The following report will make a comprehensive analysis of two organisations working in the same sector i.e. grocery retailers. The selected organisations for this report are Tesco PLC and J-Sainsbury PLC.
About Sainsbury’s PLC
Sainsbury’s PLC started its operations in the year 1869 from a small grocery shop in Duna Lane, London. After the inception, the business receives great growth opportunities in the year 1922. It was a self-service store in the earlier times. Moreover, the retail market of Sainsbury faces great risks in a business like world wars one and two. Further, the business face decline after John Davan Sainsbury retired from the post of chief executive officer of the company that damages the company’s social responsibility development (Martinuzzi et al., 2011).
In today times, Sainsbury’s offer great services like financial services, grocery, clothing, and other home used materials and had acquired the Home Retail Group that had made the organisation in one of the United Kingdom’s (UK) largest supermarket chain. In a news article, it was said that Sainsbury has taken over the second position from Asda in UK biggest supermarket with the market share of 16.5% in the year 2015 (Butler, 2015).
About Tesco PLC
In the year 1919, Jack Cohan, a pilot in Royal Airforce, starts selling groceries after the Great War ended. He came up with the company name of Tesco when Cohan joins hands with TE Stockwell for supplying and selling tea in the year 1924. They start selling their first branded product of Tesco Tea in the year 1929. In the year 1950, a supermarket named Tesco was built and started its functions on a 1750 sq. ft. at Maldon Essex, England (Tesco PLC, 2017).
And after that, the name become a level of quality in providing quality products and services. In the year 1990 Tesco PLC goes global by providing free computer equipment to the needy schools of the United States and England as well. In the year 2000, the growth of the organisation continues as they expand their services with the help of the worldwide web. In the year 2012, Tesco brings in a great deal of online offers that was the result of online business expansion (Tesco PLC, 2017).
From above paragraphs, it can be said that Tesco, being a grocery retailer store, has expanded its branches by performing product diversification on geographical basis since it get global recognition in the market. Such product diversification list of Tesco is very long as it contains retailing of toys, books, furniture, petrol, financial services, telecommunication services and other electronic products and their services. The year 1990 observes and records the market reposition of the Tesco PLC, further the Tesco PLC is listed on the London Stock Exchange under FTSE 100 index. The market capital of the Tesco PLC is in £14,824.46 million (LSE, 2017).
Evaluation of Leadership
For many of the multinational companies like Sainsbury’s and Tesco, evaluation of their leadership process is very critical. This criticality is the result of organizational success dependency. It is also said that every member of the community or the organization must know their role in the organisation. Further, it was said that the practices of effective leadership styles can bring desired level of success in the organization (Van Eeden et al., 2008, pp.253-267).
At Sainsbury’s PLC
Sainsbury’s PLC has become the second largest retailer in the UK through its supermarkets and other convenience stores, moreover it employees on part-time and full-time basis including the directors. The total number of employees in the organisation are 161100 (Annual Report, 2015). Such huge number of employees requires a great style of leadership which can lead the organisation and the employees of the organisation through the thick and thin of the organizational work.
For taking the organization through any possible business scenario, the leaders of Sainsbury’s have to follow the strategic leadership style as it is described in the year 2015 annual report of the company that the board of company directors had put emphasis on the strategic leadership approach as the leaders have to handle the strategic matters of the organization with great concerns as it matters very much. In the annual report of 2015, it was also said that performing the strategic activities for the organisation also creates great opportunities for other related members of the organisation in performing their activities in a successful manner.
The strategic leaders always make such business strategies that are beneficial for a wider range of organizational related audiences like the shareholders, stakeholders, and employees. The strategic leaders of the organizations always put his efforts in drawing new business possibilities that can help the organizations’ management in displaying certain set habits required by the organizations from their leaders (House et al., 2013).
In the 2015 annual report of Sainsbury’s, it was said that with the help of strategic leadership style, the board can develop an in-depth review of the grocery sector and can evaluate the available business opportunities and threats for five consecutive years. Such level of business plan development can help the organization in attaining the required cost savings and other capital investment plans which will be helpful for the business brokers and our investment advisors.
At Tesco PLC
According to Tesco’s annual report of the year 2015, Tesco PLC is one of the grocery retailing giants where 506,984 of the employees are working on regular and part-time bases. At Tesco PLC, a chief executive officer is the decided leader of the organization through mutual consent of directors and other employees. He is responsible for making the effective board of directors who have an excellent level of communication among themselves. This type of selecting the leadership of the organizations highlights the usage of a democratic style of leadership.
