Therefore Tesco is making their non-food sector very profitable and are moving closer to their aim of making non-food as successful as food.
Tesco’s fourth major aim is to ‘Follow customers into new retailing services’ and since 1997 when Tesco entered the sector they have been achieving this aim. In 1997 Tesco Personal Finance was launched as a joint venture with Royal Bank of Scotland. It currently offers customers a choice of 26 products ranging from savings accounts and credit cards to car and travel insurance. Since 1997 TPF has been very successful and has attracted the customer’s attention.
Tesco were able to make personal finance profitable and in 1999 Tesco launched a new on-line bookstore and on-line banking website
In 1998 Tesco Telecoms was launched, providing simple, straightforward telecoms services with great value tariffs. However Tesco didn’t take telecoms seriously until 2003. It has not purchased or built a telecoms network instead it pairs with other existing providers. To date Tesco Telecoms has over 2 million account holders and is proving to be a growing profitable business.
For this assignment I am concentrating on my local Tesco branch located in Monaghan. It is one of the 95 stores currently in Ireland. Tesco has expanded in Ireland through takeover, mainly through the takeover of Quinnsworth stores for £680 million. This is how it became the anchor tenant in the local shopping centre in Monaghan.
Tesco support local growers and buys directly from manufacturers in Ireland wherever possible. For example they buy potatoes from local producers in Monaghan. It has become a very good employer and contributes to fundraising and supports organisations such as Rehab.
Objectives
In order to fully fulfil their aims Tesco have a number of objectives which they have divided into 5 main categories’s including: customer, community, operations, people and finance.
Tesco’s main objectives are:
- Maximise Profit (Finance)
- Provide and interesting job for staff (People)
- Deliver unbeatable value to our customers (Operations)
- Be responsible, fair and honest (Community)
- Earn lifetime loyalty of customers (Customer)
Tesco monitor their objectives by using a traffic light system as shown in the illustration below:
They monitor their performance on a daily basis using this system and employ specialised staff to make sure they are operating efficiently.
Maximise Profit
Like any business Tesco needs to generate profit and continue to increase sales both in the Irish market and the International market and since Tesco started profits have been steadily increasing.
In order to maximise profits as much as possible Tesco understands the need to listen to the customers and offer the best possible service to them in order to gain their continued custom. Tesco has a very powerful tool when it comes to the customer trends, their loyalty card. Tesco’s loyalty card programme is the largest in the UK with millions of users worldwide and this tool allows them to monitor customer trends. For instance Tesco may be able to identify a product not selling very well within a 2-3 day period and offer a promotion to encourage the sale of this item. It may also help them to notice slumps in average spending or identify other interesting trends. As Tesco has the largest clubcard programme it gives them the competitive advantage and allows them to identify customer trends before their competitors.
Through their research Tesco realised that in order to maintain steadily increasing profits they needed to adjust to a changing community. This stressed the need for Tesco to continually offer new products and services from more ethnic lines to Tesco Finest and Tesco Value. Changes in the community also encouraged Tesco to adapt the multi-format stores as they identified the need to cater for customers based on location and other external factors. Tesco have also expanded its expertise into other retailing services in order to continue to maximise profits.
Tesco reported an 11.8% rise in underlying annual profits for 2007 to £2.846Bn. Tesco opened 139 stores in the UK alone since last year and is continuing to grow with another 150 planned stores to open in the UK and 9 in Ireland before the end of 2008.
Tesco Monaghan operates to make a profit and also to put something back into the community. They try to ensure a balance between helping local communities and national charities
Each Tesco branch sets its own sales targets which must be met within a specified time. When the set time is up Tesco will analyse their performance and assess whether they have met their target. They will then begin to outline further ideas for improving their sales targets. This includes the number of customers they aim to cater for and need to expand further throughout the world
The store manager, Paul explained to me that he has a set budget to spend. He explained the need for budgeting this money as it has to last the whole year and if now properly budgeted could cause huge problems and potentially affect Tesco’s profits.
Tesco Monaghan being located in the Republic of Ireland has noticed that on Northern Ireland bank holidays, their sales increase on average by 25%. Therefore in order to try and capitalise this and maximise profits, Tesco Monaghan distribute promotional flyers to bordering counties including: Fermanagh and Tyrone.
Tesco Monaghan also considers previous figures from previous years very important and constantly refers back to past data. This enables Tesco Monaghan to notice trends in the community or customer buying habits over a period of time. This information helps Tesco make improvements to improve the service and generate maximum profit.
Paul told me that having carried out surveys with the customers’ one thing they wanted to improve was the queuing time. Tesco Monaghan decided to introduce self scanning tills similar to that shown below into their store in Monaghan.
