Exploring Business - Assignment 1 Upload (Tesco) PDF

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Exploring business assignment 1 on two contrasting businesses (cancer research UK and Tesco), this essay includes: Pass Merit and Distinction...

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Unit 1: Features contributing to the success of contrasting businesses 1) Introduction I have been accepted onto a work placement in the Economic Development Unit (EDU) which is dedicated to helping businesses to start, grow and prosper. I have been asked to research and collect information on two contrasting businesses and based on this evidence write a report on why businesses are successful. I will be researching a profit and a non-profit business, the profit business I choose to research is Tesco and the contrasting non-profit business is Cancer research UK. 2) Tesco In the UK, Tesco currently holds 27% of the market share. Jack Cohen set up the first grocery stall in 1919 and the brand name “Tesco” was established in 1924. Dave Lewis is the current CEO of Tesco. In 2019 Tesco experienced around 80 million shopping trips per week, serving 66 shoppers every second and earning roughly £141,000 in sales per minute. 2.1)Ownership and Liability Tesco is an organisation within the private sector meaning they are a part of the economy that are not under direct influence of the government. As Tesco PLC (public limited company) are a private sector organisation they have multiple shareholders and are not involved with or have any ownership through the government. The ownership of Tesco is as a PLC and Tesco shares can be sold freely to the public on the stock exchange market. Tesco’s biggest shareholder is BlackRock inc. who are a global multi-asset income fund and have a 6.64% holding in the company which translates to a £1.13 billion stake. Tesco have limited liability. Limited liability means that the shareholders are legally responsible for the companies debt limited to their initial investment meaning they cannot lose anymore than they initially invested, unlike unlimited liability. Tesco’s liabilities are financial debt and obligations arising throughout the course of their business operations. 2.2)Purpose Tesco’s overarching priority is delivering the most compelling offer for customers to meet their everyday needs however, whenever and wherever they want to shop. The primary goal of a PLC is to generate profit to maximize shareholder value and to maximize profits by reducing costs (to an extent) and generating sales. The Tesco motto is ”Every Little Helps” as they aim to sell a wide variety of products that are reasonably priced. 2.3) Sector The four different sectors are: primary, secondary, tertiary and quaternary. Primary sector: The primary sector tends to make up a larger portion of the economy in less economically developed countries (LEDC’s) than it does in more economically developed countries (MEDC’s). This sector involves acquiring raw materials such as mining for metals and coal, drilling for oil, extracting rubber from trees, farming, logging and fishing. Secondary sector: This sector takes the raw materials from the primary sector and creates finished goods through the process of manufacturing, an example of this would be making plastics from oil. The assembling process is also included in this sector, for example assembling houses.

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Tertiary sector: This sector refers to the commercial services that support the production and distribution process, such as insurance, transport, infrastructure, education, advertising, financing, warehousing and other services like teaching and health care. This sector is also known as the service sector. As an organisation Tesco are part of the tertiary sector as they provide a range of insurance (such as life insurance, house insurance and pet insurance), they provide a banking service (Tesco Bank) and a currency exchange service. Quaternary Sector: The quaternary sector is the economic activity based on the intellectual economy, involving work that conceives, creates, interprets, organizes, directs and transmits with the help and support of both scientific and technical knowledge, meaning it provides information services including computing and consultancy. 76% of the work force in the UK are employed in this sector. 2.4)Scope of Business Activities The three scopes of business are local, national and international. Local scope business: A local business is one that sells its products and services to consumers in its own town, city, or geographic area. An example of a local business would be a one-person barber shop as the barber would only offer their services to individuals in that community. A local business knows the culture of its community as well as peoples wants and needs so supplies goods and services that the citizens in the community would buy. Local businesses often find it difficult to compete with larger, global companies, especially in terms of pricing, as they have fewer locations and have less buying power than the bigger businesses. For example if a global company like Tesco is selling pencils they have so much buying power that they can buy the pencils in huge bulk receiving each pencil at a slightly discounted rate meaning they can afford to sell the pencils for less, however if a corner shop sells pencils since they haven’t got much buying power they can’t afford to buy pencils in the same amount of bulk as Tesco does and therefore pays slightly more for each pencil so cannot compete with the lower pencil prices that Tesco offer. However to try combat this the local businesses focus on providing other services such as great customer service to increase customer retention. National scope business: A national business operates within the borders of a country, like local businesses they understand the countries culture as well as peoples wants and needs so develop products and services to satisfy customer demand. National businesses can be more competitive with their pricing than local businesses as they have a wider range of locations and more buying power. National businesses are also accessible to a larger portion of the population therefore attracting more customers than a local business would as their products and services are sold across the entire country. International scope business: international businesses operate all over the world and have access to a far larger market than national or local businesses so therefore attract more customers which purchase products and services provided by the company leading to larger profits for the business. Competitors are less of a threat to international businesses as these businesses have huge buying power meaning they have the competitive edge since they can afford to buy many products in bulk which reduces the price they pay per unit, they also have multiple locations so if a competitor has entered the market in one location taking their sales and resulting in a decrease in customers they still have many other locations which will continue to bring in profit so this small setback is not significant whereas if they were only a local or national business this setback could have a huge Page | 2

