Strategic Position of Tesco in the UK Using Concept - Assignment Example

? Undertake An Analysis Of The Strategic Position Of Tesco In The UK Using Concept & Tools Of External And Internal Strategic Analysis. ID Professor Course Date Briefly outline your organizations, products or services, the customer markets its services & any competition it faces,  Tesco is the chief food retailer company in the UK with 2,318 stores globally. Tesco’s headquarter is located in UK, at Hertfordshire city. The number of Tesco stores operating within UK alone is one thousands eight hundred and seventy eight (1,878) while; the rest of the stores locations include Europe and Asia. Tesco.com operates wholly as a subsidiary company with an exclusive online service like the tescidirect.com, and in tesco.net. Additionally, Tesco provides both online and offline financial services with a personal touch. The total revenue received by Tesco PLC as on February 2004 added up to ?33,557 million translating in a rise of approximately 18.7 % from the preceding year’s revenues that ranked ?28, 28 million (Humby et al, 2008). 1) Analyze its task environment Using PESTEL to categorize key issues which management need to respond to, focus on 6 CURRENT issues using evidence (STATISTICS,QUOTES,REPORTS) to substantiate them, for example: current Horse meat issue  Tesco operates in a globalised environment with stores worldwide, including six European countries. These include the Ireland Republic, Czech Republic, Hungary, Turkey, Slovakia and Poland. The Asian stores are located in South Korean Thailand, Malaysia, Japan, and Taiwan. However, Tesco’s performance relies heavily on the mother country’s political and legislative structure (Henry, 2008). Legislation requires the government to supply the population with a wide range of job opportunities, including the extremely skilled, high paid and centrally located chances. The population demands students, senior citizens and working parents to be considered in terms of job availability for varied groups of individuals. Tesco comes in play as a challenge to local businesses, which include the cutting of costs and declaring the company’s products obsolete. This results in driving the companies out of the market completely (Nathan Rao Consumer Affairs, 2013). Tesco tries to work against the problems named by providing a labor market to diverse employees including students, disabled and the elderly in the society with relatively lower pay rates. Therefore, the employees depict a significant level of loyalty to organizations with the increased level of staff turnover currently in the community (Ringland, 2006). Economic factors Tesco takes matters relating to economic factors with a considerable level of seriousness as the factors directly affect the demands, costs, prices, and the profit levels of the organization in place. The high unemployment levels in an economy results into decreased levels of effective demands for varied goods. The production level of goods lowers with a decreased profit levels, which, adversely reduces and affects the profit levels. In as much as the operating company cannot control the factors, they adversely affect the performance, and marketing mix of Tesco. Despite the growth levels that are evident in the international markets, Tesco substantially relies on the UK market for its survival. Therefore, decreased demand of UK’s foodstuffs can expose the company’s market to face risks of making losses (Nathan Rao Consumer Affairs, 2013). The social and cultural factors The British customers tend to adopt bulk shopping from their previous one stop shopping criteria. The situation prompts Tesco into additional production of food pre-cuts in the country. The increased rate of the “ageing population” and participation by women in the employment sectors result, in an increased demand for Tesco products and services. Additionally, Tesco tends to gear most of its focus on its own label of business blend, supply chains and various operational improvements with the capabilities of driving costs out of business. Consumers purchase goods that conform to their social conditioning, by incorporating their social conditioning with their resulting attitudes and beliefs. Consumers tend to understand the health issues that result from the consumption of certain types of food products. This affects the demands of inorganic food products. In a bid to capture the new market, Tesco tries to venture in the production of inorganic foodstuffs. Additionally, Tesco also happens to be among the first companies that encouraged customers to pay their bills in cheques and cash at checkouts (Ringland, 2006). Technological factors significantly affect the macro environment that prompted most of the product developments at Tesco. The customers involved with the company reap tremendously from the current technologies. The customer enjoys the easy access to the personalized services that enable convenient shopping. The introduction of efficient customer response scheme facilitated the shift that currently ensures food supply, chain management (Henry, 2008). Tesco utilizes technologies like wireless devices, electronic shelf labelling, self-check machines, and the Radio frequency identification (RFID) to enhance their services. Tesco communicates their needs to the suppliers at the correct time via Electronic points of sale, Electronic Funds transfer system together with electronic scanners (Nathan Rao Consumer Affairs, 2013). Environmental factors The year 2003 marked a significant period as companies and managers recognized their social