BUSINESS EVALUATION OF TESCO STUDENT NAME: LIPIN VARGHESE STUDENT NUMBER: 10351728 COURSE TITLE: BUSINESS STRATEGY MODULE CODE: B9MG100 LECTURE NAME: CLAIRE DEVLIN Contents Answer to Question 1. 2 Answer to Question 2. 7 Answer to Question 3. 9 Answer to Question 4.
11 References. 13 The foodand drink retail sector of UK is one of the leading industry. This sectorgenerates employment to a large mass of the population of UK. This paper will analyzeTesco’s capabilities and how it relates to the key success factors in UK.
Itwill also highlight the major stakeholder in the business operation using thestakeholder’s theory. Moreover, asuitable theoretical framework will also discussed to highlight the culture ofthe organization. On the basis of the analysis, recommendations will also beprovided for the development of the company.
Answer to Question 1 It isimportant for the successful management of the organization to monitor thechanging environment in which Tesco operates and thereby adjust its strategy.There are several multiple factors which affects the external environment andthus have a remarkable effect on the company strategy. The macro environmentalanalysis of Tesco can be carried out using PESTLE. Political factorsTesco operates in globalized environment and it has storesin different locations of UK. Tesco operates in more than six other than UK.
The performance of the company is influenced by the legislative as well aspolitical conditions in the economy. The government of UK encourages theretailers to provide job opportunities for the local people who have skills andare willing to work in companies. Tesco provides employment opportunities tolarge number of students, elderly and disabled people who are willing to workin the organization at lower rate. These workers offer loyalty and thus theycarry out their responsibilities in a better way(Tesco.com2017). Economic factors The economyof UK is assumed to grow at 2.
7%. The unemployment level in UK has lowered by1.4% in 2015. There is decrease in the household consumption and the debt levelis said to be increasing at a relatively higher rate. The economic factorscontrol the operation of Tesco. It can be said that the growing internationalprofit will contribute to larger profitability rate and thus this will help inthe improvement of the company (Tesco 2014).
Social/CulturalFactors Thecustomers in UK are influenced by the price and the convenience offered byTesco. It has been found that the customers in UK prefer to try new retailers.They also prefer those stores where they get their desired necessities at asingle place.
The demographic change such as aging of population and decline inthe meal preparation at home by the people of UK has increased theprofitability of the company. Tesco concentrates on their own label of share inthe retail business of UK and they are also trying to improve their operationalefficiency (Tesco.com 2017). Technological Factors Technologyplays an important role in the development of Tesco. The new technologies whichare launched by the company has benefitted the customers as well as thecompany. The customers were also satisfied because they received betterproducts in cheaper price. Tesco has also launched the Efficient ConsumerResponse initiative which helps in the management of food supplies of thecompany.
Environmental factors There hasbeen rising pressure on the managers and the company because they need to admittheir responsibility for the betterment and development of the society. Themost important issue which is threatening the company is the environment issuesand problems faced by the Tesco in its operation. The corporate socialresponsibility of the company is farmed in such a way so that the obligationsof the stakeholders must be clearly specified through corporate governance andregulation.
Legislative factors The policies and governmentlegislation have direct impact on the performance of Tesco. The Food RetailingCommission has highlighted an enforceable code of practice that is set in thecountry for imposing ban on the current practices adopted by Tesco. Theseincludes changing the agreed price without any prior notice and demandingpayments from the suppliers. On the other hand, the powerful competitors ofTesco also possess threat to Tesco because of intense price war and due toproduct differentiation. Tesco must also offer the consumers reduction on thefuel purchases on the basis of the commodities purchased by them from thestores and thus implement a proper pricing policy.
Moreover, Tesco also reducesthe price of the product on the basis of promotion and they also providecompensation for the consumers (Peppard and Ward2016). It is also important to conduct an analysis of Porter’s FiveForces to know the competitiveness of Tesco. These is analyzed briefly below:Threat of Newentrants The grocerymarket in UK consists of different competitors such as Sainsbury, Asda, Safewayand Tesco and they constitute more than 70% of the market share. Thesesupermarkets have established their power in the market on the basis of supplychain and their operational efficiencyin the market. However, due to steep competition among these supermarkets, thebarriers to entry has increased and it has become difficult for a new companyto enter the UK market. Thus, it can be said that the threat of new entrants islow in this industry. Bargaining Power ofthe Suppliers Tesco cannegotiate with their suppliers for better promotional prices. As there are alarge number of suppliers who are ready to supply the same quantity of goods ata cheaper price, it becomes difficult for the suppliers to do monopoly andcharge higher prices.
