How Does Tesco Meet The Macro-Environment Challenges - Essay Example

How does Tesco meet the macro-environment challenges? Tesco was founded by Jack Cohen when he began to sell surplus groceries from a stall in the East End of London. His first day’s profit was £1 and sales £4. Cohen first sold an owned brand known as Tesco Tea – before the company was called Tesco. The name comes from the initials of TE Stockwell, who was a partner in the firm of tea suppliers, and CO from Jack’s surname (Tesco history). Since the mid-90s, Tesco has been investing in new markets overseas, seeking out new opportunities for growth and ways of generating long term returns for shareholders. It now operates in 11 markets outside the UK, in Europe and Asia. Over 100,000 employees work in their international operations, serving over 15 million customers and generating over £11 billion sales and over £560 million profit. Over half of group space is now outside the UK. (Tesco International) Tesco has many branches all throughout the United Kingdom, Europe, China, Japan, and in many parts of the world, and is expanding to other parts of Asia and Hong Kong. It is an international retailer serving over 13 countries. Tesco is making headway in the difficult times and for the development of international business. It has done major acquisitions in the Czech Republic and in Poland where they bought the Leader Price stores and in Malaysia where they bought the Makro stores. (Tesco website) Competition Stiff competition enables Tesco to apply various strategies to stay on top. Tesco is aware that consumers have an easy way of switching between stores, i.e., they choose to shop in a different store from one month to the next. They have a wide range of retailers to choose from including Wall Mart/Asda, Saisbury, Morrison, Waitrose, M&S, Somerfield, Aldi, Lidl and Netto, other smaller supermarkets, Costco and Makro, the Co-Ops, Symbol groups, and thousands of independent retailers. (Talking Tesco) As regards competition on products, Tesco has 1,866 products cheaper than Asda which has 1,120 products cheaper than Tesco. Sainsbury’s has 451 products cheaper than Tesco which has 4,450 products cheaper than the former. Morrisons has only 417 products cheaper, while Tesco has 3,054 products cheaper than Morrisons. (Sir Terry Leahry interview) Tesco launched the different programs to ensure customer satisfaction, and loyalty. During 2006/07, Tesco: launched their Fruit and Veg Pledge – they offered at least five fresh fruit and vegetable products at half price every week during the whole of the year; extended their range of whole foods to include an even wider choice of pulses, beans, dried fruit and nuts, breads, oils, cereal bars, breakfast cereals and cooking oils;  posted nutritional signpost labels on 6,600 of their own-brand products, making it easier for customers to understand, and is practical to use; made organic products more affordable, selling them alongside the standard ranges, on the same shelves, instead of in a separate section; increased a range of Value non-food products to make setting up home cheaper; halved the price of energy-efficient light bulbs making them even more cost-effective than traditional light bulbs over their life-span; offered a range of Healthy Living non-food fitness equipment such as skipping ropes, pedometers, exercise bikes and rowing machines to make keeping fit more affordable. Some of the details employed by Tesco on the aspect of effective communication with the customers: Tesco listens to people – It is the largest private sector employer in the UK with over 260,000 staff. The people make Tesco a success and their feedback is very valuable. Tesco listens to suppliers – it takes a partnership approach and believes that open and constructive relationships with suppliers are key to a strong and sustainable supply chain. Tesco listens to communities – Tesco aims to improve the way they consult local communities before building new stores so that they can be sure that they have understood local issues and concerns. (Tesco website) Scenario planning Tesco’s share data sometime showed that there was a sharp increase in the sales of flowers and wine for one week at the start of the summer. An analysis of their Clubcard data showed that the majority of customers buying these items were families with school age children. Parents were buying these products for their children to take to school and give to their teacher at the end of term. With this conclusion, Tesco people were able to ensure that there was a plentiful supply of flowers and wine in their stores at the end of the school term. Using external research, they found an opportunity to improve the range. The research told them of a rapidly growing need for Polish & Eastern European products and their growing number of excellent Polish staff helped confirm their beliefs. As a result of this, they appointed one of their Polish