Analyze the Challenges Faced by Tesco in the Competitive Marketplace (GC01504)
Abstract
The aim of this study is to critically analyze the problems faced by Tesco. Then, this study provides recommendations for Tesco on how it can improve its overall business performance along with sustainable competitive advantages. The objectives of this study are a) To analyze the operational management problems faced by Tesco; b) To analyze the marketing problems faced by Tesco; c) To analyze the strategic management problems faced by Tesco; d) To analyze the financial problems faced by Tesco; e) To analyze the human resource management (HRM) problems faced by Tesco; f) To analyze the business environmental problems faced by Tesco; and g) To provide recommendation for Tesco on how it can improve its overall business performance along with sustainable competitive advantages.
The finding of this study shows that Tesco is still now dominating the grocery and general merchandise retail market in the UK, but it is now facing great challenges in a competitive marketplace. According to Yahoo Finance (2017), the key challenges of Tesco in its current operations are a decrease in revenue and profits, a decrease in stock prices, an increase in staff turnover, and a decrease in market share. Tesco is also problems with skills gaps and skill shortage, logistic services, quality in products and services, strategic issues, and leadership and management.
This study provides several recommendations for Tesco. Tesco should hire more experts and experienced staff with training and development to improve the effectiveness of research and development (R&D) activities. Tesco should make more attractive its store layouts, increase product ranges, and promotional and marketing activities. It can bring new ideas and innovation in its product and services, operation and marketing.
Tesco can apply Porter’ Generic Model to gain sustainable competitive advantages. Tesco can apply the ‘Blue Ocean Strategic Model’ to overcome its strategic gaps and limitations. Tesco can apply Maslow’s hierarchy of needs theory and Herzberg’s two-factor motivation to increase Tesco can apply a mix of visionary, charismatic and transformational leadership styles to develop its HR strategies and planning staff motivation, retention, performance and productivity. Tesco should monitor and review the performance of research and development activities and should take action as required.
Acknowledgment
I always bless my honorable parents (both mother and father) to support me from childhood with their guidance, suggestion, and finances. Their supports have helped me a lot to complete my degree at the UK University. Then, I would appreciate my honorable supervisor who has assisted me a lot by suggesting, guiding and providing effective feedback. Finally, many thanks to the writers and publisher of books, journals and websites from where I collected lots of information to accomplish this research study.
Chapter 1: Introduction
1.0 Introduction
Case study research gives an understanding of a complex object or issue and focuses on a detailed contextual analysis of these issues/events and their relationships. Social scientists recognize case study research as qualitative research that examines real-life situations applying several theories and models (Saunders et al., 2015). This chapter outlines the introduction and overview of a case study research for a business organization, named Tesco Plc. Therefore, this chapter outlines the research background and research problems along with research aims and objectives, research questions, the significance of the research, and research structure.
1.1 Background of the selected case study
Tesco is the biggest multinational grocery retailer in the UK. It was founded in 1919. It is the third biggest retailer in the world in terms of profits and the ninth-biggest retailer in the world in terms of revenue. It is now operating in global markets (including EU and Asia) covering 12 countries including Thailand, Hungary, and Ireland. Tesco is dominating the UK grocery and general merchandise retail market in the UK, where it has about 28.4% of the total market share. Tesco has now diversified geographically into several areas including grocery and merchandise, clothing, electronics, books, software, toys, petrol, furniture, internet services, telecoms services, and financial services. Tesco services millions of customers every week in its 6553 stores by over 476000 dedicated and devoted workforces. Tesco’s revenue has increased from £53.9 billion to £55.9 billion in 2016/17. However, Tesco’s operating and net income are in minus figures in 2016/17, that has decreased from £1072 million and £202 million in 2015/2016 to £1017 million and £145 million respectively in 2016/17 (Tesco Preliminary Report, 2017). Therefore, Tesco needs to conduct research on its business case to find out the solutions to the problems it is facing.
