Business at work

БОЛЬШАЯ ЛЕНИНГРАДСКАЯ БИБЛИОТЕКА - РЕФЕРАТЫ - 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

and upgrading existing ones. In the year ending 28th February 1998, the

group capital expenditure was Ј841 million, compared to Ј758 million in the

year ending 28th February 1997. This Ј841 million was divided into Ј737

million spend in the Great Britain, Ј63 million in Ireland, north and

south, and Ј41 million in Europe. Tesco anticipates that in the 1998-9

financial year, capital spending will rise to about Ј950 million, with most

of the extra spending being concentrated in Ireland and Central Europe.

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

For example, in 1998 the profits from Tesco after tax were Ј505 million.

About 50% of the profits were distributed to shareholders as dividends.

Subsequently approximately Ј250 million was retained by the company for

investment in new stores and improving their service to customers.

E2

Objectives of the business.

The objectives of the business can vary enormously A charity’s overriding

objective might be to alleviate poverty in the developing world; on the

other hand many companies’ major objective is to generate the maximum

profits possible. An organisation’s mission statement gives an indication

of the purpose of the business and dovetails with the objectives the

organisation set itself.

Mission statement.

Many organisations attempt to express the purpose of their being within a

few sentences. The mission statements are intended to provide a sense of

common purpose to direct and stimulate the organisation. This statement

represents the vision or mission of the organisation. Mission statements

change over time to reflect the changing competitive nature of the markets

in which business sell.

Mission statement normally set out to answer the following questions:

. What business is the organisation in?

. Who is to be served?

. What benefits are to be provided?

. How are consumers to be satisfied?

Objectives.

Business objectives are medium- to long-term goals or targets that provide

a sense of direction to the business. Objectives are normally measurable

and have a stated timescale.

Company may have a number of objectives. In general, the objectives

pursued by a business tend to vary according to its size, ownership and

legal structure.

Figure 1.1 illustrates the interrelationship between a company’s mission

statement and its objectives.

Figure 1.1: The hierarchy of objectives

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

secondary objectives.

. Primary objectives are those that must be achieved if the business is

to survive and be successful. These relate to issues such as profit

levels and market share.

. Secondary objectives tend to measure the efficiency of the

organisation. They may affect the chances of success, but only in the

long term. Examples include administrative efficiency and labour

turnover rates.

Profit maximisation.

Profit maximisation one of the most important objective for companies which

are owned by shareholders. Profit, at is simplest, refers to the extent to

which revenues exceed costs, so profit maximisation occurs when the

difference between sales revenue and total cost is greatest.

Survival.

Survival is an important objective for many businesses. It is particularly

important when businesses are vulnerable such as:

. during their first few years of trading

. during periods of recession or intense competition

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

Most recently established businesses have survival as an objective.

Increasing sales or market share.

Growth increases the scale of a business, resulting in higher levels of

output and more sales. Many businesses pursue growth strategies because

their managers believe that this is essential for survival. If a firm

grows, it might be able to attract more customers, earn higher profits and

begin to establish itself in the market.

Growth offers:

. increased returns for the owners of the business

. higher salaries for employees of the business

. a wider range of products for the business’s existing and potential

customers.

Growth can be important target for managers. It is increasingly common for

managers’ pay packages to be a combination of shares and salary.

Providing social or community service.

A number of organisations provide services to the community. These

organisations are part of the public sector – they are managed, directly or

indirectly, on behalf of the government – yet they are a form of business.

Their overriding objective is to provide the best positive service to the

local community.

Charitable and non-profit objectives.

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

objectives:

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

. To rise funds to support their projects.

Charities trade with the intention of earning as much revenue as possible

to spend on their particular causes.

Producing high quality products.

Just as many businesses seek to provide high quality service, a large

number of businesses also have the provision of high quality product as an

important objective. Acquiring reputation for top quality can allow

businesses to charge a premium price and to enjoy higher profits.

Reputations for supplying quality products are jealously guarded.

Tesco is committed to retaining its position as the UK’s largest

supermarket retailer. Customer feedback forms, in-store discussion groups

and a continuous analysis of sales figures has enabled Tesco to recognise

the importance of the key principles of price, quality and service.

The company owes its success to its emphasis on meeting changing customer

needs through service and innovation, while maintaining its commitment to

value and quality.

Underlying its business success is a commitment to upholding certain

values and working and working principles and seeking continuous

improvement in its ethical performance.

Companies are part of the society in which they operate and must take note

of the interests and concerns of many different groups. For Tesco these

includes its customers, its stuff, its shareholders, its suppliers and

people in the local communities close to its stores and in the world

beyond. Each group has expectations of the company which Tesco has to meet

and manage if it is to maintain its position as a leading and successful

retailer.

Tesco must serve its customers by providing the goods they want and the

service they expect. By meeting customers needs better than its

competitors, Tesco earns profits and creates value for its shareholders.

Tesco, like other large companies, however, recognises that its wider

reputation depends on other things such as its stuff relations, its

attitude to the environment, its support to the community, and its

relationships with suppliers. Also as a leading food retailer, the company

must ensure that its provides products which are safe to eat or use, as

well as giving customers advice on matters such as healthy diets.

Tesco’s main business objectives:

. to provide customers with outstanding, naturally delivered, personal

service

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

contribution

. to understand customers better than anyone

. to be competitive even on the basics

. give customers a broad range of strong relevant promotions in all

departments of the store

. give customers what they want under one roof

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

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

. to recognise Tesco has brilliant people, use this strength to make

customers’ shopping enjoyable in a way no competitor can

. use intelligence, scale and technology to deliver unbeatable value to

customers in everything Tesco does

. to maximise profits to provide high returns for shareholders

. to increase sales or market share as much as possible

. advertising should appeal to all customers in a relevant

Tesco’s main mission statements:

. To be world’s best and largest supermarket retailer.

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

loyalty.

How Tesco is going to achieve these objectives?

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

Tesco staff:

. Are all retailers, working as a one team.

. Trust and respect each other.

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

. Strive for personal excellence in everything they do, leaving no stone

unturned in order to get it right.

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

. Are rewarded for creating value for customers.

. Are talked and listened to: and their knowledge is shared, so that it

can be used.

. Have fun, celebrate success and learn from failure.

What is the comment Tesco has to its customers?

Tesco customers want the best possible value for their money. Tesco is

determined to offer its customers quality products, good service,

attractive stores and low prices.

To meet this aims, Tesco:

. works closely with suppliers to ensure products are of the highest

quality and are delivered to stores in the best possible condition.

. makes sure that its staff are committed to giving the best possible

quality of service.

. aims to create in its stores an environment which makes shopping easy,

interesting and comfortable.

For example, in 1993 Tesco introduced Value lines, which offer exceptional

value for money, followed by New Deal Pricing on leading commodities and

brands in 1994. In 1996, Tesco introduced Unbeatable Value with the pledge

that nobody would sell the equivalent product for less price.

E3

Organisational functions.

All organisations require resources to carry out their functions. One way

of judging the success of a business is to compare the resources it uses

with the value of the product that results. For example if it is a small

business running by it’s owner, for example small shop, so it doesn’t need

any workers, large piece of land and big capital, owner can work alone. But

if it is a very large business like car manufacturing so it requires a lot

of workers, very large piece of land and big capital.

The resources of the business.

One way of considering the resources used by a business is to classify them

into the factors of production. The main capital of production are capital,

labour and land.

- CAPITAL refers to any manufactured product used by the

business to make other products. This category

therefore includes all machinery, vehicles and office

equipment used in businesses. It also includes the

company’s buildings.

- LABOUR is the human resources used by business

organisations during production.

- LAND – site on which the business is located and

natural resources it might use.

- ENTERPRISE – owners and shareholders.

Functional areas.

All businesses combine factors of production as an essential part of their

production activities. To combine these factors, to engage in production

and to achieve their objectives organisations undertake a number of

functions. The major business functions include:

. finance

. production

. human resources

. administration

. research and development

Business requirements for functional areas depends on its size, for example

small business might merge many of these functions within their

administration department, with responsibility in the hand of one or two

people. As a business grows the number of people required to carry out

these functions increases.

The financial function.

Extensive use of IT

Produces standards

cost data

Customers Auditors Inland

Revenue and

(price list) (accounts)

Custom & Excise

(information

relating

to tax liability)

Figure 1.3: The financial function

A separate department normally carries out the finance function of the

business. The finance department carries out a number of key activities:

. records all financial data

. chases up slow payers

. collects payments from customers

. provides information to external bodies

. analyses costs

. advises board of directors

. monitors and analyses financial data

. advices managers and budget holders

Production function.

Production covers all the activities that must be undertaken to make the

firm’s products, from the receipt, of raw materials through to the output

of the final product. The production function concentrates primarily upon

planning and controlling the various stages of production so that the most

efficient use is made of business resources.

Production manager responsible for:

. maintaining supplies of components and raw materials to ensure

continuous production

. ensuring that the precise requirements of customers are met

. monitoring quality to insure that finished products meet the quality

standards expected by customers

. using resources – people, machinery and production space – as

efficiently as possible to make the business competitive in the

markets in which it trades.

One of the most important issues in production is quality. Modern

businesses compete just as strongly on the quality of their goods and

services as they do on price.

For example it is vital for a washing machine manufacturer to produce a

high-quality product. If the machine is not reliable or does not have a

wide range of functions, customers are more likely to purchase a

competitor’s product.

Figure 1.4: The links between the production function and other

departments

The human resource function.

Personnel management considers the tasks involved in managing people –

recruitment, selection and so forth – as separate elements. It does not

take into account how these elements can combine to achieve organisational

objectives.

The personnel management approach makes decisions relating to recruitment,

training and pay systems independently, without considering the impact the

individual decisions have on each other aspects of management and the

achievement of corporate objectives.

Human resources management (HRM) elevates the effective use of a business’s

labour force to an issue to be considered by senior managers as an

essential element of the organisation’s strategy. This approach has raised

the profile (and salaries) of those employed in human resource management.

The human resources function engages in a number of activities to ensure

employees are utilised affectively. These activities are carried out with

the aim of contributing to the achievement of the business’s objectives.

Workforce plan sets out likely future needs for labour and how these needs

might be met. Achieving the workforce plan involves the human resource

function in a number of day-to-day activities.

. recruiting employees – both internally and externally

. training new and existing employees

. paying salaries

. dealing with disciplinary matters and grievances

. overseeing industrial relations, by seeking to avoid disputes and

maintain harmonious relations and constant production

. developing and monitoring an employee appraisal system designed to

assess performance, set targets for achievement and identify any

training needs

Figure 1.5: Developing a human resources plan

The marketing function.

The marketing department carries out a wide range of functions on behalf of

the business. Essentially marketing is communications. The marketing

department communicates with a number of groups inside and outside the

business as it carries out its tasks.

Marketing activities:

. keeping customers satisfied

. discovering the needs of customers and advising the production

function accordingly

. carrying the responsibility for ensuring the effective distribution of

products to wholesalers and retailers

. liasing with marketing agencies to provide the necessary expertise

(small firms)

. if the firm is an export, the marketing department may have contact

with government agencies.

Marketing provides the organisation with information about its customers

and its markets. Effective marketing can offer businesses a number of

benefits:

. early warning of changes in consumer tastes and fashions through

regular market research

. knowledge about competitors and information regarding competitors’

product

. the means to present the company in a positive light through public

relations activities

. allowing the firm to improve the quality of its products by

coordinating and analysing customer complaints

. providing a catalyst for growth by forging relationships with

distributors, retailers and customers in new markets

. supplying consumers with the products they want and giving high levels

of customer satisfaction, which might permit a business to charge

higher prices thereby increasing its profitability.

The administration function.

The scope of the administration department varies enormously between

organisations. In a small business the administration function might

incorporate a number of the functions like finance , personnel and

marketing. However, larger organisations are more likely to operate a

specialist administration department.

A typical administration department has a number of functions:

. Administration department carries out organisation’s IT system.

. Clerical and support service. Information processing, data processing,

filing and reception services can be provided to all areas of the

organisation.

. Security and maintenance. These services are essential to the smooth

running of the business and to the effective operation of other

business functions such as production in particular.

. In some businesses, the administration function takes responsibility

for important public relations activities such as customer services.

The research and development function.

The nature of research and development (R&D) varies enormously between

businesses. Traditionally, the term research and development is taken to

refer to scientific research undertaken by firms producing manufactured

goods, high technology products or pharmaceuticals. However, R&D is equally

important to firms providing services.

By investigating in research and development a business seeks to maintain

competitiveness against its rivals. Competitiveness measures a business’s

performance in comparison with rival firms in the same market. A highly

competitive firm has some advantage over other businesses. This competitive

edge can take a number of forms:

. lower prices

. more advanced and sophisticated products

. a better image with consumers

. a good reputation for advise and after-sales service

. reliability in terms of operation and delivery dates

Types of research:

. basic research

. applied research

. development

The prime function of R&D is to develop new products that can give the firm

a competitive edge in the market. This necessary involves the R&D

department in close liaison with staff in market research, design and

production.

