This is a solution of ECB College business environment assignment which discuss about responsibilities of Sainsbury PLC as an organisation and the strategies it employs to meet them.
Started in 1869 in Drury Lane, London, by John James Sainsbury, Sainsbury’s Plc is among, the largest chains of supermarkets in Great Britain and with a market share of approximately 16.7% in UK markets; it is currently ranked second in this segment of business. Since, its inception to almost 1990s, it held the position of being the earliest and largest concept of self-help hyper markets in whole of UK. TESCO another British multinational supermarket retail chain and world’s second largest player eventually overtook them and became UK’s largest chain in end of 90s. Sainsbury’s approx. 1100 stores in all across the UK and Ireland with its 157,000 workers is also one of the great employers too. With a diversification strategy in place, in 2000s, Sainsbury’s divested into three holding companies including The Sainsbury Bank. With all the subsidiaries clubbed together, they are a group worth approx. 23 billion pounds. With these expansions in other market territories they have presence in finance, retail chain, energy, mobile telecom, food & beverages and packaged products services in UK market.
1.1 Types of organisations and their purposes
McDonald’s – McDonald’s being world’s largest fast-food restaurant chain, primarily deals in various types of burgers and specializes in Hamburgers, with an estimated serving of approx. 70 million patrons daily, in almost 35,000 outlets spread across 120 countries in the world. They are the single largest behemoth private organization in terms of the number of employees working (including on franchise payrolls). With specialization in both drive-in formats and over the counter sales of fast food restaurant business, they have recently started diversifying their portfolios by either purchasing out rightly or investing in some other restaurant chains and then finally selling it off against a positive ROI, within a time-frame.
Purpose of this organization – Their main purpose is to cater to as many as possible customers and clients with their product offerings in the fast food restaurant segment across the geographies. Their large store presence with an expansion business strategy has underlined their hunger for being the numero-uno of this industry in the whole world. With a diverse and exotic menu range and product lines which are customized to almost all the countries of their operations with local taste, cuisine and preferences of their customers being taken into account, they capture any market in the world in no-time and which helps them to cater more efficiently (Love, 1995). Their marketing strategy is also visible by their global corporate vision of being the number one company and choice of restaurant for each and every individual across the globe.
See the rules of marketing in travel and tourism assignment
National Health Scheme (NHS) England – NHS is an UK central government non-departmental body agency of the Department of Health. They are also considered as an organization which oversees and acts as an Overseer of the implementation of the Health and Social Care Act 2012 of England. Their role is quite multi-facet though, as they do budgeting, planning, delivery and day to day operation of the NHS in England. With an estimated employee number of around 6500 employees across 50 sites all over the England, it gets directly observed by the NHS commissioning board and was setup as a special health authority in 2011 in England.
Purpose of this organization – They primarily help in implementing the National Health Scheme in England, with also overseeing the implementation of the clauses and phrases of Health and Social Care Act 2012 of the England. Their primary responsibility is also to have a proper Health and Social Care setup in England and visions as per the guidelines setup by the 2012 act (England, 2013)
A nearby corner shop – A Pharmacy store in any local community area in any city across UK, offering over the counter sales medicines, prescription based drugs, surgical items, day to day care offerings and special care services related products of medical needs for the residents of that community. Their main objective is to serve them with convenience and ease by making available essential pharmacy items to the local people at their doorsteps.
Purpose – The main purpose of such outlets are convenience, easy and fast service for local people with their shopping needs for pharmacy items. Transparent and loyal customer set is their prime target by making routine offerings with availability of key and important items. They build and en-cash the ongoing customer relationship and loyalty.
1.2 Extent to which Sainsbury PLC meets the objectives of its different stakeholders
Sainsbury’s efforts and activities aligned in meeting objectives of its different stakeholders are as follows –
Investors – Investors generally provides risk capital and are concerned with returns coming on their investments, for which they are interested in information, which will help them in determining whether they should buy, hold or sell their stake. It also enables them to quantify the ability of that enterprise to pay returns and dividends. Major investors are public as it’s a listed company in Sainsbury’s case, the wealth fund and investment agency of Qatar and the family of Sainsbury’s are other substantial stake-holders in the overall share structure. By timely publishing their annual reports with all the news and updates on their website, Sainsbury’s is able to fulfil all its commitments towards its stakeholders. With improving business, they also generate substantial returns and announce timely bonuses for their shareholders.
