Tesco PLC is currently the leading retailer that specializes in household goods and groceries. Having been founded in 1919, it has grown exponentially by acquiring small businesses, forming alliances, and promoting value. With its store formats based on existing goods and locations, Tesco has managed to enter new markets in Asia, Europe, and United States. It is presently the largest retailer in the United Kingdom. This paper gives a detailed analysis of this company, its current problems, and future strategies.
Overview of Firm Competitive Advantage
This organization has several competitive advantages that make it successful in its industry. Firstly, the senior management team remains committed and focuses on future performance. Secondly, Tesco has a powerful vision that supports its objectives. Thirdly, it utilizes available resources effectively to promote organizational success. Fourthly, it establishes alliances and exploits emerging capabilities to attract more customers.
Problem Statement
The presented case study does not identify a specific problem that might affect performance. However, it is evident that Tesco’s leaders should consider and implement the most appropriate strategy that will increase profitability, attract more customers, and will eventually make it the leading global retailer (Haddock-Millar & Rigby, 2015). The other issue is for the company to retain its current model to emerge successful.
Alternative Solutions
The managers at Tesco PLC should consider various alternatives to support the current performance and continue delivering additional results. The first viable option is to maintain the existing business model but consider untapped markets, such as Latin America and Africa.
Pros: This model is capable of attracting more customers and making Tesco more competitive.
Cons: This option requires additional resources to hire expatriates, conduct market researches, expand logistical operations, and overcome cultural barriers (Haddock-Millar & Rigby, 2015).
The second strategy is to increase its product portfolio and consider the concept of diversification. This approach will deliver various pros and cons.
Pros: Tesco PLC will become more competitive and increase its profits. It will reduce business risks and stakeholders’ bargaining power.
Cons: This approach might complicate operations and attract more competitors.
Decision and Support
From this analysis, the first option appears to be the best for Tesco. This is true since this company has succeeded in Asia, Europe, and the United States. Expanding operations to Africa and Latin America will improve competitiveness. The outlined cons can be addressed using the existing business model. While the idea of diversification appears effective, it might complicate operations and disorient the targeted outcomes (Müller, 2016). The selected option will address the current level of competition. The choice can be coupled with additional products depending on customers’ needs in every market.
Action Plan
A powerful action plan is needed to implement the outlined choice. The company’s top managers should use Kurt Lewin’s model to prepare the stakeholders about the option, introduce it, and eventually make it part of the organization. This approach is less costly since the level of opposition will decrease significantly. It is also practical and can deliver positive results within a short period. The possible negative consequence is that the company will face stiff competition in the identified new region or markets. The initiative needs to be implemented within a period of two years.
The first one will be used for conducting feasibility studies and identifying potential locations (Pitt & Koufopoulos, 2012). The second year will be considered to launch the strategy successfully. The best contingency plan revolves around the decision to hire expatriates and local managers to support the entire transition. These measures will support this action plan and eventually make Tesco more successful.
References
Haddock-Millar, J., & Rigby, C. (2015). Business strategy and the environment: Tesco PLC’s declining financial performance and underlying issues. Review of Business & Finance Studies, 6(3), 91-103.
Müller, M. (2016). Critical analysis of the financing policies of Tesco PLC. Munich, DE: GRIN Verlag.
Pitt, M. R., & Koufopoulos, D. (2012). Essential of strategic management. Thousand Oaks, CA: Sage.
The introduction part of this paper tries to introduce the reader into understanding the need to adopt an electronic business system and why most business organizations are becoming digitalized.
Main Body:
The body of this paper highlights the impact of introducing electronic data interchange into an organization and further the benefits associated with adoption of an e-business in Tesco.Com.
Conclusion:
The conclusion entails what Tesco should do in order to enhance its advancement in e-business.
Introduction
Tesco is a UK based retail supermarket with the largest competitive space in the retail industry throughout Europe and its environment. Tesco was founded in 1919 by Jack Cohen as the sole and key founder. Its strategy includes acquisitions, mergers, and adoption of new technologies. Tesco operates in a very dynamic and volatile retail industry offering mainly groceries that includes beverage, home, fashion wares Tesco mobile and financial services.
Its competitors include, Asda, Sainsbury, Safeway, Morrison and many others. In 2001 Tesco was announced the first and only retail business to make online business. This triggered off a flurry of activities featuring new product design and versions. Today Tesco still remains the most competitive retail super market in the United Kingdom. (Nash 2006)
The purpose of this paper is to advance the reader’s knowledge in understanding the contribution of electronic business by critically evaluating how Tesco has successfully achieved the implementation and application of its electronic commerce in the entire industry. This study evaluates and assesses the application of strategic e-commerce techniques and how Tesco has utilized this feature to distinguish itself from its competitors thereby making it more competitive in the industry.
Different organizations have different business strategic options that strengthen their ability to overcome and sustain competitive performance in their respective industries. With the rapid pace in technological advancement every business organization is striving so hard to take the early opportunity associated with the adoption of modern technologies. (Hoggan 1998)
Tesco is one such company and still continues to invest heavily in this digital era. The topic highlights some of the unique ways that an organization can use to underscore in its industry as well as in the global arena. The objective of this paper is to equip the reader with a wide knowledge in understanding specific mechanisms in implementing an information system within an organization. Tesco runs the following electronic business systems; automated distribution, automated inventory, online grocery shopping, and online advertising. (Humby Hunt & Phillips 2006)
Critical Evaluation and Analysis of E-business strategy in Tesco
Automated distribution
Tesco believes that its brand is the strongest in the industry and therefore draws goods from suppliers to the distribution centers. Goods are processed and rebranded the Tesco’s brand. The distribution system is aided by Tesco’s powerful technology known as RFID. This is viewed in the broad spectrum to reduce operational costs and improve reliability. This has enabled Tesco to embark on a program of extending logistical practices to cover collection from its suppliers in the supply chain. (Nash 2006)
This channel has ensured that Tesco is directly linked to its customers thereby eliminating the existence of middlemen who are likely to increase the price of essential commodities desired by its customers. The use of RFID technology has increased procedures where at the same time logistics personnel are able to identify any risks that could curtail the transport network. Due to congestion, increased pollution and fuel prices, Tesco has shifted to other transport alternatives like forming alliance with Eddie Stobart Group and Manchester Ship Canal. (Hoggan 1998)
Online Inventory systems
Tesco runs a computerized inventory system. All the stores run computerized systems from where the items are coded and the codes are used to trace products from the warehouses. This has increased efficiency in inventory management. Inventory coding has also beefed up security and inventory control in the warehouse. Recently the stock management technology has the capability of reminding the storekeepers of the re-order and lead levels every time a requisition is made from the warehouse.
This ensures that the stores are kept informed about the overall movement of stock so that they can make new orders any time a safety stock is reached. This technology is also used by Morrison and Safeway. The system is designed to work on a first come first sold basis. At the stores level the system uses coding to provide all the details of the product i.e. price, date, and quantity. This is important when a customer is making a specific inquiry. (Nash 2006)
Online shopping
According to 2008 survey report Tesco UK online business was the largest in the world with a market share of 27.1% attributed to holdings in the UK retailing industry. In 2007 online sales amounted to $ 748. Under this system customers are able to access Tesco’s website view products and make orders through either on-line via tesco.Com, by phone or in selected stores at the new Tesco direct desks. Tesco.Com then starts picking orders in the morning from 6am followed by drivers who begin to deliver products from 9am to 11pm. (Pagano1987)
This is meant to increase customer satisfaction and convenience. Products sold through online are DVDS,CDS, books, electrical items as well as Tesco Personal Finance and the Telecom services, music downloads, gas, DVD rentals, flights and holidays and dieting clubs. (Humby Hunt & Phillips 2006)
Contribution of Online sales to Tesco’s success (benefits)
Tesco.Com persuades its clients to shop online through in-store advertising and marketing to the supermarket’s Club card loyalty scheme customer base. (Nash 2006)
Personalized marketing
Customers are able to access the interactive websites and view some of Tesco’s newest products and services and then decide accordingly. This has helped Tesco to minimize operational costs by eliminating the need to employee field marketers. Online selling also means direct contact to customers and therefore most clients who are loyal to Tesco brands are able to get the information they want without the need to rely on intermediaries who may delay important information. (Hoggan 1998)
Globalization
Recently, Tesco operates in many countries in Europe, Asia and United states. Through supply of online information Tesco has managed to build and establish a reputable brand across the international borders as well as in the domestic markets. This has opened up external opportunities for Tesco and hence expanding its Market niches abroad to the chagrin of its competitors. The success behind its global activities lies on its online nature of business. (Humby Hunt & Phillips 2006)
Electronic payment
Having made orders online customers do not need to travel to the physical stores to make payment. They are issued with debit/credit cards through which they can use to make the payments. This provides customers with the greatest payment convenience and thus reduces the backload of using currency coins and notes which may be bulky and insecure if offline payment was to be used. In the wider sense electronic payment has made many business organizations to lock in their customers and thus achieving customer satisfaction. Tesco supermarket is one such organization. (Simms 2007)
A 24-hour Business
Tesco operates a 24 hour business. In fact some of its superstores in urban cities like Newcastle and Manchester are busy throughout recording the highest sales volumes. This has increased Tesco’s reliability and popularity within and outside the United Kingdom. It has also led to Tesco surpassing its sales target. This implies that the company can easily meet its strategic objectives. (Nash 2006)
Procurement
Tesco runs an online procurement system where it is able to source for quotations from different suppliers. The supplier listing is generated from the stores data base. Through this method Tesco is able to view all the details relating to different suppliers in the industry according to their ratings. This has always ensured that Tesco gets the services of the most professional suppliers. There has been a lot of industry politics with key rivals asserting that Tesco is suffering from little knowledge of customers and suppliers. Over the past period, online procurement has erased this believe from the minds of many. (Sir Ian 1999)
Tesco SWOT Analysis is shown below
Strengths
Opportunities
Operates 24/7
Strong Liquidity ratios
Increase sales revenue and trading profits
Strong Balance Sheet
most competitive Supermarket Chain
Strong brand Awareness
Access to professionals
Online Shopping
New Markets opportunities
globalization
Health awareness growth –GM crops
Creativity, Innovation & Alliances
Efficient brand growth
Diversification of products and services
Non-food – offers undiscovered new markets with reasonable margins
weaknesses
Threats
sensitivity of low quality –(Tesco brands)
little knowledge of customers and culture
overseas brand
Volatility in Price of raw materials
Economic downturn
Market shift to globalization
invasion bids by other players
Conclusion
Tesco has identified itself as the industry leader in providing unmatched needs and services. This has been achieved successfully through e-business. However to be on track and maintain the lead in the industry Tesco is facing a hard task. There is already pressure from the domestic markets. This is evidenced by the presence of other giants in the industry including Asda, Sainsbury, Safeway, Morrison’s and etc. Tesco must be able to improve its existing manpower and employ new talented IT professionals who are creative and innovative enough if has to survive.
