A Brief History Of Tesco Supermarket Business Essay

Executive Summary

When I first start this assignment I was wondering which company I would be looking at then I decided it was Tesco which is a well known organization within the UK. Therefore Tesco is a well known retailer that sells a variety of product such as grocery, to non-food product. Within this assignment it will give you an outline of the Tesco Company such as their history, vision, mission and values of the company as well as their internal and external environmental etc.

Tesco Background information

Tesco is one of the leading retailers within the UK industry, and is also one of the largest food retailers in the world. Tesco store was founded in 1919 when Jack Cohen started selling additional groceries from a stall within the East End market of Brixton which is in London. On the first day Mr Cohen made a profit of £1 from sales of £4. However, the Tesco brand become visible in five years and then later within 1924, when Mr. Cohen bought a shipment of tea from Mr. T.E Stockwell. Which was then combine later with the initials letters to form Tes-co and Mr Cohen opened a flagship Tesco store in Burn Oak, North London.

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In 1930’s the Tesco brand continue to rise and Mr. Cohen has decided to build a headquarter warehouse within the north London, and within 1932 Tesco become a private limited company (PLC). In 1947 Tesco stores (Holdings) Ltd has floated to the top of the stock market with a share price of 25p. By Tim Clark8:11AM BST 15 Apr 2008

(They also sell non-food products such as clothing and electrical goods. Tesco also employs about 326, 000 people and operating around 2,318 stores within the UK, Europe and Asia. Tesco is based in Cheshunt, Hertfordshire Abstract from www.datamonitor.com)

According to (tescocorporate.com) the company group has recorded their revenues of £42,641 million during the year of 2007, and raise 8.1% over 2006. They also made a profit £2,648 million during the financial year of 2007, and raise 16.1% over 2006.

(Spulber, 2007) mention the company net profit of £1,892 million within the financial year of 2007, and raise 20.5% over 2006.

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Tesco has started the company has a grocery store, but has consequently expanded into the market with a wider variety of retail; Tesco has also enhance the store with a wide range of services. Which has included insurance, travel agency, and telecom, financial and other products? Tesco also has the influential petrol retailing business. However Tesco is predominantly present within the supermarket and also the hypermarkets, which they have, being diversified greatly through their re-evaluate period. The company has continuation operations which is constantly that include several numbers of conveniences and petrol retailing through the Tesco Express fascia, their small high street outlets via the Tesco Metro, supercentres through the Tesco Extra and non-food specialists through the Tesco Homeplus as well.

Their financial services do exist through the finance of Tesco personal finance and their online delivery services. According to (Thomas, 2007)

Methodology

3.1 The rational model of strategy development

3.1.2 Stages in the rational model:

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3.1.3 Mission and objectives

3.1.4 Position audit

3.1.5 Environment analysis

3.1.6 Corporate appraisal

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3.1.7 Strategic option generation

3.1.8 Strategic evaluation and choice

3.1.9 Strategy implementation

3.1.10 Review and control

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Vision, Mission and Objectives

Vision statement

The vision statement of Tesco is to focus more on their customers and the employees of the company.  Their intention also is to be the bigger and better leading retailer worldwide that understand their customers and to provide a better products and services as well as been a more creative company with their product and services that how Tesco would like to be. As they go by their slogan every little helps.

Mission statement

The mission of Tesco is ‘creating value for customers to earn their lifetime loyalty’. Grow profitably and to become the largest retailer in the world, which would be a benefit to both customers and the shareholders. The core values of Tesco is to create value for the customers and to earn their lifetime loyalty (tesco.com)

4.3 Statement of values

The values of Tesco are their code of conduct, in which Tesco work and strive to do business on a whole. According to Tesco no one tries harder for customers:

• By understanding their customers.
• Be the first to meet their needs.
• They also act responsible for the community.

However, the reflected of Tesco customer values, in which they strive to bring passion and value of services to the customers and the employees. Tesco also has to ensure that the working environment are of high-quality so that employee are well manage by working together as team and by motivating them so they can provide a better services to the customers. (Tesco-career.com)

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The Corporate objectives of Tesco

4.4.1To reduces customer complaints by 1% by 31st march 2011.

To reduce the employee turnover by 12.1% and increase the training budget by 50% by march 2011.

To achieve a 30 % gross profit margin by 31 marches 2011.

To opened new branches aboard by 31st march 2012.

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To supported environment through the building of 5 schools for the next five years.

To reduced emissions per case by 50% by 2012.

To becoming a zero-carbon business by 2050

Corporate Financial Objectives

The main objectives of Tesco are to maximize profit and increase value for shareholders. As a result the company will plan and strategies to accomplish their goals. Therefore Tesco has to look at the company future financial investment needs to make sure they are making profit for the business as well as the internal and external are taken into account  both long and short- term objectives. (ehow.com)

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External &Internal Environmental scanning

External Environmental Analysis

A PESTLE analysis is therefore the best external examination to look at Tesco environmental background, for example, if the company has realize within advance that the economy were heading for a recession they could have plan better ahead on how to deal with the situation.

