Current Strategic Situation of Tesco
Overview of Tesco
Tesco plc is one of the British multinational grocery and general type of merchandise headquartered in London, United Kingdom (Tesco plc, 2018). It was founded in the year 1919 by Jack Cohen and presently they are operating in more than 6553 stores and the areas served are United Kingdom, Ireland, Thailand and Hungary. The number of employees working under them are more than 476,000 and the revenues earned by the company is £55,917 million by being the third largest retailer in the market.
Current Strategic situation of Tesco
Tesco follows the six strategic drivers that set out the different plans and aspirations to create long term value for all the stakeholders. The six strategies followed by them in the present scenario are as follows:
Tesco follows differentiated brand and creates long term value for the customers in the market (Barney 2014). The main purpose of the company is to serve the shoppers in a little better manner every day and increase the brand awareness among the customers. Secondly, the reduction of the operating costs by £1.5bn to identify the future opportunities for meaningful savings. Presently, the company is trying to be creator of highly valued brands that includes developing own label brands with quality products at competitive pricing. In the year 2012, the international business generated more than 30% of the profit of the groups and they promised to be strong kind of competitor in everything to diversify the market (Lasserre 2017).
The innovative strategy that is driven by expertise in three differentiating capabilities that include channel, customer and product. The main focus is on the maximising the value to enhance the customer order. Proper strategy is the plan that the business deploys different resources to achieve the goals. In May 2011, they committed more than £1 billion capital to improve the customer experience of shopping. They value the customers and enjoy the strong long-term growth in the competitive market.
Correctness of Strategy
The strategy that gas been adopted was successful in France and United Kingdom, however it was a big failure in the entire United States of America. It was seen that due to cultural differences and wrong time of entry into the market, it was a huge pressure on them to compete with other competitors during recession. The marketing strategy utilised was popular in United Kingdom as the brand awareness program was strong and the customers got connected with the loyalty program effectively.
Correctness of Strategy
However, there were few flaws in the marketing strategy of Tesco in USA as the customers could not connect with the marketing strategy and positioning of the company. Furthermore, the customers had different kind of perceptions on different products in the entire US, however the company treated US as one country. The self-checkout system was not acceptable in market of US and the same kind of meals was not acceptable.
Failure of Tesco in United States
There are different reasons for the failure of the supermarket Tesco in The United States of America. The main reason was the time of entry in the US market that was during recession and they treated US as a single country (Hitt and Duane Ireland 2017). Furthermore, it was seen that the youngsters did not prefer eating the same meal in Australia and the entire focus of the company was on ready made meals. It was seen that the self-checkouts are not acceptable in United States of America and this created huge issues in their business to be continued in entire USA (Cbsnews.com, 2018).
They planned to create their presence in all over the world and have more than 2,000 stores within the next five years as well (Slack 2015). According to the CEO of the company, convenience is the fastest growing sector in the entire retail industry except in the US. They felt that there is huge opportunity for them in the USA for broader area of convenience and it invested Fresh & Easy and invested more than £1 billion on distribution centres and stores in US (BBC News, 2018).
Although, they focused and researched the entire market of US thoroughly and developed a full proof entry strategy, the different reports have suggested that the company neither focused on the expectations of the customers nor the own strategies (Walker, 2018). There were huge criticisms among the individuals against the company due to small kind of assortments and it provided huge emphasis on private labels and lack of customization of goods and services (Morschett, Schramm-Klein and Zentes 2015). The Fresh & Easy failed to compete with the different large supermarkets. The positioning of the company confused the customers as they were unable to understand the type of store.
Furthermore, they tried to focus more on the different corrections to revive fortune by increasing assortment of the products, modified the interiors of the stores. However, such efforts did not show any sign of profit and the operations of UK were showing different signs of strain. In the month of April, in the year 2013, Tesco Plc announced the exit from the US market as there were different cultural discrepancies between the shoppers of US and UK (Rothaermel 2015).
Failure of Tesco in United States
Popularity in UK and France
Tesco gained huge popularity in France and United Kingdom as there are different reasons that has helped them in being the top retail stores in the competitive market. The club board provides reward system that makes the customers to come back and this is the way of cultivating the customers and brand loyalty.
