The Mission, Objectives and Responsibilities of Tesco - Assignment Example

1. Identify the mission, objectives and responsibilities of an organization within its environment Tesco is the biggest food and non-food items retail store chain in the UK. It employs the largest number of employees, 250,000 in the UK. In recent years, Tesco has stepped out of UK market forging strategic alliances, taking over store chains, and diversifying into an ever increasing number of product retail. Outside of UK, Tesco now employs 100000 people. Globally Tesco caters to 30 million customers over a week selling grocery and general merchandise items. The latest foray by Tesco has been made into the East European market, China and Japan. Tesco was created in 1919 by the late Sir John Cohen. Cohen started as a small grocery in the East End, London. The name Tesco was created out of the names of TE Stockwell and Jack Cohen, 1924. Stockwell had partnered with Cohen to retail tea. The brand of tea too was named Tesco. Tesco got listed at the London Stock Exchange in 1947. John Cohen was an early bird to realize the potential that existed in the retail market. The Customer One of the key features of growth of Tesco has been its ability to understand the need of its customer and deliver products at competitive prices. Tesco sources products food items from the farms and non-food items from the manufacturers and delivers them to the customer thus cutting down on the middle man costs. Tesco follows a multi-format in its Core UK operations 10 other countries of Europe and Asia. The different formats in which Tesco operates its stores are Tesco, Tesco Extra, Tesco Express, Tesco Metro, Tesco Home Plus, and One-Stop. Tesco follows a multi-pronged business strategy to hook in the upscale high income group customer as well as middle and low income group economy shopper. Central to the Tesco plan has been cost undercutting to drive off competition from the market. The customer services at Tesco are guided by the mission objective of Tesco approach. Tesco approach is elaborated by the principle of “no-one tries harder for customers” and” “treat people how we like to be treated”. In the initial years increased quantitative sales was key element of Tesco strategy. The quantity driven business had its drawbacks. By 60s, the company came to be associated with poor quality stuff. However, the management, with change of leadership from John Cohen to Leslie Porter was quick to realize the disrepute, Tesco had earned by giving thrust quantitative sales. By the 70s Tesco’s mission objectives were more guided by delivering quality to the customer. The Employee Tesco has a policy to make its employees its partners in growth. In the UK, over 165,000 of our staff have a personal stake in Tesco’s future, through shares and share incentive schemes. Last May, we awarded a record £77 million through our Shares in Success scheme. 50,000 of our staff were also able to benefit when our Save As You Earn scheme matured in February, giving them access to shares worth £148 million (Tesco.com . In addition to these payouts, Tesco offers other health, bonus, and family welfare benefits to its employees. We also offer a range of voluntarybenefits, bonuses, health care, childcare vouchers, a10% discount when shopping in store, and vouchers for new services and products (Tesco encourages union participation for its employees. Half the number of workers are members of a union. Tesco calls this encouragement as a part of its belief to uphold labour and human rights.Our retention rate for experienced staff is 84.1%, exceeding our target of 80%. We believe in ‘growing our own’ talent: in the last three years we have appointed 27 Directors, 200 Store Managers and 8,000 Department Managers from within Tesco (Tesco.com). A component of the salary and the dividend earned by the employees goes into pension funds and their post retirement kitties.Tesco has a partnership with Union of Shop, Distributive and Allied Workers (USDAW) a workers activist group and it claims that half of its employees are members of a workers union. The Management Tesco routinely carries out Risk mitigation reviews and has entrusted it line managers to manage the risks in routine and supply information upwards to the senior management. Tesco has an all encompassing five year plan to provide broad outlines of growth and strategies for future. Three statutory committees: The Audit Committee, The Internal and External Audit Committee, The Finance Committee and three other Executive Committees 1. Compliance Committee, Corporate Responsibility Committee and Finance Committee help the company with The Board responsibilities are well defined in the Board charter. The Board is consists of Members, Chief Executive and is headed by the Chairman. Terry Leahy is the current CEO Tesco. He became the Chief Executive in 1997 and has been ever since focusing on internationalizing brand Tesco. Leahy’s strategic focused on Core UK, increasing International Operations, strengthening non food and retail business. Besides, the Board meets eight times in a year and a two Day Board conference is held to discuss policies, strategies and management issues. The Board has Schedule of Matters Reserved for Board has vested it with authority to approve financial statements, acquisitions and disposals, and governance policies. 