Company overview
This report describes the selection of the target market for the international expansion of a company. For the discussion, he famous retail company Sainsbury has taken. The company is seeking for the global expansion in China and Indonesia. Before entering in any market, it is important for the company to do the research about the marketing environment of both of the countries. First of all, it is crucial to understand the background of the company. Sainsbury is the UK based super market which has 16.9% market share in UK supermarket industry. The company was established in 1869 in Drury Lane, London. In present time, Sainsbury has become the largest grocery retail in the market. The supermarket is serving more than 11 million people with the 463 stores in all over the UK. In total stores, around 60% of stores are located in the main area of town Centre of the country. The key objective of the company is to earn maximum profit so it is operating in the private sector. The company has the extensive range of grocery and food products i.e. baked bread, coffee shop meat and fish counters restaurants and petrol stations. Now, the company is trying to expand its business in China or Indonesia market. The report provides the recommendations for the selected market (Sainsbury, 2017).
Product
To become famous and the first choice for food among the consumers, Sainsbury has announced its new corporate identity i.e. making Life, Taste better. This is more than a slogan or campaign; basically it is the real culture of Sainsbury. Sainsbury is focused on the quality and innovation of the products along with improving the range of food and new products for the customers. In the product range, the super market has wide range of fresh food i.e. ready meals, exotic fruits, reduced-fat milks, and specialty breads. Along with this, Sainsbury has also launched new range of products with the new taste. There are more than 350 food products and each product has been produced with the extra time attention and care. There are also the range of home collection, kitchen products and furnishings (Kotler& Armstrong, 2010).
Price can be determined as the profitability of the business which shows the quality of the products and services of the company. It can be seen that there is the strong competition in the retail industry. To stay competitive in the market, Sainsbury has very effective pricing strategy for the products. The company always tries to provide best quality of products at the affordable prices to the customers. The company provides the offers to the customers such as buy one get one free for the half price. The main policy of the Sainsbury includes the various exported products, competition in the industry value of the customers’ choice and the cost incurred in the production (Ellickson & Misra, 2008).The pricing strategy of the Sainsbury is based on the all classes of the customers and their needs and requirements. Pricing is the most important factor of the Sainsbury’s marketing mix. So, the company has three different pricing strategies i.e. high level pricing products which are the best for the consumers. Along with this, there are also products of medium and low range products for those customers who want the products at the low prices. Further, the products are categorized according to the needs and special discounts are offered on some products i.e. buy one and get other in half price or buy one get one free to maintain the store promotion (Cristina,Enrique&Ricardo, 2012).
Current situation of Sainsbury
Sainsbury has around 598 super markets and 714 stores in the UK market. In all the stores, 45 stores are operating every time and rest of the stores is operating till mid-night. Along with this, Sainsbury offers home delivery service and the customers can place the orders by online on the website or by the phone calls. The super market handled the distribution by own but now the company has contracted with the specialists for its distribution such as DHL, NFT etc. In present time, the company has 13 regional distribution centers and 2 national distribution centers which are for slow-moving goods (Shilpa, 2009).
Promotion is the most important strategy for the economic survival of the company in the operating market. Basically, it is about developing the brand image of the company and product among the customers. Promotion is also known for identifying and satisfying the needs and requirements of the customers. In case of Sainsbury, it is the category and merchandise management of the company is well planned and organized. All the high prices products are placed on the top of the racks and on the other hand, the low prices products are in the lower racks. By this manner, company has adopted a pattern and disciplined way of arranging clothing at one side, house hold appliances on different sides, the marine and meat products has a different segment and the groceries and bakery products are set based on the ready products or the other types. Now, the company is also using ‘Live well for less” slogan for its promotional campaigns. By launching reward cards, the company is able to improve the sales and build the loyal customers for future. By the reward card, customers can earn the points and redeem them on the next purchases (Melanie & Marian, 2011).
China is the most attractive location for the companies in the world. The country has grown to become one of the strongest powers so it is providing the opportunity of international business to the companies. The market of the China can be understood by three things i.e. size of the market, low cost of labor and growth potential of the China. It is not easy to manage the business in China. By the PESTEL analysis, the environment of China’s market can be analyzed (Keung, 2014).
There are some political factors which impact China and those are as follows:
Government Regulations-
Price
There are both formal and informal rules which impact the country and the business operations. Many people claim that the political factors are the most disturbed forces which impact the country’s business environment. It can be seen that over the past few years, the government of China is focusing on the developing of e-commerce to promote the international business in the country.
