Business Report: Tesco's Financial State, Resources, and Processes

This report provides a comprehensive analysis of Tesco's business operations, focusing on key resources, recruitment processes, and financial performance. It begins by examining recruitment documentation, employability skills, and communication skills essential for employees. The report then explores the main physical and technological resources utilized by Tesco, highlighting their significance in daily operations. Furthermore, it delves into the sources of internal and external finance, including the use of budgets for financial control. The report also includes a trading and profit and loss account analysis and evaluates Tesco's current financial state using financial ratios. Overall, the report offers valuable insights into Tesco's business model, financial strategies, and resource management practices, making it a useful resource for students studying business development.

UNIT 2 BR

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1. Recruitment documentation..................................................................................................1
P2. Main employability, personal and communication skills....................................................1
TASK 2............................................................................................................................................2
P3. Main physical and technological resources..........................................................................2
TASK 3............................................................................................................................................3
P4. Sources of internal and external finance..............................................................................3
P5. Contents of a trading and profit and loss..............................................................................3
P6. Use of budgets for exercising financial control....................................................................4
P7. Financial state of Tesco........................................................................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Key Resources is the building block describing the most important assets needed to make
a business model work. Every business model requires them, and it is only through them that
companies generate Value Propositions and Revenues. Key resources can be physical, financial,
intellectual, or human (Lai, Lin and Lin, 2015). This assignment contains the documents is
recruitment process and the skills required by the organization in the candidate. Further, it
includes the main physical and technological resources required by the organization. Finally, this
report will show the financial budget situation of the company and their current financial state.
TASK 1
P1. Recruitment documentation
Recruitment documentation consists of all the personal information an individual must
give in order to apply for the vacancy that is being advertised (Trainor and et.al., 2014). It
includes all the application forms, the person specification, the contract of employment and other
documentation such as equality and rehabilitation of Offenders along with the notes that were
made by the panel members during the interview regarding how aware the individual is of the
vacancy and the job role (De, Lim and Oh, 2013). A job description basically explains basically
the exact role of the job and what the appointed employee must do. It includes the hours they
must work along with if available how much overtime can be done.
It lists every one of the main points of the things that must be expected by the employer
for the employee to do. A job description is for both the manager and the applicants or the
appointed employee as it is important for the lot of them to know what the job involves. The
employee wouldn’t be able to do their job correctly if they don’t know what they have to do nor
can the manager give appraisals if they don’t have any idea of what that employees actual job
role involves (Meyer, Ruppen and Magerkurth, 2013). Also, if the manager is looking for gaps
for training then he/she must know what each employee’s job role is so he can analyse where
that employee may need training and what training they require.
P2. Main employability, personal and communication skills
Employability skills
Employability skills can be defined as a skill that a person needs to have in order to get a
job and/or be effective in the job role he or she has. Such skills allow the employee or person to
have a mutual and friendly relationship with colleagues or the manager thus if there are any
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problems that arise they will be resolved efficiently (Greene, Brush and Brown, 2015). There are
many examples of employability skills that employees or people applying for jobs should
possess which include; qualification and experience that are directly linked to the job that is
being applied for.
Personal skills
Personal skills can be defined as a skill that a person may possess but doesn’t necessarily
need when applying for a specific job role. There are many examples of such skills which would
benefit the business including; speaking different languages, trustworthy and having a sense a
humour. It is good if employees or applicants possess such sills when applying for a job as it will
make them more likely to get the job as it shows the employer other skills that the
employee/applicant have that can help the business; these skills are useful for a lot of different
jobs (Gaur, Kumar and Singh, 2014).
Communication skills
Communication skills can be defined as skills that help a person convey information to
another person efficiently and with ease. Managers or employees with good written or verbal
communication skills will benefit the business; this is because they will be able to talk and
understand each other properly.
TASK 2
P3. Main physical and technological resources
Physical resources
At Tesco the building they use is essential towards the day to day running of the business.
In order for the business to provide products and services to its customers they will need
different in-house resources to facilitate the smooth running of the business (Patton, 2014).
Another physical resource that is required for the operation of the business is insurance, some
insurances are required by law for businesses to have this includes employers’ liability insurance
which provides insurance in case anything happens to employees as a result of the business.
Security can be an issue for big companies like Tesco, this is because people find it easier
to steal from big corporations than little independent shops, most of the shops are open 24/7 so
they hire security staff that are there around the clock, Tesco also uses security cameras and
security tags (on expensive or commonly stolen items) to facilitate the work of the security
guards.
