How Businesses Develop Business Intermediate Unit 2

Essay by sllimzUniversity, Bachelor'sA-, March 2004

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The purpose of this essay is to produce a portfolio based on my investigation of two contrasting businesses . The requirements of this essay state that I have to research two businesses one of a major size and the other small. For this reason I have chosen Sainsbury's as my major and my local newsagent as my small.



There are many factors to consider when locating a business which all play an important part in successful sale of a product. For some firms only a few factors will be important. Other firms may need to consider and balance a complex mixture of location factors. One important factor to consider is the infrastructure of business site:

1) The business needs very good transport systems for the site the most common are (road, rail, river, canal, ports)

2) The business needs good communication systems, telephone systems, fax e-mail.

3) Production is important to a business so a firm needs to know whether there are ancillary firms in the area to help deal with waste disposal and repair machinery.

Is there labour available

The supply of labour is another important factor to consider. The business will need to consider whether the right kind of skilled, or semi skilled labour is available or grants for retraining if not; What the local wage rates are like; whether the housing school, and leisure facilities will attract and keep labour in the area. How much government, local authority help is available.


Below are ten location factors that effect a business




Cost of the site

Planning Permission from council

The firm will need to find out

How long the site will be needed?

Should it be rented or purchased?

Will the site need to be drained and leveled?

What is the level of rates payable to the local council?

Is there room for expansion?

Are there any risks with the site will this raise the insurance premiums?

Geographical factors

Waste disposal is also important for the business as some firms produce a great deal of waste during production there are various laws, which strictly control how this should be disposed of.

Prevailing wind is very important as the wind direction can take pollutants away from areas that are densely populated.

The location of a store is very important, as you can see from the diagram below the store is located in a very busy central area. I have come to find that to increase maximum profit Sainsburys have strategically placed their main stores in densely populated areas. The reason for this is to accommodate for those people who may not have a there own form of transport IE: a car. As you can see from the diagram the store is located with a tube and bus connect. This is very important because many people use public transport so it makes life for customers that much easier.

This is the location of the store I am researching as you can see it has the major transportation advantages of a direct bus route, and a close tube connect. This store has major parking facililites plus a petrol station and caters to a variety of people.

Sainsburys is a PLC business, this means that it is a Public Limited Company. It is called public because the company may advertise the sale of shares to the Public, also shares may be bought and sold freely on the Stock Exchange. It costs more for business to arrange for a new issue of shares at the stoke exchange, so a company will only go public if it wants to raise a large number of funds from a wider area of the Public. A Public Limited company must have a least two shareholders. Also Public companies have much stricter laws and regulations than Private companies to protect widespread shareholders. Another type of Business is Private Limited Company (LTD). This type of business may be operated by the proprietor (Sole Trader) alone or by employed people. The main feature of this business is that it is owned by one person and tends to be a small business. It must have at least two shareholders. It is called LTD because its shares may only be sold privately and with the agreement of other shareholders. This type of business is usually family run. Sainsburys is in direct competion with other food business's such as Tesco's, Asda, Iceland etc. This is why Sainsburys is brakining out in other business deals as i have listed below.




A listed company will find it easier to raise finance than a private limited company.

The standing of the organization in its own market, both with customers and suppliers, may be enhanced by Stock Exchange listings.

Suppliers are likely to offer listed companies more attractive credit facililites.


Public limited companies must publish far more detailed accounts than private limited companies

The extent to which any one individual, or group, can maintain control of an organization is severely limited by the sale of its shares on the stock exchange.

Stock market investors place a great emphasis on the short-term financial performance of the business in order to maintain dividends and share prices.

Sainsburys was founded in 1869 by John James and Mary Ann Sainsbury. By 1882 John James Sainsbury had four shops and had plans to expand his business further.

In this day and age Sainsburys has successfully reinvented and updated itself continually to remain at the top of its game.

This diagram shows the mission for Sainsbury's Supermarkets.

In the UK Sainsburys have driven a step change in their sales performance resulting in five consecutive quarters of strong like-for-like sales growth.

Supermarket food is one of the biggest business in the world as everyone wants quality food, however due to how much Competition there is in the food industry companies like Sainsburys are always looking for ways to increase profit. One of the ways it has managed to do this is by investing in its own-label subbrands. They claim

they have improved and developed over 3,200 products. As we all know a business is nothing without promotion, Sainsburys rigorously monitor 10,000 lines weekly to ensure that they remain competitive. Also they have reinvested some of there cost savings in price adjustments, Sainsburys continue to run a highly attractive, sustainable promotional program.

