Introduction to J Sainsbury plc

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Introduction to J Sainsbury plc

J Sainsbury plc is a leading UK and US food retailer with interests in financial services and property. The group comprises Sainsbury's Supermarkets and Sainsbury's Bank in the UK and Shaw's Supermarkets in the US.

Sainsbury's Supermarkets was established in 1869 by John James and Mary Ann Sainsbury and is Britain's longest-standing major food retailing chain.

Sainsbury's Supermarkets employs over 145,000 people, including Savacentre. Of these, 60% are part-time and 40% full-time. 62% of employees are women.

A large Sainsbury's Supermarket offers over 23,000 products, 40% of these are Sainsbury's own brand. In addition to a wide range of quality food and grocery products, many stores offer bread baked on the premises, delicatessen, meat and fish counters, pharmacies, coffee shops, restaurants and petrol stations.

Sainsbury's Supermarkets serves over 11 million customers a week and as at June 2002 had 463 stores throughout the UK. Nearly 60% of our stores are in town-centre or edge-of-centre locations, many of these built on previously derelict sites.

TASK 1

.1.1

A classification of the business according to its ownership, and an explanation of the benefits and constraints of this type of ownership. (E1)

Sainsbury's Ownership

Sainsbury's belongs in the private sector because its main aim is to make a profit. Without profit, Sainsbury's cannot keep its shareholders happy and improve its products and services. Sainsbury's will also find it difficult to plough back money into research and development and to invest in new technologies. It will not have money available to give to charities and it will not be able to increase the rewards to its employees. Of course, if Sainsbury's make a loss, it is possible to borrow, but lenders will look very carefully at Sainsbury's profit potential before parting with their funds. It is a basic fact of Sainsbury's life, therefore, that profit is important.

Comparatively, there are several different types of business ownership. Depending on the type of ownership, the owners have different responsibilities and involvement in Sainsbury's. One aspect of this is who bears Sainsbury's risk and whether the owners have limited or unlimited liability. All businesses, such as Sainsbury's can be classified in different ways.

Sainsbury's is different from a sole trader or a partnership. This is because if sole traders become bankrupt, the owner may have limited funds and will find it difficult to borrow more money. In addition, the owners are personally responsible for paying its own business debts, though the responsibility is shared in partnerships. It is different from co-operatives because members are working for themselves and are motivated to succeed. They often join together to make decisions, to work and to share profits. It also differs with charities because they have to rely on voluntary donations and the income is used to fulfil charitable aims, but do not have liability. Finally, it differs from franchises because this grants permission to sell a product and trade under a certain name in a particular area.

Sainsbury's Benefits and Constraints of being a plc

Sainsbury's is categorised as a public limited company. This is because it offers their shares to the general public, often through the Stock Exchange. It is the shares of Sainsbury's that are displayed inside the daily newspapers or press.

One of the main advantages of Sainsbury's forming a public limited company is when shareholders have limited liability. For example, if Sainsbury's goes bankrupt because it is unable to meet its debts, the shareholders or owners will not be liable or responsible by law, to lose their possessions to pay the money that is owed. The maximum amount they could lose is the amount they have put into their shares.

Another benefit for Sainsbury's being a public limited company is easy access to different sources of finance. This is because when Sainsbury's becomes a business, it is able to draw on a much wider range of sources of finance. Not only does it have access to more sources of finance, but it will also find it easier to raise finance because it is seen as being more financially secured. Sainsbury's are able to raise capital through shares, bank loans, overdrafts, mortgages and many other sources. Generally speaking, Sainsbury's will be able to borrow money more cheaply, i.e. at lower interest rates than smaller companies.

Sainsbury's can also keep the use of profits because shareholders may receive a benefit from owning shares in two ways. Firstly, they may be paid a dividend upon the shareholding, which is expressed as a return on the face value of the shares. Secondly, they may receive income by selling their shareholding at a value above that which they originally paid for it.