List of References
Sir Ian, M 1999, Tiger by the Tail: A Life in Business fromTesco to Test Cricket. London: Pan Books. ISBN 0330337714.
Simms, A 2007, Tescopoly: how one shop came out on top and why it matters? London: Constable. ISBN 1845295110.
Humby, C, Hunt, T & Phillips, T 2006, scoring points: how Tesco continues to win customer loyalty. London & Philadelphia: Kogan Page. ISBN 9780749447526.
Nash, B 2006, Fair-Trade and the growth of ethical consumerism within the mainstream: an investigation into the Tesco consumer. Leeds: University of Leeds. ISBN 75272130.
Hoggan, K 1998, “Tesco Tycoon: Interview with Tesco’s fortunes Chairman Ian MacLaurin”. Marketing (Haymarket Publishing Services).
Pagano, M 1987, “Shocked Hillards attacks greed of Prudential: Hartley disgusted with institutions after Tesco wins takeover battle”. The Guardian (the sun).
In the fields of sales and retailing, brand equity is an important indicator that determines the success of a business and creates a sustainable financial background. Tesco is a British corporation that has been operating in the market for a long time and has a wide range of regular customers. The implementation of appropriate marketing communication tools is a mechanism to increase sales and brand value.
Importance of Branding for Organisations and Consumers
From the standpoint of value to organisations, branding is an important aspect that builds market recognition and a sustainable customer base. The example of Tesco proves that an authentic selling principle that the corporation promotes is a convenient marketing practice attracting potential buyers (Barnes, 2017). In addition, creating the image of a multinational company that provides services globally increases confidence in a particular brand.
From a consumer perspective, branding policies are also significant. Al-Hajla et al. (2018) provide an example of Islamic-oriented sales, which Tesco adheres to as a strategy to engage an individual category of the population. This allows the target audience to purchase the necessary goods and, at the same time, serves as an additional incentive for trusting this brand. As a result, effective branding is beneficial for both sellers and buyers and contributes to building successful interaction mechanisms.
How Marketing Communication Tools Enhance Brand Equity
By using the example of the Tesco corporation, one can determine the possibility of increasing the brand equity through marketing communication tools. For instance, Moravcikova and Kliestikova (2017) argue that advertising services via social media and selling food due to digital applications increase the number of customers, thereby enhancing brand recognition. Taiminen (2016) confirms the importance of digital marketing and states that the channels of interaction with the target audience expand, which makes it possible to serve a larger number of consumers.
According to the assessment of academic sources, many researchers focus on online marketing as an advanced and popular mechanism for engaging the target audience (Garczarek-Bąk, 2016; Štrach, 2018). Štrach (2018) notes that delivering messages to buyers via the Internet helps personalise purchasers and increase brand recognition due to an individual approach to each client. Thus, marketing communication tools enhance confidence in a particular brand and contribute to customer retention.
Justification for Sector/Choice of Brands
The choice of Tesco as a target organisation is determined by the brand equity of this corporation and its successful approaches to increasing consumer recognition. For instance, while comparing this company with those in the clothing industry, Morgan, Tallontire and Foxon (2017) note more sustainable green production principles due to customer’s daily food consumption. According to Hökelekli, Lamey and Verboven (2017), compared with discounters, Tesco provides better products of good quality, thereby increasing client recognition.
In general, the food sector is a profitable industry to promote. Shin, Kim and Kim (2020) cite an example of the Chinese market and highlight Tesco’s high position as one of the main food distributors in terms of perceived quality. In the UK, the organisation is the largest retailer, which makes it possible to evaluate its activities comprehensively (Jones and Comfort, 2019). Therefore, the choice of the brand is determined by its success and market recognition.
Reference List
Al-Hajla, A. H. et al. (2018) ‘Advancing Islamic branding: the influence of religious beliefs and religion-compliant product adoption’, The Marketing Review, 18(1), pp. 25-39.
Barnes, A. (2017) ‘Telling stories: the role of graphic design and branding in the creation of ‘authenticity’ within food packaging’, International Journal of Food Design, 2(2), pp. 183-202.
Garczarek-Bąk, U. (2016) ‘Marketing communication instruments used by the retail chain on the Internet’, Marketing i Zarządzanie, 46(5), pp. 143-154.
Hökelekli, G., Lamey, L. and Verboven, F. (2017) ‘The battle of traditional retailers versus discounters: the role of PL tiers’, Journal of Retailing and Consumer Services, 39, pp. 11-22.
Jones, P. and Comfort, D. (2019) ‘Stories and retailer brands: a study of the UK’s leading retailers’, Indonesian Journal of Contemporary Management Research, 1(2), pp. 1-15.
Moravcikova, D. and Kliestikova, J. (2017) ‘Brand building with using phygital marketing communication’, Journal of Economics, Business and Management, 5(3), pp. 148-153.
Morgan, E., Tallontire, A. and Foxon, T. J. (2017) ‘Large UK retailers’ initiatives to reduce consumers’ emissions: a systematic assessment’, Journal of Cleaner Production, 140, pp. 227-238.
Shin, S., Kim, H. and Kim, W. (2020) ‘Transnational corporations’ localization strategies via retail attributes: focus on Chinese market’, Journal of Retailing and Consumer Services, 55, p. 102088.
Štrach, P. (2018) ‘Emerging trends in marketing communications: personalization and eventization’, Marketing Identity, 6(1/1), pp. 160-167.
Taiminen, H. (2016) ‘One gets what one orders: utilisation of digital marketing tools’, The Marketing Review, 16(4), pp. 389-404.
The asset beta of Tesco has been determined by time-series of using stock returns in 2006. this beta is assumed to inlcide the effects of leverage, hence this is the asset-beta.
Both tesco and Sainsbury are in food and drug retailing business. Although they are industry peers, they have significantly different debt-to-equity ratios. High D/E ratio definitely alters the risk profile of a company and hence it does increases the overall riskiness of the firm. We see above that D/E ratio of Tesco is much lower (1.4) compared to that of Sainsbury (2.28). Hence assuming here that both firms would have same asset-beta for they are in same industry does not justify. This assumption is not realistic although supported by theory.
At the same time, assuming that debt betas are zero also bear little factual ground. Debt is never risk free when a firm of this scale goes into such high debt ratio.
Sainsbury’s Beta using Time-series of Stock-returns
Cov Sainsbury and Markt
0.0000400234
Var Market
0.0000624301
Sainsbury Beta
0.64
βA = 0.64
βE = (0.64) x 3.28 = 2.1
Explaining the Difference
Now, based on its stock returns, Sainsbury’s equity beta comes out to be 2.1, much higher than 1.41 that was estimated using Tesco’s asset-beta. This estimate seems more realistic, considering the high debt ratio of Sainsbury.
This difference also again questions the assumtion that asset beta of botht the firms is equal. Earlier the beta of 1.41 for Sainbury was estimated on the basis of asset beta of Tesco. Now the beta of 2.1 has been determined by the time-series of stock returns of Sainsbury itself. The difference is significant, that signifies the fact that covariance of Sainbury stock with market is greater. In other words, Sainsbury’s market risk is greater than that of Tesco. This fact is both verified by the higher debt ratio of Sainsbury and also more variance of its stock returns. This is imperative also to note that if debt betas of firms are not considered to be zero, this difference might even become larger. As disscussed above, assuming debt betas to be zero is far from realistic.
Bibliography
Jonathan B. Berk, Peter M. DeMarzo. Corporate Finance. Pearson Addison Wesley, 2006.
Marketing is one of the most important components of successful companies. Therefore, research, analysis, and making recommendations in this area are necessary to maintain the competitiveness of organizations and successfully achieve their goals and objectives. Of particular importance in this process is the marketing mix, which consists of several critical elements. In other words, this indicator of the activity of organizations implies the performance of functions for the development and implementation of manufactured products for consumers. For Tesco, the marketing mix has value, as it can ensure the maintenance of high productivity and efficiency in the market. Thus, this work will evaluate the Tesco marketing mix using various analytical methods and scientific sources.
