Tesco Business Analysis

Tesco Business AnalysisIntroduction Tesco Plc is a British based union, and is the largest aliment retailer in the UK. It is matchless of the largest British sellers and holds third rank in retail industry after USA based company Wal-Mart and France based company Carrefour. It sells around 4000 food products (Euromonitor, 2010). Tesco started with the logical argument in grocery retailing, scarcely now it also sell stationary, health and beauty, utensils, c comp inthing, home entertainment, electrical goods, kitchen utensils and seasonal goods uniform barbeques and garden furniture in the summer. Annual scratch of Tesco in year 2005 was announced as 2 billion and in 2006 it announced that it was going to open unusual stores very soon. Tesco operates in 13 countries with 3275 stores of which 2115 operates in UK its largest geographical securities industry (Euromonitor, 2010). It operates through different store formats which include Extra, Express, metro, hyper commercialize and superstore. Tesco has its own products ranging from value, normal and finest for different income group of consumers. Tesco was founded by jack Cohen 1919. It stirs its name from the combination of the fo to a lower place of Tesco, Sir Jack Cohen and a partner in a firm of tea suppliers who Cohen worked with, T.E. Stockwell (Marketing (00253650)). One of the biggest investment of Tesco was in the 1980s, when Tesco invested 145m for a superstore development program and invested 500m in construct 30 current stores (BSC). The company floated on the straining exchange in December 1947 with an initial share equipment casualty of 25p (LSE). Beyond the food, Tesco also sells non-food products including electrical goods, home entertainment, stationary, clothing, beauty and health, kitchen stuff, soft furnishing and season products as barbecues and garden furniture in the summer. The company has sour as one of the UKs biggest independent petrol retailer (Datamonitor, 2010). Moreo er, the group provides pecuniary advantages (Tesco Personal Finance) which was set in joint-venture with Royal Bank of Scotland and became one of the undefeated foresees of the group. Tescos Core Purpose, as stated on their website is to create value for nodes and to earn their lifetime loyalty. Competition in Retail Market The market in which Tesco operates is a highly rivalrous field, where Tesco holds a disproportionate amount of power. Tesco has three major competitors Sainsbury, Asda and Morrison. These giants of retail have many chains and a collective skunk that can influence the food market as a whole. The figures below shows that Tesco holds over a third of the UK market share, and fifty-fifty double the amount of Asdas market share which is the second largest supermarket chain. Following is a breakdown of the market share data published by TNS for the 12 weeks to June 15, 2008 (Reuters News, 2008)However, the recent financial crisis gift Tesco under the pressure when its customers by seeking reduce its expenses switched to cheaper alternative supermarkets as Lidl, Asda and Aldi. fit to the la see TNS data Tesco, Sainsburys and Waitrose are losing share of the UK grocery market. Tescos gross revenue increased by 5.5%, Sainsburys gross sales went up by 5.6% , sales of Waitrose just climbed by 1.6% while such(prenominal) hard discount retailers as Aldi saw its sales jump 22.1% over the 12-week detail and Lidl posted sales harvest-time of 9.8% (Just Food, 2008). . To substantiate its market share, the company has tackled the business by releasing 400 low -cost new ranges of food and products on their shelves. Today Tesco has 273028 employees and it is the largest British retailer with profit exceeding 2bn, including global sales and domestic market share. In 2008, Tesco became the 4th largest retailer in the world. STEEPLE+E Analysis There are rules and regulations which are set by the political relation so that thither should be no mon opolies and healthy contest in the market. Consumer law emphasis on protecting the consumer rights and make sure that the entrepreneurs have the chance to compete in the market. According to the EU law there is assumption that the companies with large market share are dominant, the problem with this is there may be compromise on the gauge of the product and costumer may end up paying higher prices for the products. As Tesco has a large market share, it has not been assessed till now but Tesco should bear this in mind. training consent is highly regulated in UK therefore Tesco should take care of this regulation as expansion is one of the strategies which Tesco follows. Therefore, before setting up a new store Tesco should check all the planning permissions and look if there are any resistances on law grounds or local tribes opposition. In the recent downturn of economy many retailers were affected badly but Tesco was fortunate as it was not affected that much same(p) others be ca implement it makes