Strategic Management; Sainsbury

Introduction

The alignment of strategies and control systems affect the chances of a firm to successfully position itself in its chosen area of competition (Nilsson & Rapp 2005, p. 3). An organization is in a position to concentrate on the activities that create value for the customer if its strategies and control systems are mutually consistent and adapted to expected external demands. In the same way, a company has an advantage when its profits are greater than that of the rivals within the industry. A firm on the other hand has a viable business advantage when it is able to maintain the profitability for many years. The main aim of a strategy is to help a company achieve a sustained competitive advantage which in turn results to superior profitability and profit growth. The subsequent discussion offers the strategic management of Sainsbury that enhances its competitive advantage. Generally, the growth strategy of Sainsbury has been through acquisition and joint ventures followed by acquisitions (Thompson & Martin 2010, p. 64).

Sainsbury supermarket has delivered an ever improving quality shopping experience for its customers with great products at competitive and fair market prices. The supermarket’s aim is to exceed the expectations of the customers for safe, healthy and fresh food and valuable shopping (Akter 2012, p. 316). Differentiation for the supermarket has been provided by its five principles including the respect for the environment, best food for health, integrity sourcing, corporate social responsibility and its offer of a great place for the employees. While the supermarket has recently been overtaken by Tesco and ASDA, its positioning in the market is still worth mentioning (McLoughlin & Aaker 2010, p.129).

As one of the leading supermarkets in the United Kingdom, Sainsbury focuses on providing locally sourced, good and health products to their customers. The service provider has a great home shopping network while offering various approaches for services including ‘order and collect’, which differentiates it from the competitors (Henry 2008, p. 120). This approach enables customers to collect their order directly from store with minimum service charges. Their electronic shopping experience enables customers to place orders online, hence shortening the ordering period. Another advantage of the service concept is that customers are able to build their own catalogue and purchase any product by internet or phone after joining home shopping services (Hall 2012, p. 17).

Sainsbury’s success as a multiple retailer further lay in the company’s ability to purchase fresh unpackaged goods at wholesale, which are later packaged in Sainsbury’s own brand produce. For a long time, the company has dealt almost exclusively with own-brand provisions and groceries (Morelli 1997, p. 773). It is the firm’s development of capabilities in both processing, wholesaling and retailing that has provided Sainsbury with the ability to undercut price-maintained branded goods and win a reputation among customers for quality products.

According to Morelli (1997, p. 773), own-branding provides the company with the ability to establish control over supply and quality. Similarly, a sustainable supply chain management expands the concept of sustainability of the company to the supply chain level. Sustainable supply chain management should therefore provide companies with tools for improving their own and the industry’s sustainability, competitiveness and responsibility towards shareholders’ expectations.

The managerial choices within the firm are guided by the motives of effectiveness, efficiency, profitability and economic rationality (Oliver 1997, 698). External influences on the other hand are planned business factors that influence the organization including the strength of the competitors, the power of buyers and suppliers and the product and industry market structure. The factors in this case impact the selected resources and how they are organized and used.

In order to create a sustainable economic performance, the resources ought to be idiosyncratic, unique, scarce, durable, intangible, non-tradable and non-substitutable. According to resource based theorists including Grant, a firm’s competitive advantage is determined by what is unique and enshrined in its resources as defined by its main distinctive capabilities. In particular, Sainsbury has effectively made use of the available internal and external resources. The strong leadership and the rich human resources have for instance been vital in the management and performance of the company (Cole 2006, 142).

As a way of boosting the overall success of the company, Sainsbury has crafted a reward culture to improve individual employees and enhance team job performance and satisfaction. According to Akter, a reward system is very important for any firm if it is well introduced, planned and implemented. It may on the other hand de-motivate workers if the initial objectives are not well crafted (2012, p. 317). In Sainsbury however, employee reward strategies have an important role in the realization of the company’s business objectives by attracting, retaining and developing the right talent, while making them vital assets for the firm. This is an important move for the company because in any competitive industry, employees are likely to leave or move from one competitor to another in search of greener pastures. In this light, Armstrong suggests that firms ought to come up with effective systems of reward management. Reward management in this case includes the belief in the need to achieve equity, transparency, fairness and consistency in the established systems (Aketer 2012, p. 317).

