Business Report on Tesco
Executive Summary
Tesco is known as the third largest retiling store in the world. From its emergence until now, Tesco earned a lot of profit and is providing a variety of products to its consumers. Geographical diversification in Tesco leads it towards the height of success. When we analyze the internal and external factors that affect the performance of Tesco, we realize that strengths of Tesco make his business very profitable. There is a tough competition that Tesco has to be faced but due to its diversifying products and good quality business operations, Tesco is still among the top leading businesses in the world.
There are some political, social, environmental and legal factors that affect the overall performance of Tesco but with good and effect management approached, Tesco hazels all the difficulties and still has the largest market share in UK. Tesco knows about the changing trend of the customer needs. Therefore they are always engage in giving the desired products p its consumers. Customers of Tesco are very loyal with it.
Introduction:
Tesco is multinational grocery store in United Kingdom. Tesco is considered as a third largest retailer store in term of profit and in term of revenues, it is considered as second largest retailer in the world. Tesco has its store chains in 12 countries of Europe and Asia. It has covered 30% of market share in United Kingdom. It was founded in 1919. It is listed on LSE and it is also a part of FTSE 100 index. According to the records of august 2014, Tesco has market capitalization of 20.5 billion (Allen and King).
UK operations of Tesco are divided into six categories that are differentiated in term of size and products sold. They are Tesco extra, one stop, Tesco metro, Tesco express, Tesco home plus, Bobbies, Tesco superstores. Tesco also offered the service of internet retailing. United Kingdom Tesco stores offer home shipping by booking orders on Tesco.com. Tesco expanded its business operations outside the United Kingdom using the international expansion strategy but at the same time, they also focus on the joint ventures with the local partners. According to the financials of Tesco, there is an increasing trend in earning per share of the Tesco Company.
Tesco made a record profit in the recession period of 2010. Tesco want to create new jobs of 16000 employees, in which 9000 are UK based. Tesco has lost its attractiveness from customer by 2014 when the share price of Tesco decrease its value UK to 49% but Tesco struggled hard for improving their share price and try to remain in the competition with its rivals Lidi and Alsi. In 2014, Tesco has suspended its eight executives who were engage in overstating the profit by 250 pounds billion. In addition, the result of this overstatement was in form of devaluing the share price of Tesco. In 2006, test was at the fourth number in the retailing industry. Now it has become second largest retailing store in term of its revenues (Ayodele).
Currently there are more than 500,000 employees working in Tesco. Tesco was originally a grocery retailer but with the passage of time taco diversified its operations and go into the areas such as clothing, electronic, petrol, toys, financial services, internet services, furniture and telecoms. Tesco ha many subsidiaries like Tesco stores ltd, Tesco mobile, Tesco bank, Tesco family dining, bobbies garden and giraffe restaurants (Datamonitor, 2004).
Tesco is listed among the top retailers of UK. To analyze its internal and external factors that have greater impact on the business, we analyze about its strengths, weakness, opportunities, and threats.
Strengths
It is among the top retailer stores with many valuable brands. According to brand finances of 2014, Tesco is slightly below than IKEA while above the eBay. This company offers value for the money. They provide a range of many products. Tesco products have earned its good name of quality. There are almost 6784 stores in many countries. With the passage of time they are diversifying their business activities and going to involve more activities like Tesco banks or Tesco petrol pumps. This is the big strength of Tesco that they are not only confined to a single product but they have diversified their operations to keep competitive advantage. Tesco apply the customer retention strategy and for this purpose, it has provided loyalty packages to its consumers that make their customers more loyal to them. Tesco always but in bulk and then engage in retailing activities. Tesco earn a lot of profit in term of economies of scale. Tesco has done many joint ventures both on international and local level to gain the good market share (Fernie and Sparks, 2004).
