Research Korner: TESCO Case Studies

Strategic Business Analysis 	 	 		 		 		  	       Table of Contents  TOC \o "1-3" \h \z \u Task 1. PAGEREF _Toc230846863 \h 3 Introduction. PAGEREF _Toc230846863 \h 3 The Company. PAGEREF _Toc230846864 \h 4 Tesco’s Strategies PAGEREF _Toc230846865 \h 5 Tesco’s Services and Products PAGEREF _Toc230846866 \h 8 PEST Analysis of Tesco. PAGEREF _Toc230846867 \h 10   Task 2.. PAGEREF _Toc230846868 \h 13 Tesco’s Banking Capabilities PAGEREF _Toc230846868 \h 13 The Banking Industry of UK.. PAGEREF _Toc230846869 \h 14 Tesco’s SWOT Analysis PAGEREF _Toc230846870 \h 18   Task 3. PAGEREF _Toc230846871 \h 22 Tesco’s Competitiveness PAGEREF _Toc230846871 \h 22 Tesco in USA?. PAGEREF _Toc230846872 \h 23 Tesco’s Five Forces PAGEREF _Toc230846873 \h 24 Competitors PAGEREF _Toc230846874 \h 25 Entrants PAGEREF _Toc230846875 \h 25 Buyers PAGEREF _Toc230846876 \h 26 Suppliers PAGEREF _Toc230846877 \h 26 Substitute. PAGEREF _Toc230846878 \h 27 Tesco’s Advantage. PAGEREF _Toc230846879 \h 27 Market Attractiveness PAGEREF _Toc230846880 \h 28 Segmentation. PAGEREF _Toc230846881 \h 29 Targeting. PAGEREF _Toc230846882 \h 29 Positioning. PAGEREF _Toc230846883 \h 30   Conclusions PAGEREF _Toc230846884 \h 31 References PAGEREF _Toc230846885 \h 33     Introduction             Many businesses exist and grow because they are successful in satisfying a need in the market. These needs are determined by the consumers who are considered an important component of any business endeavor. The primary reason for a business existence is to continue identifying consumer needs and then come up with tangible responses to address these needs. This requirement makes business companies like Tesco spend a considerable amount of effort and intellect in analyzing the behavior of the consumers in order to effectively formulate appropriate marketing strategies that would assist the firm in effective production and delivery. As seen in the studies of Griffin, J. (2002) and Child, P. N. (2002), consumers makes companies and organizations recognize and internalize consumer issues that would help strengthen their marketing strategies. In fact, Tesco as the leading retailer in the United Kingdom and is now currently expanding undergoes very diverse changes almost everyday.  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.             As part of their business strategies, Tesco are now making their move into consumer banking.  And in accordance to the development and downturns in global financial market, is the Tesco’s plan concerning consumer banking just a value-added services or the company are becoming opportunistic and taking advantage of the 2008 turmoil in the global financial system to enter a new market when competition appear weaker?   The Company As indicated in their website, Tesco is recognized to be United Kingdom’s biggest supermarket, dominating in British retail sector with both global sales and domestic market share. It originally caters in food but expanded it scope of service to clothing, consumer electronics, consumer financial services, internet service, and consumer telecoms. Tesco’s strategy is focused in long term engagement and based into four key parts namely: core UK business, non-food business, retailing services, and international presence (Tesco.com, 2009).      In relation to their business practices, communication with their customers is really vital. Basically, marketing communications for Tesco encompasses wide range of advertising and promotions (Popper, D. E. 2007). Marketing strategies which comes with the marketing communications should be that effective to attract the consumers and be competent enough for the business market on the local and international scenario.             When marketing communications and strategies are in concern, Child, P. N. (2002) explained that Tesco has been well supportive with any methods which can make them profit and especially with no much of expenditures attach on it. One of the marketing strategies which Tesco has been doing is the lower price campaign they did in their Asia branch to compete and maintain the stand they have as one of the leading retail store in international business (Child, P. N. 2002).             To generate and encourage more frequent buying and to increase the amount of spending per visit of the patrons and consumers, these World Class Distributors gave special credit cards to the medium- and lower-income Group. For example Tesco -Lotus joined with GE Capital, the international financial firm and the world leader of private label credit cards (Child, P. N. 2002). They offered ‘The Tesco -Lotus Card’ for the individual who is at least 20 years old, and has an income over 10,000 TB/month (Bangkok) or 7,000 TB/month (outside Bangkok) and has been in employment for over one year. Member’s of the Tesco -Lotus Card also receive an extra credit line of fifty days interest free credit, with easy repayment terms (as little as 5 per cent). Tesco -Lotus also launched another card for members of the public who have an income of more than 5,000 TB/month, with minimum repayment of 5 per cent. The members have to pay 12 per cent interest per year and a fee for using their credit card of 2 per cent per month (Child, P. N. 2002).   Tesco’s Strategies In the fast-paced world of business, managers and entrepreneurs alike often lose sight of their ultimate objectives because they are preoccupied with more immediate concerns of the business venture. This has, in one way or the other, fatally caused their failure to anticipate future scenarios, proving damaging to the enterprise. Therefore, the sacred duty of those in authority to think of strategies that the business will undertake remains vital to the organization’s achievement of their previously set objectives. Formulating sound business strategies may not be the only key to success, but without it, there is a greater chance that the business will fail. Strategy is used by businesses to describe a variety of planning activities with a generally agreed upon purpose of directing the organization to a successful course of action over an extended time frame. With regards to Tesco’s business strategy, World Class Distributors tried to change customer’s brand loyalty from the suppliers’ product brand name to the store’s brand name. They increased their advertising in all kinds of media, for example, newspaper, radio, cinema and outdoor billboards. On the other hand, it must be kept in mind that the main part of this allocation came from the suppliers them selves who were willing to sell their products into these channels such as the retail stores (Dixon, A. 2009). Despite the fact that the customer began to change their buying habits from being attracted by low prices to being attracted to the store’s external promotional strategies. Currently, Tesco has entered into several partnerships with suppliers in the United Kingdom. Working closely with these suppliers, building long-term and rewarding relationships, Tesco's efficient distribution system has, in turn, increased store efficiency. This concept of "partnership sourcing" delivers tangible benefits: lower cost, a firmer basis for investment by