Sainsbury's and Globalisation

Change is taking place in our everyday life as much as the time passes. Technology is growing faster every day with a frustrating rapidity, the environment knows the climate change which our planet is subject, and which also represent its biggest long term challenge. Our companies are trying to follow the change of the world to do not be unstable and their products obsolete.Change is inevitable for every individual and group of individual in the society. Change in behaviour, in the way of thinking, in the way of reacting to issues and so on.

Change is the word that guarantees the continuity and sustainability and a long-term survivability. According to Doyle (2002) many factors are affecting the way a business operates. It could be a in a good or a bad way. These happenings are called “driving forces”. Our assessment consists today on making a business report analysing a particular company “Sainsbury’s Plc. In this business report we will surely talk about the kind of driving forces that pushed Sainsbury’s Plc.

to change as a first part, we will then have a specific regard on the Globalisation and also analyse how the chosen company is reacting to that change, whether it was an improvement or not in some areas where the company is operating. History of the Company: According to the Official J Sainsbury Website, the company was founded in 1869 in London where it is based and today counts a total of 890 stores including supermarkets and local stores, in The United Kingdom and employs more than 150000 people.

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Is it the third largest supermarket and hypermarket chain in the country after Tesco and ASDA. The organisation has also a banking and property system of assets. Sainsbury’s knew many transformations on its business strategy as changing their logo in 1999 and slogans in the same year and 2005. The objective is to ensure durable financial returns by proving to its weekly 19 million customers a better customer service every day. Internal and external factors that are affecting the company: Internal factors are the driving force which are under the control of the company and happens into it.It could be anything like changing the organisation machinery and equipment, which is a part of technology, organisational culture, system and way of management, location of the organisation, etc. According to Politi (2007) The external driving forces are for example, the industry where the company is operating and its competition, the economy of the concerned country and its demography, and obviously the political stability is also an important external factor that can affect the company’s evolution and decision making.The change will occur to the company whether they are internal or external driving forces. The trick is that the company should react and anticipate properly by showing its flexibility. Let us then make it practical with our Sainsbury’s case: External factors: According to Taylor (2008) one of the ways to examine the company’s External factors is to present a PEST analysis. * Political and legal Factors: Sainsbury’s is facing the huge growth and evolution of the globalisation which also represents an opportunity for the group.The organisation can also penetrate the emerging international market same as what Tesco and Carrefour (a French distributor) did, even if this plans are not in Sainsbury’s board. The investigation of price fixing between the four biggest brand names in the United Kingdom market can have some negative effect in the industry and for every competitor. It would be leading to lose the brand image that Sainsbury’s is having with their consumers. Moreover, the Government is about to decrease the tax rate from 30 to 28 % which will save a weighty amount of money.Sainsbury’s has to follow the packaging and labelling rules according to the food and drinks local laws. * Economic Factors: The significant increase of the food price is due to the global crisis all over the world, which will probably lead to a higher purchase costs for all the companies in the same market than Sainsbury’s, and in particular Sainsbury’s itself, which will considerably have an effect on the profit, unless Sainsbury’s rise up the price of its products but might then lose some existing customers.We also should underline that Sainsbury’s are also petrol retailer in some of their biggest stores so the increase of the petrol cost will also have an impact on the overall situation of rising prices in Sainsbury’s. This recent credit crunch can reduce the purchasing power of the population and therefore spend less on expensive and quality brand name products, something that could represent a bigger profit for the firm. Sainsbury’s are also into the financial service with HBOS and the as long as the credit crunch is directly concerning financial institutions it will be hard for Sainsbury’s to provide credits. Social and environmental factors: Nowadays people tend to more buy ready easy to cook meals. This represents an opportunity for Sainsbury’s to enhance and increase its line of this kind of products. People are although looking for healthy and safe food because of the level of overweighed people in the United Kingdom. Sainsbury’s needs to have some stock up and arrange its products according to the customers’ needs and good with affordable prices. Many companies are choosing to be social responsible by reducing the CO2 and using energy efficiency.This is not a choice anymore, every single company that have an impact on the environment has to show and prove that they are helping to reduce gas emissions, so therefore Sainsbury’s is investing more on those kind of issues and opting for “Green solutions”. Ethics are also anchored in the question of the environment. The customers want to eat healthy and safe and natural food. Organic food and the treatment of animals is surely a point where Sainsbury’s should be aware of. Its commitment toward its consumers could be jeopardized. * Technological factors:Internet is today one of the main communication tools in the world. It is also used to shop online so Sainsbury’s are providing to their customers an online shopping service with home delivery so any of the companies that are using Internet are increasing their potential market share and therefore there revenues. A third of the Global British revenue is from the online shopping. Self-checkout machines used my ASDA and Tesco first, became a very useful way for