Tesco Business Management - Book Report/Review Example

Business Management Introduction This report would give an insight into the prevailing marketing conditions in the UK’s retail sector and their direct influence on the business of Tesco Public Limited Company (PLC). Moreover the report would also contain discussion on the organizational structure of Tesco PLC with an overview of its human resources and risks associated with the human capital. 2. Introduction to the Organization Tesco PLC is a UK based retail business having its headquarters in Cheshunt, Hertfordshire. Tesco PLC was founded in 1919 by Jack Cohen and since then, Tesco is engaged in grocery and general item retail business. AT the moment, Tesco have its presence in more than 14 countries of the world with a widespread retail network of around 6,400 stores. Tesco possesses a diversified human capital comprising of 530,000 employees who helped the company to make £ 65 billion last year, out of which, £ 124 million were reported as net income of the business (Tesco PLC, 2013; Tesco PLC, 2013). 3. PESTEL Analysis of UK’s Retail Sector This section of the report entails discussion about the external environmental factors and their influence over the retail sector of United Kingdom. 3.1. Political Scenario As the majority of the retail businesses in UK are multinational and have operations across the globe, therefore; these businesses have to obey a diversified base of political conditions in the world. Particularly in UK, the retail sector enjoys a high level of privileges from the political parties as these businesses contribute a sufficient amount of taxes to the national treasury. In UK, a consistent political strategy and policy for businesses prevail which aims at stimulating the growth of the retail businesses. In this scenario, Tesco and other retail giants like Sainsbury’s and Debenhams are provided with special levies on taxes so that more amounts of the revenues can be spent on research and development. Government of UK believes on meeting customers’ needs and wants by scientifically researching the market preferences and conditions. In this regard, a significant amount of the retail sector’s revenues is required to be spent on market research. On the other hand, the policies and regulations introduced by the newly elected government in UK has helped the retail sector to strengthen its financial bases by acquiring flexible bail pout plans to overcome the adverse affects of recent financial slump across the globe. The influence of the political system on the retail sector can also be observed in the financing decisions, recruitment and selection procedures, stakeholder relationship management policies and the overall operational activities of the retail business (Hasan, 2012). 3.2. Economic Scenario The fluctuation in the economic progress of UK’s economy has had a deep influence over the growth and business level performance of the retail sector in the country. During the recent economic downturn, Tesco and other retail business in the kingdom reported downward trend in the growth of their revenues. During these times, i.e. from 2007 to 2012, Government formulated a number of policies and legislations which aimed at improving the landscape for the retail sector and transferred financial power to the consumers, so that the purchasing power of the retail sector’s consumers increase. It was not before the mid of 2011, when the government of UK was successful to recover the confidence of the retail sector on the financial landscape. As a result, the retail sector started to regain its strength and reported an upward trend in consumers’ demand for retail products. Apart form this, performance of the retail sector in UK has remain efficient and has remained at a satisfactory level, mainly because of improving consumers’ purchasing power (Robinson & Saigol, 2013). Moreover, the economic scenario for the retail sector is also favorable in UK as the trend of online shopping is increasing day by day. More and more customers are adding to the customer base of Tesco and other retail businesses in the kingdom, which is creating a more favorable economic scenario for retail businesses (Ficenec, 2013). 3.3. Social Scenario Social scenario comprises of acceptance of retail businesses’ strategies and offerings in the society and policies of the stores that are directly influenced by the social structure of a respective market. Tesco and other retail sector brands enjoy high acceptance from UK’s masses. This is because the majority of customers of the retail market expect facility and high quality at the same time. In this regard, the retail sector, under the influence of governmental policies and social guidelines, design their product and service offering strategy keeping in view the social preferences of target consumers. On the other hand, the emergence of virtual business module, i.e. the social networking portals of the retail sector has also facilitated customers in UK. It is an opportunity for the retail sector to offer a shopping experience to their target market over the internet and expand their customer base (Reuters, 2013). 3.4. Technological Scenario Technologically, the retail sector of UK is very advanced and makes use of technology in its operations and marketing campaigns. In operations, the retail sector of UK makes wide use of management information systems like inventory management system, employee relationship management, human resource information systems, and market profile data generators, and etc.