Report on 'Boots'.

Disadvantages

• A public company must be registered as such with the Registrar of Companies and has many external regulations to comply with. Any problems a company encounters may become news if the press run a story on it.
• Specific accounts must be prepared each year and these must be audited. The accounts must also be published so that a ‘problem year’ cannot be hidden.
• Shareholders will expect to receive a dividend in return for their investment. They will also want their shares to increase in value. If the company has a poor year or if the stock market performs poorly and the shares fall in value, shareholders will be tempted to sell, further lowering the price. This makes the company vulnerable to a take-over bid, as it is then relatively ‘cheap’ to buy.
• The shareholders may have little interest in the long-term prospects of the company and simply be interested in quick returns on their investment.
• The original owners may lose most of their control over the company, even if they retain a substantial number of shares.

Sole Traders

In this type of business there is only one owner and he/she can employ whom ever she wants to work in the business. This type of business is normally started up by someone’s personal savings and help from a bank or another person towards the start-up of the business.  Therefore the person who owns the business has unlimited liability which means that the owner may also lose his personal belongings and may be made bankrupt. If the firm is successful then the owner’s reward is the profit. The owner can keep all the profit after expenses have been paid (net profit), although they must pay income tax on this to the Inland Revenue.

        If the business is not successful the owner is the one who pays for all the losses. The sole trader can make all the decisions when running the business and is responsible for keeping accounts to show how much profit has been made each year.

Advantages

• Easy to set up – there are no formal procedures to follow, particularly if the sole trader is using their own name.
• Suitable for offering a personal service to customers.
• Applying the decisions made are quicker; no-one else to consult with
• The sole trader is their own boss.
• The sole trader can choose opening times of the business and when he/she wants to work.
• Unpaid debts can be avoided, as the owner usually knows the customers – and most transactions are usually for cash, rather than on credit.
• There is minimum paperwork – unless the business is registered for VAT.

Disadvantages

• Lengthy working hours
• Difficult to raise capital to start up or expand the business.
• Illness and sickness cause problems – When the business is closed the owner makes no money.
• Highly dependent upon the skills and ability of one person.
• The owner’s skills may only relate to his or her specialist area and be poor in relation to running the business and undertaking accounting, marketing and administration activities.
• Unlimited liability

Other Facts

• In law, the sole trader and the business are one and the same. If a local hairdresser ruined you, you would sue the owner, which may be the hairdresser himself or herself. When the owner dies the business ceases to exist.
• The capital to start the business is normally the owners own savings or borrowed from a family or a friend. Banks are often reluctant to lend money to sole traders.
• A sole trader can keep all the profit after expenses and income taxes are paid. The accounts of the business are private.
• Opportunities for development are likely to be limited because it is difficult to raise additional capital. The most usual way to expand is to plough the profits back into the business to extend the premises or open more outlets. However, this will depend on the ambition of the owner- many sole traders prefer to operate on a small scale.

Partnerships

A business partnership is set up by at least two people and up to twenty. The partners jointly own the business which responsibilities and risks are shared by the partners. People with different skills often form partnerships, so a greater range of services can be offered. In most partnerships, all the partners play an active part in the business. In some partnerships there may be one or more sleeping partners who have invested money but do not work in the business on a day-to-day basis. They usually receive a smaller share of profit than active partners.

        It is sensible for the partners to sign a Deed of Partnership which sets out the details of the partnership agreement, such as the salary of each partner, the share of the profits each one receives and the procedure to follow if there is a dispute. Whilst this is not a legal requirement, it does save disputes later. All partnerships are governed by the Partnership Act 1890, which assumes that all partners are equally liable for any debts, unless a Deed of Partnership with different terms has been drawn up.

Advantages

• Problems can be shared and discussed.
• New skills and ideas can be introduced.
• It is usually easier to raise capital as all the partners contribute.
• There are obvious benefits to be gained from combining the knowledge and expertise of all partners.
• The partners can specialise in their own particular area of expertise.

Disadvantages

• The partners may not always agree or contribute equally.
• The profits must be shared.
• All partners must be consulted before a major decision can be made.
• The partners have unlimited liability for any debts, and are therefore personally liable.
• The actions of one partner are binding on all the other partners.
• The death of a partner means the withdrawal of this share of the capital as the money must be paid into his/her estate. For this reason, it is usual to take out a life assurance policy on each partner’s life.

