Курсовая: Business at work

Introduction

What I need to do?

In this coursework I need to produce a detailed business report on one

medium–sized or large business. In investigating a chosen Case Study I must

comment and analyze each of the following aspects of the Business:

Objectives

Organization

Structure

Culture

Communication Channels

Quality Assurance and Control

“Adding Value”

I need to examine how these factors interrelate to affect the success of the

business. Also I need to explain how quality assurance and control systems

help the business to add value to its products and services.

As example for my investigation I chose Tesco plc., because Tesco is good

example of public limited company and Tesco – is a most popular supermarket’s

network in UK.

How businesses are classified?

I can classify the business by form, by industrial sector, by ownership, by

objective, by size and by location or market.

Forms of businesses.

SOLE TRADER.

Oldest, simplest, most common form of business easy to set up enterprise.

A sole trader exists where a single person owns a business. This is very

common form of organization. Over recent years, the number of sole traders

has grown significantly. There are several reasons for this trend including

more opportunities to work for firms on consultancy basis and government

support for self-employment. Most sole traders work on their own .

Initial capital – savings or borrowed. Very common in retailing, service trades.

Advantages:

- Easy to set up with little capital and few legal formalities

- The owner controls the business - quick decision making

- Personal contact with customers

- All profits belong to owner

- Satisfaction, motivation, interest in “Working for yourself”

- Business affairs are private – except far tax returns

Disadvantages:

- Unlimited liability for any loss or debts incurred: owner is

responsible or liable

- Cannot “Buy in bulk” and enjoy “Economies of scale”

- Expansions limited by available capital

- Division of labour is difficult

- Continuity a problem.

Good example of sole trader is T. Regan Plant Hire.

PARTNERSHIP

The minimum membership is two partners and the maximum twenty.

Must be at least one general partner who is fully liable for all debts and

obligations of the practice. “Sleeping partner” – not active. Partnership

exist mainly in the professions – doctors, lawyers, accountants and surveyors

frequently run their organization in the form of partnership. Partnerships

normally operate in local or regional markets, though advanced in information

technology are allowing many professions to offer their services more widely.

Advantages:

- Easy to set up

- More capital with extra partners

- Division of labour – specialization

- Responsibility can be shared e.g. long working hours redused

Disadvantages:

- Partners have unlimited liability

- Disagreement can cause problems – no sole decision – maker or owner

- Lack of capital may still hinder expansion

- Profits must be shared among all co-owners

- Problem of continuity

Good example of partnership is Rolls-Royce.

COMPANIES

A company is defined as an association of persons that contributes money (or

equivalent value in goods and assets) to a common stock, employ it in some

trade or business, and share the profit or loss arising out of that business.

Join stock companies are governed by and registered under the Companies Act

1985. A company has a separate legal identity form its members and can sue in

its own name. There are two types of company: public companies and private

companies. Both require minimum two shareholders, and there is no upper limit

on the number of shareholders. All companies enjoy the benefit of limited

liability. Capital is raised by selling shares.

PRIVATE LIMITED COMPANIES

Shares can be transferred privately. All must agree.Private limited companies

are suitable for small and medium-sized operations. This type of business

organization is particularly suitable for family firms and for small

enterprises involving just a handful of people.

Private limited companies find it easier to attract capital because investors

have the benefit of limited liability and this access to finance makes it

simpler for the business to grow.

Advantages:

- Shareholders have limited liability

- More capital can be raised

- Control of company held within the firm

- Shares are transferable

Disadvantages:

- Profit are shared out among more people

- Legal procedures.involve time

- Not allowed to cell shares to the public

- Restricts amount of capital raised

- Difficult to find a buyer if shareholder wishes to “leave”

Good example of privet limited company is Littlewoods Ltd.

PUBLIC LIMITED COMPANY

The second type of limited company tends to be larger and is called a public

limited company. There are about 1.2 million registered limited companies

in the UK, but only 1 per cent of them are public limited companies. However

they contribute with far more to national output and employ far more people

than private limited companies.

Good example of public limited company is Tesco plc. which I going to

investigate.

CO-OPERATIVES

Co-operatives are organised on a regional basis. Members can purchase shares

and each member has one vote at the Annual General Meeting, no matter how

many shares are owned. Members elect a board of directors who appoint

managers to run day to day

business. The Co-operative is run in the interests of its customers and part

of any surplus is distributed to members as dividend. Shares are not sold on

the stock exchange, which limits the amount of money that can be raised.

Good example of co-operative is CRS (Co-operative Retail Society).

CHARITIES

Charities are organisations with very specialised aims. They exist to raise

money for “good” causes and draw attention to the needs of disadvantaged

groups in society. They also rise awareness and pass comment on issues, such

as cold weather payments, which relate to the elderly.

Charities rely on donations for their revenue. They also organise fund

raising events such as fetes, jumble sales, sponsored activities and ruffles.

A number of charities run business ventures. Charities are generally run

according to business principles. They aim to minimise costs, market

themselves and employ staff. Most staff are volunteers, but some of the

larger charities employ professionals. In the larger charities a lot of

administration is necessary to deal with huge quantities of correspondence

and handle charity funds. Provided charities are registered, they are not

required to pay tax. In addition, business can offset any charitable

donations they make against tax. This helps charities when raising funds.

Good example of charity is British Red Cross.

FRANCHISES

A franchise is not a form of business organisation as such, but a way of

managing and growing a business. Franchising covers a variety of arrangements

under which the owner of a businnes idea grants other individuals or groups

to trade using that name or idea. However, it is important to realise that a

franchise can trade as a sole trader, a partnership or a private limited

company. The legal form of business that is chosen will depend on the capital

needed, the degree of risk, the number of people having a stake in the

franchise and the personal preferences of the owner. The person or

organisation selling the idea (the franchisor) gains a number of advantages

from the process of franchising. The franchisor normally receives a share of

the profits generated by the franchise. Usually the franchisee benefits by

being granted rights to an exclusive territory and support from the

franchiser in the form of staff training, advertising and promotion.

Franchising is a cheap and quick way to set up your own business. By the year

2004, it is estimated that 70 per cent of all new retail outlets in the US

will be franchises.

Good example of franchise is McDonald’s.

Industrial sectors.

PRIMARY – extractive organisations.

SECONDARY – manufacturing organisations.

TERTIARY – providing-services organisations.

Ownerships.

PUBLIC SECTOR: Civil service, Government departments, Public corporations,

Local Authorities.

PRIVATE SECTOR: Sole traders, Partnerships, Limited companies, Charities,

Co-operatives, Franchises.

Objectives.

- To make a profit

- To “Break – even”

- To provide service

Size.

- Small

- Medium

- Large

Locations

- Local

- Regional

- National

- Multinational

E1

Tesco plc.

History

Tesco was founded in 1924. Over the last seventy years, as the food

leading food retailer.

The founder of Tesco was Sir Jack Cohen. He used his gratuity from his

store to be opened was in 1929 in Burnt Oak, Edgware.

The business prospered and grew in the years between the wars. In 1947

price of 75p. The price at the beginning of March 1998 was around 515p.

Self-service supermarkets started in the USA in the 1930s during the

public.

Self-service stores came to Britain after the Second World War, and Jack

Cohen opened the first Tesco self-service store in St Albans in 1948.

In 1956 the first Tesco self-service supermarket was opened in a

and went into the Guinness Book of Records as the largest store in Europe.

By buying in bulk and keeping costs down, Tesco should have been able to

against the lower prices that big retailers could offer their customers.

Tesco introduced trading stamps so that it could bring lower prices to

until 1977.

Apart from opening its own new stores, Tesco bought existing chains of

became part of the company.

Tesco introduced the concept of a superstore in 1967 when it opened a

West Sussex in 1968.

By 1970, Tesco was a household name. Its reputation had been built on

proved to be a major success.

In one year in the late 1970s, the Tesco market share increased from 7%

time.

During the 1980s, Tesco continued to build new superstores, opening its

retailer.

In 1985 Tesco introduced its Healthy Eating initiative. Its own brand

nutritional value of its own brands, to customers.

its retail competitors.

In the 1990s, the company built on its success by developing new store

Scotland when it acquired a chain of 57 stores from William Low.

Tesco broke new ground in food retailing by introducing, in 1995, the

provision for customers.

By 1995, Tesco had become the largest food retailer in the UK.

In the 1990s, Tesco started to expand its operations outside the UK. In

Poland, Hungary, Slovakia and the Czech Republic.

Closer to home, in 1997 Tesco purchased 109 stores in Ireland, which

gave the company a market leadership both north and south of the border.

Tesco Chairmen 1947-1998

Sir Jack Cohen 1947-1979

Chief Executive Terry Leahy 1997

The letters ‘plc’ at the end of its name distinguishes a public limited

company from a private limited company. Most of Britain’s famous businesses

such as Marks and Spencer, ICI, BP, and Manchester United are public limited

companies. All companies with share prices quoted n the London Stock Exchange

are public limited companies.

To become a public limited company, a business must have an issued share capital

of at least £50,000 and the company must have received at least 25 per

cent of the nominal value of the shares. Public limited companies must also:

· be a company limited by shares

· have a memorandum of association with a separate clause stating

that it is a public company

· publish an annual report and balance sheet

· ensure that its shares are freely transferable – they can be bought

and sold.

Benefits:

· All members have limited liability.

· The firm continues to trade if one of the owners dies.

· Huge amount of money can be raised fom the sale of shares to the

public.

· Production costs may be lower as firm may gain economies of scale.

· Because of their size plcs can often dominate the market.

· It becomes easier to raise finance as financial institutions are

more willing to lend to plcs.

Constraints:

· The setting up costs can be very expensive – running into millions

of pounds in some cases.

· Since anyone can buy their shares, it is possible for an outside

interest to take control of the company.

· All of the company’s accounts can be inspected by members of the

public. Competitors may be able to use some of this information to their

advantage. They have to publish more information than private limited

companies.

· Because of their size they are not able to deal with their customers

at a personal level.

· The way they operate is controlled by various Company Acts which aim

to protect shareholders.

· There may b a divorce of ownership and control which might lead to

the interests of the owners being ignored to some extent.

· It is argued that many of these companies are inflexible due to

their size. For example they find change difficult to cope with.

Tesco plc. is large, private sector organisation. As it is providing-service

organisation I can classify it as tertiary sector organisation. Tesco plc. is

a national company, but it is becoming to multinational. Main objective is to

make a profit.

As Tesco is a limited company that means all owners have limited liability.

If a company has debts, the owners can only lose the money they have invested

in the firm.

Main source of finance is selling shares and borrowing from the banks. Tesco

has a thousands of owners, every man who has any shares is owner; but these

people can’t control the company, so company has a board of directors and

chairman who control the company.

Tesco has a heavy programme of capital expenditure, investing in new

stores and upgrading existing ones. In the year ending 28th

£63 million in Ireland, north and south, and £41 million in Europe.

in Ireland and Central Europe.

Profit is also distributed to shareholders in the form of dividends.

For example, in 1998 the profits from Tesco after tax were £505

million. About 50% of the profits were distributed to

service to customers.

E2

Objectives of the business.

The objectives of the business can vary enormously A charity’s overriding

objective might be to alleviate poverty in the developing world; on the other

hand many companies’ major objective is to generate the maximum profits

possible. An organisation’s mission statement gives an indication of the

purpose of the business and dovetails with the objectives the organisation

set itself.

Mission statement.

Many organisations attempt to express the purpose of their being within a few

sentences. The mission statements are intended to provide a sense of

common purpose to direct and stimulate the organisation. This statement

represents the vision or mission of the organisation. Mission statements change

over time to reflect the changing competitive nature of the markets in which

business sell.

Mission statement normally set out to answer the following questions:

• What business is the organisation in?
• Who is to be served?

• What benefits are to be provided?

• How are consumers to be satisfied?

Mission statement

Objectives.

Business objectives

Business objectives are medium- to long-term goals or targets that

provide a sense of direction to the business. Objectives are normally

measurable and have a stated timescale.