product for all, it offers a wide range of products from value to finest so it helped tidy sum to switch to value products in recession. Increase in tax or stock market fluctuation or change in currency can also affect Tesco. In the sociological aspect Tesco has foc utilize on accounting entry the products like meal for one and microwavable products to make life easy for the people migrate from the other parts of the world and are young professional. Tesco has made use of the technology well(p)y by launching the site tesco.com which makes the life of people easy by order the products from their home and it also gives Tesco a competitive advantage. Tesco has back up the blow reduction process and have raised 100 million pounds for keep openable technology fund Tesco also encourages its customers to help in reducing the carbon emission by using the same plastic bag many times, another challenge for Tesco may the reducing the use of fossil fuel which is used in its transportation. SWOT Analysis It has strong brand image and market leadership. Tesco is the largest retail group in the UK, which has nearly 30% of the UK grocery market as of June 2008, at the same time it has successful business which operates in 14 worldwide markets beyond the UK. The company built up a good disposition enables the group to launch new products and swear outs, and makes easier immersion in new markets. One of the shell examples was entering into financial services market with Tesco Personal Finance project (Datamonitor, 2010). The group has a stronger market presence in South Korea as compared its main rivals as Wal-Mart and Carrefour. These two Tescos competitors sold all of its stores and divest its unconscious process in 2006 in South Korean, due to inability to meet consumers demand (Datamonitor, 2010). This success encourages the company on making investments in order to sustain market leadership and generate more profit. As the terminus, com pany is spending 958million pounds on expanding and acquisition new stores in South Korea (FT, 2008a).Tesco.com is the largest online grocery obtain service in the world it is the fourth biggest online retailer in the UK, behind Amazon, Dell and Argos. (Datamonitor, 2010). In 2008 Tesco.com sales continue to growth constantly. Sales from Tesco.com grew by 20% in the first half of 2008, reaching 902million pounds (Tesco, 2010). fetching into consideration the online sales are forecasted to increase from 10.9 billion pounds in 2006 to 28 billion pounds in 2011 (Datamonitor, 2010), Tesco can get considerable benefits from strong foothold in online services. Notwithstanding on companys big plans to extent or open new stores in the UK, it becomes unwieldy to realize as not all expand projects satisfy local communitys requirements and finally have been frozen in waiting for governments decision. There are some negative event influences, patent infringement claims, for example, in 200 7, Franks International filed suit against the company in US order Court for the Eastern District of Texas, Marsheall Division alleging that Tescos CDS infringes two patents held by Franks (Datamonitor, 2010). Tesco do not have the small convenience store to service customer who the small areas, while the Sainsbury has the small store in the local small town , it is convenience for customer, they do not want by a lot of things, maybe just some daily consumable. There are lots of opportunities in other international markets for Tesco the Euro zone retailing sales has shown a growth of 33% as of August 2008 to compare as of August 2007, which comprised 4,732mllion pounds and 3,558million pounds respectively. While sales in Asia increased by 11% at the same period from 2, 862million pounds of as August 2007 to 3,151million pounds of August 2008, despite of a small loss in the first half as a result of establishing operations and tote up hubs in China (Tesco, 2010). About 80% of group s capital is being invested in international growth (FT, 2008b). For instance, investment in markets of rapidly growth economy such as India with planned investment around $114 m to set up the business, in China where Tesco has spent 180million pounds in 2007 to increase its support in its local partner (FT, 2008b). This provides a good opportunity to cover consumers demand of these markets which can add value to the Groups assets and significantly contribute to maintain its strong international performance. Notwithstanding on only 9 month of running business in the US, the Group has obtained sales result ($11 per square per foot per week) which is also encouraging. Successful experience of operation on international markets enables the companys to embody its plans of further overseas expands. Tesco has opportunities in non-food and services markets also, total UK non-food sales increased to 4.1billion pounds and 1.7billion pounds from international market as of August 2008, whi ch in total led to 7.3% sales grew (Tesco, 2010). However, Tesco