Running Head: Strategic Information System
Strategic Information System
September 13, 2018
TOC o “1-3” h z u External Analysis PAGEREF _Toc524594588 h 3Business Background PAGEREF _Toc524594589 h 3General environment of Tesco (Macro environment) PAGEREF _Toc524594590 h 3Political forces PAGEREF _Toc524594591 h 3Economic forces PAGEREF _Toc524594592 h 4Social forces PAGEREF _Toc524594593 h 4Technological forces PAGEREF _Toc524594594 h 4Legislative forces PAGEREF _Toc524594595 h 5Industrial environment of Tesco PLC PAGEREF _Toc524594596 h 5Threats of substitute product and services PAGEREF _Toc524594597 h 5Threat of new competitors PAGEREF _Toc524594598 h 5Intensity of Rivalry PAGEREF _Toc524594599 h 6Bargaining power of buyers PAGEREF _Toc524594600 h 6Bargaining power of Suppliers PAGEREF _Toc524594601 h 6Firm’s current competitive advantage: PAGEREF _Toc524594602 h 6SWOT Analysis PAGEREF _Toc524594603 h 7Internal Analysis PAGEREF _Toc524594604 h 8Price and promotion PAGEREF _Toc524594605 h 9Use of sophisticated technology PAGEREF _Toc524594606 h 9Economics of scales PAGEREF _Toc524594607 h 9Non-imitable value chain PAGEREF _Toc524594608 h 9Marketing Strategies for Tesco: PAGEREF _Toc524594609 h 9Proposed System and Recommendations PAGEREF _Toc524594610 h 10Direct Channels PAGEREF _Toc524594611 h 11Indirect channels PAGEREF _Toc524594612 h 11Conclusion: PAGEREF _Toc524594613 h 12References: PAGEREF _Toc524594614 h 13
External AnalysisBusiness BackgroundMarketing and Business strategy is the corresponding and combined set of actions and commitments intended to achieve competitive advantage and fundamental capabilities (Baye, 2000). Business strategy is devised by matching capabilities and resource with opportunities and investigating business environment. Tesco is a British merchandize and retail grocery store operated in 14 regions worldwide and is the third biggest global retail store. Capabilities imply the potential to execute activity, function or task (Williams, 2009).In order to achieve desired objectives, capabilities mean the capacity to integrate individual partnership resources (Worthington and Britton, 2000). Two types of capabilities are implied by Tesco: Strategic and dynamic. Organizational procedures and processes, core competencies and factors of production are Tesco’s dynamic competencies. There are various strategic capabilities, for instance, control over various parts of value-chain, good link with suppliers, and capabilities of differentiation in Tesco (Dudovskiy, 2014).
General environment of Tesco (Macro environment)
Tesco operates in more than twelve regions globally and is a multinational store (Tesco plc, 2015). PESTLE analysis analyses the factors of general environment of Tesco.
Political forcesThe global political factors influence the working of Tesco for it does its operations of retailing worldwide. Tesco’s business operations are impacted by various host region’s educational philosophies, labour training laws, deregulation philosophies, taxation laws, antitrust laws and political actions and policies of various parts of the globe. Government of various regions, because of financial instability in global economy, pressurizes Tesco to generate vacancies for domestic population. Through creating employment opportunities and diversified operations in host countries, Tesco operates in order to enhance its product demand (Tescoplc.com, 2015).
Economic forcesTesco always attempts to balance its prices, profits, demands and costs; for this organization, the economic environment is fundamental concern. Tesco is affected by any change in gross domestic product, budget surplus and deficit, trade surplus and deficit, interest rate, inflation rates. The company is still dependent on UK market although it operates globally. It holds 30% market share UK market. Through diversification, local responsiveness and internalization, Tesco adapts with worldwide economic environment. The company focuses on creating value of this brand through heavy advertisement owing to the decrease in disposable income and household income level in UK.
Social forcesGreat number of fluctuations has been observed in both global and UK markets such as alterations in preferences as to services and products characteristics, enhancing awareness towards environment, altering behavior as to the work-life quality, and diversified work force. Tesco PLC is pressurized through these types to move towards one-stop shopping and bulk shopping. This organization offers a lot item like Christmas product, health services, groceries, foods, etc. in order to deal with social changes.
Technological forcesAchieving advancement in technology is another focus of Tesco PLC. It aims at constant improvement of product. Information technology and internet are used by this organization in best ways to exploit competitive benefits. With facilities for house delivery, it has previously introduced and developed online shopping. Tesco has introduced self-service checkout points for his clients to conveniently search for their nearest outlets. To ensure intellectual capital and proper knowledge management, advance database is also used by it. A lot of energy is invested by it on development and research.
Legislative forcesIt is impacted, being a worldwide company, by the strategy change of various host regions such as USA, India, China, etc. Food retailing commission for instance banned some old practices and introduced some new practices in 2004 like fluctuating price without notices. Besides, the exit and entry policies vary from region to region that is considered by Tesco.
