Company Overview
Retail management serve to be the process in the aspect of business marketing that promotes greater sales and customer satisfaction. It helps the organizations to gain better understanding of the customers in regard to their demands and preferences of goods and services that it produces.
Tesco is a popular retailer of food that has the leading market in United Kingdom and Ireland. It has been recognised as the world’s largest online grocer whose online sales have accounted to exceed $5 billion (Tesco 2014). Founded by Jack Cohen in 1919, the company started as a bunch of market stalls from which it gradually evolved to be the leading supermarket chains of the world. The sole concern of the company was and is always prioritizing the needs of consumers and fulfilling them diligently. Its reliable brand image and strong focus on the concept “Every Little Helps” strengthen its core competitive advantage in the market (Tesco.com, 2018). The company has a customer base accounting to almost 1 million and is reported to complete more than 250000 orders in a week (Fatricia 2014). The company has 300 stores and many vans and pickers. Tesco serves to be a progressive company and is always keen to expand. It has a 12.5% market share in United Kingdom and the marketing techniques and strategies of the company have made it the leading online retailer in UK (Tesco 2014). The company enjoys customer loyalty and is highly valued and preferred by the customers it serves and the communities in which it operates. The staff commitment for the company and the shareholders faith on it has made Tesco very progressive. It always engages in upgrading itself in its managerial prospects that has made it a very modern and innovative company. The company’s motive to providing greater customer satisfaction and aim to soar higher in the global business market makes it a prosperous and growing industry as a whole. The case study on the company would enable to assess its effectiveness in both National and Global market. The strengths and vulnerabilities that Tesco faces due to its retail management processes would be analyzed by studying the entire business processes in an elaborate way.
The company Tesco has been led by the Four Group’s Stuart Howell who was aligned to work with the company as General Merchandise Property buying manager (Tesco.com, 2018). The Category Buying Manager Paul Williams led to the most challenging transformational program in the retail brand having a faith in upgrading the company. His priority for a good management of merchandise has been very beneficial for the company over the years. Tesco has always been able to maintain its core objective of rendering maximum customer satisfaction through viewing and reviewing of their needs and demands. Keeping a note on the shopping trends of customers and store layout, it has embarked on large scale reinvention of general merchandising. The internet has been very beneficial for Tesco to be informed about the market trends and the need for creating differentiators between grocery section and general merchandise (Doole and Lowe 2013). Tesco could easily analyse the essential need to create a different kind of shopping experience. Thus, they initiated strategies so that the customers could browse products rather than searching them through the traditional shelving. Thus, in order to manage merchandising, they adopted actions so that there is a successful delivery of new store concept across the country with a completely new operating model and supply chain for delivering products.
Merchandise Management
Services such as supply chain analysis, planning of the market scenario, defining matrix procurement and cost modelling are thus initiated and verified with changing time and demands. The transformational changes in managing merchandise enabled Tesco to gain an efficiency of 240 stores roll-out (Zhao 2014). It has been successful to adopt green initiative and a huge cost saving. The effective management of merchandising has brought Tesco recognition and was awarded with “Procurement Leaders Award for External Collaboration”. Their marvel supply chain, maximization of third party experiences and excellnt operations with delivery has been praised throughout. The company’s continuous improvement in the planning process has brought it greater success. Its flexibility and aim to deliver customer demands with the adoption of modern technology has been a very important pillar for its growth and success (Varley 2014).
Tesco works with motive of establishing a culture where everybody feels responsible for performance. That serves to be the base for the retail organization to maximize customer satisfaction. With the financial perspectives of growing sales, maximizing profits and managing all the company’s investments, Tesco also aims to function responsibly with transparency and honesty. With the consistency in delivering products and objective of saving both time and money, Tesco is not only a profit making retail destination but also renders the best service to its customers (Stefanska and Nestorowicz 2015). Every staff engaged in the business has the liberty to express new ideas that the company respects. This helps the company to be innovative and progressive and thus leads it to an improved performance. The company works with practical insights and strive to perform with greater professionalism and perfection. Evidence based decision making with an effective management helps Tesco to manage the retail business successfully. The company’s loyalty schemes for the target customers and potential to generate competitive advantage always kept it growing. The company has also got an internal team to have in-houses competencies that analyzes data regarding the present market situation and its future trends to extract insights. The company has been able to successfully manage its business through the simple yet powerful approach of maintaining corporate performance. With easy communication frameworks and employing of simple tools such as shopping lists or the Local Steering Wheel Template, Tesco has been able to engage people more and delegate its responsibilities effectively. The company also believes in the adoption of new technologies and advance its methods in business accordingly. Thus, it works with all its concern to provide maximum customer benefits and satisfaction with an effective management of the retail business that Tesco is popular for in the market of UK.
