Introduction to J Sainsbury plc
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'.
"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 ...
This is a preview of the whole essay
"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 corporate file document, the dividend details from the interim results have had a constant increase in share payments between 1994/1995 and 1998/1999. On the other hand, between the financial years 1999/2000 and 2001/2002, share payments have froze to the same figures of 4.02p per share.
The final figures of share payments have also experienced an increase in share payments between the financial years 1994/1995 and 1998/1999. However, between the years 1999/2000 and 2001/2002, share payments have also froze to the same figures of 10.30p per share.
These dividends per share figures are included in the following table as shown below:
Financial Year
94/95
95/96
96/97
97/98
98/99
99/00
00/01
01/02
02/03
Interim
3.20p
3.40p
3.50p
3.75p
4.02p
4.02p
4.02p
4.02p
4.22p
Final
8.50p
8.70p
8.80p
0.15p
0.30p
0.30p
0.30p
0.82p
1.36p
Total Net
1.70p
2.10p
2.30p
3.90p
4.32p
4.32p
4.32p
4.84p
5.58p
(Source: www.j-sainsbury.co.uk)
These figures are shown in this way because the profit earned by Sainsbury's stayed the same throughout the five years. This may have resulted in financial difficulties, concerning overall performance of Sainsbury's finances. By achieving its objective of providing sustainable financial returns for its shareholders, Sainsbury's have ensured that dividends are stable.
Judgement 3
Regarding Sainsbury's financial information, they have achieved its objective of reducing down prices and have achieved good value for money:
"Sir Peter Davis, group chief executive, announced on 25th September 2001, another £100 million of price cuts bringing the total invested since January 2001 to £250 million with cuts on over 5,000 lines".
"We continue to focus on quality service and price".
(Source: www.j-sainsbury.co.uk)
This is a significant achievement for Sainsbury's Group because they are now able to provide customers with certain products at reduced prices. This will enable Sainsbury's to increase their sales and improve on financial performance and clearly demonstrates that Sainsbury's have successfully achieved their objective of good value for money, by price reductions.
In addition, Sainsbury's to You section of the group, which operates an Internet home delivery service has not break-even yet from 2003:
"Sales up 71 per cent year on year significantly out-performing online grocery market".
(Source: www.j-sainsbury.co.uk
Date: 21st May 2003)
This is the case because Sainsbury's profits will have increased over the next year. This helps Sainsbury's in achieving the goal of being the number one choice for food online.
However, Sainsbury's are obviously not the consumers' first choice for food, according to Chief Executive Sir Peter Davis, as mentioned in the following quotation:
"By contrast, Tesco reported first-half sales growth of 6.3% and Morrisons saw first-half growth of 9%. Sainsbury's performance was the worst since Sir Peter Davis arrived to arrive the company in January 2000, after it lost its position as market leader in the mid-1900s".
(Source: www.theguardian.co.uk
Date: 10th October 2003)
Sainsbury's being the consumer's number one choice for food of providing high-quality products and great service at good value for money has not been achieved. This may be because Sainsbury's are currently the third most popular supermarket in the UK, due to fierce competition between its competitors Asda, Tesco and Safeway.
Judgement 4
As a private sector business, Sainsbury's main aim is to make a profit. This has been achieved in the following table shown below:
Financial Results (£m)
999
2000
2001
2002
2003
Group Turnover
6,378
7,414
8,441
8,206
8,495
Group Underlying Profit before Tax
756
580
549
627
695
(Source: www.j-sainsbury.co.uk)
Sainsbury's group turnover in 2003 has increased from 1999 to 2001. However, between the years 2001 and 2002, Sainsbury's group turnover was decreasing quite a lot.
The group's profit before tax decreased at first, but then it picked up once again between the years 2002 and 2003.
Judgement 5
The information about Sainsbury's Group preliminary results include the following financial figures:
"Underlying profit before tax of £695 million up to 10.8% (2002: £627 million)".
(Source: www.j-sainsbury.co.uk)
This statement clearly indicates that Sainsbury's Group are making a large amount of profit. Their overall main objective is to make a profit.
However, the following quotation is extremely worrying for Sainsbury's financial performance:
"Underlying sales at Sainsbury's rose just 0.1 per cent in the six months to October 11, compared with a rise of 6.3 per cent for Tesco, the UK's largest supermarket, over a similar period and 9 per cent for Morrison, the northern chain".
(Source: www.timesonline.co.uk
Date: 20th November 2003)
Judgement 6
Sainsbury's shareholders are maintaining high amounts of profits. They do this by providing good, sustainable financial returns:
"Proposed final dividend per share of 11.36 pence up 5%".
"Underlying earnings per share of 24.2 pence up 12.6% (2002: 21.5 pence)".
"Basic earnings per share of 23.7 pence up 24.1% (2002: 19.1 pence)".
(Source: www.j-sainsbury.co.uk)
These financial statements explain that Sainsbury's Group highlights have been performing successfully, in terms of profits, dividends and shares. This is important for Sainsbury's Group because they have constantly increased their shares by a high percentage, for the 52 weeks ending 29th March 2003.
Judgement 7
Sainsbury's Fair-trade policy demonstrates social conscience, as the marketing and sales department have helped achieve the objective of working with the Fair-trade Foundation:
"Sainsbury's Supermarkets, the UK's biggest retailer of Fair-trade products, announced that it is working with the Fair-trade Foundation, which guarantees a better deal for third world producers, to develop a range of own label Fair-trade products. Fair-trade ground coffee went on sale in 383 Sainsbury's stores across the UK".
(Source: www.j-sainsbury.co.uk)
This policy is made to uphold fair trade. Fair trade is when suppliers receive a suitable price for the products he or she is selling. Sainsbury's has more than 23,000 products in their largest stores and they buy from approximately 2,000 suppliers worldwide.
Judgement 8
Sainsbury's Supermarkets joined a groundbreaking partnership, between leading businesses in London, environmental groups and government to launch think about London, the Ford Motor Company's innovative sustainable mobility initiative:
"The scheme will see Ford's quiet and clean Think City electric cars on London's streets a year before they become generally available to the public".
(Source: www.j-sainsbury.co.uk)
Sainsbury's is being responsible for looking after the community and its environment. They are successfully achieving its objective from partnerships for being environmentally friendly.
Judgement 9
Sainsbury's Supermarkets have announced two healthy eating initiatives called Free Fruit to Schools and Fruitiest Tours, aimed at young children between the ages of 7 to 11:
"From September 2001, 40 schools within Birmingham and London received a free supply of quality fruit for one week each term to be used as part of lessons, encourage fruit in tuck shops or to promote a healthy eating theme at breakfast clubs".
(Source: www.j-sainsbury.co.uk)
Sainsbury's is being socially responsible to the community by providing young children with free fruit for their schools. It is successfully meeting the needs of the community and the environment being responsible for the community and the environment.
Judgement 10
In June 2001, Sainsbury's Supermarkets was awarded the Impact Endorsement Mark by Business in Community, as national recognition for its involvement in Comic Relief's 2001 Red Nose Day campaign. This programme is among only 25 community programmes to receive the Impact Endorsement Mark, as part of the prestigious Business in the Community Awards for Excellence:
"The Mark demonstrated the measurable impact that a company has had on society through its community programmes or business practices. It is a standard of excellence set by Business in the Community, recommended by the British Quality Foundation, endorsed by the Department of Trade and Industry and based on the European Business Excellence Model".
(Source: www.j-sainsbury.co.uk)
Once again, Sainsbury's is being environmentally friendly and to those people who are living in Africa. Sainsbury's have successfully achieved its objective of helping out the community and environment.
According to Sainsbury's website, I have not found out any evidence whatsoever; regarding its objective of enabling colleagues have succession to achieving rewards and developing their abilities. This could be the case because there might not be many intelligent employees, who have the required skills and qualities that enable them to make independent decisions on behalf of Sainsbury's. However, Sainsbury's are achieving the objective of being a good employer, according to the following quotation:
"10,000 jobs created to improve customer service".
(Source: www.j-sainsbury.co.uk
Date: 21st May 2003)
TASK 2
2.1.1
A description of the management styles and cultures present within the business. (E4)
Sainsbury's Organisational Structure
Businesses are structured in different ways according to the way they operate and according to their culture. The structure of Sainsbury's will affect the way it works and performs.
Sainsbury's having an organisation structure is very important. Employees know where a particular job is done and by whom. New staff can quickly learn whom they should talk to about a particular matter. They can identify the senior people in Sainsbury's and they can see who else works at the same level as themselves. A clear and effective structure will enable Sainsbury's to meet its objectives. A poor structure will lead to failure to meet objectives.
There is no 'right' or 'wrong' organisation structure. A structure works if it helps people to do their work efficiently, communicate with each other easily and assists Sainsbury's to achieve its aims and objectives.
Sainsbury's is a hierarchical organisation with clearly delineated levels of management and authority. It is a pyramid structure with a narrow top and a wide bottom because many staff with low-grade jobs and low status are needed to work on the shop floor, such as checkout operators. This is not an unusual structure for a retail organisation.
Sainsbury's Hierarchical Structure
Sainsbury's hierarchical structure will form the shape of a pyramid clearly shown below:
Directors LINE OF COMMAND Heads of Departments (The Scalar Chain)
Management Middle Management
(Branch Managers)
Supervisors/Co-Ordinators
Shop Floor
Operatives/Clerical Staff
(Source: Lewis, R. & Trevitt, R. Business for Vocational A Level 3rd Edition. Stanley Thornes Publishers Ltd. 2000)
The diagram has many advantages. It gives a quick and simple way of gaining a mental map of Sainsbury's organisational structure. It is based on the main managerial functions and is controlled from the top layer of senior management. It suggests how all the parts and people fit together and define each person's place and role.
