Once ownership and control has separated in this way, the decisions made by the directors-the controllers-may clash with the wishes of some of the shareholders-the owners. A common example is where the shareholders may wish to see a policy of profit maximisation, which may not be the wish of directors who see long-term growth as a more important strategy to pursue.
Legal Liability and legal status
Most large companies are limited by share and must include limited or plc as appropriate in their name. One feature of limited companies is that they all have separate legal identity from their owners. This means that they can own assets, forms contracts, sue and be sued in their own right. Another feature is that the owners all have limited liability. If a limited company has debts, the owners can only lose the money they have invested in the firm. They cannot be forced to use their own money, like sole traders and partners, to pay business debts.
Benefits of a public limited company
- Shareholders have limited liability. As a result more people are prepared to risk their money than in say, a partnership.
- The business will continue even if one of the owners dies and more power is enjoyed due to their larger size.
- Huge amounts of money can be raised from the sale of shares to the public.
- Production costs may be lower as firms may gain economies of scale.
- Because of their size, plcs can often dominate the market.
- It becomes easier to raise finance, as financial institutions are more willing to lend to plcs.
Constraints of a public limited company
- The setting up costs can be very expensive – running into millions of pounds in some cases.
- Since anyone can but their shares, it is possible for an outside interest to take control of the company.
- Members of the public can inspect all of the company’s accounts. Competitors may be able to use some of this information to their advantage. They have to publish more information than private companies.
- Because of their size they are not be able to deal with their customers at a personal level.
- The way they operate is controlled by various company Acts which aims to protect shareholders.
- There may be a divorce of ownership and control, which might lead to interests of the owners being ignored to some extent.
- It is argued that many of these companies are inflexible due to their size. For example, they find change difficult to cope with.
(E2) Business objectives
Business objective is a goal that every business wants to achieve to be successful. You can find these objectives in the mission statement of the company or in details in the corporate strategy. In this they clarify for everyone what the business is working to achieve. They aid the decision making process and choice of alternative strategies. They provide the means by which performance can be measured and actions can be controlled. Sainsbury also have many objectives that you can find in their mission statement. They want to be consumer’s first choice for food, products and outstanding quality. They want to give great service at a competitive cost by working simpler, faster and together. In order for objectives to be effective, they must:
- Provide detail about what specifically needs to be achieved (often in a quantitative form)
- Have a time limit by when they need to have been achieved
- Need to state the necessary resources that they require in order to be met.
Setting clearly defined and realistic objectives will enable many employees to understand exactly what their job entails and achieving clearly stated objectives might be linked to bonus payments - this can easily act as an incentive and motivator to employees.
Primary and secondary objectives
A primary objective is an ultimate long-term goal of the business (e.g. survival, profit maximisation, diversification and growth). They are often referred to as strategic objectives.
A secondary objective is a day-to-day objective, and it makes a direct contribution to meeting the primary objectives (e.g. increase sales by 5% each year, keep labour turnover at less than 4%). They are often referred to as Tactical objectives.
Sainsbury’s wants to be the leading store in United Kingdom by staying above their competitors.
The main objectives of Sainsbury’s are:
- Outstanding Quality
- Great Service
- Competitive Cost
- Customer Satisfaction
- Store Refurbished
- Improving Shares
- Major Benefits for Customers
Outstanding Quality
Quality food is a priority of Sainsbury’s customers and a key component of the Sainsbury’s brand. Sainsbury have invested in their food ranges during the year, they have improved over 320 products. Their own labels are sub-brands amongst the best in United Kingdom. They are developing stronger complementary non-food offer through Adams children’s clothes, Jeff & co. and a trial of home enhancement range. They are working to develop their own health and beauty offer through up-grading their in-house capability.
Great Service
Delivering great service is a main objective of Sainsbury’s business transformation programme. Sainsbury had made great strides last year by retraining their staff to serve their customers better. Their mystery shopper is now embedded in the company, this and their customers satisfaction index demonstrates the progress they are making. Their mystery shopper measure is now embedded in the company; this and their customer satisfaction index demonstrate the progress they are making.
They have achieved cost savings of £ 160 million in the year delivering a total of £ 250 million since they began the programme. These savings will be reinvested in enhancing the customer offer, building sales and in improving their operating margin.
