Sainsbury Tesco Operations Management Analysis Marketing Essay

Published Date: 23 Mar 2015

In this contemporary world organisations are trying to rely on modern forms of operations management techniques to enhance the productivity and effectiveness. Operations management in modern world plays very important role in organisational success because it is the backbone of every organisation. Operations Management deals with the plan and supervision of products, procedures, services and supply chains. It thinks the gaining, growth, and use of resources that firms require to bring the goods and services their customers want.

The review of OM ranges from planned to strategic and functioning levels. Agent planned issues include formative the dimension and site of developed plants, making a decision the arrangement of examination or telecommunications networks, and scheming skill supply chains.

Planned issues comprise plant arrangement and formation, project management means, and kit assortment and substitute. Operational issues comprise manufacture preparation and manage, inventory management, excellence manage and examination, traffic and materials treatment, and kit preservation policies.

Operations Management is a subject of business that is relate with the production of goods and services, and includes the responsibility of making sure that business operations are efficient and effective. It is in addition the management of capital, the allocation of goods and services to clientele, and the examination of line up systems. It focuses on the effectual planning, preparation, use, and controlling of a industrialized or service organization through the learning of concepts from design manufacturing, business engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the organization. Operations also demote to the manufacturing of goods and services, the put of value-added activities that change inputs into a lot of outputs. First and foremost, these value-adding original activities should be linked with marketplace chance for best enterprise presentation (Ackerman, 1997).

Objectives of the Paper

In this assignment we are intended to compare and contrast the operations management procedures of two different organisations. In the beginning we will select two different organisations of different industry then we will split this assignment in to three parts. First part of the assignment will identify each organization's current/prospective customers and analyze whether each organization's operation is adequately designed to meet its Customers' needs. Second part of the work discusses the concepts/frameworks on managing operations that are appropriate to each of the organizations, and we will also review the extent to which it is practised and/or applied, and analyze critically the difference between the selected organizations. The third and final part will discuss the mix of managing operations concepts/framework used by each of the organization. In order to accomplish this work we have selected two companies one is related with finance industry and another one is related with supermarket. Our first company in Sainsbury where I am currently working and my second selected company is TESCO. We have selected the financial company of TESCO.

Sainsbury: Introduction

J. Sainsbury (Sainsbury) is a UK based food retailer with business interests in financial services. The company comprises Sainsbury's supermarkets, convenience stores; an Internet-based home delivery shopping service and Sainsbury's Bank. The Company is headquartered in Holborn, London and employs approximately 150,000 people. The company recorded revenues of £17,837 million (approximately $35,809.2 million) in the financial year ended March 2008 (FY2008), an increase of 4% over 2007.The operating profit of the company was £500 million (approximately $1,003.8 million) in FY2008, a decrease of 0.6% over 2007. The net profit was £329 million (approximately $660.5 million) in FY2008, an increase of 1.2% over 2007.

Sainsbury Current & Prospective Customers

Sainsbury is serving all types of customers and it is intended to serve some lower middle as well because it has such a wide variety of products range that can serve all types of customers in UK. The UK retail section has always been in the middle of contentious subjects concerning corporation presentation, global rivalry, price wars and alterations in plan. Sainsbury is a well-known family name in retail segment. J Sainsbury plc the corporation that is at the spirit of this conversation is the parent company of Sainsbury Supermarkets Ltd; on a more ordinary note it is well known as Sainsbury's. J Sainsbury grouping also has extra ventures in the possessions and banking sector, though the income earner still remains the supermarkets. In the year 2000, J Sainsbury plc had taken on a novel business enterprise in the DIY store chain but unluckily had to sell it owing to bad presentation.

Sainsbury Corporate Strategy for Customer Satisfaction

Sainsbury offers a broad range of product and service offerings including bakeries, delicatessens, wine and spirits stores, banks, florists, clothing, pharmacies, books, CDs, DVDs, flowers, wine, gifts and electrical goods. Through Sainsbury Bank, the company also offers health coverage products, life coverage products, savings accounts, credit cards, personal loans, car finances, car insurance, home insurance, travel insurance and pet care insurance. The company's diverse product offerings increase cross selling opportunities. However, the increasing minimum wage rate could increase the company's operating costs and adversely affect the margins (Brummer, 2004).

