Investigate how businesses develop - case study Ashley Cash and Carry
Sole Trader Ashley Cash and Carry
One person owns the sole trader type of business. The sole trader can employ people but these employees are unlikely to be involved in the control, financing or decision-making of the business. Sole traders set up the majority of the businesses in the U.K. This type of organisation has unlimited liability which means that there is no limit to the amount of the business's debts that the owner is responsible for. If the business should fail, the sole trader may have to sell personal possessions- e.g. house and car- to pay off the business's debts. Ashley Cash and Carry is a Sole trader who is an individual who has set up in a business on his own. Ashley cash and Carry is located in Rayners Lane. Mr Dilip Chopra owns Ashley Cash and Carry and he employees 4 people who are working in his shop. He started his business about 10 years ago. The main product he sells is food, household products and vegetables.
Dilip Chopra owns Ashley Cash and Carry. It suits the business because the owner wants to be in charge of the business and in control of all the key business decisions. Mr Chopra wanted to be his own boss. If another company came and took him over he would be disappointed. He would lose his independences and control over the business he would also have no control over the profit of the business. A successful Mr Chopra gets to keep all the business profits and does not have to share the profits with shareholders
Advantages:
* It was easy for Mr Chopra to set up a business as a sole trader as there are no complicated forms or procedures to follow before you can start.
* Mr Chopra didn't need a lot of capital to start up Sole traders.
* Disadvantages:
* The business of Mr Chopra is a Small business and it is seen as more of a risk by financial institutions, so it can sometimes be difficult to raise money to help start a business or to expand it later on
* If Mr Chopra is sick or goes on holidays this may affect the business, as there is no one to take over the running.
Public Limited Company
Only two people are needed to set up a public limited company and there is no upper limit. It has plc at the end of its name, which distinguishes it from a private limited. Members of the general public, as well as other businesses and financial institutions, can buy shares in a public limited. The shareholders have limited liability; this means that if the company goes bankrupt then the shareholders are only responsible for the value of the shares. The company has its own legal status separate from the shareholders. This also means that the company can sue or can be sued. Most of PLCs start of as Private limited companies and then may want to grow but since it cannot sell its shares to the general public so it decides to be a PLC.
My chosen business is ASDA PLC.
ASDA chooses to be a public limited company because it is a national company and it wants to expand and have the capital.
Asda public limited company can sell shares to acquire capital and expand. Some of Asda's profits are shared with the shareholders through an annual dividend payment.
ASDA is Britain's best value retailer; it provides Britain's best value weekly shop with prices that are independently proven to be lower than their main competitors. ASDA has been voted again for the fifth successive year 'Britain's best value supermarket' by leading trade magazine, The Grocer.
ASDA became part of the Wal-Mart family - the world's largest retailer with an unrivalled reputation for delivering the lowest prices in June 1999.
ASDA was originally formed by a group of farmers from Yorkshire and now has 259 stores and 19 depots across the UK.
ASDA employ 122,000 colleagues and have a good reputation for being the best and friendliest in the industry. They have for the third year running been voted a top 10 UK employer (Sunday Times Top 100 Best Employers Survey) and were awarded the Nestle Social Commitment Award in 2002 by other businesses in the food industry.
ASDA provides an excellent mix of:
* Fresh food
* Grocery
* Clothing
* Finance
* Leisure and entertainment
Company Ownership
Part of the ASDA Way of Working is to provide all colleagues with an opportunity to change and improve the business. We believe that this should extend to providing colleagues with a chance to share in the success of the company by receiving shares in it free of charge.
ASDA has the largest Colleague Share Ownership plan (CSOP) of its kind in Britain. Around 92,000 colleagues now hold Wal-Mart share options through CSOP and Share save. The most recent payout (October 2002) saw almost 11,000 colleagues pocket £14.5 million worth of shares through both schemes
ASDA and UK Agriculture
In 2002, they launched the ASDA Agricultural Mission and Pledges. The mission and pledges are a continuation of our 'Heritage and Values'. They affirm ASDA sourcing policy of buying British wherever possible, for example, 90 per cent of all the food ASDA sell that can be sourced from Britain, is British.
ASDA's support for British farmers is steadfast - 100% of ASDA's fresh chicken and turkey is British, 95 per cent of ASDA's fresh lamb is British, 90 per cent of ASDA's fresh pork is British, and 80 per cent of our fresh beef is British.
In the last three years ASDA has led the way in supporting British dairy farmers. In September 2000, April 2001 and September 2002 ASDA asked their suppliers to increase cost prices so that dairy farmers could receive more money for their milk.
Last year ASDA sold 720 million pints of milk ...
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ASDA's support for British farmers is steadfast - 100% of ASDA's fresh chicken and turkey is British, 95 per cent of ASDA's fresh lamb is British, 90 per cent of ASDA's fresh pork is British, and 80 per cent of our fresh beef is British.
