Creditors sell a product to a company, however are still owed money by the company. They must ensure that the product they offer is to the highest quality; the company must pay them the remainder of the given price. A decision is agreed as to how much is paid, when payments are due and how much is to be paid in every instalment. If the creditor isn’t paid on time, they may be reluctant to offer the service again, if the situation becomes out of hand, the company may be unable to use creditors in the future.
Suppliers, sell their product to a given company in exchange for economic gain. A decision on price is agreed by both parties, as is quantity. A Company expects suppliers to offer products at lower prices if they buy more than competitors. Naturally, suppliers must sell products of the highest quality. If companies feel they aren’t receiving the best value for money, or if the product they buy doesn’t meet rigorously high standards the relationship is likely to cease.
The community is a stakeholder of any company. In some instances a company may choose to aid charities, although nobody demands this it brings the community together. By making the company appear as a locally run business the community feels the company is more accessible to them and their needs. Companies can not damage the environment and a breach of this law will create bad press, a problem for other stakeholders.
Tesco PLC have these stakeholders, and with varying demands and constraints they have a difficult job ensuring t everybody is satisfied with the outcome of decisions.
Naturally, the company’s shareholders demand high dividend and this year much anger was felt by many of the shareholders as it appeared more than £200m was spent on reducing prices. Shareholders felt this was unacceptable as in the early part of the year shares fell to 90% of last year’s value. Reducing costs may have been a successful decision by the company, as it is meant customers felt that Tesco offered the best value for money. This paid off as shareholders expect a final dividend of 6.2p per share, up 10.7% on last year. This increase may have come because of grievances of shareholders with the re-appointment of Terry Leary as COO. The operating profit margin has increased from 5.13% to 5.19%. The company may be wrong in increasing dividends on shares so dramatically and to invest the money would have been more successful. With little being invested back into the company the shareholders will see falls in the future with the imminent threat of Morrison’s takeover of Safeway and ASDA’s current form. The only investment that has been made by the company over the past 12 months is a small number of Tesco express stores and a small Japanese takeover. In future, whilst competition is tough, more money should be invested in British stores to increase the market share. I predict it’ll be hard with competitors stealing customers to offer such high dividend, leading to problems as shareholders may leave the company. My personal recommendation to shareholders would be to keep their shares until the New Year though the re-appointment of Terry Leary would lead to great problems.
2003 TESCO share values compared with the FTSE.
Investing money into reducing prices tempted only some new customers. Despite customers leaving TESCO, a record turnover has been projected, an increase of £300m on last year with diversification into telecommunication and finance. People have also been tempted by cut-price electrical goods and clothing. Profit on products are minuscule compared with other supermarkets and although this leads to lower shareholder profits, it encapsulates the imagination of the customers, leading to impulse buying and a greater turnover. ASDA are “best greengrocer 2003” whilst Morrison’s and Sainsbury’s offer premium meat and fish which may be problematic in coming years. In a less rich economy people won’t be able afford luxury goods. It is likely that customers will transfer companies in order to purchase better quality essentials. Despite a market share of 27%, Tesco own far less than 27% of all stores in the UK, suggesting that in the current climate people will travel. Customers will always aim to buy the best quality products at the lowest price. The customer is so important to the company these people who are gain shareholder’s such high profits. In my opinion these people are only shopping with Tesco to save money and as well as a loss in customers due in other supermarkets, Sainsbury’s, M&S and ASDA offer the best service, and should the country become less rich, these companies can expect more customers. TESCO should therefore do more to improve service before it is too late as this is also what people want nowadays. The customers have help TESCO remain as the number one supermarket in the UK however, more demands should be made in order to increase the quality of foods available.
Without employees, no company could operate therefore a good relationship must be kept. Tesco employ 195,000 British people with many different requirements. People work to earn money and it was established that the third worst paid job in Britain is a checkout assistant in a supermarket. Shareholders want high profits and customers want savings, therefore TESCO try to maintain low expenditure on staff. Although TESCO offer the highest wages for shop-floor colleagues compared with other supermarkets staff feel de-motivated by the difficult and stressful ICT based perpetual inventory jobs that must be carried out.
A trade off is when a company looks at how it could spend its money and invests it in the most promising scheme. This of course means there are problems for other stakeholders, as that money can not be spent on them. The money this year was invested in reducing prices. Staff look for short-term benefits whilst the company looks for having a positive and lasting impact on the company.
