The organisation in which I have decided to produce a written report on is Tesco's PLC as they are proving to be the most dominating organisation within the supermarket market despite Wal-Mart taking over Safeway's
Introduction
The organisation in which I have decided to produce a written report on is Tesco's PLC as they are proving to be the most dominating organisation within the supermarket market despite Wal-Mart taking over Safeway's. Tesco's as an organisation is classed as the leading supermarket within Britain, it is also the national leader within the food sector. It is now a global organisation as tesco stores are available in countries such as Ireland, Asia and Central Europe. The largest Tesco store is situated in Newcastle. In 1997 Tesco's opened their first Tesco's Extra store which has been running successfully for the past eight years.
Tesco is a leading European based retailer with retail outlets in the UK, Ireland, France, Central Europe and Asia. They have over 900 stores world-wide and serve over 14 million customers per week in the UK alone. Tesco's offer food, non food and additional services for consumers including banking and home shopping.
Tesco's responsibilities lay both internally and externally, by internal responsibilities Tescos ensure that they look after their employees and as to how the business is ran, and by external responsibilities Tescos must ensure that they manage their other branches within UK and the other countries in which they have targeted.
Tesco's have stated that their strategies focus upon four main areas which are Strong UK Core business, Non- Food markets, Tesco's are currently expanding upon this by opening non food stores within the UK to target a wider range of customers and diversifying their current market from just food products, Retailing Services and International, Tesco's strongly state that customers and staff are their main responsibility Tesco aims to manage people openly, honestly and fairly. In order to achieve this they ensure that staff training has been carried out efficiently which can reflect upon higher standards of customer services which will enable customers to receive the services in which they require.
Tesco's also contribute to other areas such as charities, regeneration, education and environment. The ways in which tesco have contributed to schools is by adding tokens and vouchers to their products for schools, which enables schools to benefit from discounted equipment. This is an incentive on Tesco's behalf as by encouraging customers to buy products towards the improvement of education will also enable customers to receive the benefits too as they receive the products which they require and assist in improving education at the same time. Tesco's main contribution towards schools has been towards and sports and ICT equipment.
By Tesco's being identified as helping the community as opposed to just within Tesco's itself, this gives them a stronger identity within the market which associates them than being more than just a supermarket but part of the public as it involvement is stronger it will benefit Tesco's as a whole.
As mentioned before, customers play a great role in the success of Tesco's as one of Tesco's values is to understand customers better than anyone. Tesco's go to great lengths to ask customers what they think, listen to their views, and then act on them.
Tesco's offer a range of four types of store which are Tesco Extra- convenience stores which Tesco's offer which the majority are open for 24 hours, Tesco- the main , Tesco Metro, Tesco Express, One Stop and Tesco Homeplus- stores which sell non food products.
Pestle Analysis of Tesco's
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As mentioned before, customers play a great role in the success of Tesco's as one of Tesco's values is to understand customers better than anyone. Tesco's go to great lengths to ask customers what they think, listen to their views, and then act on them.
Tesco's offer a range of four types of store which are Tesco Extra- convenience stores which Tesco's offer which the majority are open for 24 hours, Tesco- the main , Tesco Metro, Tesco Express, One Stop and Tesco Homeplus- stores which sell non food products.
Pestle Analysis of Tesco's
The PESTLE analysis is an abbreviated term which stands for Political, Economical, Social, Technological, Legal and environmental factors. By analysing trends and developments in a business environment it will enable Tesco's to identify new market opportunities and threats. The aim is to identify the PESTLE analysis within Tesco's.
The problems Tesco's have faced in the past is being identified by customers in the market, as some issues which have been identified classed Tesco's as 'cheap' when their prices were actually rising. This may have had an effect on Tesco's social and economical side as customers tend to choose where they shop by level of class, and by Tesco's being labelled 'cheap' this may knock consumers confidence as they may choose not to shop there and shop elsewhere. Another issue which may have had an effect on Tesco's over the past years is the interest rates
A positive outcome from Tesco's over the recent years has been the increase in their opening hours as Tesco's now operate 24 hour stores which is more beneficial towards late night shoppers and enables customers to have the freedom of shopping when they like, also by applying this it has also enhanced job opportunities.
The changes within the organisation of Tesco's which have currently have arisen would mainly be the raise in oil prices as it has affected the price of importing and exporting goods to other countries in which Tesco's is situated. By prices rising, may result in Tesco's losing their international customers which could reflect upon their market share. Also by taxes increasing this influences the increase on the price of petrol for government revenue.
The political factors which Tesco's have faced over the recent years have been planning policy guidance, the competition with the EU law and competition commission. Tesco's is classed a horizontal company, it may have room for expansion in the near future in order to monopolise over other companies such as its competition within the market.
Technological factors which have played a great role within Tesco's over the past few years has been the benefits of online shopping which has reduced the level of fuel being used from customers this therefore reduces the damage to the environment it also makes shopping much more efficient and accessible for customers that cannot travel or prefer to shop from the comfort of their home Tesco's have expanded their range of facilities in store by providing customers with self service shopping, self top ups for mobile phones, introducing pharmacies in store and the benefits of paying for petrol at the pump. By introducing these new technological methods it has enabled customers at Tesco's to benefit from their services both efficiently therefore effectively. Other products which they have introduced over the past years which has expanded their market has been products such as Tesco's personal finance and loans company, Tesco's mobile network and the Tesco Broadband which has proven to be a very successful addition to the company their initial internet started up in 1994 and then developed to broadband in late 2003.
