Sainsbury Company Investigation - Case Study Example

Marble Arch Sainsbury Introduction Sainsbury's was founded in 1869 by John James Sainsbury and his wife Mary Ann (ne Staples), in London, England, and grew rapidly during the Victorian era.Sainsbury's is now the third largest grocery retailer in the UK. After giving small introduction about Sainsbury I am now going to introduce the Sainsbury store that I will be investigating in relation to my chosen organisation. SAINSBURY LOCAL STORE IN MARBLE ARCH Services 1. The location of the store (which is at the corner of Edgware road and Oxford Street) is a residence of most tourists. According to my knowledge, upon working in the state agency, these tourists have shown high demand for products since they got no permanent residence so they are always somehow in need of some products. This will bring them to the Sainsbury store, aside from the fact that Sainsbury is the only supermarket with all sorts of food and other available product in that area. On the other side there is Oxford Street which has a huge amount of employees and costumer. Again for the same reason people would prefer to shop in Sainsbury store. Two major determinants of demand are at work in this situation: population and absence of related services. First, we expect Sainsbury to have higher demand since the population in the area is large (Fao Corporate). Given that it is the meeting place of two major streets, the location can be conveniently reached by many consumers. Second, the absence of related services provides no rivals for the services given by Sainsbury (Mankiw). This also increases the demand for this particular store. However, the problem with the service is the absence of self-serve cashiers. Given a higher demand for the service, this would mean that people will always have to queue when paying. Queues in this particular store are usually long and given that people have to use their nectar cards, it would take long before they can finish their transactions. This is a lack of service thereby reducing customer convenience. Certainly, inconvenience is one that can possibly drive the demand down. Employees 2. Upon observation, I realized that employees are not skilled enough or properly coordinated. Apparently, the planning and design of the employees' tasks were not properly done, so that when the store gets so busy, the employees fail to help each other, thus the problem of long queues cannot be addressed. Employees were not trained enough to do the tasks of others in case some experience a problem. This makes the operation paralyzed whenever the number of customers increases beyond usual. Size 3. The size of the store is very much important in delivering the service. Given that there is a large population of buyers in this particular store, it is necessary to also expand the floor area. This is a problem with Sainsbury since the area of the store remains small, compared to the number of possible customers. This problem has many possible bad effects. First, a small store area against the number of customers will bring inconvenience to the shoppers. Instead of enjoying their shopping experience, customers might feel it a burden. Second, this prevents the store from maximizing the existing demand for the product. Third, this will be a problem if a competitor builds a bigger store in the future. Sainsbury might find them divested of customers. Part Two In today's retail market, evermore discerning customers are requiring a wider range of goods and services. Increasing competition is putting profit margins under pressure and businesses across the industry must learn to manage objectives and resources professionally, efficiently and effectively. There are many factors and circumstances affecting the industry and as a result retail executives must consider fundamental solutions to their businesses in order to secure success in the market place. In order to achieve this, a large retailer such as Sainsbury's Supermarkets Limited (SSL) must improve customer service and meet customer demands continuously taking into account all seasonal and market pressures. They should also reduce labor costs, minimize over and understaffing, increase pounds () per transaction, maximize resource utilization, retain skilled staff, and reduce recruitment costs and continuous growth Abraham Maslow's theory of "Hierarchy of Needs" which is very useful in the business industry puts Sainsbury on the advantage. The theory says that the physiological needs of people are the foremost consideration (12manage). For the Sainbury business, this reflects a steady market for the product. In economic theory, this is described as an inelastic demand. There is an inelastic demand for the products, which means that buyers are not responsive to price changes given that food is a necessity (Wikimedia Foundation, Inc.). Background Significant worries have been raised about the relentless rise of supermarkets and their hold over consumers and suppliers alike. According to market research group TNS Worldpanel, the UK's