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Tesco is an international grocery and general merchandising retail chain which establish its headquarter in UK. It is one of the leading retailers around the world and the largest British retailer measured both by global sales and local market share. It is currently the third largest global retailer founded on revenue, just following the Wal-Mart and Carrefour. Tesco possesses more than 3700 branches all over the globe; the number of employees has reached 440,000. (Tesco: Annual Report, 2008) Aside from UK, Tesco also operates its business scale in other 13 countries including America, China and Japan. Original commercial sectors of Tesco mainly specialize in food and drink related parts, later it expands its business scale into areas such as clothing, electronics, financial services, telecoms, internet services, software, household and personal health care.
Another company targeted as comparison located its HQ in China. Hongqi is one of the earliest supermarket chain which gropes for franchise pattern and managerial output model. The business scale contains clothing, decorations, daily consumptions, artifacts, electronics, educational consumptions, food and drink and personal services. With more than 15 years arduous development, by the year end of 2009, Hongqi has already expanded its commercial chains to approximately 4000 all over the domestic market and strives to diversify its operational scales.
The common commercial department for both companies is the grocery mechanization which supplies public daily consumptions. This business sector serves to be the main source of revenue in the income statements and will be primarily emphasized.
Operational details of Tesco
Franchise pattern is the most favored choice for many grocery mechanizations. The business scale largely covers daily consumptions such as food, drink, decorations, presents and other pertinent items. Tesco stores can be categorized into several formats which are based on the size, layout and range of products in order to fit customers' need. Tesco Extra stores are hypermarkets which sell almost all brands of Tesco's product ranges including many large manufactures such as Coca Cola and GE. The first store was opened in 1997 and the stores number has achieved about 20 per year. Newer stores are typically constructed on two floors, with the first floor settled for food, drink, clothing, and entertainment services purpose. Cafeteria characterizes the features of most Tesco Extra stores. Another kind of store is the Tesco Superstores which are normal supermarkets, selling groceries and a relative smaller range of products. The first is in Hackney on Mare Street and now extended to a great numbers. Tesco Metro stores are the third main form of Tesco chains. Tesco Metro stores are usually located in city centers, urban parts and the inner city. Nearly all Tesco branches that possess high street pattern are renamed as Tesco Metro with the intention of offering an identity to the sub brand. The sale scale of Tesco Metro is similar with Tesco Superstores. Tesco Express is one convenience shop which largely concentrates on the stocking of food and daily essentials with an association on high-margin products. Beside chief manufacturers' brand products, Tesco is also the predecessor of popularizing its own brands such as Tesco Value and Tesco Finest.
Corporate Strategy of Tesco
Known for the focus and care on the consumer's demand, Tesco develops serials of sale plan and policy to meet changing and variable business requirements. For the purpose of serving local habitants more conveniently and better, Tesco tends to hire local people as employees and offer standard salaries in that local people may understand customer's demand more comprehensively and this commercial policy makes Tesco occupy the leading position within EU and Asia markets. (Simms, Andrew, 2007) Tesco strives to make both employees and consumers feel themselves as indispensible element within the daily operations and win the trust via quality and service security.
In common with other large retailers, Tesco transfers cargoes from suppliers into regional allocation centers to prepare for packing and delivering. Tesco also tries to extend its logistic exercise to plan proper allocation to reduce transportation costs and improve reliability. The managerial concern primarily lies on the traditional method such as road. The distribution network of Tesco recently has shifted to some other possible alternatives due to expenses consideration and legislature requirements. The rail and canal utilization are increasingly grow with the expansion of company's business scale, combined with sea transport, these new models gradually supersede the dominating position of road in transference methods in some regions.
One outstanding strategy is the use of Tesco's own-brand products as mentioned before, it includes the upper class brand Finest, mid-range Tesco brand and low-range brand Value which covers several everyday items such as food, beverage, household and Mobile. The phrase "The Tesco Way" describes the firm's core values and principles system. This tactic expands both domestically and internationally firm's market power and inferring a focus on both customers and employees. Tesco exerts great effort to maintain its reputation and brand popularity via enormous investment and advertising process. Tesco executes serials of spread actions to guarantee its fame. Its cardinal motto is "Every little helps" and the advertisements in print and on television primarily constituent of product image, information about price or appropriate text contents. Tesco also inputs great amount of money to invite stars to advertise its products. Tesco also has engaged in the contributions of its pre-tax profits to auspice regional community organizations, charities and social welfare.
