Safeway Plc
Introduction
As a component part of my ASVCE course in Business Studies, I have to investigate various forms of business enterprise and write a detailed report on one medium-sized or large business. In assembling this report, I will be investigating, and analysing the following aspects of my chosen "case study", which is Safeway Plc, illustrating "Business at work"...
> Objectives of the organisation.
> The organisation and structure of the business.
> The organisational culture of the business.
> Communication channels used by the business.
> Methods of monitoring quality assessment and control.
> Value added by the business.
> The impact of ICT upon the internal and external communications of the business.
My coursework will involve developing a detailed study of each of the above criteria related to Safeway Plc.
I initially contacted various companies of my choice, including:
HMV, Virgin, WHSmith, Asda, Heinz, Safeway, Tesco, Burton's Mensware, Next, Boots, Vodafone, Bulmers, Cadburys, Shoulers and Son, Walkers, Aston Martin, Sony, Rolls-Royce, Tommy Hilfiger and Ralph Lauren.
I contacted all the above companies via my e-mail; I found this a very quick and easy method of contacting these companies and very productive in that I received many replies. I have chosen to investigate Safeway Plc, because I found that Safeway Plc was the clearest, most helpful, and the most resourceful.
Most of the companies replied to me via post, as I stated that it would be more useful to me if they did this. This is because it gave me the chance to refer to particular parts of the company suitable for my research.
What I need to investigate
As mentioned above I need to examine Business objectives, Types of business, Organisational functions and structures, communication and Product quality & control.
Business objectives
These include:
> Making a profit
> Surviving
> Increasing sales or market share
> Providing services to the community
> Producing high quality products or offering high quality services
> Developing a skilled workforce
> Fulfilling charitable or non-profit objectives such as caring for the environment
Types of business:
These include:
> Sole trader
> Partnership
> Private Limited company
> Public limited company
> Co-operative
> Not for profit or a charity
> Franchise
Organisational functions:
These include:
> Finance
> Production
> Human Resources
> Marketing
> Administration
> Research and development
Organisational structures:
These include:
> Tall, flat and matrix
> Hierarchical, centralised and decentralised
Communication
This includes:
> Internal and external
> Formal and informal
> Upward and downward
> Open and restricted
Production and quality
This includes:
> Combining inputs to create a physical change
> Combining inputs to create a service
> Meeting customer requirements
Safeway Plc
Safeway is one of the top four food retailers in the United Kingdom. This very competitive market includes Tesco, Sainsburys and Walmart/Asda.
Food retailing has undergone many changes in the recent past with the advent of the supermarkets in the U.K. during the late 1950's, and the mobility of the population (increasing car ownership). This sector has prospered over time as shopping habits have changed.
The arrival of a new Chief Operating Officer Carlos Criado-Perez some two years ago resulted in a change of strategy, and has transformed Safeway from a "follower" to a dynamic leader in grocery retailing. This statement will be analysed elsewhere in this report.
The Safeway brand is an international one born in the USA with outlets in other parts of the Americas and Europe.
This report deals especially with Safeway Plc here in the U.K. where the company trades as an autonomous unit. (Quoted on the London Stock Exchange, in the FTSE 100). As mentioned earlier I contacted via e-mail many companies in my search for suitable material. I decided to choose Safeway Plc because I believe it to be the basis for an interesting case study.
E1 How can I classify Safeway in terms of its ownership?
What are the advantages and disadvantages, benefits and constraints of this form of ownership?
Safeway is a Public Limited Company (Plc). A Public Limited Company tends to be larger than a Private Limited Company. A Public Limited Company can be abbreviated as Plc. There are around 1.2 Million registered limited companies in the U.K., but only around 1 per cent of them are public limited companies. However, they contribute far more to national output and employ far more people than private limited companies. The shares of these companies can be bought and sold by the public on the stock exchange.
To become a public limited company, a Memorandum of Association, Articles of Association and a Statutory Declaration must be provided. This is a document, which states that the requirements of all the Company Acts have been met. When the company has been issued with a Certification of Incorporation, it is common to publish a Prospectus. This is a document, which advertises the company to potential investors and invites them to buy shares before a Flotation. To become a Plc Safeway had to go through these legal formalities, which can be expensive.