Competitive Cost
Sainsbury monitor 10,000 lines weekly to ensure that they remain competitive in the market. They have reinvested some of their cost savings in price adjustment. Alongside this they continue to run a highly attractive, sustainable promotional programme. They have set up many promotion plans to attract more customers to their business, like buy 1 get 1 free policy.
Customer Satisfaction
Despite all the work in stores Sainsbury still focused on the high standards their customers expect. They know that their customer’s satisfaction drives sales and that the investment they have made in improving their stores.
Store Refurbished
Their store reinvigoration has now been implanted across more that a third of their estate and they plan to improve further 70 stores during the coming year. A major refurbished now takes place in under 12 weeks ensuring that the improved offer is available to customers as quickly as possible.
Improving Shares
Sainsbury will improve their market shares by 2/3% to increase sales of food by 3.5%. Directors are proposing an increase in the final dividend of 5% from 10.30 pence to 10.82 pence per share.
Major Benefits for Customers
Sainsbury has to make many improvements, which will make a major difference to customers, enhancing availability and ensuring a freshest product, are on the shelf. They are developing groups to help bring their plans to life and, through their largest ever-training programme, involving and engaging their colleagues.
Overall cost benefits will include a reduction of least 25% in warehouse costs and transformation programme will around ₤100 million.
Sainsbury’s are replacing their legacy systems with ‘best in class IT solutions to help the company gain competitive advantage. The Accenture relationship continues to go well and systems, which have already been implemented, are delivering substantial business benefits. During the year they reprioritized their programme in light of new opportunities and have updated the original sequence of work.
They embarked on a major programme to modernise their supply chain by developing a network of new depots around the country. They have made good progress and three depots, Emerald Park, Haydock and Langlands Park, are already operating.
Their first automated fulfillment centre at Hams Hall, Birmingham, had opened early this year. Three additional fulfillment centers are under construction at Stoke, RYE Park (Hoddesdon) and Waltham Point; Sainsbury’s says these will be in operation by end of 2003.
Sainsbury's Launches New Non-food Range
Today Sainsbury’s new non-food range of 2,500 homeware and cookware products, chosen to complement the company’s quality and choice food offering, goes on sale in the first 12 selected stores. The range will be introduced into over half the estate by the end of October and is the biggest ever range launched in Sainsbury’s history. In addition, 1,500 new own-label and established brands have been added to Sainsbury’s existing 4,500 strong health and beauty products and are also being rolled out to selected stores.
(C1)
The graphs below shows how Sainsbury’s business is going for past few years the graphs shows that how Sainsbury’s is meeting its objectives by gaining big profit margin every year.
Business at present stage
The above graph shows the Total Shareholder Return (‘TSR’) performance of an investment of £100 in J Sainsbury plc shares over the last five years compared with an equivalent investment in the FTSE 100 Index.
You can see from the above two graphs that how well Sainsbury’s is doing by meeting its objectives. First graph shows the profit made me Sainsbury’s supermarket from last five years, the profit went down rapidly in 2001 this is because of the September 11 2001 (attacks on world trade centre USA).
The second graph shows the increase in Sainsbury’s supermarket.
(Task 2, E3)
Functional areas in business
Businesses are divided into different functional areas, which are specialized in dealing with different matters involving the business and its activities. All businesses or organizations have different functional areas to help them to achieve their aims and objectives and to be successful in the market and real world. There are many different functional areas in businesses, but I will explain about few and important functional areas of the Sainsbury.
The functional for Sainsbury are:
- Human Resources
- Marketing
- Administration
- Research and development
A business should be viewed as a system. This system processes inputs to produce outputs.
Finance
Finance department is known as the backbone of every organization.