The market is teemed with tough competition. Tesco regards competition in a wide range of retailer rivals such as Sainsbury's and Morrison. The retailers' development history shows how fast can it fail and succeed in a relative short period. In its response, Tesco sustains its sensitivity over the market requirement and never relax. Albeit competitive through the market power, Tesco also has to face the pressure imposed by other potential effective rivals, especially under the condition that consumers have alternative purchase opportunities. One tactic concerns toward the flexible pricing policy. It is believed that pricing policy is the cardinal competitive manner to occupy the market shares, however, a malignant contend in turn may cause a serious profit loss. Tesco stocks most products on the basis of national pricing level. Express stores use a distinct price list which sells products at a relative higher level due to extra costs.
Operational details of Hongqi
Similar with Tesco, Hongqi operates its business over various sites around China and provides mainly daily consumptions. Since its establishment, within 9 years development, Hongqi has already occupied the west market capacity of China associated with cargoes distribution services and E-business services. It possesses cargoes allocation centers and pertinent products suppliers have reached about 1000. The products range varies from domestic manufacturers to international and foreign goods. In order to follow the pace of market development, Hongqi constructed POS/MIS automatic managerial system which fits its own development stage and situation. With the introduction system, firm settles the network of management, finance and distribution, increasing the operational efficiency and ensuring further expansion. One characteristic of this network is to reduce its financial and operating risks and to enhance the turnover velocity.
The operating site of Hongqi usually occupies single floor due to the aim of reducing the lease costs. It designs its business scale mainly on the food and beverage sector, so the evident promotion of sales is centrally focused on the food and beverage pricing policies. Common work hours for each employee is 8 hours a day and shifts system is widely accepted. Employees must receive training courses about the servicing procedures and consultant aid every set period. The firm assumes the training expenses to increase employees' ability and confidence.
With the trend of market demands, Hongqi adopts the quality control strategy to maintain and expand its market shares. First and foremost, Hongqi exerts great effort to create a convenient and comfortable shopping environment for customers. Secondly, it insists the principle of fitting consumers' requirement to gain public trust, especially on the occasion of products' quality flaws incurred by external factors, Hongqi positively and actively adopts serials of measures for compensation. From a competition perspective, the real issue is the balance of profitability for retail businesses and the detriment for consumers. Hongqi rejects the manner of confining its accessibility to suitable sites. On the contrary, Hongqi under specific circumstances are willing to take the risk of extending its operating sites. If Hongqi is targeted by neighboring rivals, to a very limited extent, it involves itself in short term local pricing competition. It is not surprising that Hongqi lists some products price level below the cost for the dynamicity of pricing system among retail business.
During past 9 years, Hongqi chain sponsors social communities and other non-profit organizations more than 30 millions. It is consistent with the operational policy of popularization simply by charity and public welfare undertaking rather than advertisement.
Difference between two enterprises
The main discrepancy of two firms is the degree of engagement of international transactions. Tesco's aggressive expanding steps play a more active function in increasing its business scale. Tesco's international expansion strategy has responded to the need of local expectations in foreign countries in the form of joint ventures cooperated with local partners. Regional acquisitions are also a part of this expansion strategy; for instance, in 2006 financial year Tesco acquired two entities in Poland and Japan respectively. Although the UK market still accounts for more than 75% of gross income, Tesco continues its distention in the foreseeable future and concentrates on business sectors which possess strong market position. Hongqi, on the other hand, tends to focus its business sector on domestic parts and thus lack certain experience in the international markets. Another distinction is the spread policies utilized by two firms. Tesco is prone to use television and internet as primary way to enhance its reputation and popularity while Hongqi tends to use social welfare as one significant resource to increase its influence and this is manifested by the input on such social actions. Finally, Tesco possesses its own brand and declines its dependency upon other suppliers, to some extent; this behavior helps to reduce purchase costs. Hongqi on the other hand greatly counts on external providers and limits its commercial flexibility.
The difference discussed above gives hint about the reason why two firms which operate similar business are distinct in operating scales and performances. To the fore, although two firms' commercial ethoses are closely connected, especially in the respect of attitude toward consumers and quality management, the strategy adopted by each one is discrepant. One factor is the internationalization which serves to be important in shaping two firms. The direct evidence for this strategy is the financial performances. As Tesco has a wide range of business sites, its sales greatly surpasses Hongqi's expectations. However, expansion also associated with market and political risks which require company to assume much more risk tolerance ability. Another factor is the diversity of business pattern. Tesco divides its business models into several patterns, such as Tesco Extra, Superstores and Metro. By contrast, Hongqi's business pattern is more or less confined and its scale coverage is also limited. Comprehensively, for retail industry, expansion and diversification of operations are two significant components in firm's development.
Tesco: Annual Report. Tesco. 2008
Simms, Andrew (2007). Tescopoly: how one shop came out on top and why it matters. London: Constable.