BUSINESS EVALUATION OF
TESCO              
 
 
 
                        STUDENT
NAME:                LIPIN VARGHESE
                        STUDENT
NUMBER:          10351728
                        COURSE
TITLE:                   BUSINESS
STRATEGY
                         MODULE CODE:                 B9MG100
                        LECTURE
NAME:                CLAIRE DEVLIN                

 

Contents
Answer to Question 1. 2
Answer to Question 2. 7
Answer to Question 3. 9
Answer to Question 4. 11
References. 13
 

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            The food
and drink retail sector of UK is one of the leading industry. This sector
generates employment to a large mass of the population of UK. This paper will analyze
Tesco’s capabilities and how it relates to the key success factors in UK. It
will also highlight the major stakeholder in the business operation using the
stakeholder’s theory.  Moreover, a
suitable theoretical framework will also discussed to highlight the culture of
the organization. On the basis of the analysis, recommendations will also be
provided for the development of the company.

Answer to Question 1

            It is
important for the successful management of the organization to monitor the
changing environment in which Tesco operates and thereby adjust its strategy.
There are several multiple factors which affects the external environment and
thus have a remarkable effect on the company strategy. The macro environmental
analysis of Tesco can be carried out using PESTLE.

Political factors

Tesco operates in globalized environment and it has stores
in different locations of UK. Tesco operates in more than six other than UK.
The performance of the company is influenced by the legislative as well as
political conditions in the economy. The government of UK encourages the
retailers to provide job opportunities for the local people who have skills and
are willing to work in companies. Tesco provides employment opportunities to
large number of students, elderly and disabled people who are willing to work
in the organization at lower rate. These workers offer loyalty and thus they
carry out their responsibilities in a better way(Tesco.com
2017).

Economic factors

            The economy
of UK is assumed to grow at 2.7%. The unemployment level in UK has lowered by
1.4% in 2015. There is decrease in the household consumption and the debt level
is said to be increasing at a relatively higher rate. The economic factors
control the operation of Tesco. It can be said that the growing international
profit will contribute to larger profitability rate and thus this will help in
the improvement of the company (Tesco 2014).

Social/Cultural
Factors

            The
customers in UK are influenced by the price and the convenience offered by
Tesco. It has been found that the customers in UK prefer to try new retailers.
They also prefer those stores where they get their desired necessities at a
single place. The demographic change such as aging of population and decline in
the meal preparation at home by the people of UK has increased the
profitability of the company. Tesco concentrates on their own label of share in
the retail business of UK and they are also trying to improve their operational
efficiency (Tesco.com 2017).

Technological Factors

            Technology
plays an important role in the development of Tesco. The new technologies which
are launched by the company has benefitted the customers as well as the
company. The customers were also satisfied because they received better
products in cheaper price. Tesco has also launched the Efficient Consumer
Response initiative which helps in the management of food supplies of the
company.

Environmental factors

            There has
been rising pressure on the managers and the company because they need to admit
their responsibility for the betterment and development of the society. The
most important issue which is threatening the company is the environment issues
and problems faced by the Tesco in its operation. The corporate social
responsibility of the company is farmed in such a way so that the obligations
of the stakeholders must be clearly specified through corporate governance and
regulation.

Legislative factors

            The policies and government
legislation have direct impact on the performance of Tesco. The Food Retailing
Commission has highlighted an enforceable code of practice that is set in the
country for imposing ban on the current practices adopted by Tesco. These
includes changing the agreed price without any prior notice and demanding
payments from the suppliers. On the other hand, the powerful competitors of
Tesco also possess threat to Tesco because of intense price war and due to
product differentiation. Tesco must also offer the consumers reduction on the
fuel purchases on the basis of the commodities purchased by them from the
stores and thus implement a proper pricing policy. Moreover, Tesco also reduces
the price of the product on the basis of promotion and they also provide
compensation for the consumers (Peppard and Ward
2016).

