The operations and competitive advantage of Tesco
Nowadays, companies are most likely selling their brands before their product. Tesco which has a strong brand image with good quality, faith worthy goods that represent excellent value, the product and service development have also been significantly rebuild and providing better management of product lifecycles and more efficient delivery of wide ranges of products to customers. Tesco continuous innovation, efficient operations and strategic expansion has effectively become the largest and most successful retailers. In order to continue increase customer's shopping experience, Tesco further improve their operational efficiency through adding new products, new services and other capabilities. As Tesco is working on expanding to new areas, and store format, product mix and service characteristics and other factors will begin on the IT system architecture, legacy systems and business partners to assess the implementation of these plans in order to determine what the core and which meet all the requirements of the system most.
Therefore, Tesco distinctly gained the core strategic advantage.
Tesco is also very successful according to customer loyalty due to its loyalty cards system and its general approach to customizing services to the needs of every customer. Customer loyalty is the commitment to customers loyal to brands, stores, manufacturers, suppliers, retailers and consumers. One of the key factors that Tesco is so favored by the market which the service in its series of loyal customers and to consolidate as the full implementation of consumer-oriented, comprehensive care services to a single point of access mechanisms.This is truly evident in terms of incredible growth of on-line sales where the company has a strong platform to further develop this revenue stream. After considering the fact nowadays majority of people have less time for shopping, Tesco employed this on-line systems and now became the biggest online supermarket.
Price and promotions
The key to Tesco's achieved competitive advantage is the development of retail low prices, high quality and experienced customer service has led to profit growth. With their years of experience and dominance in the market in providing retail products and service, this promotes the corporate image of Tesco to potential customers as one of trustworthiness and quality. They also gained competitive advantage of the organization is their ability to maintain market leadership in the UK even after the entrance of multinational companies in the same line of business with better technologies and more market scope.
Value Chain Analysis
The value chain approach introduced by Porter (1985) is for managers thinking about resources and systems which identify the key activities to provide competitive advantage for a company to maximize the value while minimizing costs. It is the contribution of each part in the overall added value of the business is made (Lynch, 2003). In order to conduct the value chain analysis, it includes primary activities and support activities. The value chain of Tesco has been demonstrated in the following diagram:
These are placed at the first stage of the value chain and provide the earliest opportunity to create value. Hence, the elements of this stage include incoming materials, storage of goods, distributing the inputs to the product and service ensure that has been delivered on time and undamaged. Tesco tries to achieve and maintain the level of consumer choice in store as gained a benefit of low costs from its suppliers due to it has a leading market position, in the meantime, constantly upgrading the ordering system and in-store processes improves the efficiency of its distribution system as well as provides a great opportunity to minimize costs unfairly incurred by the company, therefore the cost of losses are not passed on to the consumer.
The core operations of Tesco is concerned with creating products or services which activities are service orientated. This involves machining, packing, maintaining the shelves and also replenishing the stock. Aiming of creating more appropriate and accurate ordering systems, thus diminish waste and improve availability of products with put into the right store. (Tesco.com) According to Tesco (2010), in order to gain future competitive advantage, the company has invested over £76 million for their digital program which is the third generation ERP solution. Due to the introduction of this system, Tesco has gained an increased in profitability £550 million during 2009 alone.
The third stage in the chain is concerned with location, opening hours, and queuing systems and also delivering of the product or service to the customer. According to the implementation of the trolley service that enable convenience for customers quicker to access therefore become more efficiently than other competitors. Home delivery service also could be achieved adding value in Tesco by saving customer time.
Marketing and Sales
At this stage which is about the promotion and advertising applies to products and services which inform and attract costumers. The Tesco Clubcard gives the offer of extra bonus points on certain products providing loyalty to customers. Promoting further discounts dissuade the customers from switching over to their competitors. Moreover, Tesco has introduced Greener Living Scheme therefore environmentally friendly products may also bring advantage of adding value for customers that buying those products could really help the environment.
This is concerned with additional service improving or maintaining the product such as installation, repair and after-sales service.
This area of value chain considers technology with research and development relates to raw materials or components inputs and then goes pass the operational processes using IT forecasting and ordering the right amount of stock at the right time into each store to improve delivery and at last outputs to the customer. According to Tesco (2010), improving on-shelf availability, predicting how weather affect sales and reducing depot stockholding anticipate customer needs.
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