has poor results in this market segment, while with skills in sourcing and supply chain management the company has opportunity to improve its position. Tesco Personal Finance made profit 71million pounds, where Tescos share was 35.5million pounds, up 34% compared to 2007 (Tesco, 2010). The Company completed the acquisition of 50% of TPF from the Royal Bank of Scotland by the end of 2008 (Tesco, 2010). Threat to Tesco is high competition as the result of financial crisis and consumers budget tightness such discount competitor as Alsi and Lidlrs are eaten away Tescos sales by offering high quality goods for the lowest price. The group faced risk of losing its customers who switched to the other retails in order to reduce its living be and had to revise its strategy in order to prevail its customers. McKenzies 7s Analysis McKenzie 7 S includes shared values, Strategy, Structure, System, Staff, Style, Skill. Accordingl y Tesco applied the 7 S of McKenzie as well to increase its market share and profits which are described as follows Shared Value Shared Value of the company states the objectives of the company and its believes. Tesco believes in increasing its sophisticated management techniques from primary manufacturing companies to the value of higher standards and marched northward on their value chain. Strategy Strategy describes about the methods adopted by the company to achieve its goals. Tesco applied various strategies ordinarily using Balanced Scoreboard (BSC) method. Structure It depends on the companies infra structure like top to down management. Tesco CEO thinks that they dont need of one leader, they a whole group of employees from top to down to work on strategies. System System is based on how to finish a work like how authorized is the wok and how smartly it has to been done. Tesco used a control wheel to achieve its pre determined strategies smartly simply used to help the employees in future. Staff Staff states about the number of staff in the organization. All over the world Tesco recruited more than 400,000 employees. Style It the style of the organization in which it works to achieve its objectives. Tesco used steering wheel to achieve its objectives. It has 90 degree arcs, in which four main areas are considered which are, financial, customers, operations and employee performance. Skill It describes the capabilities of the organization or the employees to a particular task. Tesco provides full seeledge to its employees to work effectively and efficiently within the organization. It provides skills to the employees to work according to the standards of Tesco (Kaplan R. and Norton D., 2008). Micro Environment analysis and Marketing Strategy Position of offering the stovepipe value for the most competitive prices contributed to be Tesco number one retail in the UK. Smart Supply Chain heed and Development strategy, constantly research, seeking i n order to meet customers needs, introducing new innovation, product quality and price, offering huge product range, store facilities and services, working closely with suppliers, developing and motivating its staff, combat-ready in the formulation of national food industry and environment protection makes possible to keep strong competitive position within market even through time. Terry Leahy, CEO of Tesco plc states there are many opportunities for business like Tesco as ample as you stay close to customer and hold to the changing circumstance (ICSC Research Review, 2008). The group provides online services through its subsidiary Tesco.com, broadband internet connection (Tesco Broadband) and telecommunications services (Tesco Mobile and Home Phone). Tesco.com is the largest online grocery shopping service in the world it is the fourth biggest online retailer in the UK, behind Amazon, Dell and Argos. Tesco.com serves 850,000 regular customers in the UK and gets more than 250,0 00 orders every week (Datamonitor, 2010). Significant advantages of purchasing online, such as comparatively low price, large product range and the ability to shop around the clock enable retailers to draw shoppers interest (Gladding, 2005). Tesco, the get together Kingdoms biggest grocer, has attracted considerable attention because of its ambitious overseas strategy and its successful on-line home delivery service (Child, 2002). Since establishing an MVNO with 02 in 2003, Tesco has built up 1.5m bustling subscribers and 250,000 of these visits the mobile portal every month (New Media Age, 2008). Hence, Tesco makes possible to carry into effect purchasing by using mobile phones and brings new life in m-commerce shopping (New Media Age, 2008). According to companys recent press release information Tesco.com sales up 20.5%, profit up 21.4%, including Tesco Direct (Tesco, 2010). Datamonitor (2010) in its Tesco, PLC SWOT Analysis states that With a strong foothold in online service s, Tesco is well placed to benefit from growing online spending. A strong online presence