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Executive Summary

This report has been developed to provide an evidence-based analysis of Argos takeover by Sainsburys in 2016 from the perspective of change management strategy effectiveness. Firstly, the background of the analyzed change management decision is introduced. Secondly, a brief overview of the case is provided with a discussion of the economic situation around the company and its decision to take over Argos. Thirdly, the PESTEL analysis model is used to analyze the external environment in which Sainsburys operated in 2016 and identify the drivers for change. Among the many factors influencing Sainsburys decision-making, two, namely economic instability and rising competition, were emphasized and supported by evidence. Fourthly, the identified drivers were analyzed as per their addressing within the companys change management response. Finally, the recommendation section is designed to address the aspects of the external environment that the company should incorporate to enhance its response to the change drivers and maintain its stable and sustainable position in the industry. Overall, the report demonstrates that Sainsburys, as an organization operating in an ever-changing business environment, should ensure its continuous technological and sustainable development to handle change effectively.

Introduction

The modern economic environment is very hectic and marked with rapid change more than ever before. Indeed, the intensive technological advancement in various areas of life and industries, internationalization trends, market-specific changes, and consumer preference fluidity makes the process of business management a challenging endeavor (Vlados Deniozos and Chatzinikolaou, 2018). These factors predispose businesses to develop resilience and invest in change management to ensure adequate response to the external and internal factors in order to maintain their competitiveness and profitability. According to Watson and Head (2016), contemporary business issues are particularly dependent on globalization due to the macroeconomic forces driving competition in international markets. Therefore, an organization is likely to encounter a need to change at some point in the lifecycle under the pressure of external and internal drivers of change.

The contemporary business world continuously faces issues associated with sustainability, globalization, social responsibility, and socio-cultural change. The case of Sainsburys and its acquisition of Argos is a vivid example of organizational change management under the influence of market-specific, economic, political, and global forces. As a large retailer in the UK market, Sainsbury made a strategic decision to acquire Argos in order to minimize the threats faced due to Brexit and bridge the growing competition in the industry (Argos takeover boosts Sainsburys trading, 2016). Indeed, for a company to maintain its competitive advantage and occupy a stable position among rivals, flexibility and resilience in long-term decision-making are essential. Timely identification of the drivers for change and sensible responses to them guarantees successful problem-solving and management of an organization at times of shifting (Cameron and Green, 2019). Given the multifaceted nature of environments in which businesses operate, including social, economic, cultural, political, and intra-organizational determinants, it is evident that the decisions related to change management must be thought through and validated by strategic vision.

This report views the case of Argos acquisition by Sainsburys as a change management decision in a time of unstable economic conditions, intensified competition in the retail market in the UK, and the overall globalization and technological advancement. The report incorporates the theoretical perspectives on change management in general as applicable to the case study and employs an external environment analysis model for the purposes of identifying the most influential drivers for change. The identified drivers are evaluated against the companys response to change outcomes. Analyzing the responses and validating Sainsburys change management decisions allow for identifying some weaknesses and suggesting several recommendations for further improvement of the anticipated outcomes. Overall, the report aims to explore and analyze the implemented solutions and generate recommendations for enhanced operational and commercial outcomes.

Case Overview

The case under investigation in this report is the takeover of Argos by Sainsburys in 2016. Sainsburys is one of the largest supermarkets in the UK, offering delicious, great quality food at competitive prices (J Sainsbury PLC, 2021, p. 2). The company primarily works in the retail food industry and prioritizes building a strong brand heritage and reputation for quality, range, and innovation while lowering prices and offering more consistent value (Were putting food back at the heart of Sainsburys, 2021, para. 1). In 2016, the company announced that it had acquired Argos, a large and successful UK-based catalogue retailer (Argos takeover boosts Sainsburys trading, 2016; UddinAhmed, Mazid, and Ahmed, 2020). The acquisition of a nonfood company by a supermarket chain was a decision that yielded positive outcomes as had been anticipated.