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Technological resources
Tesco uses software that is loaded on to all their technology. The software is the
programme that tells the technological items, like tills, what to do, it is loaded with all the
barcodes of items the store sells which means employees can quickly and easily scan items and
the tills will add it up with the least human labour possible (Bowen, 2014). Experience and skills
are necessary for Tesco to work as a business, skills are required for the higher up jobs in the
business such as management. Intellectual property needs to be kept secret as it is required for
Tesco to ensure that new ideas they come up with to improve the store will not be stolen and
used in other competing stores.
TASK 3
P4. Sources of internal and external finance
Internal sources of finance
The founder of Tesco used his own personal savings (owner’s savings) to start up
business, he used the money to pay for war-surplus groceries which was what the business
started out selling, he also used his own money to pay for the market stall that he used to sell the
goods he bought (Veit and et.al., 2014). In 2014 the company cut its capital spending to no more
than £2.5 billion as they must have figured how much they could use without using too much as
they need some money in case the business gets into financial difficulty.
External sources of finance
Tesco now is a very large company so not all forms of external finance don’t apply to
them, such as money from banks, building societies, government grants and money from friends
and family. Tesco could’ve got money from banks in the form of a business loan or the use of an
overdraft facility on the business account, an overdraft facility means that you can withdraw
money from your account up to a point without having money in it (Akter and et.al., 2016). This
would be set when the account is set up and is called an overdraft limit. Building societies work
in the same way as a bank the only difference is the way they are owned and where the money
comes from.
P5. Contents of a trading and profit and loss
A trading and profit and loss account is usually in the form of a spreadsheet and shows
how much money the business has made in a specific period, it includes the revenues, costs and
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expenses incurred during the specified period (Brush, Edelman and Manolova, 2015). The profit
and loss account is used (purpose and use) by a bank or other lender to see if the business is
worth investing in, they can also be used by Tesco to predict the future profits and losses of the
business to help them plan their future finances, below is the trading and profit and loss account
of Tesco from 2014-2015. The performance (measure of trading performance) of Tesco can be
tracked using the profit and loss account, we can see the revenue, the gross profit and then the
net profit (which is the turnover with all the expenditure and other sources of income that are not
from normal operations) (Sinkovics and et.al., 2014). The profit and loss account below
(establishing profit figures) shows that Tesco made £2,122 million gross profit and £5,766
million in overall profit (after tax) in 2015.
By law companies are expected to produce financial statements each year. These
statements appear in Company Reports. There are two main financial statements:
The profit and loss account:
The profit and loss account is also known as a statement of profit and loss, an income
statement or an income and expense statement. The profit and loss summarises on how much the
business revenues are, their costs and expenses that has been sustained during a specific period
which could usually be a quarter of year or a year (Metzger, 2014). These summaries show how
capable a business is to generate profits and handle costs.
P6. Use of budgets for exercising financial control
There are two ways of budgeting, businesses either budget by using a zero budget or by
allocating a budget. A zero-based budget isn’t like a traditional budget in the sense that a set
amount of money is given to different departments depending on their needs instead when an
employee needs money to spend they have to go to their manager and justify their reasoning for
needing the money (Wood, Wrigley and Coe, 2016); money will be released from the business
on a case-by-case basis. An allocated budget it the opposite to a zero-based budget, an allocated
budget is what Tesco uses, it is figured out by deciding upon the amount of money that is the
budget and then using analyst figures of forecasted costs, revenues and resources, the budget is
then divided up into the different departments whilst taking into account the number of
employees working within it.
A budget is an estimate of the costs, revenues and resources that are going to be needed
in the future over a set period. Tesco uses an allocated budget to:
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 Get all the facts the business needs to ensure that the money they have is going to the
right place to ensure that the company grows as quickly and efficiently as possible (Wood
and McCarthy, 2014).
 Limit expenditures that are unnecessary.
 Create a “financial roadmap”.
 Plan for future growth as using a budget means that money that was being “wasted” in
one area can now be used to invest in future business opportunities.
 Establishing attainable targets.
Financial control is exercised in planning, performance, evaluation and coordination, these are
points that are demonstrated when creating a budget:
Planning – demonstrated due to the fact that the whole point of the budget is planning for
the future using the break-even chart to show at which point the business is no longer making a
loss.
Performance – a budget takes into account how well Tesco has performed previously to
forecast how well Tesco will do in the future, it also increases the overall performance of the
business by ensuring that the money from capital is invested/spent wisely (Sullivan and
Gouldson, 2016).
Evaluation – the analyst consensus is figured out by using previous figures that are
evaluated by looking at the difference Tesco is doing now from the time the figures (Kukreja and
Gupta, 2016):
P7. Financial state of Tesco
Current Ratio
The equation to work out the current ratio is ‘Current Assets/Current Liabilities’.
