StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Internal and External Analysis of Tesco Plc - Case Study Example

Cite this document
Summary
This case study "Internal and External Analysis of Tesco Plc" focuses on Tesco having an extremely high bargaining power with its suppliers allowing it to discriminate on which it will source its merchandise. Various groups have been advocating the right of small farmers and suppliers…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.6% of users find it useful
Internal and External Analysis of Tesco Plc
Read Text Preview

Extract of sample "Internal and External Analysis of Tesco Plc"

28 March 2007 Internal and External Analysis of Tesco Plc Microenvironment Core Competencies When John Cohen founded Tesco, he envisioned a retail outlet which will become a leader in the industry because of its low cost strategy. Thus, the retail giant based its operation on a "Pile it high, sell it cheap" approach (Tesco Plc 2006). Founded in this philosophy, the retailer has grown to be a global brand which still sticks to this strategy. In the core of the company's operation is its quest of providing customers with products at the least possible price. This has become the core competency of the business organization. However, as opposed to other retailers in the global market, Tesco couples its cost competency with excellent customer service. Recognizing that customer loyalty is not only cultivated through competitive pricing, Tesco also invests in training its employees and making them part of its success through the extension of high quality service together with their cheap products (Tesco-Counting on Customer Satisfaction n.d.). Value Chain and Value Web Looking at the value chain of Tesco, it can be seen that it is relatively more efficient in carrying out its outbound logistics, distribution, and customer service. Its efficiency in outbound logistics is justified by its mere scope and size. Tesco, as one of the world's largest retailer, is a very important customer to its supplier (Tesco Plc 2007). Thus, the company posses a high bargaining leverage, enabling it to get discounts which are not otherwise available to its smaller competitors. The company also enjoys economies of scale in distribution, advertising, administrative processes, and production. This enables Tesco to significantly reduce cost and generate high margins. As opposed to other players in the industry, Tesco's own brand is a source of large margins in its total revenue (Tesco Plc 2007). With this, it can be seen that the competitive advantage of Tesco is generated through its cost efficiency. The company uses its size and economies of scale throughout its value chain in order to significantly drive down its cost, allowing it to charge lower, if not the lowest price in the market (Tesco Plc 2007). However, the fact that the company does not just offer products at less than industry average prices but couples it with excellent service implies that it also takes effort in differentiating itself from its competitors. For Tesco, it is not just about the product but the shopping experience is also a key in cultivating customer patronage and loyalty. Through the value web analysis, it can be seen that the relationship of Tesco with its supplier and its customers are very much significant in the creation of a competitive advantage. Through the company's strategic alliance with its supplier, Tesco is able to bring down prices. On the other hand, the company's launching of the Loyalty Card allows it to know more about its customers for more specific target marketing. It becomes apparent that all these strategies are very much supportive of a cost advantage. Strategic advantage entails less procurement costs while target marketing becomes a key in cutting advertising costs (Tesco Plc 2007). 2. Macroenvironment PEST Analysis Political. In the political aspect, there has been a wide and rapid integration of economies into a global village through the creation of regional blocs and free trade zones like NAFTA and European Union. This change, which is largely brought about by the various policies put in place by the government authority facilitates the faster and easier influx of goods and services through the elimination of trade barriers and inflow of foreign direct investments through the increased capital mobility (Globalization: Threat or Opportunity 2007). Economic. The world has witnessed the rapid rise of traditionally developing economies like China, India, and Brazil. China, in particular has grown fastest among the different world economies in the last decade. This economic development becomes remarkable as it is even faster than what was experienced by Japan (Pingyao 2003). Economic development in various nations has positive implications. This signals the increase in disposable income and thus, higher purchasing power to be spent on consumer and durable goods. Social. One of the most important social trends is the wide acceptance and popularity of the internet as evidenced by the rise in the number of internet users and higher internet literacy on a global basis. Together with this development is the growing confidence and preference of customers to buy products online. The internet is now considered by the customers as a place to purchase various goods, exchange product reviews from other buyers, and a