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PEST and SWOT Analysis of Tesco Plc - Case Study Example

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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…
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PEST and SWOT Analysis of Tesco Plc
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Download file to see previous pages 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.).
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 ...Download file to see next pagesRead More
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