Impact of Tescos Location Strategy in the UK - Essay Example

?IMPACT OF TESCO’S LOCATION STRATEGY IN THE UK ON ITS OVERALL GROWTH INTRODUCTION History of Tesco The foundation of Tesco goes back to the year 1924, the time when it came to existence. Its foundation of Tesco is attributed to Jack Cohen. Jack Cohen was the founder of the multimillion Tesco supermarkets that have stood the test of time for over seven decades. It was first founded in the United Kingdom (U.K), the first store getting established in London, to be particular. Its headquarters is in Hertfordshire. It appears as the third largest company that practices grocery retail all over the world. Tesco has grown tremendously over time since its foundation, establishing its stores, retail shops and super markets in over 14 markets globally. Its worldwide establishment did not happen immediately, rather, the spread into other areas of the United Kingdom and to other, states happened strategically, and involved serious and efficient planning by the founders and stakeholders of the company. Tesco has its stores in many nations, including the United States, China, Korea, India, and Japan among others. It has established many stores, which exceed 4,811 and a staff of workers of over 472,000. Its operations are on a large surface area that is estimated as 94 sq. feet (St. James Press, 2013). When first established, Jack Cohen established it as a grocery, which was a food retailing store. However, as time went by, the founders found it necessary and efficient to diversify into different markets such as clothing, electronics, and financial services. Tesco Company engages itself in a myriad of market operations, including those of extra stores, metro, hypermarkets, express, superstores and home plus. The company was formed with an aim of providing total satisfaction to its customers in order to build customer loyalty. In building customer loyalty, Tesco Company had in mind an aim of retaining its customers. In that way, Tesco Company was sure of dominating the market in no time since it would have had a huge market share composed of the loyal customers. In its venture of diversifying its operations, Tesco ventured and continues to venture into the provisions of both food and non-food products. Some of the non-food products include clothes, beauty products, health and electronic commodities. Not only does Tesco provide the non-food products mentioned above, but also kitchen equipment, stationery products and home entertainment products. It’s worth noting that Tesco also specializes in the service provision. Some of the services Tesco provides include financial services, website selling and telecom services (Laurin, 1977; Tesco Still Top of the Shops, 2007). Tesco’s location strategy Growth of Tesco has been measured using the profits the company makes yearly. The profits are attributed to the large market share the company has over many nations, which are over 14 in number. The profits are all from both the domestic and foreign Tesco business stores. Tesco Company has the largest market share in United Kingdom compared to the share of other renowned companies. Its market share is 35% of the whole country. Tesco’s growth is attributed to many factors, most of which contributed by the environment in which the market stores, and hypermarkets have been set up. Business environment is divided into two; internal environment and the external environment. The internal environment basically involves the leadership, and management put in place in a business or company. It also includes the employee’s contribution to the organization. Without the presence of hardworking and committed workers, attainment of a company’s targets and achievement of objectives would be challenging. Internal environment is one where the management has influence over. On the other hand, external environment is one that the management of a company has little or no control over. It is divided into micro and macro environments. Basically, external environment of a business is influenced by the location strategy of the firm. Location strategy is a decision based on what the external environment is ready to provide (Laurin, 1977). Location strategy is a vital strategy that is highly dependent on an expert’s advice. Such experts provide advice on where a business can be best placed to facilitate its expansion and growth. This strategy appears to be the largest contributor to Tesco Company’s growth and expansion. Location strategy is influenced by external factors, including the macro environmental factors. Such factors are grouped into a series of variables, including: political or legal environment, economic environment, social-cultural environment, technological environment, ecological environment, and demographic environment. These factors influence the location of any business. In the case of Tesco Company, the company has expanded and has set up additional operating stores in areas where the probability of the company expanding and making huge profits were seen to be high. Thus, these location factors that originate from the environment have influenced the location of the various stalls across the region (Grant, 2005). IMPACT OF THE LOCATION STRATEGY ON TESCO’S GROWTH One of the location factors is the demographic environment. Demographics refer to the characteristics of the population in terms of age structure, size, population structure, literacy levels, birth rates, and population distribution. These demographic characters contributed largely to the growth of Tesco in the United Kingdom. Tesco stores were set up in areas that had a positive reflection of the mentioned demographic characters. For example, the centers in which the stores were set up had a large population size. The population distribution in those areas was also dense. Such characters implied a lot. One of it is that the market created by such huge and dense population was huge and there was increased demand for food and food products by the huge