Research
First of all, it is necessary to gain an understanding of what Tesco is and its position in the market. To do this, I have studied the company’s website since it enables me to gather the necessary information about the organization. I gathered secondary information from the company’s website, and this gave me accurate data about its current functions and product range. There was no date shown on the website, so this information may not be up to date. Nevertheless, research showed that the company’s group sales constitution is £54.8bn, retail free cash flow is £2.277m, and statutory revenue is £61.3bn (“Key facts,” n.d.). The company distributes its products all over the world, but the greater emphasis remains in the United Kingdom, where it was founded. This data shows a fairly successful company and a large amount of profit, which largely depends on marketing activities.
Of particular importance when studying the marketing mix of Tesco was the article by Ibrahim et al. called “Customer desires on marketing mix and its impacts on Tesco (Malaysia).” The value of this source lies in the fact that its purpose is to focus on customers, who are one of the critical aspects of the company’s marketing, which is relevant for this market under study. Research stated that “the majority of buyers shop from once a week to once every two weeks at 29.2% (once a week) and 32.5% (once every two weeks) for a total of 61.7%” (Table 1) (Ibrahim et al., 2017, p. 48). This shows that the company enjoys extensive popularity with the audience, which is a direct reflection of a reasonably successful marketing company.
Table 1. “Demographic Profile of Tesco’s Customers” (Ibrahim et al., 2017).
Moreover, the strength of this source was the correlation coefficients among variables. It is useful because the information provides an understanding that the marketing mix of a company largely depends on the motivations and desires of the people who consume its products. Table 2 contains a table of these relationships, according to which it can be concluded that the higher the price of products, the higher the motivation of buyers. However, there is a negative correlation between promotion and the desires of individuals. Thus, this aspect shows that some consumers may perceive a broad marketing campaign as a sign of the poor quality of the product offered. The main weakness and limitation of this article are that it examined the population of a certain region. That is, the data obtained in the course of work may not correspond to a more global picture of the company’s activities.
Table 2. “Correlation Coefficient Among Variables” (Ibrahim et al., 2017).
Another valuable source in the evaluation of Tesco’s marketing mix was an article by Shastri. It examines in detail such aspects as product and price strategy, place and distribution strategy, and promotion strategy (Shastri, n.d.). In addition, the strength of this work is the provision of information on the main points of the marketing strategy of the organization. For example, a positive assessment is given to the wide selection of the company’s products, its cost leadership of the pricing strategy, and a comprehensive channel of online distribution of goods.
Despite the usefulness of this source, its main drawback is the lack of maintenance of the information provided by any data. This aspect could give more evidence and validity to the article. However, despite this, it is quite relevant for this work, as it gives a basic understanding of the positive and negative aspects of Tesco’s work. Thereby providing an opportunity to understand what recommendations can be provided to improve the work of the organization.
Analysis and Interpretation
In order to obtain the most valuable information regarding Tesco’s activities, a ratio analysis of the leading indicators was carried out. Conducting this financial analysis is valuable, as it can provide information about the effectiveness of the company’s activities. Thus, this analysis showed a decline in gross profit since 2019, which fell from 46.2% to 17.5% (“Tesco PLC (LSE:TSCO) > Financials > Ratios,” n.d.). Therefore, the decrease in this indicator is due to the fact that the company has less money to deal with its operating expenses.
As part of the ratio analysis, special attention was paid to such an aspect as Tesco’s liquidity. This is due to the fact that it can show how effectively an organization can create cash from assets to pay short-term obligations. Thus, the analysis showed that Tesco has a low indicator of this indicator determines that the company has difficulties selling assets for profit (Table 3) (“Tesco PLC (LSE:TSCO) > Financials > Ratios,” n.d.). Another indicator that causes concern is the inventory turnover ratio. So, it showed a fairly significant drop, which caused a decrease in the company’s ability to sell and distribute its inventory.
Table 3. Tesco Ratio Analysis
Conclusion and Recommendations
In conclusion, this work considered and evaluated the marketing mix of Tesco. Analysis of various sources, including the company’s website, showed that it operates on a global level, but most of its activities are concentrated in the United Kingdom. Moreover, the company offers a wide range of products, which has a positive effect on expanding the customer base. However, the studied scientific literature has shown that overly active promotion can result in a decrease in consumer motivation. On the other hand, this indicator is in close correlation with the pricing policy of the company. Moreover, ratio analysis showed that the main areas of concern for Tesco are liquidity and inventory turnover ratio, which have significantly decreased compared to previous years, showing a decrease in the efficiency of the company.
In addition, getting rid of unnecessary assets becomes a recommendation to increase the company’s liquidity. This is due to the fact that this aspect directly affects the ability of the organization to pay debt obligations and successfully support and provide its marketing campaign. Regarding such an aspect as promotion, the company should pay attention to building loyalty and trust of its target audience. Since sources have shown that most of the buyers are the younger generation, Tesco may pay more attention to online advertising. This is due to the fact that young people often use various social networks.
References
Ibrahim, A. A., Alkhawlani, M. A. A., & Al-shaghdari, F. M. (2017). Customers’ desires on marketing mix and its impacts on Tesco (Malaysia). International Sciences of Management Journal, 1(1).
Despite in many ways favourable macro-environmental conditions, Tesco’s ambitious entrance strategy into the Chinese market eventually failed. At the moment of the case study, Tesco had to merge with a thriving local retailer, completely forsaking its solo brand and having only 20% of the stake in a local brand (Dakhli et al., 2019). However, the situation is not hopeless, as new trends in technology and customer behaviour open possibilities in online retailing.
Future Tesco Operations in the Chinese Retail Market
Marketing-Related Problem Statement
There are several reasons for Tesco’s failure in the Chinese retailing market. According to Dakhli et al. (2019), Tesco’s market entry in 2004 was relatively late, placing it behind its competitors, such as Carrefour and Walmart. Consequently, Tesco could not benefit from the same first-to-enter advantages available to other international retailers. In addition, rising labour and space costs made it much more challenging for low-margin players to secure healthy profits (Dakhli et al., 2019). Finally, Tesco did not manage to create a unique and valuable offer, failing to reach a significant number of customers in its stores despite localisation efforts. Thus, the marketing-related problem, in the case of Tesco deciding to continue its operations, has three facets. Firstly, there is high competition in the emerging Chinese market. Secondly, the labour and space costs raise vital business concerns. Thirdly, there is a need to attract as many Chinese customers as possible.
PESTLE Macro-Environment Analysis
Political
During the past 30 years, China’s economy has changed from a centrally planned system primarily closed to international trade to a more market-oriented economy with a rapidly growing private sector. In terms of regulation of trade, the retail sector in China is not considered a prestigious industry by the Chinese government. It is, thus, not sanctioned like the heavy industry sector (Kardes et al., 2020). Currently, the local governments are changing the shape of traditional street markets and converting them into supermarkets to expand retail networks to the Western provinces of China.
Economic
Despite slowing GDP’s growth rate, consumption will rise due to overall population wage growth. China’s corporate income tax rate is currently 25% (Cai et al., 2018). However, special tax rates are available for companies that make investments in preferred regions and sectors, such as the Western provinces. Due to the majority of the fresh products originating from China, it is imperative to find local suppliers that provide goods according to international quality standards.
Social
The essential prerequisite for growing retail market share is consumer access to the internet, termed internet penetration. In this context, China has one of the highest smartphone use rates (Dakhli et al., 2019). Meanwhile, demographics show that China’s population growth rate is low and is characterised by a small youth group due to the one-child policy introduced by the government. Regarding health awareness, Chinese customers are highly concerned about product safety (Dakhli et al., 2019). In addition, there is a danger of forcing foreign formats onto Chinese customers as it might result in the rejection of foreign retail chains.
Technological
Due to vast territory and poor infrastructure, it is necessary to establish a strategic net of warehouses at specific locations and to leave distribution to a thriving distribution partner with extensive local knowledge. According to Kardes et al. (2020), technological infrastructure shaped by information and communications technologies is critical to retail operations. However, finding suppliers with the required IT capabilities to enter an existing distribution system can be challenging (Lin et al., 2018). In the meantime, Few Chinese households are equipped with a refrigerator. Thus, shopping behaviour will not likely shift quickly to one big weekly shopping trip.
Legal
Various government legislations and policies directly impact the success of foreign companies operating in China. The government’s policies of monopoly control, support of local businesses, and reduction of buyers’ power can limit operation in the sector with such controls as license requirements and limits on access to raw materials (Kardes et al., 2020). In addition, sanctions, higher taxation, and unfavourable policies against subsidies make the expansion of nonlocal retailers more challenging.
Environmental
The Chinese government has decided to abolish plastic bags – an illustration of environmental decision-making which can happen quickly and involve radical shifts. The Chinese government continuously introduced recycling programmes through its National and Social Progress Plan (Wang et al., 2019). Moreover, because of international pressure, China has become more sensitive to the issue of pollution, and there has been a trend towards stricter controls of firms in recent times.
