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This report takes a look at Tesco by examining its business environment by the use of PEST analysis since it is a key component for its success or failure. This also involved the assessment of the company`s value chain. The appropriate application of information system comes with huge competitive benefits. As a consequence, the report looked at some of these benefits. A conclusion was then drawn based on the findings.
THE COMPANY'S OVERVIEW
Tesco started as a small grocery store in Burnt Oak, North London in 1919 by John Edward Cohen. According to Corporate Watch (2004) the name Tesco was coined from the initials of Cohen's tea supplier, T E Stockwell joined with the first two letters of Cohen. From a humble beginning, Tesco has achieved growth in numbers, goodwill, portfolio, loyalty both locally and internationally.
Clark (2008) writing for The Telegraph expressed that 1929, the company's store was launched in Burnt Oak, North London. Between that period and now, tremendous impact has been made in diverse areas which have changed the face of retailing in its local environment and even in the international front. Tesco became a private limited company and has moved into countries like Turkey, China, Japan, Malaysia and Poland. The others are: Thailand, South Korea, Taiwan and the U. S. A. Within the period, Tesco launched assortment of goods and services to customers in the areas of on-line book store, on-line banking with Tesco Personal Finance, Tesco Mobile and Home Phone as well as the Tesco Broadband. As part of the company's strategy, it launched Club card Deals which opened 24 hour trading, 'Every Little Helps' computer for schools and 'Would I Buy It.' The rationale was to ensure that the customer received value for money.
Tesco as a company has purposed to create value for its customers so as to earn their total loyalty. Authenticating the above statement, Lindgreen and Hingley (2003) stated that Tesco has all that it takes to render high quality products. The Corporate Watch (2004) reported that Tesco was the premier supermarket to introduce a company loyalty card, an idea developed by the outgoing Chief Executive Officer (CEO), Terry Leahy.
Tesco's strategy according to Tesco.com has to been potent due to its diversification strategy embarked upon in 1997. There was also the idea of making its UK core market very strong and expeditiously see to the growth of international stores, enhance food and non-food sales, increase into retail services and the success of its e-commerce.
THE PEST ANALYSIS
James and Akharaserani (1988) indicated that external phenomena have impact on internal ones. By PEST, attention is paid to Political, Economic, Social and Technological (PEST) factors which could influence positively or negatively on the growth or otherwise of the organisation. The discussion below throws more light on these external issues of the organisation.
According to Lancaster et al (2002 p. 55) 'The political environment is the starting point from which many other macro-environment forces originate.' Tesco operates in a variety of political environments; the head office being in the UK. The UK has a functional democracy with elections and multi-party political system. The USA has a similar democratic setup. The political factors in both countries are stable and promote the growth of private enterprise. Most of the European markets are situated in Eastern part and the markets are Czech Republic, Poland, Hungary and Slovakia and Turkey. The political factors here are not as stable as UK or USA. Asia is the largest market outside of the UK. It has presence in Malaysia, Thailand, South Korea, China, and Japan. Of these Japan is quite stable. The most political problems are from Thailand where there is opposition from local businesses and so Tesco faces the biggest problems here.
The UK and the US are both rich countries even though faced with a recession at present. The East European markets are much poorer in comparison, but Lancaster et al (2002) indicate that there is a massive improvement in the economic environment of the Far East with the likes of Singapore, Thailand, Malaysia and China. To prevail in the economic condition of the Far East, Tesco has lowered its prices which are welcomed by the local population there.
The social structure in USA and UK are quite akin where shopping in supermarkets has existed for a long time. But for the Asian countries, the concept is relatively new. Turkey and Malaysia are both Muslim countries; hence their religious laws have to be taken into consideration by Tesco.
Assessing today's technology, Headrick (2009) says, it has brought the world to a stunning advancement. It is in the light of this that Lancaster et al (2002) establish that technology is a very important tool which has a huge impact on the marketing firm. By technology, Japan, US, UK and Malaysia have similar facilities. South Korea is also strong in this regard. Thailand might be the least technologically advanced of the markets. This is also the case with the East European markets. China has technical capability, but is mainly limited to its cities. But it can be said that the level of technology needed by Tesco in all these markets are available and hence not much obstacles in this area are anticipated.
