Research Topics: J Sainsbury Plc United Kingdom

Tesco Porter’s Five Force Model

INTRODUCTION[1] Founded in 1956, Tesco has come a long way since its first-opened store in a converted cinema in Maldon. Today, 51 years after it was founded by Sir Jack Cohen, TESCO is Britain’s leading retailer. Despite being a market leader, the organisation is not yet resting on its laurels of success, but instead, continuously innovating and developing their company in order to maintain what it has managed to achieve up to this time. Thus, they have constantly formulated competitive strategies in order to attain this. According to Michael Porter (1998), the essence of formulating competitive strategy is relating a company to its environment. Although the relevant environment is very broad, encompassing social as well as economic forces, the key aspect of the firm’s environment is the industry or industries in which it competes. Forces outside the industry are significant primarily in a relative sense; since outside forces usually affect all firms in the industry, the key is found in the differing abilities of firms to deal with them. The most dominant strategic management paradigm in recent years is known as the strategies model (Fredrickson 1991). Porter (1998) claims that the intensity of competition in an industry is neither a matter of coincidence or bad luck. Rather, competition in an industry is rooted in its underlying economic structure and goes well beyond the behaviour of current competitors. The state of competition in an industry depends on five basic competitive forces, which will be discussed in the following sections. PORTER’S FIVE FORCES MODEL IN THE TESCO CONTEXT Figure 1 – The Five Factors or Forces Affecting Competition in an Industry[2] INDUSTRY COMPETITORS             Concentration, fixed or variable costs, differentiation, capacity, pricing, behaviour and market and company growth are some of the factors considered in this force. First, there is a need to identify Tesco’s industry competitors. In their kind of industry, the concentration of rivals is very large, evidenced by the numerous number of their competitors, come of the top rivals being ASDA Group Limited, BP PLC, Carrefour S.A., ExxonMobil Corporation, The Big Food Group PLC, J Sainsbury PLC, Marks & Spencer Group PLC, Royal Dutch/Shell Group, Safeway Inc., Somerfield, The Boots Group PLC, Wm Morrison Supermarkets PLC, The Car phone Warehouse Group PLC and John Lewis Partnership PLC. Rivalry tends to intensify as the number of competitors increases and as they become more equal in size and capacity. Therefore it can be said that the intensity of rivalry in the retailing industry where Tesco belongs is very stiff. Also in this force, rivalry is usually stronger when demand for the product is growing slowly, as is the case of the retailing industry. Rivalry is likewise more intense when competitors are tempted by industry conditions to use price cuts or other competitive weapons to boost unit volume and is also stronger when the products and services of competitors are so weakly differentiated that customers incur low costs in switching from one brand to another. Further, rivalry increases in proportion to the size of the payoff from a successful strategic move and becomes more volatile and unpredictable the more diverse the competitors are in terms of their strategies, personalities, corporate priorities, resources, and countries of origin. The above conditions all apply to the arena of retailing industry where Tesco plays, thus the bigger need for the firm to focus on strategic management in order to gain competitive advantage over their competitors. POTENTIAL ENTRANTS             According to Davies & Lam (2001), barriers to entry are related to economies of scale, the existence of learning and experience curve effects, brand preferences and customer loyalty, capital requirements, cost disadvantages independent of size, access to distribution channels and government actions and policies. The economies of scale, for instance, implies that the more scale economies, the less threat of entry in that if entrant cannot quickly get large market share, it will have a major cost disadvantage. Incumbent can additionally threaten to increase output and cut price. Having 51 years of experience in the kind of business that they are in and with the incumbent retail giants existing (i.e. ), the said combination puts up a considerable barrier to entry. Where in the earlier days it is relatively easier to enter the industry because of little competition and the giants now were just medium-sized firms before, the contemporary retailing landscape is proving more and more difficult to enter into. Potential entrants will find that barriers are imposed on them, either explicitly or implicitly, by the conglomerate incumbents. Access to distribution channels will also prove harder for those who want to enter the industry. As the incumbents have already cornered the more common distribution channels, it will be difficult to both compete with the already established chains in the distribution channels and look for new channels with which to dispense of the retail products. BUYERS Davies & Lam claims that the leverage and bargaining power of customers tend to be relatively greater when customers are few in numbers and when they purchase in large quantities and when customers’ purchasers represent a sizable percentage of the selling industry’s total sales. In the retailing industry, the number of customers is very large, and often, they do not purchase in bulk. From this alone it can already be said that the bargaining power of consumers in weak. When the supplying industry is comprised of large numbers of relatively small sellers and when the item being purchased is sufficiently standardized among sellers that customers can not only find alternative sellers but they can also switch suppliers at virtually zero cost, the buyers’ buying power is strong. Fortunately for Tesco, their competitors are not as large as their own organization, which makes the market disciplined, and the competitors likewise have a disciplined approach in price setting, partly due to set government regulations. When it is economically feasible for customers to purchase the input from several suppliers rather than one, their power also increases, which does not happen in this particular industry, as it is more economic to purchase from one retailer than from a host of retailers. SUPPLIERS A group of supplier firms has more bargaining power when the input is, in one way or another, important to the buyer and when the supplier industry is dominated by a few large producers who enjoy reasonably secure market positions and who are not beleaguered by intensely competitive conditions (Davies & Lam 2001). In Tesco’s kind of industry, they have the extreme advantage of being able to dictate the price that they are willing to pay the supplier, as the suppliers, if the retailing giants refuse to pay the formers’ asking price, will be left with no one to sell to save the small supermarket chains, which would not be a wise move on the suppliers’ part. Additionally, when the suppliers’ respective products are differentiated to such an extent that it is difficult or costly for buyers to switch from one supplier to another and when the buying firms are not important customers of the suppliers, supplier power increases. In the retailing industry, this is clearly not the case, thus it can be deduced that suppliers do not exert as much power as they would have liked to. Switching from one supplier to another will not be costly for a retailing giant such as Tesco. In fact, as suppliers, they will be clamouring for the firm’s attention to choose them as supplier in the event that the company decides to switch suppliers. SUBSTITUTES The price and availability of acceptable substitutes for a product places a ceiling on the prices which the producers of that product can charge, and unless the sellers of a product can upgrade quality, reduce prices via cost reduction, or