Such a solution was informed by the opportunity for product diversification by means of incorporating the products offered by a large catalogue retailer. Upon the takeover, Sainsbury was capable of reducing operational costs, enhancing its market presence, increasing the level of its competitiveness, and reducing the tension associated with Brexit (Argos takeover boosts Sainsburys trading, 2016). Indeed, these issues have been decisive change drivers for the organization, which ultimately influenced Sainsburys change management strategy. In such a manner, the company planned to combine a complementary network of Sainsburys and Argos stores in order to enhance its market position (Fansi and Nkwantchoa, 2020, p. 12). Thus, it is important to identify and analyze some of the specific drivers of change in the environment around Sainsburys at the time of the acquisition of Argos. It will help interpret the benefits achieved by the solution and consider the relevance of the response to the particular drivers for change to the business environment.

The Companys Response to the Drivers for Change

The analysis of the case study allows for interpreting Sainsburys response to the change drivers as originating in the external environment. The companys decision to acquire Argos demonstrates strategic thinking of the management and the developmental direction at product diversification and increasing the number of break-and-mortar facilities, thus leading to an overall enhanced market presence. While these are the companys general strategic considerations at the strategic planning level, it is relevant to analyze the change management approach at Sainsburys to evaluate its quality. The responses of the company to the two most influential drivers for change are addressed in the consecutive subsections of the report.

Identification of the Drivers for Change

As the case of Sainsburys acquisition of Argos demonstrates, the decision for change was driven by a variety of factors, among which external ones were decisive. Overall, mergers and acquisitions are considered the decisions commonly made in the context of transitional change, where an organization changes its strategy and structure to minimize the impact of threats and enhance the benefits (Woldesenbet, 2018). Given the information available in the case study, it is evident that the companys decision to change structurally and strategically was driven primarily by the external environment. Indeed, the CEO of Sainsburys claimed that the complicated availability of stock and Brexit posed a challenge since 30% of the goods that Sainsburys sold came from the EU (Argos takeover boosts Sainsburys trading, 2016, para. 9). Therefore, it is relevant to apply an analysis tool for the external environment to identify some of the particular drivers for change among the many factors impacting Sainsburys operations (Nandonde, 2019). PESTEL analysis will be used to evaluate how political, economic, social, technological, environmental, and legal spheres in the external environment have influenced Sainsburys.

Within the political domain, the most influential factor that has influenced Sainsburys decision to acquire Argos is Brexit. According to Rhodes and Zhou (2019), Brexit might have its influence on the operations of supermarkets in the UK since the EU may make it difficult to leave the affordable supermarket products imported from abroad (Rhodes and Zhou, 2019, p. 2607). Moreover, as stated by Strong and Wells (2020), Brexit has a negative impact on the UKs food retail business due to the limitation of import opportunities, thus reducing the stock and obstructing previously employed retail practices in the EU. Moreover, the change in laws and regulations due to Brexit might have the effect of uncertainty on business, which is why it is essential to take the political domain into consideration when altering organizational strategy (Gamble, 2018). Thus, Brexit as a political issue serves as a driver for change for Sainsburys, triggering its strategic response.

As for the economic domain, it is closely related to the political aspect of the environment since Brexit plays a decisive role in the UKs economy as well. According to Gudgin et al. (2018), Brexit will financially burden the UKs economy due to the loans and credits that tie the state with the EU. Overall, the long-term impact of Brexit on the economy and finance is likely to be manifested in trading alterations (Gudgin et al., 2018). In the short-term perspective, this event will cause uncertainty due to the decrease in GDP. This assumption stems from an expectation that the UK will leave the single market and customs union and will fall back on WTO rules (Gudgin et al., 2018, p. 13). This factor plays an important role for Sainsburys as long as its financial performance and stock availability depend on cooperation with the EU (Argos takeover boosts Sainsburys trading, 2016). Moreover, economically, Brexit forces local businesses to employ self-regulating and self-protecting practices to maintain their operations competitive (Pettifor, 2017). Thus, the shift in macroeconomic forces manifested within the context of Brexit imposes a need for Sainsburys to change its business strategy.

