Business at work

Through innovating and investing for its customers Tesco is leading the way in new forms of retailing. Tesco is the largest on-line grocer in the world, and through the rapid development of its e-business Tesco is now offering customers real choice and value on the internet.

Tesco is new 100% subsidiary company that runs company’s e-commerce business, which is an important part of company’s future strategy. Tesco should ensure that it has a real focus, the relevant resources and can move quickly.

Grocery home shopping business offers customers shopping on-line choice, value and convenience. Hundreds of new customers are registering every day and Tesco has the capacity to grow this business at a significant rate.

On the internet Tesco is not constrained by space as the store can be as large as you like. Company’s Internet customers now have an exciting range of non-food offers beyond food shopping - just a few clicks away. Tesco’s new book store offers a choice of 1.2 million titles, with 50% off top lines and Tesco has an entertainment store selling over 300,000 CD, video and DVD titles.

Tesco’s European business is focused on the Republic of Ireland and the four Central European countries of Hungary, Poland, the Czech Republic and Slovakia accessing a population of 68 million people. In Ireland the business is progressing well as Tesco near completion of rebranding programme. And in Central Europe Tesco continue its rapid hypermarket roll-out opening 11 stores and 1.3 million square feet in the year.

Regional focus and market leadership is a key objective of Tesco’s strategy in Central Europe. Tesco is the only retailer in all four countries - Hungary, Poland, the Czech Republic and Slovakia. Company’s portfolio now includes 19 hypermarkets totalling two million square feet of retail space. Tesco is meeting and stimulating demand in these markets as customers begin to recognise the better choice, quality and value that Tesco offers.

Tesco is pursuing an active programme of store openings which will take the company to 69 hypermarkets by the end of 2002, and will make the company the market leader across the region.

The hypermarket blueprint is the focus of Central European activities. At 100,000 square feet or more, hypermarkets give Tesco the space to offer customers extensive food and non-food ranges at outstanding prices.

Tesco is learning all the time. The format is internationally transferable and adaptable to different regions, and part of the success has been to supplement UK skills in grocery retailing and customer service with international expertise.

In the Republic of Ireland Tesco should continue to make good progress. Without the benefit of any new stores, sales increased by 6.1% in the year. Cumulative sales growth since acquisition is now 20%, moving market share to 23.3%.

Ireland and Central Europe are already a significant part of the Group employing 27,000 people which will grow even further as Tesco move forward.

Asia is the second international region where Tesco is expanding. The Tesco Lotus business in Thailand now has 17 hypermarkets and is well on the way to market leadership. In South Korea, through Tesco’s partnership with Samsung, Tesco now has two outstanding hypermarkets which are among the highest turnover stores in the Tesco Group. Now Tesco should open its store in Taiwan. These three markets will give to the company access to 130 million people.

In South Korea, a country where 50% of households own a PC and 78% a mobile phone, the retail industry has huge growth potential. In 1999 Tesco invested £142m in a partnership with Samsung, which brought two world-class hypermarkets operating under a top retail brand as well as a number of sites that Tesco will now develop. Tesco should t expand more hypermarkets in next years.

Tesco now should move rapidly towards global sourcing, which will enable company to buy quality products at the best prices and deliver them at the lowest cost. Tesco has already set up three sourcing centres in Hong Kong, India and Thailand. These now source 30% of Tesco non-food products (excluding Health and Beauty). Tesco should move this higher in next years, with the opening of a fourth sourcing centre in Central Europe.

As a student from Russia (I live in Kazakstan) I would like to see Tesco further expand its activities in Eastern Europe, and therefore why not Russia? At the present time there is nothing similar to Tesco on the Russian market, so I think Tesco won’t have any problems to get into it.

It is difficult to suggest alternative approaches for Tesco’s strategy because the firm is evidently doing very well. I would suggest however that Tesco continues to seek markets overseas to further develop its growing global presence.

