Tesco Performance in the UK - Assignment Example

?Tesco Plc. All organizations are open systems; they exist within a dynamic and complex environment having a variety of interchanges with it, both receiving inputs and outputs. Companies try to control the nature of their output but very few of them can control more than a few of the inputs they receive. Hence organizations try to predict, in future, the changing environment in which they are working and in result they make strategies to combat such changing environment. Successful organizations tend to such things and hence positive results follow. The organization that I have chosen is TESCO, which is a well diversified company working in many different ventures and has created a great deal of value in the eyes of their customer. Company Profile TESCO is a well diversified company working in many different ventures; it has over the years created a great deal of value in the eyes of their customers. “Tesco operates 923 stores and employs 240,000 people, giving us access to a population of 260 million across our nine markets. Over the past five years, we have expanded from our traditional UK supermarket base into new countries, products and services, including a major non-food business, personal finance and internet shopping. The increasing scale and internationalization of our sales and purchasing operations makes a significant contribution to our efficiency and profitability, as we progress towards our long-term goal of becoming a truly international retailer” (Global Sources). Tesco is a huge British retailer having strong business operation around the globe. It is considered as the third largest retailer globally based upon the revenue that it generates. It was started in the year 1919 by Jack Cohen as a simplified grocery store until 1924 when the Tesco brand was initially launched in 1924. Its first store was opened up in 1929 in Burnt Oak, Edgware, Middlesex. In 1947, it was introduced into the London Stock Exchange and made public and this floatation started the great success story of Tesco plc which has now emerged as one of the top most renowned supermarket chain in not just United Kingdom but the entire world. The first supermarket under the name of Tesco was opened in 1956 in Maldon. Since that time period, the company has operated such smoothly that it has created standards and is nowadays considered as a benchmark for many of its industry competitors. Over the years, the company took over many other supermarkets to make itself a leader in the United Kingdom region (tescoplc.com). Environment Analysis The environment may be divided into three layers: the macro environment; industry or sector; competitors and markets. All these layers interact with each other within themselves. When considering the macro-environment factors for TESCO the basis of analysis to be used is the PESTEL analysis. This model uses broad headings such as: Political, Economic, Social, Technological, Environmental and Legal; to analyze an organization’s macro-environment. Macro-Environmental Analysis Political Each and every company in which TESCO operates has a different political risk because of the fact that different countries have different political policies which can be either beneficial or can be harmful for TESCO’S operations. For TESCO to operate in different countries, the political influence depends upon the stability of the current government. TESCO Lotus in Thailand has delivered strong growth during the year 2008-09 despite Thailand’s weakening economy and the uncertainty involved with the stability of the Thai government. TESCO’s operation in UK, Ireland and few other countries; with respect to competition have been continuously scrutinized by the competition authorities. TESCO’s management has kept itself up to date with respect to any changes in the political uncertainties and has kept them in mind when developing their long-term strategies. TESCO has remained cautious to future changes and has engaged itself with governmental and non-governmental organizations to keep ahead with respect to any dynamic changes. TESCO’s recent political donations in the form of sponsorships to many different parties and trade unions would also favor them in reducing any political risk that could have materialized (Great Britain & Jack 2009, p. 88). Economic Economic environment includes interest rates and exchange rates, as well as general state of the economy in which an organization operates. Organizations need to know the economic prospects and inflation rates for a particular country in which it operates and hence tailor a strategy to overcome any risks that might arise. The economic downturn recently has deteriorated TESCO’s performance a bit as the company while operating in the U.S.A, was unable to keep up the pace of growth against its demanding development objectives. During this economic strain, when consumers were also feeling the pressure, TESCO was one of the companies to lower its prices and introduce affordable goods for its customer. Globally the economic recession has struck every business and individuals as well, but TESCO has produced favorable results. The testing economic conditions all over the year 2008-09 have resulted in some increase in bad debt levels and fraud for TESCO. Sales Growth in Europe slowed down in the second half of the year reflecting the major economic recession. Besides this economic downturn inflation has also played a part in reducing the sales growth for TESCO in Europe. There has been an appreciation of different currencies, hence creating an exchange loss for TESCO over the year 2008-09, if this pattern continues the exchange loss might even increase, e.g. appreciation in the price of Euro over the year 2008-09. Social Socio/cultural influences include any particular changes in tastes, lifestyles, demographic make-up of a population, etc. TESCO has operated successfully in many different countries having people with different tastes and cultures. TESCO has operated in countries where people have had knowledge about the business because of its worldwide name and image. TESCO has tend to increase customer’s attitude towards leisure and work. TESCO has usually opened its stores, hypermarkets which are either in the city or very near to the outskirts of a city; this strategy has helped them to obtain customers as the stores and hypermarkets, etc are situated in