PESTLE Analysis Conclusion
In summary, the rising buyer’s power, albeit occasionally limited, overall favours doing business in China. Therefore, a company specialising in retailing, such as Tesco, has numerous opportunities in the Chinese retail market if it considers online retailing. Most importantly, the trends in growing internet penetration illustrate the new market opportunity windows. In addition, Dakhli et al. (2019) highlight that the traditional brick-and-mortar format would not be efficient since Tesco’s competitors – Carrefour, Walmart, and local enterprises – are already in control of the most profitable physical spaces. Nevertheless, Tesco will be exposed to the legal and regulatory environment that Chinese governmental institutions establish for foreign retailers.
Target Audience
Regarding the question of a target audience, several factors point to Millennials being the best choice. Population dynamics in the years after the one-child policy establishment resulted in the reduction of the youngest population groups, which makes the adult group the majority in China. At the same time, according to economic factors, China’s GDP gradually grows along with the average wage levels, which increases the number of middle-class households. In this context, Millennials can be considered increasingly vital players due to their number and earning potential.
Overall, Millennials tend to be significantly involved with various manifestations of digital technologies. Consequently, according to Dakhli et al. (2020), the retail landscape was transformed mainly by digital literacy, brand consciousness, quality orientation, and overall engagement of this population group. In light of these peculiarities and rising income, Kardes et al. (2020) provide additional insights in favour of this population group. For instance, online shoppers usually have a significantly higher income level. Thus, the growth of the middle class especially contributes to online retailers’ sales. Apart from that, technological literacy and engagement increase the opportunities for consumers to shop with such retailers.
7Ps of a Marketing Mix
In short, Millennials demand high levels of product and service personalisation and diversity. Fortunately, there is a strategic solution that, if successfully executed, is able to address all three dimensions of the given marketing-related problem – competition, lower place and labour costs, and customer attraction. The study by Ho et al. (2022) illustrates the application of live-streaming shopping (LSS) based on various scholarly evidence of its success. The 7P marketing analysis can further showcase the strength of this strategy.
Product
The product element can be defined as the item offered to the market to meet a customer’s need or want (Altay et al., 2022). It must be suited for obtaining, consuming, using, or attracting further customers. In a study based on retail sale experiences, it is stated that the product element refers to product variety and product assortment (Altay et al., 2022). They significantly affect the perceptions and satisfaction of consumers who shop online. Apart from that, most decisions made by online market shopping platforms regarding the product are related to which, how much, and what variety of products will be kept in stock (Altay et al., 2022). Product availability and quality are also considered among the most critical criteria in online grocery shopping.
In online marketing, the key factor for success is a product’s uniqueness. The majority of products sold through social commerce are highly similar (Ho et al., 2022). Consequently, the advantages of the retailers may be perceived if their products are unique, highly functional, practical, and trendy. If the product manages to become the subject of conversation, it will derive the benefits of word-of-mouth marketing and attract further customers’ attention. Conveniently, the LSS platform allows viewers to feel that the products are useful and provide good value for money (Ho et al., 2022). Therefore, products on the LSS platform positively affect customers’ purchase intention.
Price
The price element is the only marketing mix element that generates revenue. Pricing decisions in online sales are as important as traditional pricing decisions (Altay et al., 2022). In addition, there is greater price competition among online sellers, so the importance of standardising prices is critical. The shopping platform’s price images can be changed using price promotions, such as discounts and coupons, increasing the company’s perceived value. In addition, there is little to no physical store rent in online commerce, so the selling price would be lower. E-sellers often propose unique pricing to attract customers, but those who watch live streams can enjoy special discounts and pricing incentives (Ho et al., 2022). Thus, the price offered on LSS has a high probability of being positively associated with customers’ purchase intention.
Promotion
The promotion element demonstrates how a company is committed to communicating its products’ characteristics and persuading target customers to buy their products. A study on online grocery shopping argued that the main criteria regarding promotion are sales promotion, advertising, and public relations (Altay et al., 2022). The promotion element focuses on customer attraction by providing a short-term incentive. To arouse customers’ expectations and curiosity in order to achieve the promotional effect, e-sellers often announce the content of the broadcast and start time in advance. In addition, various interactive games or benefits can be organised during the live stream to enhance customers’ engagement and impulse buying (Ho et al., 2022). Such promotions can attract new followers, making sellers more popular. Therefore, the promotions offered on LSS will likely be positively associated with customers’ purchase intention.
Place
Place element covers the mobile applications for online grocery shopping platforms, including distribution channels. One of the vital features of the place element is maximising the availability of sales channels (Altay et al., 2022). In this context, shopping through a real-time broadcast is much faster than visiting physical stores or using textual communication. Additionally, consumers can interact with other people who are experts in the brands and products. It allows potential buyers to interact with salespersons in real time, inquiring or asking for opinions about the product. Thus, it becomes easier to gain consumers’ trust due to the content of live broadcasts being more authentic (Ho et al., 2022). Furthermore, a live-streaming broadcast provides an entertaining media experience. The live content is more exciting and entertaining because of human interaction, which is a significant advantage of LSS. Therefore, the placement of LSS will be positively associated with customers’ purchase intention.
People
The people element emphasises that employees represent companies against customers. It was argued that miscommunication might endanger all marketing efforts unless responsible employees are adequately trained to communicate with customers (Altay et al., 2022). It is considered an essential marketing mix’s element because service consists of a performance, which cannot be separated from the performer. In this context, attractive endorsers are able to successfully change consumers’ attitudes and beliefs regarding a product, facilitating purchase decisions and participation. Live streamers play the role of promoters of products or brands in LSS (Ho et al., 2022). Many internet celebrities who match the product image can serve as salespersons in LSS, playing a role in service delivery. Their attitude, conversational style, and appearance might influence buyers’ perceptions regarding the product or service and become regular viewers due to the personal charisma of a broadcaster and rapport with the audience.
Streamers are integral in conveying the message by skillfully responding to viewers’ questions, providing product information, making suggestions for purchases and gaining viewers’ trust. With their high popularity and product endorsement, fans will be encouraged to participate in the live broadcasts and even contribute to the show, adding more new topics. Viewers might also learn new product information and accept the celebrity’s recommendation, adjusting their previous perceptions and attitudes accordingly. Thus, the personnel of LSS can be considered to be positively associated with customers’ purchase intention.
Process
The process element determines the method and order of services; it ensures that the value proposition promised to customers is created. A poorly designed process can lead to a slow, useless, low-quality service delivery resulting in customers’ frustration (Altay et al., 2022). In some cases, after customers place an order, their orders may be cancelled as companies are out of stock. Customers can give three types of reactions in this situation. They can accept buying substitute products, change the online shopping platform, or go off the internet. A study reveals that late or incomplete online grocery delivery significantly affects customer satisfaction. In some cases, failure to deliver quickly can cause consumers to abandon their online grocery shopping platform.
Consumer experience is intertwined with the process of service or product delivery. It has been confirmed that the service process design indirectly affects the customers’ perception (Ho et al., 2022). Additionally, past research on online commerce has revealed that factors such as delivery time and ergonomics affect customer satisfaction (Ho et al., 2022). Conversely, failure to secure fast delivery may prompt consumers to abandon an online shopping platform. Therefore, shopping and transaction processes can be considered essential for live-streaming commerce. For example, customers do not need to jump to the webpage to complete the purchase of goods. Consumers perceive convenience, including ease of use and saving time, as the main reason for LSS (Ho et al., 2022). Consequently, the process of LSS will be positively associated with customers’ purchase intention.
Physical Evidence
Physical evidence element in e-commerce is divided into two components: traditional physical and virtual. While the physical environment is represented by delivery points, offline stores, and offices of the company, the virtual environment includes the website or mobile applications of online shopping platforms (Altay et al., 2022). Live streaming shoppers often experience the immersive atmosphere of the shopping environment where the decoration, furnishings and configuration make viewers more engaged in the context. This atmosphere quickly stimulates their attention and enthusiasm for participation. Information about product appearance becomes more accessible to customers (Ho et al., 2022). Furthermore, customers’ experiences are enhanced through various consumption scenarios, such as in-person demonstrations and comprehensive and dynamic product displays that spur enthusiasm and elicit consumer purchases. Viewers are prompted to follow along and place orders when there is a strong buying interest in the live stream room (Ho et al., 2022). In this regard, the environment – physical evidence – of LSS is also positively associated with customers’ purchase intention.
Marketing Research Method
In light of the number of people needed to analyse the effectiveness of the LSS strategy efficiently, the survey proves to be the method with the highest coverage. The respondents can be selected using the convenience sampling method. Through the assistance of live broadcasters, it is possible to approach viewers or customers to invite them to participate in the survey. The respondents will be required to click on an online URL and fill out the questionnaire. In this context, there are three methods available to collect data. First, an invitation to participate in the survey can be posted in the community to inform viewers as they watch the live broadcasts. Second, a link to the survey can be attached to the receipt of customers. This method prevents the post from being obscured by other information and ensures that each customer receives the survey information (Ho et al., 2022). Third, the survey information can be placed in the title or body of the live broadcasts. This way, viewers or customers will access the survey link through the high exposure and the verbal promotion of broadcasters.
Key Marketing Strategy Measurement Metrics
The power of the online medium can influence customers to persuade and convert others into customers, continually use the firm’s offerings, and change or modify their own purchase patterns. In an effort to conceptualise and metricise the customer influence on others, research has contributed two key metrics – customer influence effect (CIE) and customer influence value (CIV) (Kumar, 2018). While the CIE measures the net spread and influence of a message from a particular individual, the CIV calculates the monetary gain or loss realised by a firm that is attributable to a customer through their spread of positive or negative influence (Kumar, 2018). By tracking these two metrics for a company’s social media campaign, it is possible to monitor brand awareness, per increase in return on marketing investment, and changes in sales revenue growth rate. In other words, CIE will serve as a direct indicator of the strategy’s reach, whereas CIV will help capture indirect customer profit contributions to calculate the efficiency of LSS.
