Tesco Strategies for Market Leadership - Essay Example

Running Head: Tesco Tesco [Institute’s Tesco Introduction Tesco is one of those brands in United Kingdom that look as if they are supposed to stay there forever. Founded in 1919 by Jack Cohen, Tesco has grown enough to become the undisputed leader of the British grocery and retail market (Peppers & Rogers, pp. 13-22, 2004). Moreover, it is not lacking behind in the international market and ranks third in the list after Wal-Mart and Carrefour. Employing more than 440,000 people all around the globe, Tesco holds more than 3729 stores under its name. It started as a food and drink seller but it has diversified its operations in various areas like clothing, organic foods, electronics, financial services, insurances, DVDs, CDs, and others (Child, 2002). Very famous is the saying of Jack Cohen that represents the overall drive of Tesco. Jack said, “You cannot do business sitting on your arse” (Johnson, pp. 41-54, 2008). Jack’s strategy was of constant hard work, innovation, change, adaptability, and openness to experience and Tesco has inherited the same from him. This paper is also an attempt to look at the changes that Tesco has made since the year 2006, in order insure they market leadership. Moreover, this paper would also aim at analyzing the competitive environment of Tesco especially in the United Kingdom. Lastly, this paper would move towards its end by presenting a future strategy for Tesco, based on the information presented in the former sections. Discussion Before we look at the strategies that Tesco has adopted since the year 2006, it is important to note that these strategies had to be perfect and hitting the bull’s eye. Moreover, these strategies would be one of the most important ones to execute in the history of Tesco because of the recession that had hit the British market badly since the year 2007 (Johnson, pp. 41-54, 2008). It was in the mid 2006, when Tesco surprised the world by taking an 80 percent stake in Casino’s Price leader supermarkets in Poland. Tesco hopes to rebrand them into Tesco stores. However, Tesco already has more than 334 stores operating Poland; Tesco still believes that its diversification in Poland would provide them with better results. As an attempt to promote themselves in Ireland, in 2007, Tesco came up with an entirely unexpected and non-traditional method. It signed a contract with O2 to launch Tesco mobile and became mobile virtual network operator in Ireland (McLoughlin & Aaker, pp. 53-69, 2010). This clearly shows that Tesco is not only in an expansion mode but it also somewhat rebranding, and if not rebranding than representing itself as youthful product to appeal to the young customers. Tesco realizes that they have much to offer to the young generation in form of their CDs, DVDs and other items therefore they need to come up with branding strategy, which can make the customers feel that the brand is closer to them or may be that they can see the brand in themselves. Even in 2009, it did not leave its tradition of surprising people and announced that have achieved success in growing a unique type of tomatoes that are less juicy and thus they “do not leak” (McLoughlin & Aaker, pp. 53-69, 2010). They are being grown in Holland and Tesco aims at presenting them as their branded products. The idea is save sandwiches that use tomatoes to become soggy. It is also important to notice that these strategies have produced somewhat the desired results for Tesco. The data released by Tesco for the years 2006-2009, for each year the profits and earnings per share of Tesco have been increasing (McLoughlin & Aaker, pp. 53-69, 2010). Moreover, this increase is on increasing trend as well. It was also due to these strategies that Tesco was able to push Home Depot down the list and take the third position in the list of largest international retailers since before 2007, it was Home Depot, which was at the third position, and Tesco was at the fourth. As far as the competitive market of the Tesco is concerned, Tesco has always been facing fierce completion from its potential and real competitors. However, as David McCarthy who is Citigroup retail analyst puts it that “Tesco has pulled off a trick that I am not aware of any other retailer achieving, that is to appeal to all segments of the market” (McLoughlin & Aaker, pp. 53-69, 2010). The competitive advantage of Tesco is the same that it has not only been offering products from different categories but it also been presenting products with levels of product and price differentiation. Tesco offers to customers of branded market “Tesco’s Finest” products with high degree of price differentiation and low degree of product differentiation. Then it has “Tesco’s Value” products aimed at targeting people who are finding low priced products, with less price differentiation but high product differentiation (Humby, Hunt, & Phillips, pp. 15-34, 2007). In addition, it also offers mid-priced products as well which lie in somewhere in the middle. Tesco faces most of its competition from Sainsbury, Morrison, Asda, Marks & Spencer, Whole Foods Market, Bristol Farms, Albertsons, Pavilions, and others (Humby, Hunt, & Phillips, pp. 15-34, 2007). Sainsbury had ruled the UK retail market for long but it was in 1995 when Tesco and Asda pushed it to the third position and after then it has not been able to recover. Its traditional focus only on price and not on improving the shopping conditions, board appointments and management problems have led Sainsbury into quite some trouble. However, this giant still has all the potential to turn the tables around. Morrisons according to official figures hold around 11.8 percent of the market share in the UK retail industry as compared the massive 30.9 percent of Tesco (McLoughlin & Aaker, pp. 53-69, 2010). Despite the fact, that Morrison’s financial performance is not strong, but it still poses a threat to Tesco because it is difficult to attract the loyal customers of Morrisons. Without any doubts, Asda poses the biggest threat to Tesco since it is owned by Wal-Mart, whose sales are right times than the sales of Tesco. However, Asda growth has witnessed a slow down since 2005. Situation would have been different if Asda would have acquired Safeway instead of Morrisons, then it would have made a great contribution to beat Tesco but it did not happen. In fact, with all these rumors, Tesco bought some of the stores of Safeway just to avoid any damage due to the same. So now, Tesco holds almost 35 percent of stake in Safeway. Stores like Marks & Spencer and Waitrose were considered to be catering the