Supermarket Customer Satisfaction Analysis

This assignment analyzes customer satisfaction data for the UK supermarkets Sainsbury's and Tesco. It examines factors influencing customer purchase decisions, employee treatment perceptions, and compares sales and operating profit trends between the two retailers. The analysis utilizes statistical methods like median statistics and visual representations such as charts and graphs to present findings.

BUSINESS DECISIONS
MAKING

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Plan for the collection of primary data.............................................................................1
1.2 Survey methodology and sampling frame used................................................................2
1.3 Questionnaire on Sainsbury..............................................................................................3
TASK 2............................................................................................................................................4
2.1 Summarize the data by using representative values and measures of dispersion.............4
2.2 & 2.3 Analysis of data......................................................................................................6
2.4 Analysis of quartile, percentile and correlation results....................................................7
4.1 Appropriate information processing tools........................................................................8
TASK 3............................................................................................................................................9
3.1 Graph of Sainsbury and Tesco sales and operating profit and primary data....................9
3.2 & 4.1 Trend lines of Sainsbury and Tesco in respect to sales........................................17
3.3 Covered in PPT...............................................................................................................18
3.4 Formal business report...................................................................................................18
TASK 4..........................................................................................................................................19
4.2 Critical path method.......................................................................................................19
4.3 Use of financial tools for decisions making...................................................................20
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................26
Index of Tables
Table 1: Sainsbury’s sale and operating profit................................................................................4
Table 2: Statistical measurement of Sainsbury sales and operating profit......................................5
Table 3: Tesco sales and operating profit from FY 1997- FY 2012................................................5
Table 4: Statistical measurement of Tesco sales and operating profit.............................................6
Table 5: Quartile of Sainsbury in sales and operating profit...........................................................7
Table 6: Quartile of Tesco in sales and operating profit.................................................................7

Table 7: Correlation of Tesco and Sainsbury between sales and operating profit..........................8
Table 8: Calculation of payback period method............................................................................20
Table 9: Calculation of ARR method............................................................................................21
Table 10: Calculation of NPV.......................................................................................................22
Table 11: Calculation of IRR.........................................................................................................23
Illustration Index
Illustration 1: Sainsbury sales........................................................................................................13
Illustration 2: Sainsbury operating profit.......................................................................................14
Illustration 3: Tesco sales chart......................................................................................................15
Illustration 4: Tesco operating profit.............................................................................................16
Illustration 5: Which factor given below mostly affects your purchase decisions?......................17
Illustration 6: Do you think that employees of Sainsbury treat customers in proper manner.......17
Illustration 7: Do you think that employees of Sainsbury treat customers in proper manner.......19
Illustration 8: Sales trend line of Tesco.........................................................................................20

