Analysis of Tesco Strategy - Essay Example

School: Department: ID Number: Review of Tesco Strategy Executive Summary This essay mainly deals with the analysis if the external and internal environment of the organization of Tesco Plc in order to improve its sustainability. Along with this, by analysis its macro and micro environmental conditions, the types of strategies are analysed that may improve its position. Other than this, the corporate, business and suggested strategies are also presented in this essay that may enhance the condition of the organization of Tesco Plc in future among other rival contenders. Table of Contents Executive Summary 2 Introduction 4 Brief overview of Tesco PLC 4 Analysis of the external environment of Tesco Plc 5 Macro environment Analysis by PESTEL 5 Micro environmental analysis with Porter’s five forces 7 Analysis of the internal environment of Tesco Plc 9 Resource based view of Tesco Plc 9 Value Chain analysis of Tesco Plc 10 Analysis of PR crisis of Tesco Plc 12 Strategy Analysis of Tesco Plc 13 Business level strategy: 13 Corporate strategy of Tesco Plc 13 Strategies suggested for future evaluation 14 Implementation of models and techniques 15 Conclusion 16 References 18 Appendices 20 Introduction In this age, every segment is becoming extremely competitive in nature. This is mainly due to the presence of numerous rival players, with varying product lines and services. Due to which, the bargaining power of the customers and suppliers is increasing at a rapid pace thereby amplifying the rate of switchover costs. Similarly, the food and beverage retailing segment is the largest and extremely competitive industry in the market of United Kingdom. The prime reason behind it is the presence of numerous existing players such as ASDA, Sainsbury, Tesco Plc and many others. As a result, the retail segment offered approximately 12 percent to gross domestic product (GDP) of the nation that amplified its economic standard and image in the entire globe among others. Apart from this, the retail segment also proved effective in presenting employment to almost 3.5 million educated citizens that reduced the rate of poverty and unemployment significantly. This proved extremely effective for the nation that enhanced its portfolio and equity in the market among others. Brief overview of Tesco PLC Tesco Plc is recognised as one of the reputed international grocery and merchandise retailer in the market of United Kingdom. It includes more than 2318 stores in the entire globe comprising of 472000 experienced staffs to assist the customers in their purchases. It has positioned itself as the third largest retailer in the market of United Kingdom thereby comprising of a market share of 40 percent among many other rival contenders. It is mainly due to wide range of product lines such as clothes, electronics, financial services, and telecoms, furniture’s, healthcare products, retailing, pet products, DVD, CD, internet services and many others. Due to which, its total revenue, net income and operating income increased by £60.93 billion, £2.67 billion and £3.87 billion in the year 2010-2011. The company of Tesco Plc mainly operates under the banners, named: Extra, Supermarket, Metro and Express. This essay mainly highlights the strategies implemented by the organization of Tesco Plc in enhancing its competitive advantage and position in the market among others. However, in order to analyse the strategic review, both external and internal evaluation is essential. In order to do so, PESTEL, Porter’s five forces, resource based view and value chain analysis is performed. Along with this, evaluation of PR crisis as well as business level, corporate level strategies are performed. Other than this, in order to improve its position, varied types of strategies or remedies are also suggested along with models and techniques for future era. Tesco Plc at a glance Type Public limited company Traded as TESCO Industry Retailing Founded 1920 Founded by Jack Cohen Headquarter Cheshnut, United Kingdom Locations 5380 Products Consumer products, groceries, telecom Revenue £60.93 billion Net income £2.67 billion Operating income £3.87 billion Employees 472000 Analysis of the external environment of Tesco Plc Macro environment Analysis by PESTEL The macro analysis of Tesco Plc is performed with the help of PESTEL. Political: Tesco Plc comprises of stores in numerous locations such as Hungary, UK, and Czech Republic, Turkey, Slovakia and many others. Due to which, the political and legislative rules and regulations offered significant impact over the operations and functions of Tesco Plc. However, it did not hinder its growth but encouraged its expansion in order to reduce the problem of unemployment. This is because; it offered varied types of job opportunities to the citizens that enhanced their life style and living standard. Moreover, due to the presentation of such type of job opportunities to the students and educated citizens, the level of poverty also reduced