Introductory Statement

In this highly competitive and dynamic environment, corporate firms must equip themselves

with strategies and approaches that is adaptable, suitable and flexible enough to withstand these

transformations or what we call the revolution. In line with this, Sainsbury supermarket as a

response to the revolution acquires Argos company and such acquisition raises concerns for

some investors and related parties whether such move is strategic enough for the company’s

growth. Will this acquisition bring success to the company or will it drag the them down due to

its instability?

Background

Sainsbury is one of the big four supermarkets in the UK, however with the arrival of smaller

deep discounters who had been winning the customer in rapid rate causes the supermarket

industry to lose sales dramatically. Which is why Sainsbury thought of a way to step up the

competition by acquiring Argos company UK’s largest general, non-food merchandise retailer

for their just-in-time logistics operation. However, some analyst was openly skeptical about the

deal considering Argos was not at its best and had just issued profit warning at the same has

down market brand, they think this deal will drag down Sainsbury in this time of a huge strain in

the market.

Statement of the problem

As a strategic response to the intense competition in the market, Sainsbury acquired Argos

company because of it perceives capabilities despite of its at breaking point of bankruptcy. The

problem now is how they will integrate Argos in the system of Sainsbury in a way that it could

bring leverage to the firm and not adds up to its burden in this time where the supermarket is

having a huge strain due to the entrance of more advance stores offering the same service as

them.
Objectives

1. Evaluate the situation of Sainsbury and at the same time Its purpose of acquisition of

Argos.

2. Identify possible solutions on the identified issues

3. Create recommendations after the thorough assessment of the issues.

Alternative Course of action

1. Invest in IT structure- considering that the supermarket wanted to use the technology of

Argos for their services, they might need to invest in more advance technology tools to

improve those services.

2. Assignment of experts- with the wider coverage of operations and the integration of

two businesses, experts might be needed to oversee certain operation to ensure success

of such integration.

3. Integration of operations- with the acquisition of Argos and the purpose of improving

the system of Sainsbury some operations might be absorbed from Argos and integrated

to the operation of the firm to provide better services to the customer.

4. Adoption of stores- as the Argos company being absorbed by the firm, some of its store

which are perceived to be profitable will be absorbed by the supermarket to reduce

space retail price.

Analysis of Alternative Course of Action

1. Invest in IT structure

Advantage
Argos does not have supply chain system for food retail therefore integrating IT to the

current system of the firm will maximize their capabilities. Ramp up the delivery network of

Sainsbury with enhance

Disadvantage

This will require Sainsbury to release large amount of capital expenditure in the midst of the

strain they are facing. Furthermore, this require time to set up along with the people who

will be responsible in operating it.

2. Assignment of Experts and Teams

Advantage

With the new business to be handle by Sainsbury it would be easy to operate and monitor if

there are experts assigned to specific operation or teams that would ensure all operations are

align and linked to their strategic visions.

Disadvantage

This would require Sainsbury to disperse quality human resource to manage some operations

like the senior managers. Moreover, they may need to hire experts and people with the plan

absorbing some Argos operations. Cost and managing capabilities need to be considered

here to achieve greater results.

3. Integration of operations

Advantage

This is very important to Sainsbury’s, as one in which it’s lacking is its mobile shopping

experience, an area where Argos is a clear leader With Argos’ technology, Sainsbury’s
could leapfrog its competitors and gain a significant share of the new generation of digital

consumers

Disadvantage

There might be struggle due to the fact that Argos deals with non-food retail while

Sainsbury is into food. Furthermore, Argos has down-market brand, poor trained staff, and

issues on their sales operation which could drag down the company and distract

management team focused in facing the huge strain affecting the supermarket industry. The

compatibility of operation as well as the availability of resources post as great risk for the

firm.

4. Adoption of stores

Advantage

Sainsbury has already established their existing market, absorbing some stores of Argos in

the supermarket is a great opportunity for Sainsbury, this would make them one stop shop

for both company’s customers. It helps them provide a wider range of product for their

customer to choose.

Disadvantage

Bad publicity of one product may harm the whole company’s image the same as with the

store appearance and poor trained staff which was seen by some Analyst in Argos.

Furthermore, this will require further marketing and promotional activities to introduce the

newly absorbed stores.

Intensified competition in the Supermarket industry in terms of price wars, marketing and

promotional activities, logistic services and store closure programs pushes Sainsbury to

make a move to level up the game by acquiring Argos company. However, along with this

deal are risk that the firm may face if such merger fails considering they are now in the

middle of a huge strain. To ensure the sustainability and successful transaction, we have

identified several courses of action that will give the firm the benefit upon this acquisition

and will provide them leverage among its competitor as well as adapt to the changes in the

market environment. Among those courses of action, I think integrating the operation is one

that they should focus especially on the aspect of logistic and incorporating online shopping

experience to Sainsbury customers. With the just-in-time logistic services and web platforms

of Argos now Sainsbury could offer more choices and faster than ever which is driven by
mobile phones and digital technology at the same time reached out to a larger scope of

market. This integration would bring new change to Sainsbury supermarket as they embrace

the technological development and offers best customer experience offline and online.

