1.

Abstract : The Management accounting report on Sainsbury throws light on the present teething issues of Sainsburys in their line of business. It details the various methods of management accounting techniques available. In this report, there are a few key issues that are analysed and basis the modern management tools, solutions provided which may help improve the worsening situation. Sainsbury started its grocery business in the year 1869. It stands third in the grocery business after ASDA in second and Tesco in the first position. Sainsbury has 380 convenience stores and 560 supermarkets across the UK.
2. Background / Problem Statement:

Sainsbury employs more than 180,000 employees out of them 91,000 are full time employees. Sainsbury commands 16.1% of the UK market share in groceries which is 3rd after ASDA and Tesco who are at 17.4% and 30.4% respectively.

UK Grocery Market Share break up chart

The perennial issues that Sainsburys is facing today have become evident from analysis in this report. They are as follows: 1. Reducing market share and profitability 2. Increased cost in Procurement 3. Depleting employee morale and motivation
4. Under-utilization of assets and available resources.

1. Sainsbury was second and has moved to the third position in this business

since 2004. The present plans and polices are intended to re-gain the lost market share. 2. The costing of products that are sold in Sainsbury are more when compared with competitors.

3. Review of the Management Accounting Concepts :

Management accounting throws light on the efficiency of how the management is operating its business. Sainsburys management accounting process includes the follow through of its long term and short term goals and putting them in actionable and achievable plans of action. Management accounting uses historical data from the past to forecast for the future. It assists the leadership team in its daily operations. Management accounting is also deployment of control measures in the operations thereby to efficiently envisage profitability from each process. The efficient use of raw materials, plant, labor, machinery and assets all fall into the preview of management accounting. Gross Profit, Net Profit, Gearing ratio etc are examples of management accounting measures. The management accounting team in Sainsbury would be helpful in providing vital information pertaining to price modeling, financial forecasting, break even analysis, supply chain and value chain etc support. Capital Budgeting, rolling and Periodic

budgets, helps management to perform its activities under prescribed controls. The management budgets facilitate in realistic Planning, helps in overcome challenges and brings motivation to the employees and supports in effective and measureable Performance Evaluation.
4. Application of Management Accounting techniques to the problem in

Sainsbury : Presently Sainsbury is ranked 3rd in the business and has had a tapering effect of depleting business across its Groceries segment. With the advent of strong competitors, Sainsbury can effective use management accounting in tacking the prevalent issues such as:

Improvement of Reducing market share and profitability through Budgeting processes: The most important tool of management accounting and controlling is Budgeting. Budgets are either fixed or rolling budgets. Budgets form an essential aspect of any financial analysis and reporting. Using budgeting as a tool the Sainsburys management can effectively do planning, scheduling, controlling, resource allocation and finally effective performance evaluation.

The use of Rolling budgets in Sainsburys management would be the process formulating a monthly budget. As the groceries business has its own dynamism and market variations, a rolling budget helps absorb the spikes and troughs of market pricing. The rolling budget would bring in a flexibility to continuously take benefit of the market position and procure raw material within the allocated budget.

Improvement in the Increased cost in Procurement through Standard costing models:

Costing is a very important aspect in the success of the business. Standard costing plays an important role in the process of effective management planning. All procurement costs are preplanned and they are benchmarked as per market indicators. Standard costing is very helpful in large scale procurement of similar/ identical raw materials across the year. Standard cost follows the model of retaining a planned cost for the raw materials which form a part of the end product.

Sainsburys would benefit through the standard costing model as it has large scale procurements of groceries which run into million units per annum. Using the standard costing model, Sainsbury would be successful in setting a simplified and uniform cost model for all its branches and warehouses thereby reducing pilferages that develop in the purchasing process. Due to a standard cost products sold across all UK stores in Sainsbury would be of the same price and would bring in a uniformity and equality in its purchasing model. Standard costing helps in identifying any variance in the cost and the reasons for the same can be deduced.

Improvement of Depleting employee morale and motivation through effective motivation and personnel performance evaluation process: Sainsburys strength lies in its human resources. It has 180,000 employees working throughout the UK. An effective performance evaluation process would definitely be a boon to its growing stature. One of the critical aspects of management accounting is doing effective target setting for employees. Targets that are SMART Simple, Measureable, Attainable, Realistic and Timely, are an important factor in bringing in transparency to the evaluation system.

Motivation is indeed a very important aspect of productivity and Sainsbury can realise their goals of vision and mission through a set of motivated employees.

Improvement of Under-utilization of assets and available resources. The present resources, real-estates etc form a massive asset base of Sainsbury. Under-utilization of these resources is an opportunity lost to gain efficiencies from these resources. Using effective management accounting and supply chain management, Sainsbury stands to gain from the use of these resources to its fullest extent. In the modern world competitors employ such resources beyond 100% and the accounting models available support such accomplishments. Sainsbury needs to make due investment in this area to unravel this hidden opportunity.

5. Strength and Weakness of the report :

This management report hereby would benefit the management with effective business growth and profits. The prevalent areas where this report can add benefit are as below : Strength :
1. The report helps elaborate certain vital management accounting tools that

form the basis for a good management of resources in Sainsbury

2. The use of Break Even Analysis on a weekly basis as suggested, would

help the management steer its plans, deploy contingency plans in order to achieve efficiencies in the course of business
3. The forecasting methodologies such as Demand Forecasting, Sales

Forecasting etc, would help the Sainsbury decipher the next action to be

taken in the time to come. This helps avoid risks and introduces Salisburys management team to intelligent short term investments.
4. Effective Budgeting plans in each department would enable an effective

control on un-solicited expenses thereby bringing cost savings per unit sold. Weaknesses: 1. Sainsbury needs to invest more on its Business Intelligence data analysis to reap the benefits. This report was unable during this study, therefore lacks that vital aspect. 2. The report is brief and does not represent elaborate statistical analysis. This can be only a feeder to an extensive study and not to be considered as the actual implementable plan for Sainsbury 3. The dynamism of the market has not been considered in this report. Also, the PESTEL effect on Sainsbury has not been taken into account, therefore these areas need to be covered in the actual report.

6. Summary :

In totality the research work that is done is to establish the uses of management accounting in managing the resources of large organization. In this examples of Sainsbury, it is gathered that being a large, well known and accepted brand, Sainsbury can make optimum use of management accounting and the latest principals of management accounting in enduring and our numbering its competitors. Like accounting is the key for the success of any business, management accounting is the leveraging tool that helps use this key of accounting to its maximum output. To keep up with completion and to regain its second position, Sainsbury has to adopt the latest tools and techniques f of management accounting and analysis. Data warehousing, supply chain

management, intelligent predictive models etc are all based on simple concepts of management accounting.

7. References :
1. http://www.fleetnews.co.uk/fleet-management/road-safety---

sainsburys/35829/
2. http://www.scribd.com/doc/54981013/Introduction-to-Business-Case-

Study-Report-About-Sainsburys
3. Reports of Sainsbury http://annualreport2011.j-

sainsbury.co.uk/financialstatements/index.html

Dyson,J.R(2010)Accounting for non-accounting students , Eight Edition,Pearson Education Limited, England. Weetman, P(2011) Financial & Management Accounting An Introduction, Fifth Edition, Pearson Education Limited, England.