In the last three years ASDA has led the way in supporting British dairy farmers. In September 2000, April 2001 and September 2002 ASDA asked their suppliers to increase cost prices so that dairy farmers could receive more money for their milk.
Last year ASDA sold 720 million pints of milk - all of it British. Our entire range of own label cream and eggs is also 100 per cent British.
Agricultural Mission
ASDA and Britain's farmers growing together - To be Britain's Best Value Retailer of British fresh meat, produce and dairy products, subject to availability, quality and food safety whilst being recognised as Britain's best retail partner for long term growth.
ASDA's Agricultural Pledges
- To buy British wherever possible subject to availability, quality, and food safety
- To increase the volume of British meat and produce that is sold to British consumers
- To increase the range of products that are locally sourced
- To create a level playing field for all our suppliers
- To forge closer partnerships with our agri-suppliers
- To promote best practice within the agriculture industry
- To work in partnership with suppliers to improve product innovation
- To grow suppliers' markets through investment in communication etc
- To develop long-term business strategies with suppliers that foster growth through joint planning and dialogue
Lamb Link
In conjunction with Welsh Country Foods in July 2002, they set up ASDA Lamb Link to help British sheep farmers. Lamb Link now has 2,600 members, all of whom get paid within one or two working days for their lambs.
In addition, lambs are collected direct from farms, saving the Lamb Link farmer time and hassle. We are now handling nearly one million lambs a year and sales of ASDA British lamb are up by 10 per cent
Aberdeen Angus
The Extra Special Aberdeen Angus range of beef, launched six months ago, has already developed into a £3 million-per-year business. Not only are customers trading up to Aberdeen Angus, but they are also trading up to better cuts of meat such as fillets.
This is equivalent to 200 British Aberdeen Angus cattle per week.
ASDA Pork Link
Pork Link encourages producers to supply heavier, leaner pigs, and aims to reduce farmers' costs by between five pence and ten pence per kilo. The scheme, set up in August last year in conjunction with Grampian Country Pork and Grampian Pig Producers (Scotland's largest pig marketing cooperative) started with just one Scottish farmer.
It now boasts over 35 producers supplying more than 3,500 heavier pigs into the Grampian Buckie plant each week. Farmers on the scheme get paid within 48 hours for their pigs. In addition, farmers who are making the transition to breeding heavier pigs are offered interest free loans to ease cash flow problems.
Extending the British growing season
In the last three years ASDA has extended the British carrot-growing season from 46 to 49 weeks. This year ASDA expect to source all of our carrots from British farmers. This means an additional 4.5 million kilos of British carrots will reach their shelves in 2003 compared to 1999. We have also extended the British season for new, baby and salad potatoes by 10 weeks. In the past ASDA had to start importing these ranges in November.
Advantages of Asda being a PLC
* Asda can sell their shares to the public.
* Asda PLC can have lots of shares owned by lots of different shareholders, because everyone can own their shares.
* The board of directors are appointed by the shareholders of Asda and the board of directors runs Asda.
Disadvantages of Asda being a PLC
* Setting up Asda public limited company is expensive. There is a lot of administrative work involved and at least £50 000 has to be raised before a public limited company can be set up.
* Public limited company must publish the annual accounts and reports and this can give Asda a bad name. The competitors of Asda will also know where they earn their profit.
* The size of Asda can affect decision making, because PLCs are very big companies and it can take time to make decisions.
Industrial Sectors
In the UK there are many different types of business and they all do different things, some extract raw materials from the earth, some manufacture the raw materials into different products and others sell the final product or supply a service to the public. All these different businesses are put in to different sectors, and these sectors are called the primary sector, the secondary sector, and the tertiary sector. As time goes on technology changes and so do the sectors.
Primary Sector
In the primary sector the materials needed to make the final products are extracted from the earth, if you are going to make a table you will first need wood for the surface and iron from the ground for the leg's. This is what the business in the primary sector does; they collect natural materials and turn them into raw materials ready to be made into a final product. A few years age the British steel business was going very well and was making great profits, but now its not doing vary well and there are hardly any more steel in Britain. This is because manufacturers can get raw material cheaper abroad and sometimes it's better quality. Over the entire primary sector in Britain is not doing as well as it did in previous years.
Secondary Sector
In the secondary sector the raw materials are made in to a product, the wood is shaped in to a table and sanded and polished and the iron is shaped in to the legs and attached to the table ready to be sold. Building and constructing is also part of the secondary sector! This is because they also manufacture raw materials into an item that people will use. So businesses in the secondary sector manufacture raw materials into good that can be sold to customers or used by anybody. The west midlands use to be famous for its spring making which went on to become car valves. But then there was the industrial revolution in Japan and they started making cars that were more efficient and lasted longer. This sector hasn't really changed much but there has been a decline.