There is so much Competition in the food industry that companies like Sainsburys are looking to capitalize on other industries in the market. One of the ways it is doing

this is by trying to develop a stronger complementary non-food offer through Adam's children's clothes, Jeff and CO and a trail of a home enhancements range. They are working on developing their own health and beauty offer through up-grading their in-house capability. They also have been trialing Boots health and beauty and Pharmacy shops in six of their out-of -town stores and are now extending these by a further three stores.

Sainsburys maintain that great service is a key objective of their business transformation program. Last year Sainsburys achieved cost saving of £160 million. They say these saving will be reinvested in enhancing costumer offers, building sales and in improving their operating margins.

Sainsburys are replacing their legacy systems with 'best in class' IT solutions to help them gain a competitive advantage. This year Sainburys anticipate double running costs of 6 million as they make the transition between old and new warehouses.

Sainsburys have seen the need to expand and branch out in order to increase profit.

They have done this by

Reinvigorating 117 stores, opening 10 new supermarkets not to mention also 15 Locals, adding a further 422,00 sq. ft of new space.

Sainsburys are second in the UK on-line grocery market with current annualized sales of around £110 million and around 71 per cent coverage of UK households, with 25,000orders a week.

Lastly there is Sainsburys Bank. As we all know most food companies these days are trying to break into the banking and loan business. Sainsburys have recognized this and have tried to align their Bank business more closely with there customers. They have introduced permanent point-of-sale materials into 127 stores, this has helped deliver sales increases of 70 per cent per store. They have also driven acquisition costs to below one third of industry average.




A stakeholders is an individual or group which has an effect on and is affected by an organization. stockholders in Sainsburys are their suppliers, employees, shareholders and community. Each of these groups has an impact on the firm's success and at the same time is likely to be affected by any change in its activities. For example the managers decide to expand a business, this may lead to:

overtime for employees

more orders for suppliers

a wider range of products for consumers

more traffic for the local community.

Each stakeholder group has their own objectives. The mangers of a firm must decide on the extent to which they should change their behavior to meet these objectives. If one group of stockholders is unhappy this could effect the whole business, it is essential that all stockholder groups are given up to date information on proceedings of the company. Sainsburys does this by retraining their colleagues to serve their customers better.

Stakeholders in Sainsburys are:



Credit holders



'Stakeholder' is the term to refer to a process where people work together to create mutually beneficial solutions to their problems. It is a process of carefully managed discussion, ensuring a balance is reached between different stakeholder needs and expectations.

In every project, Sainsburys involve a great degree of consultation. Valuable insight can be gained from asking the right questions of the right people at the right time. It is logical that parties sharing a vested interest in an outcome should be involved in the developmental process of a project. This may include a broad selection of participants even if their desired outcomes seem, at first glance, opposed.

The fact that many public and private sector companies, often enter highly adversarial and hugely expensive, legal processes is a direct consequence of overlooking the need for properly designed and managed Stakeholder relationship. The legal processes and their consequences can cost dearly.

Creating opportunities for communication offers tremendous potential for exploring new options, whilst avoiding conflict. It makes good business sense, as well as good moral.


Managed Stakeholder Dialogue is different because it, focuses on differences in

people's positions. A managed dialogue seeks to identify and build on any common ground between stakeholder groups, to establish effective ways forward and to inform the decision-making process. Any stakeholder process, particularly in competitive circumstances, should be managed by an independent organization or individual, i.e. one that is not perceived as having any particular position on or interest in the outcome and is accepted as independent by all stakeholders. The role of an independent facilitator is to design a process that will best enable all parties to contribute to the final decision, Intern avoiding potential conflict and ensuring greater commitment to the outcome.

There is nothing very unusual about the actual techniques of Stakeholders. The complexities lie in how and when to use which methods of engagement and communication, and with which group of people. Any single participation process is likely to draw upon a mixture of the following techniques.

one-to-one meetings or telephone calls

mediation meetings between different parties

facilitated workshops where people work together and in groups to come up with solutions

task groups or working groups, where a group charged with a particular taskmeets for a one-off meeting or series of meetings.

Facilitated workshops are the most common way to manage Stakeholders and, when properly run, they can be extremely effective. Whilst they may appear time-consuming and labour-intensive, their results provide a framework for future growth and developments. Stakeholders feel more involved, and the company or organization will learn a great deal about its stakeholders and what really concerns them. The stakeholders will also have the chance to hear the company views on issues in a non-confrontational atmosphere, where the responsibility for the smooth running of the meeting lies with the facilitator.

