Sainsbury and TESCO Operations Management Analysis

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.

Sainsbury: Introduction:

J. Sainsbury (Sainsbury) is a United Kingdom based food retailer with business interests in financial services. The company contains Sainsbury’s supermarkets, Sainsbury’s Bank and convenience stores; an Internet based home delivery shopping service. 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, a raise 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 Introduction:

Since 1998, Tesco Stores has been the biggest trade network in England, Scotland and Wales. In Great Britain, where Tesco owns over 1.900 stores and department stores, an average commercial unit offers about 50 000 sales lines from food to CDs, clothes, books, garden furniture, and toys. Throughout Great Britain, Tesco runs various shops ranging from shops in the city centers to hypermarkets in the suburbs and outside cities. Recently, Tesco has run trade units in Ireland, Poland, the Czech Republic, Slovakia, Hungary, Thailand, Korea and Taiwan.

TESCO Current & Prospective Customers:

TESCO is serving all types of customers, low, middle and upper class people. As TESCO is providing every little thing of daily, use under one roof therefore every citizen of country is its customer. TESCO is providing cheat products to its customer so its target customers are specially lower and middle class people.

Tesco has been satisfying customers by meeting their needs by having shelves stocked all the time, selling at competitive prices, online shopping, providing a good service and everything under one roof.

Tesco encourages loyalty is through the club card system which helps to gain customers because they get one point for every pound spent in the store. The customer in return gets free vouchers which they enjoy because they can purchase their favorite items

Sir Terry Leahy, chief executive since the mid1990s, has taken the bold step of trying not to focus on the common corporate tune of “maximising shareholder value”. The company’s mission statement is, “Our core purpose is, ‘To create value for customers to earn their lifetime loyalty’. We carry this during our values.

TESCO Marketing Strategy:

Tesco’ strategy is obvious, with development being practiced from four areas , the core UK grocery business, international growth and retailing services, non food, the dot-com business and telecommunication packages. Essentially, Tesco is using its strong constant core to keep the business marking over while it forges new riskier areas of expansion. Pushing additional into non food in the next stage. (Johnson, G., Scholes, K., Whittington, R., (2005)). Lidl is presently “destroying” the market by selling the products under cost price. Therefore, Tesco’s broad strategy will have to be cost leadership, unless we can successfully distinguish our line of clothing so that we can charge a finest price.

A marketing strategy will engage analyzing the markets, and which products to offer. The strategy is executed through marketing tactics, which involve detailed conclusions about factors as the price and how the product is distributed. So Tesco must choose on its model of entry in terms of, Internet advertising, own stores, or joint venture with an existing nationwide retailer.

TESCO Corporate Strategy

Tesco’s growth over the last twenty or thirty years has concerned an alteration of its strategy and image. Its primary achievement was based on the “Pile it high, sell it cheap” advance of the founder Jack Cohen.

“Every little helps”

Tesco has very attractive slogan for their business these days , As they provide every little thing to their customers

An “inclusive offer” This slogan is used by Tesco to convey its ambition to appeal to upper income, medium income and low income customers They’ve dragged off a trick that I am not conscious of any other retailer achieving. That is to appeal to all segments of the market.

One board of this inclusivity has been Tesco’s use of its own brand products, as well as the upmarket “Finest” and low-price “Value” varieties. The company has overcome customer refusal to purchasing own brands, which are generally considered to be more cost effective for a supermarket as it upholds a high portion of the overall profit than it does for labelled products.

The company has a four-pronged strategy:

Core UK business: It has been active and innovative in finding ways to enlarge, such as making a large scale move into the ease store sector.

Non-food business: Tesco sells a growing variety of own brand non food products, as well as non food Value and Finest series. It also has done pretty well in non food sales in Ireland.

Retailing services: Tesco has obtained the lead in its segment in growing into areas like telecoms, personal finance, and utilities

International: – Tesco began to enlarge globally in 1994, and in the year ending March 2005 its global operations accounted for just over 20.5% of sales, or about £7.2 billion.

