Category Management: Principles, Processes, and Tesco Analysis

This essay provides a comprehensive overview of category management, a critical concept in retailing and purchasing. It explores the key principles and processes involved, emphasizing their application within the context of Tesco, a leading British multinational retailer. The essay delves into the strategic perspective of category management, examining how retailers like Tesco utilize various strategies to meet customer needs and maintain a competitive edge. It also analyzes the role of the buyer within the retail organization and the implications of supplier relationships. The essay covers the principles of cross-functional teams, strategic sourcing, change management, process rigor, capability development, and implementation, along with the eight-step processes of defining and managing a category. By examining Tesco's approach and comparing it to other retailers like Lidl, Aldi, and Sainsbury, the essay highlights the importance of category management in driving business outcomes and providing value to customers. The essay emphasizes the importance of adapting to changing consumer preferences, utilizing technology like online stores, and developing effective strategies to enhance sales, market share, and customer satisfaction.

Category Management
Principles and Processes

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
ESSAY ............................................................................................................................................3
Overview......................................................................................................................................3
Key principles and processes of category management..............................................................4
A strategic perspective ................................................................................................................6
Describing the role of the buyer in retail.....................................................................................8
The implication of supplier relationship within the retail organization ......................................9
CONCLUSION .............................................................................................................................10
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INTRODUCTION
Category management is important concept of retailing and purchasing that refers to
range of products which are purchased by a business entity or sold by a retailer. Further, it is
divided into distinct groups of identical products. It can be simply refereed as product category.
Further, category management can be refereed as procedure that include managing wide range of
categories of product as organizational units and making them tailor made so as to meet the
needs of customers (Varley, 2014). It is important process used by distributors or suppliers as
way of administrating categories as strategic unit of business. The main objective of category
management is to provide value to the customer. In this respect, various aspects of category
management principles and processes will be studied with reference to Tesco. It is a British
multinational grocery and general merchandising retailer incorporated in London in year 1919.
In this report, a clear understanding will be shown regarding the role of buyer. Thereafter,
implications of supplier relationship in contemporary management will be studied
ESSAY
Overview
Category management can be defined as mutual constant procedure between producers
and retailers to manage product categories as strategic business units, producing improved
business outcomes by concentrating on providing value to customers. It is important concept
related to retail buying and merchandising. With regards to this, retail can be refereed as sale of
products and services from Tesco store to its final users. The retailers can be refereed as
component of supply chain (Category Management, 2016). Tesco buys products in ample
quantity directly from producers and then offer them in smaller quantity to customers for earning
revenue (Kumar and Patel, 2010). Therefore, the organization follows modern retailing which
enable it to purchase products from manufacturers and offering them directly to consumers. On
the other hand, merchandising is important concept related to boosting the sales of products at
the cited retail store. For this aspect, Tesco assures that products are showcased in such a manner
that it drives interest of consumers to make an immediate purchase (Jayyusi, 2014). Therefore,
the entity strongly focus on physical appearance of store such as, displaying the products
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properly in shelves, using mannequin to showcase apparels etc. It also helps in generating
awareness about wide range of products that are offered by brand.
Key principles and processes of category management
It can be stated that category management is founding stone for ensuring smooth
operations of the retail organizations. It facilitates the retail corporations to make purchase in
bulk quantity and manage category of products as strategic business units to satisfy customer
requirements. The retail organization implements the main principles of category management in
core areas to facilitate overall business strategy (Gauri, Trivedi and Grewal, 2008). There are
five major principles that are considered by Tesco as well as other retailers in UK. The
explanation of which is as follows:
Cross functional team approach: It means groups of individuals with various types of
operational expertise working towards a mutual goal. It involves customers, marketing
personnel, employees handling operation as well as human resource department. They
collectively help in specifying category, quantity of product that must be offered performance
criteria etc. They further help in determining sourcing strategy for business (Andres Coca-
Stefaniak, Parker and Rees, 2010). Strategic sourcing is way that helps business in using varied
tools and techniques to optimally source products according to the needs of the consumers.
Strong supply market knowledge: In order to meet the needs of customers in best
manner, the organization ensures proper availability of products aligned with needs of buyers,
demand of quality and quantity of offerings etc. Such as, with the increase in demand of organic
food, fermented groceries, majority of retailers have started supplying the same.
Change management: It is important approach that help business in assuring flexible
operations so as align with changing preference of customers. With the help of change
management, Tesco has initiated a significant change by providing products through online
stores (Zhang, 2009). With this aspect, enterprises can support their efforts through performance
benchmarking. In addition to this aspect, effective strategy can be developed to support change.
Process rigor: It is important principle that enables the organization in incorporating
defined processes and techniques to facilitate category management and furnish top quality
products to customers. With the help of this concept, maximum customers stimulate the products
offered by the retailers (Chen and Roma, 2011). Further, company also assures that proper
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relationship is maintained with supplier so they it can provide prime quality offerings to entity.
