Development for Business Success
Introduction
In the United Kingdom, food and drink retail sector is the largest industry hence creating more job opportunities for millions of people in the manufacturing, production and retail services. This business report will discuss the Tesco company which will address the business SWOT analysis, use of corporate social responsibility and innovation by the business and recommendations on how to expand in future.
Tesco is among the largest food retailers in the United Kingdom with market share of about 28.4% and in the world. Tesco was founded in 1919 by Jack Cohen. The headquarters of the company include United Kingdom, Welwyn Garden City, England and Hertfordshire. The company operates at about 6553 stores and the employees are more than 476,000 (Datanomitor, 2010). Tesco also offer their services through the internet using its website Tesco.com. Tesco’s largest market is based in the UK where it has seven operations of Extra, Superstore, Metro and Express, Onestop, Dotcom only and Dobbies (Fame, 2010, p. 66). The Tesco company sells about 40000 food products and also clothing and non-food lines. Tesco company has approximately 55,917 million euros revenue, operating income of 1,280 million euros and a net income of 54 million euros. The main competitors of the Tesco Company include; ASDA, Sainsbury’s and Morrison’s and are termed as the Big Four in the United Kingdom (Euronomitor, 2010, p. 10). Development for Business Success
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Analysis
The strengths, weaknesses, opportunities and threats (SWOT) of the Tesco company are discussed below:
SWOT Analysis
Strengths
Strong financial performance
The company has had a strong financial performance in the past years hence showing its strategic capabilities. According to the report in 2017 the company had a net income of 54 million euro with an increase of 14.9% as compared to the report in 2008. The company has adopted a strategy which considers customization of product and services according to the demand in the market.
Increasing market share
Tesco company has about 13% share of the retail market in the United Kingdom. The capability that the company has shown has led to its past growth and in future and hence increasing the space contribution from the hypermarkets (Wood,S. and McCarthy, D., 2014, p. 10). This will help the company to improve its share in the non-food line. Development for Business Success
Insurance
Tesco has one million motor insurance policies hence becoming the fastest provider of motor insurance. The travel insurance helps the holders of Clubcard to purchase their holiday insurance in a convenient way. The company also offers a Pet insurance which has covered over 330000 cats and dogs. Also Tesco provides a life insurance policy where the company was voted as the most competitive provider of the life insurance policy in 2003.
Tesco online
Tesco’s website Tesco.com is the largest online supermarket in the world where according to the report in this year, the company had more than 577 million euro sales with an increase of 29% as compared to last year (Datanomitor, 2010, p. 48). This online service operates in about 270 stores in the country with 96% in the UK. Many people have used this website to order their services hence making the company to increase its revenue.
The brand value
According to the last year’s report, the profits of operations in Asia, Europe and Ireland have increased by 78%. This is because Tesco has a very strong brand image and the goods are of high quality and good value. This brand value has also led to the company improving the shopping experience of the customers as well as its finance and insurance efforts. Development for Business Success
UK market leadership reinforced
The company was ranked as being position one in 1996 hence coming up with a strategy that has led to its success. The sales in the UK according to the report are about 72% which is more than in Sainsbury’s hence in its domestic market the company has a strong position.
Weaknesses
Reduction in debt
Due to more investment in space for its new stores, the company has a very huge income expenditure program hence the company is expected to clear its debts. The expansion of the businesses is expensive thus reducing the cash for other operations.
Relying more on the UK market
The company has relied heavily on the UK market even though its international business is still growing. In case the UK supermarket business changes in the future could affect the company’s shares.
Opportunities
Health and beauty
The health and beauty in the UK has continued to grow hence in the market it has become the fastest growing skincare retailer (Thompson,C.,Clarke,G., Clarke,M. and Stillwell,J, 2012, p. 30). The company has also become a leading position in providing healthcare and toiletries. These services and products have led to generation of income in the health and beauty of about 27 million euro. With opticians, the company has 19 stores and 200 for pharmacies.
International growth
In Europe, the company has operations in six countries and also in the UK, Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland. Tesco also has operations in Asia, South Korea, Thailand, Malaysia, Japan and Taiwan. The international sales have increased by 10 % as compared to seven years ago. Development for Business Success
Non –food retail
The structure of hypermarket of Tesco in the UK is expecting more retail shares, hence it will be able to use the football and the structure to develop more growths in non-food line (Wood,Z. and Gibbs,S., 2014, p. 100). There is expected increase in the sales overseas which will increase the earnings. The non-food income is expected to grow rapidly in the next four years.
