TESCO Business Strategy Essay
TESCO Business Strategy
Tesco was chosen as a company which would be used in our analysis covering evaluation of different factors. Tesco is the one of the largest retail chain in the world. Their profit surpasses 3 billion euro each year. In the first phase, Tesco’s mission, vision, objectives and goals were discussed. Due to recent profit slump they were trying to implement new possible strategies to gain the profitable condition back. Different strategic planning were also talked over. Organizations have to operate their business being in the environmental factors. Tesco also operates in both macro and micro environmental factors. These factors were well discussed. And after evaluating the environmental factors, SWOT analysis was done. Stakeholders are a very important part of organization.
They help the organization to build up their own brand value and goodwill. And many other parties are also related to business as stakeholders. The expectations and influences of the stakeholders were also described. They have both positive and negative impact on the organization. And to improve their condition from current loss, they have to formulate new strategies. Different appropriate strategies were suggested too for both present and future use. To successfully implement those strategies, good leadership is needed. Different Roles and responsibilities for also talked over for leading Tesco to their desired goals. Different resources that are needed for implementing strategies, are given also. If they are followed in a regular basis, Tesco will surely reach its goal.
In retail business more and more companies are coming ahead. It is creating more completion. So, managers are very aware of it. They are already facing many threats from this newcomers in business. Old and existing business are warned with decline in sales and market share. It is quite an alarming situation. In this context, an organization is needed to be chosen, Tesco would be the desired company. We will take the information of Tesco and analyze the current situation, strategies and position of Tesco. This essay will evaluate the resource capability and strategic analysis of TESCO.
PART – A
TESCO – Company Profile
Jack Cohen founded Tesco in 1919. It is a British food and grocery retail chain operating its business internationally in 12 countries. This is one of the largest Company in UK currently operating in market. They have around 30% market share in UK market. In profit making, they are the third largest retail chain in the world. Their head office is situated in Hertfordshire in UK. At present, Dave Lewis is acting as CEO of Tesco. Though Tesco is a profitable company, they recorded their worst performance in 2014. In the month of June 2014, Tesco confirmed their worst performance. They had 3.7% decrease in sales. Till November, they completed £70.9 billion group sale. They also earned £2.3 billion profit before tax. At this moment they have almost 7,599 stores comprising franchises. Over 500,000+ staffs are employed in Tesco all over the world. In UK, they got 3,461 shops comprising franchises and around 310,000+ staffs are working currently.
Vision and Mission
A vision is called an ambition of a business where they want to see themselves in an ideal position. It is the benchmark of achieving business goals. The vision of Tesco drives the entire organization towards the strategic decision is taken. Tesco’s vision has five features. They are given here –
•wanted and needed around the world
•A growing business, full of opportunities
•Modern, innovative and full of ideas
•Winners locally whilst applying our skills globally
•Inspiring, earning trust and loyalty from customers, our colleagues and communities. The vision and mission of Tesco are interconnected with each other. Tesco’s’ mission is simple. ‘We make what matters better, together.’ This exhibits the changed perceived value of people about the disbelief towards the system of corporation and motive of profitmaking instead of providing service to the society.
Tesco follows some corporate objectives. These are –
1. Their objective is to offer the clients products with suitable and competitive prices. 2. To meet the requirements of clients by constantly reacting on their views about products. 3. To provide the shareholders more revenues for their investments. 4. To develop long-term relations with suppliers. 5. To help implementing national food industry policies. 6. To support the welfare of business community and to protect the environment.
Core competence can be understood by discussing the strength and weaknesses of Tesco.
Tesco has some strengths in their side. They are the third largest retail chain in business market. They have great influence on UK market, as they hold nearly 30% of market share. So, different economic adversities can make less impact on Tesco than other competitors business. Tesco has got a huge number of loyal customer. To sustain these loyal clients, Tesco provides them with various facilities. Tesco has improved their online shopping which already doubled their online sales. Tesco have some weaknesses too. For some periods, they provided their products at a cheap price which made a negative impact over the customers about products quality.
Many more competitors are in business right now. Tesco competes with ASDA, Morrison’s, Sainsbury’s, Waitrose and Somerfield for market share in UK. Ongoing recession had serious impact on profitability of Tesco. They experienced negative impact on sales and downfall of market share. Tesco achieved greater brand value than other business competitors. If it is utilized well, they can obtain their objectives with efficiency. They should offer consumers with access to varied ranged products in markets.
