How Tesco Became the UK's Dominating Supermarket - Research Paper Example

How Tesco became UK's Dominating Supermarket Contents Contents 1 The Background of Tesco 2 Supermarkets in United Kingdom 3 The Business Environment of Tesco in United Kingdom 4 Tesco’s Potential in Meeting Business Challenges in United Kingdom 6 Competitive Position of Tesco in United Kingdom 7 Conclusions 9 Referencing 10 The Background of Tesco Tesco Plc is a British multinational company, which is a major player in the global retail industry. At present it is the third largest company based on revenue and the stores of the company is in 14 countries across Asia, America, and Europe etc. The company is in the business of retailing electronics, clothing, book, groceries as well as telecom services, financial services and internet services. In the year 1919, Sir Jack Kohen founded the company. In the year 1932, the company became a private limited company. By the year, 1939 there were 100 Tesco stores over the United Kingdom. In the year 1947 the company floated in the London Stock Exchange in a price of 20 pence, the name of the company was Tesco Stores in the bourse. In the decades of 1950 and 1960, the company has acquired many stores, through which the operations became diverse. Tesco acquired 212 stores in the year 1960 in North England and in the year 1964 and 1965 the company has added 144 stores more. The company has also used the modern technology when it is available to them. In the year 1982 the company has introduced the computer based service in its stores. In the year 1990, the company has started its expansion beyond the geography. In the year 1974, Tesco has implemented its petrol services and by the year 1991, it has been the biggest retailer of petrol in the United Kingdom. In the year 1996 Tesco launches the trading for 24 hours, also they have added benefit in the customer service by introducing customer assistants so that the shopping became easy and fast (Tesco Plc, 2012). In the year 2000 the website of Tesco has been launched which is the on-line grocery store and the largest such in the world. The annual turnover of the company used to exceed $2 billion from the online store of the company (Sarraf and Ellis, 2007, pp.1-2). Through an excellent supply chain system and robust strategies, Tesco Plc is one of the best companies in the world. They have the retail stores across 14 countries of three continents of the world and there is the facility of online store, through which they are able to serve the customers faster. Supermarkets in United Kingdom Tesco is one of the main supermarkets in the United Kingdom, as well as in the world. The major competitors of Tesco in the United Kingdom are Asda, which is the subsidiary of Wal-Mart, Sainsbury’s, Morrisons, Marks and Spencer etc. There are also some small supermarket chains like Waitrose, Londis and others. Asda stores limited are the second largest retailer in the United Kingdom after Tesco. It is the subsidiary of Wal-mart, which is the largest retail chain in Europe. The market share of the company is 15.2% (the data of 2008) in the United Kingdom in the retail sector. Asda accounts for the half of the international sales of Wal-Mart. The company does not have the format of convenience stores; instead, they have developed the hypermarkets in the United Kingdom. There are 343 stores of Asda in the country and the stores are of large formats (Li, 2008, p.4). The number three supermarket chain in the United Kingdom is Sainsbury. John Sainsbury founded the company in the year 1869, one of the oldest supermarket chains in the United Kingdom. The company has 14.3% market share in the United Kingdom retail business. The company was the pioneer of the self-service retailing in UK as well as they developed the private level goods in the country. The strategy of the company is to provide quality food at a cheaper price to the customers, provide the complementary services and channels to the customers, and extend their presence in the non-food market like clothing and general merchandise (Sainsbury-a, 2012). The objective of the company is to grow their stores not only in the United Kingdom, but also all over the world. The company has the convenience stores. They also offer property management services to the customers (Sainsbury-b, 2012). Morrisons is the other large supermarket chain in the United Kingdom. They had 10.4% market share based on the data of 2008. Based on the market share percentage Morrison is the fourth largest supermarket chain in the United Kingdom. William Morrison has founded the company in the year 1899. The strategy of the UK based company is to provide fresh food and quality service to the people. They have the strategy to make large the customer base. As per their strategy, they have opened 43 new stores in the United Kingdom in the year 2010. One of the main strong point of Morrisons is they deliver their product through their own network. Distributing of products through their own network improves the quality of service to the customers as well as they can provide the product faster (Morrisons, 2012). There are also some other supermarkets like Waitrose, Londis etc which mainly target the customers of lower end and middle end. The Business Environment of Tesco in United