Tesco's New Product Development in a New Market

Based on the provided content, Tesco is a global retail organization that has successfully developed its new products in new markets. To achieve this goal, Tesco needs to set a market plan to attract its large customer base with all its new products. Effective environmental analysis is necessary as the organization needs to scan the environment for proper investing its financial resources.

ORGANIZATION
ANALYSIS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
COMPREHENSIVE OVERVIEW OF ORGANIZATION............................................................1
IDENTIFYING ORGANIZATION CURRENT STRATEGIES....................................................4
IDENTIFICATION OF REGULATORY FACTORS THAT IMPACT HRM PRACTICES........6
IDENTIFICATION OF ENVIRONMENTAL FACTORS.............................................................7
RECOMMENDATIONS FOR THE STRATEGIES TO BE IMPLEMENTED............................9
RECOMMENDATIONS ON STRATEGY IMPLEMENTATION ON TESCO.........................10
MARKET PENETRATION-...........................................................................................................10
MARKET DEVELOPMENT-.........................................................................................................11
PRODUCT DEVELOPMENT-......................................................................................................11
DIVERSIFICATION-.....................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

ILLUSTRATION INDEX
Illustration 1: Tesco sales comparison.............................................................................................2
Illustration 2: Financial performance of TESCO.............................................................................3
Illustration 3: Porter Generic Strategy.............................................................................................5
Illustration 4: SWOT and PESTLE analysis...................................................................................8

INTRODUCTION
Organizational analysis is considered as a process of reviewing the development, working
environment, work force and functioning of business organization. A periodic detailed
organizational analysis is necessary for the business enterprise to identify the problems or to
assess the inefficiency if it has arisen within corporate (Cano, Carrillat and Jaramillo, 2004). By
considering this topic, this present report is based on Tesco which is a British multinational
grocery and retailer company. Tesco is the third largest retailer in the world in terms of profit and
second largest measured in revenue. Mentioned company has supermarkets, hypermarkets and
superstore which focus on satisfying the needs and demand of customers. This present report
focuses on comprehensive overview of organization along with the current strategy of business
enterprise. Further, this report will have major emphasis on micro and macro environmental
factors which can affect the organizational performance. This report will also show some
recommendations in order to overcome the strategies for better performance and outcome.
COMPREHENSIVE OVERVIEW OF ORGANIZATION
Tesco is a public limited company which has its retail stores around the globe. Further,
organization is a grocery market leader in UK and has a great extent of market share. Basic
overview of company is given as below:
 Name- TESCO plc is a grocery and a merchandise retailer.
 Employees- Mentioned firm is having more than 500000 employees who serve millions
of customers every week with their retail and online operations (Doole and Lowe, 2012).
These employees are giving their productive services whole around the world in order to
satisfy the needs and demand of their customers.
 Core business- Tesco has its operations around the globe and sells major retail products
in its retail store. Further, it deals in the food products which generate major parts of their
sales. Company also deals in the durable goods like home appliances, electronic items,
etc. Further, organization has its main profit from soft and consumable goods which
includes clothing for men and women, footwear, fabrics, stationery, cosmetic and many
others.
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 Industry- Tesco is a retail organization that operates in different countries with their
excessive goods and services to satisfy the needs and demand of customers at an
affordable price.
 Organization turnover- Tesco is the third largest retailer in the world measured by
profits and second largest in terms of revenue (Hitt, Ireland and Hoskisson, 2012).
Organization’s sale is significantly increasing every year as firm tries to give the best
products and services to consumers. In 2013, Tesco sales was 70,712 £m which has
increased up to 70,894 £m in the year 2014. This shows the effective performance of
corporate both through their retail and online operations. Till now as year has not ended,
Tesco is giving its best to improve its sales as currently, they have touched 69,654 £m
sales.
Illustration 1: Tesco sales comparison
(Source: Tesco profits break through £2bn, 2015)
Further, organization’s trading profit in UK lied at 2,272 £m for the year 2013 which
reduces up to some extent in the year 2014 and stood at 2,191 £m as year has not ended and
organization has generated almost 467 £m profit for the first quarter of year and rest is about to
come (Varadarajan, 2010).
From the above sales and figures, it is clearly evident that Tesco is focusing on giving the
best results as days are passed by and they are generally trying to increase more revenue and
profits. Further, it is also evident that they are giving stiff competition to their major competitors,
that is, Asda and Walmart.
