Introduction:
Established in 1869 by John James and his wife Mary Ann in a partnership retailer store, presently it is the third largest retail supermarket chain in UK market with a total market share of 16.3%. Sainsbury is the UK’s oldest and major food retailer. In the early of 1990 Sainsbury was the market leader, however due to some reason it lost its position to Tesco and come in third position in terms of leading retailer in UK (J Sainsbury plc. 2015). The downfall involves several reasons, such as lack of innovative marketing strategy, unhealthy acquisition in Egypt, changing management and misleading in sustainability aspect, which obstruct in communicating right message to the customers.
Background of Sainsbury:
Sainsbury is looking to drastically their business operation by launching new outlets across the south of England. The company had opened fifty high street shops in England by 2014 which significantly has boosts the employment opportunities in the respective area (RetailWeek. 2013). However, the company is looking for international market opportunities from the last few years and already has owned a chain in the US and a chain in Egypt in addition to their core domestic business.
Based on the Appendix-1, it can be inferred that the financial performance of Sainsbury are tending to downwards in terms of profit margin. The net profit margin was 5.50% in 2011, which dropped to 5.40% in 2013. The prime reason for drop down in their profit margin can be economic downturn, unethical business practice, and so on. In March 2013, the total liabilities of the company increased by 12.35% that implies sharp increase in long-term borrowing and trade payables. During this year, the long term debt accounts for 53.27% of total liability of Sainsbury. The increase in long-term debt helps the company establish growth in both in store and on line sales. In short, it has provided Sainsbury with a greater financial flexibility to continue its growth.

Vision and mission statement of Sainsbury
The corporate vision of the company is to be the most trusted brand in the retail market where people love to work and shop (London Evening Standard. 2015).
Belonging from retail chain, the mission statement of Sainsbury is to be consumer first choice for food, delivering high quality product to the customers and provide great service at competitive price by working in a simpler and innovative manner.

WHY EGYPT IS GOOD FOR BUSINESS:
PESTLE ANALYSIS OF EGYPT:
Political /Legal
1) Import process
According to Abdi and El Masry (2000), “In 1999, Egyptian imports of U.S. consumer ready products totalled to $83 million compared to $56 million in 1998. Base on the statistic, Egypt has showed tremendous rise in foreign products and services due to the increase of multi-national firms that had started to invest in Egypt at that point of time. Big part of the reason is due to the policy set by General Organization for Export Imports & Control or also known as GOEIC. GOEIC has taken a more encouraging manner towards foreign investors by streamlining the process of import inspection by offering a new Presidential Decree No. 106 of 2000 (UNESCO, 2005). Reducing trade barriers: most non-tariff measures have been removed and tariff protection has been sharply reduced (World Trade Organization, 1999). It is important to note that government has the autonomy to limit or preclude entries to any industries by controls such as licensing (Pearce and Robinson, 2000). Unlike before, there were five government entities who were involved in the import clearance process, this new decree enactment ameliorate Sainsbury’s opportunities to import foreign goods without any issues.

2) Tariff
One key progress is the reduction of trade barriers in the country. Much progress has been made in reducing trade barriers: most non-tariff measures have been removed and tariff protection has been sharply reduced (World Trade Organization, 1999). Despite the amelioration, import tariffs set by the government are relatively high. According to El Masry (1999), tariffs rate for consumer oriented product changes in between 30 to 50 percent.
Economical
The economic stabilization programme initiated in the early 1990s in Egypt has improved economic growth, and reduced inflation and, to some extent, unemployment. According to El Masry (1999), there is an estimation of 10 million out of 63 million Egyptians have the capability to purchase imported food products. According to the statistic from World Bank (2003), the poverty rate in Egypt during 1999/2000 was at 16.7 percent, which is a gradual improvement in comparison with 19.41 in the year of 1995/1996. By year 2000, most Egyptian has already shifted from the rural areas to cities such as Cairo and Alexandria (CountryReview, 2000). Thus, they are becoming more demanding in terms of the quality of service, product and cleanliness (El Masry, 1999).