Additional Facts

• In law, the partners are ‘jointly and severally’ liable for the actions of each other. This means, for instance, that if one partner ran up debts and then disappeared, the others would be responsible.
• Partners share the profits equally, unless a different arrangement is specified in the Deed of Partnership. They are all liable to pay income tax on the profits.
• All the partners have unlimited liability for all debts but the accounts are still private. In a limited partnership, which is rare in the UK, the sleeping partners may only be liable for the amount they have invested in the business. In such cases at least one active partner must have unlimited liability for all the debts.
• Financing the business is easier because all the partners contribute towards the enterprise. Raising money for expansion is also easier. However, most partnerships are relatively small scale, though there are exceptions.

Co-operative

A co-operative is a corporation organized and controlled by its members, who put in resources to provide themselves and the others within the business with goods, services, or other benefits.

The co-operative's start-up capital usually comes from co-op shares purchased by members.

Each member's liability is limited to the amount of his or her share in the capital.

Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity.  In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.

Co-operatives are voluntary organisations; open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

Advantages

• owned and controlled by members
• democratic control (i.e. one member, one vote)
• limited liability
• Profit distribution (surplus earnings) to members in proportion to use of service surplus may be allocated in shares or cash.

Disadvantages

• Possibility of conflicts between members
• Takes longer to process decisions
• It requires participation of all members for success
• It requires extensive record keeping
• less incentive to invest additional capital

Franchises

A franchise occurs when a business, the franchisor, licenses its trade name, brand and business methods to an individual, the franchisee. This is a basic system for starting a franchise. When you’re starting a franchise you agree to operate the business in accordance with the Franchise Agreement with the franchisor’s support. In return the franchisee pays a fee as well as on-going royalties. If you’re starting a franchise, it’s important to know that there are two different types of franchise. When you’re starting a franchise any franchisor must give its new franchisees the systems and training that they need to operate their own business without having to work it out for themselves. The franchisor will have already made all the business mistakes. The franchisees are paying for the franchisor’s experience to gain a short cut during start up. The franchisee is essentially buying the experience of the franchisor, its brand or logo, business methods and both initial and on-going training and support. This is the only way of starting a franchise.

Advantages

• Well-known trademark, either regionally or nationally, and its growing goodwill - saving the business owner the cost of creating and advertising a name that customers already recognize.
• Established business framework – this way there is minimal work in starting up a business. Framework of the business is already made.
• Well-tested sources of supply and service - saving time and trouble in finding suppliers of needed products and equipment.
• Ongoing sales and marketing assistance - franchisors have proven, existing, and successful systems of advertising and marketing.
• Reduction of risk - you are buying into an established business so the risk of failure is lower.

Disadvantages

• Loss of control and freedom - since the franchisor's standards have to be followed, a franchisee may have limited opportunities to use his/her own initiative
• Continuous royalties could be as high as 10% of revenues - this amount could determine whether you business is profitable or not.
• Advertising fees - there is usually a fee for advertising on a regional or national basis. If the franchisor does not make the best use of your advertising money, this could be a waste of money.
• The franchisor's problems are also your problems - for example, you could have a serious issue if there was a conflict between the franchisor and a major supplier.

Charities

Charities are often run by full-time professionals and supported by a network of volunteers, which maybe all over the world, an example of a worldwide charity is UNICEF.  There are more than 6,000 registered charities and voluntary organisations in the UK alone; another example of a UK charity is the NSPCC, which helps protect children in the UK against cruelty. Such are organisations are financed by collections, flag days, donations, bequests and trading activities. Some organisations like the RSPCA even sell goods in stores such as Tesco to raise additional funds. Company sponsorship is also important, providing support such as free-rent accommodation, a minibus or the loan of a manager. The National Lottery also makes awards to charities to help boost them.

        In addition to charities, charitable trusts operate in both the private and public health and education sectors. These organisations operate as businesses but benefit from some tax advantages

Mutual Organisations

Some building societies and mutual life assurance businesses are non-profit making. Examples include the Portman Building Society and Standard Life Assurance Society. These types of businesses have no shareholders and no owners. They operate wholly in the interest of their customers (their members). Any surpluses they make are ploughed back into their business or paid to the organisations members

(E2)

Boots mission statement and objectives

“The Boots Company intends to become the leader in wellbeing products and services in the UK and overseas. This will be achieved through a major programme of change to a more integrated and focused company supported by the power and values of the Boots brand.

