Developing Enterprise Assignment Sample
1. Introduction
A successful business meets customer demands, maintains sustainability, attracts new talent as well as creates innovative opportunities. All these enhance the profitability as well as productivity of the business effectively. In this report, the business module of TESCO Company has been discussed and it has allowed the readers to understand the current financial condition of TESCO properly. The marketing strategies, pathways that TESCO has undertaken are well discussed in this report. In addition to this, the interpretation of annual cash flow is done properly and the intellectual property of the company is explained effectively.
2. Customer base and proposition of value
TESCO Plc. is a merchandise retailer that sells a variety of grocery products to customers. According to Hashim et al. (2021), a proper customer base allows organisations to increase their sales as well as enhance their revenue. It has been noted that organisations analyse their customer base in order to expand the business as well as maintain sustainability (Ranta et al. 2020). TESCO has sold a variety of retail products such as cookies, groceries to the customers and has increased the customer base by delivering good quality products at affordable prices (Tescoplc.com, 2021). For example, TESCO has cut the prices of the products to almost 30% in order to simplify shopping and increase the customer base. Moreover, the organisation has a motive to enhance the customer base with the help of online sales through their official website. According to Bailetti et al. (2020), TESCO has increased the positive attitudes of the customers to almost 4.5% and this has enabled the organisation to increase its revenue effectively. The organisation has a strategy to enhance the customer base by providing them with sustainable, affordable as well as healthy food (Tescoplc.com, 2021). This has allowed the organisation to enhance customer satisfaction to a greater level.
As seen in the SWOT analysis, TESCO has a high market share as well as diversified stores in various geographical locations such as Europe, North America. In addition to this, more than 360,000 employees work in TESCO resulting in the formation of diverse and healthy food products (Tescoplc.com, 2021). This has helped the organisation to increase its brand value by generating more sales as well as attaining high profitability. It has been noted that the brand value of TESCO was almost “7.68 billion GBP” in 2020 (Statista.com, 2021). In addition to this, TESCO has obtained a value of almost 4.2 billion USD in edible grocery sales online. The organisation has increased the brand value by offering people sustainable as well as healthy products at affordable prices. The large market share, as well as high revenue, has enabled TESCO to offer good quality products to the customers. Moreover, it has been seen in the PESTLE analysis that the political condition of the UK is quite stable and the exit of Brexit from the European Union has enabled various businesses to flourish properly (Refer to appendix 1). Thus, it can be argued that TESCO has got an opportunity to provide employment to several effective people. As a result of this, the productivity of the organisation has been increased and the brand value has been enhanced. [Refer to appendix 1]
3. Structure of business
It has been identified that the business structure at “Tesco” is a “hierarchical organizational structure”. The obligations, as well as the positions in this structure, are classified into multiple parts for ensuring that the work is done smoothly and efficiently as well. The individuals at the top and high positions are at the helm of the greatest authority as well as responsibilities (rgcharting.com, 2022). Tesco’s “corporate governance chart” depicted in the chart below shows that its organizational structure is composed of five committees in total which report to the “Tesco PLC Board” (rgcharting.com, 2022). In addition to this, it can be understood from the chart that there are a total of 11 members of the “Tesco Executive Committee” which are led by “Group Chief Executive”. Therefore, it has been concluded that “Tesco’s” chart of organizational structure is explicitly hierarchical and this depicts the wider business scope of the retail company (rgcharting.com, 2022).
Figure 1: Tesco corporate governance chart structure
(Source: orgcharting.com, 2022)
Apart from this, the “Board of Directors” of the retail company comprises of overall 10 members. Even at the store level, 4 layers of management are present at some of its large stores. The following Figure 2 illustrates a general organizational structure in Extra, Metro as well as Superstore formats (research-methodology.net, 2022). Notably, the structure at “Tesco” is not rigid for every store of the retail company, and some of its stores are operating with a little distinguished structure reflecting its range, size, location, and other specific factors of the store.