responsibilities hence, the need to function in a way that ensures the society benefits. Tesco realized that the societal issues act as a threat to the food retailers. The recognition of this trend enables the company to adopt a socially responsible way that enables the company to surpass the minimum expectations to stake holders. The expectations are subject in regulations and corporate governance. The year 2003 marked the period that most government felt obliged to introduce the strategy that ensures that a satisfying consumption and manufacture of the products that ensure reduced waste, minimized resource use, and reduced environment damage. The current laws expose the companies that produce highly processed and fatty food products by an increased tax charge. The fat tax strategy has affected the association that existed between suppliers and customers (Tesco uses BT cloud contact technology to bring it closer to customers, 2003). The legislative factors directly affect the performance of Tesco. The food retailing commission discusses the implied bans set on the demand of additional payments from suppliers and untimely alterations of prices without allocation of proper notice to facilitate the same. The vigorous competition with established brands threatens the company’s brand, especially in situations of intense price wars. The government intervention controls the build-up of monopoly control hence minimize the chances of monopoly development. The government protects the market from monopoly cases via eliminating limits on access of the raw materials. The politically correct pricing policies at Tesco realized via the fall on fuel prices. The reduced price strategy basis on the sale volumes in the stores as; reduction of a price in a certain branch is compensated, by an increased price in the next to facilitate the promotional needs (Telecompaper UK: UK- Tesco uses BT Cloud Contact platform, 2013). 2) Avoid lists of perception be perceptive. The UK maybe in general, in recession, but, but are the customer segments or geographic markets you serve different to the trend?  If there is uncertainty about the way, which current pestle issues may evolve, can SCENARIO mapping help?  The grocery market in the UK consists of few competitors with the four brands named, Adsa, Sainsbury and Safeway that consumes close to 70% of the market share. Tesco requires an analysis of the prospective competition trends in the grocery industry. The grocery market has drastically evolved into a successful supermarket business. The operation efficiency of the large chains like Tesco has enabled the company to become successful. The market control exerted by the large stores enables firms to thrive over small traditional shops like butcheries and bakery amongst others. The situations pause as a barrier to the companies eager to enter the market. This comes in play as the capital required and the technology involved in stock control remains significantly high (Fenn & Ra Telecom paper UK: UK - Tesco uses BT Cloud Contact platform, 2013). 3) Analyze industry context using 5 FORCE ANALYSIS to decide whether the STRATEGIC GROUP your organization is in is attractive or not, metrics on probability, Entry/exit, sector growth may provide evidence. Your aim is to research important and current opportunities & threats. Opportunities The research figures on sales and growth confirms that Tesco remains the biggest global grocer, with the capability of purchasing that ensures the economies of scale. Tesco posses the ability to extend its market capabilities through Asia, and South Korea depicted in the acquisition of Homever. Tesco’s achievements resulted into increased sales margin for the company. The online business and catalogue shopping ensures the expansion of Tesco’s market from the food based industry assuring the company’s high marginal returns. Tesco has also seen a growth of close to ? million customers in the year 2008. The company made a profitable shift that promises future growth and advancement within these technological areas. Bowman’s strategy highly values the competitive advantage parallels the cost, and differentiation. The product from Tesco serves different geographical areas, population and ages. Low price sometimes provide the company with an opportunity of being a price leader (Rosie, 2013). Threats The recession that is present in the American markets has resulted in economic concerns. The decreased level of employment coupled with lower incomes requires the market to adopt lower priced materials with a reduced focus in high and luxury products. This implies that the pricing strategy remains subject to change. Modern development and continued alterations in technology results into a significant change in consumer behaviours. The introduction of technology results into the change of buying patterns; hence, the technology adopted requires constant changes to ensure that the evolving consumer demands are effectively met. The increased price of raw materials implies a reduced profit margin for the goods. The sourcing changes to Far East locations impacts on the profits margins because of the restrictions applied (Henry, 2008). 