Legal issues-
There is legal framework for the e-commerce which is in its early stage. It is well known that China has little experience of e-commerce laws for the some topics such as tax and intellectual property rights protections. In the market of China, there are not the regulations supporting the recognition and privacy of the consumer rights, digital signatures and the validation of electronic contracts.
In the last five years, the economy of China has experienced significant GDP growth rate. It is estimated that if the country keeps this growth rate then it will surpass the US GDP soon. There are some factors which might help in the growth rate i.e. sigh rate of savings, skilled labor, potential urban growth and more export business. The GDP rate of china indicates that every citizen of the country is adding more and more values to the community. This is increasing the purchasing power of the consumers. Further, the labor cost the country is extremely low. The growth rate of the country is impressive but it can slow down. There are some worrying trends in China i.e. high property prices, and high inflation rate. Along with this, the interest rates have been increased by the People’s Bank of China (Fogel, 2010).
The social and cultural factors have an important role in the business environment of the China i.e. age distribution fluctuate and population growth. Family size and the social behaviors also impacts on the decision making process. There are some other social factors i.e. religion, emigration, education and lifestyles of the consumers. Basically, China has the collective culture. The literacy rate in China is more than 90%. The country promotes education and majority of people in country are literate. It is observed that most of the time, Chinese people shop online and many people spend lots of time on the sites and this volume will increase in future. But there are the group who perceive the risk associated with the online shopping so, they prefer physical shopping and face to face contact.
Place
There is the major technological problem in China that B2C industries are still underdeveloped and does not have safe and stable online payment system. The reason is that the Chinese buyers have high level of uncertainty avoidance and long-term orientation which strengthen the problem. It is analyzed that the online payment methods has low acceptance in China and the online credit card transaction is also facing low usage in the country. There is the lack of online credit card payment system which is one of the main reasons for the low usage and penetration.
But, China has highly advanced technology and internet infrastructure and allowing the high speed connectivity from any populated region. There is the rapid development of technologies in the China and due to the innovative technologies; the companies are growing very fast in recent year. With the development and advantage of the technology, China market attracts many foreign companies (Jayaraman, 2009).
China is the country which has huge market share of domestic companies. The government of China always takes actions for protecting environment and for this manner; government imposes many rules and regulations in preventing, protecting, and controlling the pollution and improving the rural environment. Along with this, the government of China also collaborates with various NGO’s to provide the protection to the nature and environment (Zhang et al, 2010).
There are the legal regulations for the employer and employees in the China. The government of China imposes labor regulations which improve overall employment and productivity growth. In the China market, the non-salary cost of employing the worker is high. If any company dismisses an employee then there is the requirement of prior consultation with the labor union and local labor bureau.
Political
Indonesia is considered as the republic country in the world. Indonesia is the third largest democracy in the world along with the largest economy in south-east Asia. The Indonesian political condition is the role model for the successful political transition. Having low inflation and political stability, Indonesia attracts foreign companies for doing business in the country. But, still the environment of the Indonesia is challenging for the multi-national companies. According to the critics, there is insufficient progress is the cause of privatization, corruption and bureaucratic reforms in the county. The waves of national policies especially natural resources have troubled the growth picture of the country. So, there can the challenge for foreign countries to survive in the country (Johansson, 2014).
Promotion
Indonesia is the developing country and due to the national resources and government policies, the GDP growth rate has increased from last few years. The country is the hub of natural resources such as in term oil production, the country has 23rd rank and in export, it has 8th position. Along with this, Indonesia has significant economic growth from last few years. Further, because of change in the population, the import, export and income in the country are increasing every year. The government is spending the money for the well-being of the country. The revenue of the government has increased over doubled in past years (Olken& Barron, 2009).
The social factors of the Indonesia include population, age factor, education, and religion of the people in the country. Indonesia has large population which is increasing at the stable rate. The country has 5th position across the world in terms of population. Further, the country is considered as the nation of young people. In terms of education, there are 90.4% of the population are literate in the country and 3.6% of the GDP of the spent on the education. Further, the country has multi culture where people of the different religion work in the country (Mietzner, 2013).
The technology and communication systemis highly developed in the Indonesia. There are 17.33 millions of people who use landlines and 83.3 millions of people who use mobile phones. Along with this, 13 million people use internet which is he good sign for the country. Along with this, domestic satellite communication system makes the communication system better in the country. Further, Indonesia has highly developed and effective transport system which is helpful for import and export and improves the businesses of the companies in the country.
The geographical location of Indonesia comprised of thousands of islands and located between the Indian and Pacific Ocean. But, due to geographic location, country has to face natural disasters such as earthquake, massive forest fire, and soil erosion which also impact on the businesses of many companies.