Sainsbury has leveraged its retail network to offer financial services through Sainsbury's Bank, a joint venture between itself and Bank of Scotland. It is the first supermarket bank in the UK and has about 2.5 million customer accounts. The products offered by Sainsbury Bank include: health coverage products, life coverage products, instant access savings accounts, direct saver accounts, Visa credit cards, personal loans, car financing packages, car insurance, home insurance, travel insurance and pet care insurance. The company's diverse product offerings increases cross selling opportunities (Barnett, 2000, pp. 1037-1041).

Sainsbury marketing Strategy

Sainsbury is trying to design its marketing strategies and plans while considering the modern needs and requirements of the customers. Increasing consumer awareness of health and environmental issues along with an increasing resistance towards genetically modified (GM) food products and GM farming, has led to the rapid increase in the demand for organic food. Natural and organic food products segment is one of the fastest growing categories in food retailing. In 2007, retail sales of organic food in the UK were approximately £2 billion (approximately $4 billion). The overall sales of organic products grew at an annual growth of 27% in the past decade. It is estimated to grow at a CAGR of 15% during 2005-10, to touch approximately £3 billion (approximately $6 billion) by 2010. Sainsbury already has an established organic brand, "Sainsbury's SO organic", which has over 450 products including organic meat, eggs and milk. Increasing customer preference for organic foods would favorably impact the company's sales (Levin, 2003, pp. 281-290).

TESCO Personal Finance Company

TESCO decision to enter in a consumer sector was very much strategic decision. TESCO plans an assault on Britain's crisis-ridden banking industry by offering mortgages and current accounts to shoppers for the first time. The supermarket giant, which defied the doom and gloom on the high street with half-year pre-tax profits of pound stg. 1.4 billion ($3.1 billion), said that its brand stood out as a safe haven for consumers worried about the safety of their money. Tesco set up Tesco Personal Finance, a joint venture with Royal Bank of Scotland, 11 years ago and offers a range of products from car insurance to credit cards. It bought out RBS in July for pound stg. 950 million and took full control (Barrell, & Pain, 2001, pp. 1770-86).

TESCO Personal Finance Current & Prospective Customers

It has major span of customers from corporate world and other individual who requires personal finance for their personal needs and requirements. A well-run grocer is likely to produce decent financial results whatever the wider economic conditions. Tesco demonstrated just how sturdily it dealt with the recent economic tribulations with its annual results, but it also showed it is equipped to drive future profits forward in almost any environment. The 12.4 per cent rise in the full-year dividend may give investors the best idea of Tesco's strengths. The size of the increase not only reflects past achievements but also management's confidence in being able to sustain growth.

In spite of the trading record, Tesco shares have done nothing special since the start of 2001. They have outperformed the market average but in absolute terms the shares are down 10 per cent in the past 18 months. However, there is every chance that Tesco's fundamental strengths will win it an increasingly enthusiastic following Buy (Barrell, & Pain, 2003, pp. 17-23).

Corporate Strategy for TESCO

TESCO has lined up high-profile banker Benny Higgins to head its personal finance business, indicating it is planning an aggressive expansion to take advantage of weak rivals. The capture of Higgins is also a signal that Tesco is close to sealing a £1bn deal to buy out Royal Bank of Scotland's half share in Tesco Personal Finance. A source confirmed the planned expansion of TPF, saying: 'It's a good time for them to push on when the market is weak.' The grocer has been casting around for a suitable candidate to take executive control of TPF since making an informal approach for RBS's stake in the joint venture a few months ago.

The partners have agreed a deal in principle. But sources said the pair is in talks with the regulator, which could take another four weeks. It is thought RBS would continue to provide banking services to TPF during a handover period and Tesco would then apply for its own banking licence from the Financial Services Authority (Barrell, & Pain, 2000).

