Business and management

Business and Management

2005

Task 1

Tesco is one of the largest players among supermarket retailers in the UK . The range of services which the supermarket offers is literally unlimited . Tesco offers both food and non-food products , according clothing , electric appliances , entertainment goods and many other items The managers of the store are sure that the large variety of products offered to the customers ensures the increasing profitability of the company

Despite the fact that Tesco has spread into many world countries , it considers UK its primary market and

therefore concentrates most of its efforts on promoting its products in the British market . The UK remains our core market . Our strategy of providing exceptional value and choice for customers ensures that we continue to grow market share . We have four store types : Extra our hypermarket destination shopping offer Superstores Metro our town centre and city centre stores and Express our convenience offer (Business Strategy . Retrieved on April 20th from source : HYPERLINK "http /www .tesco .com " http /www .tesco .com .At present , the market share which Tesco occupies in the UK can be estimated by 6 but the managers of the company are sure that in the future the market share will continue to grow . Figure 1 shows Tesco distribution of employees , turnover and selling space among different countries . The obtained results show that Tesco needs to expand its influence in Asia and Europe Figure 1 . Tesco influence in the world

because in the UK its influence is already sufficiently large . The least conquered market for Tesco is Asia . In to expand Tesco influence on this part of the world , it is necessary for the managers to analyze the cultural distinctions and needs of Asian people . It is impossible to use the same strategy for European and Asian people

Tesco needs to compete with many other companies in the global market the most important of which are Wal-Mart , Carrefour and others (Table 1 . The global sales of Tesco currently do not allow the company to reach the sales of the top 3 companies . However , well-balanced pricing and quality strategies can help Tesco get into the top three companies in sales Company Global sales , 2001

(VAT (1 ) excluded , [euro] billion

1 Wal-Mart 247 .6

2 Carrefour 69 .3

3 Ahold 66 .4

4 Metro AG 49 .4

5 Costco Wholesale 39 .6

6 Rewe 37 .7

7 Aldi 35 .8

8 Tesco 33 .6

9 Intermarche 33 .3

10 Auchan 31 .6 Table 1 . Global sales of top 10 companies in supermarket retailing

In to attract more customers , managers of Tesco constantly consider the variety of products offered and new markets in which the company could start offering its products . They constantly check for new products which can be needed by customers . Tesco has also got involved in the e-commerce business due to its increasing importance in the world . The website of the company has been designed in such a way that it immediately captures the attention of audience . There are many services which Tesco offers online . Both tesco .com and Tesco Personal Finance demonstrate our ability to extend the Tesco brand . We have also expanded our telecoms offer by launching Tesco Mobile in partnership with O2 and our Home Phone service (Business Strategy . Retrieved on April 20th from source : HYPERLINK "http /www .tesco .com http /www .tesco .com

Tesco managers do their best to ensure all of the activities of the company follow its strategic objective . The strategy of the company deals with the customers for the most part . According to the company 's vision , what really matters is not the amount of profits but the devotion and loyalty of customers . As long as the customers ' needs are satisfied , they will keep returning to Tesco . Therefore , the following strategic goal has been established by the managers of the company Creating value for customers , to earn their lifetime loyalty (Business Strategy . Retrieved on April 20th from source : HYPERLINK "http /www .tesco .com " http /www .tesco .com

In to follow the central objective , Tesco management has established many principles which need to be followed for the company to work efficiently . The following principles need to be followed by employees : understand customers better than anyone be energetic , be innovative and be first for customers use our strengths to deliver unbeatable values to our customers look after our people so they can look after our customers (Business Strategy . Retrieved on April 20th from source : HYPERLINK "http /www .tesco .com " http /www .tesco .com

Tesco management has also applied the principle of Kant 's categorical imperative in the development of its business strategy- to treat others the way they would like to get treated themselves . This type of business strategy is the most efficient because it increases the performance of the company . In to answer these strict requirements , Tesco has employed the following principles : all retailers , there 's one team .The Tesco Team trust and respect each other strive to do our very best give support to each other and praise more than criticize ask more than tell and share knowledge so that it can be used enjoy work , celebrate success and learn from experience (Business Strategy Retrieved on April 20th from source : HYPERLINK "http /www .tesco .com http /www .tesco .com

The mentioned principles are efficiently applied in the company only due to the efforts of management . Tesco managers do their best to monitor not only the performance of the employees but the attitude to work which they have . In Tesco , all of the efforts are devoted to understanding of the customers : their psychology , their needs , their interests . The managers of Tesco have devoted their lives to the goal of satisfying their customers

The company has attracted many investors by their efficient system of planning and control . It is very important for the investors into the company to be sure about the stability and profitability of their investments . Tesco well-balanced strategy has attracted many investors The most important of them are represented in table 2