Cai, J., Chen, Y., & Wang, X. (2018). The impact of corporate taxes on firm innovation: Evidence from the corporate tax collection reform in China. National Bureau of Economic Research.
This paper evaluates how elements such globalization, organizational culture and structure, leadership, change management, decision making processes, communication strategies and motivational methods affects Tesco plc in organizational and people management. These are important elements in ensuring the success of any organization.
The discussion has revealed how globalization caused the corporation to expand its tendrils to other emerging markets. Tesco has been involved in acquisitions and takeover bids to maintain its competitive advantage. In organizational culture, it has been revealed that Tesco has a strong commitment to its customers to deliver quality products and high quality standards of services.
The paper has also discussed how the corporation switched from a functional to a divisional organizational structure to enable it effectively manage its global operations and the massive number of employees. The ever changing global economic environment forced the corporation to adopt an organizational structure that could foster cost-effectiveness, organizational efficiency and employee commitment.
The corporation’s leadership style is about influencing individuals to achieve more for the company rather than sorely relying on the leader to make achievements for the company. These and many other issues are discussed in the paper.
Introduction
Ever since Tesco plc was founded by Jack Cohen in 1919, it has been able to sustain its growth to become a globally recognized grocery and general merchandising retail chain. During its formative years, Tesco specialized in serving the UK market mainly in food and drink.
Over the years, the corporation has increasingly diversified its product lines to include clothing, food products, consumer electronics, telecommunications, music download services, financial, flower delivery, legal, online diets, software, and car insurance services (Datamonitor, 2004 p.12).
It is the purpose of this paper to critically evaluate how globalization, organizational culture and structure, leadership, change management, decision making processes, communication strategies and motivational methods influence the retail chain in people management.
Globalization and its Effects
Globalization is the name given to the various processes that aims at enhancing the connectivity and interdependence of the global markets and businesses (InvestorWords.com, 2009 para. 1). The forces of globalization have enabled Tesco to transform its operations from a local business entity into a global business organization.
The effects of globalization have seen Tesco diversify in both geographical locations and product range (Hutchings, 2005, p. 349). The corporation’s geographical expansion started in 1995, when the corporation commissioned a retail store in Hungary.
To maintain its competitive advantage in international markets, the retail chain opened other outlets in Ireland, the Czech Republic, Kingdom of Thailand, Taiwan and the Republic of South Korea in the 1990’s (Datamonitor, 2004 p. 5).
Due to globalization, the corporation had to expand its tendrils to reach other emerging markets inline with the global trends. This entailed using a lot of investments to expand internationally since little potential for further expansion existed in the already saturated British market.
Tesco has been involved in acquisitions and takeover bids to maintain its competitive advantage. In essence, the corporation enters emerging markets by acquiring performing retail chains. In 1994, Tesco acquired both Global TH and WM Low and Co. In 2004, the corporation concluded its acquisition of the 40-plus Adminstore group (Tesco Merger, 2004, para. 2).
This acquisition enhanced the dominance of the corporation in the UK retail market. The corporation has been affected by issues dealing with government policy especially in its international destinations. Issues dealing with tax regimes, labour laws and work policies have always challenged Tesco’s quest to conquer international markets.
However, Tesco have relied on stringent management practices to boost its performance internationally. The 2004 financial statistics on Tesco revealed that it was a market leader in six of the twelve countries it had invested in (Datamonitor, 2004, p. 15).
Organizational Culture and Structure
Price (2007 p. 101) argued that a well formulated organizational culture coupled with effective organizational structure should be viewed as reference points for people management. Tesco plc has contracted over 440,000 employees in over 3,700 retail stores around the world (English, 2009 p.1).
In this perspective, Tesco must have a resilient organizational culture and a flexible structure to effectively demonstrate their core business interests in countries exhibiting a multiplicity of diverse cultural orientations, business etiquettes, leadership styles and techniques of conducting business.
Organizational culture details how work is perfumed in the business entity, and lays the groundwork for acceptable and non-acceptable behaviours and actions (Cranwell-Ward et al, 2002 p. 365). At Tesco, the management has realized that workers are more likely to achieve happiness if the core values and beliefs of the corporation are aligned with their own.
According to Tesco’s CEO Sir Terry Leahy, the corporation’s future success will be dependent on its own values. Presently, the corporation’s organizational culture has enabled it to achieve success in areas where other supermarkets have failed. Tesco shares a strong commitment to its customers to deliver quality products and high quality standards of service (Williamson, 2000, para. 10).
Its vision of excellence has enabled the organization to achieve success in many areas. The corporation’s staff members exhibit positive attitudes towards the customers in addition to showing high standards of professionalism, respect, self-regulation, pride, continued improvement, openness, team spirit and partnership. Tesco employs a flexible style of working to permit for additional trading hours.
However, staff members are always left with the leeway of deciding the times they would like to work. These fundamental values are critical to the success of Tesco. The illustration below shows how organizational goals, leadership abilities and organizational culture are aligned to achieve success.
Figure 1: alignment framework of goals, leadership attributes and organizational culture
Organizational structure is used to describe how individuals and tasks are arranged within a business entity in order to help the organization in meeting its fundamental objectives (Hofstede & Hofstede, 2005 p. 252).
According to Industry experts, Tesco supermarket practise a strategic business unit (SBU) model of organizational structure in order to enhance the level of competitiveness within individual market areas and across geographic regions (Hutchings, 2005 p. 354). The retail chain utilizes a four-part growth strategy, namely the core UK business, international services, non-food services and retailing services (Tesco, 2009).
These growth strategies can be perceived as people management systems (Price, 2007 p. 64). During its formative years, Tesco utilized the functional organizational structure (Wentling, 2004 p. 172).
Its stores in the UK were divided into comparatively simple components since it had not undertaken comprehensive diversification of both products and geographical locations (Hutchings, 2005 p. 351). In terms of people management, this structure is advantageous since employees can clearly understand the corporation’s operations, command structures, and tasks and responsibilities.
The corporation switched to a divisional organizational structure to enable it effectively manage its global operations and the massive number of employees. Under the divisional organizational structure, various departments and stores are divided into self-contained components, able to respond to environmental stimuli on their own (Prince, 2007, p. 188).
The ever changing global economic environment forced the corporation to adopt an organizational structure that could foster cost-effectiveness, organizational efficiency and employee commitment (Prince, 2007, p. 184).
The divisional organizational structure has greatly assisted the corporation in managing the human resources under its disposal in addition to managing its market entry and product offerings to fit individual market segments in diverse countries (Hutchings, 2005 p. 353).
In terms of people management, the divisional structure has enabled Tesco’s employees to achieve team spirit, and has enabled the customers to easily identify with the organization’s products and services based on the geographical area of operation (Prince, 2007 p. 188). Also, this arrangement gives managers the opportunity to develop broad skills needed to drive the organization’s agenda forward.
Indeed, the retail chain has successfully used the divisional structure to coordinate and reconcile its operations, decisions, and strategies, both at the corporate level and the business unit level (Prince, 2007 p. 188).
Through divisional structure, Tesco has successfully ventured into international markets by making adaptations to the local culture rather than attempting to impose their products and services to the local populations.
Leadership
Tesco has employed a combination of good leadership, effective management, and a lean business model in its quest to rise above its competitors especially in the UK market (Bono & Heller, 2006 para 1). Tesco’s leadership ethos is reflected in the corporation’s organizational culture.
In a 2007 interview, Tesco’s CEO Sir Terry Leahy argued that leadership should be about influencing individuals to achieve more for the company rather than sorely relying on the leader to make achievements for the company (Benjamin, 2007 para. 9).
According to the CEO, leadership should be about motivating and influencing employees, and challenging them to achieve more for their own objectives as well as for the objectives held by the organization.
By any standards, the above leadership style can be termed as transformational. In leadership theories, transformational leaders inspire their followers to rise above their own self interest for the purpose of accomplishing the objectives set by the organization (Tejeda et al, 2001, p. 41). As of February 2009, Tesco had over 400,000 employees working in over 3,500 stores globally.
To manage such a huge number of employees, leaders must have the capacity to instil a profound and long-lasting effect on the subordinates. Leaders must also have the capacity to deal with old challenges in new ways. To deal with such a huge multitude of employees, leaders must be charismatic, and must be able to provide vision and instil a sense of pride on the subordinates.
Consecutive studies have revealed that transformational leadership is correlated to organizational success (Tejeda et al, 2001, p. 43). The leadership style used in Tesco can be used to demonstrate why the corporation have continued to grow even in the face of economic challenges.
Leaders such as the CEO and other departmental leaders using situational leadership have been able to communicate high expectations to the employees, not mentioning the fact that they have been at the forefront in offering individualized attention and promoting rational thinking among employees. These are some of the basic tenets of transformational leadership.
Change Management
Organizations must increasingly adapt to the forces of change if they are to survive the harsh business environment of the 21st Century. Innovation and creativity are two components that have enabled Tesco to negotiate the changes occasioned by both internal and external environment. Many supermarkets have made mistakes by not recognizing their trading environments.