Function 1.6: The nature of business activity

Functional areas of Tesco plc.

The diagram above shows the key functional areas or departments of Tesco,

as one of the leading retailers in the U.K. It is currently the leading

supermarket chain in Britain, with a higher market share than its leading

rivals, Asda-Wallmart, Sainsbury’s and Safeway.

I have explained earlier the key functional areas of a typical business

and Tesco, as the diagram shows, displays this type of structure. For

example, the Company Secretary, Rowley Ager is responsible for Pensions,

the Company Secretariat (the administrative staff), the Treasury, Taxation,

Site Facilities, Transport and all aspects of Consumer Law.

The Finance Department, directed by Andrew Higginson, is responsible for

all aspects of finance and audit, and also for European affairs. These

functions are shown in Figure 1.3 in my introductory section. I have no

detailed information on Finance within Tesco other than financial data

available from the Company Accounts and from the Tesco and Bized

websites……… and these are more relevant to a detailed finance study of

Tesco as a company, a topic to be studied in a later Unit.

The Marketing Department, directed by Tim Mason, is responsible for all

aspects of marketing , Customer Service, Advertising, Market Research,

Clubcard, Estates and Metros. Since the early 1990s Tesco marketing

strategy has been to become the best in terms of price, quality and

service. Objectives are set, and ways found of meeting them, in all aspects

of company’s operation.

The Retail Department, directed by Michael Wemms, is responsible for all

retail operations and express stores.

Tesco first ventured into foreign markets when it acquired stores in Irish

Republic in 1978, but these were sold in 1986. The 1990s produced a much

better climate for European expansion. Now Tesco operates 80 stores in

Central Europe, and 16 stores in two Far East countries trading both under

the Tesco and subsidiary fascias. The 13 Tesco stores in the Czech Republic

and Slovakia, 29 stores including 5 supermarkets in Hungary, 31 stores in

Poland. Also Tesco plan to open 12 hypermarkets in Thailand and in South

Korea over the next three years.

The Human Resources Department within Tesco is responsible for many

thousands of employees across the whole spectrum of the organisation. Tesco

employs 154,000 people in the UK and 27,000 in Ireland and Europe. It does

not appear on the organisation chart, which I obtained from Tesco, because

this function is somewhat complex and shared between the main headquarters

at Cheshunt. Hertfordshire, and the many stores operated by Tesco around

the country. For example, there are two Tesco superstores in Leicester, at

Hamilton and Beaumont Leys, both of which have a Human Resources officer in

charge of personnel administration.

The Commercial Department, directed by John Gildersleeve, responsible for

all commercial operations and technical services.

The Distribution Department, directed by Philip Clarke, responsible for

Supply Chain and all distribution operations. Distribution Director

responsible for products delivery, logistics and transport. Its purpose is

to ensure that Tesco stores have the right products delivered against

agreed delivery schedules and in good condition, enabling the stores to

provide a consistently high level of customer service. Tesco products are

sent to stores from distribution centres around the country. Tesco runs 13

centres and a further six centres are run for Tesco by contractors. A

typical centre covers 300,000 square feet and handles some 50 million units

a year. The centres work around the clock, seven days a week, providing

2,500 deliveries daily, amounting to 19 million cases per week. Tesco

employs 6,800 people in distribution (excluding the staff at the contractor-

run centres), and has about 1,000 tractor units and 2,000 trailers in its

national vehicle fleet.

The Operations department, directed by David Potts, responsible for

operations of Tesco stores in Northen Ireland & the Republic of Ireland. In

May 1997, Tesco completed an agreement with Associated British Foods to

purchase all their supermarkets in the north and south of Ireland. The

purchase price was Ј641 million, giving Tesco a further 110 food stores and

a leading position as a food retailer on both sides of the Irish border.

I have considered each of the major functions of Tesco separately. However,

it is the effective interaction of business functions that is essential to

the success of an organisation in attaining its objectives.

As an example, Tesco has recently introduced a customer-oriented website on

the Internet. Company has developed within this service facility a direct

order system via E-mail – called “Tesco Direct”. Customers can order

their produce/product for home delivery.

There are now many thousands of such deliveries but these all depend upon

the successful interaction of the major business functions outlined

earlier.

In other word, -

. Marketing - responding to the initial enquiry, receiving and

processing an order, distributing the product to customer.

. Administration – adding the customers details to the IT system,

passing on details to other departments within the business.

. Finance – investigating the financial status of the customer, offering

credit terms if appropriate, invoicing for payment.

. Distribution – receiving details of order and meeting the customer’s

demands, liasing with marketing over delivery dates, rescheduling

other production as required.

. Human resources – at a store or warehouse level – ensuring sufficient

employees are available to meet the delivery requirements of the

order, arranging overtime payments if necessary.

Hence these functions help meet the objectives successfully. All Tesco’s

organisation structure works as links of a chain, if one link falls down,

all the organisation will experience difficulty. For example, most

important department of Tesco, I consider, is Distribution department. If

this department fails, products will not be delivered to the store, so

customers will go to another store. Tesco’s success is built on the good

work of each department.

E4

Organisational structure

In many small firms, the owner may have a very hands-on approach and may be

responsible for getting customers, hiring any extra labour and acquiring

other inputs and taking all financial decisions. As organisations grow,

however, their structure takes on a greater significance and those at the

top have to pay more attention to its formal structure and presentation.

The various business functions will show an increasing degree of

specialisation as an organisation expands and people will be employed to

manage and take decisions in specialist areas.

In general, an organisational structure sets out:

1. Major roles and job titles, showing who is in control of the business

as a whole and who manages its major business functions within

departments.

2. The level of seniority of people holding different positions and their

respective positions in the organisation’s overall hierarchy.

3. The working relationships between individuals, identifying

relationships in terms of superiors and their subordinates and

indicating who has authority to take certain kinds of decisions and

who are responsible for carrying out the work arising from those

decisions.

4. The extent to which decision making is concentrated in the hands of

people at or near the top of the organisation or handed down to those

at lower levels of management.

5. The broad channels through which information is communicated

throughout the organisation, indicating the route by which

instructions flow down the hierarchy and how information flows back up

the hierarchy.

Organisational charts

Organisational charts are representations of the job titles and the formal

patterns of authority and responsibility in an organisation.

Business may produce organisational charts for several reasons. First, it

is important that a company reviews its organisational structure on a

regular basis to take account of any changes in the business environment.

A formal organisational chart helps the company to identify where changes

need to be made and to decide the relationship between any new sections or

departments and the rest of the organisation. Business also produce

organisational charts because they allow a company to review its structure

and to identify areas where cost saving changes and improvements can be

made. Organisational charts are useful when changes take place in the

company. It can be updated to take account of any informal developments in

its structure that have been good for the company. A revised organisational

chart is particularly useful for informing people about the new structure

of the company after mergers or take-overs.

The organisational chart can also be used during an induction period to

give new employees a useful overview of the company and their own position

within the structure in terms of their authority and the managers to whom

they are responsible. Although an organisational chart has several uses, it

should not be taken as giving an exact description of how the organisation

actually operates. It does not give the exact nature of job

responsibilities or indicate what levels of cooperation may be necessary

between departments.

Function 1.7: Line authority in a production department.

Chain of command - is the line of command flowing down from the top to the

bottom of an organisation. It passes down the management hierarchy, from

director and senior management levels to those in middle and junior

management positions and eventually to employees in supervisory jobs who,

for example may have authority over assembly line workers or staff

providing services to the organisation’s customers. Organisations with a

long chain of command - with a hierarchy made up of many levels of

management - are said to have tall organisational structures.

Span of control - refers to the number of subordinates a manager is

responsible for and has authority over. Organisations with a long chain of

command will tend to have narrow spans of control. Organisations with a

short chain of command tend to have wider spans of control. This produces a

flat organisational structure because it has a hierarchy with fewer levels

of management.

Flat organisational structures: are generally desirable, there is a limit

to the number of subordinates who can be placed under one superior. Even

very experienced managers who have the qualities and personalities that

promote loyalty and hard work can only be responsible for so many

employees.

Tall organisational structure : some organisations have many levels and

grades of staff with a tree-like management structure and strong patterns

of vertical communication. This means that there are many different grades

of staff between people lower down the organisation and the person at the

top. Tall organisations suffer from problems with bureaucracy, as

information needs to be directed through the correct channels before

appropriate action is taken.

The main features of such a structure are as follows:

6. At each level there are several staff responsible to a person at the

next level up. The process is repeated until the top of the

organisation is reached.

7. In a limited company the person at the top is the Managing Director

who is ultimately responsible for the whole organisation.

8. As the levels within the organisation are ascended, the number of

people at each level decreases and this gives the organisation a

pyramidal structure.

In an organisation with flat structure there are fewer levels or grades of

staff and much more emphasis on communication across the organisation. This

is more likely to be the structure of a small business where everyone knows

each other and works together more as a team.

In some situations, however, a relatively wide span of control may be

acceptable if:

9. The potential disadvantages of a wide span are outweighed by the costs

of employing the extra managers needed to produce narrower spans of

control.

10. Junior employees are engaged mainly in routine work and as a result

the manager is required to make relatively few decisions.

11. Managers are willing to reduce the pressure on their own time by

delegating more decision making and they can identify staff who are

likely to respond well to the extra responsibility.

12. An effective range of financial and non-financial motivational factors

produces a committed group of people who need very little supervision.

13. The group within the span are highly skilled or talented and are given

a great deal of scope to be creative and imaginative in their work.

Line structure

In a line structure, a company is usually organised into functional

departments, each headed by a senior manager, below whom there is a chain

of command. This indicates that there is a line of authority and

responsibility as one goes down the structure.

Each person in the line has authority over those below, while being

responsible for making sure that the work handed down to them from their

immediate manager is completed. This applies even if the subordinate does

not personally undertake the actual work.

Advantages:

14. It is hierarchical structure which is simple to understand - staff

know precisely where they are in the structure, who can allocate work

to them and to whom they are responsible.

15. Managers have a clear understanding of the roles of people when

allocating work and spend less time monitoring work because

subordinates are not distracted or confused by instructions from other

sources.

16. A well-established line authority makes it possible for work to be

delegated further down the line - this can be valuable when superior

is seeking to widen the experience subordinates and develop their

management or supervisory skills.

Disadvantages:

17. It can involve a very long chain of command - instructions may take a

considerable time to filter from the top and impact on production,

which can be an important drawback if the organisation operates in a

rapidly changing market.

18. The flow of information back up a long chain to management may be a

lengthy process, causing a considerable delay before problems are

identified and tackled.

19. Individuals might only respond to requests from the superior, creating

inflexibility in the organisation which may be totally unnecessary if

co-operation with other managers does not effect working relations

with their superior.

Line and staff structure

A line and staff structure combines both a line authority and what is known

as staff authority. The term staff authority refers to those staff, usually

at a relatively senior level, whose are of work often involves dealing with

different departments. Someone with the relevant staff authority can

provide services and advises to those in the line of authority of other

departments. Managers with staff authority do not have the power to control

or give instructions, but rather the authority to deal with different

departments and to offer advice or support services in relation to problems

or exploiting new opportunities. However, since those with staff authority

are appointed because of their expertise, experience and good personal

skills, their advice, though not binding, is likely to be very persuasive.

Advantages:

20. Staff authority enables the expertise and experience of specialists to

be utilised more fully across the organisation.

21. By having access to all areas of the company, managers with staff

authority, communications between departments are at director level,

and so any inter-departmental communication has to pass up the chain

of command in one department to director level and then down the other

before it reaches the appropriate level.

22. Staff authority prevents individual departments from being too inward

looking - departments remain aware of their interdependence and their

role in seeking to achieve the organisation’s objectives.

Disadvantages:

There is a risk that staff authority may diminish the authority of

individuals in the line management, particularly if those with staff

functions acquire informal power and authority.

Matrix structure

In a matrix structure, a senior manager heads a division or team of

specialists drawn from different departments. These specialists are also

located in departments where they are part of a line authority; they are

therefore subject to two sources of authority.

In a matrix structure the simple chain of command found in a line structure

is replaced by a very large number of reporting relationships as

individuals report to managers in more than one department or function.

A matrix structure may be used for just some of an organisation’s

activities or it may cover the whole work of the organisation. It is often

used for organising and managing project teams, where people with

specialist skills, perhaps from different levels in the hierarchy, are

brought together to solve complex and urgent problems. Project teams may be

created to deal with issues which arise every now and again or they may be

an ongoing feature of the organisational structure.

Some aspects of marketing, however, may be handled by an ongoing project

team drawn from other departments, although the membership of the group may

change as different marketing issues arise.

Advantages:

23. It promotes increased co-ordination between departments because it

cuts across departmental boundaries - it encourages greater

flexibility and creativity, produced by the cross-fertilisation of

knowledge and skills.

24. It allows for the involvement of relatively junior staff, giving them

valuable experience in a wider field for the expression and

application of their particular skills.

25. Staff lower down a line structure can also gain valuable management

development in a project team, preparing them for promotion to higher

management positions.

