Strategic Planning at Tesco Plc, UK

Introduction

All organizations need to expand themselves locally and globally. For this, they adopt and frame different strategies to succeed themselves. Thus, external environment is scanned thoroughly and analyzed. Later the strategies are adopted and implemented.

Brief Overview of Tesco

Tesco has expanded its business across the world. It is headquartered in Hertfordhire, UK. Tesco is originally based in UK; however, it also operates in USA, Europe and Asia. In 2012, there were 2975 stores in UK and generated revenue of approximately £64.539 billion. Tesco globally has 6531 stores in 14 countries. The other services provided by Tesco are; banking, online shopping and insurance.

Tesco’s Vision and Core Values

The vision of the company is to gain a valuable position by its customers they serve, community, committed and loyal staff and shareholder. The company’s visions is to grow and transform it selves into an innovative and modern organization through applying their skills globally (Tesco, 2013).

The core value of Tesco is to its retail network which would help to deliver the company’s core purpose. Moreover, the company works dedicatedly to earn customer’s loyalty and to create brand value (Tesco, 2013).

Corporate Strategy

Tesco ranks among the giant retailers having large number of stores. Their principle business strategy is to create value of shareholder though innovation and focus on satisfaction of customers. The principles behind this strategy are as follows  (Tesco, 2013):

  • To nurture its business principally in UK
  • To be strong in everything
  • To retail successfully throughout the world
  • To serve the society
  • To create value through teamwork
  • To be the originator of brands
  • To expand globally

External Environment/Situational Analysis

Environmental scan is important for any organization on the basis of which a strategic plan is proposed. Following is the PEST analysis:

Political Factors

Before starting operations in any country, its political environment should be scanned thoroughly. Many countries encourage foreign direct investments and supports retailers to start its operations in that country. Starting operations in another country would help to get its people with more locally based, flexible and from average earning jobs to high paid earnings job.

Tesco helps the country’s people by providing job opportunities to many people which includes senior citizens, students, and elderly workers and disable people. Tesco has high workers turnover and they are offered high level of trustworthiness (Retail Business Review, 2012).

Technological factor

Tesco pays high attention towards technological changes that are constant in any industry as it influences expansion and growth of Tesco (Wilson and Gilligan, 2005).  The main purpose behind remaining technologically advance is that both company and customers are satisfied and benefitted. Tesco’s products deliver high level of satisfaction to its customers. The high level of satisfaction could be achieved when goods are readily available to its customers in the stores. The services by staff could also be personalized which will help to make customer’s experience worthy. Tesco is technologically efficient but usage of technology such as electronic scanners; electronic Point of Sale (EPS) and Electronic Funds Transfer Systems(EFTS) will also help to improve the distribution services and other inventory related activities.

Economical factors

Economic factors have more influence on business operations of Tesco (Veliyath and Fitzgerald, 2000).  The increasing rate of unemployment due to recession is uncontrollable factor and could not be controlled by Tesco. Nevertheless, it could be expected that the growth of international business will help to reduce level of unemployment in UK and in other countries which would help to increase profits as people’s buying power will increase. However, it could be expected that any slowdown in UK market will negatively affect the operations of Tesco which shows that the organization have greater risks of market concentration.

Environmental Factors

Performing in ethical way is one of the major responsibilities of any organization. Therefore, Tesco aims to be a socially responsible company as it pays high attention to the practice of corporate social responsibility. The company aims to satisfy all its stakeholders through performing utmost obligations which are in accordance to the corporate governance (De Toni and Tonchia, 2003).

Social-Cultural factors

Consideration of social and cultural factors are important fir any organization. The customers of UK usually do shopping in bulk which is highly by the social changes occurring in the last decades. This has influenced the shopping behavior so Tesco has expanded its stock of non-food items.

Besides social and cultural factors, demographic factors such as increase of women employees, increasing trend of frozen foods, aging population etc force retailers to consider these changing factors and update the organization accordingly (Drejer, 2000). Thus, Tesco comply to these changes and also give emphasis is given to operational improvements and supply chain management to increase the overall organizational performance.

Review of Its Existing Business Plans

As the company operates in a globalized environment therefore it has expanded its stores outlets in many countries.