Current strategic issues that are being used by Tesco have great impact on economy and society. Strategies followed by Tesco are – 1. To grow the UK core – they want to develop the UK economy. So, their business is related with UK business market. 2. To be a creator of highly valued brands – to make their brand well-known in every corners of world. 3. To be an outstanding international retailer in stores and online – to achieve the leading position in both retail chain and online shopping. 4. To grow retail services in all our markets – Tesco Bank plays a crucial part in the growth of retail services. 5. To put our responsibilities to the communities we serve at the heart of what we do – to utilize full effort to give better services. 6. To build our team so that we create more value – to create more effective and efficient leader 7. To be as strong in everything we sell as we are in food – food is heritage of Tesco. But they want to increase business sector in other products too.
There are different planning techniques that can be followed. There are many approaches to strategic planning. These are – 1. Vision-Based Planning – when the planning process is done by following the visions and missions of an organization it is called vision based planning. 2. Issues-Based Planning – when to solve different issue or to achieve different targets, issues-based planning is taken. 3. Alignment Model – alignment model is lining up the priorities in business to solve problems and move forward for more. 4. Scenario Planning – when planning is based on imaginary situation. 5. Real-Time Planning – in this process, business planning is occupied depending on the current situation reacting instantly.
Part – B
To check the organizational and environmental factors of UK, there are different analysis such as PEST analysis, SWOT analysis, Porters five forces. These are given here – PEST analysis (Macro environment)
This company is operating their industry in 12 nations. So, political influence are greatly related with Tesco. Taxation rates have effect on business economy. Tesco has to abide by the laws and regulations imposed by other countries when business is operated in their govt. ruling. Economic factors:
Economic factors is comprised with product demand, labor cost, market supply, products’ price and net profit. Tesco is mostly reliant on UK market. They have around 30% share in UK market. So, any change in UK economy will affect the economy of Tesco.
Changes in society are obvious. Choices and perceived value of customers are constantly changing. Customers are more dependent on one-stop shopping. They are more aware of health related issues about any products.
Introduction of new technologies have brought changes on operations of Tesco also. They have started more authentic online shopping strategy. They improved their systems with technology. They also started self-service system helping them to decrease labor costs.
Porter’s Five Forces Analysis (Micro Environment)
To inspect micro environment factors of Tesco, Porter’s five forces theory is analyzed here. Potential threat of new substitute goods and services:
Introduction of substitute goods are less than other types of products. Tesco already purchased many rival stores in UK region, which lowered the competition.
Threat of more competitors
Threat from new competitors are always present. They are already facing extreme competition from ASDA, Sainsbury’s, and Morrison’s.
Intensity of rivalry
All the food retail chain are competing among themselves for promotion, brand value, quality products. So, competitive rivalry is pretty intense here. Buyers’ bargaining power
Many more brands are available for consumers. So, giving different facilities can bring a loyal group of consumers at once.
Suppliers’ bargaining power
Competition is intense among the retailers. They want to provide quality products and it needs supplier to provide quality materials.
Suppliers also have impact on these companies.
SWOT Analysis for Tesco
This analysis comprises of strengths, weaknesses, opportunities & threats evaluated from a company. After analyzing micro environment and macro environment factors, we detected following strengths, weaknesses, opportunities & threats of our desired company.
1 Tesco has strong brand value among the customers which helped them to extend their business. 2 Tesco is operating their business from a long ago. In this period they created a loyal customer group with their services. These customers are their strength. 3 They asked for suitable price considering the quality of the products.
1 Due to current economic recession they lost their market shares in UK and faced decline sales. 2 Tesco have bad debts, credit card arrears and facilities of insurance which falls on Tesco as negative impact. 3 They already saw 3.7% drop in UK market share. To improve this situation they must introduce new strategies which will further reduce their profit scope.
1 Tesco has to cooperate with the constantly changing consumer behavior by using newest technology introduced in business market. 2 Increasing inflation on prices and costs can lower the profit level. 3 Wal-Mart currently involved in joint venture with ASDA. It is a threat for Tesco the present leader in market share.
1 Tesco is the third largest retail chain in the world. This is a great opportunity for them. 2 They began their business in India and China too. This expansion is also a great opportunity for profitmaking. 3 Enhanced online shopping system is also a profitmaking opportunity for Tesco.
As a retail chain, Tesco has these stakeholders, such as suppliers, customers, government, employees, creditors, shareholders. These stakeholders have expectations from the business. Suppliers want to make good profit from them keeping good relations. Customers expect to get excellent quality products in suitable prices. Government expects that business will bear social responsibility for the community. Employees expect that the organization will give them job security and other facilities when needed. Shareholders expectation is limited with extra profit and company’s business expansion. So, it is clear that their expectation is related with self-interest.