The next domain of the external environment that should be considered within the PESTEL model is the social context. Being one of the leaders in the retail food industry in the United Kingdom, Sainsbury plays a pivotal role in the social domain of the country. In return, its organizational operations are particularly impacted and driven by social change. The dependence on consumer behavior is one of the aspects that drive the change in the retail food industry. Indeed, the socio-cultural characteristics of the external environment in which Sainsbury operates suggest that the high competition implies consumers choice availability that has a tangible impact on their loyalty to popular brands. According to Fengyi (2021), there are many popular supermarket chains in the UK, including Tesco, Morisons, Waitrose, Lidl, Aldi, Asda, with which Sainsburys competes (p. 1). Thus, the growth in competition is a significant change issue necessary to address. Moreover, the fair trade movement and healthy diet trends force food retailers to invest more in sustainability policies to attract more consumers and maintain their competitive advantages (Fengyi, 2021). Thus, the socio-cultural domain in the external environment plays an important role in Sainsburys change management.

Technologically, the environment is impacted by a variety of manifestations in which technology influences the retail industry. According to Minetto et al. (2018), technological solutions are developing to ensure more cost-efficient production practices. On the other hand, Chiu et al. (2021) state that technological development is particularly important in the retail food business as an information dissemination tool in marketing. Thus, the changes in technology impose a significant burden as well as opportunities for businesses to incorporate in their organizational strategies in order to remain competitive. Research shows that today, food manufacturers in developed markets face increasingly fragmented and dynamic consumer demands for good value for money food products that are simultaneously high quality, convenient, healthy, authentic and sustainably produced (Esbjerg et al., 2016, p. 2). Thus, to keep at the same pace in the rapidly changing technological environment, organizations must invest in innovation across their supply chains.

The next aspect in the analysis of the external settings of the business is the environmental domain. In recent years, environmental protection, green production, and social responsibility issues have gained significant coverage in the economy, politics, and academia. Albizzati et al. (2019) and Naidoo and Gasparatos (2018) claim that the food industry shifts toward less waste and more sustainable production and sales. Indeed, food waste management trends constitute an emerging change driver in the retail food industry. The extent of food waste in the UK is very great; research suggests that 13.1 Mt of food waste is generated annually in the UK across all the supply chain, leading to the greenhouse gas emissions of 27 Mt of CO2 eq./yr. (Jeswani, Figueroa-Torres and Azapagic, 2021, p. 532). Thus, Sainsbury should incorporate this issue in its strategy for change management.

Finally, the legal domain in the external environment in which Sainsbury operates implies a scope of laws and regulations that control and oversee lawful practices in the industry. Fairtrade trends and the environmental impact regulations impose restrictions and responsibilities for supermarket chains operating in the United Kingdom (Yamoah et al., 2016). Moreover, according to Keogh (2016), standardization of the production and retailing of food items on both national and international levels continuously evolves, requiring businesses to change accordingly. Thus, the identified factors in the political, economic, social, technological, environmental, and legal domains of the external environment demonstrate the complexity and fluidity of the conditions in which Sainsbury operates. Thus, it is necessary to state that given the case study overview, the most influential drivers for change addressed by Sainsburys in its acquisition of Argos were growing competition and macroeconomic instability.

Sainsburys Strategic Response to Competition as a Business Sustainability Issue

From the point of view of a cost-benefit analysis implicit in the term business sustainability, the decision of Sainsburys to acquire Argos was validated by the need to reduce operational costs while maintaining a high rate of sales. Sainsbury claims to have significantly increased market share and profits due to Argos acquisition. Although Sainsburys chief executive Mike Coupe said the grocery market remained extremely competitive, the company managed to bridge the competition and sustain its advantage in the industry (Argos takeover boosts Sainsburys trading, 2016, para. 7). Thus, the change in the competitive environment toward intensification was addressed by Sainsbury in an effective manner.

