Principle of Corporate Legitimacy in Tesco Plc, Sainsbury, W M Morrison - Case Study Example

Corporate Social Responsibility Table of Contents Corporate Social Responsibility 1 Table of Contents 1 Abstract 2 History of retail in UK 2 Stakeholder’s Theory 3 Who are the Stakeholders 3 The Theory 4 Methodology 5 The companies: Overview 5 Tesco Plc 6 Sainsbury 6 W M Morrison 6 The Companies & the Suppliers 6 Findings 9 Conclusion 10 Recommendation 10 Reference 11 Bibliography 13 Abstract Corporate social responsibility is a conception where companies assimilate and incorporate their social and environmental concern in the operations (Corporate watch, 2006). Sharing of their commitment to the stakeholders is an integral part of this responsibility. One commitment of the business is surely to enhance the quality of life with contributing towards sustainable programs (Corporate watch, 2006). At the same time working with employees, suppliers, local communities, distributors, customers and governments make this venture a joyful journey. A long sustained relationship with the stakeholders only can make an organisation sustainable and successful, which is quite needed in such a competitive environment (Jensen, 2000). Log term relationship with suppliers has been one of the core advantages of the successful big companies around the globe. This report is an attempt to look insight into the sharing and commitment between the companies and their respective suppliers. History of retail in UK The past British UK industry was mostly crammed with a striking mix of the butchers, pubs, bookshops newsagents, tobacconists, greengrocers and small family-owned general stores. In due time these started to get filled by the supermarket retailers, mobile phone shops and fashion outlets (Hamlett & et.al., 2008). In late twentieth century, retail started changing in a more complex form. Back in 1955, a conventional high street of Britain used to have autonomous shops as well as the shops owned by multiple and cooperative retailers. Shops based on counter based were competing with the self service stores and the very first super markets (Hamlett & et.al., 2008). The economical advantage of manifold food retailing enabled them to have enhanced share in the mid twentieth century. Between the wars, the spending capability of the working classes increased with an increase in the availability of cheap, imported food items. This situation encouraged rapid growth of the multiple grocery shops. Back in 1939, the cooperative retail societies and multiple retailers were accounted for around 24 % and 25 % share of the sales in retail groceries (Hamlett & et.al., 2008). Apart from these retailers, few independent retailers also had large stores in significant localities. By 1947, there had been only ten self service retail shops in Britain. Later on in the late in 1950s and 1960s, the number started growing rapidly. In 1961, the number of super market stores in Britain grew from a number of 50 to a huge 572 within 11 years time period. By 1969, this number raised to a stunning 3400 (Hamlett & et.al., 2008). Stakeholder’s Theory Who are the Stakeholders Stakeholders are the groups or individuals ‘who can affect or get affected by the achievement of the organisation’s objectives’ (Friedman & Miles, 2006, pp 1). The common groups of stakeholders include shareholders, suppliers, employees, customers, distributors and local communities. Adding to it, there are some groups which can be named as stakeholders. For an instance, unions or associations of distributors or suppliers and the NGO’s can be pulled under this category. The Theory The organisation, itself, can be thought as a gathering of different stakeholders. The aim of the organisation would be to meet all the needs of the stakeholders and align their activities as per the interests of the groups and individuals attached to it. While doing this, a specific group of stakeholders would be known as focal and they have the responsibility to meet the interests of the stakeholders. Most of the times, these group of stakeholders include the top echelon managers. The concept had been elaborated onto principles (Friedman & Miles, 2006, pp 1-5). Principle of corporate legitimacy A corporation must be managed to meet the interest of the stakeholders. Shareholders, suppliers, owners, employees and local citizens are an integral part of the enterprise. This is quite important to ensure their rights and at the same ensure their participation in decisions which are supposed to put a substantial impact on them (Friedman & Miles, 2006, pp 1-5). The stakeholder fiduciary Principle Management shares a fiduciary association with the stakeholders and with the corporation with the assumption of abstract entity. So they must act in interest of the stakeholder groups as well as in sustainability of the firm in long run. Later on these two principles got altered and renamed in 2004 (Friedman & Miles, 2006,pp 3-10). The stakeholder enabling principle An organisation must be managed in alignment with the stakeholders’ interests. The principle of director’s responsibility Directors of an organisation are responsible to formulate and control the activities in agreement with the stakeholder enabling principle (Friedman & Miles, 2006, pp3-10). These are mainly the part of normative theory of stakeholders where the theories are based on how managers should react in accordance with the interests of the stakeholders. This must be done based on some ethical principles. There are a few more approaches towards this theory. A number of them are concerned with what the mangers actually do and what their