Weaknesses
When we compare the performance of last year of Tesco than its competitors then it reveals that Tesco has not performed well. In 2009, there were many products that were recalled and it resulted in the form of financial loss as well as it damages the brand image of Tesco. Tesco mostly business operations is limited to the retailing sector in United Kingdom, almost 755 of revenues from UK stores come from this industry. This is a weakness of Tesco that it does to have diversified its operation in United Kingdom. Tesco has entered in to some new markets such as mobile industry in which a lot of money has to invest for technological innovation (Lindgreen and Hingley, 2003).
Opportunities
Tesco has diversified its operations and has widened its operations to the different markets in the world. Tesco has greater opportunity to expand its business to other international markets with low risk due to its good brand image and good will. Customers of Tesco are increasing day by day and it cause in overall reduction in the cost results in more profit. Tesco has many opportunities to expand its business operations in the time of recession. If one sector is confronting with decline then other segment can fulfill the loss (tesco, 2015).
Threats
Tesco Company has its competitors that give a tough competition to this company. Although Tesco is leading the retail industry in United Kingdom from last 15 years but now competition has become very intense and can cause a threat to Tesco. Financial crisis on the overall economy of United Kingdom is the biggest threat to Tesco Company (Metzger, 2014).
PESTEL Analysis
Strategic evolution tools are necessary to analyze any company performance. Pestle analysis is necessary to analyze the unpredictable and dynamic environment that effects the operations of business. These factors include political, economic, social, technological, environmental, and legal factors.
Political Factor
Entrance of china into WTO agreement gives a larger opportunity to foreign western companies to come inching and do joint ventures. Tesco also made joint ventures with china for the development of shopping malls. Due to many countries who have signed on WTO agreement, give an excellent opportunity to Tesco to expand its operations to the other international markets (Ndungu, 2011).
Economic Factor
The most important factor for the Tesco is the economic factor of any country as it directly affects the buying behavior of the customers. In UK officially an economic recession is announced but due to decrease in interest rates, there was low level of unemployment. Due to this factor, purchasing power of the customers remains steady, but there exist still uncertainty about the finances therefore customers are not willing to spend on the premium or luxury products.
This recession has positive effect on the Tesco sales as now people started to eat more in home and less from outside, this cause an opportunity to buy grocery for the homes. Food comes under the head of basic necessary items; therefore, even in the recession session spending on food is not cut down (Rogers et al.,2005).
Social Factor
According to the analysis of UK population, there are older people than the young generation. Older retied people consume less food and less travel to the UK superstores to make grocery as compared to young generation. Internet literacy is also lees among the retired person. These social factors affect any business in longer terms. Now the overall trend of the consumer is changing with the time. People are more likely to buy food items that are healthier. There is an increasing demand for the organic food by people (Pandya and Arenyeka-Diamond, 2002).
Technological Factor
Technology is the basic factor that changed the overall operations, UK supply chain, and processes in retiling stores. Now more internet services are used in the grocery stores and some UK superstores are engaged in the facility of home service. Tesco is also using all the technological advancement in its operations to earn greater profit in less time.
Environmental factor
Now there is trend of using the environmental friendly plastic bags a Tesco is also giving recyclable and user-friendly bags for its consumers. This causes to develop a good social corporate image in the eyes of society. Tesco also introduces greener living scheme that give advice to people about environmental issues (Rogers et al.,2005).
Legal Factor
It is forecasted that VAT has increased 20% as government is going to finance the deficit dud get. This step will help the non-food sector to grow like clothing. Due to the act of increasing the mini mum wage rate of employees, operating cost of Tesco has increased.
Management Approach of Tesco
Management has different definitions by many researchers. According to peter Ferdinand, management is taken as a multipurpose process that manages business, managers, and work at a time. Mary park fillet defines management, as it is an art to get things being done through people.
For the success of every business its management must be task oriented and enough capable to achieve competitive advantage in the market. Tesco vision is actually to build new business opportunities in the world. Management of Tesco is actually based upon the organizational structure of the Tesco. There are basically five basic departments in the Tesco, finance, administration human resource, marketing, and research. Every depart net is managed with different style and has different strategies (Palmer, 2005).