The main danger for Sainsbury's being a public limited company is control. This is the case because now the shares can be traded on the Stock Exchange and individuals or groups of individuals can take over other companies by buying up shares. In the real business world, Sainsbury's can be bought and sold too frequently because existing shareholders are often tempted to sell by an attractive offer to buy shares at an inflated price by another business or interest group, such as Tesco, Asda or Safeway.

.2.1

A description and explanation of the objectives of the business. (E2)

Sainsbury's Objectives

Sainsbury's exist to provide goods and services. Whether Sainsbury's aim to make a profit or not, have to make products and provide services that satisfy customers' wants or needs. Sainsbury's sets itself objectives that govern the way it operates. The different objectives for private sector businesses, such as Sainsbury's include:

> making a profit or surplus

> increasing sales or market share.

Sainsbury's sets out in their objectives the following:

Objective 1: "Meet its customers' needs effectively".

(Source: www.j-sainsbury.co.uk)

The first objective suggests that Sainsbury's have many fully qualified and trained staff and abilities to satisfy customer needs effectively. Sainsbury's recognises this because they understand the need of different customer wants and enable to offer responses to them through products, facilities and services. Sainsbury's need to be able to provide excellent customer service because if they do not and a customer is disappointed with the service, they would not want to come back and shop at the supermarket again.

Objective 2: "To provide shareholders with good, sustainable financial returns by focusing on customers' needs".

(Source: www.j-sainsbury.co.uk)

The second objective demonstrates that Sainsbury's can facilitate to open and timely communications to all its investors and shareholders. This is achieved by producing corporate profile and dividend details at the end of each financial year. Dividends are sustainable payments paid every two years and are made to Sainsbury's shareholders out of its profits. Dividends are important for Sainsbury's shareholders, as they provide them with a regular return in the form of profits upon their investment. If Sainsbury's are losing many of its customers, then their shares will decrease and the shareholders will be dissatisfied with the outcome.

Objective 3: "It aims to ensure all colleagues have opportunities to develop their abilities and are well rewarded for their contribution to the success of the business".

(Source: www.j-sainsbury.co.uk)

The third objective indicates that Sainsbury's requirement is to develop staff skills and workforce. Sainsbury's train their own staff, so they can help them to the best of their ability. Many intelligent employees are required to have a range of skills and qualities that enables him or her independently to make decisions on behalf of Sainsbury's. The sorts of decisions the intelligent employee makes require good communication skills, good interpersonal skills, the ability to work with numbers and information technology and work effectively in problem-solving situations.

Staff training is essential if people are to continue to be efficient members of Sainsbury's. It will help employees achieve maximum efficiency in their current jobs, help Sainsbury's meet its targets for developing and keeping people with the right skills to meet future needs and balance the needs of the individual with those of Sainsbury's.

Objective 4: "Its policy is to work with all of its suppliers fairly, recognising the mutual benefit of satisfying customers' needs".

(Source: www.j-sainsbury.co.uk)

The fourth objective reveals that Sainsbury's develop and maintain mutually beneficial relationships with their suppliers. It is also providing a reliable and effective service to customers and those suppliers who deliver the correct amount of products on time. Sainsbury's recognises the mutual benefits of marketing strategies and word of mouth because it allows a positive knock-on effect on suppliers and customers being treated fairly and equally.

Objective 5: "It also aims to fulfil its responsibilities to the communities and environments in which it operates".

(Source: www.j-sainsbury.co.uk)

The fifth objective explains that Sainsbury's is recognised in local communities as a good neighbour, good employer and one that meets local food retailing needs and support local causes. It is also reducing the impact of their organisation on the environment through a programme of continuous improvement.

Objective 6: "To be the consumer's first choice for food shopping by providing high-quality products, value for money, excellent service and attention to detail".

(Source: www.j-sainsbury.co.uk)

The sixth objective is one of John Sainsbury's original objectives created in 1869 that still exist today. This is the case because customers are the number one priority for buying goods and services. Sainsbury's always offers all of their customers with a wide range of quality food and services.

In addition to Sainsbury's previously stated objectives mentioned above, Sainsbury's also have a mission statement, a written document setting out and defining Sainsbury's overall purpose. Sainsbury's mission statement states the following:

"Our mission is to be the consumer's first choice for food, delivering products of outstanding quality and great service at a competitive cost through working faster, simpler and together".

