Tescos Market Position Analysis

Tescos Market Position AnalysisThis is a report on Tesco PLC which is one of the largest grocery and widely distributed merchandising seller in the UK and in new(prenominal) countries rough the world. Tesco is the third largest retailer in the world the send- take out two largest retailers ar wall-mart which is similarly know as Asda in the UK and Carrefour which is a French inter study retail transcription. Tesco is the 2nd largest retailer in the world in comparison of profits which is direct by Wal-Mart. This report looks at the organisation on how it was formed to how it has become successful around the UK and the rest of the world.Tesco is a highly reputable organisation which has been development all over the last 8 decades and is however out dumbfoundth. Tesco is a highly profitable organisation and evidence has been shown of this in this report. In this report I testament intake a range of models and strategic analysis both internal of the organisation andextern ally as tumesce as strategy formulation. I this report I have use a rage of model and tool to demonstrate what TESCO is all about. Tescos has over 4,330 stores around the world but chief(prenominal)ly around the UK. In this report I have use the strategic tools give c are PESTEL, Porters Five Forces, SWOT analysis and a value strand analysis.2. Background how and when TESCO was introduced and its current identify in the grocery storeTesco initial was founded by Jack Cohen early in the 1920s. The filth was initially named when jack Cohen bought a shipment of tea from T.E.Stockwell and by exploitation the initials of T.E.Stockwell Cohen added the depression two letter of his surname to create the tarnish TESCO. The first Tesco was open in 1929 in the north of London in the bea of Brunt Oak.Tesco first started by selling food and drinks and over the year has diversified its product range from garment, insurance, telecommunications and retailing and renting DVDs to online s ervices like music download and softw be. The organisation has also diversified geographically as it is a well known brand around the UK which was the primary focus to the rest of the world and is now direct in 14 major(ip) countries around the world.TESCO is on the London stock exchange as the FTSE 100 Index which shows Tesco is one of the 100 most capitalised organisations in the UK. In 2009 Tescos has staggering revenue of 54biillion and the organisation employs over 472,000 employees worldwide. Tesco have over 960 Tesco designate stores around the UK which sell around 7,000 products which include fresh food around the Tesco express local stores. Tesco also has around 170 metro stores which sell a diverse range of food products around city centres. Tesco currently has over 450 superstores whichSell all their product rage including services such as DVD rental and Tesco Mobile. Tesco provides financial services called Tesco Personal Finance (TPF) as well as providing broadband in ternet connections.The position of Tescos in regards to carry ons with other foodstuff leaders have been put into a PIE chart belowMarket shareTescoASDASainsburysMorrisonOthers% of market share30.60%16.60%16.30%11.10%25.40%Fig 1 Share of leading organisations in UK Food Retail Market3. PESTELPoliticalWith the immersion of 10 more countries in the European Union (EU) in 2004 had promoted the trades between Western and the Eastern European countries (BBC, 2009). This has allowed Tesco to expand in the retail markets around the EU.Last year it was sign-language(a) off by Tesco with china that Tesco will be able to open a chain of shop malls in China. This joint project included three main malls to be built in Qinhuangdao, Anshan and Fushan. A total of 18 hypermarkets were also expected to open this year. This information was provided by Tesco last year. The growth of the international market is on the get hold and is predicted to account for 25% of the companys profit.In the Strait s Times 2010 article it is motioned that due to Chinas accession with the World Trade Organisation (WTO) it has promoted a forgo flow for foreign trades this was through by removing all barriers which would encourage companies from the west including Tesco to make it way to the most profitable market which would encompass over 1.3 gazillion people.EconomicThe economic factor is a point of concern for Tesco since the UK was officially declared as being in the recession in 2008. This has affected the consumers promptly as they became in beneficial about their financial income. The geting behaviour of Tescos customers meant since the recession consumers were more selective on what they bought. The reduction of the interest rates tendinged in the reduction of the growth of unemployment in 2009. As a result the spending power of the consumers in on the rise again as people became more secure about their financial positions. However there is still allot of people under threat and so are belike to spend less specie on the ready prepared meals, this will affect the sales value and the profit margins adversely.On a positive note in regards to the recession consumer are more likely to cook at home compared to eating out and this would have a positive effect on the amount of sales in the grocery retailers like Tescos. Consumers are less likely to cut down on food expenses instead the percentage of spending on food has travel over the years. Below is a graph showing this form Euromonitor 2010Fig 2 The % of UK consumers spending on food from 2004 2008The economic recession has been brought to radiance with the help of the following GDP growth graph since 1990 (BBC news 2010)Fig 3 UK GDP Growth 1990-2010SocialIn an analysis UK population it shows that there are more people in the UK who are retired compared to the children in the UK. The elder generation tends to eat less and tend to travel less to supermarkets compared to the younger generation. It has been predi cted that the internet shop is more convenient to the elder generation but due to the low amounts of food required by the elder generation deliveries are less profitable.In the recent decade the number of people choosing has enlarged and Tesco have identified this and have increased their product range to meet customer demands.Payments by check into and cash were 1st made achievable by Tesco.TechnologicalOne of the main macro ecological