Introduction of Firm
Tesco PLC is a British multinational grocery and general merchandise retailer that has its headquarters located in Welwyn Garden City, Hertfordshire, in England. The company is a highly successful retailer company and ranks as the third retailer in the world as measured by gross revenues and the ninth largest retailer in the world as measured by revenues. The company has shops located in different parts of the world such as Asia and Europe. It is the market leader of groceries that are sold in the UK where it has a market share of approximately 28.4% (Wood, 2014). It also holds the largest market share in different parts of the world such as Hungary, Ireland, and Thailand. The company has entered the retail markets in different parts of the world such as the United States and Asia through the use of joint ventures and acquisitions. While the outlook of the company is good, the company still faces several challenges that could hinder its future growth. This paper analyzes the competitive advantage and problem statement for Tesco PLC and proposes alternative solutions and opportunities that the company can venture in to ensure its future growth.
Overview of Tesco’s Competitive Advantage
Tesco PLC has a competitive advantage due to its leadership, economies of scale, and branding. The company’s leaders are competent in what they do making them ready to outperform competitors. The company leaders ensure that the vision is clear which propels it towards achieving its goals and objectives. The company makes use of economies of scale by having large operations which increase profits. It can lower its prices and still realize significant profits. The Tesco brand is quite popular and well-established in different parts of the world (Dudovskiy, 2016). The firm can thus easily attract huge customers and target customers in urban areas successfully. The well-established brand image has made the company has seen it join new markets successfully through the use of joint ventures.
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Problem(s) Statement
While Tesco PLC has registered huge revenues and is a global leader in retail, the company has faced significant challenges that could hinder the growth and the future of the company. The organization has failed to address concerns with customers and its staff. The leadership has not been effective in solving issues that are related to the customer and staff. The increasing complaints from the human resource department and customers could hinder the growth and the success of the company. The company has also been slow in the adoption of technological processes. With almost everything being done online, slow adoption of the internet and technology could hinder the future success of the company. A proper pricing value strategy is also required for future success. Tesco PLC should focus on different factors such as customer and staff relations, internet and technology, and staff to ensure that it is successful.
Alternative Solutions - Solutions/Opportunities
Option 1: Customer Trust and Relations Analysis
Tesco PLC should focus on an improvement in business performance across all of its units. The units that need improvement are the customers and staff. In the recent past, Tesco has been mentioned to have eroded customer trust. This has resulted in progressive losses over the past years. Customers have moved to shop across other major retailers ("Tesco 'eroded customers' trust'", 2017). Tesco should strive towards maintaining a higher trust with its customers by providing exceptional customer services.
Pros
The provision of exceptional customer service to improve customer relations can help in building the company’s brand image. It can result in a significant increase in customers that opt for the brand leading to an improvement in sales. Customer relations and customer trust can lead to customer retention which leads to a bright future for the company.
Cons
Building and improving customer trust is not an easy process. The company may incur several costs by putting in policies that favor customers. For instance, a policy such a return on products purchase could come with a huge cost for the company if several faulty products are returned. However, this can build customer trust and lead to customer retention.
Option 2: Online Shopping Analysis
There has been an increase in the interest in online shopping by several customers. Tesco can venture into this marketing by investing in its online operations and establishing online-only stores. Cutting back on physical store openings and focusing on online shopping channels is the right strategy for the company ("Tesco: A digital transformation – Technology and Operations Management", 2016). Sales are expected to grow and increase through online shopping in the next five years. Tesco PLC can improve its operational efficiency by focusing on online shopping.
Pros
The development of a robust and exclusive online shopping experience should enable Tesco to attract a huge number of online shoppers. This is a large market that Tesco can explore in order to improve its sales. A large portion of shoppers in the next few years are expected to be online. Ensuring an online presence will work for the benefit of the company as it will ensure that the company remains successful in the future.
Cons
Online shopping and online stores is a new market for Tesco PLC. The nature of operation of the market is different from the brick and mortar retail stores and Tesco may struggle to achieve significant success with online shopping. Additionally, traditional shoppers may not be pleased with online shopping and this can lead to a temporary decrease in the number of customers.
Option 3: Pricing Strategy Analysis
A proper pricing value strategy will be important for the future success of Tesco PLC. The organization can introduce a mix of discounts to reduce the price of some of its products and to improve the quality of a range of products. Doing that will entice a huge number of customers and ensure a high level of growth and success.
Pros
Lower product prices and high product quality is a product differentiation strategy. Tesco PLC can make use of this strategy to gain a competitive advantage. It can also build a brand image and ensure that Tesco is known for cheap products that come at a high quality. This will ensure that the company attracts huge customers that are responsible for the future growth and success of the company.
Cons
Lowering the prices of products can make it difficult to realize huge profits. This can put pressure on suppliers who would have to lower the prices of their products. There is also a possibility of low-quality products in case prices are low. Poor quality products can lead to the loss of customers.
Decision and Support
The decision to implement the strategies should be made by the company leaders after looking keenly at the prospects for future growth and success. Support for the various opportunities will be provided by the leaders and various stakeholders of the company such as company shareholders. While some of the ventures such as online shopping may be difficult to set up, it should be followed up by the company’s management in order to be successful.
Action Plan
The action plan to venture into the new opportunities should be carried out step by step. The company management should first improve its customer services and relations. The improvement should be monitored for three months through customer surveys and feedback. If successful, the company can engage in improving online shopping stores. Online stores would enable product prices to go down due to the absence of retail stores that could be expensive to set up. With an established and running online store, the company can make use of its pricing strategy to ensure that products are lower than that of its competitors.
References
Dudovskiy, J. (2016). Tesco Business Strategy and Competitive Advantage - Research-Methodology. Retrieved from https://research-methodology.net/tesco-business-strategy-and-competitive-advantage/
Wood, Z. (2014). Tesco market share shrinks to the lowest level in almost a decade. Retrieved from https://www.theguardian.com/business/2014/mar/11/tesco-market-share-shrinks-lowest-level-decade-aldi-supermarket
Tesco: A digital transformation – Technology and Operations Management. (2016). Retrieved from https://rctom.hbs.org/submission/tesco-a-digital-transformation/
Tesco 'eroded customers' trust'. (2015). Retrieved from https://www.bbc.com/news/business-30881267
