SOCIAL – Sainsbury’s is a responsible organisation following all legal formalities. Sainsbury’s has a Think 21 policy for all alcohol, tobacco and related products. This means all staff are effectively trained to question the age of a person who looks under 21 and that when scanning alcohol, tobacco etc. the till will display a sign asking the cashier to check if the customer is over 18.
ENVIRONMENTAL – Sainsbury’s’ most of the waste produce is generated in the stores, from cardboard and plastic packaging to waste food. It aims to reduce the waste they produce from their own operations, recover as much as is practical, and it also ensures that the remainder is disposed of responsibly.
In a report, Respect for Environment: Recycling, Sainsbury’s stated “The financial and environmental benefits of recycling for stores are clear. In 2005/06 our stores recycled 6,893 tonnes of plastic (5,000 tonnes in 2004/05) and 119,483 tonnes of cardboard (118,000 tonnes in 2004/05) and composted 2,000 tonnes of waste. We encourage our customers to recycle carrier bags. In the past year, our customers recycled 100m plastic bags through our collection points.” (Sainsbury's 2006) Figure 2 explains Sainsburys diversion and disposal.
Figure 2 Source: (Sainsbury's 2006)
3.2 INDUSTRIAL ENVIRONMENT
CORPORATE RESPONSIBILITY – Sainsbury’s explaingin its stance on Sustainability remarks “At Sainsbury’s we recognise that we need to act responsibly in managing our impact on a range of stakeholders – customers, colleagues, communities, investors, suppliers and the environment” (Sainsbury's 2006)
The good tie up relationship between Sainsburys and Mey Selections encouraged Sheila Dillon, the renowned journalist. The presenter of the Food Programme explained, “Sainsbury has made a commitment to local sourcing in Scotland called Mey Selections. This is a way of branding the top quality food produced by 300 farmers and producers based within 100 miles of the Castle of Mey – and of making farming there a viable business again.” (Mey Selections 2007)
MARKETING AND BRANDING - Since 2000 Celebrity Chef Jamie Oliver has been the public face of Sainsbury's, appearing on television and radio advertisements and in-store promotional material. The deal earns him an estimated £1.2 million every year. In the first two years these marketing and advertising campaigns are estimated to have given Sainsbury's an extra £1 billion of sales or £200 million gross profit. (BBC 2006) Over the years, Sainsbury's has used many slogans. Sainsbury's currently uses the "Try something new today".
3.3 OPERATING ENVIRONMENT
HUMAN RESOURCES – Sainsbury’s refers to all its employees as colleagues. This concept was given a good hype by the latest CEO Justin King. Justin, in September 2004 introduced the 'Tell Justin' scheme, which encourages colleagues to let their CEO how they feel Sainsbury's can be improved. (Sainsbury's 2006)
4.0 ENVIRONMENTAL SCANNING OF A LARGE COMPANY – MORRISONS
Wm Morrison Supermarkets plc, today is the fourth largest chain of supermarkets in the United Kingdom.
“Morrisons is now the fourth-largest grocery multiple in the UK by virtue of its acquisition of larger rival Safeway in 2004. It completed the conversion of retained Safeway stores at the end of 2005, but the enormity of the task put a severe strain on the business. However, the business now seems to be returning to form and is working to re-establish its credentials in the marketplace. The group is currently in the process of refocusing its brand image on being the "food specialist for everyone", emphasising fresh food, good value and good service.” (Mintel Oxygen 2007)
4.1 EXTERNAL ENVIRONMENT
ECONOMIC – Large companies are similar to that of companies operating at a national level. Even large companies most of the times operate natinally owing to their spread expansion. The company is usually referred to as Morrisons and it is part of the FTSE 100 Index of companies.
However Unlike its competitors Morrisons has been concentrating only on its core business strategy of doing the basics efficiently, selling predominantly food at lower prices.
SOCIAL – Morrisons’ pledge of healthy living is not limted to its customers but is also extended to its prospects and the general public. Morrisons’ ‘Getting your 5 a day’, ‘Let’s eat smart’ and other such campaigns are a existent example of this.
TECHNOLOGICAL – Morrisons has used technology to quite a good extent. However services like 24 hour shopping, online shopping has not yet gained momentum for Morrisons as much as for its rivals.
