INVESTIGATING BUSINESS

Investigating Business



Investigating Business

Introduction

J Sainsbury is primarily a grocery retailer. However, like the other leading players in supermarkets, it also offers an extensive non-food offering. This includes clothing, petrol, pharmacy goods and services, financial services, telecommunications, electrical goods and books, as well as in-store consumer food service (www.sainsburys.co.uk).

This paper aims at providing a detailed analysis of the business dynamics of Sainsbury's Supermarket.

Business Ownership

Whilst starting a business, one of the most important decisions a business owner needs to make is to determine the structure of the company. The most popular types of business ownerships are as follows.

A.Sole Proprietorships

B.Partnerships

C.Franchise

D.Limited Liability Company (Private Limited Company and Public Limited Company)

E.Cooperative Business Ownerships (Gudykunst et.al, 2005, 18)

Ownership Structure of Sainsbury's Supermarket

J Sainsbury is a Public Limited Company by its ownership structure. The company was founded in 1869, with the founding family retaining a great deal of power and influence over the company. Lord Sainsbury of Preston Candover is president of the company for life, and many other members of the Sainsbury family are on the company's board (Mooij, 2004, 23).

As a Public Limited Company, the owners of the company, just like its shareholders in Sainsbury's, have very limited liability to the stakeholders of the business in regard to its debt and other liabilities. The shares are open to the general public for selling and purchasing. The decision-making powers are held by a Board of Directors that makes all the important choices on behalf of the shareholders.

The earnings of the company are distributed amongst the shareholders in the form of dividends as per the amount of shares they hold in the company.

Advantages

A.As a Public Limited Company, Sainsbury's enjoys a greater amount of available capital than other businesses in the industry with a Partnership structure.

B.Sainsbury's ownership structure provides it with a legal leverage and status as a separate entity in its own right. This means that the owners are not accountable before the law for the decisions taken by the business (Stabell et.al, 2003, 44).

C.The owners only exercise a limited liability towards the stakeholders, just like the shareholders. They are not obliged to meet the debts and liabilities of the business in their personal capacity if the company goes bankrupt.

Disadvantages

A.The transition from a partnership to a Private Limited Company, and later to a Public Limited Company has been very expensive for Sainsbury's. The company has to bear very high costs in the forms of accounting and legal fees.

B.As a Public Limited Company, Sainsbury's has to maintain proper accounts. The company must publish these records annually to the public, after fulfilling the audit requirements of the law.

C.Because of the limited liability presented in the ownership type, obtaining a loan for the business can be a difficult task since there are no absolute guarantees against the loss (Brooks et.al, 2004, 67).

Contrast between Sainsbury's Ownership Structure and Other Forms of Ownership

Sole Proprietorships

Most of the small businesses and firms operate under this type of ownership. These businesses are run by one single individual, ...