1: The Tesco PLC Annual Report and Financial Statements 2013 states:
“Our Core Purpose needs to reflect how much society has changed in recent years this profound shift in society must be reflected in the way we think and behave as a business”.
Briefly outline the key societal changes that have caused Tesco Plc to change it’s core purpose and critically evaluate the impact, if any, that these changes have had on the way Tesco conducts its business.
2: Assess the attractiveness of the UK retail industry and Tesco’s current competitive position.
3: What strategies would you like to recommend to the Board of Tesco Plc in order to improve their profitability and image with the public.
1. Jack Cohen was the founder of Tesco and from the first day he of sale it gains a profit of £1 against the sales of £4 respectively. Tesco is operating in more than fourteen countries of the world and is a largest grocery retailer of the world. Besides retailing the food products, Tesco also sell some non-food products in the market, like electronic items, household goods, clothing, toiletries etc. However, focusing on the non-food items rather than food items is the most significant strategies of Tesco. In 2013, the restructuring of the core purpose of Tesco has taken place due to some societal changes(Analysisreport.morningstar.com, 2015).
There are various societal changes at present, for which the Tesco Plc has to change its core purpose of business. The societal change includes the change in demographic pattern, lifestyle trends, the buying pattern of the consumers, the attitudes and opinions of the customers etc(Aras and Crowther, 2012).
Increase in population, increase in aged population and woman workers and decline in house preparation of meal means leads to a change in the core purpose of Tesco. The incident of increase in young professionals and the increase in migration of Eastern Europeans results a change in buying patterns of the consumer or a change in consumers’ opinion towards the product. Therefore, there is a change in demand pattern of goods and services of Tesco. Therefore, with the change in social structure, there is a need for readymade food or ready to cook foods and also a need for the quick cooking instruments such as microwaves. As a result, the quantity of non-food items, which are available for sale, should be increased by Tesco, as the retailers are concentrating on the benefit product and services(Barnes, 2011).
In current trends, the clients especially the clients from South-East Asian countries, such as Malaysia, Koria prefer “volumetric” and “one stop” shopping and this is connected with various social changes. As the type of the consumer’s demand of goods and services depends on the social conditionality and their subsequent belief and installation, national retailers try to find new customers. On the question of health care, the consumers become more and more informed and as a result, there is complete change in their attitude to meal constantly.
In present world, a large portion of the consumers is technological oriented. Especially the young generation customer group prefer to buy the product by using the online service. Social media have a great impact on the choice of decision making of customers. As a result, now-a-days the core purpose of Tesco is to concentrate on the internet retailing. Through internet, retailing Tesco can capture a large portion of targeted consumers(Barnes, 2011).
The core purpose of Tesco is to take the marketing strategy according to the changes in the society. The change in society generally reflected in the way the businessperson are thinking and behave. To earn the trust and the loyalty from all the stakeholders, the Tesco should always adopt the right marketing strategy. The new core purpose of Tesco is – We make what matters better together. According to the new strategy of Tesco, it tries to understand the customers and provide the goods and services according to their needs. However, this change in core purpose of Tesco required huge expenses. Hence, there is a need for Tesco Plc to lower the expenses of business and to lower the expenses; Tesco Plc should improve its business operation, supply chain management system and the labour share of the business mix (BBC News, 2015).
The U.K. market earn a large benefit from the retail sector, which is extremely competitive and innovative and during the recent economic difficulties, it has proved resilient. The retail sector of U.K. includes the excellent international companies, innovative independents and stable high street anchors. However, with the rapid change in consumers’ need and behaviour, many retailers are struggling to survive in the competitive market.
In every location of U.K., retailers operate as the bridge between consumers and producers. This has a great impact on demand and supply operation of the market. Hence, for manufacturers, it treated as a valuable route to market. The economy may widen and the consumers’ confidence may increase due to an increase in sale in retail market. The retail sector of U.K. has a great significant in its economy, as it provides food and non-food goods, services, and employment opportunities (Clement, 2011).
There was a great proportion of increase in retail sector industry in U.K. economy in the year of 2007. However, after 2007, with the declining trend in U.K. economy, there was a quick decrease in the retail sector market. Compared to 2008, there was a fall of 9.3% in the retail sector economy in the second quarter of the year 2009, which leads to a fall in output by 5.8% at that period.
