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Tesco Management Report

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¬†¬†¬†¬†¬† Tesco plc is¬† the Britain’s leading food retailers in the Great Britain with¬† more than 2300 supermarkets.¬† and¬† 326,000 employees. The core of Tesco‚Äôs business rest in Britain, and the company has the largest food retailing operations of over 1,900 and it is largest private sector employer in the United Kingdom.¬† In the continental Europe, Tosco operates in Turkey, Poland, Hungary, the Czech Republic, Slovakia, Turkey and the Republic of Ireland. In Asia, the company operates in Thailand, Japan, Malaysia, South Korea, China and Taiwan.¬† Since 1921, Tesco growth has been on the increase with market share from 10.4% to 15.2%. The increase in the market shares of the company leads to the increase in Tesco‚Äôs customers.¬† Presently, Tesco has 164,500 shareholders with profit of about 505 million pounds after the tax .Apart from Great Britain. Therefore, the core business of Tesco is very strong, it continues to grow beyond the market by offering better value for money, and its products are getting cheaper.

¬†¬†¬†¬†¬†¬† Additionally, TESCO strength lays its operation in its professional management and in the development of the individual through training, education and reward. The company strives to combine accuracy and reliability with accountability make Tesco to be Britain’s most successful supermarket. (Tesco 2007)

Despite all the achievement the company since its operation, there are internal and external factors that are serving as problems to Tesco.

Pest has analysed the environments in which all organisations are operating. He emphasised that all business organisation are subject to the turbulent environment in which they operate .He further argued that Tesco as an organisation is being affected by   different environmental factors and the company must master these factors to its market advantage. Pest further argues that there are political, Economic legal, social and as well as technological factors   that have become the problem to Tesco organisation.

Pest tries to create a good overall picture of the external impacts on an organisation by breaking them into useful, and obvious, categories. He has identified the problems as follows:

                                    POLITICAL ENVIROMENT

           Pest analysed the political environment as government legislations and decisions of the government in the business environment. Pest analysed this as the factor that will affect Tesco. (Rob 2007).For example, in the recent years, there was an increase scrutiny on Tesco by the office of Fair-trading for exerting monopolistic powers in agricultural markets. Moreover, the government taxes on grocery products are another major problem that is hindering the company. For example, the increase in taxes on alcohol and cigarette.

Furthermore, there was an accusation that Tesco was selling a contaminated food and the company had to pay the fines of more than £50,000 after an investigation found five south Wales stores were selling out-of-date food. The trading standard officers that visited the five stores in Newport affirmed that the actions of Tesco were a public health risk. Due to the fine on the Tesco, the firm had to apologise by saying that strict procedures were not followed. The trading standard officer in charge the investigation asserted that out of  total of 102 items investigated between August and September, there were  nineteen  items   from Tesco plc  which  were one day out of date,  one was two days past, another two were six days, and three  products  did not have a date on them at all and he further explained that the various items of food purchased from Tesco  had the potential to cause serious harm to anyone who consumed them.(BBC 2008) . Another external problem facing Tesco was the suspension of the Alcohol licence by Police and local authorities in Maidstone for selling alcohol to the underage. Maidstone Borough Council imposed the three-month ban on the Tesco Express in Allington on Friday after a request from Kent Police. Two Tesco Express stores in neighbouring Sussex are currently serving one-month bans after being found selling alcohol to underage children

                      ECONOMIC ENVIROMENT

      From the Pest analysis,  Tesco has always been affected by UK economy  for example since November 2007 there has been falling in Tesco’s share price from £487 to  £400.25  by 9th April,2008..Hoewever, the fluctuations in the stock market and tax increase  have led decrease in company revenue in 2007. Thus, this has led to the fluctuation of company net income for the quarter ended December 31, 2007.Moreover, there was also loss of Net   for the fourth quarter of 2007, which resulted to loss of $1.2 million due to the expiration of the Turnkey E&P warrants. In December 31, 2007, Net income for the company was $32.3 million, or $0.86 per diluted share compared to net income of $30.5 million, or $0.83 per diluted share for 2006.

