Business Environment of Tesco Plc - Assignment Example

Task a) Explain your chosen organization’s major objectives and indicate the order of priority. What criteria were used to decide on the priority and why? The chosen organisation for this study is Tesco plc. Tesco is the biggest retailer in the UK and operates 923 stores, employing around 240,000 people. Over the past five years, Tesco has grown and has expanded into the international markets, with newer products and services, like major non – food business, personal finance and even Internet shopping (Global Sources, 2009). This has helped increase the scale and the internalisation of the company. This helps Tesco move towards its long – term goals and provides a path for the aims and objectives of the company to be reached (Tesco, 2009). The major objectives of Tesco in the order of their priority are as follows: i. Progressive Returns on Investments: This is one of the most essential objectives of the company. Tesco aims at providing the shareholders and investors with progressive returns on their investments. This ensures better profitability through better use of the investments in efficient stores and also highlights the improvements in productivity and new technology. This has been ranked to be of first priority for Tesco as it ensures better performance to be able to provide higher returns to the investors and shareholders (Tesco, 2009). ii. Value for money: Providing customers with value for their monies is another very important objective for Tesco. This has been prioritised to be second on the list of objectives as it is the basis of the business and the business model works on ensuring good quality goods to the customers, at the most competitive prices. Tesco is a store which provides for all the classes of the society. As customers form an important aspect of the business, Tesco has ensured it seeks and acts upon all the feedbacks and opinions of the customers. This objective is very important for Tesco and hence the stores ensure that all the opinions from the customers are considered and used to make the shopping trip easier and enjoyable (Tesco, 2009). iii. Relationship with the Suppliers: This is the third important objective of Tesco. Tesco believes in maintaining long term relationships with the suppliers, based mainly on the quality and price criteria. This is essential as the monies that are spent on the buying of raw materials is very high and affects the profits of Tesco to a great extent. Hence a lot of care should be taken while choosing the suppliers and creating a good working relationship with them. Also in the current working environment it is essential and most beneficial to have strong relationships with old term suppliers (Tesco, 2009). iv. Employees and Corporate Social Responsibility: Tesco places a lot of importance on the training and development of talents of the employees, through sound management and training practices, also it ensures better rewards with equal opportunities for all. Also Tesco pays attention to the CSR of the company. This includes important aspects as well like the health and safety, animal welfare, protection of environment etc (Tesco, 2009). b) Identify three important external stakeholder groups for your chosen organization and discuss why they are important. Critically evaluate your organisation’s approach to working with these three groups. The three important external stakeholders of the company are: Customers: These are the most important stakeholders of Tesco. This is mainly because the customers contribute to the revenues of the company. This makes them the most essential stakeholders. One of Tesco’s main objectives is to ensure better quality service to the customers. Since every customer has different needs the company uses all the opinions of the customers to provide as many as possible to the customers. Also since most customers prefer to shop from home and get the things delivered home, hence Tesco has started the online ordering for the customers to help them shop at their convenience. Suppliers: The suppliers are the other group of the stakeholders and a balance in the relationship between suppliers and business is very essential. Tesco has wanted to change its suppliers or even produce their own goods. However this is not the best option for the company as it would cost more and would be more time consuming. Hence it is best for the company to change its suppliers instead. Tesco has been able to work well with its suppliers and has also taken all the necessary steps to ensure that the supplier’s needs are met. Sponsors: Sponsors are a key stake holder as it is a two way process and the most successful cases is when both the parties benefit. Both the parties work hand in hand, if the business is successful then the sponsors are successful and vice versa. In this case both the business as well as the sponsors’ gains. The financial figure of the business improves because of the sponsors and on the other hand the sponsors gain as well and become better known to the public (Haydor, 2007). Task 2 Identify the market structure in which your organisation operates. Discuss the impact of this structure on determining its competitive strategies. Tesco is Britain’s most popular retailer. Tesco deals with a number of different products and is well known specially for the food items. Tesco operates mainly in an oligopolistic market. Oligopolies are markets where an industry is dominated by a small number of large sellers. For example the groceries industry is dominated by a number of firms like Tesco, Asda, Morrison, etc., the fast food outlets is dominated by McDonalds, Burger King Etc (Margetts, 2009). In this type of markets there are a few firms selling the similar products. These kinds of markets have barriers for entry. Also the firms in these markets are generally inter – dependent to one another. The actions of one firm will affect the other firms in the industry as well. Also a few big suppliers normally dominate the markets. In these types of markets the firms generally produce branded goods and the marketing and advertising in these markets play a very big role for the firms. Since the markets have firms that are inter – dependent, the firms compete for market share, and demand from the consumers to a great extent. Thus while determining the competitive strategies, a lot of aspects are required to be considered. While determining the prices, Tesco requires discounting the price of the products or range of products. This will help increase the demand and there by increase the revenues. Also in terms of the non price competition, other strategies required to help increase the market share, will require to consider a number of other factors like: i. Marketing and advertising: Since this type of market has a number of firms selling the same good, the need for advertising becomes very high to help increase the demand for the product. Hence with the help of advertising and marketing, a firm can gain a larger market portion and help improve the demand for its products, there by increasing the revenues of the company. ii. Store Loyalty Cards: These help the firms provide customers with better discounts and cash – backs. This is one of the best modes to market to the customers and this method helps gain higher number of customers and therefore higher revenues for the companies (Guardian, 2006). iii. Home Delivery Systems: This is a growing need for almost every customer. Tesco has been able to achieve a huge market since they work on the slogan ‘you shop, we drop’. This is an aspect which is liked by most customers and this helps increase the loyalty of the customers. iv. Discounted Petrol at hyper – markets: Providing customers with discounts for shopping at the stores is another very well appreciated marketing strategy. For instance