(Source: www.j-sainsbury.co.uk)

Sainsbury's mission statement can also be summarised in the following flow diagram:

Sainsbury's Mission Statement

(Source: www.j-sainsbury.co.uk)

Sainsbury's mission statement states the main objective because they need to keep all of their customers happy. Sainsbury's will do this by producing and offering consumers with high quality products and high quality services at good value for money. This is extremely important to Sainsbury's because many people shop for suitable value for money, so they will need to sell cheaper products to keep their customers satisfied. They will always want to maximise sales, provide a highly competitive service or even improving the quality of existing products and services. Sainsbury's sets out its standards and the qualities that distinguish it from other competitors, such as Tesco, Asda and Safeway.

SMART Objectives related to Sainsbury's

Each of Sainsbury's objectives can be structured out and have the following features:

> Specific - a specific objective would be for example; 'It aims to fulfil its responsibilities to the communities in which it operates'. This means that Sainsbury's are being responsible for its own community, which is specific for the responsibilities of the company as a whole.

> Measurable - according to Sainsbury's objectives, they do not have a measurable one, in which is achieved as quantifiable. This may be the case because they have made no decisions about what are the most important things to measure at present.

> Agreed/Attainable - an agreed or attainable objective may involve Sainsbury's 'to provide shareholders with good, sustainable financial returns'. This can be achieved by using Sainsbury's review progress, regarding financial information. 'Sainsbury's are meeting its customers' needs effectively' is also achievable. In order for Sainsbury's to achieve this, they will need to monitor their performance regularly.

> Realistic/Reliable - according to Sainsbury's objectives, they do not have one, which can be realistic or reliable. The reason for this is that if there were unrealistic people, Sainsbury's would probably not even try to achieve them and it would be demotivating. Also, individuals may disagree over what is realistic and achievable.

> Time Specific - according to Sainsbury's objectives, they do not have a time specific one, in which can be achieved. This could be the case because their objectives can become out of date or irrelevant if Sainsbury's market share changes rapidly.

.3.1

A description of the functional areas that exist in the business, and an explanation of how they help the business to meet its objectives. (E3)

Sainsbury's Organisational Functions

Sainsbury's produce their products and services and have to carry out a range of functions. These include the following:

> Finance and Accounts - the finance and accounts department at Sainsbury's is run by a chief accountant and is responsible for supervising the accounts and finance department. The accounts section must keep a detailed record of all money paid in and out and present the final balance sheet, sources and use of funds, profit and loss account and other financial records at regular intervals. Modern accounts are stored on computer files and accounting procedures are greatly simplified by the use of specialist software. The finance and accounts department information can be summarised in the following diagram shown below:

Keeping a record of all financial events Providing managers with

that have taken figures to help them make

place in Sainsbury's as and when decisions, for example,

they happen and to provide relating to costing and

financial summaries of what has pricing

happened, for example, a balance

sheet

(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)

How Finance and Accounts help to achieve Sainsbury's Objectives

The Sainsbury's finance and accounts department have achieved its objective of providing shareholders with good, sustainable financial returns by focusing on customer needs:

"We have achieved cost savings of £160 million in the year delivering a total of £250 million since we began the programme. These savings will be reinvested in enhancing the customer offer, building sales and in improving our operating margins".

(Source: www.j-sainsbury.co.uk)

This suggests that Sainsbury's have gained enormous amounts of profit and is now reinvesting customer offers. This enables Sainsbury's to increase sales in order to improve their products and services by requiring to succeed financial data information.

Sainsbury's also organise an annual general meeting (AGM) where shareholders can attend and contribute their ideas and suggestions to Sainsbury's. They can even listen carefully about how Sainsbury's are performing. This reveals that Sainsbury's have achieved their objective of facilitating open and timely communications to their investors.

> Production - the production department at Sainsbury's has to produce quantities of the product once the management has approved it. The functions of a product department include the production of goods, quality control, maintenance of equipment, stock control, job evaluation, production planning and control, design and development, raw materials and component purchasing, control of stocks and despatch or distribution.

