Tesco Strategy Analysis: Internal Organization and Recommendations

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17th Apr 2019 Business Strategy Reference this

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SUMMARY

Tesco is the largest grocery retailer in the UK market and provides a variety of products. In recent years it has been faced by several problems which have exposed some of its weaknesses. The financial profits of this retailer have been greatly impacted by a series of bad debt cases from credit cards and several insurance claims by too many households because of poor conditions of some of their products. Some of its recent struggles can be attributed to the failure from management to properly manage a huge number of products. Tesco is faced with shortages in experience and expertise in offering phone services to customers and this may be a factor leading to many debts. Tesco still has various opportunities to grow through the online market and recently cataloguing in shopping. Tesco will seek to have advancements in technology so that it can satisfy its customers with more ease in getting details about their products and the promotions available. Tesco has developed strategies that will help them satisfy and understand their customers through market research, product promotion strategies such as personal selling and promoting the attitudes of their staff.

ANALYSIS OF THE MARKETING INTERNAL OPERATIONS

Internal organization of Tesco business structure is made in that it is service oriented to effectively deal with the external factors and weaknesses identified in the first assignment. In this sense internal business operations are the major upstream opportunities which make it possible to provide best services and products. Among these tasks are opening daily within trading hours and maintaining the shelves as well as the stock. To achieve competitive advantage in future, Tesco need to consider opening new Metro and adapting to operating hours as in those other places.

PRICING TACTICS

Previously Tesco relied on a marketing strategy that involved promotions and use of loyalty schemes specifically its infamous club-cards to lure in customers. Recently Tesco said that they intend to do the largest shake up of their pricing strategy, a strategy that they have used for the last 20 years. The reason for this huge shake up is the recent rise in competition in the market which has led to a drop in Tesco’s direct sales. During this period Tesco has seen its market share drop to 30.4% from 30.8 %. Tesco hopes that a change in strategy will help to reverse this loss of market share (Businessinsidercom. 2018).

Tesco has identified market penetration as a strategy they intend to adopt in its Big Price Drop strategy. This will involve gaining new customers from its competitors in the market while increasing the amount of sales for its products to its existing customer base. The diagram bellow shows some of the key strategies ranging from, some very risky approaches like exploring new markets and new products to some relatively less risky plans such as market penetration where emphasis is on existing products and markets.

Tesco has opted to change its strategy in response to the increasing costs of living and more hostile competition. Many households are being faced with an increase in expenses decreasing their disposable income and the increase in the prices of food, petrol and energy as well as slow growth in wages which are the major contributors to the high costs of living.

This Big Price drop is expected to influence the cutting of the prices of various day to day food stuffs by almost 30%. It is expected that the prices of food stuff like a medium sliced loaves of bread will drop to 55p from 69p. Tesco will incur estimated costs of up to £500 million every year in order to implement this but the move to scrap its reward offer of double Clubcard points to one point per one pound spent  is expected to help Tesco save about £350 million in a year.

This new pricing will have significant implications to Tesco’s competitors. Tesco is targeting to be about 10% cheaper than some of its close competitors like Waitrose whose products are very similar to Tesco’s in that it matches the prices of over 8,000 of Tesco’s products. The move by Tesco to adopt this new strategy will squeeze the profits of these competitors to significant extents. They big question now is how the other supermarkets will react to this move by the market’s biggest player to overhaul its pricing strategy.

POSITION ON PACKAGING

Tesco is also looking to change its packaging from the use of plastics to a better and sustainable method of packaging. They are concerned with protecting the environment by implementing this change. Tesco is committed to make all its packaging is non-plastic by replacing plastics with fully compostable and recyclable packaging solutions. They also want to ensure that the board and paper that they use is fully sustainable. Finally, they intend to reduce the weight of their packages by half and all this is to be achieved by 2025.In order to achieve this feat Tesco outlines several steps to be followed. One is to make simpler and reduce the relatively diverse material types that they use for their packaging during the process of developing their products and in that case involve their suppliers as well. Reducing and simplifying the range of materials that Tesco uses currently will aid in creating a closed loop system that is based on selecting materials that are more recyclable.

