Tesco and Asda Company: Corporate Strategy

Introduction

In the world today, companies thrive in situations where the management of the organization set up establishes strategies that are geared towards achievement of its goals and objectives. Implemetntation of strategies leads to improvement of organizations activities hence greater returns are achieved within an organization.

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Tesco Company

It is one of the most profitable supermarkets in Britain. It was founded in 1924 by John Cohen and later on incorporated in 1932.The reasons for its establishment was that John Cohen got the idea from United States of America where he found out that it was a successful and profitable industry. The major challenge of this industry was that of setting up prices so that the company could derive enough revenue to run its operations. It is a self-service industry where customers are allowed to pick an item that meets their needs and wants.

The retail price maintenance firm was requested to stop setting prices for all companies within the industry as it was denying the owners freedom to generate profits to run its operations. It was reported that John Cohen approached retail price maintaince organization to regulate its operations. He requested the firm to allow the manufacturers and retailers to set prices on their goods since the large suppliers would buy goods in large quantities therefore would have greater buying power and larger economies of scale such that the smaller shops would be in a position to sell their goods at a profit.

The strategies that were enforced within the company involved: establishing international stores, building non-food stores, enlargement of its retail services and electronic commerce which would enable businesses to be conducted effectively. The reason why the company was successful was because it provided low priced goods to the customers and as a result enhanced customer loyalty. It also ventured in retailing business such as banking and insurance as they contributed to increased sales for the organization. It also ventured in merchandising business that proved to be quite profitable to the organizations since they had higher profit margins as the company could purchase on large scale therefore could generate greater earnings for the organization.

Sainbury

It is another grocery market after Tesco and Asda. In 1995, it faced major internal problems and strategic problems that led to its low sales volume. The officials of the company were illegally appointed and further on, awarded themselves bonuses yet the performance of the company was deteriorating each day.

Asda

It was formed in the year 1965 by a group of farmers who came from Yorkshire. It later on merged with the Wal-Mart Company in 1999.The kinds of products that were being provided by the supermarket were fresh food, grocery, clothing, home, leisure and entertainment goods. It has over 260 stores that are located in England, Scotland and Wales. According to a research that was carried out, it was revealed that customers preferred to have low priced goods instead of being given gifts since this strategy was aimed at maintaining the customers loyalty where they would ensure they got items that would commensurate with their needs and therefore would improve on their living standards in the future. The management of the company set up a strategy that was aimed at maximizing the needs of the retailers. They worked with the voluntary organizations such as the Christian aid fair trade foundation, governments and retailers from the ethical trade initiative so that they would get ideas on how to meet the needs of the customers as it was considered as a good plan.

Morrison Company

It is a company that deals with different kinds of materials such as turnkey material handling systems for handling systems for distributing, manufacturing and warehousing. It also deals with warehouse storage rank and carton flow rack, shelving, storage mezzanines conveyors and conveyor material, modular industrial offices, warehouse safety guards, lift tables and the lifting products.

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The reasons why Tesco, Asda, Sainsbury and Morrison are classified as strategic group of companies

Strategic groups

These are group of companies that are found in the same industry where they undertake the same strategies and have similar models. Tesco, Asda, Sainsbury and Morrison companies are group of companies that carry out the same activities in Britain. The market Research group stated that the four companies held over 74.4 % of shares in the grocery market in Britain. Tesco was considered to be a supermarket that had the highest number of shares in the grocery market.

The four companies had set up strategies that were aimed at buying other smaller companies so that they would be in a position to have greater economies as opposed to their rivals in the industry. For instance, they wanted to purchase Safeway Company but they had to submit their offers to the Office of Fair Trading (OFT) so that they would be approved on whether they were in a position to take that offer. The office of Competition commission stated that their takeover bids were illegal, as the act would affect the small businesses, as they would not generate enough income to run their operations appropriately.

The strategic groups of companies are ranked as the best performing industries in the market due to their effective delivery of services to the customers. They have different stores located in different parts of the world that use the brand name and thus command higher sales as compared to smaller supermarkets in the industry whose existence has not been recognized by the customers in various parts of the world.

They were once accused of engaging in price fixing scams of products such as food and toiletries and therefore were being investigated for undertaking illegal activities within the state. These strategic group of companies had engaged in illegal activities such as bullying the suppliers by selling to them products at very low prices yet they had bought those goods from the producers at higher prices therefore they would not carry out their operations effectively. The supermarkets had remained in business since the regulatory body within the state could not control them as they had been in business for a long time. The Competition Commission revealed that the strategic group of companies sent threatening electronic mails to the suppliers in order for them to offer them discounts against their wish so that they would be in a position to undercut the prices of their rivals in the market.