How Production help to achieve Sainsbury's Objectives

According to Sainsbury's production department, they have helped to achieve its objective of aiming to fulfil its responsibilities to the communities and environments in which it operates:

"J Sainsbury plc seeks to control its direct impact by responsible management of energy consumption, waste management and seeking to reduce the environmental impacts of its own-brand products".

(Source: www.j-sainsbury.co.uk)

This statement clearly demonstrates that Sainsbury's production department is seeking to achieve its products by being environmentally friendly. It also includes product packaging being degradable and Sainsbury's own-brand products being recyclable.

> Human Resources - the human resource management or personnel function of Sainsbury's covers a variety of activities. The main purpose of the human resources function is recruiting, selecting, training and developing members of staff. This means finding the right people, training and developing them, so they can achieve their maximum potential and high levels of morale and motivation.

How Human Resources help to achieve Sainsbury's Objectives

Sainsbury's human resources department have aided to achieve its objective of aiming to ensure that all colleagues have opportunities to develop their abilities and are well rewarded for their contribution to the success of the business:

"We want everyone who works for us to have the opportunity to develop their careers".

(Source: www.j-sainsbury.co.uk)

By being a good employer, it enables training and development to be efficient for the majority of colleagues working for Sainsbury's. Sainsbury's offer their colleagues and colleagues families with discount cards for Sainsbury's products. They also want to train their staff effectively and best of their abilities.

> Marketing and Sales - the marketing function at Sainsbury's is responsible for identifying, anticipating and satisfying customer requirements profitably. A typical marketing and sales department at Sainsbury's is responsible for market research, customer care and service, by dealing with customer complaints and problems. It also deals with sales promotion and advertising; in addition, it prepares sales budgets and forecasts. The functions of the marketing department can be summarised in the following diagram shown below:

= Profitability

(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)

How Marketing and Sales help to achieve Sainsbury's Objectives

The marketing and sales function at Sainsbury's have aimed to achieve its mission statement, by being the consumer's first choice for food on delivering high-quality products and providing a great service at a competitive cost through working faster, simpler and together:

"We rigorously monitor 10,000 lines weekly to ensure that we remain competitive. We have reinvested some of our cost savings in price adjustments. Alongside this, we continue to run a highly, attractive, sustainable promotional programme".

"We continue to focus on quality service and price".

(Source: www.j-sainsbury.co.uk)

This demonstrates that Sainsbury's marketing and sales function uses a wide range of market research methods to keep a close eye and particular attention on other leading competitors, such as Tesco, Asda and Safeway. This is to ensure that they are meeting their objective of being the first choice for consumers' food. This clearly explains that Sainsbury's have achieved their objective of providing high quality products at good value for money and providing excellent customer service. It enables Sainsbury's that they are still providing this to ensure higher standards.

> Administration - the main purpose of administration is to make sure that Sainsbury's operates as effectively as possible, by performing a wide range of support activities promptly and efficiently. The administrative system also creates an ordered routine, which enables Sainsbury's to function smoothly. It brings together the various parts of Sainsbury's, so that they all work towards the same goals. Administrative tasks include dealing with enquiries, communicating messages and producing documents for the workforce. The administrative system can be summarised in the following diagram below:

Sales Production Transport

Administrative System

Personnel Finance Catering/Security

Maintenance

(Source: Lewis, R. & Trevitt, R. Business for Vocational A Level 3rd Edition. Stanley Thornes Publishers Ltd. 2000)

How Administration help to achieve Sainsbury's Objectives

Sainsbury's administration department has a considerable impact upon all the other functional areas, given that it provides the support services, which enable these to operate effectively. Administration acts as a supporting role to all other departments at Sainsbury's.