perception is about the same. This approach is named as Descriptive Stakeholders’ theory (Friedman & Miles, 2006, pp 3-11). One of the approaches is based on the Instrumental stakeholders’ theory. The proposition is that working in accordance with the stakeholders’ interest would result in sustainable and successful organisation. These three approaches are very much important for an organisation to have sustainable growth with stakeholders’ involvement in that (Friedman & Miles, 2006, pp3-10). Methodology An attempt had been put forward to produce a report on the stakeholder issues of the companies operating in retail industry. The stakeholder, to be in focus, has been chosen to be the suppliers. The whole research has been on qualitative basis. The data collected were from the respective corporate responsibility reports of the companies. The issues have been articulated for three companies, so that a conclusion can be put forward by comparing between the issues in these companies. At last recommendations have been provided on how the companies can make better relationship with the suppliers and resolve the issue attached to them. The companies: Overview The companies, which have been chosen, to prepare this report include Tesco Plc, Sainsbury and Wm Morrison. These three are the leading retailers of UK. An overview has been provided for each of them. Tesco Plc Tesco is the leading retailer in UK with more than 4330 stores in UK and thirteen other countries (Hoovers , 2010). This third largest grocery retailer operates in food as well as non food items. In these items they offer a varied range of products staring from Value and Discount Brands to the Premium ones to their customers. No doubt, it is quite ahead of most of their competitors and on way to move ahead of the rest. Sainsbury Sainsbury, the third largest grocery seller, is getting back to its track very soon. It has a chain of some 500 grocery stores across UK. The company operates with some 290 convenience stores under three different banners; Sainsbury’s local, Bells and Jacksons. W M Morrison Wm Morrison supermarket chain has moved up the ladder by the acquisition of its rival, Safeway Plc. The company is the fourth largest grocery retail chain in UK, operating in more than 380 stores across Scotland and England. The product range varied form food to non food items. The Companies & the Suppliers Tesco has been proud to make progress across their business divisions with the assistance of their suppliers and customers. They have thousands of wide ranged suppliers around the world. Their aim has been to assemble the suppliers in a mass movement and let them take the rally with the organisation. They have been working with their suppliers to cut on the emissions in supply chain. They have issued and developed the clothing green factory framework which would help their clothing suppliers to make their existing factories more energy efficient, in compatible with the environment. In some other initiatives like ranging from packaging reduction to fish sustainability, Tesco prefers to involve their suppliers in the every effort they take forward (Tesco, 2009, pp 14- 27). They are concerned about the suppliers view points. For an instance they have been carrying out suppliers’ view point survey since 2005. Over 90 % have given a view point that Tesco is trustworthy, consistent, helpful and most importantly committed to meet the customer requirements (Tesco, 2009). Even they prefer to have feedbacks from them about their corporate social responsibilities which are quite appreciable. They support their suppliers. An example could be they help their farmers to establish cost effective farming practices which would fetch them higher returns. In some countries like India, they have provided their suppliers to have more efficient route to market (Tesco, 2009, pp-1-6). Although it is not everywhere the report is so appreciable. Few suppliers have complained that Tesco is disrespectful to them; at the same time they are slow and unreasonable. Even Tesco has faced a revolt from the suppliers as they strive to squeeze down the prices to the suppliers to be in price war against its competition (Davey, 2008). Tesco has tried improving their relationship and in 2008, the numbers of unsatisfied suppliers have decreased by a substantial number. Even this organisation holds regular meetings to share thoughts with their suppliers and get their feedbacks to sustain the long term relationship with them (Tesco, 2009, pp 1-6). Morrison Morrison also believes in sharing their success with their suppliers. They have also made their suppliers to be involved in their efforts in packaging reduction. Apart from that they have also introduced a program which enables them to support their suppliers by sharing expertise and opportunities with them. For an instance starting from the period 2009.10, there would be a support program carried out for dairy and beef farming producers which would let Morrison to share resources with their suppliers (Morrison, 2009, pp4-8). Sainsbury Sainsbury is another big name in UK retailing. It has over than 2000 suppliers with them. Sainsbury prefers to work with their suppliers in close proximity to ensure the sustainability of their quality products. The company has a proper communication channel in place to have a proper feedback from the suppliers. Sainsbury takes their suppliers’ view in account while going for product quality development in compatible with the environment. The trading and technical teams are in frequent talk with the suppliers. This helps the suppliers to have better support and technology. Apart from