Ao1 : aims and objectives
AO1 : Aims and Objectives
Tesco was founded in 1919 by a man named Jack Cohen in East London. The first ever Tesco brand begun appearing in 1924, ever since the Tesco business industry has rocketed and is now found in towns across the country. Tesco sells many varieties of products and services, which include:
- Food; frozen, canned and groceries.
- Electrical equipment
- Tesco personal finance
- Instant travel insurance
- Life insurance
- Home insurance
- Instant breakdown cover
- Online DVD/video rental
- Home delivering
- Also, home furniture and equipment
All of the above and more benefit Tesco business and this has been proven through the demand of its stores nationwide. Tesco’s customers are all people and communities who purchase their products or services. They now have five different ranges of their company all suitable and provide products designed for specific reasons. These five varieties are:
- Tesco Extra
- Tesco Metro
- Tesco Express
- One Stop
Tesco’s provide more of a larger scale of groceries and food than non-food goods. This is the general superstore, which families and people may go to for large stocks of food goods. This is why they have larger trolleys and larger car parks.
Tesco Extra are opposite to what the general Tesco offers and provides, they sell a larger scale of non-food goods, such as electrical equipment, health care etc.
Tesco Metro stores are smaller than Extra stores as they can be found on high streets and in city centres. They provide products such as on-the-go sandwiches, drinks, and a mini café beneficial to busy shoppers.
Tesco Express are like newsagent shops, which are convenient to neighbourhoods, they sell limited amount of products such as milk, bread, eggs and other products, which people use daily.
The smallest of all Tesco’s are One Stop; they are very small shops, which can be found near town centres and residential areas. The Tesco brand is “everyone, everything, everywhere and anytime”. I believe this means that they have everything to meet everyone’s needs and are available to everyone at anytime anywhere, implying most places. This is what makes their business so popular because their products and services are aimed to be beneficial to everybody.
Tesco falls into the tertiary sector of a business as it provides us with a service. Tertiary includes service industries (Tesco), leisure (e.g. David Llyod Leisure), transport (Cabs), finance (Tesco finance), distribution, retailing, wholesaling, and communications. Businesses, which categorize into the tertiary sector, are usually larger companies or businesses with many suppliers.
Other sectors include; primary; secondary and quaternary sector. The primary sector is the companies and firms, which extract raw materials from the earth. This includes mining, quarrying, fishing, agriculture, and forestry. An example of this may be jewellery specialists whom may have extracted their own pearls and gold.
The secondary sector is the processing of raw material into finished or semi-finished manufacturing. These businesses help with the making process of products.
Also, quaternary sector is hi-tech industries, which includes health, training and education, all of which are government funded.
Businesses of all sectors have aims and objectives in order for them to be successful. An aim is a general statement about what a business intends to do or achieve. Examples of aims may include:
- To make profit
- To survive
- Provide competitive service
- To be environmentally friendly
- To be charitable, voluntary or be community involved
- To maximise sales
All of the above are general aims, which most businesses wish to achieve. The most important thing for a new business may be is survival. This is because if they are incapable of surviving and sales decrease, profits decrease and they may become bankrupt and be forced to shut down.
It is important for a business to make profit to earn money and achieve. It is also important for them to provide a competitive service to achieve maximised profits and compete against other businesses that sell similar products by winning over customers.
They would also want to be environmentally friendly not to upset stakeholders such as pressure groups, which can result to protests. It is important they offer a charitable, voluntary or community service for non-profitable reasons such as helping the needy.
Most of all, it is important for a business to maximise sales or the quality of their products or services to gain more customers therefore earn more profit.
Tesco’s most important aims are to remain with a good reputation and customer views. This is important because if customer and consumers find that the business has given them bas quality of a product of service they will recommend not to go to the Tesco business. This is also known as word of mouth. However, if the word of mouth, which is given, is good, Tesco’s are to benefit from more customers therefore gain more profit.
The aims that Tesco’s has set for them have been proven to be successful and include:
- Providing goods and services to the local community successful.
- To be environmentally friendly.
- Providing a competitive service
- Surviving and expanding the business.
- Providing charitable or voluntary services.
- Making a profit
- Maximising sales and improving the quality of their products and services
Tesco’s has met all of the above aims. In terms of providing goods and services to the local community this is successful as they have a Tesco store in almost every town therefore buying Tesco’s products is no long optional but now beneficial and well known to all customers nationwide.
Also, being environmentally friendly has been met by Tesco’s as in every Tesco Extra car park recycling bins have been provided so when customers are visiting the store they may recycle goods such as, paper, green glass etc.
Tesco’s are also successful for providing a competitive service as they compete with other stores such as Sainsbury’s, Morissions, Asda, Waitrose, and newsagents in terms of prices and quality of their products.
Tesco’s have survived and expanded their business as no stores have shut down in bad circumstances, however more have opened up.
Tesco’s are advantageous to environmentalists and pressure groups as they provide charitable and voluntary services with recycling bins, Tesco vouchers for school computers. They also organise events such as the women’s breast cancer research appeal run and fund for local school’s sport’s days.
Tesco’s have met their aim to maximise sales and improving the quality of their products and services as they give out surveys and questionnaires to customers to see where their weaknesses are and how they can improve. They recently had met their quality aim as they introduced ranges of Tesco brand; one including Tesco Finest. For the Tesco Finest products they are a much higher quality than Tesco Value, however, come at a higher price. This has also been proven as they quote “lowering prices every week”, which shows Tesco are aware of the general price for products in their market and haven improved to suit customers’ needs.
