Tesco Company: US Market Entry and Crisis

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Table of Contents

Introduction
Company Overview
Summary of the Organizational Problem
Summary of the Academic Literature on the Problem
Solutions to the Problems
Conclusion
Reference List

Introduction

There are a lot of new companies which emerge in the modern world economy. At the same time, many giants of business appear overboard. Why does it happen? There are a lot of reasons for this and one of the main of them, is the company assuredness of its superiority. The time when the company believes that nothing can ruin its popularity and success, it appears in a great problem. Many factors affect the company success, therefore, a failure in one issue may ruin the whole scheme. Tesco has appeared in such situation when it has chosen to adopted “a mea culpa strategy” (Woods, 2012) and to enter a USA market without following the pieces of professional advice and applying to the research results. The main idea of this report is to consider the situation when Tesco appeared in crisis, to analyse the events and after this to offer some pieces of advice which may help the company to recover from crisis. Even though it seems that the company begins to increase its sales and to return the preference of the customers, some aspects of the company national and international strategies are to be changed. The research is going to be based on the literature review of the information when the company appeared in crisis and the latest news devoted to the current state of affairs in Tesco. The paper will also focus on the company overview with the purpose to understand the decisions made before the problems in the company appeared.

Company Overview

Tesco is a British multinational grocery which started its business in 1919 and successfully continued its raise to the peak of the UK business world. Being the largest retailing company in the UK with the closest rival of half of Tesco size, the company is famous all over the world. Being the largest UK retailer, the company did much to enter the international arena. However, the company is not that unique to enter all the countries and to gain the customers’ preference at once. Tesco managed to enter the markets in Check Republic, France, Hungary, Poland, Slovakia, the Republic of Ireland, Turkey, China, India, Japan, Malaysia, South Korea, Thailand, and the USA during different years. The most complicated for Tesco was the USA market. The problems the company faced are going to be discussed further (Tesco, 2013).

It should be mentioned that Tesco was the first companies which referred to the Internet retailing. Tesco.com is the website of the company which started functioning in 1984 when the first online purchase was made. The Internet shopping of the company is available for the large scope of customers since 1994. This strategy improved the company positions and helped Tesco become the leading retailer in UK. In spite of the leading positions and successful business, the company has a number of problems which have lead to the particular difficulties. Having enumerated the issues Tesco faced with, the literature review of the situation is going to be conducted with the purpose to give the reader the full view of the problem and the measures which have been taken. Additionally, the recommendations for further actions and changes are going to be made.

Summary of the Organizational Problem

Absence of the appropriate leadership is one of the main problems the company has faced with. The top managers of the company which appeared in 2011-2012 failed to complete their tasks successfully as this is the period when the company became to reduce its income. The sales declined and the actions of the managers may be considered as the crucial factors for this. The analysis which is going to be discussed in the next section has shown that Tesco became too assured in its success and it has referred to the risky “mea culpa strategy of self flagellation in response to the 15 per cent plunge in share prices” (Woods, 2012). One more aspect which is going to be considered is the failure to enter the US market with the income the company predicted. The failure in 2011 Christmas campaign and as a result the declination of the income in January 2012 are also the problems which are going to be highlighted.

The company began to lead shabby politics which frustrated many customers. Moreover, the failure to take on and train new employees resulted in the reduction of the service quality. Tesco seemed to stick in one time period while other companies successfully continued development and referred to the changing strategies. The price drop campaign was not also a good idea as the advertising created an impression that the company offered low quality products rather than cheaper ones for the lower from rivals’ price. Therefore, many consumers refused to buy products with Tesco having chosen cheaper but top quality goods. One more problem is the refusal from core food business of Tesco. Specialists say that “Tesco went on an acquisition and diversification spree, but at the same time it under invested in existing stores in the UK and lost its focus on food” (Barford, 2013).

Summary of the Academic Literature on the Problem

Speaking about the scope of the problems Tesco has faced with, it is possible to present the following examples. According to the research, “Tesco reports a 1.8% rise in like-for-like sales in the five weeks to 5 January and Sainsbury’s a 0.9% increase in the 14 weeks to the same date” (Tesco and Sainsbury’s all apples and oranges over Christmas trading figures, 2013). Nevertheless, Tesco cannot be called a winner due to the following. The increase is seen in comparison with the previous periods, however, it to take the numbers from the previous year of the same period, the declination of the income is seen. The income of Tesco reduced by 2% and Sainsbury’s income went down by 0.5%, therefore, Tesco cannot be considered as a winner in this situation. Being one of the largest retail companies in the world, Tesco has fallen backwards.