26. The involvement of specialists from different areas reduces the risk

of resources

being wasted on projects with no future - in non-matrix structures an idea

originating

in, say, the marketing department may be pursued for a long time before it

comes to the attention of production which might find that it is

simply not practical.

Disadvantages:

. The existence of a matrix structure and project teams can lead to

confusion as individuals are involved in a large number of different

relationships creating a complex pattern of authority and

responsibility.

. A line manager may resent a subordinate receiving instructions from

managers based on other departments, especially if they are at a lower

level of management.

. This also raises questions as to who has priority over the

subordinate’s time and what information arising out of the work of the

project team should also be reported through the line authority. This

can be a potential source of conflict and relations may also be

strained if the subordinate suffers from divided loyalty.

Centralised structure

Organisations are centralised when the majority of decisions are taken by a

few people at the top of the organisation and little decision making is

delegated to those further down the organisational structure.

Even if many important decisions are delegated to subordinates, some

aspects of the business are always likely to remain totally under central

control. In general, senior managers or a centralised department takes

responsibilities for: major financial issues, wages and salaries, manpower

planning and personnel records, purchasing.

Advantages:

27. Senior management have more control of the business, eg budgets.

28. Procedures, such as ordering and purchasing, can be standardised

throughout the organisation, leading to economies of scale and lower

costs.

29. Senior managers should be more experienced and skilful in making

decisions. In theory, centralised decisions by senior people should be

of better quality than decentralised decisions made by others less

experienced.

30. In times of crisis, a business may need strong leadership by a central

group of senior managers.

31. Communication may improve if there are fewer decision makers.

Decentralised structure

Complete decentralisation would mean subordinates would have all the

authority to take decisions. It is unlikely that any business operates in

either of these ways. Even if authority is delegated to a subordinate, it

is usual for the manager to retain responsibility.

Some delegation is necessary in all firms because of the limits to the

amount of work senior managers can carry out. Tasks that might be delegated

include staff selection, quality control, customer relations and purchasing

and stock control. A greater degree of decentralisation - over and above

the minimum which is essential - has a number of advantages.

Advantages:

32. It empowers and motivates workers.

33. It reduces the stress and burdens of senior management. It also frees

time for managers to concentrate on more important tasks.

34. It provides subordinates with greater job satisfaction by giving them

more say in decision-making, which affects their work.

35. Subordinates may have a better knowledge of ‘local’ conditions

affecting their area of work. This should allow them to make more

informed, well-judged choices.

36. Delegation should allow greater flexibility and a quicker response to

changes. If problems do not have to be referred to senior managers,

decision-making will be quicker. Since decisions are quicker, they are

easier to change in the light of unforeseen circumstances which may

arise.

37. By allowing delegated authority, management at middle and junior

levels are groomed to take-over higher positions. They are given the

experience of decision making when carrying out delegated tasks.

Delegation is therefore important for management development.

Delayered structure

Delayering involves a business reducing its staff. The cuts are directed at

particular levels of a business, such as managerial posts. Delayering

involves removing some of these layers. This gives a flatter structure.

Delayering is likely to play a major role in a policy of decentralisation

as the removal of management layers allows authority for decision making to

be shifted to a lower level in the organisation.

Advantages:

. The savings made from laying off expensive managers. It may also lead

to better communication and a better motivated staff if they are

empowered and allowed to make their own decisions.

. However, remaining managers may become demoralised after delayering.

Also staff may become overburdened as they have to do more work. Fewer

layers may also mean less chance of promotion.

Management style

Management style refers to the approach that an organisation takes in

setting objectives for its employees and the way it manages relations

between superiors and subordinates.

Management or leadership styles can be categorised as:

Autocratic: A manager that adopts an autocratic management style takes

entire responsibility for decisions and, having set objectives and

allocated tasks to employees, expects them to be carried out exactly as

specified. Employees are told exactly what, how and when work must be

started and finished. It is the kind of management style often associated

with a corporate culture centred almost exclusively around production.

Power is focused at the top, and the centralised decision making is geared

to getting the goods out of the factory and to customers. Little regard is

paid to any non-monetary needs of employees; they are not consulted or

involved in decision making.

Democratic: A democratic management style seeks to involve employees in the

decision-making process, either by consulting them directly or through

their representatives. This approach reflects a corporate culture which is

more human resource centred and recognises the organisational benefits from

meeting its employees’ non-monetary needs - such as a need for job

satisfaction and a sense of belonging. A consultative approach is

particularly important if an organisation is planning to change product

design or working conditions, methods and practices.

Laissez-faire style: This style gives people complete freedom to organise

and carry out their work. It is a very person centred approach. A laissez-

faire approach may still impose some constraints, such as completion dates

for certain key tasks or the earliest and latest arrival times for a

flexible hours working day. There is no formal structure for decision

making as decisions are taken by a variety of processes depending upon the

nature of the problem, the opportunity to be explored and the individuals

involved.

Consultative style: Leaders consult with others before decision are made.

There will be a group influence in the final decision, even though it is

made by the leader.

As diagram above shows, Tesco has many levels of staff: directors on the

top, and step by step to employees on the bottom, therefore I can think

that Tesco is a hieratical organisation, where each individual knows who he

must report to. Communication in a complex organisation such as Tesco will

be dependent on the organisational structure, but this will be discussed

later in my section on “Communication”.

I can see that Tesco has a centralised and decentralised form of

organisation because people on the top, who control the company, take the

majority of decisions and also the company’s Head office is centralised at

Cheshunt in Hertfordshire.

Tesco is very big organisation and has very many stores in different places

– this fact shows that Tesco is a decentralised organisation, with much

decision-making delegated on a regional and individual store level.

From the information I have managed to access I believe/consider that Tesco

has a very good democratic and consultative management style. It is a very

successful firm, as seen earlier, it is now the U.K. market leader with

positive leadership from above and a notable corporate culture.

The directors present their annual report to shareholders on the affairs of

the Group together with the audited consolidated financial statements of

the Group for the 52 weeks.

The principal activity of the Group is the operation of food stores and

associated activities in the UK, Republic of Ireland, France, Czech

Republic, Slovakia, Hungary, Poland and Thailand. A review of the business

is contained in the Annual Review which is published separately and,

together with this document, comprises the full Tesco PLC Annual report

Accounts.

Culture

Culture in organisations is often described as the set of values, beliefs

and attitudes of both employees and management that helps to influence

decision-making and ultimately behaviour within them. Each organisation has

a unique culture. This is what makes studying business behaviour so

fascinating. The business culture helps to determine how things get done in

firms and defines, quite simply, how the company works. The fact that

organisations are themselves organic, composed of workers constantly

interacting with each other and their environment, suggests that the

culture in firms is not static and constant – the way firms operate can

change, either intentionally through management action or more likely

through natural evolution.

Corporate culture

Corporate culture is a set of values and beliefs that are shared by people

and groups in an organisation. A simple way of explaining corporate culture

might be to say that it is the ‘way that things are done in a business’.

The corporate culture of a business can influence decision-making. It also

encourages low level managers to behave like entrepreneurs. Business

leaders are able to create a corporate culture to achieve a corporate

objectives and strategy of the company. It is important that the corporate

culture of a business is understood by all the people that work in the

organisation. It is usually transmitted to new members and reinforced

informally, by stores, symbols and socialisation, and more formally through

training.

Advantages of a strong corporate culture.

. It provides a sense of identity for employees. They feel part of the

business. This may allow workers to be flexible when the company

needs to change or is having difficulties.

. Workers identify with other employees. This may help with aspects of

the business such as team work.

. It increases the commitment of employees to the company. This may

prevent problems such as high labour turnover or industrial relations

problems .

. It motivates workers in their jobs. This may lead to increased

productivity.

. It allows employees to understand what is going on around them. This

can prevent misunderstanding in operations or instructions passed to

them.

. It helps to reinforce the values of the organisation and senior

management.

. It acts as a control device for management. This can help when

setting company strategy.

Figure 1.8: Types of business culture.

Culture, presented within Tesco plc.

Tesco has achieved its position as Britain’s leading food retailer by

offering excellent value and service to its customers. Underlying its

business success is a commitment to upholding certain values, working

principles and culture within the organisation, and to seek continuous

improvement in its ethical performance. As a measure of its achievement to

date, in 1997 the company came top in the Christian Aid league table for

ethical commitment.

Customers.

Tesco must serve its customers by providing the goods they want and the

service they expect. By meeting customer needs better than its competitors

do, Tesco earns profits and creates value for its shareholders.

Customer service is at the heart of Tesco business culture. The base line

is quality and value, but customers also look for a shopping environment

which is attractive, well planned, and enjoyable. They also expect staff to

be helpful, responsive to their needs, and sympathetic to their problems.

Tesco is constantly seeking new ways of meeting customer needs. These

include introducing Customer Assistants dedicated to helping customers at

every point during their shopping, establishing a Customer Service Centre

to deal with customer enquiries, providing facilities for customers with

disabilities, and organising customer question times when Tesco can hear

customers views.

Staff.

Tesco employs 154,000 people in the UK and 27,000 in Ireland and Europe. It

is constantly told by customers that its staff are the company’s best

asset. This means that the company must motivate and train its employees to

give the best possible customer service, and provide opportunities for all

members of staff to develop their talents to the full.

The company believes that the welfare and safety of its employees is of

paramount importance, and applies high ethical standards to protect

workers’ rights and reward employees fairly for their work. Full and part-

time staff have had their benefits harmonised, including salaries, purchase

discounts, pensions and profit-sharing. The company has a national

agreement with USDAW, the shop workers’ trade union.

The approach of Tesco to worker welfare goes beyond its own employees. The

company insists that its suppliers meet certain employment standards in

matters such as fair pay or minimum working ages. Tesco believes it can

play a positive role in influencing working practices around the world.

Like other large companies, however, Tesco recognises that its wider

reputation depends on other things, such as its staff relations, its

attitude to the environment, its support to the community, and its

relationships with its suppliers. Also, as a leading food retailer, the

company must ensure that it provides products, which are safe to eat or

use, as well as giving customers advice on matters such as healthy diets.

Health and safety

Tesco customers rightly expect that their purchases will be safe to eat or

use. The company applies the highest standards in meeting these

expectations and makes special provision for those with special dietary

needs. Following government recommendations on the nation’s diet, Tesco was

the first retailer to promote healthy eating.

Environmental policies

Tesco is committed to protecting the environment and to using its

commercial strength to put its principles into practice. In many cases, the

company’s standards far exceed legal requirements. Its environmental

policies cover matters such as recycling of packaging, working with

suppliers to minimise the use of pesticides, energy conservation, and the

siting and design of its stores. Tesco also works closely with

environmental organisations in areas relevant to its business.

Animal welfare

The company aims to set the highest standards of animal welfare in the

industry, and has introduced a code of practice on the treatment of animals

to which all its suppliers must adhere. The company is also funding

research to improve understanding of animal welfare, and will continue to

promote and implement high standards in order to improve animal husbandry

still further.

Relationships with suppliers

Tesco has relationships with thousands of suppliers in the UK and overseas,

and works closely with these suppliers in order to ensure that products are

of the highest quality and delivered in the best possible condition. By

working in close partnership with its suppliers, Tesco is helping them to

meet its own high standards, not just in efficiency and product quality,

but also in environmental protection, animal welfare and employment

practices.

The community

Tesco is very much part of local communities throughout the UK and is

committed to playing a positive role by working with community

organisations. The company’s community contribution covers support for

education, groups dedicated to helping people with disabilities, and a wide

variety of other organisations. The company has introduced schemes which

enable its own staff and customers to help raise money for good causes.

Each large supermarket retailer in Britain has its own corporate identity

and culture. Often these are very similar, yet each organisation seeks to

present its own individual image. Of the types of cultures that I have

discussed above, I think that Tesco displays many of these differing forms,

especially customer driven or customer orientated, task culture,

competitive culture, innovative culture and positive culture. It is often

said that in business “the customer is King” and this is very true of

Tesco, which operates in a very competitive market. It must be very heavily

customer orientated as satisfied customers will usually regularly return,

but dissatisfied customers may not …. and go elsewhere! It is also very

innovative, always encouraging new ideas and products, e.g. the possible

introduction of car sales. Tesco used to be a food retailer, but now it

also sells clothing, electrical goods, books and stationary, computers,

mobile phones, etc. It has a very positive culture as it is always

searching for new opportunities for its staff and also its retail products.

Its success is now a good indicator of how this blend of business cultures

has led to market growth and market leadership.

E5

Communications

The efficient communication of information is particularly important for

organisation that operates in competitive markets. Relevant and accurate

information is needed to plan and manage efficient production, marketing,

distribution and cost control. Information – whatever it is nature and

purpose – must be communicated as efficiently as possible.

All people in an organisation are part of an information flow – they are

involved to varying degrees in providing and receiving information.

However, there are three main levels at which information is required:

. operational level

. middle management

. senior management.

