HOLY ANGEL UNIVERSITY
Angeles City

CASE STUDY:

Submitted by:

Aquino, Pauline Catherine
Catajan, Nikka Camille
Garcia, Mary Fe Yza
Maniago, Lizette D.
Nepomuceno, Anna Bettina S.

Submitted to:

Mrs. Maria Cristina Naguit

September 01, 2014

Summary

Tesco is the largest British retailer and is also the world's third largest grocery retailer with outlets across Europe, USA and Asia. The business began in 1919 with one man, Jack Cohen, selling groceries from a stall in the East End of London. Jack bought surplus stocks of tea from a company called T.E. Stockwell. T.E. Stockwell and Cohen combined their names to brand the tea Cohen originally sold TESCO tea. In 1929, the first Tesco store opened in north London. Tesco has expanded since then by a combination of acquisition of new stores, retail services and by adapting to the needs of consumers. Tesco has net profits (before tax) of around £3 billion. Tesco's primary aim is 'to serve the customer'. Keeping existing customers happy is important, as they are more likely to return. This is more cost effective for the business than acquiring new ones.
In the UK Tesco now has over 2,200 stores ranging from the large Extra hypermarket style stores to small Tesco Express high street outlets. Tesco's original product range of grocery and general merchandise has diversified to include banking, insurance services, electrical goods as well as telephone equipment and airtime. This move towards 'one stop shopping' means customers can meet all their purchasing needs from one place. Tesco has also expanded its customer base through its Tesco.com website which attracts one million regular users. As the company has grown, so has its workforce. From one man and a stall, Tesco now has approximately 280,000 employees in the UK and over 460,000 worldwide. To serve its widening markets it needs flexible and well-trained staff that can recognize the needs of the customer.

Statement of the Problem * How can TESCO stop their customers from deflecting to its competitors while having a greater wide of market share?
Tesco also faces many threats. Being number one means that you are the target of competition. One big threat that Tesco faces is the takeover of Asda by Wal-Mart. The reason this is a threat is because Wal-Mart is the largest Global Competitor and therefore has the necessary skills, resources experience and funds to cause Tesco problems. A major threat to Tesco current strategies of expansion is the government and the Monopoly and mergers commission.

Analysis of the Problem
Tesco is very big company with very wide range of products. They are selling products from food, books, clothing, and furniture to insurance or petrol. But is has its weaknesses. Tesco’s finance profit was impacted by bad debt form credit cards and to many household insurance climes. Also by trying to gain new markets other that food sector such as books they are facing obstacle because there are companies that are specializing already in this area such as Amazon that might provide better service and have more loyalty from customers in this area. Another example is when Tesco wants to offer phone services as lack of experience and expertise may lead to debts. Tesco is not focusing on specializing in one area, they trying to enter many different markets which could have a negative effect. In recent times Tesco is trying to do some online selling. However to start online selling like other leading online stores, Tesco needs to invest a lot of cash for the new web technologies, where Tesco is lacking in free cash at the moment as they have large amount of debts which can be destructive as when interest rates is increasing.

Alternative courses of Action * Tesco must use its market-leading position to attack rivals by cutting costs and reducing its profits margin to turn around an expected fall in sales. * Advantage: Tesco will be able to either win “substantial share” from the competition if they refuse to cut prices or “destroy competitors’ cash flows and profits” if they do, leaving it in a position to recover more quickly. * Disadvantage: Before rebuilding comes demolition. We believe a margin fall is inevitable and a margin reset is necessary. This may create a vicious spiral because it results in “consumer unfriendly” actions that lead to further sales declines and more margin pressure. * Tesco should stick with the strategy that they following at the moment about entering new markets with new products.
TESCO is aligned with digital strategy. This is a classic method of developing a digital strategy – to score different strategic options for digital marketing based on how well they align with the business strategy.There are many opportunities for further growth and so growing the UK core. Tesco Direct and the latest marketplace initiative are clearly aligned with this – Tesco has seen the growth of Amazon and eBay marketplace and is responding to these. * Advantage: Tesco is a powerful retail brand. It is known as a company that is value for money, very convenient with the wide range of products, all products in one place. There are over four million variations of its quarterly customer mailing to ensure that its discounts and offers are tailored specifically for the customer. * Disadvanatage: Tesco seems referring to leaders to help build the team and achieve growth rather than building a team of all employees. This may result customers to openly moan at the lack of staff. Recommendations We recommend that TESCO must just stick with the strategy that they following at the moment about entering new markets with new products. TESCO can use two of their major strategies: The CRM initiative- where based on the company’s statement of its core purpose of creating ‘value for customers (and) to earn their lifetime loyalty’ (author’s emphasis), the CRM programmed was seen by many to a model of best practice. The Club card- which rewards customers by giving them one loyalty point for every £1 spent with the company. And where the biggest benefits was the way in which it allowed the retailer to treat customers as individuals and, through its mailings, gave customers a sense of being recognized. Tesco buy in bulk which means they take benefit of economies of scale. That means they can lower prices when they want in order to keep the prices attractive and be competitive with stores such as Asda or Sainsbury. By creating loyalty packages such as club card they achieving loyal customers what is important and is as a consequence they are successful company. Learnings * Aquino, Paulene Catherine
I’ve learned that TESCO must use the defensive strategies, and will vary depending upon the nature of the competitor’s attack. If the competitor’s product costs less, strategies will be focused on the price-sensitive customer. The key is to identify the competitor’s strengths first, which customers those strengths are resonating with, and respond to that challenge * Catajan, Nikka Camille
I learned that a company's success depend only with the quality of the people of the organization and how the organization develop them. And from this, the employees of the organization can serve their customers effectively. * Garcia, Mary Fe Yza * Maniago, Lizette
I learned that Tesco doesn’t need to complicate things to achieve the powerful approach for managing the corporate performance by keeping the performance framework simple and easy to understand. * Nepomuceno, Anna Bettina S.