International Retail Restructuring and Divestment: the Experience of Tesco - Case Study Example

Business-Level and Corporate-Level Strategies Contents Introduction 3 Business level strategy of Tesco 3 Corporate level strategy of Tesco 5 Analysis of the competitive environment of Tesco and identification of which of the companies to be more successful in long term 6 Conclusion 7 References 8 Introduction Tesco is a British general retailer or merchandiser and multinational grocery retail chain that has its headquarters in United Kingdom. The company is the market leader with wide range of stores in UK. Tesco was started by Jack Cohen in the year 1919 as a small collection of stalls. The company has its business operations in 12 countries and operates across Europe, North America and Asia. Tesco through its constant innovative strategic directions has been able to expand its stores from 2500 stores from just 500 stores. The company initially started off with products such as beverages and food and later the company diversified into various sector of electronics, clothing, financial services, retailing, etc. The company performs all its operations on the basis of one specific value that is to deliver its customers with good, better and best products. The success of the company is only because of its business and corporate level strategies. Business level strategy of Tesco Tesco’s main business comes from its retailing segment that accounts for approximately 60% of the total profit that is generated by the business. The business level strategy is a plan that is adopted by a company so as to utilize its resources in order to achieve its business goals. The company has even invested £1 billion so that it could provide a very pleasant shopping experience to all its customers who visit Tesco stores. The company has even subdivided its business level strategy into seven parts so that it can achieve its business goals and even provide their customers with high valued service. This business level strategy that was formulated was mainly to ensure that the company sets plans for its long term growth and profitability. The first part of the strategy is to grow in the UK market (Desjardins, 2005). The company wants to grow the core market of UK. The business tactics that were designed to support this strategy was to expand the staff base by 20,000 in the next two years, implement new promotions for its products and services, and even to restructure all its store designs. This strategy was mainly adopted to give customers more importance and wanted. The second part of the strategy to be the creator of all famous and high value brands in the market. This strategy involved creation of its own label such as Tesco Finest and F&F clothing. This indicated delivery products that were of high quality and that also at the most reasonable price. The third part of the strategy is to develop itself as an outstanding retailer both in stores as well as in online. The group’s profits were contributed by 30% by the international business (Johnson and Scholes, 2003). The strategy even incorporated opening up of 50 franchisees stores in many other countries in the coming next years. The fourth part of the business strategy was to expand and grow its retail services across all the markets and it involved the business tactics of giving importance to its major services and products such as Tesco Bank which has a future potential to grow in the retail sector. The next part of its strategy was to be socially responsible towards all communities and serve to from their heart. The company has been able to make its responsibilities centre of all the operations it performs. The sixth part of the strategy is to build their team in such an effective way so that they can create more value for its customers. The main asset of the company is people and they are the ones who sustain the vision of the company to build an innovative and highly valued company. The company takes effective measures to train and develop effective leaders (Martinel and Sparks, 2003). The last part of the strategy is to be as effective as they are in food sector in which ever sector it enters and set their mark in the market where it operates. Tesco has been able to create such a success because of its products but it has diversified into various segments and plans to go further and offer wide range of services and products through its retail stores as well as its online stores. Amongst all the business level strategies that the company has set the most important one is to be an incredible international retailer both in online as well as in stores as this strategy would help the company to secure long term growth. This is because this strategy encompasses most of its business level strategies and aims at delivering their customers value for money. This strategy would enable the company to adopt the best possible measures to create value for their customers and even diversify both in products as well as market. This strategy would even be beneficial for the company to fight against competition and act as per the demand of the consumer market. Corporate level strategy of Tesco The major aim of the corporate strategy that is formulated by Tesco is to create value for shareholders and even to incorporate a customer focused business strategy in all its operations. The corporate level strategy that is formulated by Tesco has been subdivided into five main parts. The first part of the strategy is to create value for money so that the customers have a good experience shopping at Tesco. The major focus of the company through this strategy is to deliver the products which have met quality standards and that too at a very competitive price which cannot be easily adopted by any other competitor in the market (Palmer, 2004). The second part of the strategy is to provide with a first class customer service as the company considers its customer base to be unique and it believes to retain its customers by delivering quality service. The other aspect of corporate strategy of Tesco is to create customer loyalty. The company acknowledges all its loyal customers and provides them with Clubcard. The fourth aspect of its corporate strategy is to deliver quality products to its customers and in order to do so the company works together with all its suppliers so that they can provide quality as well as wide range of products to all its customers. The last part of the strategy is to create a very pleasant shopping experience for all its customers and this it achieves through investing in its various retail stores and also plans to incorporate more of flexible formats in all its retail outlets. However the most convenient corporate strategy is creating customer loyalty. New customers requires investment by the company in order to acquire them but existing customers are always beneficial for any company as they generate sales for the company and even through their positive word of mouth helps in bringing in more of customers for the company. Thus this would be the best possible strategy for Tesco in order to create long term success and be more focused on developed a large base of loyal customer in which ever region it operates. Analysis of the competitive environment of Tesco and identification of which of the companies to be more successful in long term The major competitors of Tesco include Asda, Morrison’s and Sainsbury’s. However from the last few years the strongest competitor of Tesco is Morrison’s. This company had seen a drastic change in its sales figure. This was majorly because of its sales driven strategy as it aimed at offering its products at the most competitive prices possible. The company has involved into price wars with Tesco by which the company has adopted similar cost strategy. The business level strategy of Morrison’s is unlike that of Tesco which aims at delivering quality products and to become international retailer on the contrary its business level strategy is to provide the customers with wide range of products at best prices (Idowu and Filho, 2008). On the other hand the corporate level strategy of Morrison’s is to deliver the best of customer service and generate high returns for all its shareholders. This strategy is very much different in comparison to that of Tesco that focuses on creating more of customer loyalty and value for money for all its customers. However in comparison Tesco has more effective strategies that would enable it to grow more and even achieve long term success. In slow cycle markets the strategy that Tesco adopts would be beneficial as it takes care of not only price factor but also quality factor that develops its brand. On the other hand in fast cycle markets the strategy that is adopted by Morrison’s of wide product range and competitive prices would be more suitable but it cannot give long term success to the company and would prove to be beneficial only for short term. Conclusion The major aim through all its strategies may that is business level or corporate level is to create good relationships with all its stakeholders so that it can grow and succeed more in long term. These strategies enable the company to develop action plans so that it can sustain in the competitive market place. The company focuses on developing not only strong bonds with its suppliers so as to deliver quality products to its customers but also aims at creating value for money for the customers and even establishing customer loyalty. The growth of the company has been because of its quality customer service and a strong base of loyal customers who prefer Tesco because of its best quality and best prices. References Desjardins, D. (2005). Tesco strategies turn up competitive heat in UK, DSN Retailing Today. Vol. 44 (4), p. 6 Idowu, S. A., and Filho, W. L. (2008). Global practices of Corporate Social Responsibility. Germany: Springer. Johnson, G., and Scholes, K. (2003). Exploring Corporate Strategy. London: Prentice Hill. Martinel, E., and Sparks, L. (2003). Food retailers and financial services in the UK: a co-operative perspective, British Food Journal. Vol. 105 (9) , pp.577-590. Palmer, M. (2004). International retail restructuring and divestment: the experience of Tesco, Journal of Marketing Management. Vol. 20 (9), pp.1075-1101. Read More