Business at work

level, quality control, and giving talks and demonstrations to local

community groups.

Organising a taste panel

Market researchers will recruit customers who are shopping in the store.

These customers take part in the test only if they fulfil the recruitment

criteria that have been established for the product being tested. For

example,Tesco might ensure that all participants are heavy users of the

product, or a product aimed at children will be tested on children only.

As far as possible, consumers test Tesco products against a benchmark. This

other product is normally the market leader; testing against it allows us

to ensure that product matches or exceeds this quality standard. Products

are tested "blind" and identified by codes so that consumers do not know

which one is the Tesco product and which one is the benchmark.

The questionnaire is designed so that consumers give scores for various

questions, such as their opinion as to the appearance of the product; they

are also asked to tell us what they liked and disliked about the product.

Sensory analysis

Sensory analysis is a more technical evaluation of a product which is

carried out by consumer service officers who have been specially trained to

analyse the product using uniform objectives and technical descriptions.

They will evaluate the product and forward a description of it to Head

Office for use in the final report.

What is done with the data?

Data from sensory analysis, questionnaires and customer comments are

collated and subjected to statistical analysis at Head Office which will

lead to a product either passing or failing the tests. If it is failed, the

product is reformulated according to the comments made by customers in

response to the questionnaire. Products are then re-tested and will be

launched only when they achieve a pass result.

Implementing of quality assurance

Quality assurance is implemented at all levels in Tesco. Everyone is

"focused" on giving the customer the best possible shopping experience in

terms of service, quality, availability, price, car parking facilities and

store design. This "focus" is set in Annual Trading Plan and is implemented

through various departmental objectives and through specific training

programmes. Tesco invests large amounts of money in training, so that Tesco

can achieve specific objectives, for example First Class Service

initiative.

Usually each initiative has a sponsor, normally a Main Board member. It is

the directors and managers who brief the teams, and then it is up to

individuals to "buy in" to an idea. Tesco has found that this process works

well as it is not prescriptive and it allows people to implement new ideas

in their own way.

Setting standards for quality

A common tool for creating "benchmarking" standards is called SWOT

analysis. This stands for "strengths, weaknesses, opportunities and

threats" and it provides a useful way of evaluating quality standards.

Standards cannot exist in isolation, and SWOT allows comparison with

competitors to be taken into account. Tesco therefore uses SWOT a good deal

for specific products, for example in evaluating a new range of

merchandising or evaluating a new process provided by a supplier.

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.

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:

1. Group Turnover (incl VAT) - Ј17.8 billion (Ј17,800 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 Ј16.4 billion, and increase of 9.2%

2. Profits on ordinary activities before tax, integration costs and

disposal loss - Ј832 million, an increase of 10.9% on the previous

twelve months.

Changing of company's financial fortunes 1992-98

The 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 Ј505 million. About 50% of

the profits were distributed to shareholders as dividends. Subsequently

approximately Ј250 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

In 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

This year was another successful trading year for Tesco plc. Total sales

increased by 9.8% to Ј20,358m and underlying pre-tax profit increased by

8.4% to Ј955m. 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.

UK retail sales have grown 7.4% to Ј18,331m. 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 Ј993m 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.

Sales in the rest of Europe accelerated with total sales up 18.8% to

Ј1,527m and contributed an operating profit of Ј51m, 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 Ј357m up 96%. In South Korea, Tesco Homeplus

achieved sales of Ј140m in the period since acquisition. In the Asian

region Tesco made a small operating loss of Ј1m.

Tesco Personal Finance has now been trading for nearly three years and

share of losses this year are Ј4m compared to a Ј12m 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

Tesco does this by providing opportunities for everyone to increase their

learning, thus enabling Tesco to thrive in a constantly changing and

competitive market place. Tesco does this by:

designing training packages which equip people with the knowledge, skills

and experience needed to reach high standards of performance, and equipping

trainers to coach others thus maintaining excellent quality standards.

enabling training to be delivered in the workplace by people who know how

to do the job themselves.

exploiting new methods of learning, and thereby providing a supply of

general business managers for the future.

developing effective working relationships with colleagues and suppliers

through listening and challenging, and designing products which inspire

them.

Research and development of effective corporate human resource policies

Tesco does this by:

being constantly aware of UK and European employment legislation, and

translating it into policy that maintains a balance between cost

effectiveness, fairness, developing relationships with people, and

company’s business aims.

researching and developing people involvement strategies; this involves

analysing staff research, which includes both large-scale corporate surveys

and specialist staff research.

providing updates on employment law.

scanning and benchmarking other organisations, in order to import best

practice and maintain a competitive stance.

ensuring specific policies, for example regarding the employment of

disabled people and equal opportunities.

achieving external recognition, to ensure that Tesco is seen as a quality

employer.