Employees – Employees or workers are the actual machinery or the parts in any business engine. They are the most essential part of any organization and create better organizational structure. Employees are generally concerned and interested in information about the profitability and the stability of their employers, which helps them to assess the ability of Sainsbury’s to provide remuneration, retirement benefits and employment opportunities. Being in retail format industry, Sainsbury’s has to employ in huge numbers, but still they are one of the best companies to work for, with provisions for all round employee benefits and schemes, topping it with a conducive atmosphere to work. Sainsbury’s has been continuously voted as the best place to work in Britain for many times.
Lenders – Lenders are the retail units which lend cash or support to any organization for conducting its day to day operations for a short term period in return of handsome profits and interests on their Loans and Advances. Information which enables them to determine whether their loans and the interest attaching to them, will be paid or not by Sainsbury’s is of real importance to lenders, as Sainsbury’s requires a huge pile stock of cash for day to day operations. They have a positive credit score to back up their credibility as a debt seeker.
Suppliers and other trade creditors – These are the next most important partners for any company to work, as they provide the essential raw materials or supplies which finally enables any organization to produce or package and sell their final finished goods or services. Their reliance is on any information which will ascertain that amounts owing to them will be paid when due or not. Trade creditors are the lenders to the company for a short period of time with lending crucial supplies at a credit which is generally being paid over a mutually decided time period. Again the huge retail format and a continuous demand for goods and raw materials make Sainsbury’s Plc to have an excellent supplier-dealer network and relationship with them for which they involve in pre-decided credit periods and strictly follow the deadlines. They also invest in dealer-vendor development and management to keep its debtors satisfied and loyal.
Customers – Customers are the end objective of any company’s business activities. They are the final fate owners of any organization’s products and services future. Customers are bothered by the information about the sustainability of an enterprise for their continuance, as they have a long-term involvement with it and are dependent on it. Sainsbury’s Plc understands this and the nature of its business and has a loyal customer set of approx. one million foot falls by visitors daily to their various stores. They try and keep their customers in a long term relationship with them by launching various exciting and lucrative offers, which benefits all types of users. They are champions in pioneering Customer Relationship Management (CRM) exercises and use technological interventions also to be ahead of its customers.
Governments and their agencies – These are the regulatory bodies and guides the general policies and frameworks and hence Business Environment for any company to do its business. Governments and various agencies have interest in managing resources and, therefore, the enterprises and their activities are tracked and they require information in order to regulate these activities and determine taxation policies, which are the basis for national income and similar statistics. Sainsbury’s have always adhered to all EU and UK norms of retail chain industry formats and has served as a role-model company for sustainability efforts (Jawahar, 2001)
1.3 Responsibilities of Sainsbury PLC as an organisation and the strategies it employs to meet them
Various responsibilities of Sainsbury’s Plc as an organization and its strategies to meet them are as follows –
|Responsibilities||Strategies (20X20 Sustainability Program)|
|To serve and has a duty and remit to provide a service (Ethics)||Continue to reduce salt, saturated fat and sugar in our own brand products and we will lead on providing nutritional information enabling our customers to make informed choices|
|Operate within the boundaries of the law||To source all of our raw materials and commodities sustainably to an independent standard|
|Building reputation and trust for consumers to have trust or faith in their ability to deliver||Double the amount of British food sold|
|Strict vigil on finances and control, with a healthy management of investors’ money||To put all waste to positive use|
|Recruitment is a very important responsibility and hence recruiting workers who are reliable and have enthusiasm is very necessary. It is important not only to focus on intelligence only, but workers who are able to be creative but also to take advice and critique from management||Hiring additional 50, 000 employees and developing at-least 20% of its workforce complete 20 years in the company and take advantages of company’s retirement and benefits policies|
|Creating a Brand, to which the whole customer set is loyal and have a long lasting relationship through better marketing planning||Suppliers will be leaders in meeting or exceeding our social and environmental standards|
|To generate revenue and profits for its shareholders and remit all debts to its debtors||Achieving one billion pounds sales by fairly traded products with donations over 400 million pounds to charitable organizations and etc. (Jones, 2013)|
2.1 How different economic systems attempt to allocate resources effectively
Free Enterprise – Where markets enable mutually beneficial exchange between consumers and producers, and systems that rely on markets to solve the economic problem are called Market Economies or Free Economies. In these types of economies, resource allocation is through the interaction of free and self-directed market forces. Which means consumers determine that what to produce, producers determine how to produce and purchasing power of consumers decide who gets the produce. Market economies allow direct interaction of consumers and producers and work while allowing them to pursue their own self-interest. The pursuit of self-interest is at the heart of free market economics. Examples of such economies are UK, Australia and Germany (March, 1962).
