Strategic Management Process At Sainsburys

strategic Management Process At Sainsburys1.0 baseThe aim of this report is ab show up the Strategic Management Process and how it connect to the retail diligence. The retail industry that was chose to af regular this report is J Sainsbury Plc, the trine largest chain of super grocery stores in the United Kingdom. In dodge Management Process, it consists of iii study(ip) sections which ar, scratch, the dodge analytic conceive ofing, then fol embarrassed by strategy reflection and lastly is the system effectuation. In Strategy Management, at that place atomic number 18 versatile types of Strategy Analytical tools to apply to see out the Strength, Weaknesses, Opportunity and Threats of an transcription as each(prenominal) the ecesiss volition face its glory conviction and heavyies. princip solelyy in the retail industry, Strategy Management is the virtually common see to habit to seek the problems or opportunities available to quash the crisis and drivin g uplifted doing in the long term (Accenture.com, 2009). Few chosen tools much(prenominal) as doorkeepers PEST Analysis, Five forces, Value Chain Analysis, Portfolio Analysis, Generic Strategy, authorization System and Strategy Process were further explained and supported in this report.2.0 Strategy AnalysisAccording to Ron Meyer (2004, pg44), analysis is the first step to develop a schema finality. In Analysis stage, an judicature has to trace the opportunities and threats in the environment, as well as the strengths and weaknesses first before proceeding into schema formulation. These atomic number 18 commonly known as the four factors of S.W.O.T. analysis. SWOT analysis pass on outgrowth to identify the issues that ar must critical to the incoming of the brass instrument.As for the first articulation of the analysis, factors which ar remote to the organization ar the probability and threats. While for the internal factors argon the strength and weaknesses. There atomic number 18 strategy analytical tools to identify the external and internal factors. PEST is unrivalled of the tools that stop trace the opportunity and Five Forces lowlife call to identify the threats of the organization. On the other hand, value chains analysis shadow apply to identify the strength and weaknesses.2.1 Opportunities and ThreatsAn organizations Opportunity and Threats argon abnormal by external environment. Opportunities are external conditions that are helpful to achieving the objective of an organization while threats are external conditions that are harmful to achieving the organisations objective.2.2 Strengths and Weaknesses intimate surround affects an organisations Strengths and Weaknesses. Strength are the capabilities of the organization that are helpful to achieving the objective whereas, Weakness attri merelyes of the organization that are harmful to achieving the objective.2.3 Strategy Analytical Tools for External Environment (Macro-En vironment)Strategy analytical tools such(prenominal) as PEST and Five Forces basin identify the external environment factors to an organization.2.3.1 PEST Analysis is an External Environment Tool that light upon the Opportunity of an OrganizationThomas L. Wheelen (2010) points out that the general environment consists of all conditions in the external environment that forms a background context for music directorial decision making. In other words, general environment is the outer shape that is widely dispersed and affects organizations indirectly. General environment provoke be touched by Political factors, Environmental factors, Social factors and Technological factors or in acronym, PEST.Political Factor-Political factors refer to the g all overnment policy such as the leg of intervention in the economy.In United Kingdom, government decreases the rate of muckle tax from 30% to 28%, which stern save or help big companies alike Sainsburys signifi stinkert sums of m superst ary. (HM Treasury 2008).Economic Factor-Inte tolerate rates, taxation changes, sparing issue, inflation and exchange rates are factors of economy.As the global fare crisis rapidly increase has increased the forage prices all over the domain which ca utilize the rising purchasing costs for Sainsburys (economist.com 2008 online). This result beat an impact on the margins of the organisation and might pack to passing over the cost to consumers by increasing prices of around things in the super food marketplace. In addition, fuel price increases will have implications right without the supply chain of Sainsburys go throughing to an boilersuit situation to price hike.Social Factor-Richard Lynch stated that (2006) the demand of a unwaveringlys returns and the accessibility and willingness of a person to pop off can be affected by the changes of the social trends. Nowadays there seems to be much fury on fresh, easy path cooking. This serves an opportunity for Sainsburys to encourage revolutionary recipes and unfussy eating. Moreover, mint are more emphasis on healthy eating style mostly due to the increasing level of obesity which leads to many consumers to case towards fitter food. This new-fashioned-made trend has presents a beneficial opportunity to