Tesco is one of the world's most eminent chains of stores in the international food retail services that started as small scale domestic retailer and with its sustainable growth strategy, emerged as an international corporate giant.
Tesco's operations adhered on the lines of sustainable strategic management that marketed itself with a strong sense of community service and socially responsible business practices. Tesco, instead of aggressive investments, penetrated international markets by partnering with local regional partners. It strategically chose Asian and primarily South Asian markets as its first choice for expansion as these markets were relative not as mature as western markets. With convenience and quality of western food retail store and a market knowledge of strong local partners, Tesco immediately emerged as strong players in South Asian markets.
Tesco however twisted its strategy to enter in a much mature and aggressive U.S. market where Walmart was already a string market player. Tesco however went on with the risk, and started on a much smaller scale. The store grew over a period of time to pose tough competition for Walmart. Tesco however still needs to remove inconsistencies pertaining to its human resource and certain marketing strategy for long-term sustainability.
This paper aims at evaluating the future strategic direction based on the Ansoff Market Development strategy.
Evaluation and Justification of Selected Strategy
A business model is an important and integral part of the business a strategy of any firm whether big or small. The way a business model is developed determines and indicates the values, ethics and principles on the lines of which the business at large will be operating. It also indicates how the business is going to function and covers various internal and external dimensions of a business and the organization as a whole. The global competitive industry is getting highly competitive over a period of time with many international food retail chains primarily of European and American origins expanding on transnational levels. Within itself, Tesco has seen a lot of Product Development over a period of time with adding on newer products on its shelves thus expanding the product range it offers to its existing customers. Considering the aggressive expansions taken up by the competing retail chain stores, it is highly recommended that Tesco now moves onwards to the market development strategy. This has to be done by expanding into newer markets that offer lucrative growth opportunities for Tesco.
Tesco, Morrison and Sainsbury are all competing business in the food retail industry. While all of three have diversified their retailing business in their own way's food and grocery remains the primary focus of their services. All three of them are renowned as one of the strongest retail stores in the world. All three of these stores are based in United Kingdom and operate in similar fashion to Amazon and Tesco, their counterparts in the United States of America. All the three competing retail organizations are operating as PLCs and aim for sustainable growths as their long-term business strategy.
Tesco's business model, like the other two rivals is focused on achieving sustainable growth. Most of the business strategy is outlined and dominated by the firm's extensive indulgence in Corporate Social Responsibility. Tesco believes in attaining sustainable growth satisfying its customer and providing them value for their money in a socially responsible manner (Child 2002).
Morrisons and Sainsbury also aim for sustainable growth and are particular about corporate social responsibility; however they do the same in a different manner. They market themselves to their customers much more aggressively and according to the 'interest and psychology' of the relevant target market segments. Both Sainsbury and Tesco have an online retail service available as well. On the other hand, though Morrison's maintain an online website, it does offer little online shopping services (Epstein, 2004).
As stated earlier, Tesco's business model, though aims at sustainability and growth, but it is too much centred on corporate social responsibility. Corporate social responsibility in the contemporary corporate world is seen as an immensely important part of business strategy. It involves organizations taking responsibility of 'giving something to the society' in return of what they earn from them. Many organizations today use corporate social responsibility as a potential marketing tool, also referred to as cause related marketing. Although highly important, and also pursued by the competing firms, extreme dependence and centred focus on corporate social responsibility
Tesco's business model states Tesco's aim to 'be strong in everything' that the company sells. It however does not elaborate that in terms of what dynamics does the company aims to become strong. In order to be sustainable it is important that the company aims at strength in terms of quality of service which would automatically lead to financial strength (Kay 1996). Tesco's business model also lays too little emphasis on its employees and human resource, which remains an important contributing factor in the corporate world today.
Despite of this, outside the British markets, Tesco is much more successful as compared to its counterparts. Tesco's strong and innovative strategy of throwing smaller rivals out of the market has enabled it to make a foothold in various markets, particularly those in the Asian countries. However, even in Asia, Carrefour gave Tesco a tough competition due to its lengthier presence in the market. It, therefore became difficult for Tesco to break Carrefour's established consumer segment.
Since the early 1990s Tesco has used effective strategies to expand in the international market. Tesco's primary strategy has remained expansion through partnerships with regional partners who are well aware of local markets. This strategy however, failed in Taiwan, where Tesco could not find and effective partner.
Tesco's decision to enter the mature and aggressive U.S. market was a very risky gamble which eventually turned out in favour of Tesco. The most aggressive competitor of Tesco in the U.S. market was Wal-Mart with a stronghold in the market and Tesco had to find a way to penetrate in the market. Tesco decided to penetrate the market with the small scale Fresh and Easy retail stores which promised unmatched convenience and quality. Within an year Tesco emerged as a tough competitor for Wal Mart. The financial figures for Tesco according to Annual report of 2010 are given as follows:
Brief Discussion of Rejected Options
The future strategic road map that has been proposed for Tesco is the Market Development strategy. Through this strategy, Tesco can expand into newer markets taking its existing products and retail services.
Market Penetration strategy is in essence not strategically applicable for Tesco. The reason behind this is the fact that Tesco has been enjoying strong international presence for quite sometime and so are its competitors. Since it is not a new business in an existing market, it does not need to use a penetrative approach for the business growth.
While Product Development strategy could be an option, it is not recommended because the current market has become two volatile to launch something new in a highly saturated market. Due to the economic crunch the customers are already cutting on expenditures and there is negligible probability for Tesco to attain high levels of economies of scale to compete with the likes of Wal Mart and grab away their consumers while maintaining their own profit margins. Moreover, the current volatility of the industrial dynamics of the retail industry does not allow Tesco to take up such high levels of risk.
Since the economic crunch that started in the year 2007 in the United States of America had a strong trickle down effect all across the globe, the same industrial volatility persist in almost every region. For this reason the risks for moving with a new product into a new market increase exponentially due to which Diversification will also not be feasible option.
Current Strategic Analysis and Synopsis
Strong foothold in lucrative Asian markets that are in growth phase.
Stronghold in the retail services pertaining to online retailing.
Strong brand positioning of fresh and easy stores enables Tesco to give tough competition to established rivals.
Strong Customer relationship management and customer services along with community building vision enables Tesco to make its own role of middlemen stronger.
Varied options of modes of payment means more and more consumers can enjoy Tesco services.
Effective expansion strategies by forming liaisons and partnerships with local entities who know the regional market well.
The firm's greatest weakness lies in failure to introduce functional decentralization which hinders the process of innovation.
Technological breakdowns and website shutdowns are major problems that are inconvenient for customers.
Failure to keep costs low and control shipping costs that end up increasing the product's overall consumer price has resulted in loss of market share.
Tesco has immense opportunities to diverse in various new markets given the increased accessibility of technology.
Offering websites in other languages can enable targeting greater market.
Using social networking websites for interactive marketing strategies can help strengthening consumer relations.
Can develop specialized tablet and smart phone applications to market…