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Case Study On Tesco

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Growth of Tesco in Comparison to Peer Firms

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TASK 1

Title: To identify reasons for slow Growth of Tesco in Comparison to Peer Firms: A Case Study On Tesco.

1.1 formulating and recording the research project outline specifications

Background of study

In the current research report evaluation of the UK giant retail firm Tesco will be done. Tesco is the firm that cover a large portion of the UK retail sector in terms of market share in comparison to peer firms like Sainsbury, Morrison, Lidl and Aldi. From past few years firm is observing very slow growth in its business. Either it face loss in its business or earn very low amount of profit in the business. Thus, it is decided to carry out a detail research on Tesco and identifying the reasons due to which it is facing loss consistently in its business and failed to compete strongly with the rival firms (Major supermarkets see sales rise by a sliver but Tesco, Asda and Morrisons still lose market share while Aldi and Lidl draw in even more shoppers, 2017). In current time period business environment is changing at a very fast pace and rivals are implementing new strategies in the market. It is observed that rival firms like Lidl and Aldi are offering product at very low price relative to the Tesco then also they manage to earn sufficient amount of profit in the business. Moreover, growth rate of these firms is relatively higher then Tesco. Thus, current research is focusing on Tesco and identification of reasons due to which performance of the firm get deteriorate.

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Aim of research: To identify reasons for slow growth of Tesco in comparison to peer firms.

Objectives of research

Objectives of the research are given below.

  • To evaluate the effectiveness of business model of the Tesco.
  • To evaluate low price pricing strategy and its impact on the business firm.
  • To identify impact of legal cases on firm image among the customers.
  • To identify impact of economic condition of people on firm performance.

Research questions

  • What is the extent to which business model of Tesco is effective?
  • What impact low price strategy have on Tesco performance in terms of sales?
  • What impact court cases have on the firm image among the general public?
  • What impact economic condition of firm have on firm sales?

1.2 Identification of factors that contribute to selection of research project selection

Retail industry is one of the largest industry in the UK relative to other one. There are number of reasons due to which mentioned topic is selected for the research. Tesco is the one of the largest retail firm in the UK which have largest market share in the mentioned nation then also it is struggling for earning profit in the business. It is the strange that one of the largest firm is not able to compete with two small retail chains namely Lidl and Aldi. Thus, it was very important to identify the factors that impede growth rate of Tesco and make it incompetent in front of mentioned rival firms. If these firms will be compared with each other in terms of growth rate then it can be observed that Tesco current market share is 28.7%, ASDA market share is 16%, Morrison stands at 10%, Lidl stands at 18.9% and Aldi stands at 15%. These facts revealed that Lidl and Aldi are giving stiff competition to large size retailers. So, it can be said that Lidl and Aldi are giving stiff competition to Tesco and it was important to identify the reasons due to which such kind of things happened in the UK retail sector. These were the major factors that contribute to selection of research project.

1.3 Literature review

To evaluate the business model of the Tesco

According to Fernie and Sparks, (2014) business model have an immense impact on firm operations. This is because the way in which core business operations will be executed is ascertained by the business model which firm is following in present time period. Tesco main target is to make available product at low price to the customers and in order to do so it purchase items in bulk from producers are regular interval. Due to this reason it manage to save intermediary cost. Moreover, it get huge amount of discount from the suppliers and this enable firm to make available products at low price to the customers.

As per views of Fernie, Sparks and McKinnon, (2010) from past two to three years Tesco is facing stiff competition from its rivals. This is because rival firms like Lidl and Aldi are following unique business model which allow them to make available product at very low price to the customers. Like Tesco these retail chains are also purchasing products from producers but their business model is little distinct from same of the retail giant. Lidl and Aldi purchase items from the small producers whose products quality is good but are not well known in general public. Both firms have higher bargaining power then small manufactures and due to this reason same obtain goods at very low price from latter entity. All purchased items are sold by these firms under their own brand name. This is the reason due to which firms manage to sell items at very low price relative to Tesco.
To evaluate low cost pricing strategy and its impact on the business firm

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As per views of Christopher, (2016) low price strategy originate both threat and opportunity for the business firms. In current time period recession heavily affect the people income level and savings. There are large number of people that are unemployed and employed people have to pay their expenses. This reduce people spending capacity. In such a situation low price strategy is the best option that any firm is having in order to increase revenue in recession and grabbing as much as possible large market share in the industry. This strategy create a lots of opportunity for the business firms. However, same strategy also make competition fiercer among the business firms. This happened in the UK retail sector, as mentioned above due to recession people spending power reduced and in order to remain consistently in the market business firm’s start selling their products at low price to the customers. All companies that operate in the UK retail sector follow same strategy. Thus, profitability of the firms to some extent get reduced. Moreover, with advent of the Lidl and Aldi situation get changed and there offering at very low price forced Tesco to further reduce its product price which was not supported by its business model. Due to this reason it face heavy loss in its business. Thus, it can be said that low cost pricing strategy that is followed by Tesco and rivals play a very important role in deteriorating firm performance.

