Unit 1 Business Ao1

Task 1

Applied Business Studies
Unit 1: Investigating Business AO1

Task 1: Describe in detail the main aims and objectives of the business

 
Our Goal
At Sainsbury’s we will deliver an ever improving quality shopping experience for our customers with great product at fair prices. We aim to exceed customer expectations for healthy, safe, fresh and tasty food making their lives easier everyday.

Introduction:
I will be investigating the factors that have contributed to the success of a business in terms of its main aims and objectives and the external environment factors that have affected the ability of the business to achieve its aims and objectives. I have chosen to look at J Sainsbury PLC to do this. I decided to use Sainsbury’s, as it is a long well established respected company. There is a large amount of information, available, through books, the
internet, the stores and media. I especially found them to be a very helpful and willing to assist me with my work.

Sainsbury's was founded in 1869 by John James and Mary Ann Sainsbury. They opened their first small dairy shop at 173 Drury Lane, London. Drury Lane was one of London's poorest areas and the Sainsbury's shop quickly became popular for offering high-quality products at low prices. It was so successful that further branches were opened in other market streets in Stepney, Islington and Kentish Town. By 1882 John James Sainsbury had four shops and had plans to expand his business further. He opened a depot in Kentish Town, north-west London, to supply this growing chain and, on the same site, built bacon kilns which produced the first Sainsbury brand product. It was also in 1882 that John James opened his first branch in the suburb of Croydon. This shop sold a wide range of 'high-class' provisions and was more elaborately decorated than the earlier shops. The late Victorian period brought competition from large national multiple retailers posed a threat to small chains like Sainsbury’s. John James stepped up expansion so that he could buy goods at competitive prices. The number of branches trebled from 16 to 48 between 1890 and 1900 .





John James also opened a new depot at Blackfriars south-east London, which was close to the wholesale markets and the London docks. During the war there was staff shortages women were recruited to fill the jobs vacated by men. The interwar years, brought hardship, but this was a time of rapid expansion for Sainsbury’s. Sites were acquired in London’s expanding suburbs the company expanded into the Midlands in 1936 with the acquisition of the Thoroughgood chain and by 1939 there were 244 Sainsbury’s shops. In 1950 Sainsbury’s opened the first ‘American style’ store. The first self-service store proved very popular. Over the next three decades all Sainsbury’s counter service stores were replaced by modern supermarkets. In the 1960’s the scale of the company increased and it was necessary to decentralise the distribution system and establish a network of regional depots. Sainsbury’s was amongst the first retailers to establish and develop increasingly sophisticated computerised stock control. By the 70’s Sainsbury’s had reached a size that warranted public status. The company’s public floatation in 1973 was the largest ever floatation on the Stock Exchange, with a 45 fold over-subscription for shares. The 80’s and early 90’s saw the expansion of Sainsbury’s into the north-east of England, Scotland, north Wales and Northern Ireland extended the company’s trading areas to become national in scale Sainsbury’s also established an early lead in the introduction of in-store technology like scanning, computerised stock control and sales-based ordering; techniques which brought it huge competitive advantage. By the end of Sainsbury’s 125th year, the company had 355 stores.

Today Sainsbury’s PLC is made up of Sainsbury’s Supermarkets, convenience stores and internet based home delivery shopping service and Sainsbury’s Bank. Sainsbury’s stands for great products at fair prices. The Group work to improve and develop product ranges and is committed to giving customers an improved shopping experience. They want to ensure all colleagues have an opportunity to develop their abilities and are rewarded for their contribution. At the end of 2005/2006 Sainsbury’s employed 153,000 people.

Currently, Sainsbury is a respectable 3rd in the market place, Tesco continues to be the leading supermarket, while Sainsbury and Asda are still neck and neck for the runners up position with market shares of 15.6% and 14.9%. This is due to Tesco pushing the market growth due their sheer size and are adding new selling space fast, so can take advantage of a healthy market more than most.




Below is an up to date Chart of the Top 7 Supermarkets and the current market share



Sainsbury’s Business Objectives
I am now going to look at the aims and objectives of Sainsbury’s
Their Mission Statement.

Quote: At Sainsbury's we will deliver an ever improving quality shopping experience for our customers with great products at fair prices. We aim to exceed customer expectations for healthy, safe, fresh and tasty food making their lives easier everyday. Unquote:

Their Objectives.
Quote: Our objective is simple; to serve customers well and thereby provide shareholders with good, sustainable financial returns. We aim to ensure all colleagues have opportunities to develop their abilities and are rewarded for their contribution to the success of the business. Our policy is to work with all of our suppliers fairly, recognising the mutual benefit of satisfying customers' needs. We also aim to fulfil our responsibilities to the communities and environments in which we operate Unquote:

When I read the above mission statement, the words “we will deliver” and “we aim to exceed” is a promise and to me this promise is that this company supplies the best food and goods available. This statement tells me that Sainsbury’s works to provide something a little more special than other supermarkets, which is the highest quality food reasonably priced, with customers health and well-being at its heart. With this statement the message to all Stakeholders, from suppliers to customers to employees is that this is the standard and to expect, nothing less.




