In the present day global business environment lot of emphasis has to be given on establishing a company’s reputation and strongly holding on to in order that the company succeeds on a consistent basis. The status of the present corporate credibility is at an extremely low level and the mistrust of the public at large has gradually entered the global capital markets. Such an environment spells the need to reinstate public faith and in this context it is the public relations professionals that hold the responsibility in leading and directing changes in this direction. The reputation of a company gives it the strength to draw and hold on to clients and staff. Essentially, the reputation of a company depends upon the quality of the goods and services it offers, its business performance and its standing as a fair and stable employer. This paper examines the theory of PR in regard to the major understanding that has resulted in the classification of theoretical inputs in public relations. A major aspect in this regard is from the managerial viewpoint that has defined PR as being the relationship in management which dominates and informs about the studies and work carried out in different fields of affiliations, issues and crisis management. Another understanding pertains to the sociological aspect which is developed by modern theorists in stressing that the challenges imposed by the phase of spontaneous modernity is now truly characteristic of modern societies in the current times. The paper will also examine all aspects of public relations pertaining to the supermarket giant Tesco and an analysis will be made about the development of PR in this company over the last ten years. The present status of PR in the company will be examined in the light of its effect on the quality of goods and services offered by Tesco, its strengths and weaknesses, how the weaknesses have been overcome and the positive and negative issues surrounding the company as highlighted by the media, consumers and workers.
Introduction to the Problem
Although there are several definitions that can be given to the term public relations, its implication is very clear in being the management of the relation between the company and the different entities that have a bearing on its performance. Essentially, public relations imply the management of relations that the company has with different entities. This role steadily becomes more crucial as the organization makes its way up the success ladder.
Background to the Problem
Organizations can use several PR strategies in enhancing the level of trust in their favour. Companies stand to benefit if they can use fairness and integrity techniques while making business decisions and maintaining strict quality controls on their products and services. They ought to share genuine and factual information with their clients and people with whom they deal. They must regularly reassert their obligations to the local communities. Companies can enhance their reputation by creating platforms to promote dialogues with the different entities. The reputation of a company is strongly dependent on how it is viewed by different entities which in turn becomes the major factor in ascertaining to what extent it will be successful. Keeping this in mind the extent of suffering in the corporate world on this account can assume serious proportions. Small companies are well placed to reinstate the trust and to attain a competitive advantage over their competitors if they can improve their reputation in the eyes of the entities that they deal with. In order to achieve a better level of trust, companies must have an excellent public relations leadership since the role played by public relations is more crucial than before.
Statement of the Problem
The present study has found that public relations play an important role in enhancing job knowledge and communication abilities amongst employees. More importantly this study has gathered information in helping governments and firms in deciding whether the lengthy and expensive system of developing public relations should be pursued.
Public relations are very important for any business since business is news in the current environment of a fast changing and fast paced world. New developments keep taking place in the business world, such as closure of plants, mergers and take over, labour disturbances, strikes, layoffs, organizational expansion, coming up of new projects, catastrophes and accidents. Such developments form the basis for creating news stories which further create the need for crisis management and public relations. However most organizations are not well prepared to handle such situations at short notice which causes adverse consequences for businesses, employees, customers and the industry at large. Some businesses have the tendency to be always under the glare of the media and the public. For example, the real estate sector is an important part of the economy and has an important bearing on the over all welfare, safety and health of the people. Additionally the media always evinces keen interest in the construction industry in view of the high potential for interesting stories, both negative and positive, that can be generated from the sector. In order to be successful in the business environment of today, companies should be able to manage crisis and change in diligently working towards developing plans for crisis management and public relations.
A public relations program is essential for any business so as to complement advertisements, offer research competency for marketing strategies and enable capability to organize events in enhancing visibility of the company, to effectively deal with government organizations and to communicate effectively with customers. Public relations also enables the organization to keep a tab on views emanating from government legislation, rules, economic situations and other circumstances that impact the business. A crisis management plan that includes aspects of public relations is very crucial in maintaining the credibility of the company and its positive reputation in the face of adversities. An efficient and effective public relations capability ensures that the company’s associates and all that it deals with feel secure in terms of their respective stakes in the event of a crisis situation being professionally and effectively dealt with. It is unfortunate that most companies tend to be over confident and do not make preparations for such adversities since they do not wish to admit that they could ever be held guilty of being unable to handle crisis situations or of being held accountable for poor performance and for committing mistakes.
