The Success of Tesco in the UK Industry - Case Study Example

Tesco and Supermarket Industry in the UK By Tesco and Supermarket Industry in the UK Strategic purpose Definition of strategic purpose, in the context of a business, tries to answer the following questions, what will the business do for the owner and stakeholders, the nature of the business and finally, provides a framework of values that will enable proprietors run the business. Tesco is one of the largest leading retailer of food and suppliers in the UK market that operates in the tertiary level. Its strategy is rooted upon the four basic pillar that is focusing on to be a core UK food industry and non-food industry as well as international and offering of retailing services. Tesco had started in U.S as self-service supermarket which employed few staff while the quantity of stock that offered was more than the available staff could handle. This strategy led to lowering of product prices and therefore the management of Tesco decided to relocate it to Britain where its success was greatly manifested (Paliwoda & Stannley, 7). Another strategy of Tesco was providing goods and services that are affordable to consumer while maximising profits and revenue to the owners. In addition to that, after relocation to UK, Tesco wanted to have as many retail shops as possible so as to outshine other competitor. It is true to say that they have really maximised on this since, currently, they have approximately 200 stores, according to statistics taken in 2007. In order to attract more customers and increase profits, to around ₤2.9 million, Tesco has introduced new commodities in its stores, besides stocking foodstuff alone. As a result, Tesco competitors, like Sainsbury and Safeway, are finding it hard to compete Tesco thus leading to losing customers. Also, Tesco aims to be a green business institution. According to them, they plan to enlarge, to around 1 billion pounds, the quantity of their organic manufacture (Fernie, 10). Finally, Tesco plans to diversify its selling by opening up online stores, this according to them will reduce the distance customers will have to go in order to shop for Tesco’s products. In order to achieve these objectives, Tesco’s human resource management is committed to ensure that every worker is well developed to be able to handle operations pertaining day to day activities of Tesco. Moreover, the management is also planning to conduct performance appraisal. All this is to enable the durability of the business. In addition to that, Tesco plans to be paying their workers fair wages while providing conducive working environment such occupational health and an environment where these workers can recognize themselves. On the other hand, the supermarkets’ strategies are similar to Tesco’s with the only difference being customer loyalty. While Tesco focus on what the customer want and striving to achieve it, supermarkets simply focus on lowering prices of their goods so as to attract customers. In addition to that, a supermarket like Asda has the strategic purpose is to sell local commodities. It does so with and endeavour to play a role and create an influence in the indigenous community they conduct their operations from. Furthermore, the Asda has a long term goal of recycling waste, ensuring that the activities they undertake are environmental friendly so that the level of carbon percentage in the atmosphere is greatly minimised (Humbly, Clive & Terry, 8). Industry analysis It has been observed that Tesco is losing marker to its rivals especially to the supermarkets. The quantity of sales it makes for its grocery is reported to have dropped tremendously by 3.6pc within the past twelve weeks of the month of October. This is a great marginal drop from 30.1pc to 28.8pc that had been recorded over the past few years. On the other hand, rival supermarket like Aldi and Lidl are making hugesome sales. According to reliable resource and research done, it has been concluded that, for Tesco to rise up again and compete on the industry it ought to lower prices for its food stuff, increase the number of staff working in the grocery and finally invest a lot of cash so as to better the worth of its food. Quantitatively, around ₤3bn (Cushmen, David & Jamie, 11). Despite the fact that Tesco had the capabilities and resource to fight back, it was unable to do it. Statistically, it will therefore require a couple of years to re-engineer the business coupled with a lot of work so as to go back to the peak level it was before the downfall. It has however been noted that this drop in peak has been gradual and so Tesco will also need time to recover. This dropout is sale is attributed to the fact that most consumers, especially during this festive season, have shifted their consumption habits. They prefer to shop online where they can compare prices of different products. Also most consumers are constraining their expenditure on household income and hence spending less on grocery. In addition to that, prices of goods in UK have really fallen and as a result, groceries like Tesco, which have failed to reduce their prices are losing consumers. This customers get attracted to supermarkets, for instance, Aldi and Lidl, who stock their goods at affordable prices. Despite all these challenges however, Tesco remains to be the leading grocery retailer with 28.7c of market share having dominated Asda that poses a market share of 17.2pc. Tesco is now adopting the strategy of lowering its prices and pull to bits the methodology of demanding payments from its traders. This strategy has been put into operation by Tesco C.E.O Dave Lewis following a ₤263million of payments that resulted from an accounting error. Secondly, the plan is also meant to ensure that the grocery operates at lower prices. Finally, the strategy focuses on raising a fixed amount of profit, ₤1.4billion, and not exceeding in the forthcoming year (Seth, 15). As to conclusion, this is a hard choice to make since all suppliers of Tesco will have to revise their prices so as Tesco can purchase them. In doing so, Tesco might end up losing suppliers and this will be the coming-to-end of Tesco. Resource and capabilities In order for strategies of a given business to work, the business has to compare these strategies with the resources it has and the competitive advantage it has so that it can outshine its competitors. Tesco has accumulated a lot of profit over the past decade. Research conducted has shown that by the year 2005, it had accumulated profit amounting to 2 billion dollar. This