otherwise differentiate their product from its substitutes, they risk a low growth rate in sales and profits because of the inroads substitutes may make. In the retailing industry, as mentioned above, there is a large number of competitors. This amount of rivalry is the main force that drives the prices of all companies in the industry down. For example, Sainsbury can match the low prices that Tesco offers in the market and even equal the quality of the products that they offer, making the substitute force high in the retailing industry where Tesco operates. Further, the competition from substitutes is affected by the ease with which buyers can change over to a substitute, a key consideration being that usually the buyers switching costs—the one-time costs facing the buyer in switching from use of a product over to a substitute for it, is low. Since switching from one chain to another will create a relatively low cost or fuss for the consumer, the substitute force in the industry is relatively high. This opens an avenue for Tesco to improve quality and differentiate from their competitors while driving down costs at the same time. ADVANTAGES & DISADVANTAGES OF ANALYSIS             If these forces are properly assessed, individually and collectively, this will lead to the identification and subsequent deployment of appropriate (i.e. profitable) strategies. The approach should make transparent Tesco’s strengths and weaknesses, as well as opportunities and threats. The collective strength of the five forces determine the ultimate profit potential in the industry, where profit potential is measured in terms of long run return on invested capital. According to Porter (19998), not all industries have the same potential. They differ fundamentally in their ultimate profit potential as the collective strength of the forces differs; the forces range from intense in industries like tires, paper and steel – where no firm earns spectacular returns – to relatively mild in industries like oil-field equipment and services, cosmetics and toiletries and the retailing industry – where high returns are quite common. The goal of competitive strategy for a business unit in an industry is to find a position in the industry where the company can best defend itself against these competitive forces or can influence them in its favour. Since the collective strength of the forces may well be painfully apparent to all competitors, the key for developing strategy is to delve below the surface and analyse the sources of each. Knowledge of these underlying sources of competitive pressure highlights the critical strengths and weaknesses of the company, animates its positioning in its industry, clarifies the areas where strategic changes may yield the greatest payoff, and highlights the areas where industry trends promise to hold the greatest significance as either opportunities or threats. Understanding these sources will also prove to be useful in considering areas for diversification, though the primary focus is on strategy in the industry. Structural analysis is the fundamental underpinning for formulating competitive strategy and also applies to diagnosing industry competition in any country or in an international market, though some of the institutional circumstances may differ. Experience shows that opportunities or threats can arise from many different sources (Jackson & Dutton 1988). Thus, obtaining information about several different sectors furnishes the COE with more relevant information in aligning the firm’s competitive strategy with environmental conditions (Nutt 1984). For example, obtaining and analyzing information on competitors’ lowering or raising its product prices may enable a firm to formulate and implement strategic actions to maintain current customers or secure additional ones. Moreover, in investigating rivals’ manufacturing processes, a firm may learn of new and improved methods and processes that allow it to remain competitive. Thus, securing information across several environmental sectors may enable a firm to gain competitive advantage or maintain its market position. According to Davies & Lam (2001), although the five forces approach provides sound theoretical basis and allows systematic analysis, it has the disadvantage of not providing how to measure and weight the many different components which determine each of the forces. Also, it is only possible to make an unambiguous judgment on the strength of a force if all the indicators ‘point’ in the same direction. If indicators contradict each other, there is the problem of how to balance them. USING THE MODEL TO SAFEGUARD FUTURE PROSPECTS             The five competitive forces – suppliers, buyers, competitive rivalry among firms currently in the industry, product substitutes and potential entrants to the industry – reflect the fact that the competition in the retailing industry goes well beyond the already existing chains. Customers, suppliers, substitutes, and potential entrants are all ‘competitors’ to firms in the industry and may be more or less prominent depending on the particular circumstances (Porter 1998). All five competitive forces mutually establish the amount of industry rivalry and profitability, and the strongest force or forces are prevailing and becoming decisive from the point of view of strategy formulation. In Tesco’s case, even them who have a very strong market competition in the retailing industry where entrants have little or no threat will earn low returns on their profits if it has to face a superior quality and lower-cost alternative. OTHER FACTORS TO BE CONSIDERED             The strength of the competitive forces in an industry determines the degree to which the inflow of investment occurs and drives the return to the free market level, and thus the ability of firms to sustain above-average returns. ‘The underlying structure of an industry, reflected in the strength of the forces, should be distinguishable from the many short-run factors that can affect competition and profitability in a transient way’ (Porter 1998:3). For instance, variations in the economic environment over the business cycle manipulate the short-run productivity of the retailing industry, as can material deficiencies, strikes, and the like. Even though such factors may have strategic implications, the focal point of the analysis of industry structure is on categorizing the basic, fundamental features of the industry rooted in its economics and technology that shape the arena in which competitive strategy must be set (Porter 1998). CONCLUSION             The general, long-term development of the retailing industry is one characterised by a series of evolutionary periods that at times can best be described as revolutionary in nature (Benson & Shaw 1999). In line with this observation, Tesco PLC needs to constantly be on the lookout for strategies which would help in maintaining their market leadership. Problems in the industry today appear from so many angles, at so many levels and in so many directions that their pursuit without a regular path will soon become lost in details. Porter’s five force model will help any organisation determine the direction in which they are going to take through an analysis of the five forces: suppliers, buyers, competitive rivalry among firms currently in the industry, product substitute and competitive entrants to the industry. Using this tool, Tesco, as well as other firms, is challenged to understand an industry’s profit potential and the strategy necessary to establish a defensible competitive position, given the industry’s structural characteristics. Overall, the retailing industry in which Tesco belongs is a highly attractive industry which contributes a large share of the total profits of Tesco. With the intensity of rivalry kept in check by the retailing giants, high threat of industry entry, low supplier and buyer power, prospects for Tesco holds much promise.   [1] All Tesco information came from the company website. [2] Adapted from Porter (1998). Credit:ivythesis.typepad.com