An objective is a precise and measurable goal of a business. This includes the goals that a business wants to achieve. In order for a business to meet its objectives they may set a target. Objectives can be used to judge whether a business has met its aims. General business objectives include:
- Selling more than competitors
- Producing new goods and services
- Providing more services
- Improving a product
- Reducing costs
An example of an objective is to increase sales by 12% over the next year. This is because it is specific, measurable, and achievable and time bound. (SMART).
Objectives need to be SMART in order to achieve them. They need to be:
- Specific; to know directly what exactly what you wish to achieve
- Measurable; to see your progress of achieving your goals
- Achievable; to be achievable and realistic to ensure you are able to achieve it.
- Relevant; needs to be involved with and affecting your business otherwise it would be pointless.
- Time bound; to measure over a certain period of time and a limit to when your goals need to be achieved.
Tesco’s objectives may include:
- To increase sales by 17% in Tesco Extra store over the next six months.
- To attract older generation customers over the next two years.
- To globalise themselves and to makes themselves available to most towns across the globe over the next ten years
Tesco also state that they aim to maximise the benefits they being and minimise negative impacts. They aim to take responsibility to these impacts, to measure and tackle their effects, to work with stakeholders on issues and ensure that CR permeates on all parts of the business.
The aims and objectives are important to all businesses including Tesco as they can predict their outcome of the business over the coming years. It is important to the business as it gives a clear idea of what they have achieved and what they can do to ensure they are successful. Knowing their overall progress motivates and encourages them to do better and improve qualities and services of their business.
A business may want to change its aims if they have achieved it or may not be able to achieve it. They can change their aims again based upon “SMART”. This could possibly be the time bound was not a long enough period or irrelevant to their business.
The difference between the two aims and objectives is an aim is a general statement about what they intend to do where as an objective is precise and measurable and includes what they may need to do in order to achieve it.
Tesco believe their main purpose of their business aims is to create value for customers to earn their lifetime loyalty. In order for Tesco’s to achieve their aims and objectives they adapted their business. They adapted by location of each store, all of their business locations are near to a supply of workers, customers, and transport links.
If Tesco were to be ever more successful and could improve the quality of their business and their aims and objectives they could consider:
- Sending loyal regular customers home surveys of what their weaknesses may be so they are able to tackle this over a certain time period
- Carry out on-the-spot interviews asking customers why they choose to visit Tesco and for which products in particular whether it is for their prices or quality of the products.
What makes Tesco so popular is they believe their customer service is important and also state “cooperate responsibility is not an additional burden or a distraction from serving our customers; it is an essential part of sustaining ourselves as a responsible company”.
However, if they were to adapt and improve their aims and objectives they should aim to communicate more with the local community and become more involved with local activities such as sporting events and sponsor schools for after school activities that may encourage their parents to shop at Tesco more often.
As my sole trader I chose to investigate a local newsagent/grocers. They offer products and services, which include:
- Cold drinks
- Milk, yoghurt, cheese, bread (main food group foods)
- Frozen foods
- Tissue, stationary etc.
- Alcoholic beverages
My sole trader (Cranford Supermarket) is located in the centre of Cranford and by other shops including a liquor store, laundrette, hairdressers, two fast food shops, an estate agent, dental clinic, wine bar and vehicle rental shop. This is advantageous as they are attraction potential passing by people from other shops. The shop has been advertised with a huge displayed sign above the main entrance and some vegetables are on display outside the shop.
The business is similar to Tesco in terms of what products they offer to the public. The reason why this newsagent may not be as profitable as Tesco is because Tesco offers a wider range of products than the newsagent. The newsagent is a family-ran business, which does not employ any workers as all the work is done by them, which makes working hours flexible.
The aims of this newsagent may be to survive, as they are a small convenience store and there is a lot of competition. People choose to go to Tesco rather than the newsagent because they have a lot of products and services all in one place. However, they chose to go to the newsagent for few products for example milk in the morning and the person is rushing. This is because queues are shorter and it is more convenient for them. Other aims of my newsagent may include possibly expanding their shop or even introducing new products to the shop such as a new newspaper or more magazines. Now that Tesco has launched smaller stores such as Tesco Express newsagent have more competition, which makes survival one of their most important aims.
This is a preview of the whole essay
The objectives of the newsagent may be to survive over the next year and to increase sales by adapting their location and the varieties of products and services they offer to their community. They may even have objectives to improve their services in terms of the way they treat and greet customers, as majority of them must be local and regular.
In order for the newsagent to become even more successful or just remain having a constant amount of customers their aims and objectives need to be met on time and are achieved they may need to do this by the following methods:
- Invest in a computer; to digitally record progress of the shops income and outcome.
- Create charts and analyse which products are most profitable to the business
- Clear products which are not normally bought by customers or are out of date
- Clean the shop out and organise it in terms of shelves and product specification.
The main difference between the newsagent and Tesco is that the newsagent is a private limited company and Tesco is a public limited company. This means that the shares cannot be bought into the newsagent without owner’s permission or agreement. However, shares may be bought into Tesco, as there are already many shareholders who have also put an input into funding of opening of new stores. They are also very diverse as Tesco is very well know across the nation for its very many stores where as the newsagent may just be know to a certain community. Aims and objectives are very important to each of the business as it can determine each of their success and future opportunities in the market.
AO2: Functional Areas and Communication
There are a number of factors, which affect the organisational structure of a business. These are;
- What the business wishes to achieve
- The activities of the business
- How big the business is
- Number of staff
- The organisation type
- What the organisation produces or provides
- Its location.