place to meet new friends (Internet World Statistics 2007). Another social issue affecting companies is the growing preference for business organizations who contribute to sustainable development. This pressures companies to embark on corporate social responsibility programs. Customers do not only focus on product or service quality but on the way the company conducts its operation and how it contributes in preserving and enhancing the community where it does business. Technological. Perhaps, the technology which brought the largest impact and had become the key driver in the global business arena is the internet technology. It is expected that this technology will further shape the way companies do business by integrating the sub-units of a business organization, connecting buyers with seller, and connecting sellers with their suppliers. Technological advancement has also made it possible to surf the internet at fast speeds through the use of third generation mobile phones. This will make internet more accessible to each customer thereby bringing them closer to online business organizations (Kotler and Armstrong 2001). 3. SWOT Analysis Strengths Size and Scope. Tesco capitalizes on its mere and size and scope. As the largest retailer in the UK, the company benefits from economies of scale in terms of administrative and advertising expenses. The large operation of the business organization allows it to distribute costs among its business units thereby allowing it to become more cost efficient. The company's large scope enables it to gain high brand equity and higher recall from customers. Excellent Customer Service. Tesco recognizes the fact that its tangible products have an intangible component. Thus, the company ensures that aside from offering best value products, it also offers excellent customer service. Loyalty Cards. Tesco is distinguished in the retailing industry because of the tools that it employ in order to improve its delivery of customer service as well as how it maximizes its potential. Its Loyalty Card is subscribed by more than 10 million customers which allows the retailer to identify customer profile, sales, and establish more targeted marketing. Weaknesses Reputation. As the largest player in UK, Tesco has an extremely high bargaining power with its suppliers allowing it to discriminate on which it will source its merchandise. Various groups have been advocating the right of the small farmers and suppliers who cannot price as competitively as the large suppliers of Tesco. With the widespread use of Loyalty cards, Tesco's customers are also wary of the privacy of their personal information. Opportunities Geographical Expansion. The increasing globalization and the economic development of various countries like China, India, and Brazil posts large opportunities for Tesco to focus on these regions. The company can capitalize on its size in order to build presence abroad in order to take advantage of the expected rise in disposable income and purchasing power. Capture Mobile Users. With the easy internet access in mobile phones, Tesco can also hope to take advantage of this sector by creating features in its website which will allow customers to be better viewed by mobile users. Threats Intense Rivalry. Tesco faces more intense competition from its rivals both in the United Kingdom and other countries. As J. Sainsbury and Asda aggressively depend and battle for market share, Tesco is pressured to find ways to compete more efficiently. Foreign Currency Fluctuation. As Tesco is an international player, it is exposed to the risk of incurring losses through foreign exchange fluctuations. References De Wit, B. and Meyer, R. 2004, Strategy: Process, Content and Context, 3rd edition, Thomson, chapter, 5. Globalization: Threat or Opportunity 2007, Retrieved 28 March 2007, from http://www.imf.org/external/np/exr/ib/2000/041200.htm Kotler, P & Armstrong, G 2001, Principles of Marketing, Prentice Hall International, Inc., New Jersey Pingyao, L. 2003, China's Economic Growth: New Trends and Implications, Retrieved 28 March 2007, from http://www.iwep.org.cn/pdf/2003/wec_2003_1-2_laipingyao.pdf Tesco-Counting on Customer Satisfaction n.d., Retrieved 28 March 2007, from http://www.conchango.com/Web/Shared/Documents/Tesco%20Food%20Counters.pdf Tesco Plc 2007, Retrieved 28 March 2007, from http://en.wikipedia.org/wiki/Tesco Tesco PLC Website 2007, Retrieved 28 March 2007, from http://www.tesco.com Thompson, A. Jr. & Strickland, A.J. 2002, Strategic Management. 3rd ed. New York Mc Graw-Hill. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“PEST and SWOT Analysis of Tesco Plc Case Study Example | Topics and Well Written Essays - 1500 words”, n.d.)
PEST and SWOT Analysis of Tesco Plc Case Study Example | Topics and Well Written Essays - 1500 words. Retrieved from https://studentshare.org/miscellaneous/1506878-pest-and-swot-analysis-of-tesco-plc
(PEST and SWOT Analysis of Tesco Plc Case Study Example | Topics and Well Written Essays - 1500 Words)
PEST and SWOT Analysis of Tesco Plc Case Study Example | Topics and Well Written Essays - 1500 Words. https://studentshare.org/miscellaneous/1506878-pest-and-swot-analysis-of-tesco-plc.
“PEST and SWOT Analysis of Tesco Plc Case Study Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.org/miscellaneous/1506878-pest-and-swot-analysis-of-tesco-plc.
  • Cited: 0 times