Another economic problem facing the company is the debt that is currently serving as a threat to the organisation. Report from CNW Group reveals that as at December 31, 2007 the company debt increased from $65.0 million at September 30, 2007 to $80.8 million. Thus the company net debt to book capitalization of Tesco was 16 %( 4) at December 31, 2007

 (CNW 2007)

                          SOCIAL ENVIROMENT

            Pest also analysed the problem facing Tesco as social. For example, the demographic changes in the UK have been affecting the purchasing pattern of British people. The EU publication reveals that there are decrease in population growth in UK, the death rates of most European countries including Britain outnumbered the birth rates Thus the non-increasing in population is one of the challenging factor to the demand of Tesco products .Moreover, the increase in disposable income among Britons has changed  the customer’s  preferences for some products Moreover, there was recent  publication  that Tosco is in fuel probe. This is in related to the accusation made on Tesco that diesel fuel bought at its petrol stations in Cambridgeshire may have been contaminated. In the year 2007, Tesco received more that 50 complaints a days from the car owners that bought contaminated fuel from Tesco supermarket.

        Another internal problem facing Pesto is the complaint by the supermarket customers that Tesco supermarket are falling short of some products such as milk, bread and butter on the shelves, a study by the Grocer magazine suggests. Thus, Grocer conducted a test on availability of 33 basic goods and found   twice as many were out of stock as six months ago. The report by analysts reveals that Tesco were no more focusing on basic items on the supermarket, rather they were focusing more on reducing waste and packaging than getting items in stock. To assert the report of Grocer, they used mystery shoppers to check price and availability of 33 items. During 26 weeks of mystery shopping, Grocer found out that  on 48  occasions at least one of the 33 items was out of stock and  the number of items out of stock was much higher than for the previous six-month period. (BBC 2006)

Another teething problem facing Tesco is its criticism over the monopoly of the company in UK. The criticism resulted over the growth of the company, which has generated intense debate in UK. There was also an accusation that the monopolistic power of Tesco has pushed the smaller retailers out of the market.

                            TECHNOLOGICAL ENVIROMENT

        This is another factor affecting Tesco in business environment.The Tesco organisation is a major user of new technology. The increasing use of electronic data interchange, laser and self-scanning and other point-of-sale equipment by retailers. The company has also introduced the use of loyalty cards in the introduction of sophisticated computer-based systems.

                      LEGAL ENVIROMENT

          According to Pest, Legal environment is also problem facing Tesco organisation.

The full list in the left margin shows these categories range from the political to the environmental. Their political context involves looking at the impact of local and national government, and the international situation. Economic factors like fluctuations in the stock market and tax increases will obviously have a large impact.

                                    SWOT ANAYSIS.

          Swot identifies the factors affecting Tesco as Strengths, weakness, opportunities and treats. Swot argues that in this present globalisation, any company no matter how strong it might be will face some internal and external problems. SWOT has analysed some of Tesco problems as competition in the supermarket industry. Swot revealed that the supermarket industry in Great Britain is very competitive; each one of them stands to gain the largest share of market from each other From Swot analysis, Tesco is really facing the stiff competition from other companies operating supermarkets in the country. For example, in 2005 the ASDA, the Sainsbury’s and Morrison and Safeway are putting a real competition for Tesco. The  2005 market  report reveal that  ASDA is  behind the Tesco with  19 percent share of market with Tesco and Sainsbury sharing  16 percent of market with Tesco while Morrison and Safeway is also serving as a competition with market share of 13 percent. Thus, the highly   competitive market environment, which Tesco is facing, it is serving as a threat for the company market growth.  For Example, of the specific and biggest threat that can face Tesco is probable takeover, like the Morrison group purchasing the Safeway chain or ASDA being taken over by Wal-Mart and the take over ill be a great challenge for Tesco. The competition   the company is facing is also a major problem facing Tosco growth. The Sainsbury and ASDA are giving Tesco challenges by continually seeking to gain market a bigger market shares from Tesco. (Rob 2007)

                   RESPONSE OF TESCO TO THESE PROBLEMS AND ITS IMPACT

           Despite the problems the Tesco organisation is facing, Tesco still remain the biggest grocery store in UK and remain of one the leading hyperactive store in the world. Moreover, the company profit continues to increase thereby increasing the dividend of its shareholders. .Moreover, the Tesco also aims by maintaining the highest standards of corporate behaviour and ensure that Corporate Responsibility is integrated throughout their business. Thus, Tesco is still making a significant contribution to economic activity in the Europe and the country where it is operating. For example, each year, Tesco gives 1% of its pre-tax profits as charities and this has become the focus of the organisation. Furthermore, the Trust Community also award Scheme awards grants to local projects. The company is still providing the best value for customers by bringing lower prices more choices and bringing better food to the customers by making the shopping for customer’s trip as easy as possible. More so, the company is constantly seeking to reduce the prices to help the customers to spend less.

