Business Strategy: Tesco PLC

Introduction

British multinational grocery store, Tesco PLC is a proud owner of close to 588 supermarkets specializing in a wide range of products, some of which are homemaking products, gas, clothing, banking, and alcoholic infusions. It is estimated that it retails 12.5 percent of the gasoline purchased in Europe. Spreading its wings into the banking sector to ensure smooth shopping for customers, Tesco has recently launched a Clubcard Loyalty card which widens to a Clubcard Plus being a part of their grocery budgeting account. In the wake of the nineteenth century, John Edward (Jack) Cohen, invested thirty pounds that he had earned in the World War I and became a market trader. It was not long before his business bloomed and expanded to other markets in the East End of London. The birth of Tesco Score Limited came in the wake of 1935, gathering the name from T. E. Stockwell, a merchant he did business with, plus his surname Cohen. The company expanded rapidly in the next two decades, acquiring small grocery chains along the way. Tesco’s success is partly contributed to by its consistent fight for a share of the market. The company became known as Tesco PLC in 1983 and went on to collaborate with the likes of Marks & Spencer to cultivate shopping areas in the outskirts of the main cities. By 1995, Tesco was the first company to have a loyalty card. Tesco’s management went on to give customers a big range of financial services throwing in the Tesco Visa card, a savings account, Tesco Travel Money, and insurance. Furthermore, it began in-store banking. Ian McLaurin played a key role in Tesco’s rise to the top as a food retailing company. Tesco’s principle subsidiaries now include Tesco Insurance Limited, Tesco Property Holdings, Tesco Stores Limited, and Tesco Capital Limited. As of 2016, Tesco is a proud dominator of 25.4 percent of the market share in the United Kingdom. The company’s mission, vision, and values all focus on the customer and the stakeholders as well.

1.1 Mission, Vision, Goals, Objectives, and Core Competencies

According to the company’s official website (Tesco PLC, n.d.), Tesco’s mission statement, “We make what matters better, together,” is a brief declaration of solidity, quality in products and customer service, and the spirit of customer service. The use of words like “together” is strategic and signifies to a client-based strategy. The mission is a drive to the business and paves a way for the core competencies and values as well. At a glance, a customer and investor can know the purpose of Tesco. Stakeholders can, therefore, deduce the goals of a company and proceed as desired. Tesco goes on to state its primary objective as to serve Britain a little better every day. Tesco was built on a simple mission to centre on customer satisfaction and enable them to an enhanced quality of living (Oglethorpe & Heron, 2013).

The core vision of Tesco has always remained consistent. However, this has not hindered dynamism and adaptation into a forever altering market. This has been made possible with the use of flexible business strategies. Since Tesco was founded upon clienteles and colleagues, its vision is a guide to the strategic decisions it takes. Tesco’s vision is stated as “To be the most highly valued business by the customers we serve, the communities in which we operate, our loyal and committed colleagues and of course, our shareholders.”

This statement defines the type of company Tesco seeks to be. In a nutshell, it summarizes the key aspects of the company’s vision. The core values of Tesco centre on the well-being of the customer. They include no one tries harder for customers, treating everyone how they would like to be treated, and using their scale for good. Its objectives are unanimous with its visions and missions and are to be a business full of opportunities and always growing, modern, pioneering and innovative ideas, and to inspire, and earn the trust and loyalty of customers. It is clear that the mission and vision are all intertwined around the same dream.

1.2 Factors to Consider when Formulating a Strategic Plan

To formulate a calculated strategic plan, it is important to consider the company’s values as they set the tone for the process. With these principles as guiding compasses, decision-making during the strategy phase is scaled and bound morally. Technology is always changing and improving. Today, many people are used to shopping online as compared to the others who prefer to go to the market. It is important to provide an online platform that would include personal shopping carts with computer-friendly interfaces.

The need and want in the market have always been a factor that shapes the market demand and supply curve. It is important to consider the demand curve while making the business strategy for Tesco since this company has a broad range of stores in the world. These strategies will ensure that priority is given to individual production lines and that customer needs and wants are met on time (Boothby, 2007).

Customer service has made the handling of client complaints easier and very manageable. Often, customer complaints offer the solution to many marketing problems and provide a platform for analysis of a chain of products. Considering these factors is in line with the company’s value of customer and colleagues. Therefore, during the decision-making in a business strategy, customers’ complaints are often deliberated, and the approach made upon those complaints solves problems with each delivery.

Tesco owns almost eleven percent of the market share in London. This placement means that the company’s strategy is very much different from any other. To maintain this market share and even earn more, a stratagem built around the company’s worth is essential.  According to Armstrong & Brown (2005), international businesses generated 30% of Tesco’s profits. This revenue generation shows that the international sphere opens a wider market for Tesco, and a strategy should aim at tapping into this market.

