method. Sainsbury’s is the company that appreciates the interests and needs of the customers, and the chosen method seems to be a good way to gather as many public opinions as possible to come to one particular conclusion. Finally, this type of survey helps to gather much information from different people in a short period. Though it may vary considerably, it turns out to be a good opportunity to find out several perspectives to analyse Sainsbury’s and the methods of shopping preferable by a particular population.

Case Studies

A case study is a method that aims at investigating specific situations and trends used by the company in different periods. The case studies are introduced on the official site of Sainsbury’s and prove that the company has achieved a lot and participated in a variety of activities during the last century. The case study about the partnership with Carers UK demonstrates how important the idea of family support is. This event helps to realise that Sainsbury’s values can be shared by a variety of organisations, and Sainsbury’s has enough powers to cooperate with some of them and promote the required portion of care and understanding for their customers. Among the existing case studies, the idea to use renewable energy and reduce the level of CO2 emissions by 40% seems to be one of the most successful and noticeable (J Sainsbury Plc, 2015g). In 2008, Sainsbury’s demonstrated a good ability to decrease the production of harmful wastes by using lower lighting levels and relying on the power of daylight. A certain attention has been paid to the store’s constructions that turned out to be environmentally responsible and make it possible to recycle the materials under the most appropriate conditions.

The situations help to explain how Sainsbury’s can combine the theoretical knowledge gathered during the decades with the current possibilities and intentions of the colleagues and the leaders. Case studies alone cannot give a general explanation and evaluation of the company, but its particularity may be easily combined with some other methods.

Review of Literature

The evaluation of the material about the company that has been already created and published is a good way to learn the Sainsbury’s activities. It is not enough to find several interesting articles and analyse the information given. This research method aims at focusing on the details that the company’s activities consist of. A literature review is a synthesis of the information that helps to get a clear picture of why and how different steps are taken. For example, research of Karim, Huda, and Khan (2012) explain the worth of such issues like knowledge, skills, and attitudes that have to be considered as the most important ingredients to create a successful business, and Sainsbury’s is chosen as the example to rely on. The authors consider the outcomes of employee training and the importance of special training programmes using which Sainsbury’s can control the present changing business climate (Karim, 2012).

The article by Akter (2012) is one more credible source of information with the help of which Sainsbury’s and its business strategy can be evaluated. This work focuses on the level of employee satisfaction and its direct impact on the Sainsbury’s work. From this article, it becomes clear that the company tries to unite the values about caring the customers with the necessity to consider the role of the colleagues, who decide to work in the company. The idea to support reward systems seems to be powerful indeed as it promotes the drive for organisational performance and encourages people to do everything possible to achieve the goals set by the company (Akter, 2012).

Meta-Analysis

Meta-analysis is one of the most complicated still effective research methods that can be used to evaluate the company, its place on the market, and its abilities in regards to those, available to other companies. During the meta-analysis, it is necessary to integrate different approaches and combine the results from different studies offered on a particular topic. For example, to clear up whether Sainsbury’s is ready to enter the Chinese market, it is possible to rely on the example of the company that has already attempted to attract the attention of the Chinese customers: the case when Costco decided to go to China without even opening a store (Stock, 2014) and rely on its reputation in the USA and the ability to create and support the chosen mission (Anitsal, Anitsal, Girard, 2013). To succeed in the chosen research method, it is also possible to add some theoretical background like the evaluation of the book material about business strategies and the grocery industry in different countries. According to Aaker and McLoughlin (2010), strategic market management is an important part of the system that cannot be neglected by the companies that are going to change the marketplace. Therefore, the examples of Sainsbury’s or any other powerful supermarket retailer prove that China is one of the best options for the stores from different parts of the world to address to (Pennemann, 2013).

In general, the discussed methods introduce a solid basis for research. Sainsbury’s is the company that is going to make a serious step – to enter the Chinese market. To be sure about the effectiveness of the choice, it is necessary to touch upon such aspects like opportunities, challenges, feasibility, etc. The report is created based on a review of the past academic studies, personal experience and evaluation, and the results of the questionnaires. At the end of the project, if all the sources and methods are used properly, it can be possible to identify the potential solutions for the company, consider its real feasibility, and learn something from the past experiences of the companies that have already entered or failed to enter the Chinese grocery industry.

SWOT Analysis/Opportunity Quantification

The SWOT analysis is one of the frequently used tools to identify, understand, and evaluate the situations taking place in an organisation that focus on the company’s strengths, weaknesses, opportunities, and threats (Ferrell & Hartline, 2012). Each aspect of the analysis has to be properly identified and analysed from different perspectives to be sure about the worth of each step taken. The modern cities of China has a huge number of population, therefore, the power of purchasing among the Chinese online is huge indeed and has to be considered in the SWOT analysis as both, a threat and an opportunity for the company.

Sainsbury’s is identified as the company that chooses people, who buy grocery online/offline, as the main segment of their strategy. What the company offers is a possibility of selling goods at low prices with a considerable variety to offer. The population of the UK, where Sainsbury’s was founded and developed for a long period differs considerably from the population of China with the traditions, cultural preferences, styles of life, manners, and even tastes. The urban population of China does not have much time to go shopping anytime they want as they need to work long hours (Wu & Gaunatz, 2013). Several Chinese modern cities support the idea of grocery markets online; still, the constant changes and the necessity to improve the already formulated system due to the current information and technological progress make different markets compete on a global level to offer the best ideas to the customers. Therefore, the possibility of entrance of the UK Sainsbury’s to the Chinese market is high, and it is necessary to clear up the company strengths and weakness in regards to the Chinese population’s demands and expectations and quantify its opportunities and threats (problems).

A joint partnership is one of the market entry strategies that can work for Sainsbury’s expansion overseas (Nielsen, 2005). However, it requires sufficient capital for the investment. Sainsbury is making the right move in its financial management strategy. In the 2014/15 financial year, the firm has managed to have profit before tax levels that are higher than its performance in the 2010/11 fiscal year, yet there have been considerable investment activities in the business. Besides, the increase in cost savings in the company for the latest fiscal year has been larger than the previous increases over the last five years. The company saved 140 million pounds against 120 million pounds in the last year, despite a decrease in profits before tax from 780 million pounds in 2013/14 to 681 million pounds in 2014/15.

The company’s strategy is to diversify funding sources as a way of reducing its risk against changes in its financing environment, such as interest rates and currency exchange rates. The move aims to maintain an appropriate standby liquidity that should allow the firm to maintain a steady borrowing discipline and give assurance to its stockholders that are attainable. It places the company in a good position for taking up an opportunity to advance its online retail presence in China and boost its revenues to prevent a further slide in its profitability.