Operational level

At the operational level – on the factory floor, in the office or at

premises where consumer services are provided – there are charge hands and

supervisors who must ensure that work is planned and carried out as

efficiently as possible. In a factory, for example, a supervisor giving the

task of overseeing the production of a particular item needs to know:

. the quantity to be handle

. the completion date

. the availability of plans and machine capacity

. the operations to be performed

. the kinds of labour needed and its availability

. the materials and components required to produce the order.

The kind of information assists the supervisor in planning and controlling

he work and it is essential for decision making at an operational level.

Activities at the operational of an organisation produce data that will be

processed to provide much of the information required by middle management.

Middle management

Middle management needs to know how efficiently work at operational level

is been carried out and the extend to which any resources under their

control are being used to achieve the organisation’s objectives. Much of

this information relates to the productivity of labour, the utilisation of

machine capacity and the rate at which materials and other inputs are being

consumed.

Middle management also needs a great deal of financial information about

the costs of the resources consumed in relation to output. This financial

data can be used to determine and monitor total costs, revenues, profits

and the achievement of business objectives for example, it will be possible

to identify any fall-off in productivity or rise in labour costs which

might contribute to arise in unit labour costs or to detect the excessive

use of materials which might suggest an increased in wastage.

Senior management

So far, I have mainly considered the need for information that is processed

and generated from sources within the organisation. At senior level,

however, information from internal sources often has to be supported by

information derive from external sources to help managers ensure that the

resources and their control are used as efficiently as possible in

achieving business objectives. Decision making at senior management level

has a major influence on the success or failure of the organisation. Any

decisions concerned with controlling the organisation, assessing its

performance, planning its future and initiating action must be supported by

all relevant information.

Decision making at senior level in areas such as business strategy and

planning requires information about broad trends rather than detailed

information needed to make many routine decisions on day-to-day matters at

lower levels of the organisation. Senior management need information about:

. developments in initial costs and sale trends

. overall profitability, and the respective contribution of each part of

the business

. capital requirements, and availability of internal funds and the cost

and sources of external capital

. manpower and skills requirements

. forecast of demand of the organisation’s markets

. the impact on business of any changes in the economic, political,

social and legal environment.

Superior

Prep Line manager Prep

group

group

Staff Subordinates

Staff

relationships

relationships

Figure 1.9: Communication network

Communication channels and methods

The communication channel refers to the means by which information is

communicated. The actual choice of communication channel depends upon a

combination of:

. the need for an immediate feedback or response

. costs

. speed and urgency

. the number and location of the people who need the information

. the degree of confidentiality and security required

. the desired degree of formality

. convenience

. the complexity and amount of detail to be conveyed

. the type of information to be communicated

. the need to keep a record of the communication.

Business information can be communicated in many ways. Methods include:

. written reports

. instruction manuals

. letters, circulars and memoranda

. material posted on notice board

. in-house magazines and newspapers

. sheets of figures

. information on standard forms

. graphs, charts, drawings and photographed

. video, television and other audio-visual techniques

. meetings and interviews

. public address announcements

. electronic mail

. network messaging

. fax

. telephone and voice mail

. pager device

. video conferencing

Whatever communication method is used, the information sent should be

relevant and avoid superfluous comments and unnecessary detail. The

information communicated to a supervisor on a factory may have to include

an exact description of the operations to be carried out. In contrast, much

broader information is supplied to middle and senior management. Senior

managers may only require general indicators and a broad description of the

developments that need to be considered when assessing the organisation’s

performance, setting objectives and deciding upon strategies.

Exception reporting

To ensure tht the information provided to management is relevant, clear and

concise and makes effective use of managers’ time, some organisations

stipulate that managers are only provided with dada relating to exceptional

developments. Middle management, for example, may only receive information

connected with performance measurements that deviate by more than an agreed

percentage from their targets. The information dealing with exceptional

performance should also be supported by brief statements of the internal

and/or external factors that may have contributed to any exceptional

performance. Exception reporting makes more effective use of the time and

skills that middle management devotes to decision making and to initiating

and controlling actions.

Downward information flows

A downward information flow describes the provision of information by a

superior to an immediate subordinate. It is, therefore, concerned with

internal communications as part of a formal communications channels. A

downward information flow can cover:

. issuing instructions on the tasks that have to be carried out by a

subordinate and setting objectives, such as the target data for

completing the work

. requesting information concerning the area of work for which

subordinates are responsible

. communicating the organisation’s procedures, working methods and

practices and the rules and regulations

. given feedback on subordinate’s performance in relation to his or her

objectives and targets

. motivating people and encouraging attitudes that raise productivity

and improve quality.

Some information will not come from an employee’s immediate superior but

from other parts of the organisations. For example, when employees first

start work they receive general information about the structure and goals

of the organisation from the personnel department. However, for information

that relates to work undertaken by the subordinate, the communication

channel should be from superior to immediate subordinate.

Upward information flows

An upward information flow along a vertical information channel is from a

subordinate to a superior. This might be feedback from a downward flow or

the communication may originate directly from subordinates. An upward

information flow can cover:

. responding to a superior’s request for information on some aspect of

work for which the subordinate is responsible

. informing managers about the subordinate’s own performance, problems

or their personal ambitions in relation, for example, to promotion or

opportunities for developing new skills.

. passing on information about other employees in the subordinate’s

section and relations with sections with which there is a direct link

. submitting ideas on improving working methods and solving work

problems.

In the interests of effective working relations. Most organisations expect

subordinates to report formally through their immediate supervisor or

manager. However, they are likely to communicate in formally with managers

higher up the hierarchy and in some situations, such as grievance

procedure, may go directly to a more senior manager than their immediate

superior.

Horizontal information flow

In addition to upward and downward flows, there are also horizontal

information flows between people of the same status. Because many

operations within an organisation must work very closely together, there

must be formal arrangements for the exchange of information between

sections and departments. The production department, for example, must have

close contact with the purchasing department when it is considering changes

to materials and components or introducing advanced machinery and

equipment. Production staff also has to exchange information with employees

in requirement, training, marketing and transport.

The quality of information.

The essential characteristics of an efficient information system are that

the right people receive the right information at the right time. The

information communicated should be:

. internally relevant to the needs of the recipient

. accurate and concise

. comprehensive, avoiding a time-consuming request for extra

information

. clear – it must be presented and communicated without ambiguity or

possible misunderstanding.

The person receiving the information must have confidence in the ability of

the sender and, therefore have the confidence to take decisions based on

the contents of the communication. The person sending the information must

be confident that the receiver has the ability to understand, use and take

effective decisions based upon the information supplied.

This information system, the communication media and the kind of

information provided should be review on a regular basis. The information

system should be adjusted to take into account any developments within the

organisation such as changes in its organisational structure or management

style. This review should also take into account external factors such as

advances in information technology.

Informal communications

Vertical and horizontal information flows should be clearly defined. If

individual are not sure about from whom the y should receive information

and instructors, this can lead to the growth of information flows which are

not part of the formal system. If there are two information flows running

at the same time, there can be confusion and a fall in productivity. These

informal systems can generate alternative sources of information and create

a situation where the different levels of management receive inconsistent,

inaccurate or even conflicting information.

Many businesses, however, accept that some tasks would not get completed if

they only used formal channels of communications and chains of command. It

may be necessary to short cut the formal system if a matter is very argent

or a clash of a personalities is creating communications problems. Some

informal channels may be tolerated if groups of workers have formed good

working and personal relationship outside of the formal channels. Informal

channels may even be the most effective way of communicating some kinds of

information.

All organisations have a grapevine, which communicates information

informally through personal contact between employees both vertically and

horizontally throughout the organisation. The grapevine can be a quick way

of communicating information to the workforce as a whole as it tends to

operate by word of mouth. It can be used to pass on important information

before an official announcement and, depending upon the feedback generated,

the company may modify its intentions before the formal announcement.

The problem with using the grapevine is that information can get distorted

or exaggerated as it is passed on. Proposal to cut a workforce, through 10%

natural wastage and 5% redundancies, may soon get changed to 15% compulsory

redundancies as it spreads through the grapevine. This may be useful as the

actual announcement may prove to be much more acceptable than the distorted

version on the grapevine.

External communications

Efficient internal communications are important, but an organisation’s

external communications are vital. Its business prospects will be seriously

threatened if it neglects its external communications. An organisation

needs to communicate externally with:

. customers and clients

. suppliers of materials, parts, machinery, other physical inputs and

business services

. local, national and European authorities that deal with matters such

as taxation, planning permission, environmental protection,

competition law, investment grants, trading standards, and health and

safety

. pressure groups concerned with issues such as consumer protection,

animal welfare, environmental matters and the welfare of law paid

workers

. the media and the general public on matters that can either damage or

enhance the company’s public image.

Organisation must ensure that the quality of their external communications

is as high as possible and select the most effective media for

communicating information. It is obviously important that organisations

maintain effective communications with their customers, and most businesses

invest heavily in market research promotion to attract and keep customers.

Many companies now recognise the importance of providing a communication

channel which allows customers easy access to the company. Some companies

advertise a customer care telephone number or an E-mail address on their

packaging or promotional literature. The customer care section will be

stuffed by people trained in the kinds of communications skills needed to

deal with customers making complains. Larger companies may employ

specialists press officers and public relations officers to handle dealings

with the media, pressure groups and the general public.

Organisations relying on other companies for materials and components can

find themselves in financial difficulties of their external communications

lets them down and orders are not placed at the right time. This may led to

shortages of parts and materials, and production may be held up. Relations

with suppliers may also be affected by poor verbal communications skills

which can cause confusion of the exact nature and delivery of an order. It

is for this reason that any changes to an order made verbally should be

supported by some form of written or electronic confirmation.

Opened and restricted channel of communications

In most organisations, some internal channels and communication media are

open to all employees; stuff at all levels can access the information.

Organisations want to provide some information to all their employees. This

would include, for example, information on health and safety regulations,

environmental management policies, incentive chemist and any response to

resent adverse publicity. This downward information flow from the top of

the hierarchy would be open to all.

The content of much downward and upward information flow sis fairly

routine, and organisation are not too concerned about people beyond the

sender and recipient being aware of what is being communicated. However,

access to some information and channels of communications may be

restricted. Some information is sensitive – and if it becomes known to

people other than the intended recipients, it could create either internal

or external problems.

Information and communication technology

Both internal and external channels of communication are increasingly

supported by information technology, with computers generating and managing

information flows. A computer-based information management system provides

the mean to communicate, collect, store, summarise, analyse and present

information in a way that best suits the controlling and decision making

needs of different managers. Inform received by one department or section

can be further processed before it passed onto other departments through

the organisations computer network.

Computer systems can help organisations:

. react changes in the business environment

. process complex information

. provides administrative support

. increase job certification

. collect information at source

. communicate via the internet.

The Data Protection Act 1984

The Data Protection Act was introduced to ensure that organisations

structured and managed the data held on their computers in a responsible

way. These are its main provisions.

. Organisations must register the kind of information it keeps on

individuals with The Data Protection Agency (DPA).

. Data must be obtained and processed fairly. People should know if the

information they give to organisations will be kept on computer and why

it is needed.

. Organisations can only collect the kind if information that they have

registered with the DPA, and the data must not be used outside of the

purpose for which it has been registered.

. The information held on individuals must be accurate and, where

necessary, up to date and it must not be kept longer than necessary.

. Organisations must take precautions against unauthorised access to the

information they hold on individuals.

. Individuals are allowed access to the personal data held by

organisations and, where necessary they can correct mistakes.

In March 2000 the Data Protection Art was extended to cover records kept on

a paper as well as information stored on computers and to provide

additional protection for the individual. The protection includes new

rights to know who holds information on you. It provides a statutory right

to know the identity of the person in a business responsible for data

protection issues, right to have a photocopy of personal information held

by organisations and greater rights to object to anyone holding personal

data.

There are also new rules to prevent organisations sending data to a country

outside the European Union in an attempt to avoid complying with

legislation on data protection. There are new provisions which can lead to

individuals being held personally responsible for not abiding by the rules.

Communication within Tesco plc.

An illustration of communication within Tesco plc.

Figure 2.0: Example of vertical and lateral communication within Tesco.

I have analysed the communication within Tesco plc. and now I can say that

Tesco uses relevant and accurate information to plan and manage efficient

development, marketing, distribution and cost control. Information,

vertical and lateral, communicated within Tesco very efficiently at the all

levels. Every single person who works in Tesco is sure about from whom he

should receive information and instructions.

But apart of internal communications Tesco has very good external

communications as well. The company communicates with customers and

suppliers very well. The quality of Tesco’s external information is very

high. Tesco has many communication channels which allow customers easy

access to the company, for example, Tesco advertises a customer care free

telephone number and e-mail address on its packaging literature.

E6

Production.

Production involves activities, which combine inputs in order to bring

about the physical changes that eventually produce the desired output – the

product. The product may be goods for consumers and households or parts and

machinery for other producers and manufacturers. Production can create a

physical change through:

. Processing

. Manufacturing

. Assembly

. Craft-based processes.