When addressing the change in the level of competition in the industry, Sainsburys effectively incorporated its strategic decision-making to cooperate with a company that is an influential actor in the retail business. Indeed, Sainsburys management made a strategically correct decision when choosing Argos as an acquisition. This organization is a leading UK general merchandise retailer offering more than 60,000 products (Argos, no date, para. 1). Thus, having it as one of the brands inside Sainsburys enhances the market presence of the organization and increases its competitive capacity. Indeed, now that the takeover of Argos by Sainsbury is complete, Argos customers purchase products through its website, apps, stores and convenient Click & Collect points inside Sainsburys supermarkets, improving the performance outcomes for Sainsburys (Argos, no date, para. 1). The companies merge allowed Smoresbury to occupy a more significant market share by incorporating the customer base and eliminating one of the rivals making it a partner. Such a strategy allowed for enhancing business capability and reducing competition burden guaranteeing Sainsburys long-term benefits.

Moreover, another important aspect of Sansburys response to rising competition as a business sustainability issue is the use of enhanced retail digitalization. Indeed, research demonstrates that incorporating digital solutions in the retail industry significantly enhances competitive advantages over rivals, allowing organizations to achieve higher profit margins and win over competitors (Rusanen, 2019). Thus, given the high level of digitalization development at Argos, its acquisition by Sainsbury was a reasonable change management solution since, with the brand, the organization obtained a valuable resource for continuous growth in the digital environment. Within the same scope of change issues, Alves Martins (2018) claims that innovation available to Sainsbury upon acquiring Argos is a long-term investment in competitive improvement. Thus, the response of Sainsburys to the driver for change manifested in the growing competition has been effective. This investment was a reasonable solution to the anticipated threat, which is why the organization managed the change successfully.

Sainsburys Strategic Response to Macroeconomic Instability as a Globalization and the Changing World Issue

The second driver for change that Sainsbury has primarily addressed is macroeconomic instability caused by globalization trends and Brexit. In particular, as the case informs, cost savings improved profits while adding Argos outlets to Sainsburys stores was driving an increase in trading intensity (Argos takeover boosts Sainsburys trading, 2016, para. 1). Thus, acquisition synergies allowed for reducing expenses while preserving a sustained position in the market and obtaining an opportunity for growth.

In regard to the diminished stock availability and the dependence of Sainsburys on the EU, the decision to acquire Argos was a reasonable and beneficial one. Indeed, combining Sainsburys and Argos will forge a group offering over 100,000 products from 2,000 stores (Davey and Holton, 2016, para. 3). Such a scope of products and stores implies a leading position among UKs retail rivals and guarantees Sainsbury maintained long-term profits for continuous growth. Although the investment community views acquisition a risky solution due to the diminished control of operations and probable discipline deterioration, the acquisition of the local company allowed Sainsburys to mitigate this risk (Wood, Wrigley and Coe, 2017; Xiao, Chen, and Yu, 2021). Thus, the response to the changing economic environment was successful due to the sufficient monetary returns.

Recommendation for Response Enhancement

As demonstrated in the analysis of the companys response to the drivers for change, Sainsburys has primarily concentrated on immediate economic determinants, which were essential to address at the time. Indeed, without adequately responding to rising competition and sales shortages, the company might have faced significant monetary and competitiveness losses that could have adversely affected its long-term developmental goals. However, there are other aspects of change that Sainsbury might incorporate in its management strategy to enhance the positive outcomes of the acquisition of Argos. Indeed, as claimed by Aluko and Knight (2017), companies co-evolve with the environment in which they operate, which is why they need to acquire certain resources that can be employed to stimulate changes within their institutional environment (p. 1). Thus, Sainsbury should pursue its co-evolution in response to changes in the environment consistent with its already chosen effective strategy but with some improvements suggested further in the report.

Firstly, the incorporation of technological advancement trends in the change management tactics is recommended. Indeed, as the overview of Argos operations shows, this brand is particularly involved in technology-driven business performance through process automation and innovative solutions in delivery (Argos, no date). Indeed, the company is a technology-led retailer; its website receives more than a billion visits a year and 90% of sales originate online (Argos, no date, para. 4). Moreover, the technological aspect of the acquisition of Argos by Sainsbury has been addressed by Bentham (2018), who discussed the benefits of Argos enhanced online presence for e-commerce competition improvement for Sainsburys. Thus, it is recommended for the company to invest in further developing online practices to ensure that Argos technological and innovative solutions introduce Sainsburys to the world of online sales.

