In this introductory unit, learners study the purposes of different businesses, their structure, the effect of the external environment, and how they need to be dynamic and innovative to survive. Unit introduction. A business is any activity that provides goods or services, whether that is to make ...
Lacey Fox Candidate Number: 1061 Centre Number: 27220
Business Level 3 – Unit 1
Features Contributing to the Success of
Contrasting Businesses
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,Lacey Fox Candidate Number: 1061 Centre Number: 27220
Features of a Business (P1)
Introduction
The two businesses that I have chosen to compare are Tesco Supermarkets and Macmillan Cancer
Support. There are many differences between how the companies are run but also some
similarities. Within my report, I will explore the features of the structure of an organisation,
business features, the overall aims and objectives of a business, objectives, stakeholders, and the
successes of both of the respective chosen businesses. I will evaluate whether contrasting types of
businesses can obtain similar levels of success through different business structures.
Ownership and Liability: Tesco Supermarkets
Tesco’s Superstores are the standard large supermarket, stocking groceries and a small range of
non-food goods. It is one of the largest food retailers in the world, operating 4,673 stores globally
and employing over 326,000 people. It has the largest percentage in the UK supermarkets market
share with 28%. As well as operating in the UK it has stores in the rest of Europe and small parts of
Asia. It provides other services, such as ‘Tesco Mobile’, through its subsidiary. In 1932 Tesco
became a private limited company, listing its shares on the London Stock Exchange (LSE). In 1947,
floated on the stock exchange with a share price of 25p. By Tesco’s being a Public Limited
Company, they have limited liability, protecting their assets and shareholders from debts or
business failure. Tesco is owned by many shareholders who influence business decisions, some of
the biggest shareholders including BlackRock, Inc and Norges. Furthermore, the benefits of Tesco
being a PLC allows the company to raise capital, have limited liability and have a higher profile and
status of being known as a PLC. Being able to raise capital helps Tesco grow by providing the assets
it needs to generate more revenue, allowing them to increase the price of shares placing them in a
more secure and stable position. This growth enables the increase of their overall market share
despite already owning 28% of it.
However, being a PLC also has its disadvantages such as the potential of a hostile takeover, where
a shareholder buys 51% leading them to have the ability to decide what they want to do and not
what is in the best interests of the business’s future. Companies that are PLCs require their data to
be uploaded online to the public. This can cause pressure from external groups and factors who
are unhappy with the data provided. For instance, in 2018 Tesco had incorrectly booked supplier
income by an overestimate of £250 million, which grew to an error of £326 million in the end. As a
result, shareholders asked for compensation for the share price fall fur to this scandal, claiming
that their losses resulted from Tesco's inaccurate reporting. Moreover, by Tesco sharing their data,
it allows competitors to analyse financial decisions and gain a competitive advantage.
Ownership and Liability: Macmillan Cancer Support
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, Lacey Fox Candidate Number: 1061 Centre Number: 27220
Macmillan is a not-for-profit organisation and is registered as a charity. It is also a company limited
by guarantee causing there to be no shareholders or shares as the company is governed by a
board of trustees. Trustees are a group of people who share the ultimate responsibility for
governing a charity and directing how it is run. Due to the company being limited by guarantee,
the company is seen as a separate product from its owners and is responsible for its own debts. If
debt occurs, they will not be held accountable for it and no assets will be seized from them. A
company limited by guarantee does not have any shareholders therefore no profit that is
generated can be shared between members for the charity, if they were they did then the
company would not be defined or registered as a charity organisation.
By being a company limited to guarantee, individuals associated with the company have limited
liability and have individual legal identities separated from the company. This is an advantage
because the personal finances of these guarantors are completely protected as they are only liable
for paying debts up to the number of their guarantees. Furthermore, they cannot individually go
into debt by themselves, as this type of ownership does not allow this. Also, there is no risk of a
hostile takeover because the public is not able to buy shares in the business, and so they are
unable to attain the 51% share needed. This allows the members of Macmillan Cancer Support to
be guaranteed to be the majority holders. A disadvantage of being a company limited to guarantee
is that the guarantors are not able to sell any shares on the stock exchange. The lack of share sales
restricts growth, due to a lack of investment. When compared to Public Limited Companies like
Tesco Supermarkets growth will be smaller. This could lead to the aims and objectives being
constricted, due to a lack of funding.
Sector: Tesco Supermarkets
Tesco is a private sector company, meaning it is part of a country's economic system that is run by
individuals and companies, rather than a government entity. Most private sector organisations are
run with the intention of making a profit. Private sector companies have a professional image and
are able to reward their employees with higher salaries, holiday pay, insurance coverage and
bonuses. Companies operating within this sector are usually free from national ownership, but
they can work with the government to form private-public partnerships. Tesco fits within the
tertiary sector also because they offer customers to buy products from other external businesses
putting Tesco in the position of being a 'middleman' therefore Tesco is providing a service to the
customer. Tesco does this through bulk buying products from companies for a cheap price per
item sales, showcasing them on their shelves and generating a profit by placing a higher price on
the item than what they originally brought it for. This allows Tesco to achieve an overall high
profit. Tesco also produces and sells its own products, these include the 'Tesco Finest range and
the 'Tesco Value range. This part of the company would fall under the secondary sector because
they privately manufacture and sell them to the customer directly without a ‘middleman’.
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