Tesco Essay Example | Topics and Well Written Essays - 1250 words

Tesco - Essay Example Analysis of the company’s operating exposure 6 6. Management of operating exposure 7 7. Summary and conclusion 8 Appendices 11 1. The company Telco is a general merchandising and multinational grocery store in United Kingdom with its headquarters situated at Cheshunt. In the retailing section Telco plc ranks third in the word after Wal-Mart and Carrefour while it is second largest company in terms of profitability after Wal-Mart (Reuters, 2011). The company was founded by Jack Cohen in 1919.The company over the years has expanded geographically. The company is listed under the London Stock Exchange constituting of FTSE 100 index. Telco plc market capitalisation rate was around ?27.8 billion as on 15th September, 2012 (London South East, 2012). The main aim of the company is to provide its consumers with the best quality products at attainable rates, which make the company a success over the long period of time. The company operating in various countries like UK, US, Asia, Mala ysia, Thailand and Republic of Ireland, etc. have to confront the different market rate fluctuations. Thus this can be sorted through the study made below (Appendix: 1). 2. The macroeconomic situation United States alike the other advanced economies of the country has come through a lot of improvements from the economic perspectives. The financial markets have been stable since a past few years which got reflected through the continuous rally of corporate bonds and equities. This was achieved through the narrowing of the spreads of the corporate bonds and fall in the interest rates of inter-bank. Most of the lead indicators of the economic activity are showing signs of recovery-though the recovery of the economy is likely to take place at a modest pace. The slow recovery of the economy is the price that US is ready to pay to come to a balanced economy. Consumers entering the downturn with relatively high debt levels and low savings are pacing out the consumption of growth. However, a remarkable recovery is mainly due to the stable consumer spending and the revival of demand at the consumer level (Deloitte, 2009, p.5). 3. Porter’s five factor framework for competition It is mainly the analysis based on which the strategy of the company is incorporated before establishing a company in a new country or city. It was developed by Michael E. Porter to understand the unattractive forces of the market which may pose trouble in the establishment of a company. 3.1 Bargaining power of Buyers Apart from Wal-mart and Marshals the country of Canada lacks prospective large retailers. This gives Tesco a wide chance in establishing its business in Canada, as the population of the Canada has an earning capacity of $22,000 to $ $42,000 on an approximation (Statistics Canada, 2012). 3.2 Bargaining power of suppliers Most of the suppliers of Tesco being loyal to its company Tesco never had to face dilemma in terms of production of the related goods. Still Tesco comprising o f many suppliers their bargaining capacity is more when compared to Tesco as a buyer. In Canada the main three super markets are Wal-mart, Zellers and Giant Tigers. However, the threat faced from the suppliers is comparatively low as there is often a tendency for the large supermarkets to dictate the price paid to the suppliers of the product. If the suppliers do not agree with the price quoted by Tesco then it lies with very less options. Thus Tesco have a huge advantage in comparison to the local shops of Canada. 3.3 Competitive Rivalry Tesco can face competition on a larger scale from companies like Wal-mart, Zeller and Giant Tiger due to their business model strategy which is mainly based on the providing schemes of discounting on the overall products of the company. Thus to fight competition with the