suppliers, better product quality, improved logistics, and more innovative product development, all leading to exceptional value and competitive prices (Tesco 2009). Investment in technology since the mid- 1980s has provided the foundation for one of the most efficient replenishment and supply-chain systems in Europe, and the most rigorous control of stock levels in U.K. food retailing. For example, Tesco's electronic data interchange (EDI) system connects the retailer with nearly one thousand suppliers. Also, its depot replenishment systems enhance efficiency and productivity by scanning systems that automatically record goods received into the depot management system (Tesco 2009). As indicated in their website: “Tesco has a well-established and consistent strategy for growth, which has allowed us to strengthen our core UK business and drive expansion into new markets. The rationale for the strategy is to broaden the scope of the business to enable it to deliver strong sustainable long-term growth by following the customer into large expanding markets at home – such as financial services, non-food and telecoms – and new markets abroad, initially in Central Europe and Asia, and now also in the United States. The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco’s success in recent years. The new businesses which have been created and developed over the last decade as part of this strategy now have scale, they are competitive and profitable – in fact, the International business alone makes about the same profit as the entire Group did a decade ago.” [1]             Aside from this, the website also shows that their strategy are divided into several sections such as strategy for Core UK, Community, Non-Food, Retailing and International.  As the company stated the core UK is one of their biggest market, thus the company aimed to provide excellent value and choice fore their customers.  With regards to community section, making corporate responsibility is also important to them since they believe that being a socially responsible company is also an opportunity for growth.  In the non-food section, Tesco aimed to provide same great quality, range, price and service for their customers as they do in our food business.  For retailing section, Tesco has followed its customers into the growing world of retailing services, aiming to bring simplicity and value to complex markets. And also, Tesco was currently now an international retailer and wherever they operate they focus on giving local customers what they want (Tesco 2009). Apparently, 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 (Ko et. al 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 (‘Briefing the Tesco Takeover’ 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 (‘Briefing the Tesco Takeover’ 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 creates an environment in which their supplier accepts the prices and terms dictated by the supermarket. With Tesco’s expansion, it would have more power and influence its stakeholders, such as its suppliers to get what they want (Finch 2005).   Tesco’s Services and Products             Aside from the food products of Tesco, their non-food products and services were also promising. Tesco’s strategy remains to be as tough in non-food as in food. This signifies offering the same great range, price, service and quality for their customers as they do in their food business food business (Tesco.com 2009). As part of their strategy, their widest range of non-food can be seen in electricals, home entertainment, cookshop, clothing, health and beauty, stationery, soft furnishings, Extra stores and Homeplus, and seasonal goods such as garden furniture and barbecues in the summer. Currently, some of Tesco’s stores also have opticians and over 240 have pharmacies.  Moreover, Tesco also launched the Tesco Direct in 2006.  Actually, it was a new catalogue and online non-food offer, with over 11,000 products available online. Next day delivery is standard for small items with a unique two-hour delivery window (Tesco.com 2009). Customers also have a delivery to store option so they can pick up their order from their local store. Aside from this, Tesco clothing also shows impressive numbers in terms of profit and growth. One in seven of their customers in UK have bought from their clothing ranges (Tesco.com 2009). F&F is the label of fashion, style and great value, while our Cherokee brand offers essential trend-led kids clothing and adult casual wear (Tesco.com 2009). As previously discussed, Tesco’s creation of different types of services and offering of different types of products is quite expressive. Similar to food products and food-service related, Tesco also shows effectiveness when it comes to Non-Food, Banking and Financial Services Strategies. This means that engaging to different types of business is one of Tesco’s cultures. Venturing to different types of businesses and expanding around the globe is the core strategy of the company.  As for evidence, the success of Tesco personal finance in 2007 and the current status of global financial market created Tesco an opportunity to have a big push to their financial arm.             This is also a big test for banking organizations in UK. As stated by Tesco’s chief executive Sir Terry Leahy, “Services are bigger and faster-growing markets than food. As consumers look to make every pound work harder, it is a good time for Tesco to expand its presence.”[2]             In essence, Tesco Personal Finance and also known as Tesco Finance & Insurance is a telephone and internet based commercial bank in the United Kingdom owned by Tesco (Tesco.com 2009). Actually, before Tesco decided to buy the 50% stake to Royal Bank of Scotland, the 1997 Tesco Personal Finance has been a great success for both companies in which their returning profits hit the £65 million mark for Tesco for the financial year to February 2007 (Tesco.com 2009). Consequently, Tesco are now doing some serious move to strengthen their financial services i.e. opening of 30 more bank branches before the end of 2009 which can’t be considered as being opportunistic.   PEST Analysis of Tesco The PEST Analysis is concerned with the environmental influences of the business specifically on Political, Economic, Social, and Technological aspects. This type of strategic approach is directed in understanding the risk of uncertainty and the future operations of the business. It also prompts the business on how to respond on certain environmental considerations. On the case of Tesco and its business management, this PEST Analysis will provide the needed requirements of the organization in terms of the procurement and distribution of products and services from various producers and suppliers in both local and global perspectives. The anticipated expansion and business efforts of Tesco to various locations worldwide necessitates the understanding of these environmental factors so as to minimize problems in the arrival and distribution of products and services. In application to Tesco, political factors are seen on its compliance with the existing government regulations and relevant legislations. Most Tesco store outlets within UK operate under specific national legislative and entrepreneurial provisions and same us true to other store outlets outside UK.