Strategic Approaches That Have Helped Tesco Achieve Online Sucess - Iloka Benneth Chiemelie, Richard Krakue

INTRODUCTION

Numerous researches on strategic management have examined the issue of diversification; both on international and product level. Most of these studies have argued that the synergies of product diversification creates greater value, illustrating that firm-specific advantage is the primary force driving diversification activities (Bettis, 1981; Christensen and Montgomery, 1981; Hill and Hoskisson, 1987; Palepu, 1985; Rumelt, 1974, 1982; Teece, 1982; Wernerfelt and Montgomery, 1988). On a retail bases, retailers have sort this means as a measure for increasing market shares and attracting new customers.

The internet have offered many opportunities to firms that do take diversification approach, as they can now reach previously unreachable markets and cross borders without having to stop-check at any check-point. This concept was put into full illustration by Tesco.com and they combined this force with improve distribution channel, thus carrying out both online and offline services to their fullest measures and pulling in more customers in return.

This case study will discuss the diversification strategies adapted by Tesco.com and how these strategies have helped them to become a successful online brand. Originally from the UK, Tesco.com is not so successfully that it presently occupies positions in America, Asian and Eastern Europe markets. This case study paper is divided into three different sections as it looks to cover all the relevant elements that will showcases proper understanding of the case study and implementation of e-marketing models.

The first section is the introduction which shades light on the case study to be analysed and the content of the overall paper. The second section discusses the online strategies that have helped Tesco.com to become successful; critiquing these strategies to find out the loop-holes and possible outcomes Tesco.com could face in the future in reference to their competitors and the online market in general. The final section is the conclusion section that summarizes the overall contents of this research paper, and followed suit after with the bibliography as evidence of extensive and qualitative journal analysis.

THE STRATEGIC APPROACHES THAT HAVE HELPED TESCO.COM ACHIEVE ONLINE SUCCESS

Product range development

Product development has been highlighted as decisive for the prosperity and success of any company (Woodside and Biemans, 2005). This is because, through product development and introduction of products (including services, new possibilities and markets starts to emerge which organisations to take advantage of. Some of the solid foundation for new product development has been pointed out to be innovative input from customers and markets (Wilkinson, 2006). This is because information obtained from customers or customer's involvements with the new product range development will strengthen Company's ability to stay abreast in new product development; because they will be development products and services that are demanded by customers.

In innovation and marketing literature, the company-user approach (normally associated with the customer-active paradigm and the work of Von Hippel, 1978, 1986) has been pinpointed as the most appropriate knowledge and information accessing approach. This has been made much easier by the availability of internet technology as companies can now source number information from customer across the world, process them in their systems and store this information in their database for future reference.

Tescon.com understood this approach and implemented it to the climax under Wade-Gery's leadership. The company conducted test approaches for many months with specific markets and upon success implemented this approach into all their locations. By 2005, Tesco.com already offers 150,000 orders delivery to household and coupled this service with non-tangible service offerings by purchasing e-Diet.com for ₤ 2million and offering other services such as broadband, music download, network provisions and movie renting.

Through product diversification, Tesco.com was able to penetrate numerous markets and acquire huge markets shares in the UK and Ireland. This is because compared to their customers, they are not focused in groceries anymore and by providing more services and products, their customers can do all their shopping at Tesco.com. For instance, customer can reload their phones, subscribe for broadband, rent movies, download music and read e-Diet articles then finally shop for their groceries at Tesco.com. This provided convenience to the customers thus making their loyal and satisfied.

Improved customer experience online

As the internet unfolded and e-businesses started to emerge, many brick-and-mortar retail service firms moved to have online presence. While the internet offers great potentials for as a low-cost distribution channel, it also possesses its setbacks (Reibstein, 2002). On another approach, internet technology has become more prominent with firm-customer relationship and has changed customers service delivery to a high extent (Bitner and Brown, 2006), but the uncertainty streaming from the evolving and technology-driven customer experience leaves firms grappling for best approaches to solve these leverage (Porter, 2001).

Compared with conventional service method where customer has to wait to be served, customer-firm relationship in e-service has undergone substantial transformation. Due to expanding technology in service delivery, customers nowadays have evolved from an integral part of service processes (Langeard et al., 1981) to become partial employees (Mills et al., 1983) and co-producers of services (Etgar, 2008). Although this shift results in positive behavioural intentions in general (Prahalad and Ramaswamy, 2000; Auh et al., 2007), individuals with certain psychological profiles might react differently to tech-based services (Massey et al., 2007; Parasuraman, 2000).

As online customers seek to interact, enjoy, be entertained, and learn, the rate of communication inflow and outflow is considered essential in determining customer's experience. This is because fast communication flow aided with easy to understand scopes will make customers more willing to undertake the online experience. This will also reduce their psychic costs of seeking ways to resolve technical problems that are sometimes beyond their knowledge and capabilities.

Teaco.com took this issue serious compared with their customers, because they implemented at formula that increased customer experience in their website by reducing the time it takes to complete transaction from a whopping one hour plus to just 35 minutes. Offering improved customer services and faster transaction time is one of the essential approaches that have pioneered Tesco.com to online warrior as customers can complete more orders than they can previously do. This approach also increased their service delivery and improved customer-relationship management system as the formula provided easy to understand approaches with product and service ordering thus, giving them a competitive edge over their competitive as customer got more value for money compared to other grocery retailing websites.

