Essay on Tesco Value Chain

At its current status, Tesco’s entire revenue of 60% is from the host country (UK) and 40% from its twelve client countries. It possesses ninety-seven years of revolutionized supply chain management skills and advantages as it competes with its local & offshore local competitors such as Asda, Carrefour, Aeon Jusco, Mydin, Giant and many more.

Bargaining Power of Suppliers: The bargaining power of suppliers in the industry is low. There are numerous suppliers in this industry, and the large department stores have the ability to negotiate for the lowest prices. In addition, the switching costs are low, as the products are not highly differentiated. There are a large volume of purchases in the industry, allowing the department stores to exert even more power over the suppliers.

The value chain, made by Michael Porter, is really important to see how a company structure is created. The value chain is constituted by two parts: support activities (firm infrastructure, human resource management, technology development, procurement) and primary activities (inbound logistic, operations, outbound logistic, marketing and sales, service). (Johnson et al. 2011, p.97-99)

One of Porter’s main contributions was Porter’s value chain. The value chain is all the activities an organization undertakes to create value for a customer. According to Porter, there are two ways to gain an edge over competitors. A firm must provide comparable but value but perform the activities on the chain at a lower cost, or; Perform services in a unique way

According to Michael Porter’s concept about value chain, “activities within the business companies add value to the product and service that the business organization or companies produces”. The idea of the value chain is based on the process view of organization, the idea of seeing a manufacturing firm as a system, made up of subsystems each with inputs transformation process and output. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources – money, labour, materials, equipment, buildings, land, administration and

Keane (2008) stated to design, manufacture, promote, offer and facilitate its product or services, all organization engages in some activities. All of these activities of an organization are shown through the use of value chain process. The manner in which organization performs its varying activities along with the firm’s value chain mirrors the organization’s background, strategy along with the way in which the organization executes its strategy. Ponte (2008) stated that the analysis of value chain of an organization is used to develop the organization’s competitive strategies along with formulation the connected and interconnectedness between all the organizational activities that formulate value. Francis, Simons, and Bourlakis (2008) stated that value chain analysis is a helpful tool as an organization looks to attain competitive advantage. Furthermore, Rieple and Singh (2010) stated that a value chain is a useful tool in conceptualizing the varying activities

Two giants in the discount superstore market are Wal-Mart and Target and they differ slightly in their business strategies. Both companies are able to achieve a great deal of control over all of Porter’s Five Forces: supplier power, customer power, established rivals, new entrants, and substitutes but Wal-Mart seems to have a lower threat from suppliers than Target.

There are three fundamental rivals of Tesco and the superstore sector including, Sainsbury’s, ASDA, and Morrison’s and they apply multiple tactics independently to attracting the customers. The strategy of Sainsbury’s for its customers is on delivering an effective service quality, whereas ASDA is engaged in procuring value for its customers and these competitive attempts employed by the Tesco’s rivals are creating the issue of managing price and quality of its commodities (Which, 2012). Moreover, the customers of Tesco independently have an insignificant amount of strength in terms of the entire corporate strategy of the company (Tesco, 2011a). Nevertheless, customers jointly exposed meaningful strength because of the little expenditure and convenience in transferring to another brand (Tesco, 2011a). The past records of Tesco showed that the vendors appeared reluctant to trade with Tesco, which ultimately influenced Tesco to reduce prices as the company deals with numerous agriculturists instead a sole broad supplier (Independent, 2011). Nowadays it is very complex for non-established retailers to ensure survival in the marketplace because of the significant control of Tesco on the marketplace which taught newly entrants to modify the behavior they execute trading involving the improved part of cooperatives and they reveal the risk of fresh companies and this will be a fundamental aspect for Tesco to determine its expected competitive strategy

Tesco PLC is a multinational grocery headquartered in England. It is the third-largest retailer in the world measured by profits and second-largest grocery retailer in the world measured by revenues (Potter, 2011). It has operated in 12 countries including Asia, Europe and America and is the grocery market leader in the UK (Tesco PLC, 2014). Its stores divided into Express, Metro, Superstore, Extra and Tesco. com since 1970. Initially, it was a focused grocery retailer since the early 1990s. Tesco has diversified itself geographically into food retail, non-food retail, petrol stations and home living range since 1992. Tesco reposition itself in the 1990s, from a downmarket to a retailer crosses a wider customer group, from its Tesco Value launched in 1993 to its Tesco Finest ranges(Steve, 2014). The moves and changes were successful by the growth of stores from 500 stores in the mid-1990s to over 2,300 stores five decades later (Steve, 2014). In 2014, Tesco had a market capitalisation

According to Mintel 2010, the principal states that food market retail including Tesco, Asda, Sainburry and Morrison and there represents have already captured 80% in the UK. Therefore, the new operators in food market have to show/ produce something new and an exceptionally low price with high quality to develop its value in market.

A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The concept comes from business management and was first described and popularized by Michael Porter (Porter, 2013)

Tesco PLC is one of world’s biggest retailers, and it is primarily based in the UK and has branched to over 14 countries around the world. They prioriKze their grocery chains, but have ventured out and decided to expand their business by offering consumers a wide variety of different products. Tesco was doing great, their market share skyrocketed and they were dominaKng other leading supermarkets, but it wasn’t all good for Tesco, in 2013 they experienced a big drop in profits and had to basically exit the US market. Also, their plans of expansion overseas was a flop, they placed too much money, thinking that it will be a success, but they ended up having to retrench most of their chains and other stores. Based on the case their problems are mainly caused by change in consumer habits, and because of that change, Tesco lost a lot of their money

Tesco had to adapt to the local requirements, offering new solutions to previously recognized issues, by combining centralized purchasing and working with local suppliers, Tesco achieved economies of scale and transfer the benefit it to its customers in its express outlets. It actively engaged in creating a favorable environment in various markets; from bringing its UK based suppliers to USA and setting up in DC to engaging in Thailand with local community to explain the benefits of its value chain.

The value chain concept was created by Michael Porter and explained in his book “Competitive Advantage”, published in 1980. The value chain is a series of activities that create and build value- culminating in the contribution of total value to the organization. Porter used the concept of value chain as a systematic approach to examining the development of an organization’s competitive advantage in the marketplace.

Moreover, opinions from the top management people of TESCO are stated helping us to understand the in-depth working, discussions and goals of the company, along with some information about the profit earned by the company over the last couple of