China’s online shopping market has been growing steadily in the past years. The volume of online retail trade was US$190 billion in 2012 and is expected to rise to US$650 billion by 2020 (Australia Unlimited, 2013). Consumption continues to become a major contributor to China’s GDP, which is shifting the government’s policy to support the sector. The penetration of high-speed internet is also a factor supporting the growth of the sector. China’s demographic characteristics are also changing. A rise in the affluent middle class that is also aspirational can explain partly the rise in online retailing in the country (Australia Unlimited, 2013). China’s online retail market relies on delivery services, which are also payment collection services whose personnel can acts as sales representatives and brand ambassadors for a given product to allow companies to cultivate brand growth at the local level (Australia Unlimited, 2013).

Strengths

The identification of strong aspects of the company is one of the first steps that should be taken in the analysis. The presence of the strengths informs whether the company is ready enough for some organisational changes and the changes that can be made on a global level. Sainsbury’s is the company that possesses several strengths known locally and globally. The list of the following factors serves as the best evidence and a powerful ground for Sainsbury’s to enter the Chinese grocery market online.

1. Sainsbury’s has been already gained the fame of one of the biggest and the most successful supermarket chains in the United Kingdom (J Sainsbury Plc, 2015c). A century and a half is the approximate age of the company, and that period was enough to introduce itself as a powerful and capable organisation that is eager to take care of its customers and put their interests and demands in the first place.
2. Sainsbury’s has a strong basis of employees, usually called colleagues. More than 160,000 people work at Sainsbury’s today (J Sainsbury Plc, 2015d). The majority of them got a chance to study at the special institutions created by the company and develop the skills crucial for the work at this particular company. Sainsbury’s cannot offer their customers poor-skilled people, who promote services and help to sell and take care of the products. Therefore, one of the Sainsbury’s primary goals is to choose the best people to work with and train them on the necessary level regarding the values of the company.
3. Sainsbury’s is good at introducing its brand and advertising. It creates a captivating story within the frames of which the main values and interests of the company are presented. It is not enough to say that the products and food are of high quality and worth the customers’ attention. The company wants every customer try and enjoy the quality of food and the attitude of the team. A customer’s satisfaction is the core of advertising that differentiates the company and makes it a strong competitor in the grocery supermarket line.
4. Sainsbury’s has already opened more than 580 supermarkets and 520 convenience stores across the United Kingdom (J Sainsbury Plc, 2015d) and gained the reputation of a qualified and attentive leader in the chosen industry. Many people get to know about the supermarket, and more people want to make purchases with Sainsbury’s from any part of the United Kingdom.
5. Sainsbury’s is very attentive with the choice of its leaders and managers. Its current chairman, David Tyler, chief executive, Mike Coupe, and chief financial officer, John Rogers (J Sainsbury Plc, 2015d), introduce a good team that does care for the company and make sure that every employer has enough appropriate working conditions to provide the customers with fresh products and high-level services. The reputation of management is a crucial factor for the company, and Sainsbury’s has already proved how careful it can be.
6. The final and the most important strength of the company is the presence of loyal customers, who are using the services and goods of the company regularly. People, who have already tried the products offered by Sainsbury’s, do not want to change the supplier because they have finally found high-quality products at affordable prices.

Weaknesses

However, in addition to the strong aspects of the company’s work, Sainsbury’s still has several weak points that make the company think about the required changes and improvements. However, it has been proved by the company that the identified weaknesses are the necessity that has to be done to meet the current marketing requirements.

1. Sainsbury’s has to raise food prices because of the global changes that take place in the market. Though the company tries to make use of different coupons and sales for its regular customers, many people cannot agree with the idea of the rising prices. People admit that the whole essence of the company and its work (good products at affordable prices) is lost. People, who do not find high quality as the only reason to address the supermarket, need to be more inspired. Therefore, Sainsbury’s weakness based on the necessity to change prices and disappoint the customers in some way leads to the development of another weakness.
2. Inability to introduce an appropriate competition to such brands like Tesco or Asda regarding the prices takes place. Sainsbury’s is the line of supermarkets that has already established itself as the company of low prices and high-quality products. As soon as one of the aspects changes, people may expect the change of another aspect. Still, the expected change does not happen, and people cannot understand why the rising of prices is supported by the quality improvement. Though it is a slow process, still, it is happening – people cannot accept the changes in prices and start looking at the services and products offered by other supermarkets.

It is necessary to admit that these weaknesses do not worsen the company. They only symbolise the necessity to make some changes and improve the current state of affairs returning to the established values and proving the fact that the company has something interesting to offer to the customers.

Opportunities (Opportunity Quantification)

Taking into consideration the strengths and weaknesses of the company, it is possible to formulate the list of the opportunities it may face entering the Chinese market and offering online shopping and services to the people with preferences and culture different from those of the UK people.

1. Sainsbury’s can enter the grocery market of Chine through the cooperation with such organisation like Tmall, one of the Chinese websites that supports business-to-customer relations online and is used by the population regularly (Stock, 2014). Tmall has been already used by Costco, the American food retailer. Though the organisation does not open any physical stores in China, its brand is known to many Chinese and used by them. Costco’s experience turns out to be a good opportunity for Sainsbury’s to try entering the Chinese market and developing trustful relations with Tmall and the potential customers, who are going to learn better the UK quality.
2. Sainsbury’s get a chance to expand into the developing economies of Asia or any other countries. Still, the purpose of this particular report is to investigate the possibility and the conditions under which Sainsbury’s can join the Chinese market industry and prove that the quality of the food offered is high and even better.
3. Online shopping is a good opportunity for Sainsbury to introduce its products to a variety of the Chinese and not to spend much money on developing physical buildings, making the necessary agreements, and choosing the most appropriate locations analysis the social and economic aspects of different regions. Also, the population of China is huge indeed, and it is beneficial for the company to spread its services among the millions of people with the same cultural preferences and interests. The difference in gender, age, and incomes may cause various attitudes to online shopping (as it is seen from the questionnaire survey conducted), still, it is proved that people do want to buy food online to save their time and get access to a variety of products at different prices and quality.
4. The reputation of the company under analysis is successful indeed. If it is properly introduced in the Chinese market through the cooperation with Tmall, it will get a chance to develop more business relations with the organisations in different regions of China. Reputation and high-quality brand are the two factors that usually attract the attention of the customers and potential partners, and Sainsbury’s is the company that has these two issues being properly developed.

