When Jack Cohen started selling groceries from a stall close to London in 1919, he might not
have realized what success story he was about to create (Tesco, 2012). Hard to believe, but
this was the foundation of Tesco as we know it today. Tesco has become one of the leading
food retailers in the world with a revenue of more than 60 billion pounds and a global
workforce of around 490.000 employees in 2011. There have been various factors that have
had major impact on the company including the Second World War as well as the United
Kingdom entering the European Union. These influences can be broken up into social,
economical, legal and political. Additionally there has been another element of Tesco, which
made the company unique and attributed majorly to its success: Its growth strategies. These
will be analyzed with 'Ansoffs Matrix'.
Table of Contents
1. Introduction
2. Political factors
3. Economical factors
4. Social factors
5. Technological factors
6. Legal factors
7. Tesco's key to success
7.1 Ansoff's Matrix
8. Conclusion
Objectives & Key Topics
This work examines the historical development and strategic success of Tesco, analyzing how various macro- and micro-environmental factors—social, economic, legal, and technological—shaped the company's growth, and evaluating these strategies through the lens of Ansoff’s Matrix.
- Analysis of PESTEL-related environmental influences on retail growth.
- Evaluation of Tesco’s international expansion and market entry strategies.
- Examination of technological innovations, such as the Clubcard and online retail, in driving consumer loyalty.
- Application of Ansoff’s Matrix to categorize the company’s product and market development strategies.
- Assessment of the shift from a pure retail product company to a service-oriented business.
Excerpt from the Book
Technological factors
Technology has also impacted the company in various ways including the invention of the shopping cart. After 1950 the company introduced self-service stores, equipped with the newest technologies, reducing the labor costs of Tesco. Tesco's expansion would not have been as effective without the invention of price stamps on items and price tags, which greatly reduced its costs. Before, employees had to write down the prices by hand (Smith, 2007:266). Additionally the company introduced electronic point of sale systems, which reordered automatically reducing Tesco's warehouse costs considerably (Kew & Stretwick, 2005:18). These new technological advances reduced the company's cost and enabled the company to become price-leader. Technology enabled Tesco to investigate customer's buying behavior and target customers more effectively. Tesco launched its Clubcard in 1995 and research shows that there is a positive relationship between owning a Clubcard and loyalty to store (Turner and Wilson, 2006:958). Today there are more than 15 million club cardholders and "80% of total spending" is made using Tesco's loyalty card. "Probably the main factor in Tesco's success has been the commitment to use the data gained to drive the business" (Powell, 2004). These are just a few examples of how technology has significantly influenced the company's success. In 2001 the company launched "Tesco Online", which has become the most successful on-line grocery shopping service in the world. Via the Internet the company has been able to reach a variety of customers including "busy urban families to people in rural communities" increasing the company's sales revenue (Johnson, Scholes & Whittington, 2006:390).
Summary of Chapters
1. Introduction: This chapter provides an overview of Tesco's historical origins since 1919 and outlines the primary factors that have contributed to its development into a global retail leader.
2. Political factors: This section discusses the impact of international trade agreements, such as the European Union, on Tesco's expansion across Central Europe.
3. Economical factors: This chapter analyzes how Tesco successfully navigated historical economic fluctuations, including the Great Depression, by adapting its pricing and business strategies.
4. Social factors: This part explores changing societal structures, such as the entry of women into the workforce, and how Tesco capitalized on resulting shifts in consumer shopping habits.
5. Technological factors: This chapter details the technological innovations implemented by Tesco, including the Clubcard and automated point-of-sale systems, which enhanced operational efficiency and customer loyalty.
6. Legal factors: This section examines the influence of legislative environments on the company, specifically the struggle and eventual triumph over Retail Price Maintenance laws.
7. Tesco's key to success: This chapter investigates the core growth drivers and strategic business approaches adopted by the firm.
7.1 Ansoff's Matrix: This sub-chapter uses the Ansoff framework to classify and explain Tesco's various market penetration, product development, and diversification initiatives.
8. Conclusion: This final chapter synthesizes the company's ability to leverage environmental forces to maintain a dominant market position and adapt for future challenges.
Keywords
Tesco, Ansoff Matrix, Retail Strategy, Market Penetration, Product Development, Diversification, Clubcard, Economic Environment, Globalization, Technological Innovation, Supply Chain, Consumer Behavior, Market Expansion, Corporate Growth, Retail Marketing
Frequently Asked Questions
What is the primary focus of this document?
This document focuses on the historical success story of Tesco, analyzing the key factors—political, economical, social, technological, and legal—that enabled the company to grow from a small stall to a global retail leader.
What are the central themes covered in the text?
The central themes include Tesco's adaptability to macro-environmental changes, the strategic use of growth models, technological implementation for competitive advantage, and international market expansion.
What is the core objective of the analysis?
The core objective is to identify and explain the success factors behind Tesco’s growth and to illustrate these strategies using Ansoff's Matrix.
Which scientific framework is utilized to analyze the strategies?
The work employs Ansoff's Matrix to categorize and evaluate Tesco's product portfolio and market strategy options.
What content is explored in the main body?
The main body explores the PESTEL framework (Political, Economical, Social, Technological, Legal factors) to explain the external and internal drivers of Tesco’s business success.
Which keywords best describe the paper?
Key terms include Tesco, Ansoff Matrix, retail strategy, globalization, market expansion, consumer loyalty, and technological innovation.
How did technology specifically aid Tesco’s competitive standing?
Technology enabled Tesco to reduce labor and warehouse costs, gain deeper insights into consumer buying behavior, and foster long-term customer loyalty through the Clubcard program.
How does the company address market saturation or competition?
The company utilizes diversification strategies, such as the "Fresh & Easy" chain in the U.S. and entering the beauty and telecommunications markets, to reach new customers and maintain high profitability.
What was the impact of the "Retail Price Maintenance" laws on Tesco?
The laws initially hindered Tesco's ability to set its own prices, but their eventual abandonment in 1961 allowed the company to fully implement its "pile it high, sell it cheap" price leadership strategy.
Why is the "Tesco Online" service mentioned as a significant milestone?
It represents the company’s successful transition into a product and service business, allowing Tesco to reach a broader range of consumers, from urban families to those in rural communities.
- Quote paper
- Chris Obereder (Author), 2012, The Success Story of Tesco, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/210398
