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Tesco, a UK based retail store and merchandising chain shop is the biggest retail shop in terms of global sales and market share. Since introduced in 1919, Tesco has widened its business worldwide and offered almost everything in their large scale chain shop. Through acquisitions and franchising it has reached to almost 250 million people yearly. This academic assessment paper will analyze the Tesco's internal external environment critically as well as with a critical evaluation and discussion on Tesco's e-business as well as the areas of improvement of Tesco in order to achieve better results in e-retailing industry.
Figure 1: Porter Value Chain Analysis [available at]
The objectives of the Porter Value Chain activity are to create value that exceeds the cost of providing the product or service, thus generating a profit margin. This is the description of the activities that involve in primary value chain and support value chain.
Inbound Logistics in Tesco includes warehousing, materials handling, inventory control, etc. The inbound logistics is to maintain good relation with material supplier in order to process faster shipment due to the Tesco need to transport goods to stores very fast for the proper inventory management.
Operations are the activities that transform inputs into finished products (eg machining, testing, packaging, equipment maintenance, etc). Tesco retail has kept on developing the strategy for expanding into large markets to build up strong retailing services and achieve the goal to be as powerful in non-food as in food which means provide product with the great quality, range, price and services to the customers.
Outbound Logistics includes the activities that store and distribute products to buyers (eg warehousing, delivery vehicle operations, order processing, etc). Tesco achieved good customer services by understanding the needs of their customers and handling the product responsibly. Tesco applied the value to care the community and believe the business can have bigger contribute as how Tesco involved in the activities such as giving the support to local community aggressively and caring for the environment as well as provide the good jobs to the local people.
Marketing and Sales are the activities that provide the means for the buyer to purchase (eg advertising, sales force operations, selection and management of distribution channels, etc). The main principle of Tesco is to create value for customers to earn their lifetime loyalty which is the customers will feel happy to come back to shop with Tesco since the Tesco will award the customers with the point if they spend with their Tesco Club Card.
Service includes activities which enhance or maintain the value such as installation, repair, parts supply, etc). The Tesco is a worldwide retailer group which provide the variety products to the customers which convenience for the customers to get whatever they want in Tesco.
Human Resources Management at Tesco understands that the retail business is people-intensive industry, thus developing talent is needed to handle the growth of sales every year. To be competitive in retail market, Tesco recruit the strong workforce and train them to make sure the people able to handle the daily operation.
Procurement - By ensuring the key performance indicator, Tesco maintained the balanced scorecard by unite the resources and specific focuses the efforts of staff around Tesco customers, people, operations, finance and the community. Thus, the monitoring on a balanced basis with right observe to the needs of stakeholder had facilitate the business.
Infrastructure - In Tesco business, they have people with wealth of experience in each of the market who are able to handle the local business with adapt to the change. This is important as Tesco find out they need to stay close to customers in order to be success in the economic downturn.
Technology Development - The customers like to shop at Tesco.com as they can get the variety of product such as groceries, clothing, home electrical, furniture and so on by paying online which is convenience to them as the goods will send to the house in the estimated time.
Figure 2: SWOT Analysis [available at]
SWOT analysis is a widely used technique for creating a quick overview of a company's strategic situation. It is based on the idea that an effective strategic have to fit between an organisation's internal sources (strength and weakness) and its external situation (opportunities and threats).
The Tesco.com is another strong point to develop the business since it launched the E-business in 2000, the customers will like to purchase online because it is convenience and cheap. Moreover, Tesco provide the wide range of product which the customers can have more choices.
The Tesco Club Card was implemented in the E-business as the strong database to detect the customers' favourite product in order to convenience for Tesco to make proper inventory management and also personalize the service while the Tesco will send the offers or news to the customers.
Tesco is weak in refund policy which the customers have to refund the good within the time limit set by the management. This weak refund policy creates low product quality at the same time because it affect at the customers buying perspectives. In addition, comparing with other retailer store, Tesco did charge the customers together during the customer did purchasing through internet and the charges is actually depending in certain distance which may influence the buyer perspectives at any times as normally the buyers will think for other options on how to save on the delivery charge. Furthermore, comparing with other retailer stores, Tesco actually do not efficient enough in providing latest information to the customers which may creates misunderstanding or mistakes during the progress of purchasing through internet.
Tesco is UK's leading retail store as the business has steady strategy for growth and enables to expand the business into new markets. There are 14 markets outside of UK which the latest entry market is India. The flexible to meet the local people expectation in every market is the foundation to expand business. Furthermore, Tesco has the strong logistics and transportation to maintain the daily operation in 4308 stores worldwide. The ability to produce the own product has created lots of business opportunities especially during the global recession that happened in 2008 as their own producing product is cheaper if compare to the other same range of product from the vendor.