Sainsbury's Management Style
Sainsbury's management style means the way in which managers deal with their employees. Sainsbury's management style is the typical pattern of behaviour he or she shows in carrying out a management role over a period of time. The most common distinctions between management styles are shown in the following diagram below:
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
The management style of Sainsbury's is autocratic and formal. This style allows the managers working at Sainsbury's to take all of the decisions with very little or no consultation and they expect their orders to be carried out without any disagreements or questions. Managers at Sainsbury's are used to giving instructions, by telling people what to do rather than asking them for their opinions. These managers are the only people contributing to the decision-making process. They have been trained with this approach and may find it difficult or impossible to change their ways. They are used to holding on to power, but do not understand how the process of empowerment might work.
Autocratic managers are authoritarian; they will tell their employees what to do and do not listen much to what workers themselves have to say. Autocratic managers know what they want doing and how they want it done. They tend to use one-way, top-down communication. They give orders to workers and do not want much feedback.
Some of Sainsbury's managers are strict with their workers. They always expect deadlines to be met and targets to be hit. Others are more relaxed and understanding. If there is a goo reason why a particular task has not been completed by the deadline, they will be willing to accept this and give the employee more time.
Sainsbury's being a hierarchical structure will mostly have an autocratic and formal management, which lends itself to a formal culture with an emphasis on job roles and centralised decision-making. Sainsbury's centralisation means that they are keeping major responsibilities within sections or units of the central headquarters or at the heart of Sainsbury's.
An alternative to this could be a democratic management style. This involves empowerment and individuals and teams are given the responsibility to make decisions, usually within a given framework. The team is then held accountable or responsible for the decisions that it chooses to make. A manager with this style will feel comfortable allowing others to make decisions. The democratic manager will need to have a good overall understanding of the decisions that are being made and will want regular feedback on results. However, they will be confident that empowered individuals and teams will use the responsibility given to them wisely.
Democratic managers like to involve their workers in decisions. They tend to listen to employees' ideas and ensure people contribute to the discussion. Communication by democratic managers tends to be two-way. Managers put forward an idea and employees give their opinion. A democratic manager would regularly delegate decision-making power to junior staff.
Sainsbury's Culture
Cultures of organisations are the patterns of behaviour and value systems that characterise Sainsbury's. Sainsbury's organisation's culture is very much concerned with the way in which people in Sainsbury's interact with each other and the typical patterns of interactions that have been developed over time.
The culture of Sainsbury's describes the typical approach within the organisation. Culture refers to the personality of Sainsbury's, the shared beliefs and the written and unwritten policies and procedures that determine the ways in which Sainsbury's and its people behave and solve Sainsbury's problems. You can quickly get a feel for the culture of Sainsbury's just by looking around the organisation and talking to the people who work for it.
The culture of Sainsbury's is a role culture or bureaucracy. The role culture or bureaucracy of Sainsbury's is typical of bureaucracies with a formal structure, which is hierarchical. It has many layers of hierarchy and is based on a top-down approach, with an emphasis on communication down the line. Sainsbury's organisation chart defines the role carried out of every individual and the job or role tends to be more important than the person. Many people can do most jobs and the limits of every job are strictly controlled. It is based on routine procedures, job roles and decisions are centralised, which is generally formal. It also emphasises on clear job descriptions and tight monitoring.
Sainsbury's can be divided into various functions, including the accounts, marketing and production department. These would then have a hierarchical ordering of offices, such as production director, production managers, supervisors, technicians and operatives. Individual departments or functions can be very strong and independent, guarding their own power.
Roles will be precisely defined, using clear job descriptions and definitions of authority. There are sets ways of communicating, such as standard memos with defined circulation lists and 'usual channels', for example, subordinate to superior and no one else. There may also be accepted ways of addressing others, such as calling the boss 'Mr' or 'Mrs', instead of using other names. Decision-making will be based largely on example. There are likely to be many layers of hierarchy in a bureaucratic structure, in which there is a narrow span of control.
This culture works by logic and rationality. Power is hierarchical and derived from the employee's position in Sainsbury's. Sainsbury's strength lies in its pillars or functions. Within the functions, what people do at different levels is determined by defined communication procedures. Position is the main source of power and rules and procedures are the main source of influence.
An alternative to this would be a person culture. This is where individuals are central within the organisation, which is most important. The organisation exists only to serve the interests of those within it, for example, partnerships. Not surprisingly, person cultures are more likely to be found in co-operatives and not-for-profit organisations, such as charity and voluntary organisations, rather than in profit-motivated enterprises.
In a person culture, hierarchies are impossible except by mutual consent. An individual may leave the group, but the organisation does not have the power to evict the individual. In this sort of culture, the individual has almost complete freedom to adopt any discretion and to do as he or she pleases.
2.2.1
An explanation of how the organisational structure, culture and management style of the business affects its performance and operation and helps to meet its objectives. (C2)
How Sainsbury's Organisational Structure Affects its Performance and Operation and Helps to Meet its Objectives
The type of structure Sainsbury's has affects the performance of the organisation. The structure of Sainsbury's is likely to affect the objectives of Sainsbury's, which will help or hinder success of Sainsbury's. The hierarchy is the traditional way of developing Sainsbury's, which is quite common in the retail sector. The structure of Sainsbury's is a hierarchical structure. This helps Sainsbury's in many ways.
When working in Sainsbury's, employees frequently hear reference to 'reporting to the line manager', meaning the person to whom employees are directly responsible to. Line organisation is the typical structure of a hierarchy. There are direct communication links between Sainsbury's superiors and subordinates. Each member of Sainsbury's has a clear understanding of the chain of command and to whom he or she is responsible. This type of structure can be very effective because of its clarity. There are set rules and procedures that can be referred to.
Sainsbury's work towards different objectives. Sainsbury's are very profit centred, while others have a much clearer concern for the people who work in Sainsbury's and the customers or clients they serve.
"All of Sainsbury's colleagues have opportunities to develop their abilities".
(Source: www.j-sainsbury.co.uk)
Sainsbury's organisation structure allows staff to exactly know who does what job and also allows them to view their own promotional prospects, as there are many levels to move up. This helps Sainsbury's achieve their objective of "helping colleagues to achieve their full ability", as it provides clear and structured promotion routes. It can be achieved through having a structured and formal hierarchical organisation structure. This is because Sainsbury's colleagues can visualise their promotion routes and increases motivation. There is also a vast scope to moving 'up the ladder', compared to a flat structure where promotional opportunities are extremely limited, as there are fewer levels.
However, the fact that communications can become distorted between the levels of hierarchy may mean that messages are passed from one level to another, so staff at the bottom receives a slightly different message than the one the manager meant them to receive. Also, staff at the bottom may feel the manager at the top has no idea what they think or do and many people may have to be consulted before an important decision is made. This means that Sainsbury's may be slow to react to changes and challenges. This will result in jobs not being completed on time.
Span of control will refer to the number of employees who are directly supervised by one person. As Sainsbury's is a large organisation, the more levels of supervision will be necessary, so that one person does not have too wide span of control. A narrow span of control means tight supervision, less discretion and therefore less chance of mistakes.
The structure of Sainsbury's allows each function to be distinct from the others, so that they can concentrate on fulfilling their objectives. For example, ensuring shareholders are happy is achieved in the following objective:
"To provide shareholders with good, sustainable financial returns".
(Source: www.j-sainsbury.co.uk)
Attaining the objective of "achieving financial returns" keeps shareholders pleased. The finance and accounts department can do this because they are allowed to concentrate on the job in hand. Each of Sainsbury's functional areas is allowed to do their job well and therefore help Sainsbury's to achieve the objective of gaining a higher market share.
Management is an activity that can be divided neatly into functions, such as production, marketing, sales, accounting and finance, human resources, research and development and customer service. The job of Sainsbury's managing director and other directors, sitting at the top of the 'pillars', is to ensure that all these functions are co-ordinated. So, if each function, or department, plays it part properly, Sainsbury's will succeed.
How Sainsbury's Culture Affects its Performance and Operation and Helps to Meet its Objectives
The role culture mainly focuses on the job role rather than the person, so everyone is clear about what each person does, according to their job description. Each job is clearly specific, which allows staff to specialise and become experts in their particular field, although there is a danger that they may become bored and want a bigger challenge.
Rules and regulations help to achieve Sainsbury's objectives and affect its performance. Staff knowing procedures attain this and people tending to follow rules enables Sainsbury's to become an organised workforce and emphasising on the job helps its performance.
Sainsbury's functional areas being kept distinct and having clear job roles means that each department can concentrate on doing their job to the best of their ability. Sainsbury's must ensure that departments meet regularly, in order to communicate and achieve the company's objectives. Sainsbury's managerial functions will need to be strongly co-ordinated at the top by senior management. Then, if the departments do their job, as laid down by the rules and procedures, the results should be as planned.
The culture of Sainsbury's is very important to the success of the business. Sainsbury's are aware that its cultural change affects the direct impact of customers. They have achieved this by introducing its new corporate identity called 'Making Life Taste Better':
"Recognising the need to change, Sainsbury's Supermarkets announced its new corporate identity in February 1999. 'Making Life Taste Better' recognises that food is at the heart of people's lives. 'Making Life Taste Better' is more than just a slogan or campaign, it is about a real cultural change at Sainsbury's".
