Analyzing Competitive Environment and Logistical Operations of TESCO

This article analyzes the competitive environment of TESCO using Porter's five forces model and discusses the inbound and outbound logistical operations of the company.

Managing Information and
Technology

Table of Contents
INTRODUCTION...........................................................................................................................3
Background..................................................................................................................................3
Product and services....................................................................................................................3
MAIN BODY...................................................................................................................................4
Analyse the competitive environment.........................................................................................4
Inbound and Outbound Logistical operations of TESCO............................................................6
Support Activities in Porter's Value Chain Analysis of TESCO.................................................7
TESCO's Value Adding Services ...............................................................................................8
Reflecting how TESCO can improve its operations by using innovative IT ideas ....................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Tesco is the third largest retailer in the world in terms of gross incomes. In the middle of
1990s, Tesco opened its stores in 14 countries across Asia Europe, and North America and Tesco
overtook Sainsbury for becoming market share leader in the UK food market. Tesco provide
consumer goods, telecommunications and financial services online and grocery home shopping
service at home. Tesco is involved in the business that offering food, non-food and other
retailing services. It operates various type of grocery store formats that offer trade good, such as
fresh produce, wines and spirits, in bakery stores, ready-meals and sandwiches. The company is
developing, reacting to new thing and opportunities and many introduce.
Background
It is the largest supermarket in UK. Tesco is founded in 1919. The founder of Tesco is
Jack Cohen son of polish jewin Tailor. The first Tesco store was opened in 1929 in burnt oak,
Edgware Middlesex. UK trading operations of Tesco is the biggest within the group with all
over 3300 stores and more than 3,00,000 employees (Tesco PLC SuccessStory, 2019).
It is listed in London stock exchange market. Tesco at present control 30% of the grocery market
in UK. In 1960, Tesco accepted special division in its bigger stores called Home 'n' Wear to
conveyance higher-margin, non-food merchandise, including clothing and home items, and in
1956 Tesco work with 900 supermarkets or stores. Tesco has policy of satisfying content and
ability and affecting motivations in view of bonus for substance better development and high
returns for stakeholders.
Product and services
Tesco Extra — Tesco extra shops are established in outside hypermarket that product range
widely in the range, even though some outside area is the heart of that location. The Tesco's
biggest shop of Tesco extra is in England.
Tesco Superstore- Tesco superstores are also a largest supermarket like a Tesco extra
hypermarket and keep a little of quantity of non-food items or provision of grocery. Tesco
superstore are only sold a branded product.

Tesco express- Tesco express store are sold such product as sweets, biscuit, fizzy drinks, and
chocolates (Tesco PLC — Company Profile, Information, Business Description, History,
Background Information on Tesco PLC,2020). Tesco express shop is vicinity of small retail
business shops that stock scope of everyday items like- coffee, snack foods, soft drink tobacco
products.
Tesco metro –These shops are situated in the outside city areas' railway station and inner city
area of high street. Tesco metro shops are shape and size between Tesco superstores and Tesco
express.
One Shop — It is the smallest shop in UK divided into many small shops that are too smaller
from Tesco express shops. In these shops selling product rate are higher and one shops are run as
a separate shop. It is open each and every day for selling small type of grocery items, alcohol and
newspaper.
Tesco made great planning or control all over its capacity supply chain demand chain and
quality for achieving their long term goals and objective. Tesco has clear organizational structure
and give many job opportunities (management, graduate, school-leaver and apprentice posts).
MAIN BODY
Analyse the competitive environment
Porter's five forces is a model to understand the competitive forces which have an
influence on the company so that the organization can find out their strengths and weaknesses.
This can be used in any segment which is going to be very helpful for the organizations so that
the company can have a better functioning for themselves. This is a competitive strategy for
organizations so that they can understand and make decisions for the future accordingly. The five
forces which are included in this factor are threat of substitute, competition in industry, power of
suppliers, power of customers and potential of new entrants. This is going to be a threat for the
organization but if there are decisions which are made accordingly then Tesco can have a better
functioning for themselves. Tesco is using technological information so that they can reach out
the customers better and faster than the competitors in market.
 Threat of substitute (Medium)
Tesco is providing the customers with low prices and low quality of products so that they
can have a better competitive advantage in market. Tesco has Sainsbury's and ASDA has the
major competitors in market and that is why Tesco has to make more decisions and use strategies

