Tesco is a British multinational company that specializes in groceries and general goods retail. It has its headquarters in Welwyn Garden City, Hertfordshire, England, United Kingdom. It is ranked third-largest retailer in the world in terms of gross revenue, and it is the ninth-largest in terms of revenue. It operates in seven countries that are located in Asia and Europe (Thunderbird International Business Review, 2015). It is a market leader in the UK maintaining a market share of 28.4% also it maintains top positions in Ireland, Thailand and Hungry. Tesco was founded back in 1919 by an entrepreneur known as Jack Cohen. It fast operated as a market, but the quick shop was opened in 1939. It has diversified into areas such as books, petrol, software, furniture, toys and clothing.
Tesco has been listed in London stock exchange and forms a constituent of FTSE 100 index. On 22 April 2015, the company was registered to have £18.1 billion market capitalization. Most of the growth of the company was experienced between the 1950s and 1960s through acquisition and expansion until it reached over 700 shops (Hughes and O’Neill, 2008). The business motto of the company’s founder Jack Cohen was ‘pile it high and sell it cheap’ The Company has flourished over the year, and this paper will analyze the company’s philosophy that has been responsible for its growth.
Tesco is a leading retailer in over seven countries in Asia and Europe; this amount of success does not happen by chance. The leaders of the company have always had a clear mind and goals that are well defined by their employer. The top management has put their customers, employees and the community at the heart of their decision making (Abegg, 2012). Their main aim is to deliver a satisfying shopping experience and also a conducive working environment for the employees. Achievement of Tesco Company has significantly been contributed by its Mission and vision. Tesco has focused on long term business success through core vision which forms the basis of decision making. In a highly competitive business world, a clear vision and mission is critical to ensure that it adjusts to the changing environment
The mission of Tesco is straightforward. It is defined by the following words “To be the champion of customers in helping them to enjoy a better quality life and a more natural way of living. The statement is still valid even today. Customers are still searching for great products at affordable prices (Hughes and O’Neill, (2008). . Tesco believes that it is their work to bring this type of products at places that are convenient for the customers. That is serving shoppers a little better every day is their core purpose. Serving their customers conveniently is at the Centre of everything they do. Every employee from those in management to the supporting staff have understood the mission. In the United Kingdom Tesco is estimated to serve an average of 66 customers every second. They have taken it upon them to ensure that each customer gets a better experience every time they visit one of their stores (James, 2019). Their values help them understand how to keep it going. They all struggle to understand the customers better. They act responsibly to their communities and also help their customers get the best option.
Understanding people is the best in knowing the best way to handle them. Customers. Communities and colleagues and the things that matter to them and trying to improve on those things is the core goal of Tesco. Companies understand that people are more important than profit. Talking to people and listening to them using every possible method, from social media to club cards and then adjusting according to their needs.
Tesco aims at treating people in the way they wish to be processed by encouraging them to work as a team, trust and respect each other. The company encourages employees to support and say thank you and finally share knowledge and experience. Tesco understands that taking care of their colleagues develops a culture of trust and respect (Barnes, 2011). It makes the college feels respected and recognized. Rewarding of collogues is another crucial aspect that gives employees motivation to give their best in the company, they think they are a part of the family and hence work harder to achieve the mission of the company.
A vision is a defined strategy of where the business is aiming to be in future. Without a clear vision, a company may lose its direction and may fail to survive. Tesco defines its vision as follows; to be the most highly valued business by the customers we serve, the communities in which we operate, our loyal and committed colleagues and of course, our shareholders. The vision is taking care of five elements which gives a clear picture of the type of business they are aspiring to become (James, 2019). . These aspirations are to be wanted and needed around the world, a business that is growing and full of opportunity; they also aspire to be modern innovative and full of ideas. Also, according to the vision statement, they also want to be winners locally while they apply their skills globally and finally inspiring achieving trust from their customers.
