Tesco. A Business Analysis Example

  • Category: Business, Corporation,
  • Pages: 7
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  • Published: 03 November 2020
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Tesco is the third-largest retailer globally and the biggest grocery store in the United Kingdom with over 3400 stores. The British grocery and general merchandise retailer also has over 6,800 outlets spread across eight countries in Europe and Asia. According to Palmer (2015), Tesco has had tremendous growth in size, revenue generation, and product portfolio since its inception in 1919. This paper seeks to address Tesco’s strategic analysis by evaluating several aspects of its business and how these concepts influence the decision-making process. The study involves an in-depth review of the firm’s business strategy, organizational structure, and corporate culture. These aspects are vital in gaining insights into the company’s internal environment and how these factors affect the decision-making process. Additionally, the firm’s completion analysis using the Five Forces model is discussed, coupled with its external environment review using PESTEL analysis. Tesco’s value chain is also articulated in the paper to understand the techniques the firm employs to create value to its consumers.

Business Strategies

It is crucial to look at Tesco’s vision, mission, and core values to understand its business model. These aspects determine how the company deploys its resources to achieve its goals and they are the focal point of business strategies. The firm’s vision is to be the most valued business by its customers, community, and stakeholders. Its mission is making what matters better together. The vision and mission are crucial drivers for the business, while the values remain embedded in the operations, strategic planning, and decision-making process. They are, therefore, vital in the formation of Tesco’s business model and determination process regarding the adaptation of supporting frameworks.

The company’s business strategy involves the implementation of frameworks aimed at enhancing the levels of customer experience while creating a conducive working environment to ensure the growth of the company. This strategy focused on renovating the existing stores, increasing the company’s workforce, and introducing more promotions to attract customers. The company also focuses on creating valued brands to provide customers with quality products at competitive prices. This strategy involved the development of Tesco’s Finest and F&F clothing. Growing in retail and online platforms is also an area of focus for the company with the firm expanding its area of operations and investing in e-commerce. The company also focused on becoming a stronger seller in every aspect of its business as it is in groceries. This strategy is subject to the company’s goal of diversifying its product portfolio to serve a broader customer base. 

Organizational Structure

Tesco has a tall hierarchical organizational structure with a long chain of command and authority based at the top level. The organizational structure has three levels, namely top, mediate, and base. The top tier is composed of the executive board, head of all administrative staff and the CEO; this level makes all the critical decisions. The mediate level is made up of the vice presidents, managers, and assistant managers of the various divisions. The staff at the mediate level play a crucial role in coordinating between the ground staff and the top-level management. The based level is composed of the regional heads, assistant managers, and team leaders of the various departments. This level is composed of employees who have direct contact with customers daily.

Under this structure, there is minimal chaos or confusion since the staff follows the decisions from the top level to ensure that the company activities align with its goals. Additionally, the hierarchical organizational structure at Tesco is functionally based as opposed to the geographical one which ensures that the organization offers seamless services in all of its stores. Furthermore, the employees’ roles and responsibilities are well defined, and thus the staff understands the company’s expectations. 

Organizational Culture

Customer focus is at the core of Tesco’s organizational culture. The company has developed a culture that ensures its staff work towards ensuring that consumers have an excellent customer experience. According to Ma, Ding, & Hong, (2014), the firm’s core purpose is ‘serving shoppers a little better every day.’ Therefore, its workplace culture and support framework are subject to consumer satisfaction. Understanding customers, colleagues, and communities is an essential aspect of Tesco’s corporate culture. The firm encourages its staff to listen to the shopper’s feedback and tailor its services to meet their preferences. 

Furthermore, Tesco takes into account the views from its employees while ensuring that there are fair compensation and excellent work-life balance. Empathy towards employees is crucial in providing a conducive environment for the employees to serve the customers at their best. A culture of trust and respect is also vital at Tesco. It helps drive collaborations and teamwork within the organization; this culture encourages staff to try their hardest for customers. The company also gains inspiration from a culture of serving its customers, colleagues, and communities a little better every day. This culture plays a vital role in encouraging corporate social responsibility, whereby Tesco endeavors to make a difference in the communities it operates.

Competition (Porter’s Five Forces Framework)

Threats of New Entrants

Players in the retail industry enjoy economies of scale, robust distribution networks, financial capability, and technology advancement. These factors create dominance in the sector and coupled with high capital requirements, the threat of new entrants is a negligible concern for Tesco.

Bargaining Power of the Suppliers

The number of suppliers in the retail industry is more prominent compared to buyers. Additionally, the products sold are standardized with minimum differentiation, and thus buyers like Tesco incur low switching costs. Therefore, the bargaining power of the suppliers is weak within the retail industry.

Bargaining Power of Customers

The buyers in the retail industry have few firms to choose from and thus make them price takers. Firms like Tesco are the price-makers given that differentiation within the industry is high, and the buyers are price sensitive. Therefore, the buyers’ bargaining power is low.

Threat of Substitutes

There are few substitutes for the products offered by Tesco. In cases where the replacements are available, they are of higher quality and thus more expensive. Therefore, buyers are less likely to switch to alternative products (Perloff& Brander, 2017). The threat of substitute goods is consequently relatively weak for Tesco. 

Rivalry Among Existing Firms

Tesco operates in an industry dominated by a few competitors. Asda, Sainsbury’s and Safeway, together with Tesco, make up over 70% of the United Kingdom’s retail industry market share. There is, therefore, a fierce rivalry since one player in the industry cannot make a move without getting noticed by the other firms.