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Illustration 2: Financial performance of TESCO
(Source: Tesco urged to shut more stores after record £6.38bn loss, 2015)
 Customers and Suppliers- Tesco has prepared a simple business model for their
suppliers by standardizing the payment terms. Tesco in order to improve innovation for
the customers by encouraging an effective collaboration between the retailer and also its
supply base. Further, suppliers who deliver goods up to £100,000 for the year will be paid
within 14 days after the end of financial year. Further, individuals who trade goods want
to be a supplier of such a big multinational company as their goods will be placed in the
Tesco’s shelf (Zhou, Yim and Tse, 2005). Moreover, Tesco builds a strong relationship
with their customers and also wants that their suppliers would produce quality of goods
and services in order to satisfy the demand of their large customer’s base.
Customers are the king of market and whatever Tesco sells is by considering the needs
and demand of their large customer base. Further, just to satisfy the customers, mentioned
company employs more than 500,000 employees who serve millions of people every week in the
retail store as well as with online selling, it is satisfying many nations around the globe. Further,
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company has effective customer service policy that understands the customer’s grievance
efficiently and effectively.
IDENTIFYING ORGANIZATION CURRENT STRATEGIES
Organizations like Tesco enjoys long term success as they come under the category of
focused business ventures. Mentioned company has a core vision that remains constant while
their strategies and practices change continuously as changes made by government regarding
rules and regulations. Organization’s vision is an inspirational review as it provides a benchmark
for the mentioned company regarding the goals that they have to focus (Alon, Jaffe and Vianelli,
2012). Their vision is to be the most highly valued business organization in terms of serving to
customers and communities in which Tesco operates, builds more loyal and committed
employees and generates more shareholders along with rewarding them with the handsome
dividend. Moreover, organization’s mission is to create value for customers and to earn their
lifetime loyalty by delivering them quality of goods and services forever at an affordable price.
Tesco has different strategies for their different operations around the world because rules
and regulations in one country might not be the same in other. Further, Tesco's UK stores are
divided into 6 major categories which are generally differentiated in terms of size and range of
products to be sold. These stores are:
 Tesco Extra
 Tesco Express
 Tesco Superstores
 Tesco Homeplus
 Tesco Metro and
 One-stop
Further, demand of the customer is that, organization should provide quality of raw
material and services in order to satisfy their daily needs and wants (Navarro and et.al., 2011).
Further, customers focus is on getting best of services from employees and employee should be
polite and genuinely help the customer whenever they are stuck somewhere to find a specific
product. This will improve corporate personality so that mentioned company will be able to
generate the goodwill in coming time period.
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Porter generic strategy focuses on getting a competitive advantage over their competitors
by implementing components of this strategy. Generic strategies have been stated below: Cost Leadership- This strategy states that increasing the market share and getting
superior profits by lowering cost of their products and services. This can be achieved by
having the lowest price in target market. Mentioned company comes in this category as
the firm focuses on producing more of goods and services at an affordable price which
gives customers a chance to come again and again (Cano, Carrillat and Jaramillo, 2004).
Further, Tesco has a large chain of loyal customers as they love to shop from their
favorite retail brand. Differentiation- This strategy is applicable when target customer segment is not price
sensitive and organization focuses on delivering product that is perceived and treated as
unique in the whole industry. Further, value added by the uniqueness of the product will
allow the cited company to charge a premium price for the particular product. For
implementing this strategy, Tesco requires a strong marketing analysis and high research
capability.
 Focus- Focus strategy focuses on a narrow segment and concentrates on few target
markets. This strategy attempts to achieve either cost advantage or differentiation
strategy. Further, firm like Tesco enjoys high degree of customer loyalty and this
extended loyalty for the mentioned company discourages other firms from competing
with Tesco (Ahmed and Rafiq, 2003).
Illustration 3: Porter Generic Strategy
(Source: GENERIC (COMPETITIVE) STRATEGIES. 2015)
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From all the above points, it is clearly evident that Tesco is concentrating on all three
strategies and is focusing on developing such a brand image which increases revenue and
productivity simultaneously.
IDENTIFICATION OF REGULATORY FACTORS THAT IMPACT HRM
PRACTICES
Employee’s legislation deals with body of laws which helps Tesco to make a smooth-
textured relationship between their employers and employees (Smart and Conant, 2011). Further,
these legal and regulatory frameworks are based on some important issues like employees
benefits, their welfare and maintenance, etc. Some basic and common laws which Tesco have to
follow for their effective functioning are explained below: Sex discrimination act, 1995- This act implies that company should not discriminate any
employee on the basis of their sex, gender, race color, marital status during employment.