Customer Communications
Tesco has been the leader in social customer service and engagement. Multiple contact centres and the customer base of the company offer personalized local service to the customer base in UK. The company’s presence in the social sites helps the company to communicate with the customers for longer service hours. The twitter and face book account of Tesco directly interacts with the people trying to help them out in case of any issues (Hassan and Parves 2013). By connecting the business to social media, Tesco shows that the knowledge that its staffs hold are shared quickly and socially. The company also puts real service agents with detailed knowledge about the company and its products so that the communicated replies to the customers have real value (Quirke 2017). The company keeps empowered knowledgeable agents at store levels to give valuable services to the customers. Thus, Tesco is well appreciated by its customers for the effective customer service it provides; communicating with them in needs that aid them to have a huge customer loyalty.
Tesco being the leading supermarket in Britain is bound to perform certain CSR activities to show their concern and responsible attitude towards the society and the environment. With the aim of achieving a reasonable growth, Tesco respects the environment on which it is functional. It seeks for better pollution minimizing waste generation systems and makes the most efficient use of natural resources and energy. During the tears 1997 and 2005, Tesco was successful to reduce its energy consumption by 35% per square foot and it has campaigns that provide awareness towards the consumption of energy (Felgate and Fearne 2015). The company abides by all the legitimate commitments and contracts and enforces laws and regulations accordingly. The company is also recognized for its ensuring of the equal distribution of wealth that it generates from the market. With well-grounded business ethics, the company aims to serve for the welfare of the society as a whole. It compensates the employees and treats them justly, regardless of the cultural environment of the company’s operation. Tesco has various CSR standards abiding to which it perform in the markets. However, the company has been hold responsible in some countries for polluting the environment to certain extents.
The company participates in social welfare projects and establishes training commitments of the community. Objectives relating to environmental conservation and procuring the socially excluded people are the activities that have brought more pronouncements to Tesco (Khan and Kakabadse 2014). The company include social responsibilities by sound raising, charity works and promoting education for all. It provides healthy food for the consumers and has reasonable charges for the products. The company donates one percent of its pre-tax profits to charity in the form of gifts and donations. The charitable trust of Tesco has been reported to grant nearly 900000 pounds to the local and national charitable organizations of UK (Jones, Hillier and Comfort 2013). It has been able to reduce unemployment and supply products at fair prices. This has enabled growth in community and led to greater economic expansion. In the year 2001, Tesco had established the Corporate Responsibility Committee that includes the cross functional executives. These executives meet multiple times in a year and plan to develop the CSR activities of the company (Hughes 2015). The committee for CSR usually follows the Steering Wheel framework of Tesco to determine its accomplishment of CSR activities. The discussions of the executives enable Tesco to assess the present risks that it has in the market and the future opportunities that it can adopt for more success. Thus, overall the company has been able to have a perception among its customers as being ethically and environmentally sound for which Tesco has been always appreciated and preferred.
Corporate Social Responsibility
Tesco being a global PLC is owned by various partners who are the shareholders that fund the company. With such ownership, Tesco has the limited liability for shareholders and this helps it to raise the capital as there are no limits to the number of shareholders for the company. However, sometimes the original owners lose control for such an ownership pattern that fails them from protecting the interests. The stakeholders of the company are the owners, the customers, and employees, suppliers, pressure groups, local communities, the trade unions, Government, employee associations and the National communities. These stakeholders have a lot of influence in the business processes of the company. Tesco however, has the Oxfam type of business that address to the concern of global poverty (Kotabe and Helsen 2014). They are responsible enough to aid the people overseas in need. The company also has a number of committees operational under the Tesco Public Limited Company has been shown in the figure below:
Figure: The functional committees under Tesco.