Kingdom In the United Kingdom, the business environment is very competitive for the supermarket chains. There are the big players like Asda, Sainsbury, Morrison as well as there are the small players like Waitrose, Londis. The small players generally target the customers of the middle and lower end. The big players have to target the customers of all types. As the lower end players are working in a niche market, so this is concluded that they have specialized in the products that the lower end or the higher end customers prefer. The players like Tesco, Sainsbury, Morrison and Asda have to target all type of customers so they have to offer the products, which is preferable for all type of customers. For achieving the economies of scale, the companies have to target the customer of overseas. In the era of globalization and in flexible economic policies the big companies have the opportunity to extend their business in overseas. However, in the case of Tesco it has seen that Tesco is mainly targeting the United Kingdom market. The main weakness of Tesco is that they have little cash in their hand, so their liquidity position is not so well. When a company wants to get success in a specific country then they have to understand the customer requirement well. As Tesco Plc is mainly targeting the domestic market so they have to meet the requirements of the customers. It has found by the researcher that the customers of the United Kingdom prefer the hypermarket structure where they can get the grocery items as well as the non-food items (Datamonitort, 2004, pp.17-19). Analyzing the structure of the supermarkets of Tesco, it can concluded that Tesco have to offer the non-food service more to the customers. The two main reasons behind becoming a dominating supermarket of Tesco in the United Kingdom are their technology orientation and their acquisitions. They have started to acquire different companies from the decade of 1950, which helped them to diversify their product range, which they offer to the customers. Their diversification also helped them to increase the customer base and broaden their presence in the United Kingdom. Tesco has also used the modern technology, which has been available to them. The online services of Tesco are the highest revenue-generating website in the retail website. They made broaden their customer base as well as they can offer their services faster than the manual services. This service is also preferable for the customers as they do not have to go to the stores, and they get the services faster. The customer attracting policies and retaining policies through various type of loyalty cards has helped the company broad their customer base and also make a loyal customer base. For dominating the market in a competitive environment like the United Kingdom, it is necessary for the companies like Tesco Plc, it is necessary to have a loyal customer base. For maintaining the loyal customer base, the companies have to provide innovative policies to the customers so that they can get attracted as well as bring new customers. In the country like the United Kingdom where the competitors are like Asda, Sainsbury and Morrison then the companies have to do their marketing well as well as they have to provide quality product and services to retaining the customers. Tesco has done that well historically, so they have been able to reach the position of dominating the United Kingdom supermarket. Tesco’s Potential in Meeting Business Challenges in United Kingdom The business potential for Tesco that helps the company in countering key challenges in the United Kingdom market can be outlined in the following discussion. Firstly the company works on a customer centric strategy in lowering down the price of its products and in opening up a large number of outlets in different regions. This helps the company in enhancing both the parameters of brand awareness and consumer loyalty in the United Kingdom market. Secondly the company endeavours to build up a strong relationship with the supplier bases by not only controlling their activities through spontaneous monitoring but also in providing the right training to the supplier groups. Training is provided to guide the supplier groups about the business objectives of ethical and fair trading and in delivering quality products to the consumers at cheap rates. Tesco conducts periodical audit on the supplier’s functions in order to monitor their activities and thus enhances the professional relationships (Tesco Plc, 2012). However the process of gaining control over the supplier base in the country by Tesco is often criticised by critics in that they state that the company by owing a larger part of the market tends to command the prices of the products and hence renders low advantages of any switch over. Thus supplier groups serving Tesco find them blocked from switching over in spite of receiving lower payments (Friends of Earth, 2005, p. 3-4). Another key potential of Tesco exercised in the region of United Kingdom along with the different markets spread along other global regions is enhancement of relationship with the larger society. The company not only works in the rendering of financial and infrastructural help along different quarters of the community but also works in sustaining the