197. business level strategy a case study of tesco

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197. business level strategy a case study of tesco

  1. 1. 1 Business Level Strategy: A case study of Tesco Table of Content 1 Stage 1 Report...................................................................................................................... 3 1.1 Tesco’s history, development and growth...............................................................3 1.2 Tesco’s strategic Vision, Mission Statement, Aims and Objectives .......................3 1.2.1 Strategic vision.................................................................................................3 1.2.2 Values...............................................................................................................5 1.2.3 Strategy.............................................................................................................7 2 Stage 2 Report...................................................................................................................... 9 2.1 Tesco's Corporate Culture and Leadership and .......................................................9 2.2 Strategic formulation and evaluation.....................................................................10 2.2.1 SWOT.............................................................................................................10 2.2.2 Resource based view ......................................................................................12 2.2.3 PELST analysis ..............................................................................................14 2.2.4 Porter 5 forces model .....................................................................................17
  2. 2. 2 2.3 Tesco financial position.........................................................................................19 2.4 Tesco strategy: international expansion and diversification..................................20 2.4.1 Strategy...........................................................................................................20 2.4.2 Evaluation.......................................................................................................22 2.5 Recommendation...................................................................................................24 2.5.1 Retaining competitive advantage ...................................................................24 2.5.2 Creating competitive advanatges ...................................................................26 3 References.......................................................................................................................... 27 4 Appendix............................................................................................................................ 31
  3. 3. 3 1 Stage 1 Report 1.1 Tesco’s history, development and growth Tesco is a British multinational company (MNC), which has the head office in Hertfordshire, United Kingdom (UK). Tesco owed its foundation to Jack Cohen in 1919, an insignificant booth in East End of London which sold surplus groceries. At the present, Tesco is the owner of more than 6,700 outlets all over the world and offering service to tens of millions of persons every week (Tesco, 2013). It became the third biggest retailer all over the world with outlets presenting in 14 territories worldwide, with the inclusion of China, India, Malaysia, Korea, America, Ireland and Slovakia (Tesco, 2013). In its wide-ranging scope of products and services, Tesco offers fresh foods as well as groceries items, electronics, clothes, household items as well as financial services. Tesco aims at expanding its business range and diversifying globally to pursue a solid and sustainable long-term development (Tesco Plc., 2013e). Correspondingly, below are its corporate vision and main strategic targets: growing the UK market, and becoming a booming global retailer in-store and online (Tesco Plc., 2013e). Tesco sets the development strategy of expanding and diversifying internationally. …………………………………………………………………………………………. 1.2 Recommendation Basing on the formerly assessment, an amount of advices are advisable for Tesco in terms of how it might maintain and set up a sustainable competitive advantage in its primary market in the United Kingdom and also in its other global markets, for now and in the upcoming time. 1.2.1 Retaining competitive advantage Vitality of Localisation and Marketing The providing of the grocery retail industry strongly stands for a community’s customs, concerning the clients’ day to day needs for example foodstuff. Therefore, it is advised that Tesco go on incorporating tactical localization as well as realize cultural sensitivity in every of its globalization plans. Both in the UK and its global markets, Tesco are advised to be more creative and active in terms of its marketing plans, for example, by enlarging the variety of its Club Card loyalty systems further than client’s shopping customs. Being an enlargement to localization tactic, Tesco is capable of enhancing its customer database as
