Corporate Strategy of Tesco

drawframe An evaluation of Tescos rivalrous coif in spite of appearance the f be industry market. Corporate strategy ASB-4004. December the fourteenth 2009. Shahbaz Ansari- abpa40, 500 200603 Word count- 3300 excluding references, appendices, and tables. Contents page Introduction P3 History P3 Business strategy P3 Corporate strategy P3 Company taxs P3 Value strand P4 knock Ventures and Mergers and Acquisitions P4 PESTEL analysis P5 Competitors P7 Figure 1 Tescos principal(prenominal) competitors P7Figure 2 Ansoff ground substance for Tescos marketing strategy P8 Figure 3 Tescos sub-bran poisition in the United Kingdom P9 Figure 4 Tescos competition in the UK P10 Figure 5 Tescos internal competition P10 Core competencies P11 Human imaginativeness P12 Recommendations P13 Conclusions P14 References P15 Appendices P17 Appendix 1 Retail Competitors Analysis by Mintel P17 Appendix 2 Leading UK food retailers, market shares, 2008 P18 Appendix 3 Tesco UK store formats, 2008/09 P 1 9 Introduction The company that our group has chosen to analyse is Tesco.Tesco was founded in 1919 by Jack Cohen who began his new estimate by selling surplus groceries from a st alling in the east end of capital of the United Kingdom One his first twenty-four hour period he made ? 1 profit and ? 4 of sales (Tescoplc. com history). Tesco has come a long way since then and is now whizz of the largest food retailers in the world, operating around 2,318 stores and employing over 326,000 people. Not only has Tesco managed to monopolise the food sector, they realise in addition diversified into a number of other sectors, some of which being insurance, mobile net scarpers, clothing, and electronics.However, this report shall form a focus of the food sector in the United Kingdom. Albeit that Tesco has 2,200 stores locally, it is categorised as operating in a globalised environment. Currently Tesco has stores in s counterbalance European countries the United Kingdom, Poland, Hungary , Turkey, Slovakia, Czech Republic, and the Republic of Ireland. Further more(prenominal) also operates in Asia, stores stand be found in China, Malaysia, Japan, Korea, Thailand, and Taiwan (Tescoplc. com community plan Tescoplc. com core UK).The long term business strategy of Tesco is currently fivefold to be a made international retailer to grow the core UK business to be as strong in the non-food arena as the food arena to develop retail services- much(prenominal) as tesco. com, Telecoms, and Tesco personal finance and to put community at the heart of what they do (Tescopl. com long term strategy). How Tesco chose to implement the corporate strategy is via a c autographing wheel model that all of the key elements of the business, nodes, operations, people, finance, and community, are dealt with an equal and balanced scorecard (Tescoplc. om CR strategy). It has been stated by Tesco that the steering wheel has been implemented to place focus on the fact that corporate respons ibility is not a specialist function in Tesco, it is a part of everybodys job every day (Tescoplc. com CR strategy). Tesco works off the business value that their core purpose is to produce value for nodes to earn their lifetime hard-corety (Tescoplc. com our values). Great emphasis is placed within people, without their customers and employees Tescos success would not get under unrivalleds skin been possible.For the re chief(prenominal)der of this report the varyings that can affect Tescos competitive advantage shall be considered and evaluated. Value chain When considering the value chain of Tesco there are a number of primary variables that can either add value (+), lose value (-), or have the potential to add value (P+). For the primary activities Inbound logistics These have an integral importance in the creation of the value chain as they bear the early opportunity to create value, therefore because of the elements related to the logistics Tesco try to achieve and main tain the level of consumer choice in store (+).The efficiency of distri thoion system of Tesco does take on to be improved (+), and the quality control system should be managed by the company efficiently so that the cost of losses are not oblige upon the customers (P+). Operations Tescos core operations are service orientated and these services involve dedicateing and closing the store, shelf maintenance, and replenishing the stock (+). Outbound logistics The main emphasis for this stage in the chain is delivering the product to the customer (+), the customer service that is provided (+) and the implementation of the trolley service which is convenient for the customer (+). marketing and sales The Tesco nightspotcard gives discounts and provides hard-corety to customers (+), selling healthy and environmentally friendly products (+), and Tescos advertisements and new policies on using recycled products to help Tesco come carbon free by 2050 (+). pin Ventures and mergers and acq uisitions In 2008, Tesco made an agreement with the Royal Bank of Scotland to buy 50% of their shareholding. This allowed Tesco to build up Tesco Personal Finance. Tesco currently offer financial products much(prenominal) as home insurance and a credit card. However, Tesco wishes to offer a full service retail bank.The reason for wanting to embark on this new venture is because owning its own bank would not just increase Tescos revenue, it would also attract new customers and provide a further service for its existing loyal customers, which other competitors do not offer (REFERENCE PLEASE YOUNG). In 