so that they can have a competitive advantage. There is no maximum profit which Tesco can
have so that they can have a competitive advantage. Tesco is using technologies in organization
so that the productivity of the organization can be maintained and the needs and demands of the
customers can be meet from time to time (Tesco Supermarket: PESTLE, SWOT, Porter's Five
Forces and Value Chain, 2020). Over the last few years Tesco has improved the customers
experience by using technology so that the organization can have a competitive advantage. There
are a lot of small stores in organization which can be a great threat for Tesco even more than the
bigger companies in market.
 Rivalry among existing firm (High)
There are very few organizations which can compete with Tesco and have a large market
share like Tesco has made for itself. ASDA and Sainsbury's is a great threat for Tesco but there
are a lot of factors which can affect the organization negatively which is what is making Tesco
have a threat in market. There are a lot of products which are unique in nature which Tesco has
created for themselves which is a great advantage for the organization. Pricing and technological
changes in the organization is making Tesco have a strong competition for themselves which is a
great advantage for Tesco. The profitability in organization is low because to have an upper hand
on the competitors Tesco has reduced their prices a lot which is making the organization not
meet their objectives and goals. Jack's was launched by Tesco so that they can compete with the
other organizations like Lidl and Aldi but they did not reach their objectives and goals as
expected.
 Power of suppliers (Low)
There are 2,500 suppliers of Tesco in United Kingdom and more than thousands in all
around the world which is a very important factor for the organization because this will give
Tesco a competitive advantage and they will have a power on suppliers (Rahman, 2017).
Technology in Tesco is very good which is helping the company have a competitive advantage
because all the details are saved and the functioning of the suppliers in Tesco gets easier.
Bullying is being used by Tesco which is why the company has to have a control on the company
so that the organization can have a better functioning for themselves. There is a huge supplier
control of Tesco in organization which is why they can make a profit from the pricing strategy
they are using for attracting more customers in the company. Tesco has learnt this from Wal-

Mart and Nike as to having third supplier is very important in the industry so that they can get
their supplies from time to time.
 Power of customers (High)
The demands and needs of customers keep changing from time to time which has to be
maintained by the organization because there is a lot of competition in the market which Tesco
has to meet and get the competitive advantage. There are a lot of offers which are being provided
by tesco so that they can have a better functioning for themselves which is a very important
factor for them. Sainsbury's and ASDA are meeting the demand of the customers from time to
time with the help of technology which Tesco also has to get so that they can have a competitive
advantage which is a very important factor (Beynon‐Davies, Jones and White, 2016). There is a
lot of innovation and new products which are coming in the market which Tesco has to get so
that the customers remain loyal in the organization. This can be fulfilled by getting more
technologies in organization so that Tesco can compete and have a sustainable market for
themselves.
 Threat of new entrants (Low)
There are a lot of new entrants which can enter the industry which is going to be a great
threat for Tesco but there is a lot of technological factors which Tesco has used in organization
so that they can have a competitive advantage in market. Technology will help Tesco to have a
better productivity and be able to meet their objectives and aims from time to time. There is a lot
of investment which is required to enter this industry which Tesco has therefore they have a
better functioning for themselves. The network Tesco has created for themselves so that they can
have a better market and using online marketing for them to expand themselves and make the
customer satisfaction high the competitors can not entire this industry. Innovation has to come in
Tesco easily and this is only possible when the company uses technology to have a better
functioning for themselves and then Tesco will be able to compete with Sainsbury's and ASDA
in the market (Zhong and et.al., 2017).
Inbound and Outbound Logistical operations of TESCO
Inbound Logistics: TESCO's inbound logistical operations include the supply of thousands of
goods and services to approximately 8000 TESCO stores, all around the globe. TESCO's
logistical operations are spread widely around the world and have to perform effectively and
efficiently in order for retail stores to become productive themselves. TESCO applies the