2 Investigate the behaviour of organizations and the market environment Sainsbury as the biggest superstore chain, in UK in 1997. im Mason, the Marketing Director of Tesco summed up the achievemnet as, “No matter how fast we grew Sainsburys were always in front of us. But slowly but surely we managed to grind them down and grind them out.” ( Leahy) Tesco was for long engaged in a long tactical price war with its immediate competitor the Sainsbury. Tesco tried a futile attempt to storm the continental Europe by buying a grocery store in France. But faced with stiff competition from Promodes and Carrefour, French retail majors, Tesco beat a retreat only to touch the continent from the eastern end through previously Communist bloc countries. Countries like Poland, Hungary, Czech Republic, and Slovakia offered huge potential markets and Tesco was quick to cash on them. This year the total profit of Tesco touches ₤m1899. Tesco’s unique company profile also means strategically tying up with organisatons specialising in non-merchandise items. Tesco has a collaboration with the Royal Bank of Scotland, and gives financial services like insurance, personal loans, Visa Card, a Tesco savings account, and Tesco Travel Money. The company dexterously uses its relationship with the customer and the expertise of a financial institution to sell financial products from superstore. With Esso, a petroleum retailer, Tesco jointly sells fuel from its forecourts. Tesco has always incorporated tactical changes and changes within in a matter of fact way over its long history of 88 years. Next, in order to reposition itself, Tesco embarked upon a massive modernization program intended in part to take the chain upmarket. It closed 500 unprofitable stores and extensively upgraded and enlarged others, including the installation of enhanced lighting and the widening of aisles (Tesco.com).In its phenomenal growth Tesco had not only grown on its own but also affected some major takeovers and acquisitions of its smaller competitors. In the decades of 60s, 70s, and 80s company grew significantly by acquiring smaller store chains like Brunards, Adsega, Harrows, Williamsons, Irwins and Charles Philips. At Tesco buying and selling of stores have been marked more by necessity to adapt to a particular situation than pursuing a policy of permanence. In the early days of strategic play in retail marketing Tesco started the Green Card. Tesco provided the competitive edge to retail eliminating the middleman costs and giving more value to the customer for the money The Green card was Central to the business policy of Tesco is to adapt to change, remain in flexible mode to reorient itself to the changing needs of times and remain in readiness to adapt change. The capitalist economies like that of UK and the US, Ireland demand highest level of compliance and ethical commitment. However, even free economies have their rules to curb unethical practices and promote free and fair trade. Competition Commission constituted lately to look into the ethicality and legality of the practices followed by retailers like Tesco. In turn, the customers were asked to give their personal details. Companies use this information to make purchasing patterns from its database target its marketing strategy giving further leverage to the company. Tesco was accused of abusing the confidential information about customers that it acquired through it lucrative schemes. To offer more and more lucrative prices to the customers companies launch a price war and start cutting buying prices. In this race the farmer and the small supplier ends up bankrupt. Competition Commission was made to investigate the charges of unfair and unethical means employed by superstore chains like the Tesco. It is estimated by the Office of Fair Trading that whereas the grocery prices in UK have fallen by 7 percent across UK, Tesco prices have fallen by 17 percent. (http://www.tesco.com/talkingtesco/oldDefault.asp) In recent years Tesco has went into an overdrive by cutting its margins providing more beneficial bargains for the customer. Apart from generating greater sales volumes for Tesco, this spurt led to similar policies being pursued by its competitors like Sainsbury. Tesco is known to overwhelm its competition by buying it cheap and sell it cheap relying on small margins