4.2 INDUSTRIAL ENVIRONMENT
CORPORATE RESPONSIBILITY – Morrisons runs regular projects to raise funds through various offers, schemes etc. Recently in September 2007, it introduced the limted edition cheese called ‘Bagpuss Cheese’ on the occasion of the 80th anniversary of Asthma UK. This helped to raise money for its Charity of the Year partner. (Morrisons 2007)
MARKETING AND BRANDING
Following a strategic review, Morrisons announced that it will ditch its traditional branding and strapline in favour of a more modern brand image. CEO Marc Bolland announced: " Morrisons is a great business and the results of this review are about evolution, not revolution. Reflecting our nationwide presence and our many new customers, we will be making Morrisons ‘the food specialist for everyone’". (William Reed Business Media Ltd 2007)
4.3 OPERATING ENVIRONMENT
HUMAN RESOURCES
Morrisons employs about 118,880 employees. In comparison to other industry standards Morrisons has a very plain introduction statement for prospective employees – “Whether you work in one of our stores, at Head Office or at one of our warehouses or distribution centres, you can expect excellent training, great prospects and fantastic benefits and opportunities including the following” (Morrisons 2008) However they have tailored their old marketing tag line ‘More reasons to shop at Morrisons’ to ‘More reasons to work at Morrisons’. (Morrisons HR 2008)
5.0 ENVIRONMENTAL SCANNING FOR SMALL AND MEDIUM SIZED ENTERPRISES – SPICE OF ASIA
Spice of Asia is a leading store in the city of Aberdeen. It caters to various international groups across the Asian community. It brings together spices, vegetables and grocery from across the continent under one roof. The major consumers of Spice of Asia include students from the local universities and expatriates settled in Aberdeen. Spice of Asia is a family run business with less than 10 employees.
5.1 EXTERNAL ENVIRONMENT
ECONOMIC – Spice of Asia is a very small sized enterprise with no branches. It operates in a small area of about 150 sq. ft. of store space. However that does not limit it form doing good business. The company runs on the concept of high profit margins as customer base is limited to certain groups. All the products sold by the company are outsourced from different places in the UK, India, Pakistan, Bangladesh and other Asian countries.
SOCIO - CULTURAL
Being a seller of specialized products, the company is majorly influenced by the international community, Asian in particular. This to quite a big extent decided the sales figures for Spice of Asia. The international student community and the expatriates together are the driving force for the business of Spice of Asia.
5.2 INDUSTRY ENVIRONMENT
MARKETING – Spice of Asia very rarely indulges in any marketing activities as it uses the strongest tool of marketing – Word of mouth.
Students and individuals who purchase are more than satisfied to talk about purchasing their home town products in a foreign land. However Spice of Asia does market itself by sponsoring various events organized by the Indian Association or other social communities. This helps it to target every new individual settling down in Aberdeen.
STRUCTURE – Spice of Asia is a very clear and concise operative structure. Owned by an individual, the company is organized and managed by the immediate family members. However it also does employ a few individuals on a part time basis.
5.3 OPERATING ENVIRONMENT
SUPPLLIERS – Spice of Asia has always remained hush about the origin place of its products. Though the goods available in the store are branded and well marked of its parent production company, the information about the suppliers are difficult to be known. However, all the major Asian spices across the UK are produced by East End and Triple Lion brand. Both these brands have their supplier bases in London, Leeds or Bradford.
6.0 COMPARISON OF ENVIRONMENTAL SCANNING PROGRAM AT DIFFERENT OPERATING LEVELS
GLOBAL – Wal-Mart is the world’s biggest company in terms of revenue. It has its direct relationship with the government and all the political leaders where it operates. With the advent and use of latest technology, its pricing structure and marketing strategy; Wal-Mart leads the market with ease. However its employees across the globe criticize the company for being a poor wage payer. It is also worthy to note that Wal-Mart refers to its employees as Associates. Owing to the scale and the geography of its operations, Wal-Mart’s environmental scanning program is different from that of smaller players.
NATIONAL – Sainsbury’s UK, was the top grocer until rivals Tesco and ASDA took over. However it has been striving hard ever since to come over all obstacles. Sainsbury’s considers it employees, referred to as colleagues, to be their biggest asset. And it encourages its employees to be more than just an employee and take part in suggesting how to improve operations at Sainsbury’s using the “Tell Justin’ program. Being company operating only in UK, decisions of national changes could easily be taken. However if the same had to be in the case of Wal-Mart it would have been difficult to execute its operations as its headquartered in a different country. Hence Sainsbury’s though not fully cheaper in pricing than ASDA-Wal-Mart, still enjoys loyal customers based on loyal customer base.