Developing selection standards and implement corporate entry programmes

Two crucial roles for the Human Resources Department are:

developing selection standards which will enable managers to select the

best people who will continually increase value for customers.

implementing corporate programmes in order to ensure that the company's

manpower requirements are met.

Tesco does this by:

designing recruitment and selection processes which will equip managers

with the skill and knowledge to select the best.

training managers to maintain selection standards, and to select using the

most reliable and leading-edge processes.

developing corporate competency frameworks which enable managers to select

the right people, who have the skills the business will need in the future.

developing corporate entry programmes to ensure that corporate manpower

needs are met in terms of skills and numbers.

developing and implementing Tesco employment branding and marketing

strategy in order to ensure that Tesco is seen as a quality employer which

attracts the highest calibre candidates.

developing a pool of Excel graduates providing a supply of managers with

broad business experience.

developing at a national level links with leading education/industry

establishments, and planning initiatives whereby managers can develop links

with education at a local level.

Reward Development

Reward Development researches and develops rewards and organisational

design strategy which enable Tesco to recruit, motivate and retain the

best. Tesco does this by:

sourcing and analysing pay and benefits data to enable Tesco to keep

remuneration and benefits packages competitive.

continually shaping innovative ways of rewarding staff, thereby enhancing

the value of the reward package and increasing staff retention and

stakeholding.

developing performance management processes and tools which will improve

performance and encourage motivation in staff

providing advice and if necessary challenging organisational design,

thereby ensuring a maximum return on corporate reward spend and creating

organisational structures which will deliver business goals.

HR professionals

HR professionals operate out of the Line, working as part of the senior

management team in order to influence and implement HR strategy. They work

closely with the central HR departments and line managers to deliver key

aspects of company’s business plan:

Develop the best

Recruit the best

Retain loyal and committed people

Live the values of the company

Transfer HR skills effectively to the line.

Hence these functions help meet the objectives successfully. All Tesco’s

organisation structure works as links of a chain, if one link falls down,

all the organisation will experience difficulty. For example, most

important department of Tesco, I consider, is Distribution department. If

this department fails, products will not be delivered to the store, so

customers will go to another store. Tesco’s success is built on the good

work of each department.

As an example, Tesco has recently introduced Customer-Oriented

Initiatives, such as:

Loyalty cards

Clubcard was test-launched in October 1993 and was rolled out nationally

in February 1995. Clubcard has transformed the retail grocery sector and

has brought Tesco closer to its customer. At the heart of the programme is

one of the most sophisticated customer databases in Europe.

Clubcard is a magnetic "swipe" card obtained free in store. The checkout

assistant swipes the card prior to scanning the customers shopping. For

every Ј1 spent, one point is earned. Each point is worth 1p. When shopping

at the originating store, the till receipt advises:

. Points earned from that shopping trip

. Points accumulated during the quarter.

The points earned are recorded on a central computer and are converted into

money-off vouchers every quarter.

Customers can earn Clubcard points at:

. Tesco stores

. Tesco petrol stations

. B&Q

. Energi - through Norweb

. Tesco Personal Finance

. Tesco Home Shopping.

In addition Clubcard has recently been extended to Ireland and to the Tesco

Vin Plus store near Calais.

Home shopping

Many people today,

both single people and couples, are working longer hours and do not want to

spend part of their leisure time making a trip to the local supermarket. To

help people save time on shopping, Tesco has introduced Home Shopping, a

service which makes use of information technology so that people can do

their shopping via the Internet from their home computer. This was first

introduced on CD-ROM in July 1996, and Tesco followed this up by becoming

the first UK food retailer to offer an Internet-based home shopping service

in November 1996.

Personal Finance

In 1997, Tesco

decided to extend its customer offer to include personal financial

services. In partnership with the Royal Bank of Scotland, Tesco is

providing new ways of banking and other services to its customers.

C 3.

The impact of ICT on internal and external communications

Importance of ICT

IT is vital to Tesco because every aspect of its operation is controlled

or monitored by IT - stock, distribution, payroll, accounts, and so on. For

example, when an item has its barcode read at the checkout, the system not

only logs the price onto the till, but also logs the financial transaction

between Tesco and the customer and the fact that the stock has been reduced

by one item. On the distribution side, instructions from the mainframe

computer are sent directly to fork-lift truck operators at depots by radio

links.

All stores are connected to the mainframes at Head Office via the Tesco

Network. There are a large number of different applications that stores use

both independently and via the mainframe connection. For example there are

Personnel and Scheduling systems in-store, and access to electronic mail

via the mainframe.