Large businesses and companies like to organise their activities into different functions or departments. These activities are mostly grouped and include the following:
- Human resources
- Administration and support
- Marketing and sales
- Customer service
- Research and development
When businesses organise their company in this way it is called functional grouping. Tesco uses functional grouping and this is an advantage for them, as it would mean always knowing and only communicating with people doing the same or similar activities. E.g. the marketing department of Tesco may be located next to one another or near by, as they would have to be communicating very often. This also enables all the workers of the activity to help one another, work co-operatively, and work efficiently and productively. However, Cranford Supermarket do not use functional grouping as their business is either not large enough or prefer not to.
This also allows all workers to do their job with motivation. Most importantly, functional grouping decreases the amount of communicational problems and develops a better working relationship between employees. This is important for Tesco, as it is a very large company, which can mean various break downs in communication.
Larger companies similar to Tesco can divide their company’s departments according to the following:
- Product or specialism. This allows it a lot easier for employers and employees to find what they are seeking and is time efficient. For example, Tesco has clothing, frozen foods, electrical goods departments etc. employees are trained to work within specific departments, which allows them to provide customers with desired information required about a certain product or service.
- By customers. Businesses that are in the same competing market all attract customers of all ages. These varieties of customers can be organised as privately and commercially. For example, the bank and the suppliers are private customers however the actual consumers of Tesco’s products and services are commercial customers.
- By operation or process. Tesco uses many different operations of production of their products and services. These include; flow, job, labour, intensive, capital intensive and batch. Tesco also has a larger and taller hierarchical structure than businesses such as Co-op stores. An advantage of having a hierarchal structure for each business is that the job roles are easy to see within a business. Also, the amount earning is clearly comprehensible. However this also has disadvantages which can be communicational breakdowns as the communication up and down a hierarchy is called vertical communication, which is difficult, and time consuming for all workers.
- By area. Large companies such as Microsoft and Tesco decide to situate their activities nationally and internationally. This means for Tesco they are beginning to tackle sister countries of the UK, which are European countries such as France and other countries where labour is cheap. These may be India, China and Turkey, this is good for the business as well as the economy as they are expanding and broadening which means they are attracting ever more customers, familiarising themselves and creating employment.
Factors that affect the organisational structure of a business are:
- What the business wishes to achieve
- The activities of the business
- How big the business is
- The number of staff
- The organisation type
- What the organisation produces or provides
- Its location
The human resources department
The human resources department is most importantly responsible for recruiting and employing employees; this also involves the induction of the new employees. They try to recruit the best possible employee for the job and make sure they are settled well and feel comfortable within the workforce. Tesco’s human resources department tries to ensure they recruit the best possible person for a number of reasons. This includes that they would want someone to make the business environment better with a great attitude towards work and brings their own and innovating ideas into the company. The human resources function is also to ensure employees are doing their job well and efficiently, working productively. In order for the new employee to know what they should be doing and how, training is required. This is another main activity of the human resources function area. They give out training and organise it to ensure all workers are working to their best possible potential. Other tasks of the human resources department include:
- Retention and dismissal - dismissing employees whom are not working according to the company’s rules or for a number of other reasons.
- Working conditions – ensuring the workplace is clean and safe and hygienic.
- Health and safety – to make sure employees and customers are not at risk or mental or psychical danger and that the company should follow all heath and safety regulations.
- Employee organisation and unions – if an employee has a disagreement or dispute with their employer they can seek help or guidance to resolve the problem from the Trade Unions.
- Development and promotion – promotion to ensure employees are satisfied and motivated in their job.
Tesco candidates can collect an application form from a Tesco store or go to the website; www.tesco.com. Tesco especially want employees who are punctual, reliable, and enthusiastic and hardworking. Tesco’s human resources also keep all files and records confidential and protected as they include activities and aims and objectives of the company.
The finance department
The finance department is important in order to monitor the income and outcome of the business. This is important to see whether they are making progress and profit or are giving out more money than earning. The finance department monitor the money spent, earnt, profit received, and loss of the business. If these are not kept track of, a company may well go bankrupt without them knowing. This is also important to progress and expand the company, as they are able to see clearly where they are spending wrong and can cut down. However, they can also see if they can spend money on company improvements etc. Other tasks of the finance department include:
- Paying employees wages and salaries
- Preparing accounts
- Obtaining capital and resources
Tesco’s finance department are successful as they monitor whether they have enough capital to open a new store in another location. By analysing this they predict the amount that they will be earning once the new store is open by taking away the worker’s salary from the income. The accountants and financiers manage the profit and loss of the business. They ensure that they can afford what they buy from suppliers and pay for deliveries.
The operations department
In order for businesses to systemise their company, they use a wide range of resources including equipment and people to obtain and do this. The main activity of the operations department is to produce goods and services as efficiently and productively and the human resources department monitors this. They work effectively by making the best out of the resources and materials (e.g. equipment, workers, land etc.) given and the time given. This can be resources such as a 1000 square good land, 20 workers and 2 years to do a certain task set by a company manager. For Tesco this means building their new stores as fast as possible so they can open up and begin earning even more profit. An example of where Tesco’s operation department has achieved their goals is the new Tesco store in Slough. They worked efficiently and effectively by building the new store in a short period of time and with limited workers. Tesco’s operations ensure there are enough products on the shelves for customers to purchase (supply meets demand).
Businesses use inputs, such as raw materials and other resources such as buildings, machinery, tasks, equipment, and people to make products. The products are outputs. The process of changing resources into goods and services is called production. A business has to make the best of its resources. Production is making products and services to sell to society or conversion of resources into goods or services. The different types of production are:
- Labour intensive
- Capital intensive
Batch production involves making products in batches in one operation before moving onto the next. Advantages of batch production include:
- More efficient
- Become an expert
However, there are also disadvantages, which include:
- Repetitive work
- Become demotivated
Flow production is making a product continuously for example, car production. Job production uses a method of making a product from start to finish such as constructing a bridge. Disadvantages of job production include products are more expensive (handcrafted) and the products don’t specialise so it takes longer.
