The Analysis of the Business Strategies at Tesco Company - Case Study Example

? Table of Contents Introduction 2 Industry Environment and Competitors 3 Industry Analysis 3 Competitor Analysis 4 Tesco and its Internal Strategies6 Brand strongest resource and strategic importance 6 IT integration 6 Supply or Value Chain 7 Climate Change Strategy 8 Conclusion 8 References 10 Introduction Tesco plc. is a UK based supermarket/grocery Store Company and is one of the largest food retailers in the world. Tesco along with its subsidiaries operates stores that primarily offer food, general merchandise, clothing, and electrical products. It is also operating under the services sector of the industry and provides retail banking, financial, and insurance services. Tesco offers almost 40,000 food products, including clothing and no-food items there product range includes their own labeled products that account for almost 50% of the total sales of the company (Finance.yahoo.com. 2013). Tesco labeled products are of three grades value, normal and finest thus targeting and offering products all range of customers offering them products of different price ranges. Many of the Tesco stores have gas stations that makes it the UK's largest independent petrol retailer. Tesco has almost 530,000 employees that according to the company policy are called their colleagues and it operates almost 6,780 stores around the world with 3,146 stores in UK thus making UK its largest market and it largely depends upon the UK market as 75% of the revenues of Tesco are from UK market. Tesco also operates online store through its subsidiary Tesco.com (Tescoplc.com. 2013). Tesco is one of the largest retailers in the world and was held responsible for 5.4 million tons of Carbon Dioxide emission in 2010-11. However in 2011 Tesco was named the top retailer globally in the Carbon Disclosure. It was the recognition given to the company for its Carbon reporting and reduction measure that made it the top FTSE 350 Company (Eurofound.europa.eu. 2013). Tesco recognized its responsibility towards environment in 2007 and since then had adopted the climate change strategy to curb the carbon emission from its business and ultimately aims to become the zero carbon emission company. Industry Environment and Competitors Following below are the industry and the competitor analysis of the Tesco: Industry Analysis UK along with Germany, France, Spain and Italy is the largest food and drink producer in the EU. The food and drink manufacturing industry is the single largest manufacturing sector in the UK with almost ? 70 billion turnover in the last year while more then 500,000 people are employed by the food and drink manufacturing industry that represents around 13% of the total manufacturing workforce in UK (SOFHT, 2013). Besides the manufacturing industry food and drink retail sector is the largest industry in UK that employees almost 3 million people. The retail food and drink industry has always witnessed the growth in the UK economy as it is believed that 20% of all consumptions are relating to the food. However the year 2013 brought the growth of revenues at the fastest pace for the retail food and drink industry. Retail sales in July 2013 were 3% higher than of sales in July 2012. The major reason of this increase in revenues is thought to be the heat wave that as the longest period of hot weather that the UK has witnessed since 1997. It was thus due to the weather that people were spending more on food, drinks (alcohol), clothing and other out-door items. The surveys revealed that the grocery stores and the supermarkets dominated the UK retail industry and with every ? 1 spent 42 pence were on food. Especially in July 2013 it was seen that the consumers spent almost ?7bn per week that is an increase from ? 6.8bn in June 2013 and ?6.7bn in July 2012 (Financial Times. 2013). The food and drink retail industry in the UK has been associated to the supermarkets or the grocery retail stores that along with the traditional stores also provide their products online. UK witnesses one of the world’s largest retail stores however the growth in the industry was not just enjoyed by the largest stores that have major share of the market in UK. Food and drink retail industry is majorly shared by big four retail stores Tesco and three other of its major competitors that are Sainsbury’s, Morrison and Asda (subsidiary of Wal-Mart). All four of the big supermarkets possess almost 70% of the market share in the UK food and drink retail market (Silvera, 2013). Recent growth that the retail industry witnesses was not only enjoyed by the larger stores however it can be said that they least enjoyed the effect of growth in the market. The major factor of attraction for the customers of retails stores is the price that they offer however there is not much difference in the price witnessed amongst the retail stores neither large nor small. Competitor Analysis Sainsbury’s plc. Together is grocery store in United Kingdom it operates under three segments retailing, financial services and property investments. It operates chain of supermarkets and convenience stores that offer various food and non-food products. Along with the traditional stores it also operates online grocery and general merchandise stores (Finance.yahoo.com. 2013). Company has