Indonesia has the largest labor force in the world having 5th rank. So, to protect the labor rights, the government of Indonesia has made the rules and laws i.e. Labor laws Article 28D (2). According to this law, 40-hour workweeks and 7-hour workdays with 30-minute rest period of work is legal in Indonesia. Further, there is company law imposed by the government in which every company must register their memorandum of act under the company law.
Analysis of China
Above report has described the market environment of both the countries. Form the above analysis; it has observed that both the countries have political stability and legal obligations for the employees. In case of China, it is the third-largest importer of the food products in the world. In the country, disposable incomes are on rise and the Chinese customers are looking for the high-class goods and products, especially western and internationally recognized brand so, there would be market opportunity for the Sainsbury Supermarket in the China market. Along with this, the country is working to shift investment-based to consumption-based economy, so the country is creating opportunities for the foreign counties for their growth. Further, the sales growth of the retail stores are expected to double till 2018 so, it is assumed that Sainsbury will get success in China market (Glasse, 2010).
On the other hand, it is observe that Indonesia has recorded lowest value growth rate and the sales of retail products significantly affected by economic slowdown. Household expenses are increased and the consumers have to pay more attention for the food and daily necessities. Although business climate of Indonesia has improved but there is the need of political stability as well as helpful investment climate to grow. But still, it is expected that the sale of retail products will grow from 2016 to 2019 (MacLachlan, 2011).
From the above analysis, it is recommended that Sainsbury should expand its business in the China market. It can be seen that the sales growth of the retail products in the China market is expected to be doubled. So, it will be beneficial for the company. Further, it is also recommended that before entering in the market, the company should do market research to understand to market environment. Along with this, company should make a team which can understand the culture and overseas business. Company should remain consistent on its branding but adapt the environment of the global market. By adopting these ideas, Sainsbury can be able to get success in global market.
References
Cristina, P., Enrique, C.R.&Ricardo H.R., (2012), Organizational Competences and Competitiveness: The effect of Business Strategies, 20 (3&4), 16-31
Ellickson, P. B., &Misra, S., (2008), Supermarket Pricing Strategies: Marketing Science, 27(5), 811-825
Fogel, G. K., (2010), BUSINESS ENVIRONMENT IN CHINA: ECONOMIC, POLITICAL, AND CULTURAL FACTORS, accessed on 13th June 2017 fromhttps://www.usi.edu/media/3654697/Business-Environment-China.pdf
Glasse, J., (2010), Foreign Business in China Political Instability,accessed on 13th June 2017 fromhttps://www.faqs.org/abstracts/Business-international/
Jayaraman, K., (2009), Doing business in China: A risk analysis, accessed on 13th June 2017 fromhttps://digitalcommons.kennesaw.edu/cgi/viewcontent.cgi?article=1006&context=jekem
Johansson, A. C., (2014), Political Change and the Business Elite in Indonesia, accessed on 13th June 2017 from https://swopec.hhs.se/hascer/papers/hascer2014-034.pdf
Keung, J. K., (2014), Formulation of a Systemic PEST Analysis for Strategic Analysis: EUROPEAN ACADEMIC RESEARCH, 2(5)
Kotler, P., & Armstrong, G., (2010), Principles of marketing, (13th), UpperSaddle River, NJ: Prentice Hall, Inc.
MacLachlan, M., (2011), Doing Business in Indonesia – Successfully Navigating these Culturally Diverse Islands, accessed on 13th June 2017 fromhttps://www.communicaid.com/cross-cultural-training/blog/doing-business-in-indonesia-successfully-navigating-these-culturally-diverse-islands/
Melanie, F. D., & Marian, G.M., (2011),Using Supermarket Loyalty Card Data to Analyze the Impact of Promotions: The Market Research Society, 54 (2), 221-240
Mietzner, M., (2013), Money, Power, and Ideology: Political Parties in Post?Authoritarian Indonesia, Singapore: NUS Press
Olken, B.A., & Barron, P., (2009),The Simple Economics of Extortion: Evidence from Trucking in Aceh: Journal of Political Economy, 117, 417?452
Sainsbury, (2017), Live well for less, accessed on 13th June 2017 fromhttps://www.sainsburys.co.uk/
Shilpa, S.K., (2009), Impact of Supermarkets on Marketing Strategies of Small Stores, 3(8), 78-90
Zhang, J., Mauzerall, D. L., Zhu, T., Liang, S., Ezzati, M., &Remais, J. V., (2010),Environmental health in China: Progress towards clean air and safe water: The Lancet, 375,1110-1119
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
