How Tesco Compete in a Highly Competitive Environment

Topic of the Research

“How TESCO compete in highly competitive environment with low price of products and service”

Background to the Study

The successes of organizations are measured through analysing the productivity of organizations. Productivity of an organization is highly dependent on the market share of the organization where they have the demand for the products of the organization. In a competitive environment having a proper market share is dependent on variety of factors. Accordingly the market share and the demand for the products has become a crucial factor for the success of all organizations. Keeping and growing the market share consistency is a critical factor especially in a very competitive environment.

In most situations organizations implement and apply different strategies to ensure that their market share is strong and stabilized. Accordingly they develop magnificent range of market strategies as one method and at the same time different products such as diversifications are introduced to the market. Anyhow having a range of different strategies organizations try to keep and expand their market share.

This is a best area where a future manager or a leader should identify and study because as with the totally competitive market today organizations needs to apply different methods to keep their market share. Therefore to become a successful manager it is the duty of a potential manager to gain a magnificent knowledge in this particular area.

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This knowledge will provide an insight and a proper framework to become a strategic manger in the field of work. Accordingly it was decided to study about the particular field of study on how the organizations become successful in a competitive environment while keeping their market share. When it comes to the study area it should be narrowed down in order to obtain a proper knowledge and skill in the field of studies. Accordingly it was decided to study about how an organization competes in highly competitive environment with low price of products and service. Accordingly it was decided to conduct the study for the TESCO PLC.

Research Problem and Justification

As described earlier it is not just an easier task to compete and survive in a competitive business environment. Therefore it is required to identify how several organizations implement their strategies to compete in a competitive business environment. This is a critical problem where each and every manger should address to identify different strategies implemented by organizations.

As per the subject area is too widen at once it is impossible to conduct a research on identifying different strategies of range of organizations. Therefore the best option is selecting a one organization in the competitive market and analyse the different strategies implemented by particular organization. Accordingly it was found that TESCO Plc has become more successful in the business for a long time of period and currently as well in a growing success. At the same time TESCO is in a very competitive market environment where market leaders such as ASDA and Sainsbury are also competing. At the same time TESCO maintains a range of low cost products and still having an extraordinary market share. Considering all these aspects it was decided to conduct the research on Tesco under the following topic, “How TESCO compete in highly competitive environment with low price of products and service”.

This study will provide a comprehensive analysis on how Tesco compete in highly competitive environment with low price of products and service.

Objectives of the Study

• To identify different type of strategies implement to compete in a competitive market
• To gain an overall knowledge on TESCO
• To identify the strategies implemented by TESCO to compete in the market

Scope and Limitations of the Study

The successfulness of Tesco with the competitive market may not only due to the actions done in order to be stable in the market there may be different several reasons which affects for the success of the organization. For an example the long brand image, the quality of the products may be merely the reason for the organizational success in the market. But this study only measures up a particular area which is the impact of strategies of the organization in order to survive in the competitive market. But when come to the actual situation there may be many more reasons which create the demand for the organization. Apart from that this study should not be conducted to a one particular organization; it should be conducted to a range of organizations under the title of ‘affect of organizational strategies to survive in a competitive market with low cost products’ likewise the study should be expanded to a level where we can do the study for several case studies which will provide a better framework to critically identify the factors behind successful organizations in terms of survival in a competitive market. It will cover a vast area of research study and will provide a better environment to identify the reasons behind organizational success in terms of retaining the market share.

But here the scope of this study is limited only to identify the strategies of Tesco in order to be successful in the competitive market. It is true that this scope of study covers a vast area but to be more successful this research study can be expanded to that area.

Literature Review

The literature review on this study is consisted with two main parts one is identifying about general strategies applied in order to achieve success through having a proper market share and then it is explained the literature on TESCO plc.

Tesco was established in 1919 by Mr. Jack Cohen who began the business to sell additional groceries from a stall at the East End of London.C:Documents and SettingsAdministratorDesktopuntitled.JPG

In 1924 Jack sold out his own-brand product and at that time the first product was Tea production. After that he developed the business by intensifying it as TESCO stores.

Accordingly the branches of TESCO were opened United states, Taiwan, China etc and now they have become as a leading chain of supermarkets providing a high class customer service in UK and as well as in outside UK.

Following is a SWOT analysis of Tesco Plc.

Strengths

Weaknesses

The business has an Increasing market share. Tesco has held a 13% share of the UK retail market.

