BUSINESS UK. This paper will analyze Tesco’s capabilities

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
 

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            The food
and drink retail sector of UK is one of the leading industry. This sector
generates employment to a large mass of the population of UK. This paper will analyze
Tesco’s capabilities and how it relates to the key success factors in UK. It
will also highlight the major stakeholder in the business operation using the
stakeholder’s theory.  Moreover, a
suitable theoretical framework will also discussed to highlight the culture of
the organization. On the basis of the analysis, recommendations will also be
provided for the development of the company.

Answer to Question 1

            It is
important for the successful management of the organization to monitor the
changing environment in which Tesco operates and thereby adjust its strategy.
There are several multiple factors which affects the external environment and
thus have a remarkable effect on the company strategy. The macro environmental
analysis of Tesco can be carried out using PESTLE.

Political factors

Tesco operates in globalized environment and it has stores
in 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 as
political conditions in the economy. The government of UK encourages the
retailers to provide job opportunities for the local people who have skills and
are willing to work in companies. Tesco provides employment opportunities to
large number of students, elderly and disabled people who are willing to work
in the organization at lower rate. These workers offer loyalty and thus they
carry out their responsibilities in a better way(Tesco.com
2017).

Economic factors

            The economy
of UK is assumed to grow at 2.7%. The unemployment level in UK has lowered by
1.4% in 2015. There is decrease in the household consumption and the debt level
is said to be increasing at a relatively higher rate. The economic factors
control the operation of Tesco. It can be said that the growing international
profit will contribute to larger profitability rate and thus this will help in
the improvement of the company (Tesco 2014).

Social/Cultural
Factors

            The
customers in UK are influenced by the price and the convenience offered by
Tesco. 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 a
single place. The demographic change such as aging of population and decline in
the meal preparation at home by the people of UK has increased the profitability
of the company. Tesco concentrates on their own label of share in the retail
business of UK and they are also trying to improve their operational efficiency
(Tesco.com 2017).

Technological Factors

            Technology
plays an important role in the development of Tesco. The new technologies which
are launched by the company has benefitted the customers as well as the
company. The customers were also satisfied because they received better
products in cheaper price. Tesco has also launched the Efficient Consumer
Response initiative which helps in the management of food supplies of the
company.

Environmental factors

            There has
been rising pressure on the managers and the company because they need to admit
their responsibility for the betterment and development of the society. The
most important issue which is threatening the company is the environment issues
and problems faced by the Tesco in its operation. The corporate social
responsibility of the company is farmed in such a way so that the obligations of
the stakeholders must be clearly specified through corporate governance and
regulation.

Legislative factors

            The policies and government
legislation have direct impact on the performance of Tesco. The Food Retailing
Commission has highlighted an enforceable code of practice that is set in the
country for imposing ban on the current practices adopted by Tesco. These
includes changing the agreed price without any prior notice and demanding
payments from the suppliers. On the other hand, the powerful competitors of
Tesco also possess threat to Tesco because of intense price war and due to
product differentiation. Tesco must also offer the consumers reduction on the
fuel purchases on the basis of the commodities purchased by them from the
stores and thus implement a proper pricing policy. Moreover, Tesco also reduces
the price of the product on the basis of promotion and they also provide
compensation for the consumers (Peppard and Ward
2016).

It is also important to conduct an analysis of Porter’s Five
Forces to know the competitiveness of Tesco. These is analyzed briefly below:

Threat of New
entrants

            The grocery
market in UK consists of different competitors such as Sainsbury, Asda, Safeway
and Tesco and they constitute more than 70% of the market share. These
supermarkets have established their power in the market on the basis of supply
chain  and their operational efficiency
in the market. However, due to steep competition among these supermarkets, the
barriers to entry has increased and it has become difficult for a new company
to enter the UK market. Thus, it can be said that the threat of new entrants is
low in this industry.

Bargaining Power of
the Suppliers

            Tesco can
negotiate with their suppliers for better promotional prices. As there are a
large number of suppliers who are ready to supply the same quantity of goods at
a cheaper price, it becomes difficult for the suppliers to do monopoly and
charge higher prices. The bargaining power of the suppliers is relatively low
in this industry.

Bargaining power of
the buyers

            Tesco’s club card and loyalty
card membership helps in retaining its customer and therefore increase the
profitability of the company. Moreover, customer’s preference of better quality
products at lower price will help Tesco to retain its customers and therefore
conduct the business operation smoothly.

Threat of Substitutes

            There are different substitutes
of grocery products in the market. Customers easily switch to different product
and they also prefer to choose different supermarkets if one company
excessively charges high price on the customers. It has been found that the
supermarkets are also opening their outlets in small towns and thus are trying
to gain competitive advantage over other firms in the market. It can be said
that the threat of substitutes is high in these industry (Tesco.com 2017).

Intensity of
competitive rivalry

            It has been found that the
grocery market has increased in size and is trying to gain market dominance
over its competitors. Tesco is trying to acquire customer information so that
it can use them to communicate with the customers. The highly competitive
retail grocery market in UK had to build and maintain its market share. It has
also been found that there are innovations and expansion in the trading format
which has helped in changing the consumer behavior.

            After close
evaluation of the external factors, it can be said that Tesco will be
successful in the retail grocery market if it considers the above mentioned
factors and thus improve its area of operation. There are certain critical factors
which need to be identified for the successful operation of Tesco (Tesco.com 2017). These are mentioned below:

Branding and
Reputation

            Tesco is
one of the leading brand and it possess certain strategic advantages. The
company supplies high quality product to its customers and has a strong brand
image. Moreover, the company has also focused on enhancing a wide range of
quality products to facilitate better management and lifestyle of their
customers. Tesco is also successful in introducing its customer loyalty card
and thus satisfying the needs of the customers.

Integration of IT

            The
operation of Tesco can be considered as a necessity rather than luxury. Various
integrated systems are used to keep a track of the stock control and the
different records and analysis which are held during the transaction process.
One of the most successful contribution of IT in the operation of Tesco’s
business is the intelligent scale, wireless devices, check-out machines and
electronic shelf labeling (Ramírez &,
Selsky  2016).

Management of the
Suppliers

            Tesco is providing support to British
expertise and jobs by encouraging the suppliers for delivering exclusive
products. The food products that were sold by Tesco were mostly based on UK and
thus were preferred by the customers. The suppliers of Tesco have also laid
certain terms of contracts with the sub-suppliers to supply the best quality
product to Tesco. The company has also developed supplier management programme
to conduct survey of the franchisee and the suppliers. Moreover, the company
has also established close relationships with the contractors who are playing a
vital role in delivering the product. Therefore, it can be said that the
comapny6 must improve its supply chain to compete with the other leading
supermarkets.

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