Value added

A common feature of all forms of production is that they are the means by

which organisations add value to their operations. Put simply, all

organisations add value to the externally sourced materials and other

inputs that contribute to their output. Value added is the difference

between the value of an organisation’s output, as measured by sales

revenue, and the costs of its inputs bought in from outside which

contribute to output.

The relative importance of the input costs incurred by a producer depend

upon the nature of the business. Most businesses generally consume a

combination of:

. Raw materials

. Parts and components

. Energy

. Business services.

Quality

Quality has always been an important competitive factor in some markets,

but during the 1980s an increasing number of UK producers began to devote

more attention to quality improvement. The rise in the spending power of

the average household meant that consumers’ choice of goods and services

was no longer so dependent on price. At the same time, consumers were being

offered a wider choice obliged producers to improve and complete on

quality. Because firms producing consumer goods and services sought to

raise quality, their suppliers – companies producing materials, parts,

machinery and business services – were also forced to improve quality.

A growing number of organizations now operate in markets where product

differentiation is rapidly decreasing. For example, advances in technology

mean that there is now very little difference between personal computers

offered by the different manufacturers in particular price range. A PC

producer must therefore strive to gain a competitive advantage by

establishing a reputation as a company with high quality and good customer

care. Consider training shoes as another example. Manufactures of trainers

periodically introduce new features into their shoes in an effort to create

a greater degree of product differentiation, but they all remain

essentially the same design and product. If the identifying logos are

removed, the average buyer might find it difficult to distinguish between

brands.

Producers of both consumer goods and consumer durables must therefore place

more emphasis on quality when marketing their products.

The increasing importance of quality can also be seen in the market for

consumer services. The main features of services provided by airlines,

banks and fast food chains are often virtually identical, and product

differentiation can only really be achieved by improvements in quality.

Another factor in changing business attitudes to quality was the success of

Japanese manufacturing companies. It was perceived that quality played an

important role in helping Japanese companies succeed in European and US

markets. By the end of the Second World War very little manufacturing

capacity remained in Japan, and in the immediate post-war period Japanese

products generally had a reputation as being cheap but inferior quality

versions of products manufactured by US and European producers. However by

the early 1980s Japanese companies had become closely associated with high-

quality products for which they were able to charge premium prices. In the

early 1980s, Japan had 18 per cent of the world trade in the manufactured

goods, substantially more than the UK’s 5 per cent share.

Quality control

Quality control involves an organisation using some kin of inspection

system for identifying materials, parts, components and finished products

which do not meet the company’s specifications. Inspection or testing may

be carried out at various stages of production to ensure that faulty items

do not remain in the production chain.

The operative or inspection department may check every item or just a

sample of production. Processing industries, such as the brewing and

chemical industries, also test regular samples of their products. Quality

inspection is supported by highly sophisticated monitoring, measuring and

testing equipment. This allows organisations to make adjustments to machine

settings and control devices to improve quality.

There are some drawbacks to a quality inspection system. Using an

inspection system to control quality encourages employees to take it for

granted that some output is bound to be defective. Less attention is paid

to preventing errors and defects in the first place as they will be picked

up later by the inspection system.

A quality control system must ensure that there is regular contact between

those departments that have a particular interest in quality matters. The

marketing department, for example, may identify issues raised by customers,

while the design research and development departments should work with

production on developing the product so that current defects are eliminated

when work is being processed.

Quality assurance schemes

A quality assurance scheme is the means by which an organisation implements

its commitment to quality. It helps firms to do the job properly the first

time, because the scheme is designed to prevent failures rather than

detecting errors once they have occurred. In this way a quality assurance

scheme (QAS) differs radically from quality control systems which involve

inspection procedures at various stages of production. The design of a QAS

recognises that defects do not just happen; they are caused by people.

Assuring quality

Once an organisation has identified the reasons why people are responsible

for defects and errors, it can develop a system which eliminates the causes

of defects. In this way, quality is assured. There is no single format for

a QAS, and an organisation chooses a system which is most appropriate to

its particular product or service. What it must do is to insure that every

stage of production (or in the provision of a service) that materials,

equipment, methods and procedures are used in exactly the same way, every

single time.

All employees should be aware of what is expected of them, and should know

how their own particular performance has to meet certain clearly identified

requirements.

Product Evaluation and Quality Assurance within Tesco plc.

What product evaluation and quality assurance in Tesco plc.

Tesco products are continually monitored and tested for their quality and

customer acceptability; this is product evaluation. Tesco staff and

management procedures are also monitored to ensure that they maintain the

highest standards; this is quality assurance.

Why does Tesco carry out product evaluation?

Product evaluation is carried out for a variety of reasons. These include:

testing new products under development

testing existing products when a change of supplier is being considered

testing Tesco products against those of competitors

to update information on the packaging

to monitor quality and safety standards.

Changing of packaging information

Even when a product remains the same, packaging information may have to be

altered because of a change in legal requirements, changes in nutritional

concepts, or advances in food preservation and cooking. For example, a

product might have its packaging altered to indicate that it could be

suitable for microwave cooking. It will therefore be necessary to test the

product in company’s laboratory. Here Tesco inserts fibre optic probes into

the product. This allows us to monitor the temperature of the product

whilst it is cooking, in order to ensure that it reaches a high enough

temperature for it to be consumed with safety.

Tests on existing products

Quality control tests are conducted regularly on all existing own-brand

products at Head Office, in Consumer Advice Centres, and in specialist

laboratories. These include tests on food safety.

Consumer Advice Centre

The purpose of five Consumer Advice Centres in Sandhurst, Shoreham,

Southport, Cheshunt and Perth is to carry out practical research with

customers into new and existing products. Each centre is staffed by two

consumer service officers who are qualified home economists. Their most

important role is to conduct consumer acceptability tests and sensory

analysis. Over a four-day period, six to eight products will be tested.

Their role also includes being available to the customer for any queries

concerning diet, health and nutrition, PR work at a local and national

level, quality control, and giving talks and demonstrations to local

community groups.

Organising a taste panel

Market researchers will recruit customers who are shopping in the store.

These customers take part in the test only if they fulfil the recruitment

criteria that have been established for the product being tested. For

example,Tesco might ensure that all participants are heavy users of the

product, or a product aimed at children will be tested on children only.

As far as possible, consumers test Tesco products against a benchmark. This

other product is normally the market leader; testing against it allows us

to ensure that product matches or exceeds this quality standard. Products

are tested "blind" and identified by codes so that consumers do not know

which one is the Tesco product and which one is the benchmark.

The questionnaire is designed so that consumers give scores for various

questions, such as their opinion as to the appearance of the product; they

are also asked to tell us what they liked and disliked about the product.

Sensory analysis

Sensory analysis is a more technical evaluation of a product which is

carried out by consumer service officers who have been specially trained to

analyse the product using uniform objectives and technical descriptions.

They will evaluate the product and forward a description of it to Head

Office for use in the final report.

What is done with the data?

Data from sensory analysis, questionnaires and customer comments are

collated and subjected to statistical analysis at Head Office which will

lead to a product either passing or failing the tests. If it is failed, the

product is reformulated according to the comments made by customers in

response to the questionnaire. Products are then re-tested and will be

launched only when they achieve a pass result.

Implementing of quality assurance

Quality assurance is implemented at all levels in Tesco. Everyone is

"focused" on giving the customer the best possible shopping experience in

terms of service, quality, availability, price, car parking facilities and

store design. This "focus" is set in Annual Trading Plan and is implemented

through various departmental objectives and through specific training

programmes. Tesco invests large amounts of money in training, so that Tesco

can achieve specific objectives, for example First Class Service

initiative.

Usually each initiative has a sponsor, normally a Main Board member. It is

the directors and managers who brief the teams, and then it is up to

individuals to "buy in" to an idea. Tesco has found that this process works

well as it is not prescriptive and it allows people to implement new ideas

in their own way.

Setting standards for quality

A common tool for creating "benchmarking" standards is called SWOT

analysis. This stands for "strengths, weaknesses, opportunities and

threats" and it provides a useful way of evaluating quality standards.

Standards cannot exist in isolation, and SWOT allows comparison with

competitors to be taken into account. Tesco therefore uses SWOT a good deal

for specific products, for example in evaluating a new range of

merchandising or evaluating a new process provided by a supplier.

Tesco Packaging design.

Tesco has many "Own Brand" products, and in order to promote its own brand

correctly Tesco has its own Packaging Design Department. Products sell for

a variety of reasons; in the first instance, the visual appeal of a product

is important to attract customers to the product initially, as it is only

after the first purchase that the customer is attracted because of the

quality of the product and its value for money.

How does Tesco add value to its product?

Usually value for product depends on one very important key – quality of

the product, better quality – more tests are done – bigger value, but Tesco

tries to keep prices lower than all other national supermarkets. Tesco adds

value to its products by means of buying it from contractor for lower

price, testing it, and selling it for higher price.

C1

Success of the business in meeting its objectives.

Tesco is one of Britain's leading food retailers and has 586 stores

throughout Great Britain. In Europe Tesco has 41 stores in Hungary, 32 in

Poland, 13 in the Czech Republic and Slovakia, 33 in Northern Ireland, 76

in the Republic of Ireland and 1 in France, to prove that business meets

its objectives successfully I’ll present some diagrams and company’s

financial records.

Turnover and profits of Tesco in 1997-1998

The turnover and profits for the year ending 28th February 1998 were as

follows:

1. Group Turnover (incl VAT) - Ј17.8 billion (Ј17,800 million), an

increase of 18.7% on the previous twelve months. This figure is for 53

weeks compared to 52 weeks for the previous year and includes the

newly acquired businesses in Northern Ireland and the Republic of

Ireland. On a comparable basis with the previous year, excluding the

Irish acquisitions, turnover was Ј16.4 billion, and increase of 9.2%

2. Profits on ordinary activities before tax, integration costs and

disposal loss - Ј832 million, an increase of 10.9% on the previous

twelve months.

Changing of company's financial fortunes 1992-98

The changes in the company's financial fortunes are shown in graphs 1 and 2

Graph 1,2: Group turnover and operating profit 1992-8

Graph 3: Share earnings and dividends 1992-8

Profits share

In 1998 the profits from Tesco after tax were Ј505 million. About 50% of

the profits were distributed to shareholders as dividends. Subsequently

approximately Ј250 million was retained by the company for investment in

new stores and improving their service to customers.

Changing of share price in recent years

Between February 1997 and February 1998, the Tesco share price rose from

349p per share to 517p. It reached a peak in the period of 539p. In the

year 1998-9, the price continued to rise, being 586p on 21st April 1998,

and having peaked at 603p at the previous stock market high.

Market share of Tesco

In February 1998, Tesco had 15.2% of the UK retail food market. The

company's share has increased consistently since 1992 when it held 10.4% of

the market.

Graph 4: Market share growth 1992-8

Turnover, profits and market share of Tesco in 1999-2000

Profit and loss account

This year was another successful trading year for Tesco plc. Total sales

increased by 9.8% to Ј20,358m and underlying pre-tax profit increased by

8.4% to Ј955m. Adjusted diluted earnings per share rose 8.6% to 10.18p. A

final dividend of 3.14p per share is proposed, making the full year

dividend 4.48p, an increase of 8.7% over last year.

UK retail sales have grown 7.4% to Ј18,331m. Like-for-like sales were 4.2%

which consists of volume of 3.2% and inflation of 1.0%, with new stores

continuing to perform well, contributing 3.2% to sales.

UK operating profit increased to Ј993m up 8.1% on last year. Tesco’s UK

operating margin remained broadly flat at 5.9% in a year when Tesco made

substantial investments in price.

Company change programmes continue to deliver increasing levels of

efficiencies enabling us to invest for customers and grow profits.

Sales in the rest of Europe accelerated with total sales up 18.8% to

Ј1,527m and contributed an operating profit of Ј51m, up 6.3%. Sales in the

Republic of Ireland in local currency are up 6.1%, reflecting the benefits

of company’s store rebranding programme. In Central Europe sales are up

76.8% at constant exchange rates. Tesco 11 new hypermarkets across the

region have all traded strongly since opening.

Business in Thailand has seen good growth and the three new stores have

contributed to sales of Ј357m up 96%. In South Korea, Tesco Homeplus

achieved sales of Ј140m in the period since acquisition. In the Asian

region Tesco made a small operating loss of Ј1m.

Tesco Personal Finance has now been trading for nearly three years and

share of losses this year are Ј4m compared to a Ј12m loss last year.

Tax on underlying profit has been charged for the year at an effective rate

of 27.4%.

CHRISTMAS & NEW YEAR TRADING STATEMENT

Monday

15 January 2001

GROUP SALES GROWTH CONTINUING TO ACCELERATE

Group sales for the seven weeks ending 6 January 2001 increased by 15.4%.

This growth was driven by excellent performances from all four elements of

Tesco strategy: a strong core UK, increasing non-food sales, rapidly

developing international stores and expansion into retailing services.