Tesco Porter’s Five Force Model

INTRODUCTION [1] Founded in 1956, Tesco has come a long way since its first-opened store in a converted cinema in Maldon. Today, 51 year...

Dissertation

Dissertation

INTRODUCTION [1] Founded in 1956, Tesco has come a long way since its first-opened store in a converted cinema in Maldon. Today, 51 year...

The annual reports of J Sainsbury plc: a written course work assignment

WRITTEN COURSE WORK ASSIGNMENT Access the annual reports of J Sainsbury plc for the years 2003, 2004, 2005 and 2006. You can either obtain hard copies of the actual reports or they can be accessed on the web at: Having accessed the firm’s annual statements, prepare a report in which you:   a)     Identify significant areas of the accounts for 2006 where judgment has been used in determining the appropriate accounting policy for the company (for example depreciation of fixed assets , please note you should interacts with at least six accounting policy changed and their effects). Critically discuss how such judgments have materially affected the accounts in terms of valuation and profitability. b)     Critically discuss the extent that the information disclosed in the annual reports over the four years meets the needs of those stakeholders concerned with the social and environmental impact of the company.         Credit:ivythesis.typepad.com

The annual reports of J Sainsbury plc: a written course work assignment

WRITTEN COURSE WORK ASSIGNMENT Access the annual reports of J Sainsbury plc for the years 2003, 2004, 2005 and 2006. You can either obtain...