Tertiary Sector
In the tertiary sector the final products are sold to customers, the tables have finally been made and are sold to furniture which sells them to the public. Shops like hairdressers and bookies are also in the tertiary sector because they supply a service to people. So businesses in the tertiary sector are business that sell products to customers or other businesses and are also businesses that sell services to people. Government services e.g. schools and hospitals also come under the tertiary sector. This sector has grown a lot over the years, even though thing are mainly produced abroad, importing services like international motors have thrived.
Asda is in tertiary sector, because Asda sells goods to the consumers. Supermarkets are in tertiary sector, because they sell their products to the customers and they are providing consumers different kinds of services. Asda is not just selling food to their customers but they also provide them with other kinds of services such as banking, insurance, delivery of food to the customer's house etc.
Ashley Cash and Carry belongs into the tertiary sector, because the business is selling different kind of product such as vegetables, fruit, dry products (biscuits, cakes etc), cosmetics, meat, top up cards etc.
Retailing, distribution, hotels and catering
This part of the tertiary sector includes shops, services, pubs, fast food outlets and many others.
As Ashley Cash and Carry is involved in providing food and other services it lies in the Retailing section of the Tertiary sector. It might also fall partly in the secondary sector as it uses raw materials or vegetables and other things from primary sector to make food and serve them to their customers.
On the other hand ASDA belongs in the tertiary sector because it provides service to the customers by selling their products. From the four sections split up in the tertiary sector, Asda belongs to the public service as well as the retailing and distribution, hotels and catering.
The graph shows, the percentage of employees for primary, secondary and tertiary sector in U.K
In the above graph you can see the share of employment in each sector from 1970 till 2000.
We see that in the 1970's there was a small percentage of people working in the primary sector and as the years passed it has decreased from 10% to 3%. Another reason for why there is decreasing amount of people employed in the primary sector is because there is better technology coming out each year for example there is machinery that does the work that was manually done. Machines that dig under to get the potatoes and all other kind of vegetables. Therefore you would not need a vast majority of people working in the primary sector.
If we look at the secondary sector in the graph we can see that there has been a decline of secondary sectors over the past years. Secondary sectors are employees who actually make the product. Whereas in the 1990's there were less people who were employed to get a manufacturing job as the businesses did not need people to do the manufacturing jobs. The reasons for this is:
* New Technology has come out- there has been machines doing most of the manufacturing work so businesses need fewer employees for the manufacturing jobs.
* Manufacturing Companies are moving to countries where labour is cheap. In last years a lot of British manufacturing is done in countries like China, India, Taiwan and Thailand.
* Companies buy their supplies from other countries businesses like ASDA
Buy some of their products from other countries, as it is cheaper.
If we look at the tertiary sector on the graph we see that there has been an increase of employment working in that area. Reason for this is there has been an increase in services such as retail, banking, finance, leisure and tourism, financial services, call centres, health and education.
Activities of Asda and Ashley Cash and Carry
Asda and Ashely Cash and Carry Belongs in the tertiary sector. The main activity Asda is retailing, but Asda has also other activities and one of them is issuing contracts for groceries, some to be manufactured under the name of Asda. Asda is continually negotiating with major food manufacturers such as Heinz, Mc Vities, Birds and Eye. The Label George for Asda does the manufacturing of garments. Asda provides also other services such as banking, insurance, travel etc. The sales assistant of Asda and Ashely Cash and Carry re-stock the shelves with food, magazines, newspapers, vegetables etc, which they sell to the customers. The staff also cleans up the shop after their customers have left the shop.
Asda's and Ashley Cash and Carry's Stakeholders
A stakeholder is the name for a group or individual who has an interest in or is affected by the business, this can include anyone, such as the staff, customers, managers, owners, government etc.
Asda has two main types of stakeholders, these include:
. Internal Stakeholders
Internal stakeholders are normally part of the business, they include:
* Staff - the staff are the main part of the business as they run it and control most aspects of the business. The interest of the staff is to have a well-paid, secure job. Employees are stakeholders in Ashley Cash and Carry because the employees help the business by making sure every customer is satisfied. The interest of the staff in Asda and Ashely Cash and Carry is the employment.
The staff's objectives are to serve customers in the friendliest way they can, also they want to produce the best goods so they will be careful when handling goods.
Over a period of time, the staff would like to see extra holidays and generous fringe benefits such as a Christmas bonus, birthday bonus, etc.
The only way they would change their expectations would be if there was either poor management in which they would complain to someone as high up the chain of command as they can, also if there was quiet an aggressive area and the customers were to start getting violent, the staff should expect some protection, e.g. security guard.
The staff do have conflicting views with other stakeholders but normally just the management or shareholders, they can sometimes disagree with the managers because the business may be generating much profit and they don't receive anything extra but most of the time they will be kept happy as the management can rarely afford any strikes, revolts, etc.
