Company comparison: Tesco and Panda.

University Degree Business and Administrative studies

Organisational Insights 200306529

After doing some research, I decided to choose two companies as the organizations to be compared in the written submission, which are Tesco and Panda.

In this log-book, the information I gather will be printed in italic, and my personal opinion will be written in 14 point font size with underline.

I get most of the information from the internet, besides, I get some information from the email which the companies’ official website, press and the magazines.

Tesco operates 2,291 stores around the world and employs 296,000 people. We have grown from a domestic retailer, to an International Group, through our organic growth programme. This year, all four parts of the Tesco strategy, the core UK business, non-food, retailing services and international, have increased in profitability.

Retailing services
Tesco personal finance, established in 1997, now has over 3.4 million customer accounts and 15 products and services. It achieved profits of £96m in 2003 (Tesco share £48m). Tesco.com is the largest grocery e-tailer in the world and achieved a profit of £12m in 2003. We announced recently that we would launch a fixed line phone service in the summer of 2003.

Non-food
Half of our UK new space opened this year has been for non-food and the result has been to grow our market share to 5%.

By analyzing the above information, we can have an overview of the company. It is clear that Tesco is a large-sized organization, which has grown from a domestic retailer, to an International Group. How did Tesco make it? This is the question I have got after reading above information. This part shows some operational details of the company, for example, the employee numbers, age structure, the ownership of the firm, etc.

STATEMENT OF APPLICATION OF PRINCIPLES OF THE COMBINED CODE The Group is committed to high standards of corporate governance. This statement describes the manner in which the company has applied the principles set out in the Combined Code on Corporate Governance.

DIRECTORS AND THE BOARD The Board of Tesco PLC comprises eight Executive Directors and six independent Non-executive Directors. The Chairman, Mr. J A Gardiner, is an independent Non-executive Director who has a primary responsibility of running the Board. The Chief Executive, Sir Terry Leahy, has executive responsibilities for the operations, results and strategic development of the Group. Clear divisions of accountability and responsibility exist and operate effectively for these positions. In addition, Mr. G F Pimlott is the senior Non-executive Director. The Board ensures that no one individual or group dominates the decision-making process. Since the year-end, the Board has announced its succession plans for the retirement of Mr. J A Gardiner in March 2004.

The full Board meets at least ten times a year and annually devotes two days to a conference with senior executives on longer-term planning, giving consideration both to the opportunities and risks of future strategy. The Board manages overall control of the Group’s affairs by the schedule of matters reserved for its decision. In so far as corporate governance is concerned, these include the approval of financial statements, major acquisitions and disposals, authority levels for expenditure, treasury policies, risk management, Group governance policies and succession plans for senior executives.

To enable the Board to make considered decisions, a written protocol exists and has been communicated to senior managers ensuring that relevant information is made available to all Board members in advance of Board meetings. All Directors have access to the services of the Company Secretary and may take independent professional advice at the company’s expense in the furtherance of their duties.

The need for Director training is regularly assessed by the company.

The above information shows a part of operational details of the organization. This part explained the board of Tesco and its operation, for example, the full board meet at least ten times a year and have some more conference as well, this is very logical, All Directors may take independent professional advice at the company’s expense in the furtherance of their duties.

GOVERNANCE STRUCTURES The following paragraphs describe the key governance structures operating in the Group under the overall direction of the Board.

Executive Committee The Board delegates day-to-day and business management control to the Executive Committee, which comprises the Executive Directors. This meets formally every week and its decisions are communicated throughout the Group on a regular basis. The Executive Committee is responsible for implementing Group policy, the monitoring and performance of the business and reporting to the full Board thereon.

Nominations Committee Appointments to the Board for both Executive and Non-executive Directors are the responsibility of the Nominations Committee which is chaired by Mr. J A Gardiner and whose members are set out in the table at the bottom of this page.

As exemplified by the section on ‘Directors and their interests’ within the Directors’ report on pages 5 and 6 of the 2003 annual report, the company’s Articles of Association ensure that on a rotational basis Directors resign every three years and, if they so desire and are eligible, offer themselves for re-election.