Customer Service Management in terms of relationships and pre-commitment contracts has been another key strategy applied by Sainsbury to mitigate competition. Generally, organizations can enhance their performance by cultivating new customers or selling more by retaining the existing ones. Since recruiting new customers is more expensive than retaining the existing ones, service organizations doing businesses with their customers from a long-term relationship perspective have a greater potential of achieving cost advantages. Consequently, developing relationships with and retaining customers are vital to the concept of memberships which constitute non-contractual approaches to pre-commitment (Bharadwaj, Varadarajan & Fahy 1993, p. 90).

In view of this, Hassan and Parves (2013, p. 1) maintain that the management of customer relationship is an important phenomenon for any business entity. Organizations must in this case concentrate on the existing clients to enable them deal with the increasing competition while strengthening their operations. In particular, an effective customer relationship management in a retail business represents essentiality because of the changing market dynamics and patterns. Furthermore, the formulation of a successful market planning and business depends on better performance analysis for both retailers and consumers (Thompson 2001, p. 121).

Sainsbury has also introduced a successful Nectar Card Scheme, which has raised an amazing positive response from the customers. Like the club card system introduced by Tesco, Sainsbury’s loyalty card program has spread over a solid based of almost twelve million since it was introduced in 2002 (Hassan & Paves 2013, p. 1). The loyalty program is believed to have a connection with the improved number of followers while appealing and encouraging more customers to join worldwide.

The company’s card program also enables Sainsbury to partner with other retailers and firms and collect data on customer related issues (Hassan & Parves 2013, p. 4). The rewards generated through the use of Nectar data allows the existing customers to potential purchases. This also helps the company’s management and future planners to recognize the possible customer base where the operations can be expanded or established. As a company, Sainsbury has managed to have a strong presence in the social networking websites including Twitter and Face book.

Additionally, Sainsbury’s is also committed to high standards of corporate governance in its business (Dobson, Starkey & Richards 2004, p. 70). The firm’s codes of governance apply the principles of the combined code while providing a detailed result of its policies and procedures and an organizational structure in its annual report. Through sharing of profits and responsibility, the corporate governance strategy involves investors and shareholders in the decision making process. As a result, Sainsbury seems to be building on its accountability and transparency. Similarly, because of the firm’s strong focus on financial analysis using the market analyst opinions, Sainsbury’s business strategy is based on suggestions, discussions, deliberations and approaches that leave recommendations and suggestions open for improvement. The firm’s company’s management system therefore aims at providing higher quality products and better value for money when compared to the competitors.

Competitive advantages are always relative. A firm has a competitive advantage or not over another firm serving the same market. This is reflected in terms of what is the actual source of a cost leadership or differentiation advantage. As far as cost leadership is concerned, it is often about resources that allow low cost in terms of the most efficient suppliers, the most productive employees, the most efficient distribution network, the leanest production routines and systems, and a process innovation and cost cutting culture (Jones & Tilley 2007, p. 125). In the case of differentiation on the other hand, it is mostly about the resources that allow a distinct position on service or product attributes. This for instance includes the most skillful workers, the most adaptable production system, the highest-quality suppliers or the strongest brand name. In spite of the fact that Sainsbury has been overtaken by its competitor (Tesco), the company still offers a competitive environment for its products.

According to the resource-based strategy, a company should clarify its core strategic competencies and capabilities while seeking to exploit them by finding new market opportunities to create a competitive advantage and new values. This is with an assumption that a firm is capable of molding and developing its market with inventory new ideas (Morden, 2007, p. 81). Barney’s further proposes that a firm’s ability to attain and maintain a profitable market position depends on its ability to gain and defend advantageous positions in underlying resources. If competitive advantage is on the other hand initially gained from distinct market positioning, it only offers temporary success unless there are reasons why other firms cannot take up similar or identical positions. What underlies the success of any competitive strategy has in this case to do with the firm itself in terms of what it can do (capabilities) or what it possesses (resources) (Dobson, Starkey & Richards 2004, p. 70).

