Analysis of Tesco's Competitors

This report analyses the business structure, size, scope and organisation of three of Tesco’s competitors. Research methods for this report consisted of referring to various websites and articles.

Summary

This report examines the operations of three of Tesco’s competitor businesses in the grocery market. Exploring the ways these businesses are reaching, attracting, and retaining consumers on the high street and through online shopping. It also looks at the sustainability of any business, how important it is to keep up with competitors on the technological side.

Introduction

This report examines three competitor businesses of this organisation in order to understand how their organisations are structured, the size and scope of their operations, and how those link to the objectives, products and services they offer.

Various research methods were used to find the information for this report. The majority was obtained from the companies' websites and other sites on the internet.

Companies were also contacted for more in-depth information, however their responses were not received in time to be included.

Additional information was found through third-party/independent business analysis websites. This information was not used to a great degree as it required a payment to access the full contents. The decision was made not to purchase these documents as it was unclear how relevant their contents would be to the purpose of this report.

Different types of business organisation

Sole trader: is a business funded by one person with the after-tax profits going to that person, and is the simplest business structure to set up – only requiring the registration of a business name and the business is ready to start trading.

In the grocery world, sole-traders are the independent high street and corner shops, rarely producing their own-brand goods, but simply selling on goods purchased from a wholesaler.

Partnership: is a business created and funded by groups of people, with the profits distributed equally, or, proportionally through an agreement set up before the business starts trading. Each partner is an individual given equal or proportional responsibilities.

Partnerships are often formed amongst family members, eg; “Smith and sons”, “Brown bros”, “Robertsons”. However they can also be much larger organisations as is the case for supermarket chain, Waitrose and Partners.

Private limited Companies: are owned by small groups of people. Shares are distributed amongst their Directors. Unlike partnerships where individual partners are liable for the business, Limited companies are treated as separate entity's meaning the Director's are only liable for the business to the amount of their shares.

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Another aspect of the Limited Company business type is that it's accounts and directors details must be available for public viewing. This 'transparency' makes it possible for businesses trading with the company to see how well it is performing and make better decisions in giving credit to purchase goods. Bigger lines of credit can facilitate expansion into multiple stores. The grocery arm of supermarket chain Sainsbury's is a limited company, which is a division of Sainsbury's plc holding company.

Public Limited Company: Public Limited Companies (plc) provide limited liability to their management and owners. In contrast to Private Limited Companies, plc's are able to sell shares to the public on the stock exchange.

Public shareholder investment requires a business to account for their operations by providing annual reports on the business operations, developments, growth and accounts. A favourable report results in an increase of share value, encouraging further investment into the company.

The large supermarket chains – Tesco, Asda, Morrison's, etc are plc companies. Their growth into multiple retail outlets funded by this shareholder investment model.

Franchise organisations: Are a business model where a successful business sells licences for other businesses to copy in return for percentage payments and/or management fees. Franchises can be more difficult forms of incorporation as the franchisee is not in full control of the company, being required to operate in the ways the franchisor dictates.

Londis is an example of a franchise model in groceries. Each individual Londis store has bought into the franchise, allowing them to trade under the Londis brand and requiring them to stock Londis own brand products.

Charitable organisations: Are non-profit organisations, differing from other business types in that they centre on philanthropic goals and social well-being rather than making profits for their owners or investors.("Types of Business," 2017)

Brighton independent supermarket, HiSBe, is an example of a social enterprise grocer. HiSBe's mission is to change the way people shop for the better. Providing quality foods reducing packaging, promoting healthy, natural eating without additives and preservatives, ensuring producers are well-paid, and paying their staff a living wage are all missions put above sales profits. ("Business for Good," Unknown). (P1)

Competitor businesses

WAITROSE & PARTNERS

Waitrose is a grocery chain with, currently, 348 stores around the UK in addition to branches attached to petrol stations, concessions in Welcome Break motorway service stations plus an online store - waitrose-online. Waitrose has several stores in the Middle East and exports to 58 countries. The company was formed in 1904 when partners Wallace Waite, Arthur Rose and David Taylor opened their first shop in Acton, North London. The name Waitrose is derived from the partners surnames Waite and Rose. Waitrose produces a complete range of own-brand goods including flour, fruit, and dairy goods which it produces from its own working farm and has 5% of the UK grocery market, making it the UK's 6th largest grocery chain employing around 55,000 'partners'.