Strengths

Tesco’s strong financial position in UK and other operating countries and efficient network of supply chain management encourage company to expand its business globally.  Tesco’s business operations are across Asia, North America and Europe. Tesco operates in UK, Slovakia, Hungary, Turkey, Czech Republic, Poland, and Ireland (Retail Business Review, 2012). The company also operates in other regions such as India, Thailand, China, Malaysia, South Korea, Japan and Taiwan.

Tesco’s sales in United Kingdom is more than that of its competitors

  • Tesco’s market share is 13% in UK retail market
  • The Tesco.com is known to be the largest online supermarket in UK.
  • Tesco brand image is coupled with superior quality and reliability.

Tesco’s excellent services to its existing customer prove that the company has potential to expand itself geographically.

Weaknesses

The company is principally UK dependent. Therefore, in case of any pitfall, the company will suffer. The company is not much geographically diversified which could result in systematic risk

Business Plans

The latest business plans of Tesco are as follows:

  • Tesco will take over Giraffe which is a restaurant chain. Moreover, it has also decided to invest as shareholders in Euphorium bakeries and Harris and Hoole coffee shops (Butler, 2013).
  • Tesco will invest more on setting up of small stores and online sales stores mainly in eastern Europe and in other foreign markets (Cunliffe, 2013)
  • As the company is facing hard times, it will quit from US market and Japan  (Butler, 2013)
  • Tesco’s strategic action of acquisition of independent family big businesses will result in success of the company (Cunliffe, 2013).
  • Tesco will invest £150 million in its online business which will help the company to beat its competitor i.e., Amazon (Cripps, 2013).
  • Tesco will revive all its large stores only because the company has faced drop in profits for twenty years.

Strategic Plan of Tesco

With respect to the international expansion plan, assumption is made that Tesco will start its operations in Switzerland, Europe. Current position of Tesco is very strong as it can be judged from its large profits and constant investments in setting up new stores at both levels, i.e., locally and globally. Thus, the organization has high potential to penetrate in Swiss Market. Tesco will target customers belonging to all age groups and will try best to meet their needs and expectations. Moreover, Tesco will ensure to create strong supply chain network in Switzerland so that the company can operate successfully. Tesco will try its best to be an active member of running Corporate Social responsible campaigns as the society and community serving is important to attract Swiss people. Other main factor that can influence the decision of penetrating is Swiss market is that the market is highly developed, few competitors exists there and is a multilingual country. Moreover, the country’s investment policy is good and attracts tourist which will help to retain its local customers visiting Switzerland. Thus, the country has high potential to attract foreign investments in its country because of its economical, political and financial stability. Furthermore, the Swiss people are quality-conscious and the country has dynamic economy with low taxes. If Tesco succeeded in its operations in Swiss Market, further expansion plans of setting up new stores in Switzerland would help the company to penetrate in the market. Nonetheless, the process of further expansion could take four to five years.

Strategic Marketing Objectives

The marketing objective of Tesco is to expand its business operations in Switzerland. Furthermore, its main purpose is to become a recognized brand in Swiss Market where it could serve its targeted market.

  • To be recognized globally in retail market.
  • To produce larger profits operating globally, specifically from Switzerland as the Swiss market has high potential for successful operations of Tesco.
  • The target consumers of all age groups of Switzerland.
  • To speed up its store operations in Switzerland
  • To increase sales and create brand awareness in Switzerland
  • To increase the process of sales by upgrading and using modern technology.

Strategic Options for Tesco

Strategies (ANSOFF Model)

Tesco can adopt the following two strategic options:

New Product Development

The people of Switzerland are interested in establishing their food brands. Thus, Tesco by focusing in this area would help to create its primary market of new product development.

Market development

Adopting this strategy will help Tesco to starts its operations in Switzerland for both non-food retail and for food retail business. Besides this, the company can have joint developments and strategic alliances with other existing retailers of Switzerland. Thus, market development in Switzerland would help the company to increase its revenue through which further expansion strategies could be formed.