2013: 2052 / 2585 ≈ 0.79 2012: 1940 / 2389 ≈ 0.81.
Notes 52 weeks 52 weeks
2017 £m 2016 £m
Continuing operations
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Revenue 2 55,917 53,933
Cost of sales (53,015) (51,089)
Gross profit/ (loss) 2,902 (2,844)
Administrative expenses (1,995) (1,814)
Profits/ (losses) arising on property-related items 110 42
Operating profit/ (loss) 1,017 1,072
Share of post-tax losses of 13 (107) (21)
joint ventures and associates
Finance income 5 109 29
Finance costs 5 (874) (878)
Profit/ (loss) before tax 145 202
Taxation 6 (87) 54
Profit/ (loss) for the year 58 256
from continuing operations
Discontinued operation
Profit/ (loss) for the year from 7 (112) (127)
discontinued operations
Profit/ (loss) for the year (54) 129
Attributable to:
Owners of the parent (40) 138
Non-controlling interests (14) (9)
(54) 129
Earnings/ (losses) per share from continuing and discontinued operations
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Basic 9 (0.49)p 1.70p
Diluted 9 (0.49)p 1.69p
Earnings/ (losses) per share from continuing operations
Basic 9 0.81p 3.24p
Diluted 9 0.81p 3.22p
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CONCLUSION
From this report it has been concluded that all the financial resources are very essential in
making the business successful. Good Personal and communication skills are important for
recruiting any candidate. It was found out that the internal and external sources are required for
the organization, so that they can implement their marketing strategies.
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REFERENCES
Books and Journals
Akter, S., and et.al., 2016. How to improve firm performance using big data analytics capability
and business strategy alignment?. International Journal of Production Economics. 182.
pp.113-131.
Bowen, J. L., 2014. Emotion in organizations: Resources for business educators. Journal of
Management Education. 38(1). pp.114-142.
Brush, C. G., Edelman, L. F. and Manolova, T., 2015. The impact of resources on small firm
internationalization. Journal of Small Business Strategy. 13(1). pp.1-17.
De C. D., Lim, D. S. and Oh, C. H., 2013. Individual‐level resources and new business activity:
The contingent role of institutional context. Entrepreneurship Theory and Practice.
37(2). pp.303-330.
Gaur, A. S., Kumar, V. and Singh, D., 2014. Institutions, resources, and internationalization of
emerging economy firms. Journal of World Business. 49(1). pp.12-20.
Greene, P. G., Brush, C. G. and Brown, T. E., 2015. Resources in small firms: an exploratory
study. Journal of Small Business Strategy. 8(2). pp.25-40.
Kukreja, G. and Gupta, S., 2016. Tesco Accounting Misstatements: Myopic Ideologies
Overshadowing Larger Organisational Interests. SDMIMD Journal of Management. 7(1).
pp.9-18.
Lai, Y. L., Lin, F. J. and Lin, Y. H., 2015. Factors affecting firm's R&D investment decisions.
Journal of Business Research. 68(4). pp.840-844.
Metzger, K., 2014. Business analysis of UK supermarket industry.
Meyer, S., Ruppen, A. and Magerkurth, C., 2013, June. Internet of things-aware process
modeling: integrating IoT devices as business process resources. In International
Conference on Advanced Information Systems Engineering (pp. 84-98). Springer, Berlin,
Heidelberg.
Patton, D., 2014. Realising potential: The impact of business incubation on the absorptive
capacity of new technology-based firms. International Small Business Journal. 32(8).
pp.897-917.
Sinkovics, R. R., and et.al., 2014. Rising powers from emerging markets? The changing face of
international business. 0969-5931. 23(4). pp.675-679.
Sullivan, R. and Gouldson, A., 2016. Comparing the climate change actions, targets and
performance of UK and US retailers. Corporate Social Responsibility and Environmental
Management. 23(3). pp.129-139.
Trainor, K. J., and et.al., 2014. Social media technology usage and customer relationship
performance: A capabilities-based examination of social CRM. Journal of Business
Research. 67(6). pp.1201-1208.
Veit, D., and et.al., 2014. Business models. Business & Information Systems Engineering. 6(1).
pp.45-53.
Wood, S. and McCarthy, D., 2014. The UK food retail ‘race for space’and market saturation: A
contemporary review. The international review of retail, distribution and consumer
research. 24(2). pp.121-144.
Wood, S., Wrigley, N. and Coe, N.M., 2016. Capital discipline and financial market relations in
retail globalization: insights from the case of Tesco plc. Journal of Economic Geography.
17(1). pp.31-57.
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