Labour intensive is using a lot of people, a large workforce. Capital intensive requires a lot of machinery and money to set up for example, food processors. It is important that production is efficient in order to meet customers.
The administration and support department works alongside I.C.T support to ensure the company proceeds efficiently everyday. Responsibilities of the functional area include:
- Organising meetings
- Health and safety
- Cleaning and maintenance
- Delivering mail
- Keeping records
- Replying to requests
- Software support
For Tesco, the administration and support department is important to ensure customers and consumers are satisfied with their product or service. If they are unaware of how to use products etc. they will seek software support where someone of the Tesco workforce shall show them and support them on how to use it. Tesco’s administration and support area also cover that the store is opened and closed at appropriate times and security are working to good standards and check the store is suitable according to The Health and Safety Acts.
The marketing and sales department
This function area uses market research and promotion to complete their main activity, which is to meet customers’ needs and wants. Market research is where the business (Tesco) goes and researches what takes the customers’ interest. For example, if customers are buying more from their competitors (Waitrose) they try to see what it is that they are buying, such as a popular new product. Tesco would adapt to this by launching a new similar product to win back the customers and keep them satisfied. These marker research methods enable businesses to realise the customer’s needs and wants and adapt their products and services to these needs. Promotion is advertising their products and services. For example, through media; TV, magazines, radio, and sales etc.
Tesco’s market and sales department try to discover new strategies on how to advertise Tesco’s products. They also try to develop ideas how to market new products as well as existing ones. Tesco promote through T.V. adverts, magazines, newspapers, radio and deals e.g. buy one get one free.
The customer services department
In order for a business to make a profit, businesses depend on their customers to purchase their products and services. However, customers also expect value and quality for their money on the goods they are purchasing. They also expect safe and reliable products. To build better relationships with their customers, Tesco provide information, credit facilities, after sales services, give advice, and deliver goods. This attracts more customers to the business.
In Tesco, if customers have faults or queries about the product or service they have purchased they can ask for a refund or exchange the product. The customers also receive advice on sales and be provided with personal support such as help in the changing rooms in the clothing department and help with packing bags.
The research and development department
Business research markets in order to develop their goods and services. They do this with the help of the marketing and sales department. It is important to develop products and services to improve existing ones and to stay in competition. For example, Tesco begun with introducing their own bread, then they developed this with brown bread then to malted bread etc.
The I.C.T. Department
I.C.T. is important mainly for communication and reduces costs and develops the goods and services during production. In Tesco I.C.T is used for the following activities:
- Online support for customers
- Internal and external communications
- Electronic transactions
- Electronic security systems
- Data share facilities
They are responsible for all the computerised activities of the business and also important for advertising and promotion. With advertising, I.C.T is needed for leaflets, posters, and labels. This functional area is also responsible for ensuring all tills and cash machines are working.
All of the above functional areas are important for a business to be successful. They must all complete their functions and activities. As a sole trader all of the functions and tasks are to be carried out by themselves as their business is not big enough or does not have enough workers to organise themselves into departments. This is an advantage for larger companies, as it is less time consuming having one or a dew people alone carrying out all the functions by themselves.
This is where information regarding the business or two businesses is concerned is passed between people, internally or externally. Communication can be done by the following methods:
- Display boards
- Meetings/ conferences
- Video conferencing
- Web cam
- Microsoft outlook
- Body language
Video communications is a method of communication, which allows individuals in different locations to communicate as if they were in the same room. With the use of camera, individuals can see each other on monitors and talk to each other via telephone lines. The advantage of this type of communication is that people can talk to and see other people from anywhere in the world. As this saves on the time and cost of travelling to meetings, many businesses find it cost effective. However, it is not quite the same as meeting people face to face and video conferencing is expensive to set up because of equipment costs.
Telephones are still one of the main ways of communicating with someone who is not close by. They are relatively cheap and easy to use, but they can be engaged or the person being called may be out.
Verbal messages are often the quickest way to communicate. It is where the sender talks to the receiver of a message. It allows the message to be explained and discussed, but because the message is not written down, the receiver may forget it.
In meetings it is important everybody meets face to face to discuss business issues. Usually, an assistant writes down what was discussed and agreed. These are called the minutes and everyone gets a copy. One problem of meetings is that they take time and have to be planned in advance to make sure that everyone can be there.
Graphical communications include drawings, graphs, and images. They can help to communicate ideas and messages in a way that is clearer than words or text. For example, if sales have risen faster in one month than another, this can be shown clearly on a bar chart. Graphs are often followed by a text, video, and oral information to give a fuller explanation.
Written communications are often used when information has to be passed on formally or when a permanent record it needed. Written communications come in many forms:
- Letters. An advantage of letters is that they are cheap and easy to communicate in writing. However, it does take time to word process, check and print and then send out in the post.
- Memos. They are short and informal messages, which are used to communicate internally in a business. They are brief however, likely to be forgotten.
- Financial documents and forms. They state a businesses performance through cash flow statements, balance sheets, financial documents, sale ledgers, and cashbooks.
Internal communication is where businesses such as Tesco communicate with people within the company. This includes the managers, employees, employers, and all the departments of the business and other sister stores around the country. Tesco communicates internally via telephones, e-mail, Microsoft outlook, intranet, notice boards, memo, and radio transmitters. The Internet is ideal for internal communication as they can e-mail or quick message one another for brief reminders or tasks or can even compare competitors’ prices.
