Company Objectives
Sainsbury prides itself with the record of being the longest standing major food retail chain in Britain since 1869. The persistence of the company is attributed to their steadfastness in maintaining the principles and values that propelled the company to success for almost two centuries. Business operations of Sainsbury are directed towards two long-term objectives. These are based on the general theme of the marketing strategies of the company and the direction of expansion of the business.
First objective is the maintenance of its stable market share or preventing the decline in the number of customers and profitability. To accomplish this objective, the company is upgrading its stores in terms of the physical structure, products, services and added value. In relation to physical structure, Sainsbury is introducing improvements to some stores by changing old display shelves, storage containers and freezers, putting new flooring, and repainting the interior and exterior of the retail shops and fitting the shops with state of the art ventilation and lighting. Some of the smaller stores were extended and the storage shelves repositioned to provide bigger space for customers to move around. In terms of products, the company has divided its products into the three categories of fresh foods, groceries and non-foods. The division is made to be able to focus on fresh foods, which are the products that the company believes to comprise its competitive edge. The company is also implementing a process of ensuring food quality by contracting with credible and reliable suppliers, checking the items before displaying them in the stores and imposing regulations for hygiene and safety in the difference stores. In terms of service, the company is also seeks to provide convenient service through its hospitable staff and state of the art facilities. In terms of added value, the company is continuously seeking the feedback from customer not only as basis in providing the basic and common expectations of customers but also to exceed that expectation to provide greater value for the price that people are willing to pay for its products and services. These activities are implemented to ensure that customers are kept interested in engaging the food retail services of the company. The company also aims to become a part of the lives of customers by providing convenient place for the food demands of customers.
Second objective is to expand to other segments of the market or to other markets by identifying and targeting the expected demands of potential customers. To achieve this objective, the company established an online shopping service with the catch phrase “Try Something New Today” to reflect its marketing concept of placing the company as an alternative supplier of fresh foods, grocery and non-food items relative to other retail stores. In expanding the supermarket chain to other areas in UK and around the world, the company is coordinating with the communities affected to seek their acquiescence.
Pricing and Other Strategies of the Company
Pricing Strategy
Sainsbury’s pricing strategy is reactive and competitive. Pricing is reactive because the price accorded to its products depends upon the market and industry price. The company places a high premium on affordability in reaching out to majority of the market. Pricing is competitive because the company determines price relative to its two main competitors, which are Tesco and Morrisons. With the introduction of Walmart in the UK under the name Asda, there are now four major supermarkets competing for the market. The competition has thrown these four competitors into a controlled price war to determine cost advantage. On the part of Sainsbury, finding ways to lower its product price in order to gain customer patronage is its primary pricing strategy.
On a short-term perspective, this pricing strategy is effective because being the most cost-effective store determines its position in the market as determined by market analysts and the performance reports of the store. However, in the long-term this strategy proves hard to maintain because relying primarily on price as a competitive advantage means that the company does not have enough room to innovate and expand. This means that in maintaining a lower price relative to its competitors the company is just shifting from having the lowest price to having a higher price in a continuous cycle until the system fails.
Product Strategy
The core concepts applied by the company in its product strategy are availability and affordability. Availability pertains to providing every possible food, grocery and non-food item that customers look for. This involves expanding its product line to cover new products representing new needs. Affordability pertains to the activity of incorporating generic brands in order to provide the same retail items but at a lower cost. By doing this, the company is able to offer a wider range of products at a lower price in conjunction with its pricing strategy.
Sainsbury’s product strategy is effective in both short and long-term because it enables the company to meet demands of customers making its stores the ultimate one-stop shop providing both a convenient and cost-effective shopping experience. However, this is effective if Sainsbury is seen as a business firm without any close competitors. Relative to the other superstores, Sainsbury’s product strategy is similar to that of Tesco and Morrisons. This means that company is riding with its competitors without any substantial differentiation in relation to products so that Sainsbury does not really have a real edge that would prove helpful in case the pricing strategy fails.
