Free Essays

Ethics and Governance

Tesco Company was founded by John Edward Cohen in the year 1924. The company started as small retail shop but was later incorporated in the year 1932. Mr. John Cohen was the manager of the company and he led to its establishment as a supermarket that is known today. He got the idea of setting up a supermarket from a place he visited known as United States of America where he learnt that super market system offers its customers services at a fast rate than the retail shops and the cost of maintaining its labor was usually low .

In the year 1960’s he asked the parliament of the state to have an act known as Retail Price Maintenance Act abolished so as to allow manufactures and suppliers to set prices of goods that would not be enable the businesses to benefit from large economies of sales. The act was not implemented since parliament of the states passed a Resale Prices Act that curtailed the Retail Price Maintenance Act .

Tesco Company used to sell green shield stamps that brought high profits for the company since they sold the products at discounted rates. In 1960’s Tesco Company started its business by buying and selling goods such as grocery stores and small grocery chains around the country. It also introduced home and wears departments in to larger stores so as to obtain higher profit margins . The Company’s management also introduced non-food merchandise that included clothing and house hold items.

Mr. John Cohen stated to import goods in bulk from United States of America and sold them at cheap prices but with time the market profit margins started to decline due to the high cost of maintaining of the business and lead to a serious public image damage as the company was not able to supply the customers with enough goods to sustain the business. Mr. Ian Maclaurin took over the company from Mr.

John Cohen in the year 1973 under his leadership he started to sell the green shield trading stamps and he later launched the operation check out which was meant to cut prices of the goods and this resulted to price wars with its competitor the Sainsbury Company. Mr. Ian. Maclaurin re organized the Tesco Stores Company so as to cut down the expenses of the company it did this by closing over five hundred stores and it later enlarged and upgraded its other stores .

The upgraded and enlarged stores were to be developed in to large out of town stores whose parking was convenient. The company opened other businesses such as petrol stations in the year 1974 and by 1991 it become the largest independent petrol retailer it also dealt with its own-label product lines, it computerized and centralized the distribution systems and developed shopping centers outside major cities of the state. In 1983 the Tesco Public Limited Company was renamed as the Tesco Public Limited Company.

It later opened another super store in 1985 which was located in a 43- acre site in Brent Park Neasden, but it had problems with the local council because they were concerned about the impact the food store in London would have on the retailers in the surrounding areas. In 1993 the company introduced value lines, at a cut price range of own label goods but its competitors complained about the reduced price of the goods and this lead to the loss of value of the share prices.

After years of recession the customers of Tesco Company began to look for the company’s products since it was selling its goods at discounts but the sales of the goods soared. The company’s management later opened a new till so as to increase its sales volumes but the new system cost the company million of shillings, but the customers loved their services. In 1995 the company introduced a company loyalty card so as to increase the sales volume of the company (Co-operative Bank 1998).

Tesco company was Britain’s biggest and the most profitable super market chain of the city, it was criticized for abusing its monopoly position of being the only supermarket that was selling non food items and stock electrical items as the home entertainments, toys sports equipment, workshop and even lighting and furnishing large stores in the city thus it contributed to the society’s problems that are faced today. The problems included exploiting small farmers in the United Kingdom and under paying them.

The company used to manufacture clothes but it used to employ children in its company thus it was abusing their rights because it used to employ children who were below eighteen years yet the Company’s Act stated that workers who were to work in company’s were to be more than eighteen years of age thus they were violating the rights of the children. It was reported that Tesco own- label clothes were being produced by underage workers in the Bangladesh factories and thus they were exploiting the children’s right since they were not supposed to work when they had not reached the age of majority of being termed as responsible citizens.

The Tesco Company had a problem with the fashion designers this because the fashion retailers used to sell their new types of clothes at a high price so that they could generate enough profits for their company while the workers who worked in these company were paid merge income yet the company wanted to sell its products at low price so as to increase its sales volume.

The other ethical dilemma that the company faced was that a Guardian newspaper wrote a series of articles that claimed that the company was not paying taxes to the government thus the company sued the Guardian newspaper for the libelous and malicious statements as the company’s reputation was seriously damaged . This resulted in the customers lose of trust of the managements operations since they were entrusted to manage the companies affairs as this would have resulted in reduced sales volume of the company and also resulted in reduced profits of the company.