Command Economy – Command economies when compared to any other types of economies have certain advantages, like, at times of crisis, such as a war or following a natural disaster, how scarce resources are coordinated and allocated. The allocation of resources by government compensate for failures by various economies in distributing the resources in the time of crisis. Whereas, allocation of scarce resources by government, or an agency appointed by the government can be attributed as another solution to economic problems of allocation. These methods are referred to as central planning and economies using central planning exclusively are called Command Economies. It can also be explained as, governments direct or command resources to be used in particular ways. In some examples of this type, we see governments forcing citizens to pay taxes and deciding how many roads or hospitals to be built. Countries such as Cuba, North Korea and somewhat China are examples of this economic model.
Mixed Economy – Some examples of such economic models are Brazil, Japan, Germany, India and Indonesia etc. It is a mixed form of economic model, where almost an equal division of control and free markets by governments exist. It is also the biggest growth potential area and future expansion for Sainsbury’s Plc. With limited liberty for free market entities and a limited control by government on regulations and to work simultaneously, mixed economy ensures growth of economy and social benefits of citizens too.
Transitional Economies – Some economies are still changing from Soviet styled planned or command economy to free enterprise economy and are known as transitional economies, such as Bulgaria, Albania, Croatia, Ukraine and Czech Republic etc. These are the economies currently model around mixed system, i.e. past command and future free market economic models are used simultaneously.
2.2 Impact of fiscal and monetary policy on activities of Sainsbury PLC UK
Fiscal and Monetary policy of any country are the blueprints for the strategies to be implemented with a roadmap for that nation’s economic well being and implemented by the government of that nation. Fiscal Policy is all about money, collected through taxation and then spent on the nation’s development & welfare. In comparison to it, monetary policy of a nation explains about the money which is in the system and is directly proportional to the supply and demand of that Nation (GDP). Together both these policies of an economy impact business organizations of that nation. Fiscal Policy and monetary policy are the two tools used by the governments to achieve their macroeconomic objectives. The main functions of fiscal and monetary policies are to increase the aggregate output of the economy and to control the interest and inflation rates, respectively (Lucas, 1983). If inflation becomes very high, then reducing the aggregate demand in the economy becomes the first priority for any government, due to this AD reduction and Tax appreciation, companies like Sainsbury’s get severely hit with, Lower Sales, Higher Tax Rates and Surcharges, and High input Costs, Lower Returns and Margins.