Divisional/departmental objectives

Company may have a number of objectives. In general, the objectives pursued

by a business tend to vary according to its size, ownership and legal

structure.

Figure 1.1 illustrates the interrelationship between a company’s mission

statement and its objectives.

Figure 1.1: The hierarchy of objectives

The goals pursued by any business can be separated into primary and secondary

objectives.

· Primary objectives are those that must be achieved if the business

is to survive and be successful. These relate to issues such as profit levels

and market share.

· Secondary objectives tend to measure the efficiency of the

organisation. They may affect the chances of success, but only in the long

term. Examples include administrative efficiency and labour turnover rates.

Profit maximisation.

Profit maximisation one of the most important objective for companies which

are owned by shareholders. Profit, at is simplest, refers to the extent to

which revenues exceed costs, so profit maximisation occurs when the

difference between sales revenue and total cost is greatest.

Survival.

Survival is an important objective for many businesses. It is particularly

important when businesses are vulnerable such as:

· during their first few years of trading

· during periods of recession or intense competition

· at a time of crisis such as a hostile takeover.

Most recently established businesses have survival as an objective.

Increasing sales or market share.

Growth increases the scale of a business, resulting in higher levels of

output and more sales. Many businesses pursue growth strategies because their

managers believe that this is essential for survival. If a firm grows, it

might be able to attract more customers, earn higher profits and begin to

establish itself in the market.

Growth offers:

• increased returns for the owners of the business
• higher

  salaries for employees of the business

• a wider range of products

  for the business’s existing and potential customers.

Growth can be important target for managers. It is increasingly common for

managers’ pay packages to be a combination of shares and salary.

Providing social or community service.

A number of organisations provide services to the community. These

organisations are part of the public sector – they are managed, directly or

indirectly, on behalf of the government – yet they are a form of business.

Their overriding objective is to provide the best positive service to the

local community.

Charitable and non-profit objectives.

Charities have a high profile in the UK. Charities have a number of clear

objectives:

• to rise the public’s awareness of the cause that thy support.

• To rise funds to support their projects.

Charities trade with the intention of earning as much revenue as possible to

spend on their particular causes.

Producing high quality products.

Just as many businesses seek to provide high quality service, a large number

of businesses also have the provision of high quality product as an important

objective. Acquiring reputation for top quality can allow businesses to

charge a premium price and to enjoy higher profits. Reputations for supplying

quality products are jealously guarded.

Tesco is committed to retaining its position as the UK’s largest supermarket

retailer. Customer feedback forms, in-store discussion groups and a

continuous analysis of sales figures has enabled Tesco to recognise the

importance of the key principles of price, quality and service.

The company owes its success to its emphasis on meeting changing customer

needs through service and innovation, while maintaining its commitment to

value and quality.

Underlying its business success is a commitment to upholding certain values

and working and working principles and seeking continuous improvement in its

ethical performance.

Companies are part of the society in which they operate and must take note of

the interests and concerns of many different groups. For Tesco these includes

its customers, its stuff, its shareholders, its suppliers and people in the

local communities close to its stores and in the world beyond. Each group has

expectations of the company which Tesco has to meet and manage if it is to

maintain its position as a leading and successful retailer.

Tesco must serve its customers by providing the goods they want and the

service they expect. By meeting customers needs better than its competitors,

Tesco earns profits and creates value for its shareholders.

Tesco, like other large companies, however, recognises that its wider

reputation depends on other things such as its stuff relations, its attitude

to the environment, its support to the community, and its relationships with

suppliers. Also as a leading food retailer, the company must ensure that its

provides products which are safe to eat or use, as well as giving customers

advice on matters such as healthy diets.

Tesco’s main business objectives:

· to provide customers with outstanding, naturally

delivered, personal service

· to earn the respect of its stuff for the values and

appreciate their contribution

· to understand customers better than anyone

· to be competitive even on the basics

· give customers a broad range of strong relevant

promotions in all departments of the store

· give customers what they want under one roof

· provide an environment that is easy and pleasant to shop in

· upgrade existing stores to the standards that is

expected from Tesco

· to recognise Tesco has brilliant people, use this

strength to make customers’ shopping enjoyable in a way no competitor can

· use intelligence, scale and technology to deliver

unbeatable value to customers in everything Tesco does

· to maximise profits to provide high returns for

shareholders

· to increase sales or market share as much as possible

· advertising should appeal to all customers in a relevant

Tesco’s main mission statements:

• To be world’s best and largest supermarket retailer.

• Completely increase value for customers, and to earn their time loyalty.

How Tesco is going to achieve these objectives?

What Tesco expects from its staff in order to achieve this?

Tesco staff:

• Are all retailers, working as a one team.
• Trust and respect

  each other.

• Respect all customers, the community, suppliers and

  the competition.

• Strive for personal excellence in everything

  they do, leaving no stone unturned in order to get it right.

• Are

  encouraged to take risks, give support and do not blame others.

• Are rewarded for creating value for customers.

• Are talked and

  listened to: and their knowledge is shared, so that it can be used.

• Have fun, celebrate success and learn from failure.

What is the comment Tesco has to its customers?

Tesco customers want the best possible value for their money. Tesco is

determined to offer its customers quality products, good service, attractive

stores and low prices.

To meet this aims, Tesco:

• works closely with suppliers to ensure products are of the highest

  quality and are delivered to stores in the best possible condition.

• makes sure that its staff are committed to giving the best possible quality

  of service.

• aims to create in its stores an environment which

  makes shopping easy, interesting and comfortable.

For example, in 1993 Tesco introduced Value lines, which offer exceptional

value for money, followed by New Deal Pricing on leading commodities and

brands in 1994. In 1996, Tesco introduced Unbeatable Value with the pledge

that nobody would sell the equivalent product for less price.

E3

Organisational functions.

All organisations require resources to carry out their functions. One way of

judging the success of a business is to compare the resources it uses with

the value of the product that results. For example if it is a small business

running by it’s owner, for example small shop, so it doesn’t need any

workers, large piece of land and big capital, owner can work alone. But if it

is a very large business like car manufacturing so it requires a lot of

workers, very large piece of land and big capital.

The resources of the business.

One way of considering the resources used by a business is to classify them

into the factors of production. The main capital of production are capital,

labour and land.

-

Business Activity

CAPITAL refers to

any manufactured product used by the business to make other products. This

category therefore includes all machinery, vehicles and office equipment used

in businesses. It also includes the company’s buildings.

-

LABOUR is the human resources used by business organisations during

production.

- LAND

– site on which the business is located and natural resources it might use.

- ENTERPRISE – owners and shareholders.

Functional areas.

All businesses combine factors of production as an essential part of their

production activities. To combine these factors, to engage in production and

to achieve their objectives organisations undertake a number of functions.

The major business functions include:

· finance

· production

· human resources

· administration

· research and development

Business requirements for functional areas depends on its size, for example

small business might merge many of these functions within their

administration department, with responsibility in the hand of one or two

people. As a business grows the number of people required to carry out these

functions increases.

The financial function.

Advises managers and budget holders

Extensive use of IT

Provides information to external bodies

Produces standards

cost data

Customers Auditors Inland Revenue and

(price list) (accounts) Custom & Excise

(information relating

to tax liability)

Figure 1.3: The financial function

A separate department normally carries out the finance function of the

business. The finance department carries out a number of key activities:

· records all financial data

· chases up slow payers

· collects payments from customers

· provides information to external bodies

· analyses costs

· advises board of directors

· monitors and analyses financial data

· advices managers and budget holders

Production function.

Production covers all the activities that must be undertaken to make the

firm’s products, from the receipt, of raw materials through to the output of

the final product. The production function concentrates primarily upon

planning and controlling the various stages of production so that the most

efficient use is made of business resources.

Production manager responsible for:

· maintaining supplies of components and raw materials to ensure

continuous production

· ensuring that the precise requirements of customers are met

· monitoring quality to insure that finished products meet the quality

standards expected by customers

· using resources – people, machinery and production space – as

efficiently as possible to make the business competitive in the markets in

which it trades.

One of the most important issues in production is quality. Modern businesses

compete just as strongly on the quality of their goods and services as they

do on price.

For example it is vital for a washing machine manufacturer to produce a high-

quality product. If the machine is not reliable or does not have a wide range

of functions, customers are more likely to purchase a competitor’s product.

Finance department

Figure 1.4: The links between the production function and other departments

The human resource function.

Personnel management considers the tasks involved in managing people –

recruitment, selection and so forth – as separate elements. It does not take

into account how these elements can combine to achieve organisational

objectives.

The personnel management approach makes decisions relating to recruitment,

training and pay systems independently, without considering the impact the

individual decisions have on each other aspects of management and the

achievement of corporate objectives.

Human resources management (HRM) elevates the effective use of a

business’s labour force to an issue to be considered by senior managers as an

essential element of the organisation’s strategy. This approach has raised the

profile (and salaries) of those employed in human resource management. The

human resources function engages in a number of activities to ensure employees

are utilised affectively. These activities are carried out with the aim of

contributing to the achievement of the business’s objectives.

Workforce plan sets out likely future needs for labour and how these needs

might be met. Achieving the workforce plan involves the human resource

function in a number of day-to-day activities.

· recruiting employees – both internally and externally

· training new and existing employees

· paying salaries

· dealing with disciplinary matters and grievances

· overseeing industrial relations, by seeking to avoid disputes and

maintain harmonious relations and constant production

· developing and monitoring an employee appraisal system designed to

assess performance, set targets for achievement and identify any training

needs

Figure 1.5: Developing a human resources plan

The marketing function.

The marketing department carries out a wide range of functions on behalf of

the business. Essentially marketing is communications. The marketing

department communicates with a number of groups inside and outside the

business as it carries out its tasks.

Marketing activities:

· keeping customers satisfied

· discovering the needs of customers and advising the production

function accordingly

· carrying the responsibility for ensuring the effective distribution

of products to wholesalers and retailers

· liasing with marketing agencies to provide the necessary expertise

(small firms)

· if the firm is an export, the marketing department may have contact

with government agencies.

Marketing provides the organisation with information about its customers and

its markets. Effective marketing can offer businesses a number of benefits:

· early warning of changes in consumer tastes and fashions through

regular market research

· knowledge about competitors and information regarding competitors’

product

· the means to present the company in a positive light through public

relations activities

· allowing the firm to improve the quality of its products by

coordinating and analysing customer complaints

· providing a catalyst for growth by forging relationships with

distributors, retailers and customers in new markets

· supplying consumers with the products they want and giving high

levels of customer satisfaction, which might permit a business to charge

higher prices thereby increasing its profitability.

The administration function.

The scope of the administration department varies enormously between

organisations. In a small business the administration function might

incorporate a number of the functions like finance , personnel and

marketing. However, larger organisations are more likely to operate a

specialist administration department.

A typical administration department has a number of functions:

· Administration department carries out organisation’s IT system.

· Clerical and support service. Information processing, data

processing, filing and reception services can be provided to all areas of the

organisation.

· Security and maintenance. These services are essential to the smooth

running of the business and to the effective operation of other business

functions such as production in particular.

· In some businesses, the administration function takes responsibility

for important public relations activities such as customer services.

The research and development function.

The nature of research and development (R&D) varies enormously between

businesses. Traditionally, the term research and development is taken to refer

to scientific research undertaken by firms producing manufactured goods, high

technology products or pharmaceuticals. However, R&D is equally important

to firms providing services.

By investigating in research and development a business seeks to maintain

competitiveness against its rivals. Competitiveness measures a business’s

performance in comparison with rival firms in the same market. A highly

competitive firm has some advantage over other businesses. This competitive

edge can take a number of forms:

· lower prices

· more advanced and sophisticated products

· a better image with consumers

· a good reputation for advise and after-sales service

· reliability in terms of operation and delivery dates

Types of research:

· basic research

· applied research

· development

The prime function of R&D is to develop new products that can give the firm

a competitive edge in the market. This necessary involves the R&D

department in close liaison with staff in market research, design and

production.

