Corporate Governance of J Sainsbury PLC - Case Study Example

J Sainsbury PLC s Submitted by s: Introduction J Sainsbury PLC was established in 1869 and currently has more than one thousand two hundred convenience stores and supermarkets in operations, while employing more than one hundred and sixty thousand employees (Zentes, Morschett and Schramm-Klein, 2011, p. 355). The company prides in putting his customers at the centre of all its operations and continues to make investments in its stores, employees and the channels it used to provide the best possible shopping experiences. Its strong values and culture form part of its identity and is fundamental to the success of the company. Brief history Sainsbury is the second biggest supermarket chain in the UK and commands a market share of about seventeen percent of the supermarket sector (Martin and Hetrick, 2006, p. 222). John James Sainsbury established it in 1869 as a shop in London and it grew to become the biggest retailer of groceries in 1922 while pioneering the self-service retail approach in the UK and having its heydays in the eighties (McLoughlin and Aaker, 2010, p. 129). However, Tesco overtook the company in 1995 as the market leader, with Asda becoming the second biggest in 2003, therefore relegating Sainsbury to third. J Sainsbury PLC, which is a holding company, is divided into three divisions that include supermarkets, convenience stores and the Sainsbury Bank. The headquarters of the holding company are located in the Store Support Centre of the company in Holborn Circus and the group is also interested in the property. The biggest overall shareholder of the company is Qatar’s sovereign wealth fund, holding almost twenty-six percent of the company, which is also listed in the London Stock Exchange. Sectors Sainsbury operates a variety of store formats that are intended to meet particular requirements of the customers and locations (Schnedlitz, 2010, p. 154). It also has online operations were groceries as well as non-food sales continue to increase, especially after the introduction of the Click and Collect service that enables customers to freely pick the non-food products they order online at stores that are convenient to them and this has demonstrated to be extremely popular with most of the customers. The company has a considerable portfolio that includes buildings and long leasehold properties as well as property that exists in joint venture engagements. The Sainsbury Bank deals with a variety of quality products such savings and loans, insurances and credit cards. Additionally, it provides the customer with quality products at good prices while regularly rewarding them with Nectar points when they choose Sainsbury to handle their finance and shopping. Sainsbury’s Energy provides economical and value added propositions that aim to make energy tariffs simpler while at the same time offering advice on energy efficiency for the customers. The company’s customers reap some value from having associating with the supplier of their energy in-store as well as over the phone while accruing Nectar points on a variety of commodities. In regards to Sainsbury entertainment, the customers are able to enjoy various forms of entertainment including music, books, movies along with games, and the progressive push by the company in to digital entertainment implies that the on-demand offer continues to grow (Smith, 2001, p. 150). Sainsbury is also involved in “insight to communication”, a joint venture with Aimia, making it a one-stop shop for various brands. The insight to communication brings together increased customer insight and a complete collection of marketing solutions for the engagement of customers at appropriate phases of their shopping journeys while motivating category and enhanced brand performance (Baines, Fill and Page, 2011, p. 407). Locations Sainsbury operates two main store formats; supermarkets and convenient stores, but had previously been using other two identities for its stores. The Sainsbury central referred to its smaller supermarkets while the SavaCentre and Sainsbury’s SavaCentre referred to its hypermarkets, although the company stopped using the two identities in 2005. By 2012, the company had five hundred eighty three supermarkets and five hundred and twenty three convenient stores, occupying a total space of more than twenty one million square feet. Typically, most of Sainsbury’s stores were situated in Southeast England and London, before the company was able to acquire Thoroughgood in the thirties. Expansion that has occurred since 1945 has allowed the company to have a countrywide reach, even though the company is yet to substantially penetrate Scotland in the same way that Tesco has done, and this may be attributed to the company being surpassed by Tesco in the bidding battle for William Low. Legal status In 2007, Sainsbury’s was the first key employer in the UK to start a staff recruitment system strictly through the internet with the intention of reducing costs for the company by more than four million pounds. This approach was adopted at a time when almost half of the adults in Britain were estimated to have access to internet in their homes, but it is forecasted that the number will increase to eighty percent by 2020. In 2006, a report by the British anti-poverty charity condemned the conditions that were experienced by workers in Kenya who were involved in the supply of cut flowers to Sainsbury’s (Lewis and Potter, 2011, p. 57). Additionally, the company’s supermarkets have faced prosecutions severally for the sale of food that has expired and evidence has revealed that some of the employees working in the supermarkets have not gone through appropriate training as far as food safety is concerned. In 2014, the picture showing that the Holborn Sainsbury’s franchise reacted to anti-Semitic fears through removal of kosher commodities from its shops appeared on Twitter, and complaints were all over social media stating that it was a discriminatory act against Jews. In a reaction to the negative repute that was created, the products were returned to the shelves and the employee who had moved them faced disciplinary measures. Organizational structure Sainsbury’s Board is mainly focused on assisting in the creation of prolonged sustainable value