OUTSTANDING UK GROWTH UP 10.5%

Total UK sales for this seven weeks, covering Christmas and the New Year,

were up 10.5%. Compared to last year this period included one extra day's

trading over the New Year. Like-for-like sales were up 6.9% driven by

excellent sales volumes of 7.3%. This performance reflects determination to

deliver the best offer for customers as Tesco continue to cut prices.

Overall deflation was -0.4%.

STRONG INTERNATIONAL PERFORMANCE

In 2000 Tesco opened 32 stores internationally adding over 3m sq. ft. of

new trading space. This represents an increase in International trading

space of over 45% on the previous year. International sales were up 50%

over the Christmas and New Year period as a result of existing stores

maturing and new store openings.

RECORD NON FOOD PERFORMANCE

Company’s strategy of offering excellent value in non-food to customers was

a resounding success this Christmas. Tesco achieved sales in all areas

including 14,000 DVD players and 8,000 widescreen televisions.

TESCO.COM SALES QUADRUPLE

The roll-out of Tesco.com to cover 90% of the UK population helped drive

the performance over Christmas with sales up 400% on last year. To meet

this demand Tesco.com recruited 400 new staff, allocated 10,000 additional

delivery slots and delivered 30m products.

Some examples of meeting its objectives by Tesco plc.

Product promotions

Objective: to give customers a broad range of strong relevant promotions in

all departments of the store.

Examples: hundreds of MultiSave, Link Save and Special Offer promotions in

all stores every month.

Product range

Objective: to give customers what they want under one roof.

Examples: constant development of new and exciting food products;

introduction of clothing, CDs and videos.

Pricing

Objective: to be competitive especially with regard to the basic lines.

Examples: Value Lines and Unbeatable Value pricing, giving low prices on

key brands and own-brand products.

Customer Service

Objective: to provide customers with outstanding, naturally delivered

personal service.

Examples: baby changing facilities, no quibble money back guarantee, "one

in front" queuing policy.

Store design

Objective: to provide an environment that is easy and pleasant to shop in.

Example: store layouts, fixtures and ambience improved to ease customer

flow and make shopping more enjoyable.

Store refurbishment

Objective: to upgrade existing stores to the standard that is expected from

Tesco.

Example: existing stores improved to include recent innovations.

Communications

Objective: advertising should appeal to all social and economic groups in a

relevant and friendly way. Example: recent television ads.

C2

How the organisational structure, culture and management style of the

business affects its performance and operation and helps it to meet its

objectives?

I have analysed each of the major functions of Tesco separately. However,

it is the effective interaction of business functions that is essential to

the success of an organisation in attaining its objectives.

Marketing

Advertising.

Tesco uses advertising in the press, on the radio as well as on television

to support the company’s marketing by making the public aware of the

products and services available in its stores.

The Tesco logo.

The Tesco logo is a vital part of its image. By 1995 many versions of the

logo had evolved and company’s corporate identity was not focused. Company

therefore began to use one single Tesco logo that is the same everywhere,

on stores, letterheads, posters, lorries....

The new logo has the company name in red, the underlining in blue and the

background white. However, given the cost of this change Tesco did not

immediately change every logo for the sake of it, but gradually as old

items were replaced, repaired, repainted, reprinted or re-designed. This

means that it is taking about three years for the new logo to completely

supersede all other versions.

Chef’s Club.

The Chefs' Club is an initiative which brings the best advice on food and

drink to customers and aims to make shopping more enjoyable. Tesco is

working with some of the country's top chefs and other experts who want to

share their passion for good food and drink with customers.

Tesco Packaging Design.

Tesco has many "Own Brand" products, and in order to promote its own brand

correctly Tesco has its own Packaging Design Department. Products sell for

a variety of reasons; in the first instance, the visual appeal of a product

is important to attract customers to the product initially, as it is only

after the first purchase that the customer is attracted because of the

quality of the product and its value for money.

Tesco Product Promotion.

Product promotion is the responsibility of the Tesco public relations

team. The team is always involved at the planning stage of any new product

or service, and its brief is to generate extensive and appropriate coverage

for the new product.Tesco has three key objectives for any product

promotion; these are:

. to reinforce the Tesco brand values of quality, choice, price and

service

. to maintain the Tesco image as a market leader through its products

and services

. to manage product issues - both positive and negative.

Distribution

Purpose of the distribution department

Its purpose is to ensure that Tesco stores have the right products

delivered against agreed delivery schedules and in good condition, enabling

the stores to provide a consistently high level of customer service.

Tesco products are sent to stores from distribution centres around the

country. Tesco runs 13 centres and a further six centres are run for Tesco

by contractors. A typical centre covers 300,000 square feet and handles

some 50 million units a year. The centres work around the clock, seven days

a week, providing 2,500 deliveries daily, amounting to 19 million cases per

week. Tesco employs 6,800 people in distribution (excluding the staff at

the contractor-run centres), and has about 1,000 tractor units and 2,000

trailers in its national vehicle fleet.

How does Tesco keep each store supplied with what it needs?

The key to the distribution system’s ability to supply each store’s needs

are the advanced use of IT at all stages of the distribution system.

Information from stores about their sales and requirements is sent to Tesco

Head Office and from there to the distribution centres. The centres run a

computer system that has been specially designed to fit with Tesco working

practices and to maximise efficiency).

How does Tesco achieve maximum efficiency in its distribution centres?

Computerised information arrives via printers in the warehouse offices. The

system feeds this information directly to the staff on the warehouse floor

via radio links mounted on the fork-lift trucks. The system helps to

control the movement of stock and the activity of staff. Thus when a person

has finished a particular job, the computer decides which would be the most

efficient job to allocate next to that person, based on his or her current

position in the warehouse.

Also, in the past, Tesco’s operations have been slowed down at peak times

by the need for product identification and purchase-order matching. Now

each goods-in checker is equipped with a scan gun which can scan the outer

case code of each product and radio the information back to the Head Office

computer, which matches a delivery with its purchase order in an instant.

As well as easing bottlenecks, this system enforces accurate outer case

coding, which Tesco believes to be essential to future developments in its

distribution system.

Human Resources

People are fundamental to business and the way company recruit, develop

and reward people is the key to success. Human Resourcing in Tesco is

therefore influential, leading edge and proactive to ensure continued

success.

Human Resources at Tesco is divided into a number of central areas which

focus on the design and research of Tesco HR policies and a number of front

line HR professionals that work in partnership with company’s Line Managers

to deliver the business plan.

Promote management development

Tesco does this by providing opportunities for everyone to increase their

learning, thus enabling Tesco to thrive in a constantly changing and

competitive market place. Tesco does this by:

designing training packages which equip people with the knowledge, skills

and experience needed to reach high standards of performance, and equipping

trainers to coach others thus maintaining excellent quality standards.

enabling training to be delivered in the workplace by people who know how

to do the job themselves.

exploiting new methods of learning, and thereby providing a supply of

general business managers for the future.

developing effective working relationships with colleagues and suppliers

through listening and challenging, and designing products which inspire

them.

Research and development of effective corporate human resource policies

Tesco does this by:

being constantly aware of UK and European employment legislation, and

translating it into policy that maintains a balance between cost

effectiveness, fairness, developing relationships with people, and

company’s business aims.

researching and developing people involvement strategies; this involves

analysing staff research, which includes both large-scale corporate surveys

and specialist staff research.

providing updates on employment law.

scanning and benchmarking other organisations, in order to import best

practice and maintain a competitive stance.

ensuring specific policies, for example regarding the employment of

disabled people and equal opportunities.

achieving external recognition, to ensure that Tesco is seen as a quality

employer.

Developing selection standards and implement corporate entry programmes

Two crucial roles for the Human Resources Department are:

developing selection standards which will enable managers to select the

best people who will continually increase value for customers.

implementing corporate programmes in order to ensure that the company's

manpower requirements are met.

Tesco does this by:

designing recruitment and selection processes which will equip managers

with the skill and knowledge to select the best.

training managers to maintain selection standards, and to select using the

most reliable and leading-edge processes.

developing corporate competency frameworks which enable managers to select

the right people, who have the skills the business will need in the future.

developing corporate entry programmes to ensure that corporate manpower

needs are met in terms of skills and numbers.

developing and implementing Tesco employment branding and marketing

strategy in order to ensure that Tesco is seen as a quality employer which

attracts the highest calibre candidates.

developing a pool of Excel graduates providing a supply of managers with

broad business experience.

developing at a national level links with leading education/industry

establishments, and planning initiatives whereby managers can develop links

with education at a local level.

Reward Development

Reward Development researches and develops rewards and organisational

design strategy which enable Tesco to recruit, motivate and retain the

best. Tesco does this by:

sourcing and analysing pay and benefits data to enable Tesco to keep

remuneration and benefits packages competitive.

continually shaping innovative ways of rewarding staff, thereby enhancing

the value of the reward package and increasing staff retention and

stakeholding.

developing performance management processes and tools which will improve

performance and encourage motivation in staff

providing advice and if necessary challenging organisational design,

thereby ensuring a maximum return on corporate reward spend and creating

organisational structures which will deliver business goals.

HR professionals

HR professionals operate out of the Line, working as part of the senior

management team in order to influence and implement HR strategy. They work

closely with the central HR departments and line managers to deliver key

aspects of company’s business plan:

Develop the best

Recruit the best

Retain loyal and committed people

Live the values of the company

Transfer HR skills effectively to the line.

Hence these functions help meet the objectives successfully. All Tesco’s

organisation structure works as links of a chain, if one link falls down,

all the organisation will experience difficulty. For example, most

important department of Tesco, I consider, is Distribution department. If

this department fails, products will not be delivered to the store, so

customers will go to another store. Tesco’s success is built on the good

work of each department.

As an example, Tesco has recently introduced Customer-Oriented

Initiatives, such as:

Loyalty cards

Clubcard was test-launched in October 1993 and was rolled out nationally

in February 1995. Clubcard has transformed the retail grocery sector and

has brought Tesco closer to its customer. At the heart of the programme is

one of the most sophisticated customer databases in Europe.

Clubcard is a magnetic "swipe" card obtained free in store. The checkout

assistant swipes the card prior to scanning the customers shopping. For

every Ј1 spent, one point is earned. Each point is worth 1p. When shopping

at the originating store, the till receipt advises:

. Points earned from that shopping trip

. Points accumulated during the quarter.

The points earned are recorded on a central computer and are converted into

money-off vouchers every quarter.

Customers can earn Clubcard points at:

. Tesco stores

. Tesco petrol stations

. B&Q

. Energi - through Norweb

. Tesco Personal Finance

. Tesco Home Shopping.

In addition Clubcard has recently been extended to Ireland and to the Tesco

Vin Plus store near Calais.

Home shopping

Many people today,

both single people and couples, are working longer hours and do not want to

spend part of their leisure time making a trip to the local supermarket. To

help people save time on shopping, Tesco has introduced Home Shopping, a

service which makes use of information technology so that people can do

their shopping via the Internet from their home computer. This was first

introduced on CD-ROM in July 1996, and Tesco followed this up by becoming

the first UK food retailer to offer an Internet-based home shopping service

in November 1996.

Personal Finance

In 1997, Tesco

decided to extend its customer offer to include personal financial

services. In partnership with the Royal Bank of Scotland, Tesco is

providing new ways of banking and other services to its customers.

C 3.

The impact of ICT on internal and external communications

Importance of ICT

IT is vital to Tesco because every aspect of its operation is controlled

or monitored by IT - stock, distribution, payroll, accounts, and so on. For

example, when an item has its barcode read at the checkout, the system not

only logs the price onto the till, but also logs the financial transaction

between Tesco and the customer and the fact that the stock has been reduced

by one item. On the distribution side, instructions from the mainframe

computer are sent directly to fork-lift truck operators at depots by radio

links.

All stores are connected to the mainframes at Head Office via the Tesco

Network. There are a large number of different applications that stores use

both independently and via the mainframe connection. For example there are

Personnel and Scheduling systems in-store, and access to electronic mail

via the mainframe.

IT capacity

Tesco has a three-level architecture with mainframe, middle system servers

and PC clients. Their main frame has a 6 million Mb storage capacity

(equivalent to 6 million 500-page books!). Their private digital network to

600 stores has a capacity of 11.5 Mb. They use some 100 Tesco-written

computer applications and over 200 PC packages.

How much does Tesco spend on IT each year?

Last year, Tesco spent about Ј133 million on IT, that is about 1.4% of

turnover.

How does that compare with other companies?

A recent independent survey of Europe's leading 500 companies in all

commercial and industrial sectors placed Tesco 112th overall in Europe in

terms of IT spending, but 3rd in the list of European supermarkets, and 1st

amongst British supermarkets. [Source: Information Week 19-20/12/97].

How many on-line card authorisation requests does Tesco receive each day?

Over one million on-line card authorisation requests are dealt with every

day.

Internet site

The Internet site receives 250,000 hits per week and was used to launch

Tesco’s home shopping service and the Tesconet Inertrnet Service provider.

