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Supply Chain Management Tesco And Sainsburys Management Essay

3386 words (14 pages) Essay in Management

5/12/16 Management Reference this

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Introduction

Supply Chain Management (SCM) is one of the important activities in each and every business. It is the responsibility of management of organisation to look into issues like of taking decisions on how to coordinate among different units of organisation to make the production of goods and services good, make proper arrangement for storing sufficient amount of stock to meet the market needs, from where to get raw materials and how to make on time and cost effective delivery of product and services to customer and market. So Supply Chain Management can define as “a process which encompasses every effort involved in producing and delivering a final product or service, from the supplier’ssupplier to the customer’s customer”.

What is strategic Group

Strategic group is a term used in modern management which states that Strategic group is combination of companies within market, the main attributes for putting companies into same group is to have

  • Similar model of business
  • Similar strategies for operations in market
  • Similar products and services

Formation of a business strategic group depends upon the above stated three points, the business organisations can be put into same strategic group who have similarities in their business model, their strategies in dealing their clients and stakeholders in market, and on the variety of products and services they are producing.

One of the important strategic group based on retail market in United Kingdom consist of Tesco, Sainsbury’s, ASDA and Morrison.

Assignment Requirement 1

Give reasons that why Tesco, Sainsbury’s, ASDA and Morrison are classified as part of the main strategic group.

The main characteristic of the requirement for the formation of a strategic group (in retail market) is that all the companies in that group must at least satisfy three characteristics of a strategic group during the procedure of Strategic Group Analysis (SGA).

Following are the set of characteristics satisfied by Tesco, Sainsbury’s, ASDA and Morrison, due to which they are classified as part of same strategic group.

Product Diversity

If you open the homepage of all of the above stated companies, the first impression you will get is that all of these companies are offering almost same categories of products, like food and drinks (wines), groceries, household items. And this is one of the most important characteristic for the classification of different companies into one strategic group.

All these organisation produce their own products as well one can easily found the products of all world known multinational companies products under different categories, but the reason behind listing them in one strategic group is that they provide same range of products and services, may under different brand name and labels but the category of the product remains the same. For example under the category of food and drinks in Tesco you will found almost all those juices and drinks which are available at Sainsbury’s under the same category.

Area of operation (Geographic Coverage)

This characteristic refers to the organisation extent area in which they offering services, in how many countries with what number of subsidiaries. The idea behind this characteristic is that to merge those companies in one strategic group who has same geographical coverage and they are providing services in at same geographical locations.

All of the four companies have their operations not just limit to geographical location of United Kingdom, but they also have business subsidiaries outside UK (e.g. Tesco is working at 14 different countries). One can found Sainsbury’s, ASDA, Morrison and Tesco stores and super marts at almost all the high streets throughout UK, which shows that the geographical area of operations is also same for all these organisation and it provide justification for why they are included in one strategic group.

Market Area (Market segment served)

This characteristic for the formation of strategic group is like the combination of the above two. It includes the market area in which the company is providing services and also the segments of market which they serve. All the four companies serve a range of market segment; differ in names but same in nature. The most common market segments served by these companies are food and drinks, household items and financial services. The numbers of market areas which these companies are serving are also almost same, at one company it’s operational with different name than other but the description and nature remains the same in all companies.

Channels of Distribution

An important part of supply chain management, which make it sure that the customers gets quality items delivered to them on time. A very common practice at all the organisation for distribution is that customers place their orders and the supply chain management team make it sure to deliver right goods on time, but after evaluation of technology now all these four companies provide their customer facility of online shopping over the internet (websites) through their credit or debit cards, and receive the products they ordered at their homes. All the four companies have same infrastructure for distribution of their goods to market and shipment of customer order (delivery) to their home address.

Marketing

A very important and crucial work is how to promote your company products, the general way in which now a day’s marketing is done is very common in all organisations irrespective of the nature of their business, or they are production companies or just service providing organisations. Same is the case with these four organisations; they use same mediums for advertisement of their products and packages for customers like on their website, print and electronic media and on store advertisements.

Quality

A very basic milestone for categorisation of companies is their product quality, quality have just two parameters good quality or bad quality. The company providing good services and products can be ranked as good quality while bad services and products causes decrease in the market value and share for a certain company. In UK customers are very much focused about the quality of products they want to purchase, so these companies try to produce quality products in order to increase their market share and generate max revenue. One of the reasons of putting these four organisations in one strategy group is the quality of the services they deliver and products they produce.

Pricing Policy

Value for money is the requirements of most of the people, in modern management companies are also provide guideline to produce quality goods and services within affordable price. All the four companies in this strategic group work on the principle “Value for money” and try to provide their customers good product within affordable and min prices. Which make a sense that why these companies are classified in same strategic group.