Strategy refers to a plan that guides how a company deploys its resources to achieve its set objectives. The strategy set guidelines if the companies decision making the process. Tesco set aside £1 billion in may 2011of its revenue to improve its shopping experience for customers. It developed a seven-part strategy that was aimed to help it achieve its set objectives of being highly valued by customers and steady growth of long term (Barnes, 2011). The main elements of the policy are as follows. The growth and development of the United Kingdom core were at the heart of the plan. The fast growth was to increase the number of employees to 20,000 in two years. Introducing promotion to employees and renovating the existing stores. Tesco also had the intention of being the creator of highly valued brands. They had to develop their label, for example, F&F clothing to provoke customers with high-quality goods. The next target was to be a distinguished international retailer online and in stores (James, 2019). . Growing retail business in all their market and to be responsible for the communities in which they serve. Tesco put cooperate social responsibility at the Centre of all their activities by developing what came to be known as the three big ambitions. Tesco had a goal of improving its team so that they create more value. They took people to be their most valuable assets. Finally, Tesco has the intention of being active in everything they sell like they are in food which is their main product.
The fact that Tesco is the largest retailer in the world means that it has not come by chance. Taking calculated moves that are made possible by clear mission and vision gives every employee, leader and shareholder the direction that the company is moving. It has contributed significantly to the success of the company (Schneider, 2010). The aspects of the business are regularly monitored, and new plans are adapted where necessary to keep in track with their mission and vision. As a result, Tesco gas experienced repeated success over a long period.
Analysis of the competition environment
Tesco operation in Britain, together with its overseas activities, has exposed it to stiff competition threats and challenges. The company has faced heavy weigh competition in the United Kingdom from other well-established business with similar interests. Every business is trying to expand its market share, which has caused only the most suitable business to remain in operation (Barnes, 2011). The following is a deep analysis of the market that Tesco serves.
Tesco operations are in different countries; hence, global political factors play a vital role in its mode of operations. The political factors include tax rates, the political stability of the country and acts of legislation. The ongoing political stations make the direct government retailers create employment for the local population. Tesco plays its part in creating employment services, and at the same, it created demands for its products through the diversified human resources.
Economic factors are the primary consideration of Tesco taking in mind that they are profit-taking. Economic factors affect demand, cost, profits and prices. Tesco should be attentive to any changes in any element that affects how people earn and spend, such as taxation. Tesco is developing rapidly in other markets, but its operations are still dependent on the parent company in the United Kingdom (Schneider, 2010). The parent company controls 30% of the total market. Diversification and internationalization are two main strategies that Tesco has put in place. The decrease in disposable income and an overall reduction in household income Tesco has decided to shift most of its focus towards advertising its value brand instead of the luxurious items.
Several social factors in the United Kingdom have forced customers in the United Kingdom to shift towards buying god in bulk. Tesco adjusted to the change by investing the number of nonfood items offered for sale. Goods and services that people order are primarily influenced by the beliefs they harbour. The views and attitudes that affect the people purchase are, in turn, influenced by social conditioning (Schneider, 2010). . People are getting more aware of their health issues that arise from unhealthy eating; therefore, they are more cautious about what they buy. Tesco’s response to this change is increasing the stock of organic foods because they are believed to be less toxic.
A retail business that has attained success over a long period like Tesco must b aware of the latest technological advances that affect its operations. The two most significant technological advancement that Tesco has embraced is the development and usage of online shopping, which is connected with home to home delivery. Then there is the self-service checkpoint which provides convenience in the side of clients and reduces the cost of labour at the same time (Barnes, 2011). Tesco has invested considerable amounts of money in using eco-friendly sources of energy and reducing the impacts of fossil fuels.
There has been increased pressure for companies to reduce the negative impact their operation make on the environment and instead use methods that are beneficial to the society at large. Tesco has emplaced means that will reduce the carbon footprint by 2020 (Mehta et al. 2018). Also, the company is coming up with a method of disposing of waste produced from stores without degrading the environment. The company is sensitizing their customers to dispose of the waste responsibly.
Government policy and laws that are enacted by the various government if the countries in which they are operating affect their operations. One of those legislations is Food retailing commission of 2004. After it was enacted, it changed the way business is done (Mehta, et al, 2018). It changed the way business was done before. For example, varying prices without prior notice or asking payments from suppliers. Tesco gives a discount on the fuel bought the following goods purchased in the store.
