important to firms providing services.
By investigating in research and development a business seeks to maintain
competitiveness against its rivals. Competitiveness measures a business’s
performance in comparison with rival firms in the same market. A highly
competitive firm has some advantage over other businesses. This competitive
edge can take a number of forms:
. lower prices
. more advanced and sophisticated products
. a better image with consumers
. a good reputation for advise and after-sales service
. reliability in terms of operation and delivery dates
Types of research:
. basic research
. applied research
. development
The prime function of R&D is to develop new products that can give the firm
a competitive edge in the market. This necessary involves the R&D
department in close liaison with staff in market research, design and
production.
Function 1.6: The nature of business activity
Functional areas of Tesco plc.
The diagram above shows the key functional areas or departments of Tesco,
as one of the leading retailers in the U.K. It is currently the leading
supermarket chain in Britain, with a higher market share than its leading
rivals, Asda-Wallmart, Sainsbury’s and Safeway.
I have explained earlier the key functional areas of a typical business
and Tesco, as the diagram shows, displays this type of structure. For
example, the Company Secretary, Rowley Ager is responsible for Pensions,
the Company Secretariat (the administrative staff), the Treasury, Taxation,
Site Facilities, Transport and all aspects of Consumer Law.
The Finance Department, directed by Andrew Higginson, is responsible for
all aspects of finance and audit, and also for European affairs. These
functions are shown in Figure 1.3 in my introductory section. I have no
detailed information on Finance within Tesco other than financial data
available from the Company Accounts and from the Tesco and Bized
websites……… and these are more relevant to a detailed finance study of
Tesco as a company, a topic to be studied in a later Unit.
The Marketing Department, directed by Tim Mason, is responsible for all
aspects of marketing , Customer Service, Advertising, Market Research,
Clubcard, Estates and Metros. Since the early 1990s Tesco marketing
strategy has been to become the best in terms of price, quality and
service. Objectives are set, and ways found of meeting them, in all aspects
of company’s operation.
The Retail Department, directed by Michael Wemms, is responsible for all
retail operations and express stores.
Tesco first ventured into foreign markets when it acquired stores in Irish
Republic in 1978, but these were sold in 1986. The 1990s produced a much
better climate for European expansion. Now Tesco operates 80 stores in
Central Europe, and 16 stores in two Far East countries trading both under
the Tesco and subsidiary fascias. The 13 Tesco stores in the Czech Republic
and Slovakia, 29 stores including 5 supermarkets in Hungary, 31 stores in
Poland. Also Tesco plan to open 12 hypermarkets in Thailand and in South
Korea over the next three years.
The Human Resources Department within Tesco is responsible for many
thousands of employees across the whole spectrum of the organisation. Tesco
employs 154,000 people in the UK and 27,000 in Ireland and Europe. It does
not appear on the organisation chart, which I obtained from Tesco, because
this function is somewhat complex and shared between the main headquarters
at Cheshunt. Hertfordshire, and the many stores operated by Tesco around
the country. For example, there are two Tesco superstores in Leicester, at
Hamilton and Beaumont Leys, both of which have a Human Resources officer in
charge of personnel administration.
The Commercial Department, directed by John Gildersleeve, responsible for
all commercial operations and technical services.
The Distribution Department, directed by Philip Clarke, responsible for
Supply Chain and all distribution operations. Distribution Director
responsible for products delivery, logistics and transport. 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.
The Operations department, directed by David Potts, responsible for
operations of Tesco stores in Northen Ireland & the Republic of Ireland. In
May 1997, Tesco completed an agreement with Associated British Foods to
purchase all their supermarkets in the north and south of Ireland. The
purchase price was Ј641 million, giving Tesco a further 110 food stores and
a leading position as a food retailer on both sides of the Irish border.
I have considered 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.
As an example, Tesco has recently introduced a customer-oriented website on
the Internet. Company has developed within this service facility a direct
order system via E-mail – called “Tesco Direct”. Customers can order
their produce/product for home delivery.
There are now many thousands of such deliveries but these all depend upon
the successful interaction of the major business functions outlined
earlier.
In other word, -
. Marketing - responding to the initial enquiry, receiving and
processing an order, distributing the product to customer.
. Administration – adding the customers details to the IT system,
passing on details to other departments within the business.
. Finance – investigating the financial status of the customer, offering
credit terms if appropriate, invoicing for payment.
. Distribution – receiving details of order and meeting the customer’s
demands, liasing with marketing over delivery dates, rescheduling
other production as required.
. Human resources – at a store or warehouse level – ensuring sufficient
employees are available to meet the delivery requirements of the
order, arranging overtime payments if necessary.
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.
E4
Organisational structure
In many small firms, the owner may have a very hands-on approach and may be
responsible for getting customers, hiring any extra labour and acquiring
other inputs and taking all financial decisions. As organisations grow,
however, their structure takes on a greater significance and those at the
top have to pay more attention to its formal structure and presentation.
The various business functions will show an increasing degree of
specialisation as an organisation expands and people will be employed to
manage and take decisions in specialist areas.
In general, an organisational structure sets out:
1. Major roles and job titles, showing who is in control of the business
as a whole and who manages its major business functions within
departments.
2. The level of seniority of people holding different positions and their
respective positions in the organisation’s overall hierarchy.
3. The working relationships between individuals, identifying
relationships in terms of superiors and their subordinates and
indicating who has authority to take certain kinds of decisions and
who are responsible for carrying out the work arising from those
decisions.
4. The extent to which decision making is concentrated in the hands of
people at or near the top of the organisation or handed down to those
at lower levels of management.
5. The broad channels through which information is communicated
throughout the organisation, indicating the route by which
instructions flow down the hierarchy and how information flows back up
the hierarchy.
Organisational charts
Organisational charts are representations of the job titles and the formal
patterns of authority and responsibility in an organisation.
Business may produce organisational charts for several reasons. First, it
is important that a company reviews its organisational structure on a
regular basis to take account of any changes in the business environment.
A formal organisational chart helps the company to identify where changes
need to be made and to decide the relationship between any new sections or
departments and the rest of the organisation. Business also produce
organisational charts because they allow a company to review its structure
and to identify areas where cost saving changes and improvements can be
made. Organisational charts are useful when changes take place in the
company. It can be updated to take account of any informal developments in
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