However, Tesco has developed innovative strategies that enable the corporation to account for its customer’s buying habits that change with seasons. Some branches are known to hold a sequence of Customer Question Times, where customers are invited to ask questions (Williamson, 2000 para. 6).
Such innovative undertakings enable the retail chain to learn about new environments, trading and business practices, customer buying practices, and the perceptions and values held by the customers regarding the corporation. Such an arrangement enables Tesco to be proactive in dealing with the factors that leads to change.
Decision Making Processes
Different types of decision making processes are needed for diverse situations. At Tesco, the customer is placed at the heart of any decision-making process. According to Drive (2004 p. 7), all decisions made by Tesco’s management are supposed to be rational, accountable and transparent. Although major decisions are expected to come from the top managements, store managers always involve the workers in decision making.
Brief meetings are convened to offer the workers an opportunity to give their inputs and share their challenges and problems with the management.
The collaborative decision making not only ensures that the corporation remains ahead in its quest to conquer the retail markets but it also offers the much needed motivation to the employees. However, the decision on whether to implement the suggestions made by the employees rests sorely on the managers (Cranwell-Ward et al, 2002, p. 146).
Communication, Negotiation, Conflict Resolution, and Motivational Methods
Tesco Plc has always recognized that open communication channels and open door policy are fundamental to its success. The management has also recognized that well-motivated employees are vital for the sustained success of the organization (Cranwell-Ward et al, 2002, p. 146). Tesco started a review of work methods in the 1990’s to with the challenges of an increasing variety of products and services.
The review, also known as FUTURE program aimed at opening the channels of communication for effective management of workers. In addition, the program was aimed at freeing the employees so that they could achieve more for the organization. At Tesco, every worker has been given the opportunity to identify and voice the challenges faced, including suggesting solutions in an open and structured manner.
This serves to motivate employees to achieve more for the company while working in an environment where the freedom of communication is guaranteed and respected.
Through the FUTURE program, workers are offered the opportunity to negotiate for the tasks and duties done on behalf of the organization and how such duties could be streamlined, improved or stopped if they have no value addition. Again, this kind of freedom and responsibility serves to heighten motivation levels on the part of employees.
According to Cranwell-Ward et al (2002), “the consultation and involvement process, combined with additional communication results in a release of energy and enthusiasm in staff as they become aware that their views are appreciated and ideas actioned” (p. 146). The management also uses feedback and regular communication to enhance elevated states of motivation and productivity.
At Tesco, routine and tools that enhance more face-to-face communication on individualized basis enhances motivation on the part of employees even in times of intense organizational change. Team meetings are also used by the management to brief and consult employees on a variety of issues relevant to them.
These open communication channels ensures that conflicts are solved through amicable ways and employee-management relations remains cordial. Consequently, employees are able to attain high motivational levels to propel the corporation into new heights in terms of performance.
SWOT Analysis
In strengths, Tesco is the leading British retailer based on the local market share and global sales. In addition, the corporation ranks among the three largest worldwide retailers based on both revenue and profits (Tesco, 2009). The corporation’s multi-format capacity will ensure its continued growth in both food and non-food market shares.
Tesco’s diversification into non-food items such as insurance, internet and banking services have only served to increase the corporation’s financial clout. Tesco.com is the leading online supermarket globally. What’s more, the corporation have been able to build a formidable brand image that is associated with quality customer shopping experience, trustworthy goods and products, and excellent value for money.
In weaknesses, Tesco has often been accused of overly relying on the UK market. The corporation has a lot of opportunities especially in the non-food retail sector. According to industry experts, the corporation can continue to use its low cost structure coupled with improved merchandizing expertise to make significant inroads into the non-food market share, especially in electronics, internet and entertainment.
Tesco’s threats arise from the external operating environment, stiff competition from peer supermarkets, economic crises and mergers of supermarkets especially in the UK.
Conclusion
According to the discussion above, it is evident that Tesco will achieve monumental growth in the coming years since it has successfully fended of the 2008 economic crises despite undertaking aggressive expansion programmes (English, 2009 p.1).
While the corporation’s financial clout and customer base looks stable for now, immense opportunities for growth exists in the future due to the way its organizational culture, structure, decision making processes and leadership has helped the supermarket to manage people – both employees and customers.
Tesco’s management of the above elements have inarguably enabled it to foster cost-effectiveness, organizational efficiency and employee commitment. Consequently, Tesco is headed for better times in the future due its effective strategies in both organizational and people management.
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Williamson, V. A. (2000) Business in times of Change. The Irish Times. Web.
The name of the Company under discussion in this report is Tesco. The Company was found in Cheshunt, United Kingdom. It is a multinational organisation dealing with grocery and general retail merchandise.
In terms of revenue, it is ranked as the third largest retail merchandise in the world after Wal-Mart and Carrefour. In terms of profits, it us ranked the second after Wal-Mart stores. Its main market is in the United Kingdom but it has grocery stores in more than 13 countries in various parts of the world.
The Company’s mission is to be acknowledged by its customers as the premier drilling services Company (Tesco 2013) while the vision statement is to become a customer’s strategic partner in the elimination of non-productive time. The three core values of the organisation include ethics, compliance and safety. Others include performance; discipline and team work (Tesco 2013).
The Company’s corporate social responsibility is aimed at helping people support high standards of life through the provision of low prices for all the goods and services. It also contributes some of its pre-tax profits to charity work. For example, in 2006, it contributed 1.8% of its pre-tax profit to charity work (McLoughlin & Aaker, 2010).
External Environment
PEST analysis for Tesco Company
Political environment
The political environment under which the organisation operates is very stable. There are minimal political risks for the business, both in the United Kingdom and in other countries where it has operations (Johnson, Scholes, & Wittington, 2011).
Economic environment
In 2008, the world underwent through global recession which is the biggest since the great depression of 1930s. Just like other multinationals, Tesco was not exempt from the effects of the recession (McLoughlin & Aaker, 2010).
Social environment
The organisation operates in a friendly social environment. Many of the countries where it operates have a very friendly social environment.
This has been achieved through the sensitivity of the organisation to the needs of the local customers as well as the provision of very friendly goods and services for affordable prices. The organisation also engages itself in charity work and other corporate social responsibility activities, thus creating a very conducive social environment for its operations.
Technological environment
The organisation has embraced and adopted technology in most of its operations and service delivery. It provides its customers with various online services. It also operates a website where it posts business information for potential customers.
Porter’s Competitive Forces and Tesco’s SWOT
Threat of new entrants
Tesco’s strategy for dealing with the threat of new entrants in the merchandise industry is the differentiation of its goods and services, which it considers as one of its core competencies or strengths. New entrants may be discouraged from entering a particular industry through diversification and product differentiation, which Tesco has managed to do.
Bargaining power of suppliers
Tesco’s core competence for dealing with this threat is having large capital base, which enables it to manufacture some of the goods it needs for itself. However, it does not manufacture all the goods by itself and this forms one of its core weaknesses. It is therefore capable of being manipulated by its key suppliers.
Bargaining power of buyers
Tesco’s strategy for dealing with this is by lowering its prices so that as many people as possible can access its goods and services. The overall objective is to try to avoid having in place specific customers or buyers that the Company cannot do without.
Threat of substitute products or services
Tesco guards itself from this threat by differenting its products as well as through teaming up with other multinationals to influence government policy on the introduction of substitute goods in the industry.
Rivalry among existing competitors
Tesco has cushioned itself from rivalry through having very reliable suppliers and by manufacturing some of the goods by itself as well as diversification, which has seen it investing in various industries so that if one becomes very competitive, it may compensate the low profits in that industry from the other ventures in other industries.
Strategic rationale for global development
As explained in the introduction, the Company began in the UK as small stores. However, due to the need for diversification and expansion, the Company opened new stores in other countries outside the United Kingdom. Examples of countries where it has stores include parts of Europe, Asia, Thailand, Malaysia and Ireland as well as North America. This can be best illustrated using the globalisation concept.
Globalisation can be defined as the minimisation of the differences between people of the world and the maximisation of their similarities through interaction, cooperation and communication. During the pre-world war period, the world was characterised by minimal interaction, communication, cross-border movements and language homogeneity.
However, after the World War II, this situation changed. The changes were mainly triggered by the desire for nations of the world to unite in various spheres of development mainly economy, education, employment, environment and governance (Beck, 2000).
The main driving forces for globalisation were however the advancement in information and communication technology, improved transport systems, liberalised trade as well as liberalised immigration policies. Globalisation has made it possible for any person to work, study, marry and stay in any part of the world irrespective of his or her culture (Waters, 2001).
After the world wars, a new form of globalisation emerged. This was triggered by the new desire to unite the world through the three main development pillars namely the social, the political and economic pillars (Chrysanthopoulos, 2010).
Many States thought that the world wars were mainly caused by poor interaction between the nations of the world, arguing that many countries did not care harming others as a result of the old economic philosophy which pegged development on elimination of rivals rather than the cooperation between stakeholders (Buckman, 2004).
The contemporary form of globalisation is characterised by the liberalisation of trade, the emergence of multinational corporations as well as emergence of global institutions like the World Bank, the International Monetary Fund and other United Nations’ affiliated institutions (Gamble & Thompson, 2011).
The advancement in Information and Communication Technology (ICT) has transformed the world into a global village. Through ICT and improved means of transport, people are more than ever able to do business with each other without any barriers (Scholte, 2005).