Function 1.6: The nature of business activity

Functional areas of Tesco plc.

The diagram above shows the key functional areas or departments of Tesco, as

one of the leading retailers in the U.K. It is currently the leading

supermarket chain in Britain, with a higher market share than its leading

rivals, Asda-Wallmart, Sainsbury’s and Safeway.

I have explained earlier the key functional areas of a typical business and

Tesco, as the diagram shows, displays this type of structure. For example,

the Company Secretary, Rowley Ager is responsible for Pensions, the Company

Secretariat (the administrative staff), the Treasury, Taxation, Site

Facilities, Transport and all aspects of Consumer Law.

The Finance Department, directed by Andrew Higginson, is responsible for all

aspects of finance and audit, and also for European affairs. These functions

are shown in Figure 1.3 in my introductory section. I have no detailed

information on Finance within Tesco other than financial data available from

the Company Accounts and from the Tesco and Bized websites... and these are

more relevant to a detailed finance study of Tesco as a company, a topic to

be studied in a later Unit.

The Marketing Department, directed by Tim Mason, is responsible for all

aspects of marketing , Customer Service, Advertising, Market Research,

Clubcard, Estates and Metros. Since the early 1990s Tesco marketing strategy

has been to become the best in terms of price, quality and service.

Objectives are set, and ways found of meeting them, in all aspects of

company’s operation.

The Retail Department, directed by Michael Wemms, is responsible for all

retail operations and express stores.

Tesco first ventured into foreign markets when it acquired stores in Irish

Republic in 1978, but these were sold in 1986. The 1990s produced a much

better climate for European expansion. Now Tesco operates 80 stores in

Central Europe, and 16 stores in two Far East countries trading both under

the Tesco and subsidiary fascias. The 13 Tesco stores in the Czech Republic

and Slovakia, 29 stores including 5 supermarkets in Hungary, 31 stores in

Poland. Also Tesco plan to open 12 hypermarkets in Thailand and in South

Korea over the next three years.

The Human Resources Department within Tesco is responsible for many thousands of

employees across the whole spectrum of the organisation. Tesco employs

154,000 people in the UK and 27,000 in Ireland and Europe. It does not

appear on the organisation chart, which I obtained from Tesco, because this

function is somewhat complex and shared between the main headquarters at

Cheshunt. Hertfordshire, and the many stores operated by Tesco around the

country. For example, there are two Tesco superstores in Leicester, at Hamilton

and Beaumont Leys, both of which have a Human Resources officer in charge of

personnel administration.

The Commercial Department, directed by John Gildersleeve, responsible for all

commercial operations and technical services.

The Distribution Department, directed by Philip Clarke, responsible for Supply

Chain and all distribution operations. Distribution Director responsible for

products delivery, logistics and transport. Its purpose is to ensure

high level of customer service. Tesco products are sent to

1,000 tractor units and 2,000 trailers in its national vehicle fleet.

The Operations department, directed by David Potts, responsible for operations

of Tesco stores in Northen Ireland & the Republic of Ireland. In May 1997,

Tesco completed an agreement with Associated British Foods to purchase all

their supermarkets in the north and south of Ireland. The purchase price was

£641 million, giving Tesco a further 110 food stores and a leading

position as a food retailer on both sides of the Irish border.

I have considered each of the major functions of Tesco separately. However,

it is the effective interaction of business functions that is essential to

the success of an organisation in attaining its objectives.

As an example, Tesco has recently introduced a customer-oriented website on

the Internet. Company has developed within this service facility a direct

order system via E-mail – called “Tesco Direct”. Customers can order their

produce/product for home delivery.

There are now many thousands of such deliveries but these all depend upon the

successful interaction of the major business functions outlined earlier.

In other word, -

· Marketing - responding to the initial enquiry, receiving and

processing an order, distributing the product to customer.

· Administration – adding the customers details to the IT system,

passing on details to other departments within the business.

· Finance – investigating the financial status of the customer,

offering credit terms if appropriate, invoicing for payment.

· Distribution – receiving details of order and meeting the customer’s

demands, liasing with marketing over delivery dates, rescheduling other

production as required.

· Human resources – at a store or warehouse level – ensuring

sufficient employees are available to meet the delivery requirements of the

order, arranging overtime payments if necessary.

Hence these functions help meet the objectives successfully. All Tesco’s

organisation structure works as links of a chain, if one link falls down, all

the organisation will experience difficulty. For example, most important

department of Tesco, I consider, is Distribution department. If this

department fails, products will not be delivered to the store, so customers

will go to another store. Tesco’s success is built on the good work of each

department.

E4

Organisational structure

In many small firms, the owner may have a very hands-on approach and may be

responsible for getting customers, hiring any extra labour and acquiring

other inputs and taking all financial decisions. As organisations grow,

however, their structure takes on a greater significance and those at the top

have to pay more attention to its formal structure and presentation. The

various business functions will show an increasing degree of specialisation

as an organisation expands and people will be employed to manage and take

decisions in specialist areas.

In general, an organisational structure sets out:

· Major roles and job titles, showing who is in control of the

business as a whole and who manages its major business functions within

departments.

· The level of seniority of people holding different positions and

their respective positions in the organisation’s overall hierarchy.

· The working relationships between individuals, identifying

relationships in terms of superiors and their subordinates and indicating who

has authority to take certain kinds of decisions and who are responsible for

carrying out the work arising from those decisions.

· The extent to which decision making is concentrated in the hands of

people at or near the top of the organisation or handed down to those at

lower levels of management.

· The broad channels through which information is communicated

throughout the organisation, indicating the route by which instructions flow

down the hierarchy and how information flows back up the hierarchy.

Organisational charts

Organisational charts are representations of the job titles and the formal

patterns of authority and responsibility in an organisation.

Business may produce organisational charts for several reasons. First, it is

important that a company reviews its organisational structure on a regular

basis to take account of any changes in the business environment. A formal

organisational chart helps the company to identify where changes need to be

made and to decide the relationship between any new sections or departments

and the rest of the organisation. Business also produce organisational charts

because they allow a company to review its structure and to identify areas

where cost saving changes and improvements can be made. Organisational charts

are useful when changes take place in the company. It can be updated to take

account of any informal developments in its structure that have been good for

the company. A revised organisational chart is particularly useful for

informing people about the new structure of the company after mergers or

take-overs.

The organisational chart can also be used during an induction period to give

new employees a useful overview of the company and their own position within

the structure in terms of their authority and the managers to whom they are

responsible. Although an organisational chart has several uses, it should not

be taken as giving an exact description of how the organisation actually

operates. It does not give the exact nature of job responsibilities or

indicate what levels of cooperation may be necessary between departments.

Function 1.7: Line authority in a production department.

Chain of command - is the line of command flowing down from the top to

the bottom of an organisation. It passes down the management hierarchy, from

director and senior management levels to those in middle and junior management

positions and eventually to employees in supervisory jobs who, for example may

have authority over assembly line workers or staff providing services to the

organisation’s customers. Organisations with a long chain of command - with a

hierarchy made up of many levels of management - are said to have tall

organisational structures.

Span of control - refers to the number of subordinates a manager is

responsible for and has authority over. Organisations with a long chain of

command will tend to have narrow spans of control. Organisations with a short

chain of command tend to have wider spans of control. This produces a flat

organisational structure because it has a hierarchy with fewer levels of

management.

Flat organisational structures: are generally desirable, there is a limit

to the number of subordinates who can be placed under one superior. Even very

experienced managers who have the qualities and personalities that promote

loyalty and hard work can only be responsible for so many employees.

Tall organisational structure : some organisations have many

levels and grades of staff with a tree-like management structure and

strong patterns of vertical communication. This means that there are many

different grades of staff between people lower down the organisation and the

person at the top. Tall organisations suffer from problems with bureaucracy, as

information needs to be directed through the correct channels before

appropriate action is taken.

The main features of such a structure are as follows:

· At each level there are several staff responsible to a person at the

next level up. The process is repeated until the top of the organisation is

reached.

· In a limited company the person at the top is the Managing Director

who is ultimately responsible for the whole organisation.

· As the levels within the organisation are ascended, the number of

people at each level decreases and this gives the organisation a pyramidal

structure.

In an organisation with flat structure there are fewer levels or

grades of staff and much more emphasis on communication across the

organisation. This is more likely to be the structure of a small business where

everyone knows each other and works together more as a team.

In some situations, however, a relatively wide span of control may be

acceptable if:

· The potential disadvantages of a wide span are outweighed by the

costs of employing the extra managers needed to produce narrower spans of

control.

· Junior employees are engaged mainly in routine work and as a result

the manager is required to make relatively few decisions.

· Managers are willing to reduce the pressure on their own time by

delegating more decision making and they can identify staff who are likely to

respond well to the extra responsibility.

· An effective range of financial and non-financial motivational

factors produces a committed group of people who need very little

supervision.

· The group within the span are highly skilled or talented and are

given a great deal of scope to be creative and imaginative in their work.

Line structure

In a line structure, a company is usually organised into functional

departments, each headed by a senior manager, below whom there is a chain of

command. This indicates that there is a line of authority and responsibility

as one goes down the structure.

Each person in the line has authority over those below, while being

responsible for making sure that the work handed down to them from their

immediate manager is completed. This applies even if the subordinate does not

personally undertake the actual work.

Advantages:

· It is hierarchical structure which is simple to understand - staff

know precisely where they are in the structure, who can allocate work to them

and to whom they are responsible.

· Managers have a clear understanding of the roles of people when

allocating work and spend less time monitoring work because subordinates are

not distracted or confused by instructions from other sources.

· A well-established line authority makes it possible for work to be

delegated further down the line - this can be valuable when superior is

seeking to widen the experience subordinates and develop their management or

supervisory skills.

Disadvantages:

· It can involve a very long chain of command - instructions may take

a considerable time to filter from the top and impact on production, which

can be an important drawback if the organisation operates in a rapidly

changing market.

· The flow of information back up a long chain to management may be a

lengthy process, causing a considerable delay before problems are identified

and tackled.

· Individuals might only respond to requests from the superior,

creating inflexibility in the organisation which may be totally unnecessary

if co-operation with other managers does not effect working relations with

their superior.

Line and staff structure

A line and staff structure combines both a line authority and what is known

as staff authority. The term staff authority refers to those staff, usually

at a relatively senior level, whose are of work often involves dealing with

different departments. Someone with the relevant staff authority can provide

services and advises to those in the line of authority of other departments.

Managers with staff authority do not have the power to control or give

instructions, but rather the authority to deal with different departments and

to offer advice or support services in relation to problems or exploiting new

opportunities. However, since those with staff authority are appointed

because of their expertise, experience and good personal skills, their

advice, though not binding, is likely to be very persuasive.

Advantages:

· Staff authority enables the expertise and experience of specialists

to be utilised more fully across the organisation.

· By having access to all areas of the company, managers with staff

authority, communications between departments are at director level, and so

any inter-departmental communication has to pass up the chain of command in

one department to director level and then down the other before it reaches

the appropriate level.

· Staff authority prevents individual departments from being too

inward looking - departments remain aware of their interdependence and their

role in seeking to achieve the organisation’s objectives.

Disadvantages:

There is a risk that staff authority may diminish the authority of

individuals in the line management, particularly if those with staff

functions acquire informal power and authority.

Matrix structure

In a matrix structure, a senior manager heads a division or team of

specialists drawn from different departments. These specialists are also

located in departments where they are part of a line authority; they are

therefore subject to two sources of authority.

In a matrix structure the simple chain of command found in a line structure

is replaced by a very large number of reporting relationships as individuals

report to managers in more than one department or function.

A matrix structure may be used for just some of an organisation’s activities

or it may cover the whole work of the organisation. It is often used for

organising and managing project teams, where people with specialist skills,

perhaps from different levels in the hierarchy, are brought together to solve

complex and urgent problems. Project teams may be created to deal with issues

which arise every now and again or they may be an ongoing feature of the

organisational structure.

