INTRODUCTION
Porter’s Value Chain Analysis, developed by Michael Porter, is a key concept in business management. It refers to a series of activities that a company undertakes to deliver value to its customers. By effectively creating value, organizations can achieve a competitive edge, which in turn leads to increased profitability. Tesco, a British multinational retailer, specializes in groceries and general merchandise, with its headquarters located in Welwyn Garden City, Hertfordshire, England. It ranks as the third-largest retailer in the world by gross revenue and the ninth-largest by total revenue. This report will explore various aspects, including a SWOT analysis of Tesco and an examination of the company's value chain model.
Value chain model of Tesco
Value chain model is divided into four steps that needs to be followed.
Identify sub-activities for each primary activity
Tesco identifies those activities which needs to be sort on a primary basis so that they can work on creating a value for themselves for a specific task. The company divides their category into three categories. For the marketing and sales of products which are sold online they have categorised them under direct activities. Activities which the companies does for maintaing the relationship with customers by the team of marketing and sales they categorise it under indirect activities. The third category is to proofread the content of advertisements they make so that they can edit in an appropriate manner it is categorized under the segment of quality assurance. (Reilly, 2015.)
Identify sub-activities for each support activity
In this area the company is concerned with the activities that support them in the aspect of human resource management, infrastructure, developing technology so that they can create value of the activities which are primary for the company. Tesco assure the quality for both the activities that is direct and indirect. For instance it is difficult to create value for the department of human resources for the logistics which are inbound and for the objects which relates to the team of service, sales and marketing. It is not limited to this so that they have to do it for other aspects also. (White and et.al., 2018. )
Identify Links
This step takes a lot of time as it takes time for the company to find the links which help them to create or add value. It is necessary at the stage when the company needs to gain the competitive advantage in the market. For instance by maintaining the relationship with the customers it can help Tesco to increase the level of sales and production of the company by making the investments in those areas which is required.
Look for opportunities or solutions to optimize and create value
After the stage when Tesco has completed the analysis of the value chain model, they work on evaluating those activities for which they believe can be optimized so that they can create value for the products. They invest in those areas where quantitative and qualitative measures are concerned, do my homework for me which will help the company to increase their base of customers, gain competitive advantage, and increase the level of profitability. It will help the company to get a better return on investments (Mudambi and Puck, 2016).
Response of the company
The value chain model that Tesco uses has helped the company increase their operations. It consists of activities that drastically affect the production of the company, maintenance, and sales. The following elements are those which affect the support of the company. Inbound logistics, production, outbound logistics, marketing and sales and service department helps the company to increase the level of production as well as these are the ones who get affected with a slightest hit. These activities are those which help the company to support the activities which are primary for them as the company has been working on creating the value which has increased the working and operations of all the level of department. More the model of value chain has helped the company to increase the limit of production because of more demand from the customers and the marketing team are under the pressure to spread the awareness and promote the brand so that they can acquire more deals for the company. Sales is related with the aspects of selling more products to the customers and increase their reach as much they can. With the help of this model company has been able to focus on the principles which are central rather than focusing on specific departments and the expenses of the company. It helps the company to know that how much the interrelation of the link has growth or loss in the revenue sector of the company. This analysis has helped the company to obtain the information that whether the sources they are getting valued for their services or suffering from losses which are in the company.
SWOT Analysis of Tesco
Strength
Tesco is the leading brand in the market in the industry of grocery and retailers in UK. As compared to their competitors there sales and revenue are more. Last year their profits seen a improvement of 28 per cent. Tesco has continued to dominate the market with 27 per cent share in the market and apart from that the company has gained high level of popularity in the market of Ireland. In the year 2008 the company had 3,751 stores but now they have 6,966 stores all over the world. The revenue of the company is increasing on yearly basis because of more stores they are opening in different markets. The company generates a huge amount of employment in the country and because of that they have turned out to be the largest employer in private companies. There are more than 7,43,000 employees in the company. (Johnson and et.al., 2018. )
Weakness
The export of the company was not strong which resulted in shutting down their operations in the market of Japan and America. They served in Japan for 9 year and 5 years in US. The company was charged with hefty fines as they used the strategy of window dressing by which they showed wrong amount of profits. The operating profit of the company also decreased by 9 per cent which led to decrease in the prices of shares. It is considered to be the worst result of the company after the issue of Brexit. The company uses the strategy of low pricing which has started to decrease their margin of profit. There are some of the stores in some countries where performance is not good it is because the company didn't conducted the research of the market in an appropriate manner before entering into it. (Wood, Coe and Wrigley, 2016.)