In Sainsbury’s Plc’s case, the EU economy went for a turmoil during the recession of 2008 and the AD overall was severely reduced. Exactly then government and banks took responsibility by coming to power and tried to buoy out by decreasing existing tax rates and provided sops & benefits. This helped company’s like Sainsbury’s which have direct relation with spending power of the citizens of UK. UK Consumer spending saw its sharpest decline for 13 years between July and September 2008 (Channel 4, 2008) and hence, increased inter competition for business in the UK markets. The other problem that UK has, was of an aging population and also increasing unemployment leading to ineffective workforce and lack of productivity, with more employees need retirement benefits and hence raising the operations cost for Sainsbury’s Plc
2.3 Impact of competition policy and other regulatory mechanism on the activities of Sainsbury PLC UK
Retail Industry is highly regulated and presents appalling challenges to the operators. Sainsbury’s Plc faces and deals with regulations from –
- United Kingdom Government agencies
- UK corporate affairs and company affairs policies
- Retail Chain code of conducts in UK
- European Union (EU) F&B norms
- EU corporate affairs norms
- World Trade Organization (WTO) norms
Impact of various policies and regulatory mechanism on the activities of Sainsbury’s Plc UK –
- They have always maintained and promoted effective competition between their suppliers
- They have also promoted the reduction of costs and the development of new techniques and products
- They also have regulated prices and avoided price banding
- They have shown greater customer responsibility (being responsible to customers in providing services)
- Now that, competition policy aims to ensure, wider consumer choice, technological innovation which promotes efficiency and effective price competition between suppliers
- Sainsbury’s Plc has adhered to the above norms by widespread use of technology in their operations, offering consumer diverse choices and maintaining a healthy supplier relationship with keeping in mind benefits of public relations (Lyon, 2006)
- From their 20X20 sustainability plan, we can see impetus on reducing operational carbon emissions by 30% absolute and 65% relative (compared to 2005) and ensuring own brand products won't contribute to global deforestation etc. (Jones, 2013)
3.1 How market structures determine the pricing and output decisions of Sainsbury PLC UK
Market Structure and interplay of different players and forces in the retail industry –
Since, there are several domestic and international players in UK markets, cut throat competition prevails, based on factors like, cost effectiveness (achieved because of economies of scale, market entry and expansion strategies and various other parameters adopted, government support and subsidies and practiced by players to gain control over market share). There is also the presence of retail giants like TESCO and ASDA backed by Wal-Mart, which makes them offer cheapest prices for all the products during all the times of the year across all their stores. They have employed slew of measures which have brought down costs, such as –
- Day to Day operations assisted by intervention of various technological advancements like robots and advanced mechanics, which reduces reliance on human resources
- Forging partnerships with various global players for delivering effective and cost conscious products and services
- Strict adherence and following of government and other institutional agencies’ regulations
- Measuring and mitigating external economic factors, like purchasing power of the consumers, fuel prices and political stability
- Mitigation of seasonal fluctuations in demand with planning in advance
- A healthy inventory for all its stores across the UK has to be maintained to avoid irregular supplies of raw materials
- Advertisements with increased spending and budgets so as to raise the profile of their products and try to increase brand loyalty, if successful this will increase market sales
3.2 How market forces shape Sainsbury PLC UK responses
Sainsbury’s Plc’s responses to market forces have been thoroughly professional in response to various UK markets’ forces. They have designed their products and services to help consumers make the best use of their time by store facility layout management. Since, consumers are looking for ways to control their energy levels and to save time by doing tasks more quickly; Sainsbury’s Plc has launched a revamped website making their consumers shop online with ease of accessing their complete range of offerings online. There is also a huge cultural diversity such as, religion, creed, beliefs, cast and rituals in UK’s population and hence adhering to these social norms by recruiting an equally diverse workforce to cater all segments of the UK society for all its stores. Ethnic diversity and racism issues are huge in UK and thus having a strict policy and procedure for zero tolerance levels in all its stores and corporate offices. They have also introduced loyalty cards and improved the quality of their after sales services by pick and drop offers to babysitting areas and waiting lounges as part of their Customer Relationship Management (CRM), which are being inaugurated in some of the large format hypermarkets in UK market. They also provide some augmented benefits such as cash machine, petrol stations, medical pharmacy, free parking, cafés and toilets across 24 hours etc. They have also acquired Jacksons, Bells and Beaumont’s convenience store chains in 2004 which led to consolidation of its position with ready to integrate stores in line with their existing ones, which helped them to expand quickly in the non-reach areas of UK. New concepts like Sainsbury’s Local have been successful in driving out many small stores from the market and which has led to their convenience store format gaining momentum and hence, giving them much needed cushion over its other market competitors like ASDA and Morrison’s. They also provide substitute goods for those items with which consumers can do without like alcohol and cigarettes and this has been a major trademark appeal of Sainsbury’s Plc. They have also associated with events and functions like Sports mega events (Wimbledon and Special Olympics), Music Concerts, Arts and Theatre shows etc.