principle of economies of scale to its large scope operations and results in creation of major
value for TESCO. TESCO invests periodically into increasing its logistical capacity in order to
make exploit economies of scale even further. For example, TESCO invested in its logistical
operations in 2013 by by purchasing trailers with increased capacity to carry 51 cages as opposed
to previously used 45 cages. This investment increased TESCO's logistics productivity by 13%
(Tesco Value Chain Analysis. 2016.).
Operations: TESCO operates in 3 major categories:
Retail: These are the core operations of TESCO, functioning in 11 countries the scale of
TESCO's operations worldwide is huge. The company operates various different retail stores
catering to people in multiple markets such as Metro, Express, Extra, Superstore. TESCO has
also expanded its operations of retail stores by offering customers TESCO's own online retail
store.
Manufacturing: TESCO manufactures and sells its own everyday value products in its retail
stores. These particular products are priced at a slightly lower cost to regular products of the
same category in order to provide a strategical advantage to TESCO's home made products.
Recently, TESCO launched 76 brand new product lines under seven new brand names in an
effort to reenergise its ageing home made products.
Banking: TESCO has also expanded into the financial planning sector by operating its own
TESCO Bank which serves more than 7 million customers. In 2014, TESCO Bank generated
profits of 194 million pounds (Tesco Value Chain Analysis. 2016.).
Outbound Logistics: TESCO also generates value by using flexible and cost effective methods
of delivery in its outbound logistical operations. TESCO's retail chain provides multiple home
delivery options to the customers for purchases made via their online store. The store also
provides delivery services to customers who make their purchases via their physical stores in
select locations.
Support Activities in Porter's Value Chain Analysis of TESCO
Technological Development: Technological development in the operations and functioning of a
business like TESCO can have a massive impact on TESCO's productivity, efficiency and
profitability. Newer technological developments can be used by TESCO to launch fresh
innovative products, improve products and services currently provided by TESCO, improve
customer experience during shopping at retail stores and can also be used to stay ahead of the

competition in the market (Koc and Bozdag, 2017). For example TESCO has used technological
development of the internet to expand its operations and market share by opening an online
TESCO store which can service customers who are unable to physically come down to the retail
store, offering various discounts and delivery services in order to better satisfy customers and
grow a loyal customer base. TESCO has also applied new technological developments in its
supply chain model by installing automated software systems which record and regulate the
amount of inventory products TESCO houses daily at their warehouses and depots. These
systems manage the optimum amount of products required by retail stores, in the warehouses in
order to maximise efficiency and reduce inventory costs related to accidental contamination or
damage. TESCO's research and development division is also experimenting with AI guided self
checkout counters which will decrease TESCO's operational and staffing costs significantly
while increasing customer satisfaction levels in the long run as there would be no delays due to
human errors during checkout. All these technological developments at TESCO have the
potential to add massively to TESCO's current operations and increase their productivity,
profitability, effectiveness, efficiency, market share and customer satisfaction levels.
Human Resource Management: TESCO knows the importance of good human resource
management in order to maximise a business's productivity, profitability and efficiency.
TESCO's human resource management division takes care of many functions which are of
utmost importance in order for TESCO to perform at optimum levels. Not only does it recruit
and select potential employees for TESCO it also engages in training and development of
employees in order to improve their performance and functioning (Simatupang, Piboonrungroj
and Williams, 2017). TESCO's human resource division records and regulates all business
transactions that TESCO undertakes with respect to incomes, purchases, expenses etc. It also
maintains employees professional records along with their tax debits. TESCO's human resource
division also ensures the business's adherence to mandatory legal rules and regulations such as
labour laws, employment laws, health and safety act etc. in order to provide employees with a
safe healthy work environment in an effort to increase their motivation and job satisfaction
levels.
TESCO's Value Adding Services
After Sales Services: TESCO provides great services to customers even after they have
purchased TESCO products. TESCO provides various additional warranties and damage