[3] The intended business expansion on other locations, however, is crucial provided that the senior management must be able to evaluate national environment particularly on the case of political systems, security, and stability. For example, Tesco cannot easily open up a store in countries that are prone with political risks resulting to economic problems and uncertainty. It is because the political environment of any business plays a significant function particularly in the process of production and generation of revenues. On the other hand, Tesco needs to explore potential suppliers in a given country as well as the supply chain strategies that could be adopted from the UK branches. Apparently, economic force is about the essential issues that affect the business in the process of revenue-making. Specifically, it reflects on the economic conditions of the immediate business environment are crucial to the financial performance of the organization. On the case of Tesco, economic trends influence its operations. And since the company is previously engaged in different types of financial services and the current problem in terms of global finance is not good, Tesco may still consider enhancement of their financial services.[4]  Actually, the effort is not opportunistic since Tesco only attempts to help their nation as well as their consumer survive in the current financial turmoil. The currency and inflation rates as well as consumer purchasing power are among the trends that the senior management must anticipate and appropriately provide remedies. This applies to Tesco’s current markets as well as the intended openings of store outlets in other parts of the world. In logistics, economic issues are seen on the case of operating costs based on production, procurement, distribution, and marketing of products and services.             On the other hand, social considerations are related on the aspects that describe the society, people, culture, and circumstances surrounding the organization and might create significant impacts on its operations. For example, Tesco are able to easily relate on environments that are similar to the UK, wherein social conditions and people and their cultures do not differ considerably. It must be considered that some Western brands are prohibited on some regions.[5] The social environment is where the business is bound for. Business management on Tesco’s case is based on the need of the existing market.             Apparently, technology for Tesco is an indispensable factor in its overall operations. The advancements in technology benefits Tesco especially because Tesco maintains a strong online customer base. Technological innovations create new market opportunities for Tesco to strengthen their current competitive advantage. Technology and innovations are synonymous. This is the reason why Tesco invests on technological infrastructures to stay innovative in all the ways they do business.[6] In the business context, Tesco uses the internet in distributing products to the consumers. There are also online operations that deal with suppliers and producers. However, these are intrinsic to the organization’s own operational strategy.             In terms of Tesco’s environment, this PEST Analysis provides a framework on the environmental forces that will affect the strategic planning and decision making processes particularly their big efforts towards the venture in financial services. The sets of information that are collected in the analysis are used in combating uncertainty and other issues especially on foreign operational markets.   Tesco’s Banking Capabilities Operating in a global market requires the formulation and implementation of effective strategies to establish and sustain competitive advantage. The retail grocery industry particularly in the UK and USA was challenge by various changes for the past decades that affect every organizational operation and other relevant aspects (Benson & Shaw 1999). It is believed that the current global financial position of most banks in United Kingdom prompted Tesco’s strategic shift towards alterations of the traditional business strategies such as creation and enhancement of their personal financial and banking services (Child, 2002).  This part of the paper will be discussing the strengths and weaknesses of Tesco.  Aside from this, this paper will also evaluate the current condition of consumer banking system in United Kingdom and determine Tesco’s capabilities to contest different banks and other financial organizations.     The Banking Industry of UK Banks has traditionally been one of the more lucrative areas for investment- mainly because it is considered as one of the lowest risk but has also the lowest return investments which include money market funds, certificates of deposit from banks and Treasury bills, notes, and bonds (Bauer and Dahlquist, 1998; and  Radcliffe, 1996). Unlike other investments, UK personal banking system is largely confined to the differences in the inter-bank rates, the terms of these investment and most of all, it is liquid- they can be bought and sold at any point. However, the increasing volatility of the financial markets have rendered greater systemic risks for banks which in turn, makes bank investments which used to be risk-free, a target of several forms of risks (Konoshi & Dattaterya, 1996). In the UK where the financial market is considered to be stable and banks defaulting and bankruptcy is largely uncommon except for the some cases, banks can be considered as good investments. However, with regards to the current condition of global financial market in which we face of increasing systemic risks and bank competition, investors are becoming more wary of how to balance risks and rate of return. The current financial economics and the financial industry trend in the world can be considered as stable but at the same time, the slowdown of the US economy. However, financial and banking institutions in the European Union have asserted that the region is ready to offset any deflationary impacts from other countries. For instance, the appreciation of the euro and the lowering of oil prices have curbed the inflation in Europe. Accordingly, the world economy appears to be strong despite the cyclical peaks slowdown felt by the financial industry. Basically, the trend in the financial economy shows that while the US has been experiencing slow growths, countries in the European area have been displaying robust economies. Last 2006, the equity markets across the globe experienced major corrections amid investors’ fears of increasing inflation, higher interest rates and in some cases slowing growth prospects. As a result, some major markets dropped back to levels that they had reached in the last quarter of 2005, which for some of them implied losses of up to around 20 per cent from their recent peaks. Those losses were particularly steep in markets where strong gains had been recorded previously, like in Japan or the euro area. The euro area broad market index fell