It is also important to conduct an analysis of Porter’s Five
Forces to know the competitiveness of Tesco. These is analyzed briefly below:

Threat of New
entrants

            The grocery
market in UK consists of different competitors such as Sainsbury, Asda, Safeway
and Tesco and they constitute more than 70% of the market share. These
supermarkets have established their power in the market on the basis of supply
chain  and their operational efficiency
in the market. However, due to steep competition among these supermarkets, the
barriers to entry has increased and it has become difficult for a new company
to enter the UK market. Thus, it can be said that the threat of new entrants is
low in this industry.

Bargaining Power of
the Suppliers

            Tesco can
negotiate with their suppliers for better promotional prices. As there are a
large number of suppliers who are ready to supply the same quantity of goods at
a cheaper price, it becomes difficult for the suppliers to do monopoly and
charge higher prices. The bargaining power of the suppliers is relatively low
in this industry.

Bargaining power of
the buyers

            Tesco’s club card and loyalty
card membership helps in retaining its customer and therefore increase the
profitability of the company. Moreover, customer’s preference of better quality
products at lower price will help Tesco to retain its customers and therefore
conduct the business operation smoothly.

Threat of Substitutes

            There are different substitutes
of grocery products in the market. Customers easily switch to different product
and they also prefer to choose different supermarkets if one company
excessively charges high price on the customers. It has been found that the
supermarkets are also opening their outlets in small towns and thus are trying
to gain competitive advantage over other firms in the market. It can be said
that the threat of substitutes is high in these industry (Tesco.com 2017).

Intensity of
competitive rivalry

            It has been found that the
grocery market has increased in size and is trying to gain market dominance
over its competitors. Tesco is trying to acquire customer information so that
it can use them to communicate with the customers. The highly competitive
retail grocery market in UK had to build and maintain its market share. It has
also been found that there are innovations and expansion in the trading format
which has helped in changing the consumer behavior.

            After close
evaluation of the external factors, it can be said that Tesco will be
successful in the retail grocery market if it considers the above mentioned
factors and thus improve its area of operation. There are certain critical factors
which need to be identified for the successful operation of Tesco (Tesco.com 2017). These are mentioned below:

Branding and
Reputation

            Tesco is
one of the leading brand and it possess certain strategic advantages. The
company supplies high quality product to its customers and has a strong brand
image. Moreover, the company has also focused on enhancing a wide range of
quality products to facilitate better management and lifestyle of their
customers. Tesco is also successful in introducing its customer loyalty card
and thus satisfying the needs of the customers.

Integration of IT

            The
operation of Tesco can be considered as a necessity rather than luxury. Various
integrated systems are used to keep a track of the stock control and the
different records and analysis which are held during the transaction process.
One of the most successful contribution of IT in the operation of Tesco’s
business is the intelligent scale, wireless devices, check-out machines and
electronic shelf labeling (Ramírez &,
Selsky  2016).

Management of the
Suppliers

            Tesco is providing support to British
expertise and jobs by encouraging the suppliers for delivering exclusive
products. The food products that were sold by Tesco were mostly based on UK and
thus were preferred by the customers. The suppliers of Tesco have also laid
certain terms of contracts with the sub-suppliers to supply the best quality
product to Tesco. The company has also developed supplier management programme
to conduct survey of the franchisee and the suppliers. Moreover, the company
has also established close relationships with the contractors who are playing a
vital role in delivering the product. Therefore, it can be said that the
comapny6 must improve its supply chain to compete with the other leading
supermarkets.

Answer to Question 2

            The
stakeholder theory helps in finding out relationships between the organization
and the external and internal environment. It is important to find out how
these stakeholders plays a major role in the business operation of Tesco. The
stakeholder view helps in the integration of market based view and resource
based view of the company. The internal shareholders of Tesco are the employees
and the managers of Tesco. On the other hand, the external shareholders of
Tesco are the suppliers, shareholders, customers, local community  and the Government of UK.

            The
shareholders of Tesco are considered to be the important stakeholders as they
have invested a huge sum of money for the development of the company. The main
motive of the shareholders is to check the rising share of profit which will
help them to earn more dividend (Vu  2016).