Our commitment to managing for value remains unchanged - to maximise the values of the company for shareholders and generate superior long term returns.

While vigorously pursuing our commercial interests we will always work to enhance our reputation as well as a managed, ethical and socially responsible company”

(E3)

Boots are trying to become the leader in wellbeing products and services by being able to identify their customers; they have done this by using the Boots advantage Card. It’s the largest smartcard loyalty scheme with 14million members; it gives them a unique insight.

For Boots, the Advantage card is a major marketing and merchandising initiative to help make better marketing and merchandising decisions and sell to our customers more efficiently.

This loyalty scheme has been created solely on the principles of relationship marketing. The way Advantage Card information can be analyse means that we can obtain a better understanding of our customer's requirements and have an opportunity to establish a meaningful two-way communication with them.

By analysing the information provided through the Advantage Card we can gain meaningful insight into our customers' shopping behaviour, resulting in more accurate marketing decision making. Our sophisticated database system is considered to be one of the most advanced technological sources of customer information available today

The target market for the Advantage Card is female, aged 20-45 have B and CI socio-economic status. This is the core and most valuable market to Boots and fits well the proposition (83% of Boots customers are female). The card is marketed on an emotional rather than a rational or tactical platform, recognising the importance of our customer's life stages and the part Boots can play in each of these.

The information that Boots collects to measure its success are things, such as:

• The profit and loss accounts
• The market share sector
• sales
• questionnaires

Last year at the end of the Boots year, which was 30th April 1999 the operating profit was 3.8%, however at the end of this year 29th April 2001 the operating profit has had an increase to 4.2%. The dividend per share last year was 2.2p, which has also increased to 2.6p. The total group turnover including VAT was £451,145, which went up to £477,430. The gross profit of the group turnover excluding VAT was £52,189, which went up to £58,727. The profit on ordinary activities before taxation was £14,562, which went up to £17,161. The profit attributable to shareholders for the financial period was £11,358, which went up to 13,386. The retained profit for the period was £7,609, which went up to £8,940. As you can see above there have been no losses in the previous year from the year before.

(E4)

Boots has six functional departments that facilitate the company to achieve their ambitions:

• Finance
• Production
• Human Resources
• Marketing
• Administration
• Research and Development

The main performance of the finance function is:

• To record all business transactions
• Measure the financial performances of the business
• Control the financials and cash flow so the business stays solvent.
• Take timely financial decisions by comparing the predicted performance with actual performances.

This chart shows the structure of Boots finance department.

                                        Chief Accountant

          Payments           Coasting          Accounts             Wages

There are a variety of ways in which a business can increase finance in order to buy capital. The ways chosen by the business depends on:

•  amount of money needed by the business
•  risk the business shows to potential lenders
•  Amount of time the loan is needed.

The amount of time a loan is needed depends on the business and what the loan is needed for. There are three different types of financing, they are:

• short-term finance

• medium-term finance

• Large-term finance.

A short-term finance is normally required by a business when things such as the cost of raw materials have increased or when it is hard to pay wages and salaries to employees. A short-term finance normally lasts for about a year. There are three important methods of short-term finance, they are:

• Trade credit,
• Overdrafts  
• Debt factoring.

Trade credit is when the suppliers of a business grant them a favour of interest-free period in which they pay for goods and services that they have received.

This credit attracts businesses because it is free. The trade credit is widespread.

Overdrafts can sometimes be the best known method for a short-term finance. Overdrafts are offered by banks, which allow businesses to borrow money. This money is limited and also the business can borrow the money for as long as they want.

Debt factoring is a service provided by finance providers to help businesses to pay back money on other words debts and to build up cash.

Medium-term finance is mostly used to replace short-term finance. Medium-term finance lasts for 2-8 year. It is used for things such as leasing, hire purchasing and bank loans. Leasing is when a company rents out things like photocopiers and computers and so on. It does not necessarily have to do with property. The advantage of leasing is that the company is able to

Update their assets regularly. The costs of these assets are at reasonable prices so that the company is able to make a little profit.

