Organisations are operating in a dynamic environment. It is becoming increasingly difficult to sustain a competitive advantage for very long as market stability is threatened by short product life cycles, short product design cycles, new technologies, frequent entry by unexpected outsiders, repositioning by incumbents, and tactical redefinitions of market boundaries as diverse industries merge. Consequently a company or a business unit must constantly work to improve its competitive advantage. Merely being a lowest cost competitor, will not enough. Through continuous improvement programmes competitors too will work to lower their cost as well. Thus firms must find new ways to lower their costs further, but also to add value to the product or service being provided. The same is true of a firm or a business unit that is following a differentiation strategy. Consequently companies should focus on not only to add new features to its products but also to reduce costs through improved manufacturing processes that its price was no longer out of line with those of the competition.
Organizations can adapt to Porter's Competitive strategies when competing its rivals. Before selecting one of Porter's generic competitive strategies for a company or business unit, management should assess its feasibility in terms of company or business unit resources and capabilities.
Based on that the firm can decide on their strategies such as whether to attract customers by providing products or services at a relatively lower price than its competitors, whether to improve the quality of its services or whether it should go for some differentiations or value additions in their products or services or focus attention towards aggressive promotion and advertising campaigns to enhance the reputation of its brand name etc.
Most of the decisions made in the organizations fail because of the poor tactics. A tactic is a specific operating plan detailing how a strategy is to be implemented in terms of when and where is to be put into action. But their nature, tactics are narrow in their scope and shorter in their time horizon than are strategies. Tactics may be there fore viewed as a link between the formulation and implementation of strategy. Some of the tactics available to implement competitive strategies are timing tactics and market location tactics.
'Timing tactics' provides the understanding of the firm regarding when to compete where as 'location tactics' emphasis on where to compete. Selecting of best tactics is very much in order to determine strategies that help to respond to competitor's changes, to survive in the industry and to maintain and enhance the existing market share.
A company can adapt to one single strategy or a series of strategies when competing in the industry. In this research study it will be evaluated that, how can a company maintain its market share in a highly competitive environment. In this research study it will be evaluated Tesco Plc's existing strategies and concerns on the strategies or tactics that Tesco Plc can adopt in order to compete in its highly competitive industry and to maintain its market share.
Tesco Plc is a British international grocery and general merchandising retail chain headquartered in the Tesco House in Cheshunt, Hertfordshire. It is the UK's largest super market chain, operates in 4,811 locations and in 14 countries world wide. Currently 65% of the Tesco's selling space is outside UK.
The chain was founded by Jack Cohen in 1919 and the first Tesco store was opened in 1929 in Burnt Oak, Edgware, and Middlesex. During the 1950s and 19660s Tesco has grown organically and also through acquisitions. Originally Tesco has specialized in food and drink. But it has been diversified in to areas such as clothing, electronics, financial services, telecoms, home, health, car and dental insurance, retailing and renting DVD's, CD's, music down loads, internet and software etc.
Tesco is the largest British retailer by both global sales and domestic market share with operating profits that exceeds £ 3.5 billion, and the third largest global retailer based on revenue, after Wal- Mart and Carrefour and second largest profit behind Wal- Mart.
According to TNS World panel, Tesco's share of the UK grocery market was 30.5% in the 12 weeks to 27 December 2008 to 27 December 2009 largely in line with the increase of the other three largest supermarkets i.e. Asda, Sainsbury's and Morrison. These increases follow a decline in the market share of discount chains Lidi, Aldi and Netto in the same period.
Tesco has a well established and consistent strategy for growth, which has allowed it to strengthen its core UK business and drive expansion in to new markets. The rational for the strategy is to broaden the scope of the business to enable it to deliver strong, sustainable long term growth by following the customers in to large expanding markets at home such as financial services, non food and telecoms and new markets abroad initially in central Europe and Asia and more recently in United States.
Significance of the study
Organizations should focus on developing strategies that are best suit to the firm not merely to survive or to maintain its existing position, but also to enhance its current market position. Organizations ability to compete in the industry will depend up on the virtue of the strategies adopted by it. For the purpose of research and as well as for the ease of evaluation Tesco Plc's London outlet was selected.
There were no satisfactory researches carried out based on Tesco Plc which evaluates the effectiveness of the competitive strategies adapted by it in order to maintain and enhance its market share and so on. Emphasis will be paid on following areas when caring out this research study.