Source: (Created by Author).
Strategic positioning of a company involves the future projection of a company’s growth considering the current market scenario and the new dimensions that can be sculpted out into a revolutionary idea. This is mainly aimed towards the continuity and sustainable growth of the company. Tesco has a wide range of products and services to offer. Now it is obvious that the choices of customers won’t be homogeneous. To cope up with these segmented demands Tesco has developed a wide range of positioning strategies to captivate customers.
Functional positioning: It includes an improved quality and better functionality ranged products. Tesco Finest sells the finest quality products along with value added services. This is intended to a specific segment of customers who are willing to buy expensive and quality products compared to the cost efficient ones sold through Tesco Value.
Brand Positioning: It has a universal aim of promoting all the products with the same zeal and endeavour to project the brand value above all other characteristics (Kotler 2015). Tesco has used this brand positioning strategy to sell its own brand products like Tesco TV as well mobile and tablets mainly in the Asian market. This strategy targets a set of specific customers’ mind who buys products based on the parent brand.
Symbolic Positioning: This strategy has a more social appeal. It targets customer based on self esteem, social causes and ethical values. Tesco Real Food which sells several snacks, deserts and combo meals uses Fair Trade ingredients. Here Fair Trade serves as a charitable support especially to the farmers and their families in the developing countries (T?nase 2014). Tesco also sells Fair trade bananas which are cultivated in the farms of Costa Rica and Columbia complying with the ethical standards as well protects the plantation workers and environment. Tesco sells these Fair trade products to a particular set of customers who are socially driven by the awareness programs and acts as responsible buyers.
Conclusion
Experiential Positioning: As the name implies this strategy is solely based on experience and observations, where the customer’s buying traits are recorded. It focuses on the cognitive marketing behaviour of customers. Tesco applies this strategy mainly on the cosmetic and other beauty products.
Future Strategy and plans: Tesco has shown a commendable growth globally in the last few years. It has always been improvising to expand the core UK business by opening new stores and refurbishing the older ones. The product variety both food and non food is an incremental process to meet the needs of customers. Speaking globally, China is a promising market for Tesco in spite of some difficulties. Tesco has planned to develop hypermarkets mainly on the second and third tier cities where the competition is relatively lower (Peck et al. 2013). Tesco is also planning to launch more Tesco Life space malls in China serving as one stop destination for all Tesco products. In India and other South Asian countries it is planning to invest more in the joint ventures. European market has always been a boon for Tesco, and it has planned to include the Club Card, Discount Brands, F&F clothing in more countries.
Considering the mode of operations, Tesco has six different store formats namely, Tesco Superstores, Extra, Metro, Express, Homeplus and One Stop that are differentiated with the size and range of products sold (Munusamy and Wong 2013). The company operated globally with a portfolio of more than 1800 stores and has online operation (Laffy and Walters 2016). It runs the world’s largest grocery home-shopping service Tesco.com. Tesco Persona Finance serves to be the banking arm of Tesco plc. and the products include loans, credit cards, mortgages, saving accounts, insurances and others. It provides the loyalty card scheme with the Tesco Clubcard and has about 13 million active clubcard holders in UK. The company operated a distribution centre with more than 25 truck loading decks with 20 vehicles arriving at every one hour. It is engaged with a material handling company to design increasing capacity needs and has proposed novel loading system using AGVs (automatically guided vehicles) to deliver prepared goods. The company faces some problems in its mode of operations however its potential to advance with adoption of new technologies and using the Paragon Simulation has facilitated the business significantly.
Tesco has expanded its roots to all corners of the world by diligently analysing the demographical, political and legislative clauses of different countries (Wood, Coe and Wrigley 2016). Being a British company it has its legacy across UK, where it has collaborated with many local retailers. While in foreign countries it has entered into strategic alliances, joint stake holdings and even acquiring some local supermarkets and retailers. Tesco has thus adapted the local essence keeping the global brand value (Mollah 2014). Clubcard, a reward program which was launched in 1995 serves to be a major analytical tool for segregating customers based on multiple factors.
Tesco has segmented its market based on different attributes which we can broadly divide into the following:
Ethnicity: Tesco originating from England sprawls over 13 international markets (Tesco.com, 2018). So thorough research is carried based on customers’ choice and promoted accordingly. It even differs in different cities and provinces of a country. The segmentation is also subdivided according to weather patterns.