(Source: www.j-sainsbury.co.uk)
As Sainsbury's belongs to a role culture, it enables them to perform sufficient training and motivating employees. This allows Sainsbury's to maintain customer satisfaction and the autocratic style means that employees are being well respected and promoting a culture to their customers. Sainsbury's being a role culture or bureaucracy will not always be particularly effective in meeting their objectives. This is the case because Sainsbury's managers have learnt how to change the culture of Sainsbury's they work for; in order to enable Sainsbury's to meet its objectives. Increasingly, Sainsbury's are operating in a more dynamic world in which change is frequent. In a world of change there is less scope for the role culture.
The important aspect of organisational culture is the emphasis on tradition. Previous practice, legends and way of doing things heavily influence Sainsbury's. Sainsbury's being a backward-facing culture is likely to be procedure led and controlled by traditional managers, who have been in Sainsbury's for a long time. Sainsbury's are also conservative in attitude, resistant to change, inward looking and a risk avoider.
"Sainsbury's aims to fulfil its responsibilities to the communities and environment in which it operates".
(Source: www.j-sainsbury.co.uk)
This objective is concerned for Sainsbury's environment of change. It has become a key ingredient of the way in which Sainsbury's think. Sainsbury's have developed a culture in which their staff and their customers are very aware of issues, such as recycling and the minimisation of waste.
The culture reflects the environment in which Sainsbury's operates. As Sainsbury's is highly competitive dynamic market, the culture tends to be flexible and adjustable.
"Sainsbury's policy is to work with all of its suppliers fairly".
(Source: www.j-sainsbury.co.uk)
This objective is directly related to Sainsbury's ethics, which plays an important part in shaping Sainsbury's organisational culture. Sainsbury's ethics are sets of moral principles that are generally accepted and recognised in a particular society. Sainsbury's ethical behaviour covers a vast range of behaviours, such as being clear and open to analysis in all of Sainsbury's dealing, treating customers and suppliers equally and fairly and not being involved in double standards practice.
Sainsbury's having a role culture may have a range of objectives, from being market leaders to maximising sales and profits. This is because the bureaucracy that exists in Sainsbury's will not always be particularly effective in meeting their objectives.
How Sainsbury's Management Style Affects its Performance and Operations and Helps to Meet its Objectives
An autocratic management style means that all business decisions are centralised. This means that Sainsbury's management makes all business decisions with no outside help whatsoever. This allows Sainsbury's to be in control of themselves and save money, as they do not need to pay for the help of 'experts' in helping with the decision-making.
The autocratic management style has enabled Sainsbury's to decide on their objectives and tell the whole company about what they should be working towards. People like to work for a strong leadership and the overall pressure of decision-making is left to the management.
On the other hand, staff may feel left out, as their views are not officially 'heard', as they would be in a democracy. If Sainsbury's management style launches initiatives and generates ideas, it is seen as being responsible for progress and achieving objectives, but are blamed if things go badly.
The management style of Sainsbury's affects Sainsbury's day-to-day operations and performance. Centralisation enables Sainsbury's to make decisions by their senior management, which means they have more control over the organisation. At the moment, this does not seem to be working as well as before because of its overall performance being changed. Sainsbury's can create sets of standard procedures, so there is a set way of doing things, which will cut costs. Only the top levels of hierarchy have the authority to take decisions from the point of view of Sainsbury's as a whole. The majority of the power, authority, responsibility and decision-making are concentrated with a few senior managers, as they will have had more experience of making decisions. They may be able to make 'better decisions'. This can help speed up the decision-making process, particularly when Sainsbury's conditions are changing quickly, as fewer people are involved and less consultation is needed.
Decisions can be taken quickly and easily, specialist facilities can be developed and used by the whole of Sainsbury's, for example personnel. Specialist staff can be used and larger scale discounts can be obtained for buying in bulk. There is also better stock control and monitoring and less duplication and wasted effort.
However, centralisation reduces the opportunities for input from the lower levels of the hierarchy or the more distant parts of Sainsbury's. This can lead to poor communication and de-motivation. It can also become awkward and inefficient in Sainsbury's when control and communication become difficult. There is little opportunity for local decision-making, fewer opportunities available to gain decision-making experience and 'all power corrupts and absolute power corrupts absolutely'. For example, if you have lots of people lower down making decisions, they may not work with this overview and do things just to help their own department, which may harm Sainsbury's. In times of uncertainty, Sainsbury's may need strong leadership, which is often best given from above. Also, branches or subsidiaries cannot make their own arrangements and may resent total 'head office' control. Sainsbury's centralised structure would look like this:
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
Sainsbury's being the third most popular supermarket chain in the UK league table means that some decisions are not working. The leader of Sainsbury's makes all of the decisions and people like to work for a strong leader, but some people may feel annoyed that they do not have a chance to have their own say. Sainsbury's market share can be clearly shown in the following table and pie charts below:
Market Share - Period: 12 weeks from July - October 12 2002 and 2003 (Market Research Group TNS) Based on Till Receipts
Name of Supermarket
2002
2003
Percentage Change
Tesco
25.9
27
+1.1
Asda (Wall-Mart)
6
6.8
+0.8
Sainsbury's
7.4
6.1
-1.3
Safeway
9.8
9.2
-0.6
Morrisons
5.9
6.3
+0.4
(Source: Yahoo! Finance)
Sainsbury's market share is closely related to its desire to achieve sales revenue or volume. The market share is the fraction part or percentage share of the market held and controlled by one business compared to the average share of other business, or alternatively the proportion of the total sales of a product held by one brand. Market share is an important indicator of how well a business is doing relative to its competitors, if the market share as a whole is growing; the business needs at least to maintain its shares of this larger market. Generally, a bigger share of the market gives more power and influence to a business. If the business abuses this power by acting against the public interest, for example, by charging higher prices, it could be investigated by the Competition Commission.
According to the table and pie charts shown above, Sainsbury's market share has decreased by 1.3% between the years 2002 and 2003. This is the case because Sainsbury's have performed badly by its falling sales. Sainsbury's have currently drafted in the chief executive from Marks and Spencer to try and help recover their market share. Without decision makers, Sainsbury's would not have objectives in the first place.
2.3.1
Suggestions of alternative approaches which might enable the business to better meet its objectives. (A1)
2.4.1
An evaluation of the effects that the alternative approaches might have on the structure and functions of the business, and how it achieves its objectives. (A2)
How Alternative Organisation Structures and other Approaches could enable Sainsbury's to Better Meet its Objectives
Because Sainsbury's is such a large organisation it's best option is probably having a hierarchical organisational structure, which it has at present. This is because of the number of employees involved; it is too large to adopt a flatter and more informal structure, which would only lead to a lack of supervision and monitoring and people would be unclear about their job roles.
It is probably not a good idea to attempt a re-structure of Sainsbury's organisation, as there are so many employees to consider. The bigger the organisation, the more hierarchical it tends to be because in a large organisation, the jobs become more specialised.
A flat structure would not work because there are not enough levels to incorporate all employees; it is only useful for small organisations and can be difficult for the organisation to grow.
A tall structure would not work because there are many layers of communication and authority can slow decision-making. There are high levels of overheads because managers and supervisors are expensive and subordinates have little freedom or responsibility. There is also a long chain of command, high status and cost level and fewer people working on the shop floor, as many customers are not benefiting from a good service. It would mean that there is even more distance between the top managers and the employees towards the bottom of the structure, which would lead to communication difficulties and possibly a 'them and us' situation between the managers and the workers becoming de-motivated.
A matrix structure would not work because people may have more than one boss, for example, the project manager and their own line manager, which can cause a conflict of loyalty. There can be conflict between line managers and project managers over the allocation of resources and if a matrix system is superimposed on an existing structure, it can increase staff costs as more managers are created. It can also be difficult to control and monitor if teams have a lot of independence.
According to the alternative organisational structures mentioned above, Sainsbury's will have to maintain a hierarchical structure because of the number of employees and the amount of levels involved. Sainsbury's having a structure of a hierarchy with a broad base means staff are focusing on working on the shop floor and providing a good service to retail customers.
In reality, Sainsbury's or the people working for Sainsbury's do not always behave in the way the organisation chart would suggest. Communication may not always be upwards, but sideways; employees in different functions find it better to talk directly, rather than 'through the proper channels', for example via the boss.
The objectives of staff in different parts of Sainsbury's may not always match the corporate objectives because of personal interests or rivalries. This will lead to sales staff believing that they will do the hard work, while Sainsbury's marketing executives only dream up imaginary campaigns. Sainsbury's production managers may follow product quality for its own sake, rather than required by the customers. Sainsbury's accountants will see budgets as an objective, which others see as constraints and position power, for example, something held by Sainsbury's chief executive's personal assistant might be used to sort out communication.
Organisational success relies upon bringing staff together in a shared vision of what needs to be done and everyone's roles in achieving it. Diagrams of organisation hierarchies may give little clue about the reality of who is contributing most to Sainsbury's success.
Sainsbury's will need to compete directly with its rival competitors, some of whom have recently launched major new initiatives in sales of non-food items: Asda having a George clothing line and Tesco recently introducing its Cherokee clothing line. Sainsbury's are currently third in the supermarket league table.
This need to respond to new initiatives will affect the hierarchical structure, as re-structuring means that new managers must be introduced to head the clothing department and more employees will need to be added. This will become costly for Sainsbury's.