and heavy volumes to success. The price war drove many smaller retailers out of business making the government to constitute a commission. At present the only threat to Tescos ever-increasing market share would come if the Competition authorities stepped in to enforce monopoly legislation which defines a ‘classic monopoly’ as 25% of market share in a given sector. However, the present statistics day statistics may give Tesco a much bigger leeway before monopolistic actually become a threat. Leahy Our market share of UK retailing is 12.5% - that leaves 87.5% to go after Terry Leahy. "Tescos success has made it immensely powerful - a position that it is clearly abusing by putting small traders out of business and killing off local high streets, bullying suppliers, and damaging the environment through its never ending demand for cheap food. The evidence against Tesco can no longer be ignored, it is time for the Government to regulate and tame this corporate beast.” (http://news.bbc.co.uk/1/hi/business/3814791.stm). 3.. Explore the significance of international trade and the European dimensions for UK businesses With winds of change blowing across the world and globalization, and trade liberalization becoming the buzzwords Tesco, is increasingly looking outside of UK for its potential markets. The present day business strategy of Tesco revolves around expanding in the overseas market while maintaining a strong presence in the UK. Tesco today operatives in intense globally competitive market. About Tesco’s marketing activities abroad The Independent says, The group was late to the overseas game compared with rivals such as Frances Carrefour and Wal-Mart, but has made up for lost time. By the end of this year, 60 per cent of its floor space will be overseas. Amongst the new markets, Tesco has identified post Soviet Union, Eastern European democratic countries and Asian countries like Thailand (1998), China (2004), South Korea (1999), Taiwan (2000), m and Malaysia (2004) Often Tesco ties up with local companies to enter new market. The experiment was successfully tried in Thailand, Malaysia, and China. In fact, instead of entering the more competitive Western Europe market, Tesco has forayed into the Eastern Europe. Poland is a classic case where the chief Executive is a Pole. Tesco operates 280 stores in Poland. The management of the Tesco feels that East European nations provide a fertile ground for business growth than the western nations which have already been exploited by the local and global groups. As a part of this strategy, Tesco recently sold its Taiwan arm to Camfouur and took up companies operations in the Czech Republic. Tesco tries to outscore its competitors by making the supply chains more brisk and responsive to consumer demands. We reduced the lead time in our supply chain for over a hundred suppliers of fresh products. Later orders mean more accurate predictions of exactly how much fresh food products we need in a particular store. Because of the increased accuracy, this has improved our availability, increased our sales and helped us to reduce waste (Tesco.com). But activists accuse Tesco for exploiting small and marginal producers on the price front. No company can continue to pretend to be promoting ethical trade along its supply chains when it slashes supplier prices to the point where growers who pay a living wage, treat their workforce with respect and make environmental improvements are cut out of the market. (http://www.seatini.org/bulletins/7.03.php) Tesco has time and again gone on record to deny these allegations as unfair and concocted. The company has also repeatedly been accused of promoting child labour in its supply chain model. Going by the history of Tesco it is clear that the company finds open economies with democratic institutions more conducive to the growth of retail business, with China being the only exception. Tesco has stayed away from countries with civil and political unrest and has clearly avoided economies with less buoyancy. Tesco has entered countries with long standing commitment to free trade and democracy, Japan, Malaysia, Thailand, the US being examples. Tesco is the biggest private sector employer in the UK with over 250,000 employees. Thus it can be reasonably concluded that Tesco relies on human resource capitalization and believes in the efficacy of a larger team to Tesco has relied heavily on local institutional support often staging tie ups in new countries The company has operations in the countries which have political stability . Tesco has always claimed to promote the interest of farmers and small suppliers in its supply chain. However, it has repeatedly been accused of usurping the rights of small and marginal suppliers. Various rights groups have repeatedly protested against the trade practices of Tesco. In its policy to give the leadership of the company in local hands Ryszard Tomaszewski, a Polish national is heading the company’s operations in Poland. Tomazweski has risen from lower management level to be the country head today. Tesco also emphasizes in builidng strong relationship with its suppliers and uses that to its competitive advantage. Tesco has always maintained close ties in with the government. Its allies in the UK government have always sought to protect its trade interest. In fact one of its Directors Lucy Neville was a previous government Cabinet officer. Tesco has maintained strong relations with Labour party and given it election funds. Terry Leahy is a member of four task groups of the UK Government. 