The testing ground for a company’s PR capabilities arises when there is a scandal, a catastrophe, or the occurrence of some negative developments in regard to its business at large. The best managed companies can also face challenging situations which implies that potential damages must be avoided by opting for appropriate crisis management techniques. Most businesses have to face situations that have high risk and high impact on the public at large. Consequently the potential damages from crisis situations can be considerably multiplied. For example a spokesperson who is not well informed or is unprepared, or a person who has been a victim of a construction tragedy have immense potential in causing damage to the interest of the company by making remarks to the media that may be uncalled for. It is in these crisis situations that the PR of a company effectively deals with the media. Most people prefer to stay away from a PR assignment because they are not prepared professionally and psychologically in dealing with the media (Cutlip, 1985).
The debate continues in regard to the question whether PR is a part of corporate or marketing management, but there is now a visible consensus that practices of public relations should work as management disciplines in being an integral part of the entire management teams. Acccording to Grunig et al (1983), public relations evolves from a role such as that of a technician specialized in communication that focuses on creating and sharing information in fulfilling his role as a communication officer. In performing this function he builds and maintains relationship with the main stakeholders. It is required that public relations should be able to realize the change from technicians to managers which largely depends on the practitioner accepting the different standards and linking the requirement of professional management teams. The question next arises whether the given standard and requirement is being met by public relations in fulfilling these prerequisites. There has been a major change in the management structure of private and public sector companies in the last twenty years, particularly in the last decade. There have been lot of technical changes in terms of the enhanced awareness and growth in the acceptance of accountability. During the last two decades management of organizations have focused in adopting different tools and systems in monitoring and measuring different results and processes in regard to PR. Such systems and tools primarily include Management by Objectives, Customer Satisfaction ratings, Balanced Score Card, Benchmarking, Quality Accreditation, Quality Assurance, Total Quality Management and Key Performance Indicators in being management strategies to research into the main areas of their operations.
Aims and Objectives of Study
The aim of this research is to classify and ascertain the different roles that public relations plays in improving the over all performance of companies including profitability, customer satisfaction, employee satisfaction and growth. This study also aims at identifying the key elements of operation that determine the successful implementation of PR strategies across different size of companies.
As impacted by the aims of this study the primary objective is to analyze and examine the different issues arising with the practice of different PR interventions as relevant to the company’s employees and clients. Attempts have been made to ascertain as to how the given problems can be resolved by identifying the key operational elements.
The key questions pertinent to the study are
- What is the effectiveness of evaluating Public Relations in improving the level of quality
- What are the different roles of public relations in improving the quality levels
Significance of the Project
This study has found that public relations prove to be very helpful in enhancing job knowledge for employees and for communication thus resulting in high levels of perceptions in regard to improvement in the quality of service. The study also enables the provision of information and knowledge in assisting firms and local governments in deciding whether to continue with the policies of public relations in the face of the high cost and efforts involved in such pursuits.
Research Plan, Method and Techniques
The population for this study was public relations and a UK organization. A snowball sample was based on professional relationships and drawn from the memberships Relations Society of UK (Harold 2004, 90-122)
A public relations practitioner noted the benefit of public relations and legal departments working together and early on a crisis. He had an experience in a large class action lawsuit, similar to lawsuits othercompanies had faced. The public relations and legal people were brought in early. “Other companies did only the legal perspective in their crisis management. Their outcome showed me that ours was a better process. Other companies waited a fair amount of time before they got their public affairs people involved. They didn’t have a chance because public opinion was already fixed and they couldn’t turn that around. (Harold 2004, 90-122)
Importance of PR
In current times, gaps between advertising, communications and public relations have become virtually non existent since global economies now imply that the reputation of a company is crucial for its success and survival. Lot of focus needs to be made on corporate credibility in view of the declining levels of public mistrust that is gradually spilling over into investment markets. Such conditions create the need to reinstate public faith and it is in this area that PR professionals play a pivotal role in bringing in the required changes. The reputation of a company gives it the capability to draw customers and to retain them. The meaning of public relations is evident from the fact that it implies the management of relationships amongst the company and the entities on which it relies upon in carrying out its business activities. Public relations literally means the management of relations with members of the public and this role keeps growing in meaning and significance as a company’s reputation becomes more crucial to the success of its business. There are several ways in which a company can reinstate trust, which primarily involve the usage of a mix of different PR strategies. All business decisions have to be made by the company in adopting fairness and integrity criteria, strict quality controls have to be used to ensure the quality of goods and services, all information should be shared openly and truthfully with all entities and the company must seek feedback from the public and be positively responsive to their apprehensions. The company must consistently renew its commitment to the local community and create forums to support dialogue with all entities. The reputation of a company is a factor of its PR policies and is the essence of how it is looked upon and viewed by the public. Hence PR is a major factor in the ability of a company to achieve success. The role of public relations has become very crucial today and all companies require a strong leadership in public relations to achieve success in this regard. According to Ebersole:
“The most critical time for your business, when it comes to public relations, is when a catastrophe, scandal, or some other negative event occurs which involves your business or industry sector at large. Things can and do go wrong in the best managed companies and organizations. Therefore, by accepting this fact and anticipating certain crises, the potential damage from the crises may be minimized. Contingency planning for crises is not only a good management practice in any organization but, in my view, it is a mandatory practice for any business. Conducting public relations activities without a plan would be the same as someone trying to build a quality building project without plans and specifications or a business trying to manage the growth of their business without any plans. Conducting crisis communications and public relations during emergencies without a plan and training could be about the same as committing suicide or at least “shooting yourself in the foot,” because of the potential damage that could result to your company’s image, business, employees, management, etc. and to the image and impact on your industry” (Ebersole, 2009).