these they hold supplier conference twice in a year to communicate their strategies, best practices to the suppliers. At the same time they get opportunity to share their perception directly to the senior management team of Sainsbury. From last two years they have been conducting a survey to have a better idea of the suppliers’ view points about the company. Most suppliers have said that they were satisfied with the company. Sainsbury provides training for their suppliers to adopt the best practices and technology to excel in quality and sustainability. For an instance they have done this for their beef suppliers. Around 700 beef suppliers have been equipped with computer, software tools and IT training to compete on n international market. The company has also led the way to ‘Development Group’ framework to work in proximity with the farmers and bringing them together to enhance the supply chain. Through this model they can even share their best practices and learning among themselves. The company has been working closely with their suppliers in environmental issues such as water, fish sustainability, and reduction of carbon footprints, which would ensure the involvement of togetherness in every activity (Sainsbury, 2009, pp8-34). The company also has some problems with its suppliers as Sainsbury pay their suppliers using 300 different payments and negotiating terms (Telegraph, 2005). As they do not have any standardised payment system in place, suppliers have to face problems in terms of payment. The company has informed that they are going to introduce standardised payment system (Telegraph, 2005). Findings All of the companies have their own way to enhance the relation with the suppliers by involving, sharing and supporting them. Among these three companies, we have chosen for research, both Tesco and Sainsbury have proper feedback or survey channel in place while Morrison does not have any such channel to have feedbacks form their suppliers, which is quite necessary form improvement. Among these three companies Sainsbury has well established training program for their suppliers, which is very much necessary to have quality products. Others do share their expertise and technology with their suppliers but having a proper training program is more appreciable. Looking at the research, it seems that Tesco and Sainsbury has much better programs and processes for their suppliers than that of Morrison. A month before, the government complained that the super markets are using their power to compress their suppliers financially. Even members of National farmers’ association have complained that they do not get the proper price for their products (Harvey, 2010). Conclusion UK Supplier code of conduct was introduced in 2001 to regulate the dealings between supermarkets and their respective suppliers and large supermarkets of UK have adopted this regulation to enhance their relationship with their suppliers (Tesco, 2009). As they try to meet the expectations of the suppliers; at the same time their suppliers also have to meet their expectation of being compatible with the environmental, legal, quality and ethical parameters. Compliance from both ends to a better quality service is expected in near future. Recommendation Suppliers are integral part of the business operations. Their quality, performance, outlook and reputation are significant for a business. The retail companies must strive to enhance these characteristics for the improvement of their own products and services. It is better to share knowledge and practices with the suppliers. The companies must understand that at last this will enhance their market share. Morrison must start taking the feedback of their suppliers because consequently that would help them to have sustainable growth in their business activities. For global companies like Tesco having a proper training module for their suppliers would surely enhance the productivity and quality of the products. They can have a proper network system in place to enhance the sharing and coordination among their suppliers around the globe. In this way, the suppliers worldwide can avail to better knowledge and processes from other countries. A sustainable long term relationship with the suppliers is the base of a sustainable and successful organisation. Reference Corporate Watch. What’s wrong with Corporate Social Responsibility, 2006. Davey, J. November 2, 2008. Tesco faces revolt from suppliers. [Online]. Available at: http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article5062774.ece [Accessed on February 23, 2010]. Harvey, F. February 11, 2010. Tesco chief attacks plan for watchdog. Available at: http://www.ft.com/cms/s/0/393f4d6e-173d-11df-94f6-00144feab49a.html?ftcamp=rss [Accessed on February 23, 2010]. Friedman, A. & Miles, S. Stakeholders: theory and practice. New York: Oxford, 2006, pp 1-13. Jensen, M. July 24, 2000. Value Maximization and Stakeholder Theory. [Online]. Available at: http://hbswk.hbs.edu/item/1609.html [Accessed on February 23, 2010]. Hamlett, J., Alexander, A., Bailey, R., A. & Shaw, G. April, 2008. Regulating UK supermarkets: an oral-history. [Online]. Available at: http://www.historyandpolicy.org/papers/policy-paper-70.html [Accessed on February 22, 2010]. Hoovers. 2010. Tesco Plc. [Online]. Available at: http://www.hoovers.com/company/Tesco_PLC/sfctji-1.html [Accessed on February 23, 2010]. Hoovers. 2010. J Sainsbury plc. [Online]. Available at: http://www.hoovers.com/company/J_Sainsbury_plc/cfctki-1.html [Accessed on February 23, 2010]. Hoovers. 2010. Wm Morrison Supermarkets PLC. [Online]. 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