Sainsbury’s has always been known to be a little more expensive than other supermarkets, customers are made aware that they are buying the very best quality items at a good price. Sainsbury’s have achieved their aim through marketing. Jamie Oliver famous chef was used in TV advertisements, promoting Sainsbury’s by cooking with their fresh ingredients and promoting their suppliers eg: organic farms. They also introduced “Taste the difference” cards that have recipe suggestions which can be collected each visit and put into a folder, which help to educate the customers to eat healthy, try new recipes, as well as sell certain products.

Sanisbury’s objectives are:

“To Provide Shareholders with good financial returns by focusing on customers’ needs, adding value through their expertise and innovation, and investing for future growth”
It has been a strong year of recovery for Sainsbury’s as it continued to focus on the their plans to get more of the market, which has increased confidence in Sainsbury’s with their customers, colleagues and shareholders. The key to the recovery was increased sales, and their approach to high standards providing value and quality. It states in their annual report that new funds were raised by recognising the value in their property portfolio and in conjunction with the refinancing Sainsbury’s pension schemes received a one off contribution of £350 million. And a long term plan was introduced to support the recovery plan to ensure the company’s survival

“To provide unrivalled value to their customer in the quality of the goods they sell, in the competitiveness of their prices in the range of choice they offer”
This year Sainsbury’s increased sales by 5.8% to £17,317 million, they also increased their market share which shows that customers are responding to changes that have been made. This year Sainsbury’s improved or introduced around 3,000 food products, such as the ‘Basics’ range, a ‘Kids’ range and also New brand standards, using only free range eggs and British meat and the removal of hydrogenated vegetable oils. This is an example of Sainsbury’s responding to the customers needs, their major stakeholder, which is now being shown in their profits.



Objectives (cont/d. …)

“To achieve efficiency of operation, convenience and customer service in their stores, thereby creating as attractive and friendly shopping environment as possible.”

Sainsburys has always been keen to use technology to achieve this objective, examples of these changes are introducing night shift staff to fill empty shelves, which reduces gaps on shelves and increase product availability to the customer.
Also they gave staff new hand held stock and sales systems in every store, which provides up to the minute sales and supply data to colleagues on the shop floor, which gives a more accurate picture of stock, therefore reducing wastage costs therefore maximising profit and revenue, whilst meeting the expectations of the customer. 8,500 price reductions were made to be more competitive on price and are promoted under ‘Ways to save’ logo.

“To provide a working environment where there is a concern for the welfare of each member of staff, where all have opportunities to develop their abilities and where each is well rewarded for their contribution to the success of the
business.”

The relationship between stakeholders, customers and Sainsbury employees is taken very seriously. Every store colleague receives new customer service training. New ways to business training was delivered to 1,000 managers from stores and central teams, they then delivered training to a further 9,000 managers. Sainsbury’s developed the ‘Scan school’ which are two specially fitted double decker buses that visit their stores to train colleagues. They are trained on the buses in the staff store car park. The buses have travelled around the country so that 90,000 staff at over 500 stores can give customers faster and friendlier checkout service. They have monitored improvements that have been achieved since September 2005 and as a result over 117,000 staff will receive a share of a £52 million bonus pot as a reward.




“To fulfil their responsibilities by acting with integrity, maintaining high environmental standards and contributing to the quality of the life of the community”

Sainsbury’s are committed to finding products in the UK, and when possible find a local solution to the supply issue. As recent as May 2006 they achieved a market first by selling milk from British farms. In February this year they launched ‘Active Kids’ for the second year. This provides schools with activity equipment in return for vouchers earned in store, which last year attracted 80% of all UK primary and secondary schools. Sainsbury donated equipment worth more than £17 million. On average each school received around £700 of rewards. This is a clever way of meeting the expectations of customers in a fun way and cleverly increasing revenue, maximising profit, which encourages growth as well as contributing to the life of the local community.

 
Sainsbury’s Measuring Objectives

Since October 2004, Sainsbury's has narrowed the price gap with rivals Tesco and Asda, regaining about 500,000 customers per week. Sainsbury's has said it remains "on track" to deliver a turnaround in its fortunes after reporting a small rise in half-year profits.
The UK grocer said it made £118m ($204m) in the six months to 8 October, up from a restated £117m last year. 15 million customers currently use its stores every week.

