Factors Influencing Choosing UK as the Investment Destination of Sainsbury Plc - Coursework Example

EVALUATING AN INTERNATIONAL HRM STRATEGY-SAINSBURY by 0 Executive Summary The report is an internal evaluation of Sainsbury Plc.’s human resource strategy as it elaborates on the frameworks that the organization has implemented to come up with an ideal mechanism in its business environment. In that light, the essay elaborates on the structures that the company has deployed on how it conducts its recruitment and selection process, how it trains and develops talent within its workforce and the methodologies that it implements in coming up with its reward system. Additionally, the report tackles issues regarding the human resources strategies executed by Sainsbury with regard to the methods through which employees are incorporated in the formulation of policies as well as decision-making processes together with the mechanism that are put in place to ensure he overall performance of the company is always kept on check. The report addresses the primary economic drivers in the United Kingdom where Sainsbury is based as it makes and in-depth analysis of the economy through the PESTLE framework. Conversely, the report makes a comparative analysis of the human resource situation in the United Kingdom about the overall systems in the rest of the world. That notwithstanding, the organizational issues that influence the formulation and implementation of human resource strategies at Sainsbury have been explored extensively as well as the national factors in the United Kingdom that have influenced the same over the past five years. Table of Contents 1. Executive Summary 2 2. Introduction 4 3. Sainsbury’s Company Profile 5 4. Economic Drivers 6 4.1 Industry Overview 6 4.2 PESTEL Analysis 7 4.3 Factors Influencing choosing UK as the investment destination………………………11 5. Human Resource Policies…………………………………………………………………11 5.1 Recruitment and Selection………………………………………………………………11 5.2 Training and Development………………………………………………………………13 5.3 Reward Management……………………………………………………………………14 5.4 Performance Management………………………………………………………………15 5.5 Employee Involvement…………………………………………………………………16 6. Cultural Issues…………………………………………………………………………..17 7. Conclusion………………………………………………………………………………17 8. Recommendation…………………………………………………………………………18 9. Appendix……………………………………………………………………………….20 2.0 Introduction The objective of this report is to formulate a human resource strategy for Sainsbury Plc. That will enable it to enter into joint ventures with other organizations in its global expansion programs. The report has made an in-depth analysis of the retail sector in the United Kingdom together with the general overview of the industry from a global perspective for it to recommend the course of action. Retail industry in the UK has been robust over the past five years with some ramifications shaping the industry. Ideally, there has been a strong sales momentum that has driven the volume of sales that retail outlets are making with Sainsbury being ranked second behind Tesco based on sales volume. High sales volumes experienced in the industry were fundamentally premised by a steady rise in spending that culminated from a period of deflation that has been experienced in the second quarter of 2015. The period of deflation meant the consumers had more disposable income thus they were willing to spend more money on goods and services. Ideally, the deflation that was announced in May was the first instance since 1960 and the retail industry in the United Kingdom is riding on that factor to spur more sales since the prices of goods had significantly declined and thus increasingly the willingness of consumers to buy goods (UK Economy, 2015). Additionally, technological advancements have played a great role in influencing consumption. The digital transformation has revolutionized the shopping experience since consumers can acquire goods and services online without visiting the stores physically. Online shopping has further enhanced consumption of products and services can be bought anytime when on demand remotely. The above ramifications in the retail market industry have resulted in a significant boost to the GDP of the country since they contribute a considerable percentage of the overall revenues of the nation. It id from that pretext that organizations like Sainsbury Plc. are constantly diversifying and expanding their operations given the massive fortunes that they garner from the retail sector merit (Mathis and Jackson, 2012). 3.0 Company Profile J. Sainsbury Plc. is a public company that was incorporated in the year 1922 as J. Sainsbury Limited. The organization is based in London and runs retail stores across the United Kingdom with some of its subsidiaries operating in the United States under the franchise Shaw Markets. As of 2012 the company had a combined workforce of approximately one hundred and forty-seven thousand workers with a sales volume of £37.34 billion. Sainsbury is arguably one of the largest retailers in the United Kingdom given the extensive network of stores that it operates in the country (Sainsbury, 2015). The organization operates close to one thousand six hundred retail stores across the United Kingdom falling behind Tesco that operates a staggering two thousand two hundred and fifty stores. Initially, Sainsbury held the tag of the largest retailer in the United Kingdom based on both sales volume and the number of stores that it operated but the situation changed in the mid-1990s when the company was faced with management wrangles and stiff competition from Tesco and ASDA that proved to dethrone it from the apex. Currently, it is holding the second position though it is still battling ASDA a subsidiary of American retail giant Wal-Mart that is posing stiff competition. In 1997, the company ventured into banking and became the first retail operator in the United Kingdom to won a fully licensed bank. Sainsbury’s Bank partnered with the Bank of Scotland to offer in-store banking services to