Unit 1: Business Organization and the Environment

TM is a public company and its strategy is to a large extent influenced by its

profit-driven objectives
The most important point to remember about TM is that competes by trying to
offer the lowest prices in the market. All aspects of its business management is
organised to support this aim. TM is organised to achieve maximum efficiency and
lowest cost. Some aspects of this are positive (customers enjoy the benefit of very low
prices and wide product choice). Other aspects may be viewed negatively (key
stakeholders such as employees and suppliers seem to be poorly treated)
TM operates in an intensively competitive market supermarket retailing. The
competitive environment is likely to get even tougher as the effect of wider use of ecommerce is felt. The suggestion from the case study is that TM has not been as quick
as other global competitors to embrace e-commerce. Is it too late?
TM is big and it seems to use its power and size to get what it wants! Just
ask TMs suppliers who seem to be under pressure to give TM the best possible terms.
Just ask TMs employees who are paid the minimum allowed and no more. Perhaps it
is no surprise that TM is increasingly under scrutiny from pressure groups who are
pointing to its poor record on business ethics and social responsibility. Can a MNC
continue to succeed globally if it does not act ethically or meet is broader social
responsibilities?
Like any MNC, TM is not immune from changes in the economic
environment. The recent downturn in economic conditions in France is featured in the
case study, although this seems to have had a broadly positive effect on TMs business
there. In a recession, consumers increasingly look for value for money, since
disposable household incomes are under pressure. Will TMs lowest-price positioning
continue to be successful as economic conditions improve?
Unit 2: Human Resource Management
Who would want to be an employee or manager working for TM? Financial
rewards are very low, the workplace rules and procedures are strict, and the discipline
is tough.
So why would you work at TM? Because it is a major employer and it is a
successful business that provides secure employment, provided you follow the rules.
In many locations, the TM hypermarket will be one of the largest employers.
The most important feature of human resource management is the
organisational culture at TM. It is the culture that influences all aspects of how people
are managed in the business and how decisions are taken.
The culture at TM is all about command and control from the centre.
Centralisation is key all aspects of the business are determined by the senior
management team at TM in South America. Whilst there are some advantages to
centralization for an MNC the overall effect at the TM hypermarket in St. Laurent
appears to be negative.

 Employee morale at St. Laurent looks very poor. If Daniel Pink were to visit
the TM hypermarket there he would find little evidence of his three intrinsic
motivators - autonomy, purpose and mastery. However, if he were still alive,
motivational theorist Taylor would certainly approve of the autocratic, scientific
approach to motivation being taken by TM.
The one thing you can say about working at TM is that employees and
managers know what is expected of them and where they stand in the organisational
hierarchy. However, there is clear evidence that this hard approach to human
resource management is building significant resentment. A key question to consider,
therefore, is whether TMs HRM strategy is increasingly becoming a significant
weakness in the business.
Unit 3: Finance and accounts
We are provided with very little financial information about TM. Prepare for
that to be provided as additional information in the Paper 1 exam.
It is likely that you could be asked to look at some summary financial
information for TM. Remember that lines [86-87] state that the [MBA] case study
contains financial information for TM, which Henri uses to calculate financial ratios.
He is shocked.
Why might Henri be shocked? There are some possible clues in the case.
Suppliers are said to have been persuaded to have given TM even more
favourable purchasing terms. Might that be reflected in a very high creditor days
figure, which, it can be argued, is evidence of TM not acting ethically with suppliers.
Might Henris shock be related to TMs liquidity ratios. Remember that large
supermarkets often have a very low current ratio, since they have very few trade
debtors (customers pay in cash); relatively low stocks, and very large amounts owed
to suppliers (trade creditors). TMs current ratio might be extremely low, but is Henri
right to be shocked?
Another possible cause of Henris shock may lie in the profitability ratios for
TM. Perhaps the gross profit margin is much higher than he expected? Perhaps TM is
earning extremely high overall profits, which might seem somewhat unfair to staff
and management at St. Laurent who are paid so little.
Unit 4: Marketing
It is often said that marketing success in retailing is all about three factors:
location, location and location. However, for TM there is a different recipe for success
price
Price is the dominant part of the marketing mix for TM and is the foundation
for its growth so far. It has one, simple aim: to have the lowest prices in the market
and every aspect of the business (particularly operations and HRM) is organised to
support that aim
TM is a classic low-cost operator or discount retailer. Customers associate
TM with value. So, in order to keep its competitive advantage, it is essential that TM
operates as efficiently and cost-effectively as possible.

 In recent years however, another element of the marketing mix has started to
become more important: product. Extending the product range first to a wide variety
of non-grocery goods (e.g. automotive parts, office supplies) and then to a range of instore services (e.g. pharmacy, banking) has enabled TM to make full use of its large
hypermarkets. TM has aligned low prices with wide product range. No wonder that
when a TM hypermarket opens in a new location, other local retail businesses suffer.
They struggle to survive, let alone compete.
This powerful combination of low price and one-stop shopping might seem to
be unbeatable. However, TM faces a threat from e-commerce which it seems TM has
been slow to embrace.
Where will future growth come from given that TM has already expanded its
geographical reach outside South America (market development) and significantly
expanded the product range (product development). The next phase of growth looks
like it will come from a possible expansion into Asia. Depending on how TM decides
to expand into Asia, this could be a high-risk strategy. Many MNC retailers have
come badly unstuck in Asia believing that their marketing mix would work in markets
that turn out to be much more competitive and harder to enter than they first thought.
In the exam, make sure you are prepared, if asked, to analyse the different options
open to TM.
Unit 5: Operations Management
To understand TMs approach to operations management you need to link it to
its aim (lowest prices) and organisational culture (low cost).
TMs operations are managed in order to support operating at the lowest
possible cost. Non-core activities have been outsourced (and no doubt those suppliers
have been squeezed too). Lean production is the strategy, looking to cut out waste and
minimise the amount of stock in the business.
However, it is the scale of TM that is perhaps the most important factor in the
business operating efficiently. There are clear economies of scale benefits to TM from
being a market leader, not the least being the ability of the business to negotiate the
best purchasing terms from suppliers.
Henris MBC class study of TM suggests that customized production is a
significant threat to TM. Really? To a hypermarket retailing business? No. Much more
significant is the growing influence of e-commerce and the implications of that for
TMs operations. That is where the real threat (or opportunity) lies.