Contemporary Issues on Business Management: A Case Study of Sainsbury's and Brexit

Contemporary Issues on Business Management

Executive summary

The study will provide a brief description of business management and how the management of Sainsbury has to deal with problems arising due to Brexit deal. The study will then provide a deep analysis of the issues faced by Sainsbury due to Brexit deal. Then it will include the evaluation of the impacts of the issue on the chosen company society and the economy. The study will then end with a conclusion.

Introduction

Business management is defined as the activity to analyse, plan, manage, organise several business operations. The objective of business management is to fulfil the goals of the organisation and get maximum result with minimum resources. However, due to a Brexit deal, many companies have failed to perform well in the market. The same incident is happening at Sainsbury. The BREXIT deal has been a contemporary issue for the business, management and leadership of Sainsbury.

Sainsbury ranks second as the largest supermarket chain situated in the UK. It was founded by John James Sainsbury in 1869 and since then it's headquarter has been in the UK. In 1922 it became the largest retailer of groceries and it currently holds 16% supermarket share.

Critically analyse contemporary issues in the field of business, management and leadership.

Impact of Brexit in Sainsbury

BREXIT had major effects on companies like Sainsbury. Due to the closing of several stores the profit of supermarket group were completely wiped out. The half-year profit of Sainsbury fell from £107m to £9m (ft.com, 2019). Even though there were low inflation and an increase in wage growth, customers were still holding on consumer spending due to political issues. There were behaving as if the economy was in recession. To improve the sales, the retailers use petrol promotions, price cuts and coupon deal to attract customers, however, on an overall basis, the profits of the company dropped from £279m to £238m.

As the former CEO of Sainsbury, James King confirmed that after the Brexit deal, customers have to suffer from higher prices and poor quality of products and services. All these factors were improved due to free trading relationships, but now there will be restrictions and barriers which will create friction in the supermarket industry (ig.com 2019). Sainsbury has also been suffering from loses due to Brexit deal more than its competitors. Moreover, the investors of Sainsbury have already shunned the company because of the attempted merger with rival Asda. Apart from all these issues, Amazon is trying to enter the market which is once again a big threat to Sainsbury’s business.

Leadership issues because of Brexit

Survival: Brexit has not only affected the leadership of Sainsbury but it has put intense pressure on almost every leader in the UK. Brexit has provided a ton of challenges for the CEOs and leaders of companies. Due to social division, political turmoil, and growing uncertainty has put a lot of pressure on the management of the companies (peoplemanagement.co.uk, 2019). Sainsbury is no different. Companies are aware that the government has taken actions to support companies those who have been affected by Brexit through its Operation Kingfisher. But the biggest challenge for the leaders is to survive and excel in this changing environment.

Data and Security: The management and leadership of Sainsbury also have a deal with data and security issues. Before the Brexit, British companies had to follow the rule and guidelines of EU, and they were investing a lot of resources to align their data security services with that of EU (securityintelligence.com, 2016). However, everything’s changed now and companies like Sainsbury are not sure whether Britain should come up with their own policies or they just align with the laws of the EU.

Maintain Relationship: The current leadership duty demands a sustainable business that could survive during the hardships of Brexit. The leaders of Sainsbury must show their responsibilities towards their stakeholders. It is also important that Sainsbury also maintains its brand image so that they can remain on the top of their business. The current CEO of Sainsbury has already taken several measures to build good relations among its stakeholders. They have donated millions of pounds of charity and even prioritised their valuable customers (managementtoday.co.uk, 2020). It's the responsibility of a leader to maintain the image of the company and have good relations with their stakeholders.

Plummeted Sales: It is no shocker that the sales of Sainsbury have plummeted since Brexit and there is huge pressure on the leadership to bring back the sales. In response to lower sales, Sainsbury started winning over sales through different strategies. There was a surge in online order as the online sales went up from 370000 in March to 650,000 in June. It grocery stores sales also increased by 8.2% on grocery sales and merchandise, however, the sales of clothing stores were still down (theguardian.com, 2020).

Business issues because of Brexit

Shortage of Supplies: Brexit has also affected the business of Sainsbury. According to the CEO of Sainsbury, Simon Roberts, the supply of fish, meat and dairy products would be reduced due to Brexit (bbc.com, 2020). UK will leave the EU and Northern Ireland will remain a part of the EU's single market, therefore the products coming from Northern Ireland will be checked before reaching the UK. The products of animal origin such as meat, dairy products, and fish will be inspected thoroughly because the EU has strict policies regarding this. These checking and export health certificates aren't cheap which will add substantial costs to the products. Not to mention if Sainsbury doesn't get clarity on this situation, they might have to face restriction regarding the products they can sell.