Social/ Environment
1) Demographic
In Egypt, 90 percent of the total population are dominated by Muslim. Thus, Arabic is their official language of communication while English are only understood by educated group of people (CountryReview, 2000). Nevertheless, consumer lifestyle has been subtly westernized throughout the years.
2) Environment
In 1999, Egypt has signed and endorsed the Kyoto Protocol (Datamonitor, 2012). According to United Nations Framework Convention on Climate Change (2014), “the Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change, which commits its Parties by setting internationally binding emission reduction targets”. In other words, Egypt recognizes their responsibility as a nation to reduce emission of“Greenhouse Gas”.
Technology
Technology was not developed in Egypt until the year 1985 (Kamel and Hussein, 2002). Since then, they have started investing into information and communication infrastructures. In addition, the Ministry of Communication and Information Technology (MCIT) was set out in 1999 to transform Egypt into an ICT hub (datamonitor, 2012). Their main goals are to transform Egypt into a digital Society, develop the ICT industry and establish of Egypt as a global digital hub (MCIT, 2015). According to Schmitt (1999), by 1998, companies in Egypt have begun to follow the trend of e-commerce and online shopping sites which reach out to over 184 Egyptian commercial websites.

Egyptian retail food industry:
The Egyptian market offered considerable potential: 65 million people lived in a very concentrated area. There was a sizeable, yet largely unexploited domestic food market, where supermarkets claimed only a 5 per cent share. Relatively, Egyptians spent more than three times as much of their incomes on food than UK consumers. Over 12 million of Egypt’s 69 million people could afford to purchase imported food products. Western products and new products had wide appeal among Egyptian consumers (Table III).
In Egypt, a supermarket that sold groceries, meats and poultry was still quite unusual in the 1990s. People were accustomed to using traditional channels: specialized small grocery stores, butcher shops and bakeries located close to their residences where they negotiated the price with sellers whom they knew personally. The typical Egyptian consumer bought meat from a butcher shop and fresh vegetables and fruits from open markets. Prior to the entry of foreign retailers, Egyptian consumers rarely went to supermarkets. However, this began to change. This was especially true for more affluent Egyptians who purchased much of their food from supermarkets. Historically, supermarkets had been located primarily in Cairo and Alexandria, Egypt’s two largest cities, with populations of over 15 and 5 million people, respectively (Table IV).
The retail market in Egypt is highly stratified. A few small-scale, privately owned operations competed for wealthy customers. These groups, comprised three to four branded outlets, stocked imported foodstuffs and generally offered a wide range of services including home delivery and customer loyalty cards. A second tier of less luxurious stores generally competed on price and omitted service. State-owned retailers competed at the lower end of the market.
Egyptian consumers had become increasingly aware of quality and variety. Affluent Egyptian consumers expected cleanliness, product range, ease of service and a responsive staff. Consumption of prepared foods increased dramatically in the 1990s due, in part, to the growing numbers of working women who demanded ready-made meals and easy-to-cook foods.