to a considerable extent. Economic: due to economic crisis, the per capita income of the citizens reduced. Along with this, the prices of the products increased that reduced the demand of the products in the market. However, due to loss of the per capita income, the purchasing behaviour of the citizens reduced that hindered the profitability of the organization of Tesco Plc in the market of United Kingdom among others. Not only this, due to loss of profitability and total sale, the brand image and sustainability of the organization of Tesco Plc reduced significantly. This hindered its market share and loyalty in the market as well among other existing rival players such as ASDA and Sainsbury. Social: now a day’s the trend of shopping is changing rapidly. In order to cope up with professional deals, most of the citizens desire for bulk shopping or one-stop solution. As a result, in order to fulfil the demand and preferences of the customers, Tesco Plc presented a wide range of product lines. This is done, so as to satisfy the demands and changing preferences of the customers. By doing so, the demand and equity of the brand of Tesco Plc is enhancing rapidly thereby amplifying its market share and distinctiveness in the market of United Kingdom. Technological: Implementation of inventive products within the organization of Tesco Plc also proved effective for it. For example: introduction of wireless devices, barcode readers, intelligent scales etc helped to save the time span required by the billing department executives, after completion of the purchase. However, introduction of electronic point scale (EPoS), electronic fund transfer systems (EFTPoS) proved extremely effective in amplifying the distribution system of the products. This enhanced the brand image and prosperity of the organization in the market that amplified its total revenue and sale by 15 percent among others. Environmental: in order to improve its impacts over the society, the organization of Tesco Plc decided to offer more concentration over its corporate social responsibilities. By doing so, the demand and portfolio of the organization of Tesco Plc increased resulting in amplification of its position and ranking in the market among others. Moreover, introduction of fat tax also helped the organizations operating in retail segment to reduce over consumption of resources to minimise wastes (Beall, 2010, pp. 123-134). Legal: in order to reduce, attainment of unlawful revenues from suppliers and unnoticed changeover of the price rates of the materials might lead to Food Retailing Commission (FRC). Due to which, the organization of Tesco Plc declined its demand to accomplish unlawful revenues from the suppliers. Thu, it might be clearly revealed from the above mentioned points, that the organization need to offer high concentration over its product lines so as to satisfy them effectively. Moreover, the organization of Tesco Plc might try to offer its products at a competitive price in order to maintain its dominance and loyalty in the market of United Kingdom. Micro environmental analysis with Porter’s five forces The micro environment of Tesco Plc is analysed through Porter’s five forces. Threat of New entrants: the threat of new entrants is extremely high in the segment of retailing is quite low in the market of United Kingdom. This is because the grocery market is highly dominated by the largest retail players such as Tesco Plc, ASDA, Sainsbury and Safeway. Due to which, maximum extent of market share is attained by these largest retailers and so the rate of dominance of small retailers such as Budgens, Waitrose etc is extremely low. This is extremely worthy for the organization of Tesco Plc to retain its dominance and position in the market in long run. Other than this, as the customers of this recent age are extremely conscious about health, so they desire to accomplish branded products of Tesco Plc or Sainsbury. This factor also acts as a boon for the organization of Tesco Plc thereby amplifying its reliability and distinctiveness within the minds of the customers (Bradley, 2007, pp. 156-178). Bargaining power of the Suppliers: the bargaining power of the suppliers is extremely low. This is mainly due to the presence of numerous suppliers. So they try to offer their products to the larger retailers like Tesco Plc, Sainsbury and ASDA at a quite cheaper deal in order to retain their business. As a result, the rate of profit margin of the suppliers reduced to a significant extent but however, in order to retain their presence, the suppliers also try to accomplish the products at a very cheaper price from outside markets. Therefore, in order to cope up with such a challenging situation, the organization of Tesco Plc tried to offer products with varied features so as to create a differentiate image within the minds of the customers. It is done to improve its profit margin and market share. Bargaining power of the buyers: as the bargaining power of the customers or buyers is extremely