Some aspects of marketing, however, may be handled by an ongoing project team

drawn from other departments, although the membership of the group may change

as different marketing issues arise.

Advantages:

· It promotes increased co-ordination between departments because it

cuts across departmental boundaries - it encourages greater flexibility and

creativity, produced by the cross-fertilisation of knowledge and skills.

· It allows for the involvement of relatively junior staff, giving

them valuable experience in a wider field for the expression and application

of their particular skills.

· Staff lower down a line structure can also gain valuable management

development in a project team, preparing them for promotion to higher

management positions.

· The involvement of specialists from different areas reduces the risk

of resources

being wasted on projects with no future - in non-matrix structures an idea

originating in, say, the marketing department may be pursued for a long time

before it comes to the attention of production which might find

that it is simply not practical.

Disadvantages:

• The existence of a matrix structure and project teams can lead to

  confusion as individuals are involved in a large number of different

  relationships creating a complex pattern of authority and responsibility.

• A line manager may resent a subordinate receiving instructions from

  managers based on other departments, especially if they are at a lower

  level of management.

• This also raises questions as to who has

  priority over the subordinate’s time and what information arising out of

  the work of the project team should also be reported through the line

  authority. This can be a potential source of conflict and relations may

  also be strained if the subordinate suffers from divided loyalty.

Centralised structure

Organisations are centralised when the majority of decisions are taken by a

few people at the top of the organisation and little decision making is

delegated to those further down the organisational structure.

Even if many important decisions are delegated to subordinates, some aspects

of the business are always likely to remain totally under central control. In

general, senior managers or a centralised department takes responsibilities

for: major financial issues, wages and salaries, manpower planning and

personnel records, purchasing.

Advantages:

· Senior management have more control of the business, eg budgets.

· Procedures, such as ordering and purchasing, can be standardised

throughout the organisation, leading to economies of scale and lower costs.

· Senior managers should be more experienced and skilful in making

decisions. In theory, centralised decisions by senior people should be of

better quality than decentralised decisions made by others less experienced.

· In times of crisis, a business may need strong leadership by a

central group of senior managers.

· Communication may improve if there are fewer decision makers.

Decentralised structure

Complete decentralisation would mean subordinates would have all the

authority to take decisions. It is unlikely that any business operates in

either of these ways. Even if authority is delegated to a subordinate, it is

usual for the manager to retain responsibility.

Some delegation is necessary in all firms because of the limits to the amount

of work senior managers can carry out. Tasks that might be delegated include

staff selection, quality control, customer relations and purchasing and stock

control. A greater degree of decentralisation - over and above the minimum

which is essential - has a number of advantages.

Advantages:

· It empowers and motivates workers.

· It reduces the stress and burdens of senior management. It also

frees time for managers to concentrate on more important tasks.

· It provides subordinates with greater job satisfaction by giving

them more say in decision-making, which affects their work.

· Subordinates may have a better knowledge of ‘local’ conditions

affecting their area of work. This should allow them to make more informed,

well-judged choices.

· Delegation should allow greater flexibility and a quicker response

to changes. If problems do not have to be referred to senior managers,

decision-making will be quicker. Since decisions are quicker, they are easier

to change in the light of unforeseen circumstances which may arise.

· By allowing delegated authority, management at middle and junior

levels are groomed to take-over higher positions. They are given the

experience of decision making when carrying out delegated tasks. Delegation

is therefore important for management development.

Delayered structure

Delayering involves a business reducing its staff. The cuts are directed at

particular levels of a business, such as managerial posts. Delayering

involves removing some of these layers. This gives a flatter structure.

Delayering is likely to play a major role in a policy of decentralisation as

the removal of management layers allows authority for decision making to be

shifted to a lower level in the organisation.

Advantages:

• The savings made from laying off expensive managers. It may also

  lead to better communication and a better motivated staff if they are

  empowered and allowed to make their own decisions.

• However,

  remaining managers may become demoralised after delayering. Also staff may

  become overburdened as they have to do more work. Fewer layers may also

  mean less chance of promotion.

Management style

Management style refers to the approach that an organisation takes in setting

objectives for its employees and the way it manages relations between

superiors and subordinates.

Management or leadership styles can be categorised as:

Autocratic: A manager that adopts an autocratic management style takes

entire responsibility for decisions and, having set objectives and allocated

tasks to employees, expects them to be carried out exactly as specified.

Employees are told exactly what, how and when work must be started and

finished. It is the kind of management style often associated with a corporate

culture centred almost exclusively around production. Power is focused at the

top, and the centralised decision making is geared to getting the goods out of

the factory and to customers. Little regard is paid to any non-monetary needs

of employees; they are not consulted or involved in decision making.

Democratic: A democratic management style seeks to involve employees in

the decision-making process, either by consulting them directly or through

their representatives. This approach reflects a corporate culture which is more

human resource centred and recognises the organisational benefits from meeting

its employees’ non-monetary needs - such as a need for job satisfaction and a

sense of belonging. A consultative approach is particularly important if an

organisation is planning to change product design or working conditions,

methods and practices.

Laissez-faire style: This style gives people complete freedom to organise

and carry out their work. It is a very person centred approach. A laissez-faire

approach may still impose some constraints, such as completion dates for

certain key tasks or the earliest and latest arrival times for a flexible hours

working day. There is no formal structure for decision making as decisions are

taken by a variety of processes depending upon the nature of the problem, the

opportunity to be explored and the individuals involved.

Consultative style: Leaders consult with others before decision are made.

There will be a group influence in the final decision, even though it is made

by the leader.

As diagram above shows, Tesco has many levels of staff: directors on the top,

and step by step to employees on the bottom, therefore I can think that Tesco

is a hieratical organisation, where each individual knows who he must report

to. Communication in a complex organisation such as Tesco will be dependent

on the organisational structure, but this will be discussed later in my

section on “Communication”.

I can see that Tesco has a centralised and decentralised form of organisation

because people on the top, who control the company, take the majority of

decisions and also the company’s Head office is centralised at Cheshunt in

Hertfordshire.

Tesco is very big organisation and has very many stores in different places –

this fact shows that Tesco is a decentralised organisation, with much

decision-making delegated on a regional and individual store level.

From the information I have managed to access I believe/consider that Tesco

has a very good democratic and consultative management style. It is a very

successful firm, as seen earlier, it is now the U.K. market leader with

positive leadership from above and a notable corporate culture.

The directors present their annual report to shareholders on the affairs of

the Group together with the audited consolidated financial statements of the

Group for the 52 weeks.

The principal activity of the Group is the operation of food stores and

associated activities in the UK, Republic of Ireland, France, Czech Republic,

Slovakia, Hungary, Poland and Thailand. A review of the business is contained

in the Annual Review which is published separately and, together with this

document, comprises the full Tesco PLC Annual report Accounts.

Culture

Culture in organisations is often described as the set of values, beliefs and

attitudes of both employees and management that helps to influence decision-

making and ultimately behaviour within them. Each organisation has a unique

culture. This is what makes studying business behaviour so fascinating. The

business culture helps to determine how things get done in firms and defines,

quite simply, how the company works. The fact that organisations are

themselves organic, composed of workers constantly interacting with each

other and their environment, suggests that the culture in firms is not static

and constant – the way firms operate can change, either intentionally through

management action or more likely through natural evolution.

Corporate culture

Corporate culture is a set of values and beliefs that are shared by people

and groups in an organisation. A simple way of explaining corporate culture

might be to say that it is the ‘way that things are done in a business’. The

corporate culture of a business can influence decision-making. It also

encourages low level managers to behave like entrepreneurs. Business leaders

are able to create a corporate culture to achieve a corporate objectives and

strategy of the company. It is important that the corporate culture of a

business is understood by all the people that work in the organisation. It is

usually transmitted to new members and reinforced informally, by stores,

symbols and socialisation, and more formally through training.

Advantages of a strong corporate culture.

· It provides a sense of identity for employees. They feel part of the

business. This may allow workers to be flexible when the company needs to

change or is having difficulties.

· Workers identify with other employees. This may help with aspects of

the business such as team work.

· It increases the commitment of employees to the company. This may

prevent problems such as high labour turnover or industrial relations

problems .

· It motivates workers in their jobs. This may lead to increased

productivity.

· It allows employees to understand what is going on around them. This

can prevent misunderstanding in operations or instructions passed to them.

· It helps to reinforce the values of the organisation and senior

management.

· It acts as a control device for management. This can help when

setting company strategy.

Figure 1.8: Types of business culture.

Culture, presented within Tesco plc.

Tesco has achieved its position as Britain’s leading food retailer by

company came top in the Christian Aid league table for ethical commitment.

Customers.

Tesco must serve its customers by providing the goods they want and the

Tesco earns profits and creates value for its shareholders.

Customer service is at the heart of Tesco business culture. The base

organising customer question times when Tesco can hear customers views.

Staff.

Tesco employs 154,000 people in the UK and 27,000 in Ireland and Europe.

staff to develop their talents to the full.

The company believes that the welfare and safety of its employees is of

the shop workers’ trade union.

The approach of Tesco to worker welfare goes beyond its own employees.

positive role in influencing working practices around the world.

Like other large companies, however, Tesco recognises that its wider

advice on matters such as healthy diets.

Health and safety

Tesco customers rightly expect that their purchases will be safe to eat

to promote healthy eating.

Environmental policies

Tesco is committed to protecting the environment and to using its

areas relevant to its business.

Animal welfare

The company aims to set the highest standards of animal welfare in the

implement high standards in order to improve animal husbandry still further.

Relationships with suppliers

Tesco has relationships with thousands of suppliers in the UK and

practices.

The community

Tesco is very much part of local communities throughout the UK and is

and customers to help raise money for good causes.

Each large supermarket retailer in Britain has its own corporate

especially customer driven or

customer orientated, task culture, competitive

culture, innovative culture and positive

culture. It is often said that in business “the customer is

cultures has led to market growth and market leadership.

E5

Communications

The efficient communication of information is particularly important for

organisation that operates in competitive markets. Relevant and accurate

information is needed to plan and manage efficient production, marketing,

distribution and cost control. Information – whatever it is nature and

purpose – must be communicated as efficiently as possible.

All people in an organisation are part of an information flow – they are

involved to varying degrees in providing and receiving information. However,

there are three main levels at which information is required:

· operational level

· middle management

· senior management.

Operational level

At the operational level – on the factory floor, in the office or at premises

where consumer services are provided – there are charge hands and supervisors

who must ensure that work is planned and carried out as efficiently as

possible. In a factory, for example, a supervisor giving the task of

overseeing the production of a particular item needs to know:

• the quantity to be handle
• the completion date
• the

  availability of plans and machine capacity

• the operations to

  be performed

• the kinds of labour needed and its availability

• the materials and components required to produce the order.

The kind of information assists the supervisor in planning and controlling he

work and it is essential for decision making at an operational level.

Activities at the operational of an organisation produce data that will be

processed to provide much of the information required by middle management.

Middle management

Middle management needs to know how efficiently work at operational level is

been carried out and the extend to which any resources under their control

are being used to achieve the organisation’s objectives. Much of this

information relates to the productivity of labour, the utilisation of machine

capacity and the rate at which materials and other inputs are being consumed.

Middle management also needs a great deal of financial information about the

costs of the resources consumed in relation to output. This financial data

can be used to determine and monitor total costs, revenues, profits and the

achievement of business objectives for example, it will be possible to

identify any fall-off in productivity or rise in labour costs which might

contribute to arise in unit labour costs or to detect the excessive use of

materials which might suggest an increased in wastage.

Senior management

So far, I have mainly considered the need for information that is processed

and generated from sources within the organisation. At senior level, however,

information from internal sources often has to be supported by information

derive from external sources to help managers ensure that the resources and

their control are used as efficiently as possible in achieving business

objectives. Decision making at senior management level has a major influence

on the success or failure of the organisation. Any decisions concerned with

controlling the organisation, assessing its performance, planning its future

and initiating action must be supported by all relevant information.