Government laws and regulations is a threat for Tesco when Tesco do not obey the rules set by the local government, the government serves the right to penalize and the worst is to hold the company license. In addition, there are more retail shop opened from time to time and the world famous retailer group like Carrefour and Wal-Mart are expanding fast. They have slightly same business strategy with Tesco and it caused a very tough competitive market. The increasing price of suppliers good is another threat for Tesco as business has to maximise the profit margin by meeting the customers demand to survive in the competitive environment.
PESTLE analysis is useful tool to assist organization in understanding the external environment of whole industry and it usually exercise with the SWOT analysis.
Political is a critical issue for Tesco to open some overseas market as some of the government subsidiary good, it may have some certain rules for the investors to follow. In addition, the unstable political issue will affect the growth of business and the recent happened demonstrating of "red shirt" protesters in Thailand is a good example which the political issue should be taken into the consideration for business expanding in future.
Economical is about the cheap price product that selling in Tesco store. Tesco has a unique selection of products that are affordable because they have own production, promotion on specific products. The other competitors such as Wal-Mart cannot compete due to they don't have the wide range of house brand products to offer to customers. The house brand product can be ten to twenty percent cheaper than the other competing products in the same range and provide another choice to the customer.
Social of Tesco in every country has created the job opportunity to the local social community and targeted to the local people who has been unemployed for at least six months with providing unique jobs guarantee program. On the other hand, Tesco also provide right information on the nutritional value of products which can help the customers lead healthy lives. The nutritional labeling is a community plan which implemented in most countries and Tesco is the first retailer store to introduce the front-of-pack showing guideline daily amounts (GDAs) which other retailer failed to provide.
Technological- The Tesco online business need to have the improvement in the term of the website maintenance and the Carrefour has great maintenance because of the organization set up a team to focus on technological matter. This is important for the organization who run online business as the customer will not like to have website error when they are having online purchasing. Tesco has implemented electronic payment gateway for smoother payment processing system known as scan and go. To maintain such a large scale of technical issue, Tesco has to implement sophisticated resources to stay to the leap.
Legal - The code of ethics is different from countries regardless the remuneration regulation and working conditions. For instance, the new labor laws in China had claimed that the labor contract is required to be in writing to avoid from unofficial employment association and Tesco have to ensure the company follow the rules. In addition, Tesco have to look serious into the ethical issue to avoid the risk of receiving consumer backlash. For instance, Tesco Malaysia needs to have the proper labeling on food packaging which is "halal" or "non-halal" to ensure the Muslim customer can be more confident on the item they are purchasing.
Environmental issues at Tesco showed great result as Tesco really put on effort in this area. The Tesco believed they can work better together with their customers in environment care and introduced the rewarding system for those who reuse the carrier bags during August 2006.
In the recent press release, Tesco introduced the "BOGOF" which means "Buy One, Get One Free Later" to reduce food waste by giving a week time for the customers to pick up free promotion item since the customers may not able to finish at once. Besides that, Tesco target on reducing carbon dioxide and energy by using the natural light and ensuring the vehicle travel full in every trip. The spreading green system will operate better with committed Tesco to grow to be a zero-carbon business in 2050. In addition, every industry is maintaining green environmental issues and this goes same to Tesco. Based on the 'go green' issues, for example, government has restricted on the usage of plastic to save the environment. This will add up value to Tesco if they could maintain the clear environmental issues as environmental issues will impact on their future business.
The Influences of E-Business to Tesco
E-Business falls under the organizational integration, service enhancement and product innovation. E-Business creates service enhancement and product innovation, as it provides services for the customers to make order over the web with easy procurement and minimize time and effort. Following will be the discussion about how Tesco influenced by E-Business in expanding rapidly in retailing industry.
Tesco, probably the UK's best-known retailer with the slogan "You shop, We drop" which meaning that the online shoppers can purchase their items through the Tesco webpage, after that the items will be deliver to the door steps to every online shoppers. Through this convenience provided in this online purchasing has increase the number of online shoppers rapidly compare with the walk-in customers.
Ten years ago, Tesco has been managing its Tesco.com home delivery service for online shoppers. There are a lot company has change the way of business operation due to the rapid expansion of e-business market. Through the survey did by management, as the public has make use of the e-business, finding results was online shoppers are increasing from time to time especially small retailers are also starting to invest in the e-retailing which can impact on Tesco e-business especially in the future if Tesco do not keep on the track.
Tesco develops the e-business mostly within the internal operations because it needs e-business to increase their volume of business therefore this makes Tesco need to provides latest updated information from time to time especially to those customers who prefer to stay at home for online purchasing comparing with walk-in to Tesco itself.
The above achievements all results from the efficient and convenient e-business activities which saves lots of people golden time especially for busy people such as businessmen. For example, those businessmen will probably rather logging into internet to grab or purchase the items they need daily or for their business itself. Through this e-business, everything is processing and delivers on time as per request of the customers under certain terms and conditions.