executives who began by listening to customers and held their first ever Polish ‘Customer Question Time’ (in the Polish language) to find out which kinds of products their customers would like to buy. After talking to Polish customers, they finalized their product selection then sourced the products from a new supplier. Tesco has implemented the in-store TV network in its stores, which is known as the TESCO TV. Various programs are shown like news and entertainment, as well as promotional information on both Tesco’s own products and suppliers’ branded products. The suppliers pay to promote their products on TESCO TV as with any advertising medium. In this way, Tesco’s customers are benefited from timely promotional information in addition to enjoying non-promotional content such as cooking instructions, and some shows like cartoons and other “casual” content including news. With this solution, Tesco can provide more information to customers directly at the point of sales and can add real value to their shopping experience, and for suppliers, this also creates a genuine opportunity to better communicate with their customers. The application of Hughes Networks Systems Europe (HNSE) is a strategic move for Tesco due to its superior track record, end-to-end solution, and their very professional way of meeting customers’ needs. The company contracted Hughes Network Systems Europe (HNSE) for a turnkey solution. In addition to providing the transport infrastructure through its DIRECWAY two-way satellite broadband platform, HNSE has overall responsibility for the installation, operation, and maintenance of the entire implementation. Also, Instrumental Media Group is responsible for the content that is shown on the screens. SCALA, an HNSE partner, provides the software platform for the content production, enabling the highest flexibility with powerful authoring, editing, and scripting tools. (Hughes Network System, 2004) Target programming is delivered to different areas of the stores. In each store where TESCO TV is available, HNSE is installing approximately 50 flat screens of different sizes. Up to eight different channels are available on TESCO TV, each channel specifically intended for a particular zone of the store. The latest music videos are shown in the Home Entertainment department and Health & Beauty has its own channel. In the Café, customers can relax watching the latest news, sports clips, and other entertainment programs. (Hughes Network System, 2004) Tesco TV can influence sales through the delivery of advertising content on screens positioned at the point of sale. TESCO TV has also vastly improved the ability to cross sell and promote other products within its portfolio. This can also improve time to market. Reacting to new trends or competitive offerings is now much faster and more comprehensive than ever. A promotion can be amended, re-distributed, and displayed in all stores within a few hours, and Tesco can respond to changes in the market in almost real time. The customers can benefit by receiving information while they are being entertained. In this set up an e-Learning or back office solution could be added. Other benefits are easy training for the staff, communication of messages of the day, briefing of management team, and management of inventory. Hughes Network System Europe (HNSE) has facilities in Italy, the United Kingdom, Germany, and the Czech Republic. Utilizing its satellite hub earth stations and network operations centres in Griesheim, Germany and Milton Keynes, U.K., HNSE provides DIRECWAY broadband satellite services throughout the continent, both directly and through a growing family of value added service providers. (Hughes Network System, 2004) Hughes Network Systems is the world’s leading provider of broadband satellite network solutions for businesses and consumers. They say that Tesco listen. Their success is based on listening to customers. They listen and respond to customers and their changing lifestyles by spending lots of time and effort asking them what they want. The strategy of listening and responding has been successful, and Tesco is aware that if they stop listening and don’t respond to their customers’ needs, they will choose to shop elsewhere. This method of listening to customers made Tesco develop the Every Little Helps Promises. These promises to their customers reflect the simple things people care about when they go shopping: Prices are good; I can get what I want; The aisles are clear; I don’t queue; and The staff are great. Tesco knows that these simple promises have to be fulfilled, and that if they don’t get these things right customers will go and shop with one of their competitors. It is important for them to do the little things that really matter for customers and staff, in every store, everyday. Those promises are fundamental to their success. Listening to customers has enabled Tesco to respond to many changing customer attitudes