In this coursework I need to produce a detailed business report on one medium-sized or large business.

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What I need to do?

In this coursework I need to produce a detailed business report on one medium-sized or large business. In investigating a chosen Case Study I must comment and analyze each of the following aspects of the Business:





Communication Channels

Quality Assurance and Control

"Adding Value"

I need to examine how these factors interrelate to affect the success of the business. Also I need to explain how quality assurance and control systems help the business to add value to its products and services.

As example for my investigation I chose Tesco plc., because Tesco is good example of public limited company and Tesco - is a most popular supermarket's network in UK.

How businesses are classified?

I can classify the business by form, by industrial sector, by ownership, by objective, by size and by location or market.

Forms of businesses.


Oldest, simplest, most common form of business easy to set up enterprise.

A sole trader exists where a single person owns a business. This is very common form of organization. Over recent years, the number of sole traders has grown significantly. There are several reasons for this trend including more opportunities to work for firms on consultancy basis and government support for self-employment. Most sole traders work on their own .

Initial capital - savings or borrowed. Very common in retailing, service trades.


- Easy to set up with little capital and few legal formalities

- The owner controls the business - quick decision making

- Personal contact with customers

- All profits belong to owner

- Satisfaction, motivation, interest in "Working for yourself"

- Business affairs are private - except far tax returns


- Unlimited liability for any loss or debts incurred: owner is responsible or liable

- Cannot "Buy in bulk" and enjoy "Economies of scale"

- Expansions limited by available capital

- Division of labour is difficult

- Continuity a problem...

Good example of sole trader is T. Regan Plant Hire.


The minimum membership is two partners and the maximum twenty.

Must be at least one general partner who is fully liable for all debts and obligations of the practice. "Sleeping partner" - not active. Partnership exist mainly in the professions - doctors, lawyers, accountants and surveyors frequently run their organization in the form of partnership. Partnerships normally operate in local or regional markets, though advanced in information technology are allowing many professions to offer their services more widely.


- Easy to set up

- More capital with extra partners

- Division of labour - specialization

- Responsibility can be shared e.g. long working hours redused


- Partners have unlimited liability

- Disagreement can cause problems - no sole decision - maker or owner

- Lack of capital may still hinder expansion

- Profits must be shared among all co-owners

- Problem of continuity

Good example of partnership is Rolls-Royce.


A company is defined as an association of persons that contributes money (or equivalent value in goods and assets) to a common stock, employ it in some trade or business, and share the profit or loss arising out of that business. Join stock companies are governed by and registered under the Companies Act 1985. A company has a separate legal identity form its members and can sue in its own name. There are two types of company: public companies and private companies. Both require minimum two shareholders, and there is no upper limit on the number of shareholders. All companies enjoy the benefit of limited liability. Capital is raised by selling shares.


Shares can be transferred privately. All must agree.Private limited companies are suitable for small and medium-sized operations. This type of business organization is particularly suitable for family firms and for small enterprises involving just a handful of people.

Private limited companies find it easier to attract capital because investors have the benefit of limited liability and this access to finance makes it simpler for the business to grow.


- Shareholders have limited liability

- More capital can be raised

- Control of company held within the firm

- Shares are transferable


- Profit are shared out among more people

- Legal procedures...involve time

- Not allowed to cell shares to the public

- Restricts amount of capital raised

- Difficult to find a buyer if shareholder wishes to "leave"

Good example of privet limited company is Littlewoods Ltd.


The second type of limited company tends to be larger and is called a public limited company. There are about 1.2 million registered limited companies in the UK, but only 1 per cent of them are public limited companies. However they contribute with far more to national output and employ far more people than private limited companies.

Good example of public limited company is Tesco plc. which I going to investigate.


Co-operatives are organised on a regional basis. Members can purchase shares and each member has one vote at the Annual General Meeting, no matter how many shares are owned. Members elect a board of directors who appoint managers to run day to day

business. The Co-operative is run in the interests of its customers and part of any surplus is distributed to members as dividend. Shares are not sold on the stock exchange, which limits the amount of money that can be raised.