Not offering staff more money causes problems, as staffs become less motivated and therefore offers poorer customer service. If this occurs customers shop elsewhere. This is problematic for shareholders as their dividends are reduced. TESCO try to strike a balance by offering pension schemes, which also show their job is secure, but also keeps their expenditure to a minimum. I don’t feel this is successful, especially for younger staff who are paid less and are not interested in saving for later life. I think that the staffs have a right to be angry, however, they should be careful in the way they act. The de-motivated staffs will become so annoyed that striking may become a threat for TESCO, and more should be done in motivating staff as well as increasing their rates of pay. Motivating staff as well as making the job appear more glamorous would increase moral, cost the company little and create good press. Another way TESCO have made appear that they are aiding staff is by making jobs flexible. They offer different shifts to different people. Students can choose to work holidays only, shift swaps and store swaps are also a more flexible approach, though this helps the company because it makes them more competitive.
Suppliers may come off badly from dealings with large chains. It has been claimed that “Farmers are paying for the supermarket war”. Suppliers produce products and TESCO, want the product for the minimum price. If suppliers won’t deal at that price TESCO won’t trade with them. Dealing with larger companies may be the only way suppliers can survive. The trade off is that if more was offered to suppliers, customers would pay more. TESCO aim to have the lowest prices. It was decided in the trade off, that reducing costs was more important. TESCO bought several dairies and farms in order to reduce costs. This has led to more problems, as some suppliers aren’t required and find it hard to gain contracts elsewhere. If suppliers charge higher prices, shareholders would get lower dividends or customers would change their supermarkets so TESCO were clever in producing their own products as prices are reduced as the middle man is cut out. Suppliers must be careful as this may happen again, branching to other sections of the company. TESCO put their names to products they sell for example TESCO chicken is produced by suppliers. This is TESCO’s choice; however, if there are problems with the product bad press is created for TESCO as opposed to the supplier. I feel that suppliers would be more successful in using their own name against products as they’d create a brand for themselves and TESCO would benefit as problems would be passed directly on to the supplier.
The community is hard to satisfy causing problems for shareholders and employees. New stores cause a media frenzy, as environmental issues can’t be ignored. TESCO stores cost millions of pounds and habitats are destroyed. Environmental activists are keen to prevent this. If this happens, TESCO lose customers and shareholders lose dividends, shareholders are keen for new stores to be erected as profits rise. The environmental costs don’t bother stakeholders professionally attached with TESCO.
The community concerns TESCO once stores are erected. Environmental activists can do little to prevent new stores, but TESCO publicise the way they help the environment and this balance although costing them little makes people happier about the situation. I feel that this is unacceptable as little is done to help the environment. Councils make money from the land so they are not bothered by the moral argument.
TESCO make appear new stores are beneficial for the community. New employees are required which in turn leads to a richer lifestyle and less crime. People in the community can become employees or customers, meaning there’s a change in the stake people have.
TESCO do open on a Sunday, at the time this law was passed there was anger that it was being allowed to happen. Some people in the community argue that this reduced church attendance. I believe TESCO were correct to do this as it made shopping more accessible. Effectively there could be large increase in profits and employment in the community may also increase, leading to a reduction in crime rates and a richer lifestyle for many.
TESCO choose to support the community by offering free computers to schools, not only does this make good business sense as people are attracted to the company but problems that the company creates with increased traffic and pollution is quickly sidelined. The community can therefore work with TESCO; however, if I were connected with the business I would see the community as being a hindrance as they have no ties to use the company. They can create adverse publicity for companies, when really, better services are being offered. I feel that TESCO should continue with their “computers for schools” scheme because it gives something back to the community, and leads to cheap publicity. I feel that the money put in to making locals accept the company is often wasted and more money should be invested into new stores in order to please the many millions of people who are unable to benefit from the low costs offered by TESCO. The communities often cause problems for TESCO and from a business point of view; this leads to ill ease and affects other stakeholders as prospective employees feel threatened by the way that the community perceives large companies. I also feel that TESCO should meet their corporate social responsibility within the coming years to aid those in other countries. The successful selling of fair trade products would help in promotion, satisfy activists within the community as well as gain free and complimentary media coverage.
Throughout this essay I have looked at the way that stakeholders help mould a company. TESCO have been relatively lucky by the support that they are generally shown by all of the stakeholders. Through the successful analysis of each stakeholder’s needs successful trade-offs have occurred. The continuous development of one of England’s most well respected companies has helped many of the stakeholders. The shareholders have seen massive returns on their investment, whilst TESCO can be grateful for shareholder’s investment. Employees help in offering good service and the smooth running of a modern ICT based company, suppliers help in getting the products to the consumer at the lowest prices everyday whilst the community benefit from the corporate social responsibility TESCO has. Keeping the peace is absolutely vital because if the relationship between any of these stakeholders was broken, TESCO would be in disarray and the company would eventually shatter.