Industrial environment of Tesco PLCThe industry environment contains partnerships that operate within the market (Hitt, Ireland and Hoskisson, 1999). Tesco’s operations are held within strong competitive environment as it is one of the biggest global retailers. Porter’s five force analysis is utilized to analyse the industry environment in which Tesco operates (Businesscasestudies.co.uk, 2015).
Threats of substitute product and services
There is a relatively low level of threats faced by Tesco from substitute services and products because of its brand loyalty and low-cost market leadership. Organic shops and licenses give food products to users despite there being lots of convenience shop; they are completely not able to inflict threat on superstore such as Tesco (Businesscasestudies.co.uk, 2015).
Threat of new competitorsEntering in the food retail industry is hard for new competitors because already present partnerships established a lot of entry barriers. Large capital has to be invested by new investors as existing companies have built loyal customers and value chain. Existing firms like Sainsbury’s and Morrison, ASDA, Tesco, etc. capture a great part of the share of food industry. In case come new competitor seeks to compete this setup, customers should be provided high quality items at low prices (Special Issue of Strategic Organization: “Strategic Management Theory and Universities”, 2015).
Intensity of RivalryExtreme competition characterises food retail market. Tesco’s rivalry is with some worldwide companies such as Sainsbury`s, Morrison’s, ASDA, local convenience stores as well as wait store. The dynamics of competition is played over promotional efforts, quality and price and so on (Businesscasestudies.co.uk, 2015).
Bargaining power of buyersAs extreme competition and slow cycle market characterise the food retail market, the buyers’ buying power is always high. Relatively low diversified items are provided by all companies operating in food retail market so switching expense is not very high. Customers are empowered by low switching cost (Retail Week, 2013).
Bargaining power of SuppliersAs each company can retain their share in the market and it is a slow cycle market, the providers possess low bargaining power. In this industry, the firms sustain term association with rivals and involve them in value0chain for the purpose of improving their product quality (Businesscasestudies.co.uk, 2015).
Firm’s current competitive advantage:
Competitive advantage includes the skills which confer the firms to give customers the same value at lower prices compared to that of rivals or by way of differentiation to attain more revenue, set higher price. By matching core competencies and skills with opportunities, a firm can get competitive advantage over its rivals (Eshun, 2009). Tesco is competitively leads other rivals because its capabilities and resources are rare and non-substitutable and non-imitable.
SWOT AnalysisSWOT analysis analyses the micro environment in which Tesco operates.
To attain leading market position, Tesco has many benefits, some of which are given below:
Throughout the world, it is the third biggest grocery store and has attained in UK retail food industry 30% market share.
It possesses lots of loyal users and strong brand value all across the globe.
Its resource base is diversified.
It has strong liquidity position.
Computerized order processing system (in-time delivery).
Facilitates management system through advanced database.
It is able to track customers’ demands globally and flexibility to fit to the demand changes both locally and globally.
Tesco has some weaknesses, as given below:
In Asian market, the brand awareness is low because in Asian market, items have not yet been popularized.
As high competition characterises market, price elasticity of demand is quite high.
To finance its USA and Asian markets, this firm is over-dependent on UK industry.
There are lots of opportunities available to Tesco for attaining low-cost leadership and greater market share. Tesco’s some opportunities are provided below:
Lots of opportunities are available to Tesco for expansion in African and Asian markets. No retail super-stores are entered from global markets to many regions.
In Asian market, it can extend its business through licensing and franchise because organization is capable of operating business in developing regions. The risk of Tesco is reduced through such type of entry strategy.
In Asian market, the usage of Internet is rapidly expanding and from this opportunity, Tesco can derive benefit to exploit competitive advantages and core competencies(Igd.com, 2015)
Some threats for Tesco are described below-
Different countries’ economic restructuring strategy target contraction of user expenditure and thereby influences Tesco’s operations.
Difference between preferences, life-styles, cultures etc. can make more complicated the business operations.
In the Asian market, the probability of strategic-alliance between competitors is, for Tesco, a big threat(Euromonitor.com, 2015)
Internal AnalysisPeople come to know of environmental concerns. Environment pollution free items are now preferred by the customers. It normally considers the environmental responsiveness of item before planning diversification or new strategy. A commitment is made by this company that it shall, within 2020, reduce carbon footprint by 50%. Environmental policy needs to be prepared by Tesco as temperature goal of 1.5 degree Celsius was set by around two hundred nations including the regions in which Tesco operates, in the Paris conference on environmental changes (Tesco plc, 2015).
Price and promotionProducts of Tesco are attached with low price due to its low-cost management. Tesco develops partnering and long-term association with its providers which assists Tesco to attain competitive advantage over others and achieve low-cost management (Interactive, 2015).