Remuneration Committee The Remuneration Committee, composed entirely of Non-executive Directors, is chaired by Mr. C L Allen. The members are set out in the table at the bottom of this page. The responsibilities of the Remuneration Committee, together with an explanation of how it applies the Directors’ remuneration principles of the Combined Code, are set out in the report of the Directors on remuneration on pages 12 to 21 of the 2003 annual report.

Audit Committee The Board has an Audit Committee, chaired by Mr. G F Pimlott and consisting entirely of Nonexecutive Directors, which meets a minimum of three times a year. Membership of the Audit Committee is set out in the table at the bottom of this page. Its terms of reference are reviewed annually and represent current best practice. The Committee’s primary responsibilities include monitoring the system of internal control throughout the Group, approving the Group’s accounting policies and reviewing the interim and annual financial statements before submission to the Board. The Committee will be undertaking an assessment of the Group’s position in relation to the Financial Reporting Council guidelines for strengthening the Combined Code, issued recently as the ‘Smith Report’, although it is believed that the Group already comply substantially with the proposals. The review will also cover the role and effectiveness of the Non-executive Directors as set out in the ‘Higgs Report’.

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Compliance Committee The Compliance Committee ensures that the Board discharges its obligations to comply with all necessary laws and regulations. It has established a schedule for the regular review of the Group’s operational activities to ensure compliance with accepted practices and policies.

The Committee, comprising two Executive Directors and three members of senior management, normally meets four times a year.

This is a preview of the whole essay

The Committee, comprising two Executive Directors and three members of senior management, normally meets four times a year.

Some functional details are given in this part: the structure of management. There are five kind of committee; each one has its own duty, and they operate very well when they work together. The logical structure is another reason of Tesco’s success. As different type of organizations, there must be differences between the management structure of Tesco and Panda, I will compare them in the written submission.

INTERNAL CONTROL AND RISK MANAGEMENT The Board has overall responsibility for internal control, including risk management, and sets appropriate policies having regard to the objectives of the Group. Executive management has the responsibility for the identification, evaluation and management of financial and non-financial risks and for the implementation and maintenance of control systems in accordance with the Board’s policies.

The Board, through the Audit Committee, has reviewed the effectiveness of the systems of internal control for the accounting year and the period to the date of approval of the financial statements, although it should be understood that such systems are designed to provide reasonable but not absolute assurance against material misstatement or loss.

Internal control environment The Group operates an objectives-driven approach aimed at satisfying its core purpose that translates into a rolling five-year business plan. The plan covers both revenue and capital expenditure and forms the basis of business plans for all our business entities. From this the Board, together with monitoring regimes based upon our Steering Wheel, agrees the annual revenue and capital budgets.

The Steering Wheel is the term used to describe our balanced scorecard approach, which we believe is the best way to achieve results for our shareholders. It sets out a broad range of targets under quadrant headings of customers, operations, people and finance. This allows the business to be operated and monitored on a balanced basis with due regard for all stakeholders. The Board undertakes a formal review of progress on a quarterly basis and any resulting actions considered appropriate are communicated throughout the business.

The capital investment programme is subject to formalised review procedures requiring key criteria to be met. All major initiatives require business cases to be prepared, normally covering a minimum period of five years. Post-investment appraisals are also carried out.

Risk management process At the highest level, the Board considers strategic risk every time it meets. The two-day Board Conference, referred to earlier, considers where future opportunities and risks lie and helps shape our corporate strategy going forward. Accountabilities for managing operational risks are clearly assigned to line management. Internal controls have been developed over all risks in line with the risk appetite determined by the Board and are subject to review. Formal risk assessments are carried out routinely throughout the business. Procedures exist to ensure that significant risks and control failures are escalated to senior management and the Board, as necessary, on a daily, weekly and periodic basis.

What is the aim of these strategies? Does Panda have the similar management process? If not, how does it deal with the same problem?

Monitoring The monitoring of strategic and operational risks are responsibilities of the Board and line managers respectively.

The Board maintains the Key Risk Register and considers at their formal risk assessments whether the actions being taken in mitigation are sufficient.

The Internal Audit function also operates on a risk-based approach helping managers with their risk responsibilities and advising on appropriate controls.

PricewaterhouseCoopers LLP, our external auditors, contribute a further independent perspective on certain aspects of the internal financial control system arising from their work. Independence is strengthened by an agreement to rotate audit partners every five years. The engagement of auditors is considered annually by the Audit Committee.