Threats (Problem Quantification)

To be successful at implementing the changes within the company and joining a new country’s market industry, Sainsbury’s has to consider the possibility of threats that can influence the development of the relations and services the company addresses to China. The identification of the threats, the potential problems for the company, should help to create a good plan and overcome the challenges that can worsen the results of the work.

1. The existing level of competition is one of the most terrible threats for the company. China has already allowed Costco to its market. Sainsbury’s has to be ready to provide good explanations and promises to prove its worthiness.
2. The current economic slowdown on a global level may influence the speed of Sainsbury’s entrance to the markets of China. It is not the company that can influence the general economic picture of the country. Still, the company has all chances to use the most appropriate ideas, introduce its values, and prove the high levels of the products’ quality.
3. There is a necessity to follow the changes that take place in the country, where the market is introduced and make the improvements accordingly. There is a threat that a competitor may identify the necessity of change earlier and take the steps. The company may analyse the situation poorly and take a wrong step. Therefore, Sainsbury’s need to be ready to analyse the current changes in the Chinese market and even the economic situation to offer the appropriate products at affordable prices and take the leading positions in the competitions in the chosen sphere. Tesco, Morrison’s, and Asda are considered to be the main competitors for Sainsbury in the United Kingdom, and all of these organisations may decide to enter the Chinese market using the example of Sainsbury’s.

In general, the quantification of the problems and opportunities of Sainsbury’s demonstrate the readiness of the company to enter the Chinese market. The current economic situation in the UK and China is not stable; still, it is successful enough to provide Sainsbury’s with an opportunity to introduce its products and values to the people of a new culture. China is the country with a unique combination of interests, history, and personal preferences. The population of this country puts the technological progress in the first place. The British quality of food is a good chance for the Chinese to enjoy the freshness and naturalness; and Tmall can be used as a possible online shopping source for Sainsbury’s to spread its products due to Tmall’s popularity and reputation gained among the Chinese people.

Opportunity/Problem Resolution

Importance of Past and Future Experiences

The analysis of the opportunities for the UK grocery company, Sainsbury’s, to enter the Chinese market and expand its business through the services of an online store, Tmall, owned by Alibaba, may be based on the examples of the experience demonstrated by such companies like Costco or Tesco (Tesco plc, 2014) and the possible experience of the UK competitor, Asda.

Opportunity One. Costco is the US warehouse retailer that makes numerous attempts to enter the Chinese market and take the leading positions by a variety of means. First, it succeeded in cooperating with Alibaba ‘s Tmall (Yingying, 2015) and promoting its products to the Chinese population. One of the explanations Costco gave about its intentions to enter the market of this particular country is the presence of really fast-growing shoppers that are eager to buy foreign goods and promote it to the Chinese people. The stats shows that more than 20 million foreign companies have been already counted in China in 2014 (Yingying, 2015), but these numbers change considerably within a short period. The Costco’s experience proves that China is the country with good intentions to establish as many cross-border commerce frameworks as possible (Yingying, 2015) because online retail development cannot be stopped, and many companies from different parts of the world can win a lot in China.

Threat One. However, at the same time, Costco’s practice introduces several peculiarities of the Chinese people. First, it is stated that Chinese customers are rather cautious, and it is wrong to believe that their buying decisions are all based on price. What they are interested in is “tailor-made products and a shopping environment that reflects local touch” (Trefis Team, 2015, para. 4).

The Chinese is the nation that is extremely concerned about the quality of the products offered; therefore, Costco had to spend much time checking the quality and appropriateness of the goods delivered. On the one hand, Sainsbury’s should not worry about the quality of the products it offers as it is one of the company’s best strengths. On the other hand, before Sainsbury’s enters the market, it has to investigate the Chinese population again, clear up what people of the country expect to get with the UK grocery shop, and analyse whether Sainsbury’s can meet all expectations.

The example of Wal-Mart, another world retail giant, demonstrates that it is not enough to offer low prices. The Chinese customers are not attracted by the idea of cheapness at the expense of quality. This is why in China, people do not choose Wal-Mart but continue buying groceries at their local markets (Trefis Team, 2015). In its turn, Sainsbury’s should think about the successful methods of advertising that helps to underline the importance of British culture and uniqueness and prove that the offered products differ from the rest due to the company’s attention to the customers and the ability to follow the traditions of the UK.

Opportunity Two. The role of online shopping in the everyday life is crucial indeed. People want to save their time and money and make use of the services offered online. Still, even such burning desire to get access to a variety of products with spending fewer efforts is characterised by several unpredicted challenges. On the one hand, Sainsbury’s get an amazing opportunity to offer its groceries to the Chinese people and prove the high-level quality within a short period. On the other hand, the Chinese are rather conserved, and they need more time to be confident in the correctness of their choices, and Sainsbury’s decides to send several managers to check the regions for implementation and to provide the Chinese with the first glance at the products offered by the company (Wachman, 2010).

Threat Two. Sainsbury’s decides to cooperate with Tmall as the leading online platform for many stores in China. However, the company has to understand the threats that may come along with the Tmall’s cooperation. Several small vendors have already suffered from the strict rules introduced by the company “to charge significantly higher annual technical support fee and security deposit to vendors on Tmall” (Guo & Hu, 2014, p.44). This case should not frighten Sainsbury’s but inform about possible challenges and the necessity to be careful making agreements with the chosen organisation. The reputation of Tmall and the abilities opened are great indeed. Many companies want to work with Tmall to be in demand among the people of China.

In general, Sainsbury’s is the company with several potential benefits. It has a solid basis to start work at the Chinese market. The groceries offered by Sainsbury’s introduce the uniqueness of the British taste. The history of the company and the demonstration of its values help to prove Chinese customers their chances to enjoy individuality and taste the UK quality.

Analysis of a New Market Opportunity: Boston Matrix

To take up the opportunity, Sainsbury must get affordable capital for its investment activities. It must get a partner to support its entry into the new market. It also needs sufficient capital to honour its commitment to the new market opportunity. A Boston Matrix business analysis tool will help to analyse the opportunity.