INTRODUCTION
Business decision making is termed as most crucial aspect of business management that
is having direct impact on the performance and growth of company. For taking appropriate
business decision such as business expansion, cost control, sales management etc., several
elements are considered by managers of organization in the form of current business
performance, potential growth within business environment etc. In addition to that success of
management decision is greatly depending on appropriateness of business decisions. In order to
survive in highly competitive market, an efficient decision making system helps managers in
identification of new sources of funds, expansion of business within new emerging market and
reduction in expenses of organization. The present report is going to examine different aspects of
strategic decisions and tools with reference to management operations of Sainsbury. It is one of
the leading retail organizations of UK. It reports also determines the use of primary data
associated with views of consumers in order to evaluate quality of different product and services.
This report applies different kinds of statistical tools and concept in evaluation of profitability of
company along with current financial position of company. The study also evaluates the
application of different investment appraisal tools through which business entity is able to take
appropriate investment decisions.
TASK 1
1.1 Plan for the collection of primary data
In order to conduct a research, one needs to collect primary and secondary data. Collection of
both data is necessary for conducting a research. Primary data is a data that is collected for the
first time by the researcher. Whereas, secondary data is a data that is already collected by
someone and is available on the various sources of information. Collection of both data is
necessary for the research because by collecting secondary data, researcher comes to know about
the past scenario (Nahum-Shani and et.al, 2012). By comparing current condition with the past
scenario, researcher gets an insight about the ways through which he can form questionnaire for
the present research. Following are the techniques of primary research. Questionnaire- In this method, a paper is used through which a set of questions is
distributed among the respondents. These questionnaires may be open or closed ended in
nature. Open ended questionnaire is a questionnaire in which there is no option. This type
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of questionnaire is distributed among the respondents who have good knowledge of the
topic. Whereas, close ended questionnaire is distributed among the respondents who have
limited knowledge of the topic. This tool is effective for the data collection and due to
this reason; it is widely used by the researcher for conducting a research. Group discussion/ Focus group or Interview- In this, a meeting is conducted under
which experts carry out a discussion on the specific topic and arrive at the specific result.
This sort of data collection technique is used when respondents are the intellectual
people.
Secondary data collection
There are various sources through which secondary data can be collected by the
researcher. This includes newspaper, magazines, books and journals. Apart from this, internet
can also be used for collecting secondary data (O'Leary, 2013). Researcher can collect
information from these sources of secondary data as per their requirements.
1.2 Survey methodology and sampling frame used
Survey methodology
Sample methodology refers to the methods that are adopted to collect data from various
sources of information. Under the survey methodology, appropriate sampling method is selected
for conducting research as per the requirement of sample. Following are the various sampling
techniques that can be used by the researcher.
1. Simple random sampling- Under this sampling method, there is a population and from
the same, sampling units are taken by the researcher. These sample units are taken
randomly. It means that researcher does not use specific parameter for collecting data.
Researcher without considering any factor collects data for research. This sampling
method is mostly used when respondents with specific income level, religion and other
factors are not required for the research (Basak, 2012). In other words, it can also be said
that this method of research is used when any person can be taken as sample in the
research. Hence, for conducting normal research, this method is widely used by the
researchers.
2. Stratified random sampling- This method of sampling is totally different in comparison
to simple random sampling. Under this method of sampling, entire population is divided
into several parts by using income level, age factor and religious factors. It depends on