The bargaining power of the suppliers is relatively lowin this industry. Bargaining power ofthe buyers Tesco’s club card and loyaltycard membership helps in retaining its customer and therefore increase theprofitability of the company. Moreover, customer’s preference of better qualityproducts at lower price will help Tesco to retain its customers and thereforeconduct the business operation smoothly. Threat of Substitutes There are different substitutesof grocery products in the market. Customers easily switch to different productand they also prefer to choose different supermarkets if one companyexcessively charges high price on the customers. It has been found that thesupermarkets are also opening their outlets in small towns and thus are tryingto gain competitive advantage over other firms in the market. It can be saidthat the threat of substitutes is high in these industry (Tesco.com 2017).
Intensity ofcompetitive rivalry It has been found that thegrocery market has increased in size and is trying to gain market dominanceover its competitors. Tesco is trying to acquire customer information so thatit can use them to communicate with the customers. The highly competitiveretail grocery market in UK had to build and maintain its market share. It hasalso been found that there are innovations and expansion in the trading formatwhich has helped in changing the consumer behavior. After closeevaluation of the external factors, it can be said that Tesco will besuccessful in the retail grocery market if it considers the above mentionedfactors and thus improve its area of operation.
There are certain critical factorswhich need to be identified for the successful operation of Tesco (Tesco.com 2017). These are mentioned below:Branding andReputation Tesco isone of the leading brand and it possess certain strategic advantages.
Thecompany supplies high quality product to its customers and has a strong brandimage. Moreover, the company has also focused on enhancing a wide range ofquality products to facilitate better management and lifestyle of theircustomers. Tesco is also successful in introducing its customer loyalty cardand thus satisfying the needs of the customers.Integration of IT Theoperation of Tesco can be considered as a necessity rather than luxury. Variousintegrated systems are used to keep a track of the stock control and thedifferent records and analysis which are held during the transaction process.One of the most successful contribution of IT in the operation of Tesco’sbusiness is the intelligent scale, wireless devices, check-out machines andelectronic shelf labeling (Ramírez &,Selsky 2016). Management of theSuppliers Tesco is providing support to Britishexpertise and jobs by encouraging the suppliers for delivering exclusiveproducts. The food products that were sold by Tesco were mostly based on UK andthus were preferred by the customers.
The suppliers of Tesco have also laidcertain terms of contracts with the sub-suppliers to supply the best qualityproduct to Tesco. The company has also developed supplier management programmeto conduct survey of the franchisee and the suppliers. Moreover, the companyhas also established close relationships with the contractors who are playing avital role in delivering the product. Therefore, it can be said that thecomapny6 must improve its supply chain to compete with the other leadingsupermarkets.Answer to Question 2 Thestakeholder theory helps in finding out relationships between the organizationand the external and internal environment. It is important to find out howthese stakeholders plays a major role in the business operation of Tesco.
Thestakeholder view helps in the integration of market based view and resourcebased view of the company. The internal shareholders of Tesco are the employeesand the managers of Tesco. On the other hand, the external shareholders ofTesco are the suppliers, shareholders, customers, local community and the Government of UK. Theshareholders of Tesco are considered to be the important stakeholders as theyhave invested a huge sum of money for the development of the company. The mainmotive of the shareholders is to check the rising share of profit which willhelp them to earn more dividend (Vu 2016). On theother hand, the customers of Tesco also prefer to purchase high qualityproducts which will yield value for their money.
The customers prefer to getbetter quality food products and improved service and facilities with thepassage of time (Schlegelmilch, 2016). Thesuppliers or the contractors who supply the raw materials or the finishedproducts plays a critical role in the development of business. The suppliersprefers to get stable order and receive quick payments. It has also been foundthat the suppliers paid greater interest to Tesco because of quick credibilityin business. Tesco isalso trying to improve the environmental conditions by using eco-friendlyprocesses in its processing or supply of products to the customers. Thesupermarket is also trying to help the local community by developing newinfrastructure for educating the people or providing them more opportunity toget employed with them (Brannen et al, 2013).
TheGovernment of UK prefers to get the taxes paid on time and also create morejobs which will help the local community. The main responsibility of thegovernment is to check whether Tesco is taking acre for the welfare needs ofthe people. The trade unions along with the government are also keeping an eyeto check that the employees are paid higher wages and there exists healthyworking conditions in the organization. The employeealso wants the company to succeed its operational process. They also prefer toget higher wages, a better promotion facilities and a greater chance to securetheir jobs. Tesco isconcentrating on the right stakeholders. The company is trying to satisfy theconcerned stakeholders who are working with the organization through properengagement and thus this can help them to balance the demands.
Tesco is tryingto create better and easier life for the customers who wants to live a healthylife, tackle food poverty as well as reduce food wastage. The company is alsotrying to work with the suppliers for the development of sustainable supplychain. Moreover, Tesco is also trying hard to focus on the feedback of thecustomers directly through meetings with the local communities, suppliers andstakeholders to improve the quality of products and the services.