Sainsburys to parenthood up with more healthy food or construct healthier foods at a cheaper price than other manufacturers.Technological Factor-New technologies can create new produces and new processes that can adulterate costs, improve select and lead to innovation.Sainsbury invested new engineering science of Smart Grid to cuts energy costs and dishonors UK carbon copy emissions rate. The system monitors the grid and activates the stores biofuel generator when there is an increased demand for electricity. As a result, reserve index finger stations will not have to be used as much and the UKs carbon footprint will be decrease. The generator is the first of its kind and will be prov ide by waste oil and fat from Sainsburys stores to act as an ancillary power source. Additional technology in the store will reduce strain on the grid further by deactivating or diminution the stores heating, ventilation and lighting systems at peak times. This is an opportunity to Sainsbury as they use the waste to pay off electricity rather than using other source, hence, they can save up the electricity costs. (Sainsbury.co.uk,2010)2.4 Fives Forces Model to Analysis the External EnvironmentFive forces model is an analytical approach use to analyze a firms industry environment. Factors that are considered in five forces analysis are the hazard of entry by potential competitors, bargaining power of providers, bargaining power of buyers, threat of substitute products and rivalry among inured up firms. (John A. Pearce, 2011)The Bargaining Power of Suppliers-Suppliers can affect an industry by their ability to raise prices or reduce the quality of purchased good and runs. It s hould be noted that the suppliers are inclined towards major food and securities industry retailers and dread losing their pedigree contracts with large supermarkets. Hence, the space of the retailers like Tesco, Asda, and Sainsburys is further strengthened and negotiations are positive in order to communicate the utmost possible price from the suppliers (Ivorysearch.com).In November 2006, Sainsbury has announced that they are the first to launch new payment steering system to make it easier and fast for suppliers to access broadside information and gain early payments which has built a strong relationship with the supplier. Suppliers can view their trading account through inter pull in, this giving the supplier better visibility of their judge cash flow. This is excessively an opportunity to Sainsbury as they have a good relationship with the supplier (PrimeRevenue.com, 2009).The Intensity of Competitive Rivalry-In most industries, mints are mutually dependant. A warlik e move by one firm can be expected to have a noticeable effect on its competitors and frankincense whitethorn cause retaliation.The intensity of war-ridden rivalry in the food and grocery retail industry is extremely high. Sainsbury faces intense competition from its direct competitors, including Asda, Tesco, Morrisons and Waitrose, which are competing with each other over price, products and promotions intermittently. It should therefore be highlighted that Asda is one of the make out competitors in this segment with an increase of market share from 16.6% to 16.8% during the fiscal form 2010/ 09, while Morrisons to 11.6% from 11.3% through the same period (Euromonitor, 2010). Sainsbury has to come out new ideas to cope with the high competitive pressure in order to get over the threats from other big competitors.The Bargaining Power of Buyers-Buyers is one of the let outs that affect an industry because of their ability to force down prices, bargain for higher quality or move services, and play competitors against each other. In cases where products have a subtile specialism and are more standardised, the switching cost is very low and the buyers can good switch from one brand to another. Customers are tardily attracted towards low prices of a product. Besides, with the availability of online retail shopping, the prices of products are easily compared and thus selected. Hence, the bargaining power of customer is a threat to an industry or Sainsbury (John Thompson, 2010).The Threat of the Entry of New Competitors-New entrants to an industry typically bring to it new capacity, a desire to gain market share, and substantial resources which are threats to an established green goddess. The threat of entry depends on the presence of entry barriers and the reaction that can be expected from existing competitors. An entry barrier is an obstruction that makes it difficult for a caller-out to enter an industry. The threat of entry of new competitors into the food retail industry is low as it requires huge capital investments in order to be competitive and to establish a brand name. major brands that have already captured the food retail market are Tesco, Asda, Sainsburys and Morrisons and they account for 80% of all shopping in the UK (Mintel, 2010). Therefore, new entrants have to produce something at an exceptionally low price and/or high quality to establish their market value.The Threat of Substitute Products or Services-A substitute product is a product that appears to be different but can fill up the same need as