Figure 2: Tesco’s store-level organizational structure
(Source: research-methodology.net, 2022)
It is argued that three or more layers within the management of a single store might lead to unnecessary bureaucracy resulting in a hampered flow of orders and information across the layers of management (research-methodology.net, 2022).
4. Insurance
“Insurance” is deemed as a crucial aspect of any business, and it is significant in assisting in protecting the revenue streams. In addition to this, it also helps to solidify the professionalism of the experience that is being offered to the customers. It has been evaluated that “Public liability insurance policies” are significant in providing cover from claims made by “third parties” for injuries or property damage. It was during the construction of “Tesco’s” supermarket above a railway tunnel when the tunnel collapsed due to which the railway line and the “Network rail” remained closed for a period of 51 days. “Tesco” was deemed liable for paying the losses incurred by the train operator under the terms of the contractual deed. The retail company then tried to recover this loss from its insurers but the claim failed. It has been observed that the policy was only covering the claimant’s liability regarding the third parties. The contractual policies might have provided cover to the train owner in case it had also owned the track which actually suffered damages and the other damages might have been covered along with the damages incurred by the track.
5. Intellectual property
Intellectual property consists of various types of products that organisations produce for meeting customer needs as well as increasing customer satisfaction. According to Rodríguez et al. (2018), the promotion as well as advertising the innovative products with proper consent and utilisation of rights also falls under intellectual property. It has been noted that TESCO has produced food items such as “Rocks Organic Orange Squash”, “Tesco chopped garlic” and many others at a very low price (Tescoplc.com, 2021). All the products sold by TESCO are made of healthy ingredients and at affordable prices. For example, 225 g of TESCO’s “Canadian cooked prawns” are sold at £ 4.25 (Tescoplc.com, 2021). Thus, it can be argued that creative products sold at affordable prices increase customer satisfaction and in turn, enhance profitability. According to Lin and Peng (2018), patents, copyrights, trade secrets as well as trademarks are components of intellectual property and enable businesses to attain success as well as a competitive advantage. TESCO protects the “intellectual property rights” and these legal rights are licensed by the third parties effectively (Tescoplc.com, 2021). In addition to these, all the legal rights regarding the content of their website are owned by TESCO itself.
The content and website of TESCO are protected as well as perceived by “international copyright laws” as well as database rights. It has been noted that information regarding the trade is protected well by the database rights of the organisation so that no vital information regarding the trade of products is leaked. According to Samuelson et al. (2020), proper control over trade secrets enables organisations to mitigate the chance of financial as well as monetary loss risks effectively. TESCO has declared that no users should exploit their website page and use their trademarks for disrupting their business (Tescoplc.com, 2021). It has been noted that under Data Protection Act, 2018, TESCO uses its data transparently as well as lawfully and does not allow any other parties to use their logos, trademarks as well as information based on trade secrets illegally.
6. Marketing
Organisations focus on proper marketing in order to gain profitability and productivity. According to Rosnizam et al. (2020), proper business marketing enables organisations to attain a competitive advantage and increase the satisfaction of customers efficiently. TESCO’s marketing procedures are discussed with the help of 4 P Marketing mix procedures and these are described below:
Promotion- The strong brand image, as well as the brand value of TESCO, is mainly because of its good quality products at affordable prices. As stated by Jonah (2018), the brand values increases with proper promotion through advertising, ads, and many more. TESCO uses hoardings, various television ads to promote their brand effectively. It has been noted that a charitable event takes place in TESCO, known as the “TESCO food collection” (Tescoplc.com, 2021). This event enables organisations to raise meals as well as funds for the needy people of the community. It has been observed that this program has become very successful and TESCO is able to raise more than 1.5 million meals for the poor as well as sick people during the pandemic (Tescoplc.com, 2021). Thus, it can be argued that the conduction of proper charitable events increases the brand image and in turn, helps in the proper promotion of the brands.