Any alternatives will take a certain amount of adjusting to for Sainsbury's; particularly as the hierarchical structure remains formal, yet the new management style and culture, which are under discussion, are informal. There may be initial problems at first and Sainsbury's may need to inject more capital to counter-affect problems. For example, pay experts might need to recruit staff in the specific field to offer advice and maybe recruiting Sainsbury's re-structuring manager.
How Alternative Management Styles and other Approaches could enable Sainsbury's to Better Meet its Objectives
An alternative management style for Sainsbury's could be organic. This is because this form of organisation is far less tightly structured than its mechanistic counterpart. Decisions may be made lower down in the hierarchy and jobs are likely to be more shapeless, adapting more readily to meet the changing needs of Sainsbury's. The chain of command and channels of communication are more fluid. People will come together as project groups and task forces to solve particular problems without concerning themselves unduly about the relative status of those involved. Everyone will also have opportunities to initiate ideas and contribute to plans, for example consultation documents allow employees input to feel valued and empowered. Everyone is working together to achieve objectives, which enables everybody being responsible and valued. Employees are encouraged to generate ideas and always made to feel involved. This will enable the shop floor workers to become valued and loyal, staff turnover reduced and feel motivated. Some individuals fit more easily into one of these types of organisation.
On the other hand, if you have been used to the security and neatly ordered existence of a mechanistic type of organisation, a move to the apparent free-for-all of an organisation at the organic end of the spectrum could be an uncomfortable experience. The management needs to take control quickly and put a plan into action. Employees will feel confused and communication problems will lead to possible conflict between staff. The management may also take a back seat and become more passive and wait for ideas to come and empowers to the bottom of the organisation, where the shop floor workers are. Employees' suggestions may be impractical and time consuming and will need organising, for example, more staff incentives will lead to profit share being rewarded.
Another alternative management style could be democratic. This could help Sainsbury's meet its objectives, particularly the one mentioned in Sainsbury's mission statement:
"Sainsbury's being the consumers' first choice for food".
(Source: www.j-sainsbury.co.uk)
This is because when all employees have a say, they feel more motivated and decisions are less centralised. For example, 'experts' can be brought in to help offer a fresh new outlook and make decisions with Sainsbury's. It implies widespread delegation and the passing of power down to lower levels in the hierarchy for decision making. This can motivate and empower junior managers and supervisors and can lead to greater innovation and enthusiasm. It also reduces the need for tight control and communication. This enables senior managers having less responsibility for decision-making, so they can focus on the most important decisions. By empowering people lower down Sainsbury's, they will become more motivated and work harder for the organisation.
People lower down in the Sainsbury's hierarchy have a first-hand understanding of the business, its processes and often of customer requirements. They may have more specific knowledge and skills, enabling them to make better decisions about some issues than senior managers can. Sainsbury's have to very flexible to respond to changes and challenges. Empowerment enables Sainsbury's to make much faster responses. If people in Sainsbury's are used to making decisions, they will quickly be able to take on more responsibility.
However, it can lead to loss of control by Sainsbury's senior managers and head office. It can also lead to lack of direction or less consistency, which may damage Sainsbury's corporate identity. A possible Sainsbury's decentralised structure would look like this:
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
Sainsbury's management style can have a significant impact on the way people work. By adopting the right approach, employees are likely to be more motivated and show greater commitment. The way in which a manger deals with his or her colleagues can have a real impact on their motivation and how effectively they work. An experienced workforce, who is used to being involved in decisions, may dislike a manager, who always tries to tell them what to do. This might lead to a reduction in the quality of their work, a fall in productivity and an increase in labour turnover.
If, however, these employees were involved in decision-making, Sainsbury's could gain from better ideas and a more highly motivated workforce. This does not mean that everyone wants to be involved or indeed that it is appropriate. Sainsbury's employees may lack the necessary training or experience. Therefore, a democratic approach might simply mean taking longer for management to reach the decision it was going to make anyway.
The 'correct' or 'right' style of management will depend on factors, such as the nature of the task, the people involved and the amount of risk. It also depends on the particular circumstances and whether it is possible to help someone develop their personal qualities. As employees benefit from a higher standard of living in the UK and have higher expectations of work, managers have generally had to adopt a more democratic style to motivate people. However, there are plenty of autocratic managers who also succeed. There is no style that is always appropriate. Therefore the context of the business case is always relevant.
It may not be easy for Sainsbury's managers to change their style. There may be situations in which managers should be more democratic; this does not necessarily mean they will be. Effective management training could be a useful way to persuade managers to become flexible. There is some debate about the extent to which you can train people to become effective managers or leaders. One extreme view is that good managers and leaders are born that way, if this is true, Sainsbury's will have to put their resources into finding the right sort of person. It is more likely that a good leader is a combination of training and personal characteristics.
Sainsbury's are currently seeking effective managers. For example, Sainsbury's announced on 19th November 2003 that it had poached the boss of Marks and Spencer's food department to replace chief executive Sir Peter Davis. Good managers make effective use of Sainsbury's resources and motivate the staff. They provide vision and direction and are therefore a key element of Sainsbury's success. An example of this can be shown in the following quotation:
"It is also introducing a new range of non-food, such as crockery, in a challenge to department stores and in response to Tesco and Asda, as they diversify into non-food items that carry higher profit margins. Sainsbury's will have spent £3 billion by the end of this year on revamping itself".
(Source: www.theguardian.co.uk
Date: 10th October 2003)
This statement clearly demonstrates that this alternative suggestion is good, but they need to go one step further and introduce a clothing range to reflect true competition.
Another approach that Sainsbury's could take is to improve their service to customers, for example, the presentation and layout of the store and the quality of variety in products available throughout the store. Sainsbury's could also consider expanding its specialist lines and Internet home delivery service. In order for them to accomplish this, they must undercut its competitors Asda, Tesco, Safeway and Morrisons, by price reductions and introducing special offers, such as 'buy one get one free' or 'buy three for two'. If Sainsbury's achieves this, they can experience an increase in market share and profits.
How Alternative Cultures and other Approaches could enable Sainsbury's to Better Meet its Objectives
An alternative culture could be a people-centred culture, which might offer a better opportunity to meet Sainsbury's objectives. This is because the person culture thrives where rules, procedures and precedent are virtually non-existent, as new ground is being broken all the time. Creativity is the key factor to be considered. The cluster will be successful where work is often much specialised, with each case unique and where quick reactions to ever-changing and new events are needed, together with rapid risk taking and decision making. Also, as staff are able to specialise, services can be improved, as staff get better at their jobs.
Sainsbury's have benefits in helping to achieve its objectives of having a people-centred culture. The employees are mainly recognised more for themselves, rather than their job description as in an autocratic style, so they feel more valued and motivated, which will lead to an increase in productivity and profits. There are fewer rules and regulations to follow, which may result in a more 'fluid' working environment and create more ideas.
The people-centred culture is directly related about people and colleagues at Sainsbury's achieving corporate Investors in People recognition:
"In February 2001 we became the first major food retailer to achieve corporate Investors in People recognition. It is a unique achievement in that we gained Investors in People recognition from the bottom up rather than the top down".
(Source: www.j-sainsbury.co.uk)
Sainsbury's is being recognised by Investors in People as a standard base on customer service and its employees, in terms of communication, performance and consideration. They have also been successful in adopting and maintaining its fundamental principles. These include commitment to develop all employees to achieve Sainsbury's goals and targets and regularly reviewing training and development needs in the context of Sainsbury's. Also, taking relevant action to meet training and development needs throughout people's employment and evaluating outcomes of training and development for individuals and Sainsbury's organisation, as a basis for continuous development.
However, specialist departments of Sainsbury's, that operate as unstructured person cultures can become divorced from the main business and become self-running. It may be difficult to set targets or keep them in line within organisational objectives. The departments' spending may be difficult to control and its end results may not be apparent.
Changing the culture of Sainsbury's requires a great deal of skill. Change management is most successful when the participants in the change process feel involved. Involving everyone in Sainsbury's and listening to their ideas, therefore, can best achieve changing the culture of Sainsbury's. In this way, they will feel committed to the change rather than seeking to resist it.
Sainsbury's will also need to change people's attitudes and values, which will take time. Even if people change their behaviour, this does not necessarily change their underlying values. They usually have to demonstrate their existing approach and needs to change because some will resist it. They need to provide rewards to encourage people to change behaviour and build new behaviours into appraisals, for example, needing to assess new desired behaviour.
The problems changing Sainsbury's culture may face resistance from employees because they may like it the way it is they may fear change and they may be worse off in terms of having to do more or take greater responsibility after the change.
Changing Sainsbury's culture takes time, to introduce new values and get them accepted. They cannot simply tell people to think differently by having to show them why and demonstrating if it will work and is desirable.
The initiative of launching a Sainsbury's clothing line will mostly affect the functional areas. If a new clothing line were introduced, the finance and accounts department would need to re-budget cash flow forecasts and profit and loss statements. The human resources department would need to recruit more staff and marketing and sales would have to promote and introduce new marketing campaigns, for example television adverts. Sainsbury's are currently developing their new clothing lines and health and beauty products, which can be indicated in the following quotation:
"We are working to develop a stronger complementary non-food offer through Adam's children clothes, Jeff & Co and a trial of a home enhancements range. We are working on developing our own health and beauty offer through up-grading our in-house capability. We have also been trialling Boots health and beauty and pharmacy shops in six of our out of town stores and are now extending these by a further three stores. We will evaluate the performance of this trial by the end of this year".
