Discuss about the Global Perspectives on Contemporary Marketing.
Tesco plc is a British multinational groceries and general merchandise retailer. Its headquarters is situated in Welwyn Garden City, Hertfordshire, England, United Kingdom. Tesco plc trades as a Tesco across the globe and it stands on the third-largest retailer across the globe in terms of gross revenues and ninth-largest retailer in the world in terms of revenues (Tesco PLC, 2018). This report aims to critically evaluate Tesco’s strategies in order to propose a strategic plan. In relation with the strategic analysis for Tesco, following analyses will be conducted:
A vision is known as the inspirational view where business wants to reach one day and with regard, company sets certain benchmarks in order to attain the desired outcomes. Tesco is giant retailer and they are also available in various global parts and their core vision is to sustain in the market for longer period of time whereas, business strategies changes time to time in order to match up with the level of competitive and dynamic business requirements.
Tesco’s vision is “to deliver high quality products and services in order to enhance customer satisfaction along with seeking benefits for the society in which the organization operates. Apart from this, organization is also concerned towards its employees, shareholders and every other person who is linked with the organization and to its functionalities somehow” (Tesco PLC, 2018).
Core mission of Tesco is “to provide easier way of living to its customers by delivering them high quality goods and services. Company is concerned towards customer satisfaction and in relation with this; company is committed towards providing great value products to its customers” (Business Case Studies, 2018).
Mission, vision and objectives of Tesco are clear and relatable to their business as well as easy to understand. Company is one of the giant grocery retailers and it operates in United Kingdom, Asia and in Europe (Garnett, et. al., 2016).
Tesco is public limited company dealing in groceries and general merchandises. Company is a market leader of groceries in United Kingdom as company has acquired nearly to 25% market share including in Thailand, Ireland and Hungary.
Company’s vision and mission are clear enough as the primary objective of organization is sustain in the dynamic business environment for longer time along with being the champion for the customers. In relation with this, company helps its customers to enjoy better quality of life and an easier way of living. Primary concern for every consumer is to consume great value products at affordable prices through which their satisfaction level could be uplifted. Tesco understand its customers as well as their demands and in relation to this, company has set up its mission and vision directing towards understating customers, champion in fulfilling their needs, and adopt appropriate strategies which could also fulfilled corporate social responsibilities of the organization. In 2017, organization had approximately 6,500 shops across the globe and it has been evaluated that with this speed of growth and development, organization would be able to acquire big share as the retailer in the global grocery and general merchandise industry (Asiedu, 2015).
Motivation is one of the crucial aspect which helps in accomplishing the set goals and objectives. While building or adopting motivational strategies, certain sort of clarity is required.
Core values of Tesco are to create better every day for their customers, employees as well as for the shareholders. As a business enterprise, customer satisfaction is the major priority and in relation with this, employees should also be treated well so that organizational functionalities could be executed in an appropriate manner. Understanding people is the major concern for Tesco and it includes employees, customers and society. With regards to their requirements, Tesco tries to fulfil everyone’s requirements in order to attain their desired goals (Gulati, et. al., 2016).
In relation with the attainment of mission and vision of organization, all employees are required to work in same direction because attainment of organizational goals and objectives is a team work and for developing an effective team, motivational strategies plays key role.
Focus is another vital aspect which defines that top management should support the objectives of organization in terms of attainment of set goals and objectives. Effectiveness of Tesco’s vision and mission could be evaluated through organizational success and growth. Tesco believes in their values and these are as same as they were decade ago. These values has played essential role in terms of enhancing organizational performance.
Tesco focuses on each customer’s, employees’ and shareholder’s requirements and provides serves them with their required products and services. For encouraging employees towards organizational goals and objectives, company uses several tactics such as rewards, appreciation and punishments. These tactics motivates employees to adopt an appropriate direction through which company’s core vision and mission could be attained. Major focus will be levied on organizational values so that the customer satisfaction with regards to their products and services could be enhanced. Employee and their job satisfaction is another vital aspect for organizational success and growth as it helps the organization to accomplish organizational tasks in an effective manner which will ultimately enhance organizational efficiency (Berson, et. al., 2015).
Pestle analysis is the framework mainly used for evaluating the impact of external environmental factors over organizational or whole industry’s performance. In relation with evaluating the effectiveness of organizational current set of strategies, evaluation of impact of external environmental factors plays vital role. Pestle analysis includes political, economic, social, technological, legal and environmental factors which will be discussed below:
With the expansion of retailing industry in the global market, influence of global political factors over operations of Tesco is huge. Mainly political factors includes making amendments in policies, imposition of overnight policies, tax rates, act of legislation and the political stability of the countries. Currently, most of the countries across the globe are struggling with financial instability, thus, governments are forcing the international companies to create jobs for the domestic population so that the unemployment rate could be controlled along with providing a source of income for the domestic population. Tesco did not carry their human resources from headquarters and they believe in recruiting employees from the source location only and this helps in generating job opportunities for local public. Along with this, Tesco has also developed its effective and positive image in the global market. Creating employment opportunities for local public helps the organization to attain positive returns in terms of increased demand for their products and services and appointing local public leads to build diversified workforce (Leary & Baumeister, 2017).