Furthermore, this integration could also lead to adoption of Argos stores in the supermarket

which means there will now be wider product range for customer who visits the physical

store itself and adds up to better shopping experience for both company’s customers. In

terms of the issues on the store appearances the supermarket can incorporate management

strategy to those stores so that visions and principles would be strategically aligned to

provide better results.

Recommendations

With the integration of Argos in Sainsbury system and operation, it is not going to be easy as

we perceived it to be. There will be struggles and difficulties as well as risk considering that

the two companies are somewhat different in terms of how they were operated but let us

look on the brighter side if such integration becomes successful Sainsbury is going to be the

largest online retailing industry in UK with its incomparable services offered through online

and offline. In pursuit of this however, the firm still need to address possible risk for

example removal of certain head office roles as well as dispersal of managerial experts’

employees to oversee other operations. With this I recommend that Sainsbury recruit more

human resources especially those who have skills in modern technology preferably the

newly graduates because they may have fresh ideas and perspective on how to use this
 technology to provide quality services. For the Argos staffs that lacks training, they could

have some of their employees to assist the staff for the mean time to learn the basics.

Furthermore, I also recommend them to assess the values and principle of both company and

select the best to be applied for the whole firm to ensure that there is unity and set direction

for the organizations to avoid miscommunications and issues in culture. The adjustment may

take time but remember all success pass through trouble times.

Answer to the Case Questions

Why did Sainsbury bid for Argos?

Sainsbury bid for Argos not in desperate to beat Amazon for they welcome competition in the

industry. However, they made a move on this deal because from Sainsbury’s point of view, there

are clear synergies and real opportunities. They wanted to reduce their reliance on the highly

competitive market of supermarket. Furthermore, they wanted to produce grow non-food sales

by expanding their product range, improve non-food logistics, acquire a best-in-class mobile

commerce platform and Argos logistic service business. This Acquisition is more focus on

increasing the firm’s capabilities to produce quality service and provide better, flexible and
accessible customer experience when shopping. According to Coupe the takeover has been driven

purely by the now fundamental need to serve customers “whenever and wherever they want to shop.

2. With reference to the post-acquisition integration matrix (see Figure 11.3) consider how Sainsbury

might best integrate Argos?

Sainsbury integration of Argos must focus on creating value to both firms. Absorption is what

best integrate approach for Argos Acquisition wherein there is a high level of strategic

interdependence needed but the need for Organizational autonomy is lesser. Sainsbury states that

buying the group would help it to boost sales growth, improve its delivery networks, and mean

they could sell their products to each other's customers. However, some analyst insists that the

greatest prize of all this deal and acquisition could be Argos' delivery network which Sainsbury

lacks and in need. In relation to this, the Absorption approach will lead to appointment of new

integration manager in order to manage the organization differently at the same time dispersion

of teams and expert to oversee the projects. The acquisition success and whether it is future

proofing will depend on how the management will manage the integration and risk that comes

along with it.

4. With reference to the ‘buy, ally or DIY’ matrix (see Figure 11.6) consider whether the

acquisition of Argos is the best strategy for Sainsbury?

Acquisition can be a great move for a firm and usually it requires thorough analysis. Generally,

firms assess first whether it is a good idea to acquire the whole company or they could form a

partnership with it instead, it all depends on the level of necessity of the firm and its strategic

goals. A ‘buy, ally or DIY’ matrix summarizes four key factors that can help in choosing between

acquisitions, alliances and organic development. To analyze the acquisition done using the

matrix it has shown that the urgency upon Sainsbury is high due to the intensified competition

in the market environment and the new entrance of online shopping store. However, the
uncertainty towards the deal is also high because of the current situation of Argos and its

profitability. In this acquisition the desired capabilities are the Argos web and delivery platform

which is the whole essence of the company and could not be separated from it that is why they

opt to acquire the firm because they wanted to have control on that certain operation. If they

opt to alliance with Argos the company is not stable and they don’t have enough control on it

which could lead to control problems in the operations because it is harder to control alliance

partner than an acquired one. While with those stated needs on logistic, having it established

from the very start would be costly and would take time to prove it efficacy so they rather buy

Argos who happens to have a well establish logistic services which is effective and efficient in its

area. Over all it is a great strategy to acquire Argos however, it was also a bit risky but if the

integration will succeed as Copestake acknowledged, “it’s a fight back of one kind”
 References

J. Faull,”5 things you need to know about Sainsbury’s takeover bid for Argos” the Drum, 18

March 2016

K. Hope, ‘Why does Sainsbury’s want to buy Argos?’, BBC News, 1 February 2016.

C. Johnston,” Sainsbury’s to 'future-proof' with £1.3bn Argos deal”, BBC News, 2 February

2016

M. Nwabunka “A case study on the proposed acquisition of home retail group plc by j Sainsbury
plc” Acdemia.
Bizibl Commerce blog “Why Retailers Should Watch the Proposed Sainsbury’s Argos Takeover

with Interest”