high, the organization of Tesco Plc decided to offer value-added products at a cheaper price. This is done, in order to attract a wide range of customers of varying life styles and income groups towards the brand thereby amplifying its profitability and reputation in the market of United Kingdom. Threat of substitute products: the threat of substitute products is extremely high in the segment of grocery and retailing. Due to which, the organization of Tesco Plc always desired to offer distinctive products at a discounted or competitive price so as to retain the customers for longer period of time. Along with this, it might also offer extensive promotional advertisements to attract the customers. Competitive rivalry: the competitive rivalry is extremely high among the existing retail players in the market of United Kingdom. Due to which, the organization always tried to penetrate in new market with inventive products so as to enhance its dominance and customer base (Robins, 2000, pp. 190-214). Thus, it might be revealed from the above mentioned points that the organization of Tesco Plc might try to offer high concentration over product development, promotional activities and penetration into new markets in order to in order to increase its portfolio and popularity. Analysis of the internal environment of Tesco Plc Resource based view of Tesco Plc Resource based view is an approach, that helps to improve the market position and competitive advantage of the organization. This is done with the fullest utilisation of its resources and capabilities that enhances its market share and supremacy in the market among other existing contenders. By doing so, the organization try to attain achieve its sustainability and ranking in the market among many other rival players. Similarly in order to amplify the position and competitiveness in the market of United Kingdom, the organization of Tesco Plc decided to implement cost leadership strategy. This means, it tried to offer wide range of value-added products at a quite low price. This is done in order to amplify its customer base and loyalty in the market as compared to many other rival contenders (Ritzer, 2007, pp. 267-289). Therefore, by implementing such type of strategy, the organization of Tesco Plc increased its number of stores by 2000. Along with this, it also enhanced its staffs by 270, 000 that surely improved its turnover by £ 29.5 billion in the market of United Kingdom. However, after expanding to almost 12 new international nations, it developed almost 440 stores comprising of 1, 40, 000 staffs that presented a turnover of £7.5 billion. Other than this, in order to increase the demand and reputation of the product lines of Tesco Plc, it utilised its core and dynamic competencies as well. For example: Tesco Plc offered environment friendly products to its customers so as to enhance its reliability and loyalty within their minds. Along with this, in order to increase their sale, it offer varied types of opportunities such as club cards, loyalty schemes etc to its customers. In order to make the customers attracted towards the product lines of Tesco Plc, they improved their packaging and labelling, and presented the products at a competitive price. This strategy proved extremely effective for the organization of Tesco Plc thereby amplifying its equity and distinctiveness in the market of United Kingdom (Ritzer, 2011, pp. 167-178). Value Chain analysis of Tesco Plc As per Porter (1985), value chain is one of the reputed techniques that help to maintain a link with the key value adding activities and support actions. This is a technique to evaluate the strengths and weaknesses of an organization so as to analyse its position and competitive advantage among others. Therefore, in order to amplify the ranking and equity of the organization of Tesco Plc in the market of United Kingdom are presented below: Inbound logistics: the organization of Tesco Plc utilises cost leadership strategies in order to attract a wide range of customers towards its end. Moreover, it also utilises its reputed market position and high bargaining powers so as to attain the products at a quite low cost from the suppliers. Apart from this, it also entirely up-dates the in-store processes so as to present a very good shopping experience (Porter, 1985, pp. 867-887). Operation Management: in order to amplify the competitive advantage of the organization, Tesco Plc implemented IT systems within the supply chain management facilities. Implementation of IT system proved extremely effective in implementing cost leadership strategy and this amplified its profitability by £ 550 million. This improved its brand image and equity in the market of United Kingdom by a significant extent among others. Outbound Logistics: in order to improve the position in the market of United Kingdom, the organization of Tesco Plc offered a wide range of store formats such as Express, Metro, Superstores and Extra. This is done in order to attract customers of varying