Management Environment on Tesco
Introduction
With a core purpose to create the value for the customers and earn their loyalty, Tesco craft and shaped their objectives and can be mirrored on their culture, organizational structure, and strategies. As a well-established organization, it is important for Tesco to pay attention on their respective strategies that can accommodate their growth. The ongoing practices and strategic management of the organization reflected in the five elements in which the retailers and other organizations around the world are attempting to gain.
1. To be a successful international retailer
2. To grow the core UK business
3. To be as strong in non-food as in food.
4. To develop retailing services – such as Tesco Personal Finance, Telecoms and Tesco.com
5. To put community at the heart of what TESCO do.
Porter’s Five Forces of Analysis on Tesco
Michael Porter introduced the Five Forces of Analysis that is considered as the assessment structure of an industry. The five forces are namely categorized: competitive rivalry, barriers of entry, threats of substitutes, power of buyers, and power of suppliers (Ehmke, et al., 2004).
Competitive Rivalry
The retail market is undoubtedly competitive and the companies, both existing and new, are trying to blend that creates a more intensified competition. That is why many firms need to do some intensive and little risky market strategy. To be a successful international retailer, there is a need for effective marketing strategy and will state how the firm uses its market positioning and product differentiation, including whether to pursue price or non-price competition. Marketers usually reckon product differentiation and branding to be good marketing strategies. Each firm can reduce he competition it faces by positioning its products for sale to market segments which other firms cannot attract so successfully.
Barriers of Entry
The entry has many barriers and the first one is that the retails need a lot of investment for its sophisticated factors within the UK, along with brand development that take years of establishment. Another is that the retail business is in an advantage in the UK which means that there is little scope for new entrants. Local knowledge is not enough in the retail business, which contributes another difficulty on the side of the foreign firms. For instance, Tesco may have cornered the market for certain goods; the new supermarket will not be able to find cheap, reliable suppliers. Tesco also has the advantage of economies of scale. It will pay a lot less for large volumes of goods from suppliers. A new, small supermarket chain can only buy a relatively small volume of goods, at greater expense.
Threats of Substitutes
This is one contributor is industry rivalries. As part of the threat of substitutes, Tesco has competition from companies from Sainsbury that can provide substitutes for their goods. This drives the prices of groceries down in both companies. This kind of threat may a low classification because the consumer viewed the business as part of their necessity. The retail market is always trying to find accessibility on new innovations with respect to the products and other business to make shopping a good experience for the consumers, which is difficult to substitute no matter how much effort the competitor put into.
Power of Buyer
The power of the buyers or the consumers within the industry is high especially when there is presence of competitors that brings the same products. It can only be different in price and loyalty of the consumers. Another thing that the buyers may value is the present economic stability within the country. In this case, the buyer uses his power of choice in what will be the suitable product for him and his family. Emphasizing the consumers’ satisfaction by providing excellent services can be the most applicable way to attract more or maintain the customers of the supermarket. Fortunately, within the retail markets have a disciplined approach to price setting which means that the strategy is the basis for the success of one business on the others.
Supplier Power
Suppliers are in the middle of the war of the retailers. The suppliers establish relationships in different companies with the same products. The problem arises when the supermarkets do not sell their products, consumers will shift loyalties and this entitles the suppliers to become powerful. In present, Tesco have an overwhelming advantage over the small shopkeeper—they dictate the price they pay the supplier. If the supplier does not reduce the price, they will be left with no retailers to sell to. Tesco and the other large supermarkets will have all the customers.
References:
Ehmke, C., Fulton, J., Akridge, J., Erickson, K., & Linton, S., (2004) Industry Analysis: The Five Forces. [Online] Available at: http://www.ces.purdue.edu/extmedia/ec/ec-722.pdf. [Accessed 08 Nov 2010]
Gwyne, R.N., (2008). “UK Retail Concentration, Chilean Wine Producers and Value Chains”, The Geographical Journal, 174(2).
Tesco Plc. Our Strategy [Online] Available at: http://www.tescoplc.com/plc/about_us/strategy/ [Accessed 08 Nov 2010].
Tidd, J., Bessant, J., & Pavitt, K., (2001). “Managing Innovation: Integrating Technological, Market and Organizational Change”, John Wiley & Sons, New York.
Yoruk, D.E., & Radosevic, S., (2000). “International Expansion and Buyer-Driven Commodity Chain: The Case of Tesco” [Online] Available at: http://profesores.ie.edu/enrique_dans/TESCO/international%20expansion.pdf [Accessed 08 Nov 2010]
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