The launching of different separate venture brands allowed them in reaching specific niche markets. The guarantee of the brand is provided to the customers of the company that provides the customers with assurance and confidence. Furthermore, the strong presence on the social media that is Facebook and YouTube has created warmth and created emotional connections (Meyer, Neck and Meeks, 2017).
Key Challenges Faced by Company
There were different key challenges faced by the company in adoption of the marketing strategy effectively in United States of America. Kingdom. They did not have any knowledge on the local market of United States along with setting up the compensation plan. Tesco thought that the innovative strategies that has been applied by them in United Kingdom was not up to the mark for the market of US (Hill, Jones and Schilling 2014).
The self-checkout stores in UK is acceptable by the customers but that was not acceptable in USA. USA is a big country wherein there are different states in it and each state has different kind of tastes and preferences and they do not prefer ready made meals. The service provided by them to the customers was not up to the standard. The positioning strategy adopted by Tesco was not convenient for the customers and it failed to compete with the other large competitors in the market.
Furthermore, there are different cultural differences that has seen Tesco leave United States of America. The consumers were not at all happy and impressed as they could not appeal the customers with different kind of innovations that worked in the market of United Kingdom. Lastly, the cultural pressure was the main reason that caused Tesco to move out of UK market and this has caused huge loss to the services provided by them to the customers as well due to huge loss in revenue and profit of the company.
Alternative Strategy Directions
There are different kind of strategies that can be implemented in order to gain competitive advantage in the market. The innovative differentiation strategy along with the gaining of knowledge on preferences of the customers is helpful in becoming popular in the market. Furthermore, the cultural differences have to be removed by the company as this will provide strategic directions of the company in emphasising more on benefits with focus strategy.
Popularity in UK and France
According to me, I feel that Tesco needs to adopt the differentiation strategy in their business to spread their focus in different parts of the world. The differentiation will include making of the products and services different from other competitors and making them attractive in nature. The functionality, durability and brand image need to be adopted by them to attract the customers and provide value to the customers as well.
I feel the differentiation strategy will be adopted by Tesco in performing good research, innovation and development. This strategy will help them in delivering high quality products or services along with effective marketing and sales technique and provide differentiated offerings as well. This differentiation strategy will help the company in understanding the different requirements of the customers effectively with good research and innovation.
Suggestions
- Maximise the local market knowledge with usage of local executives along with vendors
- Set up a proper compensation plan and the research is required to be done to understand the sayings of the customers
- Lastly, the language has to be used that can be understood by the customers
Conclusion:
Therefore, it can be concluded that Tesco has faced huge failure in the business in United States of America, however it succeeded in United Kingdom and France. The strategies of marketing used by Tesco was not up to the standard and this caused huge issues in the business. It was seen that the company failed due to the wrong kind of innovative strategy adopted by them. Furthermore, suggestions has been provided to the company to improve the marketing tactics.
The report helps in analysis of the UK based company Tesco wherein the operations of the company has failed in Australia and it was successful in France and United Kingdom. The analysis and evaluation are required to understand the current situation of the company that emphasises the benefits and challenges.
The main aim and purpose of the report is to identify the different challenges faced by them while operating in USA and it was a huge success in France and United Kingdom. The correct strategy has to be described along with responsiveness of the company in different countries. The key challenges faced by the company has to be described in order to provide alternative strategies to help the company in becoming successful.
References:
Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson higher ed.
BBC News. (2018). How Tesco came to dominate. [online] Available at: https://www.bbc.co.uk/news/magazine-23988795 [Accessed 4 May 2018].
Cbsnews.com. (2018). Why did Tesco fail in the U.S.?. [online] Available at: https://www.cbsnews.com/news/why-did-tesco-fail-in-the-us/ [Accessed 4 May 2018].
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic management research. The Blackwell handbook of entrepreneurship, pp.45-63.
Lasserre, P., 2017. Global strategic management. Palgrave.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship?strategic management interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management (pp. 978-3658078836). Springer.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.
Tesco plc. (2018). Tesco PLC. [online] Available at: https://www.tescoplc.com/ [Accessed 4 May 2018].
Walker, T. (2018). Why does Tesco work in the UK but not in the United States?. [online] The Independent. Available at: https://www.independent.co.uk/news/business/analysis-and-features/why-does-tesco-work-in-the-uk-but-not-in-the-united-states-8393592.html [Accessed 4 May 2018].
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