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Module: CB311 Lewis Appleton
J SAINSBURY PLC
A SWOT analysis on the company with
recommendations.
CB311 – BUSINESS SKILLS
Module: CB311 1 Lewis Appleton
Introduction
Sainsbury's is a UK based company founded in 1869, they currently operate over...
Module: CB311 2 Lewis Appleton
Sainsbury have also been successful at persuading customers to use Sainsbury rather than
co...
Module: CB311 3 Lewis Appleton
Opportunities
Sainsbury has a large consumer base and are therefore able to take advantage ...
Module: CB311 4 Lewis Appleton
forced to shop elsewhere due to these rising costs. The cost of living is unlikely to fall ...
Module: CB311 5 Lewis Appleton
Bibliography
BBC. (2013, November 13). Sainsbury's reports 9% rise in half-year profits. Re...
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SWOT report - Sainsbury (2013)

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A SWOT Report I prepared for Sainsbury in 2013 with supporting evidence.

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SWOT report - Sainsbury (2013)

  1. 1. Module: CB311 Lewis Appleton J SAINSBURY PLC A SWOT analysis on the company with recommendations. CB311 – BUSINESS SKILLS
  2. 2. Module: CB311 1 Lewis Appleton Introduction Sainsbury's is a UK based company founded in 1869, they currently operate over 1000 stores, which are almost 50% of both supermarkets and convenience stores. The organisations focus as a majority is retail business, this includes food and non-food products as well as a variety of services. Sainsbury's has made an array of investments which include management of properties, energy and banking. The organisation has been successful at creating their own branded products alongside selling those products belonging to specific brands. The organisation has generated £25632 million in the 2012/13 financial year, £614 million of this is profit after tax, and this being a 2.7% increase than the previous year. Sainsbury currently have a long term “deliberately stretching” goal named the “20x20 sustainability plan”, this contains 20 goals that Sainsbury plan to achieve by 2020. SWOT Analysis This report will make use of the available secondary data as part of a short report on J Sainsbury plc in order to complete a SWOT analysis report. SWOT analysis is a tool that will be used to relate the position of Sainsbury to the environment they operate within. The SWOT analysis will include an evaluation of strengths, weaknesses, opportunities and threats. The annual report for Sainsbury published on 5th June 2013. To correctly make an evaluation and analyse Sainsbury's position, non- biased sources have been used including news articles from respected publishers. Findings Since established in 1869, Sainsbury have focused primarily on retail business, The Annual report carried out in 2013 shows that underlying profit has increased 6.2% from the previous year to an amount of £756 million. This figure has been increasing over the past 5 years, however, the rate of this has been reducing from an increase of 19.6% to the 6.2%. Despite the diminishing increases, the increases are still of significant value with the most recent being a difference of £44 million. While the increases here are reducing, the market share is consistently increasing with a recent increase changing the position of Sainsbury being the third largest supermarket to the second, overtaking ASDA's 16.4% with a market share of 16.6%. (The Independent, 2013) Strengths Sainsbury is well known for their strong brand name, they have a good reputation in the market, Sainsbury mainly operate in the UK and are therefore able to push their focus on this one area whereas competitors such as Tesco have stores in other countries, whilst this does limit the market to which Sainsbury can appeal to it allows them to focus on this market. This has proven to be successful over the past few years with recent reports showing a profit increase of 9% (BBC, 2013), this proves that the way they are operating is working especially the fact that their own branded products are selling well, this is a benefit as there are less costs from this and therefore more profit can be made compared to selling branded products. Sainsbury have a large number of employees, while it is true that this means there are more costs it also works in the respect that more work can be done simultaneously and this large number of employees allows the organisation to work at a faster rate. Sainsbury has been able to focus on operating within the UK and has managed to obtain a strong presence, this being shown clearly by their 16.6% market share. Their own brand has even developed to the point that it is outperforming many branded equivalents, their “basics” range being the second largest value brand in the market, the Annual report (Sainsbury, 2013) highlights that they were awarded the “Own Label Brand of the Year” in the Grocer Gold Awards.
