The Economic Situation Of J Sainsbury Plc

J Sainsbury Plc is the parent company of Sainsbury’s Supermarket Ltd, commonly known as ‘Sainsbury’s. It is the UK’s longest standing major food retailing chain, the company was founded in 1869 by John James Sainsbury and his wife Mary Ann. Together, they set up a dairy shop at 173 Drury Lane, Holborn. John James was determined to offer pure food at prices everyone could afford. Being a cunning businessman, he quickly understood the opportunities offered by the growth of London for his trade. And seizing the opportunity, from one store, Sainsbury built a chain of supermarkets which numbered 128 when he died in 1928.

When the business was incorporated in 1922, it became the UK’s largest grocery group. Sainsbury then took on the title of chairman and Governing Director, a position which he held until his death in 1928.

The company also operates Sainsbury’s Bank which sells financial services and is a joint venture with Halifax Bank Of Scotland (offering services like car, life, pet and travel insurance as well as health cover, loans, credit cards, saving accounts, and Instant Saving Accounts); Sainsbury’s online shopping (which is available to about 75% of the UK population) and has a property portfolio worth £8.6 bn.

Sainsbury’s has 3 main store formats:

Regular Sainsbury Stores ( medium format)

Sainsbury’s Local (small format)

Sainsbury’s ‘Main Plus’ Stores (hypermarkets)

In November 2008, Sainsbury’s became the first retailer and the largest employer to offer its entire workforce of 150 000 colleagues the opportunity to gain nationality recognised qualifications which supports the Government’s strategy to boost skills amongst the UK’s workforce.

2.1 TASK 1

Goal:

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

Values:

“The values of the Sainsbury’s brand – passion for healthy, safe, fresh and tasty food, our focus on delivering great products at fair prices, a history of innovation and leadership and a strong regard for the social, ethical and environmental effects of our operation – have continued to stand the test of time.”

Five principles are at the core of our business:

The best for food and health

Sourcing with integrity

Respect for our environment

Making a positive difference to our community

A great place to work.

These principles provide differentiation from Sainsbury’s major competitors and define and direct all their activities.

The board at Sainsbury’s has the overall responsibility for the system of internal controls, including risk management. A committee has been formed (Audit Committee) to review the effectiveness of the system of internal control and ensure that any required remedial action has or is being taken on any unidentified weaknesses. The system of internal controls was designed to manage rather than eliminate the risk of failure to achieve the company’s business objectives.

Sainsbury’s has a strong record in its commitment to corporate responsibility, which is an everyday part of how the company does business. The company recognises the engagement with stakeholders which goes beyond 16 million customers, 163000 colleagues and its many suppliers and investors. Developing and building relationships with a range of stakeholders help the company to understand issues, develop the business and manage risks better. Sainsbury’s seek to engage actively with range from those that have an impact on the business such as the Government, politicians and regulators, to those whose views are relevant to the way the business is run such as non-governmental organisations, charities, trade unions and trade associations. As well, the company works with other in-cross industry and multi-stakeholders, for example, Sainsbury’s is the only food retailer that is a Foundation Corporate Partner of Forum for the future as well as being members of the Ethical Trading Initiative, Business in the community, the London Benchmarking Group and the Green Alliance. The company is paying increasing attention to the importance of social, ethical and environmental performance to good management of risks. It is also committed to upholding labour standards in its overseas supply chains through its membership of the Ethical Trading Initiative.

Employees are an integral part of the organisation to help achieve the mission and goal of the company. The company feels the responsibility towards its employees on the basis of employment of disabled person, pensions, health and safety, ethics. Employees are always encouraged to hold shares in the company and over 39500 colleagues are shareholders directly or through the Committee Shares Plan Trust or the Sainsbury’s Share Purchase Plan Trust. Sainsbury’s quarterly, interim, and annual results are always communicated to them. The company is actively working with a number of organisations to promote inclusion within the workplace.

At Sainsbury’s, the need to act responsibly and manage the impact on the range of stakeholders is recognised. The company has, therefore, set some new targets and has adopted new strategies to meet those targets. Stakeholders are of paramount importance to Sainsbury’s achieving its mission and goal, the company is thus working with a strategy to offer stakeholders services and products that are better all around.

2.2 TASK 2

The sustainability and vulnerability of an economic system depend to a large extent on the macroeconomic conditions in a country. Macro economic variables are the third component seen as a precondition for economic growth in integrated analysis. Understanding the economic structure is vital for comprehensive economic analysis to boost growth.

Factors such as domestic demand, human resources investment, the breadth and depth of the economy, trade, environmental effects and natural resources are crucial for the analysis of longterm economic growth.

To safeguard the macroeconomic stability, the government budget must be financed in a sustainable, non-inflationary manner. Therefore, it makes use of the two main macro economic policies to maximise economic welfare, which are

Fiscal policy

Fiscal policy is related to government’s taxation and spending programmes with the goal of achieving full employment, price stability and economic growth. The government can use this policy instrument to counter economic slumps and smooth out peaks.

For example, if an economy is going through a slump, the government can decide to increase its spending (and borrowing) by acquiring goods and services from the private sector. This increases the flow of money in the economy and gives households more disposable income.

On the other hand, the government can as well decide to restrict the money circulating in the economy by collecting more taxes and thus balancing out the business cycle.

The business cycle is a pattern of economic fluctuations. There are four stages in the business cycle. They are

Prosperity

Recession

Depression

Recovery

(Appendix 1)

Monetary policy

Monetary policy is the process by which the government, central bank or monetary authority controls the supply of money and interest rates in order to attain a certain set of objectives oriented towards the growth and stability of the economy.

A successful combination of monetary and fiscal policies will lead to a stable macro economic environment.

In this increasingly global world, the contribution of the UK’s people in terms of creativity and inventiveness is considered the country’s greatest asset. And the ability to create, design and manufacture the goods and services that people want is more vital to the future of the UK population than ever. Many British companies are investing in research and development and are competing successfully in the global economy where the government want UK to be a key knowledge centre.

To position itself to compete effectively against low-wage, newly-emerging economies, the government find the need to increase productivity. It should provide the significant range of public goods which are necessary for a knowledge-driven economy to create competitive advantage such as science and technology, research and development.

Professor Michael Porter and Christian Ketels of Harvard University have recognised the challenge how “the UK currently faces a transition to a new phase of economic development”.

“We find that the competitiveness agenda facing UK leaders in government and business reflects the challenges of moving from a location competing on a relatively low cost of doing business to a location competing on unique value and innovation. This transition requires investments in different elements of the business environment, upgrading company strategies, and the creation and strengthening of new types of institutions”.

The policies adopted by the government are producing good results. For example, since 1997, there was a significant cultural change in the relationship between the university sector and industry. In 2000/2001, there were 248 spin-off (a small organisation split from a larger one) companies from British Universities compared with 203 in the previous year.

But it remains the case that French, German and US workers produce between a quarter and a third more in every hour they work than British workers.