People- TESCO targets audiences of every gender and with all economic conditions. According to Cao et al. (2019), offering the best products at lower prices enables TESCO to attract customers from lower economic classes as well. In addition to this, TESCO believes in diversity as well as inclusion and thus, develops products for every customer irrespective of their class, race, and financial conditions (Seidu et al. 2021). In addition to this, TESCO looks after the colleagues and has provided a supportive atmosphere for the employees to work. It has been observed that TESCO has initiated a “This Is Me” campaign, where every employee has the freedom to share their thoughts as well as report their problems (Tescoplc.com, 2021). This has enabled the organisation to enhance employee engagement efficiently. Moreover, TESCO offers a loyalty card known as the “TESCO club card” and this has enabled the organisation to segment audiences as well as target audiences effectively (Tescoplc.com, 2021). It has been noted that the loyalty club offers discounts to the customers and in turn, helps the organisation to target proper customers effectively. According to Dolega et al. (2021), both employee engagement and customer satisfaction allow organisations to attain competitive advantage and high profitability at a greater level. It has been noted that TESCO value employees as well as audiences more than anything else and work harder to fulfil their needs and attain their satisfaction.
Price- The prices of organisation’s products enhance the gratification of customers and in turn, increase organisation’s efficiency. According to Chen et al. (2019), customers are more attracted to the products of an organisation if the best quality products are sold at lower as well as affordable prices. TESCO aims to deliver a variety of innovative products at a proper price so that every customer can afford to pay for the products. For example, TESCO offers “Fusilli Pasta” at a price of only £ 1.00 per 500 g. TESCO has launched a program known as “Brand Guarantee” where the customers get discounts in prices if they buy more than 10 products at a time (Tescoplc.com, 2021). TESCO has upgraded its employees so that they develop products at lower affordable prices and meet customer demands effectively.
Place- TESCO has more than 7000 stores all across the world including Europe, North America, Ireland, and many others. TESCO has classified its stores as “TESCO Metro”, “TESCO Express”, “TESCO Extra” and many others. According to Ren (2021), expansion of businesses along various geographical locations enables organisations to achieve competitive advantage as well as high productivity effectively. The superstores of TESCO are large shops that sell a variety of non-food items including sanitary products (Tescoplc.com, 2021). On the other hand, the total area of TESCO Metro is 1000 square and this allows several customers to purchase their food products according to their needs.
7. Terms, conditions, and Contract
TESCO Plc. operates their websites on their own following the “Companies Act 2006 in England and Wales. It has been noted that the organisation is a “Private limited company” having its registered offices at Shire Park, TESCO House, and many others (Tescoplc.com, 2021). It has been observed that TESCO has appointed a special “Data Protection Officer” so that the privacy of every data as well as information is maintained properly. The organisation has set up terms and conditions in utilising their website and not publishing anything on their website regarding the products as well as trademarks. In addition to these, the organisation has undertaken “Standard Contractual Clauses” so that privacy rights are maintained (Tescoplc.com, 2021). Apart from this, an approved scheme known as the Privacy Shield has been undertaken by TESCO so that the information, as well as intellectual property of the organisation, is kept protected.
TESCO has declared firmly that no users are permitted to create any link with the company’s name as well as patents. In addition to this, the company should not be held liable for any financial loss of the customers if they access any links other than the company’s home website page. According to Li (2021), proper protection of a company’s information and privacy of data enables organisations to mitigate financial loss extensively. Moreover, the organisation takes full responsibility for personal information shared by the users and works properly in order to protect important information as well as data.
8. Pricing
Organisations set up prices according to the quality of products as well as the money involved in the manufacture of creative products. According to Ausloos (2020), high manufacturing costs enable organisations to increase the pricing level to a greater extent. However, it has been observed that TESCO offers quality products at a lower price and in turn, increases the customer’s satisfaction at greater levels. TESCO works with efficient suppliers so that they can improve the product manufacturing cost and offer products at the lowest affordable price.