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the researcher that on the basis of which factor he divides entire population into various
strata. This method is suitable when data is needed to be collected from various types of
people in order to collect information about the consumer behavior (Marjudi and et.al,
2012). Like simple random sampling, this method of sampling is also widely used by the
researcher.
1.3 Questionnaire on Sainsbury
Name-
Age
 20-30 years
 30- 40 years
 40-50 years 50-60 years
Gender
 Male
 Female
Up to what time period, you are the customer of Sainsbury’s?
 1-2 years
 2-5 years
 6-10 years
 More than 10 years
How was your experience while you make a purchase from Sainsbury’s?
 Excellent
 Good
 Somewhat
 Bad
 Very bad
Which factor mostly affects your purchase decision?
 Price
 Quality
Do you think that employees of Sainsbury treat customers in a proper manner?
 Excellent
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 Poor
 Good
 Average
Sainsbury provides its products at reasonable price?
 Strongly agree
 Agree
 Somewhat agree
 Disagree
 Highly disagree
Do you think that Sainsbury needs to bring improvement in its services?
 Yes
 No
Please give suggestions regarding improvements
TASK 2
2.1 Summarize the data by using representative values and measures of dispersion
Table 1: Sainsbury’s sale and operating profit
Sainsbury's Sainsbury's
YEARS SALES (£m) OPERATING PROFIT (£m)
1988 5001.5 314.1
1989 5915.1 386.2
1990 7257 470.1
1991 8200.5 585
1992 9202.3 667.7
1993 10269.7 785
1994 11223.8 426.3
1995 12065.4 838.3
1996 13499 756
1997 14312 658
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1998 15496 790
1999 17587 836
2000 17414 528
2001 18441 533
2002 18206 625
2003 18144 674
2004 18239 656
2005 15202 -151
2006 16061 229
2007 17151 520
2008 17837 530
2009 18911 673
2010 19964 710
2011 21102 851
2012 22294 874
Statistical measurements
Table 2: Statistical measurement of Sainsbury sales and operating profit
Mean 14759.812 590.588
Median 16061 656
Mode 0 0
Standard deviation 4866.1846862061 230.4844975264
Table 3: Tesco sales and operating profit from FY 1997- FY 2012
Tesco Tesco
YEARS SALES (£m) OPERATING PROFIT (£m)
1997 14984 774
1998 17779 817
1999 18546 934
2000 20358 1030
2001 22773 1166
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2002 25654 1322
2003 28280 1484
2004 33557 1735
2005 33866 1952
2006 39454 2280
2007 42641 2648
2008 47298 2791
2009 53898 3169
2010 56910 3457
2011 60455 3917
2012 64539 3985
Statistical measurement
Table 4: Statistical measurement of Tesco sales and operating profit
Mean 36312 2091.3125
Median 33711.5 1843.5
Mode 0 0
Standard deviation 16385.59 1112.62
2.2 & 2.3 Analysis of data Mean- It refers to the average value of the specific variable (Yuri Gasparyan and et.al,
2011). By comparing current value with the average value, manager identifies that firm is
giving poor, good or excellent performance. Mean of the Sainsbury is 14,759 and current
sales are 22,294. This indicates that the firm is giving excellent performance. Same trend
is observed in case of operating profit. On other hand, average sales of Tesco are 36,312
and actual sales are 64,539. Here, also firm gives good performance and its sales is above
mean value. Same trend is observed in case of operating profit. Hence, it can be said that
both firms give good performance.
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 Median- It refers to the value which divides the entire data into two parts (Chenand
Ratra, 2011). On the analysis of data, it can be seen that Sainsbury’s sales is increasing
steadily above and below median value. In case of Tesco, same thing is observed and
here also sales and operating profit are continuously increasing above and below median
value. Hence, it can be said that both firms are giving good performance. Mode- It is used by the analysts to check the movement of specific variable (Gumbel,
2012). In case of both firms, mode value is zero and this indicates that none of the value
is repeated in the given data. On the analysis of trend in case of both firms, it can be said
that sales and operating profit are increasing steadily. Thus, it is proved that both
companies are giving good performance.
 Standard deviation- Standard deviation indicates the deviation in the actual value from
the mean value (Cummins, 2013). Standard deviation is positive in case of both
companies. On other hand, it is observed that in case of Sainsbury standard deviation is
very high in comparison to Tesco. This difference is very high and reflects that Sainsbury
revenue is growing at faster rate than Tesco.
2.4 Analysis of quartile, percentile and correlation results
Table 5: Quartile of Sainsbury in sales and operating profit
Sales Operating profit
Q1 11223 520
Q2 16061 656
Q3 18206 756