more than 17 per cent over the same period, falling back to January 2006 levels. For the US broad market index, the corresponding loss was slightly less than 9 per cent, but the decline nevertheless wiped out within a few days gains that had been made since the previous November (OECD, 2007). The establishment of the Economic and Monetary Union (EMU) is generally expected to change the financial landscape in the European Union (EU) dramatically (Molyneux & Gardner, 1997 and Vander, 1997). It is argued, for example, that the creation of large and transparent euro capital markets will enhance competition in the European banking industry and stimulate disintermediation and securitization. Apparently, an article on large EU banks that are internationally active compares their characteristics with those of a wider group of peers, as well as with each other. However, when contrasted with one another, a higher foreign presence is positively associated with size, and negatively with provisions and capital buffers, possibly signaling some diversification benefits within the group from cross-border operations. Furthermore, several factors are found to be conducive to a higher presence of foreign credit institutions in local banking markets. Where the local banking market is more profitable, has higher safety buffers (i.e., solvency and provisions) and is more concentrated, the foreign presence tends to be higher. Smaller and financially less developed banking markets are relatively more penetrated by foreign banks, and a stable environment tends to favor the development of larger domestic entities relative to foreign ones. Apparently, as banks have become multifunctional institutions, core banking has become associated with securities activities (Beck, 2001). That has always been the situation with the universal banks of jurisdictions like Germany, but in England the clearing banks and merchant banks were for over a century institutionally separate.  That no longer being the case, in UK banking law must acknowledge the reality and find some place in its overall framework for a discussion of securities law (Beck, 2001). This is doubly important because of the long-term decline in the share of bank lending in the financial system. As a source of finance it has been losing ground to securities markets. The intermediation of core banking -- taking money on deposit and lending it -- has been overtaken by disintermediation, as larger companies raise money directly on the securities markets through the issue of equities and debt securities (Caprio & Honohan, 2004). On the other hand, many banks have compensated for this decline in traditional finance by emphasizing their securities activities (Caprio & Honohan, 2004). These range from a traditional task of merchant (investment) banks in advising, underwriting, and distributing new issues of securities, through to dealing on their own account on securities and derivatives markets. Often such activities have an international dimension to them, with the overlap and integration of domestic and international markets (Caprio & Honohan, 2004). Securities issues, especially debt securities issues, are becoming international in character. The typical purchasers of securities will be large institutions like insurance companies, pension funds, and fund managers, whose portfolios will invariably range beyond the domestic. Even though the global financial crisis of 2009 hit most businesses, no one can’t dent that the development and diffusion of information technologies (IT) and the intense competition have induced two kinds of restructuring to most banking organizations as a means of reducing costs (Beck, 2001): (1) outsourcing of activities which are computer and telecommunications intensive and (2) downsizing by heavily investing in IT and streamlining employment. This indicates the influence of organizational changes on the evolution of business processes and competitive strategies in banking. The intense competition of recent years in UK’s national and international markets is generating significant restructuring in firms (Nier & Baumann, 2003). Managers are looking for more efficient organizations, with lower fixed costs and greater flexibility in the face of changing market conditions. The banking sector is also affected by these processes and the subsequent challenges. Where appropriate, the reorganization processes are a reaction to the fact that banks have lost their leadership position in their traditional markets, and particularly to the impact of technological innovation. In the last decade, market conditions in banking have undergone deep changes (Nier & Baumann 2003). On the demand side, customer preferences differ greatly from the traditional bank products (loans and savings). On the supply side, the globalization of financial markets is accompanied by their governmental deregulation. Both factors imply an increase in the number of competitors, followed by reductions in costs and narrowing of profit margins (Nier & Baumann 2003). Thereby, banks are faced with strong competition from non-banking companies, which also accentuates the competition between the banks themselves. In the retail banking sector, the savings market share is lost, savers preferring mutual funds, money market funds, pension funds, insurance products and so on. Market position is also lost in other segments (credit cards) in favor of specialized suppliers. In the wholesale segment, the securitization and financial disintermediation processes imply that bank loans lose share in credit operations (Nier & Baumann 2003). The companies, originally the large ones and now, to an increasing extent, the medium-sized and small ones, focus less on the banking system and search for new financing sources directly or concede higher importance to internal funds (Nier & Baumann 2003).   Tesco’s SWOT Analysis Success in any company that operates for marketing and profit acquisition lies on the ability of the management in positioning and establishing the products/services being offered. Furthermore, the ability of the company and its management to compete and maintain a competitive edge among its competitor is another basis to say that it is successful. The constant development and innovation on the product line and the growing number of clientele also define the corporate standing of a company. In analyzing how Tesco, is competitive, this paper utilized SWOT analysis for the industry attractiveness as well as the key internal strengths and weaknesses.   	 		 		 		 		STRENGTHS 		 		 		 		WEAKNESSES 	 	 		 		 		1.         		 		Wide knowledge of retail industry 		 		2.        		 		Competent top management and rank & file for operation and maintenance 		 		3.        		 		Existing customer base 		 		4.       		 		Financial investment backing. 		 		5.        		 		Strong IT returns through internet shopping 		 		 		1.         		 		Low supervision on international market 		 		2.        		 		High turnover of employee 		 		3.        		 		Require local partner 		 		  	 	 		 		 		 		OPPORTUNITIES 		 		 		 		THREATS 	 	 		 		 		1.         		 		Expansion of target market 		 		2.        		 		Healthy market environment 		 		3.        		 		