The in-store sales for the group will continue to remain stable in the medium-term because of increased costs of operations and cost of goods and services. Meanwhile, the expansion and refurbishment of stores will continue to give Sainsbury the ability to offset the increases in prices with better economies of scale. However, the business has to consider overseas investments for stable and predictable growth. In particular, the entry into online shopping market in China will allow it to develop another cash cow, based on Boston matrix analysis. The business moved to banking in the past, which did not pay in favourable returns on investment. However, as the unit remains a question mark in the company’s outlook, it might change into a big source of capital financing. It will allow the company to reduce its external debt obligation and decrease its cost of capital. This will eventually invest a cash cow that contributes significantly to the overall operating cash flow for the group. Presently, there is no part of the company with a negative outlook for the future.

Table 1: Boston Matrix for Sainsbury showing a positive outlook for the group (Source: Author)

The online grocery division of the company delivered sales growth increase of seven percent, which is significant for the business and serves as proof of the potential existing in the online marketplace. With an aggressive approach at home and overseas, Sainsbury should be able to surpass the current increase of 13 percent in its average increase in orders per week. Besides, the online platform allows the company to know customers better and run targeting campaigns for boosting sales and increasing its market share. With its Click & Collect service, the company has allowed its clients to place general merchandise orders online and then be able to choose from products offered in more than 900 stores owned by Sainsbury (J Sainsbury Plc, 2015e). It will be part of the extension during expansion into the overseas market, especially China.

Sources of Finance for Expansion

The latest financing has been a long-term loan that is due in 2018 and amounts to 850 million pounds. Also, there is another long-term loan facility due in 2031 for 811 million pounds. These loans have a security of the company’s property assets, which make them relatively secure. Given that Sainsbury has been increasing its assets over the short-term with new developments, it will be able to sustain the security of the loans. It is unlike entering into a negative liquidity position because of servicing the loans. Meanwhile, unsecured loans are amounting to 339 million pounds. They range in maturity from 2015 to the year 2019. Therefore, they are paramount to the company’s profitability in the next few years as it enters the Chinese retail market. Besides, there is a 127 million pounds amount due because the company is relying on hire purchase facilities (J Sainsbury Plc, 2015e).

The company has also been relying on revolving credit facilities, with conditions for financing attached to its performance of core business. The business was able to surpass the conditions in its latest report of March 2015. The condition is to have the ratio of EBITDAR to consolidated net interest plus net rental expenditure lower than the returns on loans (J Sainsbury Plc, 2015e). After relying on an unsecured revolving credit facility, the group eventually moved to a secured resource of 1,150 million pounds. It has a final maturity of 2020, which gives the group sufficient time to conduct its business, meet other obligations, and still have sufficient funds for expansion in its traditional and new markets, such as China. The move to a secured financing facility, which is pegged against the security of 60 supermarket properties in this case, ensures that there are no financial covenants in place. Therefore, there are no restrictions on other uses of revenue by the group (Ruddick, 2015).

Long-Term versus Short-Term Debt

The evaluation of the past and current sources of finance, as well as the financial application of the company, is one of the ways to define and maximise the Sainsbury’s opportunities in regards to its attempts to expand the Chinese market. For a long period, the possibility of long-term debt was playing a crucial role in the company’s development, and its increase turned out to be a successful means of fund investments in various types of assets. The use of long-term debt makes a major component of Sainsbury’s financial strategy, with the present outlook being in the ratio of 3 to 1 for long-term debt and short-term debt. Overall, the group has been moving its unsecured loan to become secured loan facilities. It has also cleared many smaller unsecured financing facilities that were due in 2015. Notably, there has been no default.

Sainsbury’s cannot predict the results of its possible integration into the Chinese market, still, its long-term debt serves as a powerful facility in online sales using which it is possible to revenue streams, ensure long-term sustainability, reduce the risks, and get ready to invest in the Chinese market with several stable low interest rates. Also, working capital of the company has been changed from £300 million to 313 million that leads to several positive steps that can be taken to optimise and even maximise the funding position and promote the support of lending (J Sainsbury Plc, 2015e). First, it is possible to make use of the flexibility of the company’s assets and choose and even change the directions during the process of integration. The increased trade payables and their proportional dependence on revenues is a powerful evidence for flexible financial sources and coordination according to the demands identified within a short period. These opportunities will promote long-term flexibility and sustainable growth considerably; still, Sainsbury’s has to be ready to convince the potential partners and other members of the Chinese market in its stable situation and the possibility to overcome the risks (if any) with a minimum of costs.

Debt vs. Equity

The business financed its investment activities with 900 million pounds from cash flows, which were high by 310 million pounds in comparison to the previous year due to reduced property transactions that the group had. The business has also relied on new debt received of 674 million pounds that helped it offset another 659 million pounds in borrowings that it had repaid during the year, which leaves it with sufficient funds to move on with its investment activities, including expansion. The group is expecting a reduction in its year-end net debt for 2015/16 to be significantly lower than the current one, and it should also be an improvement in the group’s current retail working capital (J Sainsbury Plc, 2015e).

Debt overall remained stable from 2012 to 2015 below 3 billion pounds, while assets remained stable after a significant rise in 2014. This leaves the debt to total capital ratio to 0.638. On the other hand, the debt to equity ratio for the group is 0.499, with the total debt/total capital being just 0.333 (J Sainsbury Plc, 2015e). Such ratio values are a positive indication of the company’s ability to incur more debt without injuring its positive financial position. Present investments are also likely to bump its total asset valuation in the coming year, which will improve its debt to equity ratio in the medium term.

Sainsbury’s experience and the results achieved during the last decades show that the use of debt is faster than the use of its equity (J Sainsbury Plc., 2015e). Still, during the last five years, the debt of the company is stable and changes proportionally with equity. These activities increase investments and offer a stable basis for changes and improvements that are obvious as soon as the company wants to join the Chinese market and starts offering its groceries using Tmall as one of the leading online shops. The payment system of Tmall is stable and clear to every Chinese customer; this is why the potential customers of Sainsbury’s will hardly influence the challenges buying the products of Sainsbury’s from Tmall. However, Sainsbury’s itself has to be ready to investigate the conditions under which Tmall offers the products and explain their importance to the customers.

To maximise the opportunities Sainsbury’s may have in the Chinese market, it is crucially important to take the following steps:

1. Investigate what the Chinese customers may want in and expect from the sphere of grocery;
2. Compare the expectations with the conditions under which Tmall introduces Sainsbury’s products;
3. Define the challenges possible with the implementation of a new payment system (Tmall and Sainsbury’s have different payment methods, and the company under analysis should realise its necessity to meet the requirements of the chosen Chinese online store);
4. Consider the already approved theories and apply some of them to the situation of Sainsbury’s to clear up and get ready for the challenges and overcome them within a short period.