At the current situation where issue arise of Tesco trying to be ahead of their retail competitor. However, the policy that govern the law and regulations that Tesco has to follow through a PESTLE analysis. Therefore the PESTLE is the main issue that Tesco has to face with. The consumer rules are there to protect the consumers and other small entrepreneurs to have the opportunity to battle within the market economy. Due to the contemporary state of the economy, many small businesses are closing down because they cannot enter into the market. The PESTLE analysis can also measure the place where there is need for demand for expansion and once Tesco has seen that location they always drive for that opportunity. Under the European law, there is assumption that the organisation with the bigger market share would take the advantage. The concern is the value of goods and services will slide and there would be a possibility of paying a high price. The reason for this is to make sure the PESTLE analysis to do customary scans to assess the situation and to make sure that Tesco is not over powering the situation within an unfair way.

However, in the United Kingdom Tesco has to be aware of the planning permission and whether there is any conflict to the development was made on lawful grounds. Tesco had branded them for selling to everyone, and propose a variety of goods and services from Value to best prices as a result pleasing to all segment of the marketplace.

The Sociological aspect of the pestle analysis has to consider the increase of immigration and migrant from Eastern Europeans and young professional which are growing up.

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The Technological factor which has had the most impact on Tesco, which has seen the boost to use the new technology for example the internet, where there customer can shop on line and they can in return provide a delivery services.

Therefore a PESTLE analysis is very essential to the growth and the success of Tesco adding up to the daily day to day of management of each store across the globe which has to be in line with their strategic decision making. By not knowing the external factor which has affected the establishment of the business it is difficult to manage within a well-organized manner.

(www.Tesco.com)

Industry Competitive Analysis

The porter’s five forces (Threat of New Entrants)

Within the UK grocery marketplace which is mainconquered by the minority of competitors, such as the top main brands such as: Tesco, Asda, Sainsbury’s and Safeway which is 70% of the market share and the other 30% which has to split among the rest such as: Somerfield, Waitrose and the others, according to Ritz (2005), which also stated that the grocery market has been transformed into the supermarket dominated industry

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Bargaining power of suppliers

The main power of the suppliers is to raise their prices to the industry and hence take over some of its profit for themselves.hte power will increased by:

• The supply industry which is dominated by the few organizations such as Tesco and Asda.
• The suppliers have the proprietary product differences- which are of unique features of images that make it possible for the industry to buy elsewhere for example. The big brand food suppliers that rely on the offset the buyer power of the larger supermarket.

Bargaining Power of buyers

According to Porter the buyers use their power to operate around the manufacturing participants to gain a lower prices or improvements of the product or a different kind of quality of services. The customer power will be greater if:

• The buyer power is concentrated in a few hands.
• The products are undifferentiated
• The buyer will earn a low profits
• By lowing the switching costs
• The buyers are aware of alternative producer prices.

Henceforth, Tesco has their famous loyalty card, which is their club card which remains the most successful customer retention strategy that is significantly increasing profit to the business, where they are showing that the customer’s needs are met and they are retaining them.

Threat of substitutes

According to Porter M. (1980) that mentions the substitution is able to trim down the demand for a particular product, as there is a treat for the customers to switch to an alternative   . therefore, because of what is happening where the small chain are beginning to grow within industry , Tesco and the other lager chain are now operating there Metro and Express Stores within the high street and the city centre.

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Bargaining power of competitors

Within the grocery industry that feature the cut-throat competition, while the others are more relaxed. The latter have the top profitability. Porter also suggests that the factors that determine the competition are as follow:

• The numerous rivals
• The low industry growth rate
• The high fixed or storage costs.
• Low in differentiation or the switching of costs
• The high tactical stake
• The tall existing barrier.

(Caleb handout/http://www.321books.co.uk/catalog/tesco/porters-five-forces.htm)

Internal EnvironmentalAnalysis

Under this analysis it asses both the internal and the external environment of Tesco; the internal environment analysis seeks to identify the strength and weakness in the company, while the external environmental analysis identify the opportunities and threats in that environment. However, this factor focuses on the internal aspects of the business which can be easily changed or improved upon. This can be done through the Mckinsey 7’s model which identifies the internal factors of Tesco organization. Please see (CSF) 8-8.7.

6. Swot Analysis Summary

Any organisation undertaking strategic planning will at some point assess its own strengths and weaknesses. When combined with an inventory of opportunities and threats in the organisation’s external environment, the organisation is effectively making a SWOT analysis that is it is establishing its current position in light of its Strengths, Weaknesses, Opportunities and Threats. (cipd.co.uk)

According to cipd corporate strategy on swot analysis, the Tesco organization has implement a strategic planning in which assess their business at some stage of their internal environmental such as strength and weaknesses. Tesco also consider their external environment aspect of the business such as their opportunities and threats which is effective within their business.