This allowed customers with only a small number of items (15 or less) to avail of this self service option.
This move has proved to be successful with the majority of customers availing of this express service and therefore generating extra profit.
This system also requires only one sales assistant to monitor 6 tills so therefore reducing the need for an extra 5 staff saving Tesco money.
The introduction of this system did incur a large amount of capital investment to install but however is paying for itself in the long run.
Sales forecasts are created on the computer using past sales figures. This greatly helps in the everyday running of Tesco Monaghan as the staff can estimate stock requirements and purchase it. Tesco can also then later use these figures to evaluate success.
Tesco strives to maximise profit on a daily basis and depend heavily on the assistance of their staff. Tesco Monaghan stress the need for staff co-operation at all times and offer rewards for this. Tesco Monaghan concentrate greatly on their staff ensuring that they are employing exactly the correct staffing as too many or not enough will lower profits.
Another factor which greatly benefits Tesco Monaghan in trying to achieve this objective is their Euro/Sterling Exchange rates and their proximity to the Northern Ireland border. Because of the fact that Sterling is worth more than Euro prices look more appealing to the Northern Ireland customer. This factor therefore attracts more customers from Northern Ireland and generates extra profit. Tesco Monaghan tries to offer the best rate on sterling in town, encouraging customers to shop in their store rather than any other as they are getting more for their money.
Currently £1 sterling is worth about €1.25 making prices a lot more attractive to the customer spending sterling in store.
Paul told me that in order to try and maintain their competitive position in Monaghan they had to introduce special offers to compete with competitors mainly LIDL. Paul explained to me that a couple of years ago Tesco Monaghan introduced a special rewards scheme giving customers €30 back every 6 weeks. This offer required customers to spend at least €50 in store each week consecutively for 6 weeks. This encouraged customers to do their weekly shop in Tesco Monaghan as they were rewarded for it. Paul claims this scheme helped Tesco maintain their profits when LIDL opened and was a successful measure. In conjunction with the Loyalty Card Programme shopping in Tesco Monaghan is very rewarding for the customer.
The Loyalty Card programme allows customers to gain 1 point for every € they spend in store. When they get 100+ points they can cash in for vouchers, holidays and other services.
Tesco Monaghan is an efficient firm and is successful at meeting its aims concerning profit.
Provide an interesting job for staff
One of the biggest challenges for any business nowadays is the ability to attract and retain a good workforce. Tesco wants to attract people from all races, backgrounds and religions, people with disabilities, part-timers, young and older people to work in their stores. In order to achieve this Tesco understand the need to provide a variety of career paths and patterns of working, a good work-life balance and comprehensive employee benefits.
Tesco have also identified the need to provide lifelong learning and workplace training that brings employees from all walks of life to similar skill levels. Tesco believe that by creating a great place to work and giving people interesting jobs, their staff will in turn look after their customers.
Tesco believes in trying to provide a culture within the company where all the staff gives their utmost best, enjoy their work and are well rewarded, trusted and respected. Tesco believe that diversity is a strength and they promote it within the company under their ‘Everyone is Welcome at Tesco’ policy.
Tesco consider all their staff to be in the one team, the Tesco team, and as a result ‘try to treat people how we like to be treated’.
Tesco consider their staff views on Tesco as an employer very valuable and every January carry out a staff survey, asking all employees to give anonymous feedback.
Tesco is committed to staff development, giving all their employees both the skills to do their jobs and opportunities to develop their careers at Tesco as they feel this helps make the job interesting. All staff from general assistants to senior directors are provided with training so staff can easily see that Tesco is trying to help them as an individual.
To make the job more interesting Tesco in the UK run an apprentice scheme which gives staff aged 16-24 the experience of working in different parts of the business coached by friendly Tesco managers.
Tesco offer lifelong learning in three core areas: Basic IT, Skills for Life (English/Maths) and Languages.
Tesco also offer shares and incentive schemes in Tesco for their employees as they believe this allows staff to really feel like part of the team and have a stake in the future of Tesco. Tesco also believes this can make the job more enriching and encourages staff to give their best. To date currently over 165,000 staffs have a stake in the future of Tesco through shares and incentive schemes.
Tesco is committed to providing a safe and healthy environment for their staff. Their Health and Safety objectives fully comply with the law and help maintain a safe working environment, reducing accidents and removing and meeting staff lower motivational needs.
Tesco believe that if all staff needs are met through policies, training etc, they will be motivated and so staff will find their job interesting.
Deliver unbeatable value to our customers
Tesco has been so successful and they understand that the customers are the key to their success. Tesco understands the need to look after their customers in order to gain their continued custom.