Feasibility Study

This part of the paper concentrates on the financial strategy and current financial situation of the company to highlight its ability to take advantage of the available expansion opportunity. This section looks at the implications that the company’s financial strategy has on its performance and uses the results to determine its ability to take on the investment opportunity of entering the Chinese market by setting up its online store through Tmall. It follows the institutional theory as it applies to organisational change and adaptation. The paper shows that low levels of financial constraints in operations and investment activities of the company aid in the initiation and adoption of expansionary changes into new markets, which move away the company from its current operational position (Alhorr, Singh, & Kim, 2010). Another crucial part of the report is the explanation of why each step has its ground and can be easily explained. Sainsbury’s readiness to enter the Chinese market is not only about the financial aspects of the project. Sainsbury’s has to be ready to compete with several foreign retail companies that want to succeed in entering China and use its best issues to convince the customers.

Implications of Sainsbury’s Financial Strategy

Gearing. In the last five years, gearing has gradually increased from 33.4% to 42.3%. The change is within the 10% percent; therefore, there is no reason for alarm. However, a proposed corrective action would be to lower the gearing to below 40% in the coming year (Sainsbury (J) PLC SBRY, 2015). The gearing explains that the business has been financing its new ventures, especially stores to generate more revenue in the future. Therefore, the expectation is that with the full operation and profitability of the new investments, the net debt vs. net assets percentage will naturally go back to a lower value that is sustainable for Sainsbury.

ROCE. The return on capital employed (ROCE) before taxes had been stable in the last five years, except in 2014/15 when it dipped to 9.7% from 11.3% (J Sainsbury Plc, 2015e). A steady ROCE is a good sign of a company that has a potential to support its growth prospect, maintain healthy profit margins and reward investors. Stability indicates that a company like Sainsbury can take on new business ventures quickly and turn them into profit centres. It would be the case with online shopping ventures that the company gets into with partners in the Chinese market to deliver its unique product and service portfolio to an already established retail distribution network.

The reason for ROCE reduction reduced sales. Also, the business suffered non-cash impairment and an onerous contract charge that partly affected the ROCE (J Sainsbury Plc, 2015e). The business ended up paying 628 million pounds for the cost, which attributed the reduced ROCE on a reduction in the closing capital employed.

Cost of Capital. The overall cost of capital over the last five years remained unchanged for the company. There are no changes in debt versus equity financing structures. The company has made changes to have most of its unsecured loans move to become secure ones, thereby leaving it in a better position to get new capital when need arises (J Sainsbury Plc, 2015e). Besides, Sainsbury has also been relying on direct financing from financial institutions. It also relies on a revolving fund, which allows it to support short-term capital needs without having to enter into other additional contractual agreements with other firms. In this regard, the cost of capital for the group remains stable and predictable in the medium term. The predictability allows Sainsbury to offer better partnership deals with its potential joint partners for new ventures. It also leaves Sainsbury with the ability to honour its capital commitments for any investment activities that the company continues to embark on throughout the world (J Sainsbury Plc, 2015e).

In addition to the given financial evaluation of the company and the overall Sainsbury’s readiness to enter the Chinese market with the help of the Tmall payment services and its reputation, the evaluation of the company’s activities and its reactions to the conditions offered by the Chinese market and Tmall and the identification of the challenges and real steps have to be given to complete the report. The following points will provide the necessary explanation of how Sainsbury’s should enter the Chinese market and use the services offered by Tmall.

From the questionnaire survey, where 100 Chinese from 20 to 50 are questioned, it is clear the marital status and the level of incomes do not influence the decision whether to buy or not to buy products online. It is the question of taste and preferences. Both, a single 45year-old man and a married 28-year-old woman, can buy some groceries online or, vice versa, go to a real shop neglecting the opportunities opened with online shopping. The way of how the company offers its products and benefits for the customers influences the further usage of the services and the reputation of the company as a good grocery retailer in the country. The ads have to be focused on the issues that differentiate the products of Sainsbury’s from the other stores’ products: the company’s values, the attention to every customer, and a powerful presentation of each product with its history and production details.

To prove the feasibility of the ideas offered, the following evaluation of a product can be used. Still, it is just a general idea of how to develop an ad.

The official site of the company introduces some details about the components of the juice to rationalise the choice of a customer. Still, it is not enough for the Chinese customer to learn some nutritional information about the product. It is more interesting and effective to learn why the juice is appropriate for a Chinese person. What makes this product special? Is it possible for an ordinary Chinese man, for example, to benefit from the purchase of this juice? Why should the Chinese pay attention to the product? Sainsbury’s should underline a true UK taste and the Chinese customers’ chance to enjoy the quality that has not been introduced before. The price should not matter when a chance to touch a new country’s essence comes. It is interesting to involve the customer in the purchasing process. It is necessary to prove the correctness of the choice.

Another feasible opportunity for Sainsbury’s to enter the market in China is to study the peculiarities of Tmall and clear up how to benefit from the cooperation with the store. Tmall turns out to be a powerful platform for Sainsbury’s to offer goods to consumers. The representatives of such famous brands like Adidas or Samsung have already defined Tmall as one of the exclusive channels that make online purchases successful and credible in China (“The world’s greatest bazaar”, 2013). Even though Tmall has one definite and serious competitor, Taobao, the reputation of the former is better and more convincing. People want to use Tmall. They trust the company and the payment system created. There is no need to think about the most appropriate ways to get connected with the customers. Sainsbury’s has to discuss the conditions of work with Tmall and set the payments that suit the both parties.

As soon as the conclusions are made, the work can begin. During the last several years, Sainsbury’s has proven that the product line “Taste the Difference” is a successful solution for the company to introduce their quality. Tmall may choose this line due to the results shown: about £1 billion of annual sales and a huge amount of products that are usually in demand. Sainsbury’s should also keep in mind that Tmall is open for every company around the whole world that can pay certain entry taxes and become interesting to the customers. This is why the company may win with Tmall because of the possibility to open real physical stores, take care of the location, and spend huge money on the equipment. It seems to be enough to be attractive online and offer attractive financial ideas to make Tmall’s users pay attention to the grocery of Sainsbury’s.

Regarding the conditions under which Sainsbury’s has to work and offer its groceries to the Chinese people, it is possible to underline two crucial factors that the company has to pay attention to. On the one hand, it is the Chinese people with their demands and expectations. On the other hand, it is Tmall with its opportunities and requirements that have to be met. Both aspects introduce several benefits for Sainsbury’s, as well as create certain threats that have to be overcome. Sainsbury’s is ready to conquer a new market, and the Chinese need some new fresh and unique ideas. The financial platform of the company and the technical platform built by Tmall are perfectly combined and can be implemented accordingly.