Tesco communicates with:
- Business partners
External communication is where businesses communicate with people outside of the company. This can be financiers, local community, suppliers, council, bank, customers, and sometimes pressure groups. Tesco communicates externally through the T.V. adverts, billboards, posters, magazines, radio, but mainly through their website. Tesco has a website to inform and communicate with their customers and potential customers about the services and products, which they offer and can give quotes online. This shows that Tesco uses both internal and external communication, which is good for their business.
Tesco uses external communication to provide information to customers about new products or services that are being launched and to handle incoming enquiries about their products and services to promote corporate and brand images.
Formal Communication; In Tesco’s the managing director communicates with the managers on a daily basis. They have formal team meetings to discuss the company’s policy. Then the managers have to delegate authority to run their own departments so they use their supervisors to communicate with the staff on how they want things done.
Informal communication; These are channels in the company, that gossip and rumours get around. E.g. one manager hearts a story that another manager is slacking from a operative. The manager may get mad and then feels demotivated to work and the operative heard it from someone else.
The human resources department communicates with employers and employees. They communicate by telephone, e-mails but mostly in letters. They communicate this way, as it is formal rather than means of by text etc. The HR department also discusses recruitment needs with the sales team by meetings and conferences.
The finance department are people who have to communicate externally to banks, financiers also employees as they are paying out the wages. They communicate via telephone, letters, and meetings.
The operations department communicate with their landlords, workers, employers, and supervisors. They communicate through the telephone, meetings, and conferences, as they are important information passed along, their communication has to be formal.
The administration and support department communicate internally and externally to customers, employers, employees, other department such as the I.C.T department and suppliers. They communicate with the I.C.T. department by e-mail and telephone and to others by fax, telephone, meetings, letters and sometimes verbally face-to-face.
The marketing and sales department communicates externally with advertising agencies and media forms such as radio stations, magazine editors’ etc. by telephone, meetings and e-mail e.g. to confirm advertising strategies and schedules.
The customer services department and research and development department work together and they both communicate internally and externally. Internally customer services communicate with the research and development where they tell them the customer feedback and how they can improve and they report this to the research and development department. They communicate by memos, internet (official Tesco website), letters, questionnaires, e-mail, surveys, and telephone.
The I.C.T department communicates with all the other departments by e-mail, notice boards, meetings, conferences, telephone, and newsletters. Communication is important for them in order to confirm advertising strategies and schedules also meetings and decisions.
The methods of communication that Tesco uses are all formal. It would be inappropriate to text unsuccessful job applicants, as it is informal and arrogant. Also if they are told verbally face-to-face that they can engage in a dialogue about what may have gone wrong in the interview and what the employers were looking for. Text is also informal and it is not guaranteed the message can be picked up.
Communication is important within Tesco because it is a large company and needs to make sure all information passes employers to employees properly. If this goes wrong there could be a communication breakdown.
The different communicational methods, which Tesco uses, all help each function area in the business. This is because when they communicate with each other it can be done quickly and efficiently to share information. The most reliable method that Tesco uses is by staff meetings. This shows that Tesco’s communicational methods are successful.
AO3: Ownership and Liability
In this section of my coursework I will be investigating the different ownership types of the two businesses. I will look at the location choice of Tesco and my chosen sole trader (Cranford Supermarket). Most businesses have different types of ownership to one another. The different types of ownership include:
- Sole trader – owned by only one person. This is the smallest type of enterprise.
- Partnership – consists of between 2 – 20 people. These people are joint owners of the business.
- Co-operatives – group of individuals who collectively operate a business and share all profits and losses.
- Franchise – large businesses that allow entrepreneurs to sell their goods and also use their name for a certain fee then share the profit.
- Private limited companies – privately owned. This is the smallest type of incorporated company.
- Public limited company – (PLC). These are the largest enterprises in the UK.
Limited liability is where the owner has to pay back debts to the value of what they put into the business. The owner’s personal money cannot be taken. An example of this is where the people who have borrowed money pay back the money they have put into the business.
However, unlimited liability is the opposite where the owner is personally responsible for all the debts of the business. An example of this is where a business has taken a loan from a bank and is unable to pay it, therefore personal belongings will be substituted for the debt.
One person who owns a business by them self and operates it is known as a sole trader. However, sole traders employ workers to work within the business. For example, in my chosen sole trader they have employed till workers and stackers which give products price tags and stack boxes etc. an advantage of being a sole trader, the only owner of the business is they can make all the decisions and they are their own boss. This also means they can choose their own working days and hours and keep all the profit, as they are not paying a wage bill. Being the only owner means the financial records are private. Other advantages include that they have all the credibility and profit are not shared.
However, being a sole trader there are also disadvantages, which include long working hours and no new innovative ideas are bought to the business. This also means that if the sole trader passes away the burden of the debt will be passed along to their family members and the business may have to shut. They also have unlimited liability which means in order to pay back debts they owe if they are not able to pay it in money they may have to sell their personal possessions for example their house and car. Also, if they were ill there would be nobody to run the shop or the business, whereas compared to a partnership business, the partner would take over the shop. Examples of sole traders are hairdressers, plumbers, corner shop, electricians, and florists.
A partnership involves more than one person. It is normal for them to include between two and twenty people. Partnerships have unlimited liability, however, if you have sleeping partners, these people only have limited liability. The profits are shared amongst the partners depending on how much capital they invested in the beginning. The partners should draw up a deed of partnership. It states who is part of the partnership and how profits are shared between partners. The Partnership Act of 1890 lays out the rules for setting up and running partnerships if a deed is not drawn up. The deed of partnership could be a verbal agreement, however, partners are advised to have a written document. It details the names of partners, how much capital each is investing, how the profits and losses will be shared amongst the partners, the duties of each partner, the procedures for admitting new partners and for partners leaving. Advantages in being in a partnership include:
- There is somebody to solve problems with and talk amongst things over
- Easier to raise money because all partners can contribute.