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6.1 Strengths

6.2 Weaknesses

6.3 Opportunities

6.4 Threats

Strategy Formulation

Corporate Level Strategies

Corporate level strategy is a fundamentally is concerned with the selection of business I which Tesco should compete and with the development and coordination of their portfolio off businesses

Growth As Tesco been one of the largest retailer is one of the corporate strategy level and Tesco always striving for growth within the company. A company seeking growth faces a subset of growth choices: horizontal growth (concentration), diversification and vertical integration.

Horizontal Growth There is three components to horizontal growth. First of all Tesco is always perusing new customers, new products and also persuading new geographic location.

Stability is when a company seeking slow growth but Tesco is more seeking the centre of stability.

The element which is profit is where Tesco would like to feature on more such as cash cows: if a company is cash cowand has a solid customer base- withloyalty.

Business Level strategies

At the business, unit level, the strategic issues are less about the coordination of operating units and more about developing and sustaining a competitive advantage for the goods and services that has been produced. At the business level, the strategy formulation phase deals with such as: The positioning the business against their rivals

Functional/Departmental Strategies

The functional strategy level of Tesco is to coordinate the functional areas of Tesco such as: (marketing, finance, human resources, production, research and development). By doing this the production of goods and services could be delivered on time within an efficient and effective way. (Tutor handout)

8. Critical Success Factors

Tesco has to recognize their CFS so they can produce a regular aim of preparation to help them express and assess the achievement of their manufacturing or project. (mindtool.com)

8.1The strategy of Tesco

The strategy of Tesco is to establish the company into the market by being consistent for growth which has allow the company to have the strength and drive into the new market.

Therefore the strategy of Tesco is to broaden their business scope across the world and to deliver a strong and sustainable long -term growth by expanding the market at home to pull in a variety of customers both rich and poor. Tesco also would like to be ahead of their competitors and to expand their business into the international market where they are doing well. (www.tesco.com)

8.2 Structure

The structure of Tesco is a flat hierarchical which has just six levels between that depart staff and their chief executive

8.3 Style- determines how management team behaves when they are leading as well as their values, beliefs and norms to develop the features of Tesco organization  and how they interact with the employee as well as the culture. The style of Tesco is every little helps.

8.4 Staff -the staff at Tesco are the success to the company which has to possess the right knowledge, skills, competence and expertise

8.5 Skills-AtTesco the skills are to determine the internal strength for the company such as:

8.5.1 Leadership skills- weather the individual got a vision to be a leader others

8.5.2 Management skills – has the individual got the kills to make certain decision

8.5.3 Technical skills – how would the staff demonstrate their technical skills for the company

8.5.4 Intrapersonal skills – how would the staff demonstrate their skills within the company.

8.5.5 Interpersonal skills- how would a staff conduct themselves out side of the company.

8.6 Systems- is the processes and procedures that show how Tesco got everything in place through quality control system etc.

8.7 Shared Values- is one of the core values in Tesco organization is the concept of working together to achieve the same goals and objective as well as to define their culture of the business such as their quality and brand.

9 Implementation

9.1 Nature of Strategy Implementation

The operation ofTesco organization policy involves the purpose of the administration procedure is to obtain the required results. Particularly, the policy operation includes the design of the organization’s structure; allocate resources, developing information and the assessment process, and the management of the human resources, including the areas such as the reward system, the approach to management and employment.

9.2 Strategy Implementation Approach

According to Brodwin and Bourgeois 3rd that identify five distinct approaches to strategy implementation and strategic change; Tesco organization has implement the Commander Approach, under this approach such as:

This approach is where the leader does not take active role in implementing the strategy. The tactical leader is the mainly a thinker/planner rather than a doer. The commander approach helps the executive make difficult day-to-day decision from a strategic perspective.

9.3 The Implementation Timetable

10 Review, Monitoring and Control

10.1 How the strategy is reviewed, monitored and controlled

Tesco strategy for reviewed , monitor and control is been done through several kind of sources such as the club card, online services, feedback and surveys which is done regular so they can know whether business is good or bad or where they need to improved and this can be done on a weekly, monthly and yearly basis.

At Tesco another way of doing their reviews is to go through an independent ethical audit every year with medium-risk sites every two years. The low-risk is being done on an annual self-assessment which has being monitor. Tesco has assessed 100% of sites. They increased the number of high-risk sites audited to 94.7% from 87% in 2008 and audited 92.2% of medium- risk sites in the last two years.

Tesco also has introduce a semi-announced audits for 100% of their high-risks sites up to 100% in last year, by which they has given their supplier one-month gap in which an audit will take place instead of an precise date. By doing this they will be able to ensure that the essential paperwork will be current to reduce the risk of manipulation. (tesco.corporate 2009)

11 Budgets

A budget is therefore a fixed plan which evaluate the financial terms the various target which is set by Tesco management. That includes the estimate profits and loss account, balance sheet, accounting ratio and cash flow statements which are often breakdown by individual months to support control. (Tutor handout)

11.1 Summary of financial performance for the last 6 years