External Environment (PESTEL Analysis)

Political Factors

Since Tesco operates in different countries, political factors play a vital role in its operations and determining its turnover. Tax rates, tariffs, legislation, and stability of a country are essential in its operations. 

Economic Factors

These factors are a vital concern for Tesco, given its impact on demand, operational costs, prices, and subsequent profits. For example, high unemployment in the United Kingdom hurts the demand for particular goods (Jenkins & Williamson, 2015). Policies changes that affect access to finance are also vital economic factors affecting Tesco.

Social / Cultural Factors

Tesco is up to date with changing shopping trends since they are the primary determinants of customer satisfaction. One-stop shopping, healthy products, and excellent customer experience are some social changes affecting the firm’s interactions with its consumers.

Technological Factors

Adaptation of technology has been a critical factor in increasing Tesco’s profitability while reducing its costs. Self-checkouts have revolutionized the customer experience while online shopping has opened up new markets for the company. 

Environmental Factors

Corporate social responsibility is at the core of Tesco’s operations, with a focus on the reduction of its carbon footprint. The company opened its first zero-carbon store in 2010; It looks to have adapted to renewable energy by 2030 and developed carbon-free stores by 2050.

Legal Factors

Tesco’s operations are subject to the set government policies and legislations. For example, the company operates under the Food Retailing Commission (FRC) strict code of practice.

Value Chain

Tesco has complex inbound logistics, where the massive scale of operation is a source of value creation through the firm’s economies of scale. It has operations in different countries and under diversified brands such as metro stores, express, and superstores. The company has a robust delivery network that ensures that products are available to potential consumers. The cost-effectiveness and flexibility of this network are the primary sources of value creation for outbound logistics (Smith & Sparks, 2015). Tesco has engaged in marketing campaigns that associate the firm with competitive prices, diversified products, quality, and excellent customer experience. Tesco offers outstanding customer service, given that it has a customer-centric workplace culture and business strategy. Customer loyalty receives considerable rewards while integrating technology ensures that there is customer convenience when shopping and during the check-out processes.

Importance of the Six Topics within Tesco

Tesco’s business strategies are crucial in the decision-making process since they determine the procedure the company employs. Furthermore, the company’s vision and values also play a critical role in developing tactics that assist in making the strategy to achieve its desired impact on the firm. The hierarchical organizational structure influences decisions within the company since they all come from the top level. The structure is vital in enhancing organization and stabilizing the company since authority trickles from the top with little or no resistance. Customer experience is at the heart of every decision made at Tesco. Its strategies and policies also reflect its primary goal of ensuring high levels of consumer satisfaction. The five forces framework illustrates the competition landscape at Tesco and thus gives a more profound perspective regarding decisions made by the company to gain a competitive edge. Tesco’s PESTEL analysis provides insights into the external factors that affect the decision-making process within the organization. 

Benefits of Understanding these Topics in Today’s Corporate Structure

These topics are vital in understanding a company’s operations and environment. They assist in gaining deeper insights into the reasons companies make particular management decisions. Furthermore, the topics provide information into the factors that affect a company’s operations and strategic decisions. By understanding the issues, an individual is better at analyzing a company relative to the contemporary corporate structure. 

Strategies used by Tesco to Excel over Other Players in the Industry.

The company has a strong brand presence and a positive reputation in its areas of operation. Tesco associates with excellent quality, trustworthy goods, and value for the customer’s money. Additionally, the firm’s focus on customer experience is a significant influence of increased customer loyalty, which helps retain and attract new shoppers. Chetthamrongchai (2018), claims that Tesco’s adaptation of technology is also a crucial competitive advantage. The company cuts down costs using electronic shelf labeling and radio frequency identification (RFID) systems. Integration of technology in its operations has made Tesco an industry leader and assisted in serving its customers better. 

Conclusion

Tesco operates in an industry with fierce completion, and therefore the business models developed and implemented by a company determine the levels of its success. Despite the size of the company and the complexity of its operations, Tesco’s organizational structure is tailored to ensure that there is efficient management. The corporate culture is vital in offering a support framework for Tesco’s core purpose. The developed workplace culture supports its business model and thus plays a critical role in assisting the company in attaining its objectives. The competition and external environment analysis provide insights into the factors that affect Tesco’s operations and ability to achieve its set goals. Value chain analysis is vital in providing information that articulates ways. Tesco adds value to its services and thus stays ahead of its competitors. These factors are crucial in determining Tesco’s decision-making process since they provide insights into the factors that affect the company’s predetermination of strategies.

References

Chetthamrongchai, P. (2018). Consumer Behavior and Customer Loyalty Program: Case of Tesco in Thailand.In Proceedings of International Academic Conferences (No. 7208909).International Institute of Social and Economic Sciences.

Jenkins, W., & Williamson, D. (2015). Strategic Management and Business Analysis.Routledge.

Ma, Y., Ding, J., & Hong, W. (2014). Delivering Customer Value-based on Service Process: The Example of Tesco.Com. International Business Research, 3(2), 131.

Palmer, M. (2015). Retail Multinational Learning: A Case Study of Tesco. International Journal of Retail & Distribution Management, 33(1), 23-48.

Perloff, J. M., & Brander, J. A. (2017). Managerial Economics and Strategy. Pearson.

Smith, D., & Sparks, L. (2015).Logistics in Tesco: Past, Present, and Future. Logistics and Retail Management, 2, 101-120.