Development Strategy Tesco - Essay Example

1. TESCO SUCCESS Everybody knows that retail is one of the most competitive economics sector. Shops, marketplaces, boutiques, super- and hypermarketsoffer us great choice of different goods. That's why if any company has been taking the top positions for almost 10 years, - it is considered as a great success. Britain hypermarket net Tesco is one of such leaders. This company sails one third of all foodstuffs in the country. Tesco can firmly be named as a "national shop". Rich, average and poor customers can find the goods according their wishes and financial abilities. In the beginning of 1990th Tesco took up the small category of retail market for lower-income customers. More expensive line for well-off customers was concerned with J. Sainsbury and Waitrose. Comfortable location, competitive prices, polite staff, great variety of goods and products, mainly, circumspect development strategy helped Tesco to become a really national shop. It has happened neither due to only British goods are sold nor due to the state authorities discrimination of American "Wal Mart" or French "Carrefour. National brand buildup took place thanks to Tesco owners and managers, who understood British customers wishes, whims and the mechanism of decision making. It became possible after using Management Information System (MIS). In fact company's managers pay much attention to analyzing the customers behavior: what, when and why do they buy and in what way is it possible to lead them to buy more. Tesco set close cooperation with University College London. The scientists offered new methods of gathering, checking, collating, review, storage, access, retrieval and update of statistics information of retail sells. Fed every second by Tesco's 12 million Clubcard holders, the Crucible database could in theory generate about 12 billion pieces of data a year if each cardholder bought just 20 items a week. This information is analyzed very attentively. MIS helps managers to understand what goods are sold better together, to place them accordingly on the counters in supermarkets. Experts, who carry out such analysis for Tesco, insist that the company has one of the biggest customer databases in the world. At first, hypermarket provides constant (season, holiday, single) discounts for that goods and stuffs, which customer buys oftener then others. At the end of a quarter each Clubcard holder gets voucher, equivalent to sum total, he spent in Tesco hypermarkets. Additionally they are rewarded with coupons, which allow discounts to that goods, the customers can enjoy (according to MIS results). Surely, this generated information is based on purchase data analysis. 2. MARKETING CONCEPTS ROLE Management Information System (relevant module) defines the consumer goods basket, which can be potentially interested to a customer. During the quarter Tesco sells about 6 million letters with propositions of different discounts to loyal clients. Also Tesco MIS provides detailed sells information, which allows placing the goods on the counters according to consumers' tastes in each particular region or even in dependence of daytime. In the morning customers buy one stuffs, in the evening - another. Tesco shops in the center of London differ greatly from the little out-of-the-way ones. Other MIS module takes into account ethnic and demographic factors, fashion and even the contents of TV programs. Can you imagine customer joy and pleasure, who feels such a great attention and care from a huge hypermarket This feeling is likely to that when your relative, living far from you, one day brings you wonderful gifts, which you wished for but tell nobody about. Sir Terry Leahy, Tesco manager confirms that Tesco is a mirror, which reflects customers' tastes and wishes. Actually, hypermarket role is not so passive exactly thanks to multifunction MIS. Experts firmly consider that Tesco influence not only the manufacturing but also the "consumer-manufacturer" relationships. Retail cards system presents a unique information gathering methodology. This is an important feed-back for manufacturer. Having paid some money they can gain an access to Tesco database and undertake necessary corrections to their productive and investment programs. As Tesco sells not only foodstuffs, but also much more else (from clothes to financial services), it becomes more essential part in life of tens million of the British. Hypermarket transforms to powerful supplier of great service amount. It changes people's tastes and habits. Officers of different firms enjoy the system, when after some purchase size they can get free launch. Retail and food net combination is one more successful idea. Tesco claims (in its 2005 annual report) to be able to serve 98% of the UK population from its 300 participating stores. Tesco delivers to over 1 million households, with more than 120,000 orders per week, by 1,000 local delivery vans. In the financial year ending 26 febyuary 2005 it recorded online sales up 24.1% to 719 million and profit up 51.8% to 36 million. Gifts are the main, not the discounts! Tesco gives Clubcards, which formally are discount - it is written "1% discount" on them. More than 2 million of families signed up on such a miserable discount. Why Because according to the loyalty program, Tesco offered a great amount of other parameters and profits. Presents are also important, not only the discounts. Hypermarket can thank its customers for their loyalty with different small courtesies. It'll be even better not to emphasize the word "discounts". According to mass surveys, not more than 25% customers visit thanks to discount. The majority of consumers, especially those, who make big purchases, needn't such miserable discounts - they will not notice them at all. Presents are more interesting. What is also important, this presents can be not only from a supermarket, but also from its partners in common marketing programs. 