Studying for Business
Abstract – Tesco is the leading retailer in the United Kingdom. It manages over a thousand supermarkets, hypermarkets, and convenience stores in the United Kingdom, Ireland, Central Europe and Asia. This study explored the competition inside its retail industry, by analyzing its expansion approach, corporate social responsibility and its industry life cycle.
Introduction
Tesco is the leading retailer in the United Kingdom and is now currently expanding. Since the retail industry undergoes very diverse changes almost everyday, it is just essential to analyze its strategy on change. Being an influential corporation, Tesco has a huge responsibility to uphold the interests and needs of its consumers, staff, stakeholders and the environment. With this huge responsibility, the corporation must be able to establish good relationships with their partners and consumers, thus, helping them cope with their expansion and encountered situations.
Questions and Answers
1) Discuss the impact of Tesco expansionist approach on its stakeholders.
It has been reported that the quality, speed and cost of one’s products or services are dependent on the support and cooperation of partners, such as suppliers and distributors ( 2006). In the case of Tesco, the company emphasizes that it has placed its interest in working close partnerships with its stakeholders, such as its suppliers, in delivering unbeatable value (‘’ 2005). However, with the further expansion of Tesco, it becomes more powerful in pushing and forcing down the prices of products from suppliers, such as farmers and workers, which presents drastic effects and consequences to the farm laborers, the environment and to the welfare of animals (‘’ 2005). This just means that its expansion leads it to neglect maintaining an effective relationship with its partners and stakeholders. The expansion of Tesco has presented a myriad of positive effects on the company and its consumers and partners. However, with this expansion, additional demand will be passed on to the suppliers, including the further increase in the influence of Tesco, thus, taking advantage of such suppliers. With an almost 30% share of the grocery retail market, Tesco undoubtedly has the power, and can use this power to push down the prices it pays to its suppliers. This power includes “bullying” their supplier to either accept the prices and terms dictated by the supermarket or they lose their trade, thus, showing the unjust trading relationship between a powerful supermarket, which wants the supply chain to service its needs at a price it orders, and a supplier, which even compromises its commitment to ethical practice just to meet those needs (‘’ 2005). With Tesco’s expansion, it would have more power and influence the abuse its stakeholders, such as its suppliers to get what they want. Despite this abuse, suppliers never complain to avoid retaliation from the company ( 2005).
2) Why is corporate social responsibility so important for a big firm?
Corporate Social Responsibility or CSR is a concept stating that organizations, such as corporations have a commitment in considering the interests of their consumers, employees, stakeholders, communities and the environment in all facets of their operations, which extend beyond their constitutional commitment to conform to legislation (‘’ 2007). This concept is important for big firms like Tesco because this concept encompasses the firm’s total responsibility and commitment, in line with its goals and objectives in its industry. This is given emphasis and importance, for with this concept as a guide, companies are given the edge in coping with competition among other business organizations. Highlighting this concept enables the company to be sensitive in meeting the demands of its market, employees and stakeholders, thus, sustaining the goals of the company. In addition, with this as guide, the company will be able to contribute to helping maintain the environment, thus, becoming an effective instrument in keeping the environment clean and conducive to living.
3) What is the advantages and disadvantages of Tesco being a monopolistic competition structure?
The primary advantage of Tesco on adopting a monopolistic structure is that the barriers to entry are very high, that no other companies can operate in the industry. Although competitors may arise, Tesco is overthrowing them due to its strategies and its firm establishment in the market and in terms of customer loyalty. This leads to the limited number of companies, including Asda and Wal-Mart, to compete with Tesco, thus, is being regarded as the leading retailer store in the United Kingdom. Because of this, Tesco is also becoming more efficient in responding to various performance pressures by preventing slack in inputs. In turn, resource allocation in Tesco becomes more efficient, and focuses on implementing cost-effective strategies that will allow efficient capital allocation. In addition, because of a monopolistic structure, Tesco is able to achieve innovation, which makes their products stand out in the market and eventually overcome threats of rivalry. Due to the wide variety of products Tesco offers and the strategic location of its stores, most of the consumers avail their goods from the grocery store. It also offers an additional feature, the Tesco Clubcard, which gives access to detailed information about shoppers that cannot be surpassed or even matched by other retailers ( 2005). Moreover, due to this structure, Tesco produces positive incentives for further generation of capital, for research and development ( 2006). The generation of such incentives enables the company to purchase lands to be able to establish more stores and branches. Such structure enabled Tesco to enjoy revenues that amount up to 29 billion Euros in total market value and operate overseas (‘’ 2007).
