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As we know that expansion in the supermarket and now it is also diversified in the fields like communication, insurance, financial services. Here we are we are considering the vision of the Tesco and the ways Tesco comes up with the leading competitor in the market for the rest of companies. Here we will be discussing the various steps and strategies, policies, models used by the company in order to increase its performance in the market.
Here we are we are considering the vision of the Tesco and the ways Tesco comes up with the leading competitor in the market for the rest of companies. Here we will be discussing the various steps and strategies, policies, models used by the company in order to increase its performance in the market.
In the supermarket and now it is also diversified in the fields like communication, insurance, financial services. Talking about Tesco it is currently the UK's most successful supermarket with a UK market share in excess of 30% and annual profits of some £2bn. It is the world's fourth largest retailer. Although after the introduction in the US markets Tesco was the one of the most reasonable retailers for the customers but it have to face the critics of some of the analyst who was analysing the effect of introduction of Tesco into the retail market of US. It was said by some of the analyst that if Tesco attempt to enter in the American market it has been a failure that the company should withdraw. One of the known analysts named Piper Jaffray has estimated the cost for the company which will be the effecting cost if the Tesco will withdraw from the US markets which would be near about one billion pounds. The company's environmental claims have come under analysis, along with its property strategy, its non-unionisation policy in a relatively strongly unionised sector of business and its refusal to sign a community benefits agreement. Community benefits agreements are used by stores in the USA to gain customer loyalty. Tesco, in turn, has countered these criticisms.
Jack Cohen's business motto was "pile it high and sell it cheap", although this was quickly replaced with the saying "You Can't Do Business Sitting On Your Arse". He was known to distribute items bearing the acronym to his sales force.
Talking about the history of this company who has strong hold In the UK markets was started in 1919. This was the started by Jack Cohen who started his business career by selling the groceries from the streets of London. Tesco is the name that was billed by the names of supplier the person who brought the shipment of tea his name was T.E Stock well and the label was made by using the initial of his name and by adding the name of the owner Jack Cohen and they gave this firm a name called Tesco that is a store now sits in the sites. When Tesco stepped in to 21st century it was the most effective period for the company to grow and provide its excellence services to the customers as in 2001 they had started the online shopping for the groceries as after attaining more that quarter stake in the grocery works and it was good feedback from the customers. In the period of 2002 they made the major changes to the stores in UK as they have purchased more than 800 T&S store in one go. They have also shown some of the biggest influence in the polish market when they purchased more than ten biggest hypermarkets in Poland. The year 2003 can be called the technological year for this company as they have entered in to the telecommunication world comprising mobile and home phone services, to complement its existing Internet service provider business. In 2004 Tesco was the other company to launch broadband services but unfortunately the plan for Tesco in Thailand for creating and running the hypermarkets in the collaboration with Charoen Pokphand Group was not very successful as facing the heavy criticism in the market the Charoen Pokphand Group sold their stake. In the year 2005 when there was the breakage of contract between Safeway and BP then Tesco bought some of the store to increase its market In 2007 Tesco was placed under investigation by the UK Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets (Safeway, Tesco, Asda, Morrisons and Sainsbury) and a number of dairy companies to fix the price of milk, butter and cheese. They were reportedly paid ï¿¡5 million (US$10 million). In April 2009, Tesco announced that it had created a super tomato that "doesn't leak". The tomato is grown in Holland and is meant to be a better tomato for sandwiches since, being less juicy, they will not make sandwiches as soggy as regular tomatoes do.
2 Strategic Decisions for the company
Before saying the strategic decision, plans or objectives for the company first of all we have to understand "what are the thing that can be covered under these decisions?" In the simple words we can say that it is the systematic and the analytic approach which review the business as a whole in relation to the environment and which can be said into two different terms
To develop an integrated, co-ordinate and consistent view of the route the company wishes to follow
To facilitate the adaptation of the organization to environmental change.
They together describe the concept of the firm's business which specifies the amount of growth, the area of growth, the direction of growth, the leading strengths, and the profitable targets. In addition they are stated operationally in a form usable for guiding management decisions and actions. It is concerned with the formulation of the strategies within the framework of company policies. It involves the process of strategic management that will lead through various operational and project plans for the achievement of the objectives (Michael Armstrong, 1990).