Future developments for Tesco's could be to include the Ansoff Matrix in order to develop the company to its full potential. In order to do this they could penetrate the by improving service and quality in which they currently provide consumers as this will help boost sales even further. Tesco's have recently expanded their current target audience by introducing a hardware store which is directed at wider markets. In order to prevent the loss of market share Tesco's could withdraw current products which seem to be failing within the market which will avoid losing profits as well as their foothold within the market. Others ways in which Tesco's have developed their market over the current years has been by globalising their products and stores which has developed their market share.
The major issue which has affected Tesco's most recently has been the petrol storage explosion which occurred in London earlier this month on December 11th 2005 which will have a further impact on the cost of petrol prices. Tesco's classed themselves as being immune to the increase in oil prices, in which they were proven wrong when they received a £60 million bill. By this issue arising, not just within Tesco's other local organisations too, it has affected the business internally as it has forced them to raise costs within their stores. Due to increasing diesel, heating and lighting and even prices of carrier bags, this may have affected Tesco's customer base as some customers may not be willing to pay the additional price increases which may result in a decrease of Tesco's market share.
Another major political issue which has occurred which has affected Tesco's has been complaints from business rivals such as Wal-Mart who approached the government to try and stop Tesco's progress of overtaking the current market share. As Wal-Mart claimed that Tesco's were dominating the supermarket market.
The market environment in which Tesco's operates
The type of market in which Tesco's operates is within a very competitive market, but can be classed as a perfect competition, as there are five major supermarkets which are competing at such high levels. At present it is the UK's largest supermarket with over 26% Market share, which almost doubles the closest rival which currently happens to be Asda. Due to this issue competitors are reducing petrol prices and suffering from a loss in order to attract more customers to try and maintain their foothold within the market. The impact this has had on Tesco's by their EU membership is that there are higher taxes within the UK which will affect the prices of importing and exporting goods within the UK. This may result in Tesco's losing its membership and supply to countries such as China, in which this has occurred as Tesco's reduced their imports of textiles from China due to the European Union limiting the amount of shipments that Tesco's were permitted to import. By this issue arising this resulted in Tesco's having to buy half the amounts of clothing in which they required which left them with a limited supply of clothing.
Although international business is still growing, which will make a contribution of greater amounts to Tesco's profits over the next few years; it is still highly dependent on the UK market. Due to the fact the Morrison's group successfully purchased the Safeway chain it may enable them to achieve a greater market share and alter the balance of UK supermarket power i.e. Tesco's current domination which is having a great impact on competitors such as Asda and Morrison's.
The price followers in the UK market are about to become aggressive investors in price, Safeway because of new ownership and Sainsbury because of new management. Morrison is reducing Safeway's prices by up to 6% and Sainsbury is bound to see lower prices as one of the basic changes necessary to drive its recovery. With both Asda and Tesco committed to price leadership, this could result in a step down in industry profitability.
Tesco's effectiveness of achieving their objectives
Tesco's have been running as a successful company since 1995 from when they overtook Sainsbury's who were at the time the strongest supermarket running. Tesco's soon changed that and by 2001 proved that they were the UK's leading supermarket by taking 15.6% of the grocery market. As stated before Tesco's are now dominating the market by their current market share of over 26% which 12% more than their most competitive rival Asda which is great achievement for Tesco's over the past 10 years. Asda did opt to merge with Safeway but this was not an option for Asda as it was disallowed by competition authorities. So by Asda being left to support itself it has seemed to manage and by Safeway's being sold off to Morrison's, this has identified a few problems as Morrison's has had difficulty adjusting to Safeway's which has resulted in a profit warning, Asda seems to be the only major competition which Tesco's face as they are the only supermarket which are stabilising their profits and attempting to keep up with Tesco's.
Tesco's have previously and are currently proving that they are able to achieve high profits, which again has been proved by their by their 2.900 million. In order for Tesco's to maintain or gain further market share they have introduced new stores and products to attract a wider range of customers as opposed to food orientated products.
Tesco's growth has affected its competitors greatly especially Sainsbury's and Safeway as they are having difficulty to maintain their customers. This is due to supermarkets not being able to keep up with current changes in which Tesco's are continuously introducing such as the competition of prices and the range of products which they are offering. This is due to numerous issues mainly due to limited profits made by Tesco's rivals which have restricted them as to what they can offer to customers which has resulted in a loss.
In response to the current business environment Tesco's have paid more attention into meeting stakeholders interests
Tesco's are currently looking at other options to keep their sales levels flowing in order to do this they have introduced other non food stores, as this will aid them to make more sales. The environmental factors which are holding Tesco's back is the decrease in oil which has resulted in an increase in the price which is an issue which has affected all businesses and can not be prevented.
Tesco's success over the past years has been a result of using innovative methods such as expanding overseas, shifting to 'higher margin' non-food merchandise and maintaining a strong UK core business. Tesco's success from the UK has accumulated from low prices, maintaining customer loyalty, offering customers a wider range of stores and expanding into retailing services, such as banking and insurance, internet, mobile phones and online shopping facilities.
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Tesco and Asda are the price-cutters and they are the ones who have grown their businesses during the past five years
Tesco marketing director Tim Mason