It can study what are the motivation strategies currently practicing by the company in its London outlet.
Strengths and weaknesses of the current competitive strategies can be evaluated.
Effectiveness of the existing strategies and tactics to maintain its current market share too can be appraised.
Impact of the current competitive strategies adapted by the organization towards the long term success of the organization.
Feed back about the competitive strategies.
3.0 Research Objective and questions
3.1 Research Objective
Organisations should develop and follow various strategies in order to survive in the dynamic business world. But mere survival is not enough. Since they have to compete with its competitors in order to preserve its existing position and as well as to enhance its position. Organizations follow various strategies and some times a single strategy for this purpose. This research study attempts to investigate what are the strategies that a firm can adapt to, in order to maintain its market share in a highly competitive environment. Tesco Plc is used in order to evaluate how it competes in highly competitive environment and maintain its market share.
Specific objectives of this study would be:
To identify Tesco's competitive position in UK with compared to its rivals.
To identify the competitive strategies that Tesco is currently uses in order to compete in the industry.
To evaluate the success of its current Strategies
Suggest tactics and strategies that Tesco can develop and implement in order to maintain and enhance its market share.
3.2 Research Questions
Who are the major competitors of Tesco Plc?
What is the current competitive position of Tesco Plc in United Kingdom, with compared to its competitors?
What are the current competitive strategies adopted by Tesco Plc?
How these strategies have helped in gaining a competitive edge over its competitors?
How these existing strategies helped in maintaining its market share?
What are the areas that Tesco Plc should focus on in order to improve its competitive position?
What are the strategies that Tesco Plc can develop and implement in order to gain competitive edge over its competitors and to maintain its market share?
Literature Review
The business environment today is quite fast paced. The economy has changed rapidly and there is a need for organizations to implement competitive advantage. Organizations adhering to this principle need to take care of three key areas. Those are identifying sources of competitive advantage, implementing competitive advantage and defending competitive advantage.
Companies need to identify what parts of their organization will help them to achieve sustainable competitive advantage. Firms have the choice of using finance and their budgets to get the edge over their competitors. They could also consider their human resource segment. Another alternative is through implementation of technological changes. With all these options available it can become tricky for organizations to balance the three aspects. (Porter, 1985)
Companies can achieve competitive advantage in several ways such as by improving the quality of the products, by creating a good brand name or simply by reducing the cost (cost leadership).
In his book hyper competition, D'Aveni has stated that when industries become hypercompetitive, then they tend to go through escalating stages of competition. Firms initially compete on cost and quality until an abundance of high quality, low priced good result. The next stage is for the remaining firms to attack and destroy strong holds of other firms. As industries become hyper competitive, there is no such thing as a sustainable competitive advantage.
But this concept of hyper competition how ever, is that it may lead to an over emphasis on short term tactics over long term strategy. Too much of an orientation on the individual waves of hyper competition could cause a company to focus to much on short term temporary advantage and not enough on achieving its long term objectives through building sustainable competitive advantage.
It has found that, by being a low cost provider in the industry organizations can gain an edge over its competitors.
Cost leadership is all about lowering cost consequently lowering prices of commodities. Organizations that implement cost leadership look for methods and approaches that will reduce the amounts spent during production. Reducing production costs has two main benefits to the Company: Firstly the company will attain higher profit margins thereby achieving its goals. Secondly, the organization can afford to lower prices and this will give them an edge over all other competitors in their business environment. (Baird, 1994)
The first thing a company should consider when trying to implement the cost leadership strategy is the threat of entry. Companies should make sure that they become cost leaders so as to discourage the use of lower costs as an entry strategy by new groups. When new entrants realize that they have to compete against a certain cost leader on the basis of cost, ten they will opt out and decide to use product differentiation or any other strategy.