IT capacity

Tesco has a three-level architecture with mainframe, middle system servers

and PC clients. Their main frame has a 6 million Mb storage capacity

(equivalent to 6 million 500-page books!). Their private digital network to

600 stores has a capacity of 11.5 Mb. They use some 100 Tesco-written

computer applications and over 200 PC packages.

How much does Tesco spend on IT each year?

Last year, Tesco spent about Ј133 million on IT, that is about 1.4% of

turnover.

How does that compare with other companies?

A recent independent survey of Europe's leading 500 companies in all

commercial and industrial sectors placed Tesco 112th overall in Europe in

terms of IT spending, but 3rd in the list of European supermarkets, and 1st

amongst British supermarkets. [Source: Information Week 19-20/12/97].

How many on-line card authorisation requests does Tesco receive each day?

Over one million on-line card authorisation requests are dealt with every

day.

Internet site

The Internet site receives 250,000 hits per week and was used to launch

Tesco’s home shopping service and the Tesconet Inertrnet Service provider.

The internet site has proved to be a great success, with the introduction

of Tesco Direct, the home ordering and delivery service. Such “home

shopping” is becoming increasingly important as more and more customers

gain access to the internet via home PCs. Sainsbury’s, one of Tesco’s great

rivals, has also now launched its own home delivery service via the

internet.

[pic]

Tesco own Internet site. Home page.

ICT systems used by Distribution Department

IT has revolutionised all aspects of the selling, ordering, distribution

and analysis of Tesco products. The operation of Tesco large distribution

centres is a highly complex business. In recent years new computer systems

have revolutionised distribution operations, allowing more effective stock

control procedures, increasing productivity and making the best use of

time, space and labour.

The base system used to control the distribution operation was purchased

from Dallas Systems and customised to Tesco requirements. There are two

particularly important sub-systems, known by the acronyms DCOTA and DCAMS.

DCOTA (Distribution Centre On-board Terminal Access) is a system which

sends information by radio directly to the special terminals in the trucks

of the fork-lift truck

drivers at the distribution centres. The system controls the movement of

stock and trucks in order to make the most efficient use of time and space,

automatically matching up locations and trucks. As soon as one assignment

is finished, the next brief will be transmitted to the truck-mounted

terminal, showing the driver where to go next. Every warehouse location has

a check number prominently displayed on the racks; this number is entered

by the driver each time he visits a location, enabling the computer to

check that each pallet has been placed in the correct slot.

DCAMS (Distribution Centre Assignment Monitoring System) is the system that

monitors how far each job has progressed, and the deployment of staff. It

is available to supervisory staff via hand-held radio frequency terminals,

enabling them to predict and pre-empt problems by re-deploying staff and,

if necessary, changing work priorities.

Radio frequency communications are also used in the checking in of goods.

Ordering by stores now relies heavily on IT, using Sales Based Ordering.

Data is received by the distribution centre from the Head Office mainframe

system, and then passed to the warehouse systems described above.

These mainframe computers are among the largest in Britain. The mainframes

are either IBM or compatible (Amdahl), running IBM operating systems. There

are mainframes situated in two separate locations.

The loss of a whole mainframe would have serious effects, and for this

reason company has two mainframes to provide backup capacity. In the event

of a disaster which involved the complete destruction of one of the

computer centres, the other could re-establish these vital systems within

48 hours. The backup procedure is tested regularly each year.

The backup systems for the distribution depots include specialist routines

that allow depots to switch between computer sites, and are at the leading

edge of data processing technology. If a complete computer centre were

lost, IT communication with all affected depots would be re-established

within six hours at the most.

Goods are now ordered from suppliers using a system called Electronic Data

Interchange (EDI). Orders for goods are transferred to the suppliers

electronically using a service called INS-TRADANET. The use of EDI keeps

suppliers precisely informed of Tesco requirements for company’s stores. It

allows Tesco to run the business more effectively and efficiently because

of its speed and accuracy. It is both quicker and more cost-effective than

telephone, post or fax, and eliminates errors due to loss, or to wrongly

printed orders.

EDI is also used for:

sending sales forecasts so that suppliers can anticipate demand and reduce

lead-times for stock to reach the stores

securing the best payment terms and discounts for Tesco

simplifying the invoicing process, so that invoices are generated

automatically and postage and paperwork are eliminated

working internationally, to eliminate time and language differences.

ICT systems used in Management.

Management Information is data stored electronically for use by business

executives at all levels to support their decision making. This type of

information is typically historical, and needs human interpretation before

a decision is made. Tesco is planning to introduce a new system, called

Data Warehouse, which will give much greater analysis and flexibility, and

will further enhance the ability of managers to make informed decisions.