its customers across its network of outlets. The bank specializes in providing basic banking services, deposit, mortgages as well as dispensing personal loans. In 2000, Sainsbury disposed of Homebase Chain as well as Sainsbury’s Egypt. The Egyptian subsidiary had a number of stores in Cairo but the management opted to sell the venture after it was implicated to be related to Israel a fact that led to protesters vandalizing the stores that resulted in massive losses for the company. Notably, Sainsbury has been implementing a private label program in that it sells customized products in its stores that bear its brand. Back in the days the firm introduced Novan a laundry detergent into the market, and it performed very well since after a mere seven weeks the product had already commanded 20% of the UK market. Presently, close to 40% of the goods that are sold in Sainsbury stores bear the brand of the company (Sainsbury, 2015). 4.0 Economic Drivers 4.1 Industry Overview The UK retail sector covers all kinds of businesses that primarily sell goods to the general public. The kind of enterprises that fall under this category include; departmental stores, virtual stores, supermarket chains, and independent shops. Typically, the retail sector in the United Kingdom absorbs close to 10% of the total workforce in the country. That is an impressive figure bearing in mind the level of unemployment that has been hitting the nation in the past few years. Additionally, revenues from retail sector amount to 5% of the country’s GDP annually. It is prudent that the retail sector is an integral part of UK’s economy since it contributes a significant portion of the country’s revenues as well as employing a considerable number of the nation’s workforce enhancing revenues to the economy even further (UK Economy, 2015). The retail sector in The UK a leader in innovation as compared to other regional industries since it has been able to make distinguished strides in the line of enhancing business through technological advancements. Through the implementation of technology, the retail industry in The UK has been able to integrate E-commerce and self-services to the enterprise thus enhancing the shopping for the consumers. The country’s internet retail sales account for 12% of the global sales thus positing it as a leader in innovation in the retail sector. Additionally, based on statistics from the World Bank the country has the highest consumer spend per head in E-commerce transactions worldwide. Internet commerce is an excellent opportunity as far as the UK’s retail sector is concerned since it has been an upward trajectory over the past five years. Between 2010 and 2012 the E-commerce sales in the sector grew from 0.5% to 5.7% depicting the potential that lies in internet commerce in the industry. Over the last five years, the industry has been characterized by some emerging trends that will undoubtedly revolutionize how the sector operates in future. The implementation of the multi-channel approach in international business is a common phenomenon in the market as it assists middle and small retail enterprises to globalize their operations at an early stage. Notably, retailers that do not compete online risk being isolated from the industry since digitization of the market has been embraced by the consumers and it provides the business with opportunities both locally and internationally (UK Economy, 2015). Profile of Host Country The geographical position of the Kingdom of Thailand is in the Southeast of Asia, neighbouring countries such as Vietnam, Malaysia, and Myanmar. The country has a rich history of religion especially Buddhism as it is prevalent in the nation with approximately 95% of the total population being its followers. The overall population of Thailand is close to sixty-five million people as of 2014 based on statistics from the World Bank. 96% of the total population in Thailand live in urban areas with close to seven million people residing in Bangkok, which is the capital city of the Kingdom. The vast population of the country makes the Thailand idea for business since it presents a potential market to new firms. 4.2 PESTLE Analysis Political factors The policy factors in the Thailand have a critical influence on the manner in which firms conduct their operations in the country. Sainsbury just like any other business organization is directly affected by the political ramification in the nation. Currently, the consumer and government debt is very high thus increasing the obligation on the consumers since they impact on the prices of goods and services. The large deficits adversely impact on the consumers’ attitudes thus piling pressure on business in general. Conversely, Sainsbury has to operate in that environment and at the same time come up with a mechanism that will enable it to continue expanding its operations in spite of the political ramifications of the country. Despite the unfavourable political conditions in Thailand, Sainsbury has been able to grow steadily over time based on the fact that it has emphasized on quality products to its clients that are offered at premium prices thus making it attractive to the consumers. Recently, the country embarked on a mission to assist retail firms in the country to globalize their operations to exploit the potential at the international level. However, the move has both opportunities and challenges since the organizations have to compete against unknown sources despite the opportunity that is nigh in the global market. Consequently, few years ago the retail sector was under scrutiny when details of price fixing among the largest four retailers those are; Sainsbury, Tesco, ASDA, and Morrison emerged. The incident has an adverse effect on the industry in general as the level of consumer confidence has since dropped drastically and especially for Sainsbury as it was at the center of the controversy (Fairholm, 2009). Economic factors Economic factors are critical for any industry since they directly influence profitability, the