Good example of co-operative is CRS (Co-operative Retail Society).


Charities are organisations with very specialised aims. They exist to raise money for "good" causes and draw attention to the needs of disadvantaged groups in society. They also rise awareness and pass comment on issues, such as cold weather payments, which relate to the elderly.

Charities rely on donations for their revenue. They also organise fund raising events such as fetes, jumble sales, sponsored activities and ruffles. A number of charities run business ventures. Charities are generally run according to business principles. They aim to minimise costs, market themselves and employ staff. Most staff are volunteers, but some of the larger charities employ professionals. In the larger charities a lot of administration is necessary to deal with huge quantities of correspondence and handle charity funds. Provided charities are registered, they are not required to pay tax. In addition, business can offset any charitable donations they make against tax. This helps charities when raising funds.

Good example of charity is British Red Cross.


A franchise is not a form of business organisation as such, but a way of managing and growing a business. Franchising covers a variety of arrangements under which the owner of a businnes idea grants other individuals or groups to trade using that name or idea. However, it is important to realise that a franchise can trade as a sole trader, a partnership or a private limited company. The legal form of business that is chosen will depend on the capital needed, the degree of risk, the number of people having a stake in the franchise and the personal preferences of the owner. The person or organisation selling the idea (the franchisor) gains a number of advantages from the process of franchising. The franchisor normally receives a share of the profits generated by the franchise. Usually the franchisee benefits by being granted rights to an exclusive territory and support from the franchiser in the form of staff training, advertising and promotion.

Franchising is a cheap and quick way to set up your own business. By the year 2004, it is estimated that 70 per cent of all new retail outlets in the US will be franchises.

Good example of franchise is McDonald's.

Industrial sectors.

PRIMARY - extractive organisations.

SECONDARY - manufacturing organisations.

TERTIARY - providing-services organisations.


PUBLIC SECTOR: Civil service, Government departments, Public corporations, Local Authorities.

PRIVATE SECTOR: Sole traders, Partnerships, Limited companies, Charities, Co-operatives, Franchises.


- To make a profit

- To "Break - even"

- To provide service


- Small

- Medium

- Large


- Local

- Regional

- National

- Multinational


Tesco plc.


Tesco was founded in 1924. Over the last seventy years, as the food retailing market has changed, the company has grown and developed, responding to new opportunities and pioneering many innovations. Today it is Britain's leading food retailer.

The founder of Tesco was Sir Jack Cohen. He used his gratuity from his Army service in the First World War to start selling groceries in London's East End markets in 1919. The brand name of Tesco first appeared on packets of tea in the 1920s. The name was based on the initials of T.E. Stockwell, a partner in the firm of tea suppliers, and the first two letters of Cohen. The first store to be opened was in 1929 in Burnt Oak, Edgware.

The business prospered and grew in the years between the wars. In 1947 Tesco Stores (Holdings) Ltd was floated on the Stock Exchange, with a share price of 75p. The price at the beginning of March 1998 was around 515p.

Self-service supermarkets started in the USA in the 1930s during the depression. They soon realised that by selling a wider variety and larger volume of stock and employing fewer staff they could offer lower prices to the public.

Self-service stores came to Britain after the Second World War, and Jack Cohen opened the first Tesco self-service store in St Albans in 1948.

In 1956 the first Tesco self-service supermarket was opened in a converted cinema in Maldon. By the early 1960s, Tesco had become a familiar name. As well as groceries, the stores sold fresh food, clothing and household goods. Tesco stores were located in the high streets of many towns. The Tesco store which opened in Leicester in 1961 had 16,500 square feet of selling space and went into the Guinness Book of Records as the largest store in Europe.

By buying in bulk and keeping costs down, Tesco should have been able to sell at very competitive prices to its customers. Until 1964, however, suppliers were, by law, able to insist that retailers charged a set price for their products (the system known as Resale Price Maintenance) which meant that it was difficult to reduce prices. The intention was to protect small shops against the lower prices that big retailers could offer their customers.