All said and done, Sainsbury’s approach to business is to provide quality services to make the company great and retain customers and enhance long term relationships with distributors and suppliers (Williamson, Cooke, Jenkins & Moreton 2004, p. 181). In terms of sales, the company seems to have succeeded with each year increasing with a considerable percentage. One of the factors that could influence the sales growth is the aggressive expansion experienced by the company where ninety two stores were opened in 2011 for instance. According to Kalmarova (2012, p. 18), Sainsbury’s selling space has also grown by approximately 16% since 2009. While the company has been able to gain more customers since 2011, a stable market share further indicates the loyalty of its customers. These factors have contributed to Sainsbury’s good performance while giving it a competitive advantage to remain one of the biggest food retailers in the United Kingdom.

In conclusion, it is clear that the successful business strategy of any business is its capabilities to fulfill customers’ requirement which is a sustainable competitive advantage (Hall 2012, p.18). With Sainsbury’s aim of securing long-term competitive advantage, the battle is not just about positioning, but about competing on capabilities and resources. The competitive advantage will be ultimately attributed to the company’s ownership of a valuable resource or capability that enables an organization to perform activities better or more cheaply than competitors. Similarly, superior performance is based on coming up with a set of resources and capabilities which are competitively distinct and crafting them into a strategy.

According to Bharadwaj, Varadarajan & Fahy (1993, p. 84) however, for an organization to realize a maintainable economical gain in the market/industry segment, the variances between the said organization and its competitors must be replicated in several production attributes that are major buying criteria. Consequently, for Sainsbury’s to enjoy sustainable profits, the existing capabilities’ gap and the buying behavior ought to be enduring. Similarly, due to the changes in the consumption norm, the viability of the business’s competitive advantage will be pegged on its competence to adjust to the expected changes while influencing the key buying criteria.

 

 

 

References

Akter, S 2012, ‘Employee Satisfaction of Sainsbury’s: An Exploratory Study’, International Journal of Academic Research in Business and Social Sciences, 2:8, pp. 316-322.

 

Bharadwaj, S, Varadarajan, R & Fahy, J 1993, ‘Sustainable Competitive-Advantage in Service Industries: A Conceptual Model and Research Propositions’, Journal of Marketing, 57:4, pp. 83-99.

 

Cole, G 2006, ‘Strategic Management’, USA: Thomson Publishers

 

Dobson, P, Starkey, K & Richards, J 2004, ‘Strategic Management: Issues and Cases’, USA: Blackwell Publishers Ltd.

 

Hall, A 2012, ‘Service Operation: In UK’s Stores’, International Journal of Innovative Research in Management, 1:1, pp. 17-31.

 

Hassan, A & Parves, M 2013, ‘A Comparative Case-Study Investigating the Adoption of Customer Relationship Management (CRM): The Case of Tesco & Sainsbury’s’, InternationalJournal of Managing Value and Supply Chains, 4:1, pp. 1-10.

 

Henry, A 2008, ‘Understanding Strategic Management’, USA: Oxford University Press.

 

 

Hill, C & Jones, G 2013, ‘Strategic Management: An Integrated Approach, 10th ed. USA: South-Western.

 

Jones, O & Tilley, F 2007, ‘Competitive Advantage in SMEs: Organizing for Innovation and Change’, USA: John Wiley & Sons.

 

Kalmarova, Z 2012, ‘Sainsbury’s Vs. Morrisons – An Investment Decision Based on Financial Analysis’,Financial Assets and Investing, 3, pp. 17-28.

 

McLoughlin, D & Aaker, D 2010, ‘Strategic Market Management: Global Perspectives’, USa: John Wiley & Sons.

Morden, T 2007, ‘Principles of Strategic Management’, USA: Library of Congress.

Morelli, C 1997, ‘Britain’s Most Dynamic Sector? Competitive Advantage in Multiple Food Retailing’, Business and Economic History, 26:2, pp. 770-780.

 

Oliver, C 1997, ‘Sustainable Competitive-Advantage: Combining Institutional and Resource Based Views’, Strategic Management Journal, 18:9, pp. 697-713.

 

Thompson, J 2001, ‘Understanding Corporate Strategy’, USA: Library of Congress.

 

Thompson, J & Martin, F. 2010, ‘Strategic Management: Awareness & Change’, USA: South-Western Cengage Learning.

 

Williamson, D, Cooke, P, Jenkins, W & Moreton, M 2004, ‘Strategic Management and Business Analysis’, USA: Library of Congress.

 

 

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