Now talking about the company which is tesco the basic approach they use for the formulation and completion of the objective and goals is the IBM approach in this approach the company will show the type of business they are doing and they will express the sense of business the enterprise is in and the direction in which they are going. For making it simple for the customer to understand what they want to achieve is some time shown by the help of graph and pie charts or the wagon wheels. Before using this approach they have to keep in mind some of the basic features or requirements for the model.
So this is the main flow of plan which should be followed while using IBM approach. Now in the case of tesco they have followed the same pattern but in the different format. So now we should look at the different strategic decision or plans for the tesco. There are three type of the strategies that the tesco following in order to achieve their goals and objectives as they are typed below:
Cost leadership: One of the strategies that are used by Tesco for achieving their goals in a simple and easy way id the cost leadership as we can identify from the word cost that they are taking about the price thing as they have the strategy to provide their customer with the lower prices from any other company. The ability for reducing the cost for customer or to lower the prices they control their operating costs in such a way that they are easily able to lower the prices as in compared to others which help them to generate the high profits and thus helping them in the significant way.
Strategy of differentiation: Now this is the strategy that will differentiate the offer and the services that they have to offer to the customers and the featured customers. On the basis of this strategy they can create their brand locality for the customers that they have to offer in terms of promotions, technology, heath products, bakery, etc. Customer service is popular approaches to differentiation.
Focused market. In pursuing a cost leadership strategy Tesco focuses on the creation of internal efficiencies that will help them withstand external pressures.
As we have seen that how tesco take care of their customer by using the various strategies for the customers and which makes us to think that tesco will be in the regular connection with the operational authorities and the other in the same sectors such as buyers. While seeing to these strategies we can say that the strategies of cost leadership and market differentiation are aimed at the broad market and by using these strategies they can settle their products to any markets (potter, 1980). Or we can say in other words that they pursue a strategy of cost leadership or differentiation either in a specific market or with specific products. The danger some organisation face is that they try to do all three and become what is known as stuck in the middle. In case of Tesco it is not appropriate, as they do have a clear business strategy with a clearly defined market segment.
Raising market contribution: One of the strengths of the Tesco is the large size in the retail market which covers about the 13 percent of the total value. Just because of it versatility in every field it will be continuously growing in the UK market and contribution will also be increased not in only in food sector but also in non food.
Tesco's general growth and ROI show no sign of abating: One of the other strength of the Tesco is large investment in the west midlands departmental stores name called T and S Group which was considered the one of the massive step taken by the company for the neighbourhood markets. In addition in this year Tesco became the UK's second largest convenience chain as compared to the co-operative stores and they also opened more than 5o new stores this year. If we take a look towards the international business part of Tesco so we can see that it is continuously growing and the prediction made by the board of the company that it will contribute almost one quarter of its profit in next straight five years. Now it is so much grown that it total revenue comes to 23 percent of the total group earnings. And in end if we talk about the regional or geographical strength that is huge and will continues to grow.
Insurance: In the year 2003 Tesco reached the new mile stone of completing the one million customers under the insurance section by selling the motor insurance policies which made Tesco one of the fastest service provider and seller for the motor insurance. One of the features that Tesco provides a simple feature to their club card holders that they can purchase the holidays or travel insurance very easily at the departments. In the field of life insurance it gained award for most competitive life insurance provider in the money facts awards 2003 and got the good response of the customers. It also sells more than 330,000 pets insurance for the dogs and cats.
Tesco online: One of biggest and the most convenient feature that Tesco provides is the online shopping. Tesco website is the world's one of the biggest online shopping site. In this online shopping that almost had a sale of over 550 million pounds which shows the increase in the company of more that 27 percent in the last year stats. We can operate this site in more than 250 stores around the UK and have the customer count of over one million to whom they provide online service. This company is also showing the strong development in its revenue stream.
UK market leadership reinforced: If we take into consideration the size and the competition of Tesco to their competitors in this scale Tesco is very vast and huge in the service providing. As they got the number one ranking the year 1996 for the best markets as just because they have the multi format plans to follow which make them successful to achieve the goals easily. And in the report by the competition commission as they have said that it is very difficult for any company in the retail markets to compete with Tesco as if we see UK their sales are 71 percent larger than any company. And if it will grow at this rate then it will bring down the Wal- marts chances of being the largest seller in UK.