Managing Business Environment: the case of Tesco

Managing Business Environment: the case of Tesco               Operating in a global market requires the formulation and implementation of effective strategies to establish and sustain competitive advantage. The retail grocery industry particularly in the UK was challenge by various changes for the past decades that affect every organizational operation and other relevant aspects. It is believed that “noticeable issues concerning the development of new forms of competition (discount firms), the increased use of information technology in the management and logistics of groceries, and the diversification of the operating activities of various firms (high proportion of non-food sales)” (Athanassopoulos 2003, 932-33) prompted strategic shift towards alterations of the traditional business strategies employed by the leaders of this industry segment.             Meanwhile, Tesco is among the leading international retailers with a total of more than 3,000 outlets and approximately 600 planned store openings in more than 10 countries (Kumar 2005). Its remarkable expansion since its establishment in mid 1920s from a diversity of formats, markets, and sectors resulted to its satisfactory industry position. Tesco is committed to its long term strategy for growth as based on its four key parts: Core UK, International, Non-food, and Retailing services and these key parts are considered as their criteria for competitiveness. According to Tesco’s corporate website (www.tesco.com 2008), their employees accounted to over 450,000 in all its stores around the world. They aim for a consistent delivery of “a strong customer offer on every visit and every transaction by focusing on the Group’s core purpose: to create value for customers to earn their lifetime loyalty”. Furthermore, “this core purpose is delivered through the Tesco values: no-one tries harder for customers and treat people how we like to be treated”. The top competitors of Tesco are ASDA Group Limited, J Sainsbury plc, Wm Morrison Supermarkets PLC, and other retail grocery outlets that operate in areas where Tesco also operate.   Current Strategic Position According to its website, Tesco maintains business relationships with approximately 2,000 own-brand primary suppliers from less than a hundred countries. The current success of Tesco could be supportive of the claim that its logistics management strategy works to its competitive advantage. Specifically, facts from their corporate website identify a complex range of relationships starting “from individual farmers and growers through to processors, manufacturers, and distributors”. Partnership is essential particularly to the key players of the supply chain process. Tesco abides to the UK Government’s statutory Supplier Code of Practice, holds strict implementation on ethical trading and commercial policies, and conducts ethical trading training to all commercial staff involved with the buying for the UK. Meanwhile, logistics plays major strategic roles in organizational operations as well as the environment of the business. Over a number of years, it has been a fundamental component in coming up with a competitive business strategy resulting to a similarly competitive profit edge (Whittington 2001; Heskett 1977). According to Vernon (2002), logistics is a major management task involving the most effective management of the flow of goods and services from origin to the point of delivery particularly to the purchasing outlets and the consumers. Specifically, it consist of a systematic process from inventory holding to product distribution including the aspects of the financial and human resource, which are considered as among the building block of a successfully functioning business (Vernon 2002). Earlier researches found out that increased attention on logistics and its management can contribute to the improvement of an organization’s competitive position particularly among those that operate globally (e.g. Andraski and Novack 1996; Morash et al. 1996; Fawcett and Gloss 1993) like Tesco having stores in other European and Asian countries. In relation to competitive advantage, logistics provide competence in the excellent delivery of products and services through speed, reliability, responsiveness, and low cost distribution (Morash et al. 1996). While organizations exhaust research and development (R&D) efforts in attempting to look over strategic issues such as a close scrutiny and tightening of operational concerns particularly logistics (Vernon 2002), the integration into its operations or even into overall corporate strategy offers considerable impact on customer value as compare to any other process related to operations (Andraski and Novack 1996). Williams and colleagues (1997) identify the benefits of integrating logistics into overall corporate strategy. According to them, the usual costs of operations are reduced, opportunity for new markets is present, customer service is enhanced, and competitive advantage is eventually established and sustained if logistics works in harmony with the overall business strategy. Furthermore, the fundamental role of logistics in both organizational strategy and organizational environment (Kohn and McGinnis 1997) supports the marketing and customer service relationship strategies implemented by managers (Sautter et al. 1999). It must be understood that logistics is a supportive and complementary element to the marketing function of any organization (Sauter et al. 1999; Lambert and Stock 1993; Rinehart et al. 1989). For example, some businesses like Wal-Mart, another retail grocery business and Levi Strauss, a clothing business pay special amount of attention on their distinctive logistics capabilities with the purpose of maintaining their marketing and customer service aspects as a part of their competitive advantage (Lynch et al. 2000). In terms of marketing particularly on electronic retailing or e-tailing that is also being used by Tesco, the effective in application of logistics is considered as a competitive weapon to survive the unstable environment of online marketing (Dvorak and Van Paasschen 1996). E-tailing or online grocery retailing still uses the standard functions of logistics with the addition of the convenience of the Internet in terms of automation of many – if not all – processes and operations and creates a wide-reaching, 24-hour/day presence at a very reasonably low cost (Guttman 2002; Castells 2001). Logistics in online grocery retailing is a tool for increased efficiency and convenience (Dennis et al. 2004). It augmented the growth of retailer power to control their supply chains (Boyer and Hult 2005). The physical involvement of retailers is reduced but the supply chain management become more effective with the use of modernized equipment for operations (supplier and retailer linked) (Dennis et al. 2004). In customer service, the Internet contains profound effect on strategic thinking because of its expected ability to transform organizational cost structures and modify communication patterns with customers (Boudreau and Watson 2006). In general, logistics plays a strategic role in many companies (Mentzer et al. 2001; Mentzer and Williams 2001). Marketing and logistics must work in tandem for the customer to be satisfied particularly in both physical service factors (logistics) and intangible service factors (marketing). On the case of Tesco, there is an opportunity to increase the numbers and similarly strengthen relationships with the existing base of suppliers. There is also a chance to look on the possibility of using cost leadership strategy in product and market development. Tesco needs to come up with sound decision making strategies when it comes to managing logistics.   SWOT Analysis SWOT stands for Strengths, Weaknesses, Opportunities, and Threats and among the most popular in understanding the overall strategic position of the organization as well as its affecting environment. In common cases, SWOT is employed as source of important information considered in creating competitive marketing strategies. SWOT also points out internal and external issues in the organizational environment. In the supply chain process, SWOT analysis functions in identifying strengths and opportunities as well as weaknesses and threats that will lead to possible advantages in relation to producers and suppliers of products and services along with extending the supply chain. For example, Tesco is considered to have an outstanding strength in its internet-based marketing. The internet could also be used in extending the supply chain because it integrates various organizational functions such as sales, operations, and logistics (Boyer and Hult 2005) among others. While Tesco intends to open up several store outlets in other parts of the world, the internet as a logistics infrastructure will bring opportunities to increase productivity while saving operational costs. The internet can bring advantages if used in revising existing supply chain strategies. The weakness of the internet as logistics infrastructure is privacy and security issues in acquiring products and services or even in marketing them to the consumers. On the other hand, the threat of the internet as a logistics infrastructure is seen on the inability of Tesco to deal with the fast technological changes that will affect not only its operations but also the suppliers, producers, and customers. The SWOT Analysis is to be used by Tesco as an initial strategic approach in looking on the significant issues about the organization and its operations particularly on the internal and external environments. The information that will be collected in the analysis will serve as the basis in coming up with strategic decisions and other organizational actions predominantly on logistics.   