Unlike it's competitors, Waitrose is an employee-owned company. Employees, known as 'Partners' hold shares in the company, profits from which are distributed to shareholders each year end. This arrangement gives employees vested interest in performing well and increasing sales, and the title of partner as opposed to employee has a psychological effect of making each staff member feel valued in their role, thus feeling better in their work environment and doing a better job of serving customers and keeping their store running efficiently. ("About Us," Unknown).

Waitrose continues to aspire to founder Wallace Waite's vision to “lift the food trade to a higher plane” and does this through it's mission – most recently stated as “Food as a force for good”. ("A short history of Waitrose & Partners," Unknown).

This broad statement encompasses the commitment to: Better standards of animal welfare, Investment in farmer suppliers, Consumer education on health eating, and Reducing the environmental impact of plastic waste through less packaging. ("About Us," Unknown).

NISA RETAIL

Nisa Retail Ltd is a brand group which gives local independent grocers the marketing and purchasing advantages of large supermarket chains, yet enables them to shape and run their businesses as small operators. Businesses trading under the Nisa brand are found in local communities; on high streets, in residential areas, and petrol stations. The group currently has over 2,500 local operators.

Nisa was originally founded 40 years ago to help independent grocers compete against the growth of larger supermarkets. Giving strong support to local charities and community groups, Nisa's mission today is defined as “to support communities around the UK, by helping independent retailers to make a true difference to their community” ("History, Our approach," Unknown).

Nisa businesses do not offer customers a home delivery or ordering facility, their purpose is to be locally accessible often opening from very early morning til late into the evening seven days a week.

Very few, if any, Nisa stores stock a wide enough selection and choice of individual products to enable customers to do their full household shop in one go. Instead they focus on convenience, stocking the essential goods for customers to purchase on the go or when they only need one, or two items missing, or forgotten from their main grocery shop - items that are needed there and then and for which travelling to larger grocery stores or meeting the minimum order for home deliveries is not possible or economical.

As with Waitrose, Nisa Retail distributes shares to it's members and shares are not available for outsiders to invest in. However, whereas Waitrose distributes shares to its employees ('Partners') as a bonus incentive, Nisa members are issued shares based on their investment buying into the Brand.

hiSbe

hiSbe, an acronym for ‘how it should be’, is an independent supermarket in Brighton.  The supermarket opened in 2013, after it’s founders, Ruth Aslow, Amy Anslow, and Jack Simmonds raised £30,000 through crowdfunding.

The business operates as a social enterprise (CIC) with the vision of “supplying food that prioritized the health, happiness, and wellbeing of people and their local communities” (Social Enterprise UK, unknown).  Prioritising people over turning a profit, they pay their staff a living wage and ensure suppliers and producers are paid a fair sum - 68p in every £1, (Anslow, R. Jan 2017) for their produce. 

hiSbe champion ethical trading, reducing waste and using sustainable products.  The supermarket works to put money into the local economy, ensuring 50p in every £1 spent stays in Sussex - as opposed to the larger supermarkets where around 5p in every £1 spent goes into the local economy,  (Anslow, R. Jan 2017). 

Around 40% of the produce in store is supplied by local producers (Manson, J. Jan 2017), and where possible the supermarket offer products package-free.

Through the support of social enterprise investors as well as the local community, hiSbe has achieved sufficient success to prove their business model and branch out, opening a second store in Kemptown, Brighton.

Following the opening of the second store, the CIC has an ambitious five year plan to open a chain across Brighton, Hove, and Shoreham before branching out into other parts of the UK.

TESCO

Tesco plc is a public limited company founded in 1919 by Jack Cohen. Over the years the business has grown to almost 7,000 stores worldwide employing over half a million people. While groceries are still the principal business, Tesco's has moved into other areas, namely clothing, homewares, technology, mobile phones, insurance and banking. (“About us:History”, Unknown)

Tesco operate 6 different store formats, from out-of-town superstores, to convenience stores attached to petrol stations. This enables the company to serve the widest range of customer profiles, from those doing one big monthly shop to neighbourhood shoppers popping in for an impulse buy. In addition, Tesco's home delivery service caters for the online shopper group.

The diversity of business products and store formats has enabled Tesco to maintain a position as one of the top companies. Consistently listed as 'one of the big four' UK supermarkets, and in 2013 was named the UK's biggest private employer and third largest supermarket worldwide.

As a public limited company, Tesco shares are sold on the stock market and held by large and small investors who don't necessarily have a business interest or relationship with the Company. (P2)

Organisational structure

To manage such a large-scale operation, Tesco structures itself as a hierarchy organisation.

