Report on Tesco plc
Terms of reference
To investigate Tesco plc.
This report on Tesco plc was requested by Margaret McNally on Friday 26th September 2003.
Procedure
. Research the Tesco website and found information.
2. Spoke to staff from Tesco.
3. Found information in textbooks.
4. Visited Tesco to find information.
Findings
. History of the company
When Sir jack Cohen first started out in 1919 he began as a sole trader and was selling groceries in London's markets. The brand name Tesco didn't appear until the 1920's. Over the years Jack Cohen's business grew and become a partnership. There are many advantages of this one being that more funds are available and also you can share the responsibility of the business. This can be an advantage to some people and in Jack Cohen's case it was a good idea to go into partnership because he just kept expanding his business and has come very far in life. To start as a sole trader and now become Europe's biggest food retailer. A disadvantage of being a sole trader is that you have unlimited liability over your business and could find it difficult to obtain additional funds, also you have all the work to do and it might get too much. A disadvantage of being a partnership is that you still have unlimited liability and capital may be restricted. Where as an advantage of been a sole trader is that it is your business so you are your own boss, also you get to keep all the profits.
.2 How Tesco started its chain
Tesco opened its first store to the public in the late 20's at Edgware. By the early 30's they opened a self-service supermarket in the USA. The name Tesco came from a partner in tea supplies, which was based on the initials T.E.Stockwell. They started selling a bigger range of stock and buying in bulk, which meant that they could promote low prices. By now Tesco were been recognised and in 1947 they were quoted on the stock exchange with share prices at 25p. This was when Tesco became a plc, which meant that there were more funds available and the partners of the company might specialise in certain aspects of the business. A disadvantage to the company of being a public limited company is that they will have a lot of paperwork to do and also plc's can often be seen as remote from their customers. Tesco also must produce a memorandum of association this is a document that gives you an insight into what the company is and what it is concerned with. There is also something called articles of association this is something that sets out the rule that govern what goes on inside the company. Although is not a franchise if they were this might be an advantage because they could benefit, as they are able to expand their business with limited finance also franchisers are able to keep any remaining profits. If Tesco was a franchise this might be a disadvantage because they are often restricted to a specific site and for a specified time. Even though Tesco is a plc now it started as a private company the advantages of this are they have limited liability and it is easier to borrow money. On the other hand a disadvantage would be that you cannot sell shares to the public and may only have one director to handle everything.
As Tesco began to expand again they brought about selling clothes, household things and fresh food. With the demand for more space to store all the stock they opened a store at Leicester and measured 16,500 feet in 1961, which hit the Guinness book of records. In 1960 Tesco took over a chain of North East stores and then added another 144 stores in 1964 and 1965. By now Tesco were looking to expand even further and came up with the idea of superstores and in 1985 they opened the 100th. They also brought a store called Tesco metro 1992 this was to cater for shopping centres.
.3 Tesco organic range
In 2001 they decided to expand the range of organic food and now stocks over 1,100 organic products. Tesco is the Uk's largest organic retailer. Recently they have announced that a further £12 million products are sourced in the Uk. They have to keep up with customer demand for these products and have extended the range of organic products and have cut prices on 50 of the most popular brands people buy.
.4 Tesco annual turnover
Tesco have a very big turnover now from 2001 - 2002 Tesco saw an 82% rise in its annual turnover. Between 2002 and 2003 the profit grew to £1,946 million sales by this time were £28,613 million.
.5 Company sectors
Tesco operates as a public limited company, which means that shares can be bought and sold and the staff have unlimited liability over the company. Also a board of directors on behalf of the shareholders run it. Being a plc also means that the business has a higher status. With a public limited company it is normally the shareholders and board of directors that have control over the company. The way in which the profits are distributed is that because there are shareholders they will receive a dividend from Tesco for their share that they have in the company. When becoming a plc you need to have certain documentation this will include. Tesco is registered under the company's act 1985.
.6 Comparison of companies
A comparison with Tesco to Morison's is to be made because they are both big retailers in Britain but the difference is that Tesco is not just a British company they went multinational and expanded to sites all over the world and not just England. Tesco went multinational because they had a chance to expand and raise more capital. A multinational company is an organisation that owns or controls production or service facilities outside the UK. As with Tesco, Morrisons started as a sole trader and became a public company in 1967. They ...