Decision making at senior level in areas such as business strategy and

planning requires information about broad trends rather than detailed

information needed to make many routine decisions on day-to-day matters at

lower levels of the organisation. Senior management need information about:

• developments in initial costs and sale trends
• overall

  profitability, and the respective contribution of each part of the

  business

• capital requirements, and availability of internal

  funds and the cost and sources of external capital

• manpower and

  skills requirements

• forecast of demand of the organisation’s

  markets

• the impact on business of any changes in the

  economic, political, social and legal environment.

Superior

Prep Line manager Prep

group group

Staff Subordinates

Staff

relationships

relationships

Figure 1.9: Communication network

Communication channels and

methods

The communication channel refers to the means by which information is

communicated. The actual choice of communication channel depends upon a

combination of:

• the need for an immediate feedback or response
• costs

• speed and urgency

• the number and location of the people who need

  the information

• the degree of confidentiality and security

  required

• the desired degree of formality
• convenience

• the complexity and amount of detail to be conveyed

• the type of

  information to be communicated

• the need to keep a record of

  the communication.

Business information can be communicated in many ways. Methods include:

• written reports
• instruction manuals
• letters,

  circulars and memoranda

• material posted on notice board

• in-house magazines and newspapers

• sheets of figures

• information on standard forms

• graphs, charts, drawings and

  photographed

• video, television and other audio-visual techniques

• meetings and interviews

• public address announcements

• electronic mail

• network messaging
• fax
• telephone

  and voice mail

• pager device
• video conferencing

Whatever communication method is used, the information sent should be

relevant and avoid superfluous comments and unnecessary detail. The

information communicated to a supervisor on a factory may have to include an

exact description of the operations to be carried out. In contrast, much

broader information is supplied to middle and senior management. Senior

managers may only require general indicators and a broad description of the

developments that need to be considered when assessing the organisation’s

performance, setting objectives and deciding upon strategies.

Exception reporting

To ensure tht the information provided to management is relevant, clear and

concise and makes effective use of managers’ time, some organisations

stipulate that managers are only provided with dada relating to exceptional

developments. Middle management, for example, may only receive information

connected with performance measurements that deviate by more than an agreed

percentage from their targets. The information dealing with exceptional

performance should also be supported by brief statements of the internal

and/or external factors that may have contributed to any exceptional

performance. Exception reporting makes more effective use of the time and

skills that middle management devotes to decision making and to initiating

and controlling actions.

Downward information flows

A downward information flow describes the provision of information by a

superior to an immediate subordinate. It is, therefore, concerned with

internal communications as part of a formal communications channels. A

downward information flow can cover:

· issuing instructions on the tasks that have to be carried out by a

subordinate and setting objectives, such as the target data for completing

the work

· requesting information concerning the area of work for which

subordinates are responsible

· communicating the organisation’s procedures, working methods and

practices and the rules and regulations

· given feedback on subordinate’s performance in relation to his or

her objectives and targets

· motivating people and encouraging attitudes that raise productivity

and improve quality.

Some information will not come from an employee’s immediate superior but from

other parts of the organisations. For example, when employees first start

work they receive general information about the structure and goals of the

organisation from the personnel department. However, for information that

relates to work undertaken by the subordinate, the communication channel

should be from superior to immediate subordinate.

Upward information flows

An upward information flow along a vertical information channel is from a

subordinate to a superior. This might be feedback from a downward flow or the

communication may originate directly from subordinates. An upward information

flow can cover:

· responding to a superior’s request for information on some aspect of

work for which the subordinate is responsible

· informing managers about the subordinate’s own performance, problems

or their personal ambitions in relation, for example, to promotion or

opportunities for developing new skills.

· passing on information about other employees in the subordinate’s

section and relations with sections with which there is a direct link

· submitting ideas on improving working methods and solving work

problems.

In the interests of effective working relations. Most organisations expect

subordinates to report formally through their immediate supervisor or

manager. However, they are likely to communicate in formally with managers

higher up the hierarchy and in some situations, such as grievance procedure,

may go directly to a more senior manager than their immediate superior.

Horizontal information flow

In addition to upward and downward flows, there are also horizontal

information flows between people of the same status. Because many operations

within an organisation must work very closely together, there must be formal

arrangements for the exchange of information between sections and

departments. The production department, for example, must have close contact

with the purchasing department when it is considering changes to materials

and components or introducing advanced machinery and equipment. Production

staff also has to exchange information with employees in requirement,

training, marketing and transport.

The quality of information.

The essential characteristics of an efficient information system are that the

right people receive the right information at the right time. The information

communicated should be:

· internally relevant to the needs of the recipient

· accurate and concise

· comprehensive, avoiding a time-consuming request for extra information

· clear – it must be presented and communicated without ambiguity or

possible misunderstanding.

The person receiving the information must have confidence in the ability of

the sender and, therefore have the confidence to take decisions based on the

contents of the communication. The person sending the information must be

confident that the receiver has the ability to understand, use and take

effective decisions based upon the information supplied.

This information system, the communication media and the kind of information

provided should be review on a regular basis. The information system should

be adjusted to take into account any developments within the organisation

such as changes in its organisational structure or management style. This

review should also take into account external factors such as advances in

information technology.

Informal communications

Vertical and horizontal information flows should be clearly defined. If

individual are not sure about from whom the y should receive information and

instructors, this can lead to the growth of information flows which are not

part of the formal system. If there are two information flows running at the

same time, there can be confusion and a fall in productivity. These informal

systems can generate alternative sources of information and create a

situation where the different levels of management receive inconsistent,

inaccurate or even conflicting information.

Many businesses, however, accept that some tasks would not get completed if

they only used formal channels of communications and chains of command. It

may be necessary to short cut the formal system if a matter is very argent or

a clash of a personalities is creating communications problems. Some informal

channels may be tolerated if groups of workers have formed good working and

personal relationship outside of the formal channels. Informal channels may

even be the most effective way of communicating some kinds of information.

All organisations have a grapevine, which communicates information informally

through personal contact between employees both vertically and horizontally

throughout the organisation. The grapevine can be a quick way of

communicating information to the workforce as a whole as it tends to operate

by word of mouth. It can be used to pass on important information before an

official announcement and, depending upon the feedback generated, the company

may modify its intentions before the formal announcement.

The problem with using the grapevine is that information can get distorted or

exaggerated as it is passed on. Proposal to cut a workforce, through 10%

natural wastage and 5% redundancies, may soon get changed to 15% compulsory

redundancies as it spreads through the grapevine. This may be useful as the

actual announcement may prove to be much more acceptable than the distorted

version on the grapevine.

External communications

Efficient internal communications are important, but an organisation’s

external communications are vital. Its business prospects will be seriously

threatened if it neglects its external communications. An organisation needs

to communicate externally with:

· customers and clients

· suppliers of materials, parts, machinery, other physical inputs and

business services

· local, national and European authorities that deal with matters such

as taxation, planning permission, environmental protection, competition law,

investment grants, trading standards, and health and safety

· pressure groups concerned with issues such as consumer protection,

animal welfare, environmental matters and the welfare of law paid workers

· the media and the general public on matters that can either damage

or enhance the company’s public image.

Organisation must ensure that the quality of their external communications is

as high as possible and select the most effective media for communicating

information. It is obviously important that organisations maintain effective

communications with their customers, and most businesses invest heavily in

market research promotion to attract and keep customers.

Many companies now recognise the importance of providing a communication

channel which allows customers easy access to the company. Some companies

advertise a customer care telephone number or an E-mail address on their

packaging or promotional literature. The customer care section will be

stuffed by people trained in the kinds of communications skills needed to

deal with customers making complains. Larger companies may employ specialists

press officers and public relations officers to handle dealings with the

media, pressure groups and the general public.

Organisations relying on other companies for materials and components can

find themselves in financial difficulties of their external communications

lets them down and orders are not placed at the right time. This may led to

shortages of parts and materials, and production may be held up. Relations

with suppliers may also be affected by poor verbal communications skills

which can cause confusion of the exact nature and delivery of an order. It is

for this reason that any changes to an order made verbally should be

supported by some form of written or electronic confirmation.

Opened and restricted channel of communications

In most organisations, some internal channels and communication media are

open to all employees; stuff at all levels can access the information.

Organisations want to provide some information to all their employees. This

would include, for example, information on health and safety regulations,

environmental management policies, incentive chemist and any response to

resent adverse publicity. This downward information flow from the top of the

hierarchy would be open to all.

The content of much downward and upward information flow sis fairly routine,

and organisation are not too concerned about people beyond the sender and

recipient being aware of what is being communicated. However, access to some

information and channels of communications may be restricted. Some

information is sensitive – and if it becomes known to people other than the

intended recipients, it could create either internal or external problems.

Information and communication technology

Both internal and external channels of communication are increasingly

supported by information technology, with computers generating and managing

information flows. A computer-based information management system provides

the mean to communicate, collect, store, summarise, analyse and present

information in a way that best suits the controlling and decision making

needs of different managers. Inform received by one department or section can

be further processed before it passed onto other departments through the

organisations computer network.

Computer systems can help organisations:

· react changes in the business environment

· process complex information

· provides administrative support

· increase job certification

· collect information at source

· communicate via the internet.

The Data Protection Act 1984

The Data Protection Act was introduced to ensure that organisations

structured and managed the data held on their computers in a responsible way.

These are its main provisions.

· Organisations must register the kind of information it keeps on

individuals with The Data Protection Agency (DPA).

· Data must be obtained and processed fairly. People should know if

the information they give to organisations will be kept on computer and why

it is needed.

· Organisations can only collect the kind if information that they

have registered with the DPA, and the data must not be used outside of the

purpose for which it has been registered.

· The information held on individuals must be accurate and, where

necessary, up to date and it must not be kept longer than necessary.

· Organisations must take precautions against unauthorised access to

the information they hold on individuals.

· Individuals are allowed access to the personal data held by

organisations and, where necessary they can correct mistakes.

In March 2000 the Data Protection Art was extended to cover records kept on a

paper as well as information stored on computers and to provide additional

protection for the individual. The protection includes new rights to know who

holds information on you. It provides a statutory right to know the identity

of the person in a business responsible for data protection issues, right to

have a photocopy of personal information held by organisations and greater

rights to object to anyone holding personal data.

There are also new rules to prevent organisations sending data to a country

outside the European Union in an attempt to avoid complying with legislation

on data protection. There are new provisions which can lead to individuals

being held personally responsible for not abiding by the rules.

Communication within Tesco plc.

An illustration of communication within Tesco plc.

Figure 2.0: Example of vertical and lateral communication within Tesco.

I have analysed the communication within Tesco plc. and now I can say that

Tesco uses relevant and accurate information to plan and manage efficient

development, marketing, distribution and cost control. Information, vertical

and lateral, communicated within Tesco very efficiently at the all levels.

Every single person who works in Tesco is sure about from whom he should

receive information and instructions.

But apart of internal communications Tesco has very good external

communications as well. The company communicates with customers and suppliers

very well. The quality of Tesco’s external information is very high. Tesco

has many communication channels which allow customers easy access to the

company, for example, Tesco advertises a customer care free telephone number

and e-mail address on its packaging literature.

E6

Production.

Production involves activities, which combine inputs in order to bring about

the physical changes that eventually produce the desired output – the

product. The product may be goods for consumers and households or parts and

machinery for other producers and manufacturers. Production can create a

physical change through:

· Processing

· Manufacturing

· Assembly

· Craft-based processes.

Value added

A common feature of all forms of production is that they are the means by

which organisations add value to their operations. Put simply, all

organisations add value to the externally sourced materials and other inputs

that contribute to their output. Value added is the difference between the

value of an organisation’s output, as measured by sales revenue, and the

costs of its inputs bought in from outside which contribute to output.

