Business at work

Business at work

Introduction

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:

Objectives

Organization

Structure

Culture

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.

SOLE TRADER.

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.

Advantages:

- 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

Disadvantages:

- 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.

PARTNERSHIP

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.

Advantages:

- Easy to set up

- More capital with extra partners

- Division of labour – specialization

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

Disadvantages:

- 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.

COMPANIES

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.

PRIVATE LIMITED COMPANIES

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.

Advantages:

- Shareholders have limited liability

- More capital can be raised

- Control of company held within the firm

- Shares are transferable

Disadvantages:

- 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.

PUBLIC LIMITED COMPANY

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

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

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.

FRANCHISES

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.

Ownerships.

PUBLIC SECTOR: Civil service, Government departments, Public corporations,

Local Authorities.

PRIVATE SECTOR: Sole traders, Partnerships, Limited companies, Charities,

Co-operatives, Franchises.

Objectives.

- To make a profit

- To “Break – even”

- To provide service

Size.

- Small

- Medium

- Large

Locations

- Local

- Regional

- National

- Multinational

E1

Tesco plc.

History

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 Ј1 billion for the first time.

During the 1980s, Tesco continued to build new superstores, opening its

100th in 1985. In 1987 it announced a Ј500 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 Ј50,000 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.

Benefits:

. 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.

Constraints:

. 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

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