  4. 4. 4 well as market sensitivity to offer clients greater tailoring with shopping encounter, since clients in GRM puts vitality on customer service. Low customer loyalty and switching costs in the GRM highlight the vitality of marketing actions. Influentially, the capability of understanding customer values and drawing their attraction is critical in national as well as global GRM. Correspondingly, the current marketing range for GRM includes market – as well as – client – focused tactics with concentration on client intimacy enhancement. Obviously, in global markets, local management proves to be more appropriate in terms of tactical decision making. Besides, using locals might as well lead to saving considerable costs of thorough market investigation in overseas markets. In UK as well as global markets, it is advisable Tesco as well be more active in its marketing creations, for example, in detecting new client segments. Tesco might as well refresh its internationalisation process to make sure of sustainable competitive advantage, for instance, by example, by incorporating stakeholder-marketing-oriented approach. Regain Focus Tesco has become preoccupied with its global enlargement, specifically in the US and Chinese market, as cited by David Gray, a retail analyst, Tesco kept on an acquisition and diversification spree. As a consequence, it dropped concentration on its UK operating activities leading to sluggish response to competitors’ marketing creations and growths (e.g. Sainbury’s and Morrisons) which might have led to Tesco’s insignificant corrosion in market share between 2012 and 2013, while its competitors had proved some increases in market share and financial performance. Thus, it is advised that Tesco get back to put concentration on its primary UK business venture. 1.2.2 Creating competitive advanatges Re-entering the US market Even though Tesco have just lately left the US market, it might have become a wise selection to leave before that time if it got an exit plan prepared, or at least stop outlet enlargement throughout the territory. Tesco might be capable of re-entering the US market in the upcoming time, yet with appropriate attentiveness in much wider range of the US clients instead of merely based thorough market investigation on shopping and eating customs. With lessons withdrawn from previous leavings of a lot of retailers from Europe (e.g. Carrefour in 2000, M&S and Sainsbury in 2001) comprising itself, a various and careful entrant to market
  5. 5. 5 investigation had better be executed. An IJV might be advantageous to Tesco for forthcoming US operating activities. Nonetheless, Tesco might as well re-approach the US market by GI given that it has studied from its past faults by using US top management team with retail expertise as well as understanding about market, as well as incorporating an exit strategy. Expansions into New International Markets Investigation has proved chances for invasion into other BRIC economies, specifically Brazil, Russia and India. Such developing markets, comprising Mexico, have proved fast actual development in retail markets, enlargement in mid-class consumer base, and steadiness and development in clients’ disposable income. Besides, the low proportions of internet employment in SEA has been observed to be a solid development prospective in terms of Internet retailing as well as online advertising divisions, and are hoped to encounter fast enlargement in such areas in the upcoming time. It would be possible for Tesco to penetrate SEA markets, with its technological experience as well as its competitive advantage whilst achieving a first-mover benefit in grocery e-tailing. Nonetheless, it is advised that Tesco be attentive since such are high-context customs markets with great cultural disparity comparative to the UK’s. Therefore, it is requested of more due carefulness of the environments, since chances might as well turn out to be a hazardous risk. From the foresaid assessment of its tactics, it is advisable that Tesco either approaches new markets via IJV with local partners or acquisition of local grocery retailers, or employs local employees with local comprehension and sense of local market dynamics, and therefore become capable of making up to date determinations, making Tesco capable of a successful competing with native competitors. This document is provided by: VU Thuy Dung (Ms.) Manager Center for Online Writing Resources Facebook : https://www.facebook.com/vu.thuydung.5076 Email : assignmentsource@gmail.com Blogger : http://assignmentsource.blogspot.com/ Website : http://assignmentsource.com/
  6. 6. 6 2 References Chae, B., Olson, D., & Sheu, C. (2013). The impact of supply chain analytics on operational performance: a resource-based view. International Journal of Production Research, (ahead-of-print), 1-16. Clarke, I., Kirkup, M., & Oppewal, H. (2012). Consumer satisfaction with local retail diversity in the UK: effects of supermarket access, brand variety, and social deprivation. Environment and Planning-Part A, 44(8), 1896. Davis, P., & Reilly, A. (2010). Market power, market outcomes, and remedies in the UK groceries market. Agricultural Economics, 41(s1), 93-108. De Chernatony, L. (2012). The impact of the changed balance of power from manufacturer to retailer in the UK packaged groceries market. Retail and Marketing Channels (RLE Retailing and Distribution), 6, 258. Domb, E. (2012). Beyond Strategic Vision. Routledge. Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), 213-229. Haerifar, P. (2011). Performance Management in Tesco (Vol. 3). GRIN Verlag. Hassan, A., & Parves, M. (2013). A Comparative Case Study Investigating the Adoption of Customer Relationship Management (CRM) The Case of Tesco and Sainsbury’s. International Journal. Lowe, M., & Wrigley, N. (2009). Innovation in retail internationalisation: Tesco in the USA. The International Review of Retail, Distribution and Consumer Research, 19(4), 331-347. Ma, Y., Ding, J., & Hong, W. (2010). Delivering customer value based on service process: The example of Tesco. com. International Business Research, 3(2), P131. Mkansi, M., Qi, B., & Green, G. (2011). Management of the E-Retailing Supply and Distribution Network: A Resource-Based View of the UK Grocery Sector. Available at SSRN 1956745.
