Analysis of Tesco Company - Assignment Example

Business Report of Tesco affiliation Introduction The food production sector is one of the biggest and most significant industrial sectors in Europe. It comes after the metal industry, which is considered as the largest in the industrial sector covering approximately 15% of the total industrial turnover. Moreover, employment in the food sector symbolises about 14% of the total industrial sector. Nevertheless, the foodstuff industry is categorized by disintegration. Fewer European international companies compete globally with a broad diversity of foods. However, 99% of all businesses in the food industry are small and medium-sized enterprises (SMEs). Murcott (2009, pg 244)claims that the magnitude of the European typical market holds numerous prospects for companies wishing to upsurge their production, by making operational usage of markets of scale. The European Union’s food industry should also look to arouse innovation and improve new products so as to thrive. All this should be carried out in a way that is courteous for the environment and which warranties safe access to farming raw materials. Boyle (2007, pg 5) TESCO is one of the companies in the European market. It is a British firm which is headquartered in England, United Kingdom, where it operates around 1,878 outlets, and also operates stores in Asia and Europe. Tesco.com is an entirely owned subordinate offering a broad online service, inclusive of tesco.net and tescodirect.com. The firm offers a wide variety of both offline and online personal financial services. Task 1 Earle, (1997, pg 168) argues that, there exist other major enterprises in the food industry located in Europe. These companies include: Kerry Group; Bakkavor; Unilever; Nestle; Barilla Group; Danone; Yoplait; Paulig; Parmalat; Ferrero SpA; and Swisslion group. To begin with, Kerry Group is a public food company that has its headquarters in Ireland. It operates in 24 republics across five continents. It has a workforce of 36000 people in its technical, sales and manufacturing centres all over the world. Additionally, it supplies 15000 and above flavour products, food ingredients and food to consumers in more than 140 nations globally. Secondly, we have the Bakkavor; its headquarters are in London, England. However, it is dominant in the United Kingdom than other places. It is specialising in freshly prepared foodstuffs and has thirty-two industrial facilities in the United Kingdom, over twenty sites in five other nations. It has a workforce of 18,000 with a turnover of 1.6 billion pounds. Rayner et al. (2008, pg 150) says that, another company is the Nestle S.A., which is a Swiss international beverage and food company with its headquarters in Vevey, Switzerland. Basing on revenue collection, it is the biggest food company globally. Its products comprise of snacks; ice cream; pet foods; dairy products; baby food; breakfast cereals; frozen food; bottled water; confectionery; coffee and tea. The yearly sales of its 29 brands are over 1.1 billion dollars. It has 447 industrial units, employs approximately 330,000 individuals and operates in 197 nations. Moreover, Barilla Group is a European and Italian food company which is headquartered in Parma, Italy. It is private owned company managed by three siblings. This group controls Barilla, which is the biggest pasta manufacturer in the world. It produces pasta in more than 120 different sizes and shapes. It has branches all over the world, and its Greece office is ranked the third largest in Europe. It has a workforce of approximately 14,043 and also deals with cakes, crisps, soft bread, and cereals, among others. Another company is Unilever, which is co-headquartered in London, United Kingdom and Rotterdam, Netherlands. Basing on 2012 revenue it is ranked the world’s third leading consumer goods corporation. Its products comprise of personal care products, cleaning agents, food and beverages which are available in roughly 190 nations. It owns above 400 brands, but majors on only 14 brands with over 1 billion euros sales. Its workforce is 174,000 people. Swisslion Group is another food company in the European food industry that is headquartered in Novi Sad, Serbia. It mainly majors in the production of confectionery. This comprises alcoholic drinks, sweets, ice-creams, chocolate bars, pasta, jams and marmalade, fruit juices, wafers, biscuits, among others. The number of employees is roughly 3,203 and is situated in four locations. According to McCarthy et al. (2013, pg 70), we have Paulig, which is a family business of cocoa and coffee. Its headquarters in Helsinki, Finland and it has a revenue of 650 million euros. Yoplait also is a joint/private venture owned by French dairy cooperative sodiaal and general mills. It mainly focuses on dairy products and has branches in Portugal, Norway, South Korea, Mexico, Israel, Ireland, United Kingdom, United States, Chile, Canada, and Australia. On the other hand, we have Parmalat SpA, which has its headquarters in Collection, Italy. It is a food processing industry majoring in dairy products and milk, tea, and fruit juice. Its global operations include 140 manufacturing centres and in excess of 36,000 employees while five thousand dairy farms are reliant on the company for the bulky nature of their business. According to Warde (2002, pg 1), Ferrero SpA is also an important Italian food industry branded by