One of the most significant advantages of Tesco is that it is the biggest retailer in the United Kingdom. It has the most significant market share and hence generates the highest revenue. Its profits rise by 28% in the financial year 2018. The broad revenue base is used for advertising and strengthening its marketing strategy (Mehta et al. 2018). Tesco has diversified its geographical base by opening over 6800 shops in more than 14 countries. The number of stores they control has been rapidly increasing from 3751 stores in 2008 to 6966 in 2019. Increase in the name of stores means an increase in revenue generated in the market. Tesco has established different types of the store, such as Tesco homeplus, Tesco express, superstore, and one-stop.
Tesco is the largest private employer in the United Kingdom. It has created more than 743 thousands job worldwide. This has helped improve its image in the eyes of the public (Schneider, 2010). Also, it has achieved various awards that include the grocers own-label food and drink awards and waste not want not awards. Tesco is given a competitive advantage by the fact that they use very advanced technology.
One of Tesco’s major weakness is its failure in the United States and Japan. Its exporting operation failed utterly in 2012. The results were that it closed its operations in Japan after five years and its operations in the United States after nine years. Fraud is a significant threat to the business. Tesco was charged with disclosing wrong information about their income with a view of reducing the tax that they were supposed to pay (Schneider, 2010). Their image in the eyes of the public was distorted. Their operating profits has been decreasing slowly. The price of their shares fell by 9% due to a decrease in the operating profits, which was its worst performance since the Brexit referendum. Although Tesco is a retail market leader, its strategy of low benefits has caused lead to decrease in its earnings.
Tesco has various opportunities for growing further, even if it is a leading retail business. These opportunities are evident because of several factors. Introduction of a wing called jacks business which is a discount store. Jacks business has snowballed in a short period because it competes favourably (Schneider, 2010). . Another promising opportunity is the strategic alliance with other brands. Partnership with companies whose reputation is clean is an essential opportunity for the development of Tesco. It enables Tesco to offer a wide range of goods and hence attract more customers. Online shopping has been a tool of great value to Tesco. Online shopping has enabled Tesco to reach customers it could not have reached before.
Development of Tesco is threatened by several factors where some of them can be managed. One of those threats includes the Christmas saga. It happened in Christmas of 2017 when they placed an Ad that contained information that was offending to people from the Christian religion (Mohammad, 2012) People refused to buy its products which led to decreased profits. Tesco has been suspected of giving customers misleading information. They were producing and selling their product with a fake name Woodside farms. The issue shows Tesco go through painful legal procedures.
Five forces Porter’s
Porter 5 is an analysis tool that attempts to determine the market position of a business by analyzing five forces that affect the business. The five forces are discussed below.
Threats of new entrants
Tesco is not threatened by the entry of new products in the market. It deals with a very wide range of products belonging to different categories such as clothes and jewellery, groceries, health and beauty, home electrical, Garden and toys. As an addition, the company also sells the main substitute for these products. Therefore the fear of being pushed out of business by new entrants is irritants (Mehta et al. 2018).
Rivalry among existing firms
The amount of competition in the retail business is very stiff. To cope with the competition, Tesco spends a large portion of their revenue through advertising (Mohammad, 2012). This has enabled Tesco to maintain gross leadership in the United Kingdome market despite the fact that the competition is very stiff. The fact that the consumer does not switch cost makes the competition stiffer.
Bargaining power of suppliers
The fact that Tesco offers a wide range of products means that there is also deals with a large number of suppliers. There is no switching cost in the side of the suppliers, and hence their bargaining power is very low. Suppliers are essential to any business because they bring goods to be sold.
Bargaining power of buyers
Buyers always want to get high-quality products at the lowest possible prices. In the long run, it puts pressure on the company (Mehta et al. 2018). The size and strength of the customer’s base determine the strength of the bargaining power. In Tesco, bargaining power is meagre because the supermarket has fixed prices. Therefore the bargaining power of buyers is not a significant threat.