Tesco Competitive Priority Analysis

The UK's largest supermarket group is expected to report sales up by between five and ten per cent -- even though last year was also good with increases of 7.5 per cent. Underlining its dominance of the market, Tesco has delayed its trading statement in previous business results quarter. This contrasts with a number of struggling retailers forced to bring forward their results after a warning from the Financial Services Authority. Woolworths, Marks & Spencer and Ottakar's have already rushed out statements.

Tesco's results will make it the clear winner over the festive season, though its American-owned rival Asda is expected to show strong results. Sainsbury is still showing little improvement, with its statement on Thursday expected to show sales either flat or down one per cent.

Morrison's continues to struggle with integrating the Safeway stores it bought last year. The Bradford-based chain is forecast to show like-for-like sales up about two per cent, but sales in Safeway stores yet to be converted to the Morrison's format are down by double-digit percentages.

Part 2

Operations Management Strategy for Sainsbury

Electronic Supply Chain of Sainsbury

Sainsbury has developed an electronic and well equipped supply chain for the target market. At its heart, this is a sophisticated understanding of supply chains, beginning with electronic links to suppliers who can tell instantaneously what customers are buying at the checkout. The next, much trickier, stage is to persuade suppliers to share information with both retailers and rivals, so that they can minimise inventory and put more of what customers want on the shelves (Prynn, 2004).

If cultures are similar or the retailer is established, it is relatively easy for suppliers to accept new buying systems and new technology, and this can lead to savings. On the supply side, Sainsbury, one of the modern-day supermarkets, has created Global E-Business, a new unit that will be responsible, among other things, for expanding the use of an industry wide extranet. It will provide Sainsbury with a worldwide strategy, a new business model and a dedicated organization that will enhance our future growth.

Real-time communications

Real-time communications make it a much smaller world. We always have our antenna up to pick up change signals around the world that affect policies or the marketplace."At present, the Sainsbury has reached the highest level of exports for processed food products than any time in history, to build brands, Sainsbury must understand the market, consumers and sometimes build the infrastructure" (Lin, 2006).

International Scale Economies

In practice, however, international scale economies are hard to achieve. In the excitement of their charge into new markets, many retailers forget that the crucial ingredient of their success at home is their relative size and market share. Without enough sales and profits in a particular market, even the most long-term management will find it difficult to justify the expense of setting up a large distribution network or installing the latest technology--and without these, the international newcomer cannot compete with entrenched locals. Sainsbury opened a mere three stores in different regions of the world, and abandoned its investment before getting anywhere near the scale needed (Martin, 2002, pp. 347-362).

Managing Operations Strategy for TESCO Personal Finance

Banking Angle Competitive Edge

Tesco also is benefiting from its continued push into banking. The group's financial operation, Tesco Personal Finance, has prospered from the economic crisis as British consumers pull their money out of the country's troubled banks. Since last fall, the unit has seen a near-doubling of savings balances, to $6.6 billion, as of the end of February. Tesco, which bought out former partner Royal Bank of Scotland (RBS) last December, plans to open 30 bank branches in its stores by the end of this year. Leahy seemed to confirm Tesco's ambitions to push more aggressively into full-service banking. "We believe that we've got a good opportunity to grow that business with the Tesco customer base, and we can have a bigger, better banking business," he said (Blake, 2006, pp. 72-9).

Still, discounting is taking a toll on Tesco's profit growth. The 5.5% uptick reported on Apr. 21 was the slowest in 15 years - and far less than the 11.8% posted a year earlier. At the same time, Tesco is feeling increased pressure from rival British chains Wm. Morrison (MRW.L) and Sainsbury (SBRY.L), which saw full-year sales rise 7.9% and 4.5%, respectively, vs. growth of just 4.3% in Tesco's like-for-like British sales.

That's one reason Tesco, which already operates in 14 countries around the world, is pinning so much hope on success in the U.S. Since opening its first Fresh & Easy outlet in Los Angeles in November 2007, Tesco has unveiled 115 more in three main areas: Southern California, Las Vegas, and Phoenix. But that's a lot fewer than it once hoped. The company now says it's aiming for 200 stores by November of this year - 50 fewer and almost a year later than originally planned.