THE VALUE CHAIN
The concept of value chain has been widely and intensively spoken about by astute authors. The concept was propounded by Michael Porter. Explaining the value chain concept, Porter (1985) describes it as, 'A general framework for thinking strategically about the activities involved in any business and assessing their relative cost and role in differentiation.' Writing on the same concept, Longbottom (2006) intimated that information dissemination across the value chain has increasingly become indispensable to organisations which want to stay in competition. To support Longbottom's assertion, Dekker (2003) expressed that the importance of the value chain cannot be over-emphasised as it grants the organisation an opportunity to achieve the maximum.
According to Porter (1985) the value chain has two major parts, namely; Primary and Support activities. He says the Primary activities are those directly linked with production. They are: Inbound logistics, Operations, Outbound logistics, Marketing and Sales and Service. The Support or the Secondary activities he identified as: Procurement, Human Resources Management, Technology Development and the Firm's Infrastructure.
Below is a demonstration of how Tesco applies the value chain in its activities.
4.1 Primary Activities:
Tesco gets its materials from the suppliers who are mostly the producers and stores them in its depot.
Those that need to be turned into finished products are processed as such
Tesco has trucks of different types which supply the various stores.
Marketing and Sales
Tesco has various means of marketing its products which include the application of the promotional mix producing to meet the needs of the customer
Tesco has a track record of providing an outstanding service to customers, especially after sales. This is to find out the impression of the customer after the usage of the product.
4.2 Support Activities:
Tesco has been getting in touch with its suppliers without middlemen, hence minimising procurement cost in its purchases.
Human Resources Management
Tesco employs people who have the expertise and the commitment to serve the company with all the loyalty. Mention could be made of Terry who committed his business acumen to Tesco for fourteen years as Chief Executive Officer.
This is an area Tesco cannot be beaten to it, as it has created a formidable e-commerce for its activities through Tesco.com
The Firm's Infrastructure
In terms of infrastructure, Tesco has high class modern facilities for its stores and spacious parking places in most of its stores.
INFORMATION SYSTEM/IT AS A COMPETITIVE ADVANTAGE TOOL FOR TESCO
Speaking on the advent of technology, Goessi (2008) expressed that 'Technology has taken the business environment by storm.' Throwing more light on that, Headrick (2009) intimated that due to technology, there has been an excessive threat to the business environement. Gone are the days when every single activity that was done in organisations was manual. In recent years, automation has taken business to another level and those organisations wishing to stay and aspire ought to follow suit. The points discussed below would afford Tesco, the opportunity to gain competitive advantage.
According to Hitt et al (2009) a good IS would afford the organisation to strategically differentiate itself to be competitively ahead. In line with this, Tesco differentiates itself and gain competitive advantage by offering special services like club cards to the customer.
Integration of Supply and Distribution
Tesco could apply IS as a tool to assess and track inventory. By that the supply chain could be monitored with minor problems detected before they become major ones.
The Information System being practised in the organisation would determine how expeditious information would be disseminated. A communication system which is automated in nature would minimise cost and improve the image of Tesco as an organisation.
Quick Decision Making
Information System paves way for important information to be delivered at the right time. Any manager who wants to make a quick decision in the current business dispensation should find IS as an indispensable tool. This will provide the manager to do a quick assessment on a bordering issue and find a solution.
Tesco as an organisation has made a tremendous impact on the business landscape. Even though it had gone through rough times and still faces some competition which is inevitable in contemporary business circles, Tesco has become a household name. With its performance in both the local and the international scenes, couple with the vast technological incorporation, the sky could still be its limit as Goessi (2008) expressed, 'Many businesses today are still realizing the power their technology possesses, but once strategic knowledge is realised, the potential is endless.'