Outline of the Aims/Objectives of Sainsburys and Tesco.

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Outline of the Aims/Objectives of Sainsbury's and Tesco

I have been allocated a responsibility by Kal Panchal to follow a line of investigation with regard to how business is conducted online. This exploration will also include an investigation of the Price Brown Partnership website and will comprise of a well structured and detailed report that will pen ultimately involve me writing a letter to the directors of the Price Brown Partnership commenting on how successful I feel that their online strategy has been.

The report firstly requires me to describe with examples, how an online presence may support the accomplishment of a given business's respective aims and objectives that they wish to fulfil. Once having explained that, I will illustrate the impact on a customer point of view with in relation to the introduction of the online presences of the companies and outline the main business opportunities that arise from that online existence.

With consideration to the report, I have selected to investigate two companies which are situated within the retail region, groceries vicinity to be precise. In addition, the two companies which I chosen to explore are J Sainsbury's and Tesco Plc's. I will then contrast these two supermarket chains against that of Price Brown in terms of design, content, navigation, functionality and my overall experience.

Organisations need to have aims and objectives to be able to focus on the clear direction needed for success in the modern business world. The aim is the overreaching goal for the organisation, which can then be segmented down into a subset of objectives to achieve their aspiration. Establishing objectives may be done in a number of ways for example, looking at corporate aims in terms of looking at the company as a whole and once this has been recognised, the mission can be segregated into divisional objectives.

For e.g. the prime and generic objectives of a business will be:

> To Achieve a Profit

> To Increase Market Share

> To Offer a Highly Competitive and Quality Assured Service to the Consumer

> To Increase/Maximise Sales

Achieving Profit - Profit is effectively the disparity between the total costs that are associated with regard to manufacturing a product and the selling price per unit. In other words profit is what every organisation strives to reach in order to move forward and grow within the market they operate in. Thus, unless an organisation attains profit, they will be have the inability to modernise themselves, reward shareholders, install new and innovative technologies nor justify some sort of investment. According to the guru Peter Drucker, Profit is:

"Profit is not a cause. It is the result - the result of the performance of the business in marketing, innovation and productivity. It is the first duty of a business to survive...Business enterprise must produce the premium to cover the risks that are inevitably involved in its operation and there is only one source for this premium, profits" 1

In light of the information referred to above, the introduction of online presence will help both Tesco and Sainsbury's achieve profit because with an e-commerce base, both companies do not have the need to pay out more on overhead costs.

I.e. they will not have to pay planning and manufacturing fees for new premises seeing as it is virtual reality therefore they are eliminating the need to pay for constructing new outlets. A global business on the Internet does not require building costs such as paying for land or labour, just a web site and possibly one central warehouse. Generally, the cost of the site is about 8 percent of that business' revenues which makes them fairly cheap to cover maintenance and continued management expenses.

In addition, as business transactions are primarily handled electronically, there is no need for a large sales staff. The virtual storefront also minimises theft, damage, or breakage of the inventory. Another way in which an online presence assists Sainsbury's and Tesco become more profitable is because their e-commerce base is limitless. For example, Sainsbury's and Tesco's online presence is only limited by their imagination and their determination to succeed.

A web presence will allow both these firms to become more diversified in the sense that they are not limited to space - on the internet they can sell an enlarged range of goods and services that may not be possible for them to do so in stores, they can increase their product portfolio.

Furthermore, Sainsbury's 'Picking Centres' where orders are verified by staff have a broader reach.

This will help them gain more profit because more prospective consumers can be targeted in a wider field - online presences for both Tesco and Sainsbury's covers the width of the entire country whereas stores only cover a certain catchment area which is restricted by the prime factor of space.

"The ordering centres have the capacity to handle a much greater number of internet shopping orders than stores. Park Royal can handle around 15,000 orders every week, against the store average of around 650, meaning it can handle any sharp increases in trade".2

"Sainsbury's to You' has proven to boost annual profit margins for Sainsbury's because profits have climbed from a mere '£462 million pounds in 2000 when it was first launched to 2003 profit standings of £572 million." 3

"Tesco.com' on the other hand has accelerated their profit margins at much faster pace as their profits have increased from '£995 million pounds in 2000 when Tesco.com was initially launched to £1401 million pounds in 200"'. 4

Increase Market Share - Market Share is the term given to the percentage of a certain market a firm has control over/owns over rival competitive firms. It is imperative that in such a fierce and competitive market such as the groceries/retail market that Sainsbury's tries to reduce the percentage of the market that Tesco own who are the current market leaders. For example, TNS Market research group said that Sainsbury's market share depreciated to 16.1% in the 12 weeks running from July to 14th September 2003 against 17.2% in the same period last year.

