Stakeholder analysis of Sainsbury’s

Introduction

This write up will look at the definition of stakeholder and it will identify six stakeholder group of J Sainsbury, one of UK’s leading retailers. It will also discuss each group’s interests, where different groups interest conflict or coincide. Map out a stakeholder mapping exercise that will assist in informing the chosen company’s strategy.

According to J Sainsbury (2014) annual financial statement it has a 16.8 percent UK market share, it is one of the trusted and largest food retailers in the United Kingdom (UK) with a staff strength of 161,000, J Sainsbury was founded 1869 by John James Sainsbury and Mary Ann Sainsbury his wife in London. With a vision “to be the most trusted retailer where people love to work and shop” J Sainsbury (2014)

Sainsbury deals with 23 million customer transactions weekly, Sainsbury is truly living up to its goal which is “To make all our customers lives easier everyday by offering great quality and service at fair prices” J Sainsbury (2014.).

J Sainsbury started its bank in 1997, and the bank has delivered successive revenue annually, with a before tax revenue of 59 million pounds, half of which is the shareholders J Sainsbury (2014). Sainsbury has reached an agreement with Lloyds Banking group to buy its 50 percent shareholding; this will give Sainsbury full ownership, which will benefit the customers and shareholders J. Sainsbury. These shareholders are among the list of J Sainsbury Stakeholders.

“Stakeholders include any individual or collection of individuals with an interest in an organization. Some stakeholders will be internal to an organization and others will be external.”Claire Capon (2008) . It is a person who has some sort of concern in a business; a stakeholder is an individual or organizations who are affected by the activity, positive or negative of the organization. These are a list of stakeholders starting with the shareholders

• Shareholders: these are people or organizations who own shares, that they bought, are acquired legally in a profit oriented organization. These shareholders have made an investment to get these shares and they gain in two ways A) through dividends. B) By selling their shares for profit.
• An organization can have only one shareholder, this individual or individuals with shares make up the shareholders.

So the Shareholder can be defined as an individual, organization, or company that legally own share(s) of stock in a joint-stock company. The Sainsbury shareholders hope that each year Sainsbury continue to declare profit and have advantage in the industry and looking at Sainsbury’s record in a letter to the shareholder in its annual newsletter its chairman states that the “Underlying profit before tax was up 6.2 per cent to £756 million. Underlying basic earnings per share were up 9.3 per cent to 30.7 pence. This year your Board recommends a final dividend of 11.9 pence per share, making a full year dividend of 16.7 pence, which is an increase of 3.7 per cent over the previous year” (David Tyler 2014)

• Suppliers: with 30,000 products in its stores, Sainsbury has suppliers from Britain and internationally. Sainsbury believes in “sourcing with integrity”, this is achieved by forming partnership that raises environmental and social standards. Also Sainsbury is the funder members of the Ethical Trading Initiative (ETI).J Sainsbury (2014) by this they not only show their commitment to customers but to their suppliers who Sainsbury value a lot

• Managers: The managers carry out the vision and goal of the owners, the current growth rate of Sainsbury is related to the ability of the managers at different level to harness the basic human and other material needed to grow the team. They sit over the affairs on Sainsbury and make sure the shareholders have dividends annually

• Staff: This group according J Sainsbury (2014) annual report and financial statement of 161,000 workforces depends on the Sainsbury sustaining growth to make a living. They also put in their best to continue to help the organization meet its strategic goals. Sainsbury continues to create more jobs and train its Staff. They are the face of Sainsbury and central to its success.

• Customers: They are very important and the end users of the products at Sainsbury. Due to online purchase the customers at Sainsbury are cutting across borders. The customer’s interest is that they continue to get good quality products from Sainsbury at a fair price.

• The Community: Founded 144 years ago, with over 157,000 staff and 800 stores. J Sainsbury (2014) Sainsbury is making major economic impact. Though the economic situation looks likely to remain challenging, Sainsbury has time after time demonstrated it can succeed beside these conditions. Sainsbury has a local charity scheme and where ever Sainsbury find itself in its 800 stores, it supports the local community. As stakeholders in whatever happens at Sainsbury the community play a major role in the organizations having competitive advantage. Sainsbury provides great service, quality products and are good neighbors. Sainsbury also continues to support local charities.