  3. 3. Module: CB311 2 Lewis Appleton Sainsbury have also been successful at persuading customers to use Sainsbury rather than competitors, they have done this with a “Brand Match” scheme where if products were cheaper at a competitors store, the customer will a receive a discount coupon for the amount, this makes effective use of new technology as these prices are able to be compared instantly. Sainsbury have a highly successful partnership running with Nectar in the form of the Nectar Card scheme, this addresses loyalty and allows shoppers to accumulate credit, while at the same time data can be used by Sainsbury for research and development, Sainsbury’s Nectar Card scheme has 12 million users, Tesco’s Clubcard only has 15 million users despite having close to double the market share of Sainsbury, this shows Sainsbury are effectively retaining their customers, while the actual savings for the customers are not high, the fact that they may be persuaded to shop again is a bonus for Sainsbury. Sainsbury previously announced their 20x20 sustainability plan in which they aim to meet 20 goals by the year 2020, this was recently awarded with many awards such as the Sustainable Retailer of the Year in 2012 and being commended for 2013. Weaknesses While Sainsbury are a part of the main competitors operating in the retail sector, Tesco appears to be dominating the market still at a market share of 30%, close to double of Sainsbury who are in the second position. With such a large difference it seems impractical for Sainsbury to catch up anytime soon, this may be due to a number of reasons such as a lack of advertising or Tesco moving into other methods of distribution. A large weakness that Sainsbury faces is that it is limiting it’s potential by operating solely in the UK, their largest competitor is operating Globally and this has proved to be highly successful yet Sainsbury has made no attempt as such to enter these new markets, this may be because they do not fully understand the current trends and operating environments compared to where it currently operates. This can be a disappointment to potential investors as there is a lack of expansion which in turn has a potential for high profits. While the loyalty scheme “Nectar Card” has proven to be successful at gaining new members and allowing them to accumulate points it hasn’t proven to show many other advantages, a recent poll by WorldPay (WorldPay, 2013) has shown that use of loyalty cards is diminishing due to customers feeling they don’t add value, those who do use them have also found Tesco’s Clubcard in favour, the possible reasons for this include that it can be used in places other than Tesco itself such as the Café Rouge at a reduced price, another who took the poll also mentioned “free cinema tickets and free vouchers”, most likely these are money off vouchers for Tesco but regardless they are “awarding” the loyalty more than just 1% off store purchases. Sainsbury’s competitors have a large impact on whether customers go to them or Sainsbury, with the recent introduction of the “Brand Match” scheme, customers have been able to save and not have to worry about who will have cheaper prices because they can go to Sainsbury and get the cheapest price, however with the competitors introducing their own versions of these price match promises it is reducing the benefit to Sainsbury. The fact that the Brand Match is only available to in-store shoppers at large stores limits who can take advantage of this, with more people now using online shopping if somewhere else offers a brand match scheme and offers it online then they may choose them instead, the same applies to Sainsbury’s convenience stores.
  4. 4. Module: CB311 3 Lewis Appleton Opportunities Sainsbury has a large consumer base and are therefore able to take advantage of this with Christmas deals and campaigns, Sainsbury recently launched an hour long film (The Grocer, 2013) a few weeks ago which managed to gain almost a million views, this shows that the video has been successful, even down to celebrities sharing their interest on twitter, sharing is a highly important part of videos, the fact that twitter accounts with millions of followers shared the video is a significant part of the videos views, Cheryl Cole’s tweet alone got 1600 retweets, that is 1600 people sharing it once again which in turn leads to more views, this clearly shows the possible opportunities for Sainsbury to do more similar things in the future. Sainsbury have announced that they will stop selling physical media, while this does pose a weakness by ignoring the demand it does create opportunities, the first being that by selling music tracks online rather than by in physical form is that there are less costs and generally if the music has been purchased to distribute then Sainsbury can sell all they want without need for these extra cost, by selling other products in digital form customers are able to get what they purchase right away and with the natural desire for things right away this could prove to be advantageous. Sainsbury recently received an award for “Brand of the Year” (Marketing Magazine, 2013), this has a potential for the business not only to let customers know of their success but also to attract new customers through their success. The award may persuade current customers to buy Sainsbury’s own branded items rather than branded goods as the award that Sainsbury’s received is a visual example that they are operating successfully. In the same way this has potential to attract those who shop at competitors to shop at Sainsbury. Sainsbury’s competitors have recently had issues, the most well-known being the horse meat scandal at Tesco and a few smaller competitors, while this had an impact on Tesco’s sales (Supply Management, 2013) and the trust that consumers have in Tesco, sales elsewhere including in Sainsbury will have risen, for a scandal as large as this one it may take a while for some consumers to regain trust in Tesco and therefore there is an opportunity for Sainsbury to gain new customers from this. This could lead to Tesco’s market share falling and if Sainsbury were to be innovative they could make ground by raising their own market share. Threats Sainsbury face the same problem that most organisations do, that is, competitors, the fact that Tesco is nearly double Sainsbury in terms of market share is a threat as Tesco most likely significantly reduce the profitability for Sainsbury, the fact that there are a few other large competitors