- New ideas and initiatives are introduced to the business
- Capital expenses to start up the business will be shared so overall would be less for each of them to pay.
- Individuals can specialise in certain areas.
- They are easy to set up.
- The burden of running the business is often shared.
However, there are also disadvantages, which include:
- If one partner dies, the partnership must be dissolved
- The partners have unlimited liability.
- Profits must be shared
- Disputes over the distribution of profit
- Disagreements over business activities and decisions which means all partners must be consulted before any business action is taken which may take longer in terms of time and communication.
Examples of partnerships are body shop and KFC. Some partners are sleeping partners. They invest in the business but are not involved in the business.
There are two types of business co-operatives, which include; consumer co-operative and worker co-operative. Consumer co-operative is when a business is owned and decisions are made upon its customers with profit distributed upon those consumers. The other type, work co-operatives, is when the business is owned and ran by the workers, which means they are entitled to make decisions and they share the profit.
Advantages of business co-operatives includes:
- The profits is distributed equally
- They cannot be exploited for profits as the customers share ownership of the business.
- Less disputes and conflict between workers and owners because the workers are the owners.
- Business co-operatives have limited liability therefore if the business goes bankrupt and owes money in debt the people who they owe money cannot take their personal possessions in return for what they owe.
- There is a long time before business activities and decisions are made as all owners must be consulted
- There may be a lot of conflict between the owners over decisions of the business
- Less incentive to invest additional capital (money put into the business).
This describes a large organisation, which allows a person to sell its products and use its name in exchange for a fee and share of the profits. Advantages of franchises include:
- They are easy to finance and to set up the business
- They also have access to extensive advertising
- Well known popular trade name
- The cost of materials is expensive
- The cost of franchise and other fees may reduce the profit margin
- A franchiser could saturate your territory and termination policies of franchiser may allow little security.
Private limited companies
You can usually tell if a business is a private limited company if they have “Ltd” after their company name. (Ltd standing for limited). Unlike plc’s, private limited company shares cannot be traded openly on a stock exchange. Advantages of private limited companies include:
- Banks are more likely and willing to give out loans to them especially if they have a good credit history or financial background.
- Shares cannot be sold to the public which means accounts will remain private between owners.
- Owners have direct control over the business and they have limited liability
- Shareholders are responsible for running the business therefore more capital will be invested in the business
Disadvantages of private limited companies include:
- It is much harder to set up than a sole trader or partnership business
- Harder to raise capital as they cannot sell shares to the general public
- When selling shares private limited companies must follow specific rules
- Not possible to trader under the name of the existing business
An example of a private limited company is Manchester United Football Club, which has just been made private recently after the decision of the American chairman.
- Public limited company – (PLC)
Commonly known as a PLC, these business ownership type’s shares are sold on the stock market unlike private limited companies. Examples of PLC’s are Arsenal Football Club. Advantages include:
- Easier to raise capital as they can advertise their shares and have more shares from the general public
- Easier to borrow money as banks and financiers are aware they are involved with the general public and because of the security it offer
- They have limited liability
Disadvantages of PLC’s include:
- Financial records may not be kept as private for example information regarding profits and losses and salaries and sales
- Anybody can buy into the business, which may entitle him or her to decision making which means them bringing negative ideas into the business.
- Expensive to become a PLC.
Tesco is a public limited company (PLC). This means they have limited liability and anybody will be able to buy shares of the business. This also means partners run the business and guides Tesco in order for them to not lose their personal special assets.
This type of ownership is ideal and suitable for Tesco as by allowing anybody to buy shares this involves the general public, which is a good way of marketing and advertising. Cranford supermarket newsagent is a sole trader which means they have unlimited liability. This means that if they were in debt to businesses or people and are not able to pay it back in money, the people are allowed to take their personal possessions is exchange for what they owe.
If I were setting up a business I would choose a partnership for an ownership with limited liability. The reason for this is to have sleeping partners to help with finances of the beginning of the business. The reason for this is they are easy to set up, the amount of capital needed is often small, the burden of running the business is shared as well as the responsibility. This also means partners can specialise in certain areas.
Business location is where the business is situated. Location is considered very important for a business as it can determine if the business achieves or not. The business location is usually considered before the business is set up, as they need to look at all the factor, which affect it. Some of the factors are:
- Local government charges
- Complimentary businesses
- Near to suppliers
- Cheap land
- Cost of land
- Natural resources
- Cheap labour
- Transport links for customers and suppliers
- Busy areas, for more potential customers
- Main roads
- Economic backgrounds
- History & tradition
These factors all influence the business’ choice of location. It is important for businesses to not locate too near other competitors, as there would be more of a struggle for customers. However, it is still good to locate near them, as they are aware of the other businesses’ activities and methods of attracting customers also the products and services, which they are offering. If that business is doing better than you at the time it is easier to see which products are selling the most and that way they are able to see how they may improve or adapt to the customer’s likes.
It is also important for businesses to consider complimentary businesses where they locate for example, a video game shop locates next door to a play station selling shop therefore they are both gaining from each other as when customers come they will be visiting both stores rather than going somewhere not near for either of the both. This case does not apply to Tesco as Tesco’s customers benefit from finding everything they are looking for all under one roof for example, opticians, or photo processing centre. However, Cranford Supermarket benefit from complimentary businesses as they are next to other shops such as launderettes, which attracts more customers when they are passing.
Businesses also choose to locate near to suppliers. This is because it saves a lot of travelling costs and time. For example, if a certain product is on a very high demand at a certain time such as turkeys at Christmas time and they need to make a few more immediate orders they may not be on time if the suppliers are quite far away on the motorway. This is why it is ideal to locate near main roads or a motorway.