This is because:
> The company needs lawyers to ensure that the prospectus is 'legally' correct
> A large number of 'glossy' publications have to be made available
> The company may use a financial institution (merchant bank) to process share applications
> The share issue has to be underwritten and a fee is paid to an underwriter who must buy any unsold shares
> The company will have advertising and administrative expenses
The advantages of being a Plc
In Public Limited Companies, all members have limited liability, the firm continues to trade if one of the owners dies and more power is enjoyed due to their larger size. Others are as follows:
> Substantial amounts of money can be raised from the sale of shares to the public
> Production costs may be lower as firms may gain economies of scale
> Because of their size, plcs can often dominate the market
> It becomes easier to raise finance, as financial intuitions are more willing to lend Plc's
> Shareholders (owners) have limited liability
> The shares in the company can be freely bought and sold
The disadvantages of being a Plc
> The setting up costs can be very expensive - running into millions of pounds in some cases
> Since anyone can buy their shares, it is possible for an outside interest to take control of the company
> Members of the public can inspect all of the company's accounts. Competitors may be able to use some of this information to their advantage. They have to publish more information than the private limited companies
> Because of their size they are not able to deal with their customers at a personal level
> The way they operate is controlled by various Company Acts, which aim to protect shareholders
> There may be a divorce of ownership and control, which might lead to the interests of the owners being ignored to some extent.
The advantages and disadvantages listed above apply to all Public Limited Companies.
What about the advantages (benefits) and disadvantages (constraints) of Safeway being a Plc?
The advantages of Safeway being a Plc
* Because ...
This is a preview of the whole essay
> Because of their size they are not able to deal with their customers at a personal level
> The way they operate is controlled by various Company Acts, which aim to protect shareholders
> There may be a divorce of ownership and control, which might lead to the interests of the owners being ignored to some extent.
The advantages and disadvantages listed above apply to all Public Limited Companies.
What about the advantages (benefits) and disadvantages (constraints) of Safeway being a Plc?
The advantages of Safeway being a Plc
* Because Safeway is a Plc it can if necessary raise capital to fund expansion.
* It can raise short-term finance from the Banks or the money market and long-term finance from the stock exchange or capital market.
* Safeway shares can be freely bought and sold through the stock exchange.
* Safeway's production costs may be lower as Safeway may gain economies of scale.
* Because Safeway is a Plc it is one of the dominant supermarket retailers in the UK.
* Safeway's continued existence does not depend on the founders of the business
The disadvantages of Safeway being a Plc
* Because Safeway is a Plc it is possible for outside interests to take control of the company. Over recent years there has been a notable tendency for firms to merge in order to achieve growth. In the retail sector e.g. Wal-Mart took over Asda. There could be a possible danger for Safeway in that another predator firm might wish to absorb it.
* Because of Safeway's size it is not able to deal with its customers at the same level of service as for example a small local shop. Supermarkets however now usually provide a Customer Services provision
* Safeway is controlled by various Company Acts, which aim to protect shareholders. It must therefore comply with such government legislation.
E2 What are the key objectives of any business?
What are Safeway's objectives as a company?
Business objectives are medium - to long-term goals or targets that provide a sense of direction to the business. Objectives are normally measurable and have a stated timescale - for example, a business may have an objective to boost market share from 24 per cent to 33 per cent over the next four years. Market share simply measures the proportion of total sales in a particular market achieved by the business. One of Safeway's key objectives is to try to maintain its present market share in the face of fierce competition from its major rivals Tesco, Asda (Wal-Mart), Sainsbury's, Somerfield, Co-operative Societies, etc.
Companies may have a number of objectives. In general, the objectives pursued by a business tend to vary according to its size, ownership and legal structure. Larger businesses may aim to maximise profits, especially if they are public limited companies whose shareholders will want the highest possible return on their investments.
These objectives will reflect the purpose of the business as expressed in the mission statement and they have a considerable impact on the way in which it operates.