almost 1106 stores including more than 550 supermarkets and more than 500 convenience stores. Company was founded in 1869 and thus it has been its long-term presence in the UK market that allows it to be amongst the big four grocery or general retail stores in the UK market (Sainsbury's plc., 2012). Morrison Supermarkets plc. Is also a UK based grocery and general retail store that has been present in the market since 1899 and has strengthened its value chain? Company has almost 495 retail stores in UK that offer various categories of products mainly food and drink and along with it other household products (Morrison Supermarket plc., 2012). Another retail store chain Asda operating in UK today holds the position of third largest retail store chain in UK however it is not typically UK based and is a subsidiary of Wal-Mart (Corporatewatch.org. 2013). Like Sainsbury’s promotional idea of “Brand Match”, Tesco’s “Price promise”, Asda follows the idea of “Price Guarantee” it’s the typical approach of Wal-Mart that its subsidiary is adopting. Sainsbury’s is the only amongst the big four grocery stores that increased its market share over the past year that increased from 16.4% to 16.6% thus recorded an increase of almost 5%. It can said that other of the large stores along with Tesco reported a decline in the market share however Asda reported 0.7% increase in revenues for the three months till July 2013 and showed an increase of total 2.4% in its year on year sales and being ahead of Tesco and Morrison (Silvera, 2013). The retail industry in UK witnessed that over all there is the growth however the larger retail stores or supermarkets are being threatened by the smaller companies or retail stores. Almost all the retail stores focus on providing high quality products along with the wide range and variety of products and almost all guaranteeing the price being low especially regarding their labeled products. Therefore it can be seen that the price or the cost is no more a differentiator amongst the stores it is other services that would differentiate the store from its competitors and become attractive for the customers. The recent trend in the industry revealed that the smaller stores or competitors of Tesco that had nominal market shares showed a substantial increase in their revenues. Aldi a German Based discount store with nominal market share in the UK market showed a huge increase of almost 32.7% on its year-on-year sales. Along with it Lidl also a German based global discount super market chain showed a prominent increase or growth of 14.3% with Waitrose that is UK based supermarket chain revealed a growth of 9.3%. Aldi, Lidl and Waitrose together have compelled the larger retail stores likely the big four to change their strategy and have made them to compete on lower or middle level grounds (Silvera, 2013). It is obvious that the larger retail stores have been benefiting from their long-term presence and established relations that strengthened their value chain and allowed them to offer low prices as they were either at the bargaining or negotiating power from their supplier or had the access to cheap and quality material from worldwide markets due to their global presence and large financial and other resources available to them. Tesco and its Internal Strategies Tesco is one of the big four retail stores of UK and it has the highest market share unlike other UK based retail stores has been more focused on growth and has the international presence that makes it one of the leading retail store brands in the world. Brand strongest resource and strategic importance Tesco has maintained itself as a brand and offers long range of products under its own brand name keeping up with the quality along with the promise of low cost. Tesco has thrived for improvement always and has focused on innovation in not in its products quality, packaging and variety but also regarding the unique services that they offer to their customers in order to enhance their shopping experience (Tesco Plc., 2013). They have been quite successful in attaining customer loyalty much of the credit goes to its loyalty cards system that provides it with the data of every individual customer and thus allows it to customize its services as per the needs of every customer thus assuring their satisfaction that leads to their loyalty towards the store. IT integration Tesco today holds almost 30.7% of the UL market and its success can be associated to its internal strategic planning and quick adaptation to the changes in the market. Technology is one of the major factors that differentiates Tesco from its rivals and majorly gives it an edge over the retail stores with nominal share in the UK retail store market. Tesco successfully operates an online retail store last fiscal year reported an increase of almost 10% increase in the UK online sales and almost 46.5% increase of online international sales. Recently Tesco successfully launched an online grocery store in Thailand and Malaysia along with that they have also introduced an application for the smart phones (Tesco Plc., 2013). It has integrated IT into its business operations intelligent scales, electronic shelf labelling, self-check-out machines and radio frequency identification system is the approach that they have used to make their business