Sainsbury Company

Sainsbury Company

background

Sainsbury is one of the largest food retailers operating in the UK. They are helping their customers to live well in less (Anon., n.d.). As every big organization now wants to move on in another country to expand the business functions, Sainsbury wants to go and expand its business function in Canada. There are so many opportunities lie in the retail industry of Canada. One of the most crucial strategies is to Omnichannel that most Canadian firms adopt to reach potential customers. Because people now prefer to purchase online rather than to go to the outlet and they are buying the desired products. It would be an excellent opportunity for any firm that wants to enter and compete in the Canadian retail market (Chapman, 2020). There are also some challenges that an organization can face when it goes to expand in the Canadian retail industry. There has been slightly slow in international retailers that entered into Canada for an opening store in the past few years, and the leasing of the retail store now becomes another big issue. There are also some cases of bankruptcies and store closure, that is a challenging situation for the other retailers (Patterson, 2019). Retail underlying operating profit increased by 10.7 per cent to £692 million (2017/18: £625 million). Retail underlying operating profit increased by 3.0 per cent to £2140 million (2018/19: £2078 million) (Anon., 2019).

Environmental analysis

it includes an external audit of the industry of the UK and Canada so that it can be revealed that how the Sainsbury will expand in the Canadian retail industry along with all the opportunities and challenges.

PESTLE analysis

To find out and monitor the macro-environmental factors that have impacted on the firm’s performance is referred to the PESTLE analysis (Sammut-Bonnici & Galea, 2015).

Political factors

Political stability is essential to run the business. In the UK Brexit has caused so many issues and uncertainties. While recent crimes and violence have created severe problems, but the UK has maintained excellent relationships with other countries, and it is also a permanent member of the UN (David, 2019). Canada has political stability with a low crime rate. It is also a member of the UN (David, 2018). In this regard, the firm Sainsbury can quickly expand to the Canadian retail industry.

Economical factor

Since the 1990s, the UK has maintained persistent current account deficits. According to IMF, the current account deficit as of 2013 stood at 3.33% of GDP (Anon., 2014). While the GDP of Canada was expected to be around USD1.8 trillion in 2018. The strong economy, world-class structure, and one of the best banking system open the new doors of opportunities for new investors (David, 2018). In this stable economic condition in the industries of Canada, Sainsbury can easily set up a business operation there.

Social factors

The UK has a population with different needs and demands, and firms are successfully implemented innovative strategies to satisfy the customers. Moreover, the UK has the most educated people in the world (David, 2019). When talking about Canada, it has a shortage of skilled workers, but the community is diversified (David, 2018). In this sense, Sainsbury can get the best opportunity by expanding its business in Canada by providing jobs to its people and by satisfying the needs and wants of the diverse population in Canada.

Technological factors

In the recent era, people prefer to buy goods and services online. They don’t want to go to the retail shops. Self-checkout, loyalty cards are some of the technologies used in UK supermarkets (Metzger, 2014). On the other hand, technology industry of Canada is increasing very rapidly, and along with the political and economic stability, more and more investors are attracted here to invest and expand their business (David, 2018). In this regard, the UK has significant opportunities to expand business operations to Canada.

Porter’s five forces model analysis

This model was used to analyze the competitive position of an organization (Bruijl, 2018) concerning a country in which it wants to expand or currently to operate. Here is an analysis of the industry of the UK and Canada.

Competitive rivalry

There is high competition in the supermarket industry in the UK. Until 1995, Sainsbury was the market leader when Tesco fall due to its innovative marketing strategies. The retail industry of the UK has responded very adequately to the uncertainties brought about the Brexit. The market share of the organizations fluctuated heavily due to the Brexit issue, but the industry maintains its position by delivering high-quality services to its customers (exaltedvalue, n.d.). Whereas Canada has a large number of firms in the retail industry, and there is a high aggressiveness in the retail industry (Greenspan, 2019) so it can be said that the competition in the Canadian retail industry is also high. Sainsbury will have to face fierce competition in the retail industry of Canada.

Bargaining power of buyers

The bargaining power of the buyer is medium in the UK retail industry. The customers have so many options to select better products due to the advancement in technology. But the recession makes the people less purchaser (exaltedvalue, n.d.). In the Canadian retail industry, this power is low because of the large number of buyers, and they cannot impose pressure on the firm. Although they are diversified having different needs and wants (Greenspan, 2019). So there are opportunities for the Sainsbury to expand the business.

Bargaining power of suppliers

In the UK, suppliers want to make decisive business relation with food retailers, which in results, food retailers get food at low prices (exaltedvalue, n.d.). Due to the capital intensive nature in the transportation industry of Canada, the new manufacturers of any product face high entry barriers to the industry (Prince, 2016). So Sainsbury will face severe obstacles and high prices of suppliers when expanding the business to Canada.

The threat of substitute products

The competition is low in this regard because there is a high cost of substitute products in the UK, so there are little chances and a variety of substitute products (exaltedvalue, n.d.). In Canada, the substitute of the product depends on the prices of fuel (Prince, 2016).

The threat of new entrants

New entrants will not be financially challenged, but the uncertainties brought by Brexit will cause some issues while entering into the market (exaltedvalue, n.d.). However, new entrants face a lot of challenges while coming to the Canadian industry because of the high cost of railcars, intense human capital training (Prince, 2016). So Sainsbury will face the little challenge because it was already the most educated people in its operating country.

Porter’s Diamond Model of Five forces

This model is used to analyses why some industries within a nation are competitive while others are not (Vlados, 2019).

Factors condition

Education level is very high among the population while firms face somehow poor infrastructure with some underdeveloped markets (Anon., 2018). The infrastructure is very good of the country while the country needs to focus on increasing the number of students in the educational sector so that country will be more innovative in every industry (Midy et al., n.d.). Sainsbury can quickly expand its business in Canada as the firm has a power of human intellectual capital which is the essential element to get success in the industry.

Demand condition

The UK has high prices of land and high wages, so firms typically can open a new outlet in the market (Anon., 2018). Few economies are stable after the global recession, and Canada is one of them. Although the country reduces the tax to create a more stable economy. This tax reduction encourages the investors to invest and do the business, and this significantly impacts on the retail industry (Midy et al., n.d.). It will be easy to do business in Canada for the Sainsbury due to the low tax rate.

Related and supporting industries

In UK industries, business owners are highly supported by their suppliers to maintain a long term relation. It will affect positively in the sustainability of the businesses, especially in the food retail industry. While when talking about the Canadian industries, the smaller organizations there are cooperating with their skills and products to make the sector more profitable (Midy et al., n.d.).

Firms strategy, structure and rivalry

Even after the global recession, the UK retail sector industry has high competition and rivals. Organizations are continuously striving to compete with other organization (exaltedvalue, n.d.). Whereas, Canadian industries face a different type of competition. The main reason for this separate competition is having two different languages and two different culture in the country. The languages are French and English. And these are having two different culture as well. So industries must know that these cultural difference will impact the business process. But as Sainsbury is used to be in the very tough competition so, in Canada, there will not be so much difficult for the firm to compete.