In Tesco, there is trend of management y objective. Objectives of Tesco is actually bounded by time and are directly linked with the performance of the employees, therefore every manager is bound to report the line meager. Distinct duties are given to every employee.
The main focus of Tesco is actually to satisfy the need of customer. Tesco has a very good logistic system that is named as integrated logistics management. This management style help in reducing the overall cost and expenses of the business and on the meanwhile increasing the performance of the business.
In past Tesco mostly relied upon the primary distribution channel but with the passage of time they also used secondary distribution channel. As a leading entail industry, the main focus is on the distribution. Therefore, management of Tesco gives more attention the ways of its distribution. The overall success of the whole business depends on the fast distribution of the products to the distribution stores from the chin stores.
Organizational culture of the Tesco is actually market oriented. Corporate social responsibility is given greater consideration to attain the respect and integrity from the people. In addition to the management, there also exists a model of steering that keep balance in the management.
In Tesco, there is democratic form of authority. All the employees are encouraged to participate in decision-making process in Tesco. Employees are given flexibility to make decision on their own behalf in some situations (Rogers et al.,2005).
Tesco has earned such a good brand image in the eyes of completely world; the reason is that the good and effect management of Tesco lead the company towards the height of success.
Challenge for the Tesco and Its Impact
The most challenging feature for Tesco in the current changing trend is the international business environment. In South Korea, there is a restriction in opening stories on sandy and this is a big challenge for Tesco. Non-food items such as clothing and other goods showed low sales in Tesco the reason behind this actually emergence of many online stores. The business environment creates a challenge for the Tesco but Tesco take this challenge as a positive one and is trying to diversifying its business operation (tesco, 2015).
Recommendations
Tesco must consider the coming opportunities of the business and must have a sight on the threats from the threats. Tesco should widen its business operations to other international markets and it is working globally. Although it has many competitors in the market but with good management strategies, Tesco is still among the leading business in the retail industry.
Conclusion
References
Allen, J., & King, P. P. Tesco manangement report.
AYODELE, A. A SITUATIONAL AND STRATEGIC ANALYSIS OF IKEA AND THE FUTURE.
Chat, Q. L. This report aims to explore the external and internal environment of Tesco through using the PESTEL mode, porter’s five forces model, resource analysis as well as the value chain so as to realise the threats and opportunities faced by Tesco in the UK as well as the core competence of the corporation.
datamonitor. (2004). tesco plc.
ECONOMIC, E., SOCIO-CULTURAL, S., & LEGAL, L. Intel Pestel And Five Forces Analysis.
Fernie, J., & Sparks, L. (Eds.). (2004). Logistics and retail management: insights into current practice and trends from leading experts. Kogan Page Publishers.
Lindgreen, A., & Hingley, M. (2003). The impact of food safety and animal welfare policies on supply chain management: the case of the Tesco meat supply chain. British Food Journal, 105(6), 328-349.
Marketing, S., & Reginald, G. MARKETING AND SWOT OF RETAIL GROCERY.
Metzger, K. (2014). Business Analysis of UK Supermarket Industry.
Ndungu, K. (2011). Analysis of TESCO.
Palmer, M. (2005). Retail multinational learning: a case study of Tesco.International journal of retail & distribution management, 33(1), 23-48.
Pandya, K. V., & Arenyeka-Diamond, A. O. (2002). Towards a model of e-tailing: a SWOT analysis of electronic supermarkets. International Journal of Services Technology and Management, 3(1), 96-110.
Rogers, H., Ghauri, P. N., & George, K. L. (2005). The impact of market orientation on the internationalization of retailing firms: Tesco in Eastern Europe. The International Review of Retail, Distribution and Consumer Research, 15(1), 53-74.
tesco. (n.d.). Retrieved 2015, from tesco: http://www.tesco.com/
tesco swot analysis. (n.d.). Retrieved 2015, from research methdology: http://research-methodology.net/tesco-swot-analysis/