thickly populated areas. If TESCO is to open up in a particular country it also has to look at the level of education, the distributable income and the consumerism of that particular country. Technological These may consist of differences in retailing methods, choosing between the production techniques (e.g. greater use of automation or human labor) and faster and higher quality communication and interaction between buyers and suppliers by the use of computers, telephones, email systems, internal networks and other technologies. The technological advancements also call for an active plan to change the techniques and methods which are used in the managerial work. These technological changes should be accounted for in the management and implemented for better results. TESCO sets out an example of making such technological changes and implementing them successfully and systematically. These changes made by Tesco form another factor of its profitability and competitiveness. TESCO, in the current business environment has made use of technologies and changed its operational activites as per the modern concepts. It has incorporated the technologies like automated check-in bread and milk deliveries at the depots. This advancement in technologies and work operations reduces human administration and manual work load. Check-outs form another major topic of sales and transactional records in the operations of supermarkets. TESCO has also launched new checkout equipment for its store, this has ended up making the checkout procedure more quick and precise, and more or less 25% of TESCO’s UK purchaser dealings are via self-service checkouts (Humphery 1998, p. 227). TESCO has broad controls in order to preserve the reliability and competence of its IT infrastructure and these IT structures are shared from their international operations to guarantee uniformity of delivery. Environmental Physical environment is important for logistical reasons, as a source of resources and because of increasing regulation. Companies are under immense pressure to incorporate environmental measure into their short and long-term strategies so as to protect the environment which is exposed to the hazardous activities being carried out by organizations. TESCO has always strived to reduce its energy usage in stores, transportation, waste management and any particular event that is harmful to the society. A Corporate Responsibility committee is present within the company to ensure the company’s adherence to reduce environmental issues. There are strict product safety processes and regular management reports. TESCO works in collaboration with its suppliers to ensure mutual understanding of the standards required. It also monitors developments in areas such as health, safety and nutrition in order to respond appropriately to changing customer trends and new legislation. Over the past few years TESCO has continued to introduce proposals to save energy and lower its carbon footprint in all their operations worldwide. Since 2006-07 TESCO has reduced 21% of their stores carbon intensity. TESCO has opened their greenest store in Manchester with a carbon footprint lower than 70% below than that of a typical store in 2006. It has also increased its capital investments as a step to reduce environmental threats. Energy consumption fell by 8% in 2008-09 despite the fact that the business grew. TESCO has also introduced Green club cards, encouraging their consumers to recycle (OECD 2010, p. 86). Tesco Malaysia became the first country outside the UK to launch green Club card points to encouraging its consumers to use lesser carrier bags. TESCO took the initiative to be the first retailer in the world to carbon label products with 100 products labeled in the UK already and many more to be launched. TESCO has also been awarded with the Sustainable management award in South Korea. Legal The legal environment cover influences such as taxation, employment law, monopoly and other laws and legislations affecting a company. TESCO has set up compliance committee to ensure that the organization complies with the relevant legal rules and regulation. As in previous years, TESCO is fined for selling out of date food items which are strictly against the public health and safety law. Conclusion Tesco operates in different regions of the world and is successful in running supermarkets, hypermarkets, and convenience stores in excess of 2,300 in the United Kingdom. It is known as the leading food retailer in the UK. It also operates successfully in Ireland, Central Europe, and Asia. Its major business areas consist of convenience and gasoline retailing (Tesco Express), small urban stores (Tesco Metro), hypermarkets (Tesco Extra), and financial services through Tesco Personal Finance. It is a competitive name in the online grocery business, and a 35% stake in US grocery chain Safeway's Grocery works. Its competitiveness and success in the online grocery field is upheld by the expanded use of information technology, TV and a "retail based education institution”. Tesco has a well-established and consistent strategy for growth, this is a way in which it has strengthened its UK business and has created ways to expand into new markets. TESCO is considered a market leader in many countries in which it operates except U.S.A. TESCO has kept its image up by showing the whole world that is a socially responsible firm, this has led TESCO to achieve many awards too. TESCO has invested too much in climate change at Manchester University, this seems that it has invested too much in environmental issues whilst there are other areas which require major investment e.g. the new market i.e. U.S.A which would require major investment to prosper in future. Bibliography GREAT BRITAIN, & JACK, M. (2009). Securing food supplies up to 2050 the challenges faced by the UK : fourth report of session 2008-09. London, Stationery Office. PORTER ME. (2008). The five competitive forces that shape strategy. Harvard Business Review. 86, 78-93. (2010). Transition to a low-carbon economy: public goals and corporate practices. Paris, OECD. HUMPHERY, K. (1998). Shelf life: supermarkets and the changing cultures of consumption. Cambridge, United Kingdom, Cambridge University Press. www.tescoplc.com Global Sources, Buyer Profile, TESCO http://www.globalsources.com/PEC/PROFILES/TESCO.HTM Read More

 

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