What Do Tesco, Sainsburys, and Morrison Have in Common - Assignment Example

a. Give reasons why they are ified as part of the same strategic group' Ans. The term Strategic group was first coined by Hunt while analyzing pharmaceutical industry. By definition, a strategic group consists of those rival firms with similar competitive approaches and positions in the market. Companies in the same strategic group can resemble one another in several ways. The first dimension is scope commitment, which involves the activities of the range of market segments that are targeted, the types of products and/or services provided and the geographic reach of strategy. The second dimension, resource commitment, includes deployment of resources (cash, human resources etc.) at the business level in the functional areas for mainly obtaining and sustaining competitive advantage in the positioned market segments. The strategic group formed by the four retail majors of U.K. - Tesco, Sainsbury's, and Morrison is characterized by the following features: Geographic coverage: They are primarily UK based retail chains eventually branching out to different parts of the world. The four companies enjoy the top four positions in the market with Tesco on the top followed by , Sainsbury's and Morrison. Format: Each of them follows the format of a supermarket i.e. large retail market that sells food and other household goods and that is usually operated on a self-service basis Product/service offering: The products offered are a range of food and non-food products. The products are not necessarily outsourced; some products are sold under the label of the store. Online shopping: All of the competitors provide online shopping and home deliveries thereby setting virtual shops for the consumer. Commitment to quality and offering value for money: While , Tesco and Morrison have undertaken vertical integration to cut down expenses and increase reliability, Sainsbury believes in integrity of sourcing to ensure quality. B. Analyse the macro environment that these companies must operate within' Ans. An organization cannot be free of the macro environment that persists and has to be resolved each time. The strategic group in consideration faces threat from the environment. Some of it is high impact some is not. Nonetheless, there exists and environment that needs to be analyzed and lived with. Political factors: One needs to be in the good books of the government. There are influences the management needs to create through indirect lobbying. Forms of sponsorships, grants, political donations, etc. are to be made to keep the balance. To get an easy access to the govt. former govt officials are hired by the retail chains. The retail chain has to be a member of various lobbies, for instance Freight transport association, British retail consortium, Institute of grocery retailers, confederation of British industry, labor groups, etc Environment issues need to be taken care of-proper recycling of waste, use of recyclable poly bags, and no harm to the ever depleting natural resources. Any changes in the govt/EU policies have to be addressed. Economic Environment Changing economy is the biggest affecting factor. Consider the present situation where there is a worldwide slump and the market is seeing trends of salary cuts, the purchase power of the buyer goes down and hence the revenues of the retail are getting affected. The changing exchange rates affect the imported product price. Needless to say the buyer looks for value for money in the retail chains and thus will not be pleased with an expensive product. Raise in global price for fuel affect transportation cost and in turn the cost price of the product. Increase in real estate increases the fixed cost thereby affecting the revenue model. Social Issues: Lifestyle changes will demand need for greater product categories. People will demand more of functional food rather than fad foods. The shifting demographics, the young buyer will have different demands from the ageing population of U.K. With increasing competition, the consumer wants the best product and maximum value for money. Media plays a huge role in making or breaking a set up. Positive views in the media will keep the chain in good books of the buyer. The Brand will need to change and evolve with changing trends. Associations with the stars of the past will fetch nothing. Technological Use of better equipment/facilities in the stores for a better consumer experience. Quick turnaround time for deliveries. Online buying and timely deliveries. Adequate communication in case of lapses. Keeping all commitments. C. What are the reasons for the market leader success' Ans. Tesco stands tall as the market leader in the retail sector of U.K. Success does not come easy and there are several distinct initiatives that Tesco has taken to emerge as the market leader. 1. Customer is the king: This is the basic premise of success in service industry. Tesco not only listens to the customers, it responds to them by product offerings that evolve with and like their lifestyles. The commendable fact in this aspect is that the listening is not passive and Tesco takes initiatives to be involved in active listening. It organizes "customer question time" each year where approx. 12000 customers express their views on various issues. Customer comment cards are available in all stores and they are duly addressed by respective authorities. It employs a range of qualitative research techniques, such as focus groups, accompanied shops, home visits and others, to explore issues. It also uses quantitative techniques, such as on-street, telephone or on-line questionnaires, to talk to a wider number of customers, or to quantify views and opinions garnered in qualitative studies. By doing this it has been able to keep up its promise with the customers to provide them good staff, no queue, clear aisle, choice of products and good price. 