Annual statements received from CEOs further support the monitoring of key subsidiary operations. These statements confirm that the Board’s governance policies have been adopted in practice and spirit.

Overall, the Audit Committee seeks to ensure that the whole management process provides adequate control over all major risks to the Group. This is achieved through consideration of regular reports from internal and external audit alongside discussions with senior managers.

Other specialist functions within the Group, notably Trading Law and Technical and Company Secretariat, provide assurance and advice on health and safety, regulatory and legal compliance and social, ethical and environmental issues. These functions report their findings on a regular basis to the Compliance Committee.

What are the advantages of these responsibilities? How could they be taken in Panda? I will try to find the answer when I am doing Panda’s research. At present, I think the company can prevent from risk; at least it can reduce the bad effect.

Communication A programme of communication exists and is constantly being developed, to ensure that all staff is aware of the parameters that constitute acceptable business performance and the expectations of the Board in managing risk. This provides clear definition of the Group’s purpose and goals, accountabilities and the scope of permitted activities of companies, executive functions and individual staff.

Communication is an important part of organizational culture, what are the communication channels of Tesco and Panda? How does it work? The programme of communication is constantly developed and it is proved necessary.

CORPORATE SOCIAL RESPONSIBILITY The Board regards Corporate Social Responsibility (CSR) as an integral part of the overall corporate governance framework and is fully integrated into existing management structures and systems. Therefore, the risk management policies, procedures and monitoring methods described above equally apply to our CSR activities, including the management of social, ethical and environmental (SEE) risks.

Many investors take an interest in how companies are managing non-financial risks as these can, under certain circumstances, have an impact on shareholder value. For example, The Association of British Insurers (ABI) has published disclosure guidelines on social responsibility, including SEE matters, for investors and companies.

Last year, we published our first CSR Review on our website, . This reflects the importance that Tesco has placed on CSR over the past 10 years. More details of our CSR strategy can be found in the Tesco Corporate Social Responsibility Review 2002/03 and on our website.

We have an established cross-functional CSR Committee that meets a minimum of four times a year. The CSR Committee is chaired by the Group Corporate Affairs Director, and its membership is made up of senior managers from all parts of the business. One of its objectives is to identify threats and opportunities for the coming year and to highlight emerging issues.

The CSR Committee has established a set of CSR Key Performance Indicators (KPIs), and these KPIs are used to track performance quarterly and annually. The KPIs feed directly into the Steering Wheel monitoring system explained earlier and thus contribute to the overall monitoring of Group performance and control evaluation by the Board.

The Chairman of the CSR Committee makes regular reports to the Executive Board on CSR matters.

The CSR KPIs and the related management system are available in the CSR Review 2002/03 and on-line.

Actually there is a relationship between environment and the companies. Environmental factors influence the development of companies and create opportunities and threats for them; it influences and determines the way the company must operate and how it has to accomplish its marketing objectives. Parts of environmental details have been shown by the information. Tesco made a great effect on Corporate Social Responsibility and the company gets a strong support by its customers. I will explain the reason in the written submission.

This year sales in our core UK market have grown by 7.9% and underlying operating profit by 6.9% reinforcing our position as the number one food retailer in the UK. Our strong UK performance allows us to expand into retailing services and international markets.

Number of stores
In the UK we opened 62 new stores this year adding a further 1.4 million sq ft. We also acquired 1,202 T&S Stores, a leading convenience retailer, giving us an additional 1.8 million sq ft. This brings the total number of stores in the UK to 1,982.

Four store formats
we tailor our stores to meet our local customers’ needs. We have four different store formats: Extra, Superstore, Metro and Express. All formats provide a different shopping experience for our customers, but all offer the same outstanding value.

Store development
we listen to customer and staff feedback to continually improve our stores. This year our UK development plan has seen refresh and extension programmes, tailored to local customer requirements, improve over 200 stores.

Staff
our loyal and committed staff have helped make us Britain’s biggest supermarket. This year we have taken on an additional 9,000 people, with a further 5,000 over Christmas, to help serve our customers better. 104,000 of our staff are shareholders.