Table 6: Quartile of Tesco in sales and operating profit
Sales Operating profit
Q1 22169 1132
Q2 35089 2021
Q3 48948 2885.5
Interpretation
Like median quartile and percentile divide entire data in to multiple parts. Quartile and
percentile both are same and they show same results (Scherz and et.al, 2010). But the way of
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calculation is different in both cases. In case of Sainsbury it can be seen that sales is increasing
steadily. This is concluded by observing sales of all quarters. Sales and operating profit are
interrelated to each other and due to this reason same trend it observed in case of operating
profit. In case of Tesco also sales are increasing continuously and this is indicated by the
consistent elevation on the all quartile values. Same trend is seen in case of operating profit.
Hence, it can be said that both companies are performing better.
Table 7: Correlation of Tesco and Sainsbury between sales and operating profit
Correlation of Tesco 0.99
Correlation of Sainsbury 0.31
Interpretation
Correlation measures relationship between two variables. In this case correlation is
calculated between sales and operating profit. Correlation always remains between -1, 0 and 1.
Correlation value near to one indicates that there is a strong relationship between two variables.
Negative correlation indicates that both variables are moving in opposite direction. In case of
Tesco this value is positive and strongly nearby to one. This reflects that firm sales and operating
profit are highly correlated with each other. Strong correlation is indicating that firm is earning
entire part of its profit by making sales. In case of Sainsbury correlation value is only 0.31 and
this indicate that sales and operating profit are correlated with each other. But this correlation is
low and this indicates that other then sales other sources of income are also playing a major role
in the company profitability. This may be reason due to which huge difference is observed in
revenue of both firms. Hence, it can be said that Sainsbury profitability is entirely not depend on
the sales. Whereas, profit of Tesco is totally depend on sales. So, it can be said that Tesco is in
better position than Sainsbury.
4.1 Appropriate information processing tools
Information processing tools refers to the system in which data is stored processed and
presented in a systematic manner. Following are the different types of information processing
tools. Management information system- It is an information system in which data is stored and
processed in systematic manner. In this system huge data can be stored and processed in
bulk in single attempt. After processing of data information are arranged in systematic
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manner that help manager in taking sound business decision in short time period.
Normally, this information system is used at the middle level of the management for
taking day to day business decision. Due to good features this information system is
widely used by the managers in their business practice. Decision support system- This is an information system that have unique use. Currently,
business environment is unpredictable and it is very difficult to make day to day business
decisions. In such a complex situation it is very difficult to analyze each and every aspect
of complicated scenario. In this information system facility of simulation is available
under which prediction about the situation can be made by making some assumptions.
Hence, this information system provides information about the results of change in
business environment on the basis of some assumptions.
 Transaction processing system- It is an information system in which all details related to
transactions is made available in the system. This information system provides
information about the all transactions that are made by the firm in past months. This
information system process entire data and provide information to the manager in
systematic way. Hence, mentioned information system is used at the lower level of the
management.
TASK 3
3.1 Graph of Sainsbury and Tesco sales and operating profit and primary data
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Interpretation
From chart, it can be observed that sales of Sainsbury are increasing from 5000 to 17,857.
But in FY2000, sales decline by small percentage from 17,857 to 17414. But after this fiscal year
sales increases and in 2012, it was 22294. On the basis of analysis of overall trend it can be seen
that firm gives a good performance and sales consistently rise from 1998 to 2012.
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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
0
5000
10000
15000
20000
25000
YEARS
Sainsbury's SALES (£m)
Illustration 1: Sainsbury sales