Making home delivery part of Tesco.com's DNA

The service design structure stress on the need for a conceptual model of strategic service alignment (Goldstein et al., 2002; Heskett, 1987; Roth and Menor, 2003). This model widely highlights the merits of aligning business strategy, service concept, and service delivery system.Roth and Memor (2003) developed an integrated model of services delivery design as illustrated in figure (1) below.

Source as adapted from: Roth and Memor (2003)

The figure (1) above brings together two distinct perspective of marketing and operations by highlight the need for an integrated approach towards service design. This implies that companies must not only identified their service or products being offered, target markets for these service and products, but must also identify ways to make these services and products available to their customers.

This integrated approach was adapted by Tesco.com as a business model through which their developed an effective customer relationship management. Under the leadership of Wade-Gery, Tesco.com offered home delivery as part of their DNA to ensure improved sale volume and quality customer service. The article highlighted that Tesco.com workers starts picking orders as early as 4am, and Tesco.com had numerous delivery point to ensure fast and efficient service as they seek to ensure efficient service delivery. For instance in Newcastle alone, the company has over 15 delivery point customers can order from based on their location to each point. Through this integrated approach, customers are also offered the chance to speak with the delivery man on ways to improve the service quality. These strategies gave them competitive advantage and increase the volume of online orders as customers have envisioned them as reliable delivery system.

TESCO.COM ONLINE SUCCESS – AN E-BUSINESS MODEL AT WORK

Figure 2: e-Business model decomposition

Source as adapted from: Magali (2001)

COMPARISON ANALYSIS OF THE ABOVE MODEL WITH LITERATURE REVIEW

First stage – product innovation: this stage encompasses customer value, business mission, differentiation and value offering (Hamel, 2000).  From the above analysis of the approaches that made Tesco.com successful online, it can be revisited and illustrated that Tesco.com was able to meet this model. The first approach discussed product range development as one of the approaches that made Tesco.com successful online. Incorporating this into the e-business model, it can be seen that Tesco.com adapted this formulas a means of ensuring that they offer more values for their customers (increase their product range), differentiating their products and services from that of their customers, and offering increased improved product and service range (by home delivery and other non-tangible service offerings e.g. eDiet.com and music download)

Second stage – customer relationship: this stage involves increased access to information and insight, fulfilment and support, customer benefits and relationship dynamics (Godijn, 2000). The second approach from the above discussion highlighted improved customer experience through reduce transaction time as an essential tool which have helped Tesco.com to achieve success. From the second business model, it can be seen that Tesco.com adapted this model by providing customers with more information (solutions) to reduce psychic cost and improve experience, and improved relationship dynamics through their feedback form to understand customers' needs and find new ways to provide these needs.

Third stage – infrastructure management: this stage involves core competencies, strategic assets, core processes, value network and company boundaries (Afuah and Tucci, 2001). The third stage also aligns with the third approach discussed above just like the first and second stages respectively. This stage involves management of company assets and networks to ensure improved service delivery. Tesco.com was able to implement this stage to perception by acquiring as many shopping outlets as possible both in England, Ireland and their Asian as well as American markets respectively. Through this means, Tesco.com was close to their customer thus resulting in improved service delivery and customer loyalty in return.

Fourth stage – financial aspect: this aspect general involves the obtainable results from implementing the first, second and third stage. On an analytical level, it is clear that Tesco.com was able to meet this stage at the end of the day, as they reduced delivery costs by locating their malls close to their customer, improved sales as customers made huge orders which resulted in their staffs to start picking orders as early as 4am, and finally increased their market share which currently makes them online leader in grocery with over 41% as of 2008 record as highlighted in the article.

From these comparison and literature review, it can be seen that Tesco.com's online success was not based on mare idea generation or myth, but based on proper of an already tried and tested business model. Thus, it can be complemented that Tesco.com should be appraised for finding the defining root towards ensuring online success by implementing the e-business model strategically to work for them. As Tesco.com continues to diversify their products and service range, as well as penetrating new marketing and internationalizing their firm; it can be argued that they have a high competitive edge over their competitors and it will take a much better business model for any of their competitors to catch to with them. Nevertheless, recklessness in their business operation and model could see them fall to their competitors' pressure.

CONCLUSIONS

The above case study analysis has been able to meet the requirements by discussing all the approached implemented by Tesco.com which has made them successful online. As today's business continues to evolve into a brick-and-click model where companies can both have conventional and online presence, the importance of online presence has been highlighted as far rewarded as it helps companies to cross boundaries that were previously reachable with conventional business methods.

Tesco.com adapted one of the most strategic e-business models as they searched for ways to improve their market share. This e-business model decomposition helped them in their diversification strategy. With this model, Tesco.com was able to skim their product and service offering to suit their business model and offer efficiency in service delivery. This helped them acquire new customers, penetrate new markets and conquer the online business model. As highlighted in the case study analysis, Tesco.com is a living success story of how proper implementation of business models can help firms to gain reliable business profit and improve sustainability.

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