3. ABROAD TESCO STORES Sales in Tesco foreign stores fared even better than in the UK, up 16.1 per cent on the same period last year. In announcing these impressive international figures, Tesco is securing itself a position in the top echelon of an elite group of international retail organizations identified by Professor Neil Wrigley of the University of Southampton in his research into the global sing nature of the retail industry.Wal-Mart is the pre-eminent leader of these global retail giants with 3,600 stores worldwide, employing 1.5 million staff with revenue in excess of $250 billion. French company Carr four is the second biggest with a presence in 32 countries while German Metro has stores in 27 countries. Tosco opened its first overseas store in Eastern Europe in 1995; three years later, it opened a store in Asia and now operates 440 stores in 12 countries, including a joint venture with hypermarket chain in China and is now the 5th or 6th largest retailer in the world (depending on how it's measured). It is now looking toward opening stores in India a country with over one billion people including a middle class of over 300 million people. Its international operations account for 41 per cent of its operating space and nearly 20 per cent of its revenue. Eleven per cent comes from mainland Europe and eight per cent from Asia. Let's include statistics for different states, where Tesco opened its own stores: Country Entered Stores Area (ft) Turnover ( million) France 1992 1 16 - Hungary 1994 69 3,515,000 933 Poland 1995 78 4,212,000 691 Czech Republic 1996 25 2,145,000 386 Slovakia 1996 30 2,053,000 326 Republic of Ireland 1997 87 2,046,000 1,336 Thailand 1998 107 5,920,000 969 South Korea 1999 38 3,211,000 1,585 Taiwan 2000 4 452 108 Malaysia 2002 6 584 83 Japan 2003 104 385 266 Turkey 2003 5 406 146 China 2004 31 2,637,000 - Speaking about an expansion of operations we must understand that, for instance, emerging markets of East and Central Europe countries give real opportunities to earn money for such established retailer as Tesco. Surely, it'll take a good deal of efforts and nerve to overcome difficulties with mentality, legislation (like in Belarus) etc., but the profits can be significant enough. 4. MARKET ENVIRONMENT DAMAGE As a rule the main obstacles are generated and can be explained with the increasing number of competitors. Each great city in modern world is full of huge supermarkets. That's not an extraordinary phenomenon as retail sphere is profitable. This is the main threat for Tesco as well. Not only to enlarge but also even to keep the scale of its business, Tesco should fight against great amount of competitors. Some of them are strong and huge (such as J. Sainsbury), another are small, but very ambitious. Exactly this second group can be rather dangerous sometimes because they are ready for any unexpected steps to attract new customers. Not only competitors but also some commentators are not happy with the success of the large supermarkets The UK Office of Fair Trading has been ordered to launch a fresh probe into whether they are overly dominant in the UK grocery market. Ironically Asda's US parent company Wal-Mart called for the government to launch an investigation into Tesco's domination of the UK supermarket sector arguing that their rising market share was ant-competitive. The variety of market methods, which help to reach some desired level of profits, is wide enough to describe all of them. Speaking about small retail competitors they can do a lot of things to widen the amount of new customers. For example, set the goods prices much lower than another huge retailers. Of course, they will not be able to get necessary profits moreover they can even work with some losses first time. But in such a way they try to insinuate themselves into customers confidence. Another kind of strategic steps is to perform advertising actions according to which customers have unique opportunity of getting cheap air tickets or good car insurance. But the main threat from Tesco's competitors is the next. Likely in other countries, the small shops and traditional marketplaces owners are against great supermarkets. Tesco keeps in deep secret the conditions of delivering goods into retail net. Active opponents created "Tescopoly" union. Their main goal is to destroy Tesco, which, they considered, became a monopoly and threatens the British wealth. These are 'Friends of the Earth; the 'Small and Family Farms Alliance'; the 'New Economics Foundation (NEF); Women Working Worldwide; the GMB union; the National Group on Homeworking; War on Want; and Banana Link. They argue that Tesco's strength is harming many others in the community including farmers, others in the supply chain and local communities as well as the local and global environment. They go on to state that last year 2,000 small food retailers in the UK closed down and many more will follow. They feel that Tesco's can manipulate local planning regulations, at the expense of local communities, to benefit their own growth. Tesco deny this saying that they must be offering customers choice and value otherwise growth would not be so phenomenal. In its largest stores shoppers can now choose from 40,000 product lines - anything from baked beans to bikinis. State fair trade rules agency analyzed the Tesco business but has not found out any monopoly features. Indeed it is absurd to speak about monopoly each time when somebody has a successful business without any state authorities participation and the market blocking for other retail companies. Nevertheless Tesco started opening small shops to low down the negative boom. Today it is one of the most dynamic segments of retail foodstuff market. As the further development of hypermarket net depends on local authorities, the company invests money into public housing building, education development and something else. Conducting such a kind of business policy, Tesco can avoid a good deal of threats. They all can be overcome and shouldn't prevent Tesco's retail business. BIBLIOGRAPHY 1. Nelson, E. & Ramstad, E. 1999, Hershey's Biggest Dud Has Turned Out to Be New Computer System, Wall Street Journal 2. Laudon, K. & Laudon, J. 1998 Management Information Systems, 5th Edition , Upper Saddle River, NJ: Prentice Hall 3. Shah, SK. 2001. Improving Information System Performance through Client Value Assessment: A Case Study. Review of Business 4. Back, WE & Moreau, 2001 Information Management Strategies For Project Management Project Management Journal, 5. www.tesco.com 6. http://news.bbc.co.uk/1/hi/uk/4020023.stm 7. http://www.nocards.org/ 8. http://www.reppel.co.uk/loyalty-cards.html 9. www.tescopoly.com Read More