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.6 Comparison of companies
A comparison with Tesco to Morison's is to be made because they are both big retailers in Britain but the difference is that Tesco is not just a British company they went multinational and expanded to sites all over the world and not just England. Tesco went multinational because they had a chance to expand and raise more capital. A multinational company is an organisation that owns or controls production or service facilities outside the UK. As with Tesco, Morrisons started as a sole trader and became a public company in 1967. They also both started as a small business and expanded into small shops and grew from there. As both companies expanded and bought more sites for there shops Tesco began to expand in different ways. They expanded outside the UK and have sites all over Europe where as Morison's only expanded in the UK. They now have 123 supermarkets in the UK Tesco have 1,982. As Tesco states they have grown and developed responding to new opportunities Morrison on the other hand try to keep customers coming back and offer extended opening hours at all stores this includes Sunday shopping. They also offer free car parking, including spaces for parents with children and people with disabilities. Both Tesco and Morrison offer facilities for petrol and baby changing rooms. At Morison's they design the facilities to make visits as convenient and as comfortable as possible. Morison's and Tesco both say that they try their best to offer value for money. Morison's say they deliver "the very best for less".
The main difference with Tesco and Morrison is that Morrisons is only a UK based company and Tesco is a multinational company. This is a big advantage because they can receive more profits and they get credibility for being the world best retailer.
Tesco has changed because when they went multinational the profits have more than doubled since they opened stores outside the UK.
2. Objectives
All businesses have their own objectives. Objectives in a business are something that the business wished to achieve or meet. Aims and objectives are what a business sets out to do. Tesco have objectives that they often try to meet just like any business. Tesco have a mission statement, Tesco call their mission statement the core purpose they say "creating value for customers, to earn their lifetime loyalty". They also say that no one tried harder for customers.
2.1 Profit
This year all four parts of the Tesco strategy, the core UK business, non-food, retailing services and international have increased in profitability. The current turnover for Tesco is now £21,615 and they have opened 1,982 stores in the UK and now have a total of £1.8 million sq ft of selling space. This has been of great profit to Tesco every time they open another store they increase the profit of the company and increase the share price. In the UK they opened 62 new stores this year creating another 1.4 million sq ft of selling space, which means that the profit has been increased. In the past five years Tesco have made a profit of £9,179 million this is because they have opened more stores and went multinational. In the next five years this profit will have most probably have trebled.
Tesco have a profit aim to keep the business going and because they have share holders they have to make sure they are going to make a profit out of there share. If Tesco were a co-operative supermarket then they would only want to break even because they haven't got shareholders and they only need enough money to re order and stock up. Tesco need to aim for a goal just like people aim to loose weight, tesco aim to make a certain profit margin and every year they try to aim high and reach their goals/objectives.
2.2 Growth
Tesco have grown in many ways, one of them is the profit. The profit has risen in 2002 from £1,221 million to £1,401million by the end of 2003. The sales have risen because of them introducing more new products the sales have risen from £25,654 million in 2002 to £ 28,613million by the end of 2003. Their objectives are to meet targets and succeed in being the world's best retailer. The graph shows the percentages of the turnover in 2001 - 2002 in the UK, Europe and Asia. It also shows the number of stores open and the percentage of selling space Tesco has. As in 1924 Tesco started off as a name on packets of tea bags, which the based on the initials T.E.Stockwell. Tesco has grown in produce and as time went on Tesco stores began to open across the UK.
2.3 Providing quality
Tesco have an aim to provide quality for customers and not just value for money this is to keep their sales up and keep customers coming back which relates to their customer loyalty incentive that they call their core business activity. In 1995 tesco launched "would I buy it" this was an incentive that was more focused on the highest quality for the customer. This is also a marketing strategy because they find the customer wants and needs and try and meet that this will most probably be sales and marketing's biggest aim to provide goods of a quality nature.
2.4 Building a skilled work force
Tesco employs 221,00 people in the UK and 75,000 in Ireland, Europe and south East Asia. Tesco aims to employ people who are motivated and willing to work well as part of a team and one of the company values is to "trust and respect each other". Tesco value people that are not discriminated because of age, sex, disability, sexual orientation, race, colour, religion or ethnic origin. Tesco aim to make the work place a satisfying place to work by giving staff the opportunity to be themselves Tesco say they "encourage their health and well being and support their work/life balance needs. They do there up most best to keep all staff happy and this means they will have a better workforce and they are willing to work well.
2.5 Serving the community
Tesco is committed to helping the local communities in many ways. One is to underline their belief that "every little helps". Tesco supports projects and initiatives this gives particular benefits to children, people with disabilities and the elderly.
2.6 Caring for the environment
Tesco take pride in taking care of the environment in many ways one being to "re think rubbish" they say they are always looking for ways to reduce packaging. Such as biodegradable packaging this means that people can dispose of fruit trays, cling film and plastic nets in the back garden rather than putting it in the bin. The packaging is made out of starch and will decompose without damaging the environment. They are also involved in reusable plastic crates, which are known as green trays they are used instead of cardboard boxes and other materials, which could damage the products. They won the Queens Award for the Environment 2002. Tesco aim to be more efficient and kind to the ozone layer to show customers that they can do more for the community by being environmentally friendly.