      Additionally, in  2005 the company gave out shares  of  £106m to the staff Under the plan, thousands of Tesco staff set aside between £5 and £50 from their salary every month over a three or five year period. However, Tesco also has gone further by   creating jobs and training, providing opportunities for suppliers. Moreover, Tesco still occupy unchallengeable market dominance within a formidable food retailing oligopoly. (Tesco 2007)

THEME INFLUENCES POLICIES AND DECISIONS OF TESCO. WITH

                              REGARD TO GLOBALISATION

       The long term aim and objective and the aggressive actions of Tesco plc  pushed the company to move outside UK and this was the most important reason that pushed the company to establish outside United Kingdom. In 1993,  Tesco purchased Catteau S.A 92-store grocery chain in northern France for the total of  paid £175 million .Other Tesco expansion target move were more successful in 1990s. The company acquired William Low in August 1994 in Scotland by gaining 57 stores in Scotland and northern England. Thus, in 1994, the company moved to central European market to purchase 43 stores in northwest Hungary.

                      EVALUATE THE EFFECTIVENESS AND RESPONSE OF TESCO

        The response of Tesco plc was to move into the burgeoning central European market. The company purchased 51 percent stake in Global and 43 stores in northwest Hungary. In 1995, Tesco moved to Poland by acquiring 31-store Savia chain for £8 million. The Tesco also move to Czech Republic and Slovakia to acquire 13 Kmart stores that it soon converted to Tesco name. In 1997, Tesco moved to Ireland by acquiring the Irish food retailing businesses of Associated British Food plc for £630 million and made the company to lead the market share in both the Republic of Ireland with 75 stores and Northern Ireland with 34 stores. The response of Tesco to gain international market made it to enter Thailand in 1998, South Korea in 1999, Taiwan in 2000, Malaysia in 2002, and China in 2004. The existing operations of the company abroad are successful by several acquisitions. This include  including the 2002 purchase of HIT, a 13-store chain located in Poland, the 2003 purchase of Kipa, a four-store chain in Turkey, and the 2003 acquisition of the C Two-Network, a chain of 78 food stores in Japan.(Tosco 2007)

      EVALUATION OF TESCO’S SUCCESS IN DIFFERENT COUNTRIES.

         Tesco first launched its international expansion in 1995 by opening in Hungary. Its success in Hungary made the company to open another supermarket two years after in Poland, the Czech Republic and Slovakia .A year after, the company opened another super store in Ireland. In just two years, Tesco had opened in four countries. Thus in 1998, Tesco entered Taiwan and Thailand. In 1999, the company again opened another store in South Korea. Thus in 90s, the success of Tesco had gone rapidly that it was able to establish in eight countries. Year 2000s is also years of success for Tesco because in 2001, it entered Malaysia and in 2003, it opened another superstore in Japan and in 2004 it established in China and it was in 2006 that the super-giant  Tesco decided to enter USA.(Tesco 2007)Thus the success of the company is very tremendous at  the  at international level. Apart from its success in UK as the largest retailer and one of the world’s leading international retailers.

Tesco is also a leading international retailer with a long-term strategy for growth. The company turnover reached £33,974 million with pre-tax profits of £2,029 million in the year to February 2005. Apart from its success in the early year of 2005, Tesco also has 2,467 stores and employing over 370,000 workers in the 13 countries. In Turkey, Slovakia, Czech Republic, Poland, Hungary and Ireland   Tesco is controlling 305 stores and over 61,000 employees. In Asia, the company has 343 stores and over 40,000 employees across in China, Japan, Taiwan, Malaysia, South Korea and Thailand. Thus, the operation of Tesco in these countries has reached hypermarkets, Superstores and supermarket.

At international level, the total company international sales grew from 13.1% to up to 20.9% in the year 2005

          In The Rest of Europe, the company sales rose by 13.4% to £4.3bn  and underlying operating profit increased by 18.5% .In Asia, sales grew by 12.8% to £3.2bn and underlying operating profit increased by 24.6% to £152m .The Tesco  international operations have continued to grow. In Poland, the company success has increase tremendously .The company now has 280 stores which include 49 hypermarket In Check Republic, Tesco is now one of the leader on the market .In Slovakia, the Tosco compact market has been very successful  with strong market position. The low prices that the company always offers to the people attract more customers to the company and the strategy has improved the sales of Tesco in the country.

          The success Tesco in Hungary is tremendous. The company now has 101 stores in the country .Its strategy is by beating the price down to beat its competitors.

Tesco is also market leader in Ireland with 95 stores. The Company business is going strong daily in Poland with growing market shares. The company investment has added to the increase in sales by 14% in the year 2007.

