Stakeholder Analysis of Tesco Plc - Case Study Example

STAKEHOLDER ANALYSIS OF TESCO PLC Word Count: 2,563 Table of Content Introduction..........................................................................................................................3 Tescos Business Model........................................................................................................3 Tescos Stakeholder Relationships.......................................................................................5 Consumers................................................................................................................5 Employees.................................................................................................................6 Shareholders..............................................................................................................6 Suppliers....................................................................................................................7 Community................................................................................................................7 Government & International Authorities...................................................................8 Stakeholder Constraints on Tesco PLC.................................................................................8 Fulfilment of Stakeholder Obligations by Tesco PLC..........................................................9 Customers..................................................................................................................9 Shareholders..............................................................................................................9 Suppliers....................................................................................................................10 Community................................................................................................................10 Governments, International Authorities & Their Agencies.......................................11 Conclusion.............................................................................................................................11 References..............................................................................................................................12 Introduction Tesco PLC runs one of the largest supermarket chains in the UK. Tesco PLC has been expanding its businesses around the globe. It now has a global presence. Tesco PLC is still expanding in the UK and it continues to grow different brands and add different outlets to its operations As an organisation, Tesco PLCs owners, employees, customers and the wider community have various demands and expectations. Tesco therefore has to satisfy all these expectations to these interest groups. The nature of the demands of each interest group varies according to the geographical location within which it operates. This paper analysis and evaluates the various relationships that Tesco has with its stakeholders. This involves the examination and analysis of the stakeholder interests and expectations. These stakeholder needs and expectations come with various obligations and potential obstacles that Tesco faces in its operations and existence. The paper tries to examine these constraints in the context of organisational behaviour and business management. The paper also tries to diagnose the extent to which Tesco has succeeded in discharging its obligations to the stakeholders. In arriving at this end, the following objectives are met through this paper: 1. The analysis of the organisational structures and systems of Tesco PLC 2. The examination of the commercial, ethical and legal relationships that exist between Tesco Plc and its stakeholders. 3. An evaluation of the potential obstacles that stakeholders place on Tesco PLC in the national, continental and international contexts. 4. An assessment of the extent to which Tesco PLC has fulfilled its obligations to its stakeholders Tescos Business Model Tesco is one of the food and service retail services in the United Kingdom. Tesco began in 1919 as a small grocery store which made just £1 profit on the first day on a sale of £4 (Tesco History, 2012). Tesco maintains branches in Europe, Asia and North America (Tesco Global Reach, 2012). Tesco has branches in Poland, Turkey, India, China, South East Asia and the United States. Each of these national branches operate in different parts of the nation and many of them render the same services that Tesco UK offers to its clients. Tesco currently runs the following business activities: 1. Grocery production and retail 2. Fuel sales 3. Financial services and 4. Clothing & Fashion Over the years, Tesco Tescos strategy is to grow the UK Core and improve the international branches and e-commerce wing (Tesco Strategy, 2012). In attaining this end, Tesco intends to provide the best quality foods and grocery services as well as grow the retail services (Tesco Strategy, 2012). Tesco also has a strategic plan of discharging its responsibilities in the wider community, create high value brands and build a team that can continuously create value (Tesco Strategy, 2012). Tescos vision is to become highly valued by its customers and the community, its staff and shareholders (TescoVision, 2012). Tesco also intends to grow through modern and innovative means both locally and internationally (Tesco Vision, 2012). Stakeholders are the parties that affect and are affected by the existence and operation of a business (Dwyer, 2008). Stakeholders are the people who are vital for the existence of the business as well as those who deserve to be recognised by the business because they affect or are affected by the business (Vilcox & Mohan, 2007). The strategy and vision of Tesco give an outline of what is important to Tesco. This gives a clue of the main stakeholders that are linked to the company. Through the vision and strategy, we can identify: 1. Customers: People who buy the goods and services that Tesco sells. 2. Employees: The management and staff of Tesco Plc 3. Shareholders: The owners who pooled resources to set up and run Tesco 4. Suppliers: These are the partners who provide goods for Tesco to sell to its customers. 