The Management and the Competitors of Sainsbury's Company - Term Paper Example

Learning and self-development in the context of part time work Introduction J Sainsbury plc or more Sainsbury’s is the largest food retail chain in Britain. It was incorporated in 1922 and has climbed a long way from its humble backgrounds to be a global player. According to surveys, Sainsbury’s is one of the largely respected brands in the whole of Britain. Two young people- Mary Ann Staples and John James Sainsbury started the company in 1869. Their business was an instant success and more and more branches were added to their repertoire. Their business was based on the model of offering quality products at low prices. The company led much importance on the quality of products and organized thorough training of their staffs. In 1971, the company changed its name by eliminating the initial J and subsequently in 1973, it became a public company. Increase in competition led the company to open up diversified stores consisting of grocery items and other retail products. Sainsbury’s has cemented its position as a market leader by acquiring other chain stores and entering into newer markets like USA and Scotland. The introduction of self-label products also helped to increase the profitability of the corporation (J Sainsbury plc, n.d.). Sainsbury’s have succeeded in maintaining its position when all other family owned businesses have fallen through with its dedicated management and innovative techniques. This augurs well for the prospect of the company. Sainsbury’s have entered the field of retail banking as well. This paper will look into the management style, culture and the competitors of Sainsbury’s. Competitors of Sainsbury’s and the differentiating factor Sainsbury’s have chartered into international markets from its base in Britain. Therefore, it faces competition from different companies in the countries they operate. In the supermarket category in the UK, it faces tough competition from Tesco, Asda and Safeway. Sainsbury’s operate in the US by holding the Shaw’s retail chain. It operates in New England in the US and the main competitors there are Ahold’s stop & shop and Hanford’s stop & save. Sainsbury’s along with its competitors operate in the supermarket industry. Certain trends are unique to this industry. The consumers are driven by discounts in this industry. The supermarket giants will bargain with the distributors for more discounts in exchange of shelf space. As a result, the profitability will decrease on these products. However, the profitability can be recovered with the introduction of self-label products, which will allow the supermarkets to earn more income. Advertisement spending consists of a large share of the expenses in this category from 15-25% with more emphasis on Internet marketing. There has been a recent trend in the consumers to buy healthier foods and this is driven by the fact that suppliers are promoting more health foods. Intensified competition has resulted in more mergers and acquisitions in this industry and global superpowers are driving relentlessly to make their presence felt in newer virgin markets. The industry is characterized by low profitability ratio and this means that there should be more sales volumes to garner more profit. The bargaining power of the suppliers and consumers is intense in this industry and the supermarkets have to set off these trends to remain in the industry. The competitors of Sainsbury’s understand the industry very well and this leads to more competition for the company. The biggest player in the UK supermarket industry is Tesco, which owns 30.6% of the market share. Initialized by Jack Cohen in 1924 Tesco now offers a wide range of products at their stores including groceries, electrical goods, books, personal finance etc. The wide range of products available in the store and the setting up of their virtual online store has driven the growth of the company in UK. Asda positions itself next to Tesco capturing about 16.6% of the market. After it was taken over by Wal-Mart, Asda has been able to overtake Sainsbury’s by the strategy of delivering goods at lower prices. It owns 259 stores in Britain and the chain is utilized in catering to customers of all sectors. Sainsbury’s stands at a close third position in the market with a share of 16.3%. Safeway is a big brand in the US with its stores all over the country. In the UK though, its sales has decreased over the years. However, it still is a key player in the market. Safeway concentrated in pushing their brands in the stores, which enabled them to earn more income. It has also diverted into other products. Tesco has gone on to lead the market with a market share, which is almost unattainable (Tescos market share still rising, 2006). However, Asda has constantly beaten Tesco over the best-priced supermarket tag for the last few years after being acquired by Wal-Mart. The price gap has been closing fast but still, Asda is the cheapest store in the UK and it beats other players in the field by some distance. As the price war is heating up, other supermarket chains are increasingly