Value Chain - Tesco - Essay Example

VALUE CHAIN - TESCO Value Chain - Tesco Tesco is a United Kingdom based multinational grocery and general goods retailer. It is categorised to be within the retail industry and it had been recently ranked as the third largest retailer in the World (the other two retailers ahead of Tesco include France’s Carrefour at 2nd and USA’s Walmart at the top) (Davey & Maidment, 2012). Value Chain is a technique which is used to indicate towards the value creating activities and further help in identifying the non-value adding activities which are usually not admired by the customer of an organisation (Sekhar, n.d; Porter, 2008). Through this technique, a company is easily able to identify and eradicate its non-value adding activity, thus improving its competitive advantage within the industry (IMA, 1996; Kaplinsky, 2000; Nordberg, 2003). Tesco certainly fits within the value chain of its industry. Since Tesco is categorised within the retail industry, it can be evidently seen that the company follows similar activities as that of its competitors. Tesco is actively involved in selling various products at their official outlets. The company, which initially started as a grocery retailer, later transformed into a diversified retailer selling various products at their outlets (Tesco PLC, 2013). Tesco currently sells various products, few under its own brand name, at its dedicated outlets situated in 14 different countries. It also provides financial services within the UK which include service offerings similar to that of a bank. Tesco states that its core purpose is to "create value for customers to earn their lifetime loyalty" (Tesco, 2013). Tesco continues to offer value to its customers via its innovative thinking and approach. The supermarket chain is greatly valued by its customers and this is only made possible by the organisation’s senior management by providing exuberant environment to its customers on each and every shopping trip of theirs. Tesco has got its six step approach for its UK business in order to provide good service and value to its customers. The six steps include: Hiring professionally trained employees which would help in providing a hospitable service to is shopping customers. Improving stores in order to make them a better place for customers to shop. Providing excellent value for money through a very good mix of price, promotion and loyalty schemes to its customers. Providing a wide range of quality products under one roof in order to save customer time. Getting feedbacks from customers in order to improve any deficiencies as per customers’ requirements. Providing innovative services such as online shopping experience so that the customer may avail the facility without having to visit the stores (Annual Report, 2012). Tesco also follows a similar approach in all its other areas of operation with clear intentions of improving their services within different areas around the globe where they serve. The company prides itself in proving such services and it has gradually seen an upward thrust in their customers within the recent years. Tesco has also been actively involved in providing financial services to its customers within its stores e.g. customers can buy insurance or other Bank products offered by Tesco while shopping within their dedicated stores. According to its CEO, Tesco has also formulated an Operating Board within the UK, which would help in addressing customer issues, which as a result would help in machining important and favourable changes for the customers (Annual Report, 2012). The company’s focus towards improving customers experience has led them to achieve great profits within recent years. In the year 2012, Tesco gained a Sales growth of 7.4% and showed a modest increase in their trading profit, which increased by 1.3%. According to the company’s Chief Executive, the company performed exceptionally well internationally and a large reduction in their UK’s profits was off-set by their excellent international performance (Hergert et al, 1989). Tesco’s international performance was outstanding with a hike in trading profits by 18%. Tesco’s improved performance came from Asia whereby the company gained an increase of 20% on their trading profits. The entire improvement in the profits was all attributed towards the organisation’s dedicated team. Tesco kept its supply lines open for customers during the torrid flood within Thailand. Their dedication helped the flood affected people within Thailand and further aided them in coming out of the crisis. The Tesco staff helped customers during the Thailand flood by providing their customers with essential supplies, even after travelling for several hours within the flood waters, hence the company is proud to state that, “‘No one tries harder for customers’ and ‘Treat people how we like to be treated’ (Annual Report, 2013). The company also performed exceptionally within Europe. This was mainly attributable towards the company’s act of sharing the infrastructure in order to buy as a single region. The company has also vowed to re-launch their current Tesco Value feature as Everyday Value, which would lead to quality improvements to several of its products. Besides the quality up gradation, the other focus of this re-launch would be to help customers cope with their tight budgets (Bamford & West, 2010). The company has also planned to add customer preferences on their list of offerings. Tesco has stated that it would offer its customers more personalisation and localisation which would help them stitch up their “ranges much more from their local area” (Annual Report, 2012). Though the company has performed immensely well in the preceding years, it has recently been subject to a major dilemma. The company has had to face a major issue known as the horse-meat scandal, whereby some of its value burgers were found to contain horse meat within them. Almost 29% equine was found within its Value burgers and the company has had to face major criticism from many of its customers. This was not enough; the company also admitted that almost 100% of its frozen Bolognese contained horse meat in it (Tomlinson, 2013). Tesco has had to face a major hit as a result of this latest finding and the company’s share price has recently taken a slight downward dip (Smith, 2013). The company has been trying to bail itself out of the situation by clearly indicating their intent. They have removed all of their contaminated stock and have further indicated that the entire meat related stock would be made subject to a DNA test. The company’s administration has also claimed that the company would continue this practise in order to provide proper meat to their customers and the costs of carrying out the procedures would be borne by the company itself (Blackden, 2013; BBC News, 2013). Though the company has indicated that it would carry out the DNA test before offering its meat related products to its customers, the company has also stated that the costs related with carrying out the test might also get shifted towards the customer and this is one threat which the company certainly wanted to avert since it had reported a good 1.8% early UK profit growth (Felsted & Jones, 2013). This recent furore is certainly going to create issues for the company as it is bound to lose some of its customer goodwill (Schmitz, 2005; Creevy, 2013). Value Chain – Tesco References Annual Report. (2012). Annual Report and Financial Statements. Tesco plc. Retrieved from: http://www.tescoplc.com/files/reports/ar2012/files/pdf/tesco_annual_report_2012.pdf Bamford, C. E., & West, G. P. (2010). Strategic management: Value creation, sustainability, and performance. Australia: South-Western Cengage Learning. BBC News. (Feb 27, 2013). Tesco pledges to sell meat from closer to home. BBC. Retrieved from: http://www.bbc.co.uk/news/uk-21597596 Blackden, R. (2013). Tesco warns of higher prices after horse-meat scandal. The Telegraph. Retrieved from: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9898614/Tesco-warns-of-higher-prices-after-horse-meat-scandal.html Creevy, J. (Feb 27, 2013). Tesco chief Philip Clarke: horse meat scandal will lead to a transformation in the industry. Retail Week. Retrieved from: http://www.retail-week.com/sectors/food/tesco-chief-clarke-horse-meat-scandal-will-lead-to-industry-transformation/5046771.article?blocktitle=Latest-News-and-Insight&contentID=5963 Davey, J. & Maidment, N. (Oct 3, 2012). Tesco halts sales slide at great cost while rivals gain. Reuters. Retrieved from: http://www.reuters.com/article/2012/10/03/us-retail-britain-idUSBRE8920C520121003 Felsted, A. & Jones, A. (Jan 11, 2013). Tesco chief claims early UK sales victory. Financial Times. Retrieved from: http://www.ft.com/cms/s/0/f8ba5ff8-5af6-11e2-8ccc-00144feab49a.html#axzz2M9GerAG5 Hergert, M., & Morris, D. (March 01, 1989). Accounting data for value chain analysis.Strategic Management Journal, 10, 2, 175-188. Institute of Management Accountants. (1996). Practices and techniques: Value chain analysis for assessing competitive advantage. Montvale, NJ: the Institute. Kaplinsky, R. (December 01, 2000). Globalisation and Unequalisation: What Can Be Learned from Value Chain Analysis?. Journal of Development Studies, 37, 2, 117-146. Nordberg, M. (September 01, 2003). Using customer relationships to acquire technological innovation A value-chain analysis of supplier contracts with scientific research institutions. Journal of Business Research, 56, 9, 711-719. Porter, M. E. (2008). Competitive advantage: Creating and sustaining superior performance : with a new introduction. New York: Free Press. Schmitz, H., & International Labour Office. (2005). Value chain analysis for policy-makers and practitioners. Geneva: International Labour Office. Sekhar, G. V. S. (n.d.). Business policy and strategic management. S.l.: I K International Publication Smith, A. (Jan 16, 2013). Wrong time for Tesco to manage a crisis. Financial Times. Retrieved from: http://www.ft.com/intl/cms/s/0/cf7968c2-6001-11e2-b657-00144feab49a.html#axzz2M9GerAG5 Tesco. (2013). Our Values and Promises. Customer Services Centres. Retrieved from: http://www.tescocustomerservice-careers.com/page.cfm/content/our-values-and-promises/ Tesco PLC, Official Website. (2013). About us. Retrieved from: http://www.tescoplc.com/index.asp?pageid=6 Tomlinson, S. (Feb 27, 2013). Now IKEA withdraws sausages containing horse meat from sale in Britain as Tesco boss admits they still dont know whats in their food. Mail Online. Retrieved from: http://www.dailymail.co.uk/news/article-2285217/IKEA-withdraws-sausages-containing-horse-meat-sale-Britain-Tesco-boss-admits-dont-know-whats-food.html Read More