Stakeholders at Tesco and Bradford College - Case Study Example

Stakeholders at Tesco and Bradford College Introduction Businesses around the world are changing their organisational structure and management style congruent to the changing business environment. While earlier, businesses operated under the directives of shareholders or owners, today they are answerable to entities other than these. Business entities are no longer working for profitability alone but are learning to value social drivers like ethics, sustainable development, quality standards, and organisational learning as the basis for carrying out their day to day activities. They are beginning to understand that for an organisation to be successful, it needs to take into account of stakeholders - those who influence the business and its profitability. This is where strategies for involving stakeholders, transparency, communication, and interaction come in. Firms have started to develop new unifying frameworks for building relationships between stakeholders and the organisation itself (Bronn and Bronn, 2003). Sometimes these frameworks work for the better while at other times it conflict with the interests of the organisation. As a result these conflicts can impact the organisations profitability, and long term sustainability. Statement As organisations are recognising the importance of stakeholders, understanding the implications of these entities on organisational objectives, mission and operation becomes imperative. In the following study, the researcher shall study Tesco plc and Bradford College in the context of the stakeholders’ influence. The aim of the study is to compare how stakeholders influence these organisations objectives and purposes. Tesco plc Tesco was founded by Jack Cohen who began the business by selling groceries from a stall in East End of London. Today, Tesco, the organisation has become a Group of retailing businesses. It is essentially a public limited company involved in retailing and associated businesses in the UK and Ireland with branches in Europe, Asia, and the North America spanning over 14 countries. Its business includes retailing, banking and insurance services spanning over clothing, meals, and mobile phones to savings accounts (Tesco, 2009). The control of the Company is based on share capital issued to shareholders through ordinary shares in the stock market. The Board of directors have the executive power to plan, strategize and execute business strategies. Some of the shares are held by its employees through the companys Employee Share Incentive Plan Trust, International Employee Benefit Trust and Tesco Ireland Share Bonus Scheme Trust. Unless through voting rights, employees do not have exercisable rights but may make recommendations to the company. Only the Legal & General Investment Management Limited owns a significant 4.55 percent of the issued share capital while the rest are distributed to ad hoc shareholders. PricewaterhouseCoopers are its auditors, while the suppliers, employees and directors are responsible for its operation (Tesco, 2009). The organisation claims to be "about creating value for customers to earn their lifetime loyalty" (Tesco, 2009). The emphasis is to provide value to the customers whichever products or services they consume at Tesco. The purpose of the organisation is to "understand the customers, be the first to meet their needs, and act responsibly for (our) communities" (Tesco, 2009). To achieve these objectives, Tesco employs 470,000 staffs who are responsible for making it the worlds third largest grocery retailer in the world with group sales of £59.4bn (Tesco, 2009). Tescos 4,331 stores worldwide cover its grocery retail market, which is its main source of revenue. Other markets include health and beauty, electronics, personal finance, online shopping, and consumer research which contribute to the overall business revenue (Tesco, 2009). The business focuses on its customers, the community, human resources, operations management and financial growth, which Tesco term as its "Steering Wheel". The Steering Wheel is a balanced scorecard approach for managing the Group. The objective of having this Steering Wheel is to ensure that internal customers and external customers are treated equally, honestly, and respectfully by sharing knowledge, experience and trust to achieve mutual interests and growth. The companys strategy is to successfully establish its brand and grow its core businesses in the UK and in the international arena. The community is considered to be at the heart of the business operation for which it has established the strategy "Every Little Helps". This is a strategy which regularly survey customers and staff to work with the company to produce their desired results (Tesco, 2009). Bradford College (West Yorkshire, England) Bradford College has been providing education for the past 177 years. With over 21000 students across the globe, the College is one of the most innovative education institutions in the world (Bradford, 2009). The College has its roots in the history of Bradford city itself which had been the industrial hub during the 19th century for textile, automobile, quarries, wool, and artificial limb design. These industries had great need for technical training for its employees at the time which was the reason why the city aimed at building an institution to meet the skill gap. The Bradford Mechanics Institute was formed to provide education for the middle working class. Teachers were hired to train individuals to qualify for industrial work (Bradford, 2009). It was during the 1880s that the institution became recognized for its technical contribution, and established proper buildings for the purpose of providing the youths with vocational education. During the 20th century, the College merged with the College of Art and Technology, and became Bradford College. Later, during the 1990s Bradford College incorporated under the Further and Higher Education Act of 1992, and