Business at work

Business at work

at least 50, 000 and the company must have received at least 25 per cent of the nominal value of the shares. Public limited companies must also:

. be a company limited by shares

. have a memorandum of association with a separate clause stating that it is a public company

. publish an annual report and balance sheet

. ensure that its shares are freely transferable - they can be bought and sold.


. All members have limited liability.

. The firm continues to trade if one of the owners dies.

. Huge amount of money can be raised fom the sale of shares to the public.

. Production costs may be lower as firm may gain economies of scale.

. Because of their size plcs can often dominate the market.

. It becomes easier to raise finance as financial institutions are more willing to lend to plcs.

. The setting up costs can be very expensive - running into millions of pounds in some cases.

. Since anyone can buy their shares, it is possible for an outside interest to take control of the company.

. All of the company's accounts can be inspected by members of the public. Competitors may be able to use some of this information to their advantage. They have to publish more information than private limited companies.

. Because of their size they are not able to deal with their customers at a personal level.

. The way they operate is controlled by various Company Acts which aim to protect shareholders.

. There may ba divorce of ownership and control which might lead to the interests of the owners being ignored to some extent.

. It is argued that many of these companies are inflexible due to their size. For example they find change difficult to cope with.
Tesco plc. is large, private sector organisation. As it is providing-service organisation I can classify it as tertiary sector organisation.
Tesco plc. is a national company, but it is becoming to multinational. Main objective is to make a profit.
As Tesco is a limited company that means all owners have limited liability.
If a company has debts, the owners can only lose the money they have invested in the firm.
Main source of finance is selling shares and borrowing from the banks.
Tesco has a thousands of owners, every man who has any shares is owner; but these people can't control the company, so company has a board of directors and chairman who control the company.
Tesco has a heavy programme of capital expenditure, investing in new stores and upgrading existing ones. In the year ending 28th February 1998, the group capital expenditure was 841 million, compared to 758 million in the year ending 28th February 1997. This 841 million was divided into 737 million spend in the Great Britain, 63 million in Ireland, north and south , and 41 million in Europe. Tesco anticipates that in the 1998-9 financial year, capital spending will rise to about 950 million, with most of the extra spending being concentrated in Ireland and Central Europe.
Profit is also distributed to shareholders in the form of dividends.
For example, 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.


Objectives of the business.
The objectives of the business can vary enormously A charity's overriding objective might be to alleviate poverty in the developing world; on the other hand many companies 'major objective is to generate the maximum profits possible. An organisation's mission statement gives an indication of the purpose of the business and dovetails with the objectives the organisation set itself.

Mission statement.
Many organisations attempt to express the purpose of their being within a few sentences. The mission statements are intended to provide a sense of common purpose to direct and stimulate the organisation. This statement represents the vision or mission of the organisation. Mission statements change over time to reflect the changing competitive nature of the markets in which business sell.
Mission statement normally set out to answer the following questions:

. What business is the organisation in?

. Who is to be served?

. What benefits are to be provided?

. How are consumers to be satisfied?

Business objectives are medium-to long-term goals or targets that provide a sense of direction to the business. Objectives are normally measurable and have a stated timescale.
Company may have a number of objectives. In general, the objectives pursued by a business tend to vary according to its size, ownership and legal structure.
Figure 1.1 illustrates the interrelationship between a company's mission statement and its objectives.

Figure 1.1: The hierarchy of objectives

The goals pursued by any business can be separated into primary and secondary objectives.

. Primary objectives are those that must be achieved if the business is to survive and be successful. These relate to issues such as profit levels and market share.

. Secondary objectives tend to measure the efficiency of the organisation. They may affect the chances of success, but only in the long term. Examples include administrative efficiency and labour turnover rates.

Profit maximisation.
Profit maximisation one of the most important objective for companies which are owned by shareholders. Profit, at is simplest, refers to the extent to which revenues exceed costs, so profit maximisation occurs when the difference between sales revenue and total cost is greatest.

Survival is an important objective for many businesses. It is particularly important when businesses are vulnerable such as:

. during their first few years of trading

. during periods of recession or intense competition

. at a time of crisis such as a hostile takeover.
Most recently established businesses have survival as an objective.

Increasing sales or market share.
Growth increases the scale of a business, resulting in higher levels of output and more sales. Many businesses pursue growth strategies because their managers believe that this is essential for survival. If a firm grows, it might be able to attract more customers, earn higher profits and begin to establish itself in the market.
Growth offers:

. increased returns for the owners of the business

. higher salaries for employees of the business

. a wider range of products for the business's existing and potential customers.
Growth can be important target for managers. It is increasingly common for managers 'pay packages to be a combination of shares and salary.

Providing social or community service.
A number of organisations provide services to the community. These organisations are part of the public sector - they are managed, directly or indirectly, on behalf of the government - yet they are a form of business.
Their overriding objective is to provide the best positive service to the local community.

Charitable and non-profit objectives.
Charities have a high profile in the UK. Charities have a number of clear objectives:

. to rise the public's awareness of the cause that thy support.

. To rise funds to support their projects.
Charities trade with the intention of earning as much revenue as possible to spend on their particular causes.

Producing high quality products.
Just as many businesses seek to provide high quality service, a large number of businesses also have the provision of high quality product as an important objective. Acquiring reputation for top quality can allow businesses to charge a premium price and to enjoy higher profits.
Reputations for supplying quality products are jealously guarded.

Tesco is committed to retaining its position as the UK's