Tesco intends influence a change in behavior of their customers so that they can accept and understand the importance of this recycling infrastructure. To get this right Tesco intends to support the practice and education of its customers because customers might get frustrated if they do not understand the reasons for the abrupt change and this will cause less adoption of the recyclable packages. Tesco says it will help people to make better choices by firstly providing consistent and simple information about the packing using different media. It plans to use promotional strategies and marketing to help spread the word on recycling and help people accept to use their own containers and choose their preferred packaging after purchase (Businessinsidercom, 2018). These steps will add to the progress that Tesco has had on recycling in recent time. Tesco claims that currently, the packaging of most of its brand products is 78% recyclable.

TESCO’S STRATEGIC OPTIONS:

GENERIC STRATEGIES:

As for generic strategies, they should be characterized by how each retailer individually responds to the structure of the industry. There are therefore three generic strategies put in place which a big retailer like must choose from to be able to sustain it competitive advantage. These generic strategies were developed for use by porter. One of the strategies that Tesco’s strategists can employ is that of cutting prices to enable more people to be able to have access to their products therefore having a broader market. They therefore must come up with a means of being able to cut the prices and still be able to get high profits margins from the products they sell and be competitive in the market.

They can also make use of the second strategy which is called differentiation. In this method they must find a means of providing their customers products with features that they like. These new features that they add to their products should be unique and valuable to the customers of that product. The retailer will therefore be able to make their offerings obtain brand loyalty and their buyers must be able to see some inelasticity on the prices. The method of wideness of offering products, bringing in features that are valuable to the customer, advancing technology and customer service are the commonly used approaches when using differentiation.

The third strategy that Tesco can employ is that of cost leadership or among strategy of differentiation towards a market that is small and focused. On the cost leadership strategy, they must create efficiency from inside to be able to withhold the pressure from outside. They therefore must ensure that they visit the regulatory set up by the government of that environment regularly. Another place they must visit regularly is the supply sector.

CUSTOMER SERVICE

The first objective is to ensure that the customer is satisfied with the services offered to them. Tesco has been receiving very many feedbacks and some of them have been negative about the service that the customers get. They therefore need to improve customer service by providing training to their staff to ensure that the services they offer to their customers are to their satisfactory. They also need to have a customer care desk where customers in need of help must go to be served. As for now, Tesco has already started what they had set as their strategy. This is because they have already risen their sales by 28% although they have dropped in the profits that are prior to the taxes. They are coming up with a strategy that will enable them to be able to sustain their revenue and while still satisfying their customers. They have given out a report saying that they are changing the hours they are operating and creating customer care desk. There are also changes in the number of staff interact with the customers. They are cutting operating costs and changing the efficiency of their distribution system. They are also concentrating in their model of store operations to ensure it is as simple as possible.

TESCO Infrastructure

The structural facilities of Tesco retailer are sufficient and has upheld its capacities in satisfactory way. It essentially contains authoritative structure alongside control framework and organization culture. In this organization does scope of exercises, for example, bookkeeping, lawful, fund, advertising, quality affirmation et cetera. The stores and outlets of Tesco are extremely all around organized and outlined which has given massive comfort to clients and influenced their shopping to encounter significantly (Hooley, Piercy and Nicoulaud, 2012).

The continued focuses of the cost and cash control of Tesco are provided for by good planning and control functions. On an effort to improve and remain competitive in the market by enhancing the internal factors, Tesco has now expanded its working staff and should even hire professionals especially Programming experts to help curb the technological issues that lag the business behind by inward burglary which leads to additional costs that are directly transferred to the customers purchases. 

HUMAN ASSET ADMINISTRATION

To improve on human resource management Tesco has considered HRM as a downstream movement to cover all operations from administration to enrollment improvements. Tesco intends to develop variety of preparing plans as well as improving and widening its enrollment plans to pass on to the customers the advantages of a very much selected, all around prepared staff, not the outgoings. The trend in Tesco operations is putting more resources to benefit the customers in the sense that preparing is likewise connected straightforwardly to pay, which arouses the staff to learn and as well enhance how they deal with the clients all time so as to improve the internal image of and  their administration arrangement quality (Gerry Johnson, 2008).