(Source: www.j-sainsbury.co.uk
Date: 30th March 2002)
It is essential the functional areas of Sainsbury's are combined effectively if Sainsbury's is to meet its objectives. The best way of getting the various functions of Sainsbury's to pull in the same direction is to create a clear set of Sainsbury's objectives, that can then be translated down into functional objectives, so that each of the functions is driven by Sainsbury's objectives. This information can be clearly illustrated in the following diagram shown below:
Administration Objectives
Marketing Objectives Finance Objectives Production Objectives
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
These corporate objectives are concerned with such issues, such as giving the customer what he or she wants each and every time, getting the quality right and every time and valuing everyone in Sainsbury's and treating them as internal customers. With a clear set of objectives like the above, it is likely that everyone in Sainsbury's will pull together and functions will work in a co-ordinated way.
TASK 3
3.1.1
An identification of the communication channels used by the business. (E5)
Sainsbury's Communications
Sainsbury's need to communicate with a range of individuals and organisations, including their customers, their competitors and their suppliers, as well as their own employees. Good communication within Sainsbury's is essential if that business is to operate effectively. The different channels of communication include the following:
> Internal and external
> Formal and informal
> Upward and downward
> Open and restricted.
Sainsbury's will need to be able to communicate effectively with staff at all levels for it to function smoothly and efficiently. A properly structured communication system will require clear and well-defined channels of communication, which are used by everyone in Sainsbury's. For example, a manager could first communicate with supervisors, and then supervisors could communicate directly with operatives and vice versa.
Sainsbury's Internal and External Communications
Internal communication is communication that takes place between individuals working for the same organisation. An example of internal communication used at Sainsbury's might include an appraisal between an employee and their line manager. Much of the communication, which takes place in Sainsbury's, is designed solely for use within the organisation itself. These include information, which are confidential, such as payroll data or certain development plans. Also, information that is of no interest outside Sainsbury's, such as when departmental meetings are planned. Internal communications are typically carried out by means of face-to-face contact, memos, internal telephone calls or internal e-mail.
External communication usually happens between the organisation and its suppliers and customers. Examples may include the Sainsbury's monthly magazine, which is available to all customers or an order for new suppliers sent to Sainsbury's main dairy supplier. Sainsbury's need to communicate with a range of stakeholders, including shareholders, customers, government officials, suppliers and the community. A range of different external communications media can be employed to communicate with these groups.
Both internal and external communications have been transformed by rapid developments in information and communication technology.
Everyone in Sainsbury's communicates, for example workers will communicate with supervisors and each other and managers must communicate with their staff. Employers will need to communicate with the workforce and with external groups. Sales and marketing will communicate with customers, unions must communicate with their members and management must communicate with the unions. The information shown above can be summarised in the following diagrams clearly shown below:
Email Team Briefing Notices
Shared database Reports
Face-to-face encounters Memos
(Source: Needham, D. & Dransfield R. Advanced Business. Heinemann Educational Publishers. 2000)
(Source: Needham, D. & Dransfield R. Advanced Business. Heinemann Educational Publishers. 2000)
Sainsbury's Common Forms of Internal Communication
The three main ways of communicating information inside Sainsbury's are verbal, written and electronic.
Verbal Communication
This is communicated in 'face-to-face interactions', through telephone messages or recorded messages using answering machines and voice mail. Although verbal communication can be obtained quickly, it often needs backing up in written form. For example, when Sainsbury's communicate an important message to a work colleague, he or she might also say 'could you email me about that', or 'please can I have that in writing?'.
There is a way of giving instructions inside Sainsbury's in spoken form. Many instructions in Sainsbury's are given verbally. This is why managers and others using managerial skills need to have excellent communication skills.
> Word-of-Mouth Messages - there is also a way of passing on information in Sainsbury's. The most common form of passing on information is through word-of-mouth messages. Sainsbury's is dominated by a teamwork approach; this form of communication is an essential part of everyday interactions between team members.
> Team Briefing - a more formalised way of passing on information in Sainsbury's is 'team briefing'; in which managers and other with information to share brief their team on a daily, weekly or monthly basis.
Written Communication
This will cover a range of paper documents that are exchanged within Sainsbury's, including memos, letters and brochures. Written information takes time to process and often requires extensive filing and distribution systems. There are a number of ways of giving instructions inside Sainsbury's in written form.
> Memos - giving written instructions, passing on information, reporting on events and meetings, requesting views and information can be done effectively internally by means of a memo. Memos are the most widely used form of written communication in Sainsbury's because they are brief and to the point. Sainsbury's print their own memo pads for this purpose. Today, most of Sainsbury's memos will be sent electronically using email. The emailed memo can be sent to a group of employees, who are part of a mailing list. Using emails for memos saves paper and storage space and is quicker both to send and to obtain a response.
The main disadvantage to Sainsbury's having an email memo is that if recipients do not check their email frequently; they may miss an important message. The amounts of unwelcome emails are sent sometimes means important messages are accidentally 'junked'.
Sainsbury's name does not normally appear on a memo for internal use and it is not necessary to have a welcome or balancing ending. Memos should be kept as short as possible and ideally should deal with item only. Copies of the same memo are often distributed to a number of recipients. The following template for a memo will be included in most word processing applications:
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
> Employee Handbooks - another form of written internal communication is in the form of a company handbook, when they join Sainsbury's. This form of communication needs to be very precise and clear and will often use diagrams, flow charts, bullet points and numbered instructions. This is so that people carrying out the instructions have clear guidelines to follow. This sort of information will typically be stored for use on Sainsbury's central database, so Sainsbury's members can share it.
> Newsletters and House Journals - a way of passing on information in writing is producing employee newsletters, detailing the achievements of Sainsbury's and its members and setting out plans and changes taking place in Sainsbury's. Newsletters produced by Sainsbury's usually appear regularly with information and news about Sainsbury's and more chatty personal, social and sporty items. At Sainsbury's, there is a 'Who's Who' section and an interview with one of the managers and a crossword. The purpose of the newsletter is to tell employees what is going on in Sainsbury's, before they find out from somewhere else, as well as to create and reinforce a group culture or ethos and to reward and recognise achievement.
> Reports - Sainsbury's produce an official employees' report each year, which is all part of the process of encouraging employees to feel part of the decision-making process. They also help to give employees a sense of belonging.
> Noticeboards - this is another form of written communication. These can be useful if they are well designed and eye-catching, but making sure Sainsbury's use the correct noticeboard and it is updated regularly can be difficult. If there are too many notices on the same board, employees will not read them. Notices are intended to inform, instruct, persuade and entertain or warn. They should be clear, direct, and simple and contain all the essential information.
> Bulletins - these are used for giving news or information within Sainsbury's. They need to be restricted to really important events because if they appear too often, they will not be read. They must be kept short.
> Spreadsheets - the advantage of a spreadsheet to Sainsbury's is that the user can create any document, which contains calculations. The user can also carry out these calculations using formulae. This makes the spreadsheet easier to use and faster to produce documents, such as cash flow forecasts and profit and loss statements. This is used to prepare documents where calculations are needed.
Electronic Communication
This is rapidly replacing other forms of communication. For example, a stock list can be transferred electronically from Sainsbury's to its head office. Sainsbury's uses an internal networking system. Nearly all networks have an email facility and this is used to send documents in electronic form around Sainsbury's.
> Electronic Mail (Email) - Sainsbury's widely uses electronic mail. With e-mail sent through a service provider, for example, CompuServe, the sender forwards the document to the receiver's email address, which is actually a small area on the service provider's computer, not directly to the recipient. When the receiver logs on to his or her computer system, he or she can see on screen there is a message waiting, which he or she can either read while logged on to the system or store on the hard drive to read later. Anyone who is connected to the Internet and has a modem at Sainsbury's can use email. This can also be used for external communication.
> Tannoy System - this type of internal electronic communication is extremely effective and efficient to Sainsbury's, as it enables senior staff in giving out instructions on the switchboard. For example, reporting staff to operate at the checkout at busiest times during the day.
> Photocopier - this is used to keep copies of all documents sent out of Sainsbury's. The advantage of having a photocopier is that it copies the document as an original document. However, the disadvantage is that most copiers copy in black and white only, as colour copying is very expensive.
Sainsbury's Types of External Communications
> Interviews - another form of external verbal communication is an interview with someone from outside Sainsbury's, for example, press, radio or television. Part of a public relations strategy in such circumstances is to build up a positive perception and image of Sainsbury's. The response should, therefore, be designed to improve public understanding of Sainsbury's actions.
> Business Letters - the business letter is still the most widely used form of external communication. It may be used, for example, to make arrangements without the need for parties to meet, provide both parties with a permanent record of such arrangements and confirm verbal arrangements.
> ICT using Microsoft Word - this can be an external or internal use of communication. This is used to write up letters to send to people within Sainsbury's and outside Sainsbury's. This is also used for typing up most of the work done and all documents, which needs to be typed up. The advantage of using a word processor is that you can create many different types of documents, for example, invoices and reports, which you can amend and update easily.
Sainsbury's Formal and Informal Communications
Formal communication in Sainsbury's is communication that takes place through the recognised channels, for example, official meetings, memos and newsletters.
Sainsbury's use of formal communication may take the shape of a formal letter sent to a customer, apologising for selling them a faulty product, for example. This letter will be copied and kept by Sainsbury's, as a record of formal communication. On the other hand, informal communication will not always be recorded and can be an informal chat between employees.
