Ownership and location of Tesco and McDonalds Essay

There are many different types of business ownership. The four main privately owned enterprises are: Sole traders – owned and run by one person. Partnerships – owned and run by two or more people. Private limited companies – often a business run by a family protected by limited liability. Public limited companies – large organisations whose shares are floated on the stock exchange. In addition there are two other types: Co-operatives – where a group of people run the enterprise together and share the profits or loses. Franchise – where a large organisation allows a person to sell its products and use its name in exchange for a fee and a share of the profits. All privately owned enterprises are able to be divided into two groups: Those with unlimited liability – sole traders and partnerships Those with limited liability – all companies, some franchise and some co-operatives. Unlimited liability means that the owners are responsible for all the debts. They may even have to sell personal possessions to pay them. If this is not possible then they will declared bankrupt. Limited liability restricts the responsibility of being responsible for all you debts. You only have to pay the debts to the limit of what was invested. Not usually do they have to sell their personal possessions. There are many different advantages and disadvantages to all different types of ownership: Sole traders – owned and run by one individual. Advantages: * The owner has full control of the business and all of its profits. * All profits go to the owner. * The owner can make decisions independently without the need to consult anybody else. * Can easily create a report with customer. * Has the ability to exploit niche market. * No Set up for procedures. Disadvantages: * The owner has unlimited liability. * The profits get ploughed back into the business. * To expand the business, financing needs to be found. Partnerships – Owned and run by two or more people. Advantages: * The responsibility of running and managing the company is shared between the two partners. * Access to a wider range of skills. * More ideas and strategies. * Capitals from the partners can bring in more capital and expansion is possible. * Greater ability to gain bank loans/ financial backing. * No need to file accounts for the public. Disadvantages: * Partnerships have unlimited liability. * If a partner leaves or he/ she is not for filling his/ her position it could affect the business. * A decision has to be made a partner can take it upon his/ her self to make the decision and not consult the other partners. Private limited companies – Often a family run business with the protection of limited liability. Advantages: * Shareholders who own the company may have limited liability. * Business finances and the owner’s finances are separate. * Can take more risks due to limited liability * Usually shareholders are closely involved with the running of the business. * Can raise capital more easily. * More professional appearance: more internal structure. Disadvantages: * Shares can only be sold with the permission of the shareholders. * Shares cannot be sold to the public. * Due to their internal structure more formalities arise. * Larger overhead costs of running the companies. Public limited companies – large organisations whose shares are floated on the stock exchange. Advantages: * Shareholders who own the company have limited liability. * Business finances and the owner’s finances are separate. * Shares can be bought and sold on the stock exchange. * Greater ability to raise further capital and expand resources. * Additional shares can be issued for more funding. * More professional appearance. Disadvantages: * There is a danger of being taken over by another company with the trade of shares. * Less flexible in structure. * More formalities when dealing with decision making. * Larger overhead costs of running the company. Franchise – this is a large company who you pay to use the name of. Advantages: For the franchisee * You will own a business that is already running which means it is nearly a guaranteed success. * You will own an already established company. * Capital should be easier to raise because you will be operating under a well known name. * The franchiser will give advice foe the business running and equipment. For the franchisor * They have the possibility to expand very quickly. * It is easier to expand in foreign countries because you would be selling a franchise to somebody that knows the location, language and people. Disadvantages: For the franchisee * Start up cost so you can use the branded name is very expensive. * A set percentage of your profit will go to the franchiser and you will have to buy your equipment and products from them. * You have to stick to the business’ core activities. For the franchisor * They do not have full control over the organisation. Ownership of Tesco. Tesco unlike McDonalds is a public limited company (PLC). Tesco is a PLC because it is on suck a large scale. A group of partners would not be able to afford funding the company and it is highly unlikely they could get big enough loans, because Tesco is a PLC the shareholders fund the company. The shareholders fund the company by simply buying shares. Investors buying shares in Tesco would feel safer buying because they will get limited liability. This means that only money that has been invested can be lost if Tesco fails. The shareholders do not get a profit from Tesco; they make their money buy selling that shares for more than they originally paid. The advantages that Tesco have of being a PLC are; there is a limited liability for Tesco and all shareholders and it is much easier for Tesco to raise funds. The disadvantages are; Tesco cannot make business decisions instantly because they need to confront company directors and major shareholders and the business can be taken over if somebody buy 51% of shares. I think that this type of ownership is the most appropriate for Tesco because they may need to raise capital fast and they don’t need to be making rash decisions. Ownership of McDonald’s. McDonald’s is a franchise company which is completely different to