3.3 How the business and cultural environments shape the behaviour of Sainsbury PLC UK
Business Environment and its impact on Sainsbury’s –
- As there are many supermarkets in UK, there is always a heavy competition among players like ASDA, TESCO, Waitrose, WALMART, and Sainsbury’s etc. and since, with many discount offers and coupon schemes, companies may lose profits on certain products
- Sainsbury’s recent plan of divestment and diversification into Banking and Financial services had a huge impact too, as banks and other societies compete with Sainsbury’s bank. But since it is not a core business for Sainsbury's, they are facing huge troubles to keep afloat
- The purchasing power of the buyer is high in retail industry simply due to the presence of a lot of competitors, which sell the same products. The only differentiation is in price and consumer loyalty. Moreover, the switching costs are also low for consumers hence, an excellent strategy for CRM is required
- Sainsbury’s response to all these business environment challenges and how had they impacted Sainsbury’s –
- Focusing on growth drivers as per their Website (www.j-sainsbury.co.uk) such as –
- Great food
- Compelling general merchandise and clothing
- Complementary channels and services
- Developing new businesses
- Growing space and creating property value
- Sainsbury’s believe that their values make them different and are part of their identity and integral to their success, the alignment of it with their business strategy for growth is thus very essential
- Their values remain integral to their business; they aim to help their customers “Live Well For Less” (Jones, 2013)
- Some of their 20X20 and other business strategies and plans’ have been –
- Supporting Paralympics games held in UK and signing some open endorsement deals with celebrities to promote it
- They launched various sports related value offerings, products and services like Sports Relief, Little Mix for Sport Relief and Let the games begin
- They have a very large health promotion program in the name of “Active Kids promotional campaign”
- They also launched a “Women Coffee”. Side by side, they also ensured that all fish sold at Sainsbury’s is independently certified as sustainable and strengthen their position as the leading retailer for sustainable food
- They also started a water neutral store campaign and endeavour to make them more responsible and sustainable
Cultural Environment and its impact on Sainsbury’s –
- Ensure that everyone understands why and how diversity is important to them
- Ensure that diversity is integrated into every part of the business
- Inclusive working culture in which all their employees feel valued, respected and motivated is part of their core values
- Promote types of behaviour, values and working practices which recognize and support individuals
- Sainsbury’s efforts –
- A huge impetus on Employee Voice is in the company’s culture and values
- Collective and Individual Voices are heard and then implemented with genuine concerns
- They will be providing opportunities to 30,000 people from disadvantaged groups
- There is a focus on increasing colleagues share ownership by 25%
- They try and have approx. 20,000 colleagues reach 20 years of service with them
- They encourage 20 million children to enjoy physical activity in UK (Jones, 2013)
4.1 Significance of international trade to Sainsbury PLC UK
Significance of Global Trade to Sainsbury’s Plc UK –
- Recession and slowdown turmoil have lead to erosion of revenues with decreased sales and finally service delivery of the complete value chain for Sainsbury’s Plc, hence market expansion emphasis to newer territories across the world has lead to a renewed emphasis on emerging economies like Brazil Argentina South Africa India and China (BASIC)
- Their biggest problem due to being in retail format and stake holding for their survival is sourcing of products, raw materials and goods from all across the world, which requires an effective Supply Chain. Effective Supply Chain will smoothen out the process and ensure low costs and hence make it feasible for them to offer quality products at the cheapest possible rates which is as per their core vision
- There is also a need for developing in house products, which will reduce costs, so as overall profitability for the company will increase
For the above mentioned reason and the significance of international trade to Sainsbury PLC UK, various efforts undertaken by them will endorse their endeavours, efforts such as –
- Sainsbury’s developed a powerful private-label program with launches of almost hundred different products and labels since last twenty years
- They launched a customer service initiative, involving additional staff to man service counters, which helped customers in the aisles and in packing the groceries, which increased the overall customer satisfaction and enhances customer relationship and loyalty