For example suppliers such as General Mill, Mars and Princes work efficiently to reduce the manufacturing as well as production cost and sell high-quality products at lower prices. It has been noted manufacturing cost increases with the production of more waste during the making of products (Tescoplc.com, 2021). Hence, TESCO has made a partnership with Branston so that unwashed potatoes are sold excessively. These would double the shelf-life of potatoes and decline the food waste properly. It has been noted that TESCO’s strategy to reduce food waste has resulted in the reduction of cost because of waste to almost 65% (Tescoplc.com, 2021). Moreover, TESCO takes pride in selling fresh food products at affordable prices so that customer satisfaction, as well as gratification, is increased effectively. For example, the White Rice products of TESCO are sold at £2.32/kg and healthy oat drinks are sold at £1.80/litre (Tescoplc.com, 2021). In addition to this, TESCO sells environment-friendly home cleaning products at lower prices so that competitive advantage and high profitability are maintained.
9. Funding and Cash flow
The main funding of TESCO comes from “TESCO’s community Grants” and these have supported more than 1000 community projects from the year 2006. As stated by Ren (2021), funding enables organisations to enhance the work efficiency as well as functioning of a business. It has been noted that TESCO’s community grants have provided a fund of almost £ 4000 to support 6000 school projects, more than 2300 product making, and many others (Tescoplc.com, 2021).
Cash Flow depicts an organisation’s cash position and helps in calculating the inflow as well as outflow of cash. According to Ausloos (2020), cash flow helps in determining the standard financial position of an organisation effectively. According to the Annual cash flow report of TESCO, it has been observed that in 2021, the net cash equivalent was almost about £1978 million. In addition to this, the transaction cost of the company in 2021 was almost £6 million and the cost generated because of the organisation’s operations was almost £ 1586 million (Tescoplc.com, 2021). TESCO has faced an operating loss of £ 5482 million and a profit of £ 1736 million because of continuous operations. As stated by Ren (2021), cash flow helps in estimating the expenses spent by organisations during operational activities. It has been noted that annual revenue of the organisation was almost £ 57887 million, providing a huge success to the company (Tescoplc.com, 2021). [Refer Appendix 2]
10. VAT and TAX
TESCO takes responsibility for paying the taxes effectively every year. According to Budak and James (2018), payment of taxes at the correct time removes financial as well as tax burdens from organisations. It has been observed that TESCO pays a large sum of money as tax and in February 2021, the organisation paid “£5.2 billion of tax” (Tescoplc.com, 2021). Tax principles of TESCO are approved by the “TESCO Plc. Board” and it ensures whether the organisation has paid the correct amount of taxes in all the sectors they operate (Tescoplc.com, 2021). The Tax Director of TESCO presides over an audit committee so that taxes are paid properly on time. According to Liu et al. (2021), VAT provides an opportunity for the indirect tax payment system and it enhances the tax payment system more appropriately. It has been noted that TESCO at first feared giving VAT upon food items, however, later it got a proper VAT registration number and paid VAT properly every year.
11. Conclusion
The study can be concluded by saying that TESCO Plc. has adopted a perfect business model so that the profitability and productivity of the business are maintained. It has been noted that the organisation has made a strong customer base through its official website and provides the best quality products at affordable prices. In addition to this, TESCO targets audiences from every economic class and offers them a Loyalty Club Card. This allows the organisation to increase customer satisfaction and in turn enhance profitability to a greater extent. TESCO has an annual cash flow of almost £1978 million and net revenue of £ 57887 million in 2020. From the annual reports of TESCO, it can be explained that the high revenue is mainly because of the successful operations of the organisation. In addition to this, TESCO pays taxes regularly and has appointed a special officer to look after the privacy as well as protection of data effectively. This has enabled TESCO to mitigate the financial risks efficiently and in turn, enhance the organisation’s profitability.
References
Journals
Ausloos, M., 2020. Valuation Models Applied to Value-Based Management—Application to the Case of UK Companies with Problems. Forecasting, 2(4), pp.549-565.