The suppliers present in market must be identified and evaluated by the retail entities. Thereafter,
the one providing right quality of products at right price must be selected.
Capability development: To facilitate effective categorization, it is important for retail
entities to develop skills and abilities of its human inventory. With this principle, organization
tends to develop high performing teams by providing training and development, giving them
learning via internet sources, virtual classrooms etc (Frazier, Maltz, Antia, and Rindfleisch,
2009).
Implementation: It is concluding step where principles to support category management
are implemented within business using team support, program management etc. After
implementation process, the performance is measured and compared against desired outcomes.
Also, benefits from these principles are tracked to assure higher financial results (Rutherford,
Barksdale and Johnson, 2008).
Furthermore, to support category management within business, retailers can follow eight
step processes. The description of which are as follows:
Defining the category:- These aspects help the business in deciding products which must
be included and offered to customers and the products which should be excluded.
Defining role category: It is further based on preference of retailer regarding the role
that they wish the category to perform within their store (Jean, Sinkovics and Kim, 2010). The
category role involve, destination, routine, occasional and convenience. The destination category
helps the retailer in positioning themselves at the most favorable spot of customers. The routine
category enable the entity to categorize the products daily used by buyers such as soap, shampoo,
tooth paste, face cream etc. While, seasonal category involve products that are demanded in
particular season like, ice cream in summers.
Category appraisal: This step helps company in determining performance of category at
the store, within the market and across various retail stores. This step further involves various
functions like, pricing the offering, promotion etc. The main objective of this step is to determine
whether to continue current category categorization. Also the category requires extra efforts to
enhance revenue of business (Cousins, Lawson and Squire, 2008).
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Category scorecard: This step helps company in establishing goals for each category. It
involves the strategic assignment of task that should be performed to attain category goals.
Category strategy: The well defined plan of actions; strategy are used to facilitate
category role to attain scorecard objectives. The strategy are prepared to boost the sales, enhance
market share and amend gross profit and increase customer satisfaction level etc (Knotts, Jones
and Brown, 2008).
Category tactics: It refers to particular actions that can be taken to attain selected
category strategy. It helps in ascertaining the optimum category assortment, selecting pricing and
promotion strategy etc to facilitate attainment of overall strategic goals.
Implementation of plan: It is important step which helps the retailers in changing
developed strategies and tactics into reality. It further assists them in determining the work that
must be performed, when, where and by whom (Doyle, 2012).
Category revision: It involves monitoring performance of category and comparing with
the desired results. On the basis of the analysis, the significant actions are taken or changes are
done.
A strategic perspective
There are wide range of strategies that are used by retailers at present to meet needs of
customers and boost sales of products and services offered by them. Being a global retailer,
Tesco ensure adoption of appropriate strategy, so as to maintain competitive position. Further,
with the help of proper strategy, cited company can stay ahead of its rivals and thus maximize its
productivity as well as profitability. The organization develops its strategy considering the
vision, mission and core purpose of business. The vision of the company is to widen the scope of
business and become extremely valued among consumers, societies in which they function and
among loyal and competent human inventory (Agnihotri and Oburai, 2009). The mission of
entity is to maximize value of its shareholders and become continuously growing company.
Further, core purpose of entity is to develop value for consumers to earn their lifetime loyalty.
At present, Tesco has adopted multi channel strategy which enables the brand to provide services
through various channels so as to target maximum possible customers. Therefore, brand provides
its services through both physical as well as online stores.
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Presently, there are total 6814 stores of the brand around the world. Further, to boost its
sales and enhance the convenience to buyers, Tesco has divided its functions in home country
into different formats, distinguished by size and categories of the products sold. They are Tesco
superstore, metro; express, extra, one stop. Therefore, the superstores of brand can be regarded
as modular big size supermarket, majorly offering groceries, fruits and limited non food products
as compared to extra stores (Gauri, Trivedi and Grewal, 2008). Further, Tesco Metro is another
type of stores situated in the heart of the city; prime locations to provide comfort to buyers.
Thereafter, Tesco Express are another type of stores which mainly emphasize on providing food
products like, chocolate, sweet, biscuit etc. Further, the Tesco extra is another type of category
of retail store that enable brand to provide all types of product range. One stop is another store
which is very small in size offering basic non food products, groceries etc. On the other hand; the
brand has also started its operations through online channel. The corporations have started
providing online grocery with new concept of “click and collect”' (Jayyusi, 2014). This has
enhanced convenience and satisfaction among buyers as they can easily avail services within
their comfort zone.
Similarly, there are other retail organizations that use contrasting strategies to maintain
their leading position. Such as, Lidl is among the largest retailer of the globe and it has adopted
discounting strategy. Therefore, hard discounts are given by entity in all its nations, so as to
develop a new kind of supermarkets. It provides sales on both national as well as private labels
with 10 and 90%. It provides 1621 products in range which facilitate more choices to customers.
