Strategic Management Essay
Tesco is one of the three major international retail chains in the market. More than 3260 stores in 13 countries which is, Malaysia, Ireland, Poland, Hungary, Czech Republic, Slovakia, Thailand, South Korea, Japan, Turkey, Great Brittan, China and the U. S and therefore to remain on top position there is many aspects which Tesco has to face in its daily life. To observe strength, weakness, opportunities and threats, it is important to carry out SWOT analysis which will give a brief idea on how Tesco is performing in the market.
The vission of Tesco to be most highly valued by the customers they serve, the communiaes in which they operate, their loyal and commiced sta? and their shareholders; to be a growth company; a modern and innovative company and winning locally, applying our skills globally. Strengths Tesco is a powerful retail brand. It is known as a company that is value for money, very convenient with the wide range of products, all products in one place. TESCO have very secured market position in the global market. It is the winner of the Retailer of the Year 2008 “World Retail Awards.
From about 700 in year 2001 to over 1900 stores in year
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Moreover, Tesco was Increasing market share, Tesco holds a 13% share of the UK retail market. Its multi-format capability means that it will continue to grow share in food, while increasing space contribution from hypermarkets will allow it to drive a higher share in non-food. Tesco has grown its non-food division to the extent that its revenues now total 23% of total group earnings. Inaddition, in Insurance, In fiscal 2003 Tesco Personal Finance reached the milestone of one million motor insurance policies, making it the fastest growing motor insurance provider ever.
The group’s instant travel insurance allows Clubcard holders to buy their holiday insurance conveniently at the checkout. Pet insurance now has over 330,000 cats and dogs covered, while the life insurance policy followed on from the success of last year, when it was voted The Most Competitive Life Insurance Provider in the MoneyFacts Awards 2003. Last is Brand value, Profits for Tesco’s operations in Europe, Asia and Ireland increased by 78% during the last fiscal year. The company has a strong brand image, and is associated with good quality, trustworthy goods that represent excellent value.
Tesco’s innovative ways of improving the customer shopping experience, as well as its efforts to branch out into finance and insurance have also capitalized on this. Core Competence According to Johnson and Scholes (2003), superior performance, has to be determined by the way in which company’s resources are deployed to create competence in the organisational activities. Core competencies are activities or processes that critically underpin the company’s competitive advantage.
The primary target for the company is to recognize that competition between businesses is as much a race for competence as it is for market position and market power. Therefore, the goal for Tesco management is to focus the attention on competencies that really affect competitive advantage. The competence leads to levels of performance from an activity or process that is significantly better than competitors. Benchmarking may help in understanding performance standards and what constitutes good or bad performance. Core competences may be embedded deep in Tesco at an operational level in the work routines.
The framework developed by Prahalad and Hamel in the 1990s suggests that over time companies may develop key areas of expertise which are distinctive to that company and critical to the company’s long term growth (Drejer, 2000; De Toni, and Tonchia, 2003). In the case of Tesco the areas of expertise are most likely to develop in the critical, central areas of the organisation where the most value is added to its service and its delivery. For example, trust in the Tesco brand lies at the heart of these services and in 2003 the number of retail service accounts rose by 36%.
Some 50,000 new service accounts per week are being opened and Tesco sees these areas as long term businesses with the potential to build real scale. Through a long period of operations, core competencies of Tesco have to be rather fixed. Prahald’s and Hamel’s approach states that core competencies should change in response to changes in the company’s environment and be flexible and evolve over time. Therefore, Tesco needs to adapt to new rapidly changing circumstances and opportunities, so its core competencies will have to adapt and change. The example of this was when the company has launched its loyalty card and went into banking.
Core competences framework suggests three factors, which can help to identify core competences: First, Provide potential access to a wide variety of markets: enables the creation of new products and services. Fro instance, Tesco has established a strong leadership in food retailing industry. The core competence that enabled Tesco to enter retailing of food and non-food products was a clear distinctive brand proposition that had a focus on a properly define market segment. Tesco is recognized as the company, providing the most customized and efficient service, based on a good customer relationship management.
Second, Makes a significant contribution to the perceived customer benefits of the outcome: delivers a fundamental customer benefit. In order to identify core competences in a particular market, the question of – why is the customer willing to pay more or less for one product or service than another- needs to be addressed. For example, Tesco have been very successful in capturing the leadership of the retailing market. This shows that Tesco designs and implements effective supply systems and deliver an efficient “customer interface”. Tesco was the first UK grocer to launch a loyalty card and has been the most effective.
Palmer (2004) claims that until recently, it was the only grocer to use the information to mail customers every month. Difficult for competitors to imitate highlights the need for a core competence to be competitively unique. This indicated the importance of product differentiation. For example, for many years up to 2003 (In 2003 Tesco has been recognised a leading UK food retailer) Tesco had a very strong position within the retailing industry. It had a different approach to the service concept, providing good corporate reputation and introducing new premium quality products (MarketWatch, 2004).