Introducing Sale of New Cars by Tesco - Case Study Example

Marketing Author’s Name Grade course Institution Tutor Date Executive Summary Tesco PLC is a multinational company which offers groceries as well as other non food goods and services. The Company has been operational for close to a century. The company has a huge customer base with people spread across three continents. Tesco is the largest supermarket chain in the United Kingdom with a presence in almost every British town. Among the products offered by Tesco include banking as well as music in addition to groceries. Tesco PLC operates in a hierarchical manner with a number of departments which work in harmony to ensure that the company achieves its objectives (Tesco PLC 2013). The company has much strength and numerous opportunities which if properly utilized would lead to good, better, and best business as the business tagline goes. On the flipside, there are weaknesses with Tesco such as hardship in taking foothold in the United States. There are also numerous threats facing Tesco which come mostly in form of competitors that have curved a niche especially in the British market (Tesco PLC 2013). Introducing a new product in form of sale of cars and auto parts would be a breath of fresh air to the fortunes of Tesco. 1.0 Introduction Introducing Sale of New Cars by Tesco Tesco PLC is a multinational retailer which deals with grocery and general merchandise. Tesco headquarters are in Cheshunt, Herfordshire, England. In terms of profits Tesco ranks second globally. Tesco has stores in more than ten countries which are spread across Europe, Asia and North America. The founder of Tesco was Jack Cohen who founded the company in 1919. The business rapidly expanded in terms of the number of stores as well as the types of products that were being sold. Tesco offers a wide range of products such as electronics, books, clothing, furniture, software, internet services, among others (Humby 2003, et. al, 45). Tesco repositioned itself from a retailer that targeted those with low levels of income to one which is acceptable across the whole social spectrum. Tesco has grown by leaps and bounds and currently the retail giant has more than 6,300 stores. Tesco had introduced an online business selling second-hand car which was unfortunately closed down. However, with the retail giant daring to venture into new areas by diversifying its product range, it seeks to sell new vehicles and vehicle parts. The retailer seeks to introduce an online business selling new cars as well as introducing car dealerships. 2.0 Main Findings 2.1 Rationale for Introducing Car Sale Business 2.1.1 Customer Base Tesco has a huge presence in countries located in Asia, Europe and North America. These countries include United States, The United Kingdom, China, Czech Republic, Japan, Malaysia, and Thailand. Tesco serves very many customers in the countries where it has a presence. Being a household brand in the United Kingdom and other populous countries, it is evident that Tesco is able to reach hundreds of millions of people who purchase its products. These millions of people would be very easy to reach with introduction of a new product by the company. As a result of its operations over the years, Tesco has built a huge and loyal group of customers who value its brand. Tesco also continues its plans of expanding into new markets and gaining a bigger foothold in the markets where it has a presence (Jordan 2002, 87). This means that the retail giant is well known and able to reach very many people who are willing and have the capacity to purchase new motor vehicles as well as auto spares. 2.1.2 Position in the Market in relation to competitors Tesco ranks as the largest supermarket in the United Kingdom. Almost every town in Britain has a Tesco store. Despite this the figures posted by Tesco have not been very impressive in recent days. In 2006, Tesco ranked fourth worldwide. Tesco was behind Wal-Mart, Carrefour, and Home Depot. In the year 2007, Tesco surpassed Home Depot which faltered the supply division of Home Depot was sold. The United States dollar's decline against the British pound also led to the apparent improved performance by Tesco. Metro Group, a German retail group is also a great competitor for the top position. Metro commands the largest market share in Germany. Strengthening of the euro would see Metro's position improving further. Figures suggest that Tesco share of the United Kingdom market is 30.2%. Currently, out of the total amount of money spent in British shops, ten percent is spent in Tesco store (Rusell 2008, 45). Table 1: Tesco market share in Britain relative to other competitors Supermarket Market Share Tesco 30.2% Asda 17.9% Sainsbury's 16.6% Morrisons 12.3% The Co-operative Food 6.9% 2.1.3 Current Product/service Range Tesco retail stores stock various groceries which are found in ordinary supermarkets. However, Tesco has diversified and offers other products and services which are generally not offered by ordinary supermarkets. Tesco's stores are named according to their sizes as well as the range of products and services offered. These include Tesco Homeplus which offered only non-food items. One Stop stores usually located in less well off areas. Tesco also conducts internet retailing and shoppers have been able to