The sections below describe Tesco’s current Management Information

environment, and the planned Data Warehouse, broken down into four topics:

Business use, Technology, Data and Analytical tools.

A) Business use

Current Management Information

Access to summarised data at pre-defined levels

Most decisions made at a macro (e.g. regional level)

Planned Data Warehouse

Access to in-depth information for informed decisions

Decision made at micro level, e.g. in store

Use of balanced score carding for suppliers, stores, etc. with supporting

details

Use shopper behaviour to influence new lines, promotions, and product

ranging.

B) Technology

Current Management Information

Mainframe, text-based reporting and analysis

Downloaded to local PCs for in-depth analysis and graphics

Planned Data Warehouse

Specialised hardware and software to manage data (the 'Information

Warehouse')

Information from the Information Warehouse to be accessible from anywhere

within Tesco and available also to designated outside users, e.g.

suppliers, agencies

Cost of computer hardware and software is "scaleable", i.e. Tesco can add

processing power and storage capacity at reasonable cost and in manageable

chunks to keep pace with the information needs

Dedicated NCR machine and peripherals.

C) Data

Over 10 million customers, over 60,000 products and 586 stores

Current Management Information

Data held on mainframe, PC or on paper

Internal data analysed using SAR reports and MAS analysis tool (see below)

External data received by EDI or on paper

Planned Data Warehouse

Data collected from Tesco operational systems and external sources, and

stored centrally to provide one consistent source of information

Data is stored on customer behaviour, product performance, branch

performance supplier performance, depot performance

Data held at lowest level to enable ad hoc groupings,

e.g. salt sales in stores by the seaside last Easter.

D) Analytical tools

Current Management Information

Mainframe based

FOCUS - report generator

SAR - report viewer

MAS - Tesco-written multi-dimensional analysis tool

PC Lotus suite - spreadsheet and database applications

Planned Data Warehouse

A simple interface with the information using the score card concept, with

top level measures and capability to "drill" to the level of information

required to support decisions

IT populate the Information Warehouse and users control their reporting

requirements

Logical access to information, with user choice of level, groupings,

stores, products, measures, and other parameters

ICT systems used in store operations.

IT is essential to the running of a modern store. It is used for planning,

monitoring and auditing store operations. In fact, the logistics of running

a major store would be severely hampered without IT, and the expansion to

Superstores and Hypermarkets would have been difficult without modern IT

developments.

Tesco stores vary greatly in size, from small Express stores covering 2,500

square feet to giant hypermarkets covering 120,000 square feet. The product

range depends on the size of the store, and varies from 2,000 lines in a

small store up to about 40,000 lines in the biggest. Computerised Store

Merchandising and Planning systems ensure that Tesco get the right products

to the right store, and get the right amount of space on each shelf within

a store. This allows Tesco to get optimum sales for the space allocated to

the product, and gives the customer the most appropriate range of products.

A store can monitor what has been sold through the scanning operation at

the checkout. The introduction of barcodes and scanners not only allows

items to be checked out more easily, but it provides information that is

constantly fed back to the store's computer for the monitoring of sales,

both in terms of stock depletion and money taken.

Barcodes and scanners provide several benefits to company’s customers:

As purchases are no longer entered manually into a cash register, accurate

pricing is guaranteed.

The scanning till is faster, reducing the time for which customers have to

queue by about 15%.

Produce is now weighed at checkouts, removing the need to queue twice (once

for weighing and once at the checkout) as used to happen.

Improved promotions may be offered, such as Multisavers.

The customer gets an itemised till receipt giving details of the product

purchased, price, weight (if weighed), total cost and method of payment. It

also shows the store telephone number, plus details which will trace the

sale quickly if a customer has an enquiry.

Tesco benefits as much as the customer from the new systems. Notably:

Improved transaction accuracy: operator error is removed; fraud is limited

as there is no opportunity to enter a lower price on the keyboard.

Improved customer service - customers are important!

Improved productivity. There is no need to label each item with its price,

which can now be displayed on the shelf edge near to the product. Removing

separate weighing stations removes the need for a manned point in the

produce department; customers move through the checkout faster.

Selective promotions can be initiated.

Stock levels can be reduced as the exact quantity held is always known and

re-ordering can be made more accurate

Wastage of perishable goods is reduced, as they too can be ordered more

accurately.

Monitoring sales analysis and the effectiveness of promotions provides

valuable information for Tesco buyers and also the company's suppliers.

Every product has a unique number, the European Article Number or EAN.