After successful entrance in Switzerland, Tesco need to differentiate it’s from its existing competitors. Thus, the products and services offered should be innovative and according to Swiss people so that wide acceptance should be gained in few months of its operations (Joost, 2005). Moreover, the products offered should be with innovative packaging and new brand style along with its efficient marking support services. This would help in increased customer satisfaction, successful operation and acceptance of the newly opened store in Switzerland.

Strategic Targeting Positioning

The proposed Strategic Targeting Positioning strategies are given below:

Segmentation Strategy

Segmentation strategy helps to segment its target customer market on the basis of which the company’s success or failure depends (Hague, 2002). Originally, Tesco’s operation will be started through small store which will expand in future to other areas. The segmented market will be offered both non-food and food items.  The main objective is to sell products at fair price delivering high level of customer satisfaction. Swiss people are quality conscious so Tesco should ensure that it delivers high quality products to its people (Joost, 2005).

Targeting Strategy

The main aim behind targeting strategy is to determine business’s feasibility (Peter and Donnelly, 2002). Tesco’s target market in Switzerland includes people of all age groups i.e., infants, children, teens, adults old age people.  Tesco will offer wide range of products to the targeted market adopting well planned and unique strategies. Furthermore, the buying behaviour of the consumers will be monitored closely monitored.

Positioning strategy

Market positioning plays important role in developing a market strategy. The positioning strategy mainly focuses on the specification of the product features and brands which are close to its rival’s product in the market (Ritz, 2005). Fresh and unpreserved goods i.e., food products should be focused as people’s spends more in buying food products in Switzerland (Graiser and Scott, 2004). Besides this, fair price products will help to attract customers as people are price sensitive and quality focused in Switzerland. If this is done in persuasive way, successful implementation of marketing strategy could be ensured.

Stake-holder needs and expectations

Tesco’s successful previous operation in many countries shows that the company carefully studies its macro environment factors carefully before entering any market. This has helped the company to face minimum losses. Nonetheless, many recent news reports show that the organization has faced drop in profits in US market and Japan. But still, Tesco has its successful operations in other regions around the world. The main consideration of Tesco is its stakeholders, as they are the reason for success of Tesco. Therefore, this shows that the organization is dedicated with the stakeholders, irrespective of the country. The shareholder enjoys good dividend ratio and high P/E ratio. For a proper operational workflow, Tesco has a strong relationship with a network of suppliers and distributors. In addition, Tesco’s main concern is the contentment of its customers. Tesco makes sure that it satisfies all the requirements and prospects of its customers. After thorough analysis to enter new market of Switzerland, a marketing plan has been designed in order to start successful operation.

Strategic Plan Implementation

With respect to the implementation of the proposed plan, huge investments would be required to starts its operations in Switzerland. Infrastructure cost, cost of skilled labor, maintenance cost, supplier of goods, cost of inventory and other marketing related expenses such as advertisement etc all requires in-depth analysis (Rowley, 2003). Moreover, other expenditures such as employee salary, cost of middlemen services such as ware house, transporters, sales service workers and costs of promotional activities besides advertisement. Strict control and continuous monitoring of the plan will be required.  Besides this, Tesco should form a contingency plan so that quick decision and implementation of changed program could avoid losses (Okumus, 2003). The proposed plan should be carefully considered and could be implemented in the next two years or before. Nonetheless, its implementation can be affected by any of the external environment factors, i.e., political influence, change in policies etc.

Conclusion

The Marketing strategy discussed in this report if formed after careful analysis of external environment, so that a successful implementation of the program could be made. The strengths of the company that it is operating successfully throughout the world ensure that the company can expand itself into more geographic regions, especially in Europe. This report recommends Tesco to start its operations in Switzerland; however more in depth analysis would be required. The company should implement product development strategy according to its segmented and targeted market so that customers could be attracted and successful operations should be ensured. However, the implementation of the strategic plan proposed depends upon the prevailing conditions in Switzerland.

Recommendations

The implementation of strategic plan which is proposed in this report would help Tesco to offer its services to the consumers of Switzerland which would help to create brand awareness in that country, Moreover, profits could be increased. Nevertheless, the strategic plan proposed in this report will also help in future to expand its outlets in Switzerland

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