Fund Manager Current Rank at 01 /04 /2005

Barclays Global Investors 1 4 .46

Legal and General 2 3 .81

Axa Investment Managers 3 2 .89

Schroder Investment Management Limited 4 2 .81

State Street Global Advisors 5 2 .76

Threadneedle Investments 6 2 .38

Morley Fund Management 7 2 .06

M G Investment Management Limited 8 1 .98

Scottish Widows 9 1 .92

Fidelity Investments 10 1 .78 Table 2 . Major Shareholders

The dividend policy of the company is very favourable for the shareholders . As the data of figure 2 shows , the dividends in 2004 increased in comparison with the dividends in 2000 by ?2 ,36 per ordinary share .Figure 2 . Dividend policy in Tesco

Profits and sales of the company have been growing steadily during the last 4 years , as the data shows in figure 3 . The sales and profits of the company are directly connected with the company 's ability to satisfy the needs of its customers . The obtained results of the company 's performance let us conclude that the management of the company has been very efficient in making the company profitable . The steady tendency of profits and sales increase is in many ways determined by the quality of management .Figure 3 . Tesco profits and sales

Task 2

The most important function of management consists in applying the limited resources of the company in such a way that maximum performance is obtained . This task has been achieved by Tesco managers . Due to the efficient distribution of functions in the company , it has been performing at a high level . As Table 3 shows , the company has employed many managers and directors in to achieve maximum control and planning . The structure of the company contributes to the efficient management of resources . Tesco organizational structure is organic , that is why maximum adaptability and flexibility is achieved . The company 's managers maintain the effective allocation of equipment , financial and human resources . Through the creation of the optimal proportion of resources use , maximum performance is achieved . The company 's

Name of executor Title

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " David Reid Non-Executive Chairman

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Rodney Chase Deputy Chairman

Senior Non-Executive

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Sir Terry Leahy Chief Executive

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Richard Brasher Commercial Trading Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Philip Clarke International IT Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Andrew Higginson Finance Strategy Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Tim Mason Marketing , E-commerce , Property and Republic of Ireland Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " David Potts Retail Logistics Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Charles Allen CBE Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " E Mervyn Davies Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Dr Harald Einsmann Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Ken Hydon Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Veronique Morali Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Graham Pimlott Non-Executive Director

HYPERLINK "http /84 .40 .10 .21 /companyInfo /boardofDirectors .asp ?section 1 " \l "biog biog " Lucy Neville-Rolfe Company Secretary

Table 3 . Tesco top executives

managers prepare budgets very carefully , and there are many employees participating in the budget creation due to its importance . The process of recruitment is also well-developed in the company , and recruitment managers help to maintain the high level of employees ' skills by employing only the best professionals

Tesco management pays very serious attention to the facilities of the company , particularly the buildings in which supermarkets are located and their convenience for customers , as well as adequate decoration . In to increase sales , Tesco management has applied many tools . First of all , the number of stores in different countries has been increased and many more stores are planned in the following years (Table 4 . It is very important for the company to open more stores because in such a way its share in the countries ' markets will increase

Country Number

of stores Sales area New stores opened inc . acquisitions

in 2002 /03 Planned

openings

in 2003 /04

UNITED KINGDOM 1 ,982 21 .8m sq ft 1 ,265 59

REPUBLIC OF IRELAND 77 1 .7m sq ft 1 6

HUNGARY 53 2 .5m sq ft 5 5

POLAND 66 3 .4m sq ft 20 5

CZECH REPUBLIC 17 1 .6m sq ft 2 4

SLOVAKIA 17 1 .4m sq ft 4 4

THAILAND 52 4 .8m sq ft 17 6

SOUTH KOREA 21 2 .1m sq ft 7 8

TAIWAN 3 0 .3m sq ft 1 1

MALAYSIA 3 0 .3m sq ft 3 1

Table 4 . Tesco Stores

One of the major current competitors which Tesco has is Sainsbury , but due to the efficient allocation of resources , Tesco has won the battle TESCO has won the store wars , toppling Sainsbury 's from the number one spot after 10 years . The supermarket rang up pounds 13 .8 billion last year putting it pounds 400million ahead of Sainsbury 's (Kevan , 1998 br

.2 . The reason of this victory can be found in efficient pricing and consumer-oriented strategy applied by the company . Tesco managers combined high quality of products which attracts customers with relevant prices , and this increased the sales . Besides , innovation schemes have been applied by Tesco managers . Robert Clark of Corporate Intelligence on Retailing said "Tesco has been growing much faster than Sainsbury 's Tesco stores are brighter , they 've got better ranges and their management has just been more innovative " He blamed Sainsbury 's bosses for losing touch with what shoppers want (Kevan , 1998 ,

