Tesco is a British supermarket and general merchandise retailer, with headquarters based in Welwyn Garden City, Hertfordshire. It is the third largest retailer in the world in terms of gross revenue and is a large, global scale, profitable business as it operates and sells products around the world. It is international as it has over 6,800 shops in countries across Asia and Europe, including the U.K, Ireland, Hungary, Poland, Slovakia, China and Thailand. It also has a large scope, with over 440,000 employees and offer services in groceries, banking, clothing, technology and petrol. Being such a large business is a benefit to Tesco, as more employees means more skills to improve their products and services, along with how their business is run. Also, by being so financially stable it will enable Tesco to buy in economies of scale, resulting in them buying products cheaper in bulk and therefore being able to sell them cheaper than competitors. Last year Tesco reported a £1.28 billion annual profit and a £57,491 million revenue.
Tesco was founded in 1919 by Jack Cohen as a group of market stalls and is a public limited company (PLC) and is therefore owned by the shareholders that own its stock. This means that the shareholders have limited liability and are only liable for the money they have put into the business and if the company was to land in debt their personal possessions would be safe. By being a PLC, this helps Tesco to be successful, as by selling shares on the stock exchange they can raise more money in order to invest it in to the business. Tesco is a global company as it is recognised worldwide. Their core purpose is to “serve customers a little better every day and to help them to enjoy a better quality of life and an easier way of living.”
Tesco falls under the tertiary sector, because they sell the final product in their stores and they make the profit. However, they could also come under the secondary sector because they sell and manufacture their own products, for example, Tesco value. It is also in the Private sector as that is owned, controlled and managed by individuals and there is no involvement of the Government.
Tesco’s purpose is to “Serve shoppers a little better every day.” Therefore, to achieve this, they set out SMART aims and objectives. Tesco’s main objectives are to increase sales, increase market share, maximise sales and to grow and maintain their place as the number one retail company in the UK. They want to do better than their competitors and remain the market leader. The main aims of Tesco are to maximise profit and to provide goods/services that are affordable to consumers. SMART targets must be specific to Tesco, measureable to track their progress, achievable and realistic in order to maintain staff motivation and they must have a time period in which they wish to achieve these aims and objectives. By aiming to increase sales and profit they will set small objectives to achieve this. For example, expanding their product range and services in order to become more successful financial as well as a brand overall. Tesco is a profit-making business so their overall aim is to make a profit. Therefore, to do this they must retain customers and generate repeat purchase, as well as attracting new customers, in order to increase sales and profit.
The stakeholders for Tesco are anyone with an interest in the business. Internal stakeholders include employees, managers and owners. External stakeholders would be debtors, lenders, competitors, customers, suppliers and the local community. All these people would be affected one way or another through the actions of Tesco. PLCs such as Tesco are influenced by shareholder value. Shareholders want the value of their shares to go up to ensure their investment remains worthwhile and high value shares reflect a company is worth more money.
Customers are one of the biggest stakeholders for Tesco, so customer retention is very important as they have large competitors such as ASDA and Sainsbury’s, and will therefore want to generate repeat purchase on not only popular products that are sold elsewhere but also Tesco value products, that way customers will only be able to buy these products from Tesco. Customer retention also signifies success and the value of Tesco, as without this they wouldn’t be able to make a profit.
Suppliers are also an important stakeholder for Tesco as without them they would have no products to sell, therefore they wouldn’t be able to make a profit. It is also important for Tesco to choose the best supplier for them, depending on location, cost and availability, to ensure they are selling the highest quality products they can. This will also allow them to gain a good reputation and brand image, encouraging repeat purchase. They can have both good and bad influences on Tesco, as they offer products for Tesco to sell but if they don’t deliver on time or supply the correct products then this will affect Tesco’s reputation. Also if the products are not paid for on time this could cause conflict between themselves and the business.
Another group of stakeholders that play a high role in Tesco’s success are the employees. Without having their 44,000 employees around the world, Tesco would not be able to run such a successful franchise, because with so many stores globally, they need well-trained staff that they can rely on. Employees are paid to work for Tesco and will most likely be reliant on this income, therefore they will want the company to be successful because if not it would directly affect them. Employee’s work ethic and motivation can have an influence on Tesco; if they do not work to their best ability then it can affect how the business is run. In addition, if employees are unhappy with the treatment or pay then this could cause conflict between themselves and Tesco, likewise if managers are unhappy with staff’s performance.
Furthermore, competitors will have a huge impact on how Tesco operate and run the business. They will influence the products and price they sell them, as they know if they don’t keep up to the same standards customers will go elsewhere to other large supermarkets such as ASDA.
Managers and owners are also stakeholders for Tesco, as they have a say in how the company is run and they get paid, like employees to work for the business. Potential conflict could erupt between managers or owners if they disagree with certain ideas or prospects or a general personality clash.
Tesco follows a hierarchical organizational structure. In this structure, positions and responsibilities are divided into different parts to ensure work is completed efficiently and effectively. The ones at the top of the business pyramid have the maximum responsibilities and authority, such as the owners and managers. As shown by the image below, Tesco’s organization chart is structured with five committees reporting to one Tesco PLC Board. 11 members of Tesco’s executive committee are led by the group chief executive Dave Lewis.
However, because Tesco have so many individual stores worldwide, they also have an organisational structure for each store, which looks something like this:
In a hierarchical structure, members know to whom they report and who reports to them. This means that communication is channelled along defined and predictable paths, which allows those higher in the organization to direct questions to the appropriate parties. It also means that individuals tend to know who does and does not possess the authority to assign or change tasks.
The benefit of having a Hierarchical structure is that there is a close control of workers, which ensures that Tesco’s employees have a clear understanding of their role. The disadvantages however, is that communication barriers can be formed because of the size of the span of control. The span of control is the number of people that individuals are responsible for in an organisation. The chain of command is essentially the hierarchy of who is in control of who and who has to make the final decisions within the business. This helps to organize the company effectively and give a clear overview of how the business is managed and run.
Tesco have many different functional areas within the organisational structure, including:
• Finance- the main responsibilities of employees in finance would be keeping a record of all expenses going in and out of the business, measuring and comparing Tesco’s financial performance to previous years as well as making predictions for future outcomes. They would also control the finances and cash flow, ensuring the company have enough stability to pay off debts, salaries and bills.
• Human resources- this area of Tesco is in charge of employing, recruiting and training staff, keeping all their personal information and records up to date.
• Marketing- this includes carrying out market research, whether that’s primary in the form of questionnaires and surveys or secondary in the form of internet research. They will also create presentations on the development of new products. The marketing team will be responsible for customer service and dealing with complaints effectively as well as making sure promotions are clear and coherent for customers.
• Production- this area is accountable for the development of Tesco’s products and services and delivering products to customers. They also must ensure that enough stock is available to prevent running out of stock.
• Administration- the administration team creates an ordered system for the business to run smoothly and ensures communication is clear between management and staff.
There are many types of communication that Tesco will use within the business, such as:
• Internal communication- happens within Tesco between employees.
• External communication- takes place between Tesco and outside individuals or organisations, such as customers.
• Formal communication- official messages sent by Tesco, such as a report to suppliers.
• Informal communication- not formally approved by the business, such as an everyday conversation or gossip between staff.
Tesco have many stakeholders who they must maintain a strong relationship with in order to be successful and achieve their aims and objectives. Stakeholders all have an influence and interest in the business, as well as potential conflict if the relationship is damaged.