Industry Analysis: Evaluating a Major Company in a Chosen Sector

In this report we have been asked to choose a major organisation/company of our choice within a chosen industry sector. We then will be applying an analytical tool which we feel will be most relevant, and carry out a strategic analysis, and a detailed evaluation of the company in question. We have chosen to conduct our report on the fast-growing market leader Tesco's and we have decided to look at their competitors in a competitive analysis. In this we will use models such as Porters' Five forces, and we will also conduct a SWOT and a PEST analysis.

These tools will assist us in understanding Tesco's and the industry it works within. 2. Tesco's History Tesco's is a public limited company, which was founded in 1919 by Jack Cohen, with Terry Leahy acting as the CEO. The industry that they work within is retail, specialising in grocery. They have also expanded their product portfolio into general merchandise, financial services and telecoms. In the UK alone they have 1,800 stores employing over 260,000 staff.

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They have set up their own website at www. tesco. com. The first store to be opened was in North London, and this is when it became a private limited company.

Tesco's grew rapidly and took over 212 stores in the North of England. As the years went by their sales reached i?? 1billion. In the 1980's, Tesco's sales figure reached i?? 2billion and Tesco's Stores Ltd became Tesco PLC, making it public. Tesco's became huge in the 1990's; this is when they began expanding into other countries.

Tesco's also became a 24 hour store so this was a substantial boost for them. They opened other stores such as Tesco's Express, Metro, Extra and Superstores (see appendix 4). Tesco's provide their own brands as well as other known popular brands.

They have recently announced that they plan to enter the US market also. Tesco is operating in the UK grocery market, which in early 2007 was estimated at i?? 33. 5billion. Food sales are the core business of the chain and UK expense on food has been growing year-on-year since 1990. The market has proved to be very recession proof. However non-food articles also account for a growing share. The market is led by the 'big four' - Tesco's, Sainsbury's, ASDA, and Morrison's. 3. Strategic Management Strategic management is, as quoted by Lamb in 1984;

"An ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i. e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment. , or a new social, financial, or political environment1. " Organisations these days will have created strategic plans, and some will have tried to implement them.

However some businesses find that their intended strategies have not been implemented due to un-foreseen events, such as new technology, changes in competitors or the environment that they are working within. Sometimes simply time constraints will be the issue. A strategy is a change process and to ensure that the strategy is implemented, management need to become adaptive and responsive to issues that may arise. 4. Understanding Porters framework Porters' five forces help businesses or industries to understand their competitive forces, which should be the underlying principle of every industry (see appendix 1).

They allow a company to assess its success in terms of market dominance and potential profits, along with how they should overcome their threats and meet their opportunities within the external environment. Although there are five separate forces they should not be seen as independent forces. One area may all influence other areas, therefore changing patterns of competition, and businesses should understand the significance of this. 4. 1. Industry competitors and extent of rivalry Tesco have many competitors, these vary from the UK to overseas.

The UK competitors include the likes of "Asda, Sainsbury's and Morrison's" and in the US competitors such as Wal-Mart. Tesco's dominate the retail market by focusing on the consumer's wants and needs. Tesco understands the value of the consumers and launched a Club card in 1995. This is a loyalty scheme to encourage customers by recognising buyer's behaviour patterns, for which they will be rewarded. In 1995 Tesco's took over Sainsbury's as the UK's largest supermarket. In 2001, Tesco's occupied 15. 6% of the UK grocery retail market. In 2007, they currently hold a 31.

2% share of the UK grocery market, which is more than the combined share of its closest rivals Asda and Sainsbury. After Morrison's merged with Safeway, Tesco had permission to buy 10 of the 52 Safeway stores that Morrison's were obliged to sell, by the competition authorities for their achievement. Tesco's profits are also increasing year by year. They reached a profit of i?? 1. 6billion in 2004, which is approximately 17% higher than the previous year. However in 2007, the rate of Tesco's growth seems to be slowing down, allowing their closest competitor Sainsbury's to close in.

The growth rate of Tesco's has slowed down by 7. 2% in 2006. Tesco's have been capped off by the authorities to allow only a 31. 2% of the retail market share. This is a result of the Tesco's dominating too much of the retail share and not allowing there competitors survive. As a result of Tesco's being capped off, Sainsbury's will be back in contention challenging for the market share. Sainsbury's market share is now 16%, just behind Asda's 16. 3%. If Sainsbury's is growing in stature of 4. 2%, compared with Asda's growth rate of 1. 9% it'll be behind Tesco's in a matter of months.

Threat of new entrants Tesco is the most successful UK supermarket, and due to there only being 4-5 main competitors in this industry the threat from potential new entrants is relatively low, as it is extremely difficult to enter the market and compete with these hugely successful companies. The only real competition is now coming from Sainsbury's who are closing in on them, however Sainsbury's is an already well-established company and so has the power to do this. Porter considers this factor and has identified seven major barriers to entry, that should be given careful consideration.