trying to attract customers offering them other facilities. With competition heating up in the UK market there has been a virtual price war between the companies. This has resulted in decreasing margins of profit. Sainsbury’s, from the days of its inception, has maintained the principle of quality in their products. It has not engaged fully in the price war and some of its products are high priced. However this has not discouraged the consumers to purchase from Sainsbury’s. This strategy of maintaining quality in the face of intense pressure from rivals has made Sainsbury’s a coveted brand. The strong point and weak point will divulge more details about the brand. A SWOT analysis in this regard is as follows: Strengths: The Company’s continuous growth and the experienced management team at its helm is the core strength of Sainsbury’s. In addition to this, the company has a wide network of stores with trained personnel. The public relations system of the company is also quite developed. Its emphasis on quality has made the company one of the most coveted supermarket chains in the world. Weakness: Though Sainsbury’s have its presence in the other markets, the main concentration of its stores lie in the UK. Moreover, in the US and Scotland the company operates in tandem with other companies. As a result, it has limited powers in other markets. This may be a cause for trouble if the food industry in the UK goes through a slump. Opportunities: The Company is entering into newer areas of function like retail business. This area offers a good opportunity for growth. Subsequently other investments have also been made by the top-level management to expand the existing business of the company in other countries. The online sales mechanism offers a good opportunity for the company as the investment is low and the profit margins are higher. Threats: The continuous price war between the competitors in UK has resulted in the decrease of profitability ratio. The bigger players operate in the market with higher market share. Sainsbury’s on other hand, did not indulge in the price war and this has resulted in a trend of decreasing sales. Sainsbury’s with its dedication on quality has withstood the intense pressure from the competitors in UK. There are many occasions for the company to grow in the UK and beyond it. It has been able to create a brand for itself amidst the price war and the time has come to extend the company beyond the shores of UK. The competitors in the US are small players and more emphasis on this market will augur well for the company in the long-run. Relation with the external environment The industry in which Sainsbury’s operates in is highly affected by the external environment. The companies in this sector are influenced by the Government regulations and the bargaining power of both the suppliers and customers. The companies in the supermarket industry influence the general environment of the market. The price war between different business houses in the market has resulted in the general reduction in prices of the food products. It has also resulted in the practice of discounting among the companies. The customers are attracted by the general reduction in prices in these stores and this has resulted in the destruction of small scale stores in the country. The marketing strategies of these companies have also improved and this has resulted in the increase of online sales. Sainsburys sells six billion pounds of British foodstuff every year, which is an evident mark of strength according to a SWOT analysis. The company operates closely with smaller-scale sellers to spread out local sourcing wherever feasible, and maintains a network of more than 3,500 local sellers. In May 2006, Sainsburys introduced a ground-breaking scheme which was called Supply Something New, to facilitate the small and medium-sized sellers to acquire access to Sainsburys and produce locally produced food that would be available to a greater number of customers (Annual Report 2007). The relation of Sainsbury’s with the external environment and its influences can be grasped from the Pest analysis. PEST analysis is a model, which underlines the relation of the company with the external environment like Political, Economic, Social and Technological factors. This analysis can be done in reference with Sainsbury’s: Political Factors: The increasing integration of the world market because of globalization has embraced fresh opportunities as well as challenges for Sainsbury’s. The foremost challenge is posed by the competition with unknown forces in the market and to supply the best quality products that are financially viable from all over the world. The company can enter and participate in the markets of the emerging companies by means of partnerships or joint ventures for the purpose of surveying these new markets. The decrease in the corporate tax in 2008 has also lead to greater savings for Sainsbury’s (Corporation Tax, n.d.). However, Sainsbury’s have a chance of suffering from ill-reputation owning to the investigation that has been going on the fixing of prices by the big four supermarkets of UK, namely