Discussion

Sainsbury Expansion into China: Financial Outlook

With the present positive outlook for financial performance in its coming financial year, Sainsbury has a green light to expand into online shopping in China. The company has proof of the lucrativeness of online shopping, which allows it to increase sales without accompanying a change in its investment activities. This allows it reduce its debt appetite and have more cash flow for serving its operations. As a retail company, a low liquidity ratio is understandable due to the obligations that the business has with its in-store retail business. It has to react to changes in short-term pricing and upgrade its stores to meet customer expectations and changes in their preferences. These are cost factors that will continue to impact the liquidity position of the company. However, the move to invest in a bank is the right one for a long-term perspective of accessing affordable capital.

The financial situation for Sainsbury group is positive and allows the company to move overseas to tap avenues for growth in its online retail business. An entry through Tmall would curtail Sainsbury brand visibility, but it would have a positive impact on its finances. There would be limited licensing obligations for the company to start serving the retail market in China. It would rely on an already established delivery channel and enjoy the gains made by the parent company of Tmall to raise awareness for online shopping and overall Tmall brand awareness (Tepper, 2015). With a positive outlook for its finances, Sainsbury should be able to cope with any changes in the fees levied by Tmall in the short-term, especially the compulsory fixed sum deposit.

Sainsbury’s in China: Culture and Traditions

In addition to the already identified positive financial situation of the company, it is necessary to say a few words about the ethical aspects that are also crucial for the integration of Sainsbury’s into the Chinese market and the grocery’s industry in particular because China is the country, where the order and respect to the traditions do matter. During the whole writing process and the reasons given in the report, it is clear that Sainsbury’s has enough powerful grounds to enter the grocery market of China. Still, the company has to comprehend that it should not impose its values and traditions on the Chinese people. It should be a gentle still confident introduction of the services and products that are so popular in the United Kingdom.

The comparison and evaluate of the past experiences demonstrated by Costco and similar companies show that China is a strict company. It may allow everyone to try themselves on its market, still, not many can stay for a long period. The demands of the Chinese are high indeed. The country can understand how rich and effective its population is. Therefore, it uses the benefits got and chooses only the best and the most appropriate options that come from different parts of the world. Many companies have already experienced the Chinese “Welcome”, but only a few of them are in demand among the Chinese customers now. Sainsbury’s has to be ready to address its values and history. Its leaders understand that online stores are easy to be created in China. However, with the promotion of online Sainsbury’s stores, the company loses its strength, the professionalism of the personnel to demonstrate its care for customers. The Chinese online shoppers can enjoy the quality of UK products, but they are not able to understand what it means to be cared by a professional UK vendor. The values of the company support the business strategy chosen: first, the company offers its customers the best possible for food and health (J Sainsbury Plc, 2015f); second, Sainsbury’s supports the idea of sourcing with integrity, in other words, the company chooses to work directly with the farmers and growers to be sure of the quality of all products sold; third, the idea of respect to environment has been already supported by several companies, and Sainsbury’s is on the list of the companies that become the greenest grocery store and involves many suppliers to follow its example; and, finally, the company strives to make a positive different to the chosen community and proves itself as a good neighbour with the best intentions.

Entering a New Country Market

Sainsbury’s is a powerful company with its definite basis in the United Kingdom. Still, in China, not many people know about this grocery’s retail chain. Therefore, Sainsbury’s has to understand that its integration into the Chinese market is a new situation with no definite infrastructure, no sales, and poor knowledge of the Chinese market. Though it is possible to learn a lot from the surveys, questionnaires, and other sources or rely on the experience of various companies, the experience of Sainsbury’s may differ, and differ a lot. It is wrong to believe that the company’s decision to expand its business to China using Tmall’s opportunities is just the expansion of the already developed business (Keillor, 2011). It is a new kind of work that has to be made on a high level. It is the consideration of such issues like politics, demography, economics, culture, traditions, etc. Sainsbury’s should not only to learn the peculiarities of the new market. The company has to be ready to introduce its ideas, share their cultural preferences, and prove the worth of their work to the Chinese people with their interests and demands. The maximisation of the opportunities means the evaluation and comparison of the Chinese features in regards to the UK principles.

The general comparison of the two countries shows that the styles of life, as well as the financial conditions under which the two types of the population live, differ considerably (“China vs. United Kingdom”, 2015). One of the most evident differences is the level of expenses in the countries: China sets prices on different products lower than those of the UK, the Chinese do not usually take care of the financial aspect of the product but pay more attention to the quality and the origins of the products. Research show that the Chinese people like to use unique products (Trefis Team, 2015), and Sainsbury’s has to use its best means to prove that the British quality and culture are worth of the Chinese attention even if the prices are higher.

Conclusions

Sainsbury’s is the company that has been proving its quality and reputation for a long period. Being founded in 1869 as a store with several high-quality products, nowadays, in 2015, it does not lose any of its values and improves its reputation. However, the level of quality is not the only according to which the company has to be evaluated. The achievements demonstrated by Sainsbury’s are amazing indeed and make many other UK companies follow its example and respect its history. There are many customers, who want to use the products offered by Sainsbury’s. This company cooperates directly with many UK farmers and gardeners, who are eager to share their production and provide ordinary people with quality products.

It is not an easy task to support this kind of cooperation. Not many farmers agree with the conditions offered by a company, and not many local companies prefer the services and products of local farmers neglecting a chance to use the products with a world brand. However, grocery should not the market sphere within the frames of which people strive to sell more products with a famous brand. Sellers have to focus on the quality of the products and think about the customers, who are going to use and eat the products. Sainsbury’s introduces itself as a powerful and effective competitor on the British grocery market, as well as any other markets Sainsbury’s is involved in. This organisation has proved that not only quality can matter. In addition to this important factor, Sainsbury’s pays much attention to the relations that develop between customers and sellers. This company sets several values with the help of which all managers, sellers, and other employees truly believe that they are a part of a huge team, the colleagues, who have to do their best to satisfy the customers and meet all their needs.