From the year 2010, with the beginning of the recovery phase in the U.K. economy, there was a quick increase in retail support. Since the first quarter of 2013, there was a growth in the retail sector over 5% in every quarter comparing to the previous period. As a result the whole economy grew by 2.5% in every single quarter compared to the previous period(Dudovskiy, 2014).
In 2014, the retail industry contributed £180 billion to UK economic output, which is 11% of total GDP of U.K. Around £34 billion was spend by the consumers in U.K. in retail sector, in March 2015. For each pound, spend in the retail sector, in food stores 42p was spent, for non-food store 41p was spent and 11p spent on the automotive fuel. In other types of retailers, like mail order catalogues and market stores, the rest of one pound was spent.
There are a number of pressures in the U.K. economy due to the reduction in consumer spending for the recent economic downturn and the changes in the shopping habit of the consumers. These pressures also include the current recession, online retailing, growth, and evaluation of super markets. As a result, there is a declining trend in the key statistics of U.K. market, which include the business statistics, the volume and the value of the sales, the employment and the proportion of internet sale etc (DzÃŒÂwigoÅ‚, 2015).
The retail sector of U.K. contributes 69% of business, 60% of economic output and 71% of employment. There are two types of stores in the retail sector of U.K. market. One is the specialized stores and the other is the non-specialized stores. Tesco is a type of non-specialized store, which sell a variety of products. Though the non-specialised stores make up only 20% of retail business in U.K., 51% retail turnover can be accounted from this. These non-specialised stores generate 47% of the employment in retail sector(Jackson, 2008).
The retail sales of U.K. also depends the business cycle of U.K. market. During the inflationary period U.K., market faces a higher sale in retail sector, whereas in deflationary period, it faces relatively lower retail sales (Khachidze, 2012).
From January 2007 to January 2013, the value of internet sales of U.K. retail sector, which act as a proportion of total retail sales increase from 2.7% to 11.1%. . There was an increase in average weekly internet sales of 8.1 billion pound in December 2013.
One of the world’s leading international retailers is Tesco. Though the principle activity of the retailer is food retailing, at present, it also concentrates on the supply of non-food products. Being a most selling retailing firm of U.K. market, Tesco hold a leadership position in the U.K. market. Tesco is a most powerful retail global brand and ranked in top 100 brands of the world. Though eBay is placed slightly below Tesco and Ikea is a more popular brand than Tesco, Tesco is undoubtedly treated as a giant retailer of a wide range of products in the world market. Throughout the whole world, Tesco has 6,784 stores. Despite the disposal of their US venture, Fresh and Easy, there is an increase in 433 stores of Tesco since 2012. To expand its business further, Tesco has utilised the innovative business methods, which include the creation of stores like Tesco Express and Tesco Metro. These are the small stores, which help the customers to make most convenient shopping. Online shopping, local recruitment, joint venture etc. are the other competitive strength of Tesco to operate in the global market (Kumar, 2005).
Tesco can buy the products in bulk because of its large size and facilities. As a result, the company can easily decline its price level. As this lower price is attractive to the consumers, Tesco can easily compete with other giant retailer in the U.K. market, like Asda or Sainsbucry. Moreover, Tesco has created the logical package like Club card, to create long-term relationship with the customers (UKEssays, 2015).
In the fiscal year 2014-15, Tesco has reported the trading profit of 1.4 billion pound. To expand by growing internationally, to follow the customers in new retail services, to be as strong in non-food as in strong and to maintain the core in the UK business are the four key parts on which the long term growth strategy is based on. To increase choice for their customers, Tesco continuously innovate and investigate in new lines. To provide a healthy life to its customers Tesco provide various fresh food products to its customers. Another significant factor of growth is of Tesco is to understand its customers (Markedbyteachers.com, 2015).
Conclusion:-
Since 1994, Tesco began to expand internationally and its international operations accounted for around a quarter of sales at the end of the year 2006. In the coming period, the business activity of Tesco may be affected by the business strategy in U.K. market. There is a problem of diversification of the company, which leads to the business out of control. Despite of its various limitations the Tesco will easily exist in next ten years. However, there will be a slowdown in the growth process of Tesco Plc. With the saturation of domestic market of U.K., to maintain their position, the famous supermarket chain of U.K. such as Tesco, will look to the overseas market. This will lead to an increase in competition in the world market, where Tesco has to compete with the other giant retailers like French MNC Carrefour, U.S. retailer Wal-Mart etc.