Tesco try to look after their customers by providing them with the best possible price on products whist maintaining quality. In order to do this Tesco works very hard to lower the cost of producing and distributing so they can pass the savings onto their valued customer. Tesco sell all of their products competitively in order to try and maintain their sales and market share. Customers can be sure that any product they purchase from Tesco is priced to match or beat their competitors.
Tesco understand that customers want quality goods but do not want to pay high prices for them therefore Tesco uses the term ‘Value for Money’ to describe their products and service, as they offer quality products at reduced prices.
In Ireland, Tesco have used local sourcing and in-house preparation to produce their own label milk, butter, sugar and freshly baked bread. This measure has allowed Tesco to offer quality fresh products to customer at amazingly low prices. This also means that Tesco Ireland is supporting local farmers and therefore giving something back to the Irish community.
Tesco Ireland say that they ‘compete aggressively on prices’ but always try to be the cheapest if at all possible as they want to offer the customer the cheapest product every day with no compromise on quality.
When Tesco talk about delivering unbeatable value they also understand the need for their staff and their support. Therefore Tesco Ireland likes to try to develop and mould their employees so they can improve the overall performance of the business. In order to try and achieve this they spend millions on staff training every year, to try and develop multi skilled staff.
Tesco believe staff consider their jobs to be vital and believe that this will help them strive to deliver the best possible service they can every day. Tesco understand the need for consistency in all fields both in the services they provide and in the way they provide them, especially with the ever increasing degree of competition in this sector.
Tesco have clear policies on the quality of the food they sell. They have employed methods of getting produce from the local farmers in community to ensure that the food is as fresh as possible. Any fruits or food that comes from overseas is done promptly so that when the food arrives to the store it is as fresh as it can be therefore giving the customer the best quality food they can provide.
Tesco monitor ever changing customer opinions in all sectors and try and adapt to suit the customer so they can continue to be the best in this sector. They treat the customer with respect at all times and value what they have to say.
Tesco Monaghan also offers a service where customers can purchase their items online and they will deliver them free to their door.
Be responsible, fair and honest
As well as obvious business objectives Tesco also seriously consider their impact on the environment and try to be as environmentally friendly as possible. For example Tesco has reduced the amount of packing used on products, with some electrical products having only a barcode and tip clip attached. On a large scale as in Tesco little things like this go a long way and do have an impact on the environment.
Tesco are committed to cutting their carbon footprint in every area of their business. From big steps right through to small steps like using one label on clothes instead of two Tesco are trying to make a difference and rewarding customers for helping. Tesco have set aims to halve their energy use by the end of 2008 which will have a dramatic impact on the environment.
Tesco offer numerous recycling schemes for all items which can be recycled. For instance they offer mobile phone and ink cartridge recycling and encourage the customers to recycle by offering them clubcard points. The fact that they are rewarding customer to recycle makes it very appealing for customers so many do and in the long term Tesco aim to develop recycling attitudes among customers. Another method Tesco have introduced is their green bag scheme, allowing customers to purchase a bag and rewarding them for every time they reuse it, thus reducing waste.
Tesco also offer recycling banks at many sites for newspapers, clothes and bottles. They try to ensure that these banks are always clean and user-friendly to encourage customers to use them. At some locations Tesco have introduced automated recycling machines such as that shown below.
This machine scans and sorts plastic, glass and aluminium, making recycling even easier for customers and making it more enjoyable.
Tesco also recycle 71% of their own waste and aim to raise this to 80% by the end of this year.
In 2007 Tesco also started to work with WRAP (Waste & Resources Action Programme). WRAP is a government agency which helps encourage businesses and consumers to be more efficient in their use of materials and to recycle more. As a result of this Tesco has achieved a number of ‘green successes’. For instance Tesco has saved 2,600 tonnes of glass from one supplier by challenging them to produce lighter glass. Tesco have also made a number of other monumental ‘green successes’ which show Tesco’s continued support for the environment and their level of responsibility.
Tesco Monaghan (part of Tesco Corp) are trying their best to reduce their impact on climate change and trying to pass their opinions onto their customer so they will also help curb their impact on climate change.
Tesco in order to try and reduce their energy usage by 50% in stores are spending €120 million Euro on developing renewable energies. This is all part of Tesco pledge to reduce their carbon footprint: by 2020, Tesco plan to have halved their carbon footprint for their global business
Since the year 2000 Tesco already has reduced their energy usage by 50% but they still wish to reduce this further in order to kerb climate change. In order to try and reach these goals Tesco have spent lots of time analysing their transport facilities. As a result of this analysis Tesco has reduced the amount of trucks they have on the road by using their resources more efficiently. Tesco Monaghan along with other Tesco stores has also started to make deliveries using battery-powered vans saving fuel costs and CO2 emissions.
