Tesco is considered to be one of the largest multinational grocery and general merchandise stores in the United Kingdom. It was founded in the year 1919. The headquarters of this retail store is situated in Hertfordshire (Tesco.com. 2018). If the aspect of profits is taken into consideration
Tesco has been a growing entity since the last few years and has adopted various strategies to strengthen the core business and venture into the new markets. Through a variety of strategies like international sourcing, discounts and club card they have been able to maintain leverage and a sustained growth. The company has observed a decline in the revenue of the company and it has decreased by almost 17% n 2016 as compared to 2015 and then increased by 3.7% in 2017. As for the Gross profit, it has been increasingly steadily over the past few years after a negative dip in 2015.
The financial statements of the firm suggest that the company has been incurring huge financial expenses which tend to decrease its net profit.
The figure given in the next section reflects on the liquidity and Profitability Ratios of Tesco PLC for the year 2013-2017 (Source: Morning star. in 2018 and Nasdaq.com 2018).
|
Year and Ratios |
2017 |
2016 |
2015 |
2014 |
2013 |
|
Gross Margin |
10.37967 |
10.54642 |
-6.78184 |
12.61859 |
13.10286 |
|
Operating Margin |
1.818767 |
1.987651 |
-9.29934 |
4.139591 |
3.756742 |
|
Pre-Tax Margin |
0.259313 |
0.374539 |
-10.237 |
3.55429 |
3.244172 |
|
Net Profit Margin |
-0.09657 |
0.239186 |
-9.25759 |
1.526189 |
0.037851 |
The given charts represent the information about the business model of Tesco and the Market share and revenue generated from that
Chart data sourced from (Morningstar.in 2018)
It can be reflected from the above charts that the business model of Tesco is mainly divided into Franchise based model and company owned stores. However, as a matter of fact, the company earns higher revenue from its owned companies rather than the franchise ones.
There are some issues noticed in Tesco that could be important to improve their business to a larger scale indeed. These issues have been noticed in their operations in stores. The employees always put their best efforts to provide the best services to their customers. The training programs that Tesco has been providing to their customers are not at all up to the mark.
Grocery Retail World Market Size growth from 2013 to 2017 (Source: Euromonitor.com 2018)
The BCG Grow Share Matrix for Tesco by market sales segmentation. UK, Continental Europe and Asia.
|
Sector |
Food |
|
Arena |
Grocery |
|
Industry |
Retail |
|
Market |
Global Grocery |
The above table shows Tesco`s top 4 competitors in the grocery retail industry. The market share and the revenue have been shown
Competitive environment concept by PESTEL analysis
Tesco has been affected by the Brexit. It has put large economic pressures on their profitability. As the UK government has increased their VAT rates to get more annual revenues, this has left a negative impact on the business operations of Tesco.
After going through a severe financial crisis, the UK economy is slowly gathering its lost spot. This economic growth can be rendered as a positive sign for Tesco as well. They can get more opportunities to increase their profits if the buyer power is increased. They can provide employment to the people as well (Keller and Kotler 2016).
The increase in the baby boom generation has led to change the tastes of Tesco in many ways. The experiments have found that the elderly people in UK are comfortable with using the internet services and ordering the grocery items online. The people with the higher income rates are very much into using the online shopping process.
Tesco implements the technology in the supply chain management. They use the better technological support in order to manage the cost efficiency (Stead and Stead 2013). This helps them to gain the competitive advantages. The technological advancements are used in the making the firm stronger.
Tesco should maintain all the legal guidelines by the UK government. They should meet the agricultural policies laid down by the UK government (Ginter, Duncan and Swayne 2018). They should provide the loans and mortgages to the customers with all due legal procedures.
The aspects of global warming have deep impacts on the business operations of Tesco. They should meet all the global standards regarding the environmental sustainability. They have to pledge to protect the environment.
Samsung is considered to be one of the biggest organizations in the conglomerate industry. The headquarters of this organization lies at Seoul in South Korea. They provide several products and items to their customers like mobiles, apparels, automotive items, electronic components, hospitality equipments, communications technology and many more products.