Tesco’s PLC ownership. A franchise company allows people who currently have nothing to do with McDonald’s to buy a restaurant and use the already well established McDonald’s name. This means that McDonalds do not need to fund their own company, the franchisees will do this. McDonalds have limited liability just like Tesco, meaning that McDonald’s and franchisees can only loose investments. The advantages of McDonald’s having this type of ownership for the franchisor are; having the possibility to expand rapidly and the advantage for the franchisee are; you will own a business that is already running which means it is nearly a guaranteed success, you will own a business that is already established, capital should be easier to raise because you will be operating under a well known name and you will have free business advice from the franchisor. The disadvantage for the franchisor is; you do not have full control over the business and the disadvantages for the franchisee are; start up cost so you can use the branded name is very expensive, a set percentage of your profit will go to the franchiser and you will have to buy your equipment and products from them and you have to stick to the business’ core activities. I think that this type of ownership is a good choice of ownership for McDonalds because they do not have to do research on locations because franchisees will do this. Also McDonalds will be expanding rapidly and they do not have the risk of failing their business. They will be making profits when they aren’t even setting up there restraints. Location. Tesco Location. To investigate Tesco’s location I am going to select a small town and a large city to compare how Tesco locate their stores under different circumstances. Some of the different circumstances I am going to look at are; the size of the area in hand and the population. The town I have selected is Pembroke Dock and the city I have selected is London. Populations: Population of Pembroke Dock: Population 8,676 Post town PEMBROKE DOCK Postcode district SA72 [http://en.wikipedia.org/wiki/Pembroke_Dock] Population of London. Population – Total – Density Ranked 2nd 7,512,400[1] (mid-2006) 4,758/kmà ¯Ã‚ ¿Ã‚ ½ (mid-2006) [http://en.wikipedia.org/wiki/Greater_London] Tesco locate their stores where there is a good ratio between population and competing stores. This is because it is highly unlikely Tesco could run a successful store next to an Asda store where the population of the town is 500 people. So it is important that Tesco choose their location wisely because building unsuccessful stores can be very expensive for Tesco. Tesco generally locate their stores on the outskirts of towns, as you can see on the below maps. Land in this area can range from à ¯Ã‚ ¿Ã‚ ½60,000 for a plot of land where Tesco would not be able to fit a store on up to à ¯Ã‚ ¿Ã‚ ½250,000 where you still wouldn’t be able to fit a store. Offers in Excess of à ¯Ã‚ ¿Ã‚ ½60,000 Building Plot at Cannons Lane, Pennar, Pembroke Dock, Pembrokeshire, Pembrokeshire à ¯Ã‚ ¿Ã‚ ½250,000 Plot 15 Barnlake Point, Burton, SA73 Because I cannot find land that is big enough for Tesco to build a store on with adequate room for parking as well as loading bays I don’t feel as though I can comment on the cost of land in this area. Another Tesco stores location; when I typed in London on the Tesco store locator it came back with 110 stores. This tells me that Tesco locate many stores in big cities to meet the needs of big populations. McDonalds Location. McDonalds is a franchise so it is not actually McDonalds that choose the locations of all restaurants. But the franchisors will try to locate in busy shopping areas. I am going to pick a good and a bad example of McDonald’s location and explain why I feel they are bad. On the below maps I am showing where McDonald’s have recently set up a new restaurant in Pembroke Dock next to the Tesco store. On both maps on the previous page you can see that the locations McDonalds have chosen both are competitor free. By this I mean that in both locations there are no other competing restaurants. This is good because McDonalds do not have to worry about losing custom to other restaurants. Also on the maps on the previous page the McDonalds stores are in the middle a community. This means it should be relatively easy to find employees. This is because they are in the middle of two large populations. The populations of Haverfordwest and Pembroke Dock are: Population of Pembroke Dock: Population 8,676 Post town PEMBROKE DOCK Postcode district SA72 [http://en.wikipedia.org/wiki/Pembroke_Dock] Population of Haverfordwest: Population 10,808[1] Post town HAVERFORDWEST Postcode district SA61, SA62 [http://en.wikipedia.org/wiki/Haverfordwest] The populations of these towns are on a reasonably large scale, so I think that it would be easy for McDonald’s to find employees. As you can see from the maps on the previous page these stores are very close to raw material and have good travel systems around them. I think that they are in prime locations for travelling and raw materials. McDonalds will have a lot of choice for land because of the area in hand. It has a lot of undeveloped areas in the towns. In Pembroke Dock there is now a new plot that already has a building on that McDonalds could take up. I think that this would be a more suitable location because they will be attract the custom that comes across the bridge. The ring on the left of the above map is where McDonalds currently have a restaurant. The ring on the right of the above map is where property has become unoccupied. I think that McDonalds could relocate there restaurant here because there is a lot of traffic that come across the bridge and heads away from where the current restaurant is currently located. Although some traffic heads towards town more heads away. I have conducted my own survey to see how many cars that comes across the bridge head towards Carew and Pembroke and how many head toward Pembroke Dock over a one hour interval. Below is my table of results that I recorded. Towards Pembroke Dock. Towards Pembroke and Carew. [http://www.thedock.org.uk/Council%20Data/Pem_Dock_Traffic_Generators_2008%5B1%5D.pdf] Both Tesco and McDonalds could use this