Sainsbury plc is comprises the mother company of Sainsbury's Supermarkets Ltd, widely referred to as Sainsbury's. It is the third hugest series of supermarkets in UK with a split of UK supermarkets division of 16.5%. The assemblage head offices are in Sainsbury's Store hold up Centre located at Holborn Circus, London. The group still holds an interest in banking and property. Sainsbury's was started in 1869 by an innovative person known as John James Sainsbury, in London, England. It grew speedy during the era of Victorian. It emerged as the largest grocery retailer in the year 1922, and pioneered self-service trade in United Kingdom, and had its prime in the 1980s. In 1995, Tesco overshadowed Sainsbury's and become the market champion, and Asda emerged as the second biggest in 2003, downgrading Sainsbury's in third position. The establishment of Sainsbury family still holds approximately 16% of J., Sainsbury plc shares, through multiple trusts. The family lowered their stake as of 35% in the year 2005. The hugest Sainsbury family shareholders include Lord Sainsbury of Turville having 5.83%, and profit from 1.6% of the fair play counted in the more than. The biggest overall shareholder is the speculation vehicle concerning the Qatari royal family who currently holds 26.145% of the total company.
1) Industry Analysis and Trends
a) The Product Trend
With a lot of modern products, the company has made a major come back to the market competing effectively. The original products have had rejuvenation in recent years, with a focus now on the healthier aspects. There has been an increase of 175% in sales.
b) Green Movement
In the world today so many industries are struggling to meet the green global policy as well as boosting their international image. Though, environmental issue has not been involved the supermarkets and chain stores industry in most cases. The only name that embraces the green world environmental friendliness is Sainsbury.
c) Size and Growth
Figures show that there were 13,143 stores in the UK in 2007, producing on average revenue of $348,536. The top 10% of all store businesses have seen an increase in sales by 32% since 2004. Supermarkets and chain stores UK has risen to $25 billion in the year 2009, but later dropped. According to IBISWorld.com in 2011 $7.9 billion in total sales and a $1.3 billion profit was created in the supermarket industry. Furthermore, expectations show that we should see a 2.5% annual growth in the next 5 years. Entrepreneurs and oper4ators in supermarkets and chain stores industry adjusted their prices in order to keep consumers wanting more stock instead worrying about how much it cost.
The domestic market for supermarkets and related treats has been somewhat inactive since 2006.
d) Sainsbury Forecast
Historically, chain stores have survived an even grown during harsh economic circumstances. They flourished through the deep depression after the Second World War and the 1929 stock market crash that consolidated its positions in the traditions and customs of the Britain people. According to the executive director of the national Sainsbury, many operators have said their sales were up 20% over the summer of 2008.
e) Market Maturity and Trends
The lifecycle stage of the supermarkets and chain stores industry is mature and has been around for hundreds of years and there is no reason to believe it will be going anywhere anytime soon. The longevity of the stores in this industry is strong, with an average lifespan of 20.7 years in business. Figures from the International Dairy Foods Association reveal that 90% of UK households consume chain store products and approximately 1.55 billion gallons of products was recorded produced in 2007.
f) Risk Analysis
Structural Risk
Getting a small business loan in order to pay for the high start-up costs needed to acquire equipment, advertising, production costs, wages, and supplies. This may be difficult given the struggling UK economy.
Creating patented prices to become the sole owner of all low prices in supermarkets and chain store.
Growth Risk
Growth looks promising for chain stores and supermarkets for most products such as sugar and milk are expected to see a price drop.
The industry’s maturity will limit growth opportunities.
Sensitivity Risk
Economy is still in a downturn.
Unemployment rate in UK is higher than the national average.
Revenue Outlook
The supermarket industry future looks promising. The most recent research gathered by New Hope 360 dot com, the UK supermarket market topped $25 billion in 2011 which is a 2.4% increase over the previous year. The market for affordable products of all ranges will always be strong for families and individuals, and as our economy becomes stronger we will see an increase in sales.
2) Target Market
a) Geographic Description
The supermarket business can succeed only if the number of consumers increases. Target market means finding out the complete set of potential clients from the entire inhabitants, which may represent several sections and then gratifying the desires and requirements of every section. Conventional marketing methods have to be replaced by modern approaches. The supermarket business is spending a huge amount of money for advertisements for children.
b) Demographic Description
The purchase of supermarket products is basically an impulse-type purchase by a consumer relating to one of the following stimuli:
Passing by the Plaza on the way to another destination.
