Business in Context
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Abstract
This report looks at the food retail market specifically J Sainsburys where it sits in the food retail market against its competitors. It looks at key elements of a long steep analysis under number of strengths and weaknesses of the company.
The main sources of information for this report are online, Sainsburys own website and newspaper articles. As you are, you are is this to and can draw on its past experiences to continue to be competitive force within the market, however Sainsburys will need to look carefully at the global markets and specifically European market so they can react appropriately to the current economic uncertainty.
Sainsburys can draw on their 20 by 20 sustainability plan to incorporate their plans to expanding their British food range.
Sainsburys are turning to new technology to improve the image on their competitive pricing with the other major supermarket chains.
Introduction
This report will focus on the food retailing of J Sainsbury, although references will be made to the financial services provided by Sainsburys this report wall study issues that affect it supermarket and online shopping business. The report will not discuss Sainsburys financial services.
A background history of Sainsburys
J Sainsburys plc are primarily a supermarket chain established in 1869 it operates in the retail market predominantly within the UK.
Sainsburys have 934 stores, 557 supermarkets and 377 convenience stores. They also provide an Internet-based home delivery shopping service which is available to nearly 93% of UK households. They employee over 150,000 colleagues
In recent years it has gone into partnership with the Lloyds banking group to open Sainsburys bank and also joint property ventures with the Land Securities group plc.
The major stakeholders are Qatar Holdings LCC which holds 25.99%, Lord Sainsbury of Turville who holds 4.99% Judith portrait with 3.92% and the legal and general group who hold 3.99%.
Sainsburys strategic focus is great food at fair prices, active property management, growing supermarket space, reaching more customers through additional channels and accelerating the growth of complimentary non-food ranges and services. (Sainsbury, 2011 [online]).
In the early 1990s Sainsbury were the largest UK supermarket chain by 1995 Tescos had overtaken them to the number one slot and by 2004 Sainsburys had slipped to third when Asda overtook them (Corporate Watch, 2004 [online]. Both Tescos and Asda have managed to hook customers into their stores with cheap special offers and price promise deals.
Overview of supermarket industry
Supermarkets dominate the food retail business in the UK with the top four taking 76% of the market share, the largest share of the market is held by Tescos with 30.9%, with Asda at 16.9% Sainsburys is third highest with 16.2% followed by Morrisons with 12%, with a number of other small brands establishing themselves from small convenience stores to larger stores such as Aldi and lidl (Live Trading, 2011 [online]). This offers customers different choices to pick from, leading to an expectation of quality food, competitive prices and good customer service.
The UK supermarket industry is a highly competitive market and stores are in a battle to win customers from other Major competitors.
Analysis and Evaluation
The steep analysis (appendix i) indicates there are many factors that can have an impact on the supermarket retail industry.
The current economic crisis in the Eurozone, with countries such as Greece and Italy unable to sustain any economic growth and the massive debts of these countries threatens to destabilise the Eurozone. For the first six months of this year the UK exports to European member states was £92.5 billion pounds, while we imported £116.7 billion pounds worth of goods (Uk Trade Info, 2011 [online]), The UK relies on its trade links with Europe. Many of the food and drink products on sale in UK supermarkets are sourced from EU member states therefore any instability in the European markets could affect the ability for supermarkets to trade within these markets.
The euro has fallen against the pound although at this time not a significant drop only two cents, if this trend continues it will enable supermarkets to source cheaper European goods, however if the Eurozone continues to struggle as predicted in a report by officials in Brussels, that recovery in the single currency has come to a standstill and growth is predicted to be just 0 .5% next year with British growth of only 0.7% this year and only 0.6 in 2012 leading to a rise in inflation and unemployment, ( The Times 2011). This will mean customers will have less disposable income and will be looking to buy cheaper goods
The increase of oil over recent years. Diesel having risen from around 90 pence per litre in January 2007 to around £1.40 per litre at present-day (what gas.com 2011) has had a major effect on the on shelf price in supermarkets. Not only does it have an effect on the price of the oil based products sold in supermarkets but it has a major effect on the costs of shipping and the distribution of products.
In the UK the government reduced Corporation tax in April 2011 to 26% (HMRC, 2011 [online]). Which will save companies significant sums of money however the affects of this measure will not be apparent for some time and may not have any significant impact on supermarket prices.
There is a strong rivalry between the dominant UK supermarket industry. Since customers major concern is price, price wars among the key players are extremely intensive. However new trends in the supermarket sector indicate a focus of competition not only on price but on the quality of service it provides and to some extent its customer loyalty schemes.
Seen as a weakness, is Sainsburys perception by the general public.
Justin King Sainsburys chief executive said “the gap between the publics perception and reality of the supermarket pricing presented an opportunity to steal market share from rivals “when talking about the general publics view that Sainsburys are too pricey, hence the introduction of a brand match scheme. (The Times,11.11. 2011).
Sainsburys launch high-tech