Tesco introduced trading stamps so that it could bring lower prices to its customers. Customers collected stamps as they purchased their groceries and other items. When they had collected enough stamps to fill a book, they could exchange the book for cash or other gifts. Other retailers soon copied Tesco. Sir Jack was one of the leaders in persuading Parliament to abolish Resale Price Maintenance in 1964. After this, Tesco continued to offer trading stamps until 1977.

Apart from opening its own new stores, Tesco bought existing chains of stores. In 1960 it took over a chain of 212 stores in the north of England and added another 144 stores in 1964 and 1965. In 1968 the Victor Value chain became part of the company.

Tesco introduced the concept of a superstore in 1967 when it opened a 90,000 square feet store in Westbury, Wiltshire. The superstore was a new concept in retailing - a very large unit on the outskirts of a town, designed to provide ease of access to customers coming by car or public transport. The term superstore was first actually used when Tesco opened its store in Crawley, West Sussex in 1968.

By 1970, Tesco was a household name. Its reputation had been built on providing basic groceries at very competitive prices; the slogan 'Pile it high and sell it cheap' was the title of Sir Jack Cohen's autobiography. But as people were becoming better off, they were starting to look for more expensive luxury items as well as everyday household and food products. In the late 1970s the company decided to broaden its customer base and make its stores more attractive to a wider range of customers. Many of the older, high street stores were closed and the company concentrated on developing bigger out-of-town superstores. The superstores sold a broader range of goods, and had wider aisles and better lighting. While still offering very competitive prices, the emphasis was now on quality, customer service and a customer-friendly environment. In 1974, the company developed filling stations at its major sites, selling petrol at very competitive prices. In line with its new image, Tesco finally stopped giving trading stamps in 1977, at the same time introducing a price cutting campaign under the banner "Checkout at Tesco" which proved to be a major success.

In one year in the late 1970s, the Tesco market share increased from 7% to 12%, and in 1979 its annual turnover reached £1 billion for the first time.

During the 1980s, Tesco continued to build new superstores, opening its 100th in 1985. In 1987 it announced a £500 million programme to build another 29 stores. By 1991, the popularity of Tesco petrol filling stations at its superstores had made the company Britain's biggest independent petrol retailer.

In 1985 Tesco introduced its Healthy Eating initiative. Its own brand products carried nutritional advice and many were branded with the Healthy Eating symbol. The company was the first major retailer to emphasise the nutritional value of its own brands, to customers.

By 1990, Tesco was a very different company from what it had been 20 years before. The Tesco superstore offered customers a very wide range of goods, a pleasant shopping environment, free car parking and an emphasis on customer service. Although many financial experts had not believed that the company could so radically change its image, the new approach saw sales and profits rise consistently. Existing customers took advantage of greater choice, and new customers discovered that Tesco could successfully match the offer of any of its retail competitors.

In the 1990s, the company built on its success by developing new store concepts and new customer-focused initiatives. In 1992, it opened the first Tesco Metro, a city centre store meeting the needs of workers, high street shoppers and the local community. This was followed by Tesco Express, combining a petrol filling station with a local convenience store to give local communities a selected range of products. The company also expanded into Scotland when it acquired a chain of 57 stores from William Low.

Tesco broke new ground in food retailing by introducing, in 1995, the first customer loyalty card, which offered benefits to regular shoppers whilst helping the company discover more about its customers' needs. Other customer services followed, including home shopping for those who hadn't the time to visit a superstore, Tesco Direct for catalogue shoppers and the Tesco Babyclub for new parents. Currently, the company is adding financial services to its provision for customers.

By 1995, Tesco had become the largest food retailer in the UK.

In the 1990s, Tesco started to expand its operations outside the UK. In Eastern Europe, it has met growing consumer aspirations by developing stores in Poland, Hungary, Slovakia and the Czech Republic.

Closer to home, in 1997 Tesco purchased 109 stores in Ireland, which gave the company a market leadership both north and south of the border.

