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.

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 value to its products by means of buying it from contractor for lower price, 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 throughout Great Britain. In Europe Tesco has 41 stores in Hungary, 32 in Poland, 13 in the Czech Republic and Slovakia, 33 in Northern Ireland, 76 in the Republic of Ireland and 1 in France, to prove that business meets its objectives successfully I’ll present some diagrams and company’s financial 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 billion (£17,800 million), an increase of 18.7% on the previous twelve months. This figure is for 53 weeks compared to 52 weeks for the previous year and includes the newly acquired businesses in Northern Ireland and the Republic of Ireland. On a comparable basis with the previous year, excluding the Irish acquisitions, turnover was £16.4 billion, and increase of 9.2%

• Profits on ordinary activities before tax, integration costs and disposal loss - £832 million, an increase of 10.9% on the previous twelve months.

Changing of company's financial fortunes 1992-98

T
he 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 50% of the profits were distributed to shareholders as dividends. Subsequently approximately £250 million was retained by the company for investment in 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 349p per share to 517p. It reached a peak in the period of 539p. In the year 1998-9, the price continued to rise, being 586p on 21st April 1998, and having peaked at 603p at the previous stock market high.

Market share of Tesco

I
n February 1998, Tesco had 15.2% of the UK retail food market. The company's share has increased consistently since 1992 when it held 10.4% of the market.

Graph 4: Market share growth 1992-8

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

Profit and loss account

T his 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.

U K 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.

S ales 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.

Tesco products are sent to stores from distribution centres around the country. Tesco runs 13 centres and a further six centres are run for Tesco by contractors. A typical centre covers 300,000 square feet and handles some 50 million units a year. The centres work around the clock, seven days a week, providing 2,500 deliveries daily, amounting to 19 million cases per week. Tesco employs 6,800 people in distribution (excluding the staff at the contractor-run centres), and has about 1,000 tractor units and 2,000 trailers in its national 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 needs are the advanced use of IT at all stages of the distribution system. Information from stores about their sales and requirements is sent to Tesco Head Office and from there to the distribution centres. The centres run a computer system that has been specially designed to fit with Tesco working practices and to maximise efficiency).

How does Tesco achieve maximum efficiency in its distribution centres?

Computerised information arrives via printers in the warehouse offices. The system feeds this information directly to the staff on the warehouse floor via radio links mounted on the fork-lift trucks. The system helps to control the movement of stock and the activity of staff. Thus when a person has finished a particular job, the computer decides which would be the most efficient job to allocate next to that person, based on his or her current position in the warehouse.

Also, in the past, Tesco’s operations have been slowed down at peak times by the need for product identification and purchase-order matching. Now each goods-in checker is equipped with a scan gun which can scan the outer case code of each product and radio the information back to the Head Office computer, which matches a delivery with its purchase order in an instant. As well as easing bottlenecks, this system enforces accurate outer case coding, which Tesco believes to be essential to future developments in its distribution system.

Human Resources

People are fundamental to business and the way company recruit, develop and reward people is the key to success. Human Resourcing in Tesco is therefore influential, leading edge and proactive to ensure continued success.

Human Resources at Tesco is divided into a number of central areas which focus on the design and research of Tesco HR policies and a number of front line HR professionals that work in partnership with company’s Line Managers to deliver the business plan.

Promote management development