Sainsbury’s to check their customers out and get the process done faster.It is a revolutionary way to save, space (this kind of machines does not take much space) time and money because it boots the sales and no staff is needed, everything is done by the customers, especially in the 24 hours stores. Even if it is not well-known yet, the Radio Frequency Identification Device (RFID) technology could be very useful and beneficial to the supply chain of Sainsbury’s because it will be more profitable by not having much inventory. Internal Factors:There are ways to examine the different internal factors that could be affecting an organisation which but we will select the 5 forces and the SWOT analyse to do so with Sainsbury’s. Porter’s 5 forces analysis: * Competitive Rivalry: The market of the food sector where Sainsbury’s is operating is an almost saturated market with a lot of competitors and more firms are trying to get into it which makes it become even more hard to compete. Even if Sainsbury’s market share is increasing since restructuring program but they are still have a lot to do to cover the parts behind ASDA and the Leader of the market, Tesco. Barriers for entry: are very high in this industry because it costs a lot and requires a huge investment to face and build a firm in the most sophisticated sector in the United Kingdom, without citing the brand name development which could take years to be done. So therefore, the companies which are already in the market have their place and for the new entrants, it is very difficult to establish themselves. The knowledge of the local community is primordial in this domain and it is a very difficult matter for foreign brands. Threat of substitutes: is very low in the developed markets and starting to be more and more every day in the emerging countries as well because the consumers see it as a necessity. The customers need something else to replace their every week supermarket trolley when it is not available or when they simply want to change. The market is changing and new innovations are taking place to make the Saturday afternoon food shopping a pleasant activity so it is difficult to substitute. * Buyer power: the consumers have a high power imply because there are many suppliers selling almost the same products and people have the choice of a wide range of products. The difference is only made by the value, so the price and quality relationship. Loyalty is also one of the things that a company can benefit from a customer if this person is satisfied, so they are working hard on the customers’ satisfaction. Otherwise, the switching cost is low, and could be zero for the consumers. All the business is about the consumers and its needs. Therefore, in a recession time, it could be given more weight and importance in the decision making which will increase their power. Power of supplier: This factor is more delicate to classify it. We can though call it a reciprocal dependency between the firm and its suppliers. Obviously if one of the suppliers are letting you down (which is not in their benefit anyway) the firm can always turn to another of its thousands of suppliers but might lose some customers who are looking for the same quality and the same price and their sales products will be hugely affected. Sometimes the sales volume of the suppliers is depending on the supermarket’s performance on its products. SWOT analysis: Strengths: Sainsbury’s has been growing economically continually and regularly for the last 3 years with an average of 7 % per year since 2007. Sainsbury’s is apparently very well situated in terms of environmental initiatives by dealing with the Fair Trade products (bananas, coffee, etc…) moreover; removing the gang master had positive effects on the public, on the consumer brand, green activist and consumers themselves. Sainsbury’s has clear famous products that increase their sales. According to Dickinson (2008). “It has been simple for Sainsbury’s to see uplifts in sales of specific ingredients that have been featured in ad campaigns.Apparently the supermarket had to order nine tons – the equivalent of two years’ supply – of nutmeg to meet demand when it appeared in one of Oliver’s hundred-plus ads” * Weaknesses: the fact that Sainsbury’s have been recently taken over by a Qatari private firm can lead to complications in the management of the company and also lose the consumers loyalties. Sainsbury’s is not in any other market apart from the United Kingdom one unlike its competitors for example Tesco that is existing in the United State of America.Even though they are recording a growth of 7% per year, it still does not cover the distance between them and the challenger ASDA and the leader TESCO. * Opportunities: the alternative businesses in Banking and Properties that Sainsbury’s are operating on represent an opportunity of growth and expansion. Online shopping are a huge prospective for the future of the sales in all the businesses, not only for retailers. Sainsbury’s customers can be delivered at home without having to carry bags and so on which will encourage them to purchase more and boot the sales of the company. Threats: Sainsbury’s have to continuously invest in the environmental questions without having the immediate return. Sainsbury’s Supply chain is directly affected by the bio-petrol that they are subject; therefore, the customers are the most affected in the increased price of fuel. Like any other big firm, Sainsbury’s is subject of control in all the areas that involves fair competition, environment participation, recruitment and the employment rights, tax laws and a respect of a certain standard in terms of the quality of the products. How Sainsbury’s are dealing with the globalisation:Sainsbury’s had concede a number of factors into the organisation to affect its decision making justifying its change. This same change is also forced essentially from outside the organisation. The external factors are sort of conditioning the internal factors. According to Rigby (2008) one massive factor that is behind all the elements of these influences is the globalisation. It is a phenomenon that has been taking place over the world in the last thirty years. The term of globalisation actually means standardisation around the world of political, economic and socio-cultural norms.It means that the world becomes smaller and trade and communication barriers inexistent. Most of the products that the firm is offering to their customers are not manufactured in the United Kingdom consequently, if there is any issue in the country where that products are produced, it could affect the supply chain of Sainsbury’s. Globalisation has many impacts especially in the big firms such as Sainsbury’s. The company has reacted to it positively in some point and negatively in some other areas.The third biggest supermarket chain has been affect by an IT failure so are giving up the automated systems to get the manual ones back. After the ?140 million losses in 2006, the plan is to get Sainsbury’s back on the rails again by cutting 750 head office jobs and taking in 3000 people from stores personal on the top of four automated depots. Accenture was the IT consultancy company that designed the “Business Transformation Programme” for Sainsbury’s to create an competitive advantage over its leaders and make work as efficiently and cost effectively as possible with a ? . 