Name- MD. Jihan Iftikhar ID- 129106944 Strategic management

Sainsbury’s Plc is UK’s well known supermarket chain with a history of 143 years. The supermarket chain is among one of the UK’s largest retailers which was originally founded back in 1869 by John –James Sainsburys and his wife Mary Ann Sainsburys. (www.Sainsburys.co.uk)

In the current global recession , UK’s economy is severely affected and resulting inflation means that the survival of business has become a prominent challenge. The recent scenario in retail industry portrays a clearer image as companies like –comet, J-harris & Sons, JJb sports, Barrats etc had to close down their business’s. However even in these tough environment Sainsbury’s operates over 1000 stores and employs around 150000 people. The Company announced increase in profit and plan to open new stores in upcoming year.
It is easy to understand that profitability lies on the underlying strategy of the organisation. In the case, the strategy formulation the strategy formulation can be captured by the framework that is provided by Michael Porter (Professor in Harvard University). The framework is known as Porters 5 forces which shapes the main strategy and gives outlook of any Company such as Sainsbury’s current business situation.
This tool analysis includes 5 steps which determine the competitive power in a business situation which are:
1) Supplier power: - Sainsbury’s plc has numerous suppliers for different types of products. The supplier power is low as large group of suppliers are present for e.g. Sainsbury’s purchases milk from Wensleydale firm and holds the power to negotiate the price as there are many firms available to the company to purchase milk.
2) Buyer power:- Consumer power of Sainsburys Plc is very high as homogeneous products are easily available to them from market. Consumers are the main buyers who are extreme price sensitive and hold the power to substitute
3) Threat of substitutes:- Sainsbury’s faces fierce competition from the rival companies such as Tesco, ASDA, Morrison’s etc. so there is a very high degree of threat of alternate existence. The strategy is based in such a way to compete with rivals. E.g. offers and promotions are matched against Tesco prices.
4) Threat of new entrants:- New entry is quite hard as the entry barrier is high. The industry sector in which Sainsburys operates is also a established market and the degree of experience, capital and training required is also high which means it is far too expensive to enter the industry and the threat of new entry is low
5) Competitive Rivalry:- As stated earlier there are many competitors available who provides low switching cost to the customers and low customer loyalty suggests there is a robust competitive rivalry.
(Bowman and David 1993)
References:
www.sainsburys.co.uk/aboutinfo- {accessed-16/11/12}
Bowman and David 1993, strategic management. The MACMILLAN PRESS LTD. London.