It is a very important department in every business. The purpose of using this function is that every business needs to look after their financial sides. Sainsbury’s finance department is concerned with creating an effective balance between from where to raise the finance and where it should be used, so that it can provide the maximum return to the company. Finance function also deals with financial operations such as salaries, taxes, paying bills and keeping information of accounts for all departments within Sainsbury. This department is responsible to keep track of all the money coming in and going out of business accounts. The
financial staff will check regularly about the company’s expenditure and income. This is very important for every business, as they would need someone to go over and finalize how well the business is doing financially. . Sainsbury’s finance department has to provide finance for all other departments for e.g. like Research and development team is researching new service in the organization and they need extra funds to carry out this research so they have to ask to finance department for these funds and even departments like Human resources and marketing cannot carry on their process in Sainsbury’s with the help of finance department, if Human resources department wants to train their staff in different fields, they need extra capital to carry out this process so the managers in Human resources have to ask Finance department for these training costs.
As chief executive of Sainsbury’s said that Sainsbury’s has sparked a bidding war for rival Safeway after detailing plans for a bid of more than £3.16 billion. Sainsbury’s says it believes it would need to sell of 90 of Safeway’s 479 sites to satisfy local competition issues. Sir Peter says a deal with Safeway would generate cost benefits of at least £300 million but conceded 1,700 jobs could go. This all process cannot be successful without the contribution of finance department of Sainsbury’s.
Under finance function Sainsbury has maintain two departments:
- Finance department.
- Accounting department.
Finance department.
It decides about the capitalization of company, the capital structure of the company, return on investment to be earned by the company, how to manage the earning of the company, when to raise the capital, from where to raise the capital, what should be the cost of the capital and what should be the source of finance. The person who is incharged of this is known as accountant or chartered accountant.
Accounting department.
It deals with recording the financial information and processing it for the managerial use such as making balance sheets and profit & loss accounts, interpreting the financial information by calculating ratios (ratio analysis), using capital budgeting techniques for project appraisals to calculate the financial viability of the project. Similarly making competitive balance sheets, doing funds flow analysis to determine the working capital position of the company. Doing cash flow analysis to workout the liquidity position of the company. All this is done for the purpose of processing the information for managerial use. Accounting department also deals with wages and salaries calculation.
Human Resources
This is the most important department in many organizations. Human Resources department of Sainsbury covers a variety of activities. It performs many various roles in the organization. The work of HR is to communicate with all other areas within the company. In this department employers ensure that their employees are provided with safe work place, methods, appropriate training and more over safe equipments. HR also deals with recruiting, selection, training and development, compensation, promotion, transfers, demotions. In nutshell we can say that it is playing the following roles in Sansbury.
- Establishing a major policy that covers the place and the importance of the people in the organization.
- It is concerned with helping other managers to develop their work for e.g. helping production managers to appoint and train new production workers.
- It is concerned with looking after people at work and their needs.
- It is concerned with acting as an intermediary between different groups.
- It is also concerned with compensation, remuneration, bonus pays and fringe benefits such as implementation of health and safety rules.
- It is also concerned with educating the employees to make them capable of competing in the changing circumstances.
The key areas of Sainsbury’s Human resources department:
Marketing
Marketing is essential to the survival of most organization. It is fast paced, dynamic, highly visible and rewarding to its successful practitioners and frustrating. The main purpose of using marketing is that to find out what customer needs and providing it. In other words, marketing is looking to the business through customer’s eyes. When the need is identified the company will try to sell these needs to customers. These needs can be identified through market research. Marketing is useful for further success and profit, like Sainsbury marketing is a huge part of the activity. Their main aim is to one step ahead of their customers by identifying and anticipating their needs.
Asking someone for his/her views and opinions is called market research this has to be carried out by asking appropriate questions. In marketing terms this is called survey. Sainsbury conduct this survey by face to face, through Internet and through customer’s suggestion boxes by asking questions like.
For e.g.
- What more products do you like to be in Sainsbury?
- What kind of improvement do you like to be here?
- What prices do like?
Marketing function of Sainsbury is very important because it is responsible for anticipating the market demand, doing the research about consumers taste, behaviors and preferences, identifying marketing opportunities, making the strategies to compete with its rivals. The marketing objective is to increase Sainsbury’s lead over the United Kingdom. Competition in business performance attracts more customers and retains more profit.
Sainsbury advertise through TV, radio, press, direct mail, Internet and promotion. Marketing will run promotions with partners who reflect equal brand value to Sainsbury. They have to make sure that promotional plan is delivered with high quality communications. Sainsbury’s brand must have strong incentives with national coverage and covering various market sectors but ensuring the brand is not devalued. The types of promotion Sainsbury use include BOGOF products.