The above data prove Tesco to be the biggest retailer in UK; does it only locate in UK? If not, what about its international market? What have Panda done? As I know Panda is the biggest electronic company in China at present, and it is also facing to the international market. Between the two different types of companies, is there any similar idea when they are dealing with the global market?

In our European business sales have grown by 22.5% and underlying operating profit by 56.7%. We have opened 18 hypermarkets in the year, making us the largest hypermarket operator in Central Europe.

Five countries
Tesco now operates in five countries in Europe as well as the UK; Republic of Ireland, Hungary, Czech Republic, Slovakia and Poland, accessing 68 million people.

Number of stores
we now have a total of 230 stores across Europe and this year we became the leading hypermarket retailer in Central Europe. Our ongoing plans for the region will see us expand next year to over 100 hypermarkets, growing our market share even further.

Sales area
our expansion programme has seen our total European sales area increase to 10.6 million sq ft in the past 12 months, a rise of 31% on last year. This includes the 13 hypermarkets acquired from the HIT chain in Poland.

Staff
This year we have taken on 6,500 extra staff and we now employ 47,500 people across our European operation. In Hungary we are the country’s second biggest private employer, with 11,000 members of staff working across our operation.

This year our Asian operation has delivered sales growth of 45.5% and underlying operating profit growth of 144.8%. We operate in four countries across South East Asia including our latest market, Malaysia.

Four countries
this year we opened our first stores in Malaysia. We continue to build a business of scale in our developing markets of Thailand, South Korea, Taiwan and Malaysia, accessing a population of 155 million.

Store development
a total of 28 new stores were opened across the four countries, including seven Home plus stores in South Korea. These new stores have boosted our total floor space across Asia to 7.5 million sq ft, a rise of 34% on last year.

Store formats
we have continued to develop our formats to suit our different customers’ needs. In Taiwan, plans are in place to open our first city-format store in the capital Taipei later this year. In Thailand we now have eight Express stores, a supermarket, and our first Value store.

Staff
this year we recruited a further 4,000 local managers and staff to deliver for our customers. We now employ a total of 28,000 people across Asia. In Thailand we had over 600 internal promotions last year.

As the biggest retailer in UK, in order to have further development, Tesco has to entry to the international market, and it has already had some progress now. Now its store are located in 9 countries, and number will be still increasing. It has a large number of stores, employees, and loyal customers as well. It has different strategies in different locations. In the written submission, I will compare the data of the two companies. To complete it, I need to search more information about the functional advantages or disadvantages to location, type of property, running costs, time at location etc.

Every day, more than 11 million people visit our stores knowing they can pick what they want, when and where they want it

Tesco’s product/service details are clearly shown in its homepage. It has a big range of product/service so it can make customers feel satisfied. The nature is simple: let customers know they can pick what they want, when and where they want it.

Now I will move on to Panda, a Chinese electronic company. This part will also contain organizational details which are shown in Tesco’s.

As the cradle of China's electronics industry, Panda Electronics Group Co., Ltd. (PEG) was founded in 1936, with a history of sixty-eight years. Brand 'Panda' is the first Chinese electronics products brand entered into international market and also the first 'Well-Known Brand' of electronics industry in China. PEG is one of the largest electronics comprehensive backbone enterprises, 120 pilot enterprise groups, 512 key enterprises, six largest groups of electronics industries in China.

Recently, major products of PEG covers HF communication, satellite communication system, mobile communication system, macaronis production equipment, base station, program control exchangers, mobile phones, TV sets, washing machines, DVD players, computers, monitors, system integration, network, software and radio receivers.

Technology force of PEG is in leading position in China's electronics industry. With its own power, PEG has created many "first in China" and won national honors. PEG has not only five national engineering research centers (engineering research centre for A/V digital products, national technology development centre, mass production technology centre, micro-electronics technology design centre, and engineering research centre for mobile satellite communication technology), but also post doctoral scientific research station. PEG cooperates with 12 large international companies entered into the top 500 largest companies in the world and more than 10 key universities and research institutes in domestic in technology fields to jointly develop new products. The speeds of renew of products has been increased greatly. Up to now, PEG has subscribers of 70,000,000 people, and is a famous brand electronics company possesses the most subscribers in china. Adhering to regard subscribers' standard as the top standards of enterprise, PEG is responsible for subscribers, services for subscribers and obtained the certificate for ISO 9001 international quality standards assurance.

