A review of one of the Largest online grocery in the UK.
TitleE-Business Strategy Review Report for Tesco.com
Management SummaryThe main purpose of this report is to review and analyse one of the worlds largest retail online grocery in the UK, Tesco.com. The report would show the various E-business strategy used by Tesco since the launching of their website in year 2000. It will show how Tesco has been using e-business to expand, to save and to increase customer service in the UK.This report first shows a brief summary of the history of Tesco such as when Tesco was founded and by whom, how Tesco got its name and when Tesco launched its website, Tesco.com. A SWOT analysis was also conducted of to see their strength, which is their customer service, their weakness, which is their high dependency of the UK and Europe countries, their opportunities which is the growing demand for online shopping, music and video and lastly their threats which are their competitors. A PEST analysis was also done to access the market for Tesco.com, along with a competitor analysis in which Porters Five Forces were used to analyse the treats that can take place with the online grocery. It also, shows the e-business strategy that they have adopted and are planning to adopt along with the legal and ethical issues that they must take into account when running an online grocery site.With their tagline Every Little Helps Tesco.com has proven to be the best when it comes to customer service and has been very successful over the years, with extremely high profits that has been increasing. Tesco.com needs to continue to striving for excellent service and good prices in order to remain above their competitors.
1.0 Introduction1.1 Tescos HistoryTesco was founded in year 1919 by Jack Cohen from a market stall in East London which made a profit of 1 from the sales of 4 on his first day. Which in those day were considered to be a lot. In 1924 he created Tescos brand name from the initials of a tea supplier, Thomas Edward Stockwell (TES) and the first two letters of his last name, Cohen (CO). He later opened of the first Tesco named store in 1932. (Tesco PLC, 2012).However, it was in year 2000 that Tesco launched its e-commerce business, Tesco.com, expanding its range of products selling clothes, electrical and personal finance products, online. By September 2005 Tesco.com received 170,000 orders per week with sales of 401 million for the first half of the year (Chaffey, 2009). Although Tescos primary dot-com operations are based in the U.K., particularly in the greater London area, Tesco has also successfully exported their dot-com strategy to other countries including Poland, Czech Republic, Thailand and South Korea. (Wulfraat, 2014) Tesco.com allows customers to place orders from any computer, tablet, smartphones and even virtual shopping walls in subways. Customer has the option of click and collect or pick up later at the local store drive thru or delivery at their door. (Wulfraat, 2014)1.2 Products and Services offered by Tesco.comProductsServices
Grocery ItemsFinancial Services
Fresh Produce Broadband Internet
Frozen FoodPhone Services
Tesco DirectMusic downloads
WinesFlight and Holidays
Beauty Consultation Services
Table 1.1 showing the products and services offered by Tesco.com (Tesco, 2014)
Figure 1.1 showing the timeline of Tesco.com products & services2.0 Situation Analysis 2.1 PEST AnalysisThe PEST analysis is a business measurement tool that is useful for understanding market growth or decline, and as such the position, potential and direction for a business. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business. (Chapman, 2014)Political Because of the rise in obesity and other health problems the UK government is considering the introduction of Fat Tax. This is a tax that would be added to certain food item that contains more than a certain percentage of saturated fat. (Griffith, OConnell, 2011) This can affect Tesco.com negatively, since a rise in food prices could mean a drop in sales for certain food items. Customers may choose a healthier food option, which may also affect Tesco.com positively by increasing the sale of their healthy range of food items.Economic Over past few years the UK has been experiencing a downfall in their economy which has only recently became stable showing slight growth. With this level of uncertainty existing in an economy and with the austerity programmes on customer spending, customers would be looking for ways to curb their spending were possible. (Peston, 2015) This may affect Tesco.com positively since goods bought online are most times cheaper than in store goods, causing an increase in their online sales. This can also affect Tesco negatively since some customers may choose not to spend at all or spend very little on item that they do not really need.Social With the current age we live in, people are becoming busier than before with work and personal life and do not always have that extra time to go store to store shopping. This can be a big advantage to Tesco.com since people now prefer the convenience and comfort of shopping at home. (Rigby, 2011) Especially the elderly that are becoming more technologically advance but are less mobile and cannot move around as usual. This beats, having to face the heavy traffic on the roadways and lowers the chances of customers being affected by crime. Online shopping can be a huge benefit to them because goods are now delivered at customers door steps, therefore increasing sales at Tesco.com tremendously. Technological We live in an era where technology is the norm. Everyone is using it, from the youngest to the oldest and it is making our lives a lot easier. With this rise of technology and digital capabilities, consumers are changing the way they shop. Customers want to be able to shop however, whenever and wherever they want. They want to shop across store formats, on smartphones and on tablets. They are no longer choosing just a simple trip to a store, but are making much more dynamic and complex journeys to purchase. (Tesco, 2014) Tesco now has their online shopping mobile app that allow customers to purchase goods and services right in the palm of their hands. It also allows your phone to act as an electronic membership card that allows customer to scan their phones at the tills to get discounts and obtain their loyalty points. (Tesco. 2014)2.2 Competitor Analysis Porters Five Forces would be used to analyse the threats that can take place with Tesco.com. These five forces include: Bargaining power of buyers Bargaining power of suppliers Threat of substitute goods and services Barriers to entry Rivalry amongst existing competitors
Figure 2.1 showing Porter Five Forces Diagram (Meek, 2012)Bargaining power of buyersThe internet has increased the bargaining power of the customers on the whole. This is because there are many options available for the customers to choose from. Hence, influencing the price of goods offered by different supplier. The internet has allowed customers are ability to shop around from the comforts of their homes and compare the different prices offered by different suppliers, choosing the good that is at the cheaper price. This can cause suppliers like Tesco.com, to adjust their prices to that of their competitors or even lower. (Chaffey, 2009).Buying power of suppliersThe threats arising from the suppliers of Tesco.com are far less than that of its customers, but still needs to be considered. Many factors influence the bargaining power of the supplier, some would include having more buyers than sellers in the market. This can affect Tesco.com since the supplier can choose who they would want to do business it and at what price they want to sell their products. If for instance one of the suppliers decides to sell Tescos competitor at a cheaper price, then this would be an issues for Tesco.com since they would now have to drop their prices in order to remain competitive. (Chaffey, 2009)Threat of substitute goods and servicesHaving substitute products and services can pose problems to Tesco.com especially if they are cheaper. Currently Tesco has its own brand of grocery items such as bake beans, juices, wines which can all be easily be substituted by the customer for another brand of products, causing a decreasing in the companys revenue. (Chaffey, 2009)Barriers to entry This force shows how easy or difficult it is for new businesses to enter into the industry. This may not be much of a threat to Tesco, since it may not be so easy to do because of the high set up cost. But can pose a huge threat to Tesco.com since it is much easier for businesses to set up a big warehouse and start up business online, since it is a lot cheaper to run online that in stores. (Chaffey, 2009)Rivalry amongst existing competitorsThis force is the major determinant on how competitive and profitable an industry is. In competitive industries, firms have to compete aggressively for a market share, and this may result in price wars. Even though these price wars may seem good to customers because of the low prices, it results in low profits for businesses such as Tesco.com.(Jurevicius, 2013) 2.3 Demand Analysis Demand analysis is the assessment of the demand for e-commerce services amongst existing and potential customer segments. (Chaffey, 2009). As time goes by people are opting more for online shopping because of it many benefits. Over the years Tesco.com has seen an increase in the amount of customers shopping online. Statistics shows that in the UK, there are currently 57,075,826 internet users, this makes up 89.9% of the UKs population with inte