Tesco Global Challenges - Essay Example

?Client’s 7 April It is very important to manage employees effectively in order to get the best out of them, human resources is a very important department which should never be underestimates. Only the right people can recruit the right ones for an organization and everything comes down to recruiting right people. Keeping them motivated is also very important and not everyone succeeds in doing so. This paper will shed light upon how Tesco is managed, global challenges and what can be expected of the company in the future will also be thrown light upon. Tesco is based out of the UK, dealing mainly with grocery items and general merchandising retail chain. If the global sales and domestic market share of the company is taken into account then it is found that the company is the largest British retailer by far. The profit of the company exceeded ?2 billion for the year 2008 and it is believed that the profit will be much higher in the year 2009. The company mainly focuses upon food and drink but it has also started dealing in clothes, financial services, internet services etc. “Tesco started life in 1919 when Jack Cohen started selling surplus groceries from a stall in the East End of London. Mr. Cohen recorded a profit of ?1 from total sales of ?4 on his first day.” (A History of Tesco) The brand Tesco first appeared in the year 1924 when Jack Cohen supposedly bought a tea shipment from Mr. T. E Stockwell. The year 1929 marked the opening of a store in North London and the company rapidly developed from there on. The head quarters of the company was first established in North London in the 1930s. In the year 1932 the company became a private limited company, another feather in the cap of Tesco. Expansion of the Company The expansion of the company traces back to the year 1950 when the company quickly bought rival shops so as to expand and compete with other Giants. In another endeavor to do so, the company bought as many as 70 William stores and an unprecedented 200 Harrow stores. 1960s saw a revolution in the supermarket trend, the stores started selling more products in larger shops and Tesco was quick to capitalize on the very same opportunity. In the year 1961, the Guinness book of records acknowledged that Tesco was the largest store in the whole of Europe and more growth followed as the company opened another Superstore in Sussex. “Supermarkets once and for all changed the way people shopped and by the 1970s Tesco was building a national store network to cover the whole of the UK, which it continues to expand to this day, while also making other products available to its customers.” (A History of Tesco) The company recorded annual sale of ?1bn in the year 1979 and the sales doubled by the year 1982. The year 1987 was historical for the company as the company completed a successful takeover of their supermarket rivals Hillards for a whopping ?220m. The term superstore was an alien term but Tesco was the first company to introduce this term, the term referred to two aspects of the company, namely the size of their store and secondly the vast choice of inexpensive food and other items to choose from. The appearance of the stores mattered a lot and in order to ensure that the stores looked great, the company spent massive amount in order to put some daylight between their competitors. The company also took into account the parking space for the customers and ensured that their customers were provided with enough space and a wide range of products to choose from. The company was the first to install enhanced lightning and also widened its aisles. The company extensively worked on providing its customers with fresh food items to choose from. The company stopped depending on the manufacturers by opening a centralized warehouse to cater to the demands of its various stores spread across the whole of Europe. The company teamed up with Marks & Spencer to establish stores in all major cities, in an attempt to do so the company established a 65,000 square foot superstore which was established in the vicinity of another Marks & Spencer store which was about 69,000 square foot in area. The efficiency of the company was greatly improved when the company introduced a new policy called the six warehouse distribution system; in this system the company established many central warehouses which took care of the needs of all the stores located in different cities. The company had already established as many as 371 stores in England by the 1990s, among these 371 stores 150 of them were superstores which provided a very wide range of products to choose from for the customers. The company became one of the top three stores in the UK and this was a result of the company’s endeavors to provide the customers with varied options to choose from. The company has had its fair share of tough times too, in the year 2001 a black mailer tried to extort ?5m from the company with the help of a parcel bomb. He failed in his endeavor to do so and was arrested and jailed for 16 years. The company was also accused of pushing out the small retailers out of business, according to a research done by a non-profit organization it is believed that small retailers lose as much as ?100bn very year because of the centralization of the supermarket. Sainsbury vs. Tesco Sainsbury is another leading chain of stores in the UK, it is considered to be a very posh store and the prices of the products reflect the same. In the year 2005 the operating profit of the company fell from ?675m to ?254m which was a very big worrying signal for the members of the organization. The members tried really hard to make the chain of stores recover from this loss and gradually succeeded in doing so. “Sainsbury's performance, which compares with the record ?2bn profit produced by rival Tesco, was well received in the City. Describing them as 'a solid set of numbers' analyst Iain McDonald at Numis said the group had probably managed to maintain like-for-like sales growth at near 1.7% since the year-end. He raised his