is enough capital to enable such an organisation to compete with its rival and also to enable it achieve its strategic endeavours. Given that the company uses a lot of money on expenditure and inflation also eats into its account, it is clear to state that it is financially stable to handle its operations and meet the expectations of the shareholders. The company also ensures that their employees are taken good care of and this has enabled Tesco retain up to 84% of its employee. Statistics taken in 2007 shows that it had a manpower of around 270000 employee. This is a quite a big number of employees whom when effectively and efficiently managed can bring a lot of impact to an organisation. Departmental wise, according to figures obtained from their website, Tesco has 27 directors. The number of managers who work on their stores are 200 and 8000 more managers to work in all their departments. In terms of physical resources, Tesco has five stores that bear its name which are strategically populated all over United Kingdom. One of the most dominant Tesco store is Homeplus. This store is well known for stocking non-food commodities. The other stores, which are make lump sum profit to Tesco, are Extra, Express, Superstore and Metro. These stores are strategically positioned within UK: in busy motorways and city centres. Consequently, this makes these stores have a great impact in what they sell, non-food as well as food stuffs (Geoffrey, 2000). Another important resource the organisation possess is customer loyalty. Dependable sources shows that a population of more than 13 million people possess Tesco club card. This is to say that the supermarket has a guarantee that these people must shop at their stores. As a result of this, it has dominated its market over its competitors. The company is has also grown in terms of technology. This enables it to be able to correctly project their future investments and plan effectively. In addition to that, Tesco’s brand name has really sunk into the minds of consumers. In addition to all this resources, capabilities like competence should be put in place in order to plan for these resources well. Owing to this, the supermarket has a pool of professional and competent personnel. Finally, the club card system enables customer accumulate point every time they shop in the Tesco’s stores. With the accumulated point, customers are able to purchase some extra merchandise and discounts and as a result more customers are atrcted to these shops hence propelling Tesco’s sales (Neil, 2009). Business corporate strategies Owing to the poor market performance of Tesco and how other supermarkets have risen to dominate the, Tesco has had to come up with corporate strategies that will enable it attain its earlier market position. The new C.E.O of Tesco, Philip Klerk proposed a marketing strategy in which they are planning to plough back the profits earned into the business. This is aimed at lowering the prices of commodities so that consumers can afford. The second strategy it has is to digitalize it club card. This will enable customers use these cards with gadgets like smartphones and personal computers. Currently, Tesco is facing a problem of customer loyalty and also most customers have shifted to rivals (Humbly & Terry, 7). Due to this, the main motive of the card is to win back this customer loyalty that was lost since with this card customer-client relationship is restored. In addition to that, the C.E.O asserted that they are planning to make collaboration with a lot of partners so as to improve customer experience. The C.E.O also said that the supermarket is planning to reinvent its business again so that any customer who visits the stalls their visiting will be worth. Another important goal is to establish a multichannel leadership. Tesco believes in winning customer loyalty and keeping in touch with their customers while ensuring that these customers have access to their products at the customer’s convenience. Therefore, the multichannel leadership is meant to create environment in which the consumer can shop from any point. This will be made possible by use of mobile technology by customers while shopping (Kohen & Navin, 10). Furthermore stores like Amazon have really posed a threat to Tesco and other supermarkets. They have achieved this by ensuring that customers get immediate delivery for the commodities they have purchased. As a strategy for Tesco, it has also decided to deploy delivery vans across UK which will be used to carry out door to door delivery services to customers. This will offset Amazon since Amazon only relies on external delivery courier service while Tesco has its own vans. On the other hand, other supermarkets like Lidl have come up with campaigns strategies that are meant to market it publicly and create awareness of their products to consumers. This campaign that goes by the name Lidl Surprises, focusses on establishing streets shops from which Lidl will be selling their products (Baven, 5). This will not only make the supermarket known but it also create confidence to customers as far as Lidl foodstuff is concerned. As to conclusion, the big four supermarkets are really competing for the available market and it will take correct strategies for either of them to survive in the industry. Currently, Tesco and Sainsbury have launched their own banking system and accounts for their customers. This a gigantic step in investment and winning customer. Finally, product promotion and winning customer loyalty is key in every business success as opposed to lowering prices of commodities. References Paliwoda, T., & Stannley, J. (2007). Marketing management in UK. New York: Routledge Fernie, J. (2002). Logistics & management emerging issues and new challenges in the retail supply chain. Kogan Page Ltd. Humbly, Clive & Terry, W. (2006). Scoring point how Tesco is winning customer loyalty. Kogan Page. Cushmen, David & Jamie, P (2001). The 10 principles of open business: building success in today’s open economy. Eastern University Press. Seth, W. (2008). The grocers the rise and rise of supermarket chains. Singapore. Kogan Page Ltd. Geoffrey. R. (2000). Supermarket wars: global strategies for food retailers. Palgrave Macmillan. Humbly,C., & Terry, H. (2007). Scoring point: How Tesco is winning customer loyalty. Kogan Page. Baven, J. (2005). Trolly wars: the battle of supermarkets. Singapore McGraw-Hill. Kohen, G., & Navin, P. (2010). Green business A to Z. Sage Publications. Neil, M. (2009). The globalization of retailing. Edward Elgar. Read More