         In Turkey In Turkey  Tesco has  15 hypermarkets  with achievement of  good sales growth  It has also successfully improved margins and a strong profit increase by lowering prices and raising staff levels to beat the competitors.

Apart from Europe, Tosco is also making progress in Asia. In Thailand, The Company has become market leader by making strong sales, profit and market share growth. The company now has 107 stores trading across the country including 46 Express stores.

 In Korea, The Company has continued to make excellent progress by recording increase in sales, and making excellent profits and returns. Since Tesco entered Korea, it has successfully opened three new hypermarkets and has opened the first 45,000 square feet compact hypermarket in Namdaegu. The company has also introduced the Express convenience format with seven stores trading. Apart from this, Tesco has also acquired 12 stores in Pusan, including three compact hypermarkets and nine potential Express stores from Aram Mart. The company organic store development programme is accelerating, with 31 stores.

Tesco is also making a good progress Taiwan by delivering a strong sales performance, by increasing market share. Tesco now have six hypermarkets in the country

The company is also experiencing sales growth in Malaysia with five stores under construction, including two new hypermarkets. Tesco has also opened six hypermarkets with anticipation of trading in 11 stores very soon.

        In Japan, the company experimented the selling of fresh foods with C-Two’s grocery operation to improve the overall offer for customers. The business now trades from 104 stores, with 15 new stores (Tesco 2007)

                        PROBLEMS OF TESCO IN DIIFFERENT COUNTRIES

Despite all the achievement of Tesco globally, there are still political, economic environmental and social problems the company is facing in outside UK. For example, in Hungary Tesco-Global Stores was forced to pay HUF 5 millions fines for misleading the customers. The Hungary’s Competition Office (GVH) launched an inquiry into a sale at Tosco and based on the office’s findings, they accused the hypermarket was selling goods at prices above the control prices.

             Additionally, in some countries the business of the Tesco giant sometimes paralyse due to the political unrest and violent crimes. In   the Far East. For example, in December of 2001, the Tesco plc building narrowly escaped being destroyed by the missile launched by the terrorist on Thailand territory. However, in recent years the Malaysian government has taken actions against the large investors in the retail sector. The government has put a five-year ban on the establishment of any new hypermarkets in the country especially in Kuala Lumpur, Penang and Juhor Bahru. There was even a time the Malaysian government publicly announced that the Tesco giant might have negative effect on the economy if allowed to expand in the country.

       Other problem the company is facing is social problem. For example, In Thailand there is a large difference between people with high-income level and low-level income earners. Thus, most people with low incomes find it difficult to buy Tesco products.

 In Poland, the population of the country is mainly Roman Catholic. The left wing political parties have accused Tesco of undermining the traditional value of Polish. Although the criticisms have always come from the people with low-income level in the country who are suspicious of foreign investors. The Other problem the company is also a facing in its inability to establish successfully in the United States. There was a report that giant Tesco is delaying opening of Fresh and Easy in Neighbourhood market stores in the U.S. due to the huge stock shortages the company is experiencing. (New Europe 2008)

      DISCUSSION AND DEMOSTRATION THE AREAS OF IMPROVEMENT

      Tesco has continued to demonstrate the commitments the country where they are operating. For example, the largest percentage of the employee in Asia and Europe are local employees. Apart from this, the company is also sensitive to the standard of living of the local people. Thus, the company is constantly lowering the prices of the products so that their products will be affordable to the large number of the people in the country they are operating. Thus, Tesco will still be greater at present and in the future by keeping to their aims in by serving customers better consumers

                                     FINDINGS

¬†¬†¬†¬†¬†¬†¬†¬†¬†¬† The research has revealed that Tesco plc remains British retail grocer giant with profit that reached ¬£2bn. presently; the company is operating in 13 countries with over 326,000 employees and remains world’s biggest online supermarket with anticipated 300 percent expansion over the next five years. In the UK, its largest market, sales for the year to continue to increase with 702 stores that made it the largest food retailer in the United Kingdom. The research has also revealed that Tesco has continued to increase its market share through its policy of offering cheaper prices, offering better value for the customers. The finding has also revealed that the company share of the UK market has grown steadily since the early nineties but dropped in the year 2000s.The research has¬† also revealed that the company international operation¬† has increased steadily by establishing in¬† 11 countries and further intention to establish in U.S and Hong Kong. The company should maintain by increasing the yearly net profit thereby increase the dividends to the shareholders. Apart from this, to lay off its competitors, it should provide the customers with better service by continuing lowering its prices to maintain the constant patronising of the customers. More so, the company should avoid any actions that can draw it into legal conflict.