However, international business differs considerably from doing business at home. The company has to develop several new skills and improve its knowledge about the country to enter and the peculiarities of the market in the chosen country. There is a necessity to find a kind of guide, a helper that can show the right direction and the way of how to make a right choice. The report shows that Sainsbury’s has even found the answer to this question. It is going to use the services offered by one of the most popular and demanded by the customers’ web site, Tmall. Tmall is a chance for Sainsbury’s to enter a new country’s market and benefit from the already properly developed payment system and the already created regular group of customers. At the same time, the provided opportunities should not make the company think that there is nothing left to be done. There are much work and research that have to be made by Sainsbury’s.

In the paper, the intentions of Sainsbury’s to expand its business in China are introduced. The analysis of the past case studies and questionnaire surveys and some other methods are used to explain the steps Sainsbury’s takes. Still, even though a variety of sources is used, and several ideas are offered, certain limitations have to identified and elaborated in the following investigations that can be made as soon as Sainsbury’s starts taking the first steps and achieving the goals set. First of all, the current report is limited to the periods for entering a new country’s market. The conditions under which Sainsbury’s can enter the Chinese market can be easily changed within a short period. For example, some other companies from different countries get to know about the intentions of Sainsbury’s to enter the Chinese grocery business and make the same decisions creating challenges for the company. It may also happen that the economic situation of the chosen country can be changed because of the global changes that are happening nowadays.

Finally, though the Chinese people are fond of their traditions, culture, and history, they can be easily fascinated with the latest technological innovation that can substitute the idea of buying fresh food from a British store with the prices higher than the local ones. This is why as soon as the managers and analytics of Sainsbury’s define the scope of its possible entrance into the Chinese market and define the conditions as preferable, they have to move, implement changes, and never forget about its values and traditions that turn out to be a visit card for Sainsbury’s.

Recommendations

The following recommendations are created based on the report developed above. Sainsbury’s is defined as the company with good chances to enter the Chinese market, expand its business successfully, and operate a new online store in Tmall with several benefits. The list of the suggestions is as follows:

1. Continue investigate the Chinese grocery market and IT sphere to understand the preferences of the Chinese in the crucial for Sainsbury’s spheres.
2. Discuss the conditions under which Sainsbury’s can implement its services in Chine with Tmall as the main intermediary of the operation.
3. Pay attention to the past experiences of other countries that have already tried to enter the Chinese market (both, successfully and unsuccessfully).
4. Think about the advertisements that can be used to introduce Sainsbury’s products to the Chinese population and focus on such aspects as traditions, culture, uniqueness, and quality of services.
5. Remind the difference that exists between international and local business and do not use the same techniques that have been always used in the United Kingdom.
6. Do not set many goals at the same time but create one particular long-term goal (e.g. to become a leading international company in the sphere of grocery market with a brand name in China) and several short-term goals (e.g. establish good business relations with Tmall, introduce the products on a high level, prepare the Chinese to a possibility to buy not only groceries with Sainsbury’s, share the values developed with centuries with people, who appreciate the history and respect the traditions).

Sainsbury’s is more than ready to enter the Chinese market, and the population of China has to provide the company with a chance to share its own grocery culture with the world.

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Overview of the Sainsbury and its operations

Sainsbury Ltd, which is alternatively referred to as Sainsbury, is one of the largest chains of supermarkets located in the UK (Gilpin 1994, p.9). It has a share of 16.5% for all the UK’s supermarket industry market share (Finch 2007, p.11).

Established by John James Sainsbury and his spouse, the company opened its first outlet in 1889 and developed immensely over the Victorian period. By 1922, Sainsbury was the leading UK grocery merchant. In the 1980s, the company became the first one to offer retailing self-service.

However, the company experienced an immense competition when Tesco (holds 31.5% of the total market share) overtook it to become the market leader in self-retailing service.

In 2003, the company faced yet another blow when Asda (holds 16.7% of the market share) took the second position in terms of size thus leaving J Sainsbury to assume the third position in the UK’s supermarket industry.

The company holds this position even now. Sainsbury employs an excess of 15,000 people within its more than 1000 outlets within the UK.

By May 2011, Lord Sainsbury of Turville was the “largest family shareholder with 4.99% while Judith Portrait, the trustee of various Sainsbury settlements and charitable trusts, held 3.92%” (Sainsbury 2011, Para.14).

Qatar savings power is the single leading general owner of the business since it assumes 25.999% of all the organisation’s shares. Sainsbury also offers financial service through a joint venture with Lloyds banking group. It also provides online purchase and delivery services.

The supply chains of the company operate within 13 regional centres of distribution. Two national supply chains for foods are frozen while two other national supply chains are meant for goods that move slowly (Sainsbury 2011, Para.4). All depots have depot codes, which identify them uniquely.

The Procurement Strategy

The today’s functions of procurement operate under tight demands because most organizations’ effort to come out of the recession costs control is an incredible strategy for success (Simchi, Kaminsky & Levi 2000, 111).

For this reason, Sainsbury has invested on a procurement strategy focusing on reducing costs that are associated with procurement such as administrative costs, improvement of the buying efficiency, and ensuring reduction of maverick buying while still ensuring a constant increase in the value of the shareholders.

Through the guide of these principles, the supply chain personnel of the company are obliged to work responsibly in the effort to ensure that goods and services offered to over 17 million customers who visit the Sainsbury supermarkets weekly are offered at the lowest prices in comparison to the competitors.

In fact, Sainsbury has been pursuing the low-cost selling strategy aggressively. The company’s policy demands that procurement personnel should support this strategy while the store development staff looks for alternative strategies for attracting and retaining customers.

The company maintains that procurement cannot deliver low buying costs if it does not operate efficiently. For this reason, in 2010, the CEO of the company, Justin King, went ahead to invest about 40 million Euros in the provision of IT resources to farmers.

These resources would facilitate efficiency in the supply chain through improvement of the buying infrastructure.

Through the cost-saving strategies for enhancing the efficiency and the effectiveness of the supply chain, Sainsbury believes that it can create an opportunity for streamlining the operations of the organisation.

According to Sainsbury (2011), this strategy in turn aids in improvement of “the customer shopping experience besides making things simpler for colleagues while also making significant cost savings” (Para.5).

As a way of minimising costs of supplies, which must be extended to customers through higher prices of goods and services, the organisation embarked on measures of reducing the amount of paper work. A good example of this attempt is the provision of self-scan checkouts across about 700 stores.

Furthermore, Sainsbury (2011) informs that the organisation has “reduced the amount of paper used for store receipts by two fifths, which is equivalent to over 350 tonnes annually, by using double-sided printing” (Para. 5).

Over the last three years, the company has also managed to save the amount of energy consumed in every store by about 16 percent.

