In the year 1919 a man called Jack Cohen founded Tesco. He began by selling groceries from a market stall in the East End of London. The first day in his business he made a profit of 1 and made 4 worth of sales. In 1924 Jack Cohen sold his first home made brand product which was Tesco's Tea, this was before the company has chosen the name we know it as today. The name Tesco comes from T E S of T E Stockwell who was Jacks business partner in the firm of Tea suppliers and the CO of Cohen Jacks last name.
5 years later Jack Cohen opened his first ever Tesco store in Burnt Oak, Edgeware, North London. In 1932 was the year that Tesco's stores limited became a Private Limited Company. 2 years later Jack Cohen brought a plot of land on Angel Road, Edmonton, North London. He used the land to build his new headquarters and warehouse. This food warehouse was the first modern warehouse in the country and helped to introduce new ideas of central stock control.
Later in 1956 the first self-service supermarket opened in a converted cinema in Maldon. Tesco has changed massively since 1956. It currently has over 3,729 stores located all over the world. It also has a website (ww.tesco.co.uk) and thousands of staff totalling 440,000 people. This is a big change from a small market stall in the east end on London.
I will now explain why Tesco is a Public Limited Company. Tesco is a Public Limited Company as this will help draw shareholders to the business as they would have limited liability. This means that if Tesco went bankrupt they would only lose what they had invested in the business unlike a sole trader were all their belongings could be lost if they went bankrupt.
Tesco being a Public Limited Company would also help to bring more money into the business for investment. The extra cash is gained by having more shareholders in the business. This extra money is very useful to Tesco as it will help them with purchasing products from suppliers. If Tesco were not a Public Limited Company and were a sole trader instead they would not have as much financial backing and would not able to be as big as a supermarket as they are currently now.
Also if Tesco was not a Public Limited Company that would have to borrow money from the bank. The money that they would borrow would have to be paid back with heavy interest. This would mean that Tesco would not be able to spend the money as freely as they can with the money from their shareholders. Also Tesco might not be able to borrow money because of the current credit crunch as the top banks are reluctant to give money out to anybody as Britain and many other countries in the world are struggling during the recent financial crisis.
There is another advantage to Tesco being a plc and that is their have the board of directors. They all have individual areas of expertise and can offer a wide range of skill and knowledge. Tesco has the ability to raise larger sums of money through expanding the number of shares in order to take over other businesses. Since Tesco is a Public Limited Company they will have credibility from the public, they will have good prestige and respect from several people and loads of people will want to invest in Tesco.
Tesco being a Public Limited Company means that they have purchasing power and can put on pressure on their suppliers. Being able to do this will mean that they are able to drive down many prices so that they can easily sell merchandises and receive a large amount of profit. For example Tesco could go to a bakery and ask for 10 loaves of bread and receive them for ï¿½5 whereas a sole trader would visit and would have to pay a lot more than the Public Limited Company and would have to raise their prices so they could make a profit.
I will now explain why it would be difficult for Tesco to now become a Sole Trader or Partnership. Tesco could certainly not be a Sole Trader or Partnership because they would not have as many shareholders as they would have unlimited liability. People would not want to be shareholders in the business as it would be a risk, if they fail. Unlimited liability means if the business fails all the owners personal possessions will be included to pay the companies debts this will also happen to pay the companies debts to.
A Partnership or Sole Trader would not be able to take over Tesco or buy Tesco out as Tesco is worth millions and billions and an individual or partnership would not be able to take over as they would not be able to have enough money it. They will need to pay for costs (expenses) and maintenances which an individual or partnership can never do, they need wealthy shareholders who can invest millions.
Also the other shareholders at Tesco would have to decide if somebody wanted to own a large share of the business as they could potentially have more power in the business than other shareholders on the board of directors. A decision like this would involve the directors to look at the financial benefits that are happening.
Tesco is also too huge to be run by a sole trader or partnership as it has stores all over the world and would be very hard to keep track of all charge's that are happening. Furthermore Tesco would not be as competitive as it may not be able to negotiate as good deals with suppliers, for example an individual may not have the expertises to negotiate with suppliers, which may lead to having to buy high-priced products, but with many powerful shareholders they can overwhelm suppliers and force them into selling products for a much cheaper price, this if why Tesco is a PLC.
The credit terms with suppliers would not be as good because the more Tesco brought products from suppliers the more money the suppliers will charge, so Tesco will need to negotiate with suppliers on a regular basis, or else they will have to find different suppliers who charges low amounts.