According tothe annual report of the company, it was clearly mentioned that the company istrying to improve its listening skills to interact and communicate with thestakeholders and thus improve their business. Moreover, the feedback receivedfrom the customers has helped them in improving the business plan. It will alsohelp the company to adopt a particular approach to undertake the issues andchallenges which will help in the successful operation of the business.Therefore, it can be said that the company is focusing on the correctstakeholders and thus making a positive change in their business operation (Müller, 2015). Answer to Question 3 Tescofollows hierarchal organizational culture and the authority has clear lines ofdecision making, standardized rules and norms, accountability and controlmechanisms. These factors are regarded as the key essential factors for thesuccess of the organization.
The organizational culture in Tesco is compatiblewith this form and it is characterized by structured and formalized place wherepeople can work. There are certain procedures in the organization which governthe people. The managers and the leaders look after the entire functioning ofthe organization. The managers also try to maintain smooth and proper relationshipwith the employees and thus work for the development of the organization. Thelong term effects and concerns of Tesco are related to predictability,stability and efficiency of the organization. The managers also set certain ruleswhich hold the organization and thus help in its proper operation (Bai and Yafeng, 2016).
Tesco also helps its new employeesin the organization to carry out and maintain a fast, reliable and smoothflowing production process which will help in the development of the organization.There are certain important features of Tesco such as the decentralizedstructure of the organization, flexible working environment, high employeeempowerment power, shared values and beliefs of the people. The decision makingstructure of the organization is also decentralized. It can be said thatflexible environment helps in increasing the adaptability to change in theorganization. The shared beliefs and culture in the organization, employeeperformance and loyalty of the organization will lay impact on theorganization.
Moreover, bureaucratic culture and structure are replaced in theorganization with decentralized structure and the participation of theemployees and flexibility is increased. It can be said that inflexible andrigid culture hinders growth in the organization and the resistance of theemployees towards their work. The employees can understand the customersbecause of shared culture in the organization. There is wider span of controland it improves the relation between the employer and the employees and reducesthe chain of commands. The inter-departmentalco-ordination improves the decentralized structure. The management authority ofTesco emphasizes on the development of the organization. As there are manycompetitors of Tesco, the managers and the leaders had to face tough time inkeeping the organization at the highest position in the retail sector.
It canbe said that success and reputation are the most important factors for thesuccess of the organization. Tesco must focus on the rival activities and thereaching goals in the organization. Tesco has also set competitive prices inthe market.
Moreover, market leadership is one of the most importantcharacteristics of Tesco. It can be said that the organizational style of Tescois based on competition. Thus, it can be said that communication at each stageof hierarchy in the organization symbolizes a good internal atmosphere so thatthe company can fulfill its target and streamline its activities (Ismai ,2017). Answer to Question 4 As Tesco isone of the leading retail brand in the supermarket industry, the company has tofollow certain sets of rules and procedures which will help the company in itssmooth operation. As the company has strong and huge customer base, it is animportant duty of the mangers and the leaders to retain these customers andkeep a check on the profitability of the organization. Tesco must be able tomanage its operation process and must be flexible in its production. This willhelp to enhance the net value of the company. It must be checked that that thecompany is taking care of the environment during its production process.
Thecompany must try to increase its market share by opening more stores andsetting better technology and methods for the production process. Tesco mustuse strategic alliance and joint development for the benefit and development ofthe organization in the long run. It must tie its alliance with theinternational businesses in different countries of Asia.
This will help inenhancing the business and profitability share of the company. Moreover,product development is another important strategy of the company. The companymust opt diversification strategy and this will help to improve the sales ofthe company. On the other hand, the employees must also find out betterinnovation strategies and try to improve the product stock of the company.Tesco can also offer nationwide collection points for grocery products.
It canalso provide home delivery service to the customers within a short span of time. The customers will bewilling to purchase the food products from Tesco and they will not rely onother supermarkets. Tesco mustalso try to improve the merchandising position in the UK market. It must try tosimplify its payment system and strengthen the relationship with the suppliersfor the further development of the company. Tesco must also improve itsadvertising campaign and the company must try to improve its mobileadvertisement campaign. The company is trying to serve its customers in a muchbetter way. Tesco must ensure that it can tackle the social and environmental challengeswhich affects the community in which it operates. The company must provideenhanced training facilities to the staffs and develop a more transparent wayof working.
It is also the duty of the company to protect the human rights andconfidence of the customers by providing great products to the customers. Thecompany must also create partnership with the health companies and also try toset up prevention camps for supporting the employees and the local people intimes of disaster and challenges. Thus, it can be said that the company musttry to develop certain strategic plans so that it becomes easier to tackle thefood wastes within their area of operation. Therefore, the company try to donate the surplus food to the food banksand this will help in the smooth functioning of Tesco. ReferencesBai, F.
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