4. International European dimensions for UK businesses Economic integration international trade and global markets will bring the business environments flourishing under different political and economic systems onto one level. First the social and economic distinctions, subsidy regimes, protectionism will be wiped out. The world will be understood in as one common playfield for all players. All world market is a common resource of mankind and so are the natural resources. With curtailing of barriers, goods and commodities will move unhindered from one part of the globe to the other. The companies will have to be extremely quick, dynamic and on the look out for new markets. No single business entity will be able to bank on the market resources of one country for long enjoying the situational, geographical and political advantage. The economic integration of the global markets will make trade more business and will be less prone to stage managing of market forces. Whereas on one hand the Europe will provide a collective market, the competitors from Europe may deal a scathing blow to the monopolistic practices of the large trade houses. The smaller ones will have to face more stiff competition in the areas of their specialisation. With development of common European markets, the monopolistic practices of large trade houses on a specific area of business like retail, manufacturing, services, and wholesale trading may come to an end. The markets will become more dynamic, with performance indicators becoming more volatile to market forces. The small producer or manufacturer will find it increasingly hard to compete in an environment that will be dominated by large trade houses with diversified activities. In this circumstance the natural and human resources could be worst sufferers with disappearance of constitutional and institutional safeguards. National identities of corporations like the Tesco being identified with UK and Camfour with France will disappear. The companies will develop international identities. Governments that understand the aspirations, demands and needs of local people will have a less role in providing protectionists regimes. Economic implications of the entry of UK will link the economic and financial policies of UK with Europe. UK strategists will have to work in a macro-European model to make long term plans that help to keep the inflation down and protect the interest of UK, its people and industry with clear cut notions. The policy framework will become more subservient to the European Union than the constitutional institutions and government of UK. The government of UK will be a channel used to voicing the concerns of the people of UK rather than being a decision making entity. The decision made by the European Parliament will be binding on the UK government. The monopolistic practices of large trade houses may come to an end with an increased competition. A company like Tesco that has enjoyed a strong core UK focus may to help its overseas arm will no longer enjoy this competitive advantage and will help to compete with the continental companies on its home turf as well. Tesco has been avoiding direct competition with European companies in the past. With the UK joining EMU, the UK companies will have to fend with better strategies, with increased focus on fair trade principles. The quota of sourcing commodities from local farmers and manufacturer will be fixed and the companies will have to look for other European destinations for sourcing of material. The increased business activity with less monopolistic practices may help to lift the sagging fortune of farmers and small manufacturers. Small manufacturers and farmers will get to align the with large multi-national trade houses and will be in a better bargaining position to get the best price for their wares. 