confectionery and chocolate products. It is recognized as the largest chocolate producer all over the world. It is owned by Ferrero family and is known as one of the world’s secretive companies. It has around 38 trading firms and 18 factories worldwide. In addition, the workforce of the firm ranges at 21, 500 employees and it manufactures approximately 365,000 tonnes of Nutella annually.it is headquartered in Alba, Piedmont, Italy. Lastly, we have DANONE which is an international food Products Company located in ninth arrondissement of Paris, France. Its products comprise of dairy products which represent 52%, early life nutrition representing 21%, medical nutrition 7% and Bottled water 20%. The workforce of DANONE is 98,236 people. Therefore, TESCO faces a large competition from all these companies but has surpassed all of them to turn out to be the leading food company in the United Kingdom and other parts of Europe and Asia. Task 2 According Manage (2005, pg 1), TESCO PLC is a primary food seller that works mainly in the United Kingdom. It runs 2,291 convenience stores, superstores and supermarkets in the UK, the rest of Asia and Europe. The company has various strengths that make it more competitive than the others. To start with, there is the increasing market share. Tesco controls a 13% share of the United Kingdom wholesale market. Its multi-format ability means that it will carry on growing its share in foodstuff, while increasing space impact from hypermarkets will permit it to initiate a greater share in non-food. Its global business segment is rising steadily and is foretold to contribute around a quarter of profits from the group in the subsequent five years. According to Pandya, (2002, pg. 100), if the topographical spread carry on to develop, then Tesco’s strength regionally will continue to thrive. Secondly, insurance is another aspect. In the year 2003, the motor insurance policies of Tesco reached a million, this made it be the fastest ever growing motor insurance provider. The instant travel insurance by the group permits holders of club cards to purchase their holiday insurance appropriately at the point of sale. Refereeing to DOEG, (2005, pg. 3), The insurance on pets now has over 330,000 dogs and cats covered, followed by the life insurance which was a success in the previous year, when it was nominated the most modest life insurance provider in the money facts awards 2003. Thirdly, Tesco online is one of its strengths. Conferring to DINKHOFF, (2009, pg. 2), Tesco.com has had more than 577 million pound sales in one year, and this was a 29% increase in sales from other years. conferring to Bigliardi & Galati (2013, pg 120), Tesco.com is the largest online supermarket in the world, it operates in around 270 stores all over the country, occupying 96% of the United Kingdom. Therefore, the firm has a stronger platform to develop this income stream because more than one million houses nationally have tried the online services. For another thing, we have the Brand Value. The overall profits of Tesco in Ireland, Asia and Europe, have improved by 78% for the period of the last economic year. According to Jordana (2000, pg 150), the company is known for its trustworthy goods and good quality that signify value, and it also has a resilient brand image. Tesco’s innovative techniques of refining the shopping experience of customers, as well as its determinations to branch out into insurance and finance have also gotten the most out of this. Lastly, the United Kingdom leadership reinforced is also a major strength. According to Lindgreen and Hingley, (2003, pg. 330), the company in 1996 was ranked number one and from then it has developed a fruitful multi-format that has hastened its advantages. Its sales in UK are at 71% bigger than Sainsbury’s. Though the rivalry commission report creates it hard for a rival to challenge its gauge and has excellently ruined Wal-Mart’s likelihoods of stealing the UK leadership. Hence, Tesco is in a mainly strong location in its local market (Marketline 2011, pg 12). Task 3 However, Tesco has some weaknesses that hinder it from reaching its full potential in the food industry. Among its weaknesses, we have its reliance upon the United Kingdom market. Vizard (2013, pg 8) argues that though, there is growth in international business, and expectations to contribute to the profits of Tesco in the coming few decades, the firm is still highly reliable upon the market in the United Kingdom. While this is not a major weakness in the short term, any alterations in the supermarket industry in the United Kingdom in the coming years could change the stability of power in the UK supermarket and affect share. Secondly, the weakness comes from debt reduction. Commission (2006, pg 420) states that Tesco is not anticipated to lessen its debt pending until 2006. Due to an enormous investment in new stores spaces hence leading to bigger capital expenses program. Because it has an aggressive expansion, the company has a little amount of cash that can hardly be used for other operations. Lastly, it is the signs point to serial acquisition. Tesco undoubtedly has huge firepower arising from its enterprise value of 23 billion pounds. Additionally, its range of products are vast and nearly any acquisition can be acceptable, especially in the UK. As this strategy of fill the gap will be vital to the firm, as has been the case with United Kingdom convenience