Threats
Reduction in overseas returns
The returns in the foreign businesses are predicted to fall as each country moves past critical mass. This could be due to the failure in the company’s business model, economic conditions and competition (Schiraldi,P.,Smith ,H. and Takahashi,Y., 2012, p. 14). It can also happen because of Tesco moving into large markets in China and Japan.
Competition
The competition from Wal-Mart and ASDA could affect the business operations in the Tesco company (Porter M, 2011, p. 16). This is because ASDA competes in price and brand range of its goods being the 3rd largest supermarket in the United Kingdom.
Expensive expansion
International expansion is costly because it requires more investment and marketing to enter new markets. Pricing and distribution channels are also expensive. This might lead to increase in more debts before they even finish paying the others.
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Use of Corporate Social Responsibility by Tesco
Corporate social responsibility describes activities of a company in the society beyond revenue (Johnson G. and Schloes K., 2012, p. 210). It has three main components; values, ethics, policies and practices of the company, voluntary contributions to the society and management of environment and social issues. Every year, the board of directors of Tesco reviews the strategy of corporate social responsibility and its overall performance.
Tesco has not included the strategies that may harm the environment. This is because they affect the image of the company and its brand name. Tesco has been able to conserve the environment because it’s healthy for the employees and the company in general.
Tesco has impacted the society in different ways by encouraging its workers and customers to achieve social responsibi lity (Nwagbara,U., 2011, p. 120). The company has developed many programs like fundraising, charity for foundation and education. The company has ensured that the products they provide to the society are healthy and affordable. Development for Business Success
Tesco has also achieved economic growth and development all over the world. The company has created job opportunities and affordable products hence making the community to grow.
Its suppliers so respect the company and it’s also a member of Ethical Trading Initiative that give the company ethical goals to meet for their employees.
Innovation and Creativity at Tesco
Being the largest retail company in the UK, Tesco thrives in creativity and innovation. When the company started, it only ventured in grocery super market. Due to innovation and creativity, the company has diversified its operations to insurance, banking and finance, textile, electronic, land phone, and mobile business.
Today, Tesco has many innovations in its business operations which effectively contribute to its success. Notably, in 1990 the company innovated the “new pioneer innovation” that greatly contributed to its increased profits and performance in the market.
Recently, Tesco has succeeded in auxiliary innovations such as oracle retail warehouse management system and club card act. These creative ideas behind these recent innovations are as a result of the company’s great investment in the new technology.
The most recent and effective innovation by Tesco is the replenishment application system that collect the sale data from all checkout points and transfers this data to the supply chain department automatically. The innovation is designed in such a way that warehouse or supply departments promptly understand the product amounts required in the store using the replenishment application system.
Conclusion
The vision and mission of Tesco and its stakeholders have contributed to the success and performance of the company. The SWOT analysis of Tesco company show that the company is expected to grow in future and it should adopt appropriate strategies so as to do more investments in the opportunities that are available.
For Tesco company to have a good relationship with the society, more humanity sponsorships are necessary. Today, communities require companies like Tesco to understand that the impact of their operations is the best interest for the community. The company should continue to use the strategy of corporate social responsibility which is useful for both society and environment. The company should avoid legal conflicts because it leads to the reduced credibility before their stakeholders.
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References
Datanomitor , 2010. ‘Tesco, PLC SWOT Analysis’.
Datanomitor, 2010. “Online Retail in the United Kingdom”.
Datanomitor, 2010. ‘Company profile-Tesco,’ Datanomitor Europe,2010,Ref code:1674.
Euronomitor, 2010. ‘Industry Profile-food retailing,’. s.l.:Euronomitor International,2010.
Fame, 2010. Annual Reports Analysis-Tesco plc. s.l.:FAME International.
Johnson G. and Schloes K., 2012. Exploring Corporate strategy ,. 6th ed. London: Prentice Hill.
Nwagbara,U., 2011. Managing Organizational Change: Leadership , Tesco, and Leahy’s Resignation,. e-Journal of Organizational Learning and Leadership,9(1), pp. 56-75.
Porter M, 2011. How Competitive Forces Shape Strategy. Te McKinsey Quartely,Spring,, pp. 34-50.
Schiraldi,P.,Smith ,H. and Takahashi,Y., 2012. Estimating a dynamic game of spatial competition:The case of the UK supermarket industry.. s.l.:LSE Working Paper.
Thompson,C., Clarke, G., Clarke, M. and Stillwell, J, 2012. Modelling the future opportunities for deep discount food retailing in the UK. The international review of retail, distribution and consumer research, 22(2), pp. 143-170.
Wood, S. and McCarthy, D., 2014. The UK food retail and market saturation: A contemporary review. The International Review of Retail, Distribution and Consumer Research,24(2), pp. 121-144.