The Benefits of Price Convergence: Tesco - Case Study Example

The Benefits of Price Convergence: Tesco Introduction Since few decades, there have been rapid advancements in the field of information and technology that has altered the concept of business that was once limited to a specific geographic region (Tugendhat, pp. 11-15, 1971); however, now, businesses are expanding every other day, and one can observe progress in the field of international business. In specific, huge number of businesses is now operating in different parts of the globe, and there now exist huge competition between such international businesses. Due to such competition, businesspersons are focusing importantly on different strategies of competitors, and are putting efforts to introduce and implement new and innovative strategies to acquire an edge over the competitors. In this line of international businesses, Tesco has proved itself as one of the best in the field. While dominating the market in the United Kingdom, Tesco is now in the process of capturing markets on the international level while competing with Wal-Mart and Carrefour. In particular, in the year 1919, Jack Cohen founded the Tesco (Peppers & Rogers, pp. 19-22, 2004) and since then, the company has not looked back, and has been successful with its operating and marketing strategies, and its success is the speaking truth in this regard. Particularly, Tesco is a grocery and retail supermarket business that seem to continue setting standards in its local, as well as international market, and that is one of the reasons of choosing Tesco for this paper. Until today, Tesco has approximately 450,000 employees in different parts of the globe, and research has indicated that it has now almost 3730 stores at different locations globally. Initially, Tesco began selling only food and drink; however, since few years, it has altered its strategies and is now becoming a market leader in selling a huge range of products from clothing to financial services, and from foods to insurance (Child, 2002). Analysis has shown that although Tesco has expanded its operations, however, its strategy has remained the same since the day one that includes flexibility, hard work, and innovation (Johnson, pp. 41-54, 2008). More importantly, compliance with new experiences and such strategy has been one of the most important factors of Tesco’s success in the UK, as well as global market around the world. In particular, this paper is an effort to analyze some of the major aspects of Tesco’s operational strategies that will enable the reader to understand the ways by which the company has been successful in winning the market globally. In addition, the paper will include discussion that will analyze the steps that the Tesco has taken during the last 4-5 years to continue their leadership in the market. Furthermore, the essay will include analysis regarding the confrontation of Tesco in terms of its competitors, and the strategies that it is considering to overcome them. Finally, the paper will conclude the discussion by offering some recommendations for Tesco’s future strategies. Discussion Before the paper includes analysis of the strategies of Tesco, it must be kept in information that strategies since 2006 have only been considered to keep the discussion based on recent information, and thus, it is imperative to remember that all these strategies were implemented during the era of recession that indicates the brilliance of Tesco (Johnson, pp. 45-53, 2008). Analysis pointed out that the Tesco took a big step in the summer of 2006 when it was successful in acquiring more than eighty percent shares of one of the leading supermarkets of Poland that indicated Tesco’s aggressiveness in capturing the global market with a bang. Since after then, Tesco began to rebrand those stores of Casino’s Price into Tesco stores, and studies have shown that it was Tesco’s strategy to diversify its operations, which turned out to be a successful strategy. Subsequently, in the year 2007, Tesco surprised the world once again by taking completely a non-conventional strategy to acquire its status in Ireland. Non-traditionally, Tesco introduced itself in Ireland by posing as an operator of mobile network by signing a contract with an Irish company that was an effective strategy to launch operations in a new country (McLoughlin & Aaker, pp. 50-68, 2010). From this launch, it indicated that Tesco was not only implementing the operational strategy of expansion, but at the same time, it was in the process of rebranding its own representation from a retailer to a company admiring young consumers. In this regard, this branding strategy of Tesco in Ireland enabled it to pose itself as rebranded Tesco of young customers that has a lot to offer to its youth in the form of CDs, DVDs, etc. In addition, such strategy helped Tesco to expand its operations in Ireland in an easy manner. After two years, in the year 2009, Tesco once again continued its strategy of surprising public by announcing ‘non-leaking tomatoes’, a unique achievement of the Tesco (McLoughlin & Aaker, pp. 54-57, 2010) that once again brought the Tesco closer to its consumers, especially the young ones. With this unique range of tomatoes, the Tesco gave the idea of getting rid of damp sandwiches that was a very successful strategy to acquire admiration of young customers once again, which many companies confronted failure in doing so. Here, it is imperative to take in observation that the abovementioned strategies resulted in preferred outcomes for Tesco in the form of increasing profits since the year 2006 (McLoughlin & Aaker, pp. 50-57, 2010), and at the same time, continued to establish founding principles and strategies of the company even after the process of rebranding. In addition, since the year 2007, Tesco has been successful in fetching third place in the international retail market after pushing down its competitors, such as Home Depot, etc that were once dominating the Tesco internationally. Since 2006 and even before that, evidence has indicated that the Tesco has been confronting severe competition from different companies; however, the Tesco has continued to face the competition with brilliance while implementing its different strategies globally. In particular, David McCarthy, a Citigroup retail analyst said, “Tesco has pulled off a trick that I am not aware of any other retailer achieving, that is to appeal to all segments of the market” (McLoughlin & Aaker, pp. 50-58, 2010). This comment regarding the Tesco indicates the innovative operational strategies that Tesco has been implementing to deal with its competitors, which has enabled it to give competitive edge over its competitors. From the competition’s point of view, one can observe innovation (Zanfei, pp. 29-34, 2006) in the Tesco’s strategy. For instance, Tesco believes in not only selling products but also has been presenting them in different levels and prices, thus, welcoming and handling both customers with low and high-level incomes. In this regard, Tesco has been offering ‘Tesco’s value’ products for low-income consumers, and at the same time, ‘Tesco’s finest’ products for high-income customers (Humby, Hunt, & Phillips, pp. 15-34, 2007), whereas, most of its competitors have been involved in targeting only single level of customers, thus, unsuccessful in capturing the whole market. Experts have identified few of the companies that pose huge threats to the Tesco, and some of them are “Sainsbury, Morrison, Marks & Spencer, Albertsons, etc” (Humby, Hunt, & Phillips, pp. 11-45, 2007). In this competition, it has been an observation that unlike its competitors, Tesco has focused primarily on enhancing shopping ambience and providing operational facilities to its employees, as well as the customers. On the other hand, its competitors have been involved in focusing on prices that gave competitive edge to the Tesco over its competitors, and until today, innovation has remained a major component of Tesco’s operational strategy. In specific, in the United Kingdom market, Tesco is now enjoying more than thirty percent share, whereas, Morrisons is following it with almost twelve percent of the market (McLoughlin & Aaker, pp. 55-57, 2010). Although the difference is huge, however, analysts have indicated that Morrison still poses threats to Tesco, and besides Morrison, Wal-Mart is the leading global retailer that is presently dominating the global market, and thus, Tesco needs some innovative strategies to stand in the competition with the Wal-Mart, as well as Asda that is a sub-company of the Wal-Mart. In this regard, in response, Tesco has been using the strategy of buying stores of different companies and rebranding them in the form of Tesco stores, as it did in Ireland. However, it is very imperative that Tesco considers different cultural and social aspects before buying stores in every country, as one wrong step will result in adverse damage on the company. Besides dealing with top competitors, Tesco seems to handling other small competitors effectively as well with its innovative strategies. For instance, in the case of Marks and Spencer, experts indicated growth in the business of Marks & Spencer (Rugman, pp. 44-48, 2005) that were becoming successful in reaching high-income customers. In the response, Tesco intervened in the market, and launched its ‘Tesco’s finest’ products that gave a huge blow to Marks & Spencer. In this way, Tesco has been involved in damaging a number of its competitors that has enabled it to acquire a major status in the international market (Seth & Randall, pp. 30-33, 2000). In the result, based on the discussed strategies, Tesco has been successful in gaining competitive edge over its competitors in the United Kingdom, as well as in other parts of globe. Although the paper discussed many strategies of the Tesco, however, according to experts, Tesco’s offering of extraordinary online experience is something that has been phenomenal in enabling it to dominate the retail global market (Wattanajantra, 2008). Thus, Tesco, over the years of experience and global market growth, has been able to develop