Economic factors are major concern for the operations of Tesco as they directly create impact over leverage costs, demand, and prices of the finished goods and profits of organization. Therefore, it is required for the organization to gain enough knowledge regarding the amendments in the policies like taxation and any other policy which has direct relation with the accessibility of finance. It has been observed that Tesco has more than 6,500 stores across the globe but still, company is dependent over UK market as they have approximately 30% market share there. Over the past few years, organization is operating through diversification and internationalisation strategies and both these strategies have become the major reason for its success and growth. Moreover, due to decline in the disposable income and household incomes, Tesco has shifted its interest more towards advertising its value brands rather than more luxurious goods and services (Baron, Mueller & Wolfe, 2016).
Social factors have much influence over the retail industry and in relation to this; preferences of customers in UK market have been noticed that they opt for bulk shopping and one-stop shopping rather than going to different stores for different products. Apart from this, latest trends said that consumers have shifted their preferences more towards healthy products due to increasing health issues and this has constantly changed customer’s choices in relation with the food. To match up with the latest trends, Tesco has accommodated changed demands of consumers with organic products (Ouyang, et. al., 2015).
Technological advancement has generated various new opportunities for every sector and in terms of Tesco; majorly two big opportunities have been generated. One of the opportunities is the development and introduction of online shopping along with the facilities like home delivery. Secondly, self-service checkout points and these have provided ease and convenience to customers. This has benefitted consumers as well as organization as labour cost has been reduced. Moreover, organization has also invested a large of part of their earning towards energy efficiency projects in order to attain long term objectives of the organization with regards to reduce their carbon footprints (Zander, 2018).
Legislative requirements must be followed by every enterprise whether it is a local or multinational corporation. In relation with the scenario of Tesco, both legislations and government policies direct influence Tesco’s performance. For example, FRC (Food Retailing Commission) in 2004 suggested Code of Practice, under which various current practices will be banned such as changing prices without advance notice, demanding payment from suppliers, etc. To facilitate these policies, Tesco provides its customers price reductions on the fuel they purchase, in accordance to the amount spent on their grocery stores. Also, there are several promotion offers where prices are lowered (Gutierrez, Boukrami & Lumsden, 2015).
Every company requires facilitating environmental issues and following all the policies to save environment. Due to globalisation, companies have stopped thinking for environmental issues and other societal issues; they just seek out for their own interests, profits and growth. But due to continuous pressure from the government, companies are required to address environmental issues by adopting various strategies. Along with this, organizations are also required to find such ways through which societies could be benefitted. With regards to this, Tesco has been committed towards reducing their carbon footprints and this will be reduced by 50% till 2020 and Tesco is also minimising the waste produced in their stores by increasing social conscience in their customers (Lumsden, 2016).
Industry analysis helps in evaluation of competition in the market along with determining the profitability of the particular market. This will be perfumed with the help of Porter’s five forces which are as follows:
Threat for substitutes in the grocery retail market is considerably low for food items and for non-food items, it is medium to high. Tesco is a multinational grocery and other general merchandise store and its major substitutes are small chains, off licenses and organic shops which are not considered as the direct competitor of the international supermarkets like Tesco but reality is that they offer high quality products at considerably low prices. In order to avoid competition from local stores, Tesco is opening its Express stores in local towns and city centres in order to become the barrier for the entry to substitutes to enter into the market (Smith, 2016).
Threat of new entrants for the whole food industry is low because to enter into retail food industry, huge capital investment is required for becoming the competition for big supermarkets like Tesco as well as to establish their brand name in the competitive business environment. Tesco, Aldi, etc. are some of the major brands of food retail industry and they have acquired more than 80% of the market share of the whole retail sector in UK, thus, new entrants will be required to produce exceptionally well and that too at low prices for developing their market value (Van Wormer & Besthorn, 2017).
Due to large number of companies in grocery retail industry, intensity of industry is extremely high. Tesco’s direct competitors are Asda, Sainbury’s, Waitrose, etc. All these companies are competition with each other over factors such as price, promotions and products. Market growth rate have also been declined and all these companies are adopting unique measures and strategies to acquire Tesco’s leading position in UK market (Burns & Dewhurst, 2016).
Intensity of this factor is fairly high because consumers have various options to choose from. They could compare supermarkets on the basis of prices offered, products diversification, and quality of products. Switching cost for consumers is also very low, thus, they could easily switch from one brand to another and major concern for consumers is price and they get attracted towards low priced products. Since the introduction of online business, buyers could easily compare the prices of products from online and offline market (Jenkins & Williamson, 2015).
This factor’s intensity is fairly low because there are huge list of suppliers and companies like Tesco, Asda, Sainbury, etc. have reached to a place from where they could easily get the lowest possible price from the suppliers. Thus, suppliers need to maintain the relationship with these big brands for increasing their revenues, profitability and opportunities to grow (Adi, 2015).