'Tesco extended its market lead to 23% as the hot summer of 2003 boosted sales of barbecue foods and beer. Asda, which recently overtook Sainsbury's, retained the number two slot, boosting its share to 15.4%'. 5

It is important that Tesco maintain their competitive edge over Sainsbury's because as firms gain more of the market share, then the unit cost per items decreases and allows them to buy in bulk - benefit from economies of scale. As a result dominating the market will give flexibility for Tesco to produce on a larger scale in comparison to rivals and will mean that they can spread their financial outlay of costs over a larger output. It will give Tesco the initiative and control to produce more cheaply than their rivals. Profits can then be ploughed back into research and development and further expansion strategies to maintain market leadership. The market share for the 5 biggest supermarkets and in specific, Tesco and Sainsbury's ones are as follows:

Table 1- Market Share of Top 5 Supermarkets

YEAR.

999

2000

2001

2002

2003

Tesco

22.0

22.9

23.4

24.2

23

Sainsbury's

9.7

9.8

9.1

8.6

5

Asda

3.3

4.1

4.8

6.3

5.4

Safeway

0.3

0.2

0.0

0.1

9.7

Morrisons

3.9

3.9

4.5

5.1

5.9

SOURCE: Till Roll Share of Trade for 52 weeks ending July by independent retail analysts Taylor

Nelson Sofres Superpanel.6

With relation to the above said, an online presence could help both Sainsbury's and Tesco increase their market share because as I said earlier the e-commerce base is not restricted by factors such as space and time.

For example, both firms since they launched their e-commerce bases have tried to make their company more accessible to more people and they can do this by using the internet as more and more people own computers. If supplementary people are shopping as statistics have shown in footnote 1, than both firms will increase their profit levels as they are shopping and spending more, thus increasing their market share. The internet also provides a wider assortment of goods/services that suit different types of people's lifestyles which outlets may not supply and this in turn will give more people the motive to shop using e-commerce.

To offer a highly competitive and quality assured service to the consumer - This business objective is concerned with fulfilling the needs and wants of a company's customers at the finest possible touchstone and also focuses on ways in which customers uphold the highest possible perception centring around the firm. This objective like any other is exceptionally vital because it customer perception that drives purchases and customer loyalty.

Extract of Sainsbury's Mission About Customers

* To deliver our mission, and restore profitable growth we are

focusing on our three bubbles:

> outstanding quality and choice in food and then

importantly, in other general merchandise products

and customer services that make the weekly shop

more convenient

> delivering great service, serving customers

consistently well in all our contact with them, but

especially at checkouts and in shop floor availability

> having competitive costs, implement our

transformation programme to create an efficient

business, so we can pass the benefits of lower costs

onto our customers in competitive prices

> doing all of this 'faster, simpler, together', working as

a team to meet the needs of customers and our

stores who serve the customers 7

Extract of Tesco's Mission About Customers

"Our Core Purpose is all about customers."

"Creating value for customers, to earn their lifetime loyalty."

No one tries harder for customers:

"Understand customers better than anyone"

"Be energetic, be innovative and be first for customers"

"Use our strengths to deliver unbeatable values to our customers"

"Look after our people so they can look after our customers"

This statement is at the centre of all we do.8

An online web presence could help consolidate customer service, loyalty and perception because a web site allows a business to address its customers on a personal level. The computer can distinguish and greet repeat shoppers.

For example, when a frequent purchaser logs onto their online account a message could read, "Welcome to 'X' Category. Check out our new 'X' Range'. In relation Tesco or Sainsbury's can also additionally interrelate with that particular customer by sending them a catalogue. The computer can track customer's buying trends so the business owner can market accordingly.
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Furthermore, the audience on the Internet is international for both Sainsbury's and Tesco. Consumers all over the country are shopping online. A web site can be multi-lingual, allowing visitors to choose their language upon entering a site.

When it is after closing hours in a Tesco or Sainsbury's store customers for e.g., customers will have the alternative to make a purchase on a national scale within the U.K. Business on-line is open seven days a week, 24 hours a day - customers can shop at their convenience. The cash register is open all day and night, ...

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