The internet site has proved to be a great success, with the introduction

of Tesco Direct, the home ordering and delivery service. Such “home

shopping” is becoming increasingly important as more and more customers

gain access to the internet via home PCs. Sainsbury’s, one of Tesco’s great

rivals, has also now launched its own home delivery service via the

internet.

[pic]

Tesco own Internet site. Home page.

ICT systems used by Distribution Department

IT has revolutionised all aspects of the selling, ordering, distribution

and analysis of Tesco products. The operation of Tesco large distribution

centres is a highly complex business. In recent years new computer systems

have revolutionised distribution operations, allowing more effective stock

control procedures, increasing productivity and making the best use of

time, space and labour.

The base system used to control the distribution operation was purchased

from Dallas Systems and customised to Tesco requirements. There are two

particularly important sub-systems, known by the acronyms DCOTA and DCAMS.

DCOTA (Distribution Centre On-board Terminal Access) is a system which

sends information by radio directly to the special terminals in the trucks

of the fork-lift truck

drivers at the distribution centres. The system controls the movement of

stock and trucks in order to make the most efficient use of time and space,

automatically matching up locations and trucks. As soon as one assignment

is finished, the next brief will be transmitted to the truck-mounted

terminal, showing the driver where to go next. Every warehouse location has

a check number prominently displayed on the racks; this number is entered

by the driver each time he visits a location, enabling the computer to

check that each pallet has been placed in the correct slot.

DCAMS (Distribution Centre Assignment Monitoring System) is the system that

monitors how far each job has progressed, and the deployment of staff. It

is available to supervisory staff via hand-held radio frequency terminals,

enabling them to predict and pre-empt problems by re-deploying staff and,

if necessary, changing work priorities.

Radio frequency communications are also used in the checking in of goods.

Ordering by stores now relies heavily on IT, using Sales Based Ordering.

Data is received by the distribution centre from the Head Office mainframe

system, and then passed to the warehouse systems described above.

These mainframe computers are among the largest in Britain. The mainframes

are either IBM or compatible (Amdahl), running IBM operating systems. There

are mainframes situated in two separate locations.

The loss of a whole mainframe would have serious effects, and for this

reason company has two mainframes to provide backup capacity. In the event

of a disaster which involved the complete destruction of one of the

computer centres, the other could re-establish these vital systems within

48 hours. The backup procedure is tested regularly each year.

The backup systems for the distribution depots include specialist routines

that allow depots to switch between computer sites, and are at the leading

edge of data processing technology. If a complete computer centre were

lost, IT communication with all affected depots would be re-established

within six hours at the most.

Goods are now ordered from suppliers using a system called Electronic Data

Interchange (EDI). Orders for goods are transferred to the suppliers

electronically using a service called INS-TRADANET. The use of EDI keeps

suppliers precisely informed of Tesco requirements for company’s stores. It

allows Tesco to run the business more effectively and efficiently because

of its speed and accuracy. It is both quicker and more cost-effective than

telephone, post or fax, and eliminates errors due to loss, or to wrongly

printed orders.

EDI is also used for:

sending sales forecasts so that suppliers can anticipate demand and reduce

lead-times for stock to reach the stores

securing the best payment terms and discounts for Tesco

simplifying the invoicing process, so that invoices are generated

automatically and postage and paperwork are eliminated

working internationally, to eliminate time and language differences.

ICT systems used in Management.

Management Information is data stored electronically for use by business

executives at all levels to support their decision making. This type of

information is typically historical, and needs human interpretation before

a decision is made. Tesco is planning to introduce a new system, called

Data Warehouse, which will give much greater analysis and flexibility, and

will further enhance the ability of managers to make informed decisions.

The sections below describe Tesco’s current Management Information

environment, and the planned Data Warehouse, broken down into four topics:

Business use, Technology, Data and Analytical tools.

A) Business use

Current Management Information

Access to summarised data at pre-defined levels

Most decisions made at a macro (e.g. regional level)

Planned Data Warehouse

Access to in-depth information for informed decisions

Decision made at micro level, e.g. in store

Use of balanced score carding for suppliers, stores, etc. with supporting

details

Use shopper behaviour to influence new lines, promotions, and product

ranging.

B) Technology

Current Management Information

Mainframe, text-based reporting and analysis

Downloaded to local PCs for in-depth analysis and graphics

Planned Data Warehouse

Specialised hardware and software to manage data (the 'Information

Warehouse')

Information from the Information Warehouse to be accessible from anywhere

within Tesco and available also to designated outside users, e.g.

suppliers, agencies

Cost of computer hardware and software is "scaleable", i.e. Tesco can add

processing power and storage capacity at reasonable cost and in manageable

chunks to keep pace with the information needs

Dedicated NCR machine and peripherals.

C) Data

Over 10 million customers, over 60,000 products and 586 stores

Current Management Information

Data held on mainframe, PC or on paper

Internal data analysed using SAR reports and MAS analysis tool (see below)

External data received by EDI or on paper

Planned Data Warehouse

Data collected from Tesco operational systems and external sources, and

stored centrally to provide one consistent source of information

Data is stored on customer behaviour, product performance, branch

performance supplier performance, depot performance

Data held at lowest level to enable ad hoc groupings,

e.g. salt sales in stores by the seaside last Easter.

D) Analytical tools

Current Management Information

Mainframe based

FOCUS - report generator

SAR - report viewer

MAS - Tesco-written multi-dimensional analysis tool

PC Lotus suite - spreadsheet and database applications

Planned Data Warehouse

A simple interface with the information using the score card concept, with

top level measures and capability to "drill" to the level of information

required to support decisions

IT populate the Information Warehouse and users control their reporting

requirements

Logical access to information, with user choice of level, groupings,

stores, products, measures, and other parameters

ICT systems used in store operations.

IT is essential to the running of a modern store. It is used for planning,

monitoring and auditing store operations. In fact, the logistics of running

a major store would be severely hampered without IT, and the expansion to

Superstores and Hypermarkets would have been difficult without modern IT

developments.

Tesco stores vary greatly in size, from small Express stores covering 2,500

square feet to giant hypermarkets covering 120,000 square feet. The product

range depends on the size of the store, and varies from 2,000 lines in a

small store up to about 40,000 lines in the biggest. Computerised Store

Merchandising and Planning systems ensure that Tesco get the right products

to the right store, and get the right amount of space on each shelf within

a store. This allows Tesco to get optimum sales for the space allocated to

the product, and gives the customer the most appropriate range of products.

A store can monitor what has been sold through the scanning operation at

the checkout. The introduction of barcodes and scanners not only allows

items to be checked out more easily, but it provides information that is

constantly fed back to the store's computer for the monitoring of sales,

both in terms of stock depletion and money taken.

Barcodes and scanners provide several benefits to company’s customers:

As purchases are no longer entered manually into a cash register, accurate

pricing is guaranteed.

The scanning till is faster, reducing the time for which customers have to

queue by about 15%.

Produce is now weighed at checkouts, removing the need to queue twice (once

for weighing and once at the checkout) as used to happen.

Improved promotions may be offered, such as Multisavers.

The customer gets an itemised till receipt giving details of the product

purchased, price, weight (if weighed), total cost and method of payment. It

also shows the store telephone number, plus details which will trace the

sale quickly if a customer has an enquiry.

Tesco benefits as much as the customer from the new systems. Notably:

Improved transaction accuracy: operator error is removed; fraud is limited

as there is no opportunity to enter a lower price on the keyboard.

Improved customer service - customers are important!

Improved productivity. There is no need to label each item with its price,

which can now be displayed on the shelf edge near to the product. Removing

separate weighing stations removes the need for a manned point in the

produce department; customers move through the checkout faster.

Selective promotions can be initiated.

Stock levels can be reduced as the exact quantity held is always known and

re-ordering can be made more accurate

Wastage of perishable goods is reduced, as they too can be ordered more

accurately.

Monitoring sales analysis and the effectiveness of promotions provides

valuable information for Tesco buyers and also the company's suppliers.

Every product has a unique number, the European Article Number or EAN.

This number is allocated to each product by the Article Number Association,

which oversees the operation of the numbers for all businesses in the UK.

The number can be found below the bar code. The bar code is a

representation of that number in a binary form that can be read by a

scanner. The scanner uses a laser and measures the difference in reflection

to the laser of the bars and spaces.

The EAN and barcodes normally consist of 13 digits, although there may be

only eight on smaller products. The first two digits are a national code,

representing the marketing country. The next five digits identify the

supplier of the product and the following five identify the product itself.

The final figure is a "check digit" based on the other twelve numbers,

which allows the computer to validate the code.

The introduction of IT in shopping has been matched by banks. This has

resulted in new developments in payment. The simplest of these is that

cheque details can be printed out by the till, based on the information

used to produce the receipt. Credit card vouchers can be printed similarly,

and credit card details read electronically from the card.

A further advance has come with Electronic Funds Transfer at Point of Sale

(EFTPOS). This allows Tesco to transfer money from a customer's bank

account or credit card account automatically. Two developments that have

come from this are the debit card and "cashback".

Debit cards are a means of purchasing without cash or a cheque. Unlike

cheques, there is no limit to the amount a customer can spend with a debit

card as the transaction is automatically checked at the customer's bank

and, providing there are sufficient funds in the customer's bank account,

the payment is then guaranteed to Tesco. Unlike credit cards, the customer

pays at the time of the sale.

The facility to give customers up to Ј50 in cash also comes from being able

to check the customer's bank or credit card account, and has proved a

popular innovation with customers, who are saved the necessity of a trip to

a bank or cashpoint.

Within a store there are two crucial systems that enable Tesco to sell

products. These are the front-end system, called ProgreSS, and the

replenishment system, SBO.

The ProgreSS system holds pricing details of the 60,000 different products

that Tesco sells, their description, and details of any special offers on

them. It records details about each sale, not just the amount of each item

sold, but whether the price has been reduced, the amount of money tendered

and the change given. It also controls Clubcard processing, registering the

points earned on the card. Whilst the system manages the main grocery

tills, it also has the ability to be aligned to specific business

functions. So different "personalities" are used within the garage,

pharmacy, hot chicken counter and pizza areas.

The system is also used to control the back office and cash areas. During a

normal day's operation the system will transmit batches of information to

the mainframe systems at Head Office. This is primarily sales data, but

also includes details on reduction sales and Clubcard details, together

with daily totals and so on. In return it receives price changes, and new

and delisted product information.

The ProgreSS system runs on an RS6000 machine.

The stock replenishment system is called Sales Based Ordering (SBO). As its

name implies, it orders new stock on the basis of what has been sold. It

also manages in-store stock control and the central ranging and ordering

process.

Whilst there are some 60,000 products sold by Tesco, even the biggest

hypermarket will stock only about 40,000 of them. Some Express stores will

stock only 2,000 lines. The system keeps track of what products are stocked

and how much is in the store, and is then able to use this information,

together with the sales data, to calculate how much more should be ordered.

Most products have to be calculated every day, on a one or two day lead

time (the time between ordering and delivery).

The SBO system also manages the recording of all store-based stock

movements (for example damaged goods, out-of-code waste, transfers to other

stores), stock count scheduling and validation. The stores also use the

system to influence their orders, for example factoring up expected sales

of ice cream when a hot spell is forecast.

ICT systems used by Customer Service Centre.

The centre provides a central customer service operation for the company;

it handles requests for information and customer enquiries. It also handles

the management and administration of Tesco Clubcard, and the processing of

orders for the Baby Catalogue and the Home Shopping service.

The scale of the operation, and the efficient organisation of staff to

provide exceptional customer service, requires the extensive use of IT both

in telephone and information systems.

To give you an idea of the scale of company operation, Tesco employs over

400 staff, both full and part-time. The Clubcard loyalty scheme has over 10

million customers. In a typical week Tesco get 100,000 telephone calls,

5,000 letters, and 1,500 e-mails from customers, and company generates

7,000 outbound letters to customers.

Tesco uses IT to manage 100,000 calls a week, both to organise the calls

efficiently and to provide information on the timing and length of calls

for planning and monitoring purposes. Among the systems Tesco uses are:

ACD - Automatic call distribution (Meridian)

This system manages the way calls get routed to Customer Service Centre

staff. Calls into the centre are distributed to ensure that call queues

are managed effectively. Real time monitoring facilities provide

information on service levels.

Call forecasting and scheduling system (QMax)

The distribution of calls varies significantly throughout the week. This

system is used for forecasting when calls are likely to be made. The

information is then used to schedule staff availability so that they are

there to take the calls.

IVR - Interactive voice response

This is a menuing system on the telephone to filter out those calls that

can be handled without an operator. The customer selects various options

so that calls can be transferred directly to the appropriate service or

person.

There are many ways in which IT provides and organises information for

Tesco. For example :

Customer services have systems to assist in logging customer enquiries,

handling responses and tracking progress on outstanding issues.

Tesco has an addressing system, based on the Post Office Address File, that

enables accurate addresses to be captured quickly.

Tesco has a knowledge base on an intranet to help staff deal with customer

queries. This contains frequently asked information about the company’s

stores, products, services and policies, as well as general information

about nutrition and healthy eating.

