What Tesco has been able to leverage against its counterparts are some of the key factors that appear to be the leading factors derived from Tesco: a relentless focus on supply chain management, effective use of data analytics, adept handling of store formats, and a robust private label strategy.
Tesco does well within its supply chain management through the proper application of technology and data that optimizes choice, size, and distribution over its inventory. With the introduction of the wireless network in all connecting company stores, Tesco provides real-time distribution and transportation management, having the 6,553 stores across thirteen countries taken care of appropriately through efficient operation in their global network. An agile supply chain empowers Tesco to swiftly respond to changing consumer dynamics and rising market trends, never allowing it to spot and create a cutting-edge advantage over leading competitors like Walmart (Gupta & Chauhan, 2021).
The data analytics used show that Tesco is very responsive to consumer needs. This is only possible since Tesco is allied to a data mining company, Dunnhumby, whereby it can actually research consumer behavior for market targeting and the development of its product range, pricing, and stores. In all this way, Tesco follows the approach based on data, which helps it forecast some of the latest trends and spot opportunities before other firms in the business.
Its success, in addition, has been based on handling what it defines as an assortment of store formats by way of proper management. The different formats are customized to suit the needs of the local markets. Therefore, Tesco has more elasticity, which gives it the ability to serve not just the urban area but also the rural area. It enables Tesco to penetrate different markets and capture the market better than its competitors by using the approach of a one-size-fits-all approach.
Another very important factor that has contributed to the success of TESCO is the implementation of a robust private label strategy. Having the strategy to offer a wide line of good quality own-label products at all price points, TESCO has been able to list itself from adversities and build customer loyalty (Ferreira et al., 2020). Therefore, being so uncompromising, Tesco is about the quality of private label products as it is in some markets, where they amount to 60% of the revenue.
Profits from Tesco have been realized because of world-class supply chain management, effective data analysis in the organization, quality store formats, and private label business strategy. All these strengths have enabled Tesco to outshine Walmart in the competition through different times and remain at the top with a culture of excellence in the retailing world. At such a time, Tesco will be able to retain its top leadership through continued innovation and change to meet the ever-changing surroundings once the competition and retailing environment change.
The replication of Tesco’s data management would offer both opportunities and challenges. The concerned competing firms on the lines of Walmart or Carrefour might, in all likelihood, possess the required capabilities and resources for adopting parallel strategies. Still, many other factors constrain the feasibility of firms adopting Tesco’s strategy.
One of the challenges posed to the competitors in refurbishing their current systems and practices is that they would have to match Tesco’s measures when it came to data management. A lot of investment is to be incurred in infrastructure and technology, including setting up a wireless network connecting all the stores, handheld PDAs for data entry, and integrating the Radio Frequency Identification (RFID) tags in supply chain operations (Griffin, & Pustay, 2020). Of course, the rivals have to consider whether such an investment is feasible and outweighs the cost incurred compared to the benefits bought in terms of operational efficiencies and customer satisfaction.
Second, cultural and organizational factors may pose a learning challenge. The degree to which Tesco has succeeded in managing its data accrues to the technology used, but it focuses more on the organizational culture that creates value for data-led decision-making and innovation. Such is a case in which rivals would have to gear a culture effective at all levels within an organization in supporting data literacy, preparedness for collaboration, and support for experiments, but then they can only be effectively used to leverage data insights in making strategic decisions and for process enhancements.
However, entry into rivals may be stiffened in the form of various resistances from stakeholders such as employees, suppliers, or even customers who could be hesitant to support or adapt to changes that might result from the adoption of the Tesco way of managing its data. Appropriate change management strategies would be very important in addressing the concerns, creating buy-in, and helping to change the data operating model.
There are many opportunities for rivals to learn Tesco’s best practices in data handling and devise their distinct take, maximizing the advantage of their strengths. Giant corporations almost representative of size and knowledge, such as Walmart or Carrefour, naturally have very high resources that can be implemented in the Tesco style but in their way, which is quite unique, sovereign market dynamics. For example, in the U.S.U.S., Walmart’s point of sale scanning experience and supply chain management experience provide a good base on which to adopt some of Tesco’s approaches to data management. Similarly, Carrefour’s wide international spread and several store formats would come in handy in replicating Tesco’s store management success in several markets (Puspita, 2020).
As much as Tesco and Walmart suffered due to the effects of the international recession, it could be said that Tesco was more hurt due to the few factors responsible for the structure of the business model and positioning in the industry. First, reliance on the growth strategy of huge international expansion exposed Tesco to an economic downturn. Prior to the global recession, Tesco embarked upon aggressive expansion and entered new markets through the opening of a chain in the U.S. named Fresh & Easy.
The short to medium-term strategy continued to pay off before the occurrence of the great recession, which triggered a sharp fall in consumer spending and confidence and eventually led to weaker-than-expected sales and profitability for Tesco’s international operations. The expense of Tesco also hit a risk since, at this point in time, the U.S. property market was staying at its highest point; studies have found that at locations with the most extraordinary U.S. explosion of homes, the U.S. property market was staying at its highest point at the time when Tesco decided to launch its new stores. This came at the time when Tesco had already decided to launch its Fresh & Easy stores in California, Arizona, and Nevada.
This implies that the diversification of store formats made by Tesco and the use of different store formats may have exposed the firm to recession. Where diversification often becomes a strength in regular times of economic health to help present a high level of insulation against the vagaries of particularly troubled markets and sectors, in such trying times of economic uncertainty, diversification may, in fact, disproportionately bring complexity and operational problems. Tesco’s diverse store portfolio, from hypermarkets to convenience stores, may have sapped additional resources and focus from managing effectively through the recession, drawing attention from core operations and strategic priorities.
Even in regular economic times, Tesco’s private label strategy worked well in terms of generating sales and margins. However, the strategy could have been described as imperfect during the recession since it was not able to keep as high a margin as before. This was because consumers turned out to be more value-focused rather than paying heed to the premium prices of the national brands. While on most accounts, the argument goes that private label products give better margins than national label products, the Tesco case of maintaining the competitive price of the premium label and quality perception might have been affected during the recession, affecting the overall situation of profitability and competitiveness.
In great contrast to this, the business model aspirated by Walmart, whether in terms of the “everyday low price” strategy or, for that matter, generally being an efficient operator, might well have insulated Walmart from the ill effects of the recession. It meant the retailer was set up to attract value shoppers amid downturns. The vast size of Walmart and its potent balance sheet must have ensured it was a much better place contestant of the downturn than Tesco, at least to carry on investments through price cuts, store expansions, and similarly strategic initiatives that beef up their smack-it-home lead.
References
Ferreira, J., Coelho, A., & Moutinho, L. (2020). Dynamic capabilities, creativity and innovation capability and their impact on competitive advantage and firm performance: The moderating role of entrepreneurial orientation. Technovation, 92, 102061.
Griffin, R. W., & Pustay, M. W. (2020). International business: a managerial perspective. Pearson
Gupta, P., & Chauhan, S. (2021). Firm capabilities and export performance of small firms: A meta-analytical review. European Management Journal, 39(5), 558-576.
Puspita, L. E., Christiananta, B., & Ellitan, L. (2020). The effect of strategic orientation, supply chain capability, innovation capability on competitive advantage and performance of furniture retails. International Journal of Scientific & Technology Research, 9(03), 4521-4529.
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