1999 a French hypermarket chain named Carrefour tried to enter the Korean market but it failed. This was due to the fact that the Korean population had a preference for national supermarket chains, which this was not as the owners failed to localise the store (REFERENCE PLEASE YOUNG).Interestingly Tesco attempted to enter the South Korean market in 1999 as a mutual venture with Samsun g. It was named Samsung Homeplus Tesco and was extremely successful due to the recognition by the Koreans that it was a domestic retailer. By joining forces with a Korean business Tesco was given an instant competitive advantage and the opportunity to thrive it has now blend in one of Koreas trail retailers and there are currently 30 hypermarkets and two super express stores (Kollewe, 2004). Finally, in 2008 Tesco packd a Korean supermarket chain named Homever which was owned by the E-land group in Korea.Tesco paid ? 958 million to take over the 36 stores that the group owned (Walker, 2008). The takeover will not only increase Tescos revenue, in a country that they have already been successful in, but will also enable Tesco to gain knowledge of the off the beaten track(predicate) East and Asian markets by dint of meeting the two companies, this hopefully should enable them to be just as successful within these new markets. PESTEL analysis for Tesco Political Due to operating i n a global environment, Tesco is largely influenced by the political and legislative conditions of these countries, as well as the European Union enforcing governing rules.The government legislation for employment encourages retailers to provide work for a variant of people, ranging from flexible, lowered paid, and locally based jobs to in high spiritsly skilled, highly paid, and centrally-located jobs (Balchin, 1994). This piece of legislation also allows for the unlike demographics to be given work opportunities, such as students, senior citizens, disabled people, people from various ethnic backgrounds, and working parents. This gives Tesco a competitive advantage as it produces loyal employees. EconomicalThe receding has caused the unemployment level in the United Kingdom to soar over 28. 93 million (Office for national statistics). As economical factors are likely to influence demand, cost, price, and profits, these manakins should ferment Tescos management olfactory modal ity particularly apprehensive. Although Tescos international business does bring in a high amount of profit, they are still largely open on the UK market. If the unemployment rates continue to soar, the slowdown of the UK food market could have a severely detrimental effect on Tescos. SocialBritish customers have become one stop shoppers. Due to this movement, Tesco has been able to successfully diversify their company into a cast of different markets. One can now not only buy their weekly shop but can purchase personal insurance, electronic goods, clothing, and a range of other products from Tesco. com. Technological This particular variable of the macro-environment has helped to develop many of Tescos products and has not only been indicative of the companys satisfaction but also that of the customers. Due to services such as Tesco. om, the self checkout service and the Tesco Clubcard, the customer satisfaction levels have increased due to more personalised shopping, goods that are readily available, and convenience. However, due to the juvenile use of technology, it does allow for job cuts as face to face services have been replaced. Environmental Tesco has put in place measures to ensure that their company helps in the fight to lower carbon emissions. Their challenge is to achieve a 30% reduction of the carbon impact of the Tescos supply chain by 2020 and to become a zero carbon business by 2050 (Tescoplc. om Press release, 2009). Implementations in the forms of using green clubcard points in order to encourage environmentally friendly, carbon conscious buy the buy one get one free later scheme, that allows customers to acquire their free product at a later date to reduce scat out and are striving to reduce packaging, reduced carrier bag use, and increase recycling, this year alone they have reduced carrier bag usage by 53% (Tescopl. com Press release, 2009). Legal There are certain government legislatives and policies that Tescos have to abide by an d have a direct impact on their performance.Bodies such as the Food Retailing Commission (FRC), who prevent companies from demanding payments from suppliers and changing agreed prices without notice. Government policies for monopoly and the reduction of the buyers power can limit entry into the sector (Mintel report, 2004). Competitors The market leader of food retailers in UK is Tesco. It has 26. 2% (including non-retail is 31. 5%) market share, 2,115 stores and ? 34,874 million sales (Mintel, Food Retailing, 2008, details in Appendix 1). J Sainsbury which has 823 stores and 13. 5 (16. 5) % market share is in the second position. The third one is Asda group, and it gains 13. (15. 1) % market share with less than half of the Sainsbury stores number. The forth player in food retailing market is Wm Morrison Group which holds 9. 5(11. 