Increasing detraction of small retail businesses 		 		4.       		 		Enhancement of personal banking services 		 		 		  		 		1.         		 		Economic restructuring 		 		2.        		 		Intensified competition 		 		3.        		 		Government regulation 	 Basically, SWOT stands for Strengths, Weaknesses, Opportunities, and Threats and among the most popular in understanding the overall strategic position of the organization as well as its affecting environment. In common cases, SWOT is employed as source of important information considered in creating competitive marketing strategies. SWOT also points out internal and external issues in the organizational environment. In the supply chain process, SWOT analysis functions in identifying strengths and opportunities as well as weaknesses and threats that will lead to possible advantages in relation to producers and suppliers of products and services along with extending the supply chain (Hoggarth, Jacson & Nier 2003). For example, Tesco is considered to have an outstanding strength in its internet-based marketing. The internet could also be used in extending the supply chain because it integrates various organizational functions such as sales, operations, and logistics (Boyer & Hult 2005) among others. While Tesco intends to open up several store outlets in other parts of the world, the internet will bring opportunities to increase productivity while saving operational costs. The internet can bring advantages if used in revising existing supply chain strategies. The weakness of the internet is privacy and security issues in acquiring products and services or even in marketing them to the consumers. On the other hand, the threat of the internet is seen on the inability of Tesco to deal with the fast technological changes that will affect not only its operations but also the suppliers, producers, and customers. According to its website (Tesco.com, 2009), Tesco maintains business relationships with approximately 2,000 own-brand primary suppliers from less than a hundred countries. The current success of Tesco could be supportive of the claim that its management strategy works to its competitive advantage. Specifically, facts from their corporate website identify a complex range of relationships starting “from individual farmers and growers through to processors, manufacturers, and distributors”. Partnership is essential particularly to the key players of the supply chain process. Tesco abides to the UK Government's statutory Supplier Code of Practice, holds strict implementation on ethical trading and commercial policies, and conducts ethical trading training to all commercial staff involved with the buying for the UK (Tesco.com, 2009). For Tesco, the management should be able to take means of identifying of the stakeholders, the priorities of the stakeholders; understanding of the stakeholders’ perspectives and incorporating the stakeholders’ perspectives to the future plans of the company. Moreover, the company should cultivate growing consumer markets to promote growth and development of the business organization. This will address the expansion possibilities of the organization to serve not only the locale consumers but also provide services to a larger customer base. As such international relations and the overall business practices and trends all over the world should be investigated so as to make sound decisions that will realize the goals of the company. Furthermore, the company should continue cultivating community relations and environmental efforts to increase market visibility and improve brand strength such as community programs that will advertise the humanitarian causes of the company, charity and scholarship programs, and advertising messages that translates the environmental concerns.   Service delivery is an interactive and dynamic process that from the consumer's point of view is much more than a passive exchange of money for a particular service. Characteristics of services (e.g., intangibility, heterogeneity, simultaneity, and perishability) often require customers to be actively involved in helping to create the service value – either by serving themselves or by cooperating and often working collaboratively with service personnel. In high-contact systems customers can influence the time of demand, the exact nature of the service, and the quality of service (Chase 1984). If consumers somehow become better customers – that is, more knowledgeable, participative, or productive – the quality of the service experience will likely be enhanced for the customer and the organization (Bowers, Martin and Luker 1990 cited in Hackl and Westlund 2000). In this regard, the company needs to strengthen relationship with suppliers and increase market share. This effort will result to parallel business interests that will contribute to the company as well as the suppliers’ business objectives. Contract agreements and other business transactions should present advantages and benefits for both parties. Efficient delivery of products and services through premeditated and tactical supply chain management initiatives should be prioritized. As the nature of financial management, finance managers face a wide array of challenges, opportunities and options for him or her to enhance the investing and financing activities of the organization as well as the inherent risks and circumstances of the decisions that will be made. The challenge now for companies is to explore the options and take advantage of the opportunities while taking caution in managing the risks (Macmenamin 1999). Tesco needs to keep operational expenses within budget to be able to devote the necessary financial resources to both exploration and marketing activities of the company. Financial management decisions that will supply for the internal and external business operations of the corporation should be closely monitored to be able to control the flow of cash. Investing on profit-generating projects as well as training-specific programs for the human resources of the company will ensure extended success. Tesco should enhance marketing campaigns and take advantage of company control over the Asian retail industry competition. It should initiate efforts to come up with sound advertising and promotional strategies that will bring the people closer. Lastly, there is a need to improve technological innovations to increase efficiency as well as quality of the service. This includes investments on machineries and equipment that will necessitate the increased and efficient operation of the business organization’s management system. Financial assistance on human resources particularly to knowledgeable and skilled individuals should be accorded in order to improve the overall business operation as well as the engineering, monitoring, and control aspects of the business.   