Opportunities
Recently company has opened up a new venture by the name Jacks it is a discount store by the company and it helped them to grow significantly. The company has the opportunity to compete this new venture with their competitors such as Aldi and Lidi. Tesco has the scope and opportunity to enter into various markets in order to increase their revenues. They have the scope to open up in markets such as Turkey, South Korea and Indonesia as it can be profitable areas for them. Company can come into a partnership or joint venture in those areas where their stores has not been able to make an impact in an positive manner in the eyes of the people. By coming into joint venture the company can get the information about the local areas which will help them ti improvise and serve better. (Jaligot and et.al., 2016. )
Threats
In the year 2017 Tesco suffered from a controversy on the day of Christmas as they launched an ad with an inappropriate content which has disrespecting the people and the people started believing that they are not respecting their culture. Another controversy which has affected the brand image of the company was the company was accused of mistreating the customers by offering them fake farm products under the name of Wood side farms and for that they are still fighting the case in the court. Apart from this Britain no longer comes under European Union which has affected the cost of trading for the company. Company is facing a lot of threat from their competitors as they are also operating on a large scale and they are performing better than Tesco which can reduce the share that the company has in the market. The economy of UK, the regulations which are imposed by the government, matters which are related to tax and legal aspects all this puts a threat on the company as it can affect the operational efficiency of the company. (Gonen and et.al., 2017.)
Reflection on the Value Chain Model
Through the whole study I learned that Tesco uses the model of value chain so that they can offer the products which has more value according to their needs and wants. By adding or creating the products with value it helps Tesco to gain the competitive advantage over their competitors which has helped them to generate high amount of productivity and profitability.
I learned that there are four departments which are required to support the activities that Tesco requires for adding or creating the value by the model of value chain. The four departments are infrastructure of the firm, management of human resources, development of technology and procurement. I believe that the activities which are primary for the company Tesco need their support so that they can create the base of the company. An example of support activity can be the department of human resources and they help the activities which are primary for the company and support the aspects of outbound logistics. This concerns the activities such as outbound logistics. The infrastructure of the firm is concerned with managing the daily operations in which the company is engaged in. I learned that the activities which helps in creating the value of the infrastructure of the company is line management, handling of administration, management of finances for the company. The department of HR of Tesco said that more the workforce of the company is developed more they will support the activities of the company. Activities which comes under the working of human resource department are recruitment of staff, coaching and training of staff, retaining and compensating them with others. Activities which relate to the department of IT and technology helps the company to develop their products and services in both the ways that is internal and external. They help the company to come up with new ways so that they can cope up with the changes of the market. Innovation and invention of technology, development of the product based on the technology that is introduced newly into the market, these activities helps in creating the value so that they can optimize and innovate the product and the department of IT these all are the examples of development of technology. All the activities which are used for support is relate able to the procurement so that they can offer quality service to the customers. Procurement is concerned with entering into different markets, maintaining the relationship with suppliers and negotiate with them so that they can break the prices of the product, purchasing of the materials from the suppliers and forming agreements of outsourcing. These are the examples that come under procurement and I am sure that it helps Tesco to support various types of activities and use the ones which are primary so that they can create the value, offer them a sustainable amount of service. (Bammann, 2019. )
CONCLUSION
From the above studies it has been concluded that Tesco is the leading brand in the market as compared to its competitors though the company is facing a tough competition from them and because of the controversies they have been or accused of there profits has been decreased which has also led to decrease the amount of their stock prices. The value chain model helps the company to support the activities which are primary for them and by creating the value it has helped the company to gain the competitive advantage in the market which has led to increase the profits of the company.
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