This assessment will cover the following questions:
- Explain the value chain model proposed by porter.
- Tesco is the retail supermarket in UK. Explain the model chain of internal environment of the company.
- Reflect the importance of the value chain model which helps in the working of Tesco
Value Chain model is introduced by Michael Porter. This framework is helpful for analyzing peculiar activities by which company can develop value and competitive advantages. Whereas Inbound logistics consists of storing, receiving, inventory control and scheduling for transportation.
TESCO plc trade as Tesco. It is the multinational general and groceries merchandise retailer. The company had its head office at Welwyn Garden City, Hertfordshire, England, UK. It was established by Jack Cohen in 1919. The above report includes Value Chain Model and company's overview. Report further carried forward with explanation to the internal environment and the report ends with the refection on Value Chain Model.
Value Chain Model
Value Chain Model is also known as the Porter's Value Chain Analysis. It is the business management concept which is developed by the Michael Porter. The Value Chain Analysis is being explained in the book of Competitive Advantage in 1985 written by Michael Porter. Value chain is set of activity which are performed by organization for creating value for their consumers. Value creation develops added value that lead to the competitive advantages. So that higher profitability can be created for company (Swinnen and Kuijpers, 2019). The Value Chain Analysis mainly focus on activities and system with consumer as central principles rather than on the various department and categories for accounting expenses.
In this system activities and system are linked with each other and thus further demonstrating effect which it had on profit and costs. It consists of number of activity which are named as primary activity and support activity. In which primary activity have a direct impact on production, sales, maintenance and support of goods and service which is to be supplied. Primary activities are assist by support activity and thus base is formed for a company. The support activity such as human resource management is important among primary activities operations but along with that they also support other activity that are outbound logistics and services. It is an approach in which business functions are break down into strategic relevant activities by which utility is added in goods and services. The aim of framework is to maximize value creation along with minimizing cost. It is the internal process by which organization can design, sell, produce, support and deliver products. Value Chain analysis is thus dependent on basic fiscal principle of the advantages.
TESCO is leading Britain's food retailing company which employee over 160,000 people in whole United Kingdom. It has more than 702 stores. It was developed in 1919 by Jack Cohen, which is an immigrant from Poland to United Kingdom. Among past 5 years company has explored from traditional United Kingdom based supermarket into the new countries, goods and service that also includes major non food businesses, internet shopping and personal finance (Kawharu, 2018). Thus, TESCO had progressed as international retailer and had further employed 140,000 new employees at their 214 stores in nine marketplaces globally. Increase in internationalization and scale of TESCO purchasing and sale operations had significantly contributed in the hike of profitability and efficiency for company. It is the public limited company. Company has the leading market share of 27% in supermarket sector. There is huge competition created for company by the rise of Sainsbury, Asda Walmart, Aldi and Lidl etc., The value chain analysis of TESCO cab be used for competitive decision-making process. Performance of company can be improved by following-
It is very essential for a company to maintain strong relationship with their suppliers so that they can receive, distribute and store products. With the inbound logistics Tesco can face several challenge in product development phase. In the analysation of inbound logistics company needs to focus on each and every aspect of the transformation of raw material into the final goods.
The outbound logistics contains activities which deliver goods to consumer by crossing through various intermediaries. Tesco can optimize and analyse outbound logistic for exploring competitive advantages source and achieving growth and development in the business. When the outbound activity are managed timely with product delivery and optimal cost process then it is helpful in maximizing the consumer satisfaction and enhances growth opportunity for company.
Almost all the value chain activities are depended on the technological development. The technical integration in distribution, production, human resource and marketing activities are helpful to TESCO for realization of importance of technology development in company (Ferranti, 2018). It automated software, product design research, customer service which is supported by technology and data analytics are technological inundation which are introduced by company in their operation activities.
Marketing and Sales
Tesco marketing and sales includes advertising, sales force, pricing, promotional, activities, building relations, channel selection with their channel members. The marketing funnel approach can be used by company to structure their sales and marketing activities. Wisely and effectively integrated marketing and sales activities is helpful for TESCO to develop its brand equity and thus can stand out from competition.
Human Resource Management
The human resource management can be analyzed by TESCO by evaluating various HR aspect that includes selecting, recruiting, rewarding, training and performance management. Effective HR management can allow TESCO for reducing competitive pressure which is based on commitment, motivation and skills for their workforce.