1.2 Research problems
Tesco is still now dominating the grocery and general merchandise retail market in the UK, but it is now facing great challenges in a competitive marketplace. According to Yahoo Finance (2017), the key challenges of Tesco in its current operations are a decrease in revenue and profits, a decrease in stock prices, an increase in staff turnover, and a decrease in market share. Tesco is also problems with skills gaps and skill shortage, logistic services, quality in products and services, strategic issues, and leadership and management.
1.1.1 Operations management-related problems
Tesco’s logistic process and business operations are facing challenges. The key challenges are coming from rapid changes in the retail grocery industry and technological developments (Esper and Russell, 2014). Tesco is facing difficulties to ensure quality customer service (ResearchoMatic, 2017). Then, Tesco’s logistic service is still now human-related, where many of its competitors are using logistic service for delivering products to the customers. This is the cause of losing Tesco’s 30% sales value (Zhao, 2014). The ineffective logistics strategy of Tesco is unable to maintain stock information properly, which creates organizational conflicts and complexity in Tesco’s business and management (Barbradozier, 2016).
1.1.2 Marketing related problems
According to LLB Reporter (2016), Tesco is now considered as the second-worst performance in the UK grocery retail industry. According to a report published by Yahoo Finance in 2017, Tesco is losing its market share and revenue in the competitive market. In 2016, it lost 0.8% of market share (from 28.3% in 2015 to 27.5% in 2016) and 2.7% of revenue. According to Silverthorne (2010), Tesco did costly mistakes when it entered the US market in 2006. For instance, Tesco opened some of its Fresh & Easy stores in the US on the wrong side of the road, failing to select the right place for its stores.
1.1.3 Strategic Management related problems
Many of the customers now take the discounters (including Lidl and Aldi) as the socially acceptable places to shop. Tesco has had to cut £200 million price cuts in response to these new entrants that have greatly affected Tesco’s profit margin (ResearchoMatic, 2017). The increased growth trend of internet and convenience stores has affected the performance of Tesco’s big stores. This means Tesco’s big stores are becoming “White Elephants” as the customers are turning their eyes to the internet and convenience stores for smaller top-up shops (Barbradozier, 2016). Then, Tesco’s 20-year-old slogan “Every Little Helps” is not now enough to hold its brand in a superior position. In addition, Asda’s “everyday low price” and Sainsbury’s “value and values” give the shoppers that Tesco is not the best at either quality or price. Then, Tesco Clubcard has failed to achieve its goals in many cases (Esper and Russell, 2014).
1.1.4 Finance related problems
According to Tesco Preliminary Report (2017), Tesco’s operating and net income have decreased from £1072 million and £202 million in 2015/2016 to £1017 million and £145 million respectively in 2016/17. In addition, Tesco’s share dropped by 11.9% to 153p in 2016 (Yahoo Finance, 2017), which was the lowest value since 1997 and made Tesco the second worst-performing stock in FTSE100 (LLB Reporter, 2016). Yahoo Finance (2017) said the rise of new entrants (mainly Aldi and Lidl) is the main cause of the permanent drop in profit and share prices of Tesco. According to Tesco Preliminary Report (2017), Tesco has also failed to recover its disappointing figure of stock and share prices in 2016-17. Morningstar (2017) said Tesco’s stock has been overvalued. Additionally, food retailing is a highly slower process. Therefore, it will take time and effort to rebuild the profit margin, stock and share prices.
1.1.5 HRM-related problems
Tesco is facing challenges with its human resources. Glassdoor (2017) said high staff turnover in Tesco affects its business performance significantly. Maxine Dolan, the head of retail training, high employee turnover is unavoidable in Tesco. Thus, Tesco has less concentration on conventional academic qualifications. Rather, Tesco always focuses on the right people for the right positions and provides training to improve productivity and performance (Dolan, 2016). In addition, Tesco is facing skill shortages and skills gaps. This is because Tesco has failed to attract and retain talented graduates. Many talents leave Tesco within a short time after they joined. They believe Tesco fails to recognize its contributions. In addition, Tesco has weaknesses in visionary leadership and management practices. Many staffs also believe there are lots of ‘land grabbing’ and ‘political games’ in Tesco workplace (Glassdoor, 2017)………
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