Tesco, Asda, Morrisons and Sainsbury’s (Rigby, 2008). Although Sainsburys is quite well established in the customers section, these allegations might give it a negative public image because of anti-feelings rising among the consumers. Economic Factors: The swiftly rising food crisis all across the world has lead to an increase in the prices of food. This rise in price has resulted in increasing purchasing costs for Sainsbury’s. This has impacted the margins of the company and has lead to increase in prices of its products as a direct consequence of the rise in the costs incurred by it. Moreover, the recent hikes in the oil prices have similar implications all the way right through the supply chain of Sainsburys that has ultimately lead to an overall scenario of price rise which is expected to go higher with greater hike in the oil price. The effect of the global credit crunch has led to decreased purchasing power in the hands of the consumers and hence, it is quite evident that the customers would be wary with their expenditure and restrict themselves to the purchase of essentials. This has however had a negative consequence on the profit margins of Sainsbury’s since a large part of their earnings come from the sale of luxury items. Since Sainsbury’s even operates a financial services company along with HBOS (Annual Report 2007), the global economic crisis has also affected it in more than one way. The financial crisis has directly affected Sainsbury bank especially with respect to its ability to provide credit since it does not hold an established ground in the financial services sector. Moreover, neck-to-neck competition among the retailers in the market has resulted in a number of incentives given by the retailers to the consumers to get better share of the market. Since, Sainsbury’s target the up market, it has faced problems in lowering its prices significantly compared to the others. However, it has experienced a rise in selling of its food takeaway boxes, as customers prefer preparing food at home rather than visiting any restaurant or taking the service of takeaways. It has also seen a rise in its Christmas sales by 4.5 percent (Stiff, 2009; Leroux, 2009). Social factors: owing to the present awareness of health, a greater emphasis has been put on fresh and easy low calorie food and cooking. Sainsbury’s has taken advantage of this as shown by the increaser in its sales of food take away boxes. However, it can further exploit the situation by creating new recipes and simple cooking styles. The government has also put an immense emphasis on the concept of healthy eating mainly owing to the growing rate of obesity in the United Kingdom (Department of Health 2008). This has resulted in a paradigm shift of consumers from high-calories to proper eating and life style. This gives Sainsbury’s an opportunity to come up with a greater number of healthy food or produce healthier foods at a less expensive price than other retailers so as to reap the advantages from this new trend. Technological: The Internet technology has been continuously growing within western countries. It is expected that online retail revenues will increase to 263 billion euro in Europe by 2011, with British purchasers accounting for more than a third of total revenue. The Internet makes up for 8 percent of total advertising expenses and is growing rapidly (The Economist, 2007). If used skillfully, Sainsburys can pull the internet to its benefit. One of the disadvantages of shopping in supermarkets is the queuing system that customers frequently find themselves in at the checkout. Self checkout equipments, used by Asda and Tesco, could assist resolving this problem, particularly for consumers who have to queue up for a few items. Moreover, self checkout equipment could facilitate Sainsbury’s in opening 24 hours stores that might help enhance sales. Though RFID (Radio Frequency Identification Device) technology is not that accepted, yet it can be used for considerable advantages to Sainsburys supply chain. If implemented, this technology would produce fewer inventories for the supermarket companies leading to a more profitable organization. Sainsbury plc apart from being the leading food retail chain in UK has also keen interests in financial services. It has branched out into several convenient stores which comprises of Sainsburys Supermarkets, Sainsburys Local, Jacksons Stores, Bells Stores and JB Beaumont, Sainsburys Online and Sainsburys Bank. Their main objective is to offer good service to their customers and in that way provides their shareholders with excellent and sustainable financial returns. They seek to make sure that all their employees have opportunities to cultivate their abilities and for that they are given incentives and rewards for their involvement in achieving the targets of the business. The management styles employed in Sainsbury’s Most organizations employ some kind of management system with varies across the companies with respect to the purpose, depth, extent of bureaucracy and style. Generally there are three key management styles employed by firms. These are namely, autocratic, consultative