Out of a total population of 69 million, only six million people had bank accounts and less than half a million carried out more than two banking transactions a year. The credit card market grew quickly in the 1990s – from 200,000 cards in 1990 to 450,000 in 1999. However, it was still much smaller than either Morocco or Lebanon. Meanwhile, there are no mortgages, private pensions, consumer loans or life insurance policies in this Moslem country.
The USA, France, Germany, Italy, Switzerland, Greece, Holland, Denmark and South Africa were the predominant suppliers of consumer-ready food products in Egypt. Multinational firms started to invest in Egypt, especially the French firm, Carrefours; the German firm, Metro; and the South African firm, Shoprite. With the expansion of supermarkets through international partnerships, it was likely that international companies and hypermarkets would soon dominate the Egyptian retail food business. Metro developed the “Metro Express” in Cairo and Alexandria, outlets half the size (250 m2) with a quarter of the product line (3,000 items) of its regular Metro stores. A Metro Express did not carry fresh meat, vegetables or fruits. The new stores were located in middle-income, residential neighborhoods in Cairo and Alexandria. Carrefours sought to expand in Egypt, and intended to open its first hypermarket after 2000. Majid Al Futaim of Dubai, the Middle East franchisee for the French Carrefour hypermarket chain, had announced that it will open 15 stores in Egypt over the next 15 years
Sainsbury Entry to Egypt:
J Sainsbury’s plc foresaw a need to consider additional growth opportunities outside its domestic markets. The specter of Wal-Mart entering the UK market motivated Sainsbury’s to increase its worldwide volume to cover the anticipated loss of UK market share. Moreover, its top managers believed that Sainsbury’s needed to become a global retailer to compete in the twenty-first century and to leverage potential global sourcing opportunities. The top management team saw three opportunities for international expansion: * Short-term return on investment: Largely available in more developed markets such as North America, Western Europe and Australia. * Medium-term return on investment: Emerging markets where investment returns were expected within four to seven years. While growing and offering less competition, emerging markets generally lacked necessary infrastructures. Egypt was perceived as such an investment opportunity; the Egyptian population and economy were projected to grow faster than many European countries, and the Egyptian domestic food market was already greater than that of The Netherlands or Belgium. For Sainsbury’s, Egypt represented a relatively stable country in terms of political and economic risk. Sainsbury’s was not totally unfamiliar with Egypt; the company had already imported Egyptian products to the UK. Through the use of expatriates, Sainsbury’s believed it could transfer its key retail skills to its Egyptian stores. While currently weak, Egypt had the potential to become competitive in the international supermarket industry. * Long-term return on investment: Significant returns only after seven or more years. These investments were perceived as “seedcorn” investments in countries such as India, China or Central Africa.
In 1999, Sainsbury’s decided to enter the Egyptian market. The decision was consistent with the company’s continuous search for growth opportunities outside the UK and US markets. The Egyptian market was attractive because of the size of the potential market, high consumption patterns for consumer goods, the excellent performance of consumer goods multinationals in Egypt over the past 10 years, the quality of the workforce, favorable investment conditions and good relations between the Egyptian and British Governments. The Egyptian market, with its diversified demographics in terms of economic and social classes, together with its large and growing population, was very attractive. Egypt was also viewed as a stepping stone for further expansions into the Middle East region.
Sainsbury’s international organizational structure was purely functional. This model was characterized by tight simple controls, with key strategic decisions made at headquarters. Sainsbury’s Egypt reported to the company’s top management team headquartered in the UK. Headquarters tightly controlled the business both from overseas and through their staffing strategies. In Egypt, Sainsbury’s used expatriates. The Egyptian subsidiary was run by 64 expatriates who held senior management-level and other operational positions. The company expected these expatriates to transfer their knowledge, expertise and systems, and then later hand over the operations to the Egyptian staff.
Sainsbury’s experiences in the USA were thought to provide some insights into its new market penetration. The recent acquisition of Star Markets helped Sainsbury’s to build scale economies in the USA with its existing Shaw’s supermarkets. Additionally, while achieving a high level of value, Star Markets applied its core skills in its own label development, supply chain management and distribution systems integration. Star Markets skill sets, upscale brand position, locations, customer-tailored product offerings and strong food court operations and formats fit well with Sainsbury’s existing US operations and positioned Shaw’s Supermarkets for further expansion in the USA. However, a total integration between its UK and USA businesses had not been fully realized prior to the rollout in Egypt.
Sainsbury’s international operations had previously been restricted to the USA, so it was a challenge to apply what was learned in America to Egypt. Sainsbury’s management believed that its “success in the USA is not the limit of our international ambitions and our firmly established world-class retailing skills will drive expansion into other regions” (J Sainsbury’s plc Annual Report and Accounts, 1999, p. 4). Sainsbury’s standardization processes went beyond utilizing global efficiency; it had standardized processes and procedures for most activities. However, standardization was not for the purpose of scale or scope economies, but rather based on the belief that what worked in the UK and USA markets, would work just as well in the Egyptian market.

PROBLEMS FACED BY SAINSBURY IN EGYPT:
Sainsbury’s marketing:
Shifting consumers’ buying habits to supermarkets was a major challenge. Sainsbury’s was extremely successful in removing the fears of many consumers. Sainsbury’s tackled the problem through store designs tailored to match its target customers. The designs concentrated on simplicity, moderate illumination and basic graphics configurations, all of which encouraged people to go to the stores. One of the challenges faced by the meat departments was overcoming the perception that the meat was not fresh; display adjustments and different product positionings were helpful in overcoming this problem. Just as these perception problems were addressed, the fear of mad cow disease led to almost zero demand for beef products.
The complete range of products sold by Sainsbury’s Egypt included 10,000 items, but store location determined what was stocked. Continuous modifications were made in response to sales reports and the sales figures for different items. For example, contrary to initial assumptions, it was discovered that higher-quality meats with their higher prices were actually more appealing in lower-income areas. Beverages in cans had unexpected high turnover because teenagers in some lower-income neighborhoods would buy them although they cost more than bottled beverages. These purchases were seen as a sort of social differentiation among friends. Initially, Sainsbury’s expected to import a wide range of its products from the UK. However, high customs duties jeopardized this strategy. Further, problems with customs officials often meant only non-perishable items could be imported.
Sainsbury’s made use of its brand name in the Egyptian market, where it branded its own fresh bread and fresh juices and distributed other Sainsbury’s branded products. In Egypt, people started going to Sainsbury’s supermarkets to obtain Sainsbury’s products, and, while in the stores, they started shopping longer and bought more. Sainsbury’s branded products were promoted in Egypt just as they were in the UK. Sainsbury’s brands proved to be very popular in Egypt, especially the freshly squeezed fruit juices.