Distribution Strategy
Sainsbury expands its operations by establishing an online shopping service and introducing a superstore in strategic geographic areas. Like the other superstores, Sainsbury has trouble in seeking the acquiescence of suburban communities for the introduction of its superstore branch due to the protests of small and family owned shops in the locality. The strategy employed is to convince the community that the benefits that the introduction of the store brings are greater in the long-term relative to its cost to them. But then again, its competitors also apply this strategy. This means that there is no substantial different in the distribution strategy of Sainsbury relative to its competitors.
Promotion
The gist of the promotion activities of the company is differentiating the company as an alternative to its competitors. The focus of its promotions is on the food products so that the company markets the claims that it offers better quality, fresher and healthier products. The company also aligns itself with the trend towards organic food by marketing its claim of being the largest supporter and distributor of organic products.
Placing the company as an alternative is effective because it attempts to distinguish the superstore in terms of its claimed competitive advantage. The one problem is it may not be able to substantiate these claims since there is no actual and substantial product differentiation between Sainsbury and its competitors.
Sainsbury Strategies and the Identified Objectives
Sainsbury’s pricing strategy is in some aspects consistent and in some areas inconsistent with the objective of maintaining market share through the prevention of decline of customers and profitability. There is only consistency if Sainsbury is in the position of being the superstore providing the best option for cost-effectiveness. However, once the company falls below its competitors in terms of pricing then the strategy fails to meet this objective. In the same light, its pricing strategy is only consistent with the objective of expansion if Sainsbury is able to maintain its leadership in the market to gain high brand/company name equity and the financial resources to support the expansion. Consistency with the objectives previously identified depends upon the ability of the company to perform at par or above its competitors. Since the company goes through a cycle of winning and loosing in the controlled price wars, the pricing strategy effectively supports the objectives in the short-term during the time of winning but fails to support the objectives in the long-term once the company experiences loosing out to its competitors.
The company’s product strategy is consistent with the objective of maintaining market share provided the company continuous to implement the strategy of expanding its product line and offering an affordable price. However, part of this strategy is affected by the pricing strategy. The product strategy is consistent with the objective only if the company is able to maintain both its product and pricing strategy or it is able to counter the lowering of prices of its competitors with the expansion and generic shifting of its retail products. In terms of the objective of expanding the company to other segments of the market and other markets, the product strategy supports the objective if it is able to go through the changes in company position relative to pricing by depending upon its ability to expand and adjust to new products and new needs and introducing generic brands to provide affordable alternatives. The product strategy supports the objectives only if the company strengthens its ability and the public perception of its ability to expand its products and incorporate generic products into its stores.
Its distribution strategy is directed towards the objective of expansion affecting only indirectly the objective of maintaining market share. Sainsbury’s strategy of developing an online shopping service that competes with other major superstores is consistent with the objective of expansion to new segments of the market. Its strategy of communicating with suburban communities before physically introducing a superstore is also consistent with the expansion objective.
Its promotions strategy of attempting to differentiate the company from its competitors through its claims is consistent with both the objectives of maintaining market share and expansion. However, claims should be substantiated for these claims to be effective in the long-term.
Recommended Strategies in the Future
Focusing on real and substantial product and service differentiation is the most important strategy that Sainsbury needs in the long-term. The market influences pricing and the only way that the company can become competitive is to participate in the price wars. However, Sainsbury can also strengthen its product strategy as a security net in case of the failure of the pricing strategy. The company should have a product strategy that results to its exceeding the performance of its competitors in this area. Implementing a real and substantial product differentiation may include strengthening its claims of organic food advocacy by offering a complete line of organic products still at an affordable price and promoting healthy living.
Expanding outside of the United Kingdom and into other regions where the company does not have representation is another viable strategy particularly in areas where its competitors have not yet expanded to in order to avoid the same difficulties experienced in the UK where the only significant source of competitive advantage is price. Sainsbury can look into emerging market such as Eastern Europe, Latin America and some parts of Asia. The UK market is already saturated so that the company’s future goal should to maintain its market in the UK and gain new markets in other countries or regions.
Credit:ivythesis.typepad.com
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