segments and varying living standards and income groups. This proved extremely effective for the organization of Tesco Plc thereby amplifying its brand image and reputation among others (Pride & Ferrell, 2004, pp. 178-190) Marketing and Sales: in order to amplify the total sales, the organization of Tesco Plc tried to offer varied types of loyalty schemes such as club card, discount cards etc. Other than this, organization of Tesco Plc introduced greener living schemes so as to offer varied types of advices to the customers over environmental issues. This might enhance their position and reputation in the market among others. Services: in order to improve the profitability and reliability of the customers, the organization of Tesco Plc implemented dual strategy, cost leadership and differentiation. By doing so, the organization of Tesco Plc became successful in attracting a wide range of customers of varying income groups and life styles. Moreover, due to the implementation of these strategies, the organization of Tesco Plc became successful in attaining a dominating position among other competitors such as ASDA, Sainsbury etc. Human resource management: the organization of Tesco Plc implemented participative leadership style in order to amplify its position. Along with this, it also tried to manage and maintain the employees by offer effective training programs that amplified their behaviours and attitudes (ESOMAR. 2008, pp. 110-123). Procurement: the organization of Tesco Plc tried to procure the materials at lowest cost so as to present it to the customers, at competitive rate. Along with this, the organization of Tesco Plc tried to offer, extremely healthy products to the customers so as to amplify their reliability and trust. Technology development: the organization of Tesco Plc tried to implement inventive technologies such as wireless devices, bar code readers, internet facilities etc to simplify the billing facilities and to enhance the shopping experience. Therefore, from the value chain analysis, it might be clearly depicted that, the implementing the above mentioned strategies, Tesco Plc amplified its position. Analysis of PR crisis of Tesco Plc In order to amplify the position and reputation in the market of United Kingdom, communication theory of PR might be the best option. This is because; by doing so the executives of the organization of Tesco Plc might easily communicate with the customers. By doing so, the organizational executives might easily understand the underlining desires of the customers and it might prove effective in its future era. For example: implementation of internet for online shopping is also an underlining desire of the customers that amplified its position and reputation in the market of United Kingdom as compared to many other rival players. Apart from this, implementation of online shopping sites helped to increase the total sale and revenues thereby amplifying its equity and distinctiveness (Drummond & Ensor, 2006, pp. 647-667). In addition, implementation of online sites, the total range of customers increased that increased its dominance and competitive advantage among other rival players such as ASDA, Sainsbury. Thus, it might be clearly depicted that communication theory of PR, is the most effective way that improved its ranking and distinctiveness. Strategy Analysis of Tesco Plc Business level strategy: The organization of Tesco Plc tried to implement dual strategy, cost leadership strategy and differentiation. BY doing so, the organization of Tesco Plc became successful in offering its wide range of products at a quite lowest price, so as to amplify the position and brand image in the market of United Kingdom among many other rival players such as ASDA, Sainsbury etc. Other than this, by presenting the products at a lowest price, Tesco Plc might easily attract the customers of varying income groups and attitudes. This helped the organization to increase its range of customers to a considerable extent as compared to others. As a result of which, the total sale and profitability of the organization of Tesco Plc amplified to a significant extent that augmented its competitive advantage in the market of United Kingdom (Bolton & Houlihan, 2007, pp. 657-667). In addition to this, by implementing cost leadership strategy, the organization of Tesco Plc, became successful in amplifying its dominance and supremacy in the market of United Kingdom. Moreover, by implementing differentiation strategy, the organization of Tesco Plc became successful in presenting varied types of product lines comprising of various features and characteristics. These strategies might prove extremely effective for the organization in amplifying its reputation and equity in the market among others (Blyton & Turnbull, 2004, pp. 432-445). Corporate strategy of Tesco Plc In order to retain the competitive advantage and sustainability in this aggressive market, presentation of inventive product lines is the most effective idea. By doing so, an