(Felsted, 2013). On the other hand, for marketing and sales purposes, retailers in UK’s market uses internet for promoting brands and discount offers whereas social networking portals are useful for providing customers with online shopping experience and book their orders (Ficenec, 2013). Besides, technology is also used for protecting the environment from the hazardous affects of retailers’ operation, which includes environment friendly distribution and transportation of goods and services. 3.5. Environmental Scenario Keeping in view, the national and international legislations and regulations for protection of environment, Tesco and other retailers in UK’s market encourage the use of efficient techniques in operations management. This is to ensure that the operating capacity of the business is not causing problems for the natural environment and the distribution mechanisms are producing fewer percentage of carbon emission that damages the natural environment. Moreover, quality control is also essential in product offering, as the delivery of sub-standard products or the one made of hazardous material is considered as professional crime in UK. Another major strategy that has been adopted by UK’s retail sector is the use of recycled packaging material, which is also adding to the socially responsible conducts of retail businesses. Several consumer awareness programs are also launched by retailers in UK, one of them is Greener Living Scheme by Tesco, which acknowledges customers about the hazardous impact of inefficient waste management (Tesco PLC, 2013). 3.6. Legal Scenario Due to fluctuations in the taxation system and the introduction of value added taxes, retailers in UK has seen their revenues soaring to a significant amount. The legal scenario in UK requires retailers to ensure quality of the products they are offering to the market, maintain decorum in the operations of the business, brings businesses in alignment with the social and cultural acceptance, maintain a healthy financial portfolio and adopt socially responsible and globally accepted performance standards and management styles. Not only this, the legal environment also controls the retail sectors’ expansion plans and implements policies that promote healthy competition within the industry. In this manner, consumers of the retail sector in UK receives quality products which are in accordance with the international standards and empowers them to make retailers adopt product offering strategies that are aligned with the social structure and cultural preferences of consumers in the market (Tesco PLC, 2013). 4. Tesco’s Organizational Structure As far as the organizational structure of Tesco is concerned, the retail giant has adopted a highly centralized organizational structure, which allows uniformity in the operations and consistency in the products delivered to customers. In one region, store managers are responsible for taking care of the business of Tesco. The store managers report to the regional manager, who usually has 3 to 5 stores to manage in a given region. The regional managers report directly to the director of operations who looks after Tesco’s business in UK. From there, the reports are sent to the headquarters where directors and executives develop their respective strategies for each department keeping in view the profitability and scope of growth in a given region (Aaker & McLoughlin, 2010). The store manager of each Tesco store receives business report from three managers who are working under him/her. One of these managers is responsible for taking care of food retail business, another one is responsible for non-food retail business and the third manager is Personnel to the Store manager who assists him/her in decision-making and business report development submission to the headquarters. The centralized environment is favorable for Tesco as it allows to maintain the consistency and standard of products purchased by customers. On the other hand, centralization of operations also enables the company to provide similar shopping experience at all Tesco stores across UK (Williamson et al., 2013). From the investment point of view, Tesco is a public limited company, who depends on their shareholders and other stakeholders for raising capital. Besides, capital is also acquired from Bank of England and other private and public sector banks. Tesco has divided its shareholders into primary, secondary and tertiary category. The first one is the type of stakeholder who directly influences the policies and strategies of Tesco’s business and the company executives look after their satisfaction on priority basis. Then there are secondary stakeholders who are included in the consensus development for business strategy but do not have a direct influence on Tesco’s decision making (Haerifar, 2011). 