However, if organization fails to follow this act then it will lead to legal implication
which might hamper the organization brand image. Equal Pay Act, 1970- Under this act, Tesco has to pay equal amount of salary to all the
employees working in the organization as per their designation (Day, 2011). Further, no
discrimination should be made on financial basis according to their age, sex, race and
gender. Works and families Act, 2005- This act helps the employees in mentioned organization
to make a stable balance between their personal and professional life without any
consequences and problems. For this, Tesco have to provide convenient working hours,
maternity and paternity leaves, etc.
 Disability discrimination act, 2005- This act also states that Tesco should not
discriminate any employees on the basis of their sickness or disabilities. However, if any
employee is terminated relating to this factor then it can result into legal proceedings
against the establishment (Proctor, 2014).
Hence, these legal norms and regulatory frameworks assist the cited company to operate
business activities in a smooth manner which will lead towards achievement of organizational
goals and objectives in an effectual manner.
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IDENTIFICATION OF ENVIRONMENTAL FACTORS
Tesco's success is influenced by factors which are persisting in internal and external
environment. In order to overcome this, mentioned company can increase its popularity by
choosing different strategies which will help the organization to achieve their goals and
objectives.
Micro environmental analysis: SWOT
Strength:
 Tesco is one of the largest supermarket chain in UK
 Organization has a strong goodwill and well managed financial flow.
 Mentioned company is third largest retailer after Walmart and Carrefour.
 Tesco effectively uses their technology in form of marketing and promotion. Has an excellent market share in UK i.e. almost 31% ahead of ASDA and Sainsbury who
have 16.6% and 16.3% respectively (Arena and Azzone, 2009).
Weakness:
 Organization has high geographical spread which is not letting organization to focus on
the single market.
 With new start in telecom and insurance market, Tesco will require time to get stable and
experience.
 Tesco for their revenue and profits are highly dependent on their UK market. Transport cost is high as there are places where its branches are not available
Opportunities:
 Tesco can have strategic alliance with other companies in order to increase the number of
goods
 Focuses on marketing and promoting their products and service on the online platform
 Opening new retail outlets
 Non-food retail
 Health and beauty sector Tapping Asian market
Threats:
 Faces tough competition from Walmart, Carrefour, Sainsbury, etc.
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 Any changes made by government in tax rates can directly affect the corporate financial
profits.
 Innovation carried out by other supermarkets
 Increase in raw material cost
 UK structural change could create a price war
Illustration 4: SWOT and PESTLE analysis
(Source: PESTLE and SWOT analyses. 2014)
Macro environmental analysis: PESTLE
Political:
 Global political factors affect the performance of Tesco which includes tax rates,
different government policies and rules and regulations. Ongoing financial stability in world encourages retail organization to develop more jobs
for individuals (Martínez and et.al., 2010).
Economic:
 Economic factors is a major concern for Tesco as they are most likely to leverage the
cost, demands, profits and prices
 Mentioned company have to be aware of any changes in the policies as like change in
taxation policies can significantly affect the corporate performance. Tesco might get affected by the slowdown in UK food market and are generally exposed
to the market concentration risks (Pickett-Baker and Ozaki, 2008).
Social:
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 Individuals in UK has moved from “one-stop” to “bulk shopping” which is a major point
of social change
 Tesco has increased the amount of non-food items for sale which has further enhanced
the revenue.
 Products and services chosen by customers depend upon the perception and mindset of
individuals as the mentioned company cannot force people to buy their commodities. Consumers are becoming more aware of the health issues and in order to cope up with
this, cited company adapts new change by accommodating the demands of organic
products and services.
Technological:
 Advancement in technology has brought significant new opportunities for aforesaid
organization
 By having such a global presence, Tesco has started online shopping along with
delivering the product at home.
 Self-service checkout points have provided convenience and easy facility for customers
which have reduced the cost of keeping a guard. Cited organization has invested in high amount of energy efficiency projects in order to
fulfill their long term objectives with reducing the carbon footprints (Van Weele, 2009).
Legal:
 Government policies and their rules and regulations directly affect the performance of the
mentioned company. Tesco gives discounts to customer on prices on the fuel they purchase accordance to the
amount spent on grocery stores.