Each business organization wants to expand both locally & globally. They need this to do because of market saturation in the existing market in which they are currently operating. All the firms have to face high competition when they are trying to expand themselves by entering into the new market. The degree of competition depends on the nature of the market and the political, environmental factors of the country in which they want to set down their new operation process. Therefore, the business organizations have to formulate and implement different effective strategy so that they can win in this rat-race and make a strong position in the new market. Every business firm has to analyzed thoroughly the external environment of the country and also the nature of the market in which it wants to enter .Also it has to identify the no. of rivals , the product or the service quality prevails in that market in that time. Therefore, it is very important for a business firm to formulate effective strategy when it is extending to some market irrespective of the geographical position (PLC, 2015).
Currently Tesco is operating throughout the world with it’s headquarter situated in United Kingdom. Tesco is a UK based company, which currently has their outlets in USA, Asia & Europe. It is basically a retail company but it also provides banking, online shopping (e-commerce) and insurance service (UKEssays, 2015).
The main goal of Tesco PLs is to mark a significant impact on its customers to whom they provide service .Another important objective of this retail firm is to blow up its profitability through the adoption of innovative & modern technology in the operation and hiring skilled labor. This firm is very much dedicated to provide good quality product to its customer (prezi.com, 2015).
The principle corporate strategy of Tesco PLC is to increase its share value through modernization & innovation. The main focus of the corporate strategy is customer’s satisfaction (Ray, 2012). The main principles of the corporate strategy should be
External Analysis is necessary before the formulation of new strategy. The PEST analysis is discussed below:
U.K is politically stable country. Therefore, no political issues can make any hindrance in the expansion of TESCO. Another favorable point for TESCO is it gets adequate supports from the U.K govt. to expand its operation. TESCO also helps the U.K citizen by offering job opportunities. TESCO has large employment strength in the retail sector (Rogers, Ghauri and George, 2005).
TESCO always emphasizes on the technological changes in the production process. This change helps the company in the expansion & also in the growth of the TESCO. This technological improvement is beneficiary both for the company and for customers. The modern technology also ensures that TESCO will deliver high quality goods to its customer and also in less time than previous.
Economic factors in an economy are very important for the business operation of a firm. At present, the unemployment rate is continuously increasing in U.K because of recession. The increase in employment rate leads to the decrease in the buying power of the U.K residents. Therefore, it can be expected that due to this slowdown, the total sale amount of TESCO may be negatively affected by this recession (Sadgrove, 2015).
The technology used in the TESCO is very much eco-friendly. Therefore, this company does not affect the environment adversely. Tesco is treated as socially responsible company in the U.K as it focuses an important attention to the corporate social responsibility practice.
Social & Culture factors of the U.K economy also play a significant role in the business of TESCO. Generally the GEN Y section of the U.K population is very much shopaholic. They prefers to go to the TESCO shop because of it offers trendy goods to its customers.
Currently the market share of TESCO in the U.K market is 13%. One of the pitfall of TESCO is that it is very much U.K dependent. Therefore, if there happens any adverse situation in U.K, then it will immediately affect the operations of TESCO. The present position of TESCO in the U.K market is very strong. It earns high profit and also able to collect high amount of investment from different investors. This indicates that organization has high potential to successfully expand its business (Wharton, 2015). For its future expansion and development Tesco should focus on some factors .Theses are as follows-
1) It should target to the customers from the entire income group.
2) It should try to fulfill the customers’ requirement with the lowest possible time using innovative technology.
3) It should expand its supply chain network to the areas where its outlet is not available at present.
4) Though initially it sells only the food product but due to change in consumer’s preference, it should increase its product range to retain its old market position (Thomson and Creevy, 2013).
References
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Barnes, R. (2011). The great Tesco beauty gamble (the Tesco supermarket chainÂ’s marketing strategy for breaking into the UK beauty services market). Strategic Direction, 27(7).
BBC News, (2015). Tesco turns stale as competitors freshen up ideas – BBC News. [online] Available at: https://www.bbc.com/news/business-29310445 [Accessed 11 Jul. 2015].
Clement, M. (2011). Rage against the market: Bristol’s Tesco riot. Race & Class, 53(3), pp.81-90.
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