Tesco Chairmen 1947-1998

Sir Jack Cohen 1947-1979

Sir Leslie Porter 1979-1985

Sir Ian MacLaurin (Lord MacLaurin from 1996) 1985-1998

John Gardiner 1997

Chief Executive Terry Leahy 1997

The letters 'plc' at the end of its name distinguishes a public limited company from a private limited company. Most of Britain's famous businesses such as Marks and Spencer, ICI, BP, and Manchester United are public limited companies. All companies with share prices quoted n the London Stock Exchange are public limited companies.

To become a public limited company, a business must have an issued share capital of at least £50,000 and the company must have received at least 25 per cent of the nominal value of the shares. Public limited companies must also:

* be a company limited by shares

* have a memorandum of association with a separate clause stating that it is a public company

* publish an annual report and balance sheet

* ensure that its shares are freely transferable - they can be bought and sold.


* All members have limited liability.

* The firm continues to trade if one of the owners dies.

* Huge amount of money can be raised fom the sale of shares to the public.

* Production costs may be lower as firm may gain economies of scale.

* Because of their size plcs can often dominate the market.

* It becomes easier to raise finance as financial institutions are more willing to lend to plcs.


* The setting up costs can be very expensive - running into millions of pounds in some cases.

* Since anyone can buy their shares, it is possible for an outside interest to take control of the company.

* All of the company's accounts can be inspected by members of the public. Competitors may be able to use some of this information to their advantage. They have to publish more information than private limited companies.

* Because of their size they are not able to deal with their customers at a personal level.

* The way they operate is controlled by various Company Acts which aim to protect shareholders.

* There may b a divorce of ownership and control which might lead to the interests of the owners being ignored to some extent.

* It is argued that many of these companies are inflexible due to their size. For example they find change difficult to cope with.

Tesco plc. is large, private sector organisation. As it is providing-service organisation I can classify it as tertiary sector organisation. Tesco plc. is a national company, but it is becoming to multinational. Main objective is to make a profit.

As Tesco is a limited company that means all owners have limited liability. If a company has debts, the owners can only lose the money they have invested in the firm.

Main source of finance is selling shares and borrowing from the banks. Tesco has a thousands of owners, every man who has any shares is owner; but these people can't control the company, so company has a board of directors and chairman who control the company.

Tesco has a heavy programme of capital expenditure, investing in new stores and upgrading existing ones. In the year ending 28th February 1998, the group capital expenditure was £841 million, compared to £758 million in the year ending 28th February 1997. This £841 million was divided into £737 million spend in the Great Britain, £63 million in Ireland, north and south, and £41 million in Europe. Tesco anticipates that in the 1998-9 financial year, capital spending will rise to about £950 million, with most of the extra spending being concentrated in Ireland and Central Europe.

Profit is also distributed to shareholders in the form of dividends.

For example, in 1998 the profits from Tesco after tax were £505 million. About 50% of the profits were distributed to shareholders as dividends. Subsequently approximately £250 million was retained by the company for investment in new stores and improving their service to customers.


Objectives of the business.

The objectives of the business can vary enormously A charity's overriding objective might be to alleviate poverty in the developing world; on the other hand many companies' major objective is to generate the maximum profits possible. An organisation's mission statement gives an indication of the purpose of the business and dovetails with the objectives the organisation set itself.

Mission statement.

Many organisations attempt to express the purpose of their being within a few sentences. The mission statements are intended to provide a sense of common purpose to direct and stimulate the organisation. This statement represents the vision or mission of the organisation. Mission statements change over time to reflect the changing competitive nature of the markets in which business sell.

Mission statement normally set out to answer the following questions:

* What business is the organisation in?

* Who is to be served?

* What benefits are to be provided?

* How are consumers to be satisfied?


Business objectives are medium- to long-term goals or targets that provide a sense of direction to the business. Objectives are normally measurable and have a stated timescale.