The availability of a people workforce and the cost of labour influence a business. For example if the cost of labour were high, businesses will choose not to locate there as labour costs would be high so they would consider places where labour costs are cheaper.
Low costs of land, labour will attract businesses to locate there. Also, if cost or rent of land is expensive most money earned will go towards rent and they will receive less profit.
It is important for businesses to locate near to their customers. Businesses such as petrol stations and shops rely on passing trader are found on the main road. Other small shops are found on housing estates and are known as “corner shops”. However, some businesses area associated within an area historically or traditionally. For example, in China Town in London there are many Chinese restaurants, which associate with the area’s theme and tradition.
Businesses also need to be near to financial help for the business. The help given could be in the form of grants, help with finding the business premises of calculating the annual business expenditures or on rents of premises etc. the financial help encourages for business to locate in certain areas.
It is important for all the factors of business location to be considered because if the location is not near transport links, busy areas, or competitors it will not attract many customers unless it has been highly advertised.
Tesco and other businesses may set up in an area where there are:
- Low priced land rental
- Low business rates
- Brown field areas so there is land available to build upon (planning permission).
- Near to suppliers who provide products so this would save delivery time and delivery costs.
One Tesco store in particular I have chosen to investigate is located in central to Hayes, Southall, Heathrow Airport, Cranford, and the M4. The M4 is a good transport link. This means that suppliers have easy access to Tesco so can deliver goods effectively and efficiently. This makes it easy and convenient for customers to do their shopping. Consequently, Tesco benefits from their location, as it is easier for them to attract customers, which will help to make profit. The Tesco also has a petrol pump, which allows passing by travellers to purchase their fuel from here. As it is located very close to Heathrow Airport, it is beneficial to passing traders and taxi drivers; it has a petrol pump for taxi drivers and has an in-store café for flight passengers. It is also central to Hayes, Southall, and Cranford, which do not have any large superstore links here. There are only small stores, which offer similar products and services, however, unlike Tesco these stores, does not sell these all under one roof. Tesco also have a much larger variety.
Cranford supermarket is located in Cranford quite near to the Tesco store. It is also central to Heathrow Airport, which means they are in competition to Tesco, competing for flight passengers and workers etc. Their location is also very advantageous as their customers are mainly ones whom live residentially. The shop is clearly advertised with the shop sign and is visible to all areas of Cranford and passing trade of the main road. This is all shown on the map below.
This Tesco superstore’s location is advantageous and the most important factor which they have taken into consideration was that their location. This is an advantage, as it increases the amount of potential customers and deliveries can be made at short notice in a short period of time.
This Tesco store is an extra store which means the products range from clothing, halal, kosher, afro Caribbean, Asian, deli counter, fish counter, meat counter, and super unleaded petrol. Their facilities include:
- Open 24 hours
- Home shopping
- Petrol station
- Customer toilets
- Jet wash
- Car wash
- Pay at pump
- 1 hour photo processing
- Cash machine
- Disabled access
Another Tesco store, which has recently opened, is in Slough. Its location obvious to most residents of Slough as it is in the centre of the shopping centres; opposite of Queensmere and Observatory shopping centres also two minute walk from the main high street which means they are attracting a large amount of customers. The location is shown on the map below.
The new opening of this store has shown Tesco business to have improved and expanded as they have an in-store ‘krispy Krème’ doughnut store, the very first in Britain. They have also invested in lifts and elevators, which you can take trolleys up and jewellery.
If Tesco had a sole trader ownership, which it originally was, it would not have been so successful for numerous amounts of reasons. Mainly because the sole trader would not have been able to control the business by themselves and finances would be very difficult to control. Also, it would be very stressful and they would become demotivated and there would be more wages bills by having to employ a very lot of employees, financiers etc. other disadvantages include having unlimited liability which means there would be a high possibility of them having lost their personal and prized possessions. This also means if the sole trader passes away, the business would have to shut down and would not be a partner to look after the business.
If Tesco were to have been a private limited company (Ltd.) they would not have been able to raise capital through selling shares as they cannot be sold to the general public. Also, if Tesco were to be even more successful, they should have a franchise ownership, this way they could globalise a lot faster and are earning a lot more profit. They also have access to extensive advertising, which is need to promote the company and has control over the other franchises. However, Tesco being a PLC, which it is, is ever more advantageous as they are able to sell shares to the general public, which allows them to raise more capital.
This type of ownership is ideal for the company especially because they are given grants and subsidies by the government as they have located their business in certain areas where the government has wished them. The government also wishes for them to be successful as b opening more stores across the country they area creating more employment.
Overall, Tesco’s ownership and business location is successful as they area attracting customers from busy areas where there are hardly any large superstore businesses which are on the same competitive market as them for example, Waitrose and Sainsbury’s. The ownership is successful as they are receiving extra capital from general public shares.
AO4: External Influences
External influences are factors, which affect a business from outside their control. The external influences of Tesco are:
- Economic conditions
- Environmental constrains
In order for Tesco and Cranford Supermarket and other businesses to remain successful they must take into consideration:
- Environmental constrains
- Pressure groups
- Government policies
Competition is where two or more parties compete against each other in order to obtain and gain the most customers to make profit.
Competitors affect the business in the amount of customers they may have. If there is a lot of competition around to compete the markets will decrease their prices to attract potential customers. This shows that the customers are in control. This is bad for Tesco and other competitors. However, if there were no competition customers would have any choice but to buy products and services from that particular company.