big four - Tesco, Asda, Sainsbury's and Morrisons - now hold almost three-quarters (74.4%) of the grocery market. Tesco, the UK's number one supermarket has the biggest share and now takes 1 of every 8 spent by consumers in the UK. When you consider that UK retail sales, it totaled 246bn in 2004 - more than the combined economies of Switzerland and Ireland - that's a significant amount. According to the All Party Parliamentary Small Shops Group, half the UK's 278,630 shops are owned and managed by a sole trader. However, these local shops are now losing out to supermarkets, which are moving into the convenience store format. According to the Association of Convenience Stores, in the 12 months to June last year, 2,000 independent convenience stores closed down as supermarkets moved in. Any criticism mainly seems to come down to gripes about market leader Tesco, which currently has a 30.2% share of the market - way ahead of Sainsbury (16.2%). But rivals have spoken out about its expansion, as the group plans a rapid rollout of its local format stores across the country. Asda's owner Wal-Mart has called on the government to investigate Tesco's continuing domination, because it was so difficult for rivals to try to catch up. Remarkably, smaller rival Waitrose - owned by department store John Lewis - has also added its voice to concerns about declining competition in the convenience store sector. While insisting it was not anti-Tesco, the retailer recently revealed it had been prevented from opening stores in many towns as it had been outbid by Tesco. Local authorities fail to consider competition, service and social issues, instead concentrating purely on who pays the highest price, Waitrose added. The following section will focus on a proposition with regards to my selected business "Sainsbury's Plc Marble Arch". After careful research and interviews with Sainsbury's I have found the following: 1.1 Services - Short Term Initiative As previously discussed in part 1 there is a clear problem with meeting the customers' needs and demands. From the research I have conducted I believe that new implications and strategies to incorporate new services would be a great influence on Sainsbury's everyday demands to customers. In order to gain an understanding of the kind of services they could include I conducted research and first hand investigations into other market leaders and competition in this field (I.E Tesco, Morrisons, Asda). Top Market Leader Chain: 1. Tesco 2. Asda 3. Sainsbury's 4. Morrison All the above include attractive services for their customers although one point I would like to focus attention on would be the use of "Self Service Station". In this day and age the leading chains have opened local supermarkets, such as, Tesco Extra and Sainsbury's local. Unknown to this business's demand was extremely high therefore the customer inflow was much greater than expected. As such the supply chains put in place were unable to cope with demand. Location was a key factor that contributed to the high demand. A self-service counter would do much to lessen the queue thereby allowing the store to accommodate greater number of customers. This should be a priority investment of Sainsbury. This move will make the transactions faster, make the service more convenient therefore improving the sales performance of the store. 1.2 Employees - Medium Term Initiative Recruiting skilled employees is a key part of successful business. Supermarkets employ many different skilled people in order to meet their demands. In the case of Sainsbury's, employee relations seem to be weak. After an email interview with store manager for Sainsbury's Marble Arch, Mr. Hughes made it clear that Sainsbury's had a new initiative for employees in order to increase success in their working environment. A very important part of the interview focused on customer demand and costs. Mr. Hughes went on to discuss how Sainsbury's aim to combine both customer satisfaction and cost effective products together. Relative to the high demand (also related to the location factor) employees are deemed not skilled enough to perform multi tasks. Employees are segregated into their own skills. For example when demand gets high you cant have an employee who works on shelves to also work on the checkouts. This is a clear problem I found from Mr. Hughes when interviewing. With a more experienced and skilled workforce there could very likely be an increase in the methods of operation which would in turn help respond to the demand. Mr. Hughes also stated that the number of part time employees employed by Sainsbury's is also increasing in order to meet the demand at busy times of the week and specific hours of the day. From further investigation it is clear to see that peak times are early morning when people go to work and afternoons at the end of a working day. Why not increase these part-time jobs to these times Mr. Hughes was unable to comment but went on to explain that Sainsbury's will be announcing new regulations for employees in the near future. Proper scheduling plays an important and critical role in Sainsbury's day to day operations and profitability. The integrated workforce management solution for Sainsbury's is an intelligent solution for the operational deployment of human resources, integrated business forecasting, generation and calculation of workload and staff scheduling. The workforce management technology has provided Sainsbury's with a fully web-based and centralized system that produces optimum schedules for all employees therefore satisfying the forecasted demand of work with granularity of fifteen minutes. The system is configured to respect all operational and business requirements as well as employee contractual constraints. 