The different stakeholders at Sainsbury have different interest and these interests do sometimes conflict or coincide. The shareholders are the owners of the business and like every other stakeholder needs the business to be successful and would gladly love that the dividend be higher than it currently is, that may mean that the managing team gets the supplied products cheaper, spend less in the running the organization, this will not go down well with the suppliers, who are also looking for maximum profit, this is turn will affect the staff who would not mind a pay increase. Sainsbury customer goal is “to make all our customers’ lives easier every day by offering great quality and service at fair prices” J Sainsbury (2014) If the organization loses focus of this goal and goes for maximum profit, it will begin to lose its competitive edge and advantage and ultimately loose customers, which will affect the community and its economic standing in Britain.

The power and the influence of the stakeholders cannot be underplayed, that’s one of the reasons Sainsbury has a good relationship with each of these stakeholders, the organizations investment in training of its suppliers points to this truth, over 80million pounds was awarded to staff, Sainsbury committee initiative and constant assistance to its community is the organizations way of telling the stakeholders, internal or external that Sainsbury recognizes their influence

Stakeholders: Sainsbury

Figure 1

Conclusion

Sainsbury’s goal and vision informs its operational activities towards its suppliers, community and other stakeholders. Its vision “to be the most trusted retailer, where people love to work and shop” motivates its stand on integrity, ethics and excellence. It also motivates its involvement in society fulfilling its goal “to make all our customers’ lives easier every day by offering great quality and service at fair prices”. Sainsbury’s long term strategy continues to convey quality, worth and service and has led to good earnings and sales growth over the years.

J Sainsbury proposed 17.3p full year dividend, which is an upward move by 3.6% according to its annual report, (2014). This is a picture of the organization growing annually.

This report has taken a closer look at the Sainsbury stakeholders and how they add to the Sainsbury story, also in this report we see Sainsbury adding value to and this value couldn’t be possible but for the 161,000 thousand men and women whose hard work, smiling faces and dedication keep the Sainsbury wheel moving.

TASK 2

The second part of this task will carry out an analysis of the competitive forces that exist within the industry that Sainsbury operates using Porters five forces. Looking at all the relevant terms and be able to draw conclusions relevant to the strategic approach at Sainsbury

The model of the Porter five forces was developed by Michael E. Porter in 1980. Ever since it has turned into an important tool used to analyze organizations industry structure in strategic processes. Porter’s model says that the threats and opportunities from the external environment of an organization should be met by corporate strategy with a competitive edge, having knowledge of industry structures and how they constantly transform.

Porters 5 Forces

Adapted from investopedia.com Fig 2

Porters five forces helps us to discover who has the most powerful advantage in a situation, therefore we can effectively analyze and be able to know if a service or product will be profitable

The five Porters forces are supplier power, buyer power, competitive rivalry, the threat of substitutes, and the threat of new entry.

For Sainsbury the first of the five forces is

• Competitive Rivalry: it’s the characteristics of organizations in the same industry. In a vast industry that has other retail giant as Tesco and Asda, Sainsbury’s ability to have competitive advantage is important. The retail industry in UK is a very mature one, the competitive rivalry is high, the giants Asda, Sainsbury, Tesco all battle for the same market and the competition can be brutal

“The supermarket industry in the UK is a good illustration of extremely fierce competitive rivalry” Capon (2008)

• Bargaining Power of Suppliers: Depending on the options available. When there are other suppliers of a product in any industry there is room to have bargaining power, but where suppliers are few they have the Bargaining Power. Because of the number of suppliers and the competition, the power of suppliers to dictate the price, if one supplier is proofing expensive there are others willing and ready to supply, so the supermarkets bargain hard to get the best prices is rather low

This is a major strategic decision for Sainsbury, though they have an advantage here, they still assist in the training of their suppliers , they set up a Technical Management Academy (TMA), established in 2006, this is in line with their strategic goal “…great quality and service at great prices” J Sainsbury (2013)

• Threat of New Entrants: in the retail industry this threat does not exist, it is not an easy business to enter, with 592 supermarkets and a 798million pounds underlying profit before tax, J. Sainsbury (2014) any new entrants is not much of a threat.

The other major supermarkets are able to do about the same.

When the industry is attractive enough this seems to be the case. This is also affected by capital requirement for entry, which may discourage certain people and even when they do they operate at very low scale, access to supply and distribution channel, the supplier might choose to be loyal to more established firms, customer loyalty as people tend to stay with brands they are used to, especially where they is good relationship with the established brands. Sainsbury continues to build good relationship with its customers, so they keep growing and that is why Sainsbury can claim “33 consecutive quarters of like- for-like sales growth” J Sainsbury (2013)