protection schemes on a range of its electronic and electrical products. TESCO also provides
customers option to return and exchange faulty goods purchased within a week at any of their
stores. These after sales services provided by TESCO help a lot in increasing customer
satisfaction levels as well as increasing customer loyalty towards TESCO.
Customer Care: TESCO also provides customer care services to all its customers both via the
phone and online on social media platforms. TESCO's online customer care has been received
very well by the customers due to their fast response time, ability to solve issues and problems
faced by customers and addressing customers with the same values and respect that TESCO
retail store managers provide (Amara, Halilem and Traoré, 2016). Customer care services bridge
the gap between TESCO and its customers and help increase customer satisfaction and loyalty
levels.
Value through Advertisements: TESCO also employs and hires multiple celebrities and stars to
endorse and advertise their products both online and offline. These celebrity endorsements also
add value to TESCO products on their own and help market them to a wide audience.
Online Stores: TESCO also operates its own online store in order to service a wide range of
customers. TESCO's online stores also provide multiple scheduled delivery options for
customers to choose from based on their preference. TESCO's online store adds great value to
its operations by effectively increasing TESCO's productivity, profitability and market share
serviced.
Reflecting how TESCO can improve its operations by using innovative IT ideas
Although TESCO has implemented some technological development of the last decade
into its operations and has also managed to reap some benefits provided by them, there is still a
huge scope for TESCO to improve upon its implementation of innovative information
technological ideas and products in order to further increase its productivity, profitability,
market share and customer satisfaction levels respectively.
Though TESCO has opened and begun operating its own online store, it still lags behind
competitor's such as ASDA's online alternative solutions when comparing their performance and
profitability. This means that TESCO upon improving their services provided on online stores
can significantly increase TESCO's productivity, profitability and market share values (Vardar,
2018). TESCO is recommended to try and make their online store less aesthetically cluttered and
more easy to navigate for non tech savvy customers. TESCO is also advised to also provide

unique and novel products on their online stores in an effort to attract even larger amounts of
customers to the targer site. Based on the type of choices alternative online stores provide to
customers, it is recommended that TESCO's online store should also provide the option of EMI
payment, cash on delivery and free shipping in order to better satisfy its customers requirements.
TESCO is also advised to research into the newly surfaced technology of self checkout
counter systems. Implementation of these self checkout counters at TESCO's retail stores will
result in drastic decrease in the operational and staffing costs incurred by TESCO in the long run,
as these counters would render most current employees of TESCO redundant, saving costs.
TESCO should research into these emerging technologies in order to increase its futire
productivity, profitability, market share and customer satisfaction levels.
TESCO is also recommended to make use of tracking software in its retail and online
stores which can track and record customers preferences, requirements and personally favoured
products in an attempt to better service the customers in the future. Such tracking software can
also recommend suitable additional products to customers on the basis of history of their
purchases, for example recommending phone cases on the purchase of a smartphone or
recommending assortment of ties and watches on the purchase of a shirt or recommending
additional albums by an artist on the purchase of his latest albums (Pal and Altay, 2019).
Implementing these tracking software systems to their online and retail stores will help TESCO
better service their customers, increasing their productivity, profitability, customer satisfaction
and loyalty levels.
In these ways TESCO can better implement innovative information technological ideas
and solutions into their operations and functions in order to maximise their productivity and
profitability measures while also increasing their total market share, customer satisfaction and
loyalty levels.

REFERENCES
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value chain approach. European Journal of Operational Research. 257(2). pp.559-
567.
Pal, R. and Altay, N., 2019. Identifying Key Success Factors for Social Enterprises Serving
Base‐of‐Pyramid Markets through Analysis of Value Chain Complexities. Journal of
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