Sainsbury’s main distribution channels were through large stores located in key areas; it focused on big stores located in highly populated areas where potential customers had medium purchasing power. Sainsbury’s tried to appeal to a wide-based market. The initial stores were in areas where price was the main driver (C-class areas). Areas with more affluent consumers (A-class stores) were exploited later. The performance of A-class stores did not meet forecasts because Sainsbury’s was not well received by sophisticated consumers, who perceived Sainsbury’s stores as cheap and not offering quality products. The A-class stores’ images were adversely affected by inconsistent marketing messages generated by this dual marketing approach. Although all A-class stores replaced older, existing stores located at key locations with high traffic, these stores failed to attract the affluent customer and, consequently, reported poor performance. The wider-based target market, which was usually served by local stores, also caused some of the resentment by the public and opposition by competitors.
Sainsbury’s offered the best prices in the market. A number of techniques were used to reduce costs and improve margins. Sainsbury’s attracted consumers by identifying 130 Key Value Items (KVIs). Sainsbury’s KVIs generally had profit margins that were quite low, and Sainsbury’s used the KVIs to project its image as a low priced vendor. The KVIs were products that generated traffic when competitively priced. The KVIs were usually the items that gave consumers a feeling about the whole store, i.e. whether the store was inexpensive and prices were reasonable. Based on the KVIs, many consumers decided that Sainsbury’s was the best store for their needs. The KVIs were very competitively priced, often being cheaper than other stores. This technique targeted the entire purchase made by the consumer, both KVIs and other regularly priced items. The KVI strategy succeeded in attracting many customers and the average expenditure reached £E.50, considerably higher than other competitors’ averages of £E.28. The success of the strategy was more obvious in specific stores, especially those located in C-class areas, where sales records were achieved for a limited time. One of the most successful stores had daily sales of over £E.500,000, unprecedented in the Egyptian market.

Exclusive supply arrangements with producers were a strategy used for groceries, poultry and meats. The procurement department would buy all of the production of reliable suppliers, which enabled Sainsbury’s to secure lower costs. In addition, after its first quarter of operation Sainsbury’s began to offer private label products produced for it by Egyptian manufacturers. Similarly, Sainsbury’s contracted to buy a complete production run for a specific time period and have it packaged with its brand name. This approach was used successfully for products such as detergents, soap, and macaroni.
Sainsbury’s promotion techniques did not include television advertising, only newsprint. This allowed the company to control promotional costs and to match product offerings to target customers. Sainsbury’s was a market leader in making promotional product offers. Sainsbury’s made special offers by bundling products, with supplier support and cooperation. Less appealing products were often bundled with key selling items in special promotions. This bundling enhanced Sainsbury’s buying power with its suppliers.
Sainsbury’s marketing techniques depended greatly on speed of service, timely replenishment, and comprehensive sales analysis. Speed of service was achieved through offering items in a convenient visual display, using shelf height and product locations. Meat products were offered in pre-cut packages in weights usually ordered by the consumers, thus matching the customer’s expectation while providing quick service. Given the high sales turnover, the challenge was to keep items in stock and displayed. This required stringent controls on the reordering process, including inventory control systems and point of purchase registers. A basic requirement of these systems was the bar coding of all items sold throughout the stores. However, in the Egyptian market, bar coding was not required of suppliers. Sainsbury’s was able to impose bar-coding requirements on some suppliers. Until a bar-coding requirement was fully implemented, each store had to use bar-coded stickers. The stickers were placed on items by hand, which was quite costly in terms of both materials and labor. Moreover, the cashiers often found items with missing bar codes, yet they sold the items by using the bar code of any other item that had the same price, which led to inventory control problems. Marketing analysis reports were developed from the automated sales systems, and these reports were used to make marketing decisions about which items should be bundled, the pricing of products to maximize profit, and the reordering of profitable products. However, the inaccuracies of the inventory control systems jeopardized the effective use of these reports. Conclusion: Business in new country, company must have full knowledge about consumer behaviour of that country, have to follow each and every step of marketing and come up with those strategies that is suitable for that country market. Even though Sainsbury’s have strong external environment and internal capabilities, Sainsbury’s may have the resources needed to sustain themselves in the Egypt market. Because there is change in consumer behaviour Sainsbury can’t stand in Egypt market.

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