LARGE – Morrisons, a large company in the UK enjoys almost the same benefits like a national company. Bur the economies of operation in case of Morrisons are smaller in comparison to Sainsbury’s. Morrisons has been concentrating on a straight forward approach of cheaper prices, and better customer service. In comparison to a national level or global company of the same industry, Mintel’s research for this report shows its appeal is skewed to older customers (59% of its customer profile is over 45 and 39% over 55), and the C1 and C2 socio-economic groups. (Mintel Oxygen 2007)
This explains that each of these companies of the same industry vary from each other due to difference in the scale of operation and geographies of the company. However it is important to understand the factors involved at the SME level, as every company discussed earlier comes from this level.
SMALL AND MEDIUM BUSINESS ENTERPRISE – Spice of Asia enjoys proprietor to customer direct relationship. The goods sold by them are very specialized and addresses a specific target audience. The company here operates with a strategy of higher profit margins than higher sales volumes due to the limitation of target audience.
7.0 KEY DRIVERS
“Key Drivers of change are forces likely to affect the industry, sector or market.” (Johnson, Scholes and Whittington 2005) It is important to identify the vital key drivers of change, which are forces likely to affect the structure of an industry, sector or market.
Key drivers are used in a majority of scenarios for analyzing the external forces to a company, whilst performing its environmental scanning. The main three drivers affecting key drivers in the retail industry are economies of scale, population, and technology.
7.1 ECONOMIES OF SCALE – In the retail industry, one of the key factors affecting the success of the business are the soundness and scale of the companies operations. This is one of the major advantges a company has over its competetion. Economies of large scale operations help any company in selling products at highly discounted prices resulting in competition elimination.
Companies with larger scale of economies enjoy better control over the market including their suppliers and other ancillary vendors. Wal-Mart for instance dictates its terms with its suppliers for the variety, size shape design and other specification of the product they want. They can do this because of the market coverage they enjoy.
7.2 POPULATION – Population is one of the key drivers involved in analysis of an external and industrial environment. Population growth is generally good news for retailers, creating a larger market to target and address. However, the balance of the population is shifting towards the older generation and households are getting smaller at the same time. These trends have mixed implications for demand for food and the demands on food retailers. The following figure explains the population implications for the grocery market.
Population implications for the grocery market
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Fresh produce: the over-50s and the retired are more likely to cook at home, from scratch, with less demand for ready meals and more for fresh fruit and vegetables. Similarly, they are less likely to consume eg fizzy drinks, sweets and snacks.
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Small stores: older consumers are less likely to do one weekly shop, preferring to shop for food more frequently. This and small households suggest demand for smaller local stores over out-of-town hypermarkets.
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Indulgence: The baby boom generation are used to indulging themselves. Increasingly, these shoppers put themselves first. This could be good news for premium products.
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Provenance matters: The over-45s show greater readiness to pay more for organic produce and higher demand for Fair Trade products.
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No to jumbo-packs: the family-size will see demand decline, with portions tailored for the one or two-person household to gain ground.
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Food only: The over-55s are less likely than average to buy most non-food products at supermarkets.
7.3 TECHNOLOGY – Big Multi corporations have used technology to the optimum limit. Technology forms the base for any developments in a company. These technological developments are a symbol of striving excellence of a company. It ensures the company keeps itself up to date with the technological advancement in the industry. These innovations help them capture the market to a great extent. Market penetration rate remains on a ever rising high with the help of technology.
The major examples of technological usage can be attributed to the latest developments in the retails industry. Online shopping, 24 hour customer service in select countries, continuous R&D, innovation of new products and other factors like upgrade of technology for the ease of customers has not only gained momentum for the retail industry, but also has kept the standard of living in a high boom.
Technological boom and its benefits are grabbed by every organisation in the right time. The deal here is the use of technology and the ancillary available resources to the optimum level. This will ensure extensive usage of resources for good and result in better productivity and higher sales in turn for the retails industry.
There still exist the old grocer shops across the street in many a areas striving against the stiff competition of conglomerate retailers. Little would they have known with the ease of technology, would give them a run for their business. However the rule in business, according to the giant retailers, is the survival of the fittest.
