Tesco Food Industry INTRODUCTION
This report speaks in Volume about the Tesco Retail food industry in United Kingdom. The food and retail market in UK is heavily consolidated (Clarke, 2002). There are mainly five companies i.e. Tesco, Sainsbury’s, ASDA, Wm. Morrison and Somerfield that have more than 5% of market share. These companies face extensive competition as well. This report would explore the current trends and happening in the present food retail market of United Kingdom. Further, competitor analysis of TESCO is also being done to know the strategic direction of the UK food retailing sector .
WHAT IS HAPPENING IN THE UK FOOD RETAILING SECTOR?
1.Clarke R., 2002. Buyer Power and Competition in European Food Retailing. Edward Elgar Publishing.
Form the last couple of decades, significant changes in the UK food retail sectors has been witnessed. Emergence of new formats of stores, development of technology, increased prevalence of retail chains and improvement in logistics has increased the level of competition among the leading retail groups. In this book the author, Roger Clarke has contributed an understanding of behavior, nature and degree of competition between the food retailers. He said that the retail and buyer power is an important issue in UK. Most of the market in United Kingdom is being controlled by a handful of integrated store group. As a result, both the buying and selling side of market tend to become concentrated. He entails an overview of the retail power and buyer power in the European food market.
2.Finne S, 2008. The Retail Value Chain: How to Gain Competitive Advantage through Efficient Consumer Response (ECR) Strategies. Kogan Page Publishers.
Organization carry put various activities. These activities are linked together to create a value of the firm and together they form an organization’s value chain. When talking about the retail market of UK, many new firms has been entered successfully and they were able to establish as a sound product manufacturing companies. The author Sami Finne, in his book analyzed the alterations and modifications in the retail industry and evaluates the strategic options available with the companies as well. Various concepts of efficient consumer response are also being explored by him. Many companies in UK like, Tesco and ASDA were successful in creating value for their customers and captured most of the market.
3.Humby C and Phillips 2004. Scoring Points: How Tesco continues to win Customer Loyalty. 2nd ed. Kogan Page Publishers.
There are many few companies in UK retail food industry that enjoys a dominant position in the market. The one among them is TESCO. A critical analysis is being made by the author as how companies achieve customer loyalty by offering quality and innovative services. This excellent book is being written by various authors i.e. Humby, Hunt and Philips. In this book, the author speaks in volume about the dramatic story of various services being offered by TESCO. Basically it entails about the Tesco Club card i.e. how this concept was concept was being conceived, launched and developed. This information was very useful in conducting the research.
4.Jones , P. Comfort, and Eastwood 2005. Corporate social responsibility: a case study of the UK's leading food retailers. British Food Journal.
There are many leading retailers in UK who are making use of corporate social responsibilities as a means of marketing. Tesco, ASDA and Sainsbury are biggest food retail stores in UK and they ensure superior quality and value to their customers. This paper was presented by Peter Jones, Daphne Comfort, David Hillier and Ian Eastwood in the year 2005. The main purpose of this paper was to explore the issues of corporate social responsibility being addressed by the Food retailers of UK. These issues are important to understand, as this will lead the companies to change the concept of market and can be trend setter in the UK food retail sector.
7.Worsfold D , and Griffith C. J, 2003. A survey of food hygiene and safety training in the retail and catering industry. Nutrition & Food Science.
Today each and every person is concerned about health, hygiene and safety. In this context, the UK food retail market has developed various food management packs in order to help the retail businesses in complying with the regulations of food hygiene. These packs take care of different aspects like contamination, cleaning and chilling. With reference to this, the authors Denise Worsfold and Christopher J. Griffith, has presented a paper that speaks in volume about the training of staff in regards with the hygiene and safety. Safety should be maintained by every staff in cooking and preparations, cleaning, safe methods of operations and cross contamination.
TESCO – COMPANY INTRODUCTION
Tesco is a multinational retailer of groceries and general merchandise based in United Kingdom (Tesco Competitive Analysis 2005,2011). The company was established in the year 1919 and is headquartered in Hertfordshire; U.K. TESCO is the third largest companies in the world, which operates in almost 14 nations with 2,318 stores approximately. During its initial stage company has emphasized on retailing groceries, but later on company decided to enlarge their assortment of goods to furniture, clothing, electronics, financial writing services, software and telecoms(Newman and Cullen, 2002). The company was able to capture large amount of market share in UK through its rapid innovation and efficient operational management system. They have adopted many business strategies from time to time in order to became an outstanding international retail stores all around the globe.
Porter’s five force analysis
Porter’s five force modelis used to analyze the competitor and industry. It is a framework for industry analysis and business strategy development . It includes five forces i.e. Threat from the New Competition, Pressure of prices from the complementary products, Bargaining powers of the suppliers, Bargaining powers of the buyers and Rivalry among the existing competitors (Porter’s five forces for private health care industry, n.d). This will help Tesco to evaluate the competitor position in the market.
High thereat is likely to be faced by the competitive rivalries. Amazon, ASDA, super markets and Non-food retailers are probable rivalries of the TESCO. All the above companies are involved in the same concept like that of Tesco.
Bargaining power of the suppliers
Suppliers of the company enjoy little power; this is becauselarge super markets often dictate prices being paid to their suppliers. If the supplier does not agree with the prices of Tesco than they will be left with no retailer in the market.
Threats of new entry
There are many firms which imposes barrier to entry for many firms. These companies are Tesco, ASDA, super markets and Sainsbury. All these existing firms have created considerable barriers for the new companies to enter into the market.
Bargaining power of buyers
They enjoy high power over the prices of the product.For instance, if beans and other vegetables are expensive in Tesco than buyers will move to some other retail outlet and chain.
Threat of substitute products
Tesco has very lower amount of threats from their substitute. Company faces intense competition from super markets that can provide substitute product in the market (SWOT, PESTEL, Porter's Five Forces and Value Chain Analysis of Tesco,n.d). This will lead the prices of products of both the companies down.
Competitor analysis of TESCO
Company faces competition from many firms in the market. However, with the use of innovative technology and efficient operational management system, they were able to achieve the path of success and positioned itself as a dominant player in the market. TESCO faced competition from ASDA, Exxon Mobil, the Big Food Group, Safeway, Super markets and many other firms . TESCO has the largest share of market in UK of around 30.6%. However, ASDA is not far behind with 16.6% of the total market share in the UK. There are other companies whose market share is little and are far behind to give a strong competition to TESCO and ASDA.
With reference to the above analysis it can be concluded that Tesco was successful in holding a leadership position within highly disordered retail segment of UK. In such as situation, firms need to pursue both differentiation and cost leadership strategies. Through agile and lean supply chain management, Tesco has successfully achieved both. Company’s alignment with the business environment has been the major competencies and therefore it highlights the positive future outlook for the company (Huxley, 2003).
By over viewing the strategic direction of Tesco, it is being recommended to the company to slow down its process expansion plan and they should concentrate on refitting their existing stores and outlet. They can also improve their services by merging and forming a strategic alliance with the other potential companies in the market.
- Huxley, R., 2003. A Review of the UK Food Market.
- Porter’s five forces for private health care industry.n.d.
- SWOT, PESTEL, Porter's Five Forces and Value Chain Analysis of Tesco.n.d.
- Tesco Competitive Analysis 2005.2011.
- Tesco SWOT Analysis.
- Tesco’s IT strategy to support international expansion.