Retail Failure of Tesco - Essay Example

Critical Discussion and Evaluation of Retail Failure - Tesco as a Case to Analysis Introduction Marketing and management theories help achieve organizational goals. Tesco United States research includes the principles of marketing. The study borders on management concepts. The Tesco United States refusal to set into motion the management concepts triggered its bankruptcy. Section 1: General Information Tesco set up a branch in the United States. The stores had been built using the convenience store structure. The convenience store is characterized by the exclusive cashier’s booth. The people will have lesser time to line up and pay for their products bought (Uniglobal, 2009). The Tesco management employs the marketing concepts. Pricing is one marketing concept. Promotion is another viable concept. Product quality is a necessary product concept. Place is an important marketing concept. Further, Tesco management institutes the complicated management functions. Controlling is one of the functions. Organizing is another management function. Staffing is a third management function. Planning is the fourth management function. Directing is the last management function. Furthermore, the first United States branch was set up during 2007. The branches are strategically located in California (Scott, 2011). With the huge population in California, The United States Tesco branch investment was estimated at around £250 million during the 2007 ground breaking operations. The company is expected to fund additional £250 million during the 2008 and future years (Uniglobal, 2009). Additionally, the additional yearly investments are pegged to set up branches in other major cities in the United States (Ross, 2011). Tesco’ Chief Operating Officer Terry Leahy mentioned that “the investment in Tesco United States is another leg in the Tesco United Kingdom’s expansion into internationally lucrative nations.” The Chief Operating Officer enthusiastically claims that the United States expansion is very bold and profitable venture. The officer is correct for the United States is one of the biggest economies in the world. With a nation of huge number of prospective customers, the Tesco United States branch is expected to play a significant role in augmenting the revenues generated by the Tesco home office branches located in the United Kingdom (Uniglobal, 2009). Additionally, the company planned to set up an estimated 1,000 Tesco United States branches starting in 2007, where the initial branch was established in California. During 2008, the company targeted the setting of an additional 200 Tesco United States branches during 2008 alone (Uniglobal, 2009). However, the bright profitable future envisioned by The Chief Operating Officer was not that rosy. During year ended February 2009, the Tesco United States branches only generated an unfavorable $208.5 million loss. The loss was higher than the prior year’s $91 million loss (Uniglobal, 2009). Likewise, the United States branch generated a poor financial performance during the first three years of operations. The poor financial performance is grounded on the low revenues generated by the United States branch. With the low revenues, the company net profits precipitated to a similarly lower output. With the low gross profit output, the company generated losses during the year (Brealey, 2011). Additionally, the branch had been criticised by several quarters for its lackluster employment policies. The employment policies of the United States branch included using some of the company’s United States resources to prevent the employees from setting up a labor union (Uniglobal, 2009). Likewise, the United States Tesco branch exerts extra efforts to prevent one of the largest labor union groups in the United States from establishing a labor union within the halls of Tesco, United States. The United States Tesco branch was criticized for its systematic and excessive actions to thwart the employees’ desire to set up their own labor union. Further, Tesco United States continually closed its doors to the knockings of the employees’ requests for the Tesco United States leadership to accept the employees’ plans for a new Tesco United States employees’ union (Uniglobal, 2009). The management of Tesco United States determined not to entertain the requests of the labor union proponents to set up a labor union within the United States Tesco grocery chain workplace (Schermerhorn, 1997). Additionally, the employees’ leaders presented a petition for the recognition of the employees union. However, all their attempts fell on deaf Tesco United States management ears. The management officers of Tesco United States allocate time and money to discourage the employees from forming any labor union within the school premises. On some occasions, the Tesco United States management shut the management doors to the employee leaders request to persuade the Tesco United States employees to form and register in a new labor union (Uniglobal, 2009). On the other hand, Tesco United Kingdom grocery chain branches had recognized the labor unions starting as far back as the 1970s. The United Kingdom Tesco branches recognize and allow the United Kingdom employees to join, elect, and propose employee benefits. The employees’ benefits are set forth in the collective bargaining agreement (Uniglobal, 2009). In response several stockholders of United Kingdom Tesco branch were very vocal against the unfair treatment of employees, in terms of preventing the employees from realizing their dream to become part of a strong labor union. The employees’ labor union actions are very understandable. With the establishment of a labor union, the employees can have bigger voice. For example, management refuses to grant certain labor law mandated benefits. When this happens, the employees can call a meeting to discuss the unfavorable management actions. During