Through globalisation, Tesco managed to move to China where the culture and values are completely different from those of the United Kingdom where the Company started. The Company entered China in 2004 after acquiring about 50% of the Hymall.
It also operates in various cities and towns of China such as Shanghai, Weifang and Taizhou, where it deals with imported wines and beers as well as cheese products especially from Italy, Netherlands and France. In Shaghai, the Company introduced what it refers to as Tesco Express, which is a customised store made to suit the needs of the local people both in display and branding of the products.
In Malaysia, the company has been operating a chain of stores since 2002. Currently, it operates over 45 stores which accounts for 30% of local market share. The stores mainly deal with electronic goods, cloth wares and the club card service.
In 1999, the Company in partnership with the Samsung Company opened its first store branded ‘Home-plus’ in South Korea. Tesco runs hypermarkets as well as a customer delivery service, where it delivers goods to its customers especially those who purchase in bulk. Home Plus is the second largest store in South Korea after Shinsegae Company.
Methods Used By Tesco Company to Expand Globally
Multinational organisations such as Tesco usually operate in diverse environment in terms of culture. Due to this, it is essential for them to be proactive in internationalizing their operations if they want to succeed in establishing stable businesses. Being proactive involves planning in advance and putting the proper infrastructure in place for business management and establishment (Henry, 2011).
This may involve establishing relationships and networks with local business stakeholders, the government as well as insuring the businesses against any risk(s). It also involves studying and understanding the culture of the foreign countries before establishing the business (Reif, 1996).
Tesco’s expansion strategy was coined to respond to the needs of local customers in other countries. Due to the difficulties of entering new markets, especially abroad, the organisation used two main methods to enter those markets. The methods include mergers and acquisitions. These are briefly explained below.
Mergers and Acquisitions
Due to the ever changing business environment, businesses and organisations are finding themselves operating in a very dynamic and competitive environment, which calls for adoption of strategies for coping and surviving the storms brought about by the forces of globalisation.
One such strategy is what is referred to as mergers and acquisitions. Companies may merge with others or acquire property of others as a way out in surviving the storms and also as a way of increasing their competitive advantage (Cumming & Worley, 2008).
Organisational analysts have suggested a three phase model of mergers and acquisitions. These phases include pre-merger, merger and post-merger. The planning in the first phase entails establishing the reasons for the merger and acquisition. The human resource managers at this phase are supposed to search for their partners, identify a merger and acquisition leader and initiate learning process about the merger and acquisition.
Other activities prominent in this stage include assessment of the culture of both organisations, formation of a team to sphere head the process and initiation of practices which enhance knowledge transfer across the organisations involved (Cumming & Worley, 2008).
During the second phase of merger, the organisations are integrated in a manner that they become one. The most important aspect during this phase is the selection of an integration manager, who is charged with all the activities of the merger and acquisition.
Some of the activities crucial in this phase include establishment of a new organisational culture and structure, dismissing and retaining of employees, employee motivation, formulation of human resource polices, designing teams and managing change which comes with the process of merger and acquisition.
The second phase therefore literally makes the change happen and brings the organisations to work together in the merger or acquisition (Cumming & Worley, 2008).
During the third phase of post-merger, the organisations are already integrated and what this phase entails is the solidification of their union. The key aspects of the merger during this phase include assessment of the new organisational culture, structure and strategies and harmonization of the two organisational cultures (Cumming & Worley, 2008).
Examples of mergers by the Tesco Company include the partnership with Samsung in South Korea to form Samsung –Tesco Home Plus merger, with Tesco owning over 90% of shares in the merger. The other example is in Thailand, where it went into a partnership with Charoen Pokphad to form a merger called Tesco-Lotus.
The Company acquired several Companies in 2005 in South Korea. In the same year, it made two more acquisitions; one in Japan and another in Poland. The company also acquired a store in Taiwan belonging to its competitor Carrefour (McLoughlin & Aaker, 2010).
Conclusions and Recommendations
Tesco Company was started way back in 1919. After its formation, it witnessed a steady growth which enabled the founder to open many stores in the United Kingdom. In 1990s, the Company diversified from grocery to other products and services. Currently, it is the leading retail merchandise in Britain and the 3rd largest in the world after Wal-Mart and Carrefour. It operates in more than 13 countries outside the United Kingdom.
It operates various types of stores in various countries, cities and towns. Some of the types include Tesco Metro, One Stop, Dobbies, Tesco Extra, Tesco Express and Tesco Superstores.
Each type of store is suited for a particular market and made to respond to specific needs of customers or tailored to fit in a given market. One country may deserve one type of store and not the other depending on the business environment and the likes and preferences of the local customers.
The Company has managed to place itself in a global strategic position. It has managed this through differentiation and positioning of its products, goods, services and operations. It has been able to enter various markets especially through mergers and acquisitions.
What I would recommend to the Company regarding its future strategic direction and how to increase its competitive advantage is to invest more resources in differentiation and positioning. In strategic management, differentiation is the process of distinguishing a product or service from the rest through describing its unique differences and or characteristics.
It is done for competition purposes with a view of creating a market niche for that particular product or service. Differentiation seeks to create a good image about a particular product among the targeted consumers so as to ensure that they perceive it as unique and different from other similar products (Thompson & Martin, 2010).
A company may engage itself in differentiation of several products at the same time. This could enable it to have customers who cannot purchase goods and services elsewhere due to the uniqueness of its products or services. This is what is called positioning.
Positing entails using various strategies like promotion, distribution of products or services and production of unique products with unique pricing to build an identity of a particular Company or organisation in the minds of consumers. Positioning seeks to stabilize and retain the positions of the particular differentiated products for a particular Company so as to retain the competitive advantage of the Company in regard to those products.
Reference List
Beck, U 2000, What is globalisation?, Wiley, Malden.
Buckman, G 2004,Globalisation: tame it or scrap it? : mapping the alternatives of the anti-globalisation movement, Zed Books, London.
Chrysanthopoulos, M 2010, Cultural Diversity and Education, NLap Lambert Academic Publishing, New York.
Tesco Plc. Is a leading U.K. based retailing companies with its operations in different markets. The company’s consolidated balance sheet for three years is evaluated in this paper. It could be indicated that the company follows International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) to prepared its consolidated balance sheet. The company prepares its balance sheet according to ‘IAS 1 – Presentation of Financial Statements’ (“IAS 1 — Presentation of Financial Statements”). The company uses the accounting equation given below for preparing its balance sheet. The following analysis provides an evaluation of financial performance of Tesco along with the discussion of accounting policy and any erros reported by the company.
Tesco’s Assets
The summary of the company’s total assets is provided in Table 1. The analysis indicates that the company’s total assets declined over the three-year period.
Table 1. Tesco’s Assets.
2016
2015
2014
Total Assets
43,904
44,214
50,164
Non-current Assets
29,076
32,256
34,592
Current Assets
14,828
11,958
15,572
Sources: (“Tesco Annual Report and Financial Statements 2015” 87; “Tesco Annual Report and Financial Statements 2016” 85).
Further analysis indicates that the major reduction was in the company’s non-current assets value. The company’s current assets declined significantly in 2015 but increased in 2016 (“Tesco Annual Report and Financial Statements 2016” 85). The balance sheet of the company indicated that the company’s goodwill was impaired and recorded according to IAS 38 — Intangible Assets (“IAS 38 — Intangible Assets”). The book value of intangible assets of the company was compared with their market value to determine the impairment of value for the year. The company sold its property, plant, and equipment (PPE) in 2016 and reported its PPE at their historical cost less accumulated depreciation according to IAS 16 — Property, Plant, and Equipment (“IAS 16 — Property, Plant, and Equipment”). The company also had leased property, and it reported its value on the basis of assumptions related to discount rates, margin, and growth rates (“Tesco Annual Report and Financial Statements 2016” 88). Furthermore, the company recorded its inventories at lower of its cost or fair value after deducting selling expenses (“Tesco Annual Report and Financial Statements 2016” 90). The company follows IAS 2 — Inventories for recording and reporting its inventories (“IAS 2 — Inventories”).
Tesco’s Liabilities
Table 2 indicates that the company’s total liabilities slightly declined in the last three years. Further analysis indicates that the company’s current liabilities declined and its non-current liabilities increased over the three-year period.
Table 2. Tesco’s Liabilities.
2016
2015
2014
Total Liabilities
35,288
37,143
35,442
Non-current Liabilities
15,574
17,338
14,043
Current Liabilities
19,714
19,805
21,399
Sources: (“Tesco Annual Report and Financial Statements 2015” 87; “Tesco Annual Report and Financial Statements 2016” 85).
The company’s liabilities include interest-bearing borrowings and trade payables that were recorded initially at their fair value. The effective interest method was then used to determine their amortized cost for later years (“Tesco Annual Report and Financial Statements 2016” 92).
Tesco’s Equity
The company’s equity declined in the last three years. A major decline in the equity was reported in 2015 because of the reduction in the company’s retained earnings. The company faced major challenges due to the lack of concentration on its primary U.K. market. Other companies such as Sainsbury’s and Aldi gained market share as they offered better value and service to customers than Tesco.
Table 3. Tesco’s Equity.
2016
2015
2014
Total Equity
8,616
7,071
14,722
Sources: (“Tesco Annual Report and Financial Statements 2015” 87; “Tesco Annual Report and Financial Statements 2016” 85).