5. Human Resource Management at Tesco The human resource management practices at Tesco PLC are designed on the basis of two principles, i.e. to strengthen their management and leadership expertise and building a team comprising of diversified workforce. Tesco has adopted a highly decentralized human resource management strategy. The hiring at the headquarters are carried out through newspaper and national television network mediums. Applicants are accepted from all over UK and the selected applicants are invited to Tesco’s headquarter for further development in the hiring process. Hiring for Tesco stores is carried out on the domestic level, targeting potential candidates in high college and universities. In this manner, Tesco stores gather a pool of job candidates who are want to work on an hourly basis and earn money (Tesco PLC, 2012). At the organizational level, Tesco promotes continuous growth and learning of its work force. As the business is carried out in a highly volatile and ever changing environment, therefore; it is considered as being essential for each employee to undergo the process of training and development before they are deployed to the store’s floor. Besides, employees are also provided with financial and moral support to lift their motivational level and to encourage them to put their best efforts on job, leaving behind their personal lives and conflicts. Employees of Tesco are considered as the core asset of the organization and this is the reason that Tesco has outlined the development of an efficient workforce, as an integral organizational objective in its mission and vision statements (Tesco PLC, 2013). 6. Business Strategy of Tesco PLC The business level strategy of Tesco PLC aims at providing customers with true value of their money by delivering them quality products at affordable rates. Customer services are put on the top of core responsibilities of the business which in return enables the organization to retain customers’ loyalty towards its offerings. Moreover, Tesco’s business objective is to keep its suppliers in close relationship with the business in order to enhance their ability to meet customers’ demands and preferences. Lastly, Tesco’s business level objective surrounds around facilitating target markets’ shopping experience by providing them options on the online portal and inside traditional physical retail stores in UK (Tesco PLC, 2013). 7. Risks Associated with Human and Financial Capital The biggest challenge that Tesco PLC faces pertaining to its human capital is that, majority of the employees at Tesco Stores are from different nationalities other than UK. These employees are present in UK for academic purposes and they engage in to their jobs at Tesco PLC to make their living and academic expenditures. Once, these employees complete their education and their stay limit is over in UK, they leave for their respective countries. Every year, Tesco have to fill around 4,500 jobs in UK only, which is the resultant of above mentioned scenario. In this respect, Tesco have to hire new employees each year, train them from scratch and make significant expenditures on the hiring, training and development efforts. Another risk associated with the human capital is that, Tesco does not provide financial motivators to its employees, which cause lower loyalty of employees associated with their job stay at Tesco. As a result, these employees leave Tesco PLC and join another retail organization, which is a direct competition to Tesco (Euromonitor, 2013). On financial grounds, the biggest challenge to Tesco PLC is lack of confidence amongst capital investment organizations in UK who are afraid of investing into retail sector due to quickly changing economic scenario. On the other hand, the fulfillment of social responsibility frameworks and stakeholders’ desire also causing Tesco to minimize the percentage of net profit and disperse the left over amount to the stakeholders. Moreover, the affordability of Government also does not allow it or its financial institutions to lend money to the Tesco and other retailers at lower interest rates. In this scenario, the financial capital of the firm is already exhausted by the end of the year and a little amount is left over for research and development, product and market development activities of the business (Euromonitor, 2013). List of References Aaker, D.A. and McLoughlin, D., 2010. Strategic Market Management: Global Perspectives. NJ: John Wiley. Allen, M., 2011. Analysing the Organisational Environment. NY: Select Knowledge Limited. Andong, G., 2012. Organizational Chart Tesco Stores. [Online] Available at: [Accessed 10 November 2013]. Basu, R., 2004. Implementing Quality: A Practical Guide to Tools and Techniques : Enabling the Power of Operational Excellence. NY: Cengage. Cadle, J., Paul, D. and Turner, P., 2010. Business Analysis Techniques: 72 Essential Tools for Success. London: The Chartered Institute. Euromonitor, 2013. Tesco Plc in Retailing. London: Euromonitor International Euromonitor International. Eva, M., Hindle, K. and Rollaston, C., 2010. Business Analysis. London: The Chartered Institute. Felsted, A., 2013. Investor appetite returns for UK retail development market. [Online] Available at: [Accessed 10 November 2013]. Ficenec, J., 2013. Online shopping boosts UK retail. [Online] Available at: [Accessed 9 November 2013]. Haerifar, P., 2011. Performance Management in Tesco. Nordersted: GRIN Verlag. Hasan, R., 2012. Managerial Finance Analysis of Wm Morrison PLC and Tesco PLC. Norderstedt: GRIN Verlag. Reuters, 2013. UK retail sales rise more than expected in September. [Online] Available at: [Accessed 9 November 2013]. Robinson, D. and Saigol, L., 2013. UK retailers report strong results. [Online] Available at: [Accessed 9 November 2013]. Tesco PLC, 2012. To build our team so that we create more value. [Online] Available at: [Accessed 11 November 2013]. Tesco PLC, 2013. About Tesco. [Online] Available at: [Accessed 9 November 2013]. Tesco PLC, 2013. Annual Report 2012. Herdforshire: Pureprint Group Ltd Tesco PLC. Tesco PLC, 2013. Corporate Strategy. [Online] Available at: [Accessed 11 November 2013]. Tesco PLC, 2013. Vision and Strategy. [Online] Available at: [Accessed 8 November 2013]. Williamson, D., Cooke, P., Jenkins, W. and Moreton, K.M., 2013. Strategic Management and Business Analysis. London: Routledge. Read More