The impact of stakeholders on Tesco PLC and Process Instruments (UK) Ltd
Stakeholders are very influential people who range from individuals, organisations and they are people who have an interest in the decisions that businesses make. Stakeholders can be either external stakeholders or internal. The external stakeholders are groups who are outside the business and internal stakeholders are groups within the business who work in conjunction with the business.
The stakeholders can affect the purpose of an organisation and I have chosen two businesses to study how the stakeholders can influence them. The businesses I have chosen are; Tesco PLC and Process Instruments (UK) Ltd.
The purpose of Tesco is to maximise profit, expand to become a bigger company, provide a retail service and sell goods to the customer therefore they operate in the tertiary sector. Tesco do however; offer other services such as banking and pet insurance as well.
The purpose of Process Instruments is to manufacture process instrumentation locally through research and development which will help the local economy. Although they sell their items, their main aim is to manufacture products so they are in the secondary sector.
Customers are external stakeholders and they want the company to produce products of great quality at a great price for them and they love to see improvements that give them better value for money and this creates customer loyalty towards a business and this can be done by stocking the correct items since customers tend to identify certain brands and stick to them because they are tried and tested. The customers are Tesco’s most important stakeholders because retailers, like Tesco needs customers to buy their products and use the services they offer in order to survive. Keeping customers pleased is vital and is key to the purpose of Tesco which is keeping their customers happy.
To aid them in achieving this purpose, Tesco have introduced loyalty schemes such as Club Card vouchers and Price Promise which informs the customer how much they have saved on products shopping at Tesco than if they had shopped elsewhere. But, if a rival supermarket was cheaper then Tesco would issue vouchers which would be £x off at your next purchase to ensure that the customer is not disadvantaged and they do receive a good deal. The customers of Process Instruements request Process Instruments to make specific products for them therefore the company ploughs money into Research and Development so they can continue to manufacture innovative products so they can achieve their purposes of Research and Development. Also, it keeps customers happy and satisfied because the company manages to give them specialist items on request and they can see that Process Instruments is making an attemp to please their customers.
They are internal stakeholders who are employed by a business and seek job security and good opportunity of career promotion and good rewards. The company they work for provides them with a livelihood and they would want to work for a company that understands their importance. It is important that Tesco understand their importance and keep them happy so the employees can work to the best of their abilities serving the customers and without having as many employees as they do, Tesco would not be a multinational corporation as it is now. Tesco offer good training with decent pay combined with comfortable working hours which makes the experience of working for Tesco appear rewarding and exciting. Process Instruments currently have five apprentices in areas ranging from manufacturing to accounting and admin. However, it can be time consuming teaching the apprentices roles and training them. They have recruited one person on an internship doing an SEO which is an unknown science because it involves very detailed specialised programming and it is difficult to find someone who is able to do this task because it is very specific and unique to Process Instruments.
Suppliers want to feel valued by the company they supply and would like to be paid on time and receive high number of frequent orders: they are important to Tesco because Tesco would cease to exist if they had no stock to sell. Suppliers stay happy with Tesco because they don’t have a middle man but they deal with the suppliers by themselves which allows Tesco to get the products cheaper because there is no middle man waiting for his cut. Moreover, Tesco order in high frequency and high quantity with their trusted suppliers who they know will supply them with the products of the best quality- this allows Tesco to save money and sell products at a cheaper price to the customer and keep them happy.
Process Instruments only choose local suppliers which suits their purpose of sourcing everything from the East Lancashire region which will improve the local area’s economy. Although it would be cheaper to buy products in bulk from China, the quality may be poor and they would just have to make do but if they got products locally then if it wasn’t up to scratch they could ask the suppliers to reform it to how they would like it so they can control the quality. For this, Process Instruments have won awards and they have also met former Labour leader and former PM Gordon Brown for their links with local suppliers. Suppliers are the stakeholders who have the biggest influence on Process Instruments because as PI are innovative and constantly developing their products, the suppliers must be adaptable and if the suppliers charge more than they originally did then Process Instruments would have to pay more and then their profit would decrease.
Owners are internal stakeholders as they are directly involved in the company as they own it. Tesco is a public limited company so it is run by shareholders who have invested a lot of time and money into a business and they would like to see their investment becoming the catalyst of the value of the business rising whilst their share of the profit rising. If Tesco continue to make profits it keeps the owners happy because more customers and sales means more money therefore the more money Tesco makes, the bigger their share of the profits will be. A lot of the people who work at Process Instruments are also shareholders which means they have a stake in the company, they would like the company to be profitable which would result the profits being put back into research and development. Mike Riding’s plan is to sell the company in 3 or 5 years time. When Process Instruments moved into the new building, Mike Riding still to date, has to pay council tax and it is paid by his pension.
Trade Unions and Employers Associations
Both trade unions and employer associations are external stakeholders . Trade unions represent the interests of groups of employees and they strive to secure higher wages and better working conditions for their members. Employer associations are the employer’s equivalent to trade unions and they represent the interest of employers in specific industries. Tesco are able to keep the trade unions happy by providing competitive salaries for their workforce and making the work environment enjoyable and pleasant. The working hours for employees are comfortable and the employer has a legal responsibility towards their employees so they follow the employee rights. Employer associations are made up of businesses and employers who all pay annual fees for their benefits. They negotiate with trade unions on behalf of their members and give give advice on employment laws, health and safety, taxation laws etc. Trade unions and employers associations have no influence on Process Instruments because the employees choose not to have them however the choice is still available. This is because it is a small business with only 19 staff members and the atmosphere is friendly because they all know each other and it feels like a closely knit family.