Tesco provides for discount coupons. This coupon gives the customers a discount of £0.10 on every litre of petrol for every £10 spent in the store. This acts as a motivating factor for the customers and ensures the customers return to the store again. v. Extended working Hours: Since the markets have a number of firms providing the same products, hence firms that work on aspects that differentiate the firms to a great extent. Aspects like extended working hours like 24 hours shopping in Tesco provides a competitive edge to the store. This allows the customers to have a choice for the hours of shopping and thereby makes shopping a pleasure for the customers. vi. Internet Shopping: With the increasing use of internet, shopping has also to a great extent preferred to be done online. This helps the customers shop at their convenience from home at any time during the day. This also is another aspect that makes shopping a pleasure for the customers. All these factors and a number of other factors help the firms compete within an oligopolistic market (Humby, et.al., 2008). This also allows the firms to create a brand image and allows for a better recognition, thereby increasing the demand for their brand name. The competitive strategy used by Tesco to a great extent allows the firm to create a differentiated image and has hence made Tesco the largest retailer of Britain. Task 3 a) Compare and contrast transitional and emerging economies. Use examples to support your answer. Transitional economy is an economy is one that is in the process of change from a centrally planned economy to free markets. These markets undergo economic liberalizations, stabilisations of macroeconomics, and also restructuring of and privatization of public to private ownership. The process normally leads to a lot of confusions and inequalities and the distribution of wealth is uneven through out the markets. Also in these kinds of economies, dramatic changes can be seen in the inflation and fall of the gross domestic profits. In countries where the representative institutions are put in the democratisation is normally referred to as transitional democracies. The final aim of these is to achieve fully functional market economies. The use of this type of economy normally helps and provide for a lot of scope for growth of international business. There are a number of different countries that are in this mode in the economy. Countries like Romania, Albania, Bulgaria, Russia, Georgia, and etc. fall into this category. Emerging economies on the other hand includes countries with low to middle levels of per capita income. There are a number of countries that fall into this category, simply because of the developments and reforms. Countries like China, India etc, form a part of the emerging economies (Heakal, 2009). Countries like China, despite being the economic powerhouse, is considered to be an emerging economy as the economy has embarked on the economic development and the markets are in the process of opening up. These markets are normally fast growing economies. b) Using some contemporary examples from either the US or UK economy, critically evaluate the role of government intervention in a period of recession. The economy of United Kingdom is facing a high level of recession. Post the Northern Rock crisis the government as well as the Bank of England has taken a number of steps to try to resolve the issue and instability that has been created in the entire country (Aldrick and Dey, 2007). The crisis has caused a complete break of trust of the customers in the commercial banks. The Government along with the assistance of the Bank of England has helped fund the Bank with large amounts of funds as much as 25 billion pounds. This was provided to let the bank return to a liquid position however the Bank of England and the Government have come to a concise that Northern Rock requires being nationalised (Reuters, 2008). This intervention has been very useful for the crisis situation as the Bank has been noted to have broken the rules and regulations for banks in terms of the investments made. Thus the nationalisation has eased the situation and has ensured that the customers do not loose their monies due to the careless investing of the banks. Thus it can be seen that the Government has taken steps actively during periods of recession. In many instances, the Government has intervened during crisis hours of various bodies including commercial bodies and helped them to regroup and stabilise. Task 4 a) Describe and discuss the role of foreign direct investment (FDI) in globalisation. What do you conclude? Foreign Direct Investment (FDI) is a method that has been used by companies to invest in physical investments across the world. In short FDI enables companies to use their finances to buy cheaper raw materials, labour and even operations. The relationship consists of two companies, a parent enterprise and a foreign affiliate. For the foreign direct investment to be successful, the parent company requires to have control over the foreign affiliate (Gangopadhyay, et.al., 2005). The Foreign Direct Investment has allowed for a lot of increase of globalisation in the past few years. FDI has impacted the economic growth in the global process to a great extent, however with an uneven distribution of the FDI throughout the world. There are a number of countries that are way below the other countries in terms of the FDIs and also it has been noted that the poorest countries are still have troubles and the results are very disappointing (Rahman, 2008). The globalisation is very beneficial and the FDIs are also being invested into the Asian countries. These are beneficial and will help the Asian countries develop at faster rates and will also provide support for the countries in terms of both financial as well as international exposure. b) Critically evaluate the contribution of Economic and Monetary Union (EMU) to progress towards full integration. Though efforts were made earlier in many instances to create a fully integrated European Union, a more clear, realistic and achievable plan was set up in 1989. A three stage plan was proposed to implement the EMU (Economic and Monetary Union) (Grauwe, 2007). As a first step towards integration, the capital movement was liberalised in the European Economic Community (EEC). This brought about a number of healthy changes and this was the main reason behind the EU absorbing the EEC as the European Community Pillar in the Maastricht Treaty in 1992. The Treaty was a milestone in the integration initiatives, as it established the completion of the European Monetary Union as the formal objective. The crucial convergence criteria such as the inflation rate, interest rates, exchange rate stability and public finances were set and formed the guidelines towards the EMU. In the second stage, the European Monetary Institute was created in January 1994 in order to encourage cooperation among the member states. A number of developments were made in this stage with the official name of the new currency (Euro) being decided. The 11 countries to enter into the third stage were selected. The European Monetary Institute (EMI) was dissolved in 1998 to form the European Central Bank (ECB) which set the conversion rates of the participating countries. In third stage, the Euro currency was officially introduced and after a three year transition period, it was fully implemented in the member countries. Some more countries such as Greece, Slovenia, Cyprus, Malta and Slovakia joined the EU. Thus EMU contributed significantly towards a free market and a fully integrated European Union. The efforts to complete the integration are still continuing and the EMU has given a formidable base towards a single European Union (Landler, 2008). 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