A Critical Analysis of Tesco and Its Operations
Essay Preview: A Critical Analysis of Tesco and Its Operations
Report this essay
Tesco is the UKs number one retailer, second cheapest store after Asda which is a subsidiary of Wal-mart, with the largest market share and the third biggest retailer in the world and has a popular and controversial slogan: “Every little helps”. John Edward Cohen founded Tesco in 1924 and is responsible for several small revolutions in retailing which led to the rise of the super markets we know presently. Tesco started up as a grocery store but over the years, it has expanded and diversified its operations to other non-food activities such as retailing of books, electronics, clothing, household items, petrol, financial services and others. Since the inception of Tesco, it has grown stronger and become unstoppable, selling over 40,000 different products, expanding into 13 other countries, with its first expansion in Hungary in 1995 and having over 4800 stores as at 2010 and is still expanding till date. (Jenny Stocks, 2010)
Tesco has gone through many changes in the past from the days of its founder, Cohen, when it operated high piling and cheap selling formula, which he adopted from the USA but was not suited to Tesco and Ian Maclaurin who took over from him leading Tesco to become an “aspirational mass retailer” thereby closing unprofitable stores while extensively upgrading and enlarging others. By 1985, Tesco had amassed so much properties and market share that it conveniently opened its 100th store and been the first to cross the £2 billion profit margin.
With the aggressive and continuous expansion of Tesco around the world and mostly in the United Kingdom, it has aroused so many controversies and active oppositions with some people and even communities challenging their decisions to open a “Tesco” around them for reasons like, near monopoly as Tesco brings fierce competition with its many stores in one area thereby, leading local retailers out of business and the other side with people warmly welcoming and receiving new Tesco stores due to its convenience and mostly job opportunities it creates.( Anon, 2006)
1.1 COMPANYS STRATEGY
“The strategy Tesco is using is far ahead of most of its competitors as it has grown a strong UK core, and then rapidly developed international stores, built non-food sales, expanded into retailing services and exploited e-commerce successfully”. (Data monitor, 2005)
Tescos success in recent years has mainly come from its strategies of expanding overseas, shifting to higher margin non-food merchandise and maintaining a strong UK core business. Its UK success has also been built on low prices, cultivating customer loyalty and offering a range of different store concepts. According to Tesco, their main approach is to create value for our customers, to earn their lifetime loyalty and its two values are: “no one tries harder than we do for our customers and we treat people the way we like to be treated”. However people criticize this by claiming that these values are rather selectively applied to customers and shareholders rather than the environment, farmers and small competitors whom Tesco does not give as much consideration. (Corporate Watch UK, 2004)
2.0 CORPORATE SOCIAL RESPONSIBILITY
According to Terry Leahy, group chief executive of Tesco in Tesco CSR review, “Corporate Social Responsibility makes sound business sense. The key to our approach is our integrated business system, where environmental and social performance is managed alongside financial performance. This means we have a year on year program of focused action to drive improvement.” Corporate social responsibility was also said to be an important aspect of its corporate structure as Tescos CSR initiatives across several internal and external activities include local regeneration projects, being environmentally conscious, and community issues. A special focus is given to recycling, use of organics, use of energy and water, as well as its charity and community initiatives which reflects in its day to day activities. (Case Study Inc, 2008)
The main divisions of where Tescos CSR activities can be identified are:
2.1 ENVIRONMENT
“The major societal issue threatening mainly food, clothes and other retailers has been environmental issues, a key area for companies to act in a socially responsible way. Hence, by recognizing this trend within the broad ethical stance, Tescos corporate social responsibility is concerned with the ways in which an organization exceeds the minimum obligations to stakeholders specified through regulation and corporate governance.” (Johnson and Scholes, 2003)
Tesco is one of the companies that contributes the most to climate change due to the amount of their operations, with the energy used in their over 4,800 stores and other merchandise flown from all over the world and trucked around thereby adding to the carbon emission which it so claims it is trying as much to reduce, but this is not true as