Tesco PLC

To overcome this problem Tesco changed their ownership to the final type, public limited company. This allowed them to sell their shares to general public worldwide over the stock market. This again enabled the business to get furthermore influx of capital into the business. Tesco's latest share price is 316.000p.

Graph showing Tesco's share price performance over the past year

The above graph shows how Tesco's share price has changed over the past year however has stayed relatively high. The graph points out Tesco's highest share price of 335.75 and lowest of 294.75, there is only a difference of 41 between the two prices which shows the relative stableness of their share price.

Public Limited Company also meant that the company's financial performance would be disclosed. This helped to make Tesco a more attractive proposition for potential investors with their current profits of over £2bn, and it meant more people were investing their money in Tesco due to the great performance and minimal risk of limited liability.

However there always some disadvantages faced by the ownership status of PLC. Firstly the company cannot refuse the sale of shares to any one in the world which can be quite a downside if there are some issues with the potential holder of the shares. Also the accounts of the business will be disclosed to the public meaning that they can be publicly criticised for bad sales performances. A final disadvantage, yet not a big one, as such is the fact that one shareholder has to invest at least £50,000 into the business for it to become a PLC which may not be much of a problem if large sums of investment is available.

Why does it suit Tesco to be a plc?

Tesco is a multinational company and have around 2300 stores worldwide with large profits of over £2bn.

One of the reasons being a PLC suits Tesco is the funds. Tesco have vast amount of funds available to them through investors and shareholders. This enables them to diversify their product ranges and build new luxurious stores and offer new convenient services to meet the needs of their customers.

Another reason Tesco suits being a plc is limited liability. This safeguards all Tesco shareholders against losing their personal possessions. If Tesco didn't have Limited Liability then they would have been viewed as a risky investment and would have less influx of funds through shareholders. Without these shareholders funds then they would have been unable to invest in expansions in Britain and abroad and go multinational, which currently gives then profits of £28 million a year. They have also invested this money in a massive internet shopping project which approximately brings in £10 million a month.

Type of Shareholders

Number of Shareholders

Percentage of Shareholders

Employees

55,000

2.2%

Other Individuals

89,000

8.2%

Institutions e.g. banks

21,000

89.6%

This table shows the type of shareholders and number of shareholders Tesco has

Another reason that it suits Tesco to be a plc is due to the fact that they have so many stores all over the world.

This table shows the current number of stores Tesco has and what future plans it has. More stores equal more profit which makes the shareholders happier as they get more dividends.

Location

Year of

Number of

Sales area

Planned store

entry

stores

(million sq ft)

openings

2005/06

UK

1,780

24.2

111

Czech Republic

1996

25

2.1

8

Hungary

1994

69

3.5

14

Poland

1995

78

4.2

20

Rep. of Ireland

1997

87

2

6

Slovakia

1996

30

2.1

6

Turkey

2003

5

0.4

3

China

2004

31

2.6

15

Japan

2003

104

0.4

3

Malaysia

2001

6

0.6

5

South Korea

1999

38

3.2

31

Taiwan

2000

5

0.5

1

Thailand

1998

107

5.9

83

Total

2,365

5.9

318

Shareholder Return Chart

This chart shows the shareholders returns from August 2005 - January 2006.

The graph above shows the brilliant return on their investment Tesco's shareholders has received over the past year. In August 2005 the shareholders received an amazing 5%on their investment however the returns later reduced, this is probably mainly due to Tesco investing in new projects e.g. superstores.

Good share prices and returns like these to shareholders give Tesco good publicity which makes them a more attractive proposition for potential stakeholders. This means they get more investors and more inflow of capital; this is why it suits them to a plc.

Tesco has now proven itself as it has met its aims & objectives and is now the leading supermarket and is dominating the market share leaving their competitors Sainsbury's and Asda far behind.

The ownership changes every time shareholders change hands, however, it is better for Tesco to remain as a PLC because they need the backing of the shareholders. However, Tesco can make more subsidiary companies for Tesco finance or non food products. As Tesco changed their activities in future, they may decide to form smaller companies to handle the activities of new products e.g. property is a field which Tesco are planning to embark on. It seems sensible if smaller specialist companies deal with the every day to day work of these companies.