enables the group to serve new customer segments, avoid investments in physical infrastructure and earn better margins. The company has an impressive brand image, which is associated with high quality goods and services, huge range of assortments and at the time the best prices. Credible brand name enables the company to launch more new products and new market lines to go through new markets much easier and quickly, and become successful in this field as well, as it was its entry into the Personal Finance market (Datamonitor, 2010). Through the diversification process, Tesco has increased the range of its operation by entering to new markets of distribution and service supply, such as petrol distribution, banking and insurance, real estate and communications. Such changes and strategy improvements have further reinforced companys market power above its main competitors. Since the mid-90s, Tes co has been investing in overseas markets, by looking for new opportunities to expand and opening new ways of generating long term growth of shareholders value. Today the Group operates in 12 markets outside the UK, in Europe, Asia and North America. The half of the retail shops are represented beyond the UK (Tesco.com). As a part of international expansion, now Tesco is planning to open wholesale grocery store in India by investing up to $114 million over two years. It complements our entries into China and the United States, giving us access to another important economy in the world commented this decision the companys straits executed (World Trade, 2008). At the same time, Tesco announced that it has set up a South China headquarters office in Guangzhou in order to maintain its presence in this country, where the company already has 47 stores and has been running the business over three years long (World Trade, 2008). As a part of reinforcement its global expansion create by m ental act, the company plans to centralise all its overseas business after signing a 100million pounds network and voice contract. Through this network upgrade, mountain pass Folkes, Tescos IT director, commented, that the company will be able to standardise key finance, human resources, data warehouse and sales applications across the whole worldwide operations. The course Wireless network will connect 1,800 Tesco sites in the UK, stores in more than 14 countries and 440,000 employees worldwide, hence, significantly contribute expenditure reduction from reducing call costs to savings on staff travel expenses. He remarked Our aim is to have a common technology platform in tandem with common business processes so that we remain competitive as we continue our expansion abroad (Kamath, J. 2008). Smart human resource management is also important key of Tescos business performance. The company has selected Red Prairies workforce management solution to manage its global store staff, w hich will enable Tesco to improve customer service by aligning customer traffic with employee schedule. Ultimately, it will improve our business by increasing store productivity, and supporting revenue growth said Dave Briggs, programme manager for Tesco (Apparel Magazine, 2008). Tesco has been turn up a very good innovator as bachelors placements in Tesco yet further proved its innovation temperament which has seen in Tesco as they have the ability to mold according to the trend whatever are the market need as it become the first who protect the convenience outlets in UK, its one of the biggest innovation of all is the Clubcard Loyalty Program, Another great innovation done by Tesco was in supply chain management in which it partitioned the loaders according to the delivery like 1 chamber of frozen foods, another ambient products in only one truck, another innovation is the collection of data from customers on every purchase to use this information to offer the draw on product ra nge, Voucher get off to the customers according to the purchasing behavior of the consumer so that it can return to Tesco. Continuous analysis on the data gathered from the market it innovates its products like once Tesco got to know that nappies does not have market share so they researched on it and introduced the club offering baby advice on pregnancy and get downhood. With this around one fourth mother and baby market was captured by the company (Strategic Direction, 2008). Company has that much strength that it wanted to collaborate with the US grocery market where other European companies solicitude to stand. US market is known as typical market as it produces very luxury products at one end and cheaper products on the other end, but Tesco is the only one who can stand with this giant market as it is UKs biggest market which ability to attract customers of all social groups. Normally, people in US live near a big supermarket but Tesco bet that it will provide small stores w ith all needful products which are preferred by the people of US. Tesco look forward to launch Tesco Fresh