market, Tesco is at the danger of developing into a serial acquirer, as this will be likely to reduce earning quality and visibility (Cooper 2008, pg 4). Task 4 Potential strategies that can aid in the growth for the company are like the growth to in international firms. Menrad, (2003, pg. 185) states that, Tesco now operates in six the nations in Europe, in addition to the others in the United Kingdom, Hungary, Slovakia, Czech Republic, Ireland, Poland and Turkey. Additional to these the firm also operates in Asia: in Taiwan and Japan, Malaysia, Thailand and South Korea. In the past seven years, it has shown an improvement in the international sales. Their sales were 770, 000 billion euros and to date their sales have risen to seven billion euros and profits of 306 million euros. In the present time, Tesco is focusing on adding about 2.5 million square feet to expand their business, and this is a possibility that it will enter another market. The growth of the company internationally has led it to becoming serious on hypermarkets, and this has substantial positive impacts for development in the United Kingdom. In addition, the company has created a strategic affiliation with the United States supermarket, Safeway Inc., to look out for the tesco.com home-based shopping model to the US (Levidow & Bijman 2002, pg 40). Referring to Maloni & Brown (2006, pg 45), Health and beauty are also opportunities for how you are going the weaknesses that may develop again within the company in the near future. Tesco’s UK beauty and health ranges continue to develop, presently, it is the fastest and topmost skincare retailer in the marketplace. The firm contains a volume market-leading point in both healthcare and toiletries and is the topmost retailer of baby goods markets. Tesco remains to capitalise on price to deliver the value customers have come to expect and this year invested 27 million euros on beauty and health pricing alone. Currently, it has 200 stores with pharmacists and 19 stores with opticians. Lastly, the company aims at trying the sales of non-food stuffs and be strong in it like the food industry. Therefore, sales from non-foods stuffs are expected to be on the rise (Plimmer 2010, pg 377). Reference list Bigliardi, B. & Galati, F., 2013. Innovation trends in the food industry: The case of functional foods. Trends in Food Science & Technology, 31, pp.118–129. Available at: http://www.sciencedirect.com/science/article/pii/S0924224413000678. Boyle, M., 2007. Tesco. Fortune, 155, p.46. Available at: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=24448791&site=ehost-live&scope=site. Commission, E., 2006. Competitiveness of the European Food Industry An economic and legal assessment. Agribusiness, 24, pp.417–439. Available at: http://scholar.google.com/scholar?hl=en&btnG=Search&q=intitle:Competitiveness+of+the+European+Food+Industry+An+economic+and+legal+assessment#0. Cooper, W., 2008. Tesco bids to become online destination for green issues via site overhaul. New Media Age, p.4. Available at: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=35710016&site=ehost-live&scope=site. DINKHOFF, M. (2009). Business valuation of Tesco Calculation of different valuation methods and presentation of differences between them. München, GRIN Verlag GmbH. http://nbn-resolving.de/urn:nbn:de:101:1-2010091029028 DOEG, C. (2005). Crisis management in the food and drinks industry a practical approach. New York, Springer. http://public.eblib.com/choice/publicfullrecord.aspx?p=302657. Earle, M.D., 1997. Innovation in the food industry. Trends in Food Science and Technology, 8, pp.166–175. Jordana, J., 2000. Traditional foods: Challenges facing the European food industry. In Food Research International. pp. 147–152. Levidow, L. & Bijman, J., 2002. Farm inputs under pressure from the European food industry. Food Policy, 27, pp.31–45. Lindgreen, A., & Hingley, M. (2003). The impact of food safety and animal welfare policies on supply chain management: the case of the Tesco meat supply chain. British Food Journal, 105(6), 328-349. Maloni, M.J. & Brown, M.E., 2006. Corporate social responsibility in the supply chain: An application in the food industry. Journal of Business Ethics, 68, pp.35–52. Manage, T., 2005. SWOT analysis. Twelve Manage, pp.1–2. Marketline, 2011. Tesco plc Case Study., McCarthy, M. et al., 2013. Food and health research in Europe: Structures, Gaps and futures. Food Policy, 39, pp.64–71. Murcott, A., 2009. Food and the City in Europe since 1800. Cultural and Social History, 6, pp.244–245. Pandya, K. V., & Arenyeka-Diamond, A. O. 2002. Towards a model of e-tailing: a SWOT analysis of electronic supermarkets. International Journal of Services Technology and Management, 3(1), 96-110. Plimmer, G., 2010. Scoring points: How Tesco continues to win customer loyalty. Journal of Revenue and Pricing Management, 9, pp.377–378. Rayner, G., Barling, D. & Lang, T., 2008. Sustainable Food Systems in Europe: Policies, Realities and Futures. Journal of Hunger & Environmental Nutrition, 3, pp.145–168. Vizard, S., 2013. Tesco faces backlash over “All I want for Christmas is a puppy” message. Marketing Week (Online Edition), p.8. Available at: http://ezproxy.net.ucf.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=91583389&site=ehost-live. Warde, A., 2002. Food, Drink and Identity: Cooking, Eating and Drinking in Europe since the Middle Ages. Sociological Research Online, 6. . Read More