As mentioned above, Tesco has been very successful over recent years, and it is therefore quite difficult to suggest “Alternative strategies”.

However, from my I might suggest the following:

· Expansion overseas – e.g. Russia.

· Increase market share – e.g. merge with Safeway. If Walmart took over Asda, why can’t Tesco take over Safeway, for example.

· Expand into new market / product – e.g. cars, travel.

· Rewards to staff, introduce a widespread – bonus or share ownership (if Tesco doesn’t do it yet)

A2

Evaluation of the effects that the alternative approaches might have on the structure and functions of the business, and how it achieves its objectives.

Alternative approaches, suggested in A1 can affect the functions of the organisation and how it achieves its objectives very much, but they won’t really affect structure of the organisation, because Tesco’s organisation structure is very good and there is no point of changing it.

Expand to Russia

If Tesco expands to Russia, in general, it is going to be only benefit to the company. Of course first Tesco will have to spend some money to build and open new supermarkets, but it is not going to be very difficult because there are no other companies like Tesco. Big advantage of expanding Tesco into Russian market is that straight way after it Tesco will definitely become a dominant firm on market, because there are not very strong competitors and very soon Tesco can become a monopoly on the Russian market. Disadvantage of expanding is that Tesco can get failure as well. Russian prices and British prices are very different, so if Tesco retails goods, which are more expensive then in others stores, not many people will by it.

Increase market share

Every single organisation wants to increase its market share, and the best way of doing it is to merge or take over another company. And I suggest that Tesco also could increase its market share by merging another retailer, for example Safeway. Safeway is not as big as Tesco, so it is not going to be very difficult to merge it or take it over. The advantage of the merger is that Tesco will increase its market share very much (by 10%) and two dominant firms of UK’s market joined together can easy become a monopoly. The disadvantage of it that it is not very easy to do, because now Tesco has 35% market share, and if it merges Safeway, Tesco’s market share will be increased up to 45%. But British law says that firm which has 45% of market share is monopoly, so competition commission won’t be happy about it and it will never agree with this merge.

Expand into new market

Non-food retailing now becoming a major part of Tesco strategy. As I said before, Tesco is increasing competition and offering customers real value and choice in all areas from sportswear to software, electricals to spectacles. But still, I think Tesco didn’t get into one very perspective market – cars. Cars are very important in our time and there is a very high demand for cars in the UK. I think for Tesco it is won’t be very difficult do get into this market, because Tesco is known as cheapest retailer in the UK, therefore people will continue to by everything from Tesco, and cars as well. But it could be easy and could be not, because currently there are many different firms on this market, and what I think is that there are could be some barriers to entry.

Rewards to staff – introduce a widespread

At the present time, many successful firms introducing new types of rewarding to staff. What I suggest is that Tesco also should introduce a widespread of rewarding to staff, for example employees could be awarded an annual bonus, which they can take in cash, vouchers or shares. The advantage of this type of payment is that if employees take shares, they will be interested in good work of the company and if they take vouchers, they will have to spend all salary in Tesco stores. So I think that it is very good way of rewarding with all benefits to the company.

Affects of the alternative approaches

As I mentioned before, alternative approaches, suggested in A1 can affect the functions of the organisation and how it achieves its objectives very much, but they won’t really affect structure of the organisation, because Tesco now has very good organisation structure with very good consultative and democratic management style.

If Tesco expands to Russia and merges Safeway, there are will be “Operation – Russia” department in the organisation chart. More people will be involved to work for Tesco, so Human Resources department will become bigger. After expanding to Russia Tesco easy can expand to other countries of Soviet Union such as Kazakstan, Uzbekistan, Kirgiztan and so on. It also will definitely help Tesco to prove itself as very strong multinational firm.

List of resources

1. The main resource was Tesco’s own web site: www.tesco.
2. I asked Tesco for some information and they sent me it.
3. Web site: www.bized.ac.uk
4. Business for Vocational A level – book.
5. Newspapers