Tesco : Strategic 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.
This paper analyzes the strategic capability of TESCO Malaysia (see Appendix). In analyzing how Tesco, Malaysia is competitive, the study utilized SWOT and value chain analyses for the industry attractiveness as well as the key internal strengths and weaknesses. Practical and strategic recommendations are elicited in relation to some pitfalls observed in the case study.
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
1. Expansion of target market
2. Healthy market environment
3. Increasing detraction of small retail businesses in Malaysia
1. Economic restructuring
2. Intensified competition
3. Government regulation
VALUE CHAIN MANAGEMENT ANALYSIS
Firms respond to conditions in their marketplaces by modifying their competencies such as internal capabilities and linkages with suppliers and associates and the ways in which they position themselves in relation to their competitors specifically their strategic direction (1999). The value chain also is useful in retailing decision-making. Understanding the linkages between activities can lead to more optimal make–or–buy decisions that can result in either a cost advantage or a differentiation advantage. The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit (2000). In the case of Tesco, the entire operation of the business should be examined and evaluated in order to determine the service delivery processes that strengthen as well as weaken the business. This will result to managerial options to eliminate the liabilities that detract the business or the need to developed and intensify some aspects of the operations.
Meanwhile, (1996) believe that modern organizations passed by the guild structures and as organizations grew larger, skills become increasingly fragmented and specialized and positions become more functionally differentiated. Stakeholders are defined as the individuals or organizations which can either gain or lose from the success or failure of a system (2004). (2000) said balance between enhanced company processes and renewed objectives should be critically appraised in order to ensure the success of the company. As such, stakeholder analysis reminds management that it is important to evaluate the interests of the individuals or organizations who can influence or can be affected by the activities of the company.
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 (1978 ;2001; 1979 ; 2003). 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 (1990; 2000;1998). 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 (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 Malaysia 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.
KEY INTERNAL STRENGTHS AND WEAKNESSES
(1996) emphasized the idea to take advantage of the competitive situation not just by being better in how that product gets sold, serviced, and marketed at the customer interface. It requires that companies create breakthroughs in how they interact with customers, and design a way of interacting that makes an indelible impression on customers, one that so utterly distinguishes them from others that it becomes a brand in itself (). Tesco’s marketing communication made its first step through founder slogan “pile 'em high, sell 'em cheap”. This was not the case after 1977 when the company decided to appeal to a different market armed with higher prices and higher quality products (2005).
More than just a Grocery. Tesco is undoubtedly a whole mall in itself. Everything is literally found in one roof. No longer limited to grocery items, it offers services that would allow a customer to avail of everything in one stop. Besides the extra selling of books, CDs, digital music, videos, flowers, games, gardening, gas, holidays and flights, they also provide financial services (e.g. credit cards, loans, mortgages, savings) insurance services (e.g. car, home, life, travel) telecoms services (e.g. Internet, home and mobile phone) and healthy living services (through its Tesco eDiets and healthy living club). Tesco has developed various kinds of Tesco stores ranging from Tesco Extra, Metro Tesco and Tesco Express in its continuing quest to properly address the needs of their various customers when and where they want it (2005). Since Tesco is considered a one stop shop retail outlet, it can be assumed that it caters to every market segment in the country.
Clubcard: Every Little Helps. Discount and club cards have been a strategy to developed similar loyalty schemes in order to identify and stimulate brand awareness. Attached to Tesco’s name is its Clubcard feature. Presenting a Clubcard during purchases would accumulate points that in turn can be used as vouchers (once the points collected are one hundred fifty (150) in-store or online, Clubcard deals or AirMiles. Tesco markets this feature as a “shop now and get your money back” mechanism. One Clubcard point is spent in One pound. In fact Tesco’s success should be attributed to this invention. Clubcard functioned more than just a pure customer service and benefit program to Tesco. It also allowed Tesco to know its customers and strike to their interests and products using card data (2003). Clubcard is so attached and linked to Tesco that Tesco’s motto takes from it which is “Every Little Helps” (2005).