the meeting, the employees can vote on the labor union’s next action. One of the possible actions is announcing that the labor union will contact a strike. During a strike, all labor union members may block entry of other employees into the company premises (Uniglobal, 2009). In addition, the same labor union officers may conduct work stoppages (Twomey, 2009). When the strike is in progress, the strike may linger for several days or weeks. Consequently, the company cannot produce the customers’ required product needs. With the lack of supplies, the Tesco United States customers are forced to buy their product need from the competitors. The competitors of Tesco United States include other grocery chain stores. Consequently, the Tesco United States branches will not be able to generate revenues during the strike period. Without the required revenues, the company is not able to generate gross profit outputs. The sale slowdown precipitates to the company generating low net profits or even net loss operating performances. On the other hand, the absence of the labor unions will be at the advantage of the Tesco United States branch management. One disgruntled employee cannot have the same power that the labor union has. The lone complaining employee cannot declare a strike and stand outside the company premises alone. The lone employee cannot benefit from having a lone work stoppage. Further, the labor row dispute included the hiring part time employees. With the employment of the part time employees, Tesco was able to save on the wages paid. By hiring regular full time employees, the company would have to pay higher wages. The regular employees are paid basic salary for a minimum of eight hours of work. On the other hand, the part time employees are hired for lesser hours of work per day. With the employment of the part time employees, the company is able to save on retirement pay, sick leave pay, vacation pay, and other fringe benefits. Additionally, the company pays relative low salaries to its United States grocery chain store employees. With the corresponding low pay, the employees do not have enough money to enjoy a life of decent living. Further, the company sets strict pension fund contribution schemes. The schemes reduced the Tesco United States employees’ chances to benefit for the pension fund’s matching scheme. With the strict requirements of the pension fund scheme, the employees are prohibited from easily attaining their preferred pension fund retirement expectations. Furthermore, the United States Tesco branch implements a restrictive health insurance scheme. The scheme was designed to reduce the number of employee who can benefit from the insurance plan. One of the restrictions is requiring the employees to work a minimum number of hours in order to qualify for the insurance scheme benefits. The insurance premiums are also pegged high in order to discourage some of the employees from enrolling in the insurance scheme. With the employees’ low salaries, the employees are discouraged from allocating a portion of the payroll to enrolling in the insurance scheme. Likewise, the insurance scheme benefits of the Tesco United States branch preferred insurance company offer lower insurance benefits. The chosen Tesco insurance company has lower insurance claim benefits compared to the other competitor insurance companies in the United States communities. The company’s failure to conduct surveys triggered annual losses generated by Tesco United States during starting in 2007 until 2012. The surveys would help management find the causes of the low customer demand of the company’s products and services. Tesco’s original plans to set up more United States branches were decreased. The decrease was necessary in order reduce investments. During the prior years, the Tesco United States branches generated consistent losses. Several investors recommended to the Tesco United States management to close its United States branch operations. However, the Tesco managers refused to give up its American dream to generate grocery profits from its United States grocery operations (Donnell, Tesco's Plans to Expand Are Scaled Back, 2012). Reuters news mentioned that the British grocery chain Tesco reviewed the many years of net loss outputs during the year. Tesco Chief Executive Philip Clarke is reviewing the probability of closing down the United States Tesco operations (Tesco to Review U.S. Operations, 2012). Further, Tesco had firmly decided move towards closing its California Tesco United States branches (Butler, 2012). Tesco had reduced its us tesco branch losses (Kleiman, 2012). Tesco had finally decided to closeits United States Tesco operations in 2013. The many year so net loss had forcedthe United Kingdom grocery chain to call it quits in the United States market segment (Edwards, Tesco Signals Embarrassing Retreat from the U.S. After Losing its 1 billion pound Gamble to Take on Supermarket Giant Wal-mart, 2013). Holly Williams reiterated that Tesco lost £ 1 billiion to the United States local grocery chain, Wal-Mart (Williams, 2012). Section 2: Overarching Theories Marketing Theories Product marketing theory. The Tesco United States branches are run using several marketing theories. The company sells quality products (Kotler, 2006). With the quality products, the company is expected to generate revenues from the current and future United States customers. With the high quality grocery products, the United States grocery chain generated a high customer demand. The Tesco United States grocery stores offer products that fit the diverse customers’ demands. Price marketing theory. The Tesco United States branches sell products at reasonable prices (Ingram, 1998). Reasonable price does not automatically mean the lowest prices. The reasonable price is based on the cost of putting the products on onto each Tesco United States grocery store shelf. The reasonable price includes an amount