Safeway's Mission Statement is:
"Our Goal is to be the first choice for those customers who have the opportunity to shop locally in a Safeway store."
"To deliver this goal we will focus on:
* Product and price, and be
* Best at fresh
* Best at availability and
* Best at customer service"
The Key objectives of businesses usually tend to concentrate upon:
a) Making a profit (or surplus)
A firm, which wants to maximise its profit, can do one of several things to achieve its objective.
* It can try to save as much as possible on its factors of production - this means, to use the cheapest premises, labour and machinery. Nowadays, firms often find that using machines is cheaper than employing people, and so they invest in machinery and reduce their workforce.
* It can concentrate on making goods or providing services for which demand is growing. This needs very careful planning, and can sometimes result in too many companies all providing the same goods and services.
* It can work out the level of production at which the levels of profit are greatest, and remain at that level of production.
* A very large business organisation can adjust its prices or the amount it produces in order to achieve the highest profits.
* In order to stay ahead of competitors, it can try to provide new products. This can be done through a research and development programme and is very expensive, so only very large organisations can do this.
* Making a profit is vital in order to satisfy shareholders. Often this can be the major objective in order to provide value to investors through good dividends and increasing share prices.
b) Survival
Many businesses do not aim at making a profit, only at making enough to enable them to continue being in business. This is often true of small businesses, such as sole traders. In times of economic difficulties, survival becomes important for many organisations.
If surviving is the aim, the business hopes to break even. For a relatively short period of time, it might even operate below that point, but no business can go on losing money indefinitely.
c) Increasing sales or market share
Delivering increases in sales and/or market share is a key component of Safeway's strategy.
Simon Laffin, Finance Director identifies "Driving profit through sales" as a major objective for the group. To achieve increases in sales Safeway has to bring new customers into its stores and encourage those new and existing customers to purchase more once in store.
The introduction of "Best Deals Ever" featuring deep price cuts on volume lines was the key tactic used in store to encourage shoppers to buy more. Local advertising spread this message locally and "flyers" direct to homes. Thereby bringing new or lapsed shoppers back to Safeway.
Having got the early response to this approach Safeway are now concentrating in turning new customers (or clients as they are known in Safeway) into local supporters.
Increased customer numbers together with higher spend per visit will show increased sales.
Safeway have seen an 8% increase in customers and a 5.1% increase in sales during the past year. This in turn has contributed to a 31% increase in profit recorded in the latest annual report.
Because Safeway is the smallest of the top 4 U.K. grocers it is not using market share as a driver in its current strategy. It is however, delivering against its main objectives as seen from a customer satisfaction perspective.
The current policy will impact on others in the sector and Safeway's current market share is likely to grow as a result of its current strategy. Market share going in decline leaves a company vulnerable to competitors.
Companies who achieve dominance in their respective markets can increase prices and profitability.
d) Providing services to the community/ Awareness of environmental issues.
Community
Companies increasingly recognise their responsibilities to the communities in which they operate.
In the case of Safeway Plc a key point of their strategy is their "Best at fresh" this means that they will work with their suppliers (farmers + fruit etc) in order to promote best practise and subsequently prime produce for Safeway customers. This degree of teamwork provides employment far beyond the actual stores. Thereby involving communities across the country and beyond with a vested interest in the Safeway brand.
On a local basis individual stores get involved in local activities. Sponsorships of a wide variety of projects for hospitals, schools, disabled sports, and student work placements for example a feature in Safeway's local community activity. Safeway Plc made contributions in excess of £100k in the year 2001, to a wide range of charities.
Environment
As governments place environmental issues higher on their agendas companies too are making efforts to improve their practices either by complying with legislation or by paying particular attention to areas such as: -
> Energy conservation
> Waste management
> Packaging development
> Sustainability of raw materials
Safeway Plc has an environmental philosophy "We strive to operate in harmony with the global environment and promote environmental protection as an integral part of our business activities"
The implementation of Safeway's policy is the responsibility of the company's directors.