PEST Analysis The PEST Analysis is concerned with the environmental influences of the business specifically on Political, Economic, Social, and Technological aspects. On other instances, there are two added elements – Legal and Environmental, thus making it PESTEL. However, these two added elements are argued to be included in the others. This type of strategic approach is directed in understanding the risk of uncertainty and the future operations of the business. It also prompts the business on how to respond on certain environmental considerations. The application of PEST Analysis is seen on the context of strategic planning and decision making. Like SWOT Analysis, it provides important and variety of information that are deemed contributory or affecting the organizational operations and other functions. On the case of Tesco and its logistics management, PEST Analysis will provide the needed requirements of the organization in terms of the procurement and distribution of products and services from various producers and suppliers in both local and global perspectives. The anticipated expansion of Tesco to various locations worldwide necessitates the understanding of these environmental factors so as to minimize problems in the arrival and distribution of products and services. In application to the logistics of Tesco, political factors are seen on its compliance with the existing government regulations and relevant legislations. Most Tesco store outlets within UK operate under specific national legislative and entrepreneurial provisions and same us true to other store outlets outside UK. The intended business expansion on other locations, however, is crucial provided that the senior management must be able to evaluate national environment particularly on the case of political systems, security, and stability (e.g. China). For example, Tesco cannot easily open up a store in countries that are prone with political risks resulting to economic problems and uncertainty. It is because the political environment of any business plays a significant function particularly in the process of production and generation of revenues. In logistics, Tesco needs to explore potential suppliers in a given country as well as the supply chain strategies that could be adopted from the UK branches. Economic force is about the essential issues that affect the business in the process of revenue-making. Specifically, it reflects on the economic conditions of the immediate business environment are crucial to the financial performance of the organization. On the case of Tesco, economic trends influence its operations. The currency and inflation rates as well as consumer purchasing power are among the trends that the senior management must anticipate and appropriately provide remedies. This applies to Tesco’s current markets as well as the intended openings of store outlets in other parts of the world. In logistics, economic issues are seen on the case of operating costs based on production, procurement, distribution, and marketing of products and services.             Social considerations are related on the aspects that describe the society, people, culture, and circumstances surrounding the organization and might create significant impacts on its operations. For example, Tesco are able to easily relate on environments that are similar to the UK, wherein social conditions and people and their cultures do not differ considerably. It must be considered that some Western brands are prohibited on some regions (e.g. Japan). The social environment is where the business is bound for. Logistics management on Tesco’s case is based on the need of the existing market.             Technology for Tesco is an indispensable factor in its overall operations. The advancements in technology benefits Tesco especially because Tesco maintains a strong online customer base. Technological innovations create new market opportunities for Tesco to strengthen their current competitive advantage. Technology and innovations are synonymous. This is the reason why Tesco invests on technological infrastructures to stay innovative in all the ways they do business. In the logistics context, Tesco uses the internet in distributing products to the consumers. There are also online operations that deal with suppliers and producers. However, these are intrinsic to the organization’s own operational strategy.             All in all, PEST Analysis is same as SWOT Analysis. In terms of logistics, PEST Analysis provides a framework on the environmental forces that will affect the strategic planning and decision making processes. The sets of information that are collected in the analysis are used in combating uncertainty and other issues especially on foreign operational markets.   Porter’s 5 Forces Porter’s Five Forces Model is composed of competitive forces namely: the threat of entry of new competitors (new entrants); the threat of substitutes; the bargaining power of buyers; the bargaining power of suppliers; and the degree of rivalry between existing competitors. This model is used in understanding the competitiveness of the business within its niche industry as compared to its competitors or even other industries. It is commonly acknowledge that the analysis using the 5 Forces model determine the competitive position or power in a certain situation. On the case of Tesco’s logistics, this model is deemed essential in dealing with the stiff competition in the retail industry not only in UK but the world. It also deals with the issues in supply chains particularly on the suppliers who are in-charged in production and increase of product/service line. Although there are around a hundred suppliers, Tesco must establish a high quality supply chain to prevent scarcity and problems in its production. There are many businesses that are similar to Tesco so most suppliers will not hesitate to withdraw their products or services. Tesco is expected to maintain alignment with its logistics capabilities and work more closely with vendors for the improvement of inventory flow. Tesco can find other suppliers that can provide its supply needs.   Value Chain Management Analysis Understanding the linkages between activities can lead to more optimal make–or–buy decisions that can result in either a cost advantage or a differentiation advantage. The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit (Del Vecchio 2000). In the case of Tesco, the entire operation of the business should be examined and evaluated in relation to the current trends in the UK as well as global retail grocery market. According to Gurdjian and group (2000), it is important to understand local market conditions especially consumer behavior, competitive environments, management styles, and legal regulations because there are different variations across Europe and also globally. Considering Tesco operates in other European countries and Asian regions, understanding contributing factors help in determining the service delivery processes that strengthen as well as weaken the entire business operations. This will result to managerial options to eliminate the liabilities that detract the business or the need to developed and intensify some aspects of the operations.  The Analysis points out on its primary activities particularly of inbound and outbound logistics. In inbound logistics including material handling, warehousing, and inventory control and outbound logistics including collecting, storing, and distributing products to customers, Tesco uses considerable amount of financial resources to the total cost to produce some goods and services. Achieving competitive advantage through logistics and its effective management creates value when integrated with cost leadership business level strategy rather than on the case of differentiation business level strategy (Lynch et al. 2000). To do this, Tesco must be able to come up with valuable ways to reduce costs particularly on primary activities like inbound and outbound logistics. Superior effectiveness of the computer-controlled logistics schemes is seen in Tesco (Fernie and McKinnon 2003). In terms of its e-tailing as key marketing and sales activity, the process of placing grocery orders over the internet that utilise highly automated centralized warehouses and computerized logistics structures is more efficient as to compare with groceries in the supermarket. On this case, Tesco should be able to establish contact to prospective customer and achieve an exchange of merchandise for payments not always requiring a visit to a physical store (Dennis et al. 2004). Some retailers saved a significant amount of their resources in operations “by replacing electronic-data-interchange (EDI) tools with Internet-based ones that facilitate product comparisons, streamline logistics, and help business-to-business vendors” (Calkins et al. 2000, 140). Tesco’s challenge is to look over the existing strategies in e-tailing in accordance to the