Assignment Requirement 2

Factors which are outside the organisation and out of control of the management of organisation but influence the company and product development called Macro environment factors.

Following are six fundamental macro environment factors / forces.

  • Cultural
  • Demographic
  • Economic
  • Natural
  • Political
  • Technological

Macro Environment Analysis for Tesco

Tesco is one of the largest company in UK with more than three hundred and sixty thousand employees and its operations in 14 different countries at Europe and outside the Europe. In UK the Tesco store are from a small basic level store to large level super markets, where about 86 % of the total worldwide sales of Tesco are at UK markets. In United KingdomTesco strengths is that they have captured the market in UK super markets and can be called the leaders of super markets sector in United Kingdom. They have employees from every ethnic region and culture, so like other UK’s companies Tesco is also having mixed and diversified culture, which help Tesco much better in dealing with their customers and improve their customer satisfaction when a person from Tesco team come up to a customer and speak with him / her in the language customer wants to speak in.

Demographic and Economic are also very important for any organization’s business, it mean the area in which the organization run their business, as UK is one of the good economies in the world so it also helps Tesco because the origin of Tesco is also UK and as stated earlier that 86% of their sales are at UK markets.

For Tesco it is hard to get natural resources like some of the raw materials from other countries, but as the company focused is not too much on production of different products so this force effect the organizational business but not too much.

Political and Technological macro are also of big importance in organizational business. As UK is one of the most stable democracy in the world and its political system is peaceful, so that’s why the political forces like administration, and other agencies helps organization like Tesco to improve their business and also help them in understanding and removing the treats for their business especially in current credit crunch. While technology is driving businesses in today’s world, the more you effectively use the technology the better will you get the results. So at Tesco they are very much focused on the use of technology in their daily business activities both at operational (customer) level and administration level to grab the benefits of using technology.

Macro Environment Analysis for Sainsbury’s

Like Tesco Sainsbury’s also have mixed organizational culture, having employees from each region of the world. Which make the organizational culture rich and a pool of individuals which make share of knowledge and skills, and also provide opportunity for management to take advantage of the skills of employees from round the world.

Demographic and Economic conditions of Sainsbury’s are also in good position to make the organizational business more beneficiaries. The areas where their stores are located are densely populated and you can see their subsidiaries at all high streets across UK. The salary level and grades are good to attract potential candidates to apply for jobs at their stores and offices. The purchasing power of customers in UK is good and Sainsbury’s provide them best quality under reasonable prices so it makes this organization a prestigious one, and to generate more and more revenue.

Macro Environment Analysis for ASDA

They are having same benefits of the Economy, cultural, natural and political forces of macro environment, but they lack in demographic, because you will not see their store as frequent as that of Tesco and Sainsbury’s. They can grab the benefits of demographic macro by opening their new stores at thickly populated areas and especially on high streets.

They also lack in technology, the website don’t provide enough information to customers. It will be good for them to make proper use of technology in their business to improve their market share and generate max revenue.

Macro Environment Analysis for Morrisons

They also enjoy the benefits of good (but struggling) economy of UK and a smooth political system while the buyer power is also high and natural resources are available. But like ASDA they also lack in the macro force of Demographic, because they have less no of stores as compare to Tesco and Sainsbury’s. they need to focus on opening new stores at highly populated areas in order to get benefits of having large population which is a driving force for any business, and also focus on to make the use of technology improved in their business (as discussed for ASDA) to make their business progressive and increase their market share.

Assignment Requirement 3

Reasons for market Leader Success

There are a number of reasons for becoming leader in business market and how to accomplish difficult tasks to become market leader. Following is list of well known reasons for market leader success.

  • Customer oriented strategy
  • Competitive strategy
  • By following successful companies steps
  • Setting realistic and flexible goals
  • Building sustainable competitive advantages

According to Jhon Romero a management writer “You’re headed in the right direction when you realize the customer viewpoint is more important than the company viewpoint. It’s more productive to learn from your customers instead of about them”. All the leaders in market make their strategies customer oriented, giving priority and importance to their customers need while formulating their business strategies. They believe that the customers are the centre of their business, and without customer support they can’t be able to accomplish their organizational goals and objectives.

If an organisation wants to become leader in their respective market, they need to make their organisation innovation-friendly organization, developingnew business modelsandnew productsor services. Make best use new technology technologies for innovations and get feedback from their potential customers on the way they want this product to be.