Tesco’s Competitiveness From the previous discussion, it shows that Tesco has efficient and enough capacities that can compete to different banking and financial institutions in UK. And it was justified by Tesco’s financial capabilities and expressive advancement in terms of technology and expansion. Actually, the macrotendencies marking the evolution of financial markets entail the continuous erosion of the bank’s market share, in retail operations as well as in wholesale ones. Although the general tendencies are common to all financial systems, the behavior and final outcomes are not the same in all of them. Under the pressure of intense competition in UK and of course with the presence of Tesco’s personal banking services, banks may have reacted in several ways. Some of them may aim of rapidly improving profits, which may have increase the income obtained from fee based business activities or have ventured into high-risk segments, such as securities derivatives. Others may also try to benefit from all the opportunities offered by the application of new ITs for aggressive price competition and to introduce product and process innovations that imply great changes in the services offered to customers. In this sense, we can distinguish two clear types of policies. On the one hand, following a general tendency in the economy, greater specialization can be found in those areas of business or activities in a position of competitive advantage. If this happened, both processes, outsourcing and downsizing, may respond to a fundamental change in the competitive strategy which implies a greater emphasis on acquiring new customers rather than on maintaining current customer loyalty. In this strategy, cost together with convenience become the main competitive priorities and the main attraction for new customers through periodic adjustments in interest rates and commissions discounts, accompanied by intense advertising campaigns with various promotions. With regards to price competition, Tesco is particularly clear in the segment of banking and to a lesser extent in the market for medium and large financial companies. This type of competition will avoid risk and seeks profits in short-term transactions rather than maintaining stable long-term relationships.   Tesco in USA?[7]             Tesco plc is one of the largest retailers in the world, operating more than 2,300 supermarkets and convenience stores and employing 326,000 people. Tesco's core business is in Britain, where the company ranks as the largest private sector employer in the United Kingdom and the largest food retailer, operating nearly 1,900 stores. In continental Europe, Tesco operates in the Czech Republic, Hungary, Poland, the Republic of Ireland, Slovakia, and Turkey. In Asia, the company operates in Japan, Malaysia, South Korea, Taiwan, and Thailand. Through Tesco.com, the company ranks as the largest online supermarket in the world. The company also offers financial services through Tesco Financial Services, which controls 4.6 million customer accounts roughly divided between credit cards and car insurance policies. Through the more than 100-unit Tesco Express chain, the company ranks as the largest seller of gasoline in the United Kingdom. In accordance to the global expansion of Tesco, the company announced its intention to move into the United States market last February 2006.  The organization opened their first chain of grocery convenience stores on the West Coast particularly in Arizona, California and Nevada in 2007 named Fresh & Easy.  Afterwards, Tesco in the name of Fresh & Easy established its U.S. headquarters in El Segundo, California at 2120 Park Place. The first store opened in November 2007 with 100 more expected in the first year. They plan to open a new one every two-and-a-half days in the United States, to impersonate the successful expansion of pharmacy chains such as Walgreens in the U.S. Currently, Fresh & Easy operates for more that 100 stores in the United States.   Tesco’s Five Forces Porter’s Five Forces Model is composed of competitive forces namely: the threat of entry of new competitors (new entrants); the threat of substitutes; the bargaining power of buyers; the bargaining power of suppliers; and the degree of rivalry between existing competitors (Porter 1985). This model is used in understanding the competitiveness of the business within its niche industry as compared to its competitors or even other industries (Porter 1985). It is commonly acknowledge that the analysis using the 5 Forces model determine the competitive position or power in a certain situation. On the case of Tesco, this model is deemed essential in dealing with the stiff competition in the supermarket industry not only in UK but also in USA.   Ø  Competitors In USA, rivalry for Tesco is very intense, as there are only a many dominant industry competitions (e.g. Wal-Mart and Kmart), and similar to Tesco, the competitors also have powerful and fully integrated IT platforms and financial backing. Actually, rivalry tends to intensify as the number of competitors increases and as they become more equal in size and capacity. As a result it can be said that the intensity of rivalry in the retailing industry where Tesco belongs is very stiff. Also in this force, rivalry is usually stronger when demand for the product is growing slowly, as is the case of the retailing industry. In addition, rivalry increases in proportion to the size of the payoff from a successful strategic move and becomes more volatile and unpredictable the more diverse the competitors are in terms of their strategies, corporate priorities, resources, personalities, and countries of origin. The above conditions all apply in USA in which their marketing arm Fresh & Easy plays.   Entrants The threat of new entrants is very high due to low entry barriers to the industry. The economies of scale, i.e. the very competitive prices in the industry, the not-so-large amount of capital and investment requirements and the easy access to industry distribution channels are some of the contributors to the low barrier of entry to the supermarket and retail industry.             With great number of years of experience in the kind of business that they are in and with the incumbent retail giants existing in USA (i.e. Wal-Mart, ASDA and Kmart), the said combination puts up a considerable barrier to entry. Where in the earlier days it is relatively easier to enter the industry because of little competition and the giants now were just medium-sized firms before, the contemporary retailing landscape is proving more and more difficult to enter into (Tesco.com 2009).   Ø  Buyers As there are still a few giant retailers worldwide, the bargaining power of buyers was still as great coupled with the industry being a key supplying group for the buyers, which in this case, are large companies. When the supplying industry is involved of large numbers of comparatively small sellers and when the item being procured is adequately standardized among sellers that customers can not only find substitute sellers but they can also switch suppliers at virtually zero cost, the buyers’ buying power is strong. Even tough some of Tesco’s competitors are as large as their own organization they still maintained the market disciplined, and the competitors have a disciplined approach in price setting, partly due to set government regulations.   