Despite the advantages of a monopolistic structure are its disadvantages. With monopoly, prices are higher compared with having competition ( 2006). This is considered a disadvantage for many consumers, for not all can afford the prices set by Tesco, including its suppliers and stakeholders. Second, since the limited operating firms, such as Tesco have considerable market shares, the retail of goods can be affected. Without the presence of a driving force, the company focuses only on the profitability aspect of the business. The last disadvantage to take note of is that Tesco have more market power than competitors ( 2006). This actually sounds good for the company, however, having more market power leads to the crisis of many suppliers at present, wherein due to the market power of Tesco, they are being demanded to compromise to the prices it dictates. Because of such disadvantages, a case from the Office of Fair Trading has been given against Tesco, for noticing the dominance of the company in the retail industry.
4) What is the Office of Fair Trading case against Tesco?
Aside from the case of Tesco on pushing the prices down from its suppliers, the grave case of the Office of Fair Trading against Tesco is that it found out that Tesco held more than half of the UK’s 319 potential store land sites ( and 2007). The increase in the occupied store land sites owned by Tesco contributes to its market expansion, thus, restricting the choices of consumers. If the market dominance of Tesco continues, then this would result to the worsening of local market shares ( and 2007). The market dominance of Tesco in the retail industry overpowers smaller businesses, thus, contributing to the downfall of smaller businesses and entrepreneurs. Because of this the Office of Fair Trading is coming up with a plan to somehow stop Tesco from amassing huge numbers of store sites in order to increase competition in the retail industry and give other companies and small businesses to be sustained in the market.
5) What has contributed towards Tesco’s success in line with corporate social responsibility?
Despite the cases that Tesco is facing right now regarding their suppliers, their land stores and the environment, the company can still be regarded as successful in giving importance to their corporate social responsibility. In line with this, Tesco has been successful in their commitment in bearing in mind the demands, needs, and wants of their consumers. Because of the variety of products that the grocery store retails, it has able to capture the trust of its consumers, thus, enjoys the prestige of being the country’s leading retail corporation. It has gained the confidence and loyalty of its consumers, such that the products available in their store serve as indication that the company gives importance to their needs, thus, showing the value of the customers. Customer values refer to those benefits focused on solving customer problems and not merely on the products and services themselves. Its focus is on the customer and on solving problems faced by the customer (‘ ’ 2003). With the sales and profit Tesco is enjoying now, it can be understood that it was able to provide their consumers not only with effective products and services, but with practical solutions that exhibit their value as consumers. In addition, due to the increase in revenues that the company enjoys, it has also met the expectations and demands of its employees, in terms of allocation of resources, budget, incentives, motivation, coordination and control. With adequate resources, the employees in the company will be given enough salary and compensation that would enable them to function and perform better. With enough monetary resources, the employees will be able to enjoy more incentives, which serve to increase their motivation and desire to work in the company. Incentives can be used to motivate compliance to specific requirements, such as achievement on output targets, low absenteeism, and quality of output ( 2006). From this, it can be understood that the accumulation of resources in the company has led to the satisfaction and good performance of its employees, in turn, leading to the success of Tesco as a whole.
Conclusion
From the discussion, it can be understood that the concept of corporate social responsibility is important to take note of in any business organization, including Tesco. Corporate social responsibility must be incorporated in the processes and operations of any company for it to be able to fulfill its responsibilities and goals in its chosen industry. This concept serves as a guide for Tesco in their aim in sustaining and maintaining their reputation and establishment in the market.
References
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