2.7 looking after the customers
Tesco use a number of things to help their customers like help for the hearing impaired. They have introduced a loop service is available on some checkouts and at the customer service desk and tobacco kiosks.
3. Functional areas of Tesco
A functional area in a business is what keeps the business running. Functional areas within a business include Production, Human Resources, Finance, Administration, Sales and Marketing and Customer Services. All these functions do not exist in every business some only have two or three. Businesses have functional like these so it is easier to run the business. The same way businesses have a purpose individuals in a business have set jobs to do. Most businesses have more or less all the functional areas to operate efficiently. They divide everything up so people can do different things like Tesco a person that works on the shop floor will not promote the products they sell as well, they get someone else to do that job. This is why a business is split into different areas so there isn't a big workload and they will have certain people to do jobs in those functional areas. All functional areas are designed to help, support and carry out the aims and objectives of the business. If the business wants to be efficient and effective there has to be good links with all individuals in each functional area.
3.1 Functional areas
There are a few different functional areas within a business and they all do different things but not all of them apply to all businesses. Human Resource (personnel) is one of Tescos functional areas. This function covers most responsibilities all concerning people employed within the business. This function is also responsible for the hiring and firing of employees. They are also involved in staff training and development. Figure 1 shows some of the responsibilities of this function.
Figure 1
Another functional area at Tesco is Finance this function is a department that is responsible for all financial records of the company. This will involve keeping the records in manual form or on a computer file. They will also produce financial statements for the company. This department also normally oversees the payment of wages and the handling of cash from the cashier at the end of a working day. They are responsible for the management of the accounts. The finance function will also be closely involved in the planning process, as it is responsible for raising the finance needed by the business. Tesco have a finance department to organise all financial documents and help with the payment of wages. This is a big function and without the finance function businesses like Tesco would not be able to function and staff would not be paid correctly.
Another function that exists in Tesco is Sales and Marketing this is a very important function within a business because this function is needed to sell goods/services. The Sales and Marketing function works with customers to provide the best quality products at the lowest price. Employees in this function research what their customer's wants and needs are and try to meet them. Also in Sales and Marketing function they research new products and find the best way to advertise and sell them. Sales and Marketing are split into different sections marketing get the company to produce what the customer wants and the sales gets the customer to want what the company has produced. Sales and Marketing play a big part in business because without this function the business will not be able to operate effectively. Some other jobs Sales and Marketing do are market research, advertising, packing, promotion, distribution and pricing.
The Administration function is where staff deals with any enquiries, messages and they also produce documents for other staff in the workforce. The staff in the Administration control key aspects of the firm's paperwork. This function will also deal with any mail, word processing things and data handling. Most administrative staff now has the use information facilities and communication systems. Most functions will have there own clerical/support staff.
Production --- (ADD MORE)
Customer Service ---(ADD MORE)
3.2 Functions at Head office
Here Tesco have operations and distribution function, Finance function, Sales and Marketing and an Administration function. Head office has an operations and distribution function because they can keep check and record what has been distributed to what store and the area it has gone to.
They have a Finance function to keep all financial records and they look at all the money coming in and going out of the stores and try to help solve any problems that might occur. They also keep balance sheets and profit and loss accounts for all stores. Also within the Finance function there are other smaller functions like wages department, which will be concerned with all staff payroll (the calculating of staff wages). The Sales and Marketing function at head office is concerned with producing products that complies with customers wants and needs.
4. Meeting objectives
Human Resource helps Tesco meet its objectives by creating a skilled workforce in stores and giving staff the training they need to get the best out of the job they are doing. Human Resource doesn't just hire and fire people they are concerned about their staff and the wellbeing of their staff. They give staff appraisals where needed, they develop staff to meet their goals and the aims of the organisation.
Tesco have a finance function because this plays a big part in the organisation meeting its objectives. They need to remain profitable and keep records on annual accounts and present the final profit and loss and balance sheets. It is important to keep up with targets and trying 2 meet or beat the target set for that year.
The Sales and Marketing function plays a big part and helps Tesco meet its objectives by creating value for customers and finding out the customers needs and wants and giving themselves the aim/target to meet this in order to give complete customer satisfaction. To keep customer loyalty they provide cut and always lowering prices and quality products and services. They provide a service to the community by selling products at competitive prices and highlighting they earn lifetime loyalty.