another product.2.5 Strategy Analytical Methods for Internal Environment (Micro-Environment)Value Chain Analysis defines as the activities that educate post in a profession and relates them to an analysis of the competitive strength of the business. Michael porter suggested that the activities of a business could be grouped under two headings which are Primary and Supported Activities. Primary activities are activi ties that directly create and conduct a product whereas support activities are not directly abstruse in labor and it may increase effectiveness or capacity of the production. On the primary activities are inbound logistics, movements, outbound logistics, marketing and gross revenue and service. On the other hand, supported activities include procurement, human resource attention, technology development and Firm Infra organize. (Anthony Henry, 2008). Value Chain Analysis is one fashion of identifying which activities are the strengths or weaknesses of the organization.2.5.1 Operations of Primary ActivitiesThese are the activities related to the production of products and services. This section can be split into departments in certain companies. For instances, the operations in case of a Sainsbury would include information foresee, services counter and cashier.After operating without a third-party inventory auditor for ten grades, Sainsburys retailers lacked a sound process for ensuring that accurate counts of product were recorded. The absence of a bona fide system prevented Sainsburys from accurately measuring its inventory, thereby limiting their ability to envision product shrinkage. This, in turn, led to lower earnings. Also present was the hesitance by store personnel to change store procedures and accept indebtedness for accurate store reporting. This ends up becoming weaknesses to Sainsburys operation. (RGIS, 2010)2.5.2 outward-bound Logistics of Primary ActivitiesOutbound logistics are activities that distributing the final product or services to the customers. (David Cambell)Product availability is now the best it has been for years. The depot net unravel has been successfully reorganised to play along to improve service to stores. With the increase in gross revenue, the depots now handle over a million more cases and improved efficiencies have also reduced the cost per case. A new distribution centre in Northampton ensures there is gen erous capacity to match growth expectations and creating 750 new jobs. This strength of the organization has not only improved efficiency to the consumer and also provided jobs for the people (J-Sainsbury.co.uk, 2007)2.6 homo Resource Management of Supported ActivitiesHuman resource management involves with recruiting, training, cause and rewarding the workforce of the come with. Human resources management is important to a companys operation nowadays as it is a way of attaining sustainable competitive advantage. In the case of Sainsbury, colleagues are the anchor to the companys success and over the past year leadership training to 9000 managers throughout the business was completed. Sainsbury learned how to engage with its colleagues with its goals and value through their talkback survey and last year had marked improvements in two colleague engagement and its leaders skills. As for that, Sainsbury has a good profile for treating its module professionally so that this stre ngth of it can recruit staff even easily.After analysed the Strength and Weaknesses and Opportunity and Threats by using Strategic Analytical tools, the next step is Strategy Formulation. With the analysis result are collected, to formulate changes has to base on the analysed results in order to change accordingly.3.0 Strategy FormulationRon Meyer (2004) describes strategy formulation as the development of long hightail it plans for the effective management of environmental opportunities and threats in light of corporal strengths and weaknesses. It includes delineate the somatic mission, specifying achievable objectives, growing strategies and setting policy guidelines.3.1 StrategiesM. Thenmozhi (2001) concludes that a strategy of a corporation forms a comprehensive master plan stating how the corporation will accomplish its mission and objectives. There are different types of strategy and the typical business firm will considers three types of strategy which are corporate, bu siness and structural strategies.3.2 Corporate StrategyIt describes a companys overall way in terms of its general attitude towards growth and management of its various business and product lines. Corporate strategy deals with three key issues liner the corporation as a whole.3.2.1 Directional strategyIt is the firms overall penchant towards growth, stability and retrenchment.Growth Strategies-Expanding a companys activities to increase sales or to cook advantage to reduce the per-unit cost of products sold which increase derives. There are two canonical growth strategies which are concentration and diversification.Concentration-Concentrate or work closely on the product line that contribute growth or profitable to the organization. The two staple fibre concentration strategies are vertical growth and horizontal growth.Diversification-A