This number is allocated to each product by the Article Number Association,

which oversees the operation of the numbers for all businesses in the UK.

The number can be found below the bar code. The bar code is a

representation of that number in a binary form that can be read by a

scanner. The scanner uses a laser and measures the difference in reflection

to the laser of the bars and spaces.

The EAN and barcodes normally consist of 13 digits, although there may be

only eight on smaller products. The first two digits are a national code,

representing the marketing country. The next five digits identify the

supplier of the product and the following five identify the product itself.

The final figure is a "check digit" based on the other twelve numbers,

which allows the computer to validate the code.

The introduction of IT in shopping has been matched by banks. This has

resulted in new developments in payment. The simplest of these is that

cheque details can be printed out by the till, based on the information

used to produce the receipt. Credit card vouchers can be printed similarly,

and credit card details read electronically from the card.

A further advance has come with Electronic Funds Transfer at Point of Sale

(EFTPOS). This allows Tesco to transfer money from a customer's bank

account or credit card account automatically. Two developments that have

come from this are the debit card and "cashback".

Debit cards are a means of purchasing without cash or a cheque. Unlike

cheques, there is no limit to the amount a customer can spend with a debit

card as the transaction is automatically checked at the customer's bank

and, providing there are sufficient funds in the customer's bank account,

the payment is then guaranteed to Tesco. Unlike credit cards, the customer

pays at the time of the sale.

The facility to give customers up to Ј50 in cash also comes from being able

to check the customer's bank or credit card account, and has proved a

popular innovation with customers, who are saved the necessity of a trip to

a bank or cashpoint.

Within a store there are two crucial systems that enable Tesco to sell

products. These are the front-end system, called ProgreSS, and the

replenishment system, SBO.

The ProgreSS system holds pricing details of the 60,000 different products

that Tesco sells, their description, and details of any special offers on

them. It records details about each sale, not just the amount of each item

sold, but whether the price has been reduced, the amount of money tendered

and the change given. It also controls Clubcard processing, registering the

points earned on the card. Whilst the system manages the main grocery

tills, it also has the ability to be aligned to specific business

functions. So different "personalities" are used within the garage,

pharmacy, hot chicken counter and pizza areas.

The system is also used to control the back office and cash areas. During a

normal day's operation the system will transmit batches of information to

the mainframe systems at Head Office. This is primarily sales data, but

also includes details on reduction sales and Clubcard details, together

with daily totals and so on. In return it receives price changes, and new

and delisted product information.

The ProgreSS system runs on an RS6000 machine.

The stock replenishment system is called Sales Based Ordering (SBO). As its

name implies, it orders new stock on the basis of what has been sold. It

also manages in-store stock control and the central ranging and ordering

process.

Whilst there are some 60,000 products sold by Tesco, even the biggest

hypermarket will stock only about 40,000 of them. Some Express stores will

stock only 2,000 lines. The system keeps track of what products are stocked

and how much is in the store, and is then able to use this information,

together with the sales data, to calculate how much more should be ordered.

Most products have to be calculated every day, on a one or two day lead

time (the time between ordering and delivery).

The SBO system also manages the recording of all store-based stock

movements (for example damaged goods, out-of-code waste, transfers to other

stores), stock count scheduling and validation. The stores also use the

system to influence their orders, for example factoring up expected sales

of ice cream when a hot spell is forecast.

ICT systems used by Customer Service Centre.

The centre provides a central customer service operation for the company;

it handles requests for information and customer enquiries. It also handles

the management and administration of Tesco Clubcard, and the processing of

orders for the Baby Catalogue and the Home Shopping service.

The scale of the operation, and the efficient organisation of staff to

provide exceptional customer service, requires the extensive use of IT both

in telephone and information systems.

To give you an idea of the scale of company operation, Tesco employs over

400 staff, both full and part-time. The Clubcard loyalty scheme has over 10

million customers. In a typical week Tesco get 100,000 telephone calls,

5,000 letters, and 1,500 e-mails from customers, and company generates

7,000 outbound letters to customers.

Tesco uses IT to manage 100,000 calls a week, both to organise the calls

efficiently and to provide information on the timing and length of calls

for planning and monitoring purposes. Among the systems Tesco uses are:

ACD - Automatic call distribution (Meridian)

This system manages the way calls get routed to Customer Service Centre

staff. Calls into the centre are distributed to ensure that call queues

are managed effectively. Real time monitoring facilities provide

information on service levels.

Call forecasting and scheduling system (QMax)

The distribution of calls varies significantly throughout the week. This

system is used for forecasting when calls are likely to be made. The

information is then used to schedule staff availability so that they are

there to take the calls.