The company also faced another ethical dilemma when it announced that it would produce carbon labeling of Tesco products, but an environmentalist opposed the idea because the production of the products would result in the emissions of carbon dioxide which would be harmful to the residents of the state thus the company could not produce the product because of the protests imposed on the product , yet the product would be made from plastics which would be recycled into products that would be useful that is the fleece jackets which would be worn by the residents and this would have increased the sales volume of the company and then its profits would increase in its financial year.

The supermarkets were killing the small-scale farms by forcing the farmers to sell their animals, crops or produce for a lesser amount than the cost thus they displayed anti-competitive practices and this resulted in the closure of most livestock markets. The other ethical dilemmas that the company faced were that it reduced the price of the standard chicken by more than a third to $ 1. 9. The welfare groups argued that the discount offered as a result of the reduced price was undermining the efforts of the welfare group since the income they derived from the poultry business was not enough to sustain the cost of running the business (Adkins, S. 1999. ) The other dilemma that the company faced was that of the company’s business of selling turtle meat .

Most people in China complained that slaughtering the turtle was a barbaric fashion and they said that the animal underwent extreme pain and distress during the slaughtering exercise thus they dismissed the idea of selling turtle meat thus the company had a problem because most of the customers demanded for the product yet the same customer dismissed the slaughtering of the same (Action Aid, 1998). The company also had a problem of transporting the perishable foods thus it had to use means as they aero planes to transport their product from one country to another so that the products could not go bad yet this means transport was extremely expensive for the company to sustain. The company embarked on a program of training of its suppliers so as to avoid the problems that were present in the company. The company’s management designed a training course that was to train the buyers the on the ethical issues and he designed mechanisms of how to manage the effects of the purchasing practices that had an impact on the labor standards.

The training was carried out through brainstorming exercises that focused on discussing on issues such as on a variety of products, buying scenarios and ethical issues in different countries and industries since the company had grown to be a big company with over three thousand two hundred and sixty three stores and had employed over three thousand employees since this would train the company’s employees to know how to manage the customers and their suppliers who contributed to the success of the company.. (Bendell, J. 1998)

The dilemmas of Tesco Company were managed and resolved through the establishment of an ethical trading initiative whose aim was to improve the lives of the workers and their families in the global chains. It was observed that for companies producing, supplying and selling products for consumer market they were to observe national and international laws so as to promote responsible corporate practices that would help it in the future.

The chief executive officer of Tesco company stated in his speech that he addressed to the residents of the state that in order to claim back the sales volume of the company then they had to relate well with the members of the community since they were the final consumers of their products and also they had to accept the impact of the environmental challenges on the lives of the people in the community.

They also had to behave more responsibly so that the image of the company could not be tarnished as this may have resulted in its reduced sales volume. The ways in which the company resolved to manage its ethical dilemmas were also to regulate the budget so that there would be enough money set in the budget so as to curb the green house emissions which were a health hazard to the people of the state.

The government also placed a legal requirement that ensured the country’s carbon account did not exceed its carbon emissions across the country; they were also to charge the carbon through a trading tax so as to allow the company to attain the most cost effective reductions.

The other way that the government used to curb the emissions was to encourage innovation in low carbon technologies and the third was to remove barriers in action including encouraging long term behavioral change of the management of the company so that they would put the needs of the customers when they were setting the objectives of the company because the customers were the final consumers of their products thus they were the determining factors of what would be produced or not.


Website http://www. ethicaltrade. org/z/lib/2007/09/high-st-fashion-press/index. sl accessed on 12th April 2008 Website http://72. 14-205/search?q=cache:gbfisbG35Hsj-static. gooshing. c accessed on 12th April 2008 Website http://72. 14-205/search? q=cache:gbfisbG35Hsj-static. gooshing. cas accessed on 12th April 2008 Website http://www. perishableproduct. com/dailypundit/2007/October/pundito71 accessed on 12th April 2008 Adkins, S. 1999.

The Wider Benefits of Backing a Good Cause Marketing, p. 20-21 . Action Aid, 1998, In Good Company: London: Action Aid. Bendell, J. 1998 ‘Citizen’s Cane? Relations between Business and Civil Society’, paper Presented at the Third ISTR International Conference, Geneva, Switzerland, 8-11 July. On Website: http://www. mailbase. ac. uk/lists/business-ngo-relations