Interpretation
On analysis of chart it can be seen that like sales operating profit of the firm is also rising.
But growth rate is not same in case of operating profit. This is proved from the low correlation
between sales and operating profit. In FY 2000 decline is observed in sales and due to this reason
operating profit of the firm also decline. But after FY 2000 situation get changed and both sales
and operating profit get increased till FY 2012.
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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
-400
-200
0
200
400
600
800
1000
Sainsbury's OPERATING
PROFIT (£m)
Illustration 2: Sainsbury operating profit

Tesco
Interpretation
On analysis of chart it can be seen that sales of the firm is consistently rising from FY
1998 to FY 2012. This indicates that firm gives a marvelous performance and even crisis of 2007
comes in existence it managed to increase sale of its product. This indicates that firm prepares a
good business strategy in order to maintain its sales. After 2007 there were many businesses that
run in loss and failed to compete in uncertain business environment. But it was Tesco who
managed its sales in proper manner. This indicates that its management is very sound.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
0
10000
20000
30000
40000
50000
60000
70000
YEARS
Tesco SALES (£m)
Illustration 3: Tesco sales chart

Interpretation
From chart it can be seen that firm operating profit is increasing continuously by
following sales. This indicates that both are moving in same direction and by nearby percentage.
This is also proved by the correlation value which is 0.99. This reflects that by whatever
percentage sales will change operating profit will also changed by the same percentage. This also
indicates that firm earning is dependent on sales completely. So, Tesco even it is giving excellent
performance must try to identify additional sources for earning revenue. This will reduce firm
dependency on sales foe earning target revenue.
Which factor given below mostly affects your purchase decisions?
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Tesco OPERATING PROFIT
(£m)
Illustration 4: Tesco operating profit

Interpretation
In research it has been find out that quality is a factor that mostly affects people purchase
decisions in comparison to price. Hence, Sainsbury must focus on quality instead of price.
Do you think that employees of Sainsbury treat customers in proper manner?
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Price Quality
0
5
10
15
20
25
30
35
Column C
Illustration 5: Which factor given below mostly affect your purchase decisions ?

Interpretation
In research it has been identified that most of the people think that Sainsbury employees
are not serving customers in proper manner. For this table given below can be reviewed.
Excellent 10
Poor 10
Good 20
Average 10
Thus, Sainsbury needs to provide training to its employees.
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Excellent
Poor
Good
Average
Illustration 6: Do you think that employees of Sainsbury treat customers in proper manner

Sainsbury provides its products at reasonable price?
Interpretation
In research it has been find out that firm is providing products at the reasonable price.
This is evident from the fact given below.
Strongly agree 10
Agree 10
Somewhat agree 20
Disagree 5
Highly disagree 5
Hence it can be said that firm is giving good performance.
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Strongly agree
Agree
Somewht agree
Disagree
Highly disagree
0 2 4 6 8 10 12 14 16 18 20
Column C
Illustration 7: Do you think that employees of Sainsbury treat customers in proper manner

3.2 & 4.1 Trend lines of Sainsbury and Tesco in respect to sales
Sainsbury
On analysis of chart it can be seen that most of the times firm sales is nearby to the trend
line. Minor up and down is observed in the chart. This is usual and not a matter of concern for
the firm. Deviation is above the trend line which is a good indication. This indicates that firm
will earn good profit in future and it can break estimations that are made on the basis of trend
line. So, it can be said that firm in future will give a good performance.
Tesco
Interpretation
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
Column L
Linear (Column L)
Illustration 8: Sales trend line of Tesco