In order to meet customers’ requests for Tesco’s help in identifying their customers carbon footprint, Tesco have joined forces with The Carbon Trust. Tesco now print ‘Carbon Labels’ on most of their products telling the customer how many grams of greenhouse gases were emitted as a result of the product. This figure takes into account growing, manufacturing, transporting and storing. Some of the labels also give customers tips on how to reduce a product’s footprint when cooking it, using it or disposing it.
Tesco have spent time and money calculating their carbon footprint which was 4.47 million tonnes of carbon dioxide and other greenhouse gases in 2007. Tesco now understand the extent to which they are harming the environment and have pledged to reduce this in other to reduce their impact on climate change. Tesco has formed strong relationships with organisations combating climate change and this will also help Tesco succeed in meeting their targets.
In order to meet Tesco’s objective to ‘Be Responsible, Fair and Honest’ Tesco also try and contribute to the local community they are located in. Tesco Monaghan uses local sourcing for a number of its products one being locally sourced milk. Tesco Monaghan buys their milk from local, smaller farmers and pay over the going rate for their milk. Although when this milk comes onto the shelves it is a little more expensive but customers can be assured that they are supporting local farmers and consuming milk produced locally. This local sourcing also reduces some transport cost as some goods to not have to be delivered from head quarters in Dublin.
Tesco Monaghan also support local charities and events and try to give back to the Monaghan community to some extent. Specific projects and initiatives are also developed by Tesco Monaghan and have a local flavour, tailored to the needs of the Monaghan community. Tesco Monaghan support Healthy Living, Education, Community, Local Sourcing and the Environment.
Tesco have told us that in recent years customers have showed an increasing interest in where the food comes from and how it is sourced. Therefore in 2001 Tesco introduced the Organic and Fair Trade food lines. Although a little more expensive customers can be assured that the product they are consuming is of the best quality possible and if buying fair trade products, can be assured that the farmers are paid over the odds for their produce.
Earn lifetime loyalty of customers
Tesco Monaghan is trying like all Tesco branches to earn lifetime loyalty of their customers. In order to do this Tesco Monaghan has taken a number of measures to make their customers’ shopping experience just that little bit easier and more rewarding.
In order to determine the main factors that customers could be influenced by, surveys were carried out by Tesco Monaghan. From these surveys they were able to determine the main factors which annoyed customers when shopping. The biggest factors were parking and queuing time.
Based on these results Tesco took into account that if they were to deal with these factors and meet the needs of the customer they would make the shopping experience of customers better and thus improve customers’ opinions on Tesco Monaghan and earn loyalty. Therefore Tesco Monaghan took drastic measures to improve firstly the parking facilities. As a result of this measure a joint venture between Monaghan County Council and Tesco was developed which saw the creation of a 220 space car park. The car park is just across from the shopping centre in Monaghan where Tesco is located and has provided an efficient parking facility for customers. To meet with even further increasing demand for better parking facilities Tesco Monaghan also purchased a small plot of development land. It is near the shopping centre and they are currently building a multi-story car park on it. This car park will see the creation of 400 new car parking spaces.
In order to try and deal with the other main customer dissatisfaction factor (queuing time) Tesco Monaghan has taken a number or measures. Firstly they completed an in-depth analysis study on the efficiency of their staff with regards to customer volume. From this study they were able to establish that they were understaffed. As a result of this under staffing Tesco Monaghan employed 4 more staff and made another strategic decision.
They were the first branch in Ireland to install the automated express self service tills which replaced the need for a member of staff to cover each till. This was a huge investment which Tesco Monaghan believes has been successful as these tills are in full operation every day and customers are making the most of the facility. As a result of these measures taken customer queuing has been drastically reduced with the average customer queuing time now 2 minutes.
Tesco Monaghan ensure that every customer entering the store has access to either a basket or a shopping trolley and stock more than required. All of these facilities are maintained to a high quality and inspected on a monthly basis. If they do not pass the inspection for some reason they are recycled and a replacement is ordered.
Tesco Monaghan like all the other Tesco Ireland stores also provide customers with rewards on their Clubcard depending on the amount they spend. Customers are therefore gaining points for simply doing their usual shop. Points build up and do not expire over time, when a customer gains so many points they can exchange them for vouchers and other money off incentives. This scheme rewards the customer for shopping with Tesco Monaghan and encourages customers to return on a regular basis.
Shane McCudden 18 Sept 2008 Page:/