Indeed, technology and digitalization are considered some of the essential and rapidly evolving drivers for change in business. According to Davey and Holton (2016), Sainsburys takeover of Argos yields significant opportunities for meeting customer requests for a more diversified shopping experience and convenience. As the companys Chief Executive Mike Coupe said, our customers want us to offer more choice, that choice to be faster than ever, driven by the rise of mobile phones and digital technology (Davey and Holton, 2016, para. 4). Thus,

Secondly, the company should expand its response to the drivers of change beyond mere economic and operational considerations to include environmental protection and sustainability issues in its strategy. The company has already embarked on a journey toward environmental stewardship and sustainable development across its operations. Indeed, being a large organization with thousands of suppliers, using Supplier Sustainability Scorecards, [Sainsburys claim] to have realized 70,500 tonnes of CO2 savings to date (Tidy, Wang and Hall, 2016, p. 3300). As stated by Tidy, Wang, and Hall (2016), Sainsburys has reported: an 8% reduction [of CO2 emission volumes] up to 2012 (p. 3300). Therefore, it is recommended for the organization to invest in its practices to reduce the carbon footprint across its supply chain. Within the context of Argos acquisition, Sainsbury might design a joined sustainability program to boost environmental protection practices.

Another significant opportunity for Sainsburys to address the environmental issues in this industry is to reduce food waste. As long as the supermarket chain is particularly involved in the food retail industry, its activities should reflect the changing trends in the sphere of food waste management. According to Filimonau and Gherbin (2017), with the UKs market share of 16.7%, Sainsbury demonstrates a highly-developed system of food waste management programs. Indeed, the currently implemented practices are effective and serve as a strength for the company, forming its competitive advantage over rivals.

Indeed, Sainsburys donates excessive food to Fare Share, launches a Waste Less, Save More customer awareness campaign, and uses advanced labeling and packaging approaches to minimize waste (Filimonau and Gherbin, 2017). However, as the research conducted by Filimonau and Gherbin (2017) demonstrates, Sainsbury, unlike its rivals, does not employ a price reduction strategy as a means for food waste management. Thus, given the reduction of costs obtained by the acquisition of Argos, Sainsbury might invest in the launching of price reduction to gain more benefits in the area of food waste management. In view of the fact that food waste management is an important issue for the public and Sainsburys customers, it should use its strengths and intensify existing programs by involving Argos as a newly acquired brand in the designing of innovative solutions. Indeed, with the technological capabilities of Argos, Sainsbury might be able to reduce the percentage of unmanaged food waste and respond to the change in environmental stewardship trends more consistently.

Thirdly, the research and analysis of consumer behavior change with the utilization of innovations and technologies might be an invaluable tool for Sainsburys to enhance its change management strategy toward sustained competitive advantage and social responsibility policy strengthening. This goal might be achieved by means of partnership to ensure the use of the experiences of other organizations in the market and share Sainsburys experience with them (Yang and Kobbacy, 2021). Indeed, such a strategy might enhance the social responsibility policy, address consumer needs, and enhance the organizations sustainability stewardship.

Conclusion

In summation, the designed report has analyzed and evaluated the change management strategies and practices employed by Sainsburys in response to economic instability and rising competition in the industry. It has been identified that the most influential drivers for change among the external environment factors faced by Sainsburys were the business sustainability threats manifested through rising competition and the macroeconomic instability influenced by internationalization. The company has effectively responded to these drivers of change; however, there are several aspects, including technological, environmental, and innovative, that might enhance Sainsburys response to change. Overall, the recommendations in relation to the enhancement of the existing change management practices include investing in technologies and innovation to ensure competitive advantage, maintained product quality, food waste management practices, information technologies, and social responsibility policies.

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