Company may have a number of objectives. In general, the objectives pursued by a business tend to vary according to its size, ownership and legal structure.

Figure 1.1 illustrates the interrelationship between a company's mission statement and its objectives.

Figure 1.1: The hierarchy of objectives

The goals pursued by any business can be separated into primary and secondary objectives.

* Primary objectives are those that must be achieved if the business is to survive and be successful. These relate to issues such as profit levels and market share.

* Secondary objectives tend to measure the efficiency of the organisation. They may affect the chances of success, but only in the long term. Examples include administrative efficiency and labour turnover rates.

Profit maximisation.

Profit maximisation one of the most important objective for companies which are owned by shareholders. Profit, at is simplest, refers to the extent to which revenues exceed costs, so profit maximisation occurs when the difference between sales revenue and total cost is greatest.


Survival is an important objective for many businesses. It is particularly important when businesses are vulnerable such as:

* during their first few years of trading

* during periods of recession or intense competition

* at a time of crisis such as a hostile takeover.

Most recently established businesses have survival as an objective.

Increasing sales or market share.

Growth increases the scale of a business, resulting in higher levels of output and more sales. Many businesses pursue growth strategies because their managers believe that this is essential for survival. If a firm grows, it might be able to attract more customers, earn higher profits and begin to establish itself in the market.

Growth offers:

* increased returns for the owners of the business

* higher salaries for employees of the business

* a wider range of products for the business's existing and potential customers.

Growth can be important target for managers. It is increasingly common for managers' pay packages to be a combination of shares and salary.

Providing social or community service.

A number of organisations provide services to the community. These organisations are part of the public sector - they are managed, directly or indirectly, on behalf of the government - yet they are a form of business. Their overriding objective is to provide the best positive service to the local community.

Charitable and non-profit objectives.

Charities have a high profile in the UK. Charities have a number of clear objectives:

* to rise the public's awareness of the cause that thy support.

* To rise funds to support their projects.

Charities trade with the intention of earning as much revenue as possible to spend on their particular causes.

Producing high quality products.

Just as many businesses seek to provide high quality service, a large number of businesses also have the provision of high quality product as an important objective. Acquiring reputation for top quality can allow businesses to charge a premium price and to enjoy higher profits. Reputations for supplying quality products are jealously guarded.

Tesco is committed to retaining its position as the UK's largest supermarket retailer. Customer feedback forms, in-store discussion groups and a continuous analysis of sales figures has enabled Tesco to recognise the importance of the key principles of price, quality and service.

The company owes its success to its emphasis on meeting changing customer needs through service and innovation, while maintaining its commitment to value and quality.

Underlying its business success is a commitment to upholding certain values and working and working principles and seeking continuous improvement in its ethical performance.

Companies are part of the society in which they operate and must take note of the interests and concerns of many different groups. For Tesco these includes its customers, its stuff, its shareholders, its suppliers and people in the local communities close to its stores and in the world beyond. Each group has expectations of the company which Tesco has to meet and manage if it is to maintain its position as a leading and successful retailer.

Tesco must serve its customers by providing the goods they want and the service they expect. By meeting customers needs better than its competitors, Tesco earns profits and creates value for its shareholders.

Tesco, like other large companies, however, recognises that its wider reputation depends on other things such as its stuff relations, its attitude to the environment, its support to the community, and its relationships with suppliers. Also as a leading food retailer, the company must ensure that its provides products which are safe to eat or use, as well as giving customers advice on matters such as healthy diets.

Tesco's main business objectives:

* to provide customers with outstanding, naturally delivered, personal service

* to earn the respect of its stuff for the values and appreciate their contribution

* to understand customers better than anyone

* to be competitive even on the basics

* give customers a broad range of strong relevant promotions in all departments of the store

* give customers what they want under one roof

* provide an environment that is easy and pleasant to shop in

* upgrade existing stores to the standards that is expected from Tesco

* to recognise Tesco has brilliant people, use this strength to make customers' shopping enjoyable in a way no competitor can

* use intelligence, scale and technology to deliver unbeatable value to customers in everything Tesco does

* to maximise profits to provide high returns for shareholders

* to increase sales or market share as much as possible

* advertising should appeal to all customers in a relevant

Tesco's main mission statements:

* To be world's best and largest supermarket retailer.