Contrary to this Grugulis and Bozkurt (2011) state that low cost price strategy is not responsible for the firm poor performance. This is because the steps that were taken by the rivals can also be followed by Tesco, but it remain stick to its business model and never try to alter it. It is simply a policy failure. Business firm does not make changes in its business and does not identify the extent to which due to unique business model German retailers can achieve huge success in the business. This is the main reason that is responsible for the failure of the Tesco in its business.

To identify impact of legal cases on firm image among the customers

According to Haskel and Sadun, (2012) on Tesco there are many legal cases which destroy firm image among the people. There are large number of cases that are filed against the Tesco on which court does not give verdict till the date. Some of the cases like horse meat and filing of case by university student are very popular among the people. Under the first case which is horse meat firm serve food items which contain contaminated ingredients. Apart from this real facts related to serve items were concealed from the people. On this ground firm was sue in the court and this damaged the firm image among the people. Apart from this, in case of students online order was placed by Tesco does not make available that order. When students asked for refund to the managers of Tesco money was not returned back. Both cases revealed that firm does not behave ethically in its business and cheat its customers. All these things overall create negative image of Tesco among the people. This is the reason due to which less number of people prefer to make purchase from Tesco retail store. All these things ultimately affect the firm profit to large extent.

To identify impact of economic condition of people on firm performance

Gustavsson and Stage, (2011) claims that economic condition of the nation put a very huge impact on the firm performance. This is because due to economic recession firms earn low profit or face loss in the business consistently. Due to this reason in order to survive in the market business firms curtail their workforce as same thing is observed across all nations of the world. So, the scenario that comes in existence due to this situation is that employed people have to bear burden of unemployed people. Due to this reason overnight people saving rate reduced which put negative impact on the people spending capacity. In order to combat with this situation business firms reduce their product price. Lidl and Aldi substantially reduce their product price relative to Tesco and this is the reason at rapid rate manage to increase their market share in UK retail sector.

1.4 Producing a research project specification

Aim of research: To identify reasons for slow growth of Tesco in comparison to peer firms.

Objectives of research

Objectives of the research are given below.

  • To evaluate the effectiveness of business model of the Tesco.
  • To evaluate low price pricing strategy and its impact on the business firm.
  • To identify impact of legal cases on firm image among the customers.
  • To identify impact of economic condition of people on firm performance.

Research questions

  • What is the extent to which business model of Tesco is effective?
  • What impact low price strategy have on Tesco performance in terms of sales?
  • What impact court cases have on the firm image among the general public?
  • What impact economic condition of firm have on firm sales?

TASK 2

2.1 Matching resources efficiently to the research questions

There are some of the resources that are needed to conduct research in respect to above mentioned questions. These resources are finance and time. Funds are required to collect primary and secondary data. In order to collect primary data one or two people need to be hired that will collect data from the respondents. Thus, fund is needed to meet their travelling expenses and compensation need to make to them for the work they are doing in the research. Time is another important resource that need to be used properly. On right time data need to be collected from the respondents so that they freely give answer to the questions. By effectively using all these resources research will be conducted in better way.

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2.2 Undertaking proposed investigation as per specification

Research design: Exploratory research design will be used in the present research. This is because in order to conduct research it is very important to develop broad understanding about research subject. It can be done only through exploratory research design.

Research type: There are two sort of researches that are conducted namely qualitative and quantitative research (Keightley, 2010). In the present research study qualitative research will be done by using thematic analysis method. In this way research will be done in better way.

Research approach: There are two approaches by following which research is conducted namely inductive and deductive. In the inductive approach observation is done and on that basis new theory is developed. Whereas, in deductive approach inverse happened. In present research inductive approach will be followed and on that basis meaningful information will be obtained.

Research philosophy: In research there are two sort of philosophy namely interpretivism and positivism. Interpretivism philosophy is followed when nonscientific research is conducted by the researcher (Danping and Lee, 2011). Contrary to this, positivism philosophy is used when scientific research is conducted by an individual. In current research, interpretivism philosophy will be used.

Data collection and sampling: Data will be collected through primary and secondary sources. Secondary data will be collected from the books, journals and magazines. Whereas, primary data will be collected from the 30 respondents that are employees of Tesco. Sample will be collected by following simple random sampling method. In this way, both sort of data will be gathered by researcher.