Ø  Suppliers There are a lot of dominant suppliers in the industry, but they so far have not threatened to integrate forward to the industry, or threaten to set up their own retail outlets due to absence of strong Internet presence and powerful IT platform, so the bargaining power of suppliers is relatively controlled. Ø  Substitute Threat of substitutes is also high, as the price to shift from one supermarket and retail business is relatively small. As consumers are often looking for ways to save through buying cheaper but quality products, the buyer’s willingness to substitute is pretty high. Also, the relative price and performance of the substitutes, coupled with the relatively low cost of switching to substitutes present a grave threat.   Tesco’s Advantage Tesco’s competitive advantage in the retail and supermarket industry is mainly their admirable portfolio of references. With their years of experience and dominance in the market in providing retail products and services, they have gained a long list of loyal clients who have impressive business backgrounds by themselves (Tesco.com 2009). This promotes the corporate image of Tesco to potential customers as one of trustworthiness and quality. If such companies in Tesco’s references were deeply satisfied with the products and services that Tesco provides, larger chances of attracting possible additional clients in their already long list are sizeable. This portfolio of clients could be Tesco’s most effective marketing tool yet. On a more general context, the competitive advantage of Tesco could be pointed at their good record in being able to keep clients satisfied, which is an attribute that not all rivals in the business can boast of (Tesco.com 2009). Another competitive advantage of the organization is their ability to maintain market leadership in the UK even after the entrance of multinational companies in the same line of business with better technologies and more market scope than Tesco (Tesco.com 2009).             Another Tesco aspect which can be considered as a core competency is their strategic business planning (Tesco.com 2009). Their planning is about setting a direction for the business, a direction to which everybody, executives and employees become committed. It ensures that every part of the company is in harmony, moving towards a clear business purpose that will give Tesco further competitive advantage and improve its performance even more. With the planning of Tesco’s business come actions or decisions with high impact, or those decisions that affect the company strategically, rather than those that merely concern its normal operating routine. Most of those decisions concern for instance, changing the business model, focusing on new market sectors, fundamental improvements in customer service, making critical investment decisions or obtaining a better return on research and development expenditure. Such action or decisions affect Tesco’s long-term performance and enable it to achieve its competitive advantage.   Market Attractiveness It cannot be denied that the world is full of competition and it is essential that every individual should have the ability to compete especially those who are assigned to mange people in organization. Perhaps, it can be considered as the greatest challenge in every organization particularly to international organizations to have members who will contribute to the growth and development of an organization.  Furthermore good management skills are very important in order to achieve the mission and reach the vision of a certain organization. Every organization has work to do in the real world and someway it has responsibility to measure how well that work has been done. With regards to the market attractiveness, three factors should be considered i.e. segmentation, targeting, and positioning strategies of the company. In the same manner, the justifications on the decisions on employing these strategies will also be given.    Ø  Segmentation Applbaum (2004, 32) defined the segmentation activity as “the act of dividing a market into distinct groups of buyers.” This indicates the process have to deal with the general market and possible buyers of the products of Tesco. In looking at the market, it seems that it could be identified and considerably large to acquire some level of profit for the company. With the platform used by the company, i.e. the internet, the consumers could easily reach the company provided that they have ready access to the web. In the same manner, those who intend to purchase the products of the company are easily reached by the company given that an account will be made on their name. However, given that the company is rather new in the market of USA, the potential consumers may yet display some responsiveness on the site of the company (Tesco.com 2009).   Ø  Targeting In the same account, Applbaum (2004, 34) defined targeting as “the act of developing measures of segment attractiveness and selecting one or more market segments to enter.” Although, the company is most likely related to different types of business, they may now target individual who have access to the internet. These segments are targeted given that these individuals have more time to access the web and are more inclined to purchase head gears as a part of their fashion statement. Based on the market, there is no particularly strong competitor that holds most of the market share. However, there are a considerable number of sites that offer the same services and products as those offered by the company. Being Tesco, the consumers are able to substitute the services and products forwarded by the company with those in malls and other specialty shops within their community (Tesco.com 2009). However, it must be emphasized that the quality of the products of the company are exclusively distributed by the company. This means that there is some equal footing in the context of power with the suppliers and buyers in the market.      Ø  Positioning The act of positioning is characterized as “the act of designing a set of meaningful differences to distinguish the company's offer from competitors' offers.” (Applbaum, 2004, 35) Given that there is a considerable number of players in the industry and possible competitors, the company has to position itself in terms of high quality items works along with a prompt service delivery. Along with these, Tesco will also attempt to sell the items in a slightly lower price as compared to its other competitors.  On this manner, the consumers will be able to find more value for their money. On the same account, the company will be using marketing techniques such as word-of-mouth and product endorsements such that the public may become aware of the brand and products of the organization.   Conclusions From the previous discussion, we may say that Tesco is completely centralized. From the United States, Tesco has adopted the marvel of in-store shops such as bakeries, florists, pharmacies, and fresh-meat departments. The grocer has taken the service dimension a step further; many stores feature the "Tesco Kitchen," where a professional helps shoppers plan parties and gives them nutritional advice and now in the current year 2009, Tesco are now giving a great push to their financial arm. In accordance to the strategies and financial efforts of Tesco, some companies today find it impossible to create any kind of sustainable competitive advantage based on product alone. It is common knowledge that every one of the successful companies sought and found a precise understanding of how it could create a customer-centered competitive advantage.  