Thereafter, another discount retailer Aldi, focuses on providing prime quality products at
incredibly reduced prices. The organization has adopted an effective product strategy for
carrying a modest range of fast moving products. Aldi is specialized in selling staple offerings
like, eatables, beverage and household supplies it’s also carries limited range of products with
700 contrasting products only (Kumar and Patel, 2010). Further, Sainsbury is recognized as the
largest grocery store which have adopted a viable strategy; mid low model pricing strategy. With
this strategy, brand has cut down the prices of around 12000 products in past 18 months. By
keeping the affordable prices of its products, company is able to boost sales of its offering. The
overall strategic perspective of Sainsbury is based on the vision of brand to become the most
trustworthy retailer where individuals love to work and customer prefer to shop. Furthermore,
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the organization uses these strategies to not only maintain its competitive position but also
enhance its productivity and profitability (Varley, 2014). These entities ensure there is proper
availability of products in right quantity, quality at right location on right time. In addition to this
aspect, proper merchandising is ensured to induce customers buy more and more products and
boost the sales of the business.
Describing the role of the buyer in retail
The buyers play a vital role in retail organizations. In retail industry, buyers are the
individuals who choose what type of products must be stored based on current trends, preference
of customers etc. Thy further play an important role in assuring the sales of product by using
sales and other types of promotion. The buyers in retail industry are also known as merchandise
buyer (Retail buyer, 2016). Therefore, the role of merchandise buyers is to determine products
which must be offered to customers, the quantity of products that must be purchased from
suppliers. Therefore, they assist business in inventory management. Merchandise buyers further
help in determining supplier which must be selected from the retail organizations to meet needs
of business in best manner (Cousins, Lawson and Squire, 2008). Thereafter, they also negotiate
with suppliers regarding prices and conditions of delivery etc. Merchandise buyers also assist in
deciding the prices at which the product must be offered to customers on the basis of their
market knowledge. Further, buyer play a key role of forecasting future demand of product and
the price at which offering can be sold. With the help of this aspect, proper quantity of products
is made available to customers within the retail store. Retail buyers help business in responding
with the changes in demand and distribution. In addition to this, it also assures the need,
preference of consumers is focused while operating. Also, they resolve the complaints of
customers and take feedback from them regarding the products offered in the outlet (Rutherford,
Barksdale and Johnson, 2008). Merchandise buyer also plays an important role in maintaining
quality of products within the outlet by using various quality control tools etc. The retail buyer
have major function in maintaining sound relationship with suppliers by building effective
communication and providing them timely payment etc. Thereafter, retail buyers prepare
financial budget which determines expenditure that must be incurred on purchasing maintaining
the inventory and doing in store promotion (Jean, Sinkovics and Kim, 2010). Other than this,
retail buyers work in collaboration with other departments within the entity like, marketing,
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merchandising, quality control, store etc to assure projects are completed on time. Overall, it has
been identified that retail buyer play a key role in planning, choosing and buying the appropriate
quality and quantity of goods and merchandise that are offered within the retail outlet.
The implication of supplier relationship within the retail organization
The suppliers are the important part of retail organization as they provide goods and
services which are further offered by retailers to final consumers. It is important for Tesco and
other retail entities to maintain good relationship with the suppliers. This will help business in
obtaining prime quality products at appropriate price. For this aspect, corporations can adopt
supplier relationship management approach (Frazier, Maltz, Antia and Rindfleisch, 2009). It is
practice of doing strategic planning, and the administrating all the conversation with the
enterprise or individuals that provide product and services to retailers so as to enhance value of
those interactions. The main concern of suppliers is to get proper information and clear all dues
and payment on time. The suppliers in turn provide valuable market information that assures
long term success and sustainability of business. It further minimizes the risk of failure of
business. With the help of supplier relationship management, retail enterprises can develop
mutually advantageous terms with strategic supply partners to provide improved level of
innovation and competitive benefit (Chen and Roma, 2011). Furthermore, by maintaining proper
supplier relationship, retail organization can use skills and competence of suppliers individual in
attaining goals and objective of organization. The supplier further provides viable information
about competitors, their strategy so that proper actions can be taken on appropriate time.
Further, they suggest and advice retailers regarding product categorization that must be done
within outlet to meet needs of customers in the best manner (Zhang, 2009). Therefore, it is
important for retail entities to maintain strong relationship with suppliers. For this aspect, proper
technology and processes can be used which will further provide information about performance
of supplier, important data across various locations or regions. Also, proper structure must be
used to integrate supplier relationship management in the heart of business activities.
CONCLUSION
Summing up the entire essay, it can be stated that category management play an
important role for the retail organizations. With the help of categorization, retailers can divide
their bulk purchases into strategic business units. This concept play important role in providing
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value to its customers. There are eight important steps which can be followed by retail
organizations to facilitate category management. It has been identified from the above study that
retail buyer play important role within business. They further negotiate with suppliers, forecast
the demand of products and help in promotion of business offerings.
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