The companies record in recognising its responsibility has resulted in a number of "FIRSTS" for example; way back ion 1971 Safeway was the first supermarket to introduce recycled carrier bags. It introduced the first bottle bank, supports the chair at The London Guildhall University for Environmental Policy + Management, and more recently Safeway converted some of its 600 strong vehicle fleet to Natural Gas. This ground breaking initiative was introduced to meet both environmental + community objectives.
The vehicles produce fewer emissions thereby reducing pollution particularly in congested city areas. They are also significantly quieter than their diesel counterparts allowing deliveries to be made at night even in residential areas.
The government supports such initiatives in terms of tax breaks on fuel, so the company benefits. Safeway has seen a 24% saving on fuel costs when compared to the diesel equivalent since 1998.
Cost savings such as these have a beneficial impact on profits.
e) Producing high quality products or high quality services
A good example of this policy is the so-called "Best at fresh"
"The growing strength of our fresh food offer - how we have made the product the hero, upgraded our ranges and helped suppliers achieve success in the market place."
For example Safeway's passion for fresh food means that they are constantly improving their ranges, including the introduction of fresh pasta, a delicious patisserie range and a wide selection of fish and seafood.
Safeway's new ways of merchandising have allowed their customers to see the freshness and quality of their products.
Another good example of this policy is Safeway's "Customer service"
"Giving Safeway people the skills to deliver first class customer service"
The people who work in Safeway's stores are central to the delivery of their business goals. It is the skills, flair and enthusiasm of their people that ensure success. This is reflected in the investment they are making in training and development.
Making staff more knowledgeable about the product offering ensures a high degree of customer satisfaction.
Increasing current market value is also an important objective for Safeway Plc, as this is an indicator of public confidence in the firm.
Current market value
Safeway Plc has a market capitalisation of £3.5 billion pounds as identified in 'The Sunday Times' dated October 7th. The following chart identifies Safeway's progress versus the FTSE 100 over the past two years. This timescale is the same as the C.O.O's (Chief Operating Officer) revised strategy.
E3 What are the functional areas of Safeway Plc?
Safeway's business is complex and a key theme of the organisation is communication both up and down the organisation as well as between functions. Safeway's main business is to operate 460 store + supermarkets in the Retail Food Sector. The main functions supporting this are activity are: -
The heart of such an operation is the Finance Department.
All businesses combine factors of production as an essential part of their production activities. To combine these factors, to engage in production and to achieve their objectives organisations undertake a number of functions. The major business functions include:
* Finance
* Production
* Human resources
* Marketing
* Administration
* Research and Development
The finance function
A separate department normally carries out the finance function of the business. The finance department carries out a number of key activities. These are summarised below:
* The finance department records all the financial activities of the business, listing the revenue earned by the business and the expenditure necessary for production.
* Employees in the finance department monitor the expenditure of all parts of the business and advise if expenditure appears to be too high.
* They oversee customer accounts to ensure that the business receives the money to which it is entitled and is therefore able to pay its own bills.
* Employees in the finance department may interpret financial data for senior and middle managers to ensure that decision-making is base on the most up-to-date information possible.
* The finance department also provides financial information about the company to important external bodies, including the Inland Revenue which collects corporation and income tax and HM Customs and Excise, which collects VAT.
* Accountants in the finance department analyse the costs incurred by the business and compute standard costs associated with various aspects of the firm's activity. Standards costs are normal (or average) costs associated with a particular a specific component. This data helps businesses to forecast production costs with greater accuracy.
* The finance department provides information to firms of accountants auditing the business's financial records. Auditors are employed to confirm a business's accounts are a true and fair statement of its activities.
This key functional department is responsible for maintaining the viability of the company. It releases funds for investment in the business. Capital projects such as store refurbishments. New machinery for production of own label products, etc.
It is also the Companies interface with the city where "sentiment" can make or break share prices. The Finance Department managers such issues as Taxation, Property purchases + disposals. It prepares the annual accounts and managers the companies business through financial ratios.