Above is the organizational structure for the Sainsburys, it shows the different kinds of stockholders that exist in this particular store.




The second business I am researching is my local small newsagents. Paks is a very small family run business. As this is a sole trader business unlike Sainsburys the owners have unlimited liability, this means that they cannot afford to close even if someone is taken ill. However this type of ownership suits the business because the owners is able to make rapid decisions giving the benefit of total control. Also the owners have created close contacts with customers. All staff employed are know on a personal basis so the possibility of friction between staff is low. When a business is run like this it gives the business the ability to respond quickly to changes in the competitive environment. This may allow survival even when competition from a much larger organization, because they are able to charge lower prices.

Unlike Sainsburys this newsagent like many others is located bang in the middle of nowhere but houses and flats. This is a very clever location because there is no other shop for a good 20 minutes and also close relationships can be formed with customers.

Paks is very popular around my area because they run a very small unversial business they sell everything buspasses, travelcards to groceries and popular magazines. Although this newsagants is quick successful they are losing business due to the major increase in off license stores opening.

Below are a couple of questions I feel should be important to a Sole Trader choosing a location for a new business.

What Type of Location is Best for a small Business?

The key to picking a profitable location is determining the factors that will increase customer volume for your business. Ask yourself questions such as:

Will customers come on foot?

Will customers drive and, if so, where will they park?

Will more customers come if you locate near other similar businesses?

Will the reputation of the neighborhood or even of a particular building help draw customers?



The size of the business means that less capital is needed to start the business.

The business is independent so there is no need to consult anyone when making decisions.

Profit is not shared with anyone else.


Unlimited liability. This means that if the business goes bankrupt and the owner is unable to pay creditors, they can take personal possessions such as cars, house and its contents to pay the debt.

The owner must provide capital.

The owner will often find it hard to obtain loans of capital because they are a bigger risk than a large business.


Cost of Site must be fairly cheap

must be a fairly concentrated area

There must be sufficient space for loading new supplies

The store must have good visibility

Parking is not essential but is a bonus

Must be room for expansion



The tertiary sector of industry is also known as the service industry. It involves the provision of services to other businesses or people. Sainsburys belongs to this sector. Services may involve the transport, distribution and sale of goods from producer to a consumer as may happen in wholesaling and retailing, or may involve the provision of a service, such as in tourism or entertainment. The goods may be transformed in the process of providing the service, as happens in the restaurant industry. There may not even be any goods involved.

It sector includes all types of services ranging from lawyers and consultants to local hairdressers. For the last 20 years there has been a substantial shift from the other two industry sectors to the Tertiary Sector in industrialized countries.




Entertainment, including the Record industry, Music industry, Radio, Television and Movies.

News media

Leisure industry

Public utilities are often considered part of the tertiary sector as they provide services to people, the structure is often considered part of the secondary sector, even though the same business may be involved in both aspects of the operation.

Sainsburys belong to this sector as they has been expanding into greater business deals of which include banking, internet shopping and selling clothes. Pak News agents is part of this sector

As you can see from the Figure diagram below Tertiary sales and employment has risen over the past 30 years.



The Primary sector of industry involves the change of natural resources into primary products. Most products from this sector are considered commodities or raw materials for other industries. Major businesses in this sector include agriculture, agribusiness, fishing, forestry and all mining and quarrying industries.

Manufacturing industries that, pack, package, purify or process the raw materials close to the primary producers are normally considered part of this sector, especially if the raw material is unsuitable for sale or difficult to transport long distances.

As you can see from the diagram Primary employment has fallen over the past 30 years.


The Secondary sector of industry is the manufacturing sector of industry. This sector of industry generally takes the output of the primary sector and manufactures finished goods or products to a point where they are suitable for use by other businesses, for export, or sale to domestic consumers. This sector is often divided into light industry and heavy industry. Many of these industries consume large quantities of energy and require factories and machinery to convert the raw materials into goods and products. They also produce waste materials and waste heat that may pose environmental problems or cause pollution. Sainsburys also belongs to this sector.

Other divisions of this sector include the Aircraft, car manufacturers, Brewing industry Chemical industry Engineering Energy industries including the production of petroleum, gas and Electric power Steel production Tobacco industry Radio, and Telephone industries.

As you can see from the diagram Secondary employment and output has also fallen over the past 30 years.