Samsung is a leading electronic brand around the globe. The company was initially a market leader, however recently it has been facing problems with respect to its competitor, the IFB and LG (Rothaermel 2015). However the gross profit and revenue of the Samsung has been quite stable recently. The company has experienced a growth of around $25000000 in its operations since 2016. This may be attributed to the success of its smart phones business. The gross profit has also been increasing steadily since the last few years. From their financial statement it could be observed that, the inventory is not being managed well and the company needs to look after that aspect.
The figure given in the next section reflects on the liquidity and Profitability Ratios of Samsung for the year 2013-2017 (Source: Morning star. in 2018 and Nasdaq.com 2018).
|
Particulars |
2013 |
2014 |
2015 |
2016 |
2017 |
|
Revenue |
100 |
100 |
100 |
100 |
100 |
|
COGS |
60.21 |
62.21 |
61.54 |
59.58 |
54.84 |
|
Gross Margin |
39.79 |
37.79 |
38.46 |
40.42 |
45.16 |
|
SG&A |
11.04 |
11.53 |
11.38 |
11.32 |
9.96 |
|
R&D |
6.26 |
6.98 |
7.4 |
7.33 |
7.11 |
|
Other |
6.41 |
7.15 |
6.52 |
7.29 |
7.06 |
|
Operating Margin |
16.08 |
12.14 |
13.16 |
14.49 |
21.03 |
|
Net Int Inc & Other |
0.69 |
1.38 |
-0.23 |
0.73 |
0.58 |
|
EBT Margin |
16.78 |
13.52 |
12.94 |
15.21 |
21.61 |
The given charts represent the information about the business model of Samsung the Market share and revenue generated from the countries. Source: (NASDAQ.com 2018)
The business model of Samsung is very simple. The company has its own stores and then it offers its stores in other normal stores as well. The company operates with the help of its own stores, which comprise around 20% of its operations and given franchisee of around 30%. However, as Samsung sells its products in other stores as well, it operates around 50% of its operations in this manner. The company`s portfolio comprises of various products like Televisions, Air conditioners, mobile phones and other home appliances.
Samsung has been facing several issues and challenges all over the world. Their latest phones have been facing battery problems. Even their latest Galaxy S8 had exploded earlier. This is due to terrible use of technology and hardware (Samsung.com 2018). Their high budget phones have found new competitors like Google Pixel and Apple iPhone series. These phones are giving good features and their use of technology is of a high standard as well.
Figure: The value chain analysis of Samsung (As created by the author)
Strengths
The product portfolio of Samsung is indeed very wide. This helps them to get the customers in a large variety. Samsung possesses an enormous market share indeed. They have made many great innovations in the mobile phones market. This is why they had overtaken the market share of Nokia. They always look to introduce new things in their technological gazettes. Samsung has also grabbed the Asian market by a large number now (Kotler 2015).
Weaknesses
Samsung had launched a series of smart phones that eventually led to cannibalization. Nokia is still considered to be the most trusted brand in some countries. They depend on their software than other companies. They are not being able to cope up with the Chinese companies in terms of sales (Kotler 2015).
Opportunities
They are planning to focus on their air conditioned products more. This will help them to get more customers indeed. They are also planning to launch some customized products for the Indian market. As their financial condition is strong enough they can bounce back strongly as well (Kotler 2015).
Threats
As their product line is various, failure in one product line can ruin the other product lines as well. Their fierce rivals Nokia focuses on only one segment so they can take over their market share anytime by providing new innovative ways (Kotler 2015).
References
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction. Pearson Education.
Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson higher ed.
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Ginter, P.M., Duncan, J. and Swayne, L.E., 2018. The Strategic Management of Healthcare Organizations. John Wiley & Sons.
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Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education Limited.
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Lasserre, P., 2017. Global strategic management. Palgrave.
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NASDAQ.com. ,2018. NASDAQ’s Homepage for Retail Investors. [online] Available at: https://www.nasdaq.com/ [Accessed 11 Mar. 2018].
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
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Stead, J.G. and Stead, W.E., 2013. Sustainable strategic management. ME Sharpe.
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