such as increasing concern for health, local sourcing of food and a renewed sense of community. Research has helped them identify new general trends such as an ageing population, more single person households and more working mothers. Tesco believes that these emerging trends are likely to continue and produce more changes in what customers expect from the company. How does the company listen? Tesco has a program known as Customer Question Time sessions each year, a forum where they listen to customers’ views on everything, from products, price, quality and service to Tesco’s role in the community and the Tesco brand. Customer Comment Cards are available in all their stores. They also have customer service helpline, and the club card, which celebrated its tenth anniversary, and with over 13 million active card holders, it is a world-leading loyalty programme. This program allowed Tesco to better understand what customers want. A range of qualitative research techniques is also employed, which include focus groups, accompanied shots, home visits and others, to explore issues as they arise. Tesco uses quantitative techniques, such as on-street, telephone or on-line questionnaires, to talk to a wider number of customers, or to quantify views and opinions garnered in qualitative studies. It has on-going research trackers asking the same key questions regularly, to allow them to track performance over time. Tesco uses multiple sources of information which allows them to look at many aspects of consumer lifestyles, to understand a problem, or to discover opportunities to do more for customers. (Talking Tesco) Tesco aims to develop store structures to better meet the needs of both customers and staff. It wants to provide Tesco leaders with coaching to support their teams better, and to get more people in to work more of the time. Tesco also desires to reduce management vacancies down to a minimum. (Tesco website) The community plan is a continuous process that will drive change across the business in the years to come. Building upon Tesco’s current corporate responsibility, it provides a platform for constant innovation to deliver two broad objectives: Be a good neighbour Tesco respects the local communities in which they operate and wants to make a positive contribution to them as good corporate citizen and a friendly neighbour. Be environmentally responsible Tesco also aims to take care of the environment by examining processes and reviewing the energy consumption, and promoting environmentally responsible practices. Projects for 2006 include reducing carrier bag usage, energy saving and improvements to recycling facilities for customers. (Talking Tesco: how we compete) CRITICAL EVALUATION Tesco has become Britain’s most popular retailer by recognizing and responding to social change. The battle to win customers in the 21st century will increasingly be fought not just on value, choice and convenience but on being good neighbours, being active in communities, seizing the environmental challenges, and behaving responsibly fairly and honestly in all of Tesco’s actions. Stakeholder issues, from pricing to public relations to Porter’s five forces are addressed in Tesco’s program for future developments. Tesco management deems it important that a new store opening is welcomed by local people. The people on the other hand give suggestions, and respond to Tesco’s questions. The company talks to local people when they plan their stores. They work closely with local communities so that they understand local issues and concerns. They distribute leaflets locally, detailing their plans and inviting feedback. They also hold public exhibitions so that people can come and talk to them about their plans for a new store. They also talk to local traders about how their stores can attract new customers to the area and improve business for all. This year, 2007, they’ve held public exhibitions and consulted local communities proactively in other ways on every new Tesco superstore. References: Datamonitor website. Available from: www.datamonitor.com., http://catalogue.londonmet.ac.uk/search?/.b1501950/.b1501950/1,1,1,B/l856~b1501950&FF=&1,0,,1,0. 24.09.07) Sir Terry Leahry interview, available from: http://w3.cantos.com/07/int-tesc-704-azwuz/interviews.php?task=view&i=1&cnt=bb&med=asx&int=changed&type=video Talking Tesco: how we compete. http://www.tesco.com/talkingtesco/p/inc/TalkingTesco.pdf. [cited 18 Dec 2007] Tesco website. Available from: http://www.tesco.com.[cited 18 Dec 2007] Tesco History. http://www.tescocorporate.com/page.aspx?pointerid=D01B1F9C28E346B38DA0479EF0BE8FC3. [cited 18 Dec 2007] Tesco International. Available from: http://www.tescocorporate.com/page.aspx?pointerid=3B3A4B25C27741408604630168DAE624. [cited 19 Dec 2007] Hughes Network System (2004). Tesco taps into the power of satellite. Available from: http://www.hnseu.com/files/downloads/TESCO%20TV_0804.pdf. [cited 18 Dec 2007] Read More