Tesco Expected to Look to Premium Positioning - Case Study Example

Analysis of an Organisation (Tesco Plc) Student’s Name: Instructor’s Name: Course Code: Date of Submission: Executive summary This study is about presenting Tesco Plc. business situation by taking a critical analysis of the various factors surrounding its strategy choice environment. Tesco Plc was established in 1919 by Jack Cohen who by then owned very small stall in London region of East End. The company organizational structure is developed in such away that power is derived down to junior staff in order to help it making informed decisions on daily situations on an independent basis. Despite the opportunities and the strengths the company experience in the market, competition is turning out to be a major threat for it to maintain its leadership in the industry. This analysis has further established that the company has strong brand and position in the market both locally and internationally. However, because the company is operating in the countries with most of which the industry is very competitive, penetrating into the new markets in the developed world would be very significant for the business and the recommended strategy to do so is through market development. This is because the strategy will help introduce new products that fit the markets even though this must be supported by extensive market research. Table of Contents Executive summary 2 1. Company overview 4 1.1 Organizational chart 4 1.2 Product portfolio 4 1.3 SWOT for the company 5 2. Market analysis  5 2.1 Tesco brand 6 2.2 Tesco positioning 6 2.3 Market segmentation 7 3. Strategic choices 7 3.1 Ansof Matrix analysis 7 3.1.1 Market penetration 8 3.1.2 Market development 9 3.1.3 Product development 9 3.1.4 Product diversification 9 3.2 PEST analysis 10 3.2.1 Political factors 10 3.2.2 Economic factors 10 3.2.3 Social factors 10 3.2.4 Technological factors 11 3.3 New product development 11 4. Conclusion and recommendation 11 References 12 Baker, R 2010, Tesco expected to look to premium positioning, BusinessWeek, viewed 12th Dec. 2012 from http://www.marketingweek.co.uk/tesco-expected-to-look-to-premium- positioning/3012471.article 12 Tesco Plc 2012, Our strategy, viewed 12th Dec. 2012 from http://www.tescoplc.com/index.asp?pageid=12 13 Appendix 1: Organizational chart 13 1. Company overview Tesco Plc was established in 1919 by Jack Cohen who by then owned very small stall in London region of East End. Since then, the company has grown to reach greater heights employing upto 500,000 workers who serve millions of customers across the globe each work (Finch 2010). 1.1 Organizational chart The company chart can be described in terms of decentralization whereby power has been devolved into various functions which include customer, community, operations, people and finances. This is to ensure that all functions have some independence even though attachment to top rank in the organization headed by the company CEO. As shown in appendix 1 below, power can be easily filtered down so that even the people working in the lower rank have the opportunity to some decisions while working in the company stores. 1.2 Product portfolio The company has a wide range of products and services. The company first of all deals in all food related products making it one of the largest food brands in the UK and the rest of the world. The company also engages in some banking services for its customers. 1.3 SWOT for the company Brand is the key strength for the company with large capital and infrastructure base. The company weakness is based on the fact that the company is more engaged in food retailing. Company strength can be talked of one stop shopping. Finally, the company threat emerges from competition and change of climate that affect food production. 2. Market analysis  The competitor analysis is an instrument that can be used by the strategist to tell how the market looks like and the position of each in the industry. Tesco being a retail company is facing competition with other companies for the market leadership and position. Among the competitors are Asda Group Ltd, BP PlC, Carrefour S.A, ExxonMobil Corporation, The Big Food Group Plc and Royal Dutch/Shell Group. Others include Safeway Inc., Safeway Plc, Aldi Group and John Lewis Partnership Plc. The competitive position in the industry is determined by the position of other rival companies in the industry and what they are able to offer (Tesco 2012). The retail industry in the United Kingdom is among the largest in the world employing more than 3 million people. Each company in the industry has got its own significant share. The industry is expected to grow by about 5% for the next five years thus making its prospects positive despite the hard economic times. The retail industry has continued to play a very significant role in the UK’s economy with the country’s 8% of GDP coming from the retail industry. Despite the fact that there are numerous retail companies operating in the united kingdom, Tesco’s main challenger is Asda which has excelled and also trading in similar product base as Tesco. The competition in the market for most of the companies operating in the industry is more witnessed in the markets which the companies have chosen to concentrate in. For instance, the rival companies are spending much more in concentrating their efforts in major cities like London, Paris and New York. Since the competition is expected to turn sour when the market growth rate declines, then it’s expected that for Tesco to survive, penetration into small towns and other rural areas may be considered appropriate (Tesco 2012). 