In divisional structure senior Directors ( who are on the Operating Board which is responsible for the day-to-day running of the company. The Chief Executive and the Finance Director are also part of this team. “http://www. j-sainsbury. co. uk/ar05/index. asp? pageid=50”) give each unit the authority to design, produce and deliver the product or service, using resources under its control or bought from outside suppliers.
A functional structure (represented in Fig 2) can be expected to operate within each division and hierarchies become more apparent. The Group Director of a division or business area will report to the Operating Board which then reports to the board of Directors who oversee all the divisions of the organisation. The advantages are that the units can focus all resources on the one product or business area.
Separate areas of functional expertise are more likely to cooperate as they all depend on satisfying the same set of customers. It is probably more expensive, as each business may have a wide range of specialisms, duplicating provision. Sainsbury’s does not follow the divisional structure entirely, as some functions are common across all business areas such as Human Resources and Finance. This is where aspects of the Matrix model become apparent in Sainsbury’s organisation.
Under retail services in the organisation there are; Sainsbury’s Supermarkets, Bells Stores, Shaws Supermarkets, JB Beaumont, and Jacksons Stores. A Director for Retail businesses sits on the Operating Board representing this collection of business. For these stores the Group Retail Director will set some policies at group level but then leave their corresponding businesses freedom to operate according to local need in other respects. It can be said therefore that Sainsbury’s is a hybrid of Divisional, Functional and Matrix structures.
Sainsbury’s business principles and operating style seem well suited to the predominantly divisional, decentralised structures currently in place. This allows freedom for businesses to act on the basis that they know their customers and business issues best. Central control is limited to performance, finance and some core functions in HR and Marketing for example. In difficult business conditions it is tempting for organisations to abandon these principles for a more centralised, highly controlled approach.
This is what is often termed the ‘turnaround’ or ‘burning platform’ approach. Whilst this may be necessary in the short term to avoid organisational disaster it is rarely a recipe for long-term success. Sainsbury’s may need to tighten some controls, particularly if issues such as logistics and supply to stores are failing but that should not be seen as a basis for altering the fundamental structure and values of the organisation.
We can see major changes in the profit mix at Sainsbury. Supermarkets are now contributing significantly less than they were five years ago; Sainsbury’s bank is virtually operating at break even point since its profits are so small; Shaw’s supermarket division is returning ever increasing profits and the profit sharing part of the business is suffering as a result of the drop in the overall profitability of the business.
The profit margins have seen weak growth, however this is not totally out of keeping with the retail sector. The figures certainly do not put Sainsbury’s at the top of the pile and given Sainsbury’s had been number one retailer for so long it suggests that all is not well and competitors are taking business away. There is no real indication of meltdown but figures such as liquidity and gearing show some signs of weakness.
Supermarkets need to drive profits through sales/turnover and this is clearly proving difficult for Sainsbury’s. It can be said that Sainsbury’s is currently performing ok but there are signs of financial problems to come. This table helps summarise some of these issues as it shows recent turnover dip as a worrying shift on top of some declining profitability, but the impact of cost controls is masking lost turnover. It is possible that cost-cutting has led to driving customers away.