Profit Reduction: In the first quarter, the sale of Sainsbury's supermarket fell by 1.6 per cent (ft.com, 2019). Sainsbury has already warned that if the Brexit deal goes through, there will be a shortage of supplies. There could be a strain on the warehouse capacity of the retailers. Due to Brexit, the market turned highly promotional and uncertain due to which the sales of general merchandise fell by 3.1 per cent. Even the clothing department has to suffer loses as their sales were down by 4.5 percent (ft.com 2019). Sainsbury has started focusing on sprucing up some stores and reducing debts. Their main focus is to improve their price competitiveness on the commodity items.

Additional Tariff Cost: Due to Brexit deal, Sainsbury has to pay additional charges for importing and exporting product which was once a free trade. However, to deal with such adversities, Sainsbury has asked its supplier to cover much of the costs and deliver products at delivery duty paid (DPP) basis. It has asked its suppliers to cover charges for additional logistics costs as well as the tariff charges. If this did not happen and charges fall on Sainsbury, the prices of food and commodities would increase considerable which will affect the customers. Due to high prices, the business of Sainsbury would surely suffer.

Identify and critically evaluate the impacts of the issue on the chosen company society and the economy.

Figure 1: Impacts of the issues of Sainsbury

Influence of Brexit on profit leap: Sainsbury’s has been spurned by shareholders as its struggled merger with competitor Asda was thwarted by officials. The collaboration was meant to be the supermarkets' response to TESCO although was ruined regarding the battle and so Sainsbury had to persuade the market that the company has an additional strategy. With certain acquisitions and mergers, the firm aimed at shoring-up the balance area and enhancing its attractiveness on cost. The corporation has become more bearish than its competitors when it falls to Brexit. Additionally, political ambiguity is holding the customer's expenditure as the supermarket's team gains were erased out by the price of closing retailers (ig.com, 2019). Brexit has helped the workers to enter the market and have free trade. On the other hand, the labour force of Sainsbury may lose the negotiation authority if they leave their job.

Influence of Brexit on Confinement Alleviation: According to the EU referendum in 2016, despite Brexit's influence on employment, the standard has continued to expand. Although in 2019, the employment development gradually decreased, and as such the labour market remained stagnant. However, in this situation, the numbers of openings were still elevated. Therefore, the share of Sainsbury reportage staffing problems has upgraded for numerous staff. The occurrence of the circumstances was due to expansion in the number of EU public that has come to work in the UK (ft.com, 2019)

According to the report of CIPD’S Labour Market Outlook (LMO), the share of the company describing hard to fill vacancies have increased from 56% to 61% in 2019. Thus, it can be assumed that Brexit can minimize the recruitment price in Sainsbury that creates pressure on clients concerned with commodities and facilities. Moreover, the dwindling quantity of labour and skills states that Brexit has not diminished employers’ benefit in hiring EU migrant labourers. Besides, Sainsbury is employing EU nationals and providing training and also pursuing to hire a broader array of underprivileged teams such as older labourers or those from racial subgroup upbringing (theguardian.com, 2021)

Impact of Brexit on Trade Responsibilities: Regarding no-deal Brexit, the UK government put a disrespectful temporary trade eventuality scheme. Thus, it is demonstrated that commodities from other countries except the EU will be favoured more. The influence Sainsbury had to face in its business due to Brexit involves:

a. Influence on supply chain: In the occurrence of no-deal Brexit, commodities of Sainsbury moving between EU and UK requires to form an extra check at the border, which will lead to delays. Moreover, extra custom service will influence the transfer of commodities among the roll-on roll-off ports in the EU as well as the UK. Therefore, Sainsbury requires engaging with the suppliers of other countries and examining the potential influence on the supply of products and what is required to stay in conformity with the new regulations (cipd.co.uk, 2021).

b. Trade responsibilities and procedures: In the post-Brexit UK, Sainsbury requires to recognise the new trade procedures and responsibilities. As such, the commodities transferring between the UK and EU will not be regarded as export and import instead than reports and assets. So, when Sainsbury is importing its commodities, the company needs to complete the full information such as the origin of the country, goods codes, and others.

c. Value Added Tax (VAT): The government of the UK is intending to not make any development in the Vat PROCESS OF UK. After Brexit, UK is planning to launch delayed trade-in VAT secretarial for companies that have listed for UK VAT. EU VAT procedures, such as triangulation and distance trading, will no lengthier are relevant in the country. Subsequently, Sainsbury requires scrutinizing the supply chain and ascertaining the extent to which VART repercussions will influence the company (internationalworkplace.com, 2018).