Visual contact with signs located on the freeway and the shops signs located at the plaza entrance.
Buying Sensitivity Description
Since 2008 the entire country has been affected by the economic downturn and has had to cut back on their spending habits. Across the board almost every product in UK has seen a decline in sales in recent years; this is partly due to the high unemployment rate and increased costs of daily products such as food and gas. Now more than ever people are paying close attention to what and where they spend their money on in stores and shopping departments shifting each person’s wants and needs in order to deal with the economy, particularly spending on specialty products and services.
3) Competitive Analysis
a) Competitive Environment
There are no comparable supermarkets businesses in the UK, although different companies provide similar products and services. As a first mover in the market with low barriers of entry, management will use the opportunity to build substantial relationships with the target market as well as building strategic partnerships with local providers before an effective competitor enter the market. Sainsbury will offer customers a place they can come to enjoy a number of products that our made so anyone can enjoy. We will offer premium products that will give us a competitive advantage that cannot be provided by any other competitor in the area.
b) Key Success Factor
Access to the Latest Available and Most Efficient Technology and Techniques: Due to mature levels of consumption, sales growth depends heavily on product innovation through the latest technology. Efficient technology and techniques are important for price competition and cost management.
c) Key Competitors
Sainsbury will carve out a unique niche market in UK by focusing on creating an environment that is both fun and exciting. The staff will be carefully selected to provide and create a unique atmosphere that is not offered anywhere else in UK; this will be achieved by the personalities and chemistry of the staff.
Wal-Mart Strengths: Wall-Mart is by far the biggest competitor in the area, and with the recent addition of the supercenter being added Wall-Mart will have a competitive advantage. The Wal-Mart supercenter will be located just 100 yards away in the every Sainsbury junction shopping center.
Weaknesses – Small local businesses often can’t compete with Wall-Mart, and go out of business which has alienated the small local business community. Wall-Mart’s image is questionable; they have been sued several times for unfair labor practices, sexual harassment, and discrimination. “Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control” (SWOT Analysis Wal-Mart, 2000). Since Wal-Mart sells products across many sectors, they don’t have its main focus on frozen desserts and they only offer a few options with products.
4) Strategy
This section includes a strategic plan for Sainsbury. It reviews strengths, weaknesses, threats and opportunities; presents a series of statements relating to Sainsbury’s vision, mission, and corporate values; and sets out its proposed strategies and goals.
Vision
Sainsbury will be operating from a 1400 sq ft shop located in the several UK Junction Shopping Centers. It will employ approximately 5 additional employees including an accountant and an assistant manager to help run the stores. Sainsbury will offer three premium products that include ice cream, frozen yogurt, and all natural fruit smoothies throughout UK. Sainsbury will offer products and services to customers that will be of higher quality than competitors
Mission Statement
The Sainsbury Company’s mission is to not only be a great example of a fine producer of high quality services within our industry, but also a model of excellence in how we treat our employees, our customers, and our community. We want to provide our customers with different options that include our delicious all natural fruit smoothies, snacks, electronics, and clothes among others. Our goal is to operate the Company in a way that actively recognizes the central role that business plays in society by initiating innovative ways to improve the quality of our local communities and the people who live in them.
Marketing Objectives:
Several policies have been implemented to maximize the promotion of the supermarket business to the correct markets. The objectives must give supervision for every decision which includes capital, human resources and market promotion. Equally significant is the objectives must be measurable statements as to what the business wishes to accomplish in a certain time. The different marketing objectives of Sainsbury are,
Finding out target markets.
Knowing the demands of the customers.
Making the customers conscious of the marketing offers.
Company Values
The company values governing Sainsbury development will include the following:
Sainsbury will operate in accordance with the highest standards in all relationships with customers, suppliers, employees, environment and the community.
Sainsbury will encourage innovation and diligence amongst staff and rewards will be given accordingly.
Grand Strategy
With the corporate structure laid out for Sainsbury the plan of action falls into three major categories: growth, stability, and retrenchment. The long term goals and envision for the company is most compatible with gaining stability among the local communities for many years. It will be satisfied to see a modest profit margin yearly without the need to expand or grow within the first 10 years as of right now.
Corporate Strategies
To succeed, Sainsbury shops must accomplish the following:
Attract the target customers into the shop.
Assure that customers are entertained once in the shops.
Create awareness of the unique products and service at Sainsbury.