  7. 7. 7 Obereder, C. (2013). The Success Story of Tesco: From the beginning up to 2012 (Vol. 683). GRIN Verlag. Palmer, M., Simmons, G., & Quinn, B. (2009). Go On (Tesco PLC) Innovate and dominate global markets: What’s stopping-resisting you? Double movement innovation. Schoemaker, P. J. (2012). How to link strategic vision to core capabilities. Sloan Management. Taylor, A., & Collyer, K. (2012). Defining Product Markets in the UK Grocery Industry. Antitrust Chronicle, 9. Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2), 172-194. Tesco Plc., (2012). Annual Report and Financial Statements 2012. Available at: http://www.tescoplc.com/files/pdf/reports/tesco_annual_report_2012.pdf Tesco Plc., (2013). Annual Review. Available at: http://www.tescoplc.com/index.asp?pageid=546 Tesco Plc., (2013a). Tesco Plc: Preliminary Results 2012/13: Additional Information. Available at: http://www.tescoplc.com/files/pdf/results/2013/prelim/prelim_2012- 13_analyst_pack.pdf Tesco Plc., (2013b). Our Vision. Available at: http://www.tescoplc.com/index.asp?pageid=12 Tesco Plc., (2013c). Our Businesses. Available at: http://www.tescoplc.com/index.asp?pageid=276 Tesco Plc., (2013d). Preliminary Results 2012/13. Available at: http://www.tescoplc.com/files/pdf/results/2013/prelim/prelim_2012- 13_results_statement.pdf Tesco Plc., (2013e). Vision and Strategy. Available at: http://www.tescoplc.com/index.asp?pageid=97 Tesco, (2013f). Tesco: About us. Available at: http://www.tescoplc.com/index.asp?pageid=6
  8. 8. 8 Turner, J. J. (2012). Are Tesco customers exhibiting a more social type of loyalty towards Tesco and Tesco Clubcard? A critical analysis of the nature and type of Tesco customer loyalty to Tesco in Dundee. Xie, Y., & Allen, C. (2013). Information technologies in retail supply chains: a comparison of Tesco and Asda. International Journal of Business Performance and Supply Chain Modelling, 5(1), 46-62.
  9. 9. 9 3 Appendix Details of our financial performance over the last five years 2009 2010 2011 2012 2013 Financial statistics (£m) Sales including VAT excluding IFRIC 13 59,426 62,537 67,074 71,402 72,363 Revenue excluding IFRIC 13 UK 38,028 39,104 40,766 42,803 43,579 Rest of Europe 8,862 8,724 9,192 9,866 9,319 Asia 7,068 8,465 9,802 10,828 11,479 US 206 349 495 – – Tesco Bank 163 860 919 1,044 1,021 Group revenue excluding IFRIC 13 54,327 57,502 61,174 64,541 65,398 Trading profit UK 2,309 2,413 2,504 2,478 2,272 Rest of Europe 496 474 527 529 329 Asia 355 440 605 737 661 US (142) (165) (186) – – Tesco Bank 68 250 264 225 191 Group trading profit 3,086 3,412 3,714 3,969 3,453 Operating profit 3,169 3,457 3,917 4,182 2,188 Operating profit margin 5.8% 6.0% 6.4% 6.5% 3.3% Share of post-tax profits of joint ventures and associates 110 33 57 91 54 Net finance costs (362) (314) (333) (235) (282) Profit before tax 2,917 3,176 3,641 4,038 1,960 Taxation (779) (840) (864) (874) (574) Profit for the year from continuing operations 2,138 2,336 2,777 3,164 1,386 Discontinued operations – – (106) (350) (1,266) Profit for the period 2,138 2,336 2,671 2,814 120 Attributable to:
  10. 10. 10 2009 2010 2011 2012 2013 Owners of the parent 2,133 2,327 2,655 2,806 124 Non-controlling interests 5 9 16 8 (4) Underlying profit before tax – continuing operations 3,124 3,395 3,853 4,149 3,549 Other financial statistics Diluted earnings per share – continuing operations 26.96p 29.19p 34.25p 39.23p 17.30p Underlying diluted earnings per share – continuing operations 28.87p 31.66p 36.26p 40.31p 35.97p Dividend per share 11.96p 13.05p 14.46p 14.76p 14.76p Return on capital employed (‘ROCE’) 12.8%7 12.1% 12.9% 14.7% 12.7% Total shareholder return 8.0% 9.5% 6.7% (3.0)% 2.1% Net debt (£m) 9,600 7,929 6,790 6,838 6,597 Enterprise value (£m) 35,907 41,442 39,462 32,324 36,578 Group retail statistics Number of stores 4,332 4,836 5,265 6,049 6,784 Total sales area – 000 sq ft 88,556 95,231 103,172 110,563 116,236 Average employees 468,508 472,094 488,347 514,615 537,784 Average full-time equivalent employees 364,015 366,413 382,049 401,791 416,441 UK retail statistics Number of stores 2,306 2,507 2,715 2,979 3,146 Total sales area – 000 sq ft 32,389 34,237 36,722 39,082 40,495 Average full-time equivalent employees 194,420 196,604 200,966 205,852 213,304 Revenue per employee – £ 195,597 198,897 202,850 207,931 204,305 Weekly sales per sq ft – £ 25.34 25.22 24.95 24.86 24.15
  11. 11. 11 Tesco Business Model

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