price of goods and services as well as the overall demand in the market. In the light of the economic slowdown in Thailand inflation and unemployment grew steadily factors that significantly affected the operations of Sainsbury. As a result of increased rates of unemployment in Thailand together with inflation that led to the growth in the prices of food products their overall production will decrease which on the other hand will escalate the prices of these products as well as enhance unemployment due to job cuts. It is prudent for Sainsbury to contemplate in expanding into new emerging markets to ensure that it manages the risks associated with Thailand’s economic environment effectively. Social factors It is notable that the consumer behaviour in the Thailand has changed in a manner that customers are becoming increasingly interested in one-stop shopping whereby they can shop for all the goods and services that they require in one roof. That, is a significant boost to the retail sector since a majority of the supermarket chains are dealing with a wide variety of goods in their outlets thus satisfying the preference of the consumers. Initially, Sainsbury specialized in offering food products only bit with the changes in consumer tastes and preferences they have diversified the types of goods that are sold in their outlets thus capitalizing on the current shopping trend in the country. Relatively, a social factor such as increased female workforce has decreased the domestic meal making, and a majority of the people will buy food that is already prepared from the supermarkets. That ramification is a big boost to the retail sector especially Sainsbury that specialized in offering food products. Technological factors Technological advancement normally has a positive impact on the business if it is utilized effectively. Thailand retail industry has recorded a significant growth in the e-commerce transactions over the past five years. Sainsbury’s online food delivery system is expanding at a considerable rate with a 23% growth being experienced annually in the past two years. Typically, e-commerce transactions are utilized by approximately 90% of Thailand households thus indicating the impressive uptake of technology among the consumers in this particular market. Environmental factors Business organizations have been receiving increased pressure to watch their operations ensure they are conducted in a sustainable manner that has the least impact on the environment. Firms influence the environment both directly through their routine manufacturing and processing processes and as well as indirectly through the waste and raw materials. Thailand is a signatory to the World Trade Convention, and thus it has instituted stringent measures that govern the practice of firms to ensure environmental pollution is minimized to the highest possible levels. Sainsbury has taken the initiative to be sustainable in its operations by implementing a program that is meant for promoting reusing recycling as well as reducing its impact on the environment. Legal factors Policies and legislation from the government have a direct impact on the manner in which business firms operate in any given environment. For instance, the corporate tax was dropped from 43% to 40% a move that excited investors as it implied the government was keen to create an enabling business environment in the country. Conversely, in line with health policies the government introduces a new tax that is meant to be imposed on fatty foods and highly processed food products. Such a move is adverse to Sainsbury and other firms that specialize in food products since they will have to incur an extra expense as they market their products to the consumers. 4.3 Why go there It is prudent from the above factor that indeed the business environment in Thailand is enabling and thus attractive to potential investors. The government has ensured a liberalized system whereby business organizations can conduct their operations with minimal restrictions from the authorities. Similarly, it would ideal to invest in this market since the government has likewise demonstrated its willingness to assist retail business by coming up with policies that will enable them to globalize their operations to leverage from the benefits of the international market. 5.0 Human Resource Policies 5.1 Recruitment and Selection Recruitment is an integral process in human resource since it is the source of an organization’s workforce. In this case, Sainsbury is making a joint venture expand its operations to the Thailand market and thus it requires the additional workforce to fill both administrative and clerical jobs at its new outlets. In that light, it will have to conduct a thorough recruitment and selection process to ensure that it picks the most qualified candidates to fill those vacancies to ensure the operations of the company goes on effectively. It is prudent to note that Sainsbury’s joint venture is in line with its expansion plan thus it is going to globalize its operations. Thus, since the organization seeks to commence operations in Thailand a new market that it has never exploited before it has to select carefully the workforce that will represent it there to ensure it creates a positive impression for the firm as well as drive performance. Ideally, the workforce composition for the joint venture will be composed of both locals and expatriates since the host country will have to be represented in the joint venture’s personnel structure as well as workers from other countries to ensure the company is culturally diverse in order to fit perfectly in the global environment merit (Mathis and Jackson, 2012). The recruitment process will be target scope in nature since the firm will be looking for specific knowledge and skills from the potential employees to fill up the vacancies that have been created in the new joint venture. Since the new outlets in Thailand will require all types of personnel necessarily the recruitment process will fill all these position but