Sainsbury - a Case Study

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Figure 2 (Sebora, Rubach, and Cantril 2014)

The technological challenges are among the most supporting and challenging factors for the business growth in the contemporary. in 2000, Sainsbury’s spent￡11 million establishing a platform that customers can shop and interact with rather than purchasing merchandises through queuing system at the store(Abdi and El Masry 2000). In addition, home-delivery was available for those who want a convenient and effective way to do the weekly shopping. These improvements could underpin the original customer base and appeal to more new customers and might contribute to the growth of sale in the long term (Abdi and El Masry 2000).

Environmentally, Sainsbury’s they made a great contribution to the protection of the ecological environment by supporting the Marine Stewardship Council (MSC) whose mission is to prevent over-finishing. In return, Sainsbury’s is proud to offer the customers the first sustainable products certified by MSC, providing more choices for the customers and also enhancing the degree of reliability of company. Furthermore, foods which almost reached the deadline of usage were donated to the charities instead of bringing pollutions to living environment and help those who were in short of food (Abdi and El Masry 2000). Such reasonable approach would probably mitigate the poverty level of those who lived in the lowest pyramid and helped the company gain more commitment from the newly developed Egyptian market.

2.2.2 Threats

However, there were also some challenges brought from the legal and political factors which could be avoided in domestic market. The legal aspect played an unneglectable role when importing goods and in the employee systems. In the first half of 2000, there were approximately $15 million operating loss because of the goods clearing customs and the difficulty to get the license (A. ORME Jr. 2001). On top of that, the initial assumption for the labor cost were never met as expected due to the local regulations that deteriorate the labor costs, leading to the situation that employees could get their salary without really working, all of which were established on the extra cost in the developing processes(A. ORME Jr. 2001).

Politically, the Palestinian Intifada initiated a boycott against the products made by USA and European countries in September 2000 since the American support for Israel in the territory issue between Palestine and Israel (Dawoud and Whitaker 2000). Rumors about the connection between Sainsbury’s and Israel was made by the irritated minority competitors. Although Sainsbury made a clarification which disavowed the relationship with Israel country, consumers stopped shopping at Sainsbury’s and opponents fired against the branches by throwing the stones into the windows. Finally, Sainsbury’s opting to pull out the Egyptian market with the result of nearly 4800 employees lost their job (Economist 2000).

3. Strategies

The process to enter the Egyptian market went on roughly. The company entered the market with a vision of rapid expansion which turned out to be a critical strike to the firm, lacking enough investigation into the beliefs and cultures of the local residents (the territory issue as mentioned above). In terms of the strategic location, the reason why Egypt was chosen was because of the well relations between Egyptian and British governments as well as that the company had already imported Egyptian goods to United Kingdom. After the location was targeted, the strategy of implementation was to sign a joint venture agreement with the local company called Edge Group which had run about 100 stores in Cairo and had strong relationship with the local government. Moreover, they had generated powerful systems of distribution and management (Sebora, Rubach, and Cantril 2014). All of these attractiveness motivate Sainsbury’s to buy an initial 25.1 percent stake with ￡10 million in March 1999. In 2000, Sainsbury’s spent another ￡40 million to increase its ownership of the joint venture to 80.1 percent based on the initial success (CNN 2001). Among the years, ABC Supermarket Expo which own five larger stores was purchased to cater to the upmarket (Anon 2001). All these acquisitions were consistent with the vision of expanding rapidly, enhancing the market commitment

In terms of the marketing, a simple decoration was designed to tackle the fear of the customers, attracting them to go into the supermarket and thus gradually changing their shopping habits. Moreover, a few approaches were applied to reach the cost advantages and improve margins through the application of 130 Key Value Items, the exclusive supply arrangement with the producers and bundled products which were the combinations of the less appealing products and popular ones. In addition, a bar-coding of all items, which is the paramount component of the inventory control systems and automated sales systems, were required of suppliers by Sainsbury’s (Sebora, Rubach, and Cantril 2014). Consequently, the company could succeed in replenishing commodities timely and choosing the perfect bundled products according to sales analysis, increasing the growth of sales of the products and enhancing the competitiveness among the local competitors.

4. Conclusion

Sainsbury’s received a large popularity from its customers at the first beginning but ended up with polling out of the Egyptian market. The reason could be boiled down to mismanagement. Although Egypt was the optimal country to invest among all the countries, it is necessary to take the full use of opportunities and strengths to strengthen the competitive advantages and to overcome or avoid the threats and weaknesses mentioned above.

5. Recommendations

It is our view that several actions need to be taken to improve the operation in Egypt in the long term, we therefore make the following recommendations:

- Investigations about the local beliefs and culture should be done by visiting the library and interviewing the customers

- British managers should be replaced by local managers with skills for they have strong connection with the locals and more knowledge about them.

- Daily discussion about the problems faced on work between managers and employees should be organized in the pursuit of high efficiency.

- An explicit wage system should be established according to the local circumstances.

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