IVR - Interactive voice response

This is a menuing system on the telephone to filter out those calls that

can be handled without an operator. The customer selects various options

so that calls can be transferred directly to the appropriate service or

person.

There are many ways in which IT provides and organises information for

Tesco. For example :

Customer services have systems to assist in logging customer enquiries,

handling responses and tracking progress on outstanding issues.

Tesco has an addressing system, based on the Post Office Address File, that

enables accurate addresses to be captured quickly.

Tesco has a knowledge base on an intranet to help staff deal with customer

queries. This contains frequently asked information about the company’s

stores, products, services and policies, as well as general information

about nutrition and healthy eating.

Management reporting is used extensively to provide information to the

business on customer concerns. Tesco is now looking at new technology as a

way of pro- actively reporting on any serious issues that emerge requiring

close, urgent attention.

Orders from Home Shopping customers may be received over the telephone, by

fax or via the Internet. These are collated by store and go through a

delivery scheduling system which plans the most efficient delivery route,

and are then transmitted to the stores for packing and delivery.

The Clubcard system enables staff to deal with customer queries related to

the service. This involves managing a large number of routine calls with

regard to changes of address, lost cards, and so on. IVR systems are used

to intercept these routine calls so that they can be handled automatically.

A1

Alternative approaches which might enable the business to better meet its

objectives.

The retail grocery market is intensely competitive today and no serious

contender can afford to rest on its past achievements. This should

encourage Tesco to pioneer many new ideas. By listening and responding to

customer needs, Tesco will continue to bring in new ideas and services. Its

latest venture, with the Royal Bank of Scotland, launched in November 1997,

is to offer customers competitive financial services through its stores. It

is fifty years since Jack Cohen opened his first self-service shop, and we

expect Tesco stores in fifty years' time to be as different from those we

know today as Tesco’s current stores are to the stores of fifty years ago.

Non-food retailing is a major part of Tesco strategy. Tesco is increasing

competition and offering customers real value and choice in all areas from

sportswear to software, electricals to spectacles. By introducing these

ranges to more of company’s stores Tesco also offer customers the

convenience of shopping for great value non-food along with their food and

household goods.

More choice in-store includes many new lines for the home and garden,

motoring and leisure, fashion and cosmetics. Opticians, mobile phones and

health and beauty are examples of departments that have been expanded to

meet customer demand. Tesco relaunched its clothing range to offer better

value, quality and choice.

In this year Tesco should continue to bring its customers big names at

competitive prices. Last year, for example, Tesco sold 14-inch Bush TVs and

Vodafone, Orange, One 2 One and Cellnet mobile phones at record low prices.

Film and batteries came down by 30% and cuts of between 15% and 50% are

being made on stationery, pet accessories, video tapes, CDs and DVDs and

many other popular products.

The convenience of shopping for non-food alongside food is what Tesco

should offer customers. At the start of the year Tesco already had 90

stores trading with full non-food offer in the UK. During the year Tesco

should increase this as much as possible through extensions, refits and new

store development programmes.

Through these programmes Tesco will have more Tesco Extra stores including

its newest at Newcastle upon Tyne. It is Tesco’s first UK store to be

designed and built to hypermarket blueprint, using many of the elements

which Tesco has found to be successful in European and Asian stores. It

has given to the company the opportunity to introduce a much wider range of

non-food products to the UK, giving its customers even more choice when

they shop at Tesco.

Through innovating and investing for its customers Tesco is leading the way

in new forms of retailing. Tesco is the largest on-line grocer in the

world, and through the rapid development of its e-business Tesco is now

offering customers real choice and value on the internet.

Tesco.com is new 100% subsidiary company that runs company’s e-commerce

business, which is an important part of company’s future strategy. Tesco

should ensure that it has a real focus, the relevant resources and can move

quickly.

Grocery home shopping business offers customers shopping on-line choice,

value and convenience. Hundreds of new customers are registering every day

and Tesco has the capacity to grow this business at a significant rate.

On the internet Tesco is not constrained by space as the store can be as

large as you like. Company’s Internet customers now have an exciting range

of non-food offers beyond food shopping - just a few clicks away. Tesco’s

new book store offers a choice of 1.2 million titles, with 50% off top

lines and Tesco has an entertainment store selling over 300,000 CD, video

and DVD titles.

Tesco’s European business is focused on the Republic of Ireland and the

four Central European countries of Hungary, Poland, the Czech Republic and

Slovakia accessing a population of 68 million people. In Ireland the

business is progressing well as Tesco near completion of rebranding

programme. And in Central Europe Tesco continue its rapid hypermarket roll-

out opening 11 stores and 1.3 million square feet in the year.