5. Community: The people in the environment within which Tesco operates Aside these major stakeholders that are vital for the survival of Tesco, there are some other stakeholders who are important. They include: 1. Government: The UK government and the laws that regulate the wider community. 2. International authorities: These are the authorities that set the parameters for Tesco to operate in foreign countries around the world. Tesco is ran by a six executive directors and eight independent non-executive directors (Tesco, Governance, 2012). These directors are in charge of the management and governance of Tesco. As such, they have a duty of ensuring that they put in place measures to preserve the various interests of stakeholders. The directors have to set up a system of ethics and risk management to ensure that all the needs and expectations of stakeholders are met in the operation of Tesco in the UK and beyond. Tescos Stakeholder Relationships Tesco has a relationship with its stakeholders. Each of the stakeholder groups have commercial, ethical and legal relationship that Tesco is bound to honour at different points in times as it operates. Consumers Consumers represent the actual and potential people and entities that buy Tescos products. This include the members of the society who purchase goods from Tesco at different points in time. Consumers are a major stakeholder group. This is because they pay money to acquire the groceries and services that Tesco offers. Commercially, consumers are the lifeline of Tescos existence. This is because the money they pay for Tesco products and services provides revenue that Tesco uses to pay its bills and declare profits for its shareholders. In return for paying money to Tesco, consumers expect that their needs will be met. This means that the purchase forms some kind of social relationship in which Tesco will be required to provide the best interest of consumers. Some matters like health concerns of consumers and the proper provision of services must be met by Tesco. Legally, consumer laws like the Unfair Contracts Act in Britain protects these consumers from exploitation. This provides rights for the consumers to be respected by Tesco in the sales and services they provide to the public. Employees Employees include the workers and supervisors of Tesco. Tescos owners and management cannot run the many branches around the UK and the world. They will therefore have to employ workers to do that. These workers also expect their interests to be respected at all times. Commercially, the employees effort makes it possible for consumers needs to be met. This means that employees labour is a significant component of the business of Tesco. Without them, the consumers cannot get what they need. The collective effort of employees allows Tesco to make profits. Employees will want to be treated as partners at Tesco. They will want to be respected as people who play a key role in delivering profits to the company. As such, they will expect to be recognised for their effort not only by salary but through a share in profits. Legally, there are labour laws that protect UK employees who work for Tesco. These employees need to have their rights protected and enhanced in all situations and circumstances. Otherwise, Tesco will face legal suits that can be devastating for the company. Shareholders Shareholders are investors who pooled their resources to set up the company (Piercy, 2008). These shareholders are the owners of the company. As such, they will expect a reward in terms of profits which lead to good dividends. Commercially, the operations and existence of Tesco is credited to the capital they gain from shareholders. The contributions of these shareholders form the working capital and the liquid resources that are used to purchase assets and pay important bills. These funds ensure that Tesco earn revenue. The fundamental expectations of investors is to make profits. These investors will expect dividends and an increase in the value of Tesco shares. Legally, there are laws that prevent the exploitation of these shareholders in Britain and around the world. Suppliers These are the companies that provide groceries and other outsourced services which supports Tesco to make revenue. It includes the producers of fresh products and processed foods and clothes as well as third party service providers that support the financial services of Tesco. The suppliers provide goods and services for Tesco at a lower price. Tesco adds value to these goods and services and sells them to members of the public at a mark up on cost. This provides a profit for Tesco. Suppliers will expect their pay on time and also expect that Tesco abides by the terms of the contracts they maintain. Tesco will also expect the same. Tesco will also expect that suppliers provide services that meet its standards at all times. Community The wider community forms the business environment within which Tesco operates. Tesco simply takes raw materials from the environment, adds value to them and sells to the members of the community. The community therefore forms the market for Tescos service. At the same time, the community is affected by the activities of Tesco. Ethically, Tesco will have to give back to the society. It will have to find ways of improving the community and business environment. Tesco will also have to be sensitive to the effects of its operations on the environment. There are laws that bind Tesco in its operations. There are environmental laws and expectations that Tesco needs to be sensitive to. Government & International Authorities Tesco operates in the macro-economy of Britain and the nations within which they operate. They therefore have an obligation to honour the laws and expectations of the wider economy. Tesco has an obligation to remain as a responsible business. It will have to support the state in the advancement of human rights and improvement of lives of residents in the nation. This way, there are taxation and laws that Tesco needs to be sensitive to at all times. Stakeholder Constraints on Tesco PLC The stakeholder relationships that Tesco maintains with various components in Britain and the international operations puts some limitations on what Tesco can do. Consumers interest requires Tesco to be conscious of the best interest of customers. Tesco will have to produce healthy products and seek the best interests of customers. Failure to do this will mean that customers can purchase from other competitors