and democratic. As the name suggests, autocratic management style is one where the manager plays the role of an autocrat. The manager gives instructions regarding the course of action without consulting or discussing with the employees. He is the sole contributor to the process of decision making in the firm. The consultative management style is opposite to autocratic, where the manager consults with the employees and considers their opinions before taking any decision. The democratic management style is more prevalent in large corporate houses. This style employs a method within an organization that facilitates free flow of thoughts and sharing of those thoughts between employees and managers. It encourages more participation by delegating job responsibilities and tasks to the subordinates. The managers of the organizations need to inspire the team as a whole and encourage each individual singly. Team motivation shoots from the personal eagerness of the manager, the way work is distributed and structured, a clear understanding of the goal and the established standards for reaching that goal. The company’s manager sets a model with his/ her own personal organization and behavior and creates an atmosphere conducive of progress and approval of change. Individual motivation is gained by means of personal rapport and the tacit understanding of what the employee and the company’s manager look forward to get from each other. A crucial component of this inspiration is the design of the person’s job, which should have the correct amount of challenge and diversity and direct towards a perceptible and significant outcome. Everyone ought to have agreed objectives that bind into comprehensible goals, in addition to personal and career growth from challenging tasks, professional benchmarks, feedback and coaching (Whetten and Cameron, 2005). In Sainsbury’s the essence of efficiency is its teamwork. More clearly, the present management style of Sainsbury’s is democratic involving a wide participation by its employees. Sainsbury’s has a well-built web-based alerts and resolution system (ARM) that allows it to make sure that it can overcome any business issues that might arise. The Arm also enables the company to improve working relationships and achieve optimum supply chain efficiency. These are all in a roundabout way associated with the performance management evaluation. Communication is the chief factor in the supply chain management. Sainsbury’s as a corporation completely understands that. They are aware of the fact that to enhance customer satisfaction, propel sales and handle customer loyalty by making the right products accessible at the right time, they have to boost orderliness relationships with suppliers. This is familiarly known as supplier relationship management. It can be said that Sainsbury’s employs two performance management systems which are the ARM system, along with the employee evaluation system. The employee evaluation system is used to determine the level of performance of an employee and to find out their situation within the corporation in connection with pay rises and promotion in the future (Personnel Today, 2005; How Sainsbury’s transformed its Supply chain, 2004). On the whole, Sainsbury’s is extremely employee oriented at every level by making use of of a number of indicators to monitor this. The Chief Executive Officer, Justin King emphasizes on the team approach of working and has by far been a great leader in the company. The team approach starts from the CEO and flows through the employees and makes each employee feel cared for. Such individual interaction becomes difficult for big business houses like Sainsbury’s and hence, it is a big challenge for the managers and leaders to ensure it. This is a continuously developing area and further work is done to foster the team work. The outstanding chain planning and career expansion accessible by Sainsbury does reflect that staffs are valued in the company and they are also made to understand it. Sainsbury’s employs efficient corporate communication tools to make sure that there is effective shop floor communication. It is also based on the one team approach. From a period of three years, from 2004 to 2007, the company has realized a 10 percent increase in employment engagement (Investors in People, 2007; Mullins, 2007). There has also been a development in the management of non-attendance and their index training is also functioning to a greater level. Talent management is also vital and of quite a good standard and the company is constantly enhancing the potential of their workforce. Sainsbury’s main asset is its ability to cultivate employees through questions and constant improvement, and they do not shrink back from difficult decision or troubles. Investor in People has lent a hand in focusing activity to sections that need it; say for instance it was pointed out that Sainsbury’s induction programme needed to be modified to some extent. The engagement survey examined from a somewhat different perspective and stretched out to get it work harder and do extremely well as a human resource tool. Moreover, in