purchase groceries from Tesco stores since 1994. Internet retailing was a first for any retail store and Tesco has expanded to offering music and online movie streaming. Tesco also offers financial services. This is conducted through Tesco Bank as a joint venture with the Royal Bank of Scotland (Bosijevac & Burrow 2009, 52). Through Tesco Bank, the company offers many products ranging from loans, mortgages, credit cards, saving accounts as well as a number of insurance policies. Tesco runs petrol stations selling fuel developed by Greenergy where Tesco is a shareholder. Tesco also operates a business offering broadband, mobile phone as well as home phone services (Hiam 2009, 42). The Telecoms business by Tesco is done through collaboration with businesses already running such businesses. Tesco does offer photo processing as well as Information Technology services. 2.3 How Tesco PLC Operates. Tesco's management is divided into a number of departments. The company employs in excess of 360,000 people. The departments include Business Development, Corporate Affairs, Corporate Purchasing, Financing, Commercial-Clothing, Commercial-Food, and Commercial-General Merchandise. However, the organization structure for Tesco is quite complex and there are many and different levels of people involved in management right from the managing director at the top to the store attendant at the bottom of the ladder (Kotler 2009, 22). Being a multinational company, Tesco roles are spread across different countries. It would be difficult to come up with a flat organization structure for a huge company. It is becomes necessary that there are different people performing administrative, financial as well as other roles to keep the large corporation running. Tesco runs a lot of businesses and there are numerous departments. The organization structure is such that the departments and teams are left and given a great autonomy in dealing with their problem and coming up with the necessary solution. The assumption made is that the organization structure is hierarchical. 2.4 SWOT Analysis 2.4.1 Strengths Tesco is a leader in the market not only in the United Kingdom but also at the world stage. In the United Kingdom, Tesco ranks first among the retailers. Tesco is dominant no only in the food market but also in non food market as well. Estimates indicate that over 10% of all retail purchases are conducted in outlets owned and run by Tesco. Tesco therefore controls about 30% of all foods sales retailed in the United Kingdom. This gives the company an advantage in reaching many customers and it is able to access the right talent to run its affairs. Tesco has been transformed into a big empire abroad and which is very profitable (Silk 2006, 71). Tesco's overseas empire covers three continents and about 14 countries. There are Tesco store in North America specifically in the United States, there are Tesco stores in Asian countries such as Malaysia and South Korea and in Europe, Tesco stores are found in, among other countries, Poland and Hungary. Tesco got into customer loyalty card market very about two decades ago. The company offers the Tesco Clubcard as a way of marketing and promotion. This is made possible due to the huge database it possesses for customer and a lot of research it conducts on its customers' preferences. In terms of property, Tesco possesses a lot of freehold property which is very valuable not just in the United Kingdom but in overseas as well. The property possessed by Tesco rakes in a lot of profits from leases as well as sale. Tesco has successfully ventured into provision of financial as well as other services (Bohm 2009, 12). These services have been run at a profit. In terms of online business, Tesco was among the first retail stores to have customers purchase goods online through tesco.com. Tesco provides home delivery services and the many years in business have given Tesco invaluable experience in online sales. 2.4.2 Weaknesses The business in the United Kingdom has been neglected for long. Profits earned in the United Kingdom were used to support Tesco's expansion overseas. This affected the quality of shops and service offered and this negatively affected competition. Tesco's business in the United States has continued to post losses. This is despite the fact that Tesco took over successful local chains in the west coast (Fine 2009, 43). There are issues of uncertainty in Tesco's management. Top managers have left the retail giant within a very short period of time. Evidence available points to the fact that consumers are less likely now to shop in big hypermarkets. Tesco has many hypermarkets which makes its position very vulnerable. 2.4.3 Opportunities Tesco has set aside at least one billion pounds to revamp its stores in the United Kingdom. The company seeks to have a better image in the United Kingdom. The company plans to effectively the stores that are already available instead of adding new ones. Tesco is also increasing staffing levels as well as making its stores more attractive. The company is seeking to maximize on advertising opportunities (Dealtry 1992, 87). The company is seeking to take advantage of the fact that many member of public in the United Kingdom have lost confidence in the big banks. Tesco sees this as an opportunity to market its financial services division. 