varying trends in online retailing, consumer buying behaviors, marketing communications, needs and demands, and so on. In connection, implementing marketing strategies requires the need for continuing optimization or the ability to assess a myriad of possibilities in order to find the best one or near best one (Hoctor and Thierauf 2003). Strategies must be evaluated and improved by integrating other elements of marketing and management. Tesco must reach out to a broader target market and must project an image relevant to every members of the society. Its corporate social responsibility must be defined. Meanwhile, the service delivery is an interactive and dynamic process that from the consumer’s point of view is much more than a passive exchange of money for a particular service. Tesco needs to strengthen its relationship with suppliers and increase market share based on the characteristics of services (e.g., intangibility, heterogeneity, simultaneity, and perishability) (Thompson and Strickland 2003). This effort will result to parallel business interests that will contribute to the beneficial effects to Tesco and its management as well as the suppliers’ business objectives. Contract agreements and other business transactions should present advantages and benefits for both parties. Efficient delivery of products and services through premeditated and tactical supply chain management initiatives should be prioritized. In support activities, Tesco’s procurement process in unquestionable regardless of the criticism pertaining to monopoly and labor issues. Tesco maintains outstanding relationship to around a hundred producers and suppliers. On the case of management, Tesco’s management is prompted to take means based on current market conditions implied in research and development (R&D). Goal-setting is sought because there is a need to identify the key stakeholders and their priorities, understand and incorporate their perspectives to the future plans of the business. The conflicting interests of various stakeholders are perceived to be barriers for effectiveness and among the most primary management issue. On this case, Tesco should be able to unite stakeholders’ and organization’s interests and wellbeing by having a strong will of central leadership and administration that is supplemental to the overall mechanisms in the workforce. The management of human resources is controversial. There are criticisms that are directed on Tesco on how they treat their employees. On this case, Tesco should cultivate and promote development on the needs of the employees provided that they are among the most essential assets of the organization. Financial assistance on human resources particularly to knowledgeable and skilled individuals should be accorded in order to improve the overall business operation as well as the engineering, monitoring, and control aspects of the business. Today, the challenge for every company is to explore the options and take advantage of the opportunities while taking caution in managing the risks (Macmenamin 1999). Tesco, with the recommendation of shifting to cost leadership business level strategy, needs to keep its operational expenses within a specified budget allocation in order to devote the necessary financial resources to both exploration and marketing. Lastly, Tesco must be able to recognize technological changes and infrastructure particularly on its e-tailing business. Aside from Tesco’s use of internet as major technological infrastructure, changes are to be anticipated or the management should be able to deal with the rapid changes in technologies. Tesco is required to improve technological infrastructures through innovations to increase efficiency as well as quality of the products and services. This includes investments on machineries and equipment that will necessitate the increased and efficient operation of the organization’s management system particularly in logistics and its management. Technology management that is rooted on the idea of effective application of technology to create maximum profitability and performance should be perfected. It is necessary for Tesco to extend its technology management not only on the aspect of technology but also on the role of human labor force and their intervention and most especially in logistics context. All in all, Tesco’s senior executives who think about how to establish and sustain competitive advantage using logistics strategy should consider how to tailor their own logistics. To do so, they will need a sound understanding of the fundamental principles of good logistics as well as exploring new logistics capabilities. References — (2008) ‘Tesco at a glance’, Tesco Corporate Website [online] (cited 11 July 2008) Available from http://www.tescocorporate.com/page.aspx?theLang=001lngdef&pointerid=A8E0E60508F94A8DBA909E2ABB5F2CC7   Andraski, J and Novack, RA (1996) ‘Marketing Logistics Value: Managing the 5 P’s’, Journal of Business Logistics, 17:1, 23-34   Athanassopoulos, AD (2003, June) ‘Strategic Groups, Frontier Benchmarking and Performance Differences: Evidence from the UK Retail Grocery Industry’, Journal of Management Studies, 40: 4, 921-953   Boyer, KK and Hult, GTM (2005, September) ‘Extending the supply chain: Integrating operations and marketing in the online grocery industry’, Journal of Operations Management, 23: 6, 642-661   Boudreau, M and Watson, RT (2006) ‘Internet advertising strategy alignment’, Internet Research, 16: 1, 23-37   Calkins, JD, Farello, MJ, and Shi, CS (2000) ‘From Retailing to E-Tailing’, The McKinsey Quarterly, 1, 140-147   Castells, M (2001) Internet Galaxy: Reflections on the Internet, Business and Society, Oxford University Press, New York   Del Vecchio, J (2000) ‘Assessing Internet Stocks in 2001’, The Motley Fool Homepage [online] (cited 07 May 2008) Available from http://www.fool.com/research/2000/foolsden001114.htm?terms=assessing+internet+stocks&vstest=search_042607_linkdefault   Dennis, C, Fenech, T, and Merrilees, B (2004) E-Retailing, Routledge, New York   Dvorak, RE and Van Paasschen, F (1996) ‘Retail Logistics: One Size Doesn’t Fit All’, The McKinsey Quarterly, 2, 120-129   Fawcett, SE and Closs, DJ (1993) ‘Coordinated Global Manufacturing, The Logistics Manufacturing Interaction and Firm Performance’, Journal of Business Logistics, 14:1, 1-25   Fernie, J and McKinnon, AC 2003, ‘The Grocery Supply Chain in the UK: Improving Efficiency in the Logistics Network’, International Review of Retail, Distribution and Consumer Research, 13: 2, 161-174   Gurdjian, P, Kerschbaumer, G, Kliger, M, and Waterous, J (2000) ‘Bagging Europe’s Groceries’, The McKinsey Quarterly, Special Edition, 2, 68-75   Guttmann, R (2002) Cybercash: The Coming Era of Electronic Money, Palgrave Macmillan, New York   Harris, L and Dennis, C (2002) Marketing the e-Business, Routledge, London   Heskett, JL (1977) ‘The Coming of the New Organization’, Harvard Business Review, 55: 6, 85-96   Hitt, MA, Ireland, RD, and Hoskisson, RE (2003) Strategic Management: Competitiveness and Globalization, 5th ed., South-Western, Singapore   Hoctor, JJ and Thierauf, RJ (2003) Smart Business Systems for the Optimized Organization, Praeger, Westport, CT   Humby, C, Hunt, T, and Phillips, T (2003) Scoring Points: How Tesco is Winning Customer Loyalty, Kogan Page, London   Kohn, JW and McGinnis, MA (1997) ‘Advanced Logistics Structures Revisited’, Journal of Business Logistics, 18:2, 147-162   Kumar, N (2005, March) ‘The Global Retail Challenge’ Business Strategy Review, 16: 1, 5-13   Lambert, DM and Stock, JR (1993) Strategic logistics management, 3d ed., Irwin, Homewood, IL   Lynch, DF, Keller, SB, and Ozment, J (2000) ‘The effects of logistics capabilities and strategy on firm performance’, Journal of Business Logistics, 21:2, 47-68   Mcmenamin, J (1999) Financial Management: An Introduction, Routledge, London   Mentzer, JT, Flint, DJ, and Huit, GTM (2001) ‘Logistics Service Quality as a Segment-Customized Process’, Journal of Marketing, 65: 4, 82-105   Mentzer, JT and Williams, LR (2001) ‘The Role of Logistics Leverage in Marketing Strategy’, Journal of Marketing Channels, 8: 3/4, 29-48   Morash, EA, Droge, C, and Vickery, S (1996) ‘Strategic Logistics Capabilities for Competitive Advantages and Firm Success’, Journal of Business Logistics, 17: 1, 1-22   Rinehart, LM, Cooper, MB, and Wagenheim, GD (1989) ‘Furthering the integration of marketing and logistics through customer service in the channel’, Journal of the Academy of Marketing Science, 17: 1, 63-71   Sautter, ET, Boberg, K, and Maltz, A (1999, August) ‘A Customer Service Course: Bringing Marketing and Logistics Together’, Journal of Marketing Education, 21: 2, 138-145   Smaros, J, HolmstrÄom, J, & KÄamÄarÄainen, V (2000) ‘New service opportunities in the e-grocery business’, International Journal of Logistics Management, 11: 1, 61-74   Thompson, AA & Strickland, AJ (2003) Strategic Management: Concepts   and Cases, International Edition, McGraw-Hill, New York   Vernon, M 2002, Business: The Key Concepts, Routledge, New York   Whittington, R (2001) ‘What is strategy – and does it matter?, 2nd Ed., Thomson Learning, London   Williams, L, Nibbs, A, Irby, D, and Finley, T (1997) ‘Logistics Integration: The Effect of Information Technology, Team Composition and Corporate Competitive Positioning’, Journal of Business Logistics, 18: 2, 31-41     Credit:ivythesis.typepad.com