The relative importance of the input costs incurred by a producer depend upon

the nature of the business. Most businesses generally consume a combination

of:

· Raw materials

· Parts and components

· Energy

· Business services.

Quality

Quality has always been an important competitive factor in some markets, but

during the 1980s an increasing number of UK producers began to devote more

attention to quality improvement. The rise in the spending power of the

average household meant that consumers’ choice of goods and services was no

longer so dependent on price. At the same time, consumers were being offered

a wider choice obliged producers to improve and complete on quality. Because

firms producing consumer goods and services sought to raise quality, their

suppliers – companies producing materials, parts, machinery and business

services – were also forced to improve quality.

A growing number of organizations now operate in markets where product

differentiation is rapidly decreasing. For example, advances in technology

mean that there is now very little difference between personal computers

offered by the different manufacturers in particular price range. A PC

producer must therefore strive to gain a competitive advantage by

establishing a reputation as a company with high quality and good customer

care. Consider training shoes as another example. Manufactures of trainers

periodically introduce new features into their shoes in an effort to create a

greater degree of product differentiation, but they all remain essentially

the same design and product. If the identifying logos are removed, the

average buyer might find it difficult to distinguish between brands.

Producers of both consumer goods and consumer durables must therefore place

more emphasis on quality when marketing their products.

The increasing importance of quality can also be seen in the market for

consumer services. The main features of services provided by airlines, banks

and fast food chains are often virtually identical, and product

differentiation can only really be achieved by improvements in quality.

Another factor in changing business attitudes to quality was the success of

Japanese manufacturing companies. It was perceived that quality played an

important role in helping Japanese companies succeed in European and US

markets. By the end of the Second World War very little manufacturing

capacity remained in Japan, and in the immediate post-war period Japanese

products generally had a reputation as being cheap but inferior quality

versions of products manufactured by US and European producers. However by

the early 1980s Japanese companies had become closely associated with high-

quality products for which they were able to charge premium prices. In the

early 1980s, Japan had 18 per cent of the world trade in the manufactured

goods, substantially more than the UK’s 5 per cent share.

Quality control

Quality control involves an organisation using some kin of inspection system

for identifying materials, parts, components and finished products which do

not meet the company’s specifications. Inspection or testing may be carried

out at various stages of production to ensure that faulty items do not remain

in the production chain.

The operative or inspection department may check every item or just a sample

of production. Processing industries, such as the brewing and chemical

industries, also test regular samples of their products. Quality inspection

is supported by highly sophisticated monitoring, measuring and testing

equipment. This allows organisations to make adjustments to machine settings

and control devices to improve quality.

There are some drawbacks to a quality inspection system. Using an inspection

system to control quality encourages employees to take it for granted that

some output is bound to be defective. Less attention is paid to preventing

errors and defects in the first place as they will be picked up later by the

inspection system.

A quality control system must ensure that there is regular contact between

those departments that have a particular interest in quality matters. The

marketing department, for example, may identify issues raised by customers,

while the design research and development departments should work with

production on developing the product so that current defects are eliminated

when work is being processed.

Quality assurance schemes

A quality assurance scheme is the means by which an organisation implements

its commitment to quality. It helps firms to do the job properly the first

time, because the scheme is designed to prevent failures rather than

detecting errors once they have occurred. In this way a quality assurance

scheme (QAS) differs radically from quality control systems which involve

inspection procedures at various stages of production. The design of a QAS

recognises that defects do not just happen; they are caused by people.

Assuring quality

Once an organisation has identified the reasons why people are responsible

for defects and errors, it can develop a system which eliminates the causes

of defects. In this way, quality is assured. There is no single format for a

QAS, and an organisation chooses a system which is most appropriate to its

particular product or service. What it must do is to insure that every stage

of production (or in the provision of a service) that materials, equipment,

methods and procedures are used in exactly the same way, every single time.

All employees should be aware of what is expected of them, and should know

how their own particular performance has to meet certain clearly identified

requirements.

Product Evaluation and Quality Assurance within Tesco plc.

What product evaluation and quality assurance in Tesco plc.

Tesco products are continually monitored and tested for their quality

highest standards; this is quality assurance.

Why does Tesco carry out product evaluation?

Product evaluation is carried out for a variety of reasons. These include:

· testing new products under development

· testing existing products when a change of

supplier is being considered

· testing Tesco products against those of competitors

· to update information on the packaging

· to monitor quality and safety standards.

Changing of packaging information

Even when a product remains the same, packaging information may have to

consumed with safety.

Tests on existing products

Quality control tests are conducted regularly on all existing own-brand

laboratories. These include tests on food safety.

Consumer Advice Centre

The purpose of five Consumer Advice Centres in Sandhurst, Shoreham,

period, six to eight products will be tested.

Their role also includes being available to the customer for any queries

quality control, and giving talks and demonstrations to local community groups.

Organising a taste panel

Market researchers will recruit customers who are shopping in the store.

product, or a product aimed at children will be tested on children only.

As far as possible, consumers test Tesco products against a benchmark.

is the Tesco product and which one is the benchmark.

The questionnaire is designed so that consumers give scores for various

also asked to tell us what they liked and disliked about the product.

Sensory analysis

Sensory analysis is a more technical evaluation of a product which is

use in the final report.

What is done with the data?

Data from sensory analysis, questionnaires and customer comments are

achieve a pass result.

Implementing of quality assurance

Quality assurance is implemented at all levels in Tesco. Everyone is

objectives, for example First Class Service initiative.

Usually each initiative has a sponsor, normally a Main Board member. It

their own way.

Setting standards for quality

A common tool for creating "benchmarking" standards is called SWOT

provided by a supplier.

Tesco Packaging design.

Tesco has many "Own Brand" products, and in order to promote its own

product and its value for money.

How does Tesco add value to its product?

Usually value for product depends on one very important key – quality of the

product, better quality – more tests are done – bigger value, but Tesco tries

to keep prices lower than all other national supermarkets. Tesco adds

testing it, and selling it for higher price.

C1

Success of the business in meeting its objectives.

Tesco is one of Britain's leading food retailers and has 586 stores

records.

Turnover and profits of Tesco in 1997-1998

The turnover and profits for the year ending 28th February 1998 were as follows:

· Group Turnover (incl VAT) - £17.8

acquisitions, turnover was £16.4 billion, and increase of 9.2%

· Profits on ordinary activities before tax,

on the previous twelve months.

Changing of company's financial fortunes 1992-98

The changes in the company's financial fortunes are shown in graphs 1 and 2

Graph 1,2: Group turnover and operating profit 1992-8

Graph 3: Share earnings and dividends 1992-8

Profits share

In 1998 the profits from Tesco after tax were £505 million. About

new stores and improving their service to customers.

Changing of share price in recent years

Between February 1997 and February 1998, the Tesco share price rose from

peaked at 603p at the previous stock market high.

Market share of Tesco

In February 1998, Tesco had 15.2% of the UK retail food market. The

market.

Graph 4: Market share growth 1992-8

Turnover, profits and market share of Tesco in 1999-2000

Profit and loss account

This year was another

successful trading year for Tesco plc. Total sales increased by 9.8% to

£20,358m and underlying pre-tax profit increased by 8.4% to £955m.

Adjusted diluted earnings per share rose 8.6% to 10.18p. A final dividend of

3.14p per share is proposed, making the full year dividend 4.48p, an increase

of 8.7% over last year.

UK retail sales have grown

7.4% to £18,331m. Like-for-like sales were 4.2% which consists of volume

of 3.2% and inflation of 1.0%, with new stores continuing to perform well,

contributing 3.2% to sales.

UK operating profit increased to £993m up 8.1% on last year. Tesco’s UK

operating margin remained broadly flat at 5.9% in a year when Tesco made

substantial investments in price.

Company change programmes continue to deliver increasing levels of

efficiencies enabling us to invest for customers and grow profits.

Sales in the rest of Europe

accelerated with total sales up 18.8% to £1,527m and contributed an

operating profit of £51m, up 6.3%. Sales in the Republic of Ireland in

local currency are up 6.1%, reflecting the benefits of company’s store

rebranding programme. In Central Europe sales are up 76.8% at constant exchange

rates. Tesco 11 new hypermarkets across the region have all traded strongly

since opening.

Business in Thailand has seen good growth and the three new stores have

contributed to sales of £357m up 96%. In South Korea, Tesco Homeplus

achieved sales of £140m in the period since acquisition. In the Asian

region Tesco made a small operating loss of £1m.

Tesco Personal Finance has now been trading for nearly three years and share of

losses this year are £4m compared to a £12m loss last year.

Tax on underlying profit has been charged for the year at an effective rate

of 27.4%.

CHRISTMAS & NEW YEAR TRADING STATEMENT

Monday 15 January 2001

GROUP SALES GROWTH CONTINUING TO ACCELERATE

Group sales for the seven weeks ending 6 January 2001 increased by 15.4%.

This growth was driven by excellent performances from all four elements of

Tesco strategy: a strong core UK, increasing non-food sales, rapidly

developing international stores and expansion into retailing services.

OUTSTANDING UK GROWTH UP 10.5%

Total UK sales for this seven weeks, covering Christmas and the New Year,

were up 10.5%. Compared to last year this period included one extra day's

trading over the New Year. Like-for-like sales were up 6.9% driven by

excellent sales volumes of 7.3%. This performance reflects determination to

deliver the best offer for customers as Tesco continue to cut prices. Overall

deflation was -0.4%.

STRONG INTERNATIONAL PERFORMANCE

In 2000 Tesco opened 32 stores internationally adding over 3m sq. ft. of new

trading space. This represents an increase in International trading space of

over 45% on the previous year. International sales were up 50% over the

Christmas and New Year period as a result of existing stores maturing and new

store openings.

RECORD NON FOOD PERFORMANCE

Company’s strategy of offering excellent value in non-food to customers was a

resounding success this Christmas. Tesco achieved sales in all areas

including 14,000 DVD players and 8,000 widescreen televisions.

TESCO.COM SALES QUADRUPLE

The roll-out of Tesco.com to cover 90% of the UK population helped drive the

performance over Christmas with sales up 400% on last year. To meet this

demand Tesco.com recruited 400 new staff, allocated 10,000 additional

delivery slots and delivered 30m products.

Some examples of meeting its objectives by Tesco plc.

Product promotions

Objective: to give customers a broad range of strong relevant promotions in

all departments of the store.

Examples: hundreds of MultiSave, Link Save and Special Offer promotions in

all stores every month.

Product range

Objective: to give customers what they want under one roof.

Examples: constant development of new and exciting food products;

introduction of clothing, CDs and videos.

Pricing

Objective: to be competitive especially with regard to the basic lines.

Examples: Value Lines and Unbeatable Value pricing, giving low prices on key

brands and own-brand products.

Customer Service

Objective: to provide customers with outstanding, naturally delivered

personal service.

Examples: baby changing facilities, no quibble money back guarantee, "one in

front" queuing policy.

Store design

Objective: to provide an environment that is easy and pleasant to shop in.

Example: store layouts, fixtures and ambience improved to ease customer flow

and make shopping more enjoyable.

Store refurbishment

Objective: to upgrade existing stores to the standard that is expected from

Tesco.

Example: existing stores improved to include recent innovations.

Communications

Objective: advertising should appeal to all social and economic groups in a

relevant and friendly way. Example: recent television ads.

C2

How the organisational structure, culture and management style of the

business affects its performance and operation and helps it to meet its

objectives?

I have analysed each of the major functions of Tesco separately. However, it

is the effective interaction of business functions that is essential to the

success of an organisation in attaining its objectives.

Marketing

Advertising.

Tesco uses advertising in the press, on the radio as well as on television to

support the company’s marketing by making the public aware of the products

and services available in its stores.

The Tesco logo.

The Tesco logo is a vital part of its image. By 1995 many versions of the

logo had evolved and company’s corporate identity was not focused. Company

therefore began to use one single Tesco logo that is the same everywhere, on

stores, letterheads, posters, lorries....

