Tesco's company analysis and e-business model essay
The study conducts an audit of the internal and external environment of Tesco. Internal audit will be conducted through SWOT analysis. Analysis of the external environment will be done through PEST analysis. Once this is done, Tesco's e-business strategy will be discussed and examined in detail.
Brief Company Overview
Tesco is one of the biggest names in food retail across the world and is the biggest food retailer in UK. Its operation is not limited to food retail but extends to electrical appliances, clothing and financial service. It operates 4,331 stores in 14 countries worldwide. Its store formats consist of Express, Metro, Extra. It has 960 Express stores which offer fresh food at convenient locations. It has 170 Metro stores which are located in town and city centres locations. In addition, it also has 175 superstores called Extra and Tesco's Homeplus stores which are dedicated to non-food, including clothing (Datamonitor, 2009).
Market Share and Customer Share
Latest industry reports published in 2009 suggested that Tesco's held 31.6% of the UK grocery market (Tesco Company Reports, 2009). This easily makes it the biggest retailer in UK and the third biggest in the world. Tesco's scale of operations means it can easily acquire or drive competition out of the market and get huge economies of scale. Its strong and loyal supplier network and 30 strong distribution centre makes it a potent force to compete against.
Tesco operates in different store formats; Extra, Metro, Express, Superstore and hypermarkets. The various store formats are strategically chosen in order to meet varying customer needs and compete against big and small retailers at various levels (Tesco Company Reports, 2009). Eg. Tesco Extra competes against the big out of town retailers like ASDA and Morrison's. Tesco Metro competes against the like of Sainsbury's Central. Tesco Express competes with local retailers. All three formats also fulfil different customer demands. Eg. Extra is used by weekend shoppers, Express is used for emergency and ‘on the day' shopping while Metro is used for ‘top-up' shopping. Store formats give Tesco the power and opportunity to reach to various target audience and fulfil the demand and market need at various levels. While, there has been a lot of negative publicity against Tesco Express Stores, which, critics believe are driving local retailers out of the market, this store format continues to grow.
Relationship Marketing Strategy
One of Tesco biggest strengths lies in the collection and use of data. Tesco collects customer's transactional data through the Club-card (Tesco's loyalty scheme) which is converted into information and actionable knowledge in DunHumpy. This knowledge is then used to target existing customers with relevant offers. Tesco also increases customer loyalty by rewarding existing customers through a quarterly Club-card voucher mailing in return for their data exchange (Cheung et al., 2003). Data collected though the Club card helps Tesco divide customers into various segments and profile these segments in order to create customer personas (Jacob & Mui, 2004).
Brand Trust and Prominence
Tesco not only has a strong brand but also a ‘trusted' brand. Various brand tracking studies conducted by (Okumura, 2009) revealed that Tesco is well positioned to gain from the financial crisis. People trusted Tesco more than any other financial service providers which mean Tesco's brand extension into mortgages and loans can prove successful. Tesco's brand is also associated with quality, value and good shopping experience.
Price and Product Range
As with store formats, Tesco's broad price and product range means it caters to most market segments. Its price range includes ‘Value', ‘Discount ‘and ‘Finest' range. Its product range includes financial services, DVDs, video rentals,