8 million seven years contract. However this IT project has not been a success which leads to a rebuild the IT team and renegotiates the contract. Accenture has gradually kept itself far from the supply chain issues that Sainsbury’s had and stated that the contract was not stipulating the cover of these areas in case of problems. Sainsbury’s management strategy as responses: The environment: Sainsbury’s is now developing a strategic method by raising the commitment of the staff to meet their goals.The Energy Team are willing to save energy by showing their colleagues some technics to do so and also reduce waste and eliminate it in the long term. This process is into the Sainsbury’s environmental achievements, and on the top of it, they are encouraging their employees to be fully involved into a communication process for those employees who agreed to achieve some particular environmental tasks. Sainsbury’s published two Best Practice Guides and distributed it to its managers to organise training and showing examples of responsible practices to employ inside the corporate.The firm is highly committed to the environmental reporting which is within the main part of their strategy. According to According to Shifrin (2008), online sales and reduce the costs of IT made the profit jump. Looking form a globalisation point of view, IT is in the forefront of most of the companies in the business framework by recruiting the new IT Change Director in 2008. Sainsbury’s is therefore taking it as an important key success as it is the first time in the company has the IT department director on the operational board.The firm affirms that it will be increasing its online sales by including non-food good for sale and indeed it did increase the following year by 40% and is aiming to run the online service from 200 stores by 2010 in a vision of a major progress of its internet transactions on all its products. Sainsbury’s reaction to effective change in its board: According to Official J Sainsbury’s PLC Website (2010) In June 2010, Sainsbury’s has declared changes inside the company’s boards. This change is aiming to support the company‘s long term growth strategy and enhancing the teams.Mike Coupe is now a Trading Director will be transferred to the post of Commercial Director on the plc board without losing its duties in the Trading and IT department. Darren Shapland, the financial Chief Officer will be in his turn promoted as Group development Director on the same board than previous colleague, and responsible of the company’s growth results in all the branches of the group (Sainsbury’s bank, Property and Sainsbury’s). John Roger will be helping him in the operating board having already worked in the Group finance and Director of Corporate Finance during 20 years.In addition to these experienced people, Sainsbury’s appointed Helen Buck as Convenience Director. She has being recruited in 2005 and held many post of responsibility in the company with more than 30 years experiences in the domain of retail and strategic consulting. Try something new today: According to Andy (2006) This new slogan that Sainsbury’s has invented in 2006 is to encourage the customers to try something new in their shopping basket. That little extra money that they are going to spend every time they shop allowed them reach the sales led recovery of ? . 5 billion revenue and it generated ? 550 million in two years only. The firm has a very clear target to get the people change their behaviour of shopping through all the networks. Sainsbury’s want to make the customers come to enjoy their food shopping and taste the difference between its diverse products. This strategy has mainly being relied on TV advertising which lead to an obvious improvement of the results and getting the distance of the market share smaller between them and their competitors ASDA and Tesco. Supply chain :The third biggest supermarket brand name in the United Kingdom has seen its overall profits increasing significally after enhancing their supply chain strategy. The company recorded 2. 9 per cent revenues more than Tesco in terms of total sales including online performance. The supply chain and IT improvements have booted the company’s records and leaded it to a continous progress over the time. In 2009, Sainsbury’s expanded its online services by selling more than 8000 non food products and currently testing “click and collect method” in few of its stores.With the launch of the shopping from home such as little stores called Local Sainsbury’s on the top of the very wide range of merchandises that they sell, they are developing a certain number of supply chain network with its level to cope with the difficulty of the process. Logistic teams are usually responsible of managing the movement of the supply chain. Distribution are taking care of the delivery of good in the stores and physical stock. Sainsbury’s have faith in that in the process of continuous evolution and will bring its fruits over the time. Recommandations:In a globalisation prospective, Sainsbury’s should seek other international markets in order to gain more market share and increasing their revenues, while Tesco are doing well around the world and operating in 17 countries in three continents. They should also perfectionate their supply chain and the IT governance that seemed to be fragile even though an improvement in the last few years. Increasing the number of stores and seeking new territories where Sainsbury’s could open new supermarkets and Local Sainsbury’s. Taking example of its leaders is also a way to improve in many aspect in the company.