smooth, effective and efficient. This approach has allowed the Tesco to maintain its ability to handle any increase in the volume of products, services as the customer base increases while at the same time keeping costs low thus fulfilling their promise of quality products at low price. Supply or Value Chain Tesco has utilized its long term presence in the UK market to enhance the strength of its value chain however besides that like many other grocery store chains it sources its goods from overseas manufacturers and suppliers. It also utilizes its international presence to get the access to suppliers that are more competent towards price and volume. It has been the strategy of the Tesco to promote the business and economy of UK however in recent years it has become a necessity to look abroad for the cheaper products as it became difficult to maintain the prices especially during 2009-10 as it struggled to deliver like its previous performance and was not able to show much growth. Thus it became the strategic necessity of the company to move abroad however they did it through their UK partners. Food especially the prepared is totally UK based it requires high standards and quality that cannot be compromised as it is the trust of the customers that is at stake. Climate Change Strategy Tesco is thriving to become an environmental friendly company as few years back company had a huge CO2 emission however they have realized their responsibility and they have adopted climate change strategy. It has been the internal strategy and the decision from the top management to recognize Tesco’s corporate social responsibility. Thus it is the strategy that could enhance the brand image and reputation of the company and assure long-term sustainability and growth for the company. The climate change or carbon reduction strategy has been used as a twofold strategy by the company as it allows reduction in costs in the long-run and business risks though lower energy use, thus allowing the company to have greater energy security and high resource efficiency (Eurofound.europa.eu. 2013). The climate change strategy has been integrated into culture of the company as it is believed that climate change has core relevance to the retail business as one way other it effects the supply chain and eventually the business. Conclusion Tesco is largest retail store chain in UK and third largest in the world. It has been long term presence of the Tesco that it has utilized to strengthen its position in UK market and unlike its competitors in UK market has used international expansion strategy for growth. Tesco has been innovative in its ways and has focused on enhancing the customer experience that has gained them their loyalty. The recent year witnessed a growth in the retail industry especially food and drink retail industry however it was witnessed that none of the big four retailers were able to show some significant growth Tesco might have even declined some market share. It is the retailers that have nominal market share that are challenging the bigger retailers showing that cost is no longer a differentiator. Tesco’s strategies, management and along with that internally generated resources have been quite strong however they found it difficult during period of 2009-10 and further to keep up with their promise of low cost. Thus internal strategies should be revived in order to gain growth in growing market of retail in UK as it is UK market that accounts for 75% of the revenues of the company. References Asda. (2013, January). Your Asda. Retrieved from Asda: http://your.asda.com/system/dragonfly/production/2013/01/25/09_04_33_849_Asda_Income_Tracker_January_2013.pdf [Accessed: 24 Nov 2013]. Corporatewatch.org. 2013. ASDA Wal-Mart : Overview. [online] Available at: http://www.corporatewatch.org/?lid=800 [Accessed: 24 Nov 2013]. Eurofound.europa.eu. 2013. United Kingdom: Tesco case study report. [online] Available at: http://www.eurofound.europa.eu/emcc/labourmarket/greening/cases/tescouk.htm [Accessed: 24 Nov 2013]. Finance.yahoo.com. 2013. SBRY.L Profile | SAINSBURY Stock - Yahoo! Finance. [online] Available at: http://finance.yahoo.com/q/pr?s=SBRY.L [Accessed: 24 Nov 2013]. Finance.yahoo.com. 2013. TSCO.L Profile | TESCO PLC Stock - Yahoo! Finance. [online] Available at: http://finance.yahoo.com/q/pr?s=TSCO.L+Profile [Accessed: 24 Nov 2013]. Financial Times. 2013. Food and drink help UK retail sales to soar in the sunshine - FT.com. [online] Available at: http://www.ft.com/intl/cms/s/0/2e91ff40-0589-11e3-ad01-00144feab7de.html#axzz2lZIWUWu9 [Accessed: 24 Nov 2013]. Morrison Supermarket plc. (2012). Annual . Bradford: Morrison. Sainsbury's plc. (2012). Annual Report . London: Sainsbury's. Silvera, I. 2013. Britain's Big Four Supermarkets Sainsbury's, Tesco, Asda, Morrisons Feel Pressure from Smaller Competitors. [online] Available at: http://www.ibtimes.co.uk/articles/508586/20130924/supermarket-retailer-research-aldi-lidl-sainsbury-s.htm [Accessed: 24 Nov 2013]. SOFHT. (2013). Media Pack. Retrieved from The Society of Food hygience and technology: http://www.sofht.co.uk/members/documents/SOFHT-media-pack-2012-2013.pdf [Accessed: 24 Nov 2013]. Tesco Plc. (2013). Annual report. Cheshunt: Tesco Tescoplc.com. 2013. Tesco PLC. [online] Available at: http://www.tescoplc.com/ [Accessed: 24 Nov 2013]. Read More