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impact on the businesses survival. International businesses often provide products that cannot be sourced locally or nationally giving themselves a unique selling point and providing consumers with more product choices. Tesco are an international scope business and plan to pursue disciplined international growth by grouping their international markets into 3 groups {Korea, Malaysia and Thailand} where they see significant future potential for growth, {Ireland, the UK, Czech Republic, Hungary, Poland and Slovakia} where they focus on improving returns and holding their position in the market and finally {China, India and Turkey} where they’re focusing on a more profitable approach to growth. Here’s a graph above showing how Tesco has grown from having 3751 stores in 2008 to now having 7005 stores across the globe.

2.5)Size The four business sizes are micro, small, medium and large. Micro business: this is a business that consists of less than 10 employees and has a turnover of less than £2,000,000 per year. Small business: a small business has more than 9 but less than 50 employees and a turnover of between two and ten million pounds per year. Medium business: a medium business has less than 250 employees but more than 49 and has an annual turnover somewhere between 10 million and 50 million. Large business: this is a business with over 250 employees that makes more than £1,500,000,000 per annum. Tesco is a large business as they have more than 500,000 employees and turnover more than 52,898,000,000 annually. 2.6)Organisation Structure The diagram below shows the organisational structure within the produce department at Tesco. There is one manager (Rowan) who manages the whole produce department, makes rotas each Page | 3

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week for the workers in produce and assigns each worker to the job they’ll be carrying out on any given day. He (along with managers of other departments such as chilled food and the bakery) reports back to the fresh manager (Gary) who will then report back to (Graeme) the store manager (along with other managers of different departments that have the same level of responsibility and authority as Gary). Tesco follows a tall matrix organizational structure as positions are divided into many parts ensuring work is done both efficiently and smoothly. People at the top of the business pyramid have the most responsibility, authority and control with the level of responsibility, authority and control assigned to each person decreasing as you go down the pyramid. The benefit with this type of hierarchy is that the lines of authority and responsibility can be easily identified and it’s easy to clearly see who reports to who. This organisational structure also represents paygrades as the higher up the hierarchy you go the higher the band of pay that person is receiving. One great benefit to this is that there is not one manager trying to manage everyone as each manager in Tesco has their own group of people (department) that they manage and are responsible for making it easier for staff and more precise for managers to do their job. However some disadvantages to this are there is less communication between a manager and a group of employees within the workplace who are managed by a different manager and decisions can take a long time to be processed and finalised as they go through each level of the hierarchy which can be time consuming. Not all Tesco stores have the exact same organisational structure but they all follow a very similar pattern in that there will always be one manager who manages a portion of the employees with other managers each managing and being responsible for a different portion of the workers and same with the managers in that a portion of the managers will report to one manager who is higher then them in the hierarchy and another portion of managers also reporting to a different manager higher than themselves in the hierarchy and so on. Tesco use this hierarchal structure as it suits the size of their business and it’s the best form of organisation they could use to maximise efficiency and therefore as a result of this success. One problem with having this many staff who are a level above other staff in the company is that with each level above the last there is an increase in pay meaning that in such a tall hierarchy the people towards the top end of the pyramid are eating into Tesco’s profits which in turn decreases the profits going to shareholders.

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2.7)Aims and Objectives Tesco’s mission statement is: “We make what matters better, together.” This statement portrays the organisations aims as improving health, improving lives and distinguishing quality. Health is improved at they source the freshest possible products straight from their farm (examples of these products would include fresh fruit and vegetables) and Tesco’s hygiene is kept up to a high standard through having sanitising stations across the store and using all the correct equipment when baking or cooking meals. Lives are improved by Tesco through its Little Helps Plan where Tesco colleagues, serving customers with an affordable, healthy, sustainable product, supporting communities in places where they have a stake and working in a way that protects the planet are all taken into consideration. Tesco’s Little Helps Plan is underpinned by their Code of Business Conduct which ensures they use their values and leadership behaviours to guide their conduct and decision-making ensuring they are always doing the right thing for the business and their customers. Tesco have distinguished their quality through providing a wide selection of products to their shoppers for more than 100 years and keeping their promise on good customer service through “Serving shoppers a little better each day”. Tesco’s vision is “To be the most highly valued business by: the customers we serve, the communities in which we operate, our loyal and committed colleagues and of course, our shareholders.” Showing that the satisfaction of their stakeholders is a vital part of the companies vision and is very important to Tesco. Tesco’s aims are to maximise profits, to create value for customers to earn their lifetime loyalty and to attract loyal staff. Both customer and staff retention lead to increased profit for Tesco as happy staff attract more loyal customers which in turn bring more profit into the organisation. The structure of Tesco allows it to achieve its aims through the different departments within Tesco working so closely together and maximising efficiency as for example at Christmas time there is a high level of stock in the produce department on offer which Page | 5