The Administration function helps Tesco meet its objectives by communicating with all other staff in the different functional areas. They are also like a support service to all other functions. They word process all documents and keep in contact with their club cardholders.
4.1 Tesco meeting their objectives
Tesco have come along way since they first started out as a supermarket and meet objectives successfully to an extent that the business is still running effectively. (ADD MORE)
5. Communicating in Business
All businesses rely on different types of communication to help the business function/run effectively. Things like ICT, written communication, telephone, memos, face-to-face, pagers and staff communicating with each other. All staff in a business needs access to suitable information in order to do their job effectively. Businesses rely more on ICT than any other form of communication. There are different channels of communication i.e. internal and external, which are people inside or outside a business. There are other things like upward and downward communication, which is where communication within the structure flows up and down the organisation freely. Lateral communication is where departments and functions within a business must communicate together and co-ordinate activities to ensure the business works effectively. ICT is the more modern form of communication and is more reliable, quicker, more convenient and also versatile. Businesses have to keep up to date or communications will break down and the business will not be able to function effectively. Tesco have benefited from modern day technology because they are able to give their customers more and provide a better quality and service which with the help of technology can help improve on customer care and service. If tesco didn't have the technology they have things would be slower, they would not be able to offer and savings to their customers like buy one get one free. All transactions would have to be manually inputted which would take longer and also it would take longer to re order stock because that would have t be manually sorted and would make things much harder and tesco would not be able to meet the objectives they set as a company.
5.1 Internal communication
ICT has a big effect on internal communication because this is all the communication that is kept within a business. Also ICT is used for planning, monitoring and auditing store operations. With Tesco ICT played a big part in the planning and development of new stores and going multinational. Tesco use ICT to monitor which stock is going where, this would also help in other businesses and be an internal factor of the business. Also an internal source of the business is barcode scanning this is fast, easy and less time consuming to the customer. Accurate pricing will be a benefit not having to manually enter prices as with barcode scanners. Accurate pricing will also be a benefit to people so they don't have to enter them manually. As with barcode scanners there are benefits to the customers and to a business like Tesco. Benefits to Tesco are they have improvement over accuracy; most errors from cashiers have been removed. There will be a limitation on fraud, they can improve on customer service and re-ordering can be more accurate because they know what stock has been purchased and what is left instore. There is also improved productivity prices do not have to be on all products but can be placed on the shelving units below or at the side of a product. Advantages to the customer are the timing is better it is 15% faster than the manual entering of prices. Promotions have been introduced and more can be offered to customers like buy one get one free. Customers can have itemised billing with product details and store contact details on also any loose products bought can now be weighed at the checkouts. ICT plays a big part in the communication of stores i.e. keeps check of all stock in all stores and then staff knows what and when to order. Computers calculate what stock to order because it uses the stock levels and stock sold. Another way of communicating with staff and the aid of ICT is using CCTV within the business. Close circuit television (CCTV), as it is known is a very good way of communicating and checking things i.e. looking for people that are stealing products.
5.2 External
Using ICT to communicate externally is where say Tesco communicated with their suppliers. Factors of external communication could be writing a letter thanking a customer for opening an account or purchasing a store card. Communicating externally is where businesses come in contact with people like customers, shareholders, suppliers and other businesses. Also a business can communicate externally by sending a customer a sales invoice to be paid. You could place a job advert for a sales assistant this would be communicating with potential employees. Banks are another external function. Tesco would interact with the bank when they have any outstanding bills or to look at there financial records i.e. profit and loss account and balance sheet. Businesses can now use ICT and the Internet to set up a website for the business i.e. Tesco customers are now able to shop online instead of going into the shop. The Internet is also a way of businesses communicating with suppliers and the public. Tesco also use the telephone to communicate this is also needed when using the Internet.
6. Tesco organisational structure
Tesco operate a hierarchical structure, which is where there are lots of different layers or levels. With management at the top then the department managers, supervisors/line managers and sales staff would make a basic structure. A hierarchical structure can have many levels. Businesses that employ a lot of staff or are a public limited company, they often have a hierarchical structure this is sometimes so big and has many levels they are broken down into different functional areas i.e. Finance, Administration, Human Resources and many more. All employees in the structure are controlled by the people on the level above them e.g. sales staff and department managers. Tesco have an autocratic management style. This means that the manager of the business makes all the decisions and they are mostly obeyed although employees tend to be less motivated in the workplace. This could be a disadvantage to tesco because if staff motivation is low then moral is low and staff may not want to work in that environment any more and leave the company. As for the organisational culture of tesco I would say that tesco had a role culture because it is best suited to hierarchical structures and where every employee has there own role to do this also involves a clear chain of command.