At the top of the hierarchy is the Board and Executive Committee:

The members of the board are fluid, with changes(replacements) occurring periodically throughout the year.(“Tesco Organizational Structure,” 18th May 2018). 

Reporting to the Board and Executive Committee are a number of 'sub-committees' who consider various aspects of the business, these are:

The roles of the committees are to support the board by considering issues relating to the overall Tesco operation and report their findings.("Tesco Organizational Structure," 18th May 2018).

The board committees meet at Tesco Headquarters where the company operation is organised.

Head Office comprises of a number of departments:

The Head Office is the hub of the organisation.  Implementing instructions from the board and committees and developing the company before passing changes down the chain to the outlets. 

Head Office comprises a number of departments, each focussing on different aspects of the organisation. This enables the organisation to appoint the most competent personnel to manage their tasks and means that colleagues know exactly where to go when a concern arises.

These departments, while specialising in their own work, are fully conversant with other departments.  eg; the Legal and Compliance team might advise the branding team regarding trademark and copyright issues, the product team regarding packaging claims, the customer team regarding customer injury claims, the people team regarding employee tribunals; the Marketing team will work with the product and own brand team on new product launches and the customer team in new customer retention initiatives; the People(HR)team will be aware of the positions to be filled and types of candidates the other departments need and will be looking after the welfare of the employees throughout the organisation.

At the store level, there are further lines of hierarchy:

The hierarchical organisation of the Company creates an efficient system in which to communicate from the top down and vice-versa, and across departments to enable cohesion within the Company to manage the diverse operations of the business as well as the large number of employees. ("Tesco Organizational Structure," 18th May 2018)

This arrangement of working in individual groups as well as grouping together allows the organisation to realise its objectives through cohesion across the departments individualising the various functions of those objectives.

This hierarchy of 'appointed people' also simplifies the organisation as roles and responsibilities allocated to each person are defined, so when an issue is raised the person delegated to resolve the matter is quickly identified. On the other hand, confusion can rise where the limitations of each person in the line - how much responsibility for solving the issue is that person authorised to take, and when should they involve the next person up the line, are not clear.

In my experience working on the shop floor at Tesco’s, I would suggest that for employees at the lower end of the pyramid, communications being passed through the line can be missed or passed on incorrectly, leaving the employee frustrated at not knowing whether their concerns have reached the right person. In a Company as large as Tesco, the likelihood that this problem could occur is pretty high given the number of people they employ.

Comparison with other competitor's organisational structures

At the store-level, the organisational structure of Waitrose & Partners resembles that of Tesco's. Comprising of in-store department managers, up through store managers to regional managers.

Above this level at Head Office there are a number of differences due to the differing natures of the businesses.  For example, Waitrose operate their own farm on the Leckford Estate and so have an Agricultural department.  Tesco have expanded beyond groceries into banking and mobile telecommunications, so have dedicated departments to facilitate that work.  However, the departments that manage the different functions of the organisation - HR, Finance, Marketing, Logistics, Product Development, are comparative.  

There are further differences at board level as Waitrose & Partners is a partnership organisation – answering to its Partners who are the employees within the stores, as opposed to Tesco's structure where the board is answerable to it's external investors and shareholders.

Waitrose have Partner members on their board who represent the interests of the partners and report the groups activities to the partners. ('Our Structure', Unknown).

Nisa Retail is also a Partnership organisation, the Partners being the independent store owners within the group. Like Waitrose, Nisa has Partner representatives on it's board who communicate with and represent those Partners down to its Regional Manager level.

As the stores within the partnership are independent operations, Nisa would not be involved with the store's organisational structures which may differ across the group according to each independent owners operation. Consequently, Nisa Retail's organisational structure is much flatter than those of Tesco's and Waitrose & Partners. ('About Us', Unknown), ('Nisa Retail Ltd – Group Structure', 21st August 2018).

Conclusion

This report illustrates that it is common for grocery businesses to operate as limited or public liability companies as they grow their business into multiple stores. Limited and public liability companies give the principals the ability to obtain investment and enable the business to fund the expansion of their operation.

Due to the complex nature of large supermarket chains; selling a wide range of different products, through multiple outlets, employing a large volume of staff at different levels, while being held accountable to both their investors and consumers, separating the various functions of the organisation into different divisions on many levels, is necessary to give the organisation some order facilitating clear communication channels in order to accomplish the organisation’s objectives.

References

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