and Easy computer memorys in US. These stores will be much spacious to provide all the necessary products under one roof, not like US outlets which does not provide alcohol, pizzas, snacks etc. Healthy eating is also one of the major fields where Tesco apprehension to capitalize its money. One of the biggest hurdles is to persuade the US people to behave likewise of the Tesco trend in UK where transportation facility and easy convenience helps people to buy more products especially in the case of perishable goods. Tesco has one more worry in front of it as its credit rating in respect of measuring quality of goods and services has been slumped where rivals were resurgent in this process (Strategic Direction, 2008). So Tesco is proved to be a good innovator which makes it in building strong reputation and brand name in the UK market providing all the necessary products under o ne roof. Tesco strategies makes it possible to compete it in the market like its brand strategy, price strategy and its thorough analysis of the market like Product life cycle analysis etc. making Tesco a competitive brand. According to the Product Life Cycle when a new product is launched or old product is launched in new market generally there is no competition expected at this stage and a high expenditure is needed in market research, launch cost and market test so the product may fix financial losses in early stage. The same situation was there when Fresh Easy chain of Tesco incur a loss of $106.8 million. It is clear that there were very low sales of these products so the weakness of the sales raises questions about the expandability of this format, what Tesco is into these days. So Tesco should limit the expandability at such a large scale in new market. Balance Scorecard In 1998 Tescos balanced scorecard was introduced and now it is known as management Wheel and it is the main driving tool for the business. It has helped Tesco to achieve a lot and it is followed from the board room to the shop floor. The steering wheel is annually reviewed and it ensures that Tesco is achieving its goal and also it ensures that Tesco meet the demands of organizational strategy. Although customers are not much aware of the balanced scorecard but the staff follows it strictly on the data which is collected weekly. Store take scorecard is given to the manager of the stores in which contains the quarterly corporate scorecard. However a strong link is there between the corporate level scorecard and the corporate level scorecard because of this whole data is collected by various systems and mechanism. Top management monitor the performance and look for the problem areas, after identifying the problems local management are asked to resolve and seek the improvement. Referencing Apparel Magazine (2008) IN BRIEF, Vol. 50 Issue 2, p16-20, 4p, (On-line), Retrieved on March 2 2 010 from EBSCOhost database http//web.ebscohost.com Child, P. N., (2002), Taking Tesco global, McKinsey Quarterly 2002 Issue 3, p134-144, Retrieved on 26 February 2010 from EBSCOhost database http//web.ebscohost.com Datamonitor (2010) Online Retail in the United Kingdom Datamonitor (2010) Tesco, PLC SWOT Analysis Euromonitor (2010) Gladding, N., (2005), Analyst comment, Marketing 5/25/2005, p39, (On-line). Retrieved on February 26 2010 from EBSCOhost database http//web.ebscohost.com Just-Food (2008), Tesco, Sainsburys losing share TNS, Retrieved on March 4 2010 from http//www.just-food.com/article.aspx?id=104077 Kaplan R. and Norton D. (2008), Tescos Approach to Strategy Communication, retrieved on March 3, 2010 from http//blogs.hbr.org/hbr/kaplan-norton/2008/09/tescos-approach-to-strategy-co.html Marketing (00253650), (2002). Tesco, Business germ Complete, EBSCOhost (accessed March 1, 2010). Reuters News, (2008), Tesco, Sainsbury market shares down slightly TNS, (Online) Retrie ved on 2 March 2010. Accessed at http//in.reuters.com/article/rbssConsumerGoodsAndRetailNews/idINL2456038620080624 Tescos American dream Doing it differently (2008) Strategic Direction, 24(2), 11-15. Retrieved on March 5, 2010 from Business Source Complete database. Tesco Personal Finance, retrieved on 28 February 2010 from http//www.tescoplc.com/plc/about_us/strategy/services/ Tesco (2010), Tesco plc web-site retrieved on the 1 March 2010 from http//www.tescoplc.com/plc/about_us/strategy/international/ The Financial Times (2008a), Tesco in Korean expansion The Financial Times (2008b), Tesco in new drive on China World Trade (2008), Britains Largest Retailer to Open Shop in India,Oct, Vol. 21 Issue 10, p14-14, (On-line). Retrieved on February 28 2010 from EBSCOhost database http//web.ebscohost.com Woodley, P.M. (2007), CULTURE MANAGEMENT THROUGH THE BALANCED SCORECARD A CASE STUDYOther Essays on TescoOther essays obtainable on the Tesco organisations areTesco Changing Business Envi ronmentTesco is one of the leading supermarketsTesco Strategy analysisTesco SWOT analysisTesco Fresh Veg Supply Chain Management