5. Identify and apply strategies to find appropriate solutions: TESCO PLC and Marks & Spencer Marks and Spencer like Tesco too has a strong business identity. However, there are many differences in business approach of the two companies. Whereas Tesco Plc had always looked up to cheaper Asian and African supplies for food and non-food items, Marks and Spencer had always sought only British goods from British suppliers. The company was inflexible in many regards to the Tesco. It didn’t, for long, accept credit cards other than its in-house Marks and Spencer card. Tesco had relied heavily on price undercutting to enhance the customer loyalty, Marks and Spencer was always led by an elitist business approach and focussed on delivering ‘quality.’ Marks and Spencer promoted its brand name on many items. In clothing it had earlier used the brand name of St. Michael. Tesco never relied on promoting brand names except that of an all-inclusive store that could sell anything under the sky. Tesco promoting itself by opening more and more stores in different formats in every nook and corner of the country. The best advertising Tesco had sought was ‘being there’ everywhere. Marks and Spencer roped in celebrities, film stars and models to endorse its products. Marks and Spencer stores were more ritzy, located in upmarket areas and attracted the customers by their looks and glow. Tesco, on the other hand projected a friendlier and utilitarian image that could cater to the needs of everyone from the common man to the up market shopper. Tesco never associated itself with selling a particular type of clothing but Marks and Spencer promotes specialised clothing like Men’s Wear, Women’s Wear and signature clothing. Unlike Tesco, Marks and Spencer was always slow to adopt a change and always relied on its strong brand presence in the public to promote its interests. Marks and Spencer relied heavily on franchising in the international sphere and is today doing business in 40 countries in all parts of the globe Tesco on the other hand never resorted to franchising its business and control all its worldwide operations from a central command base in UK. Tesco operates 1988 stores across the UK whereas Marks and Spencer has only 520 stores in the country. Marks and Spencer gives stress on more educated employees and has its own Graduate Management Trainee programme for its prospective commercial manager. Tesco is less committal in formal professional education of its employees but employs more of human resource and on job training to its employees. The success of a commercial manager is counted in turning around the fortunes at a Tesco store and show managerial capabilities in practice over the years. Tesco has believed in growing big by staging acquisitions. In fact, the history of Tesco can be read as growth patterned on a series of unending acquisitions and mergers. On the other hand, Marks and Spencer has only grown only organically. Tesco is always ready to bargain its strong British identity by entering into alliances with non-British businesses but Marks and Spencer maintains a distinct British identity always. 6) Reflective Journal In order to gain knowledge about Tesco Plc, I extensively studies the website Tesco.com. To know about its corporate commitment, employee relations, stakeholders, macro-environment in which it functions, an extensive research was carried out on the Internet. To develop the critical analysis of Tesco and technicalities and legalities of its operations, I studied popular media websites like BBC, The Guardian and The Independent. In addition to this, I went through websites belonging to many NGOs, Rights Groups, Pressure Groups and Environment Awareness Groups. I have quoted the views of some of the journalists, spokesmen for the groups and functionaries of Tesco Plc, on key environmental and fiscal matters. This helped me to develop an unbiased view especially on the matters regarding monopolistic practices, Competition Commission, and the implications of UK joining the EMU. To develop a comprehensive understanding of the UK businesses and the impending impacts on their activities due to joining of UK with EMU, I studied reflections of some of the key economists. The comparison between Marks and Spencer and Tesco was carried out by me by studying and comparing the information available on the website of Marks and Spencer with the knowledge I had gathered on the operations of Tesco Plc. The documents I went through are listed here: 1. http://goliath.ecnext.com/coms2/summary_0199-1655280_ITM 2. http://news.bbc.co.uk/2/hi/business/3814791.stm 3. http://en.wikipedia.org/wiki/Marks_&_Spencer 4. http://www.niesr.ac.uk/pubs/dps/dp168.pdf 5. http://pages.stern.nyu.edu/~nroubini/Emu/EMUGuideFT1196.htm 6. http://archive.corporatewatch.org/profiles/tesco/tesco3.htm 7. http://www.corporatewatch.org.uk/?lid=252#sum 8. https://www.fundinguniverse.com/company-histories/Tesco-plc-Company-History.html 9. http://www.tescocorporate.com/ 10. http://en.wikipedia.org/wiki/Tesco 11. http://www.tescocorporate.com/page.aspx?pointerid=11A1B6FB786D439DA7B324EE402EC221 12. http://www.seatini.org/bulletins/7.03.php Read More