Informal communications are ones that take place that are not part of the 'officially' recognised networks of Sainsbury's. This does not mean informal communications are necessarily negative or anti-organisational. Indeed, much of the good work in Sainsbury's is carried out by Sainsbury's members, taking initiative into their own hands and coming up with ideas that directly benefit Sainsbury's. Informal communications can also serve as motivating forces because they are based on individual initiative.
Research into the nature of communications in Sainsbury's indicates it is important to have both formal and informal communications. For example, management may break information to employees through team briefings, but the full understanding of what management has had to say may come about only through informal discussions between team members. Unofficial discussions and conversations have a considerable impact within Sainsbury's and most managers recognise the importance of informal communications networks.
However, there is a danger of misinformation being spread along Sainsbury's. This is particularly the case when changes are being planned within Sainsbury's. Individuals involved in the informal communications networks may deliberately distort messages or through lack of understanding of what is going on may give out confusing messages.
Sainsbury's Upward and Downward Communication
Much of the communication in Sainsbury's is carried out in a downward direction. Most managers still consider that their main function is to give orders and direct the workforce in the emphasis on downward communication. Managers have created the systems, the rules and the work programmes and communicated these down the line to junior employees.
There are clear advantages to such an upward approach at Sainsbury's. These include senior managers being able to set targets and objectives and then giving the instructions to make sure they are carried out. Sainsbury's has a clear line of command because instructions can be clear and consistent. Operating with an efficient system in which fewer errors are made can cut costs.
However, much can be gained from consulting with employees in a positive and constructive way and there is also more emphasis today on upward communication. This is the process whereby management formally obtains the views and ideas of the workforce. This feels to be important because good ideas can bubble up from below from people who deal with decisions on a day-to-day basis. Many people at the bottom of Sainsbury's hierarchy are very talented and have good ideas that are worth listening to. Managers can be made aware of likely problems before they occur. It provides feedback on the decisions being made by senior managers. People lower down Sainsbury's are more likely to know what is practical in a working setting than those higher up. Being asked to be involved in the communication process motivates those lower down Sainsbury's.
There are several methods available for Sainsbury's using upward communication. These include the following:
> Employee Surveys - in Sainsbury's, this may be the only way to get employee views. The key to running a successful survey for Sainsbury's is to ask questions, which are directly relevant to the workforce, be prepared to act on suggestions, otherwise the whole exercise will just be viewed as time-wasting. There will be no point and no-one will do anything about the problems. Sainsbury's can also hold feedback sessions on the findings and ask employees what they would like to see done in Sainsbury's and be prepared for a wide range of replies.
> Suggestion Schemes - these are systems that allow Sainsbury's employees are encouraged to produce ideas in writing or orally on how products, processes or administrative procedures could be improved.
> Encourage Participation through Empowerment - empowerment can create trust and responsibility and encourages upward communication with Sainsbury's supervisors and managers, particularly when Sainsbury's has a hierarchical structure.
> Appraisal Interviews - Sainsbury's takes training and development seriously, for example through the award of Investors in People with a certificate, which will hold regular performance appraisal interviews with all their employees. These are an ideal occasion for obtaining employee views and attitudes; however they will only work if the culture of Sainsbury's is open and honest.
> Managing by 'Walking About' - with this approach managers literally walk around Sainsbury's. They can be seen and approached. Staff feel they are known, recognised and appreciated. Managers get a reputation for knowing what is going on and staff beginning to volunteer information. Communications become less formal and more personal.
Sainsbury's Open and Restricted Channels
Communications in Sainsbury's can either flow through open channels or through restricted channels. Open channels are routes of information flow where information is placed in the public domain, where anyone can have access to it. This is useful when it is not certain who needs the information or where it is assumed that most people will find the information of interest.
Open channels can be traditional or electronic. A noticeboard or a newsletter will potentially reach all the members of Sainsbury's. Announcing the launch of a new product will be of concern to all and carry out no security risk. Such open methods are suitable when the message is the same for all.
Computer Management Information Systems can also be tailored to send information to all users to ensure certain information goes to specific people only. This can contribute to the control, confidentiality and security of information. For example, messages can be broadcast to all the users of a computer network, so that everyone logging on will see them. Likewise, data that is of use to all employees, such as the availability of stock can be made available across a network to all users.
Restricted channels are when the communication is not for general circulation and is aimed at only one person or a small number of individuals.
Examples might include a speech or presentation from a manager to members of the board, a memo sent to a small group of staff or a computer system, which only channels information to certain users on a network. Electronic mail can be placed in specific mailboxes, so that the only people who receive it are those with a need to know.
The reasons why information flow may be restricted could be because of issues of confidentiality, or more often because it is simply inefficient and unnecessary to broadcast information to people who do not need it. This would waste time and effort. It is far more effective if the sender of information can filter it as far as possible, so that it only goes where it is really needed. A diagram can be represented when identifying Sainsbury's open and restricted channels of communication. This is shown on the next page:
OU OU OU OU OU
OU
OU OU OU OU OU
RU - Restricted User
OU - Open User
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
Sainsbury's Barriers of Good Communication
Sainsbury's communication can break down because either the sender or the receiver of the information has failed to covey the meaning and the importance of the message.
> Sender Breakdowns - the sender of the information could be at fault because the language could be too difficult or complex and there could be too much information, so that the receiver misses the key points. The sender may also be using threatening verbal or body language, for example, shouting or being aggressive, so that the receiver does not listen. It may be afraid of giving direct orders, so the receiver does not recognise what is required and could be 'talking down' to the receiver, so the latter is unwilling to listen.
Good communication always depends on the sender of Sainsbury's.
> Method Breakdowns - when the information is very detailed or complicated, then written instructions are better than verbal messages, which can be misinterpreted. For example, anything which disrupts communication between the sender and receiver, such as physical noise, a crackling telephone, small print, illegible writing, long words and jargon.
> Receiver Breakdowns - the receivers of information could be at fault because they may deliberately choose to misinterpret the message because of their attitude, for example, Sainsbury's subordinates might not want to be bothered to wear safety helmets because the weather is hot. They may also not listen because they do not want to hear the information, for example people at Sainsbury's do not like to hear bad news.
Examples of Sainsbury's good barriers of communication are communication protocols, which can be identified, in the following quotations:
"Thanks to developments in our corporate website, we can make a great deal of published material, including results information, trading statements and presentations, more accessible to our shareholders and customers at all times. As part of our commitment to providing all shareholders with up-to-date information both the Preliminary and Interim Results presentations to analysts are webcasted on the day of the announcement from our website".
"We maintain a regular programme of meetings with major institutional shareholders to discuss information that is publicly available relating to the progress of the business".
(Source: www.j-sainsbury.co.uk)
3.2.1
An analysis of the impact of ICT on internal and external communications of the business. (C3)
Information and communication technology (ICT) has had a dramatic effect on the way communication takes place in Sainsbury's. With the invention of cables and microwaves, Sainsbury's communications have been revolutionised.
Sainsbury's Types of Communication using New Technology
Sainsbury's uses the following types of communication using the new technologies:
> Fixed Telephone Systems - the most frequently used form of external verbal communication is the telephone. Modern switchboards are computerised, which allows, for example, automatic queuing systems. Its great benefit to Sainsbury's is that it is fast and allows people who would find it difficult to meet and converse. Also, phone answering machines can tape callers' messages, which can be played back from a distance by calling the number and typing in a pre-set code. A telephone call may be the first point of contact an outsider has with Sainsbury's. If a bad impression is created through the first call, it may be difficult to correct. Developing a telephone technique that makes the caller feel at ease and that it creates the impression of efficiency is always very important.
> Fascimiles (The Fax Machine) - a form of internal and external communication that has experienced massive expansion over recent years and that is capable of sending both written and visual information is the facsimile ('fax'). Fax machines are now essential office equipment at Sainsbury's and are desktop machines, which send information electronically over telephone lines. To appellate the fax machine, the user types in the fax number of the recipient of the message. Sainsbury's can also use it to send pictures and other information. This will be a replica copy of the original information. This is used to send copies of plans of messages to Sainsbury's workers. It is also used to send messages to the client.
> WANs (Wide Area Networks) - this may be used to connect computers on different sites by making use of telecommunications. WANs can also be used for internal communication, between parts of Sainsbury's or external communication with other businesses. The great benefit to Sainsbury's is that WAN networks extend the use of the computer beyond the office by using a modem, which converts computer signals for transmission over the telephone lines before reconverting them again. Modems are used because telephone lines are primarily for speech transmissions and not for use by computers. Waves travelling along lines are analogue waves, where sound and images are converted into corresponding variations in electrical voltages or currents. However, the digital revolution has seen the creation of new formats that enable the transmission of video and voice signals. Information transfer is much faster under the new digital systems.
Sainsbury's Current Developments in Communications Technology
There are on-going developments in information and communications technology, which also help Sainsbury's. These include the following:
> Electronic Mail (E-Mail) - this is an increasingly popular means of communicating and sending information and Sainsbury's documents without the need of sending paper. Computers linked to the telephone network can send and receive computer files, containing Sainsbury's documents to and from other computers all over the world. E-mail can be sent via computers, either within Sainsbury's using an Intranet or between different organisations via Internet. This is used to send messages within Sainsbury's. They also use this to send messages outside Sainsbury's, for example, clients.
