Case Study of Tesco

Business and Marketing: Case Study of Tesco
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Institution
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Contents TOC \o "1-3" \h \z \u Executive summary PAGEREF _Toc306297805 \h 3Company background PAGEREF _Toc306297806 \h 4Headquarters PAGEREF _Toc306297807 \h 4SWOT analysis PAGEREF _Toc306297808 \h 5Strengths: PAGEREF _Toc306297809 \h 5Weaknesses: PAGEREF _Toc306297810 \h 5Opportunities: PAGEREF _Toc306297811 \h 5Threats: PAGEREF _Toc306297812 \h 5Market Analysis PAGEREF _Toc306297813 \h 5Competitors PAGEREF _Toc306297814 \h 6Branding and Positioning PAGEREF _Toc306297815 \h 6Market segmentation PAGEREF _Toc306297816 \h 7Ansoff Matrix PAGEREF _Toc306297817 \h 9P.E.S.T Analysis PAGEREF _Toc306297818 \h 10Political factors PAGEREF _Toc306297819 \h 10Economic factors PAGEREF _Toc306297820 \h 10Social/cultural factors PAGEREF _Toc306297821 \h 10Technological factors PAGEREF _Toc306297822 \h 11Opportunities for New Product Development (NPD) PAGEREF _Toc306297823 \h 11Conclusion PAGEREF _Toc306297824 \h 12Recommendations PAGEREF _Toc306297825 \h 13References PAGEREF _Toc306297826 \h 15
Executive summary
It takes a lot to set up and run business successfully in the current world. As such, even companies that started operations decades ago have to continually restructure and reformulate their strategies. Marketing is a core factor in the business life. This paper looks at Tesco, a company based in the U.K but with operations internationally. It explores the company by looking into some of its features such as:
* The history of the company from the 1919 when it was started by Jack Cohen to date and its organizational structure
* The various products that the company deals in such as foodstuff, furniture, DVD rental, clothing, stationery among others.
* Market analysis where a detailed analysis of competitors will be given. Both local and international competitors such as Wal Mart, Asad and Cadbury`s are analyzed. Light is shed on how these competitors have helped in reshaping Tesco over the years.
* An analysis of the strategic choices available for Tesco comprising of the Ansoff matrix showing how Tesco has increased the market share in the U.K and spread to the U.S.A and several countries in the Asian continent. The political, economical, social and technological effects on Tesco are further explained. The opportunities for new product development are also explained in detail. These indicate that by expanding the market share to international levels, Tesco captures a more diverse clientele base with diversified needs. In trying to satisfy those needs, the company gets an opportunity for new product development.
* The paper concludes by summing up all the above issues and coming up with recommendations that the company can employ to better its services. If implemented, the recommendations can ensure that the company remains on the competitive front for longer and captures an even wider market
Company background
Tesco was set up in 1919 by Sir Jack Cohen who used his army gratuity to start a grocery stool in the Western end of London. Over the years, it has grown into a multidisciplinary enterprise dealing in furniture, petrol, electronics, music and internet, books and clothing (Tesco Plc, 2011).
Headquarters: Located in Cheshunt, Broxbourne, U.K
Store DirectorOrganisational structure: Tesco has an overall managerial board with 15 members. Every store also has its managerial structure as indicate below:
Store Manager
Customer Service ManagerSecurity ManagerNon-food ManagerStock ControllerTraining ManagerAmbient ManagerPersonnel ManagerFresh Manager
Stock Control AssistantsPersonnel/Admin AssistantsAmbient Team LeaderCounters ManagerBakery Team LeaderRestaurant Team LeaderClothing Team LeaderElectrical Team leaderSecurity AssistantsCustomer Service Assistants
Support OfficeCustomer Service DeskNon-Food Assistants
Fresh AssistantsTeam Assistants
(Adopted from /.../Tesco%20Rugby%20Organisation%2...)
SWOT analysis: Tesco can be analyzed as follows:
Strengths:
* Largest grocery store in the U.K
* Online shopping facilities
* Trusted brand name
* Wide portfolio of products (Dransfield, et al 2005).
Weaknesses:
* Over-reliance on the U.K market
* Heavy specialization in hypermarket nature of business.
Opportunities:
* U.S market is an opportunity for expansion (Kathleen, 2006)
* More products introduced into the market such as organic foods
* Acquisition of companies such as Marks & Spencer, increasing market base (Grundy and Brown, 2002)
Threats:
* Competitors like Wal-Mart, ASDA and Sainsbury
* Illegal downloads of music (CIO, 2007)
Market Analysis
According to Tescoplc.com (2011), Tesco operates in 14 countries with an employee base of well over 492,000 people. The weekly clientelle base is in terms of millions. Furthermore, the enterprise prides of about 5,380 stores in Europe, The U.S and Asia.
