A Strategic Analysis of J Sainsbury PLC
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A strategic Analysis of J Sainsbury PLC Report To Managing Director by Christopher Robinson 1. Organisational Structure * 1.1 Current structure * 1.2 Disadvantages of Sainsbury's current Organisation Structure * 1.3 Alternative Organisation Structures * 1.4 The Future of Sainsbury's Organisation Structure 2. Finances * 2.1 Analysis of data 3. Marketing * 3.1 Introduction * 3.2 Conclusion 4. Management * 4.1 Open Systems * 4.2 Human Relations * 4.3 Internal Process 5. References Appendix 1. Alternative Models of Business Structure 2. Analysis of Financial data 3.The Marketing Mix * 3.1 Porter's 5 Forces Model * 3.2.1. Threat of New Entrants * 3.2.2. The Power of Buyers * 3.2.3. The Power of Suppliers * 3.2.4. Threat of Substitutes * 3.2.5. Industry Competitors * 3.2.6. Boston Matrix * 3.3 Conclusion 4. Strategic analysis of Sainsbury PLC using Porter's 5-Force Model 5. The Boston Matrix 1. Organisational Structure 1.1 Current structure J Sainsbury PLC is a decentralised organisation with a divisional or 'group' approach as the basis of structure (fig 1). Fig 1 Whilst the main focus would appear to be on the UK supermarket chain there are several other businesses (operating units) in which the organisation holds interests. Theses include: * Shaw's Supermarkets Inc * Sainsbury's Bank * J Sainsbury Developments Ltd * Sainsbury's Property Company In divisional structure senior Directors ( who are on the Operating Board which is responsible for the day-to-day running of the company. The Chief Executive and the Finance Director are also part of this team. "http://www.j-sainsbury.co.uk/ar05/index.asp?pageid=50") give each unit the authority to design, produce and deliver the product or service, using resources under its control or bought from outside suppliers. Fig 2 A functional structure (represented in Fig 2) can be expected to operate within each division and hierarchies become more apparent. The Group Director of a division or business area will report to the Operating Board which then reports to the board of Directors who oversee all the divisions of the organisation.
EPS serves as an indicator of a company's profitability. The rise in the earnings per share from £143 in 2001 to £188 in 2002 is a good sign clearly for shareholders, but it also shows an increase in the profitability of Sainsbury's. The Chief Executive and Chairman are happy with the improvement in these figures, however, declining share price is a continuing cause for concern as the table below shows; Appendix 3 The Marketing Mix Product Decisions are made about how to target the market and make the product appropriate to the market segment that the company is trying to sell to. Factors that need to be taken into account include; packaging design, materials used, value of the product, quality of the product, product branding, usefulness of the product, and quantity of the product provided. Sainsbury's product is based around a wide choice of branded products plus cheaper but still good quality own brand products. Part of the Product section of the mix is the ability to change or develop the product being provided in order to match the requirements of the customers that it is being aimed at. It is essential that a firm can change/alter their products to reflect any change in consumer needs. Sainsbury's is currently struggling to get the product differentiation required to attract a particular segment of the market (high quality, modest prices) as Marks and Spencer along with Waitrose occupy the high quality high prices segment and Tesco occupies the medium-high quality low price segment. Now more than ever Sainsbury's needs to realise that the products it provides are at the end of their maturity stage in the product life cycle. The methods for product revival are to; encourage consumer loyalty, distribute the product as widely as it is demanded by consumers, and cut selling prices. Price The price of the product, particularly the price compared to that of your competitors is a vital part of marketing.
Power of Buyers * Threat of Substitutes * Threat of New Entry * Bargaining Power of Suppliers The critical issue is how Sainsbury's supermarkets can rebuild it's market share if not it's past dominance in a highly competitive environment. The UK company has struggled to compete recently with Tesco's advances, especially into the 'middle ground' of better-off, middle class customers, as they have combined higher reputation for quality with low prices. Whilst the US company has seen growth in it's convenience sector Sainsbury's other businesses do not enjoy significant market share and are principally seeking to create niche markets using the leverage of the brand reputation of the parent company. Sainsbury's bank in particular has encountered a challenging competitive environment with the growth of the on-line financial services sector. All in all Sainsbury's is operating in a challenging and developing strategic business environment and struggling to cope with intense competitive pressures; old glories are becoming increasingly hard to repeat. Appendix 5 The Boston Matrix This diagram below is a supplement to the marketing mix analysis and shows where I think each of the divisions under investigation in Sainsbury's are placed. The boston matrix is a means of analysing the product portfolio and informing decision making about possible market strategies. Analysis In recent years Sainsbury's supermarkets have been moving away from STAR status to a CASH COW. This is because; it has a high market share, low growth markets (maturity stage of product life cycle), high cash revenue and positive cash flows. Contrary to Sainsbury's supermarkets, Shaws is moving away from DOG status -where large sums of money are required for support and the products are in a low growth market - to a STAR status. It is becoming the best performing division in the organisation. Sainsbury's Bank and Developments Property have been hard to organise but I believe that whilst the bank hasn't performed particularly well there is scope for a successful division here if more of the organisations efforts are focused on it.
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