Retail Management Case

Maja Zalewska


Table of Contents
Introduction .......................................................................................................................... 3
Industry Analysis .................................................................................................................. 4
Political Factors ................................................................................................................ 4
Economical Factors .......................................................................................................... 5
Social Factors ................................................................................................................... 5
Technological Factors ...................................................................................................... 6
Environmental Factors ..................................................................................................... 7
Legislative Factors ........................................................................................................... 7
Retail Management Strategy ................................................................................................ 8
CONCLUSION .................................................................................................................. 10
REFERENCES ................................................................................................................... 11








Introduction

Tesco is a UK-based food retailer company. It was established by John Cohen in
1919. Tesco is regarded the global number one among the global grocery market.
According to Top 25 Global Retailer 2013, the company was aligned second largest
calculated by annual revenues and profits (after Walmart), (Supermarketnews, 2014).
Tescos shops are situated in fourteen different countries across the world such as: Asia,
Europe and North America. The company is recognized globally as the major retail leader
in the Great Britain possessing about thirty percent of whole market share in the UK.
(Tesco, 2014). The corporation is very strong as it based its management strategies on
diversifying their activities. The main policy for its merchandises is good, better and best
offering including numerous products ranges: food, drinks, home, clothes, Tesco Mobile.
Moreover, the company introduced their own banking and insurance offerings. In Britain
the firm also operates under subsidiaries: Tesco Extra, Tesco Superstore, Tesco Metro and
Tesco Express.
The biggest Tescos competitor in the UK is ASDA (daughter company of Walmart)
owning about twenty percent of the whole market share, only ten percent less than Tesco.
Globally, firm hires over 6 00 thousands employees and has almost 7 000 stores across
fourteen countries of their operations with annual sales of $ 102.7 billion.
(Supermarketnews, 2014). Their achievement and great success is due to their broad
variety of offerings. The online shopping largely also contributes to their great success as
home-delivery offering became more and more common along the industry. Moreover,
their main strategy is to focus on dynamic worldwide expansion. The company wants to
lure as many costumers as possible. What is also very important is Tescos brilliant capital
structure analysis in order to support their expansion.

Industry Analysis

In order to do the industrial analysis the PESTEL structure will be taken into
consideration. Hereby, the following factors will be described: political, economical,
social, technological, environmental and legislative. The PESTEL framework is used to
spot diversify macroeconomic determinants that might impact companys actions now and
in the future. (Businessmate.org, 2014).

Political Factors

The Tesco has its operations worldwide makes their efficiency is extremely
affected by the political and governmental situation of the countries the company operates
in. In case of the employment legislature, the chains like Tesco are persuaded by the UK
government to offer a variety of work prospects. The jobs differ, starting from more
flexible, less paid and regional-located to highly-skilled, more paid and centrally-based
(Balchin, 1994). Tesco also tries to cope with the requirements from community groups
like for instance: youth, middle age people and senior customers. The retailer
comprehends that its business influences working place and human aspects as creation of
new institutions are usually perceive as ruining competitors jobs among the market. The
giant hires hundreds of students, handicapped or aging employee at the part-time, most of
them paid minimal wage.


Economical Factors
For Tesco, the economical factors are also very important as it is probable that they
will affect, not only the products demand, costs and prices but also the profit of the
company. For the firm it is vital to observe the joblessness level. High unemployment
level has a negative impact on the efficient demand for lots of merchandises and
unfavourably disturbing the demand compulsory to manufacture these products. The
company cannot monitor these factors however can observe their results on the
performance of the firm. While the global economy maintains to grow and is predicted to
positively influence future profit of Tesco, the firm is constantly greatly dependent on its
maternal market, British market. This indicates that any sluggishness in the UK grocery
industry will negatively impact Tesco.

Social Factors
It is proven that nowadays UK clients changed their shopping habits, they prefer to
do shopping on one-stop basis. Consequently, Tesco has introduced more non-food
products in order to poses more costumers. As a result of the changes in demography, the
population not only in the UK but in the whole Europe start ageing; there is a raise in
female workforce and a decrease in habit of preparing food at home. All this alteration
encouraged the UK groceries to concentrate more on added-value offerings. Moreover, the
chains like Tesco are flooding the food market, leaving the small retailers on the bottom
(Clarke,1994). The kinds of products and offerings acquired by clients are equivalent to
their societal adaptation and their philosophy. Buyers are more conscious of healthiness
and diet, and their perception of products is all the time altering. But Tesco tries to adapt
very quickly, as an example it is worth mentioning the raise in the organic food offering.

Technological Factors
In nowadays business technology is very important and is one of the most
important factor in management strategies of Tesco which helps to increase its expansion.
Technology, not only helps to meet the customers expectations but also helps the
company to progress. The reason why buyers approval increases as Tescos service
became easier and more suitable. Tesco tries to make all customers satisfied by
introducing for instance: self check-out machines; there is no need to wait to be served
when clients can do it quicker. Many wireless devices, intelligent scales and electronic
shelf labelling were also introduced to make the shopping more convenient. Many other
actions were also done in order to satisfy the buyers, for instance online shopping with
home-delivery, radio frequency identification (FRID), electronic point of sale (EPOS) etc.
(Finch, 2004).


Environmental Factors
Ten years ago, the company faced the environmental problem in which the
managers of many groceries had to behave in socially accountable approach (Lindgreen
and Hingley, 2003). Therefore, Business of Tesco deals with the approaches in which the
company transgresses the least amount of duty to shareholders (Johnson, 2003).
According to Graiser and Scott (2004), in 2003 the UK government has introduced the
new policy for tenable devouring and manufacturing to decrease waste, lessen devouring
of resources and reduction of environmental damage. There was also a legislation that
formed tax on promoting fatty products and extremely processed food. The tax had a great
negative impact on Tesco products. The company now, tries to adapt and satisfy
consumers.