Use of sophisticated technologySophisticated technology is used by online order processing systems such as wireless devices, self-check-out machines, electronic self-labelling, radio frequency identification, intelligent scale etc. The result of these technologies is the increased competitive advantage (Makos et al., 2014).
Economics of scalesLarge quantity of products is produced by Tesco which declines cost per unit and assist the business to get competitive advantage over its rivals.
Non-imitable value chainTesco establishes a value-chain by way of the mix of partnering association of more than 48000 supporting people, 3500 stores in Europe and 4000 suppliers. It is almost impossible to imitate such type of value-chain which is a fundamental source of competitive advantage for the firm (MBA School-Study. Learn. Share. 2015).
Marketing Strategies for Tesco:While bringing products into new markets, it is essential to have a reasonable definition of what’s in store from the market and how to approach the market. Culture is the set of convictions, values ??and standards that affect the way in which a specific business carries on. Division includes merging a substantial market in submarkets and after that, providing each market with its demands.
The political environment ought to likewise be considered critical, on the grounds that it is basic to decide in which nations you should concentrate more. Most creating nations are influenced by steady wars that repress the obtaining intensity of individuals.
The pay of people in these nations ought to be considered to decide the likelihood of procurement. In creating nations, a great many people live underneath or over the neediness line, and the extent of all-around prepared individuals is low. This will help figure out which products will be gone into every one of the segments to enable the organization to settle the two segments, earning profits from both.
The above elements help to discover a marketing combination that is the arranged scope of controllable components that are utilized to build up a marketing plan. It is a combination of 4P marketing that is product, price, place and promotion. These four make it less demanding to figure out what ought to be conveyed to the market.
Proposed System and RecommendationsAt the time we live today, it is imperative that organizations exploit the Internet and take advantage of them. Digital marketing is currently moderately modest and simple to utilize contrasted with ten years back. Digital marketing channels enable organizations to achieve more potential customers and enable them to get the name of the company.
There are numerous favourable circumstances to having an effective digital marketing effort, as a bigger target gathering of people, organizations that intended interest groups can run from little scale to neighbourhood scale on a bigger scale the world over, with this more extensive crowd, deals will expand, the company’s salary. There are numerous channels that organizations can utilize, which we will talk about underneath, yet a large number of these channels are free, so most organizations utilize them, however the trouble is the correct utilization of these channels to advance your business.
Direct ChannelsThe direct channel is where the organization or company offers its products directly to the customers’ market. The advantage of the direct channel is that the product’s benefits are elite of the company’s right. Constraining the direct channel is that versatility turns into a problem if the organization is directed to a bigger shopping market. The benefit of TESO through the direct channel is that it offers users the accommodation of purchasing locally established products. They can get the prices of the organizations that are not taken care of by any nearby store and the product that the customers will be unique and legitimate. Direct channels additionally offer customers a scope of products to look over and can modify particular details as per their necessities. A few weaknesses that TESCO could confront, which could disillusion the client, would be that there could be delivery costs and dispatching costs added by the company to convey the product at home. This is excluded in the price of the product, and the client needs to pay additional relying upon the location. Furthermore, reaching bigger organizations in the market can be an issue for customers since customers need to hold up quite a while by telephone and email reacts to play around with their company.
Indirect channels enable organizations to advance and offer buyer products. In indirect channels, organizations offer their products for the most part to retailers, which are then sold to customers by these retailers. The indirect channel makes product versatility and advances it in bigger markets where the principle organization may have issues to address. The advantage that TESCO can have in the indirect channel is that they can grow their business to a favourable level and not extend the company. Since an outsider is associated with the conveyance of customers’ products, the company needs to rely on that organization to engage customers toward the finish of their business. Indirect channels make long channels between the company and customers, which makes extensive stretches of time. Merchants cannot be steadfast either by serving a specific product or company. Merchants can help customers by offering client bolster and furnishing customers with any questions; however in some cases this can be troublesome in light of the fact that retailers might not have the full involvement to value their customers as far as fulfilment. The specialized staff cannot be at the level of employees by the company. What’s more, the products and particulars here and there don’t meet the gauges that the customer demands. Retailers likewise have a price change on the company; Transportation costs can be ignored in this situation.
Conclusion:The marketing manager, in conclusion, can have a preliminary strategy which is complete and concrete and involves considering all the elements which may influence the primary activity into the industry. These elements include culture, the income of individuals, segmentation and political environment (Dawson, 2010). Basis for an action in the market is provided by these factors if they are favourable. Then they must pay attention to looking at the marketing blend of promotion, price, place and product which will assist in managing products which satisfy, at reasonable prices, the entire market. The customers should have access to the products as well as they should be aware of the existence of products via marketing and advertisement.
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Euromonitor.com, (2015). Tesco Company Profile – SWOT Analysis. Online Available at: http://www.euromonitor.com/tesco-plc-in-retailing/report Accessed 13 September 2018.