Competitors
Dransfield, et al (2005) observes that the nature of business in which Tesco specializes is highly competitive. He indicates that though the company enjoyed great success and reaped high profits, some environmental pressure groups and local inhabitants felt that the overdependence would limit the consumers` choice. With this in mind, the business environment gradually evolved. Currently, Tesco faces high competition from local equals like ASDA and Sainsbury.
In the internet and music sectors, Tesco also faces stiff competition from other major players. Businesswire, (2006) notes that the U.K video and music market recorded reduced growth and consolidation as of 2006. Another challenge in this line of business is the unlawful downloading of music the market is further reduced by the growth in technology which further constrains an already saturated market. This leaves Tesco to compete for the remaining clientele base with other companies such as Virgin, HMV, ASDA, Apple, Woolworths among others.
Tesco seeks to capture the external market, and set up branches in the U.S in 2007 (Tesco PLC, 2011). Here, Tesco has to sweat it out with Wal-Mart, the largest retailer in the world which recorded annual sales of $312 billion in the year 2005 (Kathleen, 2006). Wal-Mart boasts of greater publicity than Tesco, though the later also has a positive in that it can thrive in locations where Wal-Mart faced resistance.
Branding and Positioning
Clarke, Bennison and Guy (1994) explain that Tesco`s major strength is that it markets its brands before marketing the product itself. The secret behind the rapid growth of the company was branded packaging. The slogan "every penny counts" helped to assert that the company paid great attention to quality goods which would be trusted to deliver quality value. As a result, the company enjoyed a strong brand image. To serve the clients better, Tesco introduced online shopping and has become the largest on-line supermarket (Tesco PLC, 2011). Grundy and Laura (2002) further indicate that Tesco used acquisition to earn a better position in the market. This is demonstrated by the acquisition of Marks & Spencer, which would mean that internal Stakeholders of Tesco would come from Marks & Spencer. Although this would pose some querries, the overall result is that Tesco becomes more popular in the non-food sector. The use of an own label also helps to place Tesco in a strategic business position. The company enjoys an excellent merchandise mix with private-labeled wares taking the bulk of the goods. The major competitors in the U.S such as Safeway, Albertson`s and Kroger and other traditional grocers have only about 15% of their goods having the private label (Kathleen, 2006). On the other hand, over 50% of Tesco`s products both inside and outside the U.K. have a private label. Besides creating brand preference from the consumers, this strategy helps to ensure that the company gets a good place in the market share.
Market segmentation
Compared in terms of revenue generated, Tesco is the third largest global retailer after Wal-Mart and Carrefour. In terms of profits, it only seconds Wal-Mart (Toni and Tonchia, 2003). As earlier indicated, it has branches in Asia, North America and Europe totaling up to 14 stores (Tesco PLC, 2011). This indicates that the company must have a good chunk of the market share. This is indicated by the Tesco Annual report (2011) which indicates that the company commands a market share of about 30% in the U.K. Tesco also has stores in the Republic of Ireland, Malaysia and Thailand.
Dransfield, et al (2005) confirmed this assertion through a study of the market share for food retailers in the U.K. According to their findings, Tesco has the lion`s share with a percentage market share of 29. ASDA, Sainsbury and Morrison`s and Safeway trail with a market share of 17%, 16% and 13% respectively. With about 2000 stores in the U.K alone, the company takes about a third of all the money spent on grocery in the U.K. Its clothing outlets such as Fred and Florence also bask in the glory of success while the electrical stores have achieved tremendous milestones owing to their lower prices.
Tesco is also listed in the London Stock Exchange market where it carries the code LSE. The share price as of 2011 was 402.38 Great Britain Pounds and the market capital was 32.2598 billion pounds (Tescoplc, 2011). This shows significantly good terms of trade. The high price per share and the huge capital depict market stability, which means that the company must have command in the market segmentation. Cripps (2011) provides a detailed analysis of Tesco`s performance in the first half of 2011. He shows that, though the period was a lean seasons that the company managed to make sales amounting to 23.4 billion, which is a 7.1% growth. The profits made from the U.K market were up by 4.5 percent to hit the 1.3 billion mark. This was lower than Sainsbury, the major competitor with Tesco. Sainsbury saw a 7.8% rise in sale and 20% growth. However, Tesco is underway to better its offers and improve the conditions of the store, so as not to risk the loss of the market share.
To boost the market share, Tesco has not only employed acquisition strategies but it has also formed alliances and penetrated new markets. It also went into alliances and/or partnerships so as to enjoy larger economies of scale and command a larger market share. It has found ways into the Chinese and Japanese markets all ...