* Completely increase value for customers, and to earn their time loyalty.

How Tesco is going to achieve these objectives?

What Tesco expects from its staff in order to achieve this?

Tesco staff:

* Are all retailers, working as a one team.

* Trust and respect each other.

* Respect all customers, the community, suppliers and the competition.

* Strive for personal excellence in everything they do, leaving no stone unturned in order to get it right.

* Are encouraged to take risks, give support and do not blame others.

* Are rewarded for creating value for customers.

* Are talked and listened to: and their knowledge is shared, so that it can be used.

* Have fun, celebrate success and learn from failure.

What is the comment Tesco has to its customers?

Tesco customers want the best possible value for their money. Tesco is determined to offer its customers quality products, good service, attractive stores and low prices.

To meet this aims, Tesco:

* works closely with suppliers to ensure products are of the highest quality and are delivered to stores in the best possible condition.

* makes sure that its staff are committed to giving the best possible quality of service.

* aims to create in its stores an environment which makes shopping easy, interesting and comfortable.

For example, in 1993 Tesco introduced Value lines, which offer exceptional value for money, followed by New Deal Pricing on leading commodities and brands in 1994. In 1996, Tesco introduced Unbeatable Value with the pledge that nobody would sell the equivalent product for less price.


Organisational functions.

All organisations require resources to carry out their functions. One way of judging the success of a business is to compare the resources it uses with the value of the product that results. For example if it is a small business running by it's owner, for example small shop, so it doesn't need any workers, large piece of land and big capital, owner can work alone. But if it is a very large business like car manufacturing so it requires a lot of workers, very large piece of land and big capital.

The resources of the business.

One way of considering the resources used by a business is to classify them into the factors of production. The main capital of production are capital, labour and land.

- CAPITAL refers to any manufactured product used by the business to make other products. This category therefore includes all machinery, vehicles and office equipment used in businesses. It also includes the company's buildings.

- LABOUR is the human resources used by business organisations during production.

- LAND - site on which the business is located and natural resources it might use.

- ENTERPRISE - owners and shareholders.

Functional areas.

All businesses combine factors of production as an essential part of their production activities. To combine these factors, to engage in production and to achieve their objectives organisations undertake a number of functions. The major business functions include:

* finance

* production

* human resources

* administration

* research and development

Business requirements for functional areas depends on its size, for example small business might merge many of these functions within their administration department, with responsibility in the hand of one or two people. As a business grows the number of people required to carry out these functions increases.

The financial function.

Extensive use of IT

Produces standards

cost data

Customers Auditors Inland Revenue and

(price list) (accounts) Custom & Excise

(information relating

to tax liability)

Figure 1.3: The financial function

A separate department normally carries out the finance function of the business. The finance department carries out a number of key activities:

* records all financial data

* chases up slow payers

* collects payments from customers

* provides information to external bodies

* analyses costs

* advises board of directors

* monitors and analyses financial data

* advices managers and budget holders

Production function.

Production covers all the activities that must be undertaken to make the firm's products, from the receipt, of raw materials through to the output of the final product. The production function concentrates primarily upon planning and controlling the various stages of production so that the most efficient use is made of business resources.

Production manager responsible for:

* maintaining supplies of components and raw materials to ensure continuous production

* ensuring that the precise requirements of customers are met

* monitoring quality to insure that finished products meet the quality standards expected by customers
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* using resources - people, machinery and production space - as efficiently as possible to make the business competitive in the markets in which it trades.

One of the most important issues in production is quality. Modern businesses compete just as strongly on the quality of their goods and services as they do on price.

For example it is vital for a washing machine manufacturer to produce a high-quality product. If the machine is not reliable or does not have a wide range of functions, customers are more likely to purchase a competitor's product.

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