Case Study of Tesco Firm - Management Paper Example

Tesco firm is a British multinational grocery and general merchandise retailer with its headquarters in Welwyn. It was founded by Jack Cohen in 1919 as a group of market stalls, and by 1939 the business had expanded as it has over 100 Tesco stores across the country. Currently, it is the largest retailer in the UK that denominates the food and grocery market. It overtook Sainsbury and became the leading retailer, this made it stronger, and it grew yearly.

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History and Growth

Tescos growth is highly attributed to its positive prospects in the UK. This is because of the thin market coverage they have there as compared to other developed nations. In the 21st century convenience is the key point and Tesco has maximized on that by offering shoppers a one-stop place for all the items they need, this definitely contributes to its growth as the figure below will also illustrate; (Robinson, 2011).

The rise of Tesco is greatly attributed to its marketing strategies, in particular with the introduction of the Tesco Club Card that made it successful (Ryle, 2013). Thus, ensuring it grows into being a major and dominant brand. Through the introduction of the Tesco Club Card in 1995, despite there being a lot of doubt and negative speculation from other supermarkets, Tesco still surpassed them all in the business and also overtook Sainsbury this leading to its breakthrough and success in the industry.

Problems and Challenges

One of the challenges facing Tesco is that it is not sure which shoppers to target in the market. It is not sure whether those with the upmarket offer that goes to Sainsbury or the discounters at Aldi and Lidi (Anderson, 2015). It lost the advantage it had in the easy because when it launched its new venture Fresh and easy, was at a bad timing back in 2007. During this time the consumers adventure in tasting and spending had declined , and also the habit of taking home a meal from the supermarket instead of ordering a takeout was more common in the UK than in the US. This then led to it cutting off from the US back in 2013. With the recession in the UK, the grocery market has been tough with prices going up, and Tesco has suffered substantially in that matter. Tesco is currently not famous as it was in the nineties. The reason is that it concentrated on high growth, accelerated expansion and cheap bargains instead of good customer care and relationship with its suppliers (Anderson, 2015).

Tesco may face difficulty in the future in maintaining its market share. Other companies, such as Morrisons, have more potential for growth regarding new store openings. The fact that the Tesco store portfolio covers the whole of the UK means, the company has less growth potential compared to its competitors, which may prove to be a problem going forward. Thus it will need to remain innovative regarding promotional strategies, store layouts, service, etc.

Channel Strategies

Tesco business strategy lies in its cost leadership within the grocery industry. Its slogan of Every Little Helps inspires the realization of the firms profitability. The company operates on a wider market base hence benefits from the economies of scale. Moreover, Tesco has a tradition strategy of experimenting different aspects of business, which has revolutionised its operations completely. For instance, it was the pioneer retailer to introduce a 24-hour shopping for its customer and today integrates the e-business technologies in its operation thus improving accessibility of its products to prospective buyers.

Tesco has a number of channel strategies namely; distribution or multichannel marketing and customer relationship management. A distribution or multichannel marketing involves Tesco using many different marketing channels to reach a customer. This channels strength is that each channel targets a different group of buyer who would be having different needs and thus ensuring the right products are delivered at the right time and at a low cost, and this has successfully applied to Tescos marketing strategy. Its weakness is that in the long run due to the large number of customers this channel will prove to be expensive.

The customer relationship management channel ensures that Tesco treats its more valuable customers who buy more products or have high expenditures differently as compared to the others. Thus the relationship management program inn 1995 introduced the Club Card initiative uses knowledge of customers shopping to contribute majorly in the driving of sales. It could also use the information from the shoppers purchases to know what they want and give them vouchers for items they liked to buy and this is a major strength on Tescos part. It is a market strategy of gathering and interpretation of actionable competitive information, with the objective of establishing marketing strategies and tactics to make use of that information (Sorger, 2013). Its weakness is that the Club Card initiative made the store to be more personal to the shoppers by calling them if there is an offer, but this would be unfair to other customers, as they would not have the same privilege.