Administration
As the spinal cord is the basic structure upon which our human body is standing. Similarly every organization for successful standing depends upon administrative spine. Sainsbury’s administration department deals with the enquiries, communicating messages, doing correspondence, and maintaining the past records and producing documents for the workforce. So the administration is very important.
The problem arises when the administrators clog up the arteries of an organization with administrative work that moves the organization away from its capital objectives. Every large firm like Sainsbury is having a central office that is responsible for controlling key aspects of the firm’s paperwork. This department might handle the filing of the materials, the companies mail, word processing and data handling facilities. Sainsbury focuses on the management of work through information technology and communication system.
Each department is having office services manager with the responsibility of coordinating office services and for offering the expert advice to the departmental managers. The office manager is bearing the following duties:
- He/she takes the responsibility for and to organize the training of administrative staff.
- Advise department about office layout, working practices, maintainace of office equipment and staff development.
- Ensure the standardization of administrative work and the layout of documents and letters etc.
- Study and analyze administrative practices within the organization in order to develop an overall strategy for administration.
- Reporting to the higher authorities about the optimum utilization and effectiveness of administrative work.
Research and Development
The research and development department is the department that researches new products and develops the old products. To remain successful, business must constantly work to create new and better products and processes. Sainsbury is also doing a huge expenditure on research and development for which Sainsbury has maintained a research and development department.
Research-this involves carrying out investigation to come up with new idea, e.g. by carrying out brainstorming, examining competitors products or carrying out research in laboratory.
Development- this involves turning the findings of the research into useful products or processes.
If Sainsbury had a mishap with its products, the research and development department would try to correct the mishap. The research and development department must work closely with the marketing and production Departments in particular this is because marketing and production are the beginning and end of producing a product.
As Sainsbury’s Research and Development team was developing a major service initiative Scan and pack had been successfully launched in April 2003 creating 10,000 new jobs to improve their checkout service. They had also launched the self-service checkout, which allows the shoppers doing all the work themselves. This new service allows the customers to scan items, put them in carrier bags, pay and even get cash-back – all without need for a cashier.
The first of the checkouts have been installed at the Sainsbury’s store in Hazel Grove, Stockport, Greater Manchester, and will be followed by a wider trial in six additional branches.
Sainsbury’s research and development team had just developed Blue Parrot café. This is a new range of food products especially for children, this is mainly aimed at parents that this food is healthy for children and as good as home made, but with all the convenience of ready-made meals. Blue parrot café is very successful in the market.
So Research and development function helps Sainsbury’s to create new ideas, new tastes for different people and helps Sainsbury’s to be successful in the market, meet its objectives and to compete with its rivals.
All these functional areas are combined effectively. If the organization is to meet its objectives from time to time we hear of organization in which the functional manager have been pulling in different directions. Each function may have developed its own value and culture that are at odds with what the overall organization is trying to achieve.
(Diagram from www.j-sainsbury.co.uk)
Combining the functions
It is essential for the functions to combine if the business is to meet their objectives. From time to time some department mangers may develop their own values and cultures that are odd at what the organisation is trying to achieve. The best way to pull the functions in the same way is to create a clear set of company objectives that can then be made into functional objectives, so each function is driven by the organisations objectives.
Sainsbury has translated down its functional objectives so that each of the function is driven by organization’s objectives.
How the functional areas help Sainsbury’s meets its objectives.
In order for the functional areas to work effectively, they must be able to communicate with each other, at Sainsbury’s some of the ways they do this is by holding regular appraisals schemes, setting up staff training events and other staff development activities, organizing induction programs to familiarize, the functional areas with Sainsbury’s methods, which keep them up to date.
The staff at Sainsbury’s benefit from these activities, as they are able to gain experience, which makes them eligible for promotion, which gives them a chance to broaden their skills and knowledge. Sainsbury’s also benefits a lot from this, as it helps them to motivate staff which means Sainsbury’s will meet their aims/objectives a lot quicker.
At Sainsbury’s the administration department has a big impact on the other functional areas as it provides support services for other functional areas to operate effectively.