such a strong strategy, which not only fulfills the original objectives of the cooperation, but also enables it to prosper and conquer a greater market share for itself (Rothacher, pp. 77-81, 2004). In order to make this possible, Tesco believes in strengthening its bond with the customers, and developing such a strategy in which both the sellers and consumers could lie on an equal plane, making the market more permeable. Therefore, it is believed that the cooperation holds a very massive and authentic database of its loyal customers, and looks forward to serve them in the best way possible, as to attract more customers has become very expensive for the company. It is clichéd that their database is so strong and legitimate that the company would have the news of the arrival of a baby at their customer’s house even before its registration; it even efficiently predicts the needs of their customers in the long and the short run, before they request for a specific item (Seth & Randall, pp. 212-213, 2001). For such analysis, Tesco maintains advanced software and database systems (Marcouse, pp. 19-29, 2003), which note and record every item bought by a customer. In return, to such proper cataloging the customer is introduced to only required and useful promotions, advertisements, and other marketing offers that enables efficiency at the end of the company, and allows the customers to save time and the hassle of market search. Other than that, if these specified promotions are availed by the consumer, then he gains a position of a ‘higher level category’ brining in greater profits to the firm in return. The cooperation has been working for almost a century and its success lies in the proficient balance of many variables put together making it a multinational triumph. Of all the work put together the most important variable contributing to Tesco’s growth is the integrity and position of authenticity that the company has gained through its years of diligent work and loyal service. Tesco believes that when a customer is served well and leaves the cash counter gaining the marginal utility worth of his purchases, then the work of the seller has been done correctly, and such a customer would not only come again but would attract a bunch of other customers with pre assured belief in quality (Thompson & Martin, pp. 89-90, 2005). Next to the success gained by sheer reputation comes the factor of the strong objectives of the company, which have remained for decades and are followed our religiously followed worldwide. Lastly, Tesco has been able to attract not only a large but also a very strong, reliable customer base, though it’s basic 3-word slogan of “better, simpler, and cheaper” approach, which according to David McCarthy (Jones, pp. 67-75, 2005) has never been achieved by any competitive company. This policy helps to cater all needs of a customer and an employer by providing the best quality, in an almost automatic manner (items arriving themselves at the time of need), also at the lowest rate possible (Humby, Hunt & Phillips, pp. 23-24, 2007). The exhibition of Tesco at the Magor’s Distribution Centre proved the fact that the cooperation understood the fact that in order to survive as the fittest in today’s competitive world, it is highly important to maintain a very strong and efficient technology base. At the center, there are many items that help in providing excellence in standards, through which alone it is able to meet up to its stand up to its goals. Few of these innovations include the HHTO stock management system (Varley, pp. 51-66, 2006), Denver’s Labor Management System, Damage Control Asset Management System (used to scan goods), DCOTA, which maintains the movement of reserved pallets of stock via FLT terminals and also high tech standards of AMT’s are used to enable paperless picking. Other systems such as LPH Loading and ISOTRACK (Interbrand Business Week, pp. 1-5, 2006) provide efficiency in the delivery of shipment and keep track of the inventories on the road; the trucks are loaded with an inbuilt emergency system to respond immediately to any form of hindrance that maybe encountered during the move. While the Paragon system-running parallel to the main computer base helps to reallocate the tractors and drivers with greater efficiency saving time and money in the lure. Recommendations No matter through the last century, Tesco has become an alternate symbol of quality and satisfaction, but the main dilemma that the company in today’s globalized world faces is a dead end in its domestic market, which is now only giving a forced standing with no significant growth to be seen in the future. Therefore, in order for the cooperation to further expand and not externalities or diminishing returns, it needs to search for new markets, and attract international customers on a more serious mode (Child, 2002). For a successful growth plan experts and economists of the company openly point out towards the South Asian market to be the most amiable and profitable market to direct. These markets represent a very large