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 £1 billion for the first time.

During the 1980s Tesco continued to build new superstores opening its 100th in 1985. In 1987 it announced a £500 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.

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