The key advantages of email at Sainsbury's are that the same message can be sent immediately to many people and it is faster and efficient than ordinary mail. It frees up time for other tasks and you do not have to bother to print the message. This is more environmentally friendly, as less paper and energy in the delivery process are used. It is also a very cost-effective way of communicating, once a computer system has been installed and access is available to relevant staff. By using a laptop and a modem, staff can keep in touch anywhere in the world and complete files can be sent or downloaded with any message. It also gives access to the rest of the Internet, for example, through e-mail newsletters and there is a permanent record of e-mails available on the hard disk.
On the other hand, the disadvantages to Sainsbury's are that people at Sainsbury's may not read their email regularly and not everyone has access to email facilities. It can also result in junk mail where the wrong people receive the message and there is no face-to-face or verbal contact with Sainsbury's colleagues or friends. Messages tend to be written in e-mail jargon, which can be misinterpreted. Legally, emails have the same status as other forms of written communication, and careless or potentially libellous (badmouthing) comments must be avoided. It can take up a large amount of time and forces people to reply, which can cause stress. Unrestricted access can increase costs and e-mail has the same legal liability as written material.
> Electronic Data Interchange (EDI) - increasingly, Sainsbury's are setting up large-scale systems for the electronic purchasing of goods. This allows users to exchange Sainsbury's documents and information, such as orders and invoices directly through the telephone network and other more sophisticated, electronic communication systems. EDI is a network link that allows Sainsbury's to pay suppliers electronically, without the need for invoices and cheques, which dramatically reduces time, paperwork and costs.
> Electronic Point of Sale (EPOS) - in Sainsbury's, computerised tills are used to record information about the goods sold. In Sainsbury's, the laser beam scanning of bar codes is widely used. The scanners input data into the computer to process, improving speed of throughput of customers, stock control and recording procedures.
> Scanners - a scanner can read printed text and graphics into the computer. It may be hand-held, so that it is manually passed over the material or it may be a desktop machine.
> Internet - perhaps the most dramatic increase in the use of electronic media for the purpose of internal and external communication is the creation of Sainsbury's Internet websites. The Internet has revolutionised global communication in just a few years. In the early part of the new millennium, it is about to revolutionise the way people and businesses in every country, to buy goods and services from all over the world. This is used to send e-mails to clients and workers and also to access websites of suppliers to place orders.
Sainsbury's have an Internet website they use for all forms of external communications purposes and for public relations activities. Sainsbury's operates two separate websites: one is www.j-sainsbury.co.uk, which contains corporate information. It is aimed at anyone who is interested in the history, background and accounts and finances, as well as overall performance of the company; it is aimed primarily at shareholders and potential shareholders. The company also operates two other websites, www.sainsbury.co.uk and www.sainsburystoyou.co.uk, which are aimed at customers and enables viewers to see what products lines are available and to place orders on-line for home delivery. This means that the company can have more central warehouses with delivery vans to distribute goods, rather than having the expense of a large number of stores. If it is easy to use and goods are delivered reliably and in good condition, it will also generate customer loyalty and repeat business.
> LANs (Local Area Networks) - this may be used to connect computers within a single room, building or a group of buildings on the same site, without the use of telecommunications links. Communication is internal within Sainsbury's. LANs may be linked to a file server, which is a permanent data store that provides files and software for other PCs and also acts as a storage base. This can be shown in a diagram clearly shown below:
> Mobile Phones - this is used to contact employees and also people inside and outside Sainsbury's. The advantage of having a mobile phone is that you can be contacted and you can contact anyone at any time. This is very useful because it can save time and money.
Sainsbury's Security and Networks
Security is a key issue with PC networks at Sainsbury's. There are security issues with using computers, such as viruses, hackers and unauthorised access. Here is how Sainsbury's try to combat these:
> Viruses - these are programs that 'infect' and destroy data. However, network PCs are more vulnerable at Sainsbury's. Sainsbury's use of E-mail and Internet are possible technologies for virus spread, as are unauthorised disks. Sainsbury's uses virus-checking programmes.
> Hackers - hacking is the unauthorised entry into computer files or systems at Sainsbury's. However, some hackers are specifically employed by Sainsbury's, either to break into competitors' systems or test the security of their own.
> Unauthorised Access - Sainsbury's LANs users gain access to the system by using a password. There are sophisticated methods of login, which perform a second level of confirmation beyond the simple password. Sainsbury's security processor is available on the market and aims to protect information being transmitted over networks, by scrambling data to all outlets, except the intended destination.
Sainsbury's Data Protection Act 1998
Sainsbury's must comply with the Data Protection Act 1998 when dealing with personal information. With the developments of Sainsbury's computer databases a great deal of private information has been collective on individuals. The speed at which computers can search and sort data, related to the fact that the data can be accessed from greater distances via modem, has meant that it is increasingly easy for this information to be passed on. It is recognised that there is a need to protect the rights of those about whom data is held. The main requirements of the Act are that personal data however stored must be secure and Sainsbury's must notify the Data Protection Commissioner if they intend to keep and process data. Sainsbury's individuals have a right to be told what information is held on them and any automated decisions should be supported by human intervention. Any system must take into account the requirements of the Data Protection Act and other legal requirements, for example, concerning health and safety.
Improving security is a major factor at Sainsbury's because data or program security is important and a system must ensure unauthorised people do not access it. Security features may include electronic controls, such as passwords and data encryption to ensure that the system is kept secure.
Sainsbury's Benefits of using an Electronic Information Processing System
The main benefit of Sainsbury's using an electronic information processing system is that it provides high quality information to control and manage Sainsbury's. Stock control, payroll, personnel records and invoice systems all involve information processing. This involves processing facts of data and producing information. This information may include order levels for stock control, total wages on the payroll, commission earned by a sales representative and statistical information graphically displayed for personnel.
Sainsbury's processing used to be carried out manually, but now more and more manual systems are being replaced by computer systems. This is why Sainsbury's now use electronic information processing for information technology.
An example of an information processing system used at Sainsbury's is clearly shown below:
(Source: Lewis, R. & Trevitt, R. Business for Vocational A Level 3rd Edition. Stanley Thornes Publishers Ltd. 2000)
(Source: Lewis, R. & Trevitt, R. Business for Vocational A Level 3rd Edition. Stanley Thornes Publishers Ltd. 2000)
In looking at an information processing system, manual or electronic, Sainsbury's need to consider the collection of data to be processed and the tasks that are being carried out by the processing system. They also need to think about the devices and
media used to enter, store and output the data and the use of the processed data information.
It is the tasks, devices and media stages, which are replaced by computers when changing from a manual to computerised system.
Sir Peter Davis, the chief executive who will be promoted to chairman next year, demonstrates Sainsbury's on-going developments on Sainsbury's information and communications technology:
"The new distribution and IT systems would not be fully operational until next summer, months later than the March deadline. He blamed teething troubles with equipment at new automated depots and the implementation of an IT package for the delay".
(Source: www.timesonline.co.uk
Date: 20th November 2003
"In August this year we completed the conversion of our store systems. We have also installed major merchandising and trading systems, which greatly increase our ranging flexibility".
(Source: www.timesonline.co.uk
Date: 5th December 2003)
The advantage of modern electronic stock systems is that sales of particular items in a specific store can be closely monitored, and changes in demand responded to immediately. As an example, a store in North London with a customer base comprising a large number of Asians may find a particular line of Asian food selling well during a certain period: this would be registered electronically and more of the best-selling line could be ordered and available in store very quickly.
Sainsbury's have also been modernising Information Technology Systems:
"IT is a major enabler as we upgrade and modernise our company and we have made considerable progress updating our infrastructure. We installed new electronic point of sale equipment and in-store computer systems in 318 stores and 132 petrol filling stations in 2002/2003 and have continued this programme in the new financial year".
(Source: www.j-sainsbury.co.uk)
In conclusion, the impacts of ICT on internal communications at Sainsbury's are that there are better management information systems leading to more effective control and decision-making. There is greater use of electronic data and quicker distribution of information, for example through e-mail. There is also less reliance on face-to-face meetings and effect on management and staff, for example fewer staff are needed and the amount of training required.
The impact of ICT on external communications at Sainsbury's is that there is a high level of customer satisfaction. There are computer-generated bills, invoices and order forms used and good relations with suppliers. There is also a speed of response to enquiries and quicker access to centrally held information through databases.
The impact of new technologies and ICT on Sainsbury's has meant that the internal and external communications are much faster, more accurate and secure and can reach more people than ever before.
3.3.1
An explanation of how the production process and quality assurance/control system used by the business helps it to add value to its product or service. (E6)
Production and Quality
Sainsbury's changes inputs, such as people and materials into outputs to produce goods and services that meet the needs of their customers. At each stage of the transformation process value is added to the product. Value chain analysis is the process of identifying, describing and analysing the individual activities involved in the production of a product or delivery of a service, where the purpose of trying to cut costs or value is added. The main ways of adding value include the following:
> Combining inputs to create a physical change
> Combining inputs to create a service
> Meeting customer requirements.
Quality is an important factor throughout the production process. Quality control means inspecting or testing quality at various points in the manufacture of a product or delivery of a service. It is usually applied during or after production. However, Sainsbury's use organisation-wide approaches to quality, making quality the responsibility of everyone at all stages of the production of the goods or services. This is quality assurance.
There are numerous quality control and assurance systems including:
> Total quality management (TQM)
> Quality circles (QCs)
> Self-checking or inspection
> ISO 9000
> Benchmarking
> Training and development (T&D).
