Value Chain Analysis Of Tesco Management

In this assignment, I have doing research on Tesco, UK. Tesco is the leading retailer in UK. Other than UK, it is also manages over thousand of supermarkets and Hypermarkets in Ireland, Central Europe and Asia.

I start with Value chain analysis (internal analysis) of Tesco. This tool used to demonstrate the Inbound Logistics, Operation, Outbound Logistics, and Service. Then analyzed the PEST analysis which stands for Political, Economics, Social/Culture, and Technology Factors. It's easily extended into a more detailed analysis by adding legal end environmental considerations.

On the other hand, I have critically evaluated 3 strategic options of Tesco. First strategy is Generic Strategy. That is the competitive strategy developed by Porter. One out of three generic strategies are Cost Leadership, Differentiation, and Focus. Second strategy options are the Market Development strategy Joint development, strategy alliances, and partnership. Last strategy are the Ansoff's Matrix strategy Market Penetration, Market Development, Product development, and Diversification.

Finally choose Ansoff's Matrix strategy as a best fitted theory of Tesco. This is because Ansoff's matrix provides the basis for an organisation's objective setting process and sets the foundation of directional policy for its future.

Strategic Management 2Introduction of the company

Company background of Tesco,UK

Tesco is the leading retailer in UK. Its manages over a thousand supermarkets, hypermarkets and convenience stores in United Kingdom, Ireland, Central Europe and Asia. It's operating around 2,318 stores and employing over 326,000 people. It provides online services through its subsidiary, Tesco.com. The UK is the company's largest market, where it operates under four banners of Extra, Superstore, Metro and Express. The company sells almost 40,000 food products, including clothing and other non-food lines. The company's own-label products are at three levels, value, normal and finest. As well as convenience produce, many stores have gas stations, becoming one of Britain's largest independent petrol retailers. Other retailing services offered include Tesco Personal Finance.

History of Tesco

Tesco started life in 1919 when Jack Cohen started selling surplus groceries from a stall in the East End of London. Mr. Cohen made a profit of £1 from sales of £4 on his first day. The Tesco brand first appeared five years later in 1924 when he bought a shipment of tea from Mr. T. E Stock well. The initials and letters were combined to form Tes-co and in 1929 Mr. Cohen opened the flagship Tesco store in Burnt Oak, North London.

Strategic Management 3

The brand continued its rise in the 1930s when Mr. Cohen built a headquarters and warehouse in North London and in 1932 Tesco became a private limited company. In 1947 Tesco Stores (Holdings) Ltd floated on the stock exchange with a share price of 25p.

Strategic Management 4Value chain Analysis of Tesco- internal analysis.

Value chain is defined as the links between key value adding activities and their interface with the support activities. Value chain has been implied as a strategic evaluation tool used for distinguishing the strengths and weaknesses in value adding processes. The value chain of Tesco has been demonstrated in the following diagram:-

Inbound Infrastructure

H.R Management

Margin

Supported

Activities

Technology Procurement

Procurement

Inbound Logistics 20%

Margin

20%

Services

5%

Outbound Logistics

15%

Operation

30%

Primary Activities

Fig 1: Value Addition in Value Chain of Tesco [Source : Value chain, Lynch (2003)]

Inbound Logistics

The overall cost leadership strategic management of Tesco is exhibited in its lean and agile inbound logistics function.  Drawing upon Abeysinghe, the company uses its leading market position and economies of scope as key bargaining powers to achieve low costs from its suppliers.  The analysts have also highlighted the constant upgrading of their ordering system, approved vendor lists, and in-store processes to induce effectiveness and efficiency into the company's inbound logistics operations.

Operations Management

Tesco has been praised by a number of supply chain management critics for its effective use of IT systems that facilitate the company's low cost

Strategic Management 5

leadership strategy.  According to Tesco, the company has invested