.2

Another reason of Tesco growing profitability is the quality of its human resources . The strategy of Tesco recruitment consists in employing people with great skills and high potential and providing very favourable working conditions for them . One of the recent innovations applied by the management include profit-share schemes which enable employees to participate in the profits of the company . The company 's profit-share scheme , which is now the biggest of any private- sector UK company , is expected to pay out more than pounds 40 million in bonuses The 106 ,000 staff included in the scheme will receive an extra four per cent on top of their pay (Shilliogford , 1999 ,

.46

This compensation policy is very efficient because it gives the employees an incentive to work better . They all realize that their small contribution into the company 's performance will be multiplied by the contributions of other employees , and they are going to participate in the obtained profits . This gives motivation to all of the employees to increase their own performance . Adrian Mann , 18 , a stock controller at Tesco store in March , Cambridgeshire , says "The profit-share makes you feel more needed and you benefit if the company does well (Shillingford , 1999 ,

.46 . In addition to the mentioned feature of the compensation policy , employees are also able to receive a large part of salary in bonuses judging from their performance . Managers , as well as other employees , receive adequate compensation according to this plan A manager of a large Tesco store earning about pounds 45 ,000 can expect an extra pounds 1 ,800 , while a checkout girl or boy on pounds 9 ,000- pounds 10 ,000 a year should get about pounds 400 . Bonuses for senior managers are capped at pounds 8 ,000 (Shillingford , 1999 br

.46

The managers of the company also contribute to its efficient performance due to their good leadership and communication skills . Tesco managers hardly ever apply directive leadership styles due to its inefficiency in the constantly changing environment . It is often impossible for the manager to give exact tasks when the environment might change , and this policy will be inefficient . The company 's managers often practice supporting leadership style . They usually practice the policy of employees ' empowerment . Employees are able to make their own decisions and thus their performance can increase rapidly . Tesco managers also create friendly atmosphere in the company which prevents conflicts in the workplace from happening . Due to this well-balanced policy , the employees ' performance in the company is always on a high level

It is also necessary to note that Tesco is good example of the change management strategy implementation . The company 's leaders have noted a long time ago that change management is particularly important for the company 's success . In to achieve maximum performance , all of the company 's objectives are constantly re-considered according to the new requirements of the environment . The strategic goal of the company does not undergo any changes because it serves as a building clock for the company . All of its activities are based on it . However , short-term objectives can be adjusted according to the changing environment . Tesco management provides detailed analysis of the current market situation and particularly the strategies of competitors in the market . Before any plans in the company are adopted , the management analyses the current conditions in the market . The conditions are constantly changing . For example , the interests and needs of the consumers can change because new products will be introduced . Besides , some major events can happen in the market which will also influence the interests of consumers . For example , the situation in the country can get worse and due to the limited incomes , consumers will be buying only cheap products . However an opposite situation can occur in the market . The boom in economy will enable the consumers to buy more goods than ever , so they will need a larger variety of goods in the store

The activities which are provided by Tesco managers serve the interests of the company 's strategic goal . All of the steps which the company takes are channelled to the development of the consumers ' loyalty to the supermarket . As the obtained data shows , the management has been very efficient in implementing of the company 's strategic goal in the recent years

Bibliography

Boehm Rodger , Phipps Cody . Flatness Forays . The McKinsey Quarterly Issue : 3 . Publication Year : 1996

Business Strategy . Retrieved on April 20th from source : HYPERLINK "http /www .tesco .com " http /www .tesco .com

Child Peter N . Taking Tesco Global : David Reid , Deputy Chairman of the United Kingdom 's Largest Grocer , Explains the Company 's International Strategy . The McKinsey Quarterly . Publication Year : 2002

Deal , T . and Kennedy , A . Corporate Cultures , London : Penguin Books 1988

Guarrero , C . The Leadership Challenge . Security Management , Vol . 42 October 1998

Keers Helena . Tesco Sets Up Shop in Japan with Pounds 139m Offer for Retailer . Daily Telegraph . Publication Date : June 11 , 2003

Reilly Kevan . NO1 TESCO PROVES SMALL IS BIGGEST High Street Strategy Topples Arch Rival Sainsbury 's . The Mirror . Publication Date : May 5 1998

Shillingford Joia TESCO STAFF CASH IN WITH Pounds 40m BONUSES . Sunday Mirror . Publication Date : April 11 , 1999

Tesco Takes a Chance on 'Difficult ' Japanese Market . The Journal Publication Date : June 11 , 2003

TESCO WELCOMES BUDGET MOVE ON BIO-DIESEL . IMMEDIATE RELEASE . Wednesday March 17 , 2004 . Retrieved on April 20th from source : HYPERLINK "http /www .tesco .com " http /www .tesco .com

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