The Classification of Sainsburys

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The Classification of Sainsburys

Sainsburys is a plc, a public limited company and has limited liability, which is the idea that the owners (shareholders) are financially only responsible for the amount that they have invested in the company rather than their personal wealth. So if a firm becomes insolvent, the maximum the creditors can receive is the shareholders original investment. In order to both protect and inform creditors the word Ltd or Plc appears after the company name. By limiting the shareholders liability it encourages people to invest in the company, as it is possible for them to invest with little risk. Public limited companies are the only type of company to be quoted on the stock exchange. Plc's are part of the Private Sector, which is the part of the economy owned by either private individuals or the shareholders. The Public Sector is the organisations that are either owned or funded by the local or national government.

However there is some concern with plc's that even though the shareholders own the company the management team run them and this can lead problems with conflicting loyalties where managers may pursue objectives that can improve their job satisfaction or benefit their careers instead of looking after the shareholders best interests. Divorce of ownership and control is a common phrase used to convey the concern for this.

Advantages

Disadvantages

Owners have limited liability

Going public can be expensive

Shares can be advertised

Some plc's can grow so large that there may be come difficult to manage

Shares can be sold through the stock exchange

Risk of takeover by rival companies who have bought shares in the company

Large plc's may find it easier to borrow from banks

Objectives

Sainsbury's strive to meet their objectives, these are:

* Understand customers better than anyone

* Be energetic, be innovative and be first for customers

* Use our strengths to deliver unbeatable value to our customers

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

They are using and improving customers services all the time, throughout the country right now they are implanting the following things:

* Sainsbury's aim to provide shareholders with good financial returns by focusing on customer needs adding value through their expertise and innovation, and investing for future growth.

* Reducing checkout times: at Sainsburys stores, checkouts will continue to be opened if customers have more than one person queuing in front of them, until all checkouts are open.

* Staff training: Sainsburys is running a staff-training scheme called First Class Service. The aim is to encourage all staff to see themselves as company ambassadors and to use their own ideas when serving customers, based on how they themselves would like to be served.

* Sainsbury's are able to give customers the service and products that they want in theory insuring that people continue to shop at Sainsbury's and enjoy good customer service while the shareholders will be happy as they will be getting a reasonable return on their money.

* Opening a customer service centre: a 400-strong team handles over 100,000 phone calls a week, as well as letters, e-mail and faxes all relating to customer queries, questions and comments on Customer Service and other internal aspects of the Sainsburys stores.

* In providing outstanding value for money and a wide range of products Sainsbury's compete strongly with competitors in the market.

* Introducing customer assistants: 5,000 new staff dedicated solely to helping customers at every point in their shopping trip

* Opening a customer service centre: a 400-strong team handles over 100,000 phone calls a week, as well as letters, e-mail and faxes all relating to customer queries, questions and comments on Customer Service and other internal aspects of the Sainsburys stores.

* Pioneering home shopping so that customers can use the Internet to select and order goods from their local store for home delivery.

* Opening new types of store to meet the changing needs of more groups of people as well as existing customers, and indeed piloting 24-hour shopping in some areas.

Sainsbury's serve on average over 9.5 million customers a week and currently has 432 stores in the U.K., mostly situated in town centres or on the edge of town. A large percentage of these stores were built on previously derelict sites. Sainsbury's has in the last year opened many new stores and has extended 27 older stores. In the next year Sainsbury's plan to open another 13 stores and to extend another 22 stores.

Being a firm believer in playing an active part of community Sainsbury's donated £5 million to charity groups, community projects and sponsorship. Annually Sainsbury's run a reward scheme for schools and so far has donated approximately £24 million in equipment to schools.

Sainsbury's launched a new Low price guarantee in October 1999 on 1,600 of its most regularly purchased items including its own brand label as well as some top brands.

Is Sainsburys being successful in meeting its objectives?

To try and measure whether or not Sainsburys has been successful in meeting its objectives I have gathered information from the company.

I have gathered information referring to the company's recent financial turnovers:

Financial results

(£ million)

996(b)

997(c)

998(d)

999(e)

2000(f)

Group turnover (including VAT and sales taxes)

3,499

4,312

5,496

6,378

7,414

Increase on previous year

1.9%

6.0%

8.3%

5.7%

6.3%

Group operating profit (before Year 2000 costs and profit sharing)

Sainsbury's Supermarkets

778

692

766

732

522

Home base

26

6

55

75

57

Shaw's

-

41

38

53

80

Sainsbury's Bank

-

(6)

(15)

(5)

3

Sainsbury's Egypt

-

-

-

-

(11)

Other operating activities

(1)

2

0

2

6

803

745

854

867

667

Year 2000 costs

-

-

(20)

(28)

(6)

Profit sharing

(50)

(37)

(44)

(45)

(10)

Associated undertakings

9

9

6

1

Interest receivable/(payable)

(59)

(76)

(78)

(50)

(72)

Group profit before tax, amortisation of goodwill, exceptional costs and non-operating items

764

651

728

755

580

(Decrease)/increase on previous year

(5.4)%

(14.8)%

1.8%

3.7%

(23.2)%

Earnings per share

Basic

26.8p

22.0p

25.1p

29.2p

8.3p

(Decrease)/increase on previous year

(10.1)%

(17.9)%

4.1%

6.3%

(37.3)%

Diluted (before amortisation of goodwill, exceptional costs and non-operating items)

27.8p

23.1p

26.6p

26.8p

20.5p

(Decrease)/increase on previous year

(4.1)%

(16.9)%

5.2%

0.8%

(23.5)%

Dividend per share

2.1p

2.3p

3.9p

4.32p(a)

4.32p

A Sainsburys aim was to provide shareholders with good financial returns by focusing on customer needs adding value through their expertise and innovation, and investing for future growth.

Using the table above taken from the Sainsbury's annual report of year 2000 I have concluded that Sainsbury's is not meeting the above objective. The underlying profit of the company (before tax) has decreased from 755 million pounds to 580 million pounds. A total lost of 175 million. The underlying earnings per share have also decreased from 27p to 20.5p however shareholders are still receiving a dividend of 14.32p per share, a stick from 1999. Judging by these figures Sainsbury's had a very slow year, probably behind its main competitors in innovation and sales thus not meeting its objectives in the year 2000. However In the year to 31 May 2001, J Sainsburys plc reported total sales up 5.9% to £18.4 billion and underlying group profit before tax, amortisation of goodwill and exceptional items of £549 million. The fact that they were not as profitable the year before leads me to believe that this year could have been spent improving their company's systems perhaps. They piloted a new stock control system, which is talked about later on, as well as dabbling in the internet (on-line shopping market). So infect I believe Sainsburys have met this objective.
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To achieve efficiency of operation, convenience and customer service in their stores, thereby creating as attractive and friendly shopping environment as possible. To reduce checkout times.

Obviously since I have not been in the facilities of every Sainsburys and every customer in the UK, I cannot strictly answer this. Although there is evidence pointing towards its truth, such as the integration of the scanners whilst shopping. There was also a survey that stated customers were happy with check times within the supermarket. (These polls can be found at http://www.j-sainsbury.co.uk) So it is my belief that they successfully ...

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