- With UK government, Sainsbury’s Plc launched a four million pound initiative to improve the lives of workers and farmers in supply chains from across the world
- They also started a ground-breaking project, which will be involving over 26,000 farmers and workers– plus their families and communities – who supply them vegetables, tea and flowers
- Sainsbury’s fruit supply chains across five regions in South Africa, saw the launch of an ambitious project, which involved workers, who will be working with the National Training Institute to deliver courses to provide skills and opportunities for participants to gain better and more secure jobs
- Sourcing with integrity is a key in their dealings, since their consumers put trust in them to do the right thing throughout their buying process, so with farmers, growers and suppliers in the UK and around the world (Hughes, 1996)
4.2 Impact of global factors on Sainsbury PLC UK
- Lower Aggregate demand due to heavy recession in US and UK economies, which have a direct impact on any organization working out of any of these two countries. The financial market crisis which led to high interest rates, high household debts, and reduced credit availability was originated first in these economies, which led to lower spends by consumers
- Easily available cash with lenders was evaporated due to economic slowdown of 2008 and the credit crunch associated with it for companies like Sainsbury’s, which was required for their day to day operations and hence making it difficult for them to pay off their short term debts and keep their global suppliers happy
- Sainsbury should contemplate on expansion into new emerging markets in coming future and hence the globalization of Sainsbury's operations will enable it to well-manage the risks associated with the economic slowdown
- Factors on a global scale, such as increased internet usage and development of various online shopping modules has led to a huge impact on retail industry shopping, where nowadays consumers want shopping experience from the comfort of their homes. Sainsbury’s Plc took initiative, developed and launched “Sainsbury’s Online” – An internet shopping experience/service offered to its new-age consumers
- The challenges in treatment of its overseas workers and reports of ethnicity violations with racism calls has also impacted Sainsbury’s Plc a lot and hence a corporate wide policy of Zero or No tolerance for such events was highly called for and justified
- BASIC economies like India, China and Brazil are able to produce large quantities of products at very low costs, which makes it very difficult for its UK-based competitors
- Since, energy prices have always been important costs for many businesses like retail chain outlets, hence cheap sourcing of energy and power with security of uninterrupted supplies in future is very necessary. Hence, Sainsbury’s Plc launch Sainsbury’s Energy in association with various British Oil and Gas majors was a big step forward (Hopwood, 2010)
- Labour shortages, hence training and developing of new recruits has also impacted them and thus, hiring responsible, fit and efficient workforce with intervention of newer technology in operations mitigating this impact is very much required
4.3 Impact of policies of the European Union on Sainsbury PLC UK
EU polices –
- EU has a Single Market program of economic integration which guarantees ‘four freedoms’
- EU’s exclusive competence to negotiate trade and investment agreements with countries outside the Union
- A strong customs union with a common external tariff on all the imported goods (Featherstone, 2003)
- There are also some fiscal consequences as a result of EU membership for UK’s like consumer prices are affected through the Common Agricultural Policy and common external tariffs levied on imports
- Decisions made by foreign stakeholders about whether to invest in the UKor not is governed somewhat by EU too
- Health and safety compliances and strict measure to keep legal threats and incidents away from the company (Borzel, 2003)
Impact on Sainsbury’s –
- Cumbersome to rein in and decide their own course of action
- Huge financial impact on raw materials for Sainsbury’s Plc being sourced from various parts of the globe
- Imperative for companies like Sainsbury’s to be in EU good-books
- Increased input costs in maintaining quality standards for compliance and hence reduced profitability
Sainsbury’s Plc has been in a comfortable position early on, up-till very recently, when being finally challenged by other external players and competitors. This led to their slippage from top, but a timely intervention in terms of internal policy and strategy changes has led to emergence and re-entry to the dominance. Further steps required to consolidate and create a sustainable business are required and addressed by them in recent past, which are also analyzed here. With these understandings, it is hopeful that Sainsbury’s Plc will be able to re-track its past glory at a much larger levels this time.
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