7) % market share. The top four account for 63% of all food retailers sales (after adjusting for fuel sales) and dominate the market for main food shopp ing. (Mintel, Food Retailing, 2008) British supermarkets are typically evaluated by potential customers by two fix ups of criteria the perceived price levels charged and the quality of service offered interns of range of goods, quality of merchandise, opening hours, and store environment (Bradley, 2003). drawg Figure 1 Tescos main competitors adapted from Mintel report, 2009, (see appendix 1). As Tesco is in the midway of the position map, it has the opportunities to expand its product line to meet the up-market needs, or to have some discount products get the down-market interests, but the competition level in this position is very high. It is necessary to look at how Tesco still hold the No. 1 position in UK food-retailing industry. drawg Figure 2 Ansoff matrix to analyse Tescos marketing strategy.Tesco started in the UK food retailing market and the business is maturing. Sales density and market share growth are both slowing, and UK space is becoming a smaller part of the whole (Leahy, 2008). AlthoughTesco will still plan to open more stroes in UK, 80% will open outside of the UK in 2009 (Mintel, Food Retailing, 2008). The opportunities for Tesco are 1. Taking advantages of the food retailing value chain to continue to grow internationall by market development, and 2. Providing non-food products/services to the loyal customers in food retailing area by product development.Figure 3 Tescos sub-bran poisition in the United Kingdom. drawg The above figure summaries the sub-brands of Tesco with two main factors the customer perceived convenience and the product range (Food vs. Non-food). In order to hold and increase the market share, what Tesco is difficult to do is to to set a small number of big stores which could be the best choice to purchase the products when the customer have enough time. Meanwhile, there are more than one thousand express/One Stop stores which could be convenient for the customers daily life purchase.When considering the competitive advantages, our group uses Poters Five Forces (1980) to analyze Tesco competition in the UK and international markets. In the UK, Tesco bulits the barriers for new entrants (high fixed cost and difficult to get suppliers), cooperates with local suppliers (strong relationship with farmers), uses Clubcard for retaining customers (Customer loyalty), and in the food retailing there is no peculiar(prenominal) substitutes. drawg Figure 4 Tescos competition in the United Kingdom. drawg In the international markets, the situation will be different. Tesco should build relationship with the international suppliers, promote its brand to the international customers, provide products differentiation to avoid the threat from substitutes and potential entrants and compete with the international competitors which may already have strong supplier chains. Figure 5 Tesco internal markets competition. Core competencies There are two issues as the core competencies of Tesco. One is the employees, and a nother is the customers. The staffs deposit the competitiveness through the internal of the business, whereas the customers determine the external environment the profitability of the business (Kotler and Keller, 2009). Especially, when the business is in the downturn, Tesco needs to spend more time to do the research on how to satisfy the customers better than its competitors. The ultimate goal of Tesco is to reduce the cost for the customers. Since Asda enter the UK market with the introduction of parity strategy, the main players in supermarkets has face a fierce competition which based on the low-cost strategy.At that period of time (1980s), some of the main supermarkets had been replaced which was related to a low customer loyalty. People had a wide range of choice with a cheaper price. Until the Clubcard was established, customers have become more relevant to the supermarket. Although a Clubcard itself does not create loyalty, it can be a medium to produce the Tesco points ( which can be accumulated and exchange the goods/money within Tesco, source from Assen, Van den Berg, and Pietersma, 2009).Tesco notice that the total customer satisfaction experience can create the generate loyalty towards a pull strategy which is better than a direct promotion that is based on a low-cost products (a push strategy). According to Tescos annual report, In the first 6 months of the club card introduction, without any advertising case, Tesco have achieved about 17% of the customer spontaneous usage. Based on this research, it is obviously to see that a Tesco Clubcard can not only enhance the customers loyalties, but also can create a customer relationship management (CRM) for Tesco.Tesco can get the information from CRM and analyze it to find those most valuable customers. On one hand it can reduce the cost and make Tesco to target more efficiently and effectively. On the other hand this may improve the companys service quality and customer satisfaction. Club card acti vity is successful and remarkable. Customers like these activities, as well as the store managers. It gives the opportunity to create a communication channel for the managers and the customers sharing knowledge. Tesco is trying to treat its customers as shareholders.In addition, Tesco must learn and adjust their marketing strategy to meet their customers needs. That means if Tesco can notice the changing of the customers needs more quick than its competitors. Their competitors will lose their customers satisfaction and this is one of the most important competencies of Tesco, especially the critical successful factor in UK. Human Resource Tescos distinctive strategical resources and assets can be found in its employees. The HR department in Tescos has been strategically integrated in the overall plans management utilizes HR whenever