Introduction to Tesco

Tesco is Britain’s leading food retailer employing 160 000 people in the U K throughout its 702 stores. Over the past five years Tesco has expanded from a traditional U K based supermarket into new countries, products and services including a major non food business, personal finance and internet shopping. Tesco has progressed into a truly international retailer employing a further 140 000 people throughout 214 stores in nine markets worldwide. The increasing scale and internationalization of Tescos sales and purchasing operations contributes to a significant increase in efficiency and profitability.

In this assignment I will be examining Tesco’s position in the economy, explaining the role of economies of scale within Tesco and drawing up a detailed swot analysis of the organisation. I will also be examining the role of production within the firm.

Tescos position in the economy

Tesco is a public limited company (plc).  Public limited companies are businesses with share price on the stock exchange. To become a public limited company, a business must have an issued share capital of at least £50 000. The company must have reissued at least 25% of the nominal value of the shares. Tesco can raise significant sums of capital by selling shares to the general public. Shares are bought and sold on the stock market.

Management of Tesco is in the hands of the board of directors who are appointed by the major shareholders at the annual general meeting (AGM). Tesco has approximately 100 000 active shareholders within the company. Tescos share holders do not have any say in the day to day running of the company. There is a distinct division between ownership and control within Plc companies. This is unlike sole traders, partnerships and some private limited companies, where owners usually take on management duties. Being a plc Tesco benefits from limited liability this will limit financial risk. In the unlikely case of Tesco going bankrupt and falling into debt shareholders can only lose the value of their fully paid shares at worst. Their personal property is immune. This is not the case for sole traders and partnerships as unlimited liability is present. Therefore the owners will be fully liable for all of their debts.

Plc’s have become the dominant type of business organisation in the private sector. Tesco will experience fewer difficulties in raising capital than most other types of business. Not only can they raise capital, but their high public profile also makes it easy to arrange loans from financial institutions giving it the resources to trade throughout the world and compete in the toughest markets overseas.

Tescos legal obligations:

  • Memorandum of Association – This is a statement of the name of the company, the address of the companies registered office, a statement of the companies aims.
  • Articles of association – This is a set of rules by which the company is governed. The articles are a contract between the company and its shareholders. The document must provide details of. :
  1. The firms nominal capital.
  2. When shareholders meetings are to be held and how they are to be conducted.
  3. The voting rights of shareholders.
  4. How profits and losses are to be distributed.
  5. Names of directors.
  6. How directors are appointed and the nature of their authority.

Tescos business objectives

Business objectives are medium to long-term goals or targets that provide a sense of direction to the business. These usually have a stated time scale. For instance, Tesco might have an objective to boost market share from 27% to 30% over the next four years.

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Tesco owes its success to fulfilling their major business objectives and meeting consumer needs. These are as follows:

  • Making a profit
  • Increasing sales and market share
  • Providing services to the community
  • Producing high quality products and offering high quality services
  • Developing a skilled workforce
  • Expanding into overseas markets
  • Fulfilling charitable or non-profit objectives

Tescos Market share

Market share is the term used ...

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