Legislative Factors
The different policies affect the Tescos sales and situation. Many strong rivals that
have well-known brands formed a risk of forceful price battles, need for wide range of
new offerings. It can lead to reduction of numbers of entrants due to government
legislations against monopoly and needed certificated (Myers, 2004). Tesco tries to meet
all requirement regarding pricing policies therefore the retailer encourages customers by
giving discounts on fuel or shopping depending on amount spend by customer in the shop
before.
Retail Management Strategy

Tesco's retail chain aims to reach their clients on many levels as Tesco Express, which are
small and local stores; Tesco Metro which are larger stores within urban areas; and Tesco
Extra which are even larger stores, situated mostly in suburban areas (Tesco 2014).
Current social trends indicate that British customers prefer doing all of their shopping in
one go; in order to address that preference TESCO increased the amount of non-food
items in their offer. For instance, Tesco Express stores aim to offer a complete set of
everyday items, but given the limited shelf space of a local store, they can offer only a
couple of brands per item.
Limitation in the variety of brands offered in store together with current social changes
such as aging population, increase in female workers, and decline in home meal
preparation promoted added-value services and products, including the focus on own-
labelled services and products. Moreover, consumers nowadays are more aware of health-
related issues and they pay more attention to the health aspect of their food, which sparked
the proliferation of food and drink products labelled as 'organic' and 'healthy', including
Tesco's own 'Tesco Organic' brand. Current situation of grocery retail sector in UK gives a
lot of bargaining power to the customers, as competitors' offers converge to address the
preference of shopping in 'bulk' described above. This means that there is lots of
competing retail chains with similar offer and the switching cost for costumers was
reduced over time; currently there is virtually no cost of choosing Tesco's competitors in
urban areas. The company successfully attracted and kept customers thanks to the
introduction of their loyalty card system - Tesco ClubCard. Loyalty cards remain a strong
customer retention strategy by allowing tailoring the service to the customers needs and
customizing the service. ClubCard allows clients to not only collect points based on the
amount of shopping done in stores, but also based on how environment friendly the client
is -- there are special points awarded for reusing old bags. Valuing environment friendly
customers also contributed to company's Corporate Social Responsibility and the whole
brand's image (Tesco, 2014).
The company imports its merchandises from abroad producers who have more convenient
price range. The giant as a retailer of diverse offerings works with lots of global suppliers
with multinational workers. Consequently, Tesco focus on their convenient approach to
establish unquotable cooperation with its suppliers by adopting high technology in order
to ease the communication. Moreover, Tesco aims to choose the most efficient suppliers
with high quality products in order to improve supply chain. The company also focus their
strategies on expanding their supplier administration programmes in order to review best
suppliers.
Tesco in order to maintain its level as a one of the best worldwide retailer needs to follow
generic strategies. The cost leadership strategy is based on seeking how to get the lowest
costs among the market and sell the overseas at cheapest prices. That approach will be
focused on the companys skills to monitor operating expenditures in order to value their
merchandises competitively and benefit from it. The second strategy would be based on
differentiation where Tesco would have to adapt its offerings by use of technology,
customer service. Thus the offering would become special and would encourage
customers to buy them and posses brand-loyal clients. Last but not least strategy is locking
up Tesco products in one detailed market or present smaller amount of merchandise to
overseas industry. Hence, Tesco could continue the approach of concentration (Porter,
1980).


CONCLUSION

The great success of Giant Tesco presents how important the retail management
strategies are in order to satisfy customers and meet their expectations. Among the fast
altering world where customer become more and more health conscious, and is a high
level of potential rivals Tesco has to adapt and find the best way to pleased customers and
stand out. The most important is to have a team of managers who can learn from mistakes
and try to understand what targeted customer wants. Therefore, new strategies should be
based on permanent process of adapting and learning. Learning here, means knowing what
companies main objectives are, how to achieve them. Everything will depend on how
Tesco quick can adapt and learn. In such a big company like Tesco all decisions ought to
be first analyzed. That is also why the PESTEL framework is useful to determine as it was
in the beginning of this paper. Than the retail management strategy of Tesco was
presented.



REFERENCES

Balchin A. (1994) Part-time workers in the multiple retail sector: small change from
employment protection legislation? Employee Relations
Businessmate (2014) PESTEL Analysis, available online at:
http://www.businessmate.org/Article.php?ArtikelId=16
Clarke I., Bennison D. and Guy C. (1994) The Dynamics of UK Grocery Retailing at
the Local Scale, International Journal of Retail & Distribution Management
Finch P. (2004) Supply chain risk management, Supply Chain Management: An
International Journal
Graiser A. and Scott T. (2004) Understanding the Dynamics of the Supermarket Sector,
The Secured Lender
Lindgreen A. and Hingley M. (2003) The impact of food safety and animal welfare
policies on supply chain management: The case of the Tesco meat supply chain, British
Food Journal
Johnson G. and Scholes K. (2003) Exploring Corporate Strategy, 8th ed., Prentice
Hill: London;
Myers H. (2004) Trends in the food retail sector across Europe, European Retail
Digest, Spring,
Porter M. (1980) How Competitive Forces Shape Strategy
Supermarketnews (2014) TOP 25 Retailers, available at:
http://supermarketnews.com/top-25-global-food-retailers-2013
Supermarketnews (2014) Tesco, available at:
http://supermarketnews.com/tesco-2013
Tesco (2014), available at:
tesco.com