variables that have inclined the supply chain, operation and wait on of grocery and food retailers is technology. The operations of supermarkets are being affected by the use of services like internet shopping. Internet shopping has been growing and is still growing in the UK. The subscription of internet has developed by over 50% and it is estimated to have 70% of UK being users of the internet. (Office for National Statistics, 2010).The use of loyalty schemes which are used by online retailer helps to retain customer as people are discouraged to shop elsewhere (Sun, 2009).Online shopping is also available on telecommunicate so people can shop anywhere at any time.Due to the increase of the access of broadband internet shopping is increasing in the UK.15.5 million Number of users is in UK who is broadband users and this account for 70% of the total market (Keynote 2010).EnvironmentalThe environmentally warm solution of reducing packaging is promoted by the UK Government. In a study by the Office for National statistic, the number of people using reusable bags has raised by 3% from 71% to 74% and those consumers using normal bags and are trying to cut down has also increased from 65% to 68%. This has helped in reducing the cost and it also soundly for Tesco CSR image.Tesco has recently started adding carbon footprint data to dairy product, orange juice and potatoes and plans to expanding this data onto bread and non-food items in the future (Tesco 2010)There are customers who are reusing bags, cycle old mobile phones and aluminium cans and also prefer bagless deliveries. These customers are being awarded for their contributions through the Tescos Club control panel points (Datamonitor, 2010).Supermarket Tesco have put wind turbines on one of the stores roof this produces adequate energy to run all 15 tills.Fig 4 Consumers actively being Green 2007-2010LegalDue to the rise of the VAT in January to 20% by the government to reduce the budget deficit, Tesco non-food products will be affected such as clothing and electrical goods.In recent years the national minimum wage has been increased by 15.5% this has increased the supermarkets running and operating costs.Porters Five Forces AnalysisThreat for substitute products and servicesIn the retail market the threats for grocery retail products is low compared to non-food products.Substitute food products are available from local convenience stores and shop but are not seen as a threat for Tesco as Tesco is able to provide higher quality for lower prices d ue to buying power and other factors. Tesco are also opening express stores which take most of the business form local convenience stores.The threat for non food items is high as consumers are inclined to by discounted products like clothing form other retailers, however due to the recession Tescos is benefiting compared to the specialised clothing outlets.Threat of entry of new competitorsThreats in the food retail industry are low for new competitors.To succeed in the food retail market a huge investment is required to be matched against Tesco or other food retailers as the new organisation would have to build a brand name. Major retailer of food like Tesco, Asda, Morrisons and Sainsbury account for 80% of shopping for food in the UK (Mintel 2010).In order to compete against the tryed brads the new brad must either produce a higher quality or sell the product for lower prices or even both to be any threat to the big players.To gain permission from the local government to establ ish a new supermarket could take a considerable amount of time so therefore there is a key barrier for new fledgeling in this business.Intensity of competitive rivalryCompetitive rivalry is quite high in the food retail industry.Due to the high level and the growing levels of rival market shares Tesco is at risk of losing its market leadership. All the major competitors like Asda Morrisons and Sainsbury have had an increase in the market share for 2009-2010.All the major retailers are being very competitive against each other as they are always lowering prices and promoting products.In the rural areas of the UK consumers are inclined to go to places like Somerfield and Co-op due to the distance of the major retailers.The highly discounted food products from retailer like Aldi and Lidl are inclining customers to go there especially in generation of financial difficulties due to the recession. These retailers have grown by 25% during 2008. (Keynote, 2010).Bargaining power for buyers The Bargaining power for the buyer is high.Consumers are inclined to buy cheaper products and with the use of the internet for comparing product prices consumers are inclined to switch to cheaper alternatives.Where products are more standardised and have little differentiation consumers can intimately switch from one brand to a different one.Bargaining power for suppliersBargaining power for suppliers is lowSuppliers are geted to sell their products to major retailer like Asda and Tesco as the supplier would not want to lose their contacts with these major suppliers due to their selling power and so the negotiations with suppliers are strengthened and the major retailers are likely to come with a positive outcome when it comes to buying at lower prices.Detailed SWOT AnalysisBelow I have done a SWOT analysis for Tesco.StrengthsTesco is the 3rd largest retailer in the world.Tesco holds 30.7% of shares for the UK grocery market.In a research done by Datamonitor 2010 Tesco has a turno ver of 54 meg this in an increase of 14.9% compared to 2008.Tesco has done this by customising products and services to meet the demands of the consumers.Tesco has focused on reducing product prices without compromising on quality.Online services in the non-food retail market Tesco Direct has seen an increase by 50% (Tesco, 2010).Tesco has retained its customer with the use of Clubcard. The information from Clubcard has been used to promote products and other promotional techniques.Fig 4 Tesco annual Growth in Key Performance IndicatorsWeaknessesTesco has not performed well over the last year compared to the competitor in a report by Mintel (2010).A large number of goods were recalled which has resulted in finical loss. This has also had negative impact on the brands image.The main operations of the organisation are in the UK where it is preserve more than 75% of its revenue