The threat of substitute products
Customers can be satisfied with different products. When such a scenario appears, the industry suffers. Tesco has widely diversified on the products it offers in the market. Eliminating the danger in question (Schneider, 2010). Therefore Tesco does not need to worry over been pushed out of business by a similar outcome. The diversification gives customers a wide range of choices such that they will always have something unique.
Criticizing Tesco past strategies
Different people and organizations have criticized Tesco prior strategy. The path which they chose to achieve their objectives has gotten them in trouble several times (Mehta et al, 2018). Trade bodies national bodies, trade organizations, consumer groups and even individuals have opened legal wars with Tesco. The major criticism is the argument that it poses a serious threat to small scale and private business because it is almost monopolistic to the products it sells. Several other areas that have contrives to include unfair treatment of staffs, customer relations and business deals with its suppliers. Also, its approach to foreign business has been questioned severally. Their method of gaining land in which they build their stalls has been challenged (Schneider, 2010).
The different claims that have been filed against Tesco are listed below.
- Discrimination of customers of Asian agents.
- Cooperate policy that was not honest.
- Environmental degradations
- Fake price cuts
- Intimidation of buyers and suppliers
- Issues of safety and health issues
- The accusation of child labour.
The legal claims that Tesco has faced include claims of injured employees, dismal of employees unfairly, and several other commercial claims (Mikoláš, and Žváková, 2012). The above applications have destroyed Tesco’s image, and it spent a considerable amount of many in the advertisement to cleanse the name.
However, the strategy that Tesco has put in place have failed on several occasion. The main strategy failures are discussed in this section. To begin with, shabby shops have been a significant setback of Tesco. Tesco accepted the Pledge and spent £1 billion in introducing a more authentic appearance of the stores. It later planned a renovation of 430 stores with a cost of £400 (Mohammad, 2012). They spent this amount after customers complained; therefore, its bad image has gone into the mind of customers.
Tesco went wrong when it promised to train 8000 staffs that would work in new stores that would be opened. This never happened, and instead of increasing their teams, the number of crews attending to customers per square feet fell from 6.3 to 4.8 in a time interval of six years. Tesco concentrated in increasing profits margins while ignoring essential inputs such as staffs (Mikoláš and Žváková, 2012). Congestion in the number of customers waiting to be served. When a customer spends a long time waiting, they may end up seeking a better option elsewhere. Also, means of communication from the management to the employees have been criticized for being poor. And inefficient.
Tesco has been accused of negligence of its own label of a range of foods. They appeared to have been stuck in times of innovation while its customers were constantly making innovations. In addition, Tesco clinched to its three-tier strategy while which included a standard range and efficient (Schneider, 2010). The strategy has stagnated for over 15 years. Other supermarkets have changed many business aspects; for example, Asda adopted Chosen by you as their motto. Tesco took a new formula for giving a discount in 2008. However, the brands were confusing to customers, for example, words such as cream field’s cheese, daisy washing liquid, and packers best tea. There has been an accusation that Tesco wanted to compete with Aldi and Lidl, but in the process, they overdid to a threat of limited competitive threat.
Several analysts think that Tesco shifted away from food too fast. Taking it in mind that food was its core product they offered in the market and focusing on many products resulted in the business being overstretched and under-resourced, reducing its competing power.
Tesco has attained success over a long period of time it has been through ups and downs over the years. Its huge market potential in the grocery market is very promising. Strategic decision making and making use of effective marketing tools. Tesco has a good chance of developing its revenue base and compete effectively in the retail business. Despite the various difficulties it has gone through Tesco gas achieved a commendable expansion to being a leader in retailer business in Asia and Europe. Such success is not achieved by chance. It is achieved through efficient management and leadership. A clear mission and vision become the bases under which all decision are made. Where the business wants to be in future becomes a motivating factor to every employee where supporting staff or in management level. Mission and vision affect how a business allocates its resources. Monitoring of every activity taken helped identify whether such steps were worth being of they should be aborted. Tesco has had several mistakes, as shown above. Some of those mistakes have been solved legally tarnishing its name. In future, such activities should be avoided for further development.
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