Regional focus and market leadership is a key objective of Tesco’s strategy

in Central Europe. Tesco is the only retailer in all four countries -

Hungary, Poland, the Czech Republic and Slovakia. Company’s portfolio now

includes 19 hypermarkets totalling two million square feet of retail space.

Tesco is meeting and stimulating demand in these markets as customers begin

to recognise the better choice, quality and value that Tesco offers.

Tesco is pursuing an active programme of store openings which will take the

company to 69 hypermarkets by the end of 2002, and will make the company

the market leader across the region.

The hypermarket blueprint is the focus of Central European activities. At

100,000 square feet or more, hypermarkets give Tesco the space to offer

customers extensive food and non-food ranges at outstanding prices.

Tesco is learning all the time. The format is internationally transferable

and adaptable to different regions, and part of the success has been to

supplement UK skills in grocery retailing and customer service with

international expertise.

In the Republic of Ireland Tesco should continue to make good progress.

Without the benefit of any new stores, sales increased by 6.1% in the year.

Cumulative sales growth since acquisition is now 20%, moving market share

to 23.3%.

Ireland and Central Europe are already a significant part of the Group

employing 27,000 people which will grow even further as Tesco move forward.

Asia is the second international region where Tesco is expanding. The Tesco

Lotus business in Thailand now has 17 hypermarkets and is well on the way

to market leadership. In South Korea, through Tesco’s partnership with

Samsung, Tesco now has two outstanding hypermarkets which are among the

highest turnover stores in the Tesco Group. Now Tesco should open its store

in Taiwan. These three markets will give to the company access to 130

million people.

In South Korea, a country where 50% of households own a PC and 78% a mobile

phone, the retail industry has huge growth potential. In 1999 Tesco

invested Ј142m in a partnership with Samsung, which brought two world-class

hypermarkets operating under a top retail brand as well as a number of

sites that Tesco will now develop. Tesco should t expand more hypermarkets

in next years.

Tesco now should move rapidly towards global sourcing, which will enable

company to buy quality products at the best prices and deliver them at the

lowest cost. Tesco has already set up three sourcing centres in Hong Kong,

India and Thailand. These now source 30% of Tesco non-food products

(excluding Health and Beauty). Tesco should move this higher in next

years, with the opening of a fourth sourcing centre in Central Europe.

As a student from Russia (I live in Kazakstan) I would like to see Tesco

further expand its activities in Eastern Europe, and therefore why not

Russia? At the present time there is nothing similar to Tesco on the

Russian market, so I think Tesco won’t have any problems to get into it.

It is difficult to suggest alternative approaches for Tesco’s strategy

because the firm is evidently doing very well. I would suggest however that

Tesco continues to seek markets overseas to further develop its growing

global presence.

As mentioned above, Tesco has been very successful over recent years, and

it is therefore quite difficult to suggest “Alternative strategies”.

However, from my I might suggest the following:

. Expansion overseas – e.g. Russia.

. Increase market share – e.g. merge with Safeway. If Walmart took over

Asda, why can’t Tesco take over Safeway, for example.

. Expand into new market / product – e.g. cars, travel.

. Rewards to staff, introduce a widespread – bonus or share ownership (if

Tesco doesn’t do it yet)

A2

Evaluation of the effects that the alternative approaches might have on the

structure and functions of the business, and how it achieves its

objectives.

Alternative approaches, suggested in A1 can affect the functions of the

organisation and how it achieves its objectives very much, but they won’t

really affect structure of the organisation, because Tesco’s organisation

structure is very good and there is no point of changing it.

Expand to Russia

If Tesco expands to Russia, in general, it is going to be only benefit to

the company. Of course first Tesco will have to spend some money to build

and open new supermarkets, but it is not going to be very difficult because

there are no other companies like Tesco. Big advantage of expanding Tesco

into Russian market is that straight way after it Tesco will definitely

become a dominant firm on market, because there are not very strong

competitors and very soon Tesco can become a monopoly on the Russian

market. Disadvantage of expanding is that Tesco can get failure as well.

Russian prices and British prices are very different, so if Tesco retails

goods, which are more expensive then in others stores, not many people will

by it.

Increase market share

Every single organisation wants to increase its market share, and the best

way of doing it is to merge or take over another company. And I suggest

that Tesco also could increase its market share by merging another

retailer, for example Safeway. Safeway is not as big as Tesco, so it is not

going to be very difficult to merge it or take it over. The advantage of

the merger is that Tesco will increase its market share very much (by 10%)

and two dominant firms of UK’s market joined together can easy become a

monopoly. The disadvantage of it that it is not very easy to do, because

now Tesco has 35% market share, and if it merges Safeway, Tesco’s market

share will be increased up to 45%. But British law says that firm which has

45% of market share is monopoly, so competition commission won’t be happy

about it and it will never agree with this merge.