company chooses to diversify to seek to increase profitability through greater sales volume obtained from new products and new markets. The three basic diversification strategies are concentric, horizontal and conglomerate. In the case of Sainsbury, Sainsbury has diversified into new market of Sainsburys assert in 1997. This is a joint venture with Bank of Scotland into a new segment of market. (Encyclopedia.com, 2001)Stability- Anthony Henry (2008) notes that an organization can relate its current activities without any significant change in direction. Some of the more popular of these strategies are the pause/proceed-with-caution, no-change and profit strategies.Pause/Proceed-With-Caution-This is an opportunity to rest before continuing a growth or retrenchment strategy. It is a very deliberate attempt to make only incremental improvements until a particular environmental situation changes.No-Change Strategy-No change strategy is a decision to do nothing new, it is a choice to continue current operations and policies for the foreseeable future.Profit Strategy-A profit strategy is a decision to do nothing new in a wo rsening situation but instead to act as though the companys problems are only temporary. The profit strategy is an attempt to artificially support profits when a companys sales are declining by reducing investment and short-term discretionary expenditures. suppression Strategies-Thomas L. Wheelen (2006) suggests that companies that are facing declining sales or making losses can imply retrenchment strategy to eliminate the weaknesses that are dragging the company down. Management may follow one of the several retrenchment strategies such as reversion, becoming a captive company to selling out, bankruptcy or liquidation.Turnaround Strategy-Emphasizes the improvement of operational efficiency and is probably most appropriate when a corporations problems are pervasive but not and critical. A poorly performing firm is able to improve its performance by cutting costs and expenses and by selling assets. There are two types of turnaround strategy which are contraction and consolidation . Sainsbury lost its position as Britains second largest supermarket retailer to Wal-Marts Asda as the sales volume had dropped. Sainsburys Cheif Exceutive plotted to cut out 900m of costs to improve its performance. (Richard Fletcher, 2003)Captive Company Strategy-Captive company strategy involves giving up independence in exchange for security. A company with a weak competitive position may not be able to engage in a full-blown turnaround strategy. The industry may not be sufficiently attractive to loose such an effort from any the current management or investors. trade Out-If a corporation with a weak competitive position in an industry is unable either to pull itself up by its bootstraps or to find a customer to which it can become a captive company, it may have no choice but to sell out.failure and Liquidation Strategy-When a company is in a poor competitive situation, there are no one is interested to buy a weak company in an unattractive industry. Hence, the firm must comp ly a bankruptcy or liquidation strategy. Bankruptcy involves giving up management of the firm to the courts in return for some settlement of the corporations obligations. In contrast to bankruptcy, which seeks to perpetuate a corporation, liquidation is the termination of a firm.3.2.2 Portfolio AnalysisTop management views its product lines and business units as a serial publication of portfolio investment and constantly keep analyzing for a profitable return. Two of the most popular strategies are the BCG Growth Share Matrix and GE Matrix.BCG or Boston Consulting Group Growth-Share Matrix ( Picture refers to Appendix A)BCG-Share Matrix is a management tool that serves four distinct purposes, it can be used to classify product portfolio in four business types based on four graphic labels including Stars, Cash Cows, Question Marks and Dogs. Besides, it can be used to determine what priorities should be given in the product portfolio of a company. Thirdly, it can classify an organisat ions product portfolio according to their cash usage and generation. Lastly, it offers management available strategies to tackle various product lines. (Tripod.com)Cash Cows-Are units with high market share in a slow- growth industry. These units typically generate cash in excess of the amount of cash needed to maintain the business.Dogs-Are units with low market share in a mature, slow-growing industry. These units typically break even, generating barely enough cash to maintain the businesss market share.Question Marks-This section are growing rapidly and consume large amount of cash, but because of the low market shares they do not generate much cash this results large net cash consumption.Stars-Are units with a high market share in a fast-growing industry.3.2.3 Parenting StrategyIt views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units. Corporate parenting generates corporate str ategy by focusing on the core competencies of the parent corporation and on the value created from the relationship between the parent and its business.3.3 Business StrategyChristina Crowe (2010) describes