The saved energy can power 90 stores. By capitalising on mechanisms of reducing the direct costs associated with supplies, it implies the organisation is able to distribute its products at much lower costs in comparison to its competitors.

Hence, the overall chain supply strategy for Sainsbury is driven by the principle of competitive advantage.

Management of Supplier Relationship

Suppliers form one of the crucial stakeholders of the Sainsbury. They supply both food and non-food products, which are sold at a profit in the Sainsbury outlets. Consequently, for maintained growth of business of the organisation, Sainsbury must ensure that it maintains positive relations with the large pool of suppliers.

In this endeavour, the organisation has strategically focused on suppliers’ engagements at all levels of procurement.

Consistent with such a move, Jacoby (2009) argues that, to maintain good relationships with suppliers, an organisation needs to “work with suppliers to improve sustainability performance through the supply chain and stimulate innovation” (p.36).

In this line of thought, Sainsbury has put in place parameters for ensuring that sustainability is measured as an integral element of the key suppliers coupled with other suppliers’ category management processes. Sustainability in supplies is critical to the organisation.

In 2010, as a way of building positive suppliers’ relationships, Sainsbury offered to give cash bonuses to farmers who adopted good practices of agriculture meaning sustainable and eco-friendly techniques of farming.

By doing this effort, the company lest assured that it would not encounter challenges in the supplies to its stores for agricultural products in the near future.

The concern above calls for incorporation of the means and processes of assessment of operational risks associated with poor maintenance of suppliers relationships (Shreekant & Amol 2012).

In this regard, Sainsbury has developed and initiated programs, which are structured to recognise the direct and indirect contributions of suppliers in sustainable growth and development of the organisation.

Where the organisation’s policies are found to impair the identified contributions, a consideration is made to review the policies in order to build strong suppliers confidence.

Such policies are also made in such a way that, in their heart, there rests mechanisms of driving efficiency, supplier risk management, innovation, and increased opportunities.

By maintaining positive customer relations, confidence is built in the suppliers of the Sainsbury such that they perceive doing business with the company as less risky. Consequently, the company is able to take advantage of economies of scale.

This case happens because a single supplier will be willing to supply large quantities of products and services. In this sense, the company is able to meet its procurement strategy of buying cheaply in order to sell at the lowest prices.

Sainsbury believes that maintaining good suppliers’ relationships implies conducting the sourcing activity with integrity. Indeed, integrity is crucial in the sourcing since it enables an organisation to offer great products at the most fair prices to consumers.

In the context of Sainsbury, sourcing with integrity means that the organisation works with all suppliers in the endeavour to ensure that sustainable supply chains are built by taking into perspectives environmental, economic, and even social impacts of the sourcing activities on suppliers.

In this regard, Sainsbury asserts that its supplier relationship management strategies aim at bringing value to “the communities we source our products from, as well as promoting high standards of animal welfare and responsible sourcing” (Sainsbury 2011, Para.4).

This measure is consistent with the organisation’s goal of becoming the world leader in sales of foods, which are certified and derived from sustainable resources.

Management of supplier development

No single approach can be cited as impeccable for enhancing supplier development. Rather, “purchasing and supply management professionals must select the most appropriate approach to suit their relationship with the supplier that they have selected for development” (Marko, Johnson & Choi 2013, p.9).

Different supply development approaches suit different markets and different industries. Irrespective of the type of supplier development approach deployed, the concept refers to “embracing supplier expertise and aligning it to the buying organisation’s business need” (Krause & Ellram 1997, p.21).

In the case of Sainsbury, the supplier development strategy is organised around the development of the business of the suppliers’ such as aiding them to evaluate coupled with redesigning of the suppliers’ corporate strategy.

Suppliers’ development is central to the future anticipated success of the Sainsbury. It is aimed at helping an organisation to reduce costs, enhance the performance of the supplies, resolving quality issues, and in the sourcing of new supply routes (Chopra & Meindel 2002: Gokhan & Needy 2010 ).

Although the organisation endeavours to build strong positive supplier relationships to ensure its stores do not fall short of both fresh and quality supplies, challenges are also encountered. The organisation sources supply from across the UK and in some instances in other places across the world.

In the long-term, although building positive customer relationships ensures that the organisation has plenty of supplies, the growing population across the world means that land is exposed to immense pressure. Consequently, the cost of supplies is likely to increase in the long-term.

However, by working with suppliers to build relationships with them via initiatives such as development groups, the organisation hopes to address such challenges. The anticipation is to make the company more efficient in managing environmental, social, and ethical issues, which may affect suppliers negatively.

Development groups are critical in helping Sainsbury to build good relations with suppliers in the chief supply chains of the agricultural products.

The company shares the outstanding practices with this group of suppliers by providing training on various new techniques of farming alongside aiding in the introduction of technology to boost production whenever appropriate.

In fact, Sainsbury committed more than 30 million Euros in enhancing these relationships in 2006.

This move was strategic in the development of suppliers since it can “lead to improvements in the total added value from the suppliers in question in terms of product or service offering, business processes, and performance” (Marko, Johnson & Choi 2013, p.10).

By 2011, the Sainsbury had more than 2000 farmers coupled with growers engaged in the suppliers’ development program through the suppliers’ development groups.

The development groups ensure much of the products sold via the organisations labels originate from various supply chains, which are principally dedicated to the organisation, are ethical, environmentally sustainable, and fit well with the future aims and objectives of Sainsbury.

The view from the suppliers

Any effective supply chain management strategy needs to win the confidence of the suppliers. Despite the values of suppliers’ development programs on the suppliers, “some suppliers may be resistant to being developed” (Krause & Ellram 1997, p.21).

Sainsbury encountered such a situation when it initially introduced the development program aimed at empowering its farm products producers. Faced with this challenge, the company embarked on deployment of the interpersonal skills of its supplies relations personnel to counter the reaction.

This move made suppliers immensely influenced so that they started seeing the positive aspect of not only the strategies of building supplies relationships but also the benefits accruing from engaging in the development groups.

Sainsbury efforts to build positive relationships with the organisation’s suppliers have been received well over the last two years. Through the efforts, Sainsbury’s suppliers have responded by availing more fresh products to the supply collection centres.

This strategy has culminated into success of the ‘great good initiatives’ and ‘tastes the difference’ campaigns for selling products tagged y the organisation as being offered in the fresh counters.

The fact that Sainsbury has managed to maintain a constant and adequate flow of fresh green products at low prices across its counters means that suppliers have welcomed its farming supplies development program. It is adding value to businesses of the suppliers.

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