While self-developing, PEG made great efforts to exploit the international market and actively joint venture with the international large companies, such as Sweden's ERICSSON, Japan's SHARP and Korea's LG, made good economic efficiency. It became a new growth point of economic efficiency of the company.

Nanjing Panda Electronics Co., Ltd. was founded in 1996. H shares and shares were issued to the public in Hong Kong and Shanghai respectively. The Company was listed on The Stock Exchange of Hong Kong Limited and the Shanghai Stock Exchange respectively. In 1999, the Company carried out the policy of reconstructing of the assets, realized the reform of multi-element property rights.

As the cradle of China's electronics industry, Panda Electronics Group Co., Ltd. was founded in 1936. Brand 'Panda' is the first Chinese electronics products brand entered into international market and also the first 'famous Brand' of electronics industry in China. Panda Electronics Group Co., Ltd. is one of the top 520 national key enterprises, one of the top 120 enterprises under experiment and one of the key enterprise groups in Nanjing Municipality and Jiangsu Province. The Company established 5 national R & D centers and a postdoctorate research work station.

The Company established marketing networks spreading over nationwide, more than 40 countries and regions in the world. Users and consumers are up to 70,000,000. The Company was honored 'First Grade Stated-Owned Enterprise' in the first batch, 'National Key New High-Tech Enterprise' and ranked among the top 500 largest industrial enterprises in China for 10 years running.

Now I have an overview about Panda’s company profile, from a simple point, what is the difference between Tesco and Panda? This would be an important part I which I should explain in my essay. It also shows some operational and locational details, which I can compare to Tesco’s directly in the essay. The operational details I have got is not as many as Tesco’s, although I sent the company an email, they replied me with few information. However, I find more locational details of Panda, so I can have a detailed discussion about its advantages/disadvantages in the essay. There are both common points and differentia between the two companies’ operational details, but all the information proved the locational details of the two companies are quite distinct from each other. These discussions will take an important part in the following written submission.

Then I found Panda’s functional details on its website and the magazine, in the essay, I can compare this with Tesco’s functional details to point out their feature.

They also sent me some more details with email, shown in the next page.

Board of Directors

Senior Management

As a comprehensive multinational corporation, what is the characteristic of its structure? What is the difference between the two companies’ structure? Why do they have differences? This is the main part I am going to explain in my essay.

Panda Management Conceptions

In our understanding, management of an enterprise denotes the administrator's thoughts and ideological level. It is the process through which the administrator does his management work with a clear and dedicated aim to advance the prospects of the company.

In doing something new, we will certainly meet some obstacles. If we are reluctant to have a try or even to make plans for innovations, we will surely not succeed in making progress. Furthermore in making innovations, we might struggle or even fail sometimes, but we feel we can make progress gradually by learning from our mistakes.

An administrator's ideological level has a great effect on the management efficiency. We feel he needs to be open and aboveboard, and should manage the company with strong ideals of justice and fairness.

An administrator should always set up a new aim for the company to operate with as a goal in mind. A new aim stimulates all of the staff to work harder. We need to always bear in his mind that only the fittest will be able to survive in the tough market competition. Market competition is like sailing against the current: either you keep forging ahead or you keep falling behind. Thus, an administrator should always work with a new goal in mind. Only in this way can he continue to take new action and to deal with new situations with foresight which will allow the company to make useful progress.

So, the characteristics of Panda management depend on the philosophy that people are treated as the foundation of the company's success and that while the management rules are always strictly adhered to, the employees are nevertheless an integral part of and always regarded as essential to the company’s continued progress and success.

Panda Ideas

The purpose of the company is to serve people with technology.

In our business operations, we have a clear management concept that we will win the market so long as we produce on a large scale at a leading pace.

We have taken a market-and-order-orientation attitude toward the market. All we are doing in our work is for the services of customers and market.

We are constantly improving the quality of our products. We are trying to reach the highest level in quality control.

In personnel management, we firmly believe that the company should on the one hand offer employees’ opportunities to expand their abilities and that on the other hand the employees will earn profits for the company. Thus we consider the relationship between company and employees as a reciprocal one from which both can benefit.