became one of the largest institutions to enrol 36000 students and offer portfolio for vocational training and education (Bradford, 2009). Today, Bradford College is the centre of learning with a wide range of academics and institutional services like Womens Resource Centre, Teacher Training Agency, Early Years Test Centre, the WOW Academy, Bradford Art School and Yorkshire Craft Centre, Bradford School of Business and Law, and McMillan School of Teaching, Health and Care etc. to cater to diversified population of learners from all over the world (Bradford, 2009). Bradford has state-of-the-art campus, and boasts of a variety of courses from which learners can choose and qualify in. Bradford Colleges mission is "to help students from the region, nationally and internationally, achieve their potential and make a rewarding contribution to their own communities" (Bradford, 2009). To carry out this mission the College employs dedicated faculty members and staffs. The College is governed by a Governing Body or Corporation whose members change from time to time, and chosen on the basis of their terms of office. They are usually from local business, communities and students. Despite being incorporated by the Government, Bradford College is privately managed by the Corporation, but its members are not paid. The Principal and the senior management report to the Corporation which is responsible for approval review, monitoring of the College activities and services. It is also responsible for the formulation and execution of long-term strategy, as well as assuring quality standards for teaching at the College. These strategies are aimed at ensuring the Colleges financial solvency (Bradford, 2009). For the FY 2007/08, the College has generated an operating surplus of £2.29 million and accumulated reserves of £14.41 million. Apart from the education centres, the College owns subsidiary companies Training for Bradford Ltd. and Inprint & Design Ltd., from which it receives revenues of £167k and £100k respectively (Bradford, 2009). The purpose of the College is to develop learners to their full potential through qualified teaching, learning environment, student support, and innovation in learning strategies. Recently, the College has established new campuses and wings to upgrade its peripheral services for learners, and thereby achieve its financial objectives which are to increase annual income and keep expenditure and income ratio under 70 percent. Furthermore, the College aims to maintain its Grade A status as assessed by the LSC (Learning and Skills Council), its main funding source (Bradford, 2009). Stakeholder theories have gained much attention in the recent years because they help explain how organisations function and how constituents are affected by the stakeholders. Freemans (1984) definition of stakeholder is "any group or individual who can affect or who is affected by the achievement of the firms objectives" (30). Others claim that stakeholders have financial, human or other form of stake (risk) involved in the organisation which is why they are affected by the loss or gain of the firms behaviour. Based on these factors, today stakeholder theories are based on the premise that firms seek to maximize profitability. Managers in turn set the objectives to maximize their personal objectives. Growth is the result of both the organisation and managers decision making to produce satisfactory profits. Both the firm and the manager are influenced by stakeholder power which can be categorized into external stakeholders and internal stakeholders. Regardless of the definition, understanding of the stakeholders influence and how the firm respond to those influences are important for the organisations survival in todays changing business environment. Stakeholders influence on Tesco In this context of the stakeholder theory, Tescos stakeholders can be categorised into external and internal stakeholders. Tescos internal stakeholders are defined by its employees, board of directors, and trade unions. Among these the board of directors have the most influence over the operation of the company, strategy making and its execution. They have the main decision making power. However, they are partly influenced by the employees who are also the shareholders of the company through the compensation Trusts. Although they do not usually exert their rights but their influence is noticeable through productivity level. The trade union does not have much influence over Tescos working and therefore has the least influence (Tesco 2009). On the other hand, Tesco is very much pressured by its external stakeholders. This is because of its organisational objectives and mission - which is to cater to its customers needs from all aspects. To cater to their consumers, Tesco has to maintain cordial relationships with a host of external stakeholders including the suppliers, auditors, creditors, financial services firms, competitors, telecom companies, and social activists. Suppliers hold the life line to Tescos operating system. They are the determinant of low cost and cheap price at Tesco. Creditors and financial services firms too have financial influence over the company as they influence the financial objectives of the company. Auditors, competitors and social activists (community) though have indirect influence over Tesco; their presence in the business lifecycle cannot be neglected. These stakeholders are the gate keepers who decide whether Tesco is conducting its business in an ethical manner or not. But most important among its stakeholders are the customers and the shareholders. The customers are the main stakeholders who can make or break Tescos business through their buying decision and approval of its business while the shareholders are the major financial influencers (Tesco, 2009. Tescos stakeholders influence can be understood by the rationale that the more positive influence the stakeholder has on the organisation, the more negative impact it has on profitability (Drago 1998; Tesco, 2009). Stakeholders influence on Bradford College On the other hand, the nature of influence at Bradford College is different. According to Phillips (2003) not all stakeholders have financial influence over the organisation. Some have moral influence while others have cooperative or contributive influence over the organisation and its productivity. Unlike those in Tesco, power of influence at Bradford College is derived from legal hierarchy, leadership, knowledge management and control of strategic resources. Bradford College stakeholders in this context can be categorized into primary and secondary stakeholders. Primary stakeholders are those who are affected by the project. Secondary stakeholders are those who are the intermediaries and can affect the delivery process in the organisation (IDeA, 2009). The Colleges primary stakeholders include the students, prospective students, and the colleges faculty. If the College deteriorate or excel in its performance the students are ultimately affected because they rely on the Colleges performance for gaining knowledge and training. Vice versa, without the students, the College would lose its financial stability. Similarly the teaching faculty who depends on the College for their salaries, and who in turn can affect the quality of education delivery (Bradford, 2009). However, the College is most influenced by the secondary stakeholders who though have less influence over financial matters (except for the LSC) affect the delivery process. For example the LSC is responsible for monitoring the Colleges performance, strategy and its achievement in delivering quality education. The government, Quality Assurance Agency, Association of Colleges, Total Training Solutions, and Centre of Vocational Excellence have influence over Bradford Colleges performance, quality of training and education standard. Their awards and accolades elevate the Colleges ranking while the lack of it can result in lowering its position among other colleges and in attracting prospective students. But at the core of the Colleges operation is the Corporation which make up a combination of external and internal stakeholders who oversee its function and delivery, including all decisions pertaining to the organisations short term performance and long-term sustenance. The Corporation is the main influencing body within the organisation acting as the gatekeepers, financial experts, and business conduct. Unlike, Tescos stakeholders, Bradfords stakeholders have more strategic and operational influence over the College which ultimately influence its financial standing. Since the College operates on the funding of the government, LSC and European Union, it is not concerned about financial performance but more influenced by reputation, delivery, and innovation performance to meet industries technical knowledge needs. In this context, Bradford has a wider circle of stakeholders who have indirect influence over its performance (Bradford, 2009). Conclusion From the above analysis, the researcher understands that stakeholders influence do not necessarily mean financial influence. Stakeholders have power over organisational plans, cause uncertainty, and undermine the organisations sustainability. The role of stakeholders and their influence over the organisation perhaps depend on the nature of the organisation. For instance, Tesco is a commercial organisation with business in retailing, personal finance and so on. Tescos business constituents depend on financial streams for its sustenance. Likewise, the organisations stakeholders are those who have financial relationship with it, directly and indirectly. Their categorisation reflects their level of influence and their role within and outside the organisation. On the other hand, Bradford is an organisation which relies on contributions and collaborations from a host of entities which are indirectly responsible for its existence. The Colleges executive decision makers, responsible for its operation and performance are those who exist outside the organisation (except for its faculty) who are there without any monetary compensation. These are the people who make the standard of education, quality of technical training, and knowledge dissemination possible. It is perhaps this reason which is why Bradford is much influenced by the secondary stakeholders as compared to Tesco. Regardless of the categorisation and nature of stakeholders, Phillips (2003) is of the view that organisations are responsible for them, and vice versa because ultimately they can influence the success or failure of the organisation. Hence, the absence of a quality assurance agency acknowledgement for Bradford would perhaps influence its prospective students decision to get admission at the College or even get their existing students jobs in the business sector. Similarly, without competitors and the community, Tesco would perhaps not gain the popularity it does today. References Andriof, J. (2002) Unfolding stakeholder thinking: theory, responsibility and engagement. Greenleaf Publishing. Bronn, P. and Bronn, C. (2003) A reflective stakeholder approach: Co-orientation as a basis for communication and learning. Journal of Communication Management. Vol. 7, No. 4, pp. 291 - 303 Drago, W. A. (1998) Predicting Organisational Objectives: Role of Stakeholder Influence and Volatility of Environmental Sectors. Management Research News. Vol. 21 No. 9. Freeman, E. (1984) Strategic management: a stakeholder approach. Pitman Publishing. IDeA (2009) "Stakeholders Analysis" Online accessed on 31 October 2009 from: http://www.idea.gov.uk/idk/core/page.do?pageId=7216611 Official Website Bradford College. Online accessed on 31 October 2009 from: http://www.bradfordcollege.ac.uk/about-us Official Website Tesco plc. Online accessed on 31 October 2009 from: http://www.tescoplc.com/annualreport09/abouttesco/financial_highlights/ Phillips, R. (2003) Stakeholder Theory and Organizational Ethics. Berrett-Koehler. Read More