The human resource function
In modern businesses, human resource management is now taking on the role previously carried out by personnel management. There is a very clear distinction between personnel management and human resource management. Personnel management considers the tasks involved in managing people - recruitment, selection and so forth - as separate elements. It does not take into account how these elements can combine to achieve organisational objectives. The personnel management approach makes decisions relating to recruitment, training and pay systems independently, without considering the impact the individual decisions have on each other aspects of management and the achievement of corporate objectives.
In contrast, human resource management (HRM) elevates the effective use of a business's labour force to an issue to be considered by senior managers as an essential element of the organisation's strategy. This approach has raised the profile (and salaries) of those employed in human resource management.
The human resource function engages in a number of activities to ensure employees are utilised effectively. These activities are carried out with the aim of contributing to the achievement of the business's objectives. The organisation's need for employees is regularly monitored and incorporated into a workforce plan. This sets out likely future needs for labour and how (through training and recruitment) these needs might be met. In order to fulfil the workforce plan, managers responsible for human relations audit existing human resources and put into action a plan to develop the right number of employees with the correct skills to take the organisation forward.
Achieving the workforce plan involves the human resource function in a number of day-to-day activities
* Recruiting employees - both internally and externally.
* Training new and existing employees.
* Paying salaries.
* Overseeing industrial relations, by seeking to avoid disputes and maintain harmonious relations and constant production.
* Developing and monitoring an employee appraisal system designed to assess performance, set targets for achievement and identify any training needs.
The Human Resources Function in Safeway Plc
The company has a huge workforce of over 80,000 people. Personal records have to be maintained on each member of staff.
The Human Resources Department provides ongoing training and development of Personnel. It also has responsibility for recruiting, developing and rewarding the staff.
Staff are encouraged to improve their knowledge and skills across the company. The introduction of a performance bonus system has ensured that more staff enjoys Safeway's success.
The Distribution function
This function is the main artery between the stores and the various depots departments. The importance of managing the supply chain effectively in any retail operation is of critical importance.
The whole operation is dependant upon I.T. to ensure that stores place orders on the depots. In turn the depots place orders upon suppliers. The loading + despatch of trucks to the stores completes the process. Tight control of stock management throughout the supply chain ensures that product is in store to satisfy consumer needs.
The Marketing function
The marketing department carries out a wide range of functions on behalf of the business. Essentially marketing is communications. The marketing department communicates with a number of groups inside and outside the business as it carries out its tasks. Some of the marketing department's relationships are shown below: -
* Customers. Keeping customers satisfied is a key objective for the majority of businesses and marketing plays a central role in attaining this target. The marketing department carries out the market research to discover the needs of consumers. This research is likely to be an ongoing activity to ensure the firm is aware of changing tastes and fashions. The department is also responsible for organising advertising campaigns, special offers and other activities designed to promote the company's products. The marketing function may also deal with customer complaints.
* The production department. This is possibly the most important internal relationship between business functions. The marketing department discovers the needs of customers and advises the production function accordingly. If this channel of communication operates effectively, the business should be more able to meet the needs of consumers.
* Distributions and retailers. The marketing function normally carries the responsibility for ensuring the effective distribution of products to wholesalers and retailers. It may also liase with retailers to gain prominent display positions for the company's products and to arrange special offers and promotions. With the development of the Internet, many firms now sell their products direct to consumers. This has placed additional responsibilities on the marketing department.
The importance of marketing
Marketing provides the organisation with information about its customers and its markets. Effective marketing can offer businesses a number of benefits:
* Early warning of changes in consumer tastes and fashions through regular market research
* Knowledge about competitors and information regarding competitors' products
* The means to present the company in a positive light through public relations activities
* Allowing the firm to improve the quality of its products by coordinating and analysing customer complaints
* Providing a catalyst for growth by forging relationships with distributors, retailers and customers in new markets
* Supplying consumers with the products they want and giving high levels of customer satisfaction, which might permit a business to charge higher prices thereby increasing its profitability.
Marketing is an influential factor assisting organisations to achieve objectives such as growth and market share. Successful marketing results in satisfied consumers with the products they want and providing high levels of customer satisfaction, a business might be able to charge higher prices and increase its profitability.