1.3 Size - Long Term Initiative Size is a key influencing factor when it comes to supply and demand. Sainsbury's Marble Arch is a booming store attracting over 4,000 customers per day. After interviewing Mr. Hughes it was clear to see that they had plans to increase size and scope of product at this specific store on a long term basis over the next 5 years. If the store had for seen the demand rates or at least had higher expectations of the success rate seeing as the locations are prime, it may have been possible to implement strategies pre-opening to tackle the problems they face now. Herein lies a key problem. Overall the post-interview analysis would be the following with respect to all categories (A, B, C): Amount of consumers/buyers per week is roughly 23,000, at peak times (i.e. Christmas and summer) this rises to around 32,000. Total amount of employees 30, with a slight change in festive and busy periods. Fixed and Variable costs, along with elasticity which seems to be a key part of Sainsbury's business structure aims to provide higher production along with importance or retaining there "Quality" branded products. Competition is ever increasing and Sainsbury's aim to provide new initiatives to secure their market brand name and customer retention as well as customer development. 1.4 Areas for Improvement 1. Customer relationship Management - Customer Relationship Management can mean a "customer-centric" organization. (12manage). It can be used to build a customer-intimacy and customer-friendly image (12manage). The company has much to rake from the customers. It can create an image different from other big supermarkets. Instead of being unfriendly to other businesses, Sainsbury can create an image of friendliness and gentleness. As many throw criticisms against the big supermarkets of UK, Sainsbury can stand to make a difference. 2. Since Sainsbury caters to customers of different cultures, it must adapt the five cultural dimensions of Hofstede. It describes five types of differences between people: power distance, individualism versus collectivism, masculinity and femininity, uncertainty avoidance and lastly, short-term and long-term orientation (12manage). The company should show empathy to people of all sorts of culture. This can be done through promotions focused on certain group of customers. 3. Product Differentiation - Sainsbury is operating in a perfectly competitive market wherein there are homogenous or identical products (Bizcovering.com). One thing that Sainsbury can improve on is to differentiate their product or service from the other supermarkets. There are different ways to differentiate their product and service. "When using product differentiation to reach your target audience, compile a list of what makes your product better than the rest. This list should be tailored to the consumers you are trying to reach. Some examples are differences in quality, price, features, or design. You may also want to reveal the limits of the competing product" (Popular Marketing). Conclusion This report concludes that Sainsbury's is an ever growing company, maximizing their own brands and holding their status level in a growing market. One factor however that forbids the store to maximize their sales opportunity is the smaller store compared to the total number of customers. Therefore a move to expand their shops would increase transactions and profitability. This is the capital investment that they should strive to undertake in the soonest possible time. The opportunity cost of lost number of customers due to small location might be high and might even increase in the coming period when the market expands even greater. I believe Sainsbury's is in a market of its own, providing competitive prices as well as the high quality they strive for. This is a key aspect to the success of their supermarkets, in this case Sainsbury's Local Marble Arch. Works Cited 12manage. "http://www.12manage.com." 26 July 2009 Bizcovering.com. "http://bizcovering.com." 26 July 2009 . Fao Corporate. http://www.fao.org. 22 July 2009 . Mankiw, N.Gregory. Principles of Macroeconomics. Orlando, Florida: The Dryden Press Harcourt Brace College Publishers, 1998. Popular Marketing. http://camouflagepink.squarespace.com. 26 July 2009 . Wikimedia Foundation, Inc. "http://en.wikipedia.org." 7 July 2009. 26 July 2009 . Read More