organization might easily satisfy the changing demands and needs of the customers in an effective way thereby amplifying its loyalty and reputation in the market. Along with this, by presenting varied types of product lines, the organization might easily amplify its dominance and equity among others. Apart from this, in order to improve the market share and distinctiveness, the organization of Tesco Plc might try to penetrate into new markets. Only then, the organization of Tesco Plc might amplify its customer base and brand value. By doing so, the reputation and total revenue of the organization of Tesco Plc might also be improved to a significant extent as compared to many others such as ASDA, Sainsbury. Strategies suggested for future evaluation In order to improve the sustainability and competitive position of the organization of Tesco Plc, varied types of strategies need to be implemented. Firstly, in this age, promotion plays a very vital part. The products that are well displayed or promoted, the sale of those products are comparatively high. Therefore, the organization of Tesco Plc needs to offer more concentration over the promotion of the products so as to increase the level of awareness of the products lines. By doing so, not only the total sale of the product lines increases but also the demand and popularity of the products enhances. Apart from this, by promoting the features and characteristics of the products lines, a wide range of customers get attracted towards the products thereby amplifying its profitability and brand image among others (Blyton & et.al. 2011, pp. 332-343). Along with this, the dominance of the products in the market of United Kingdom also increases as compared to many other rival products. This helps the organization of Tesco Plc to amplify its equity and reputation in the market among others. Other than this, in order to improve the total sale of the products, the organization of Tesco Plc might enhance its distribution system. By doing so, the interested or loyal customers might very easily attain the products of their choice that might improve their retention ability. Moreover, if the availability of the products of Tesco Plc increases then the rate of switchover costs might also be reduced significantly. This is extremely effective for the organization of Tesco Plc thereby amplifying its brand image and market share among many other rival contenders. However, in order to improve the rate of distribution, the organization of Tesco Plc need to hire or appoint the best suppliers so as to attain the products at accurate time and cost. Only by doing so, the organization of Tesco Plc might present the products at accurate cost to its customers so as to retain its reliability and equity over the brand as compared to others. Furthermore, the organization of Tesco Plc might try to recruit highly experienced human resources within the organization (Blake & et.al. 2011, pp. 256-278). This is because, by doing so, the employees might assist the customers in an effective way in their purchasing decision. As a result, the purchasing behaviours of the customers might get improved that may increase the total sale and revenues of the organization of Tesco Plc as compared to others. However, in order to improve the inner skill and talents of the employees, varied types of training programs need to be implemented within the organization (Beardwell & Claydon, 2010, pp. 234-245). This might prove effective for the employees to enhance their communication and behavioural attitudes that may improve their tackling power. This is extremely essential for the organization of retailing in order to retain the customers for longer period of time. Only then, the organization of Tesco Plc might attain its sustainability and rankings in the market among many other rival contenders. In addition to this, the organization of Tesco plc might try to offer varied types of discounts in festive seasons in order to amplify the total sale of the products. This might prove effective for the organization of Tesco Plc in augmenting its popularity and dominance among many other new entrants and substitute products. Therefore, from the above mentioned strategies, it might be stated that, the rate of distinctiveness and reputation of the organization of Tesco Plc might get amplified to a significant extent in this age of extensive bargaining power of the customers. Implementation of models and techniques In this age, sustainability is the most essential requirement of an organization. Keeping this idea in mind, SAF might be the best model that might be implemented. SAF stands for sustainability, acceptability and feasibility. At the time of penetrating a new market, the organization of Tesco Plc might utilise the technique of wholly new subsidiary so as to improve its market share and sustainability in the market among others. Other than this, effective market research might be performed in order to analyse the strengths and weaknesses of that market so as