Tesco - Changes in the Firms Environment and How the Firm Deals with Them - Report Example

Analysing changes in the firm’s environment and how the firm deals with them Contents Evaluate the measures taken by the ities to get us out ofrecession 3 Performance of Tesco in times of recession 3 Using supply and demand diagrams discuss the impact of recent macroeconomic events on your chosen firm 4 Outline a strategic plan for your firm to follow over the next few years that takes into account the current situation and future prospects for the UK economy. 8 Reference 11 Evaluate the measures taken by the authorities to get us out of recession The policies to address the effects of the financial crisis can be categorized into three basic principles. The first principle calls for corporative actions by the nations. The current crisis is on the path to exceed the crisis of oil in depth and extent and so the time calls for all the nations to come together and face the existing challenges. The second principle takes into account the actions that are suited to various economic phases. The third principle asks to take a comprehensive approach over horizons of time. The specific measures include measures that aim to support employment. In this measure emphasis is put on emergency employment opportunities that will create new jobs and provide a safety net for the casual workers. The supports that can be provided by the government are increasing the level of subsidies or unemployment benefits. The government can also lend its hand to support re-employment and provide opportunities that will help to develop the vocational skills of the labor force. The support system should also include the persons with disabilities. Among the financial measures the policies includes promoting the financial intermediary services for smooth functioning, to bring the small and medium sized enterprises under the financial support systems, the support system should also consider the large and medium sized companies. The stock market needs the support of the government financially (Government of Japan, 2009, p. 9). The countries which are rich in resources experienced rapid growth in the periods prior to the crisis. It has been argued that these countries seemed to suffer the most as a result of financial crisis due to deterioration in trade. There was a shrink in global demand and the prices of most commodities took the declining curve. The countries dependent on exports as a result was losing precious foreign exchange. Performance of Tesco in times of recession The company that has been selected for the project is Tesco Plc Ltd. The company has got the headquarters at United Kingdom and id the multinational grocery of Britain. The company is ranked third in the world when measured by revenues and ranked second when measured by profits. The company operates in 14 countries across many continents and is the leader of the market in UK. The company is also listed in the LSE (London Stock Exchange). The company held its position during the global financial crisis and faced huge competition. The degree of competition can be determined by share of the market, consumer base, and penetration into the market. The factors that can be accounted for is the “Terry Leahy factor’. The Chief executive officer of the company declared that the company has only become stronger after recession than it was before recession. Tesco is involved in opening up new stores in different corners of the world. One cannot account for any single reason for the success of the company during the times of recession but the foremost or the prime reason that can be accounted is the focus of the company on the consumers. It sounds simple but rarely companies follow this step. The size of the company also matters. The company took the initiatives to sell more. The resultant was better terms of buying. The general economic theories played in the market and that equals to lower prices as well as higher levels of profit. The virtuous circle is complete when the lower prices attract more selling potential. The range of the prices was designed to serve the board. Tesco has changed its pricing and promotional strategy every time it has changed its top management, such as the CEO of the company. Recently, it has adopted the strategy of investing 2% of its total sales for the purpose of effective promotional activities in the existing markets, especially in the US market. This will affect the company’s cash flow, and it will also increase operating expenses by a large amount (Finch, 2010). The company gains more through acquisitions rather than expanding their own business. Using supply and demand diagrams discuss the impact of recent macroeconomic events on your chosen firm It can well be judged that the company under consideration was able to keep itself out from the effects on recession mainly because of its quick as well as effective steps keeping the situation in consideration. The company in fact never slipped down from the growth curve and continued to creep up even in the situation of crisis. The company has been able to acquire revenue of over 40,000 million pounds in 2010. The total number of stores is above 2,700 in UK. The table below shows the performance of the company around the world. The following picture shows the performance of the company relative to the competitors. It can be seen that the company enjoyed around 30% of the consumer’s loyalty which is by far the most in percentage terms compared to the other competitors. The following diagram gives the sales of the competitors as well as the company in the year 2010 in UK. Tesco seems to grab the leading bar in the value of sales. A comparison between the company and its competitors is shown in the figure below. The time periods are taken into consideration and tit is evident from the picture that over the years the competitors has not been able to bridge the gap with the company. Recently the existing gap has widened which acts as the witness to how efficiently the company is operating presently. It can also be noted that a steady upward rising curve has been followed by the company while the other competitors failed to follow such curve. This proves that recent macroeconomic events had less or no effect on the functioning of the company. The company has been able to increase the sales above 8% and the underlying profit before tax has been around 4 billion pounds in 2010. The ROCE rocketed to 12.9% which represents an important step towards the target of the company for the financial year 2014/15. The