It should avoid selling the contaminated food or products that have expired. Moreover, Tesco has not yet operated globally, the company is only operating in 11 countries, and there are countries in Europe and Asia that the company has not yet established. Countries like France, Germany, Holland, Belgium and other countries in Europe that Tesco has not yet established. Moreover, in Asia there are countries with better economy that Tesco should establish. Singapore is a country in Asia that has potential marker for Tosco products. Moreover, Tesco should establish in Canada and some countries in Latin America. Planning and monitoring helps the management in Tescos plc treat their employees with consideration and pay them with the correct rate corresponding to their skills and qualification. Planning will help them design a program of induction, which will play a crucial role in helping new employees understand and engage with the Company’s retail vision and values. They will make sure that the working environment is suitable to the employees to achieve their duties without feeling insecure, unsafe and restraining them from enjoying themselves while working. Close circuit cameras are installed and kept on 24-hours/7 day operation in order to keep resources on sight.  The cameras are used to track down potential shoplifters and to see what is going on in the stores.

                                 CONCLUSION.

          In 1990s until the year 2000s, it is very important that the giant Tesco has learned the lesson from the past mistakes it has made. Moreover, the research is to elaborate the activities of Tesco company.It understands that the research will help to improve the globalisation of Tesco as it is noted that the company has not yet taken the advantage of the overall world market. There are still billions of  potential buyers of the Tesco products which spreads  all over the world.(Fernie 2005)  Moreover , the Tesco international expansion has been   a very good strategy and  once Tesco has understood the shopping habits and preferences  of local people foreign countries there will  be expansion of  new markets for Tesco organisation. Moreover, since the customers in different markets have different preferences. The local people should be put in charge of newly opened stores to increase the chances of success for Tesco. With  UK grocery market has been known to nearly reached  saturation, Tesco has been able to  prove  that  there is potential for long-term growth and profits with its expansion  in the non-food sector, retailing services and expansion abroad.(Referaty).Moreover the  selling and buying of property that the company has lunched into is real  advantage for the company.

With its strategy, Tesco has able to be one of the largest independent providers of conveyancing services in England and Wales. This also by providing a comprehensive legal service to homeowners¬† ¬†in England and Wales. Thus, the customer can easily c get an immediate online quote for buying or selling of properties we they are interested in and all actions of the Tesco is to beat its competitors in all level and helping the company to speed things up once a sale’s agreed. Thus by simply¬† providing the company¬† with the details and the value of the property by ¬†getting ¬†an instant quote. With this system Tesco has been able to diversify its business into several¬† sectors thereby making the company to be more stronger than any of its competitors With its ¬† scheme to offer home to low income earners and¬† helping the with low wages to process the house. This has also helped ¬†many young buyers who ¬†are still paying off graduate loans to be able to process the house of their own .Thus, its scheme to provide the houses for all has viewed by observers to be the best charitable offer any company can offer the community. The company policies to its workers and the people are the best any of the UK company has ever offered to the people of UK and the citizens of the countries which Tesco is operating.

REFERENCES

TESCO every little helps (2007) Our History (Online). Available from: http://www.tescocorporate.com/asiadetailed.htm (Accessed 8 April 2008)

Drandsfield Rob .2005. GCE  AS Level Business Single Award for OCR. Heinemann .UKP.137.

Drandsfield Rob .2005. GCE  AS Level Business Single Award for OCR. Heinemann .UK P.139.

BBC News (2008). Tesco fined over out-of-date food(Online) Available from http://news.bbc.co.uk/1/hi/wales/south_east/7204682.stm ( 8 April 2008)

BBC News(2006). Shoppers ‘facing empty shelves'( Online). Available from http://news.bbc.co.uk/1/hi/business/6190063.stm (8April 2008)

CNW Group(2007) TESCO CORPORATTION(Online) Available from http://www.newswire.ca/en/releases/archive/February2008/24/c5351.html ( 8 April  2008)

THE EUROPEAN WEEKLY.NEW EUROPE.(2008) Not enough stock, Tesco halts US store openings(Online) Available from http://www.neurope.eu/view_news.php?id=8496(9 April 2008)

John Fernie,J  2005. International Retailing.Emerald Group Publishing

Referaty.SK. TESCO.(Online) Available from http://referaty.atlas.sk/cudzie-jazyky/anglictina/33669/?print=1 ( 9April 2008

TESCO PROPERTY MARKET .Home Information pack.(2007)(Online) Available from http://www.tescopropertymarket.com/Magazine/Financial-and-legal/Buying-a-home/Home-information-packs/Page-1 ( 10 April 2008)

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