2.4.4 Threats Tesco faces stiff competition in the United Kingdom. The retail sector is very competitive in the United Kingdom. Tesco is trying to rebrand and reposition itself after neglecting the United Kingdom market. Other stores have already overtaken Tesco in terms of products offered as well as quality. Retailers such as Asda, Morrisons and Sainsbury's are experiencing growth and putting more investments in their businesses. Among the high end and low end markets, Tesco faces other giant such as Waitrose for the high end market and Aldi which is a favourite for those shoppers who do not have too much to spend. There are also threats facing Tesco's business abroad (Surhon 2010, et. al, 51). The Eurozone crisis has negatively affected business operations of the retail giant in central Europe. In South Korea, the government has been issuing restrictions on hours for shops opening which has affected its operations in the Asian country. Tesco's operations in China are faced by serious challenges. There are serious problems for Tesco due to the stiff competition. It is not yet clear that the huge investments being made in the United Kingdom are going to bear fruit. Faced by difficulties in the United States, the company might pull out its operations from that country (Berliner 2000, 67). The tough economic times in Asia and Europe are a cause for alarm for Tesco as it seeks to stabilize its operations. 3.0 External and Internal Environment Analysis 3.1 External Environment Analysis The 3 C’s Model The Model that best suits Tesco is the 3C's Model. This is a business model that offers a look at factors which are required for success. According to the model, Tesco should focus on three key players. These are the customer, the competitors and the Corporation (Steel 2008, 28). Tesco require concentrating on the three factors so as to turn around its fortunes (Pride, 41). Tesco require meeting the needs of the customers. The company should place importance on what the customers requires. The company needs to differentiate itself from its competitors. Finally, the company needs to tap into the potential products that it can offer. In this case Tesco has chosen to start selling cars and auto spares online. 3.1 Internal Environment Analysis McKinsey 7S Framework For internal environment analysis, the model that best suits Tesco is McKinsey’s 7S Framework. This model includes 7S which stand for structure, systems, staff, style, skills, strategy and finally the shared values. For Tesco to attain its objectives, McKinseys 7S Framework appears to be the best since by looking at all the elements brought in the framework, Tesco would ensure that it offers the best products and services courtesy of good organization and structure. By using this model, Tesco would be in a position to improve on its performance and also come up with ways of implementing the strategy to retake its good performance. Appendix 2: McKinsey 7S Framework. Conclusions Tesco is one of the largest retail chains in the world. The company has operations which span across three continents. Tesco has a large number of stores across the world and offers a wide range of services. Initially, Tesco was formed to sell groceries but lately diversified into products and services which are not in line with the traditional supermarkets. Tesco has endeavoured to satisfy all the needs of its huge clientele. Despite the seemingly great successes by Tesco, there are challenges facing the company. There is there need for revitalizing of the business in the face of growing competition. However, it is not all doom and gloom for the company as it has a lot of experience and it is well grounded which gives it an added advantage over many competitors. Recommendations Tesco should introduce new products which are sale of new cars and sale of auto spares. Introducing these new products shall ensure that the company is able to take advantage of its huge customer base and it is able to meet their needs. Through its experience with online marketing, Tesco is strategically positioned to understand the intricacies of doing business online. Tesco should think of offering better and more efficient customer service to its customers. This could include offering after sale service as well as terms of payment which suits certain categories of people especially where the goods purchased are of high value. Tesco should make use of advertisement to promote and position its brand. Being an old brand, it is easier for members of the public to identify with Tesco which has been around for a long time. Consumers like to be reminded each and every time. References Baker, MJ, & Hart, SJ, 2008, The Marketing Book, Boston: Butterworth-Heinemann. Berliner,2000, Major problems in introducing new products, Connecticut: Berliner Research Center. Bohm, A., 2009, The SWOT Analysis, Munich: Verlag. Bosijevac, J., & Burrow, J, 2009, Marketing, Ohio: South-Western. 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Tesco PLC 2013, accessed 26 November 2013, Asda Stores Ltd.2013, accessed 26 November 2013, J Sainsbury plc 2013, accessed 26 November 2013, Wm Morrison Supermarkets plc 2013, accessed 26 November 2013, The Co-operative Food 2013, accessed 26 November 2013, Appendix 1: Organization Structure of Tesco Appendix 2: McKinsey 7S Framework Read More