1.3 Effectiveness of the Ansoff’s Matrix and BCG Matrix

The Ansoff matrix enables Tesco to evaluate its product, market expansion, and growth strategy. Due to an analysis performed on the market penetration, this will ensure that the new approach considers different aspects of the market. Tesco has competitive pricing and often uses promotions and rewards for customer satisfaction. This matrix will also open up different aspects of the market for the analysis of market and product development. During the decision-making process of strategic planning, facts arising from market development, such as how Tesco moved into own product branding, will ensure that already developed areas are not focused on, and will shed light on untapped sectors of the retail market. The Ansoff’s matrix study of diversification will aid the new strategy with ideas of new products and new markets (Mainardes et al., 2014)

The BCG matrix is strategic to Tesco’s market effectiveness. With products like Tesco’s lard falling, this model provides an efficient way of analyzing product consumption and adjusts accordingly. Products that fall under the different categories can then be changed, pulled from the market, promoted, or moved to other markets. With Tesco’s well-balanced portfolio, evaluating income returns is a strategy analysis to identify the working and the non-working factors.

2.1 TESCO Analysis

2.1.1 SWOT Analysis

2.1.1.1 Strengths

2.1.1.1.1 A Growing Market Stake

Tesco owns 13 percent of the U. K. retail market. Its growing expansion and franchise sector are indicators of the predicted grow in food retail and contribution to hypermarkets. According to Mainardes et al. (2014), Tesco’s return on investment (ROI) showed no sign of growing dwindling. In 2002, Tesco had moved aggressively into the West-Midlands and currently owns 25.4 percent of the market share.

2.1.1.1.2 Insurance Market

By the year 2003, Tesco Personal Finance culminated to a whopping one million motor insurance policies. Clubcard holders enjoyed various benefits such as the ability to purchase the family’s holiday insurance expediently at the checkout. As of February 2015, Tesco reported an increase in insurance profits. Over the course of the year, insurance income posted at 169.2 million in pounds. Current sales in motor insurances have risen by five percent and the home insurance by six percent. Tesco has gone on to provide pet insurance that has covered over 400, 000 cats and dogs.

2.1.1.1.3 International Growth

Tesco, as early as the nineties, has expanded non-stop. Today, international profits are growing at steady rates of 30 percent and the global market is opening up for Tesco. Since Tesco is already a recognized brand with a proven track record, it possesses the good will to break through barriers of the international market and is mostly, always well received by the customers.

2.1.1.1.4 Customer Loyalty

As this runs at the core of the company, the mission, vision, goals and values have steered the company into developing, maintain and also strengthening the trust in customers. Product quality and an efficient service system have enhanced customer loyalty. This strength is a significant advantage for the company and significantly contributes to the retaining of old customers and acquisition of new ones. This strength is also a key factor in the procurement of related business chains into Tesco.

2.1.1.1.5 Tesco Online

Tesco Online is among the world’s largest and most efficient online shopping platform. It not only does provide a customer-friendly interface, but delivery, and refunds are also a part of the deal. Digitization has been met by Tesco with equal force, not only hosting the clients who prefer to shop online, but providing an enjoyable service that is not backed with system failures.

2.1.1.2 Weaknesses

2.1.1.2.1 Dependence on the European Market

The greater sector of Tesco’s businesses is based in the U. K. As much as this is not a fundamental reason, the international market has proven as viable, with Tesco’s insurance sector producing over 30% profits in income annually. Despite the expanding nature of the company, Tesco still largely depends on the European market.

2.1.1.2.2 Debt

The growth of debt in Tesco can be attributed to its highly assertive expansion process. It possesses a hefty capital for expenditure mainly contributed to by heavy investments in space for new branches. Debt reduction is a weakness considering that Tesco is still rapidly expanding.

2.1.1.2.3 Serial Procurement

Tesco offers a wide product range acquiring an enterprise of over 23 billion pounds. Tesco can be termed as having “big firepower,” therefore, acquisition of any businesses is vindicated. However, an addiction to this trend by large companies pause threats of reduced income visibility and the quality as well.

2.1.1.3 Opportunities

2.1.1.3.1 Growth

Tesco has the potential to grow and dominate the international markets as well. This viability is brought about because of mergers and Tesco’s market share in London. Global retailers would gain from Tesco, and the values and goodwill the company brings to the table would catapult customer service to the next level. In addition, Tesco is still able to expand the company’s portfolio and delve into more different areas of retail and wholesale.

2.1.1.4 Threats

2.1.1.4.1 Global Expansion

This is an expensive venture that requires substantial investment and marketing. The growth of new brands in the international markets depends mostly on the perception of the customer and the quality of the product.