current-year profits forecast from ?248m to ?300m.” (Sainsbury Signals Recovery) The store in order to compete with the liked of Tesco and other major stores based in the UK cut prices on as many as 1000 items and the customers realized the same and ended up purchasing more items from the store which meant a sharp increase in the sales took place. The same reflected in the market share of the company which rose from 15.4% to 15.8% and this happened in the gap of as little as four weeks. Tesco’s chief executive was paid a bonus of ?2m and to keep up with the same Sainsbury also announced that if the chief executive of the company is able to reach the target sales, he would also be richly rewarded for his efforts. “On average, Sainsbury's is 'slightly cheaper than Morrisons and slightly more expensive than Tesco and Asda'. A Grocer magazine survey claims that Sainsbury's has been cheaper than the 'industry average' for the past two weeks and King pledges to retain this position. (Sainsbury’s Declares Price War). Sainsbury aggressively cut the prices of its products in order to attract the attention of the customers and the same paid off as the profit of the company increased. Another competitor Asda, at the very same time increased its prices to 3.3% and Tesco on the other hand also recorded an increase in its prices by 1.5%. Tesco and Sainsbury have been involved in more battles than one and the same has been going on for decades. Both the Stores wanted to build a store in the centre of Wolverhampton in order to expand. “Sainsbury’s owns more than 70 per cent of the land but planning chiefs in the city have named Tesco as their preferred developer for the project, which could also include building homes and shops. It is believed Tesco’s vow to transform the nearby derelict Royal Hospital site, which it owns, into an office and housing development, helped it clinch the deal.” (Tesco’s Vision for City Store). Sainsbury has plans of making use of the land by doing multiple things like having a petrol Station, Constructing private flats etc and the whole project was believed to be roughly about ?65 million. Sainsbury even launched a high court appeal in order to ensure that they subdue Tesco. The long saga will continue for years to come. It is extremely important to pay attention to the marketing strategy of Tesco, the organization has put in a lot of efforts into marketing, and they have captured almost every opportunity to grow. The specialty of the organization was initially in drink and food business but the giants gradually decided to enter into consumer products like music players, CD players, computers and other products that sell like hot cakes. The competitive marketing plan of the organization is right up there with the best, each store is a different segment and steps are taken on every store to increase the sales and generate good profits. The SWOT is in favor of Tesco, the biggest strength of the organization is its workforce, as mentioned earlier the employees are very affable and friendly. The customers feel good when they share their problems with the employees. Another strength of the organization is its global reach, the stores are spread across in several countries which is no ordinary achievement. Jack Cohen started on a very basic level and within no time the organization has grown into a big and a really powerful unit. The organization has also received funding from the bank of Scotland which also means that the organization has financial backing which is obviously good for any organization. Reasonable prices is another strength of the organization, customers flock like bees into the various stores because they get the best prices and this is what makes an organization better and powerful over a period of time. If the weaknesses are to be discussed the organization can work on making the marketing plan better, for instance a food company in South Korea knew that the Koreans are very hardworking people and they have no time to shop, they introduced virtual stores on the railway stations, this meant that the customers can text the virtual code of the product that they would like to buy and the product gets delivered right at their doorstep the next day. This has really propelled the sales of that particular company; something along the same lines can be introduced by Tesco also. It will become a rage and the organization will make even more money. Opportunities are too many but the right sense is essential to capitalize on those opportunities, Tesco can still get a lot of profit. They have to manage the workforce better and cut the deadwood out in order to make the organization better and effective. There are several threats to Tesco, the likes of Wal-Mart, Sainsbury and a few others present huge threats to Tesco. These threats can however be countered with the help of the right approach and thinking. Tesco has to become more aggressive and it should work on its marketing strategy. It is important to know that the organization can make the most of logistics; this is one key area which can change everything for the best. This was the SWOT analysis of Tesco, strengths, weaknesses, opportunities and threats have been comprehensively analyzed. Tesco Plc operates with its stores and outlets in around 14 countries across North America, Asia and Europe. Besides this, it has become the leading retailer in the grocery market in United Kingdom by capturing a market share of approximately 30%. The company, which was originally a UK-focused grocery retailer, has diversified itself into the areas of geography and the retailing of books, clothing, electronics, furniture, petrol and software; financial services; telecoms and internet services; DVD rental; and music downloads (Tesco, 2008). Being one of the largest retail stores in the world, Tesco has provided employment to 326,000 workers all over the world. The company has many stores amounting to around 2318 stores. The services of the company can also be availed online. All items that are provided within the stores can also be availed