INNOVATION ADVANCEMENT

They are alluded to as advances that aid exercises that make esteem. With regards to Tesco, they have utilized new and ad libbed innovation for getting consideration of vast number of clients and giving helpful shopping background. They have additionally given choices like home conveyance, web-based shopping, self-check focuses; club cards and so on with the goal that most extreme consumer loyalty can be given to them (Johnson and Scholes, 2008). It is a downstream movement and is the capacity to give new inventive item runs/arrangements that suspect client needs. It likewise remains a key upper hand, including esteem, as Tesco’s image name gives the item essentialness (+). Be that as it may, establishment and capital venture is a long-haul process and needs add up to duty of the staff. In any case, will’s identity in charge of the administration arrangement and the floor work force?

ADMINISTRATIONS

They are the help of clients that they give after they got items and administrations and in this unique situation, Tesco is conforming to double system of cost authority and separation which has improved the essentialness of client benefit (Tan and Platts, 2005). They have given client mind benefits with a specific end goal to hold clients for longer term of time and give them plentiful advantages to drawing their consideration at customary interim of time.

HUMAN ASSET ADMINISTRATION

It is a standout amongst the most essential backings that aides in assist development and improvement of retail mammoth. In this whole game-plan enlistment and choice of workers occur and, in the meantime, preparing and improvement is given to them with the goal that they can do their arrangement of obligations steadily. Tesco gives proper remuneration to its current workforce, so they accomplish most extreme fulfillment level. They have huge number of people utilized inside work environment that care for different working. They are as a rule continually persuaded by methods for different financial and non-money related advantages which has keep them roused all through their residency (Sigalas, Economou and Georgopoulos, 2013).

BEING A GLOBAL RETAILER

For quite a long time Tesco has been looking for new opportunities outside the country with an intention to r extension and collecting long haul securities and returns for investors. Today Tesco is available in 13 showcases outside UK and intending to enter India. To satisfy every single global desire Tesco has advanced a methodology in view of six components. Be flexible (in Japan individuals like to purchase little measure of crisp nourishment consistently) ; Act nearby (In Thailand clients have a propensity to collaborate with sellers and picking what they need from heaps of generation); Maintain center; Use multi-positions (opening range from accommodation to hypermarkets) ; Develop capacity; Build brands.

To develop the center UK business. Center UK business has more than 285,000 workers and more than 2,200 stores, in addition, 70% of offers and benefits originates from UK business. Tesco in intending to keep up their diverse store organize system, which comprises of Express, Metro, Superstore, Extra and Homeplus.

To be as solid in non-nourishment as in sustenance. The broadest scope of non-nourishment items can be found in Extra stores and Homeplus that incorporate such items as apparel, wellbeing and magnificence, stationery, cookshop and delicate decorations, and so on (Retail-weekcom. 2018). In 2018 was propelled Tesco Direct, an online index with non-sustenance offers, incorporating right around 13,000 items in it.

CONCLUSION

Even though with intense rivalry Tesco’s is continue enhancing their innovation, market and administrations. Tesco’s have expanded their additional esteem items so clients with less transfer pay can bear to purchase and fulfill them. Tesco’s continually endeavoring to keep their positioning higher to get more piece of the overall industry and kept up their seat check.

References

  • Don Peppers, M. R. (2004). Managing Customer Relationships: A Strategic Framework. John Wiley & Sons Inc.
  • Gerry Johnson, K. S. ( 2008). Fundamentals of Strategy. Pearson Education M.U.A.
  • Isobel Doole, R. L. (2012). International Marketing Strategy. Cengage Learning Emea – M.U.A.
  • Businessinsidercom. 2018. Business Insider. [Online]. [4 March 2018]. Available from: http://uk.businessinsider.com/r-uks-tesco-is-planning-a-chain-of-discount-stores-sunday-times-2018-2
  • Blogspotcom. 2018. Blogspotcom. [Online]. [4 March 2018]. Available from: http://123articlesworld.blogspot.com/2012/04/pestle-analysis-of-tesco.html
  • Conveniencestorecouk. 2018. ConvenienceStorecouk. [Online]. [4 March 2018]. Available from: https://www.conveniencestore.co.uk/advice/your-business/set-the-trends/546245.article
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  • Internetretailingnet. 2017. InternetRetailing. [Online]. [4 March 2018]. Available from: http://internetretailing.net/2017/06/tesco-transformation-strategy-simplifies-customer-service-loss-1100-jobs/
  • Simon Collinson, R. N. (2016). International Business. Pearson Education M.U.A.

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