Hire purchase is the same as leasing but when the company has finished paying for the material that they have bought the material is the companies to keep. The ways that companies do this is they put a deposit in and then pay the rest slowly. This is normally used for things such as cars. The advantage of this is that once the business has paid for the item it then becomes theirs to keep. However the disadvantage is that it will cost the business more than if it bought it all at once.

Bank loans are normally used for buying material with banks or building societies. This is only done if the business agrees to pay the money back within a limited time.    

A long-term finance is used for major capital such as land or buildings. Companies also require a long-term finance when looking towards moving on or taking over another company.

Production

Production can be measured in a number of diverse ways. Production covers a broad area of process of adding value when businesses supply goods and services to customers. Production is either altering or improving in order to make the business superior. One change which can be considered is technology because whilst it is changing it is also improving. Firms this way operate faster and more efficiently. It also gives a better reputation to the business.

The Boots production team includes them assembling the Boots education website and other Boots services. The production team is responsible for providing sufficient goods to meet customer demand. Additionally, other activities are included:

• Maintaining and Improving quality
• Controlling costs and working efficiently
• Meeting the specific needs of customers
• Ensuring adequate stocks of raw materials and finished goods
• Maintenance and control of machinery and equipment.

The method of production is an important factor in determining the amount of added value in business. A high level of added value can be achieved if there is

• Effective use of labour
• Minimum wastage
• Maximum utilisation of equipment

Boots effective use of labour means the employing of specialist staff, for instance, should there be sufficient work. There is an increasing tendency to employ people on short term contracts to allow business ‘flexibility’.

Effective records management is an integral part of Boots ongoing strategy for creating and maintaining an efficient organisation. Minimum wastage and loss of raw materials calls for detailed control and often calls for computerisation. At Boots we make full use of our computerised stock control system to analyse flows, minimise delays in ordering and avoid the problem of ‘dead stock’.  An internal computerised system for sending and retrieving boxes can be accessed by any authorised member of Boots staff. The system consists of a database which records the ID, contents, ownership and duration of storage for each archive box. Access for retrieval can also be restricted by record owners, if necessary.

The benefits of the system primarily lie in the more efficient use of the prime office space, along with the speed and efficiency of access to the records. The estimated cost savings for outsourcing these records is around £250,000. Overall, this initiative provides cost-effective and well-managed off-site storage for important company records that are easy to access through a secure and reliable service.

Human Resources department perform a number of needs and is one of the most significant departments in an organisation. The human resource department is accountable for employing and dismissing employees, for staff training and development, and for dealing with matters relating to industrial relations. The human Resources department also makes sure that the organisation has the right number of employees and the right quality of employees, they also have to determine techniques to measure and reduce labour turnover.

The Human resources department of Boots is to

• Equal pay policy

This is when each person should get paid evenly according to the number of years worked.

• Equal opportunities policy

Everyone should be able to do a multiplicity of jobs inside the business without regard of their gender.

• Sick pay policy

This is when an employee has fallen sick they have the privilege of pay for the number of days taken off only if mentioned at the beginning. Most businesses start this policy after about a year.

• Non-discrimination policy

This is when people discriminate each other (E.g. - Racism)

All these come under human resource policy. The directors are normally in control of this regime.

The effective use of human resources can increase the value added in production. The way in which this can be done is that managers can train and motivate staff. Training can help staff and the business. This is done by the staff gaining more knowledge and experience and for the businesses wastage can be decreased.

The main purpose of the Human Resources department function is to recruit, select, train and develop staff.

Boots rely on finding the tight people, training and developing them so they achieve their maximum potential and creating systems that achieve high levels of morale and motivation. The purpose of personnel administration to provide and develop systems to carry out these functions and to maintain accurate personnel records as required by the law.

Administration

Administration is considered in different ways. These ways are things like:

• administration systems
• process and procedures
• Security.

Administration is an operation of which:

• Information is collated
• Information is converted
• Information is stored
• Information is then given out.

Information is something, which helps to make decisions. Especially for managers. That is why it needs to be:

• accurate
• on time
• complete
• Good effect on cost.

Administration process is the way things are done. Things such as manual or automatic process or paper or electronic process.

A wide majority of administration systems today are automatic and electronic because of the technology developing dramatically and making it more efficient to work.

Administration systems need to be secure. There are three things to secure, which are:

• Information
• Finance
• Electronic data files.