through the online services of the company. The main market where the company is operating its retail business is the United Kingdom. The company works under four kinds of businesses that are Extra, Superstore, Metro and Express. The company operates in almost 40,000 products that include garments and non-food items. Tesco also sells its products under its own label. These items include three levels that are value, normal and finest. These levels have been set by the company so that the customer of all segments of the society can avail the retail services offered by the company (Casher & Metzger, 1998,). With the retail services that the company offers worldwide, many of the Tesco stores have gas stations, as well. Thus, the company is considered to be one of the largest retail stores in the world that has its independent gas station, as well. There are many other services that are offered by the retail store. It includes the services of Personal Finance. The strategic management at Tesco has been given high importance in order to regulate its operations effectively. The company is mainly operating its business in the United Kingdom thus providing employment opportunities with the country. However, there are various other services that the company needs in order to regulate its daily operations. Thus, the company avail the services of the overseas manufacturers to regulate its operations smoothly. However, the services of the prepared food are still availed by the company from the United Kingdom (Chakraborty & Majumder, 2010). The supply chain process implies the execution of the management process throughout the company. It includes the execution of the financial, physical and networks information in order to regulate the movement of funds, materials and the linked information by following the complete process of logistics. The process of logistics involves movement of several items from one place to another. From the attainment of raw materials till the delivery of the end products to the final users, the process of logistics is applicable. However, the supply chain management includes several other functions such as communication with the vendors, coordination with the service providers, customers and with the intermediaries (Clinton, 2004). The logistics play an important role in the execution of the whole management process. The logistics implies the transportation of materials from one place to another. It is the management of the flow of materials, order and other things involved in business from one point to another so that the demands of the customers can be met. However, the concept of the third-party logistics is different from the logistics. It implies the company to obtain the services of the third party for transporting the goods and services from one place to another (Clinton & Del, 2002). The third party logistic services are rendered by the companies usually when it is unable to perform the previously performed function due to some reasons. The company can out source any kind of activities related to the logistics and was previously performed by the company itself. If the company hires the external services of logistics for transporting any kind of its goods and services, then it will be considered as the third-party logistics. The business of logistics is one of the emerging operations in the world that is considered to be very profitable (Cloud, 2000). The impact of the third-party logistics on the supply chain management is an important one. The hiring of the third party to provide the logistic services is an important decision for the company as it can cast different impacts on the company. The outsourcing of the transporting service is the important function that affects the efficiency of the company. If the management of the logistics performs its function effectively, it can allow the company to achieve greater profits in the future. The supply chain management in Tesco has been recently modernized (Cokins, 2003). The company has adopted the technology of RFID in making its supply chain management more efficient. In the past, the company has successfully implemented the lean management solutions in its supply chain management. It has also implemented the techniques of path breaking and other systems that include point of sales data, continuous replenishment and primary distribution. Currently, the supply chain system at Tesco evaluates the data and controls the whole in-store inventory of the company. However, recently the company has adopted the system of Micro Focus to modernize the supply chain management and expand its application on the business activities. The software Micro Focus has been implemented in all the data centers of Tesco. The application of the Micro Focus will save a considerable amount that can be used later on for the productive activities within the company (Cooper & Slagmulder). The application of Micro Focus will also be appropriate for the strategic management as there will be applied similar system throughout the stores of the Tesco in the whole world. It has been found out that the 16% of the Tesco’s goods are transported by different companies offering third-party logistics. Out of 25 retail stores network, only four stores use the services of the third-party logistics in the distribution centre network of Tesco (Copacino, 2004). The company has outsourced very little portion of the warehouses and the distribution operation to the third-party logistics. The third party logistics Wincanton is providing logistic services in three stores of Tesco. These stores are in Daventry, Middleton and Snodland. The third party logistic DHL Excel provides the logistic services in Northampton through an open book contract. The primary collection of the Tesco transport fleet is the shared user of the third-party operation. The secondary collection of the Tesco transport fleet is the combination of the Tesco’s private transport, shared user third party and the dedicated third party. Tesco has also been availing the services of the Import Services as the third -party logistics (Dekker, 2003). “On average, Sainsbury's is 'slightly cheaper than Morrisons and slightly more expensive than Tesco and Asda'. A Grocer magazine survey claims that Sainsbury's has been cheaper than the 'industry average' for the past two weeks and King pledges to retain this position. (Sainsbury’s Declares Price War). Sainsbury aggressively cut the prices of its products in order to attract the attention of the customers and the same paid off as the profit of the company increased. Another competitor Asda, at the very same time increased its prices to 3.3% and Tesco on the other hand also recorded an increase in its prices by 1.5%. Tesco and Sainsbury have been involved in more battles than one and the same has been going on for decades. Both the Stores wanted to build a store in the centre of Wolverhampton in order to expand. “Sainsbury’s owns more than 70 per cent of the land but planning chiefs in the city have named Tesco as their preferred developer for the project, which could also include building homes and shops. It is believed Tesco’s vow to transform the nearby derelict Royal Hospital site, which it owns, into an office and housing development, helped it clinch the deal.” (Tesco’s Vision for City Store). Sainsbury has plans of making use of the land by doing multiple things like having a petrol Station, Constructing private flats etc and the whole project was believed to be roughly about ?65 million. Sainsbury even launched a high court appeal in order to ensure that they subdue Tesco. The long saga will continue for years to come. In order to be the best Tesco still has to do a little extra, it has become very competitive these days and Tesco has to just keep its nose to the grindstone. Conclusion The research study can be concluded that the supply chain process is greatly affected due to the third party logistics. In the case of Tesco, the third party logistics has affected the supply chain process extensively. As the supply chain process has great importance in executing the work within the company, it should incorporate the management functions actively. The process of supply chain is associated with the flow of information from higher authority to the lower authority, the flow of products from the supplier to the manufacturer, to the wholesaler, to the retailer and finally to the customers. It also includes the flow of financial information from one place to another in order to carry on the process with greater reliability. The overall operational strategy is the long-term goal of Tesco. It is important for the company to have an operational strategy because it establishes the types of goods and services that it will offer its target market. These operational strategies have also enabled the company to achieve advantages over its competitors. Tesco made good planning and control in its capacity, supply chain and quality. Besides, in order to make improvements in the supply chain operations, Tesco measures quality, speed, dependability, flexibility and cost. Although they have made some improvements, there are still some loopholes in its operational strategy. The company has recently adopted new software of the supply chain management known as the Application Service Providers (ASP). These software are provided with the Web interfaces that compete with other web based software. The software have greatly helped the company in saving the time and cost of the employees and management. Thus, the adoption of the new supply chain software has increased the efficiency of the company operations. To increase the values and improve service, Tesco should improve and train staffs at all levels. This helps them run operations more efficiently as all staff is fully trained and therefore they will do their best to do their jobs. Tesco should utilize capacity planning and control appropriately, when the operations managers are going to make their inventory decisions, there are three factors they must considerate: 1) how much they order 2) when to order 3) how they are going to control the system (Slack, 2001). The most common model used to figure out when the stock needs replenishment, are the Economic Order Quantity Model (EOQ). Technology is also another important aspect that can be adopted in the supply chain process of the company. As we know technology is developing day by day, so keeping up to date and using new and efficient technology would help Tesco to act more efficient in its operation. The company has already made improvements in the supply chain process however there is a need of further improvements in it. Works Cited A History of Tesco. In The Telegraph. Retrieved from: Dekker, S. W. A. (2003). Investigating human error: Incidents, accidents and complex Systems. Risk management, 6(1), 73-74. Loyalty Points Boosting . Never Choose Where You Shop. Retrieved From Sainsbury Signals Recovery. In this is Money. Retrieved from: Sainsbury’s Declares Price War. In this is Money. Retrieved from: Sainsbury Signals Recovery. In this is Money. Retrieved from: Sainsbury’s Declares Price War. In this is Money. Retrieved from: Tesco’s Vision for City Sore. In Express and Star. Retrieved from: Tesco’s Club card Loyalty Program. Every Little Helps. Retrieved From Tesco’s Vision for City Sore. In Express and Star. Retrieved from: Bibliography Cooper & Slagmulder.  Edition, illustrated, reprint. Publisher, Productivity Press, 1997 Copacino, 2004. President and CEO of Copacino Advisory Services, a consultancy ... in 2004  Cokins, 2003.  Information technologies have greatly changed the business environment. Cloud, 2000. Computing benefits include high performance and better business  Clinton & Del, 2002. Cosourcing in manufacturing. Journal of Cost Management  Clinton, 2004. Clinton's name in the list of people registered to run for the 2004 presidential election Chakraborty & Majumder, 2010. S. V. Ghaisas and Chiranjib Majumder-- International Journal of Nanotechnology 2010 Casher & Metzger, 1998. IOMA's Report on Managing Accounts Payable describes Jon Casher's talk  Read More