in a limited nature in that some workers will be transferred from The United Kingdom so as they may be like mentors to new staff in order to ensure the values and principles of the organization are passed to the new employees. The process of recruiting new employees will be an external affair as the company will contract an international employment agency to place the advertisement of the vacancy and then its independent body will select the qualified candidates based on Rodger’s’ seven-point plan (Cameron and Green, 2012). See Appendix 1. The candidates will be refined through interviews and oral tests to determine their suitability by testing their intelligence, educational qualification as well as their individual disposition. Since the company is keen to have a diversified workforce gender and cultural balance will be adhered to ensure a balance that will result in a broad range of cultures and ethnicities among the personnel (Cole, 2004). 5.2 Training and Development Training and development are essential to any organization since it enhances the skills and knowledge of its workforce to ensure they conduct their duties effectively to improve performance. Ideally, the principle role of training is to ensure the personnel acquired knowledge related to the job to facilitate service delivery. The company will implement on job training to ensure it cut extra cost of having to send it employees to tertiary institutions to acquire the skills as well as reduce the instances of absenteeism due to study leaves (Paton and McCalman, 2008). As a result the new employees will be assigned to mentors who will constitute the old employees who will be transferred from the UK to mentor them on issue regarding how the systems of the parent company operates as well as the general way of performing duties at the firms. The newly recruited employees will be inducted on safety and health issues concerning the operations of the joint venture to ensure they observe workforce safety and maintenance procedures. Ideally, since the personnel of the joint venture will be composed of some expatriate workers some of them will not be conversant with the English language since it will be the official language in the company. Language classes will be organized for them especially for those from the host country. Expatriates from other countries which has an interest in the jobs had to have knowledge of English as a requirement to qualify for the position (Konrad, 2006). The training process will be based on the ASK model as it will be aimed at first changing the attitude of the employees to align their objectives with those of the firm. Once the training has managed to bind the workers by a common goal, it will enable them develop skills that will ensure they accomplish the set goals. Additionally, the skills they gained will be put into practice in their jobs thus increasing their overall knowledge about their respective jobs. Similarly, the process of training and development will be in line with Kiprich’s four levels of evaluation. The training process will at first focus on changing the attitudes of the workers by assisting them to maintain their reaction to issues then help them to learn new skills and knowledge that will enable them accomplish their job obligations. Relatively, the behavior of the employees will be moulded into desirable traits since they will be bound by certain values and morals that characterize the norm of operation at the organization. The morals encompass discipline, hard work, honesty just to name, but a few that forms the integral behavior of Sainsbury employees, and that will result in increased performance (Miner, 2001). See Appendix 2. 5.3 Reward Management The employees need to be motivated to ensure consistent and viable performance in an organization. Thus, the joint venture needs to come up with a comprehensive reward system that will motivate the employees at the same time be sustainable for the firm to implement. The reward system that will be employed will be based on the compensation principles in the sense that it should be competitive in that when compared with other firms or rather other employees in the similar category in the market the amount of reward payable to the workers should match the trend in the market. It implies that a worker at the joint venture should be earning a wage that is close to a similar class of worker I another company in Thailand. The reward system should be simple and readily understandable to ensure the workers are conversant with all the provisions concerning the formula that is used to calculate their wages. Again the type of reward system to be implemented should be fair to the employees based on their skills and knowledge as well as the scope of work they are performing in the company. Conversely, the rewards should be designed in a manner that is sustainable for the firm to ensure it can service them without any difficulty. Skill-based pay will be implemented for the case of the joint venture since it encourages multi-skilling and a high level of flexibility among the employees a characteristic that is desirable especially for the new venture that is operating in a new market that is set to be very dynamic. Additionally, this type of reward system is cost efficient as it only rewards based on the knowledge and skills that the works bring to the company. That notwithstanding, the workers will be motivated through additional benefits such as; bonuses, overtime pay, paid leaves, team recognition as well as pay on merit (Mathis and Jackson, 2012). 