> Research and Development - the purpose of research and development at Sainsbury's is to enable Sainsbury's to compete successfully and achieve a permanently sustainable competitive edge over its competitors. Becoming more efficient and profitable by giving customers added value does this. Research and development and the flow of new products and processes can be summarised in the following diagram shown on the following page:

Into

New Products New Processes

(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)

How Research and Development help to achieve Sainsbury's Objectives

Sainsbury's research and development department meets customers' needs through working closely with marketing and sales and customer service departments. In order for Sainsbury's to remain competitive, products have to evolve and improve. This doesn't happen on its own; money needs to be spent on research and development to ensure it.

> Customer Service - the purpose of the customer service function at Sainsbury's is when customers buy goods and services; they do so to satisfy a need. They also expect certain things, such as expecting goods to be available when they want them, expecting items sold to be safe and reliable and have the right to get good value for money. This is performed in order to keep customers happy by fulfilling their expectations, by making them feel important and by providing a range of services, which fulfil their ongoing needs.

How Customer Service help to achieve Sainsbury's Objectives

The customer service department at Sainsbury's have achieved its objective of meeting its customers' needs effectively:

"Through our customer data warehouse, we analyse data from our reward card to help us understand our customer needs and shopping missions better. Our programme of reinvigorating stores has evolved, as we develop formats and trial them".

(Source: www.j-sainsbury.co.uk)

This clearly states that Sainsbury's customer service department have helped in meeting its objective of satisfying customer needs and satisfaction. Sainsbury's To You customer data warehouse helps identify meet customers' needs and expectations.

Sainsbury's also provide customers with a nectar reward card, which enables customers to gain a certain amount of points and this leads to them benefiting from many discounts on the products that they buy. This is an excellent customer incentive because it allows satisfied customers wanting to come back again and enables Sainsbury's to keep customer records.

They have also assisted to attain its objective of aiming to fulfil its responsibilities to the communities and environments in which it operates:

"Sainsbury's has a long-standing involvement in education and is strongly committed to partnerships with education bodies".

(Source: www.j-sainsbury.co.uk)

This statement clearly suggests that Sainsbury's Taste of Success campaign is responsible for the community. The customer service department liase with schools and offers teacher training to help achieve the objective of being responsible to the community.

The Sainsbury's customer service department have also helped to meet its objective of being the consumer's first choice for food shopping by providing high-quality products, value for money, excellent service and attention to detail:

"Delivering great service is a key objective of our business transformation programme and during the year, we made great strides in retraining our colleagues to serve our customers better. Our mystery shopper measure is now embedded in the company; this and our customer satisfaction index demonstrate the progress we are making".

(Source: www.j-sainsbury.co.uk)

This clearly explains that retraining colleagues and measuring mystery shoppers perform customer service. It also achieves its objective by training colleagues and maintaining customer satisfaction.

Sainsbury's also provide customers with a nectar reward card, which enables customers to gain a certain amount of points and this leads to them benefiting from many discounts on the products that they buy. This is an excellent customer incentive because it allows satisfied customers wanting to come back again and enables Sainsbury's to keep customer records. Therefore, Sainsbury's can send regular customers with monthly newsletters, to find out customers wants and needs. The nectar reward card has been the UK's largest loyalty scheme and with over 11 million card users in every household, this proves that Sainsbury's have considerably achieved their objective of meeting customer needs effectively.

.4.1

Judgements about how successfully the business is meeting its aims and objectives. (C1)

Judgement 1

Sainsbury's are meeting the needs of customers effectively by satisfying customers' needs on providing different types of products:

"To meet the needs of many of its customers and those looking for a more holistic approach to healthy living, Sainsbury's Supermarkets introduced, into all of its 450 stores a range of food and non-food products called 'well-being, for body and mind'.
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"All stores will sell the core range of foods for special diets, such as gluten-free, wheat-free and dairy products. More than 50 of Sainsbury's largest stores will offer a whole aisle, approximately 100ft of 'well-being' products".

(Source: www.j-sainsbury.co.uk)

This clearly suggests that Sainsbury's have listened carefully to customers needs and researched customers' wants. The ranges of more than 800 products include everything from raw ingredients, flour and cake mixes to staples, breakfast cereals, hemp and corn pastas, part-baked gluten and wheat-free breads and dairy-free spreads, yoghurts and cheeses.

Judgement 2

According to Sainsbury's ...

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