Now I understand Panda’s management conceptions/ideas, as parts of its organizational culture, it contains many differences with Tesco’s. I will explain what the differences are in the essay.

Since the 50's of 20th century, more than 30 Chinese leaders including Mao Zedong, Deng Xiaoping and Jiang Zemin had inspected PEG. With the great concerns of leaders of the government and the Party, PEG has developed rapidly. Monopolization is forbidden in China, so Chinese government gives some help to other smaller competitors of PEG. As a huge market, China attracts many foreign companies, some large-sized companies, such as Sony, Samsung, and National, join in to the competition, to encourage the foreign enterprises, Chinese government constituted some policy for them as well, for example, low tax. Without the support from the government, PEG is not too strong to win the competition. International marketing has become a major issue for companies. In the twentieth century, world trade has been more and more important. All over the world; companies are aiming at penetrating new foreign markets.

As a large company which can not get enough market shares in its own country, PEG planed to entry the international market as well. When entering international business it is necessary to take into account the political system of the target country.

It is much more risky to operate in absolutism or anarchy than in democracy. Political stability is a basic requirement. The legal environment of the target country is also essential to consider. China has free trade agreements with several countries, making it less expensive and easier to export Chinese products and to import foreign products. These circumstances contribute to the increase of foreign trade by providing an environment, in which it is easy for Chinese companies to export their products to international markets. In case of an export company, the most important legal factors are the export-import regulations, requirements, restrictions and the rate of tariffs. When establishing a subsidiary in another country, other legal factors become important. The company law, competition policy and tax regulations determine the everyday operations of the company. Along with foreign investment regulations, environment-protection requirements etc., they set the legal environment for the firm. It is important to carefully examine and consider these factors. The threat posed by them can be reduced if the management is aware of them and understands these regulations well. PEG did get this great chance and it exported a large amount of its products to the developing countries and some western countries, unfortunately it did not deal with the regulations very well, for example, in Chinese advertisements it is usually allowed to compare competing productions, but it is not allowed in many European countries, PEG did not realize this when it first entry a foreign market, as a result, in some countries the company was indicted as export dumping.

In order to review an organization or individual services, it is important to understand the external factors that influence the organization. An effective way to identify these external influences is to carry out a PESTEL analysis. Because of the different situation of China and UK, it is no doubt that the impacts of environmental factors for the two companies are different. By using the information I have, I can do a ‘PEST’ analysis of both Tesco and Panda in my essay by taking some examples.

It manufactures many kinds of products including the following series:

Color TV series: CTV, PTV, Applied TV series (Hotel TV, Huge Projection TV Wall, CRT TV Wall, TV-PC, Playback TV, etc)…

Air-conditioner series: all kinds of Windows, Wall-mounted, Cabinet, Floor-mounted, and small Central Air-conditioners…

AV product series: all kinds of DVD, VCD, DVD+AMP, Amplifier, Voice speaker Box, CD, MP3…

Network series: DVB-C, DVB-S, ADSL, C-LAN, and Family Information-resolution System…

Battery series: High Quality Environmental Protection Battery, Rechargeable Battery, Nichrome Storage Battery and kinds of Chargers…

Electronic Component series: PCB, FBT, Tuner, kinds of Transformers and Coils, Inductance, Conduct-electricity Rubber, Spring…

Protection for Safety series: Finance Band System, Hotel System, Traffic Management, Public Place, Family Protection for Safety, Individual Protection System for Safety…

LCD series: LCD-TV, LCD-M and other LCD applied products…

White Household Appliance and small Household Appliance series: Washing Machine, Water-heater, and Fuel Gas Canteen…

Technology Equipment series: kinds of Assembly Line, Frock of Assembly Line, Meters of Assembly Line, and Tools of Production…

These are information which relates to Panda’s product/service details. As same as Tesco, Panda have many different kinds of products, and it also develops in some other industries. Comparing to each other, the two companies’ product/service are totally in different area, however, they may have the common management conceptions/ideas, it will be interesting to compare this part in the essay.

Now I have collected the two companies’ details about their operation, location, function, environment and product/service. All the information will be used to prove my opinion in the written submission.