The new logo has the company name in red, the underlining in blue and the

background white. However, given the cost of this change Tesco did not

immediately change every logo for the sake of it, but gradually as old items

were replaced, repaired, repainted, reprinted or re-designed. This means that

it is taking about three years for the new logo to completely supersede all

other versions.

Chef’s Club.

The Chefs' Club is an initiative which brings the best advice on food and

drink to customers and aims to make shopping more enjoyable. Tesco is working

with some of the country's top chefs and other experts who want to share

their passion for good food and drink with customers.

Tesco Packaging Design.

Tesco has many "Own Brand" products, and in order to promote its own brand

correctly Tesco has its own Packaging Design Department. Products sell for a

variety of reasons; in the first instance, the visual appeal of a product is

important to attract customers to the product initially, as it is only after

the first purchase that the customer is attracted because of the quality of

the product and its value for money.

Tesco Product Promotion.

Product promotion is the responsibility of the Tesco public relations team.

The team is always involved at the planning stage of any new product or

service, and its brief is to generate extensive and appropriate coverage for

the new product.Tesco has three key objectives for any product promotion;

these are:

• to reinforce the Tesco brand values of quality, choice, price and

  service

• to maintain the Tesco image as a market leader through

  its products and services

• to manage product issues - both

  positive and negative.

Distribution

Purpose of the distribution department

Its purpose is

to ensure that Tesco stores have the right products delivered against agreed

delivery schedules and in good condition, enabling the stores to provide a

consistently high level of customer service.

vehicle fleet.

How does Tesco keep each store supplied with what it needs?

The key to the distribution system’s ability to supply each store’s

practices and to maximise efficiency).

How does Tesco achieve maximum efficiency in its distribution centres?

Computerised information arrives via printers in the warehouse offices.

position in the warehouse.

Also, in the past, Tesco’s operations have been slowed down at peak

system.

Human Resources

People are fundamental to business and the way company recruit, develop

influential, leading edge and proactive to ensure continued success.

Human Resources at Tesco is divided into a number of central areas which

deliver the business plan.

Promote management development

Tesco does this by providing opportunities for everyone to increase

competitive market place. Tesco does this by:

· designing training packages which equip people

quality standards.

· enabling training to be delivered in the

workplace by people who know how to do the job themselves.

· exploiting new methods of learning, and

thereby providing a supply of general business managers for the future.

· developing effective working relationships

products which inspire them.

Research and development of effective corporate human resource policies

Tesco does this by:

· being constantly aware of UK and European

company’s business aims.

· researching and developing people involvement

large-scale corporate surveys and specialist staff research.

· providing updates on employment law.

· scanning and benchmarking other organisations,

in order to import best practice and maintain a competitive stance.

· ensuring specific policies, for example

regarding the employment of disabled people and equal opportunities.

· achieving external recognition, to ensure that

Tesco is seen as a quality employer.

Developing selection standards and implement corporate entry programmes

Two crucial roles for the Human Resources Department are:

· developing selection standards which will

for customers.

· implementing corporate programmes in order to

ensure that the company's manpower requirements are met.

Tesco does this by:

· designing recruitment and selection processes

which will equip managers with the skill and knowledge to select the best.

· training managers to maintain selection

standards, and to select using the most reliable and leading-edge processes.

· developing corporate competency frameworks

business will need in the future.

· developing corporate entry programmes to

ensure that corporate manpower needs are met in terms of skills and numbers.

· developing and implementing Tesco employment

quality employer which attracts the highest calibre candidates.

· developing a pool of Excel graduates providing

a supply of managers with broad business experience.

· developing at a national level links with

managers can develop links with education at a local level.

Reward Development

Reward Development researches and develops rewards and organisational

Tesco does this by:

· sourcing and analysing pay and benefits data

to enable Tesco to keep remuneration and benefits packages competitive.

· continually shaping innovative ways of

increasing staff retention and stakeholding.

· developing performance management processes

and tools which will improve performance and encourage motivation in staff

· providing advice and if necessary challenging

spend and creating organisational structures which will deliver business goals.

HR professionals

HR professionals operate out of the Line, working as part of the senior

aspects of company’s business plan:

· Develop the best

· Recruit the best

· Retain loyal and committed people

· Live the values of the company

· Transfer HR skills effectively to the line.

Hence these functions help meet the objectives successfully. All Tesco’s

organisation structure works as links of a chain, if one link falls down, all

the organisation will experience difficulty. For example, most important

department of Tesco, I consider, is Distribution department. If this

department fails, products will not be delivered to the store, so customers

will go to another store. Tesco’s success is built on the good work of each

department.

As an example, Tesco has recently introduced Customer-Oriented Initiatives,

such as:

Loyalty cards

the most sophisticated customer databases in Europe.

Clubcard is a magnetic "swipe" card obtained free in store. The checkout

assistant swipes the card prior to scanning the customers shopping. For every

£1 spent, one point is earned. Each point is worth 1p. When shopping at

the originating store, the till receipt advises:

• Points earned from that shopping trip
• Points

  accumulated during the quarter.

The points earned are recorded on a central computer and are converted into

money-off vouchers every quarter.

Customers can earn Clubcard points at:

• Tesco stores
• Tesco petrol stations

• B&Q

• Energi - through Norweb
• Tesco Personal

  Finance

• Tesco Home Shopping.

In addition Clubcard has recently been extended to Ireland and to the Tesco

Vin Plus store near Calais.

Home shopping

Many people today, both single people and couples, are working longer hours and

do not want to spend part of their leisure time making a trip to the local

supermarket. To help people save time on shopping, Tesco has introduced Home

Shopping, a service which makes use of information technology so that people

can do their shopping via the Internet from their home computer. This was first

introduced on CD-ROM in July 1996, and Tesco followed this up by becoming the

first UK food retailer to offer an Internet-based home shopping service in

November 1996.

Personal Finance

In 1997, Tesco decided to extend its customer offer to include personal

financial services. In partnership with the Royal Bank of Scotland, Tesco is

providing new ways of banking and other services to its customers.

C 3.

The impact of ICT on internal and external communications

Importance of ICT

IT is vital to Tesco because every aspect of its operation is controlled or

monitored by IT - stock, distribution, payroll, accounts, and so on. For

example, when an item has its barcode read at the checkout, the system not

only logs the price onto the till, but also logs the financial transaction

between Tesco and the customer and the fact that the stock has been reduced

by one item. On the distribution side, instructions from the mainframe

computer are sent directly to fork-lift truck operators at depots by radio

links.

All stores are connected to the mainframes at Head Office via the Tesco

Network. There are a large number of different applications that stores use

both independently and via the mainframe connection. For example there are

Personnel and Scheduling systems in-store, and access to electronic mail via

the mainframe.

IT capacity

Tesco has a three-level architecture with mainframe, middle system servers

and PC clients. Their main frame has a 6 million Mb storage capacity

(equivalent to 6 million 500-page books!). Their private digital network to

600 stores has a capacity of 11.5 Mb. They use some 100 Tesco-written

computer applications and over 200 PC packages.

How much does Tesco spend on IT each year?

Last year, Tesco spent about £133 million on IT, that is about 1.4% of turnover.

How does that compare with other companies?

A recent independent survey of Europe's leading 500 companies in all

commercial and industrial sectors placed Tesco 112th overall in Europe in

terms of IT spending, but 3rd in the list of European supermarkets, and 1st

amongst British supermarkets. [Source: Information Week 19-20/12/97].

How many on-line card authorisation requests does Tesco receive each day?

Over one million on-line card authorisation requests are dealt with every day.

Internet site

The Internet site receives 250,000 hits per week and was used to launch

Tesco’s home shopping service and the Tesconet Inertrnet Service provider.

The internet site has proved to be a great success, with the introduction of

Tesco Direct, the home ordering and delivery service. Such “home shopping” is

becoming increasingly important as more and more customers gain access to the

internet via home PCs. Sainsbury’s, one of Tesco’s great rivals, has also now

launched its own home delivery service via the internet.

Tesco own Internet site. Home page.

ICT systems used by Distribution Department

IT has revolutionised all aspects of the selling, ordering, distribution

labour.

The base system used to control the distribution operation was purchased

particularly important sub-systems, known by the acronyms DCOTA and DCAMS.

DCOTA (Distribution Centre On-board Terminal Access) is a system which

the fork-lift truck

drivers at the distribution centres. The system controls the movement of

has been placed in the correct slot.

DCAMS (Distribution Centre Assignment Monitoring System) is the system

necessary, changing work priorities.

Radio frequency communications are also used in the checking in of goods.

Ordering by stores now relies heavily on IT, using Sales Based Ordering.

system, and then passed to the warehouse systems described above.

mainframes situated in two separate locations.

The loss of a whole mainframe would have serious effects, and for this

backup procedure is tested regularly each year.

The backup systems for the distribution depots include specialist

six hours at the most.

Goods are now ordered from suppliers using a system called Electronic

printed orders.

EDI is also used for:

· sending sales forecasts so that suppliers can

anticipate demand and reduce lead-times for stock to reach the stores

· securing the best payment terms and discounts for Tesco

· simplifying the invoicing process, so that

invoices are generated automatically and postage and paperwork are eliminated

· working internationally, to eliminate time and language differences.

ICT systems used in Management.

Management Information is data stored electronically for use by business

further enhance the ability of managers to make informed decisions.

Technology, Data and Analytical tools.

A) Business use

Current Management Information

· Access to summarised data at pre-defined levels

· Most decisions made at a macro (e.g. regional level)

Planned Data Warehouse

· Access to in-depth information for informed decisions

· Decision made at micro level, e.g. in store

· Use of balanced score carding for suppliers,

stores, etc. with supporting details

· Use shopper behaviour to influence new lines,

promotions, and product ranging.

B) Technology

Current Management Information

· Mainframe, text-based reporting and analysis

· Downloaded to local PCs for in-depth analysis and graphics

Planned Data Warehouse

· Specialised hardware and software to manage

data (the 'Information Warehouse')

· Information from the Information Warehouse to

outside users, e.g. suppliers, agencies

· Cost of computer hardware and software is

needs

· Dedicated NCR machine and peripherals.

C) Data

Over 10 million customers, over 60,000 products and 586 stores

Current Management Information

· Data held on mainframe, PC or on paper

· Internal data analysed using SAR reports and

MAS analysis tool (see below)

· External data received by EDI or on paper

Planned Data Warehouse

· Data collected from Tesco operational systems

information

· Data is stored on customer behaviour, product

performance, branch performance supplier performance, depot performance

· Data held at lowest level to enable ad hoc groupings,

e.g. salt sales in stores by the seaside last Easter.

D) Analytical tools

Current Management Information

· Mainframe based

· FOCUS - report generator

· SAR - report viewer

· MAS - Tesco-written multi-dimensional analysis tool

· PC Lotus suite - spreadsheet and database applications

Planned Data Warehouse

· A simple interface with the information using

the level of information required to support decisions

· IT populate the Information Warehouse and

users control their reporting requirements

· Logical access to information, with user

choice of level, groupings, stores, products, measures, and other parameters

ICT systems used in store operations.

IT is essential to the running of a modern store. It is used for

developments.

Tesco stores vary greatly in size, from small Express stores covering

product, and gives the customer the most appropriate range of products.

A store can monitor what has been sold through the scanning

in terms of stock depletion and money taken.

Barcodes and scanners provide several benefits to company’s customers:

· As purchases are no longer entered manually

into a cash register, accurate pricing is guaranteed.

· The scanning till is faster, reducing the time

for which customers have to queue by about 15%.

· Produce is now weighed at checkouts, removing

happen.

· Improved promotions may be offered, such as Multisavers.

· The customer gets an itemised till receipt

which will trace the sale quickly if a customer has an enquiry.

Tesco benefits as much as the customer from the new systems. Notably:

· Improved transaction accuracy: operator error

on the keyboard.

· Improved customer service - customers are important!

· Improved productivity. There is no need to

faster.

· Selective promotions can be initiated.