The company’s equity included share capital issued at the market price and share premium. It also included retained earnings of the company and other reserves. The other reserves were related to foreign currency translations.
Overall, it could be concluded that the company’s financial performance declined in the last three years. The company’s accounting policies related to assets, liabilities, and equity are based on IAS and IFRS. There are no errors and omissions reported by the company and its auditors.
The following essay deals with organisational culture and innovation. Organisational culture wields a lot of influence on the organisation and the individuals. The culture may act as a gateway of innovation or a hindrance to innovation. The review evaluates the influences of organisation on the behaviours related to innovation and change in the Tesco Group of companies that is one of the largest grocery stores in United Kingdom with branches all over Europe.
Theoretical perspectives
Organisational culture refers to the actions, behaviours and symbols that characterize an organisation. It is the traditions and precedents of how the organisation operates and functions in terms of how it interacts with the clients, the public and with other organisations. It is also the actions and precedents set by the organisations and handed over to the new members of the organisation (Burns, 1961). The organisational culture is an integral part of the organisation and it influences the manner in which the company operates (Hofstede, 2001).
It determines the kind of the results of the organisation. With the dynamism of the twenty first century, many organisations are finding themselves incorporating changes in their organisation and maintaining the status quo. The following are theoretical perspectives, which explore the role of culture in organisations, and how the cultural patterns differ as per the organisation and how to bring change in the organisation (Schein, 1992).
There are two major theoretical perspectives shaping the organisation culture. The first perspective views culture as an external entity of the organisation such that it is prone to manipulation by the organisation leaders and influences of time as well as technology. This aspect sees the organisation symbols, artefacts and rituals as aspects that may bring change as their meaning and interpretations depend on the individuals in the organisation (Burns, 1961). The second perspective views the organisational culture as part of the organisation and a major aspect of the organisation which is critical and enhances performance of the organisation in matters of time and opportunity. The artefacts, colours and logos of the organisation have a lot to do with the organisation and they determine what the stakeholders of the organisation perceive it to be (Burns, 1961).
Cultures impact on innovation
The organisations culture is very influential on the innovativeness of the organisation as the cultural aspects may hinder or promote the innovativeness and creativity of the employees. The culture contributes to the organisation innovativeness in the following aspects (Morgan, 2006). The first impact of culture is on the goals emphasis. The organisations individualised or collective achievement of goals determines whether the employee participation on innovative projects will be personal or collective (Mullins, 2010). When the results expected are clearly outlined, the employees dedicate their energies towards the achievement of the goals unlike in settings where there is no clarity of the set goals and energies are focused in determining the goals to be achieved rather than how to achieve those goals (Cameron & Quinn, 2006).
Organisations with cultures, which emphasise on the set objectives, communicate clearly and they have proper lines of communication unlike those that are not emphatic on the goals set. The organisations with clear objectives are likely to experience innovative aspects of their employees compared to organisations that are not goal specific (Alvesson & Sveningsson, 2008).
The other way in which the organisational culture affects the innovations experienced in the organisation is whether the organisation rewards system is based on the innovative results (Dorfman, & Gupta, 2004). If the rewards received have basis on the creativity of the employees in their operations, innovative breakthroughs will be a norm unlike in organisations where the rewards do not have a basis of innovative results. This provides the employees with an intrinsic motivation to be innovative (Holbeche, 2006).
How can the leadership of an organisation influence organisation’s culture and innovation
The organisation’s leadership is critical in enhancing and determining whether the organisation will embrace innovation as part of its culture or not. Innovation is usually risky and time consuming and many organisations leadership do not influence the kind of culture needed by the employees (Alvesson & Sveningsson, 2008). For the organisations leadership to embrace innovation, it is imperative for it to ensure that it has well formulated ways of motivating employees. The major role of leadership is to motivate innovativeness by expressing the support to the employees verbally. This unequivocal support allows innovation, which is necessary for the organisation to achieve the goal (Alvesson & Sveningsson, 2008).
The leadership can influence the organisation’s innovation processes positively through provision of the necessary resources vital in the innovation process. The resources needed may be in the form of funds to buy equipment. The process of innovation is risky and losses may be incurred if the management is not experienced. Organisations that do not encourage mistakes and losses incurred through the innovation process will not experience any breakthrough in innovation (Alvesson & Sveningsson, 2008).
The leadership of the organisation also influences the organisation’s innovation through the communication mechanisms adopted by the organisation. (Dorfman & Gupta, 2004). The communication from the leadership of the organisation must have clarity on the organisations expectations on the employee. Leaders who fail to communicate effectively do not encourage innovation in the organisation (Holbeche, 2006). For the organisation to encourage innovation, it is necessary for the leadership to institute innovation based evaluation and reward mechanisms (Amabile & Collins, 1999). The reward system serves as a motivator for the employees to embrace innovation (Dorfman, & Gupta, 2004).
When the organisation leadership uses the transformational style of leadership where the leaders act as guide rather than the controllers, more innovativeness may be experienced than in organisations that embrace the transactional or authoritative form of leadership where only one individual has lots of power (Amabile & Collins, 1999). This ensures that leaders and employees receive feedback on their performance and explore together new ways of improving performance thereby coming up with new processes of making work easier (Brooks, 2009).
The Tesco’s cultural influence on behaviours related to innovation and change
Tesco group of companies is a grocery ownership company that has retail stores in Britain, other parts of Europe, Thailand and the United States of America. The company has a culture, which enabled it to succeed as a chain store supermarket. The following is an analysis of the organisational culture of Tesco.
The first aspect of Tesco to explore regards its organisational structure. Tesco has two organisational structures. Below board of directors are the subsidiary executives in charge of the operations of Tesco in different countries. In addition, below them are the branch managers of various Tesco branches in each country. The other organisational structure is having the branch management where the branches operate independently; they have their own departments and way of operations, which is very important. The independence of the branch has enabled the branch manager to formulate policies that are innovative and geared towards achievement of results (Brooks, 2009).
The other cultural aspect of the organisation relate to the products sold by the organisation. Tesco has a philosophy of selling cheap, as this was the intention of the organisation’s founder. This especially applies to the grocery and food items where it sells at lower prices compared to the competitors. This philosophy has however received numerous challenges because at times selling at low prices calls for compromise in quality. The company has decided to strike a balance between selling low and selling quality products (Troompenaars &Williams, 2003).
The organisation culture of the company especially about the rewards schemes of the organisation are not intended to encourage innovation. They create employee loyalty and reduce labour force turn over. It is important that the organisation look for ways of rewarding the employees because of not only performance but also based on creative performance.
The organisation must formulate task support mechanisms where the employees receive direct support in their innovative activities. The support activities include allocating funds for research on the market trends of the customers and formulating products or marketing programs according to the customer behaviours (Troompenaars &Williams, 2003).
There has to be direct and clear flow of information in the company to ensure that the information received from the seniors is full of clarity in terms of the goals and the expectations that the company has on the employees. In the situation where goals are ambiguous, a lot of time is wasted on determining the gaols to pursue (Amabile & Collins, 1999).
In the information age, integrating information technology as part of the organisation culture is imperative. Tesco’s online market is growing everyday and there is need to harness the ability of the company to handle the increasing number of the online buyers. The company must formulate creative ways of managing traffic on the websites as well as capturing data of the buyers analysing the trend.
Strategies that leaders of Tesco may implement to create appropriate culture
The following are strategies that Leaders of Tesco may use to create an organisational culture that promotes innovation. The first one is that the organisation may incorporate innovation as part of its culture in ensuring there are resources allocated towards innovation in the organisation budget (Hofstede & Minkov, 2010). The allocation of resources allows funding of innovative activities and ensuring that they have the first priority. Innovation is an important part of the organisation and this ensures that the organisation succeeds in its activities. The resources also incorporate allocating time for the pursuit of innovative activities (Burns, 1961).
The other recommendation that the leaders of Tesco need to implement in the organisation to promote innovation is creating innovation myth and stories. The stories are narrations of heroes and individuals who have contributed to the success of the organisation through their innovative engagements (Amabile, 1998). This intrinsically motivates the employees to apply creativity in the daily operations, as they perceive that it is part of the organisation’s culture (Hofstede & Minkov, 2010). The stories act as a guide and testimonials that the organisation promotes innovation (Lewis, 2006).
The innovation processes usually consume time and are risky which makes many organisations not to have innovation processes as part of their culture. For Tesco to incorporate innovativeness in its culture, it is imperative for the leadership to consider having an innovation or research academy. This is where new ideas are evaluated and implemented on a low risk environment to test the effectiveness. The academy may conduct research on the behaviour of employees and customers and look for ways of implementing the strategies (Brooks, 2009).
The organisation must allow or create mechanisms of collective evaluation of performance. The collective evaluation process brings an opportunity for identifying causes of failure and situations where performance may be improved through application of new ideas. The feedback obtained from the evaluation assists the leaders to evaluate their effectiveness as well as look for ways of having the corporate culture that promotes innovation (Troompenaars, 2010).
Conclusion
The future of organisation depends on the ability to innovate. Companies must work to enhance their scope of innovation for them to be at par with the competitors otherwise, they will fail. The Organisation should be innovative as part of the organisational culture. The symbols and the brand of the company must convey an aspect of innovation so that customers can be attracted and retained.
References
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Trompenaars, F. and Williams, P. (2003). Business across cultures. Capstone: Chichester.