Local and national communities
Also external stakeholders .The actions of a business can have a drastic effect on communities which can be positive or negative such as creating jobs in a town where the unemployment rate is high or they could upset the community e.g creating noise pollution by having lots of deliveries early in the morning and disrupting the locals if the business is close to a residential area. To inform the businesses and provide feedback speaking on behalf of the community is the role of community leaders.
Tesco, before making any huge decisions for example creating a new store will meet with community leaders to decide what is best for the community. Small local communities may not want tesco to open stores because it may destroy the livelihood of small independent retailers who are known to start petitions against Tesco creating new stores: this is known as a conflict of interest and an example of this is when regular visitors of a pub campaigned against extending and converting the pub into a Tesco Express store. However, they were unsuccessful in doing so since the proposition was unpopular to the local community. The national communities stay happy by providing services and having stores in various areas so it is accessible to the customers so it is easier to do their shopping. Burnley Council offer businesses similar to Process Instruments support by supporting them with their planning projects for example.
Governments are external stakeholders and they like seeing successful businesses paying taxes and jobs being created. They also like to see flourishing businesses taking an interest in the welfare of society. Tesco manage to please the government by abiding to the law and paying high taxes. They create jobs for people in many areas and keep people in communities by offering them their services and products available to be sold to them. The government can influence Tesco by new legislations such as introducing a display ban on tobacco products and increasing the cost of fuel. It makes it difficult for Tesco employees and customers to find and select tobacco products as they would be hidden. Also, the rising cost of fuel is detrimental to Tesco because it means that Tesco would spend more money on fuel from suppliers so they would have to pay more in deliveries so to recover the money they would have to increase fuel prices but can keep them happy by offering discounts on fuel if they buy other products or spend a certain amount of money.
The Sunday trading hours are a cause of the government because it means that in England they can only trade for 6 hours but the smaller local Tesco Express stores are open for longer which is convenient if the larger Tesco Extra stores are closed. Also, the government influences the operation of Process Instruments as health and safety legislation for instance, grows each year so more risk assessment has to be done which means that some future projects have to be cancelled because the dangers are too high. Process Instruments have won awards from the government and they support his idea of research and development and Mike Riding has also been invited to 10 Downing Street in the past. However, he now has to offer pensions to the other workers which is a 5% increase than he used to but they choose not to take it.
Conflict of Interest
Conflict- The conflict was that Tesco wanted to open a new Express store in a village but the locals objected sicne they were concerned that it would have a negative effect on local shops and Tesco would bring nothing new
Shareholders would want as many Tesco stores to be built as possible because it means that profit will increase because they would gain more customers. It allows them to achieve their purpose of maximising profit and coming the world’s largest retailer since expansion is also one of their aims
Some customers may be for Tesco being built in their communities as they could shop at night in peace and if it is in a good location they won’t have to travel far. They would also receive discounts if they are club card members and they can afford to buy Tesco value products
Employees would also support the creation of more Tesco branches because it creates jobs and keeps the area prosperous. By creating jobs it could improve the area as more people would be working and crime would drop. Also, if they already worked for Tesco they wouldn’t have to travel as far
The Government would support Tesco because they are a big retailer that makes the market valuable and they would want Tesco to succeed and make more profits so Tesco can pay more corporation tax. The more jobs Tesco create the more people will pay tax
The local community (especially local retailers and their loyal customers) would not be happy with Tesco opening a new store in their area because it could put a retailer out of business because they would not be able to match the low prices and discounts that Tesco offer because of the size of Tesco and they may feel there are enough Tesco branches in the first place. Also, the community in general may be disrupted if Tesco are open 24/7 because of late night or all day traffic which causes noise pollution. This could lead to people campaigning and protesting which could lead to Tesco’s reputation being tarnished and could possibly mean Tesco could lose customers and profits
Recently, between Process Instruments and the local community, there was a conflict of interest because the company expanded and wanted to move premises which was in a residential area but the local residents did not want a ‘factory’ which would cause noise pollution arriving therefore they appealed against Process Instruments’ application of change of purpose and wanted to restrict the proposed trading hours of Process Instruments.
Employees supported the move because it meant they could have more space to work to work. It could make their job easier and could help them create the products faster and better. Also, it would allow all staff and shareholders to meet in one boardroom. They would also have better facilities
They would like to see Process Instruments move as it could benefit the company and since it could benefit the company as they are privately owned- they could pay more tax since they could export more goods and the government offers grants to companies to Process Instruments as they focus on Research and Development which is a key aim of Process Instruments
Burnley Council wanted Process Instruments to move because it would create jobs in the area and boost the local economy and improve the area with the money coming in. The council helped Pi with the planning permission.
The local community didn’t want the company to move because it could cause noise pollution whilst deliveries were coming in because the premises was located in a residential area
Shareholders- Although the move is in the best interests of the company, it would have a negative personal effect on Mike Riding as Process Instruments have abandoned the old building as they have not found anyone to take over so he still has to pay for it.