population, which means that the company holds a very high scope of growth and strong penetration, before it meets the ends of a saturation point. In addition, a lack of a high competitive base plus a prospering white collar economy, represent fair chance to get a high market share, with a surging demand all present the most ideal market ground for Tesco. Such a market will not only help the company grow, but would also bring greater recognition to the brand name. However, this does not employ that the local market by any means is ignorable, but it has to keep its roots strong believing in the agenda of ‘ethical consumerism’ (Albert, pp. 10-15, 1997). For such developments to be made possible, it is pivotal that Tesco follows very precise steps, which do not stand against the ethical beliefs in its domestic market; or it would trap the company it a state of crisis. To maintain an amiable and neutral position, Tesco would have to alter some of its previous practices to match up to the growing demands. For instance, in the year 2008, Waitrose had to make a statement to allow ducks to ‘swim’ freely before they were slaughtered. This very practice was in return highly appreciated as it presented the fact that the company was not only greedy for its own profits but also cared for its surroundings. Similarly, Tesco needs to represent itself as the ambassador of an environmentally friendly world, which believes in developing a sustainable environment through completely abolishing the concepts of traditional consumerism and profit making, which would form the basis of its popularity and recognition. Such non-conventional means of advertisement bring along a silent revolution with them, showing a care of humanity as well as fretting for survival in the sea of competition. Such practices would be successful for Tesco because they are attractive as they raise a very flamboyant slogan through the banal statements made by every other company. Furthermore, such methods (Dobson, pp. 11-27, 2005) if adopted could be even much cheaper and effective in reaching the customers as compared to the old redundant methods. Acts of taking Cooperate Social Responsibility into serious practice and maintaining a good ethical appearance would allow the company to break across its saturation point and safely make its way into foreign markets with higher growth perspectives. The food market is slowly being captured by the British, and is thus losing its US basis, which itself is a bright signal of upcoming opportunities of success that need to be efficiently availed, as since the last seven working years it has shown massive growth to those who have been able to pay the premiums on the organic products. Under the banner of ‘green environment’ (Clutterbuck, pp. 56-60, 2002), such organic markets have been a hit in the local market; which no matter stands small at the present moment, but once more traders get involved in such green ideas, then Tesco might be seeing a large competitive market growing against it in the near future (Johnson, pp. 41-54, 2008). Conclusion The research paper provided an in-depth analysis of one of the major aspects of Tesco’s strategies since 2006, strongly focusing on the strengths of the company that has enabled it to grow with such efficiency, outlining prospective markets and weaknesses of the company, which need to be catered to immediately. It also helped to identify and critically analyze the market environment of the company, which is the basis of the business activities, playing a pivotal role against other competitors. Tesco is the most renowned brand of quality and satisfaction for the British, and has high chances of establishing a strong footing even in foreign soils. Tesco’s claim of having more than 0.4 million employees and more than 3700 stores worldwide itself is enough to sing its success song (Wada, pp. 20-22, 2002). More than that, Tesco has been able to attract a large amount of youth to shop at its stores through its new e-marketing strategy, which has brought it success over night. Through the analysis of various researches conducted on Tesco, it is clearly evident that despite the hard competition that the cooperation has faced, coming through all direct and means, it has never been hard enough for the company it loose its stability and stronghold in the market; but has always appeared as the worst competition for others. It however, still has a large market to conquer and further expand and prove itself as invincible; while this study alone is a great opportunity for students and teachers to understand the making of successful cooperation’s such as Tesco. References Albert, Charles. (1997). Strategies for multinationals and competition for FDI. International Finance Corporation. Child, Peter N. (2002). Tesco taking Global. Retrieved on March 23, 2010. Retrieved from http://www.mckinseyquarterly.com/Retail_Consumer_Goods/Sectors_Regions/Taking_Tesco_global_1221 Clutterbuck, David. (2002). Talking Business. Salt Lake City: Elsevier. Dobson, Wendy. (2005). 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