British Based International Grocery - TESCO - Research Paper Example

British Based International Grocery - TESCO TESCO plc is a British based international grocery and general merchandising retail chain having the highest rankings in the line of retail stores. It is a British chain having the highest sales in global market and has the largest market share of domestic market i.e. 30%. It comes on number three in the largest global retailers’ list after the world’s famous chains: Wal-Mart and Carrefour. There are stores of this chain in 14 different countries around the world (Tesco.com). The company was instituted by Jack Cohen in 1919 and the first store was established in 1929 (Tesco.com). The name was suggested when the company purchased its first shipment of tea and the name was completed by adding the initials of the founder. The chain has a very diverse portfolio of products and services including book retailing, electronics, clothing, petrol, furniture; software, and financial and consultancy services, internet and telecom services. The company got enlisted on LSE in 1947. The company has its online business being managed and conducted through website by the same name. The retail chain had 4308 stores in the year 2009 with more than 2300 stores in the UK (Mcloughlin & Aaker, 2010, p.126-127). Cohen started the concept of food rationing before the British Government during 2nd World war so that the public gets equal food supply. Tesco started its global expansion in 1994 and acquired William Low, a Scottish chain, Quinnesworth, Crazy Prices stores, and the Irish chains. In addition to this joint ventures with local chains are also adopted like the joint venture with Lotus in Thailand. It has entered into various brand lines, for instance Tesco mobile was established by joint venture with O2. The baseline for successful operations of the retail chain lies in the change of strategy, image, selling propositions, and customer oriented schemes. Tesco offers the four categories of its own brand to cater the needs of broad range of customers and maintain a high market share. The finest quality starts at high price moving towards reasonable prices according to the affordability spectrum of different market segments (Mcloughlin & Aaker, 2010, p.126-127). Strengths The stores of Tesco named fresh and easy are not very large, like big supermarkets, but are still customer friendly due to easy to shop aisles. The store offers fresh meat and fresh produce at affordable prices, and the products are free of artificial color, flavors and fats. Tesco’s major power lies in having joint ventures and local management which make it successful in global expansion and marketing (Pradhan, 2009, p.105). Reputation and brand image of the company is strong enough to help the company pursue new ventures like adding the telecom and financial services with the food based business. Even though the strategy was also strong, but the well known brand name was a major success factor as well. The chains are open 24/7 which makes the stores user friendly, and flexible timing allows the customers to adjust their schedules more flexibly. The broad product line provides the opportunity to find many things under one name and one roof. The management of adding the products and maintaining stocks efficiently leads the stores, and ultimately the entire company, to progress day by day. In addition to this, the company also conducts market research to better understand the customer needs and requirements and fulfill them by considering the domestic flavors and cultural differences. The food variety is made available in accordance with the norms, values, regional and cultural traditions. The company has the power to make integration in its ‘brick n mortar’ business and its ‘click n mortar’ business. The presence of company in the e-commerce world makes it a very strong point for the company. The processes can be automated by taking orders and specifications online, and delivering the products through physical means. Weaknesses The management is not maintaining a steady system for relating the worth and pay with employees’ tasks, which means that there is a percentage of employees that are more expensive for performing tasks of similar worth. This weakness is in dire need of consideration because the company’s valuable resources are being wasted in such mismanaged HR activities, which incurs extra HR costs, as well as the opportunity costs for the loss of resources. Tesco is also unable to dominate city centre marketplace which is a hurdle in its rate of progress and growth. The stores are not easily accessible by a large proportion of the customers because of their location in different countries; hence, the company should work on acquiring appropriate locations for the stores to make Tesco more productive and successful. Although the company maintains four categories of prices in various product categories, but there are some of the products which are not in reasonable range of quality standards. The issue is that the customer is not satisfied with the price he/she has paid and the value he/she gets, that is, the money for value is not satisfied. They initiated a major program to counteract their key weakness and maintain quality. From around 1983, Tesco has upgraded stores and the quality and range of what they sold; at present they are still working at it (Pringle, 2004, p.246). Tesco is weak in the area of adding more facilities to its stores to make the shopping experience worth repeating for its customers. If the customer is not feeling comfortable and pleased by going to a store, the probability of customer retention decreases many times, hence the company needs to add more facilities in its retail stores in order to attract and retain more loyal customers. Opportunities Due to excellent expansion strategies, the company has great opportunities in expanding its operations in more countries. They can obtain benefits of local human resource and general resources. The increase in global expansion of the company is the foremost opportunity for the organization (Nag & Sengupta, 2007, p.152). Tesco could make the home delivery service more efficient in terms of time and speed. The service should be free of charges, which would help the company overcome the weakness of the store’s locations which make the store out of reach for a large segment of customers. Facilities provided by the store should be increased to make the store and its reputation strong and successful. The e-commerce mode of Tesco provides another opportunity to grow and succeed in the global market because in this way the company can mobilize its operations across the globe more efficiently and speedily. China is one of the potential places where Tesco is investigating and conducting market research at the moment for future investments. It represents an opportunity and area for expansion and GIS provides Tesco with mapping systems and applications that are very useful in evaluating and analyzing the marketplace (Nag & Sengupta, 2007, p.152). Threats The threat for Tesco is in the form of increased competition from other retail brands like Wal-Mart and Carrefour. The competitors are providing competition in terms of quality and facilities for the customers. The second threat is in the form of increasing tax rates in the UK. When tax increases, the net profit earned by the company will be reduced and the company will make less profit with same level of effort and investment. The company needs to make efforts to increase their sales and reduce costs to maintain their existing levels of profit, and still more efforts are required to be made for making growth and expansion in existing revenues. In this respect, the key lesson that Tesco has gained knowledge of is that they should be able to make the most of unexpected events (threats or opportunities) at their earliest and this position means having well planned and long term strategy to reap benefits. The way Tesco handled the unanticipated victories, faults, and blunders makes it possible for the company to learn by doing (Fernie, 2005, p.6). Another threat for Tesco can be taken in terms of its dependency on the suppliers and transportation partners. Tesco has agreements with British airways and in case flights are troubled, for various reasons, the company’s operations are on stake. In a similar way the company’s dependency on various members of supply chain management, poses a threat. The company has reduced the risk in terms of partnerships with local companies by forming joint ventures; however, there is still some probability of getting into trouble so more sound systems and back up plans are required. The quality issues are also an area of concern for the company because customer satisfaction is the most important ingredient of an organization’s success. If the company is unable to retain its customers and cater for their needs, it makes itself vulnerable to ultimate reduction in revenues and loss. The quality complaints are another threat for the company that need to be dealt with. The company has to improve its quality standards and their strict application to maintain their competitive advantage. Thus Tesco is a strong company with great growth potential, but this potential can be utilized at its best when it is taken seriously and special efforts are made in eliminating the weaknesses, as well as dealing with the threats. Works Cited Fernie, P. 2005, ‘International retailing, Volume 33, Emerald Group Publishing, pp.6 Mcloughlin, D. & Aaker, D. 2010, ‘Strategic Market Management: Global Perspectives’, John Wiley and Sons, pp.126-127 Nag, P. & Sengupta, S. 2007, ‘Geographical Information System Concepts and Business Opportunities’, Concept Publishing Company, pp.152 Pradhan, 2009, ‘Retailing Management 3E’, Tata McGraw-Hill Education, pp.105 Pringle, H. 2004, ‘Celebrity sells’, John Wiley and Sons, pp.246 Tesco.com, 2010, TESCO Plc, retrieved 22 May 2011 from: http://www.tescoplc.com/plc/about_us/tesco_story/ Read More