that Business strategy is to strengthen a particular business so that its performance increases and the business are more profitable. It improves the competitive position of the corporations products or services in the specific industry or marketing segment. Michael Porter developed Generic strategies which consist of cost leadership, preeminence and focus.3.3.1 Generic Strategy (Picture refer to Appendix B)Cost leadership-It is emphasizing efficiency, cost reduction is needful in all aspects of the business. It has to produce high volume of standardized products to take the advantage of economies of scales and experience curve effects. The product is lots a basic no-frills product which is low cost and made available to a very large customer base. It will be profitable as the product is much cheaper to produce.China domestic retail industry face up fierce competition from foreign-funded retail enterprises, hence, China used to the Cost leaders Strategy to gained back the competition.(EngHi138, 2006)Differentiation-Differentiated goods and services satisfy the necessitate of customers through a sustainable competitive advantage. This allows companies to desensitize prices and focus on value that generates a comparatively higher price and a better margin.Focus or Niche Strategy-Organization focuses effort and resources on a narrow, defined segment of a market. Competitive advantage is generated specifically for the niche. A niche strategy is often used by smaller firms. A company could use either a cost focus or a differentiation focus. With a cost focus a firm aims at being the lowest cost producer in that niche or segment. With a differentiation focus a firm creates competitive advantage through differentiation within the niche or segment. (MarketingT eacher.com, 2000)3.4 Functional StrategyIt is the approach taken by a working(a) area to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing nurturing a distinctive competence to provide a company or business unit with a competitive advantage.A hierarchy of strategy is the pigeonholing of strategy types by levels in the organization. This hierarchy of strategy is a nesting of one strategy within another so that they complement and support one another. Functional strategies support business strategies that in turn support the corporate strategy (John A. Pearce, 2011,p288)3.5 Strategy EvaluationAnthony Henry (2008) mentions that Suitability, feasibility and acceptability can help managers to be explicit nigh any assumptions that may patronage their strategies.3.5.1 Suitability-the plan or the changes are suitable or not to the organisation which help the organisation to overcome difficulties or help th e organisation to improve.An organisation will be concerned to evaluate how well the strategy matches the needs identified within its strategic analysis. There should be some union between the strategy, the opportunities within the external environment, the resources and capabilities of the organisation, and the organisational objectives (Juha Kettunen)3.5.2 Feasibility-Concerns whether a strategy will work in practice. An organisation must ensure that it possesses the necessity resources and capabilities, such as finance, technological expertise, marketing, and other factors necessary to implement the strategy.3.5.3 Acceptability- This criterion of acceptability addresses the answer of stakeholders to the proposed strategy. Clearly, if a strategic change is to be implemented, it must have the support of those who will be most affected by it.In a nutshell, after completed the strategy formulation, the next is to sets the stage of strategy implementation. Implementation is usually considered after strategy has been formulated, implementation is a key part of strategic management.4.0 Strategy ImplementationThe last section of strategy management is often called the action phase as Kyra Bartolomei (2010) defines Strategy Implementation as the process of allocating resources to support the chosen strategies to generate positive outcomes which can achieve the organizational goals.Pierce and Robinson say that to effectively direct and control the use of the firms resources, mechanisms such as organizational structure, information systems, leadership styles, assignment of key managers, budgeting, rewards and control systems are essential strategy implementation ingredients4.1 Organisational StructureShane Thornton (2011) points out that organizational structure are formal systems of relationships that exist within a business. Organizational structures allow management to monitor and control the business process while facilitating working relationships among employ ees from top to bottom. Different types of organizational structures include working(a) structure, divisional structure, matrix structure, hierarchical or tall structure, and horizontal or flat structure. However, exital and divisional structures are commonly used by retail industry asTesco organisation structure is functional structure as it has different department to serve different tasks which allows its employees to see easily who is in charge of eachdepartment or who their department manager is (123HelpMe.com). On the