Under Pressure

What are the origins of the pressure groups that emerge in order to fight for their right to be heard and to effect change? Where do the ideas behind organisations that exist to expose big business bad practice? Who were the forerunners of groups such as the McLibel duo?(http://www.bized.co.uk/compfact/mcdonalds/mc19.htm )

In the face of such pressure, how do large business organisations respond? How do they make themselves more relevant to the communities in which they are located? In other words, how can businesses, which are exposed to the glare of investigation by pressure groups, fight off these often unwelcome intrusions into their affairs?

Image: the Stocks and Stripes flag, the united stockholders of Amercia. This protest flag signifies corporate influence over America. Copyright: Jason Cangialosi, stock.xchng.

Industries considered will include: UK supermarket retailing, US oil production and supply, and US meat packing. The period covers the turn of the 20th Century in the USA, up to the present day.

Protest Against Business in the US

At the turn of the 20th Century, concerns were raised in America over the control exercised by monopolies in many large industries. Oil, tobacco and food - all these areas of work were dominated by big trusts and corporations.

Trusts are the US equivalent of monopolies: large organisations in dominant positions in their markets, effectively eliminating competition.

Standard Oil became fabulously wealthy companies by engaging in questionable competition. © Photolibrary Group

Monopolies were tolerated by the state; regulators agreed with the view of the powerful individuals who controlled big business, that concentration and monopoly helped business to exploit economies of scale. It was also a form of protection against what some saw as 'ruinous competition'.

The events of the 1890s and early 1900s may seem like ancient history, but the names of these individual businessmen live on today: Rockefeller, Guggenheim, Heinz. The power they wielded was enormous; a single individual, J.P. Morgan, was sufficiently wealthy to rescue the bankrupt US Government on several occasions.

The full extent of the company's power was revealed in a series of articles written by Ida M Tarbell. The articles were later incorporated into a book called 'The History of the Standard Oil Company'. This work is widely credited as leading to the eventual enforced break-up of the company in 1911. Tarbell's writing on Standard Oil is seen as one of the foundations of modern investigative journalism.

Tarbell's work provoked an angry reaction among some parts of US public opinion. One particularly vexed journalist, called Ivy Lee, set up an agency offering advice to firms who faced similar pressure. So this case study saw the birth of the modern public relations agency, as well as the break-up of one of the world's largest corporations.

Interestingly, the names of some contemporary oil companies have their origins in the break-up of Standard Oil. For instance, Standard Oil of New Jersey became Eastern States Standard Oil, or Esso.

Other notable campaigns around this time by journalists and others working against the excesses of big business included:

the 1906 Pure Food and Drug Act which regulated food additives and food safety. Henry Heinz was the only major food producer who supported this law. It was forced through as a result of public pressure brought by the Pure Food Movement pressure group and the new investigative journalism
reforms to the US meat industry occurred after the publication of the book 'The Jungle' written by Upton Sinclair, which documented the appalling conditions in the industry

Comments from this period of American history about the power of monopolies still ring true today. Wikipedia's entry on Standard Oil refers to a politician's statement at the time that:

Trusts have made products cheaper, have reduced prices; but if the price of oil, for instance, were reduced to one cent a barrel, it would not right the wrong done to people of this country by the trusts which have destroyed legitimate competition and driven honest men from legitimate business enterprise.

Quote attributed to Rep. William Mason, accessed from Wikipedia (http://en.wikipedia.org/wiki/Standard_Oil)

Applying the Pressure to UK Business

In the UK a century later, similar concerns exist over the power of some firms to control their markets. One such example is provided by Tesco, which has attracted recent criticism for its activities. Tesco is a massive business, which now takes £1 in every £8 spent in UK shops. This organisation has become increasingly dominant and has expanded into the convenience store and hypermarket sectors of retailing.

Tesco's growth has been such that in 2005 they had more than a 30% share of the grocery market. The company made £2 billion profit on a turnover of £37 billion in 2005. It has moved into new markets in financial services and non-food products and plans to diversify into the travel and tourism as well as leisure sectors in the future.

But this success has come at a price and chief executive Terry Leahy is careful to monitor opposition to the business. Appearances on TV and radio help in this regard, making the company's case and plainly putting its success down to its ability to meet consumer demand. Tesco need to make sure that fears over their market power do not damage their business.

Pressure groups such as Friends of the Earth (FOE) point to Tesco's policies of buying up large amounts of land in order to build new stores; fighting battles with local authorities over planning; and bringing the company's brand into the high street through its purchase of small convenience stores. The opposition voiced by FOE is well summarised in its report 'Calling the shots: How supermarkets get their way in planning decisions' (see link below):

Quote from FOE briefing 'Calling the shots: How supermarkets get their way in planning decisions'.

But Tesco also face opposition from less mainstream pressure groups. A good example of this is Tescopoly, an online group aimed at exposing and limiting what they see as the market-distorting power of the business. This campaign group points to cases where Tesco have overstepped their permission to build retail outlets, or where Tesco have admitted to having broken the planning regulations.

Non-foods Growth in UK Supermarkets

Claims that supermarket giants such as Tesco are changing the face of Britain's high streets, as new stores are opened and new product lines established, are likely to grow as these firms expand into non-food lines.

The past five years have seen a near doubling of sales of non-food items in supermarkets. Some of the main contributors to this growth are listed below:

Responding to the Pressure

The key to this is the way in which the business organisation communicates with its consumers, regulators, the media and the general public. Recent (February 2006) appearances made by Tesco chief executive Sir Terry Leahy indicate the importance of communication to the business:

In addition, the company responds to claims made by organisations such as FOE, appreciating that it's vital to provide rebuttals to negative claims. The theory here is that by rejecting a claim immediately, it's possible to prevent bad news about an organisation from taking root in the public's mind.

From the early 1900s to the start of the 21st century, business has had to contend with the efforts of individuals and groups who dedicate their time to investigating and exposing corporate malpractice. It's clear that the work of the pressure group will continue for as long as large corporations exist. Today's giant firms, McDonalds, Microsoft, Wal-Mart and here in the UK, Tesco and others face pressure from customers, suppliers and competitors, but must also fight off the attentions of pressure groups.

Activities

What products or services were supplied by the three business leaders mentioned earlier: Rockefeller, Guggenheim and Heinz?
Go to the Investor Centre section of Tesco's Web site (accessible from Tesco's corporate Web site (http://www.tescocorporate.com)) and find the five year summary (under 'Financials'. Use the retail statistics at the foot of this page to draw a graph plotting the expansion of Tesco in the UK and abroad.
Ida Tarbell belonged to informal group of writers who became known as the 'muckrakers'. From the Wikipedia entry on this term, make a list of the issues covered by the early muckrakers. (http://en.wikipedia.org/wiki/Muckraker)
Use the list of sources which follows these tasks to find out more about Tesco's market power. Create a set of arguments in favour and against their having such control over their market.
Use the arguments generated in task 4 to take part in a group debate on the following statement: 'Tesco have made products cheaper, have reduced prices; but if the price of food was cut to 1p per kilo, it would not right the wrong done to people of this country by destroying small shops and changing the nature of the UK high street'.
Supermarkets have almost doubled sales of non-food items in the past five years. How have they achieved this?
Tesco envisage diversifying into the leisure sector and travel and tourism in the future. What kind of products and services do you think they will try to sell? Which of the following media will they use do you think: hypermarket stores, convenience store, the Internet?
What do Tescopoly stand for and what are they trying to achieve? How does ICT affect the work of a pressure group?

At Your Leisure - 6 March 2006