SWOT Analysis enables company to identify factors that are required by company to be taken in account while developing corporate and marketing strategy. During the analysis Major strength, weaknesses and along with related opportunities and threats are being optimized by the company (Zamora, 2016). It can be described below-
The company has leading market share that are currently 28.1%. TESCO renders various product variety and choices to their consumers. It is the biggest retailer globally. The company is operating its business in several countries and had 6,809 stores across the world. They had club cards for their customer's which h is the effective information tool for them. Company had significant online operations.
Company had faced serious brand damage in 2015 because of its commercial income scandal which had put the negative impact of company on its consumers. They do not motivate and encourage their employees thus the employees who are working with company had low morale. The company also faces the weak financial performance in 2015 due to scandal.
The TESCO can adopt strategy that they can expand their business to the international marketplace. They can enhance their presence in the financial service industry. Company can further increase their non-food retail range so that they can have better option to stand in marketplace. The marketing strategies effectiveness can be enhanced by them.
The company had major threats from its rivals which are present in the market and render the high quality products at low cost. Major fluctuation in currency is also major threat to company which had slow down the sale of company (Swisher, Ruiz-Menjivar and Koenig, 2018). No agreed deals with European Union that can create uncertainty over the costing when goods are imported from Europe or performing deal with suppliers.
VRIO analysis of TESCO
VRIO analysis is helpful for determining internal resource of company and identifying that these resources can render benefits of competition to business. For TESCO it helps them to enhance their resources which provides them huge competitive advantage.
The VRIO analysis of Tesco states that financial resources of company are highly valuable which is helpful for them to invest in the external opportunities which arises for company. Company can easily compete with external threats. Their local food product which are valuable resources as they were highly differentiated from other products. Employees are also valuable resources for company.
Financial resource of Tesco Plc are founded as rare as per VRIO Analysis. Strong financial resource are processed by some companies in industry. Local food product are also not to be founded as rare by company as this can be easily rendered in market by other competitive rivals (Janicot, Mignon and Walliser, 2016). The company's patent are also rare which are not easily available and are not processed by their rivals.
The Financial resources of company are costly imitate by them. This resource is taken by company for their prolonged profits over year. Employees and local food products are also not costly to intimate as their employees are trained with time to time training and thus local food product can also be take over by rivals by investing in research and development.
The company had organized financial resource for capturing value which is identified by VRIO analysis. These can be further used for strategically invest in appropriate place, implementing opportunities in business operations and coping up with threats (Fanzo and et.al., 2017). The distribution network of company is well organized and helpful for them in reaching their customers and ensuring that there products are available to them on time when it is demanded.
Reflection on the value chain model
With the help of Value Chain Model TESCO could source and select premium quality raw materials and on the basis of that huge consumer loyalty base is developed by them. They can build and develop strong brand loyalty among the marketplace and easily compete with the rivals in market effectively. A competitive advantage is thus set by company by aggressive and effective marketing and managing coordination among product development and marketing department. TESCO had maximized its operational efficiency by reducing waste and integrating sustainability in their business operation thus it is helpful for them in gaining huge consumer interest and attraction towards their stores. They had also got appreciation for their efforts for waste reduction along with that they had implemented the paper bags in their stores and less packaging is done by them for their products. Tesco should use Value Chain Analysis instrument for its backward integration which is done by purchasing or merging with suppliers for ensuring availability of raw materials on time (Ouzrout and et.al., 2018). Company can easily expand itself to the global market so that they can gain huge revenue and profit margin further. The analysis is helpful for company in rendering huge consumer support so that they are encouraged to open their more stores globally and expand themselves at large level. It is also allows company to reduce costing and finding better business deal with suppliers and thus they can provide high quality goods to their consumers at affordable prices so that their sales can be enhanced. Innovations are implemented by them in their products and services so that more and more consumers are attracted towards company and its stores. TESCO highly invest in human resource practice so that they can gain huge competitive advantage for company. They can create specific marketing opportunities and extract value from the generic market of commodity with the help of value chain analysis.
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From the above study it has been concluded that the value chain model is very helpful for company in gaining the huge competitive advantage for company among its rivals. Company can easily sustain in market by the help of this analysis and implement the strategies according to tat so that they can well perform their operation activities. They brand loyalty can be developed for their consumer in the market place. By this company can attract wide range of consumers to the company so that they can raise their sales and profits significantly. Company can achieve huge success and expand itself to the developing countries by developing better strategies and working ahead for further expansion and growth of company.
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