is generated in the UK in 2009. This was mentioned in a report by Tesco (2010).The organisation lacks geog raphic diversification and this shows a key weakness for Tesco to systematic risks of the UK market.OpportunitiesIn a report by Mintel (2010) it is recorded that Tesco have opened over 620stores in 2009 and 435 of them were in international locations. The geographic growth will help the firm to improvising its economy of scale, while it is also reducing the expo certain of the systematic risk.In the Guardian (2010) it is mentioned that Tesco.com has over 1 million customers, this has provided the firm to attract new customers which is helping to increase profits due to overall costs.The company is focusing in expanding geographically this will strengthen its global market position. Tesco has signed off a new deal with Tata group which is one of the major industrial organisations based in India (Daily Mail, 2010)The food retail market is expected to grow from 125 billion in 2009 to over 145 billion by the year 2014 as it is important to have enough food. (Euromonitor, 2010)ThreatsDu e to the reduction to consumers income and the rise of unemployment the buyers behaviour is affected and non-food products are being adversely affected.Tesco has been the market share leader for over 15 years and is now facing difficult times due to the intense competition of its competitors like Asda and Morrisons (Mintel, 2010).Bellow is an abridged SWOT analysis of which can be summarised in the illustration belowFig 5 Tesco reduced SWOT AnalysisValue Chain Analysis for TescoThe value chain shows the strength and weakness in the value accumulation process.The value chain for Tesco has been illustrated belowFig 6 Value chain for TescoPrimary ActivitiesInbound logisticsThe primary stage of the value chain is where the opportunity arises to create value for the business. The first stage is known to be upstream for activities. Inbound logistics is where products are bought from the supplier and are and are handled and transported to the shelves. Tesco adds value by maintaining the le vel of choice while it is also improving the efficiency of distribution system. Quality control measures are taken to remove the damaged goods and reducing the cost which may be incurred to its consumers.OperationsIn the day to day running of the stores Tesco has to maintain its service levels by selling the products and services and making sure they are open for business in accord to their trading hours. Tesco would have to also make sure products are available on shelves for their day to day business, this is done overnight daily. In order to uphold their competitive advantage Tesco may have to consider opening more hours or even opening metro and express stores.To do this Tesco must desire permission from the council and sometimes this may not be possible, this would take away their competitive advantage.Outbound logisticsOutbound logistic is the third stage of the value chain and Tesco add value by providing deliveries to customers. Tangibles such as parking facilities, troll ey collection, staff at till and systems are also used to gain the competitive advantage by saving time of consumers if done properly. The implementation of trolley deposit stations and keeping them orderly helps customers to get to and from the stores premises allot quicker as well as making these facilities available to use.Marketing and salesThe marketing and sales side of the value chain is more downstream. The Tesco club card provides discounts and help to keep customers loyal. Tesco also advertise on the radio, newspapers as well as TV adverts to attract customers with their pricing and promotions available. In regards to selling environmentally friendly products there are some constrains however Tesco can take advantage of this by providing products that are environmentally friendly which could help attract new customers. sustentation ActivitiesCompany InfrastructureTo help maintain the price of the products the implementation of security systems are in place as well as anti impostor systems to prevent people acting fraudulently. To reduce costs departments such as profit protection are employed by Tesco to reduce losses. The reduction of offensive activity and its prevention helps Tesco keeps is low prices low.Human resource managementHuman resource management would be regarded as a downstream activity. The job of HRM is to make sure staff are recruited and trained properly so benefits are passed to the customers. Tesco are always trying to maintain is high level of customers service by displace in programs for employees which are performance related. Employees are paid more by providing a better service to its customers and so employees are encouraged to do this. engine room developmentThis activity is also downstream and Tescos ability to provide product ranges which are new and innovative products has to be maintained. The product vitality adds value to the brand of these products.ConclusionThe report has clearly showed the success of Tescos from a small enterprise to a large PLC. Tesco success depends on their brand name which has always been evolving. Tescos brand name has hit the world like a virus but mainly in the UK. Tesco have managed to get the right message across to its consumers by making sure their CRS was to focus on their stakeholders.In order to succeed in the future Tesco has to diversify its products ranges and also diversify geographically as it has done over the last 8 decades, this will continue to create new customers as well as retaining its existing customers. Also to continue to succeed Tesco must adapt to any changes which may occur like a change in the services like broadband, BT have started to install fibre optic to increase its broadband seed. If Tesco wants to continue to grow its must adopt to all changes in real time, not only with this help retain customers as the services and products are up to date but this will also attract new customers. The strategy formulation for Tesco is to continue t o learn.Large organisations like Tesco the strategy should be analysed and apply on all levels of the hierarchy. The strategy of the different levels must be common throughout the hierarchy in order to have the competitive advantage.http//www.tesco.com/talkingtesco/retailing/ lowlife of FormTop of FormTop of FormBottom of Form