Impact of Brexit on condition and protection: In the UK, the backbone of lawful guards for staff is the Health and Safety at Work Act, 1974. The act has been introduced and accompanied by various EU rules and commands. As Sainsbury is managing its business both in the EU and UK, the company has to face certain obstacles. The company will require adapting to make sure that they understand the needs in both EU and UK. Thus, it may lead to extra employment and skilled assistance price as well as additional time and endeavour to keep on foremost needs under both the procedures. Since Sainsbury is a UK-based organisation, it will want to trade with the EU so that it will be commercially driven to maintain provide effectual and inexpensive risk-based supervision structure (thorntons-law.co.uk, 2020).

Substantially, highly wellbeing and protection laws that emanate from Europe and regulate security in the work take the form of European Directives. With more influence across principle and the parliamentary schedule, the administrator may have the opportunity to transform the wellbeing and security law of the country to give it up to date with evolving expertise and new operating procedures further swiftly than EU equivalents. Therefore, it will benefit Sainsbury in expanding their business. Generally, Brexit is expected to have a partial effect on the current law over safety and health.

Impact of Brexit on occupation: Many organisations have informed that some European buyers and other IT employees are resigning their jobs in the UK and after the Brexit vote, there will no longer be entertained. Whereas, it is found that instead of recruiting many organisations are building up groups in other EU places. According to the study of the University of Leuven, the loss of jobs in the country would be around 14,000 for soft Brexit. The study suggests that out of 5 companies 1 company si thinking to locate their occupation outside the EU.

Despite such situations, Sainsbury announced that the company will recruit 2000 employees by increasing its area within the country. The appearance of the country has also been buoyed by an association of significant investments in the UK by bigger organisations following the vote. On the other hand, the ONS Report demonstrated that whilst the number of job openings has been mostly upgrading from 2012, it has been decreasing since 2019. According to research, in 2019, while recruiting staff, the recruiting purpose for the first quarter was down by 2%. Nonetheless, when collaborated with the Coivid-19 issue, there is a potentiality for employment opening after the breakdown(thorntons-law.co.uk, 2020). Nonetheless, it is not clear how Brexit has impacted the job market. The economic development has slackened down though the standard of employment is still elevated.

Analyse critically the impact stakeholder views have on approaches taken by organisations.

Theoretical review of stakeholder views

Stakeholder Theory emphasizes the relationship between a business and its stakeholders including customers, employees, suppliers, as well as the investors. It is a view of capitalism which states that a company should not only create value for its investors, but also its stakeholders (stakeholdertheory.org, 2018). In this case, the theoretical review of stakeholder analysis will be done on Sainsbury:

• Customers: Customers are one of the most important stakeholders for Sainsbury as they are the end-users of the products at Sainsbury. Sainsbury currently does 28.1 million customer transactions per week (about.sainsburys.co.uk, 2020). The company creates value for the customers by providing them with the best quality products at a much reasonable price.

• Suppliers: Sainsbury sells more than 30,000 products at their supermarket. This is only possible because of the suppliers who not only bring supplies from the UK but also other nations. Sainsbury has developed the policy of Sustainable Sourcing based on the International Labour Organisation, the Ethical Trading Initiative's Base Code, and the Universal Declaration of Human Rights (about.sainsburys.co.uk, 2021). This policy aims to respect the associates engaged in supply and provide them with training, and knowledge.

• Employees: Employees are the heart of Sainsbury. Managers carry out their duties to guide the company while staff members perform different tasks to meet the strategic goal of Sainsbury. The company takes special care of its employees by giving salaries, incentives and many insurance benefits.

• Investors: They are the ones who fuel the organisation. Their funds help the organisation to take proper actions in business. This is the reason investors are given a special seat on the board meetings where they can decide the future of the company.