From above paragraph, the management of Tesco has acquired the likes of democracy for conducting the process of organizational leadership. By following democratic leadership style, Tesco PLC’s management encourages the workers to perform their best. For this reason, the associates of the organization keep on providing better services to their clients.
The senior management of Tesco hires separate managers and leaders for their separate stores so that the business of the specific store can be managed in most effective manner. This is done because every member of the separate store must know his duties and perform those duties in a manner that increase the overall revenue of the business.
The managers and the leaders of each store perform regular audits of the business for classifying and resolving issues faced by the management of the company. Further, the managers of the company also accomplish the functioning tasks which includes the procedure to deliver the store in great standards along with better opportunities and excellent services for its clients.
With the use of democratic leadership style in the Tesco PLC, it can be said that the information flows freely from the top to bottom, and bottom to top as everyone in the organization provided with a free hand to speak about their thoughts related to the situation faced by them. The employees and other working members’ opinion about handling the organizational workflow are given the required consideration by the management of the organization.
Tesco boosts its workforces by giving them rewards and advantages like presenting them an entire package for taking part in the profit, protect their future and take care of their selves with paid holidays. Moreover, Tesco leaders provide a discount card to every employee who has completed its one year of the job.
Lynch’s four Link model
Lynch develops a four-link model that help the multinational organisations like Sainsbury’s and Tesco in designing the perfect mechanism for their organisational success. The four-links developed in the model helps all the organisations with the governments of the host countries, other informal networks of co-operations, formal connections with other corporations, and further connections with the commentators of the organisation as displayed in the picture on the next page.
With above four links, Lynch believes that organisations can be trained to use the adaptability of their environment to increase their comfort with it. The leadership evaluations model always holds more stability in comparison of company’s performance. But when a company is growing in the market then it requires more of its understandable knowledge with employees rather than developing different market strategies, meaning developers must identify strategies to increase the organisational performance.
Determination of the strategic position is the integral part of any company’s strategic management process. Moreover, the strategic position of the organization is directly concerned with its internal and external environments and other business related competencies (Pine, &, Gilmore, 2008. pp.35-40).
In the case of Sainsbury’s, the basic concept of business strategy is described on their website as they had developed three steps for defining their strategic position. These three steps are identified as their business vision to become the most trusted retailer; their goal of making customers’ life easier than before by offering quality products; and by developing a strong strategy to understand the customers’ need at different levels (J-Sainsbury, 2017).
For developing a further understanding of the strategic position about Sainsbury PLC, the report will describe the internal and external forces working for the organization such as Porter five forces analysis, SWOT analysis, and STEEPLE analysis. Porter five forces model and STEEPLE analysis will be performed for identifying the external environmental analysis of strategic position; and for internal environmental analysis SWOT analysis will be conducted that can also define the competitive advantages.
External environmental analysis
Porter Five Forces Model
The use of Porter Five Forces Model is done in the organization because the organization wants to analyze different markets that are impacting or can impact their market position in future. The Porter’s five forces are, threats of new entrants; threats of substitutes, bargaining power of buyers, bargaining power of suppliers, and the competitive rivalry among the firms of similar sector (E. Dobbs, 2014. pp.32-45).
In accordance with the annual report of the year 2015 for the selected company of Sainsbury PLC, it can be said that there are very minimal or no threats to Sainsbury when any new business is establishing its self to perform its activities at complete level. The performance of activities to the full extent in retail sector requires a high amount of initial investment and continuous observation of the trend change in the UK markets, which can be difficult for the new entrants.
Further, there are other retailers at the small scale in the UK who are providing similar types of products in the market of the UK which are provided by Sainsbury. Therefore, it can be said that Sainsbury PLC faces greater threats from the available substitutes in the market. And to reduce such threat they must introduce new products in the market.
With the increased number of threats from substitutes of business products in the retail industry, the targeted customers came to shop with great or high bargaining power. For resolving and catering the high bargaining power of the buyers, the organization has started paying discounts on various products of the organization. The discount offers provided to the customers of Sainsbury depicts that the higher bargaining power of the buyers.
In connection to higher bargaining powers on buyers at Sainsbury PLC, the power of product suppliers is kind of moderate or at low level. This is because the organization has developed long term partnerships with its suppliers of non-organic products and vegetables. But in products like eggs and quality meat, the suppliers possess high bargaining power. Therefore, overall bargaining power of suppliers can be distinguished as low for Sainsbury.