Managing Business Environment: the case of Tesco

Managing Business Environment: the case of Tesco Operating in a global market requires the formulation and implementation...

The Financial Management of J Sainsbury

The Financial Management of J Sainsbury Introduction Studying the financial management of the J Sainsbury which is a UK company based in UK and engaged in grocery business and relates to the business of financial services is significant both for the management, to the stakeholders, and to the customers. This research paper is commonly available in doing assessment in the company’s financials as well as its performance that are relatively correlated to the industry and to the peers. The financial management is simple optimizing the logic that appears in the wisdom which received by most of the financial officers. Thus, the financial managers of J Sainsbury doing its job and focus on the three issues as optimizing for the supermarket in its money availability, the productivity of the money, and cost of the money. Relatively, the efficiency of the financial management is can also be considered to its emphasis and not to the economic. This implies that the term imply signifies the pursuing of maximizing the output to minimize the cost or minimum output. This can also readily available in by the aide of the techniques and process of management science in resolving the problems (Khan and Hildreth, 2004,            p. 90). In order to see the financial changes and management of the company, it is important to determine its financial report to show its financial growth, the changes of the board and management, the expansion, renovation, and re-engineering of its supply chains as well as the improvement in its IT system are all factors which can affect the company financial management. These can also be seen in the paper and how the company allocates sources and deals with the competitors. Company Profile             One of the leading food retailers in UK is the J Sainsbury plc as well as having its interest in financial services. The company’s services include the Sainsbury’s Local, Sainsbury’s Supermarket, Jackson Stores, the Bells Stores, and the JB Beaumont as well as the Sainsbury’s Bank and Sainsbury Online. The company’s objective is simple which is to serve the customers and provide its shareholders the sustainable and financial returns. The company has also the goal of ensuring its colleagues in developing the abilities and opportunities as well as it rewards in contribution of the success of the company (J Sainsbury Corporate Website, 2008). Today, J Sainsbury is considered to be the leading the company for the distribution for the consumer goods. This group is running for about 350 supermarkets of Sainsbury and has the 300 shops branded that are branded in Belles Stores and Sainsbury Local. In connection to the high updated use of technology, the company also goes to this flow by accepting orders thru internet. The company is also catering the 14 millions of customers every week and offers a wide range of articles from the healthcare products and to the food products and the half are sold under the own brand of the company. The company also owns the huge amount of real estate as manage by the division of Property of Sainsbury which is the outcome of its continuous growth of sales. J Sainsbury is also connected to the HBOS and offers its single client the wide range of the banking services including loans, fund management, insurance, and the credit cards. For the financial year of March 2008, there are 147 stores that provide the Internet-based delivery of home shopping service (Yahoo Finance, 2008). Today, the company is playing to catch up in order to regain the market share at time. The company was on the stage of the renewal trail as it attempts in regaining to lead the position in the retail industry in UK. With the aid of the association of the tools in common management to the broad rang of the areas in the stocks of shelves that full items that the customers needs to buy in company services in system of supply chain management and the information technology which was analyzed by the new management team. Pat of the changes of the group was the selling of the 5% of the shareholding for the Sainsbury bank to the Bank of Scotland which became the 50:50 joint ventures amidst the HBOS and the company. There are also re-launching of the Taste Difference and the introduction of Dairy Development Group for supplying the 420 million liter of the conventional milk as bought by the customers (Ibid).   The Financial Risks of the J Sainsbury             The treasury policies of the company with regards to the treasuring its management are being approved by the board. There are joint delegate between the chief executive and the financial officer in approving the financial transaction which costs £ 300 million. The function of the central treasury is to manage its liquidity resources, the interest rate, and the funding requirements as well as the currency exposures. The company has the permission to use the derivatives though for the purpose of reducing exposures that arises in the activity underlying business and not the speculative purposes.             There are main risks that the company is experiencing in using its current financial instruments as risk in foreign exchange rate and interest as well as the credit risk and liquidity risk. In the interest rate risk, the fluctuations of the group in exposing its business to the fluctuation of interest rate can be managed with the used of options and interest rate. The objective then of the group are matching the profile of interest rate and the borrowings into its revenues, the reduction of its interest expense as well as minimizing the volatility through holding the sufficient mix of fixed and borrowings, the inflation and floating-linked interest rates. The policy of the group which can provide the significant proportion for the inflation and floating-linked borrowings can be varied in defining the markets into the neutral benchmarks which was ranges from 20% to 80% of the net debt in contrast to the performance benchmark. In the year 2004, after the swap took place, there is proportionality between fixed rate of the interest rate and the net debt for about 33 percent with the average period of 6.1 years.             The currency risks of the company also occur when it exposed its currency to the overseas trade purchase which is made the currencies that are not sterling. The company is also using the program of contract which known as the rolling forward in order to reduce the risk of exchange rate which is connected to the said purchases as can be contracted or not. In accordance to the International Accounting Standard (IAS 39), or the financial instruments: Recognition and Measurements, the company’s gains and losses are deferred on the contracts under the equity if it qualifies in hedging accounting. The company also experienced the currency exposure in the year 2004 on the domination of the US dollar net assets and income for its subsidiaries in US. The company has the objective of reducing the least long-term in the US dollar and the reduction of leverage volatility. The movements of exchange rate on the liabilities of US as created by UK have the aim of hedging the investment of US and known as reserves. Thus, the company had experienced the currency exposure to the purchases of overseas trade that made in the currencies and not the relevant currency functionality. Thus, it employs program of hedging in moving forward and in reducing the risk for the exchange rate as connected to the purchases made. The company had also experienced the liquidity risk in managing the requirements of pre funding cash flow, maintains the diversity of the funding which can take the forms of the term loans which are secured for over the property assets and maturing obligation of the debt as well as the spreads of debt for the repayment of range maturities. The core funding of the group will take on the form of term of losses that are being secured for over the property assets. The funds which are considered as short terms are raised on the markets of wholesale money. Thus, the contingent liquidity can be maintained with the new £ 400 million for the revolving of credit facility of five years. The facilities are also acting as the commercial paper for the company for the year 2000 where it has the policy of requiring of not greater than 25% of the borrowings needs to be matured for any of the financial year. The liquidity of the company for the past 5 year is given below:   2004 2005 2006 2007 2008 Current Assets 4,055 2,901 3,820 1,915 1,610 Current Liabilities 4,906 5,036 4,810 2,721 2,605 Current Ratio 0.83 0.58 0.79 0.70 0.62             Source: Reuters.com Based on the table above figures, the year 2005 has the least current ratio which means that this year was the year wherein the company has the least liquidity measures and least ability in meeting it short term obligation and the result of the major changes happened to which was contrary to the previous year 2004 which has the best year in meeting it short term debts. In general, though the ratios were all less than which is an ideal for the retail sector. Then it only shows that the company has the better position than its competitors in the same industry. There are also operation risks for the company in adapting IT for its business. This means that the company needs to improve in looking its balance sheet which can go to leverage the aide of IT. This will result to underline its recovery in the market share as compared to its rivals Safeway and Tesco. This also resulted to the conversion of the ownership for leasing of the real estate and the outsourced of the IT in wholesale for the consulting firm. Most of the investors are not convinced regarding its recovery despite its sales figures improvement. Thus, it only shows that that it was risky for the company in losing control over the IT (Chorafas, 2004, p. 21). Since the company has almost 1,400 direct suppliers which are mostly packers, manufacturers, and importers as well as agents have the supply chains to the thousands of suppliers, then the company made the assessment regarding the risk for every product which can have five tier or more. The company had carried out the assessment in monitoring the compliance with respect to the code. In this way, it can help the company in assess the level of the risk which it experiencing. The third party had been audited the risk suppliers whether they are high or medium. The repeated audit had been carried out by the various frequencies which was high depends on the level of risk and to the past findings of profits. The assessment for the risk had also been done by the company in the year 2005 to 2006 though the proper evaluation is needed so that ethical standard can be recognized. The company also made relation to Sedex or the Supplier Ethical Data Exchange as well as working with the other member companies in resolving the other issues (Sainsbury Corporate Responsibility, 2006). In the year 2007, the company has the risks that took regarding the family discount while the investors need to face the block dominance. There is also vulnerability in criticism if it agreed on the private equity partners into fairly priced. Therefore, the shareholders will vote for the subsequently emerges which can kill the options for the shareholders. Then, the minority shareholders that dominate the family members of Sainsbury will be resistant on the price offer which can possibly fail for any offerings. Thus, the company lacks the persuasion power that convince the shareholders for the merits which can be risky for having no bid as well as share drift which cause the wrong kind of the family discount (Hughes, 2007).    