Stakeholder mapping

Figure 2: Stakeholder Mapping

Stakeholder mapping is a tool that helps to about understand the power and influence of different stakeholders (cleenet.org, 2016). They identify which stakeholder are the key players and decision-makers of the company and who is not. The following stakeholders are:

• Customers: Customers have neither influence on the business project of Sainsbury, nor they have an interest in the subject. This is the reason they need to be only monitored.

• Suppliers: Suppliers do not influence the business of the company; however they do have an interest in the company's business affair because it affects their business as well. For this reason, they should be kept informed.

• Employees: Employees have a strong influence over the business of Sainsbury and they also have an interest in its affairs. This is the reason they should be managed closely.

• Investors: Investors aren't interested in the process of business, they only for-profit and return. However, they hold a lot of authority over the decisions of the business. This is the reason they should be kept satisfied.

Steps of engagement

Sainsbury can perform five steps for effective engagement of stakeholders. The steps are listed as follows:

• Engagement Strategy: First Sainsbury has to develop a strategy for engagement. They need to set a vision for future engagement and develop plans to after reviewing past engagements.

• Stakeholder Mapping: Sainsbury needs to define the criteria of its stakeholder. They need to prioritize their stakeholder based on their influence and interest in the business and then select engagement mechanisms accordingly.

• Preparation: After analysing the position and priorities of different stakeholder, the next step is to prepare the plan accordingly. It is time to focus on long-term goals and set rules and logistics of engagement.

• Engagement: It is time to conduct the engagement. Sainsbury needs to mitigating tension and to be sure about the contribution of stakeholders. This way they can focus on their priorities.

• Action Plan: Get feedbacks from different stakeholders regarding business. Sainsbury needs to come up with opportunities so that they can get feedback and after that, they can determine their actions. It will also help them to plan the next steps for future engagement and revisit prior goals.

Stakeholder challenges and effects

Challenges:

Companies like Sainsbury face several challenges while engaging with stakeholders. The challenges are listed as follows:

• Priorities and Constrained Time: Every stakeholder is set on the priority list of the company. Since opportunities are limited, companies have to deal with constrained time to complete the objectives of stakeholders (decisionlens.com, 2019).

• Make Haste: Perception of stakeholders change if they are not properly informed. Sainsbury has to make sure their stakeholders up to date otherwise it will represent a bad image of the company.

• Too much Effort: For short projects, stakeholder engagement is nothing but hassle as it generally requires a lot of planning.

• Virtual Meetings: Engaging face to face is easy, however, when it comes to the digital world because of a different story.

• Find Common Ground: To engage stakeholder and grab their attention, companies need to find a common ground with their stakeholders.

Effects:

The Effects of various stakeholders are listed as follows:

• Customers: Customers help in developing products and services by providing their valuable feedback.

• Suppliers: Any changes in the quality of supplies affect the overall production of a company. So they heavily impact the business operation of a company.

• Managers: They are the ones who heavily impact the company as they are decision-makers of the company.

• Staff: They do not have a direct impact on the company, however, their performance does affect the operations of the business.

• Investors: They strong a hold authority in making decisions for the company, so their decisions heavily impact the working of the company.

Critical analysis of the action of the organisation on stakeholder views

Customers: Sainsbury's main purpose is to help its customers by providing them with the best quality products that add value in their lives even they are struggling after Brexit deal. For customers, the Board always updates their trends by market research, social media listening, through Customer feedback programme (CSAT) and many more approaches.

Employees: Employees are the heart of the business so it is important to create a place where employees love to work. Sainsbury has dedicated to create a friendly environment for employees where they can perform their business in their activities. Even in a tough time of Brexit, Sainsbury tried its best to retain their employees.

Suppliers: Sainsbury currently has 4,000 Goods for Resale suppliers and 2,500 Goods Not for Resale suppliers (about.sainsburys.co.uk, 2020). Their suppliers are from all over the world including big MNCs to small independent businesses. Even though the company will have to struggle to get supplies from other parts of Europe due to the effects of Brexit, Company is constantly building strong relations with other companies and suppliers to drive greater product differentiation. Through a Fairly Traded Programme and the Fair Development Fund, Sainsbury has always engaged with suppliers and build stronger relations with them (about.sainsburys.co.uk, 2020).

Conclusion

Managing a business is not an easy task especially when it’s a company like Sainsbury. From this report, it can be concluded that Brexit deal has affected Sainsbury on both management and on business levels. From analysing the stakeholders of Sainsbury, it can also be concluded companies use several strategies to engage stakeholders and their presence affects their business operations.

Reference List

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