such as ASDA and Morrison’s, although smaller, will also impact on the sales of Sainsbury, therefore Sainsbury should try to be innovative and give consumers reason to pick them rather than competitors. With many organisations moving into online strategies there are many potential threats as a result of using technology, one of the largest of these is cyber-attacks, this is essentially when people hack into systems, recently Adobe were compromised and many emails and encrypted passwords on their database were leaked, clearly if someone was able to hack into Sainsbury’s website and steal customers details then this would need to be addressed which provides a requirement for security which can be costly to obtain, as well as cyber-attacks running a website in general can be costly as Sainsbury will have to pay for bandwidth and staff to manage and run their online operations. In general the rising cost of living may force people to reduce how much they spend, as a result of this if Sainsbury are clearly not offering the cheapest products they may find that customers will be
  5. 5. Module: CB311 4 Lewis Appleton forced to shop elsewhere due to these rising costs. The cost of living is unlikely to fall anytime soon so this is something that should be addressed. Recently a customer bought a cereal bar full of hairs (Mirror, 2013), although this did not lead to masses of bad publicity it easily could have done and the public apology that Sainsbury gave should prevent bad publicity from occurring although there is still the threat that it can happen. Conclusion Although Sainsbury never managed to fully exploit its opportunities when establishing before many competitors it has been recently successful at increasing its profit as a percentage more and more each year, their success has been seen with their recent increase in market share placing them above their competitor ASDA and therefore taking the spot as the second largest chain of supermarkets in the UK. Sainsbury have been effective at improving their reputation in the UK going as far as winning awards for best brand. The weaknesses that Sainsbury suffers from are not a loss of profits but rather a loss of potential for more profits, the fact that they operate solely in the UK has been successful although it does limit their potential. Opportunities have appeared as a result of a recent Christmas film for Sainsbury to make use of social media which essentially can be free advertising, the increase in online operations allows Sainsbury to reduce operating costs. Other than competitors, Sainsbury do not face many threats, the main one being the risk of operating online, as long as there is security there should be no problems. Recommendations Based on the findings and analysis above, there are a few recommendations that could have potential for good to the operations of Sainsbury’s. The first of my recommendations is that Sainsbury make more effective use of social media, if they were to have interesting content as such to share such as the recent Christmas film then it would give reason for consumers to show interest, this in turn could attract more consumers and essentially would be a form of free advertising, a possible way to do this would be to offer unique offers that are only available through these social media platforms whether it be competitions or giveaways to win free goodies or simply a money saving offer to be used in store, this would give reason for consumers to want to use the social media. Sainsbury do have an effective “Brand Match” scheme that allows customers to save money if they would have saved shopping elsewhere however it would be a more idealistic situation if the customers didn’t have to go elsewhere to get a cheaper price, while its impractical for Sainsbury’s to have the cheapest price they should aim to lower their prices on both their own branded products and other branded products, if customers start to notice they could have saved at Sainsbury they will be more inclined to do so. Sainsbury’s Nectar Card scheme has been effective at promoting loyalty however findings from a poll found that their competitor’s Tesco Clubcard was more favourable due to the variety of benefits, Sainsbury’s could challenge this weakness by introducing more benefits to the Nectar Card such as regular offers and the opportunity to enter free prize draws, this would be highly appreciated by consumers and may also attract new members. The last recommendation for Sainsbury is to consider expanding into other countries, whilst this doesn’t have to mean opening a chain of stores in America it could be as simple as experimenting with a store in another country and evaluating the progress, competitors such as the market leader Tesco have been successful at operating in other countries and therefore it is possible that the same will happen for Sainsbury.
  6. 6. Module: CB311 5 Lewis Appleton Bibliography BBC. (2013, November 13). Sainsbury's reports 9% rise in half-year profits. Retrieved from BBC News Business: http://www.bbc.co.uk/news/business-24922971 Marketing Magazine. (2013, November 22). Sainsbury's wins Brand of the Year. Retrieved from Marketing Magazine: http://www.marketingmagazine.co.uk/article/1222037/sainsburys- wins-brand-year Mirror. (2013, November 23). Sainsbury's offers 65p refund after customer bites into cereal bar full of HAIR. Retrieved from Mirror News: http://www.mirror.co.uk/news/uk-news/sainsburys- offers-65p-refund-after-2844074 Sainsbury. (2013, June 5). Sainsbury Annual Report 2012/3. Retrieved from Sainsbury: http://www.j-sainsbury.co.uk/media/1616189/sainsburys_ara.pdf Supply Management. (2013, June 6). Tesco sales hurt by horse meat scandal. Retrieved from Supply Management: http://www.supplymanagement.com/news/2013/tesco-sales-hurt-by- horse-meat-scandal The Grocer. (2013, December 13). Sainsbury's Christmas in a Day film racks up 842,000 views. Retrieved from The Grocer: http://www.thegrocer.co.uk/companies/supermarkets/sainsburys/sainsburys-christmas-in-a- day-film-racks-up-842000-views/352755.article The Independent. (2013, October 26). Sainsbury's overtakes Asda to become UK's second-biggest supermarket. Retrieved from Independant: http://www.independent.co.uk/news/business/news/sainsburys-overtakes-asda-to-become- uks-secondbiggest-supermarket-8905239.html WorldPay. (2013, August 21). Omni-Payments Report. Retrieved from WorldPay: http://www.worldpay.com/media/content/omnipayments-report.pdf

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