Different big organization like Microsoft, IBM and so many other companies’ success stories provide guidelines for developing organizations whose aim is to become leader in market, so by following those steps and modeling those steps into the way their organization perform different activities help organization to accomplish a success story.

Some organization lack in setting their goals and business objectives, they set goals which are unrealistic and unachievable in the given scenario, so if they want to become market leaders and post a success story, they need to have goals which are realistic and achievable.

Leader organization often have prolonged and sustainable strategies with some unique values and combination of unique resources within organization that cannot be replicated by competitors.Sustainable competitive advantage allows the maintenance and improvement of your enterprise’s competitive position in the market. It is an advantage that enables your business to survive against its competition over a long period of time.

Assignment Requirement 4

Comparison of two companies in strategic group

As per requirement of the assignment, here is comparison between two companies of the given strategic group. The comparison is between Tesco and Sainsbury’s

Tesco VS Sainsbury’s

Tesco was founded by Jack Cohen in 1919 when he started selling groceries from a market stall. It became a limited company in 1932 with stock market listing being obtained in 1947. Tesco now employs over 470,000 staff in over 4,000 stores across 14 countries worldwide. With sales amounting to £59.4 billion in 2009, Tesco is the third largest grocery retailer in the world. Tim Mason, a member of the Board of Directors of Tesco, says “Developing talent is crucial to any growing business, particularly retail, which is a people-intensive industry.” Hence, he realises the importance of people management in his industry.

In UK the Tesco store are from a small basic level store to large level super markets, where about 86 % of the total worldwide sales of Tesco are at UK markets. In United KingdomTesco strengths is that they have captured the market in UK super markets and can be called the leaders of super markets sector in United Kingdom.

The given table shows the Tesco stores types in UK an abroad and the benefits they provide to their customers.

Store

Facilities

Express

Convenience and Value. Fresh local food

Metro

Convenience in town and city centres. Lots of Food Lines

Super Stores

A wide range of non food lines, such as DVD’s and books

Extra

A wide range of food and none food, including seasonal items such as garden furniture.

Sainsbury’s

Sainsbury is one of the famous stores of the London. It is also listed on London stock exchange. And is a constituent of the FTSE 100 index. J Sainsbury plc is the parent company of Sainsbury’s supermarket ltd. commonly known as Sainsbury’s the third largest chain of supermarket in United Kingdom .with a share of the U.K supermarket sector of 16.3%. the group also has interest in property and banking . Sainsbury’s is now the third largest grocery retailer in the UK on the basis of reported turnover, having recently been overtaken by ASDA — it was the UK’s leading grocery retailer from the late 1980s to 1995.

In the year ended March 2003 it reported worldwide group turnover of over £17.4 billion and profits of £454 million, with a total of over 170,000 full- and part time-staff. It has 498 stores in the UK, with an average sales area of about 2,800 m2, as well as 185 stores in the USA.

Sainsbury’s has struggled in recent years, along with Safeway, to achieve the growth of its more successful UK competitors, and market share has decline to just over 16%, Because of huge competition in retail market .

Contrast B/W Tesco and Sainsbury’s

Sainsbury’s

Tesco

  • Leading supermarket in the U.K
  • Range of product and service such as Sainsbury bank, online shopping and local shop.
  • Perceived as good quality
  • Recent investment in store upgrades
  • Diversification in to cloths, electrical, high-tech consumable etc. local store in garages etc.
  • Always they prefer to sell better quality product than most other food store.
  • Brand name economies of scale.
  • Top super market in UK
  • Different services, now also in telecom sector offering Tesco mobiles
  • Generate max revenue from UK
  • Make proper use of technology at their stores
  • Improved quality products and value for money.
  • Worldwide known brand name.

References

  • http://scm.ncsu.edu/public/basics/
  • http://www.witiger.com/internationalbusiness/SupplyChainManagement.htm
  • http://www.dallasfed.org/research/indepth/2005/id0501.html
  • http://www.1000ventures.com/business_guide/market_leader.html
  • http://www.businessdictionary.com/definition/macro-environment.html
  • http://www.allbusiness.com/glossaries/macroenvironment/4954903-1.html
  • http://www.reevesstrategygroup.com/
  • http://www.sciencedirect.com/
  • http://www.entrepreneur.com/tradejournals/article/55208492.html
  • http://icc.oxfordjournals.org/cgi/content/abstract/2/1/91
  • www.tesc
  • http://www.morrisons.co.uk/Corporate/
  • http://www.asda.co.uk/corp/home.html
  • http://www.sainsburys.co.uk/sol/index.jsp?
  • http://www.tescoplc.com/plc/tools/search?freesearch=Tesco+culture&x=0&y=0
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