Environmental:
 By 2020, Tesco has planned to reduce its carbon footprint by 50%
 Cited company is also reducing the waste so produced in the retail store by increasing
more of the awareness in their customers.
RECOMMENDATIONS FOR THE STRATEGIES TO BE IMPLEMENTED
Tesco is a global brand and has its existence all around the world. Mentioned company
can consider new ways to grow either through their existing products or can develop new ones to
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increase their revenue and productivity (Hollensen, 2015). Under this, Ansoff matrix provides
different growth strategies:
 Market penetration- Companies seek to achieve growth with their existing products in
current marketplace aiming to increase their market share. This strategy is less risky as it
leverages many firm’s existing resources and capabilities. However, this market has some
limits as well.
 Market development- Under this strategy, Tesco seeks their growth by targeting
existing products and services to the new market segments. Development of new market
with the help of existing products can be a good strategy if cited company's core
competencies are related to specific product.
 Product development- Tesco develops new products in order to satisfy needs and
demands of their existing market segments. This type of strategy is appropriate when
Tesco's strength is related with specific customers rather than the specific products itself.
 Diversification- It is a broader concept where business enterprise grows by diversifying
into new business by manufacturing new products for the new markets (Vargo and Lusch,
2008). This is the most risky part in this growth strategy model as it requires both product
and market development.
RECOMMENDATIONS ON STRATEGY IMPLEMENTATION ON TESCO
MARKET PENETRATION-
 Increase in the share of retail organization at the expense of the subsidiary company
Sainsbury.
 Tesco further can increase its market share by selling their different types of products in
the current market.
 Focuses on selling more of the same product to targeted customers which in general is a
major source of earning for the cited company.
 In dead market- Tesco can focus on grabbing the share of that market.
 Advertising their existing product to encouraging individual to use that product. Quoting new price or developing other special promotions
MARKET DEVELOPMENT-
 Tesco can move into convenience store market along with hypermarkets.
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 Organization can further expand their business ventures to international countries by
properly analyzing rules and regulations of that country.
 Organization can focus on selling the same product in the different market (Van Kleef,
van Trijp and Luning, 2005).
 Market development requires change in marketing strategy, pricing policy and
promotional strategy. Tesco can use market development when untapped market is attractive.
PRODUCT DEVELOPMENT-
 Expansion into petrol sales technique with development of the financial services.
 Tesco can focus on developing new products with the existing ones which are less in
demand.
 Further, mentioned company can emphasize on developing products at a different quality
level with that of the existing products. Tesco can extend their product by developing different variants and also by packing their
existing product in a new way.
DIVERSIFICATION-
 Involves huge risk for Tesco, as mentioned company has to focus on each and minute
aspect of developing a new product in the whole new market.
 Tesco can focus on selling new products in the new markets.
 Tesco have to set a market plan in order to attract their large customer base in new
market with all its new products (Pohl, 2010).
 Effective environmental analysis is necessary as organization have to scan the
environment for proper investing its financial resources.
CONCLUSION
From the above report it is clearly evident that Tesco is a global retail organization which
has its presence all around the globe. This report clearly states that organization has a healthy
and effective financial performance and year by year their sales and profits are increasingly with
a moderate rate. Further, this report concludes Porter generic strategy where Tesco focuses on
achieving all the major elements like cost leadership, differentiation and focus. From the above
report it is also found that Tesco is operating in highly competitive industry where there are
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many giant organizations in the same retail industry. However, Tesco has to successfully deal
with the strategies because its different strategies create more value for their customers. The
organization has many opportunities and strengths that help Tesco to compete with these
companies.
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REFERENCES
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Online
GENERIC (COMPETITIVE) STRATEGIES. 2015. [Online]. Available through:
<http://www.learnmarketing.net/generic.htm>. [Accessed on 10th November 2015].
PESTLE and SWOT analyses. 2014. [Online]. Available through:
<http://www.jiscinfonet.ac.uk/tools/pestle-swot/>. [Accessed on 10th November 2015].
Tesco profits break through £2bn. 2015. [Online]. Available through:
<http://news.bbc.co.uk/2/hi/business/4435339.stm>. [Accessed on 10th November 2015].
Tesco urged to shut more stores after record £6.38bn loss. 2015. [Online]. Available through:
<http://www.theguardian.com/business/live/2015/apr/22/tesco-loss-dave-lewis-greece-
bailout-eurozone-live>. [Accessed on 10th November 2015].
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