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attracts more customers into the store who buy produce and then continue on with their shop spending more money in the alcohol department and the chilled department on dips and cheeses, then spend money on crisps etc. however without the discounted produce there would have been less of an incentive for customers to enter the store meaning other departments would lose out in sales. One of Tesco’s objectives is to increase their market share by 5% through selling £1 billion more of organic products by 2025. This is measurable as at the end of each month Tesco can take a look at how much closer to their long term target they are, this is achievable as more people are interested in organic products now than ever before, this is realistic as Tesco have 4 more years to reach their goal and the companies structure can help achieve this objective as every food department in Tesco sells organic products and the majority of Tesco’s sales come from the departments that sell food. 3) Cancer research UK Cancer Research UK was formed on the 4th of February in 2002 by a combination of The Cancer Research Campaign and the Imperial Cancer Research Fund. In the financial year (2019/2020) Cancer Research UK funded research worth £455 million, here is a chart showing how their funding was spent:

Cancer Research UK have helped build a research network across 90 institutions in more than 40 towns and cities across the UK. Their overarching aim is to reduce the number of deaths from cancer and to raise awareness about cancer. Cancer Research UK is a non-profit organisation meaning they do not earn money for its owners but instead raise money to carry out research for the public. Cancer Research UK are exempt from paying tax on the money raised as they don’t aim to make a profit but instead their focus is on providing as much social help and support as possible. Most years Cancer Research UK raises around £650m, a large percentage of which are from public donations. 3.1) Ownership and Liability As Cancer Research UK is a charity it is a non-profit organisation so they get all their funding from the community, raise money and accept donations. Cancer Research UK is a Public Limited Company and is owned by the Government. As Cancer Research UK is a non-profit organisation there is no one person who runs this organisation however there are different ranks within the organisation that have more power and have a bigger say in what goes on. Cancer Research UK is a registered charity in the UK and a resident of the UK and the money it accumulates is to be spent on research and charitable operations and is not to be shared among or given to any of its stakeholders. A trustee is an individual or firm who deals with the administration Page | 6

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of assets, trustees are stakeholders. Big decisions are shared among the charities trustees and they ensure the charities money is well spent. The charities board of directors is normally chosen by its trustees. If the charity lost money the lost money would be money the charity had received through funding. 3.2) Purpose The purpose of Cancer Research UK is to reduce the amount of deaths resulting from cancer. One of Cancer Research UK’s long term objectives is to discover the cure for cancer and one day for us to be living in a cancer free environment. Through raising funding and awareness each year Cancer Research UK is getting one step closer to fulfilling their objectives. Their research and results have proven effective so far as over the last 40 years cancer survival rates in the UK have doubled from only a quarter of people who got cancer in the 1970s surviving to today where 50% of people who get cancer are surviving. Their ambition is to accelerate progress to see three quarters of people with cancer surviving by 2034. Cancer Research UK does not only bring benefit to the UK but benefits the global population and does its research to help fight cancer all around the world. 3.3) Sector As an organisation Cancer Research UK are part of the tertiary sector as they both sell and provide services such as health care, education and treatment for cancer. 3.4) Scope of Business Activities Despite the research of Cancer Research UK being used across the world, as an organisation it only operates in the UK meaning they are a national scope business as they operate within the borders of the United Kingdom. 3.5) Size Cancer Research UK is a large business as they have 44,000 employees who work for them, however only 4,000 (less than 10%) of these employees are paid meaning they have 40,000 volunteers in the UK but despite not being paid for their work volunteers can claim back their travel expenses. 3.6) Organisation Structure Depending on the location, the organisational structure of Cancer Research UK can vary slightly however the basic structure consists of a tall matrix structure (as shown below) with the Board of Directors for Cancer Research UK dealing with day to day operations as well as mission delegations despite the Board of Trustees having the greater proportion of authority when making decisions. This type of organisational structure works best for Cancer Research UK as they are a large company with a high number of staff and this structure suits by allowing the organisation to work to their maximum level of efficiency and in turn obtain the best possible results in their battle against cancer. Those at the top of the hierarchy have the most responsibility, authority and control with the level of responsibility, authority and control decreasing as you descend through the hierarchy. An advantage to this type of structure is the workload is spread among the companies staff giving each member of staff a lighter workload and therefore reducing the stress being put on the companies volunteers and employees and allowing each member of staff to become more specialised in their role. One disadvantage to this type of organisational structure is that decision making can be a lengthy process as decisions have to be considered along all the stages in the hierarchy.

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3.7) Aims and Objectives In the words of Cancer Research UK “Our mission is to prevent, control and cure cancer through our ground-breaking research and in the last 40 years our work has helped double survival rates. But there is more work to be done.” This statem...