Successful trade in Insurance, Tesco Personal Finance reached the milestone of one million motor insurance policies in fiscal 2003

Tesco -online Super market- Tesco Provides an online supermarket and it is the world’s major online supermarket and this year the group had sales of over £577 million

High Brand value for the business- The earnings for the operations of this organization has enlarged in 75% covering the countries in Europe, Asia and Ireland in the last fiscal year

Has reinforced the UK market leadership- Tesco has developed a unbeaten business strategy that has increased its advantage. Tesco’s UK sales are now 71% larger than Sainsbury’s who is a competitor for Tesco

Dependence mainly upon the UK market- still mainly dependable on the UK market. 73.8% of there revenue is from there UK market

decrease of Debt- Tesco is not predictable to decrease its debt until at least 2006

Opportunities

Threats

Non-food trade high demand- The growth in Tesco’s hypermarket format in the UK means that there are prediction of seeing its 13% share of retail sales

Increasing demand for Health and beauty- Tesco’s UK health and beauty ranges go on to grow

Further international expansion on the business area-expanded business to Asia & Europe

structural modify of UK could flash a price war

Overseas income could be reduced due to hazards in those countries

International growth of competitors

The Corporate Strategy of TESCO

The fundamental for the corporate strategy of TESCO is to widen the range of the business which can bring strong sustainable long-term growth by following the customer into large growing markets at residents – such as financial services, non-food and telecoms and new markets abroad, initially in Central Europe and Asia, and more recently in the United States.

Accordingly the strategy of diversify the trade of TESCO was started from 1997 and it became the basis of Tesco’s success in recent past. The objectives of Tesco corporate strategy are as follows,

•To become a unbeaten international retailer

•To grow the heart of the business in UK

•To become powerful in non-food services as in food service.

•To put up retailing services – such as Tesco Personal Finance, Telecoms and Tesco.com

•To give main concern to the community on what Tesco does.

The Strategies of Tesco is based on five main elements as Core UK, Community, Non-food, Retailing services, International.

Maintaining UK as the Core

Growth in the UK business Tesco is more consider to new spaces, additions to existing stores and a multi-format approach. Sales of non-food, which shapes another key part of their strategy, also add to the overall UK growth picture.

Consider about Community

They are having Community Plans in each nation which based around their community promises – actively behind local communities; buying and selling their products responsibly; caring for the environment; giving customers healthy choices and good jobs for local people – and replicates the needs of the local communities they serve.

Non Food Business

Their strongest range of non-food can be seen in Extra stores and Homeplus, including electrical, home entertainment, clothing, health and beauty, stationery, cook shop and soft furnishings, and seasonal goods such as barbecues and garden furniture in the summer.

Retailing Services

The Tesco’s main strategy on this is they consider that their customers are diverse and their needs are changing always. So they try to offer more than one way to shop. Accordingly they are having Tesco Personal Finance (TPF), Tesco.com, and Tesco Telecoms to offer wide range of services.

Consideration on International Market

Tesco operations operate in 13 markets outside the UK, in Europe, Asia and North America. Their latest strategy is to enter into the Indian market where they have taken first step in last year, by establishing a cash & carry business.

The above literature covers a vast area on the TESCO which is highly important in doing a research study because in actually without having a proper understanding about the organization it is difficult to study a particular area of the organization. Accordingly after gaining an overall understanding about the organization the following literature has been discussed on strategies done to ensure competitive advantage in general and as well the specific strategies of Tesco to compete in high competitive market.

Competitive Advantage

Many firms put their fullest attempt to achieve the competitive advantage. Some businesses try to get the competitive advantage by offering lesser prices or providing excellence services or other benefits that rationalize a higher price. But organizations must always try to build the strongest competitive advantage which is a strategy that cannot be simulated by the other companies.

Michael Porter (1980) introduces three strategies to accomplish competitive advantage as

Cost leadership

Differentiation

Focus

Once the competitive advantage is accomplished it is not the end result, because once accomplish that company should try to retain in that situation. It means the firms should have to be in a sustainable position. The competitive advantage of that stage is ‘sustainable competitive advantage’. In order for a firm to reach a “sustainable” competitive advantage, its broad strategy must be stranded in a quality that meets four criteria. Those are as follows:

Valuable -it is of value to consumers.

Rare -it is not commonplace or easily obtained.

Inimitable -it cannot be easily imitated or copied by competitors.

Non-substitutable-consumers cannot or will not substitute another product

(Info Abstracted by: Competitive Advantage. Encyclopaedia of Business, 2nd ed. By Dena Waggoner)

The following section assesses the different strategies implemented by Tesco in order to compete in highly competitive environment with low price of products and service.

The analysis of data and information of Tesco Plc was done by identifying the different faces of brand management and how can that effect to achieve the competitive advantage. As the introduction was given about brand management at the literature review if an organization need to be in a position of sustainable competitive advantage position. That brand should bear following four characteristics.

Valuable -it is of value to consumers.

Rare -it is not commonplace or easily obtained.

Inimitable -it cannot be easily imitated or copied by competitors.