that produce better services. There are national laws that require consumer rights to be respected. European Union Laws also require Tesco to remain sensitive to the human rights of consumers. In other countries around the world, similar laws compel Tesco to respect all such rights. Employees are protected by British and European Union Laws. In other countries, there are similar laws that protect workers. European Union labour laws makes it imperative for Tesco to hire people from other European nations. Tesco employees also have the right to indulge in unionism which can cause them to bargain collectively for better services. This puts Tesco in a situation where it needs to work hard to honour obligations to workers. Shareholders can always sell their shares and liquidate their funds. When the management of Tesco fail to increase profitability and returns on investment, the value of Tesco shares will fall and this will make it a less attractive company to invest in. This means Tesco will lose its working capital and this will cause financial constraints. Suppliers needs means that Tesco will have to always pay fair price and honour contract terms. European Union laws requires Tesco UK to purchase from the best suppliers in the European Union and treat all suppliers as such. This means that Tesco will have to respect EU laws on fair treatment of European suppliers. Governments and International Authorities require Tesco to declare taxes, which is somewhat about 30% of profits. This goes to the government treasury and reduces the revenue base significantly. Parliamentary laws, policies of government and budgets all impact on activities of the government. This places a strain on Tesco in its operations. Fulfilment of Stakeholder Obligations by Tesco PLC A critical analysis of Tesco PLCs annual reports indicates that numerous stakeholder interests and expectations were honoured in the 2010/11 trading year. Customers Tesco made a large stock of revenue from consumers. They made a total of £40 billion sales in the UK. Tesco bank made sales of £919 million to consumers. In the US, European and Asia, Tesco made £495 million, £9 billion and £10 billion in sales (Tesco Annual Report, 2011 pp1 – 2). This sales was supported by ethical practices and solid customer care service which was a major part of the administrative costs of Tescos financial statements. All in all, the group made a profit of £3.7 billion in the trading year. Employers Tesco has a over 400,000 employees worldwide. In the UK, there are 290,000 employees. Tesco Bank operates with about 1,270 employees. In the USA, Europea and Asia, there are 4,314, 89,559 and 104,000 employees respective (Tesco Annual Report, 2011, pp 1 – 2). Tesco run the Share in Success Scheme in 2010/11. In this scheme, Tesco provided £105 million worth of shares to employees (Annual Report, p3). This showed that the employees were treated as partners and they were sufficiently motivated. In the United States, 75% of employees are granted medical and dental cover by Tesco (Annual Report, p42). A total of 30,000 employees also gained some form of training at the expense of Tesco (Annual Reports, p43). Shareholders The management of Tesco declared a dividend of 10.09p per share (Annual Report p3). This represented an increase of 10.8% of the value of shares. This shows that in spite of the many constraints that Tesco is faced with, they managed to discharge their primary obligation to the owners of the company. Suppliers Tesco declared in its annual reports that the Group Code of Business conduct is formulated by the directors to govern the relationship with suppliers (p71). This code provides the best practices for the regulation of conducts with suppliers to provide a win-win relationship with them. Also, Tesco indulged in a conscious effort to grow local businesses by contracting local businesses to supply goods to them (p71). Through this plan Tesco supported the growth of local industries wherever they operated around the world. Community The Chief Executive Officer of Tesco announced that the Tesco gave a total of £64 billion to charity (p3). This translates to about 1% of Tescos profits. This donation effort meant that Tesco gave back to support and sustain the communities within which it operated. Tesco also has an environmental policy department that examines present issues and situations in environmental matters and ensure compliance Governments, International Authorities & Their Agencies Tesco operates a corporate governance system that ensures that risks are evaluated and handled appropriately. One of the main compliance element was compliance to government requirements. Texco paied a total of £864 million in the UK and £760 million in its overseas operations. Tesco honours Financial Services Authority rules in handling its financial compliance issues. Accounting is done through International Accounting Standards to provide the required documents for inspection by governments and their agencies. Conclusion Tesco is a profit oriented company. However, it has several stakeholders like consumers, employees, suppliers, community and government agencies to satisfy aside shareholders. Tesco needs to be sensitive to all these interest groups and this forms some form of constraint on Tesco. Tesco has however made conscious efforts to discharge these stakeholder requirements in its operations. References Dwyer, Sandra (2008) Thinking Ethically in Business London: Humanities Publishing Piercy, Nigel (2008) Strategic-Oriented Marketing London: Elsevier Publishing Tesco Annual Reports (2011) Annual & Financial Statements 2011 Tesco PLC Tesco Global Reach (2012) A Global Business [Online] Available: http://www.tescoplc.com/about-tesco/a-global-business/ [26th January, 2012] Tesco Governance (2012) Board & Management Team [Online] Available: http://www.tescoplc.com/about-tesco/board-and-management-team/ [26th January, 2012] Tesco History (2012) Our History [Online] Available: http://www.tescoplc.com/about-tesco/our-history/ [26th January, 2012] Tesco Strategy (2012) Our Strategy [Online] Available: http://www.tescoplc.com/about-tesco/our-strategy/ [26th January, 2012] Tesco Vision (2012) Our Vision [Online] Available: http://www.tescoplc.com/about-tesco/our-vision/ [26th January, 2012] Vilcox, Mary & Mohan Thomas (2007) Contemporary Issues in Ethics Nova Publishing. Read More