consequence of the assessment, performance management all across the company needed to be examined and amended and their training guide simplified. Their intranet system also functioned effectively and was also an extremely good way to communicate all across the company. There were quite large improvements within the company. However, there is a continuous focus on achieving an even higher level of efficiency in the workplace. This clearly explicates the kind of thriving working culture they have along with a driven fortitude to grow to be the best. Sainsbury’s has everything done correctly right from the crest to the bottom, with the CEO, Justin King, representing outstanding leadership and integrity with all associates at the leading edge. The things that make Sainsbury’s a great company is its ingenuousness and eagerness to learn and improve, which by all means are the characteristics of a successful business. Each region that looks after the retail operations in Sainsbury’s has a training subdivision offering professional training services to their stores. Every store is provided with an individual personnel manager and several store instructors excelling respectively in co-coordinating training programs and conducting daily training of sales employees (Towers, 421). Culture of Sainsbury’s Corporate culture takes a vital position in determining the economic operation of firms. Corporate culture can be advantageous and at the same time be onerous within the same company. In fact, it is considered that the strength of Sainsburys business culture helped it in not reacting to competitive changes swinging its home market near the beginning of 1990s. However, the very business culture that was growing to be increasingly inapt within the food retailing market in the UK was being profitably employed broad by Sainsbury (Shackleton, 1998). Values present in the workplace are more often subject to culture. Generally companies’ having global networks like Sainsbury’s have employees with different cultures and it is an important challenge to coalesce such differences in to one common corporate goal. In the theory proposed by Hofstede, different cultures are understood in the light of five aspects namely, “power distance index (PDI)”, “individualism (IDV)”, “Masculinity (MAS)”, “Uncertainty Avoidance Index (UAI)” and “Long-term Orientation (LTO)” (Hofstede, n.d.). PDI is defined as the extent to which the members of businesses and institutions who are less powerful acknowledge and presume that power is spread unequally. This stands for inequity (that is, more versus less), which is however identified from below and not from above. Individualism deals with the degree to which individuals are not incorporated into groups. In other words it refers to the opposite of collectivism. Masculinity is defined in contrast to feminity. Masculinity is defined as one which follows a management style of competition and assertion while a feminine culture is one which is more amenable and modest. Uncertainty avoidance index is used to measure the extent to which the culture of an organization is able to make its employees comfortable in an unprecedented situation. In other words, it means how well a culture accepts uncertainties in the organization. Long term Orientation (in comparison to short term orientation) is related to the values of prudence and perseverance (Hofstede, n.d.). Sainsbury’s has emphasized on the customers services section with respect to not only meeting customer requirements of products but also needs related to childcare facilities, free parking, reducing the length of queues, food courts and one-stop shopping plazas. The use of information technology to meet better the customer needs has benefited both t he customers and the organization as well. A lot of training has led to this imbibed culture in the organization. The underlying factor to success in any business is customer satisfaction. Sainsbury’s is extremely aware of this factor and hence worked a lot in developing this field. Improving such services is one of the main strategies to boost the competitiveness of organizations that offer services. Hence, Sainsbury’s since the early 1900s has stressed on the reorientation of its organizational structure so as to give better services to its customers (Towers, 422-425). The companys rule is to work with all of its suppliers fair and square, recognizing the mutual gain of satisfying customers needs. They also intend to fulfill their duties towards the communities and surroundings in which they carry out their operations. References 1. J Sainsbury plc, 2007, Annual Report 2007, Available from: http://www.sainsbury.co.uk/ar07/downloads/Sainsbury_Review_2007.pdf (Accessed on Feb 12, 2010). 2. Corporation Tax, n.d., “Finance”, Available from: http://www.acs.org.uk/en/Advice/advice_guides/finance/corporation_tax.cfm (Accessed on Feb 12, 2010). 3. Stiff, P, 2009, “Sainsburys Christmas surge defies retail gloom”, Available from: http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article5471924.ece (Accessed on Feb 15, 2009). 4. 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