2.1 Tesco brand Tesco in the market has managed to establish a very strong brand and this can greatly be attributed to its values which identify the need to sit at the heart of the business to help the organization deliver on its core purpose which is to create value for the customers as away of earning their lifetime brand loyalty. In other words, what is important here is that striving to be excellent by delivering quality to the customers. For instance, the desire to work hard for the customers more any other company can do, has helped the company to understand its customers in terms of their desires, what they want to meet their needs and way of acting responsibly in the community in which they are operating in (Baker 2010). 2.2 Tesco positioning In order to ensure that the company has captured and attracted the attention of many potential consumers in the market, the company is engaged in a very ambitious effort of ensuring that it has established UK market as its core market, lead in online businesses, remain strong in whatever the company does and also to be a creator of those brands that are highly valued (Desjardins 2005). To grow the UK market for instance, the company is committing £1 billion to improve on the shopping experience and other things matter to the customers. International business in 1997 generated about 1.8% of the company revenue, but now the company being a leader in the industry is leading in the online business something that is attracting over 30% of the company revenues. Finally, the company is leading food diversity and acting responsibly to the environment through its responsibility programs (Baker 2010). 2.3 Market segmentation The company market segmentation is done in many different ways. The market is segmented into regional markets and product. For instance, the company has segmented its market into the local markets and international market. To illustrate, the company is currently generating over 60% of its revenues from the local markets. Finally, the company is segmenting in terms of household use. This is the major market segment for the company. This is because much of the company revenue is generated from sale of food and other related products to the market. This is an important segment since it provides almost certain market (Baker 2010). 3. Strategic choices 3.1 Ansof Matrix analysis The Ansoff Matrix is an important marketing planning instrument that could be used to determine both the product and market growth strategy. The matrix provides for main strategic choices to growth the product and the market for any given company and the strategies include market penetration, market development, product development and diversification as shown in the model below. Diagram 1: Ansoff Growth Matrix 3.1.1 Market penetration This strategic choice entail trying to sell already existing products and services to already existing markets and the objective being to increase the market share, securing dominance, restructuring the nature of the market and also increase the usage (Finch 2010). This strategy may be considered as business as usual but what Tesco will be expected to do, is to collect as much information as possible about the customers and the competitors so as to establish what can be done to serve the customers better and also competitively suit in the business environment. 3.1.2 Market development Market development is one strategic option that Tesco should consider. This is because it will help the company create more market for its already existing products. Despite the company showing positive returns in the United Kingdom, the market is so concentrated with many other retail companies. On the same line, the company is operating in other 13 countries from Europe, America and Asia-Pacific. This analysis therefore show that the company market penetration would greatly help the company grow its revenues by invading markets from other parts of the world like the Middle East and Africa where the competition still may be low. 3.1.3 Product development Product development as a strategy for the business will entail developing new products to the market that the company has already established. However, this strategy brings a challenge to the business as it calls for the need to have some competencies especially technology so as to help develop highly modified products. In the case of Tesco Plc, the strategy may follow the differentiation route so as to ensure competitive advantage in the industry and this can be achieved by offering best quality and affordable prices for the company products and services. 