population. Hence, Tesco was able to make huge sales and, as a result, huge profits were registered. These profits were reinvested into the company to increase its operations country wide and even internationally, leading to the company’s growth (Elearn, 2012). Another location advantage of the Tesco stores and hypermarkets getting set up in areas of huge populations was that it could get huge labor that it used to run its operations. The labor was affordable since it was cheap hiring the population, which so much struggled to get employed. Thus, running its operations became easy, since it could access labor from the large population. Labor is the key to all operations within a firm. As a result, with sufficient labor in the areas of its operations; it was easy for the company to experience immense growth as it could carry out its operations efficiently. The age structure, population structure and the literacy level also had an impact on the growth of Tesco Company as it enabled the company to know what to produce. These characteristics could facilitate Tesco company know its target market (Porter, 1985). Another factor in which location strategy influenced Tesco’s growth is the economic aspect. Economic factors consist of factors that influence consumer’s spending patterns or purchasing power. Such factors determine consumer’s demand and ability to buy. Some of the key aspects of economic environment include total income, income distribution, demand for a particular product, unemployment, and changing consumer patterns. Tesco stores were majorly set up in areas where most of the residents were high-income earners. The population of most areas of its establishments was employed and had sources of income. Thus, by establishing its stores and hypermarkets in those areas, the stalls made huge sales on daily basis resulting in huge margins of profits. It was able to strategically position itself in areas where there were huge demands of food and other products from the high-income earners. Given the fact that the products from Tesco Company guaranteed high levels of satisfaction, and were of considerable prices, Tesco could attract a huge share of the consumers, which contributed to its growth in the long run (Freeman, 1984). The political and legal environment also had an influence on the growth of Tesco Company in terms of its location strategy. The political or legal concept consists of laws and policies that the government stipulates for the purpose of regulating and affecting business activities in the market or business area. In its area of establishments, the laws and regulations were well-conceived which encouraged competition and ensured free markets for goods and services. With the favorable and flexible laws and policies, Tesco was in a position of carrying out its operations with minimal disturbances, thus, leading to its growth. Governments formulate laws and policies for the purpose of guiding commerce. Laws are set up to protect the interests of societies, consumers and also companies against competition and unfair practices. With the aid of those policies, Tesco Company was able to carry out its operations in a peaceful and efficient environment which facilitated its growth and expansion (Rainey, 2006). One other factor that originated from the location position of Tesco, that contributed to its growth was the technology in place. Technology has grown over time and has dominated all sectors, including the business sectors. United Kingdom is a developed country. Its technology is highly developed to the extent that every business operation is beginning to rely on it for the purpose of growing and expanding. Tesco Company had to rely by a large extent on computerizing its operations. It was the first to install the use of CCTVs in its stores. There was the use of computers to carry out the accounts of things bought and sold in the company. Thus, with the presence of the internet in the area, linking one store to another became easy, thus, operations were properly linked. This boosted the operation of the company, which resulted to its growth and global expansion (Siegel, 2006). Furthermore, in the location of the Tesco stores, there were a lot of competitive factors. These pushed the company to intensify its operations and in that verge, it could establish its outlets in other areas of the country. It is the competitors that pushed the Tesco Company to expand since it could react to competition by increasing its stores and hypermarkets, with an aim of retaining their name of being the most competitive in the market (Porter, 1985). Conclusion In conclusion, location strategy has contributed largely to the growth and expansion of Tesco Company. The company benefits a lot from the factors of the environment that relate to the location of the company’s stores. The economic, political, technological and demographic factors relating to the location strategy of the company have contributed a lot to the growth and expansion of the company, which has led it to establish its operations in other parts of the world. References Elearn, 2012. Business Environment Revised Edition. Hoboken: Taylor & Francis. St. James Press, 2013. Encyclopedia of global brands, 2nd ed. Detroit: St. James Press. Freeman, R., 1984. Strategic Management: A Stakeholder Approach. Boston: Pitman Grant, R., 2005. Contemporary strategy analysis. 5th Ed. Oxford: Blackwell Publishing. Laurin, I. M., 1977. The Story Behind Tesco's Stamp Decision: And the Company's Policy for the Future. International Journal of Retail & Distribution Management, 5(6), 29-31. Porter, M. E., 1985. Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press. Porter, M., 1985. Competitive Advantage. New York: Free Press. Rainey, D., 2006. Sustainable business development: Inventing the future. Cambridge: Cambridge University Press. Siegel, D. S., 2006. Technological entrepreneurship. Cheltenham, UK: Edward Elgar. Tesco Still Top of the Shops, April 18, 2007. The Birmingham Post Read More