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

Tesco has to make sure that the stores that they run are always maintaining effectiveness. This helps them to attract more customers as they would like to shop at a store that is successful. Tesco is a large organisation that must make sure that their products are ready to be put on shelves all the time so that they do not disappoint customers. One example of this is that the tills must always work otherwise large queues would be formed and this would upset the customers.

Tesco check that all operations are working such as:

• Cleaning

• Tills are working

• Shelves full

• Lighting

• Delivery of goods

Tesco’s success has been proven by the firm meeting the aims and objectives that they have set. They have been able to capture 34% of the market share and accumulate high profits. Tesco has exceeded rival stores by understanding customer’s requirements. In this situation Tesco sells at low prices and creates value as this helps Tesco to reach its mission statement of retaining customers.

The new online shopping website has shown that Tesco has had a monopoly in this area.

Tesco has recently been showing its true potential of Technology is increasing rapidly. Tesco have taken advantage of the latest technology that is now out, they must capture the most creative technology; this helps Tesco to achieve their aims and objectives.

Tesco conduct market research frequently so that it is able to see the new technology and adapt to them. Tesco reach out to all those who want to shop at Tesco through the internet. The business has made it comfortable for customers who can now pay online, it is convenient for them and they can receive their goods that they purchased instantly. It has been proven that 95% of customers have access to the internet; this is partly the reason why Tesco invested in the online website as they know that their profits would increase, and it has increased. It has led to an increase of 50% in market share of supermarket trading.

Another way Tesco managed to change their aims and objectives is by responding to new taste in fashion and food products. The latest trend shows that organic food is very popular in the market and therefore they have managed to introduce this successfully and the customers purchase these products every week. Their sales have gone up £80 million. Once again it shows that Tesco responds to changes whenever necessary because they want to remain at the top of the market.

Part 3

Basically operations management mix include the following factors

Top down perspectives

Market requirements perspectives

Operations Resources perspectives

Bottom – up perspectives

TESCO Operations Management Mix

Every little helps as this is Tesco’s slogan. That means tesco is for every 1 for every little help and to full fill every little need of customers. Basically Tesco is leading in huge market .and Tesco is based on 4 main factors Core UK business, Non-food business, Retailing services and International growth. As well as Tesco is using its own brand products as the “Finest” and low-price “Value” varieties. These all are plus points for Tesco to take competitive edge on its competitors.

For maximizing its customers they use bottom- up perspective along with the Top down perspectives as their day to day experience operations are different, recently on Football world cup tournament Tesco used to sell different accessories and cloths having UK football team logos and numbers to support British Football team.

On Christmas Tesco is full of with Christmas gifts and cakes ,On Valentines’ day Tesco is full of chocolates and flowers ,this is all because they understand their customer’s day-to-day needs and demands and they are fulfilling their demands and needs efficiently.

They are also using Market requirements perspectives in their operations efficiently. As they know their target market and they are successfully providing what their customers need in favourable price and time to time thy update their products and services according to customer’s expectations to satisfy them

And further more they are capturing huge market very nicely they have lots of superstores in different cities of country that made more convenient for people to go in Tesco as compared o other super markets.and in their supermarkets they have proper management and quality control departments for delivering maximum quality.

They also have huge range of varieties for all people belong to different geographic parts of whole world.

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?

Conclusion:

After evaluate the mix of managing operations concepts/framework used by Tesco and Sainsbury, discussing their operations, strategies, their target market, their customers i came on this result that Tesco is more successful as compared to Sainsbury.

Because Tesco is targeting huge market as compared to Sainsbury, their stores are not as huger but their attractive medium sized supermarkets are located in perfect and most convenient locations of the whole country.

Sainsbury have huge variety of goods but Tesco is focusing more on customers’ needs and demands for example Tesco has traditional Pakistani foods for Pakistani people, Tesco has Halal meat for Muslim people, Tesco has Traditional Indian cloths for Indian ladies that means Tesco is serving better without making any difference in customer from where they belongs, ethnic origin they have.

And this is all because Tesco is conducting customer needs researches frequently to identify their needs.

This is all about course work and i want to share that after studying this Operations management course now i am clear about organization’s operations, their workings, their implementations of different marketing strategies in fast changing environment