Cause Related Marketing. At present, health issues around the world are increasing and have become more pressing, and Tesco should continue to join the government, hospitals and institutions in promoting awareness to the people. In 2001, the Alzheimer's Society and Alzheimer Scotland were Tesco Charities of the year. Cystic Fibrosis was the Tesco Charity of the year for 2002. In addition, Tesco is the national sponsor for Race for Life, in aid of the Imperial Cancer Research Fund where over 250,000 women have participated in raising more than £15m (2003). In 2003, Tesco can get actively involved by sponsoring symposiums, talks, and seminars on health issues, with more focus on prevention of illnesses and other conditions. At the same time, Tesco can introduce and promote the fresh and nutritious food they can offer to the customers, and highlight the importance of good health in mind and body. Vitamins, food supplements and other medicines can be introduced as an addition to Tesco’s food and non-food lines. This strategy can greatly help millions of people by promoting awareness, and make them feel that their well-being is important and considered at Tesco’s. This, in turn, will gain their trust and lifetime loyalty, the core purposes of Tesco, while providing the essentials for good health all in one place (2003).
On the other hand, enhancing quality and efficiency enhancement should be given enough amount of attention. As these two aspects seems to be predominant pitfalls in the organization’s operations.
Enhancing Quality. Everyday, top managers of Tesco stores gather for an hour-and-a-half customer advocacy meeting to pore over that week's performance statistics. What makes this unusual is that every performance measure under scrutiny relates to customer satisfaction, and this meeting is the most important one on the corporate schedule. The vice presidents discuss several measures, including on-time delivery (OTD), product returns and their causes, and abandonment rates for calls to Tesco’s toll-free number. But the company was already expending a disproportionate effort on getting production to match demand. The business was transformed into a "made-to-order" manufacturing operation with three- to four-day cycle times. The results are apparent. No failure in customer service is easier to identify, measure, and compare.
Satisfaction occurs when the product has been able to meet or exceed the conceived expectations that the customer has (1996). Furthermore, customer satisfaction may also be considered as the measure of the high degree of quality of the product (1998). As the customers demand for higher standards, any shortcomings on the part of the companies to deliver would jeopardize the life of their respective company. Hence, it is really important for companies to not only maintain and protect these intangible assets. It is also a must that they increase these assets for future benefits (2003). According to the study of (1998), relationship with customers should not be regarded as a single transaction, rather, a long-term. Customer satisfaction is considered a must for customer retention and loyalty, and undoubtedly helps in realizing economic goals like profitability, market share, return on investment and other corporate target (1996; 2000). The management must be highly concerned with their customers’ welfare and satisfaction as this is one of the secret principles on being the leader in their area of industry.
Efficiency Enhancement. Tesco always put their efforts to do things “better, simpler and cheaper,” for their customers and employees. They usually enhance not by focusing on big aspects of the business, but by providing small enhancements. In customer welfare, consumer feedback system must be reinforced. The resolution of customer complaints and problems is a key for companies to be able to maintain the loyalty of their dissatisfied customers. Dissatisfied customers are more likely to tell people about their experience than satisfied customers are (1997). After finding out the problems from the viewpoint of the customers, Tesco should undertake actions that would not only address the complaints of the customers but as well as actions that would lead to organizational improvements.
In implementing marketing strategies, there is a need for continuing optimization – the ability to assess a myriad of possibilities in order to find the best one or near best one (2003). In cooperation with the other elements of marketing and business management, strategies must be evaluated and improved. In building the impression of people about the company, Tesco must reach out to a broader target market and must project an image relevant to every members of the society. Its corporate social responsibility must be defined.
In the management of Tesco, leadership and administration of the company must be a supplemental mechanism in the workforce. Human resources management improvements must be considered to fully utilize human asset. With the growing market and competitive edge of Sunbeam, its workforce also plays a significant role in materializing defined objectives and achieving success.
Today, most companies like Tesco Malaysia 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. Thus, there are numerous aspects that every management should tackle. In Tesco Malaysia, the key internal strengths are the appropriate and effective marketing strategies used. 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 Malaysia to improve its operational standards is the ultimate solution to emerging conditions brought about by different occurrences such as stiff competition, globalization, technological innovations and others.
Overview of the Organization
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