Business at work

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:

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