Online Banking

Online banking is no longer being viewed as such a crucial weapon in the battle for customers that are raging among the major high-street players. Bu tin case of retail banking it is still the crucial weapon that bankers can use to attract more and more customers and to retain them by offering several beneficial services. Twelve months ago, the pressure on banks to implement an e-commerce strategy was intense and those who failed were severely punished in the stock market. The ability to carry out detailed financial transactions over the internet, insisted observers would be an essential tool to attract investors over the coming months.

The growth of the online banking world, it concluded, would be down to the major institutions restoring public faith in their services after a wave of negative publicity. However, these feelings won't really impact on the way the industry views the attractiveness of the web. Having an internet strategy is another feather in the cap of banking. It's another medium through which banks can deliver services and products to customers. Today, it is still important to have a multi-distribution platform that will include a full mix of avenues such as the web, branches and telephone banking. Online is just another option (Blake, & Young, G. (2005, p. 7).

Part 3

Operations Management Mix Used by Sainsbury

Being a global player in the supermarket Sainsbury tends to be very proactive and competitive in order to survive in this market. Yet Sainsbury, the epitome of a global supermarket brand, decided to adapt its different mix to local markets.

If they are to overcome such obstacles, multinational retailers need a fanatical attention to detail, and a willingness to do whatever local whim dictates.

One way of getting an inside track on local tastes is to join a local partner, something that in many developing countries is required by law. But even that often leads to conflict, since many big western retailers think they know better. At its heart, this is a sophisticated understanding of supply chains, beginning with electronic links to suppliers who can tell instantaneously what customers are buying at the checkout. The next, much trickier, stage is to persuade suppliers to share information with both retailers and rivals, so that they can minimise inventory and put more of what customers want on the shelves (Prynn, 2004).

If cultures are similar or the retailer is established, it is relatively easy for suppliers to accept new buying systems and new technology, and this can lead to savings. Given that globalisation is fraught with such difficulties, which sort of retailers will make a good fist of it?

Operations Management Mix Used by TESCO

Financial services are now one area that Tesco has been just beginning as it seeks to uphold enlargement. In buying out RBS and taking full possession of its Tesco Personal Finance commerce, Tesco should be able to produce annual profits to GBP1 billion, from the GBP240 million estimated for 2008. In applying its centre values of ease and value, Tesco could make life hard for smaller lenders.

Established in 1997 as a combined venture between Tesco and Royal Bank of Scotland (RBS), Tesco Personal Finance (TPF) was set up to sketch on the bank's monetary skills, while using Tesco's stores and website as a means for employing and serving customers at low cost.

High street banks, which are at present pain from the credit chomp and pending the High Court bank charges case choice, will see Tesco's choice to buy TPF from RBS for GBP950 million as a confrontations. Moreover, Tesco has been able to take advantage of on the fact that RBS is disposing of investments as the have an account seeks to raise GBP4 billion to boost its battered balance sheet (Minford, et al. 2002, pp. 30-67).

It is obvious that the seller has recognized significant range for additional possible growth in what is a very lively and broad sector. In taking full possession of the commerce, the firm will be improved able to use the possible offered by TPF. Even at this near the beginning stage, Tesco intends to add to the attendance of TPF products in-store, as well as just beginning new products. Indeed, the achievement of the TPF 'trial branch' in Glasgow demonstrates the huge existing potential to build the TPF trade.

Tesco has debatable the chance for more savings products and the option of a current account, with the entry into mortgages charge on client demand. As TPF is not at present bare to mortgages, it has a strong balance sheet and, different many of its competitors, is not exposed to bad debt or sub-prime loans. Looking additional ahead, Tesco is probable to use its financial services commerce to make stronger its global interests, which stay self-effacing in this area.

An essential part of the plan going forward is to develop TPF into a full overhaul retail bank, as long as better choice, novelty and value to clientele. Achieving this will be much easier subsequent the meeting of Benny Higgins as chief decision-making; Mr Higgins brings considerable sector experience from his time as head of retail banking at RBS and HBOS. This will not only allay fears of Tesco overstretching itself, but will add confidence in the venture from shareholders and the City (Niehans, 2000).