In addition, e-business helps people to save money as people have to spend when they need to go out by own transport or public transport to the retail itself. At the same time it save times because through online purchasing does not time consuming compare with buying items at the retail itself and especially when there is no any Tesco outlet around the customer staying area.
Effectiveness of Tesco's Response
As many businesses do, Tesco pluck in more certainty and options into the business when making decision. The estimation of customer potential is taking into consideration as first priority is given to those busy working couples with young children who do not have time to do their shopping at store. The Tesco.com had fulfilled their needs as they can get the variety product by clicking the page and adding the product into the list.
Today, e-business is considered essential to every retailer as they can get new income stream from the online shoppers and sometimes it may goes higher than the expectation especially during the promotion period or member's day. Anyhow, Tesco.com still have not fulfilled the most advanced internet server requirement as it can cause the online shoppers to be impatient while waiting the web to load especially when they are selecting on some items to purchase. Comparing with others, such as Carrefour and Wal-mart, there is not as heavy as Tesco in webpage navigation because other retailer dividing the webpage into a few part to increase the speed of the loading webpage. To attract or to maintain the customers, webpage navigation have to be easily loaded and every time is updated with the latest promotions which may catch up the customers before they load into other retailer webpage, Another disadvantages of Tesco.com, once the customers purchase the items, it is delivered to door step with certain charge based on the distance but without knowing the estimated date and time for the delivery. Meanwhile, comparing with other retailers, their web has the server which already setup properly to estimate the date of delivery to the online shoppers to satisfy the buyers.
Furthermore, in Tesco.com, everything is fit into one webpage. This creates confusion to the online shoppers because it makes trouble to them to search the items they need all in one webpage. For example, comparing with other retailers, the items are categorized accordingly and some even divide into separate website though is still under same retailer.
For Tesco e-business still has to improve the service like other competitor which can deliver the goods to the customer in speed after the online purchase is making. Since the customer have no time to purchase at store and do the purchasing online directly, the customer may need the goods in rush. Tesco should take this element into the e business as the other competitor can deliver the goods on time especially during holidays because it is meaningless to have the business without fulfil the customer perception.
In addition, the other competitor has strength in classified the goods in good order as well as showing information of the product in specify before purchasing which Tesco can apply into the e business. The customer will feel convince in the goods they are buying as they viewed and study the product in detail before buying. This is a brilliant strategy for the competitor in marketing the brand as the value added to the business.
Areas for Improvement
In year 2010, everything need to be fast, simple, and achieving target and same goes to Tesco because future of the any business is unpredictable so before it falls in the market, Tesco have to plan carefully to backup themselves to compete with others. Since Tesco.com has own a value in the Tesco business, the improvement on server is needed to avoid the overload servers by visiting or purchasing. It is because Tesco.com has a number of customers and login to the server in the same time might cause the server down. The customers cannot enjoy their online shopping when the system responds slowly. Thus,
Tesco should have always keep an eye in monitoring on the internet server and keep on upgrading the system database during the peak period especially during those public holidays like Christmas or New Year eve to avoid from the above internet traffic.
Besides that, Tesco.com can consider developing the software to allow estimated time and date for delivery for customer to review after the purchase is done. By implement the time estimated system, Tesco.com can reduce the time in dealing with the customer as the customer can monitor the delivery time themselves. On the other hand, Tesco.com have to organize well on the delivery schedule with the developing the software to allow estimated time and date of delivery to make their service efficient. This can helps to improve the delivery time after the customers make online purchasing. Next, Tesco need to improve the webpage navigation by reducing the information updated in a page because Tesco is currently practising uploading all the information in a page which makes the webpage slow. To survive in the competitive environment, Tesco need to learn to overcome the competitors' strength in classifying or categorising items such as Tesco should organize their categories of items correctly by not confusing the customers. Thus, it is imperative that management need to consider putting in more effort in additional marketing and advertising strategies in their web to attract more customers. For example, comparing with other retailers, the guideline of usage of online purchasing is clearly mentioned to the customers in the webpage including the policies and the categories of items. Besides, the application apply in the website has to be user friendly and having high security to protect the customers information especially in the payment section to avoid any discrepancy. Last but not least, Tesco as the worldwide retailer has to consider in developing e-business into other country in order to survive in the industry, for example, Malaysia, before the competitor do so.
As conclusion, certain factors in Tesco surrounding need to be carefully monitor to improve themselves because it can cause any failure in business in the future if there is no any action taken. In this competitive environment, Tesco need to overcome their weakness to maintain their regular customers especially to ensure future growth. Continuous in developing the e-business throughout the world will be the best solution to overcome the competitor weaknesses before the competitors enter because nowadays, people is looking for more advance technology to save their golden time especially. It will be a challenge to Tesco in developing the e-business because without a good e-business structure, Tesco will be left behind by the competitors but if Tesco could manage to overcome it before anyone else, then Tesco can doing better in future.
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