Sainsbury's Production Process of Freshly Baked Bread
(Source: Lewis, R. & Trevitt, R. Business for Vocational A Level 3rd Edition. Stanley Thornes Publishers Ltd. 2000)
> Inbound Logistics - Sainsbury's assure that transportation methods are clean and hygienic for transporting the wheat to the bakery and insure that the storage of materials, consisting of wheat is air tight and clean.
> Operations - Sainsbury's change and transform the inputs into goods and services. For example, Sainsbury's insure that all bakery staff are fully trained when they are turning materials into saleable goods, in this case when baking the bread and that the bakery is clean and the machinery is fully functional.
> Outbound Logistics - Sainsbury's need to make sure that the transportation, storing and distribution of the finished products of freshly baked bread is provided to their customers.
> Marketing and Sales - Sainsbury's must let their customers know that the goods are these. These include advertising by one get one free offers, sales administration and selling costs; whatever average is chosen, including Internet selling.
> Services - Sainsbury's added extras, including Internet home delivery, fitting of appliances and after sales service.
Adding Value through Sainsbury's Quality
Quality is the production process, the sun of those features and benefits that enable Sainsbury's products and services, which produces an output to meet and satisfy customer requirements. It can be looked at in many ways. The basic distinction is between product and service quality; in both cases it is necessary to measure quality against agreed standards. This can be highlighted in the following flow diagram, indicating the meaning of quality standards from the customer's point of view:
Customer Standards involve:
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
An example of Sainsbury's customer quality standards is that the telephone is answered within three rings and complaints are dealt with in 24 hours:
"Quality food is a priority for our customers and a key component of the Sainsbury's brand. We have invested in our food ranges and during the year, have improved or developed over 3,200 products. Our own label sub-brands are again amongst the best in the UK".
(Source: www.j-sainsbury.co.uk
Date: 30th March 2002)
Every member in Sainsbury's must be involved from the highest executive in the boardroom to the shop floor workers, sales assistants and clerical staff. Employees in Sainsbury's set out to satisfy customers, placing them at the heart of the production process. The commitment to quality must be instilled into everyone from the moment they join Sainsbury's:
"Any worker when asked the question 'Who is responsible for quality in your organisation? Should be able to reply "I am". The answer should not be 'the quality manager' or 'the quality department' or 'the departmental manager'. This makes everyone responsible for quality".
(Source: Lewis, R. & Trevitt, R. Business for Vocational A Level 3rd Edition. Stanley Thornes Publishers Ltd. 2000)
"We judge ourselves mostly by our intentions, but others judge us mostly by our actions".
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
"By next summer we should be able to address the issue of price and value for money, which I know some commentators said we should be addressing but we weren't always able to do".
(Source: Sir Peter Davis, Chief Executive
www.timesonline.co.uk
Date: 20th November 2003)
"Differentiation in terms of quality, choice and service at competitive price is the focus of our brand. We know our customers want choice including superior ranges and 70 per cent regularly buy our biggest brand, Taste the Difference, made with extra time, care and attention".
(Source: www.j-sainsbury.co.uk
Date: 21st May 2003)
These interesting quotations are worth remembering; as it gives Sainsbury's a useful indicator of the importance of quality. In the context of quality, customers judge goods and services in terms of what the producer hopes to provide. Sainsbury's emphasises the importance of total quality management, which involves taking quality to new heights. Sir Peter Davis, the chief executive demonstrates that Sainsbury's will provide customers with good value for money, in terms of quality, choice and service at a competitive price.
Differences between Quality Control and Quality Assurance and how these help to Add Value to Sainsbury's Products and Services
> Quality Control - this is defined as the maintenance of specified standards by inspecting, sampling or testing quality at various points in the manufacture of Sainsbury's products and services. It is also concerned with detecting and cutting out components or products that fall below Sainsbury's set standards. This process is usually applied or taken place during or after production. It involves considerable waste as faulty products are scrapped. Quality control inspectors carry out quality control. Inspection and testing are the most common methods of carrying out quality control at Sainsbury's.
> Quality Assurance - this is the responsibility of Sainsbury's workforce, working in teams, rather than an inspector, although inspection will take place. Quality standards should always be maintained through following steps set out in a quality assurance system. Currently, however, Sainsbury's uses organisation-wide approaches to quality, which make quality the responsibility of everyone at all stages of the production of goods and services. Today, Sainsbury's quality is built in from the design stage through the choice of suppliers at all points of the production process to the finished product.
Sainsbury's have currently achieved quality assurance and quality control through salmon products and quality food, which are clearly explained in the following quotations:
"Sainsbury's breaded Salmon Bites have won the title of Best Retail Packaging For A New Product in the European Seafood Exposition Brussels Seafood Pix d'Elite New Product competition. On top of winning the packaging prize, the judges were highly complimentary of both the visual appearance and the quality of the product".
"The food centre plays a pivotal role in ensuring excellence and innovation in Sainsbury's Supermarkets own-label products. A highly experienced team with extensive knowledge of the food industry provides the company with specialist quality control, creative food development, sensory appraisal and supports Sainsbury's Supermarkets range, product quality and choice programme".
(Source: www.j-sainsbury.co.uk)
Quality Assurance Systems
> Total Quality Management (TQM) - Sainsbury's works under total quality management (TQM). It is concerned with creating a quality culture, so that every employee at Sainsbury's will seek to delight customers. It also encourages everyone in the workplace to think about quality in everything he or she does.
The customer is at the centre of the production process. Sainsbury's have been following the policy for a long time. It involves providing customers with what they want, when they want it and how they want it. It involves moving with changing customer requirements and fashions to design products and services that meet and exceed their requirements. Delighted customers will pass the message on to their friends. This can be summarised in the following graph, indicating the movement of total quality management at Sainsbury's:
Levels of
Quality
TQM
QA Continuous Improvement
QC Prevention
Inspection Detection
Increasing Emphasis on Customer
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
Customer preferences will constantly change. Sainsbury's, therefore, has to provide new ways of responding to changing needs and wants.
> Quality circles (QCs) - these are an important way of increasing participation in Sainsbury's activities. A quality circle is a study group of volunteers between five to fifteen people, who meet regularly to work on a variety of operational and employee problems. The quality circle will be made up of ordinary working employees and their immediate supervisors and managers. One supervisor or manager at Sainsbury's will usually operate as the circle's leader. Staff need to be empowered or given responsibility to make decisions and create solutions. Quality circles do not deal with theoretical problems; they are concerned with putting ideas into action. This involves in-depth analysis, proposals for action and presentations to Sainsbury's management on what could be or ought to be done.
The benefits of Sainsbury's having quality circles are that it gives power and responsibility to workers and are able to share experiences and make concrete proposals. It can also result in cost reductions and improvements in productivity and encourages team building and co-operation.
> Self-Checking or Inspection - during production, self-checking and direct inspection have traditionally been the main ways of achieving quality control. Whenever or wherever goods have been made, there has been some form of inspection.
The benefits of Sainsbury's having self-checking and inspection are that it gives responsibility to all staff and because it is an informal system, it is quick and easy to apply. Another major advantage of self-checking is that it is cheaper to carry out. Improvement is a continuous process and you do not have to wait for the problems to come to light at the end of the process. Workers also consider quality inspection as part of the job and managers feel supported, rather than threatened, for example, constant inspection at Sainsbury's means that they can feel more confident about the finished product.
> BS EN ISO 9000 - Sainsbury's complies with BS EN ISO 9000 standards. Reliable quality is a prime concern when deciding which supplier of Sainsbury's goods and services to use. Sainsbury's have extended their own quality control procedures into their suppliers' organisation to ensure reliability. A reputation for quality is important, but it can be established only over time. This presents problems for Sainsbury's tendering for orders from new customers. The International Standard ISO 9000 certificate indicates to potential customers that the quality procedures of the certificate holders are reliable and by implication, Sainsbury's are capable of delivering consistently the promised quality products and services.
The benefits to Sainsbury's having BS EN ISO 9000 standards are that it examines its performance and improves its systems, methods and procedures. This often leads to significant cost savings. It also involves and motivates staff to raise their performance, introduce further improvements and do things right first time. It ensures that orders are delivered consistently on time and highlights products or services deficiencies and develop design and process improvements. It makes sure that any quality failures and customer complaints are recorded and investigated and prompt action is taken to prevent recurrence. ISO 9000 is an important part of total quality management, as it aims to develop a culture of continuous improvement throughout Sainsbury's.
> Benchmarking - a benchmark is a standard point of reference. Benchmarking is a technique for comparing the performance of Sainsbury's with another. If Sainsbury's is to improve it must be able to set standards and monitor its progress. It needs a goal or target at which to aim. Sainsbury's needs to identify which other organisations are the best in their field, these are the benchmarks, finding out why they are the best and then doing better. It is learning by looking at other companies. Sainsbury's benchmarking process can be visualised in the following diagram clearly shown on the following page:
(Source: Needham, D. & Dransfield, R. Advanced Business. Heinemann Educational Publishers. 2000)
> Training and Development (T&D) - training and development at Sainsbury's is a crucial part of the implementation of any quality programme. The quality is all about continuous improvement in Sainsbury's because it necessarily involves ongoing training and development for all staff. Employees of Sainsbury's need to be trained in approaches to quality, such as total quality management and benchmarking.
If individuals are going to be the best able to contribute to helping Sainsbury's continually to improve, they need to be fully in tune with their objectives. At the same time, Sainsbury's needs to understand the development objectives of the people who work for it.
Sunir Pindoria
Business at Work Coursework