            On the
other hand, the customers of Tesco also prefer to purchase high quality
products which will yield value for their money. The customers prefer to get
better quality food products and improved service and facilities with the
passage of time (Schlegelmilch, 2016).

            The
suppliers or the contractors who supply the raw materials or the finished
products plays a critical role in the development of business. The suppliers
prefers to get stable order and receive quick payments. It has also been found
that the suppliers paid greater interest to Tesco because of quick credibility
in business.

            Tesco is
also trying to improve the environmental conditions by using eco-friendly
processes in its processing or supply of products to the customers. The
supermarket is also trying to help the local community by developing new
infrastructure for educating the people or providing them more opportunity to
get employed with them (Brannen et al, 2013).

            The
Government of UK prefers to get the taxes paid on time and also create more
jobs which will help the local community. The main responsibility of the
government is to check whether Tesco is taking acre for the welfare needs of
the people. The trade unions along with the government are also keeping an eye
to check that the employees are paid higher wages and there exists healthy
working conditions in the organization.

            The employee
also wants the company to succeed its operational process. They also prefer to
get higher wages, a better promotion facilities and a greater chance to secure
their jobs. 

            Tesco is
concentrating on the right stakeholders. The company is trying to satisfy the
concerned stakeholders who are working with the organization through proper
engagement and thus this can help them to balance the demands. Tesco is trying
to create better and easier life for the customers who wants to live a healthy
life, tackle food poverty as well as reduce food wastage. The company is also
trying to work with the suppliers for the development of sustainable supply
chain. Moreover, Tesco is also trying hard to focus on the feedback of the
customers directly through meetings with the local communities, suppliers and
stakeholders to improve the quality of products and the services. According to
the annual report of the company, it was clearly mentioned that the company is
trying to improve its listening skills to interact and communicate with the
stakeholders and thus improve their business. Moreover, the feedback received
from the customers has helped them in improving the business plan. It will also
help the company to adopt a particular approach to undertake the issues and
challenges which will help in the successful operation of the business.
Therefore, it can be said that the company is focusing on the correct
stakeholders and thus making a positive change in their business operation (Müller, 2015).

Answer to Question 3

            Tesco
follows hierarchal organizational culture and the authority has clear lines of
decision making, standardized rules and norms, accountability and control
mechanisms. These factors are regarded as the key essential factors for the
success of the organization. The organizational culture in Tesco is compatible
with this form and it is characterized by structured and formalized place where
people can work. There are certain procedures in the organization which govern
the people. The managers and the leaders look after the entire functioning of
the organization. The managers also try to maintain smooth and proper relationship
with the employees and thus work for the development of the organization. The
long term effects and concerns of Tesco are related to predictability,
stability and efficiency of the organization. The managers also set certain rules
which hold the organization and thus help in its proper operation (Bai and Yafeng, 2016).

Tesco also helps its new employees
in the organization to carry out and maintain a fast, reliable and smooth
flowing production process which will help in the development of the organization.
There are certain important features of Tesco such as the decentralized
structure of the organization, flexible working environment, high employee
empowerment power, shared values and beliefs of the people. The decision making
structure of the organization is also decentralized. It can be said that
flexible environment helps in increasing the adaptability to change in the
organization. The shared beliefs and culture in the organization, employee
performance and loyalty of the organization will lay impact on the
organization. Moreover, bureaucratic culture and structure are replaced in the
organization with decentralized structure and the participation of the
employees and flexibility is increased. It can be said that inflexible and
rigid culture hinders growth in the organization and the resistance of the
employees towards their work. The employees can understand the customers
because of shared culture in the organization. There is wider span of control
and it improves the relation between the employer and the employees and reduces
the chain of commands.

The inter-departmental
co-ordination improves the decentralized structure. The management authority of
Tesco emphasizes on the development of the organization. As there are many
competitors of Tesco, the managers and the leaders had to face tough time in
keeping the organization at the highest position in the retail sector. It can
be said that success and reputation are the most important factors for the
success of the organization. Tesco must focus on the rival activities and the
reaching goals in the organization. Tesco has also set competitive prices in
the market. Moreover, market leadership is one of the most important
characteristics of Tesco. It can be said that the organizational style of Tesco
is based on competition. Thus, it can be said that communication at each stage
of hierarchy in the organization symbolizes a good internal atmosphere so that
the company can fulfill its target and streamline its activities (Ismai ,2017).