· Stock levels can be reduced as the exact

quantity held is always known and re-ordering can be made more accurate

· Wastage of perishable goods is reduced, as

they too can be ordered more accurately.

· Monitoring sales analysis and the

also the company's suppliers.

Every product has a unique number, the European Article Number or EAN.

spaces.

The EAN and barcodes normally consist of 13 digits, although there may

computer to validate the code.

read electronically from the card.

A further advance has come with Electronic Funds Transfer at Point of

from this are the debit card and "cashback".

Debit cards are a means of purchasing without cash or a cheque. Unlike

the time of the sale.

The facility to give customers up to £50 in cash also comes from

bank or cashpoint.

SBO.

The ProgreSS system holds pricing details of the 60,000 different

pizza areas.

The system is also used to control the back office and cash areas.

product information.

The ProgreSS system runs on an RS6000 machine.

The stock replenishment system is called Sales Based Ordering (SBO). As

process.

Whilst there are some 60,000 products sold by Tesco, even the biggest

time between ordering and delivery).

The SBO system also manages the recording of all store-based stock

when a hot spell is forecast.

ICT systems used by Customer Service Centre.

The centre provides a central customer service operation for the

of orders for the Baby Catalogue and the Home Shopping service.

The scale of the operation, and the efficient organisation of staff to

telephone and information systems.

To give you an idea of the scale of company operation, Tesco employs

outbound letters to customers.

Tesco uses IT to manage 100,000 calls a week, both to organise the calls

planning and monitoring purposes. Among the systems Tesco uses are:

ACD - Automatic call distribution (Meridian)

This system manages the way calls get routed to Customer Service Centre

service levels.

Call forecasting and scheduling system (QMax)

The distribution of calls varies significantly throughout the week. This

to take the calls.

IVR - Interactive voice response

This is a menuing system on the telephone to filter out those calls that

that calls can be transferred directly to the appropriate service or person.

There are many ways in which IT provides and organises information for

Tesco. For example :

· Customer services have systems to assist in

outstanding issues.

· Tesco has an addressing system, based on the

quickly.

· Tesco has a knowledge base on an intranet to

well as general information about nutrition and healthy eating.

· Management reporting is used extensively to

that emerge requiring close, urgent attention.

Orders from Home Shopping customers may be received over the telephone,

are then transmitted to the stores for packing and delivery.

The Clubcard system enables staff to deal with customer queries related

intercept these routine calls so that they can be handled automatically.

A1

Alternative approaches which might enable the business to better meet its

objectives.

The retail grocery market is intensely competitive today and no serious

current stores are to the stores of fifty years ago.

Non-food retailing is a major part of Tesco strategy. Tesco is increasing

competition and offering customers real value and choice in all areas from

sportswear to software, electricals to spectacles. By introducing these ranges

to more of company’s stores Tesco also offer customers the convenience of

shopping for great value non-food along with their food and household goods.

More choice in-store includes many new lines for the home and garden,

motoring and leisure, fashion and cosmetics. Opticians, mobile phones and

health and beauty are examples of departments that have been expanded to meet

customer demand. Tesco relaunched its clothing range to offer better value,

quality and choice.

In this year Tesco should continue to bring its customers big names at

competitive prices. Last year, for example, Tesco sold 14-inch Bush TVs and

Vodafone, Orange, One 2 One and Cellnet mobile phones at record low prices.

Film and batteries came down by 30% and cuts of between 15% and 50% are being

made on stationery, pet accessories, video tapes, CDs and DVDs and many other

popular products.

The convenience of shopping for non-food alongside food is what Tesco should

offer customers. At the start of the year Tesco already had 90 stores

trading with full non-food offer in the UK. During the year Tesco should

increase this as much as possible through extensions, refits and new store

development programmes.

Through these programmes Tesco will have more Tesco Extra stores including

its newest at Newcastle upon Tyne. It is Tesco’s first UK store to be

designed and built to hypermarket blueprint, using many of the elements

which Tesco has found to be successful in European and Asian stores. It has

given to the company the opportunity to introduce a much wider range of non-

food products to the UK, giving its customers even more choice when they shop

at Tesco.

Through innovating and investing for its customers Tesco is leading the

way in new forms of retailing. Tesco is the largest on-line grocer in the

world, and through the rapid development of its e-business Tesco is now

offering customers real choice and value on the internet.

Tesco.com is new 100% subsidiary company that runs company’s e-commerce

business, which is an important part of company’s future strategy. Tesco

should ensure that it has a real focus, the relevant resources and can move

quickly.

Grocery home shopping business offers customers shopping on-line choice,

value and convenience. Hundreds of new customers are registering every day

and Tesco has the capacity to grow this business at a significant rate.

On the internet Tesco is not constrained by space as the store can be as

large as you like. Company’s Internet customers now have an exciting range of

non-food offers beyond food shopping - just a few clicks away. Tesco’s new

book store offers a choice of 1.2 million titles, with 50% off top lines and

Tesco has an entertainment store selling over 300,000 CD, video and DVD

titles.

Tesco’s European business is focused on the Republic of Ireland and the

four Central European countries of Hungary, Poland, the Czech Republic and

Slovakia accessing a population of 68 million people. In Ireland the business

is progressing well as Tesco near completion of rebranding programme. And in

Central Europe Tesco continue its rapid hypermarket roll-out opening 11 stores

and 1.3 million square feet in the year.

Regional focus and market leadership is a key objective of Tesco’s strategy

in Central Europe. Tesco is the only retailer in all four countries -

Hungary, Poland, the Czech Republic and Slovakia. Company’s portfolio now

includes 19 hypermarkets totalling two million square feet of retail space.

Tesco is meeting and stimulating demand in these markets as customers begin

to recognise the better choice, quality and value that Tesco offers.

Tesco is pursuing an active programme of store openings which will take the

company to 69 hypermarkets by the end of 2002, and will make the company the

market leader across the region.

The hypermarket blueprint is the focus of Central European activities. At

100,000 square feet or more, hypermarkets give Tesco the space to offer

customers extensive food and non-food ranges at outstanding prices.

Tesco is learning all the time. The format is internationally transferable

and adaptable to different regions, and part of the success has been to

supplement UK skills in grocery retailing and customer service with

international expertise.

In the Republic of Ireland Tesco should continue to make good progress.

Without the benefit of any new stores, sales increased by 6.1% in the year.

Cumulative sales growth since acquisition is now 20%, moving market share to

23.3%.

Ireland and Central Europe are already a significant part of the Group

employing 27,000 people which will grow even further as Tesco move forward.

Asia is the second international region where Tesco is expanding. The

Tesco Lotus business in Thailand now has 17 hypermarkets and is well on the way

to market leadership. In South Korea, through Tesco’s partnership with Samsung,

Tesco now has two outstanding hypermarkets which are among the highest turnover

stores in the Tesco Group. Now Tesco should open its store in Taiwan. These

three markets will give to the company access to 130 million people.

In South Korea, a country where 50% of households own a PC and 78% a mobile

phone, the retail industry has huge growth potential. In 1999 Tesco invested

£142m in a partnership with Samsung, which brought two world-class

hypermarkets operating under a top retail brand as well as a number of sites

that Tesco will now develop. Tesco should t expand more hypermarkets in next

years.

Tesco now should move rapidly towards global sourcing, which will enable

company to buy quality products at the best prices and deliver them at the

lowest cost. Tesco has already set up three sourcing centres in Hong Kong,

India and Thailand. These now source 30% of Tesco non-food products

(excluding Health and Beauty). Tesco should move this higher in next years,

with the opening of a fourth sourcing centre in Central Europe.

As a student from Russia (I live in Kazakstan) I would like to see Tesco

further expand its activities in Eastern Europe, and therefore why not

Russia? At the present time there is nothing similar to Tesco on the Russian

market, so I think Tesco won’t have any problems to get into it.

It is difficult to suggest alternative approaches for Tesco’s strategy

because the firm is evidently doing very well. I would suggest however that

Tesco continues to seek markets overseas to further develop its growing

global presence.

As mentioned above, Tesco has been very successful over recent years, and it

is therefore quite difficult to suggest “Alternative strategies”.

However, from my I might suggest the following:

· Expansion overseas – e.g. Russia.

· Increase market share – e.g. merge with Safeway. If Walmart took

over Asda, why can’t Tesco take over Safeway, for example.

· Expand into new market / product – e.g. cars, travel.

· Rewards to staff, introduce a widespread – bonus or share ownership

(if Tesco doesn’t do it yet)

A2

Evaluation of the effects that the alternative approaches might have on the

structure and functions of the business, and how it achieves its objectives.

Alternative approaches, suggested in A1 can affect the functions of the

organisation and how it achieves its objectives very much, but they won’t

really affect structure of the organisation, because Tesco’s organisation

structure is very good and there is no point of changing it.

Expand to Russia

If Tesco expands to Russia, in general, it is going to be only benefit to the

company. Of course first Tesco will have to spend some money to build and

open new supermarkets, but it is not going to be very difficult because there

are no other companies like Tesco. Big advantage of expanding Tesco into

Russian market is that straight way after it Tesco will definitely become a

dominant firm on market, because there are not very strong competitors and

very soon Tesco can become a monopoly on the Russian market. Disadvantage of

expanding is that Tesco can get failure as well. Russian prices and British

prices are very different, so if Tesco retails goods, which are more

expensive then in others stores, not many people will by it.

Increase market share

Every single organisation wants to increase its market share, and the best

way of doing it is to merge or take over another company. And I suggest that

Tesco also could increase its market share by merging another retailer, for

example Safeway. Safeway is not as big as Tesco, so it is not going to be

very difficult to merge it or take it over. The advantage of the merger is

that Tesco will increase its market share very much (by 10%) and two dominant

firms of UK’s market joined together can easy become a monopoly. The

disadvantage of it that it is not very easy to do, because now Tesco has 35%

market share, and if it merges Safeway, Tesco’s market share will be

increased up to 45%. But British law says that firm which has 45% of market

share is monopoly, so competition commission won’t be happy about it and it

will never agree with this merge.

Expand into new market

Non-food retailing now becoming a major part of Tesco strategy. As I said

before, Tesco is increasing competition and offering customers real value and

choice in all areas from sportswear to software, electricals to spectacles.

But still, I think Tesco didn’t get into one very perspective market – cars.

Cars are very important in our time and there is a very high demand for cars

in the UK. I think for Tesco it is won’t be very difficult do get into this

market, because Tesco is known as cheapest retailer in the UK, therefore

people will continue to by everything from Tesco, and cars as well. But it

could be easy and could be not, because currently there are many different

firms on this market, and what I think is that there are could be some

barriers to entry.

Rewards to staff – introduce a widespread

At the present time, many successful firms introducing new types of rewarding

to staff. What I suggest is that Tesco also should introduce a widespread of

rewarding to staff, for example employees could be awarded an annual bonus,

which they can take in cash, vouchers or shares. The advantage of this type

of payment is that if employees take shares, they will be interested in good

work of the company and if they take vouchers, they will have to spend all

salary in Tesco stores. So I think that it is very good way of rewarding with

all benefits to the company.

Affects of the alternative approaches

As I mentioned before, alternative approaches, suggested in A1 can affect the

functions of the organisation and how it achieves its objectives very much,

but they won’t really affect structure of the organisation, because Tesco now

has very good organisation structure with very good consultative and

democratic management style.

If Tesco expands to Russia and merges Safeway, there are will be “Operation –

Russia” department in the organisation chart. More people will be involved to

work for Tesco, so Human Resources department will become bigger. After

expanding to Russia Tesco easy can expand to other countries of Soviet Union

such as Kazakstan, Uzbekistan, Kirgiztan and so on. It also will definitely

help Tesco to prove itself as very strong multinational firm.

List of resources

1. The main resource was Tesco’s own web site: www.tesco.com.

2. I asked Tesco for some information and they sent me it.

3. Web site:

   www.bized.ac.uk

4. Business for Vocational A level – book.

5. Newspapers