Demography: Demography plays the primary role in consolidating and extracting target customers based on age, family, sex, income, expenditure, social status and others (Lakatos and Fukui 2013). Clubcard uses all its existing information from its registered users and promotes specific packages based on the demographical data. For example, the premium customers are allured to Tesco Finest while the low income consumers are targeted by Tesco Value which provides cheaper products.
Psychographic: Tesco also takes utmost care into each individual’s psychological choices. It has its own magazines and is also featured in various magazines that connote to the taste and preferences of its customers. The elements that it addresses in the magazines reflect the taste and preferences of people that varies with time and thus targets to the customers’ personality. This helps it to promote the brand widely.
Behavioural Patterns: Tesco keeps a track of people’s behaviour that traces the portions where customers tend to stop and purchase items. It notes the purchasing history of the customers and looks after what they really want in the present market scenario (Vogel and Paul 2015). The remarkable knowledge that the company keeps about the purchasing behaviour of the customers enable it to be progressive in the market.
Retail Locations:
Tesco was founded in England, UK but has expanded to a number of locations with about 6553 stores. It is present in the countries of UK, Ireland, India, Malaysia, Thailand, Czech Republic and Hungary with its supermarkets, hypermarkets and superstores.
Strengths:
Tesco one of the largest retail market in terms of profit and revenue. It has acquired a tradition of trust from the people of UK since its inception. Tesco has a colossal market size sprawling Europe, North America, South America, Africa and Asia. It has a wide range of stores like Tesco Value, Tesco Express, and Tesco Metro for different set of customers providing the finest to the most discounted products. Currently it has improved its logistics operations both in terms of price and efficiency by use of modern technologies. Even after the collapse of the Fresh and Easy, a joint venture in US it stood economically strong and also started investing in China and India backed by a strong local recruitment of staffs and managers in the respective countries. Tesco with its substantial capital reserve can improve its stance even in the underperforming countries. It can hire local experts in the field of market research to get a grasp in the local markets. Tesco can make strategic alliance with the leading retailers of South Asia, China and India to sell their own brand of tablets, phones and other electronic gadgets. Online shopping, home deliveries are some of the mandatory modules that the company takes good care of as they prove to be a low cost and efficient model especially in places where Tesco has lesser physical presence. It also has the potential to invest in Australian grocery retail market where the competition is comparatively less.
Vulnerabilities-
Tesco being a very large market has been facing many difficulties from its subsidiaries. Tesco Finance has suffered a considerable amount of loss due to credit card debts as well as many insurance claims. The ever increasing competitive market has compelled to keep the prices minimal thus reducing the margin of profit as is observed from social networking fights (Hastings 2017). Some of the subsidiaries and joint ventures in other countries have not shown much profit which shows the lack of research and analytical deficit for the company. Tesco requires regular technological uplift as well as store renovation which also affects the sale for a short period. Prices of raw materials for food and other merchandises are increasing, which will implicitly reduce the margin of profit. This is where Tesco faces major vulnerabilities. It faces competition from Asda, Sainsbury’s and Morrison’s in the UK market. Labour agitations for increase of wages and remunerations continue to be a major threat in terms of profitability as well as work satisfaction (Mason and Evans 2015). Various external factors like political scenarios of different countries as well as government regulations have forced to implement new policies in the company burdening the cost in restructuring the business.
Conclusion:
From the case study, it can be concluded that Tesco has the potential to be sustainable in the market through its effective operation and retail management. Its motive of valuating market situations and prioritizing customers’ demands keeps it growing. Being a part of the competitive industry, Tesco faces various challenges. However, it has always been integrating strategies that has led to its greater evolution and success stories in the market. Tesco works with the motive of growing up from challenges and threats considering criticisms to be evolving out of its success than its failures. This confidence in its business notion with greater concern to work ethics and customer satisfaction has led Sir Terry Leahy, the Chief Executive of Tesco win the National Business Awards. The unique approach of Tesco to prosper gradually with honesty and ethics is noteworthy. Its retail management has not only led to its greater economic success but has enabled Tesco to have a huge reputation in the market.
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