Information should be secure so that a firm could produce products that others don’t. If other firms know about the product then the first firm will not make the money as it ought to make because customers will start buying the product from other firms as well.

Marketing is to convene the customer needs in a way to make a profit at the same time. The individuals who are accountable for marketing in the organisation have to find out the requirements for the future as well. Reviews have to be made in marketing so that the firm can keep track to see if they are meeting customer wishes. A way an organisation can measure success is that if the customers repeatedly by the same product this shows the product is succeeding and is a success. Marketing as a whole is an important aspect in business. It covers a lot of things such as:

• Functions of marketing
• Marketing research and development
• Communication
• Customer needs and satisfaction.

The marketing departments in Boots are constantly thinking of new ways to market a product. Whist Boots continue to use tried and tested methods such as TV press and advertising, new communication channels mean that there is a wider array of tools Boots can use to get their message across to their customers. Examples including Internet and Direct Mail through the Boots Loyalty Card.

(E5)

Boots has a consultative style of management leadership, there heading towards their goal with renewed energy and ambition, stepping up investment to drive sustainable top-line growth and working to enhance their reputation as a well managed, ethical and socially responsible company. It is good to have a Consultative style of management because management is concerned with planning, controlling and co-ordinating and use of resources.

The culture in a business is the set of customers. Values, attitudes and behaviour adopted and shared by its fellow members. The culture sets the standards for the business, it gives support and guidance. The culture of an organisation directly affects its structure. Both have to work in order to achieve its aims.

Role Structure        or bureaucracy

• Formal Structure which is hierarchical
• The organisation chart defines the role of every individual
• The job or role tends to be more important than the person
• The limits of every job are strictly controlled
• Emphasis on rules, routine and procedures

At Boots they are working to enhance their reputation as a well managed ethical and socially responsible company. As leaders in wellbeing we intend to reinforce our key role in the UK’s primary healthcare.

”We won’t abandon our role as ‘the nation’s chemist’. On the contrary, as leaders in wellbeing we intend to reinforce our key role in the UK’s primary healthcare.”

“We changed our culture by understanding customers better then anyone else and by taking care of our staff.”

(E6)

Boots PLC is a large company Nationwide, for this reason the importance of communication is vital to the company. Boots need to communicate with their staff and people outside the organisation. The types of ICT used in Boots are

• Intranet
• E-mail
• Sales System
• Stock Control System

The Intranet in Boots is pivotal, this is a system similar to the Internet, but it is used for sharing information entirely within the organisation.

E-mail is also another vital attribute to Boots, E-mail is the best method of communication, and Management can contact all staff immediately by just sending one E-mail. Boots PLC use E-mail to setup meetings also to send each branch a ‘Boots Newsletter’. The advantages of E-mail are that it is fast and efficient and frees up time for other tasks, and also there is a permanent record of E-mails available on the hard disk.

Internal communication is information that is moved from one place to another within an organisation. The internal communication in Boots is aimed to: motivate, encourage teamwork, command, organise people, influence attitudes and encourage performance. The methods that are used to do this are: telephones, interviews, discussions, staff meetings, lectures, team briefing, face-to-face talk and tonnoys.

External communication is communicating with outside people such as suppliers of goods, shareholder, customers and so on. The methods, which are used to do this, are: telephones, fax, e-mail, face-to-face talk and computers...

Internal Communication:

The way that internal communication contributes to Boots is that it needs to transfer information for e.g. a person needs to be supervised on the tills so it uses a tannoy to call a supervisor. Another example is a worker needs to improve his/her performance so the manager has a discussion and gives him/her a little lecture. These two examples show what information needs to be transferred and what methods are used to do this.

External Communication:

Boots PLC also uses External Communication within the business and outside the business. They also use E-mail as a form of communication within the company and they feel they could sue it to communicate with different departments. They could also use Fax which would make it more formal but it would have to be word-processed. Boots frequently send Fax’s to other branches.

ICT has a vital importance in communications in this day and age. By using the Internet, faxes and letters, Boots management very rarely have face-to-face conversations with Head-Management because it is more sufficient and time consuming.

ICT is very effective in communicating and is also very important in an organisation. Boots PLC would find it very hard to communicate face to face with each employee; the use of ICT has given businesses more assistance. Customer Services have improved because of ICT, ICT has increased customer satisfaction.