CHECK THESE SAMPLES OF Internal and External Analysis of Tesco Plc

External Environment Analysis of Tesco PLC

From the paper 'External Environment analysis of tesco plc" it is clear that the green field marketing strategy adopted by Tesco was a gamble that did not work.... First of all, analysts believed that tesco's entry to the U.... But still as the above SWOT and PEST analysis showed tesco has the opportunity to succeed.... In the early 90s, tesco was lagging behind Sainsbury's as the second-largest retailer in the country and the operations of the country was subjected to the U....
11 Pages (2750 words) Case Study

Tesco PLCs External and Internal Business Environment

The economic package helped to boost the performance of tesco plc and other retail sectors.... The paper "tesco plc's External and Internal Business Environment" identifies and discusses the effect of the external and internal business environment of Tesco.... tesco plc is one the leading brands in the grocery and supermarket sectors in the UK as well as in the world.... tesco plc is one of the largest UK supermarket retail chains....
6 Pages (1500 words) Coursework

Analysis of the Companys External Business Environment

The study shows the impact of the internal and external environment on the operations of the company.... The internal and external factors have both a favorable and an unfavorable effect on the performance of the company.... The aim of this study is to focus on the strategies and plans undertaken by a renowned retail brand tesco plc so as to operate in the industry.... Introduction (please shorten it – and provided me citation behind sentence) tesco plc is a multinational company founded in 1919 by Jack Cohen, carries its business in the form of grocery and general merchandise retailer....
7 Pages (1750 words) Coursework

Environmental audit Tesco Plc

Tesco Stores Ltd is a subsidiary of tesco plc in United Kingdom.... Tesco Stores Ltd is a subsidiary of tesco plc in United Kingdom.... The company chosen for study is tesco plc which is the biggest multinational general merchandise and grocery retailer in United Kingdom.... The company chosen for study is tesco plc which is the biggest multinational general merchandise and grocery retailer in United Kingdom.... tesco plc was founded by Jack Cohen in 1919 as a group of market stalls....
7 Pages (1750 words) Coursework

Internal Strategic Analysis of Tesco

This case study "Internal Strategic analysis of tesco" presents Tesco that has maintained its position as a market leader in the U.... From the analysis of the external environment, it can be seen that external factors have a strong influence on business development.... This is followed by an analysis of Porter's competitive forces to evaluate parameters that affect the competitiveness of the business.... he penultimate section of the report comprises ethical practices that have been adopted by tesco....
16 Pages (4000 words) Case Study

External and Internal Method of Recruitment at Tesco Plc

There are various types of decision which are taken by the managers of tesco plc before the process of recruitment, which includes initially thinking about candidates from inside the division.... The author of the present essay "External and Internal Method of Recruitment at tesco plc" points out that tesco plc is one of the British international general merchandise and grocery retailer having it's headquartered in the United Kingdom, England, Hertfordshire, and Chestnut....
7 Pages (1750 words) Essay

Market Analysis of The Tesco Brand

The Tesco brand can be traced back to 1929 when Jack Cohen started a modest sales brand in London (tesco plc, History, 2013).... Firstly, it undertakes an analysis of the external environment of tesco; secondly, it identifies the company's marketing mix to achieve its status as a market leader.... The report "Market analysis of The Tesco Brand" examines the Tesco brand by critiquing some important elements of the company.... The macro-environmental analysis of a company can be carried out if the researcher examines the external environment, and this can be done through the use of strategic management tools like PESTEL (Johnson, Scholes and Whittington, 2009), and Industry analysis models like Porters Five Forces....
12 Pages (3000 words) Report

Essential Analysis Frameworks in the External and Organizational Environment

Global political factors affect the business practices of tesco because it operates in the global market.... The paper "Essential Analysis Frameworks in the External and Organizational Environment" suggests that the essential analysis frameworks for tesco in the external and organizational environments are SWOT, Value Chain Analysis, Resource-Based View, PESTEL, and Five Porter's Forces Framework.... tesco is a food retailer headquartered in the United Kingdom and has branches in over 12 countries....
8 Pages (2000 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us