The company has started on a recovery plan to help increase their market share.

'Steps forward'
"While the customer experience is much improved we still need to work on achieving consistency across all of our stores" Justin King, Sainsbury's chief executive




Under the new slogan "try something new today", Sainsbury’s is the third-biggest supermarket chain in the UK, they have spent £10m on revamping its image. Sainsbury's admitted the availability of products in its stores, was a problem which has now been sorted. This has been achieved by finding local fresh products, such as milk, chicken, pork, eggs, vegetables and also ’night shift’ staff to keep the shelves stocked. These changes have worked as sales increased by 5.7% to £16,987 million, at Easter figures continue to show an increase and was up 6.1%. These strong performances delivered within food, non food and Convenience produced positive sales growth, which was achieved with increased volumes.





We can see from the figures above that the profit before tax increased for 2006 by 17m which proves the recovery strategy is working, although there is still a long way for them to go.

Up todate Chart of the Top 7 Supermarkets and the current market share





Performance graph


The graph shows the Total Shareholder Return ("TSR") performance of an investment of £100 in J Sainsbury plc shares over the last five years compared with an equivalent investment in the FTSE 100 Index. Again this reflects the positive impact of the recovery plan and shows after the dip in performance in 2003, although this was reflective of the investment market as a whole, Sainsbury’s is delivering its promises to stakeholders and delivering good financial returns by focusing on customers needs which links to their objective.

Sainsbury’s has also concentrated on the non food items, after customer research showed them what items they wish to find in-store, such as DVD’s clothes and accessories. They responded by introducing more space for non food products, introduced their own label clothing range, which was incredibly successful this year with sales up more than 40%. They also added a further 41 in store pharmacies a total of 169 in their stores fulfilling one of their major objectives of expanding choice, efficiency and convenience for customers. Sales for non food items grew by 8% which was ahead of the market. Customer also wanted to know more about what they eat. Sainsbury responded in January 2005 they led the industry on nutritional labelling by introducing a traffic light system on over 3000 products, just one of their objectives of maintaining high environmental standards. Customers rated Sainsbury’s approach to healthy eating above that of everyone of their competitors. Another method of collecting information is their internal colleague feedback survey, which proves a monthly snapshot of colleague engagement across all areas of the business, which reflects the objective for their contribution to the success of the business.

Sainsbury has also a very successful advertising campaign their use of Jamie Oliver, a famous television chef, has publicised the companies commitment to food freshness and standards. The aim is to inspire customers to try new foods, use a wider range of ingredients and to eat healthily, When Jamie Oliver used a whole nutmeg to season pasta, sales increased from 1,400 jars to 6,000 in a week. More than 7 million customers are collecting ‘tip’ cards and are now trying products and recipes they have never experienced which encourages loyalty.


Summary

There are five principles that Sainsbury’s use in their approach to Corporate responsibility:

* The best for food
* Health Respect for the environment
* Sourcing with integrity
* Making a positive difference to the community
* A great place to work

These guidelines are used and influence every decision that is made to continually strive to exceed their customers expectations. Their involvement or lead with many other initiatives such as Fairtrade, Local heroes, Supporting British farms converting to organic standards, the Salvation Army , fish sustainability, nutritional labelling, energy efficiency, recycling, buying from smaller suppliers, and local producers, Active Kids, Comic Relief, Sports Relief and many more show their commitment to their objectives, both locally and internationally and that their objectives are the centre of everything they stand for. With their recovery plan ahead of target and the continually improving financial and market position shows that Sainsbury’s are achieving their objectives.



Retailer
11th June 2005
17th June 2006
Tesco
28.1%
29.1%
Asda
15.7%
15.5%
Sainsbury's
14.7%
14.9%
Morrisons
11.2%
10.7%
Total Co-op
6.1%
6.4%
Somerfield
4.1%
4.1%
Waitrose
3.4%
3.5%
Continuing Operations
2006
2005
2004
2003
Sales (inc VAT)
£17,317m
£16,364m
£18,239m
£18,144m
Sales (ex VAT)
£16,061m
£15,202m
£14,440m
£14,104m
Underlying operating profit 2
£342m
£325m
£590m
594m
Underlying profit before tax 3
£267m
£238m
£522m
539m
Profit/(loss) before tax
£104m
£(238)m
£610m
£667m
Profit/(loss) after tax
£58m
£(187)m
£404m
£461m
Underlying earnings per share 4
10.50p
8.30p
23.4p
23.7p
Basic earnings/(losses) per share
3.80p
(17.40p)
80.7p
23.7p
Proposed dividend per share 5
8.00p
7.80p n/a n/a
Retailer
11th June 2005
17th June 2006
Tesco
28.1%
29.1%
Asda
15.7%
15.5%