* Directors - at the start of the business, the directors would have wanted the business just to survive so they can be sure to not lose their investments. Now the business is up and running properly, they want to have good returns on their investments by decreasing costs and maximising profits. The main interest of the director is the employment.
The Directors objectives are to steer the business in the right direction and make sure it is profitable, they can also vote on who is the managing director and help debate on important issues with the business.
Over a period of time, the directors would like to see the business expand and use their good investments to do so, with this backing, the business will be able to rely on the directors as a first option for a loan, etc. as they will have good be receiving good dividends if the business is successful.
The Directors expectations will be the business succeeding and giving good returns on their investments, but if the business ever starts to decline or lose sales, the Directors will lose interest and be less willing to invest more. The shareholder of Asda chooses the directors of Asda.
* Shareholders - the shareholders are the founding financers of the business; the business can acquire more over time if it ever needs to. The shareholders want a good return on investments, maximum short-term profits and valuable long-term growth. Shareholders are the owner of the company so their interest is that the company makes profit so they don't lose their invested money.
Shareholders objectives are to invest as much capital as they can into the business so when it starts generating profit, they will have large claims. Over a period of time, the shareholders would love to see a growth in their shares, even an increase as little as 10% is still a fair amount, which will keep them very happy.
The shareholders expectations first off will be that the business does not lose their investment, if the business makes profit, they will expect good returns on their shares and they would most probably like to keep them and speed up the businesses growth so they could receive even larger returns or their investment.
The shareholders can disagree with internal stakeholders usually managers or directors when they are not generating enough profit and they could pull their investment out they can do this by selling their shares.
2. External Stakeholders
External stakeholders normally are not part of the business but have an interest in or are affected by it, they include:
· Customers - the customers are very important to the business because they are the lifelines of its survival, Asda and Ashely Cash and Carry continually offer them different types of product. If these two businesses don't attract enough customers they will make loss.
· Suppliers - the suppliers are very interested in the business because, if it grows, the supplier will have more products to supply, if the business acquires more customers, the supplier will be delivering larger orders. As long as the business grows, the supplier will have a more work to do.
· Government - the government is always interested in business because of employment and this is important for government because Asda or Cash and Carry will have some people working their. The government will also want a full taxation and they want Asda to meet the legislative requirements.
· Local Communities- the local communities are interested firstly because of employment, An example of this is when Asda branch was opened at Wembley, the area was rather run down and the unemployment was very high so Asda helped by providing the local community some work. Ashely Cash and Carry and Asda offers work experience to local schools, which helps pupils to experience of what it is to go to work.
Location of Asda in Wembley Park and Ashley Cash and Carry in Rayners Lane
Asda and Ashley Cash and Carry need to find a good location for their business. This is because if they fail to find a good location, they won't attract many customers, and this will cost Asda and Ashley cash and carry a lot of money. The fixed costs have to be paid each month. This includes rent/mortgage, bills and wages. Relocation and transferring goods to it are costly and not easy. Rent is also expensive and businesses need to make sure that they get it right the first time. All these factors will result in their business failing, causing their investment to go to waste.
There are many factors affecting a business. These include:
Nearness to markets
Businesses need to locate their business near their target market. This will increase their chances of attracting customers and, therefore, increasing sales revenue.
Asda and Ashely Cash and Carry also need to locate their business near to high-population so they can sell their products and services. They can achieve this through market research.
Transport links
Businesses need to make sure that their business is easily accessible, both for customers and staff. This is because a deprivation of either factor will cause the business to not run smoothly. Asda need to make sure that the location they choose has enough people to come and work for them. They also have to employ staff with the right qualities i.e. people with the right educational and training background. They also have to be available at the right price. 80% of deliveries are made by road. This is also the most common way businesses receive their goods. Air and rail transport are also under this category. However, air transport is quick but too expensive and rail transport is cheap but also unreliable in this country.
Competition
Businesses also need to check the amount/intensity of competition in and near their location. It will not be wise for a small start-up to locate near big, established businesses that sell the same or similar product. Asda in Wembley Park is the only big retail shop in the area so they don't have to fear competition from their competitors such as Tesco, Sainsburry's, waitrose etc.
Grants
Government or city councils some times provide grants for businesses that will locate in a run-down area or an area with high unemployment. The area where Asda is Located at the moment in Wembley Park was a run down area and Brent Council gave funds to Asda to reduce unemployment and to regenerate the area.
Introduction:
In this assignment I have been instructed to investigate how businesses develop.
The first company that I have chosen is Ashley Cash and Carry, which is a sole trader, and the second company is that I have chosen is ASDA, which is Public Limited Company.
How businesses develop
Name: Khalid Zamani
Lecturer: Dorothy Moore