authorities of the company are certain of further improvements to come. The company has been able to show its mark in online retailing and is now the leader in green retailing. The company has doubled the sales growth in a decade. The company has extended its boundary beyond grocery and is involved to penetrate in the markets of clothing, electrical as well as entertainment. It enjoys only a market share of 4% in the sector for non-food and so efforts are required to capture a significant portion of the market. The goal of the organization is to grow the core business of UK. The success of the company was triggered by deliveries of great shopping trip in each and every store. The company took the initiative to deliver efficiently to the consumers and it allowed the company to accrue more than 44 billion pounds of revenue in 2010. The sales volume was up by 5.5% and the trading profit rose to 2.5 billion pounds. Outline a strategic plan for your firm to follow over the next few years that takes into account the current situation and future prospects for the UK economy. In order to cope up with changing environments the company needs to adapt itself within the economy. If it is unable to match itself with the developments, serious concerns will blow up regarding the sustainability of the company. The competitors will require no invitations to drive the company and attract the company to their favor. Such an action will be worse for the company and the company is going to loose the consumer base. Therefore, strategies need to be implemented or a business outline must always be followed for gaining maximum from the future prospects of the organization. The company is engaged in running many charities across the world. The company aims to make a difference through charity, providing medical facilities, first aid and food to the people of the third world countries. If the company still plans to engage themselves in social work, then they would be required to make more medication. This would call up for advertising for sponsorships. Tesco needs to give emphasis in creating brand value. Although it already enjoys the advantages but such an emphasis will only cement their place in the market. By following by some social strategies, the economy will gain along with the company. It will be able to present that the company has got some social responsibility and the company is aware of that. Through advertisements it can present their products in the public forum which is always the step a company will like to take at any time. The main factor from the political point of view is grants and loans. In the current status of the economy it is expected that the support from the government will shoot up. People will not have enough money to spend. In order to overcome this situation, the company needs to take out grants as well as loans. Money is required for the usual operation of the business and they need to return the borrowed money from the government. The company is the leading brand in the retail sector which enjoys maximum share of the market. But the main problem that is faced by most of the companies is how to sustain in the market. Tesco took the measure to diversify the business. Earlier Tesco was engaged in only retail sector but now it had diversified its business in personal financing, travel agency and some other non food sectors. This provides the company to participate in all types of market so that an expected not so good performance of any sector can be nullified by great performance of the other sectors. The company should adopt a defensive strategy to remain the leader of the market. The company needs to strengthen the relationship between the suppliers and the partners. This will help the company to remain competitive in the market and offer a competitive price for their products. The company will also be able to enjoy the comparative advantages. It should come as the company which cares or takes into consideration the ethical issues in doing business. In order to ensure the motivation and the dedication of the employees it must follow a system of rewarding. The company must be prepared from any frontal attacks from the competitors. The management must lay stress to improve the relationship with the consumers. Consumer satisfaction is the prime focus for the company. Taking the market of UK, which is constantly experiencing changes, a strategy from the competitors can easily drive out the consumers from the company. So the company needs to gain the trust of the consumers. It can offer certain discounts so that the consumers will feel privileged (Panagioutou, n.d. pp. 1-18). The market for UK is highly competitive and if the company engages in setting up new stores that would mean a mere cannibalizing the retail chains. The profits gained shall be utilized in expanding their business in the emerging countries. Innovation in the area of retail industry will provide the company a strong foothold in the existing market. The non food sector is anticipated to experience rapid growth over the next few years and that is why the time calls for rapid decisions and investment of the company in this sector to take the advantage of the situation to come. In order to gain the leadership, the company should take the necessary steps to find the cheap suppliers who will transport the products to the warehouses efficiently. Another potential area is pharmaceutical retail. Diversification of the company in this area may be fruitful due to the increase in the demand for the products beneficial to health as well as medicines. A trend is emerging among the consumers to prefer the environment friendly products and is open to pay small premium for such products. If the company takes appropriate steps to create such green products it will be able to divert the consumers from its competitors towards its stores. Reference Finch, J. 2010. Tesco beats the recession to unveil record profits again. [online]. Available at: http://www.guardian.co.uk/business/2010/apr/25/tesco-record-profits-terry-leahy. [Accessed:17th May, 2012]. TESCO, 2011, Annual Report and Financial Statements. [pdf]. Available at: http://www.tescoplc.com/media/417/tesco_annual_report_2011_final.pdf. [Accessed:17th May, 2012]. Panagioutou,G., n.d., Strategic Management. [pdf]. Available at: http://issuu.com/aureliam/docs/tesco_strategic_plan. . [Accessed:17th May, 2012]. Government of Japan, (2009). Policy Package to Address Economic Crisis. Available at: http://www5.cao.go.jp/keizai1/2009/0420summary-english.pdf. [Accessed:17th May, 2012]. Read More