Marketing in Safeway Plc
The marketing of Safeway's offer to the public is by the way of local adverts and house to house distribution of flyers is undertaken by this function. So to is the Safeway magazine, which is offered free at checkouts. These communication activities are key as is the appearance and ambiance of the stores. Own label product packaging and customer research projects are undertaken by the Marketing Department. The Internet site Safeway.co.uk is also the responsibility of this department.
The Trading Function in Safeway Plc
In order to meet their goal of "Best at fresh" the function of this department is to source the best fresh foods in the market. A team of traders buy, develop and price all fresh goods ensuring they are of the highest quality.
The area of impact stretches from Fish to ready meals, from Bakery to Organic Yoghurt, from Indian + Chinese takeaway meals to traditional English cheeses. A vast array of the Best At Fresh!
The I.T. Function in Safeway
This forms part of the Finance/Analytical area and links all parts of the business from hand held shop floor computers for stock recording/ordering to the Main Frame at a Central location. Computers plan journeys for the trucks and notify the precise time that truck will require unloading. All company records are stored centrally and senior management can have a "snapshot" of the business at any time.
The administration function
The scope of the administration department varies enormously between organisations. A typical administration department has a number of functions:
* The provision of information throughout the organisation. It is common for a business's information technology section to be a part of the administration function. The IT system within a business provides management information for decision-making throughout the organisation.
* Clerical and support services. Information processing, data processing, filing and reception services can be provided to all areas of the organisation. These duties play a vital role in linking together the activities of other functions within the business.
* Security and maintenance. These services are essential to smooth running of the business and to effective operation of other business functions such as production in particular.
Administration is heavily dependant upon the use of information technology. This technology allows businesses to collect information from within and outside the organisation, to analyse it and to provide important data for decision-making. However, the benefits provided by information technology have also contributed to a situation in which a discrete or separate administration department is less likely. In the effect, the technology enables small and separate 'mini' administration functions to operate within other areas of the business.
The research and development function
The nature research and development (R&D) varies enormously between businesses. Traditionally, the term research and development is taken to refer to scientific research undertaken by firms producing manufactured goods, high technology products or pharmaceuticals. This Department is equally important to firms providing services.
By investing in research and development a business seeks to maintain competitiveness against its rivals. Competitiveness measures a business's performance in comparison with rival firms in the same market. A highly competitive firm has some advantage over other businesses. This competitive edge can take a number of forms:
* Lower prices
* More advanced and sophisticated products
* A better image with consumers
* A good reputation for advice and after-sales service
* Reliability in terms of operation and delivery dates
Types of research
* Research and development can be broken down into three components:
* Basic research
* Applied research
* Development
Basic or fundamental research is undertaken mainly to achieve advancements in scientific knowledge that have commercial possibilities. The discovery of digital technology in broadcasting is an example of basic research.
Applied research then takes forward the scientific discovery and attempts to develop it in a way that results in a saleable product.
The development aspect of R&D uses the results from applied research to bring the product to the stage where it is marketable.
The interaction of business functions
I have considered each of the major functions of my organisation separately. However, it is the effective interaction of Safeway's business functions that is essential to the success of an organisation in attaining its objectives.
As an example, consider how Safeway may respond to an enquiry from a potential customer. Assume that the customer is interested in placing a large order, but wants delivery quickly. This enquiry, if followed through to a sale, may involve all the business functions in different ways.
> Marketing - responding to the initial enquiry, receiving and processing an order, distributing the product to the customer.
> Administration - adding the customer's details to the IT system, passing on details to other departments within the business.
> Finance - investigating the financial status of the customer, offering credit terms if appropriate, invoicing for payment.
> Production - receiving details of order and meeting the customer's demands, liasing with marketing over delivery dates, rescheduling other production as required.
> Human Resources - ensuring sufficient employees are available to meet the production requirements of the order, arranging overtime payments if necessary.
> Research and Development - liasing with marketing over possible customer requirements and reactions to product supplied.
A significant move has taken place recently within Safeway Plc where the H.O. function, which houses many of the departments above, has been renamed Stores Support Section. Thereby directing more focus on the stores themselves. Making the store in the community the most important visible aspect of Safeway Plc.