for all its shareholders in regards to the management of performance and risk, governance succession plans, as well as strategic leadership (Hopwood, Unerman and Fries, 2010, p. 66). Every day management of the Group is given to the delegated to the Operating Board that is under the leadership of a Chief Executive who has the responsibility of executing the strategies of the company that have been settled upon by the Board. He is supposed to create a system of strategies, objectives, and values that will make sure of effective achievement of outcomes while at the same time allocating responsibilities to other people in the company appropriately. The company has a commitment to exceptional corporate governance standards and applies the supporting principles associated with the Corporate Governance Code of the UK (Bloomfield, 2013, p. 215). This has put emphasis on the need for appropriately balanced, supervision of the management of risk, effective boards as well as aligning of remuneration policies in regards to the interests of the shareholders and working relations. It is the responsibility of the board to deal with internal control systems along with managing risks, as the system of internal controls is intended to manage instead of eliminating risks of failure with the aim of achieving the business objectives of the company and providing practical assertion against losses or misstatements. The internal control systems as well as risk management are entrenched in the operations of Sainsbury’s and the measures that are taken to alleviate any faults are monitored in a careful manner. Recent financial performance In the period between 1990 and 2010, the turnover of the company rose from almost seven billion pounds to more than twenty one billion pounds, with a slight decline in 2005, as some sections of the company were being restructured. Pre and post-tax profits have been fluctuating, with majority of the years realizing pre-tax profits of between five hundred and seven hundred million pounds and a profit for a year being between three hundred and five hundred million pounds. 2005 and 2006 showed a decline in figures as 2005 was characterized by extraordinary costs of approximately one hundred million pounds, while in 2006 the company spent one hundred and fifty million pounds one-off costs of operation that included sixty three million for the termination of an IT outsourcing contract it had with Accenture. Reports in 2012 stated that Sainsbury’s had exceptional financial performance in that year to reach six percent profits with part of this success being attributed to manufacturing of own brands by the company’s supermarkets. The marketing strategy The values and vision of Sainsbury’s have remained the same and it has continued to refine its goals so that they can reflect its commitment to ensuring the needs of the customers have been met when they wish to shop for clothing, general commodities, food as well as a variety of services. The company has also updated its strategy through its vision of being the most trusted retailer that will created a good environment for working and shopping (Blythe, 2010, p. 160). The main objective of the company is to ensure that the live of the customers are made easier by providing superior quality and services at fair prices and serving the customers anywhere are anywhere they need to be served. Since the company claims to know its customers better than any other business, its strategy is to ensure that it remain accessible to the customers while offering superior commodities and services that have been priced affordably and Sainsbury’s uses this as its differentiation strategy. Sainsbury’s was among the companies that founded the biggest retail loyalty scheme in the UK known as Nectar, which enables customers to accumulate points on most of the products and services they acquire at Sainsbury’s and other participating retailers that they can redeem for various products. For each pound the customer spends, two points are earned, while offering one bonus point for each of the carrier bags that are reused by the customers. furthermore, the company runs a voucher scheme every year for local firms to redeem equipment for various activities including sports, where the customers are able to earn the vouchers when they shop so that they can donate them to the firms the choose to be redeemed for points that can be spent on products from a catalogue. From 2010, Ellie Simmonds, a Paralympic swimmer, has been the ambassador for Sainsbury’s Active Kids, while David Beckham became an Active Kids ambassador in 2012 with the aim of emphasizing the sponsorship. Summary According to Sainsbury’s, customers are an integral part of the business and in terms of future success, it needs to understand what they need to do, therefore, it has regular interactions with its customers in order to get a comprehensive portrayal of the manner in which they shop throughout all its channels. These interactions also seek to find out what the customers value, the manner in which their needs are evolving and better ways of ensuring the customers remain satisfied. This awareness, along with superior products, brands that are trusted by the customers, as well expansive retail space in strategic locations has assisted the company to deliver what the customers need and provide a competitive advantage in the industry. Bibliography Baines, P., Fill, C. and Page, K. 2011, Marketing, Oxford University Press, Oxford. Bloomfield, S. 2013, Theory and practice of corporate governance, Cambridge University Press, Cambridge. Blythe, J. 2010, Marketing essentials, Butterworth-Heinemann, Amsterdam. Hopwood, A., Unerman, J. and Fries, J. 2010, Accounting for sustainability, Earthscan, London. Lewis, T. and Potter, E. 2011, Ethical consumption, Routledge, Milton Park, Abingdon, Oxon. Martin, G. and Hetrick, S. 2006, Corporate reputations, branding and people management, Butterworth-Heinemann, Amsterdam. McLoughlin, D. and Aaker, D. 2010, Strategic market management, Wiley, Hoboken, N.J. Schnedlitz, P. 2010, European retail research. Gabler Verlag, Wiesbaden. Smith, D. 2001, Food industry and the Internet, Blackwell Science, London. Zentes, J., Morschett, D. and Schramm-Klein, H. 2011, Strategic retail management, Gabler, Wiesbaden. Read More