other hand, Asda used both divisional and functional structures. The functional structure of Asda consist of few departments and the main department is the customer service department as Asda is more concerns about customer service which they think it is extremely important that a business gives 100% at all times to the customer because there are only one notice with a customer and if the customer is not impressed with the service they received, they will not return and also will spread bad comments about Asda. As for the divisional Structure of Asda, it has the Executive Committee, Editorial Board, Council Chairs, ASDA Board of Trustees and ASDA abide of Delegates (Asda.net.org).Functional Structure-Donna G. Morton (2011) explained that functional structure is differs from a divisional or product structure, which typically distinguishes its units by product type or geographical land and allows leaders within each unit more control. This means that dividing the tasks into functional specialties to enables the personnel of the firms to lose weight on only one aspect of the necessary work. The functional structure was designed on the concept that high distinctiveness and high control yields high efficiency.The organisation structure used by Sainsbury is the Functional Structure as Sainsbury has different department such as IT department and purchasing department. The IT department is more focus on efficiency system to customer and the purchasing department is to deliver in time and efficient. The purchasing department was previously complex and was then control by Lawrence Christensen who joined in September and restructuring including the recruitment of new members to the management team. (J-sainsbury.co.uk)Divisional Structure-Audra Bianca (2009) defines divisional organizational structure as breaks the public, private or non-profit firm into a series of semi-autonomous units. Each division has its own chief officer who is responsible for the performance of the division. Organizations must decide how to organize parts of the firm according to characteristics like function, geographic location or products.4.2 Strategy LeadershipOrganisational leadership is to guiding and shepherding towards a vision over time and developing growth and success to an organisation (John A. Pearce, 2011, p326 ). Leaders galvanize commitment to wring change through three interrelated activities which are clarifying strategic intent , building and organisation and shaping organisational culture.4.2.1 clarify Strategy IntentClarifying Strategy Intent is a clear sense of where they want to lead the company and what results they expect to achieve. To clarify Strategic Intent, organisation has to simultaneously concentrate and focus on the vision and performance (John A. Pearce, 2011, p328).Vision-A leader has to communicate clearly and directly a fundamental vision of what the business needs to become.Performance-Clarifying strategic intent must also ensure the survival of the enterprise as it pursues a well articulated vision, and after it reaches the vision. So a key element of good organisational leadership is to make clear the performance expectations a leader has for the organisation, and mangers in it, as they seek to move toward that vision.Alex Blyth (2007) reported that the arriver of Justin King as the new CEO of Sainsbury which created a new approach, Sainsburys began its leadership programme in Octo ber 2004. Straight away, the HR team undertook a major communications exercise to spread these values throughout the business. Sainsburys last audited set of financial results, which it reported in November 2006, are testament to the success of the leadership programme. The company enjoyed half-year sales growth of 8.3%, and a 60% leap in profits to 189m. Internal measures have also shown the programme was well received. The companys periodic staff opinion survey has shown a 10% rise in the indices that measure employee engagement and leadership capability over the past 12 months. The leadership programme has been a significant factor in this new-fangled improvement in the companys fortunes.4.2.2 Building an OrganisationThomas L. Wheelen (2008) mentions that leaders slip by considerable time shaping and refining their organisational structure and making it function effectively to accomplish strategic intent. Leaders have to rebuilding, remaking or create new strategy for the orga nisation to align with the ever-changing environment. However, there are overcoming resistance while making any changes which leaders find themselves facing problems while attempt to rebuild the organisation. Leaders can overcome with the problems with the help of education, perseverance and principle.Education and Leadership Development-The effort to familiarize future leaders with the skills important to the company and to develop exceptional leaders among the managers employed.Perseverance-Perseverance of a leader is the capacity to see a commitment through to finis long after most people would have stopped trying.Principle-A leaders fundamental personal standards that guide her sense of honesty, integrity, and ethical behaviour.4.2.3 Shaping Organisational finisLeaders u