2.1.1.4.2 Loss in Global Returns

Economic factors, social factors, failure in Tesco’s strategic model, and stiff competition, affect the performance of the international market where Tesco has invested and is currently moving into.

2.2 Environmental Audit for Tesco (PESTLE)

2.2.1 Political Factors

The placement of Tesco is a strategic one that goes on to occupy the market space in areas that are easily accessible for the consumer. Its headquarters are in the U. K., and is, therefore, affected by regulations passed on by the E. U. Moreover, Tesco faces supervisory limitations such as the safety of food products, labelling, and quality of produce. Employment laws that have been set by the resident government encourage employment of local citizens. Tesco is a haven of a wide-range of jobs including full-time and part-time, low-paid and high-paid, and less-skilled and highly-skilled. For efficient functioning, Tesco conforms to employment laws and other laws depending on the country it has set up (Lowe, et al., 2012).

2.2.2 Economic Factors

Inflation rates have in recent years led to major shifts in the pricing of goods and services. Other factors such as interest rates and unemployment rates have affected Tesco’s product pricing in many areas. The demand for products and subsequent profits to the organization contributes to its growth and expansion. Despite the fact that economic factors cannot be controlled, the hostile effect they can have on companies can be monitored. Tesco has a significant market share but still utterly depends on the U. K. market even though it has extended internationally. This dependency, therefore, means that a significant change in the U. K. market would equal to a major change in Tesco’s market share.

2.2.3. Social Factors

The important social factors that can create a substantial effect on a business include customer attitudes and behaviours and the demographic changes. For Tesco, the retail food business requires constant scrutiny of a customer attitude aimed to carefully identify preferences and to find a demand. Tesco has widened its stores to include non-food items this way hosting a wide selection of customers (Lowe, et al., 2012).

2.2.4 Technological Factors

Since technology is dynamic, the dynamism of Tesco has been of benefit to both the company and the customers. Tesco uses self-check-out machines, radio frequency identification, and has incorporated electronic labelling for shelves and electronic points of sale. These advancements have increased customer satisfaction, thereby, increasing the customer base. For the company, the stocking and marking process has also been greatly improved (Lowe, et al., 2012).

2.2.5 Legal Factors

Factors like the Food Retailing Commission have fortified the idea of standard pricing for food products. Since most companies try to reduce prices to attract customers, Tesco went on to reduce prices on the promoted goods.

2.2.6 Environmental Factors

It is important to impact positively the environment to maintain stable levels of the weather. Tesco has taken environmental responsibility of cutting back on wastage during production, decreasing the misuse of resources by recycling, and also by reducing environmental damage.

2.3 Significance of Stakeholders’ Analysis

Stakeholders form a crucial part of a company’s board. The success of a company is greatly connected to the management among other factors. For a large company as Tesco, stakeholders are an important aspect. Stakeholders’ analysis helps the company to recognize topics that are of significance to the stakeholders, particularly customers, and the community.

To sufficiently re-establish trust, a stakeholders’ analysis provides a consistent reference. This has enabled Tesco over the years to develop its competitiveness and reinforce its stake in the market. For the company to create an environment of contentment with the customer, and finally rebuild trust, understanding the stakeholders is the first step. This means a careful eye to the stakeholders’ analysis and a shifted focus to the issues the stakeholders hold dear (Zhao, 2014).

A stakeholders’ analysis is crucial in the recovery of a company from debt. Since a strategic plan ought to include a debt reduction plan, the stakeholders’ analysis provides highlights of desirable changes, which can sometimes lead to debt reduction. Also, this analysis provides an insight into investment changes and ideas, since the views of the stakeholders are the controlling factors of the company’s operations.

2.4 New Strategy Based on Organisational Audit and Stakeholders’ Analysis

2.4.1 To Dominate the International Market

To accomplish this, existing stores in the international market would face a facelift that would include more stores, more promotions, and acquisition of key brands in the respective market. In addition, joint business ventures with already developed brands in that market would ensure goodwill and brand recognition. This is also an element of one of the core values of Tesco; making customers feel wanted and respected (Lowe, et al., 2012)

2.4.2 To Create Customer-Optimized Apps with a Free Connection to Customer Service

This strategy is in place to ensure quality online shopping services with in-built trouble shooting and free and fast connection to customer service. This will ensure personal trouble shooting and reduce cases that need to be handled by customer service. Also, giving control to the buyer is proportional to building trust and maintaining customers (Zhao, 2014).

2.4.3 Strategic Price Reduction

To accommodate a range of customers, it is important to stock goods that range in price as well. This means that highly consumed products would decrease in price, and this surplus would be shifted to the good that are bought by the one percent who sometimes do not bother to check price tags. Products for the masses, food mostly, would be the cheapest products as this difference would be accounted for by other products.

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