Answer to Question 4

            As Tesco is
one of the leading retail brand in the supermarket industry, the company has to
follow certain sets of rules and procedures which will help the company in its
smooth operation. As the company has strong and huge customer base, it is an
important duty of the mangers and the leaders to retain these customers and
keep a check on the profitability of the organization. Tesco must be able to
manage its operation process and must be flexible in its production. This will
help to enhance the net value of the company. It must be checked that that the
company is taking care of the environment during its production process. The
company must try to increase its market share by opening more stores and
setting better technology and methods for the production process.

            Tesco must
use strategic alliance and joint development for the benefit and development of
the organization in the long run. It must tie its alliance with the
international businesses in different countries of Asia. This will help in
enhancing the business and profitability share of the company. Moreover,
product development is another important strategy of the company. The company
must opt diversification strategy and this will help to improve the sales of
the company. On the other hand, the employees must also find out better
innovation strategies and try to improve the product stock of the company.
Tesco can also offer nationwide collection points for grocery products. It can
also provide home delivery service to the customers within a  short span of time. The customers will be
willing to purchase the food products from Tesco and they will not rely on
other supermarkets.

            Tesco must
also try to improve the merchandising position in the UK market. It must try to
simplify its payment system and strengthen the relationship with the suppliers
for the further development of the company. Tesco must also improve its
advertising campaign and the company must try to improve its mobile
advertisement campaign. The company is trying to serve its customers in a much
better way. Tesco must ensure that it can tackle the social and environmental challenges
which affects the community in which it operates. The company must provide
enhanced training facilities to the staffs and develop a more transparent way
of working. It is also the duty of the company to protect the human rights and
confidence of the customers by providing great products to the customers. The
company must also create partnership with the health companies and also try to
set up prevention camps for supporting the employees and the local people in
times of disaster and challenges. Thus, it can be said that the company must
try to develop certain strategic plans so that it becomes easier to tackle the
food wastes within their area of operation. 
Therefore, the company try to donate the surplus food to the food banks
and this will help in the smooth functioning of Tesco.

 

References

Bai, F. and Yafeng, Q., 2016.
The Implementation of Relationship Marketing and CRM: How to Become a
Customer-Focused Organization. Journal of Business & Economic
Policy, 3(2).

Brannen, M.Y., Moore, F. and
Mughan, T., 2013, September. Strategic ethnography and reinvigorating Tesco
Plc: Leveraging inside/out bicultural bridging in multicultural teams. In Ethnographic
Praxis in Industry Conference Proceedings(Vol. 2013, No. 1, pp. 282-299).

Ismail, I.N., 2017. The Roles
of Corporate Governance and its Influances on Risk and Performance: Tesco Plc.

Müller, M., 2015. Critical
Analysis Of The Financing Policies of Tesco plc.

Peppard, J. and Ward, J.,
2016. The strategic management of information systems: Building a
digital strategy. John Wiley & Sons.

Ramírez, R. and Selsky, J.W.,
2016. Strategic planning in turbulent environments: A social ecology approach
to scenarios. Long Range Planning, 49(1), pp.90-102.

Schlegelmilch, B.B., 2016.
Global Branding and Communication. In Global Marketing Strategy (pp.
153-176). Springer International Publishing.

Tesco, P.L.C., 2014. Annual
report and financial statements 2014. TESCO http://www. tescoplc.
com/media/417/tesco_annual_report_2011. pdf.

Tesco.com. (2017). Tesco.
online Available at:
https://www.tescoplc.com/media/264195/strategic-report-2016.pdf Accessed 12
Dec. 2017.

Vu, M., 2016. IS THE BALANCED
SCORECARD USEFUL IN A COMPETITIVE INDUSTRY?: Using Tesco PLC as a case study in
the UK grocery retail industry.

 

            

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