up-market customers but Tesco soon started its intervention in their market share by offering its own “finest” products to cater those customers as well (Seth & Randall, pp. 31-36, 2000). Despite the fact, that Whole Foods Market’s roots are in US, but now it no more a stranger to the British people. It has been operating there for more than seven years, it is heaven for people how are willing to pay a premium for organic products. It puts a lot of emphasis on the “green environment” and thus, it has undertaken many activities for the same. Therefore, it actually caters a growing niche market in the UK and if it grows substantially big then it would become a serious problem for Tesco (Johnson, pp. 41-54, 2008). However, according to the last news, Tesco still has an edge over all these and other retailers in the United Kingdom at least. Many of the reasons have been mentioned-above but one reason also remains the great online experience that Tesco is offering. Many companies that have tried to shift from Brick and Mortar approach to the E-business have not been able to hit the bull’s eye. However, Tesco was named as the best online retail seller of the year 2009 (Wattanajantra, 2008). Now this paper would enter into the last part of its discussion, which is regarding the future strategy that Tesco should adopt. Quite clearly, the domestic market in which Tesco is operating is reaching its saturation point and no further growth would be possible in this market. Therefore, Tesco understands that it is all about international expansion and searching for new markets (Child, 2002). However, Tesco would have to show extreme carefulness in selection of these markets. Many experts agree to the fact that South Asian markets present the most feasible option for expansion. This is because of the fact that many of these countries have high population, which means it would ages for Tesco to reach the saturation point, growing middle class that indicates high feasibility and adequate purchasing power, less competition that means easier life and lower regulations and customer awareness which always benefit the seller. However, Tesco at the same time has to survive within the local market as well. One very important that is surrounding the west is ethical consumerism. Quite understandably, these customers are extremely conscious about the practices undertaken by the seller. It would be very important for Tesco to make sure that no allegations of unethical practices are surrounding Tesco. There are many products and firms that have to alter there practices due to the pressure put by these movements. For example, in late 2008 Waitrose announced to let their ducks swim since they were facing a lot of pressure on them to allow the ducks that they slaughter, provide a healthier environment to grow. This would not only help the duck species but also healthier ducks would mean healthier meat for the consumer. Not only should Tesco focus on environment friendly, green, ethical, and sustainable practices but also this would provide a great opportunity for them to promote themselves. Quite clearly, many firms today are turning to non-traditional advertising methods because of obvious reasons. Firstly, the market is being saturated with the traditional methods of advertising and even the customers are no longer interested in being reached by these methods. Furthermore, traditional methods are becoming more and more costly and no longer are effective and efficient. Therefore, using non-traditional methods like Corporate Social Responsibility and promoting the ethical practices can provide Tesco the competitive advantage even in the future. Conclusion Convincingly, the researcher has identified and analyzed some of the noteworthy aspects of Tesco, and specifically its strategic initiatives since 2006. In addition, the researcher attempted to scrutinize environment of the Tesco that the company confronts while carrying out its different business activities, specifically competitors that play a crucial role in survival of the Tesco. In specific, the paper identified Tesco as one of the forever-staying brands in the United Kingdom and it seems that Tesco is implementing the same policy of staying forever outside the UK market as well. As now, it has more than 0.4 million employees in different parts of the world, whereas it has approximately more than 3700 stores under its banner worldwide that is a huge achievement. Although Tesco has carried out a huge expansion in terms of its store and employees volume, however, the paper recognized that Tesco has gone through somewhat rebranding strategies by transforming into a youth-related organisation, especially by introducing itself on the internet in the form of e-business structures of Tesco that have been major tools of its success worldwide. Furthermore, analysis during the paper pointed out that despite of fierce and harsh competition from various competitors in the United Kingdom and global market, the Tesco has proved itself as a giant that has the capability of turning the tables around anytime. In this regard, the researcher recognized and examined various researches related to the Tesco; however, it is an understanding that the future studies on the same aspect will enable experts in acquiring a more practical and updated understanding about the company. Lastly, the researcher endeavored to propose some future strategies for the Tesco in the United Kingdom, as well as in other markets around the globe. It is anticipation of the researcher that the current paper will be advantageous for students, teachers, and professionals in comprehensive understanding of the Tesco. References Child, Peter N. (2002). Tesco taking Global. Retrieved on March 23, 2010. Retrieved from http://www.mckinseyquarterly.com/Retail_Consumer_Goods/Sectors_Regions/Taking_Tesco_global_1221 Humby, Clive, Hunt, Terry, & Phillips, Tim. (2007). scoring points: how Tesco continues to win customer loyalty. Kogan Page Publishers. Johnson, Gerry. (2008). Exploring Corporate Strategy: Text & Cases. Pearson Education India. McLoughlin, Damien, & Aaker, David A. (2010). Strategic Market Management: Global Perspectives. John Wiley and Sons. Peppers, Don, & Rogers, Martha. (2004). managing customer relationships: a strategic framework. John Wiley and Sons. Seth, Andrew, & Randall, Geoffrey. (2000). the Grocers: The Rise and Rise of the Supermarket Chains. Kogan Page Publishers. Wattanajantra, Asavin. (2008). Tesco website tops for customer experience. Retrieved on March 23, 2010. Retrieved from http://www.itpro.co.uk/188583/tesco-website-tops-for-customer-experience Read More