Establish Sainsbury as the #1 choice for customer’s ages 14-45 years of age in UK.
Differentiate Sainsbury from competitors such as Wall-Mart through aggressive integrated marketing plan.
Marketing/Advertising Strategy
Sainsbury SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
IMPORTANCE OF FINANACE PLANNING
a) Financial Planning
Financial planning should for every organization. A financial plan is done to arrange a budget in which the finance required for various expenses are allocated and arrangements for the receipt of profits from possible sources are judged. “Financial planning is the process of meeting your life goals through the proper management of your finances (What You Should Know about Financial Planning, 1998, p. 1).
b) Estimate of the Start-Up Expenses Including First Year Operational Expenses of the Business
The startup expenses are essential for the success of every new business. All business start-ups have distinctive financial requirements. Some businesses can begin with less finance while other businesses need huge financial support for purchasing equipment, stock and other start-up expenses. To guarantee a business is correctly financed, business owners could establish the financing and borrowing requirements of the new business by assessing its start-up expenses. The start-up expenses include:
Expenses of acquiring site: It includes costs for selecting the contractor, location for building, furniture, obtaining signage, and landscaping the exterior, sales tax and freight costs.
The cost of acquiring the location.
Key Financial Success Factors for Business
Most business owners will first assess the success of business in terms of financial aspects.
The income is one of the financial success factors of the business. With higher growth in income, the business will be able to achieve higher goal and increased the means to wealth. Financial performance of a business is evaluated by presenting a review of how the business acquires its revenues and expenses through both operating and non-operating dealings. It also presents the net profit or loss acquired over a particular accounting period. It reveals information about revenues and expenses that are a immediate effect on the normal business procedures.
Costs and Overheads
The business organizations have to take steps to administer costs, while improving responsiveness to the business organization they operate. They need to take a powerful and continued concentration on decreasing costs while improving its business performance. Organizations under pressure maintain lower overhead costs also meet demands to raise resources to develop customer service and better quality.
Cash Flow
Cash flows are another key factor in the success of every business. Up-to-date information about the financial position, as well as consistent planning of liquidity growth and their targeted management, are vital tools and facilitate to reduce risk of business. The function of cash management is to constantly follow and manage financial flows within and afar from the company.
Plan for the Future
The business requires suitable strategies for the future of finance, which also involves outsourcing and collective services.
Reporting Standards
The business needs to pursue statutory reporting standards and make sure that the reputation of the organization is at all times confined with regard to reporting necessities.
Manage Working Capital
The business needs to effectively examine and administer working capital, particularly receivables, payables, and cash. They need to make sure that suitable strategies are in place to reduce working capital with appropriate procedure, reporting and management.
Tax Management
It is necessary to scrutinize every feature of tax agreement and planning; and apply external providers efficiently and effectively.
The Need for Liquidity
Markets require liquidity in order to function well. Well-functioning businesses could no longer obtain financing as the market at large had mislaid so much wealth. The market must also distribute that easily obtainable capital powerfully and cleverly in order to exploit the success of the financing business.
e) Sources of Funding
A start-up expense of Sainsbury includes Banks, Finance companies and Government support.
Banks
It has been stated that the most significant aspect in receiving a small loan is the credit history of the borrower. Sainsbury can take Business Loans from bank. Entrepreneurs across the UK following small business economic assistance in the form of a grant, loan, or another support programmer need to recognize where to look. Government funding plan can help fund training workers, creating a web site, with product expansion, purchasing equipment, and others.
Financial Companies
Financial companies provide small business resources that can aid to obtain government money and give advice to run the business forward. “By far the most common source of funding comes from high street banks – in the form of loans, overdrafts, and other types of finance.
Managing the Companies Finance
The function of finance of every business is perhaps one of the most important areas for that business. The first step in organizing the finance function of Sainsbury is to maintain detailed records of every account. The extra detail has in books the easier it is to maintain track of the finance.
g) Pro forma Financial Statement
Income Statement:
As the income statement shows, Sainsbury expects to continue its steady growth in profitability over the next three years of operations. “Based on the market research and a few assumptions, however, the pro forma statement will help to organize, evaluate, and quantify the results. The pro forma statement shows the income or revenue minus the expenses for a specific period (Baird, 1999, p. 8).
Break-Even Analysis
Sainsbury break even analysis is based on the average first year values for total sales by units, and by operating expenses. These are presented as per unit cost, revenue and fixed costs. These traditional assumptions create for a more correct approximation of real risk.
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