Management reporting is used extensively to provide information to the

business on customer concerns. Tesco is now looking at new technology as a

way of pro- actively reporting on any serious issues that emerge requiring

close, urgent attention.

Orders from Home Shopping customers may be received over the telephone, by

fax or via the Internet. These are collated by store and go through a

delivery scheduling system which plans the most efficient delivery route,

and are then transmitted to the stores for packing and delivery.

The Clubcard system enables staff to deal with customer queries related to

the service. This involves managing a large number of routine calls with

regard to changes of address, lost cards, and so on. IVR systems are used

to intercept these routine calls so that they can be handled automatically.

A1

Alternative approaches which might enable the business to better meet its

objectives.

The retail grocery market is intensely competitive today and no serious

contender can afford to rest on its past achievements. This should

encourage Tesco to pioneer many new ideas. By listening and responding to

customer needs, Tesco will continue to bring in new ideas and services. Its

latest venture, with the Royal Bank of Scotland, launched in November 1997,

is to offer customers competitive financial services through its stores. It

is fifty years since Jack Cohen opened his first self-service shop, and we

expect Tesco stores in fifty years' time to be as different from those we

know today as Tesco’s current stores are to the stores of fifty years ago.

Non-food retailing is a major part of Tesco strategy. Tesco is increasing

competition and offering customers real value and choice in all areas from

sportswear to software, electricals to spectacles. By introducing these

ranges to more of company’s stores Tesco also offer customers the

convenience of shopping for great value non-food along with their food and

household goods.

More choice in-store includes many new lines for the home and garden,

motoring and leisure, fashion and cosmetics. Opticians, mobile phones and

health and beauty are examples of departments that have been expanded to

meet customer demand. Tesco relaunched its clothing range to offer better

value, quality and choice.

In this year Tesco should continue to bring its customers big names at

competitive prices. Last year, for example, Tesco sold 14-inch Bush TVs and

Vodafone, Orange, One 2 One and Cellnet mobile phones at record low prices.

Film and batteries came down by 30% and cuts of between 15% and 50% are

being made on stationery, pet accessories, video tapes, CDs and DVDs and

many other popular products.

The convenience of shopping for non-food alongside food is what Tesco

should offer customers. At the start of the year Tesco already had 90

stores trading with full non-food offer in the UK. During the year Tesco

should increase this as much as possible through extensions, refits and new

store development programmes.

Through these programmes Tesco will have more Tesco Extra stores including

its newest at Newcastle upon Tyne. It is Tesco’s first UK store to be

designed and built to hypermarket blueprint, using many of the elements

which Tesco has found to be successful in European and Asian stores. It

has given to the company the opportunity to introduce a much wider range of

non-food products to the UK, giving its customers even more choice when

they shop at Tesco.

Through innovating and investing for its customers Tesco is leading the way

in new forms of retailing. Tesco is the largest on-line grocer in the

world, and through the rapid development of its e-business Tesco is now

offering customers real choice and value on the internet.

Tesco.com is new 100% subsidiary company that runs company’s e-commerce

business, which is an important part of company’s future strategy. Tesco

should ensure that it has a real focus, the relevant resources and can move

quickly.

Grocery home shopping business offers customers shopping on-line choice,

value and convenience. Hundreds of new customers are registering every day

and Tesco has the capacity to grow this business at a significant rate.

On the internet Tesco is not constrained by space as the store can be as

large as you like. Company’s Internet customers now have an exciting range

of non-food offers beyond food shopping - just a few clicks away. Tesco’s

new book store offers a choice of 1.2 million titles, with 50% off top

lines and Tesco has an entertainment store selling over 300,000 CD, video

and DVD titles.

Tesco’s European business is focused on the Republic of Ireland and the

four Central European countries of Hungary, Poland, the Czech Republic and

Slovakia accessing a population of 68 million people. In Ireland the

business is progressing well as Tesco near completion of rebranding

programme. And in Central Europe Tesco continue its rapid hypermarket roll-

out opening 11 stores and 1.3 million square feet in the year.

Regional focus and market leadership is a key objective of Tesco’s strategy

in Central Europe. Tesco is the only retailer in all four countries -

Hungary, Poland, the Czech Republic and Slovakia. Company’s portfolio now

includes 19 hypermarkets totalling two million square feet of retail space.

Tesco is meeting and stimulating demand in these markets as customers begin

to recognise the better choice, quality and value that Tesco offers.

Tesco is pursuing an active programme of store openings which will take the

company to 69 hypermarkets by the end of 2002, and will make the company

the market leader across the region.

The hypermarket blueprint is the focus of Central European activities. At

100,000 square feet or more, hypermarkets give Tesco the space to offer

customers extensive food and non-food ranges at outstanding prices.

Tesco is learning all the time. The format is internationally transferable

and adaptable to different regions, and part of the success has been to

supplement UK skills in grocery retailing and customer service with

international expertise.

In the Republic of Ireland Tesco should continue to make good progress.

Without the benefit of any new stores, sales increased by 6.1% in the year.

Cumulative sales growth since acquisition is now 20%, moving market share

to 23.3%.

Ireland and Central Europe are already a significant part of the Group

employing 27,000 people which will grow even further as Tesco move forward.

Asia is the second international region where Tesco is expanding. The Tesco

Lotus business in Thailand now has 17 hypermarkets and is well on the way

to market leadership. In South Korea, through Tesco’s partnership with

Samsung, Tesco now has two outstanding hypermarkets which are among the

highest turnover stores in the Tesco Group. Now Tesco should open its store

in Taiwan. These three markets will give to the company access to 130

million people.

In South Korea, a country where 50% of households own a PC and 78% a mobile

phone, the retail industry has huge growth potential. In 1999 Tesco

invested Ј142m in a partnership with Samsung, which brought two world-class

hypermarkets operating under a top retail brand as well as a number of

sites that Tesco will now develop. Tesco should t expand more hypermarkets

in next years.

Tesco now should move rapidly towards global sourcing, which will enable

company to buy quality products at the best prices and deliver them at the

lowest cost. Tesco has already set up three sourcing centres in Hong Kong,

India and Thailand. These now source 30% of Tesco non-food products

(excluding Health and Beauty). Tesco should move this higher in next

years, with the opening of a fourth sourcing centre in Central Europe.

As a student from Russia (I live in Kazakstan) I would like to see Tesco

further expand its activities in Eastern Europe, and therefore why not

Russia? At the present time there is nothing similar to Tesco on the

Russian market, so I think Tesco won’t have any problems to get into it.

It is difficult to suggest alternative approaches for Tesco’s strategy

because the firm is evidently doing very well. I would suggest however that

Tesco continues to seek markets overseas to further develop its growing

global presence.

As mentioned above, Tesco has been very successful over recent years, and

it is therefore quite difficult to suggest “Alternative strategies”.

However, from my I might suggest the following:

. Expansion overseas – e.g. Russia.

. Increase market share – e.g. merge with Safeway. If Walmart took over

Asda, why can’t Tesco take over Safeway, for example.

. Expand into new market / product – e.g. cars, travel.

. Rewards to staff, introduce a widespread – bonus or share ownership (if

Tesco doesn’t do it yet)

A2

Evaluation of the effects that the alternative approaches might have on the

structure and functions of the business, and how it achieves its

objectives.

Alternative approaches, suggested in A1 can affect the functions of the

organisation and how it achieves its objectives very much, but they won’t

really affect structure of the organisation, because Tesco’s organisation

structure is very good and there is no point of changing it.

Expand to Russia

If Tesco expands to Russia, in general, it is going to be only benefit to

the company. Of course first Tesco will have to spend some money to build

and open new supermarkets, but it is not going to be very difficult because

there are no other companies like Tesco. Big advantage of expanding Tesco

into Russian market is that straight way after it Tesco will definitely

become a dominant firm on market, because there are not very strong

competitors and very soon Tesco can become a monopoly on the Russian

market. Disadvantage of expanding is that Tesco can get failure as well.

Russian prices and British prices are very different, so if Tesco retails

goods, which are more expensive then in others stores, not many people will

by it.

Increase market share

Every single organisation wants to increase its market share, and the best

way of doing it is to merge or take over another company. And I suggest

that Tesco also could increase its market share by merging another

retailer, for example Safeway. Safeway is not as big as Tesco, so it is not

going to be very difficult to merge it or take it over. The advantage of

the merger is that Tesco will increase its market share very much (by 10%)

and two dominant firms of UK’s market joined together can easy become a

monopoly. The disadvantage of it that it is not very easy to do, because

now Tesco has 35% market share, and if it merges Safeway, Tesco’s market

share will be increased up to 45%. But British law says that firm which has

45% of market share is monopoly, so competition commission won’t be happy

about it and it will never agree with this merge.

Expand into new market

Non-food retailing now becoming a major part of Tesco strategy. As I said

before, Tesco is increasing competition and offering customers real value

and choice in all areas from sportswear to software, electricals to

spectacles. But still, I think Tesco didn’t get into one very perspective

market – cars. Cars are very important in our time and there is a very high

demand for cars in the UK. I think for Tesco it is won’t be very difficult

do get into this market, because Tesco is known as cheapest retailer in the

UK, therefore people will continue to by everything from Tesco, and cars as

well. But it could be easy and could be not, because currently there are

many different firms on this market, and what I think is that there are

could be some barriers to entry.

Rewards to staff – introduce a widespread

At the present time, many successful firms introducing new types of

rewarding to staff. What I suggest is that Tesco also should introduce a

widespread of rewarding to staff, for example employees could be awarded an

annual bonus, which they can take in cash, vouchers or shares. The

advantage of this type of payment is that if employees take shares, they

will be interested in good work of the company and if they take vouchers,

they will have to spend all salary in Tesco stores. So I think that it is

very good way of rewarding with all benefits to the company.

Affects of the alternative approaches

As I mentioned before, alternative approaches, suggested in A1 can affect

the functions of the organisation and how it achieves its objectives very

much, but they won’t really affect structure of the organisation, because

Tesco now has very good organisation structure with very good consultative

and democratic management style.

If Tesco expands to Russia and merges Safeway, there are will be “Operation

– Russia” department in the organisation chart. More people will be

involved to work for Tesco, so Human Resources department will become

bigger. After expanding to Russia Tesco easy can expand to other countries

of Soviet Union such as Kazakstan, Uzbekistan, Kirgiztan and so on. It also

will definitely help Tesco to prove itself as very strong multinational

firm.

List of resources

1. The main resource was Tesco’s own web site: www.tesco.com.

2. I asked Tesco for some information and they sent me it.

3. Web site: www.bized.ac.uk

4. Business for Vocational A level – book.

5. Newspapers

-----------------------

Finance department

. accountants

. account technicians

. account clerks

Records all financial data

Chases up slow payers

Collects payments from customers

Provides information to external bodies

Advises managers and budget holders

Monitors and analyses financial data

Advises board of directors

Analyses

costs

Production activities

Finance department

Research and development department

Marketing department

Corporate objectives

Demand of labour

. numbers of workers needed

. skills required

. location of employees

Supply of labour

. existing workforce

. skills shown through skills audit

. changes in productivity and working week

Human resources plan

This may require the use of one or more of the following:

. recruitment

. training

. redundancy and redeployment

BUSINESS ACTIVITY

Marketing

Finance

Administration

Human resources

Research & Development

Production

LAND

Labour

Capital

Enterp-rise

GOODS

OR SERVICES

WASTE

Chairman (non executive)

Chief Executive

Deputy Chairman

Company

Secretary

Marketing Department

Finance Department

Retail Department

Commercial Department

Distribution Department

Operations:

Ireland

Business

Activity

Managing director

Research and development director

Finance director

Marketing director

Production director

Human resource director

Production manager

Plant manager

Quality control manager

Production control manager

Assistant plant manager

Supervisor:

materials

Supervisor:

materials

Supervisor: buildings

Supervisor: mechanical

Supervisor: electrical

Section manager

Section manager

Section manager

Supervisor

Supervisor

Supervisor

Supervisor

Supervisor

Supervisor

Operatives

Operatives

Operatives

Operatives

Operatives

Operatives

Deputy

Chairman

Chairman

(non executive)

Chief

Executive

Marketing

Director

Finance

Director

Retail Director

Commercial Director

Distribution Director

Head of

Operations

Ireland

Company

Secretary

Section

managers

Section

managers

Section

managers

Section

managers

Section

managers

Section

managers

Section

managers

Supervisors

Supervisors

Supervisors

Supervisors

Supervisors

Supervisors

Supervisors

Operatives

Operatives

Operatives

Operatives

Operatives

Operatives

Operatives

Dynamic/innovative culture

BUSINESS

CULTURE

Customer driven culture

Bureaucratic

culture

Task culture

Risk averse culture

Technological culture

Person culture

Negative culture

Positive culture

Competitive culture

Power culture.

[pic]

Board of directors

Marketing Department

Distribution Department

Retail

Department

Employees in Retail Department

Employees in Distribution Department

Employees in Marketing Department

Mission statement

Business objectives

Divisional/departmental objectives

[pic]

[pic]

[pic]

[pic]