Expand into new market

Non-food retailing now becoming a major part of Tesco strategy. As I said

before, Tesco is increasing competition and offering customers real value

and choice in all areas from sportswear to software, electricals to

spectacles. But still, I think Tesco didn’t get into one very perspective

market – cars. Cars are very important in our time and there is a very high

demand for cars in the UK. I think for Tesco it is won’t be very difficult

do get into this market, because Tesco is known as cheapest retailer in the

UK, therefore people will continue to by everything from Tesco, and cars as

well. But it could be easy and could be not, because currently there are

many different firms on this market, and what I think is that there are

could be some barriers to entry.

Rewards to staff – introduce a widespread

At the present time, many successful firms introducing new types of

rewarding to staff. What I suggest is that Tesco also should introduce a

widespread of rewarding to staff, for example employees could be awarded an

annual bonus, which they can take in cash, vouchers or shares. The

advantage of this type of payment is that if employees take shares, they

will be interested in good work of the company and if they take vouchers,

they will have to spend all salary in Tesco stores. So I think that it is

very good way of rewarding with all benefits to the company.

Affects of the alternative approaches

As I mentioned before, alternative approaches, suggested in A1 can affect

the functions of the organisation and how it achieves its objectives very

much, but they won’t really affect structure of the organisation, because

Tesco now has very good organisation structure with very good consultative

and democratic management style.

If Tesco expands to Russia and merges Safeway, there are will be “Operation

– Russia” department in the organisation chart. More people will be

involved to work for Tesco, so Human Resources department will become

bigger. After expanding to Russia Tesco easy can expand to other countries

of Soviet Union such as Kazakstan, Uzbekistan, Kirgiztan and so on. It also

will definitely help Tesco to prove itself as very strong multinational

firm.

List of resources

1. The main resource was Tesco’s own web site: www.tesco.com.

2. I asked Tesco for some information and they sent me it.

3. Web site: www.bized.ac.uk

4. Business for Vocational A level – book.

5. Newspapers

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Finance department

. accountants

. account technicians

. account clerks

Records all financial data

Chases up slow payers

Collects payments from customers

Provides information to external bodies

Advises managers and budget holders

Monitors and analyses financial data

Advises board of directors

Analyses

costs

Production activities

Finance department

Research and development department

Marketing department

Corporate objectives

Demand of labour

. numbers of workers needed

. skills required

. location of employees

Supply of labour

. existing workforce

. skills shown through skills audit

. changes in productivity and working week

Human resources plan

This may require the use of one or more of the following:

. recruitment

. training

. redundancy and redeployment

BUSINESS ACTIVITY

Marketing

Finance

Administration

Human resources

Research & Development

Production

LAND

Labour

Capital

Enterp-rise

GOODS

OR SERVICES

WASTE

Chairman (non executive)

Chief Executive

Deputy Chairman

Company

Secretary

Marketing Department

Finance Department

Retail Department

Commercial Department

Distribution Department

Operations:

Ireland

Business

Activity

Managing director

Research and development director

Finance director

Marketing director

Production director

Human resource director

Production manager

Plant manager

Quality control manager

Production control manager

Assistant plant manager

Supervisor:

materials

Supervisor:

materials

Supervisor: buildings

Supervisor: mechanical

Supervisor: electrical

Section manager

Section manager

Section manager

Supervisor

Supervisor

Supervisor

Supervisor

Supervisor

Supervisor

Operatives

Operatives

Operatives

Operatives

Operatives

Operatives

Deputy

Chairman

Chairman

(non executive)

Chief

Executive

Marketing

Director

Finance

Director

Retail Director

Commercial Director

Distribution Director

Head of

Operations

Ireland

Company

Secretary

Section

managers

Section

managers

Section

managers

Section

managers

Section

managers

Section

managers

Section

managers

Supervisors

Supervisors

Supervisors

Supervisors

Supervisors

Supervisors

Supervisors

Operatives

Operatives

Operatives

Operatives

Operatives

Operatives

Operatives

Dynamic/innovative culture

BUSINESS

CULTURE

Customer driven culture

Bureaucratic

culture

Task culture

Risk averse culture

Technological culture

Person culture

Negative culture

Positive culture

Competitive culture

Power culture.

[pic]

Board of directors

Marketing Department

Distribution Department

Retail

Department

Employees in Retail Department

Employees in Distribution Department

Employees in Marketing Department

Mission statement

Business objectives

Divisional/departmental objectives

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