4) Analyze the strategic capabilities of your organization distinguishing between the threshold & distinctive resources or competencies. In evidence, you should bench mark capabilities against past performance & industry competitors in suitable ways (financial data, performance data, quotes and or reports). Comment on the sustainability of your capabilities using VRIN criteria. In which part of the VALUE CHAIN does your organization excel? your aim is to carefully research important capability strengths or weaknesses to achieve competitive advantage The value, rare and imperfect technology applied by Tesco enables the company achieve competitive advantage over its competitors making the company maintain its cost reduction, and differentiation of its food products. The staffs at the stores and head office undergo training. The training based at the Valuable resources helps Tesco implements strategies that boost its effectiveness. Tesco trains its employees constantly ensuring that the employees possess correct skills to compete effectively in the global market. Rare technology adopted by Tesco remains unique to the firm. Imperfectly imitable that is why Tesco has maintained leadership in cost and differentiation since 1990 (DataMonitor, 2004). Value chain analysis Value chain refers to the association between the chief value adding activities and their border point with supporting activities. Inbound logistics Tesco remains a marketing leader, hence use the situation coupled with economies in ensuring low costs from the suppliers. Tesco undergoes unending upgrades in the ordering strategies, authorized vendor list and in-store process to facilitate efficiency and effective inbound logistics functions (DataMonitor, 2004). Operations management at Tesco, The Company invests heavily on its IT system facilitating the low cost leadership strategy. The Tesco invested ?76 million in the reforming of the strategy. The reformation saw the profit margins increase to ?550 million in additional profitability in the year 2009. Tesco utilized a large ERP system facilitating the reduced stock holdings in the company (DataMonitor, 2004). Tesco’s value chain analysis Fig 1: Additional values in Value Chain of Tesco Outbound Logistics and sales and marketing strategies The location of Tesco online food retail sections together with the offline store remains strategically placed near the target population. This ensures maintenance of Tesco position as the best online and offline food sellers. Stores like Express, metro, superstores, extra and home plus remains strategically placed. Tesco adopts a sales and marketing structure that encourages customer loyalty. Programs such as Tesco club card utilize IT advances, which encourages customers to stick to Tesco’s products. The greener living schemes encourages customers to preserve the environment, like ways of minimizing food wastes and reducing emission of carbon food prints while cooking (DataMonitor, 2004). Tesco’s services value the customers’ needs thus the dual strategy cost leadership and differentiation. The services come in forms of self-service kiosks, financial services, promotions and direct marketing. Tesco has been able to produce high quality products. Tesco ensures the progress via the use of the cost leadership. Hence, Tesco attains high value that surpasses their competitor’s products. The diagram confirms the difference (Tesco, 2013). Fig 2: Benchmarking Analysis: Cost as a Percentage of Sales Conclusion In light of the above analysis, Tesco maintains their leadership position in massively tumultuous retail sectors, where companies pursue both cost leadership, and demarcation policies. Tesco has achieved all these aspects through the aid of an inclined and agile supply chain organization, along with the planned utility of information technology. The core competencies of Tesco align with the business environment, therefore, highlighting a positive outlook for the company (Tesco, 2013). The large size and degree chain in Tesco allows employees; suppliers and customers achieve social responsibility. The task can be adopted to promote education, health etc. at a subsidized price. From 1992, Tesco planned computers for school schemes supplying schools and hospitals, extracting voucher for the loyal shopper Tesco. In the year 2004, ? 92million in equipment allocated in the organizations; Tesco supplied charity organizations with close to 1% of their pre-tax profit by the year 2004-2005, which translated in an increase in charity contributions to ?21 762 931. Tesco released grants that came close to ?878,556 within neighbouring and national aid organization in the United Kingdom (Ringland & Young, 2006). Bibliography DATAMONITOR. (2004). Tesco PLC: Company Profile. Available at FENN, J., & RASKINO, M. (2008). Mastering the hype cycle: how to choose the right innovation at the right time. Boston, Mass, Harvard Business Press. Available at HUMBY, C., HUNT, T., & PHILLIPS, T. (2008). Scoring Points How Tesco Continues to Win Customer Loyalty. London, Kogan Page. Available at RINGLAND, G., & YOUNG, L. (2006). Scenarios in marketing from vision to decision. Chichester, England, Wiley. Available at HENRY, A. (2008). Understanding strategic management. Oxford, Oxford University Press. Available at ROSIE, B 2013, 'Marketing Week: Tesco to source more meat from the UK', Marketing Week, 27 February, NewsBank, EBSCOhost, viewed 2 March 2013. Available at Telecompaper UK:UK - Tesco uses BT Cloud Contact platform, 2013, Telecompaper UK, 31 January, NewsBank, EBSCOhost, viewed 2 March 2013. Available at 'Tesco uses BT cloud contact technology to bring it closer to customers; BT's flexible Cloud Contact solution being used by all UK Tesco contact centre employees', 2013, M2 Presswire, 31 January, NewsBank, EBSCOhost, viewed 2 March 2013. Available at NATHAN RAO CONSUMER AFFAIRS, E. (2013). 'The Express: Tesco pledges to sell more UK meat', Express, The (London, England), 28 February, NewsBank, EBSCOhost, viewed 2 March 2013. Available at Read More