From the above chart, it is estimated that on the basis of previous five year sales growth
rate, it is estimated that sales will be increased up to 76866 in 2015. Which is good signal for the
Tesco specially when economic environment is not in well condition and Euro zone is facing a
problem? But firm must not fully believe on the trend line because it is formed only on the basis
of past data. With change in situation these facts may prove wrong. Hence, firm need to review
its competitors time to time and also need to make sure that it is changing its strategy with
passage of time. This will help firm in making trend line estimates actual in upcoming years.
From the table, it has been seen that in past five years, revenues of both companies are
fluctuating and growth rate of operating profit become very low in past years. UK economy is
recovering from recession and inflation rate is also very low. Hence, people will buy food
products at low price. This will increase demand for the products from consumer side. Hence,
there is a very high optimism from the profit point of view for both firms.
3.3 Covered in PPT
3.4 Formal business report
To
The Board of Directors of Sainsbury
Date- 12 January 2016
Sir/ madam
Introduction
The main purpose of this report is to find out the answers of questions that are
mentioned in question file. The first question for which an attempt made is to identify the
relationship between the sales and operating profit of the firm. This was objective of the
research because it was necessary to understand the extent to which sales affects operating
profit of the firm. The second main objective of the research was to measure the level of
satisfaction of the customers at the Sainsbury. This was done to identify the extent to which
people are satisfied from the company products and services. On the basis of analysis of data
firm will come to know about the direction in which it needs to work out by formulating an
appropriate strategy. Hence, this report will provide valuable information to the team of the
board of directors of Sainsbury.
Methodology
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In order to conduct research in proper manner primary and secondary data is collected
by the researcher. Secondary data is collected from the company annual reports and articles that
are published in journals. These articles help researcher in understanding past scenarios in the
UK retail industry. From annual reports company sales and profit data is taken. After collection
of data same are arranged in proper manner. On this data various statistical tools are applied
like mean, median, mode, standard deviation, quartile and correlation. By using these
Cummins, H. ed., 2013. Photon correlation and light beating spectroscopy (Vol. 3). Springer
Science & Business Media.
Tools data is evaluated from various angels. Hence, this help researcher in evaluating both
firms performance from various sides. On the basis of sales data forecasting is done and its
results are interpreted in proper manner. Primary data is collected by distributing questionnaire
among the respondents. Their results are collected and interpreted in proper manner and in this
way entire data is collected by the researcher.
Findings
On analysis of data it has been find out that sales and operating profit are higher in case of
Tesco relative to Sainsbury. It is also find out that customer satisfaction is low in case of
Sainsbury. Hence, it needs to work on its weak point.
TASK 4
4.2 Critical path method
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Critical Path = 20 minutes + 40 minutes = 60 minutes
Interpretation
Network diagram is a technique that is used by the business firms in order to identify the
time period with in which their project will get completed. If project is completed in the time
period that is indicated by the network diagram then cost of project can be minimized and time
as an important resource can be used effectively. This technique also helps in utilizing human
resource in the proper manner (Project evaluation and review technique. 2016). This method
mainly indicates the sequence of activities that must be followed in order to complete project on
time. This sequence must be followed in proper manner in order to make sure that project will be
completed on time and in proper manner. Due to these specific benefits network diagram
technique is widely used in the project management by the project managers.
4.3 Use of financial tools for decisions making
Table 8: Calculation of payback period method
Project A Project B
Initial
investment -50000 -50000
1 35000 -15000 20000 -30000
2 30000 15000 20000 -10000
3 25000 40000 24000 14000
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4 20000 60000 36000 50000
Interpretation
Pay back period indicate the time period within which project will recover its investment
amount (Herrera, 2010). Project a payback period is one year and sale of project B is two year.
Hence, on the basis of this factor it can be said that project A is viable then project B. This
method is very popular among the experts because it is very easy to apply this technique. For
using this technique expertise in project management is not required. A person from non finance
background can also apply this technique. But this method of project evaluation is often
criticized by the experts because in this method present value concept is not used. Due to this
reason project cannot be valued at the current date. But this not undermines importance of this
method because it is only technique which helps project manager in measuring the time period
which is required to recover investment amount. Hence, due to this reason mentioned method is
widely used by the project managers in their management practice.
Table 9: Calculation of ARR method
Project A Project B
Initial
investment 50000 50000
1 35000 20000
2 30000 20000
3 25000 24000
4 20000 36000
Total 110000 100000
Average 27500 20000
ARR 55.00% 40.00%
Interpretation
ARR indicate the average return that a project can earn on the invested amount
(Brinkerhoff, 2012). ARR of the project A is 55% and sale of project B is 40%. This reflects that
project A is viable then project B. The main advantage of this method is that in this technique
average return that a project can give to an investor is computed. Hence, project manager gets an
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overview of the project in terms of return. The point where this technique is often criticized is