Their influence in the organization is given below: Suppliers
Suppliers’ duty is to supply quality material to the organization. If they supply low quality material company’s reputation can be in danger. Customers
Customers are also stakeholders of Tesco. Their purchases are running as cash flow in the organization.
In different situations, government can impose many directions, rules and regulations through which Tesco has to perform their activities. Employees
Employees are a part of the stakeholders. Because their efforts can bring changes to this organization.
Shareholders provide capital in exchange of net profits and other services to enjoy from Tesco.
PART – C
To improve the current situation Tesco can follow different strategies like pricing, advertising, Customer relationship management, segmenting/targeting/positioning strategy (STP) etc.
Pricing strategy is aimed at setting the best price for the products to defend new competitors or to capture the consumer market for more profitability. Tesco can follow this strategy. This strategy will influence customers to switch to Tesco.
Advertising strategy is to influence a customer to buy specific product through advertising the qualities and advantages of a product. Tesco can advertise their products and encourage a buyer to buy them.
It stands for customer relationship management strategy. It is a system of managing relations between company and customers of both present and future. Tesco offers various facilities with ClubCard to sustain their loyal customers and attract more.
STP is segmenting, targeting or positioning strategy. This marketing strategy is used to divide the market according to customer behavior or characteristics and produce product to meet their needs.
We have discussed some of the basic strategies that Tesco can follow. But to improve the situation for future, Tesco can follow two more strategies – internationalization and product diversification.
Tesco has experienced profit slump in UK. So, they should expand their business in biggest consumer markets to gain an advantage over the competitors. They already started their business in India and China. They should expand business in more countries.
Tesco can produce many quality products so that the customer can be convinced to buy everything they need every day from their products only. Expansion of business in other areas of products can create product diversification of Tesco.
PART – D
Comparing the roles % responsibilities for strategy implementation To achieve success in strategy implementation, strong leadership in important. CEO needs to bring all the positive ideas and changes. Strategic intension is the goal to be achieved in near future. In many organizations, employees are given responsibility chart so that they are alerted about their roles & responsibilities. The chart will help to reduce confusions. It will indicate other issues such as gaps in sections, other employee’s responsibilities etc.
To make a successful implementation of strategy is to communicate with the whole section of organization. When both roles & responsibilities are present for employees, the business inside the origination stays moral confirming strong communication. Possessing particular roles helps employees to uphold individual records. Roles & responsibilities helps to maintain moral standards in the business. It is managers’ responsibility to realize the establishment’s values, ways and prospects.
Evaluation of resource requirements to implement a new strategy Maintaining Tesco’s competitive advantages mainly depends on the resources which are substituted or limited. When all resources are shared, they can form new competences and abilities. A strategy will be used when it has possibility to obtain the expected results. Resource is used to implement the tactics successfully. To implement a new strategy, Tesco needs these resources – human, financial, physical and information resources.
Human resources are the main asset of Tesco. This resource will apply the new strategy in business. Physical resources is also an important matter in strategy implementation. Tesco have many super shops throughout the UK region. Financial resources concerns Tesco about how to implement a strategy with precise financial operations. And information resource discuss where to save the information of customer, what facts must be kept in mind to give better services and etc.
Targets and timescales for achievement in Tesco in given strategy Tesco is among the largest retail chain. Internationalization is a great strategy for Tesco to take their business in overseas. If Tesco desires to open a new store in Bangladesh they have to follow six principles – customers, shareholders, neighborhood, partners, network quality, and stores. When targets and timescale is considered, long term purposes will affect the short term objectives. One way to achieve success is expanding market share and increasing consumer loyalty.
Tesco will offer their best products to the available consumers. It will increase more loyal consumers. Though, the segmentation of strategy into little targets and timescales helps them to find out the best method to be implemented. Tesco can adopt various marketing strategies to improve growth and sales, interest new buyers, increase their brand value and raise products’ health consciousness. By following these, Tesco can achievement success in given strategy.
In business world, retail chain business is facing competition, which is the main concern of the managers of other companies. Tesco is one of the largest retail chain companies in the world. Due to recent recession they had profit slump and decline in slaes. This is quite an alarming sitatuation for this company. So, a report is made evaluating all the ennvironemntal factors infleuncing the business of Tesco and their current strategies and market postions. Their SWOT analysis is also done. To improve their condition, a new strategy is also introduced. And different ways and means are discussed to implement a strategy successfully so that Tesco can reclaim their top position in market.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 22 September 2016
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