Companies should also integrate threats from rivalries. They can do this by either imitating their competitor's prices or they could decide to set their prices lower than their competitors. The former strategy is more risky than the latter because Companies that imitate their competitors prices usually get a lower market share and may record less sales. On the other hand, setting prices below those ones of their competitors will cause the Company to attract more consumers. Consequently, their sales volume will increase. However, such firms may have to pay the price by recording reduced profits. (Benter and Booms, 1981)
Some times technology can be applied to a Company's operating processes regardless of the level of expansion or without consideration of the economies of scale in order to compete with its rivals. (Grant, 2005)
A company that applied technology successfully in its service delivery was the Amazon Corporation. Their customer service is conducted through technology; they have instant feedback systems sent to consumers every time they conduct business and have the access to a wide range of buyers throughout the world. Cost of production has been reduced by introducing online selling. Amazon has also lowered overhead costs in terms of advertisement and other marketing techniques. They discovered online advertising which has gone a long way in ensuring that the Company stays ahead of its competition. (Jeff Bezos, 2008)
Companies need to put in mind threats of buyers. Buyers can become a hindrance to Company profits when they demand high quality and at the same time lower prices. Cost leaders need to make sure that they are able to produce their goods and services according to consumer demands at a lower price. It may become tricky for most Companies who are cost lenders because they tend to compromise on quality and concentrate on lower costs of production. This is the reason why some consumers may still opt for quality items regardless of their price. (Tesco, 2007)
Measurement
This Research attempts to identify the competitive strategies used by Tesco Plc and how they have helped in maintaining its market share within highly competitive retail industry. As such it is necessary to explore data in order to discover the relationship in above factors.
Selection of appropriate strategy is very much important in order to outperform its competitors in a highly competitive environment as most of the organizations fail as a result of implementing inappropriate strategies. Therefore to find out current strategies and their effectiveness, data should be gathered. Thus the overall objective of the project is to explore competitive strategies adopted by Tesco Plc and how it has impacted on gaining a competitive edge and maintaining its market share even in a hyper competitive environment. There fore for this purpose,
Tesco retail supermarket is taken as the population to this project.
Tesco supermarket, London outlet is taken as the sample in order to carry out the research study.
Data collection Methods
It is needed to gather data from primary and as well as from secondary sources.
Primary Data sources
Since the study is expected to be based on Tesco Plc- London outlet, primarily it is expected to gather data from the outlet manager and other key personals and as well as from employees.
Secondary data Sources
Annual Reports- Annual reports of the Tesco Plc disclose lot of information regarding its current status in terms of financial and non financial. Further it too discloses the growth achieved over the period of time and strategies behind the success.
Hand Books - This will provide concise information about a particular company, product, service or some other matter. This will help in gathering information regarding Tesco Plc, its products and as well as about its customers.
Magazines - A serial is a publication, such as a magazine, newspaper, or scholarly journal that is published in ongoing installments. Like books, serials can function both as primary sources and secondary sources depending on how one approaches them.
Managements texts - Management books can use to get theoretical information about the topic and also provide subject knowledge and also it will helps in building up a good literature review.
Previous research papers - Use previous research studies to gather information helps in gathering information regarding the subject.
Journals - Journals can use to write good literature review and it provide data like ,up to date information, recent statistics, specialized and focused information ,new topics and research reports, means of communication (e.g. through letters pages)
7.0 Data Analysis
Basically there are qualitative and the quantitative data used to for this project. According to the situation graphical method and simple statistical methods can be used for the purpose of the data analysis. Also the other statistical methods will be used for this purpose based on the situation.
Scope and the Limitations
Scope
Scope of the study will disclose the effectiveness of the Tesco Plc's London outlet's current competitive strategies in achieving long term success and as well as maintaining its market share.
Limitations
Time availability to conduct this research is limited.
Tesco Plc is a diversified company with world wide branch network. To narrow down the scope for the research purpose, and as well as due to financial and logistical constraints faced by the researcher it was decided to limit the study to Tesco Plc- London retail outlet.
Difficulty of gathering data in relation to internal strategy formulation and implementation.
Inability to gather sufficient data from secondary data sources.
Time scale for the MBA Dissertation
Key activities of the Dissertation
Time scale for achieve the key activities.
Resources required for achieve the key activities.
Finding the details of the various topics.
1week
Instruction from the supervisor and the browsing from the internet
Selecting about the topic
1 week
Instruction from the supervisor and the browsing from the internet
Proposal about the project
1 week
Word document
Literature review regarding the project
3 week
Text books, journals, internet browsing, magazines.
Implementing of the research problem
1 week
Discussion with the supervisor.
Data collection from the relevant people and sources
1 week
Use text books, journals, web sites of the TESCO, and as well as relevant personals as per the requirement.
Data analysis
2 weeks
Microsoft office tools
Final writing and the corrections
2 weeks
Microsoft office tools and the supervisor discussions
Extra time for solve the unexpected problems
1 week
Microsoft office tools and the supervisor discussion and the Harvard business reference.