8.0 COMPANIES IN THE RETAIL INDUSTRY
The retail industry today is one of the most competitive industries. Though there are only a top few players in the fight, it still is difficult to survive without a sound strategy to survive. Everything in this industry happens with planning on a long term, however there are lots of short comes which needs to be addressed, failing which would result in heavy damage to the business and to the reputation of the company. There are hosts of achievement that a company strives to achieve while performing an environmental scanning during the course of its business. The top in the list are
- Gain a competitive advantage
- Reduce operating risks
- Create business opportunities
8.1 GAINING A COMPETITIVE ADVANTAGE
Competitive advantage is an essential part of business and strategy management in retailing. Every big player in the retail industry is fighting for the fact and reason that there is a competitor waiting to take advantage of a mistake done by rival companies. In simpler terms competitive advantage means the lead one company has relative to its rivals.
In retailing competitive advantage most of the times is directly related to large fixed costs and economies of scale in operations which create natural monopolies by creating a huge utility amongst the products the company sells. For instance, the highly discounted price of Wal-Mart in comparison to Sainsbury’s is one such competitive advantage.
If highly discounted price is Wal-Mart’s competitive advantage, SME’s like Spice of Asia strive on their competitive advantage of selling unique range of products exclusive to its customer base of international students and expatriates.
To gain a competitive advantage it is very necessary to have something unique to the company. The source of the advantage can be anything which is and asset to the company or which is to increase the profits of the business in retailing. It can also be a brand like Wal-Mart or a patent such as Viagra.
8.2 REDUCE OPERATING RISK
In the world of retailing, reduction of operating risk is crucial. Operational risks include health and safety in the top priority. However the major money spent and lost is on wastage dues over stocking of inventory or business lost due to lack of proper supply of inventory. If these two issues are not addressed in the top priorities it costs the company - loss of monies, business and reputation of the company.
Wal-Mart has what is considered to be the most sophisticated distribution system called Retail Link. This system connects each store with headquarters and over 2,000 suppliers so that they will never run out of or have too much inventory. Wal-Mart turns over their inventory more than any other retail store. The current challenge exists with supplying their overseas stores, especially while this is the area that they are concentrating on growing. In order to become more efficient overseas, Wal-Mart has started is on Customs Brokering division to take care of its global procurement, which saves them brokering and freight forwarding fees, and also gives them more control. They have also started to "request" strongly that their suppliers also be physically located in the countries where Wal-Mart is to better supply them.
Similarly all the retail giants have their own operational systems. However at a SME level, Spic of Asia does also operate on the same ground rules. But the level of monies involved with SME’s are less due to lower economies of operational scale.
8.3 CREATE BUSINESS OPPORTUNITIES
Business opportunities are available every where in the market including the competitors. It is purely subjective as to how a company cashes upon the opportunity. Business sustenance is subject to profits for the company.
With economies of large scale retailing, it is necessary not just to keep earning profits in the same geography or market but to expand. Many times expansion alone is not enough for optimum business opportunities. Along with expansion one needs to find the right business opportunity in a new market, in a new geography.
For Instance, at a global level, Wal-Mart has been expanding at a good pace. However it was stopped from entering the Indian market due to governmental policies. But Wal-Mart found a huge potential in the Indian market and converted this potential into a business opportunity.
In November 2006, Wal-Mart announced a joint venture with Bharti Enterprises to open retail stores in India. As foreign corporations are not allowed to directly enter the retail sector in India, Wal-Mart will operate through franchises and handle the wholesale end of the venture. (New York Times 2006)
The partnership involves two joint ventures –Walmart and Bharti Enterprises. Bharti will manage the front end involving opening of retail outlets, while Wal-Mart will take care of the back end, such as cold chains and logistics.
Approximately 40% of products sold in Wal-Mart are private label store brands, or products offered by Wal-Mart and produced through subsidized contracts awarded to the lowest bidder. Though Wal-Mart has entered in a joint venture with Bharti, yet 40% of the products on shelf in the new store will be that of Wal-Mart. This is one of the best examples of grabbing a good business opportunity.
CONCLUSION
Retail industry is a huge business across the globe. Business opportunities in the retail industry are available from the grass root levels until the global level of operations. But before hurrying up to grab the opportunity, a company needs to understand its limitations and forces in its environment which will help or deter it from making good profits. An environment scanning program helps an organisation to assess various external factors that would influence its business operations. With the use of this method and other strategic elements, a company can gain a competitive advantage over its competitors. The scanning of the environment also helps a company to develop strategies to reduce operational risks by streamlining processes to achieve optimum utilization of available resources. By making use of its competitive advantage to reduce operational risks for new business opportunities, a company can be highly successful in the market.
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