they are making decisions (Beardwell J. 004). HR department helps in the building of the company through the following creating new plans and techniqu es to measure and reduce labour turnover. It has played a authoritative role in aiding diversification into new business sectors. Their slogan Every Little Helps is part of their ethos and is also inculcated in the training programs offered to their employees (Armstrong, M 2005) Tescos focuses on high commitment through the HR department by incorporating all employees by discussing its strategic directions.The major challenge to Tescos is ensuring that all employees are aware of the roles assigned and how these various roles and actions can affect the big Tescos picture (Whitelock, N. 2003). As a result, training has increased within the organization with high value placed on employees through the offer of basic and extended training. (Beardwell J. 2004). The increment in employee training within the organization is as a result of HR adopting a proactive strategic role and not an administrative one.The stance taken by HR is that by equipping the employees with the skills that they need to work will in the long run lead to increased growth. (Mullins, L. 2005) Career development is also looked at. This is in light of the changing employment market and employees feeling less secure in their jobs. A disadvantage of this is that since these skills are transferrable, they could in the long run be of benefit to their competitors. Though the merits of training the employees outweigh the demerits, employee shift or movement should not be overlooked. Marchington M & Wilkinson, A 1997) In terms of sustainability, developing employees through T&D and education are imperative because these are the most important factors in determining long-term business profitability. This can also be achieved by fully exploiting the wealth of knowledge within the organization its employees. (Armstrong, M 2005) It aims to integrate learning as part of it business culture because learning is seen as an integral way of being flexible which has a long term organizational value thus maintain ing its huge step ahead of its competition.In conclusion, Tescos integrating HR as part of its strategy and focusing on the training of its employees has made them feel a part of the overall strategy which in turn has lead to higher employee commitment. This long run effect gives Tescos the added value it needs in the competitive retail market. Recommendations There are a number of recommendations that can be specified which could enable Tesco to grow into more dominant brand and have even more success both locally and internationally.Tescos growth largely depends on its non-food products, these account for over 25% of its sales (not including petrol), and it is these areas that are the key to Tescos future success. The main emphasis should now be on developing new and innovative strategies so that these areas can blossom. Already it has been noted that Tesco beauty atom is only second to boots, and their skin care range is the fastest growing range in all supermarkets. However, th ey do face stiff competition from Asdas and Sainsburys clothing range.If Tesco wishes to be viewed as the number one one stop shop then more efforts need to be placed into the non-food areas differently customers shall use a different supermarket that do satisfy all their consumer needs. Currently there is a serious cause for concern that our carbon foot score needs to be decreased drastically. All supermarkets have a high level of waste cardboard, plastics, paper. This problem needs to be address, although Tesco has stated that they wish to be carbon free by 2050, they need to ensure that this dream becomes a realisation.They can reduce these variables by having less packaging on products, promoting recycling, and disposing with plastic bags all together and instead implement long life bags that the customer brings to the store when they visit. Tesco have been extremely successful in many foreign markets through joint ventures and mergers and acquisitions. They have acquired a lo t of useful knowledge about the Korean market and now hopefully will flourish in the Asian and Far East market. This shall only happen though if they bring not only their own values but adopt the ones of the country that they are entering.Finally, further move need to be taken into promoting Tescos banking service. If this venture does go ahead they will be an unstoppable force. Conclusion Tesco is a remarkable chain. Although it is leading in its market and is attempting to conquer the international world, it is the values that they uphold that are second to none. It is the emphasis on its people that have allowed them to be so successful by continuously trying to provide better and faster services of a high quality, and investing time and money in its employees is why they have so many loyal customers.Tescos are known for innovation, they have now become a one stop store, not only can one acquire the weekly shop but now can obtain insurance, home furnishing, clothing, and electri cal goods. It is for reasons such as these that they have always been able to stay one step ahead of their competitors. Word count 3300 References Armstrong, M (2005) (9th Edition) A Handbook of Human Resource Management Practice Kogan Page, London Assen, M. , V. , Van den Berg, G. , and Pietersma. , P. 2009) primeval Management Models The 60+ models every manager needs to know, 2nd edition, Balchin A. 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