Tesco like other businesses in world operate in a more complicated, and more regulated, environment. With regards to the current crisis that we are facing, the strategic task, then, is to create a distinctive way ahead, using whatever core competencies and resources at its disposal, against the background and influence of the environment. Through these distinctive capabilities the organization seeks sustainable competitive advantage. Thus, there are numerous aspects that every management should tackle. The efforts of Tesco with regards to their financial services may not be considered as opportunistic move. In Tesco, the key internal strengths are the appropriate and effective marketing strategies used such as increasing their efforts towards their marketing arm. On the other hand, the flaws of the marketing strategies implemented by the company serve as its major internal setback. Then again, the continuous effort of every company likes Tesco to advance its operational standards is the ultimate solution to emerging conditions brought about by different occurrences such as stiff competition, technological innovations, globalization, and others. As discussed, the knowledge of the underlying sources of competitive pressure highlights the critical strengths and weaknesses of Tesco, animates its positioning in its industry, clarifies the areas where strategic changes may yield the greatest payoff, and highlights the areas where industry trends promise to hold the greatest significance as either opportunities or threats. Understanding these sources will also prove to be useful in considering areas for diversification, though the primary focus is on strategy in the industry. Structural analysis is the fundamental underpinning for formulating competitive strategy and also applies to diagnosing industry competition in any country or in an international market, though some of the institutional circumstances may differ. Experience shows that opportunities or threats can arise from many different sources. Thus, obtaining information about several different sectors furnishes the CEO with more relevant information in aligning the firm's competitive strategy with environmental conditions (Nutt 1984). Moreover, in investigating rivals' business processes, a firm may learn of new and improved methods and processes that allow it to remain competitive. Thus, securing information across several environmental sectors may enable a firm to gain competitive advantage or maintain its market position.    References: ‘Briefing the Tesco Takeover’ (2005). Friends of the Earth   Applbaum, K (2004). The Marketing Era: From Professional Practice to Global Provisioning. New York: Routledge.   Bauer, RJ & JR Dahlquist (1998). Technical Market Indicators: Analysis & Performance. New York: John Wiley & Sons.   Beck, T (2001). Deposit Insurance as Private Club: Is Germany a Model? Policy Research Working Paper no. 2559. The World Bank.   Benson, J & Shaw, G (1999). The Retailing Industry, St. Martin’s Press, New York.   Bowers, MR, Martin, CL & Luker, A (1990).’Trading places: Employees as customers, customers as employees’, Journal of Services Marketing, vol. 4 (Spring), pp. 55-69.   Boyer, KK & Hult, GTM (2005, September). ‘Extending the supply chain: Integrating operations and marketing in the online grocery industry’, Journal of Operations Management, 23: 6, 642-661   Caprio, G & Honohan, P (2004). Can the unsophisticated market provide discipline?, World Bank Policy Research Working Paper 3364   Chase, R (1998). Production and Operations Management, Manufacturing and Services, Richard D. Irwin, Inc., USA.   Child, PN (2002). Taking Tesco Global: David Reid, Deputy Chairman of the United Kingdom's Largest Grocer, Explains the Company's International Strategy. 135+. Retrieved May 22, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=5000806002   Dixon, A (2009). With a Smile: Customer Service Affects Every Aspect of Your Business. Black Enterprise, 38, 43. Retrieved May 22, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=5024849602   Finch, J (2001). E-grocery sales soar in Britain: Tesco.com leads the way as shoppers decide cyberpower eases the burden. The Guardian Feb. 23, p. 28.   Griffin, J (2002). Customer Loyalty:  How to Earn It, How to Keep It. San Francisco: Jossey-Bass. Retrieved May 22, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=108852298   Hackl, P & Westlund, AH (2000). “On structural equation modelling for customer satisfaction measurement,” Total Quality Management, vol. 11, no. 4/5/6, pp. S820-S825.   Hoggarth, G Jacson, P & Nier, E (2003). Market discipline and financial stability, Economic Conference.   Ko, A, Hall, C, Yeung, P, Poon, T, Wong, R and Makino, S (2006). ‘Strategy Implementation and Control’, The Open University of Hong Kong.   Konoshi, A & RE Dattatreya, (eds) (1996). The Handbook of Derivative Instruments. Chicago: Irwin Professional Publishing.   Mcmenamin, J (1999). Financial Management: An Introduction, London: Routledge.   Molyneux, P & EPM Gardner (1997). ‘Cost Economies in European Banking and the Implications of EMU’, CEPS, Business Policy Report, no. 4, pp. 1-14.   Nier, E and Baumann, U (2003). Market discipline, disclosure and moral hazard in banking, Bank of England   Nutt, P (1984). ‘Types of Organizational Decisions’, Administrative Science Quarterly, vol. 29, pp. 414-450.   OECD. (2007). Highlights of Recent Trends in the Financial Markets. OECD.   Popper, DE (2007). Traceability: Tracking and Privacy in the Food System. The Geographical Review, 97(3), 365+. Retrieved May 22, 2009, from Questia database: http://www.questia.com/PM.qst?a=o&d=5024361777   Porter, M (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York: The Free Press.   Radcliffe, RC (1996). Investment: Concepts, Analysis, Strategy. Reading, MA: Addison-Wesley Publishing Co., 1996.   Tesco.com (2009). About Us (online). viewed May 22 2009, Available at: <http://www.tesco.com/help/jump.asp?choiceA=1&choiceB=1>.   Vander VR (1997). ‘EMU and Bank Consolidation’, CEPS, Business Policy Report, no. 4, pp. 15-30. 	   	 		 		 		 		[1] 		From http://www.tescocorporate.com/plc/about_us/strategy/ 	 		 		 		 		[2] 		From http://news.bbc.co.uk/2/hi/business/7529544.stm 	 		 		 		 		[3] 		From 		http://news.sky.com/skynews/Home/Business/Tesco-Pays-Royal-Bank-Of-Scotland-950m-In-New-Personal-Finance-Deal/Article/200807415058484?lpos=Business_2&lid=ARTICLE_15058484_Tesco%2BPays%2BRoyal%2BBank%2BOf%2BScotland%2B%25C2%25A3950m%2BIn%2BNew%2BPersonal%2BFinance%2BDeal 	 		 		 		 		[4] 		Ibid. 	 		 		 		 		[5] 		From 		http://www.tescocorporate.com/page.aspx?pointerid=14163CB2412F41B1BD7765AC8DBE49EB 	 		 		 		 		[6] 		Ibid. 	 		 		 		 		[7] 		All information are form 		 		www.tesco.com otherwise indicated

Strategic Business Analysis of Tesco

Strategic Business Analysis Table of Contents TOC \o "1-3...