2. Follow the community plan: Tesco believes in being a good neighbor and undertakes community service by small initiatives like supporting the local sports team. At the same time they realize their responsibility towards the environment and have modeled a plan to achieve it. The highlights of the plan include saving energy, encouraging healthy eating, recycling, etc. 3. Competitive pricing: In the times of increasing prices of all resources, Tesco drives to control its pricing and thereby extend good price to its customers. There is a regular check on competitors pricing to be able to offer competitive pricing to the customer. Tesco believes in fair pricing and offers similar rates in stores all across except a few large stores due to higher costs. 4. Good supplier relationships: Good suppliers are the backbone of retail industry. Tesco not only has strong ties with its suppliers, it partners them truly so that it is a win win situation for both the parties. The suppliers thus feel motivated to be with Tesco. 5. Product Choice: The most important factor of retailing, "Choice". Tesco offers choice to its maximum. With 40,000 products across all ranges, it offers products in numerous categories. It offers organic products, kids snack, Free from products (for allergic people), healthy living products, etc. 6. Tesco's commitment to making its business more relevant to the customer drives much of its successful innovation, such as launching value lines, the introduction of a loyalty card, introducing 24 hour shopping and developing online services. 7. Tescos's move in non food products, provision of services as banking and telecom and overseas expansion has also been a critical factor in keeping the margins in green. 8. A great CRM program: When Tesco says, "Every little helps", it really means it. Its CRM program is certainly one of the best in the world, and customers love it. The card provides Tesco with vital customer information such as what products the customer buys and what he does not buy, where do they spend their time in the store, and where they do not, as measured by spending. Customers receive vouchers for items they like to buy and offers to explore parts of the store that they have not yet seen. Different lifestyle magazines have been created for different customers, and high-value customers got calls from the manager of the store, valet parking when they came to shop, and other special privileges. All this put together makes Tesco a success as we see today. It has risen from an underdog 20 years ago to be a market leader and one can easily owe it to the brand's customer centric approach. Tesco has been particularly sensitive to the needs of the customer and strived to achieve them. D. Compare and contrast any two of the companies in the strategic group' Ans. Drawing a comparison between Tesco and . S.no Premise Tesco 1 Format 4 different store formats-express, metro, superstore and extra. Apart from this another format is home plus. They all vary in sizes. There are different models: /Walmart super centers, Superstores, Living and George high street stores 2 Product offering Food Items - labels and own, non food like clothing, home, etc Food and non food items 3 Geographical Reach The Group operates in 12 markets outside the UK, in Europe, Asia and North America ' 4 Online shopping It has a dedicated portal called tesco.com It has a dedicated portal .com 5 Loyalty program Club card - it offers the buyers an array of benefits. None 6 Promotion offers Current offers are for Christmas ' 7 No. of stores over 2100 356 8 Suppliers ' 500 9 Corporate responsibility As part of corporate responsibility, it undertakes community plans. The Community Plan in each country is based around its community promises; actively supporting local communities; buying and selling its products responsibly; caring for the environment; giving customers healthy choices and good jobs for local people; and reflects the needs of the local communities it serves Support more than 300 communities. Support charities, Undertake school projects and local sponsorship schemes raised through foundation. 10 Strategy Tesco has a well-established and consistent strategy for growth, which has allowed us to strengthen our core UK business and drive expansion into new markets. At , the guiding principles have always been the same and these are at the centre of everything they do - from how they treat their colleagues and customers right through to how and where they source the products. Tesco is closely followed by as far as market share is concerned. With its customer centric approaches, Tesco has won credibility among buyers and continues to do so. Retail is all about adapting to change and evolving as the buyer behavior evolves. It is truly survival of the alertest player. Reference: 1. .co.uk. [internet] available. accessed on 26 November 2008 2. Dr. Paul temporal.Tesco - The brand experience is everything.Hi tech hi-tech branding [internet] Available accessed on 26 November 2008 3. Kotler (2005) Marketing Management. 11th edition. India. Pearson 4. Mesure,S. 2003. Is there no stopping the Tesco success story' Independent.co.uk.[Internet] 17 September 2003Available< http://www.independent.co.uk/news/business/analysis-and-features/is-there-no-stopping-the-tesco-success-story-580208.html>accessed on 26 November 2008 5. Morrisons.co.uk.[internet] available. accessed on 26 November 2008 6. Sainsburys.co.uk.[internet] available. accessed on 26 November 2008 7. Tesco.co.uk.[internet] available. accessed on 26 November 2008 (2004). Tesco's success puts Club card firm on the map. The Sunday Times. [internet]. December 19, 2004. Available accessed on 26 November 2008 8. (2004) From crisis to success - The Tesco story. [internet]. 19 march 2004. Available. accessed on 26 November 2008 Read More