Value chain is defined as the linkage between key values adding activities and their connection with the supporting activities. It is known as an evaluation tool used for distinguishing strengths and weaknesses in terms of adding value processes. Following are certain crucial components of value chain analysis of Tesco:
Tesco executes its functionalities with lean and agile inbound logistics function. In relation with this, company used its leadership position and brand name to get the lowest prices possible from suppliers. Organization is constantly upgrading its ordering system, vendor list and in-store processes in order to induce effectiveness and efficiency in company’s inbound logistics operations.
Company has immense talented human resources through which they use IT system for managing their operations along with enhancing their efficiency. With this regard, company could easily facilitate its cost leadership strategy and due to this, company needs to face lot of criticism from supply chain management critics (Campbell & Park, 2017).
Due to effective and efficient outbound logistics, Tesco holds leadership position in both online as well as offline retail food segments. Moreover, organization has also set up number of stores with different concepts for widening customer base. These concepts are Metro, Superstores, Extra, Homeplus, Express, etc. and these all segmented on the basis of target population.
Tesco performs various activities time to time for retaining existing and potential customers. Loyalty programs like Tesco Clubcard is one of the effective measures empowered with information technology which provides additional discount to the customers along with gaining certain points on their every purchase and these points could be redeemed on next purchase. Apart from this, company also perform various strategies such as Greener Living Scheme for dealing with environmental and waste management issues (Dey, 2016).
Tesco is operating through cost leadership and differentiation strategy and these strategies have helped the organization to acquire huge customer base along with decent market share in the global retail industry.
|
Resources |
Valuable |
Rare |
Imitable |
Organisation |
Advantage |
|
IT integration |
Yes |
No |
Yes |
Yes |
Temporary |
|
Yes |
No |
No |
Yes |
Temporary |
|
|
Workforce |
Yes |
Yes |
No |
Yes |
Permanent |
|
Club Card |
Yes |
Yes |
No |
Yes |
Permanent |
|
Unique Store Format |
Yes |
Yes |
No |
Yes |
Permanent |
|
Cost efficiency |
Yes |
Yes |
Yes |
Yes |
Permanent |
Tesco is a multinational grocery retailer with a leadership position in UK market. Although, company operates in various global parts and holds more than 6500 stores globally, but their major earnings are dependent over UK market and there, they holds more than 30% market share. In order to expand their business in the other global parts, it is necessary to adopt one of the best alternatives of growth strategy. With regards to the Tesco’s operations, Porter’s Generic Strategies will be recommended for the objective of enhancing organizational growth.
|
Strengths · Leader of UK’s grocery retail market with approximately 30% market share. · Highly sophisticated supply networks with 58% supplier satisfaction (Tesco PLC, 2018). · Employee satisfaction is also high nearly to 70%. |
Weaknesses · Some of the Tesco’s subsidiaries are not performing well. · Competitive pressure has led to price wars. · Some of the retail formats in certain countries have not performed as well as expected. |
|
Opportunities · Opportunities for strategic alliances with other brands. · Opportunity in the private label sector. · Opportunities in emerging sector. |
Threats · Increasing competition. · Small shops delivering high quality products at low prices. |
This strategy is adopted for the objective of attaining competitive advantage as well as to establish an effective position in existing or in the new market. This mainly includes four strategies i.e. cost leadership, differentiation, cost focus and differentiation focus.
This strategy states reducing cost of production and this will also lower down the prices for finished goods, thus, competitive advantage could be attained easily. With the help of attainment of competitive advantage, there are two major ways which are as follows:
This strategy states that organization is required to differentiate its products and services from the competitors. Along with differentiating the products, organization is also required to make them unique in order to attract the customers. For successful execution of differentiation strategy, organization requires to:
This strategy states that organization will be required to focus on one niche market and by evaluating and understanding the demands and preferences of customers in the market, appropriate and low-cost products are developed. This helps to acquire huge market share in the particular market along with gaining the leading position (Alstete, 2015).
Differentiation focus strategy states that organization is requires to add something unique and extra to the existing products and services for acquiring the attention of existing as well as of new customers. With regards to this, organization would easily be able to enhance its customer base, market share, revenues and profitability (Yu, Ramanathan & Nath, 2014).
With the help of SAF framework, effectiveness of company’s chosen strategies will be analysed. This framework has three aspects such as suitability, acceptability and feasibility.
|
Suitability |
All the proposed strategies must address the internal as well as external challenges. |
|
Acceptability |
The chosen strategies must generate positive financial returns as well as these should be approved by all stakeholders. |
|
Feasibility |
Chosen strategies are whether achievable within the financial and other resources limitations (Tansey, Spillane & Meng, 2014). |
Conclusion
From the aforesaid information, it can be concluded that every organization requires adopting unique and advanced level of strategies for the objective of enhancing their market share, for enhancing growth opportunities as well as for the purpose of acquiring competitive advantage in the target market. Strategic evaluation in this report describes the effectiveness of organizational current strategies and this has determined that there is huge scope of improvement through which organizational subsidiaries’ performance could be improved.
References
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Tesco PLC. 2018. About us [online]. Available at: https://www.tescoplc.com/about-us/. [31/07/2018].
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