Despite the accusations that had been imposed on the companies, they continued with their operations of expanding their businesses so that they could meet the needs of the consumers as they arose. The consumers that were being targeted were cashrich, time poor consumers, as they would pick products from the groceries at convenient time as they went home from their places of work.

Tesco, Asda and Sainsbury supermarkets market chains enforced barriers to the new supermarkets, as they required large amounts of capital to undertake their operations. The large companies enjoyed economies of scale since they had been in business for a longtime therefore could offer cheap, reliable prices to the customers thus remained profitable throughout their stay in business.

The macro environment group of companies should work in

Macro environment refers to the external conditions that affect a company such as demographic, economic, natural, technological, political and cultural forces. These are the forces that affect a firm closely while undertaking its operations. There are sub-environments that influence the operations of an organization such as suppliers, competitors and distributors macro environments. Supplier environment involves individuals or firms that provide different kinds of items to the firms such as: raw materials, product constituents and other retailing firm with finished goods. Distributive environment consists of persons who ensure that products reach the consumers at the appropriate time for example, wholesalers, factors, agents and the distributors. Competitive environment deals with the threat that arises from companies that produce and sell the same products whether they produce them locally or imported from the foreign countries.

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The other type of macro-environment involves legal, economic, social, cultural factors and the technological factors.

Political and legal factors

These are the factors in which the authorities dictate the way the operations of a firm should be carried out. Many firms are involved in international operations where they export and form joint venture companies with other companies in the world and therefore should follow the procedures that are imposed by the authorities while undertaking their tasks within an organization. The legal, economic and social developments that occur within a company arise from political factors, such as privatization of state industries and the way laws and policies are regulated within a country. A political factor involves the laws and regulations that should be followed by an organizations and companies when carrying out their tasks and duties during the period they are in operation. Governments impose those regulations and laws so that a free and fair market may be conducted appropriately within a stipulated period of time.

Economic factor

It takes into account the factors that influence the purchasing power of the customers in an organization. These factors address issues such as demand, costs, prices and profits that influence the way the operations of a firm are carried out. For instance, high levels of unemployment can lead to low demand for luxurious goods such as cars, since they can affect the returns that some investors would like to generate in the future.

Socio-cultural factor

It is the factor that is used to address people’s core beliefs or values that they are expected to influence the society. It takes into account the way people view themselves, organizations, society and the universe so that they can be in a position to carry out their duties and responsibilities effectively.

Technological factor

It is a factor that deals with the creation of new markets and opportunities for businesses so that the right kinds of products are produced for an organization. It was noted that companies that used old-fashioned machinery led to production of goods and services that were not relevant to an organization, therefore cannot command greater returns within an organization. Companies should implement the latest technologies so that they improve on the performance hence generate greater returns that leads to the growth and development within an organization.

Reasons for market leader success

Market leader refers to market that dominates an industry due to having a higher market share in an economy. A market is considered to lead if it can develop new business models and products that are commensurate with the needs of organizations consumers (Bernstein and Rasco 2007).

The reasons why market leaders are successful are that they implement new technologies and innovative businesses processes that lead to creation of products that can meet the needs of an organization.The customer value proposition can give possible solutions to the customer problems and products since it is carried out in a professional way. Market leader is considered to be successful if it becomes customer oriented. This is achieved through taking into consideration weaknesses of the rival companies and dealing with them than on their strengths so as to be in a position to penetrate in the world market and be in a position to launch a new product in the market.

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Sustainable competitive advantage is another factor that ensures market leader to be successful in the market. It is achieved through maintaining and improving on the enterprises competitive position in the market. Its benefits consists of ensuring firms remain in business for a long time through setting up strategies that are aimed at overcoming competition from rival companies in the market (Bernstein and Rasco 2007).

Relentless growth attitude is another factor that ensures that market leader is successful in the market. It involves the management’s implementation of new ideas and enforcement of laws that can bring about changes within an organization. This factor is enforced through setting the direction to be followed by an organization, creating a strategy of accomplishing goals within an organization, and ensuring that learning takes place so that the employees can acquire the relevant skills and knowledge that can enhance activities to be carried out effectively within an organization. Venture strategies involve the process of undertaking the process of searching for new sources of growth that the firms would like to achieve in the future.

Similarities of Tesco and Asda companies

Asda was founded in 1949 as the Associated Dairies and Farm Stores in United Kingdom. It offers a wide range of products such as food; clothing and the general merchandise products. Asda Company has over 21 supercenters, 245 superstores, 37 supermarkets, 37 living stores, 10 clothing stores and 24 depots. It engages in property development with other companies so as to expand its operations and hence increase the sales volume and revenue of the company.