to evaluate its viability or feasibility. This is because, with the help of market research, the behaviours and preferences of the customers might be easily analysed that may prove effective for the organization of Tesco Plc to present its products. However, if the products are presented as per the taste and preferences of the customers, then it might be surely accepted by them. By doing so, the total sale and profitability of the organization of Tesco Plc might get enhanced to a significant extent as compared to many other rival players. This is extremely essential for the organization, at the time of penetrating a new market s as to develop its position and image within the minds of the customers. Once, the products of the organization of Tesco Plc are accepted then the range of customers might get enhanced day by day thereby amplifying its position and supremacy. This might amplify the dependency and loyalty of the organization of Tesco Plc that may amplify its total revenue, operating income and net income as well to a significant extent (Grant, 2005, pp. 442-456). Due to these causes, the model of SAF might prove effective for the organization of Tesco Plc in amplifying its brad value and equity in the market among many other contenders. Moreover, by doing so, the organization of Tesco Plc might retain its leadership in the market effectively for long run (Gupta, 2004, pp. 768-778). Conclusion Conclusively, it might be depicted that in order to amplify the level of retention and sustainability, improvement in the distribution channel is extremely effective. This might increase the intensity to attain the products. As a result, the interested customers might easily attain them and improve its profit margin and total revenue. Along with thus, by proper distribution channel, the rate of switch over costs of the customers might also get reduced to a significant extent among others. This might improve the reliability and equity of the organization of Tesco Plc in the market among other contenders. Other than this, the organization of Tesco Plc might try to offer the products at competitive costs so as to retain its demand and equity in the market. Moreover, due to the presence of the products at low costs, the range of customers might get enhanced to a significant extent that may amplify its profit margin and total revenue as well. Moreover, the organization of Tesco Plc might try to offer extensive promotional advertisements in order to amplify its total sale and awareness. This might prove effective for the organization of Tesco Plc to increase its brand value and market share to a significant extent as compared to many other rival contenders. Other than this, introduction of online site might also prove effective for the organization of Tesco Plc to amplify its total range of customers that may amplify its net income and operating income to a remarkable extent. Hence, in order to amplify its ranking and demand in the market, all the above mentioned strategies need to be followed effectively. Only then, it might improve its sustainability and competitive advantage in the market of United Kingdom. References Beall, A, E. 2010. Strategic Market Research: A Guide to Conducting Research to solve problems. Boston: Harvard Business School Press. Bradley, N. 2007. Marketing Research: Tools & Techniques. New York: McGraw-Hill. Beardwell, .J. & Claydon, T. 2010. Human Resource Management. London: Sage. Blake, S. & et.al. 2011. A Practical Approach to Alternative Dispute Resolution. London: Oxford. Blyton, P. & et.al. 2011. Reassessing the Employment Relationship. New York: Palgrave Macmillan. Blyton, P. & Turnbull, P. 2004. The Dynamics of Employee Relations, 3rd edition. London: Sage. Bolton S & Houlihan, M. 2007. Searching for the Human in Human Resource Management. New York: Palgrave. Drummond, G. & Ensor, J. 2006. Introduction to Marketing Concepts. New York: Cengage Learning. ESOMAR. 2008. Market Research Handbook. London: Sage. Grant, R, M. 2005. Contemporary Strategy Analysis. London: Sage. Gupta, S, L. 2004. Marketing Research. New York: McGraw-Hill. Porter, M, E. 1985. Competitive Strategy: Techniques for Analyzing Industries and Competitors. London: Simon and Schuster. Pride, W. M. & Ferrell, O. C. 2004. Marketing. London: Sage. Ritzer, G. 2011. Globalization: The Essentials. Chichester: Wiley-Blackwell. Ritzer, G. 2007. The Globalization of Nothing 2. London: Sage. Robins, K. 2000. Encountering Globalization’ in Held, D. and McGrew, A (eds) The global transformations reader. Cambridge: Polity Press. Sims, R, R. 2002. Organizational Success Through Effective Human Resources Management. London: Sage. Appendices Resource based view In the market of UK In international markets No of stores:2000 No of stores: 440 Staffs: 270000 Staffs: 140000 Turnover: £2.95 billion Turnover: £7.5 billion Schemes: clubcard Clubcards Loyalty cards Loyalty cards Improved labelling Improved labelling Value chain (Source: Sims, 2002, pp. 213-123). Read More

 

Read More