that in this method present value concept is not used by the project managers. Due to this reason
present value of the project is not computed in this project. Hence, again in this method like
payback period project cannot be valued in relation to the current time period. But this not
reduces power of this method because in this method project manager is getting information
about the average return that a project can earn on the invested amount. Hence, it helps project
manager in evaluating project from other side.
Net Present Value:
Net present value is considered as one of the most significant methods in the investment
appraisal techniques (Nijkamp, Rietveld and Voogd, 2013). The main purpose of this approach is
comparing the present value of two or more available investment proposal so that suitable and
reliable decision can be made. In general it is the difference between the present value of cash
inflows and the present values of the cash outflow. Furthermore, there are several companies that
undertake this approach of capital budgeting to analyze the profitability of a projected
investment or proposed project. Herein, Sainsbury is focusing on expanding its business
operations and for which management has come across two different projects. However, cost of
capital of both the project has been considered different which are 10% for project A and 60%
for project B respectively. Following are the computation of net present value for the given
proposals.
Table 10: Calculation of NPV
Project A Pv @10% Present value Project B PV @60%
Present
value
Initial
investment 50000 50000
1 35000 0.909 31815 20000 0.625 12500
2 30000 0.826 24780 20000 0.391 7812.5
3 25000 0.751 18775 24000 0.244 5859.4
4 20000 0.683 13660 36000 0.153 5493.2
Total 89030 31665
NPV 39030 -18334
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Interpretation:
On the basis of above calculation of net present value, the reliability and validity of both
the given proposals has been analyzed. However, through the means of different PV factor, both
project requires different costs of capital which is a major aspect that management of Sainsbury
has to consider while making the decision regarding selecting the suitable investment proposal.
Herein, through the means of above defined calculation, Project A has been selected for the top
level management Sainsbury because it is showing higher net present value as compared to the
Project B. Furthermore, the value of NPV for project A is 39030 which are significantly higher
than the NPV value of project B which is 18334.96. Thus, project A has been recommended to
the senior authority of Sainsbury to invest in as it will help in generating fruitful and desired
financial results for the company in near future. Along with this, this outcome is suitable because
net present value approach considered time value for money that every manager considered
while operating in such a competitive environment of retail industry.
Internal rate of return:
In general, internal rate of return is one of the most significant approach for computing
the rate of return that project will regain after certain period of time (Flagg, 2013 ). However, the
internal refers to the fact that this method of investment appraisal technique does not consider
environmental factors such as interest rate or inflation. However, the main purpose behind using
internal rate of return method is to evaluate the desirability of given investment proposals.
Furthermore, it is the expected rate of growth on the basis of which project will grow and
generate returns. The IRR of any project is greater than its cost of capital is considered as the
profitable. Therefore, it is the duty of Sainsbury senior managers to make sure that before
making any investment decision they should evaluate and analyze the internal rate of return of
the proposal and accordingly make smart judgment.
Table 11: Calculation of IRR
Project A Project B
Initial
investment -50000 -50000
1 35000 20000
2 30000 20000
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3 25000 24000
4 20000 36000
IRR 46.76% 30.80%
Interpretation:
On the basis of above computation of internal rate of return the expected return in the
form of percentage has been analyzed for the two different proposals available to the top level
management of Sainsbury. However, it is the rate which net present value of the costs of an
investment proposal equals to the expected future returns of the investment. However, higher the
rate of return is more profitable for the firm to invest in. In this regard, top level management of
Sainsbury has been recommended that they should invest in project A because it is showing
higher internal rate of return with 46.76% as compared to the rate of return for project B is
30.80%. Therefore, on the basis of result generated from both the approaches Project A is more
feasible for the Retail Giant as they are operating in such a competitive market, investing in
Project A will help in generating desired results and outcomes in near future and enhance
sustainability.
CONCLUSION
On the basis of above assessment, it can be concluded that every business entity has to
consider several aspects while taking different management decision as per the different business
objectives. In this regard, this report has found that tools of primary research such as
questionnaire and interview have played important role in order to assess the perception of
consumers about different products and services. It has found that information acquired from
consumers has played important role in order to improve overall quality of different products and
services that is essential for long term growth. This report has determined that several elements
of descriptive statics provides significant assistance to management of Sainsbury in order to
value appropriate decisions for increasing sales of company along with profit value. In this
context, different statistical tools such as mean, median and mode have played important role in
evaluation profitability trends with reference to total sales of company. The present study has
addressed that each organization uses different tools to increase income of company by investing
funds in several projects. In this regard, Net present value and IRR has provided significant
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assistance to management during selection of appropriate investment proposal by calculating
their profitability and risk.
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