Data analysis: Collected data will be analyzed by using thematic analysis method. Under this charts will be prepared and interpretation of same will be prepared.

Ethical considerations: It will be ensured that data collected from respondents is safe and is inaccessible to any unauthorized person. In this regard appropriate measures will be taken by the research at his own level.

Research limitations: The main limitation of research is that small sample size is taken in the present research (Dane, 2010). Every attempt is made to ensure that reliable data will be collected from the respondents. Hence, it can be said that correct results will be obtained from the research.

Research scope: In the current research study Tesco firm is analyzed and in this regard secondary data is gathered from multiple sources. Questionnaire is distributed among 20 respondents. On this basis it can be said that there is wide scope of the project.

TASK 3

3.1 Description of methods to be used for analyze data collected

In order to analyze the data thematic analysis method will be used in the present research. By using this method collected data will be analyzed in systematic way. Table for each asked question will be prepared separately and charting of same will be done. In this way data will be analyzed in thematic analysis method.

3.2 Analysis of data

Do you think that in past few years Tesco competitiveness is reduced?

Tesco competitiveness is reduced

Interpretation

It can be seen from the table that there are 20 respondents who think that in past few years’ competitiveness of mentioned firm get reduced. There are 10 respondents who think that competitiveness of Tesco does not reduce. It can be said that majority of respondents think that Tesco is less competitive to its rivals.

Tesco competition on price with Lidl and Aldi

Interpretation

15 and 10 respondents are strongly agree and agree on the fact that Tesco failed to compete with Lidl and Aldi. There are only two respondents who are somewhat agree on the asked statement. Two respondent are disagree and one is highly disagree on same. It can be said that Tesco failed to compete with Lidl and Aldi on price factor.

People response on impact of business model on firm performance

Interpretation

10 and 9 respondents are strongly agree and agree on the fact that business model is the one of the most important factor which does not make Tesco competitive relative to rival firms. One respondent is somewhat agree and 5 respondents are disagree and highly disagree on same statement. It can be said that most respondents think that business model of Tesco negatively affect its performance.

Impact of economic environment on firms

Interpretation

Half of respondents think that economic environment put adverse impact on the firm performance. 9 and 3 respondents are agree and somewhat agree on same statement. 2 are disagree and 1 is highly disagree and believe that economic environment does not affect firm negatively. It can be said that fluctuation in economy affects people purchasing power.

Impact of court cases on firm image

Interpretation

There are only 25 respondent who think that cases on the firm that are in court heavily affect its image. There are only 5 who assume that court cases have no impact on firm image among people. Case was filed against Tesco for using horse meat in producing burgers. It was serious case of cheat with customers. Thus, court give verdict against the business firm which tarnish its image in the market. It can be said that cases that are on the firm in court affects its sales.

Low price strategy and profitability

Interpretation

Mixed response is received on asked statement as there are 16 respondents who think that low price strategy prove profitable for the firm because without using same firm in any manner cannot compete with its competitors. There are 14 respondents who think that low price strategy does not prove profitable for the firm. Hence, it can be said that people have mixed thinking on asked statement.

3.3 Recommendation

It is recommended to the business firm that it must change its business model and like Lidl and Aldi must try to make purchase from the small scale manufacturers. Firm must ensure that its managers are behaving in ethical manner. By doing so firm can prevent enhancement of number of cases in court. Firm must prepare attractive offers in order to create more and more new customers in business. By doing so firm can improve its performance. In this regard firm can follow psychological pricing method under which product can be prices at £99 instead of £100. By doing so firm can create positive psychology of customers towards its product and can enhance sales of same. Change in business model will lead to reduction in the purchasing cost and firm will be able to sale items at much cheaper rate to the customers. This will surely improve firm performance to large extent.

3.4 Recommendation for future research

It is recommended that for conducting present research sample of more than 20 will be taken. By doing so it will be ensured that data that is collected from respondents is reliable in nature and can be used to obtain relevant results.

References

  • Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
  • Dane, F.C., 2010. Evaluating research: methodology for people who need to read research. Sage.
  • Danping, L. and Lee, C.K., 2011. A review of the research methodology for the re-entrant scheduling problem. International Journal of Production Research. 49(8). pp.2221-2242.
  • Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new challenges in the retail supply chain. Kogan Page Publishers.
  • Fernie, J., Sparks, L. and McKinnon, A.C., 2010. Retail logistics in the UK: past, present and future. International Journal of Retail & Distribution Management. 38(11/12). pp.894-914.
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