needed to generate profits. All profit-based companies sell products in order to recuperate the operating expenses. Likewise, Tesco sells products in order generate gains (Hartline, 2011). Promotion marketing theory. Tesco United States branches promote the products and services of each United States branch store (Ferrell, 2010). The promotions include word of mouth advertising. With the quality products being enjoyed by the current and future customers of Tesco United States, the customers spread favorable news about the quality products, reasonable product prices and quality services of the Tesco United States branches (Etzel, 2001). Place marketing theory. The company sets up its branches in the major cities in the United States (Fisk, 2006). The major cities include those set up in California, the West Coast part of the United States. By selling in highly populated places, there is a corresponding sales output. With the high sales turnout, the company generates a high gross profit. With the high gross profit, there is a higher probability that the company will generate high net profits (Czinkota, 2007). Strengths. There are strengths in the marketing theories (McDonald, 2007). The theories help the management increase revenues. The theories will train the employees to implement a unified marketing plan. The theories can increase customer demand for the company’s products and store services. Functions of management. Management of Tesco includes staffing the Tesco stores with employees (Weihrich, 2009). The employees are customer-oriented. The employees are trained to deliver quality service and quality products at reasonable prices to each valued store visitor. Staffing includes hiring the best applicant for the vacant Tesco United States grocery chain sales person job. The Tesco management directs its employees to ensure that each customer’s Tesco store visit must impress on the current and future customers that the customers’ needs and wants are prioritized (Khan, 2006). Directing includes guiding the employees on what is expected of them. Directing includes giving instructions on what should be done and what should not be done. The Tesco United States management plans each step of the marketing process (Still, 1988). Planning includes determining which products to sell and which products to drop from the store shelf display areas. The management must plan how many products and types of products shall be delivered to each grocery chain store. Planning includes which store shelf should carry each product brand. The Tesco United States management controls each avoidable expense (Davis, 1999). Controlling includes reducing the amount of expenses to allowable levels. Controlling includes turning off the lights in the grocery stores when no one is around. Controlling also includes preventing spoilage by placing the older items facing nearest the store visitors. The Tesco United States management organises the store display in order to persuade the current and future customers to patroanise the company’s grocery chain stores’ products and services. Organising includes assigning personnel to each job vacancy. Organising includes delegation of authority and responsibility assignment of each Tesco store employee. The management theories have their strengths (Holmes, 1998). The employees of Tesco United States know what is expected of them. The management can reduce the company’s prior year Tesco United States losses. Management can enhance current management leadership of the Tesco United States employees. Weaknesses. There are weaknesses in the marketing and management strategies. The strategies do not include surveys. Surveys indicate the current and future customers’ feedback on the company’s products and services (Donnelly, 2007). The survey will help management alleviate the loopholes in the company’s marketing and management strategies, increasing revenues and profits. Section 3: Lessons Learned Summarizing, marketing and management concepts aid in the fulfillment of organizational goals. The marketing concepts of Tesco United States should include customer feedback. Customer feedback, surveys, indicates the reasons why current and future customers shy away from the Tesco United States grocery stores. The research centers on the management function of Tesco United States. Evidently, Tesco United States’ unsuccessful setting into \motion the marketing and management concepts triggered the United States branches’ untimely closure. Section 4: Future Directions As retail marketing executive of Tesco United States, the first priority is to get client feedback. Feedbacks include conducting surveys. The surveys will show why the current and future customers are not interested to buy from the Tesco United States branches. The results of the surveys will be used in revising the Tesco United States marketing strategies and management function itineraries. References Brealey, R. 2011, Principles of Corporate Finance, McGraw Hill, London. Butler, S. 2012, December 8, Fresh, But Not Easy: Tesco Joins a Long List of British Failure in America. 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Kotler, P. 2006, Marketing Management, Pearson, London. McDonald, M. 2007, Marketing Plans, Butterowrth - Heinemann Press, London. Ross, S. 2011, Mathematical Finance, University, London. Schermerhorn, J. 1997, Organizational Behaviour. J. Wiley & Sons, London. Scott, C. 2011, Guide to Supply Chain Management, Springer, London. Still, R. 1988, Sales Management, Prentice Hall, London. Tesco to Review U.S. Operations. 2012, December 12, Reuters , p. 1. Twomey, D. 2009, Labor & Employment Law, Cengage Learning, London. Uniglobal, 2009, Tesco’s Employment Practices in the U.S., Uniglobal, London. Weihrich, H. 2009, Management, McGrawHill, London. Williams, H. 2012, December 5, US Failure Costs Tesco one billiion pound as Store CallsTimeon American Venture, The Independent. Read More