The competitive rivalry for Sainsbury’s has increased as the UK retail industry is becoming more competitive with the emergence of new market players like Aldi and Lidl. These market retailers have started to cannibalize the market for the old players of the industry.
STEEPLE analysis is one of the variants developed from the simple strategic management tool of PEST analysis for analysis the external environment of the organization. STEEPLE analysis adds environmental, ethical and legal factors in the simple political, economic, social, and technological factors of PEST analysis (Montalescot, et al., 2008. pp.462-471).
Sainsbury’s PLC offers great social experience to its customers and its employees as the current market trend is moving towards one-stop shopping. The customers like to shop for their everyday usage things from one shop. Sainsbury is also following the strategy of one-stop shopping by offering different non-food products in their stores.
Moreover, with the usage of one-stop shopping social strategy, the technological advancements are also used by the Sainsbury management in developing a positive image of their business operations for increasing the business growth potential. Further, the economic factors of Sainsbury’s also help in making business growth as they distinguish the business costs and profitability.
Sainsbury’s PLC is also making efforts for making a positive impact on the environment of UK by running their social campaign of ‘Reduce, Recycle, and Reuse’ approach which has helped them in reducing the carbon footprint. There are also certain political rules to reduce the carbon footprint in the environment. Moreover, the government of UK has a more political influence on the operations of Sainsbury.
The legal system of the UK has introduced the new tax on the conducting business advertising for processed foods. Sainsbury’s PLC follows such legal rules by complying its products to the laws. The obedience of legal rules and other business laws reflect the ethical conduct of the business.
Internal Environment Analysis
The term SWOT in the phrase of SWOT analysis is the jargon of four internal characteristics of any organization. These four internal characteristics are referred as the strengths, weaknesses, opportunities and threats (Helms, &, Nixon, 2010. pp.215-251). The basic strength of Sainsbury’s is its product line and its brand value. Customer think very high about the organization and its products, therefore, Sainsbury is the most trusted brand of UK.
The basic weakness for the business is that it is not on the global scene of operation in comparison of its competitors like Tesco and Asda. Such global absence of the organization has impacted negatively on the growth opportunities of business. To remove such weakness, the organization can expand its business on the global basis. Moreover, there are other sectors like banking which has more growth opportunities for Sainsbury. Threats faced by Sainsbury’s are the increased price competition in the retail sector from other industry giants like Tesco. Moreover, the increased number of discount givers in the retail market has grown and they are the highest threat to Sainsbury.
At Tesco PLC
With respect to Tesco PLC, it can be said that the business strategy displayed on their website and on their annual report of the year 2015 is directly connected with the concept of ‘every little help’. This business strategy had helped them in attaining many goals that had lead it to a current business position.
For further understanding the strategic position of Tesco PLC, the report will conduct internal and external environment analysis. For doing such deep analysis of Tesco PLC, the report will study Porter five forces and STEEPLE analysis for external environment and will conduct SWOT analysis for gaining information about the business internal environment.
External Environment Analysis
Porter Five Forces
The Tesco PLC also faces high threats from the products of small scale retailers which are direct substitute for Tesco non-food items. But Tesco has opened various express stores in the local town areas to sub-due the impact of threats received from substitute products. The food retail industry faces very low threat form the new entrants as Tesco, too, faces very low threats from new entrants in the industry. This threat is low for the Tesco PLC as the entrance in the food retail sector requires a great amount of investment. And to perform the activities of food retail business in complete manner also requires a high amount of initial investment and continuous observation of the trend change in the UK markets, which can be difficult for the new entrants.
The competitive rivalry for Tesco PLC has increased as the UK retail industry is becoming more competitive with the emergence of new market players like Aldi and Lidl. These market retailers have started to cannibalize the market for the old players of the industry.
As the level of threat from product substitute is high in the retail industry, the targeted customers come in the stores with the mind set of buying high-quality product at cheap rates; and if they do not find it they can move to substitute products very easily. Such type of action from buyers increases their bargaining power. Therefore, it was decided by the authorities that low prices will attract more customers towards the supermarket.
The bargaining power of suppliers in the retail food industry is very low and same thing can be said in reference of Tesco, PLC. This is because the suppliers of Tesco PLC do not want to lose the contract from such large and multinational supermarket in future.