greener and healthy environment through controlling of carbon emissions and also in conserving energy of the different outlets. With these set of activities the company enables itself in creating a more faithful social and corporate image in the country (Tesco, 2011, p.22-29). Competitive Position of Tesco in United Kingdom Tesco in United Kingdom appears to be a growing and profitable retail concern in the opening up of large number of new retail outlets in different regions of the country. During the period ranging from 2003 to 2004 the company is found to have opened around 21 stores in different parts of United Kingdom thus reflecting spontaneous growth in its business expansion activities. To enhance its competitive position in United Kingdom the retail company in comparison to the other supermarkets and grocery stores endeavours to lower down the price of its products. This activity in turn helps in enhancing its brand awareness and brand loyalty among large groups of consumers in the region. Moreover, firms like Sainsbury which once stood at the top level in regards to rendering grocery products to consumers fell in the third position to Tesco owing to faltering business policies. Thus where Tesco proceeds in gaining market share, Sainsbury loses it. Another grocery retail company, Morrisons is also found to suffer from profitability losses helping Tesco to gain to new heights. However, the supermarket giant Tesco in operating in United Kingdom gains heavy competition from Asda, owned by the global retail giant Wal-Mart. This company is gradually gaining in the United Kingdom market for apparels. The company through the sale of private label brands like George and also aims to penetrate a larger market in the region through low price setting activities for its jeans. Tesco further competes with the emerging competitors in the retail market in United Kingdom through formidable acquisition of large number of stores thus gaining entry into newer markets and gaining on market shares. In terms of the best quality pertaining to both food and non-food products, Tesco also renders a tough challenge to companies like Marks and Spencer. Tesco through its strong supplier potential aims to reach new heights in the United Kingdom retail market by helping its consumers to gain the best quality of products than obtained from other firms. However, Tesco is accused by industry researchers that in the bid to gaining new markets the company works in lowering the cost of acquiring and sustaining suppliers thus also hampering the profitability of the farmers (Corporate Watch, 2004). Tesco in its bid to enhance its competitive position tends to expand to international areas to gain the advantage of foreign markets. Moreover, Tesco diversifies into other areas like Insurance in the general sector to compete against its regional competitors. The company also tends to conduct sales on an online basis gaining hold of around 96 percent of total retail market share in United Kingdom. During 2003 the sales value through online retail sales reached a figure of 577 million pounds. This feature reflects that Tesco still dominates as the largest retailer selling grocery products both online and physically in United Kingdom (Datamonitor, 2004, p.15). Conclusions Tesco operates as a large retail grocery store in United Kingdom. The company operates through the operation of large number of stores in several regions of the country aiming in delivering the best quality of food supplies and at reasonable rates to the consumer. Of recently the company has also started operating though an online framework where the company welcomes consumers to conduct sales and purchase through the online medium. This practices help the company in enhancing its relationship base with the consumers of both United Kingdom and as well as with the people of the other global areas where the company focuses to open its outlets. Further the company also tends to maintain a strong and formidable relationship with the supplier groups in United Kingdom. The company in that not only tends to monitor the functions of the supplier groups through auditing and other activities but also tends to train the people effectively to render the best products safely and effectively. Tesco in its operation in United Kingdom also tends to counter challenges from different competitors like Sainsbury, Asda, Marks and Spencer and others. However the company through its wide social networks and ethical set of business practices aims at penetrating the minds of the large consumer groups. The company also works to create a safer environment for the people to thrive in thus aiming to gain the advantage of a transparent and positive social image. Diversification and Internationalisation are also on the cards of Tesco through which the company tends to gain hold of uncharted business and geographical territories and thereby gain the advantage accruing from such. Tesco thus now operates in large number of countries round the globe and in different sectors like insurance and banking to enhance its business competence. Referencing Corporate Watch, 2004. Tesco. [Online]. Available At: http://www.corporatewatch.org/?lid=252#core. [Accessed 7 March, 2012]. Datamonitor, 2004. 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