The Financial Sources of J Sainsbury Regarding the financial instruments of the company, the groups is using the issues and hold its financial instruments in financing to manage and operate the currency risk and interest rate that associated to the sources of finance. The company’s other financial instruments includes the payables, and trade receivables that arise to the commercial operations of the group. The company also finances its operations by the combination of the securing the loans taken from the financial companies, share capital, unsecured bank loans, and the cash which has been generated by the operation of its subsidies. The company also borrows some sterling at floating, fixed, and inflation-linked rates of interest with the aid of swaps and options that are appropriate in generating the desired profile of interest rate. The management of the group when it comes to the credit risk was managed by the limiting positions of credit to the financial institutions that carries A1/P1 ratings of credits. The exposures of the counterpart can be monitored on the regular and single basis as well as the dealing the activity which are controlled through with aid of the dealing mandates as well as the operations and the instructions settlements. The company’s book values are its fair values of short-term deposits, the overdrafts, deposits, loans, and payables for the maturity for less than a year. This is based on the comparable instruments of market price to the date of balance sheet date is traded publicly. For the bank loans of the company, its fair values and financial liabilities for the purpose for the disclosure purpose can be estimated through the discount of the cash flows and the current interest rate of the market. The other financial asset can also be based on its fair values and based on the market values for the portfolio of underlying property.             The company also has borrowing in financing its operations which includes the bank loans and bank overdrafts that are repayable for the bank loans and demand which are unpaid in the existing financial year. It has also the long-term financing that are secured for the 127 of its properties of supermarket that primarily comprises of the loans of the two financial companies which includes the outstanding principal of £1,186 million for the year 2006 which has the weighted average of 4.97%. The group had also entered the three year swaps of interest rate in converting the £ 782 million for the £ 1,186 million in the year 2006 loans for the floating and fixed interest rate which only implies that it was accounted as the hedge in fair value of the company.             In general, the company holds and made the financial instruments in order to finance its management and operation as well as the currency risk and the interest rate from the sources of its finances. The other financial instruments that the company is using is the trade creditors, the trade debtors, prepayment and the accruals which can be occurred as direct results in the commercial operations of the group. Thus, its financial can get to the combinations of the issuance of the commercial paper, bank loans, bonds, notes, leases, capital markets, cash generated and share capital that operation of its subsidiaries. The borrowings of the group are all primarily raised by its parent company as well as the on-lent in the operations of its subsidiaries for the commercial terms. The borrowings of the group are all the currencies which are both the floating and fixed rates of interest with the aide of the derivatives as it is properly generate the desired profile of interest rate and currency. The objective of using the derivatives for the company is the interest rate options and swaps, the forward contracts, and the cross currency swaps. Thus, the major risks that the company is experiencing in the financial instruments of the group are the risks in exchange rate, liquidity, interest rate, and in credit risk.              The company also has the financial leases that have will finance the cost of the stores for the groups operation in US which are considered as book value. The company’s financial liability floating rate was comprises of the commercial paper and the bank borrowings as in the bank base rate and the fixed rate of LIBOR. Its properties and assets of the company are also its financial sources which include its net book value and recorded of having the properties of freehold and long leasehold of £ 5.2 billion. This implies that it has the market value of 65 percent higher and based on the investment for the valuation basis which carries the independent surveyors with the total value of £ 8.6 billion. It has the 292 long and leasehold and freehold properties which comprises of about 286 supermarkets and accounting for about 62 percent of the total supermarket.   Market Efficiency and Financial Performance of J Sainsbury Plc             The J Sainsbury is offering variety of the foods that ranges to all kinds of budgets and half of the customers are the ends of food range as the Taste the difference and Basics. This can also provides its own brand for its organic products together with its branded products. The performance of the company can be seen in the figure below which can also reflects its market efficiency. To show the market efficiency of the company, its ratios of profitability needs to be analyzing as:     2007 2006 2005 2004 2003 Return on Capital 6.96% 1.31% 0.23% 7.94% 9.19% Return on Assets 4.98% 0.82% 0.13% 4.84% 5.54% Profit Margin 2.78% 0.65% 0.10% 3.56% 3.83% Return on Shareholders Funds 10.97% 2.68% 0.34% 11.95% 13.33% Source: Reuters.com             Seeing the continuous growth of the company, the year 2005 is bad year for the company when it comes to profitability and cash flow due to the changes made. Despite the year 2005’s dilemma, the four parameters were still upward which are in the conservative side. But, the profit margin and the ROC are all below to the sector average. The plan of recovery for the overlapping of the growth is expected to have 3.5b pounds of revenue in the year 2010. The company’s profit margin was still considered to competitive due to the improvement of the supply chain which got the support from the suppliers in better prices while building and supporting the strong network for the cheaper rate with quality of goods. This measure can lead to the better future profit margin (Atrill and McLaney, 2004, p.58).             In dealing the company to its finances, the working capital management can also be analyzing as:   2007 2006 2005 2004 2003 Stock Turnover 29.07 27.88 23.85 22.76 21.79 Credit Period (Days) 0.64 0.75 61.45 1.51 2.43 Working Capital by Sales -4.55% -6.01% -5.05% -4.96% -3.56% Trade Credit by Debtors 56.87 43 0.54 17.31 10.66               The company seemingly wants to compensate to the higher dividend when it compared to the previous years. Looking to the company’s bad performance for the past three years will only shows that most of the investors will be conscious in investing in up beating the stock. Nevertheless, if the performance of the company will continue, then it will outperform and gives great competition in the market. There are also the trends of increase for the stock turnover from 21.79 for the year 2003 and 29 for last year which only shows the improvement of the supply chain and further will result to efficiency which also includes the reconfiguration and extension of the depots. With regards to the ratio of the working capital, the sale seems weak yet it is considered to be competitive in the retail sectors and it is better than Tesco which has the same ratio of 8.4%. The credit position for the day is also good and take the suppliers while there are better negotiated for the suppliers. The company had also experienced the growth in profit, revenue and EPS. There is a significant effect in the last two years for the year in the company which only the outcome of the recovery for the original plan. The company had 1.8b of pound revenue in the last two years and saw the improvement starting 2004 which has the projected expansions of projects that needs to improve. The graph below shows the company’s Price, Earnings, and Dividends for the past 5 years.               Regarding the competitiveness of the company, it is important to compare it to its competitors who is the Morrison and is smaller business compared to Sainsbury but have the better business, utilization of assets and margin. But, the Sainsbury has the possible funds for leveraging with the aide of the additional borrow in doing expansion and acquisition.             The Chairman of the company Sir George Bull was optimistic that the statement for the 2003 report says that the company was on the right track and has the bright future. Nevertheless, it cannot be denied that the things are going wrong which was the thin percentage of the revenue growth amidst the increase of the stores, workers, and the selling spaces. When the change of management was made and Justin King was the new CEO, there is a slow growth of sales, earnings and profit due to the detraction of major changes in improving the activities. Under the management of the new chairman Phillip Hampton, there was a moving sale in the strategy which also talks in their stakeholders as the employees, the customers, and the suppliers. The generation of the cost efficiencies can be a better idea but cannot be as like the Asda and Tesco which are its competitors and are masters of the cost cutting without neglecting their customers and the Sainsbury weakness.             Including the efficiency of the company in the market is its dealing to its stakeholders, employees, and suppliers as well as the customers. The company also adopted the long term strategy which can hit the parents and the kids in developing the future customers.  Conclusion             From the year 2004, there has been a major change happening in the J Sainsbury which includes the management change which took to aggressive and large approach. This had resulted to the good number with regards to its profit margin as well as its sales. Seeing the perspective every year, the company sees its growth in term of the cash flow and to the net profit margin in the industry. In dealing with the company’s growth and success, it is only important that it must have the cost saving to the labour, IT and supply chain but there must be reliance on the infrastructures of IT in order to trade. In this regard, the failure for any of these businesses will have the impact to the company. Thus, the online business and the bank must focus on by the management because it can give the additional revenue to the company, encourage great results, and can leverage the current customers of HBOS.             Since, the Groceries in UK has the mature market, the rate of growth below are dealing with the spelling and GDP which can strive for retaining its customers. But, regarding the evaluation of the company’s financial statement, it is only clear to see that the company was and very good options for investment. The company’s changes can provide investment story as in the new computers, the new supply chains, and the new investment story and can cost in producing the cost savings for £ 250m for this year and can give boost earnings. Thus, the company is still profitable which can offer to its shareholders greater than Tesco in the dividend and profit. Looking at the company’s 5 years report, it only signifies that it has the bad shares in the past 3 years but trying its best to recover in this year and to the following years. Bibliography J Sainsbury Company Profile 2008, Yahoo Finance, viewed 06 October, 2008, http://uk.finance.yahoo.com/q/pr?s=SBRY.L. J Sainsbury Plc Profile 2008, J Sainsbury Corporate Website, viewed 06 October, 2008, http://www.jsainsburys.co.uk/index.asp?pageid=12   Khan A and Hildreth B 2004, Financial Management Theory in the Public Sector, Greenwood Publishing Group, United Kingdom.    J Sainsbury PLC Financials, Reuters, viewed 07 October, 2008, http://www.reuters.com/finance/stocks/incomeStatement?stmtType=BAL&perType=ANN&symbol=SBRY.L Atrill, P. and McLaney, E.2004, Accounting and Finance for non-specialists, 4th edition, FT Printice Hall Chorafas, D 2004, Operational Risk Control with Basel II: Basic Principles and Capital Requirements, Butterworth-Heinemann, United Kingdom. Sainsbury Responsibility Report 2006, Sainsbury Corporate Website, viewed 07 October, 2008, http://www.j-sainsbury.co.uk/files/reports/cr2006/index.asp?pageid=93 J Sainsbury taking on a family discount investors must face up to a dominant block 2007, Financial Times, Hughes, C. viewed 07 October, 2008, http://www.ft.com/cms/s/0/0cc9335a-e700-11db-9034 000b5df10621.html?nclick_check=1     Credit:ivythesis.typepad.com

The Financial Management of J Sainsbury

The Financial Management of J Sainsbury Introduction Studying the financial management of the J Sainsbury which is a UK company based ...