3.1.4 Product diversification Tesco Plc if chooses to employ the product diversification strategy to grow its business and market, then it must make sure that it has the capacity to develop new products for new markets. However, this approach may turn out to bear a very big risk if the company does not have substantial information about the new markets. This therefore calls for the need by the company to undertake an honest risk analysis and relate to the benefits that are likely to be accrued if the strategy is to be used (Salaman 2001). 3.2 PEST analysis 3.2.1 Political factors Tesco Company is currently operating in over 14 countries world over. This kind of business which is global has exposed the business into different political and legal frameworks and policies which either directly or indirectly will influence the strategy choice of the business. Giving majority of employment opportunities to the locals, being responsible citizen and ensuring diversity in workforce are some of the requirements that the company must satisfy (Salaman 2001). 3.2.2 Economic factors The economic factors are of great significance to Tesco Plc which in particular operates in very diverse background. Economic factors are very important as they influence the performance of the company, consumer buying behaviours, demand, revenues and cost as a production factor. The high rate of unemployment for instance that has been contributed to by the global economic down is one factor that could easily affect the company strategic choice. The company has grown in different markets including the UK. What this means therefore is that if the economy of these markets fluctuates, then the business is also likely to suffer in equal measures (Salaman 2001). 3.2.3 Social factors According to the Data Monitor Report of 2003, it was established that buying patterns among the Britons was changing. This is because people were seen to prefer using buying bulky goods from just one shop rather than moving around shops to fill their shopping baskets. The working demographics are also changing accordingly as more women are now in the working class and people are preferring outside cooked food than the one prepared at home. This scenario is reflected in many other markets (Finch 2010). This calls for the company to be conscious of what it offers for the market. 3.2.4 Technological factors Use of internet to do online business transaction is now embraced in many different markets as it is improving convenience and customer satisfaction and also enhancing efficiency for the side of the company. With this regard, the company will be expected put more emphasis on use of most appropriate technology to meet customer changing demands (Daloitte 2010). 3.3 New product development New Product Development by Tesco will only be appropriate if the company chooses to operate in a totally different market environment otherwise considering modifying the available products for the market to differentiate from the rest is what the company may consider now (Finch 2010). 4. Conclusion and recommendation The analysis of Tesco Plc has established that there are various marketing and strategic frameworks that could be used by the company to ensure that it’s successful in the market in terms of product and service delivery. The analysis has also established that the company has a very strong position in the market and this is because of the product base it has. Further, the company is yet to work on improving on technology and development strategies to help enhance its performance both at local and international markets. However, with the emerging competition in majority of the markets in which the company is operating currently, it is has become very necessary to come up with the most suitable strategy will help the business sustain its growth and the market. The recommended strategy in this case therefore is the use of market development. this is because the company will stand a chance to develop new products for the potential markets like from the Middle East and parts of Africa and this must be supported with conclusive data on what the market expects. References Baker, R 2010, Tesco expected to look to premium positioning, BusinessWeek, viewed 12th Dec. 2012 from http://www.marketingweek.co.uk/tesco-expected-to-look-to-premium- positioning/3012471.article Daloitte 2010, Emerging from the downturn: Global Powers of Retailing, Daloitte.com, viewed 12th Dec. 2012 from http://www.deloitte.com/assets/Dcom- Australia/Local%20Assets/Documents/news- research/Press%20releases/Global%20Powers%20of%20Retailing/Global_Powers_of_R etailing _2010_report.pdf  Desjardins, D 2005, Tesco strategies turn up competitive heat in U.K , bnet news, viewed 12th Dec. 2012 from http://findarticles.com/p/articles/mi_m0FNP/is_4_44/ai_n13248624/ Finch, J 2010, Tesco opens its first zero carbon store, The Guardian (UK), viewed 12th Dec. 2012 from http://www.guardian.co.uk/business/2010/feb/02/tesco-carbon-neutral-green- building Fortune 2010, Tesco PLC, Global 500 Companies, viewed 12th Dec. 2012 from http://money.cnn.com/magazines/fortune/global500/2010/snapshots/7930.html Salaman, G 2001, Understanding business organizations, London, Routledge. Tesco Plc 2012, Our strategy, viewed 12th Dec. 2012 from http://www.tescoplc.com/index.asp?pageid=12 Appendix 1: Organizational chart Read More