Reliance upon the UK market: As this the one of the best and the biggest company in the UK markets but it is very limited in the most of the UK markets. Although it s growing internationally but their main steps are based in the UK market will is the most significant weakness of the company. As we know that they are rising day by day but we have to see the competition in the market as it was in the reports that in the supermarket industry over the period of one year Morrison group will buy the Safeway group will be the affecting for the market sharing for the company.
Debt reduction: One of the other weakness for the Tesco id of high gearing ratio for the company as their debs ate increasing at very high rate and they are n ready to reduce that as because they had used all the money in the huge investment for the increasing the assets for the company and in the meeting with the managing director he said that there is little plan to return the debts as lot of money is being used in the other sectors.
Signs point to serial acquisitions: One the company assets and the operation we have seen that this company is enormously big in every state but to filling up the gap they have to sued the certain methods or plans that can help them to achieve the things easily. Thays why they have used the fill the gap strategy and has been the case with the UK convenience market, there is the danger of Tesco becoming a serial acquirer, as this tends to reduce earnings visibility and quality.
Health and beauty: Opportunities are the things that are good for any company to grow as we have seen in the case of Tesco that it have increased its market in the health and beauty products from quite a while and became the leading retailer in the field of health and beauty. As the secondary things they have one of the best toiletries and healthcare and they have increasingly become the number seller of baby goods. They have invested in the health and beauty about 27 million alone in the market the money in the huge investment for the increasing the assets for the company and in the meeting with the managing director he said that there is little plan to return the debts as lot of money is being used in the other sectors.
Further international growth: Tesco has shaped a strategic association with US supermarket, Safeway Inc, to take the tesco.com home shopping model to the US. Telecoms are the latest stage in its strategy to develop popular retail services. It has repeated its approach in banking, by capitalizing on its brand. In 2004 the company plans to enter the Chinese market, as China is one of the largest economies in the world with tremendous forecast growth and will present many opportunities for Tesco.
UK structural change could spark a price war: Threats are the more likely to be in the large business as they have more things to worry about as per the small things can cause big damage to them. As now the biggest threat to the business is the price for the customers and as in UK the customers are more aggressive for the prices just because in the competition the companies are reducing their prices and in the case of Morrison they are decreasing the prices by 6 percent on every item as in compare to Tesco. For these things they have to be committed to price changes in coming future.
Overseas returns could fall: In the case of the UK it is developed and they have nothing in compare able to the others but it will not be the good for the company to go to the other country and set up the business as they are certain factors that they have to consider while setting up. They have to look at the economical, political, social factors and competitor's condition. So that they are ready to take the consequences if we take the example of china and Japan they are have completely different conditions.
Talking about the challenges faced by the company here we can take the example of Tesco's experience in the middle kingdom like in the country like china and the middle of the Asia. As they all are saturated markets and all these are maximum the developed countries and they have the maximum competition and very less opportunity so the Tesco is thinking about the most effective and the simplest strategies so that they can build up there. Ut we have to consider the various factors which have to be keep in mind like the economic, political, social and environmental issues.
So here in this paper after talking about the one of the biggest group in the retail markets we just came to conclusion that it is working very good from every aspect as there are many fields where we have seen that Tesco was new but using their most simple and easy strategies they made them self a very huge and large industry and have reached to the success in one year time that is so impressive. The way they brand their products and the way they provide the customer service to their customer's is beyond the thinking. It had fostered powerful identities by making their retailing concept into a virus and spending it out into the culture via a variety of channels: cultural sponsorship, political controversy, and consumer's experience and brand extensions. So here we did the swot analysis of the company which give us the fact that there are many global and internal factors that re associated with the companies' performance. In last 30 years opinion of the market has altered from a product and customer direction to strategic course. Here we are we are considering the vision of the Tesco and the ways Tesco comes up with the leading competitor in the market for the rest of companies. Here we will be discussing the various steps and strategies, policies, models used by the company in order to increase its performance in the market.