Tesco’s competitors are:
- Marks & Spencer’s
They also include mini-markets such as Iceland and greengrocers and corner shops etc. these are all considered as external influences. They are their competitors because they offer similar products and services. They try to compete for the same customers depending on price, quality, brand, fashion (media influences) and quantity (amount). Another external influence was if the public were receiving higher income there would be an increase in demand. If businesses are doing badly they may need to make a few adjustments. However, all of their actions have consequences. If they were to lower their prices they would have to highly advertise and promote this which would have costs. Also, if they had to reduce costs they would have to fire employees.
Cranford Supermarket’s competitors are Tesco’s and all of their competitors also other shops similar to themselves around the area. Their strengths against Tesco’s is that when customers visit Tesco they are obligated to line up in a queue for a long time even if they are purchasing very few items. Due to this reason, Tesco recently created a “10 items or less” checkouts, however, a similar problem occurs. This is an advantage to newsagents as they attract customers who only wish to purchase few items very quickly.
Tesco have an advantage over their competitors as they are now beginning to offer even more products and services to the market to suit customers needs providing where they are located and season and the demand for these products/services. They also have an advantage of Cranford Supermarket in terms of quality and prices as they
The factors affecting demands for Tesco’s products and services are:
- Advertising – media
- Prices of other products (competitors)
- Consumers taste
The factors, which may affect the supply of Tesco’s products and services, include:
- Natural disasters
- Resources available
- Cost of raw materials
- Government regulation
- Factors of production
When the term ‘economy’ is used people usually mean the wealth and resources of a particular country. Economic conditions can affect interest rats and businesses by:
- Exchange rates
Economic influences are affected by the behaviour of people and businesses, all of which act independently. Interest is the cost of borrowing money. If you borrowed £100 from a bank for a year at 10% interest, then the cost of your loan would be £10. An interest rate is an amount bank charge of the money borrowed per year.
Prices affect businesses, as when they are high, the public are less likely to buy businesses products or services. However, when they are low, people are influenced to buy more of the product. The other factors, which affect this, are interest rates and public income.
Interest rates can affect a business that it increases in the rates, which also affects the behaviour of consumers. Many people have mortgages, which become expensive if interest rates are high. This leaves less money for the public to spend. People are also less keen to borrow money to make expensive purchases when interest rates are high. This means the loan taken out from a bank is charged at a rate in order for the bank to earn their profit. E.g. if somebody were to take out a loan of £25,000 at an average interest rate of 6.95% per year and paid it over 25 years the total amount paid back would be £43437.50. Tesco would be capable of taking out a large loan for their business as they would be able to pay it back as they have a large income from the profits they receive. However, Cranford Supermarket would not be able to, or would be refused the loan as they would be incapable of paying back the money or the time period paying back would be much longer than Tesco.
Businesses are also affected and influenced if interest rates fall. In this case, the original loan would cost less and sales may increase at the same time. For this reason, most businesses prefer interest rates to be low. This way, the government can influence the expenditure of people in the economy.
An increase in income means being paid more money. Families and other people benefit from higher incomes to make other essential things more affordable e.g. food, bills and an easy lifestyle is available to them. The extra money earned may be chosen to spend more on luxurious products from Tesco such as from the “Tesco finest” range or even home furniture.
Tesco could suffer from a decrease in demand for goods and services, if unemployment is high because people will be earning a much lower income. Demand for non-essential (or necessities) e.g. electrical goods will be affected the most. Cranford Supermarket will not be as affected as much if unemployment was high as they are a newsagent who offer necessities such as bread, milk and eggs and customers would rather go locally for these items than into Tesco, taking longer. However, their profit is most likely to decrease by the fall in demand for the other goods and services such as the lottery. Although, newspapers may be at a higher demand as unemployed people usually buy newspaper fro job searching.
Recession is where businesses do not do as well because there is not enough demand in the economy and there is less spending in the economy. Recession may be due to the amount, which the incomes are earning, again unemployment, and most importantly prices. If prices have raised dramatically it could result in recession, as less people are willing to spend money on expensive goods and services. In order to prevent this Tesco would try their best to maintain earning profit and would have to reduce prices consequently.
The economic boom is where the economy is doing really well and the demand is high for products and services. Inflation is known to be where the general level of prices rises and causes problems for the public as well as businesses.
Exchange rates are the price or rate at which currency can be exchanged for another. Exchange rates affect businesses and individuals supposing if businesses want to buy products from another country they will need the currency of that country to buy its products. Also, a business selling to another country will be paid in that country’s currency.
Air pollution is a big factor which companies produce whilst manufacturing products. Air pollution is where substances are harmful to humans or to the environment is released into the atmosphere. This occurs when for example, processes in industries such as power stations create harmful emissions, which are released into the air. Another major cause of air pollution is traffic. Traffic pollution is the type of pollution Tesco could cause. They can also cause noise pollution of their lorries and customer’s cars. Tesco’s waste is managed through laws, tips and recycling. Recycling involves processing waste into new products. Many waste materials can be recycled, including paper, glass, cardboard, plastics, and metal. Some hazardous wastes can also be recycled.
There are many laws/acts, which try to protect the environment one of which is The Special Waste Disposal 1998 – which controls the disposal of toxic or hazardous materials such as chemicals. In addition, the Environment Agency
regulates waste manages through a licensing system. Under the Environment Protection Act 1990, all businesses must ensure that their waste is stored safely and disposed of by someone who is authorised to take it and deal with it.
Tesco ensures that all these laws are met and does not put off customers by showing their disposable waste by disposing in lorries where it cannot be seen. Also, they keep pressure groups happy by at Christmas time they sell Christmas cards, which have been made from recycled paper.
It is important that Tesco and Cranford Supermarket remain environmentally friendly in order to:
- Improve public image
- Attract ethical investors and customers
- They could experience increased demand for their products
- To gain a competitive edge over competitors
- To demonstrate business ethics.