Competitive Strengths, Weaknesses Threats, and Opportunities of Tesco Plc

Tesco sets itself as a major actor in the grocery industry by maintaining its products at competitively lower prices. In the recent past, the firm has used its economies of scale to drive further its prices lower than that charged by its close opponents (Dinkhoff, 2013). It has embarked on some price wars with other companies, with it being a forerunner in the competitive environment of price competition. This strategy enabled it to go through the launch of the Big Price Drop which saw prices cut on 3,000 items a year.

Tesco has also utilized its economies of scale through buying of its products in bulk, reduction of transportation costs, distribution, and marketing of its products. It has also accomplished this by driving down the prices they pay their suppliers (Dinkhoff, 2013). Thus, enabling them to compete more intensely with other companies on price, as they would not want to have to recover more profits so as to cover their cost of manage and production.

Tesco draws its strengths from its ability to operate multiple stores throughout the world with predominance in the United Kingdom. Venturing into the global market improves the business ability to reach more customers. In addition, the firm has embraced modern marketing trends such as electronic marketing thus widening its market size to get new customers and outdo its competitors. Since the company has its stores widely spread throughout the world, the digital marketing makes it easy for products to be distributed at customer convenience thus mainstreaming loyalty. Most of the chain stores are located in the urban areas where there is high disposable income and high purchasing power leading to profitability thus able to leverage the competition it gets from competing firms such as Sainsbury, Marks & Spencer, and ASDA. Diversification of product to include a variety to include clothing and other products apart from its main food and drink offerings, the firm remedies revenue loss that characterizes single product businesses.

Despite these internal merits, Tesco primarily targets the developed world thus unable to access customers form such regions. Based on the ongoing innovations developed by its close competitors such as Sainsbury, Tesco has to embrace a wider scale of technologies that encompass production, distribution and marketing. It is evident that embracing digital advertisement is a positive step towards technological pervasiveness of Tesco. The widening progress in technology provides the company with unique potential to expand its customer base and enter into strategic alliances with other firms to reduce costs incurred on production and distribution.

Company Competitive Position and Success

Tesco invests in growth, and according to its chairperson, he stated that You cannot save your way to prosperity, he thus stressed that growth is important to business and that it must be carried out in a controlled manner. Tesco has also grown inorganically by expanding through buying of rival grocers, and this has made its presence available in every postal code area In the UK, this has transformed it into a local store as its everywhere (Ryle, 2013). It also has a broad range of store formats namely Express, Metro, Tesco, Extra and Tesco home-plus that are strategically placed in different towns. Therefore the new space has been a significant factor in driving sales growth for the company.

Company Data Analysis

In the UK supermarket market analysis Tesco emerged as the leading retailer, this is because of its focus on providing all services under one roof and through the Club Card they can offer services according to the consumers wants and needs. The Chart below illustrates that;

Source Kantar worldwide 2014

Tesco has had a hard time in its growth at the overseas countries with US being the toughest. The reason is that the US has a highly competitive market and maturity, thus despite being there for six years and having a 1 billion in Euros investment it still exited the US market in 2013. The figure below can give us an insight into that;

Alternatives for Resolution and Recommendations for Change

Tesco has evolved from being a traditional grocer and now sells a broad range of products and services in a variety of retail formats. It started in 1919 by selling groceries from a market stall, but it now sells a broad range of products including clothing, electrical goods, homeware, fuel and much more (Dinkhoff, 2013). It also operates within the financial services and the telecoms sector. Thus Tesco is advised to focus on Non-food products tend to have much bigger profit margins than traditional groceries and so have been an important driver for growth for the company. In 2010, the company had a 4% share of the non-food retail sector.

In 1974 it made a deal with Esso to begin selling fuel on the grounds of its superstores and thus from this it became the largest fuel retailer in the UK. Tesco also enables cross-shopping where one can buy a variety of food and non-food products under one roof. It has continued to grow by introducing new initiatives and developments that have led to the dynamic growth of Tesco like being a 24-hour store and offering home delivery services. It also is the largest e-grocer in the UK that is I the format of ordering groceries online and having them delivered in the comfort of your home.

Conclusion

In summary, the turning poin...