Essay about Tesco Value Chain

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Pages: 5


The notion of the ‘value chain’ was first created by Michael Porter. The concept of having a value chain in any business is for it to develop a sustainable competitive advantage in the industry that it operates in. All organizations entail various activities that link together to create the value of the company, and together these activities form the organisation’s value chain. The Value chain of any industry always begins with the production of raw materials and ends when the final product is delivered to the consumer. The primary aim of the value chain framework is maximize value creation while minimizing the costs involved. The value chain analysis essentially entails the linkage of two areas. Firstly, the value
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Since TESCO consolidates its requirement, it buys in huge quantity. The sheer volume of TESCO’s requirement makes it attractive for any supplier to have TESCO as its client.

Value Capture – Downstream

Competition from other retailers is also a key factor that affects value captured by TESCO.
Since TESCO’s strategy is focused on being a “low priced” mass market retailer, gaining a large market share and protecting it is crucial. To capture and protect its market share TESCO competes aggressively with its peers in organized low cost retail.

TESCO seeing the aggressive growth in retail space, has acquired land in prime locations in all its key markets. This has served twin benefits for TESCO. First of all, TESCO now has ensured that it has land available for it to build stores if it considers expansion as the way forward. Secondly, it acts as a barrier to further expansion by competitors as they lack access to real estate in key locations. This helps TESCO in its efforts to capture value from its competitors.

Customer loyalty and repeat business helps to maintain market share and TESCO tries to lock in its customers by way of introducing loyalty cards, discount vouchers, cash back schemes and free home delivery.

Further, TESCO has also diversified the product offerings from the more traditional “need” based products to more modern product lines such as home furnishing, banking, insurance and mobile telephones.