Non-substitutable -consumers cannot or will not substitute another product

(Info Abstracted by: Competitive Advantage. Encyclopaedia of Business, 2nd ed. By Dena Waggoner)

Competitive Advantage strategies of Tesco

A company should be strategic enough to assess the possible techniques of brand management and then select the most appropriate and worth enough competitive advantage method. According to Michael Porter differentiation is a one best method of strategic competitive advantage. Differentiation can be done by People differentiation, market differentiation, price differentiation, and product differentiation and so on. In this differentiation accompany should be able to make sure the customer wants, understands, and understands the difference offered.

If we get the product differentiation that difference should be significant, unique, superior, communicable, primitive, reasonable, and profitable. Otherwise that variety will not become a competitive advantage and it will be a waste to the organization. When an organization do a differentiation which is important, distinctive, superior, communicable, primitive, affordable, and profitable, it will get popular within the society and immerge as a brand. That is the success of the competitive advantage.

So if we get the case study of Tesco Company, it first came out with the Tesco brand in 1924. Today Tesco is known as the British largest retailer by global sales an also domestic market. And as well it is the third largest retailer of the world. So the study of the manner that they are controlling the brand name ‘Tesco’ in order to achieve the competitive advantage is a good opportunity to gather massive knowledge in this subject area. It was done by studying different viewpoint of brand management in Tesco.

Brand value of Tesco:

As per the literature embraces on consumer ideas the main reason for this strong brand image is because of the good quality, consistent goods that represent outstanding value. Tesco’s original ways of improving the customer shopping understanding, as well as its hard work to branch out into finance and insurance have also capitalized on this brand image. Because of this brand value the profits of Tesco’s operations in Europe, Asia and Ireland enlarged by 78% during the last fiscal year. Their main market base is UK. So the way that they are doing the brand management is as follows.

Brand Management of UK Market Base

As the prime retailer in the UK, the customer expectation on Tesco is high. So a small failure in upholding the brand image will lose the trust and confidence of the organization. That is why they gained competitive advantage should be sustainable and brand management should be done to retain that. So the consideration of potential risks for the Tesco’s brand image is extremely important.

According to the analysis we can describe they have used the present affecting Tesco brand image of people to expand into new areas such as retail services and non-food and to identify the commercial urgent to do the exact thing for all their stakeholders and evade the loss of such loyalty of people. They are upholding Tesco’s values at every level and the organization’s Code of Ethics guides staff’s behaviour in their transactions with customers, employees and suppliers.

They try to work out with all the level’s stakeholders to get their views and to make sure that the strategies are reflects of the stakeholders. The initiate of the Community Plan in 2006 which was established their pledge to engaging in a wide range of social and environmental issues. Tesco is having eminent level of committees, including the Executive Committee, Corporate Responsibility Committee and Compliance Committee, to guide and monitor their policies.

International Brand Management

Tesco is having more than ten years of experience in foreign countries; they are using strategy based on six basics in international brand management:

Be flexible – each market is exceptional and requires a diverse approach

Act local – local customers, local cultures, local supply chains and local regulations require a modified offer conveyed by local staff

Uphold focus on a few countries – to be the leading local brand is a long term effort and they believe that it cannot do like growing mushrooms.

Use multi-formats – no single format can reach the whole of the market. A whole range from convenience to hypermarkets is necessary and they require to take a discounter move towards all the way through

Develop ability – It’s not about scale, it’s about skill – so they want to build that they have enough capability through people, processes & systems

Build brands – brands allow the building of significant continuing relationships with customers.

Methodology of the Study

The methodology of this research study can be divided into several sections.

The first section of the research study deals with the literature review on several aspects, firstly it finds out various articles, definitions, different studies to exactly define about different strategies of organizations applied to compete in a challengeable business environment.

After clarify above two from the literature, above broad review of literature has been carried out on TESCO plc starting from its history in to a broad study of organizational products, services, low cost products and strategies. This will be a major part of the literature review which really analyses the literature on organization in analysing its strategies to compete in highly competitive environment with low price of products and service.

After that comprehensive literature study the questioner survey will be conducted with the clients of the Tesco to find out its impact on strategies. Apart from that a study will be conducted as a direct interview with the senior management of Tesco selecting a proper sample.

Conclusion

This is a research proposal based on the topic of ‘How TESCO competes in highly competitive environment with low price of products and service’. Accordingly this study discusses about the background to the study and the problem of the study and the justification of the study. After that the consideration was given to identify the objectives of the study and then it was discussed the scope of the study and as well the limitations of the study.

After identifying the above topics the methodology of the study has been described and after that a comprehensive literature review has been conducted.

As a conclusion that this research proposal provides a better and a comprehensive framework to conduct the research study in a meaningful manner.

Accordingly it can be elaborated that in the real research study further we can find out more secondary information on the organization and as well on the factors behind successful strategies to become highly competitive environment with low price of products and service.

Further the research study can be completed as a study which discusses a wide area on the factors in finding competitive strategies of organizations with fruitful findings to apply for national and international business environment.