Bailetti, T., Tanev, S. and Keen, C., 2020. What makes value propositions distinct and valuable to new companies committed to scale rapidly?. Technology Innovation Management Review, 10(6).
Budak, T. and James, S., 2018. The level of tax complexity: A comparative analysis between the UK and Turkey based on the OTS Index. Int’l Tax J., 44, p.23.
Cao, G., Duan, Y. and El Banna, A., 2019. A dynamic capability view of marketing analytics: Evidence from UK firms. Industrial Marketing Management, 76, pp.72-83.
Chen, D., Ignatius, J., Sun, D., Zhan, S., Zhou, C., Marra, M. and Demirbag, M., 2019. Reverse logistics pricing strategy for a green supply chain: A view of customers’ environmental awareness. International Journal of Production Economics, 217, pp.197-210.
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Hashim, M., Nazam, M., Abrar, M., Hussain, Z., Nazim, M. and Shabbir, R., 2021. Unlocking the Sustainable Production Indicators: A Novel TESCO based Fuzzy AHP Approach. Cogent Business & Management, 8(1), p.1870807.
Jonah, U.I., 2018. The Influence of Transaction Costs on the Business Performances of Tesco Supermarket. International Journal of Business and Social Science, 9(5).
Li, Y., 2021, April. Case Analysis of Financial Performance After Asset Integration. In 2021 6th International Conference on Social Sciences and Economic Development (ICSSED 2021) (pp. 571-578). Atlantis Press.
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Ranta, V., Keränen, J. and Aarikka-Stenroos, L., 2020. How B2B suppliers articulate customer value propositions in the circular economy: Four innovation-driven value creation logics. Industrial Marketing Management, 87, pp.291-305.
Ren, J., 2021, December. The Research of Tesco’s Current Investment Portfolio and Some Recommendations. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 1461-1465). Atlantis Press.
Rodríguez, P., Mendes, E. and Turhan, B., 2018. Key stakeholders’ value propositions for feature selection in software-intensive products: An industrial case study. IEEE Transactions on Software Engineering, 46(12), pp.1340-1363.
Rosnizam, M.R.A.B., Kee, D.M.H., Akhir, M.E.H.B.M., Shahqira, M., Yusoff, M.A.H.B.M., Budiman, R.S. and Alajmi, A.M., 2020. Market Opportunities and Challenges: A Case Study of Tesco. Journal of the Community Development in Asia (JCDA), 3(2), pp.18-27.
Samuelson, P., Golden, J.M. and Gergen, M.P., 2020. Recalibrating the Disgorgement Remedy in Intellectual Property Cases. BUL Rev., 100, p.1999.
Seidu, R.D., Young, B.E., Madanayake, U.H. and Clark, H., 2021. The UK retail industry and its effect on construction sectors. Journal of Emerging Trends in Economics and Management Sciences, 12(1), pp.27-33.
Websites
Orgcharting.com, 2022, TESCO COMPANY ORGANISATIONAL STRUCTURE CHART EXAMPLE, available at: http://www.orgcharting.com/tesco-company-organisational-structure-chart-example/#:~:text=Tesco%20follows%20a%20hierarchical%20organizational,the%20maximum%20responsibilities%20and%20authority [Accessed on: 21st January, 2021]
Research-methodlogy.net, 2022, Tesco Organizational Structure, available at: https://research-methodology.net/tesco-organizational-structure/ [Accessed on: 21st January, 2021]
Statista.com, 2021, Tesco PLC – Statistics and Facts, Available at:https://www.statista.com/topics/3807/tesco-plc/#dossierKeyfigures, [Accessed on: 21st January, 2021]
Tescoplc.com, 2021, About, Available at:https://www.tescoplc.com/about/, [Accessed on: 21st January, 2021]
Tescoplc.com, 2021, About, Available at:https://www.tescoplc.com/investors/reports-results-and-presentations/financial-performance/five-year-record/, [Accessed on: 21st January, 2021]
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