Tesco Company has a large share in the grocery industry. It has directors who undertake their tasks as required and it records higher profit margins as compared to its competitors in the market. The reason why it has been recording significant success is that it has been in a position to accept change as it occurs (Lechmere 2008).

These two companies undertake their operations through trading their products using the online shopping mode of conducting their businesses so that the customers can be informed about the existence of their products in the market. They run retail businesses that mostly involve sale of grocery produce within the state. The television-broadcasting corporation stated that the companies offered their products at significantly cheaper prices but the management of the two companies refuted those allegations so that the reputation of the company is not affected.

The two companies have van insurances that it sells to its clients. They also provide extras and bonuses for the drivers that take care of their cars while driving them on the roads. The other services provided by the companies include breakdown services, coverage for the van content and fittings. They also give legal services in case a client’s car is involved in an accident and the owners are given trade discounts on their premiums they pay to the insurance companies. In order to receive these incentives, a manager of car should observe the rules and regulations that pertain to the way the operations of the company are carried out.

Both companies offer similar job categories that show how duties and responsibilities should be carried out. They are also command a higher market share and this is because of Asdas merger with Wal-Mart whose operations proved to be profitable within the organization. The profit margins of both companies were absolutely high and this is because of good strategic plans. They also employed qualified personnel who ensured that the activities within their companies were carried out effectively.

Tesco company also had good strategic plans therefore could offer fair prices to the customers which proved to be favorable to the organization. The supermarket provides the customers with a wide range of products from which to choose from and this drastically changed the customers eating and buying habits that have been changing over the years. The customers have been buying junky foods and their presence has been noted in the supermarket because of their practice of impulse buying that has contributed to the increased sales for the organization (Lechmere 2008)…

Management of the companies has continually advertised their products in the market so that the customers could be informed of their existence in the market. For instance, Tesco company had been advertising its products’ through selling of green shield stamps but the customers lost interest in the business but it later ventured in the business through lowering its prices so that the customers could be in a position to purchase their products since there was stiff competition from the rival companies which contributed to price wars within the state.

The Chief Executive Officer of Tesco Company Terry Leahy and Asda Company boss Andy Bond stated that they would work with the government to solve the problem of alcohol abuse and underage drinking as it hindered development within the country. It was reported that wines and spirits were being sold at very low prices therefore young people were in a position to access them, hence, led to their excessive drinking.The products were also being sold at losses therefore the suppliers complained bitterly concerning the prices of their produce as they could not generate enough profits to run the businesses effectively.

Differences between Tesco and Asda

Asda is a subsidiary of the Wal-Mart Company therefore cannot declare its quarterly or its half yearly earnings at any particular time but Tesco Company declares its earnings at the end of the financial period of the organization since it’s solely managed by its board of directors.

The two companies were in disagreement on the slogan “we sell for less” since each of the companies, claimed that they each had a right to advertise their products, but it was considered that it was being done in bad faith as Tesco company had copied the slogan from Asda company therefore leading to conflict of interest. The reasons for denying them access to use the slogan were that it would undermine the interests of other businesses to generate profits for their organization even though the slogan was meant to attract customers to buy the company’s products. Tesco Company conducted its business by its self while Asda Company merged with Wal-Mart Company so that it would be in a position to generate profits that would enhance its growth and development in the future (Lechmere, 2008).

Tesco Company has been facing challenges due its desire to form monopolies with other large companies that have been contributing to social and environment problems occurring within the country. The other issue that was being addressed was that of exploitation of small farmers as their produce was being bought at very low prices hence, could lead to low wages and labor rights being violated by the retailers. There were other issues of dealing with illegal activities that had been taking place within the organization that hindered its success. Asda Company has not been facing challenges as it merged with Wal-Mart so that the operations of the company would be carried out effectively.

It is important for companies to carry out research work on the environments in which they would like to conduct their activities as this can lead to generation of greater returns within an organization.

References

  1. Bernstein, R.and Rasco, J. (2007). “Africa: the final frontier.” New York, NY: Merrill Lynch.
  2. Bettis, R.A.and Prahalad C.K. (1995). The dominant logic: retrospective and Extension. Strategic Management Journal, 16, 5-14,
  3. David, C. (2000). Market Leader. Intermediate Business English Course Book, Berlin: Langenscheidt-Longman.
  4. Christine, J. (2000). Market Leader. Business English Banking and Finance, Berlin: Langenscheidt-Longman.
  5. Lechmere, A. (2008). Tesco, Asda binge drinking announcements welcomed.
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