5.4 Performance Management To ensure the performance of the organization is tracked at all times, performance appraisals are critical in administering performance management. Performance evaluation is essential since it helps the management of the firm to identify its strengths as well as the weaknesses so as to enable it design an action plan that will serve to correct any form of undoing that is derailing the overall performance of the company. Ideally, appraising performance is important as it assist the management is coming up with an efficient compensation plan that will reward the employees based on their level of output to the organization (Baker, and Doran, 2007). Similarly, it is from this premise that job promotions are developed to employees who have had outstanding performance over time. Conversely, appraising performance helps the managers to identify the weaknesses in the organization and thus develop training programs to create capacity in the affected areas to ensure they plan the careers of the employees. The new venture will implement the multisource appraisal 360 degrees to determine the level of performance within its ranks. The technique promotes teamwork within the company since it allows workers to appraise fellow employees thus increasing the level of reliability in performance management (Reiss, 2012). See Appendix 3. 5.5 Employee Involvement For the personnel of the joint venture to feel motivated, they ought to be engaged and involved in the activities of the firm. The contribution of employees to critical issues affecting the organization tends to enhance their esteem and reputation in the company since they feel a sense of belonging in the business. To ensure employees are involved in the affairs of the joint venture, their ideas will be sought either through questionnaires or open forums regarding any important policy that the company intends to implement. Ideally, the employees or their representatives should be engaged whenever any issues that touch on their welfare is being discussed so as to safeguard their rights. See Appendix 4. Employee involvement in the joint venture will be spearheaded by the engagement drive model that outlines a progression from the print the employees are given the opportunity to work for the firm, how they ought to be recognized whenever they perform exemplary to raise the reputation of the company and finally how their pay will be structured to motivate their performance (Cole, 2004). 6.0 Cultural Issues The joint venture will employ an ethnocentric approach in the manner that it will manage the subsidiary in Thailand. The primary reason for that strategy is to ensure the parent company maintains total control of the joint venture’s operation since all the critical decisions will be made from the headquarters. Relatively is a simpler mechanism of managing a subsidiary without incurring massive extra costs. The core reason why Sainsbury took the decision to run a joint venture in Thailand is to gain knowledge of the new market environment through the joint venture as well as increase its economies of scale in the wake of globalization of businesses. Conversely, Thailand is different from the United Kingdom as far as conducting business is concerned since it is less liberal, and the government has more control on business operations in the country (Konrad, 2006). 7.0 Conclusion Ideally, developing a multinational enterprise takes a great deal of human resources strategies since it is from this premise that the resulting organization will be framed to success. Firms that are keen to expand their operations to cover the global market should first conduct pilot project by the use of joint ventures to the markets of their choice to first learn the ramifications in those business environments before rolling out their full operations. In order for a company to come up with an effective human resource strategy for a multinational venture it has to consider issues regarding, training and selection, performance management, employee training as well as recruitment and selection of new workers to the firm. 8.0 Recommendation The joint venture should employ a wider selection criterion so as to ensure its workforce is composed of both locals and expatriates in order to achieve workforce diversity since it is vital for the overall success of the company. The chain of command should be centralized from the headquarters to ensure the parent company is always in total control of the joint venture to avoid any form of interferences from its partners in implementing its policies. Senior managers and officers should be transferred from The United Kingdom to help implement the organization culture of the firm in the joint venture to ensure congruence in the manner in which operations are being run at the new outlets. 9.0 References Baker, J. R., & Doran, M. S., 2007. Human resource management: a problem-solving approach linked to ISLLC standards. Lanham, Md, Rowman & Littlefield Education. Cameron, E., & Green, M., 2012. Making sense of change management a complete guide to the models, tools and techniques of organizational change. London, Kogan Page. Retrieved from http://www.123library.org/book_details/?id=98984. [Accessed on 26 June 2015] Cole, G. A., 2004. Personnel and human resource management. London, Thomson Learning. Fairholm, G. W., 2009. Organizational power politics: tactics in organizational leadership. Santa Barbara, Calif, Praeger/ABC-CLIO. Konrad, A. M., 2006. Handbook of workplace diversity. London [u.a.], Sage Publ. Mathis, R. L., & Jackson, J. H., 2012. Human resource management: essential perspectives. Mason, Ohio, South-Western Cengage Learning. Miner, J. B., 2001. Organizational behavior: foundations, theories, and analyzes. New York, Oxford University Press. Paton, R. A., & McCalman, J., 2008. Change Management a Guide to Effective Implementation. London, Sage Publications. Retrieved from http://public.eblib.com/choice/publicfullrecord.aspx?p=880860. [Accessed on 26 June 2015] Reiss, M., 2012. Change management: a balanced and blended approach. Norderstedt, Books on Demand. Sainsbury, 2015. Retrieved from http://www.sainsburys.co.uk/sol/index.jsp [Accessed on 26 June 2015] Sims, R. R., 2007. Human resource management: contemporary issues, challenges, and opportunities. Greenwich, Conn, Information Age Publ. UK Economy, 2015. Retrieved from https://www.gov.uk/government/topics/uk-economy [Accessed on 26 June 2015] 10.0 Appendices Appendix 1 Appendix 2 Appendix 3 Appendix 4 Read More