For the social factors of the Tesco PLC, it can be said that the target market’s attitude towards purchasing from super markets is changing in a drastic manner the age of major portion of population is crossing 60 years and they do not tend to visit the superstores. Rather, they would like to make purchases online. Such social change in the target market was realized by Tesco and they have their huge online presence mainly all around the globe.
The development of huge presence on world wide web has helped Tesco in using more technological instruments for conducting their supply chain and other product rating activities with great ease. The use of technology has also impacted on the earning pattern of the Tesco as they are the first in business that bring the triple payment method where the buyers can pay tier bill through cash, cheque, and/or credit card. Such step has increased their economic value of Tesco PLC.
With the change in the payment methods through technology, the packaging techniques has been changed to support the environment of UK. Furthermore, Tesco has started to write the carbon footprint information on its products if they are not correctly disposed by the customers. This has increase the knowledge of carbon footprint among the customers and they are also helping Tesco in reducing the carbon footprint.
With such environment friendly actions, Tesco PLC does face any political burdens in marketing its products around the globe. But the political policies regarding taxing the products had been changed. That is, a 20% increase in the value-added tax bill has been passed. Such legal implications from government can impact negatively on the non-food sector of Tesco. But, still, they are accepting it which displays the ethical behaviour of doing business.
Internal Environment Analysis
The basic strength of Tesco PLC is to make the product affordable to its target market so that they can easily purchase it and provide their share in attaining business growth. In such manner, the targeted customers’ budget will not be affected and the amount of annual sales will grow on a rapid basis.
The basic weakness of Tesco PLC is that they make product strategies for all their chains in the offices of the UK which produce a negative impact on their operations in different societies. Basic opportunities available to the business are covered in the increased sales of the general food products because every person needs to eat healthy food. Fierce competition in the UK retail sector is the only threat that is faced by Tesco PLC. This is because, from the big four retail store group including Tesco, the other three namely Sainsbury, Asda, and Morrisons are gaining market share at fast speed.
The business strategic directions can be determined using BCG matrix, and Ansoff matrix. For the two selected companies of Sainsbury’s and Tesco PLC, the results from Ansoff matrix and BCG matrix are shared. Both matrices are divided into four different columns. The Ansoff matrix is divided into four quadrants of market penetration, product development, market development and diversification. The BCG matrix is divided into four quadrants of stars, question marks, dogs, and cash-cows.
Ansoff Matrix of Sainsbury’s PLC
It ca be said that Sainsbury’s PLC has used all the four quadrants of Ansoff Matrix very adequately during its business process. But from the analysis done above where it is observed that there is a stiff market competition in the UK, therefore, Sainsbury should find new markets through it market development and diversification strategies and must deal with competition in the market by product development strategies. Moreover, Tesco has marked its presence in the international markets along with great product diversification.
Ansoff Matrix of Tesco PLC
Tesco PLC has also been using all four techniques explained in the Ansoff matrix. That is, Tesco PLC makes its efforts in increasing the market share of its current products through market penetration strategies of Ansoff matrix. Moreover, Tesco also launches new products in the similar market for developing its product range in the market through product development.
BCG Matrix for Sainsbury’s
Sainsbury is offering its services in terms of retail stores, online retailing, financial services, energy sector and entertainment. And according to BCG matrix quadrants, the online retailing is the star of the Sainsbury as it has high market growth. Further, dogs of the Sainsbury are it entertainment and energy sectors as they low market share and high growth potential. The cash cows of Sainsbury are the retail stores business as the have moderate market potential with great revenue generation potential. The question marks of Sainsbury are its financial services as they are generating low market value and have very little market growth (Annual Report, 2015).
BCG matrix of Tesco
Tesco PLC provides its services in online retailing, retail stores, telecommunications, banking and petrol distribution. The star business of Tesco in current times is the Tesco Petrol which have high market share with high growth potential. The question marks sector of the Company is telecommunication sector as it has low market share but has high market growth. The retail stores and online retail marketing are the cash cows of the Tesco PLC as they high market share and moderate growth level. Tesco PLC’s banking sector is the dog of the group which has low market growth and low market share (Annual Report, 2015).
Strategic options and their evaluation
After developing the report, there are certain strategic options for Sainsbury. These options are related to the development of new markets for increasing the sales revenue. Moreover, Sainsbury must implement market development strategies along with product development so that they can grow steadily in the competition. For Tesco PLC, it can be said that it has to focus more on the diversification strategies of conducting business in new markets. By implementing such strategies they can gain the desired level of market share.
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