Introduction to Tesco Essay Example

Introduction to Tesco   Essay Tesco is Britains leading food retailer employing 160 000 people in the U K throughout its 702 stores. Over the past five years Tesco has expanded from a traditional U K based supermarket into new countries, products and services including a major non food business, personal finance and internet shopping. Tesco has progressed into a truly international retailer employing a further 140 000 people throughout 214 stores in nine markets worldwide. The increasing scale and internationalization of Tescos sales and purchasing operations contributes to a significant increase in efficiency and profitability. In this assignment I will be examining Tescos position in the economy, explaining the role of economies of scale within Tesco and drawing up a detailed swot analysis of the organisation. I will also be examining the role of production within the firm. Tescos position in the economy Tesco is a public limited company (plc). Public limited companies are businesses with share price on the stock exchange. To become a public limited company, a business must have an issued share capital of at least à ¯Ã‚ ¿Ã‚ ½50 000. The company must have reissued at least 25% of the nominal value of the shares. Tesco can raise significant sums of capital by selling shares to the general public. Shares are bought and sold on the stock market. We will write a custom essay sample on Introduction to Tesco   specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Introduction to Tesco   specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Introduction to Tesco   specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Management of Tesco is in the hands of the board of directors who are appointed by the major shareholders at the annual general meeting (AGM). Tesco has approximately 100 000 active shareholders within the company. Tescos share holders do not have any say in the day to day running of the company. There is a distinct division between ownership and control within Plc companies. This is unlike sole traders, partnerships and some private limited companies, where owners usually take on management duties. Being a plc Tesco benefits from limited liability this will limit financial risk. In the unlikely case of Tesco going bankrupt and falling into debt shareholders can only lose the value of their fully paid shares at worst. Their personal property is immune. This is not the case for sole traders and partnerships as unlimited liability is present. Therefore the owners will be fully liable for all of their debts. Plcs have become the dominant type of business organisation in the private sector. Tesco will experience fewer difficulties in raising capital than most other types of business. Not only can they raise capital, but their high public profile also makes it easy to arrange loans from financial institutions giving it the resources to trade throughout the world and compete in the toughest markets overseas. Tescos legal obligations: * Memorandum of Association This is a statement of the name of the company, the address of the companies registered office, a statement of the companies aims. * Articles of association This is a set of rules by which the company is governed. The articles are a contract between the company and its shareholders. The document must provide details of. : 1. The firms nominal capital. 2. When shareholders meetings are to be held and how they are to be conducted. 3. The voting rights of shareholders. 4. How profits and losses are to be distributed. 5. Names of directors. 6. How directors are appointed and the nature of their authority. Tescos business objectives Business objectives are medium to long-term goals or targets that provide a sense of direction to the business. These usually have a stated time scale. For instance, Tesco might have an objective to boost market share from 27% to 30% over the next four years. Tesco owes its success to fulfilling their major business objectives and meeting consumer needs. These are as follows: * Making a profit * Increasing sales and market share * Providing services to the community * Producing high quality products and offering high quality services * Developing a skilled workforce * Expanding into overseas markets * Fulfilling charitable or non-profit objectives Tescos Market share Market share is the term used to describe the proportion of total sales in a particular market for which one or more firms are responsible. This is usually expressed as a percentage. The supermarket sector has always been highly competitive. Tesco is the leading company in the sector with a huge 27% market share. Tesco is under much increased competition for market share and sales with the rise of Asda Walmart, sainsburys and the takeover of Safeway by Morrisons. Tescos dominant market share is put down to their policy of cheaper prices, offering better choice and convenience for their customers and its emphasis on meeting changing consumer needs through service and innovation, while maintaining its commitment to value and quality. In June 2003 the third largest supermarket was created. This came about by the takeover of Safeway by Morrisons. According to BBC news a deal worth à ¯Ã‚ ¿Ã‚ ½2.9bn was agreed by the two supermarket chains. The combined firm, with 598 stores, a turnover of à ¯Ã‚ ¿Ã‚ ½12.6bn and a market share of 16%, aims to compete with Tesco, Sainsburys and Asda- the giants of the U K supermarket sector. This was a massive boost for Morrisons which prior to the takeover was a fast growing but medium sized supermarket chain based in the north of England. The take over has opened up the South of England to Morrisons where Safeway was predominantly located. The well documented takeover of Safeway by Morrisons was proposed by all of the supermarket giants including Tesco. Tesco showed a great deal of interest in the takeover but their bid was blocked by the competition commission. The office of fair trading decided to block Tescos bid stating that it would give Tesco increased buying power over manufacturers and suppliers resulting in a push up of prices. The office of fair trading also had concern for small stores and its negative effect on local communities. Financial Information In April 2003 Tesco announced a 14.7% rise in annual profits. This rise in profits has been put down to increased emphasis on non-food products and its expanding overseas operations. Tesco announced pre-tax profits of 1.4bn for the year to February 22nd. These profits exceeded forecasts of 1.3bn. Tesco decided six years ago to focus on expansion into higher margin non-food products such as clothing, healthcare and retail services such as banking, as well as expanding overseas. Tescos International sales rose 31.2% to à ¯Ã‚ ¿Ã‚ ½5.2bn in the year to February 22nd. Meanwhile in the U K sales grew 7.9% to à ¯Ã‚ ¿Ã‚ ½23.4bn.