Furthermore, it has already been mentioned that “a mea culpa strategy of self flagellation in response to the 15 per cent plunge in share prices wiped off its value” (Woods, 2012). The main reason of the appearance of this problem is a mistake of a new chief executive, Philip Clarke, who failed to complete its task and to calculate the income and expenses of the Tesco Christmas campaign successfully (Woods 2012). The staff problem also provoked the issue of lowering the quality of staff performance. The US issue is also connected with the staff. Trying to enter the US market, Tesco has committed a number of mistakes. First of all, it should be mentioned that before entering this market the company spent 20 years on searching the US market, its needs and customer preference. Moreover, Tesco also spent 2 years on intensive on-the-ground research.

The senior executives of the company were sent to the US families with the purpose to research their preferences and needs. The test stores under other trade marks were opened to research the customers’ needs. However, when it was time to practical implementation of the US invasion, Tesco ignored all the research points and organized the marketing in accordance with personal desire. As a result, the US invasion was ruined. The US strategies did not work at the US market, the cultural differences and various life positions affected the situation (Butler 2012). Speaking about staff issues, the personal use of the corporate money should be considered. According to Neate (2012) the Tesco executives spent £9m in 2011 for private jets. Such expenses are to be limited as the company is unable to pay such sums of money on the points which may be reduced.

The company was lucky to have profit at other world markets, therefore, it managed to get some profit and to remain active. However, the expenses the company suffered from were too big to leave the issue without consideration. The company has to reconsider its vision of entering new international markets (Schultes, 2012). There is one more problem Tesco faced. Many scholars stress that there are a lot of grocers which are opening now. It is difficult to keep the priority as different customers have different needs. Additionally, having used to go to one market, not many customers are going to change their preference and go to another one (Felsted, 2012).

According to The Guardian, the company has increased its sales in 2013. The Christmas campaigns 2012 were much better than those of 2011 when the company suffers the deepest crisis. Philip Clarke, Tesco’s chief executive is also sure that the company is “back on form” (Moulds, 2013). However, it has not reached the income it had in January 2012 after the 2011 Christmas campaign as the failures the company has done are too serious to be solved just by one successful campaign (Tesco, 2013). More specific actions are to be done in order to reach the pre-crisis activities and cover the problems which occurred in the company structure.

Solutions to the Problems

Therefore, it is obvious that a company has faced a number of difficulties connected with the staff organization and the choice of the business strategies. However, why has it happened? Pratley (2012) is sure that Tesco has faced all the difficulties and expenses because it became too complacent. The company became assured in its uniqueness and that no one was able to overcome it. The success of the company was considered as something ordinary and obvious, not as the work of many specialists and employees. Tesco management focused too much on overseas expansion having forgotten about the need to pay attention to the national stores.

Trying to solve the problem of the declination of the income, the company should refuse from its cheap products strategy. The advertising campaign should be created with the purpose to stress the quality of the food without mentioning the price. The previous company strategy has shown that customers prefer top quality products even though they seem to be more expensive to cheaper low quality goods. Solving the problem with the staff, it should be mentioned that having a good team of analyst and researchers, the company top managers became so assured in their magnificence that they ignored the recommendations and research results. The company conducted the research of the US customers for 20 years and the self-assuredness of the managers and the rulers of US business ruined everything. The recommendations in this care are going to be directed at the HR managers who have to change the staff training scheme having stressed on financial risks.

Tesco should not try to increase the number of the stores both at the national and international markets. It is important to strengthen its positions as the already existing niche. Moreover, it is possible to widen the clients by means of attracting new range of customers. Various advertising campaigns and discounts may be emerged, however, it is important to listen to the recommendations of the experts who conduct a research. Therefore, the buying rate of the UK and world customers may increase due to the company strategy in the already existing stores.

Conclusion

Therefore, it may be concluded that having assured oneself in personal superiority over its rivals, Tesco failed to notice the fact of personal degradation. The company was sure that nothing could affect its superiority and leading positions at the UK market. However, the company has forgotten that to remain a leader it has to support its positions and strengthen them. The wrong staff and marketing management have led to the situation that Tesco has failed to success and suffered expenses. The change in the HR management and in national strategies may result in positive affect.

Reference List

Barford, V, 2013. Five things Tesco got wrong. BBC News Magazine. Web.

Butler, S, 2012 Fresh, but not so easy: Tesco joins a long list of British failure in America. The Guardian. Web.

Felsted, A, 2012. Tesco’s troubles put brakes on ‘space race’. Financial times. Web.

Moulds, J, 2013. Tesco ‘back on form’ as Christmas sales beat City forecasts. The Guardian. Web.

Neate, R, 2012. Tesco spends £9m on private jets for bosses. The Guardian. Web.

Pratley, A, 2012. The trouble at Tesco’. The Guardian. Web.

Schultes, R, 2012. Tesco gets tough on US troubles. The Wall Street Journal. Web.

Tesco and Sainsbury’s all apples and oranges over Christmas trading figures, 2013. The Guardian. Web.

Tesco, 2013a. The Guardian. Web.

Tesco 2013, Web.

Woods, J, 2012. Why there’s trouble in store for Tesco. The Telegraph. Web.

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