All people dealing with Public relations must imbibe higher levels of understanding of PR research in order to effectively function in the business environment in the 21st century. PR requires that the essence of its theory and understanding be built in keeping with the minimum requirements of basic research. Several core issues arise in public relations about the true nature of PR and how it impacts society. Most of modern public relations theory is based on Edward Bernays’ book Crystallising Public Opinion as written in the 1920s and its further expansion titled The Engineering of Consent. However the theory has now been challenged by new concepts such as the Two-Way Symmetric Model of PR and Co-orientation Theory as developed by Grunig. The Bernays paradigm has defined public relations as being a way of persuasive communication that influences public opinion in line with that of the organization. According to Marvin Olasky (1984) such a concept has destructive qualities, the continued use of which will hasten the descent of PR practices. There are some arguments amongst modern theorists that the entire theoretical reasoning of PR requires to be evaluated in the present context along with further research based on new parameters. There is need to expand upon efforts in regard to evaluative and formative research on the part of practitioners and researchers in the area of public relations. Research in public relations entails much more than just evaluating press clippings.
According to Pavlik (1987), “to set realistic, achievable objectives and deliver public relations advice and programs that are effective, public relations practitioners need to have at least a rudimentary understanding of communication theory. Assumptions about what communication can achieve lead to misguided and overly optimistic claims in some public relations plans which make evaluation risky and problematic. Pavlik makes the sobering comment that much of what PR efforts traditionally have been designed to achieve may be unrealistic. A comprehensive review of communication theory is not possible in this paper, but some of the key developments are noted as they directly impact on how PR programs are structured and, therefore, on how they can be evaluated” (Pavlik, 1987).
Setting PR Objectives
A major objective of evaluating programs of public relations pertains to setting objectives that are measurable, specific and clear since most of the PR proposals and plans are immeasurable, not precise and are vague. Most of the PR programs often have the intention to create a better awareness of the given programs and policies, to effectively introduce a new product or service and to improve the morale of staff. In order to fix objectives that are rational and attainable and also to evolve public relations programs and actions which are effective, it is required of PR practitioners to have a basic knowledge of communications theory. It is not proper to have assumptions about the achievements brought about by using communications theory since it may result in mistaken and unrealistic claims in regard to the plans for public relations thus making assessment difficult and unsafe. Pavlik has said in this regard that “much of what PR efforts traditionally have been designed to achieve may be unrealistic”.
The evolution of communication theory has taken place through the Information Processing Model that provided for a source, a message, a channel and a receiver. The Information Processing Model makes assumptions that result in attitudinal changes that inevitably bring about changes in behavior (Flay, 1981). This pattern has been well reflected in the development of the Hierarchy of Effects and the Domino Model that foresaw the evolution of awareness levels, comprehension abilities, confidence and action in being a sequence of communication steps whereby one aspect led to the next. Another deviation in regard to the Hierarchy Model which has been largely used in advertising for a long time also provided for the awareness levels, comprehension abilities, confidence and action. Such theories made assumptions about the evolution from cognitive to effective to conative, thus implying the process of thinking, evaluating and acting respectively. According to Botal et al (2006),
“Excellent PR departments will design their communication programs on the two-way symmetrical model of communication, rather than the press agentry, public information, or two-way asymmetrical models. Two-way symmetrical PR attempts to balance the interests of the organization and its publics. It is based on research, and it uses communication to manage conflict with strategic publics. As a result, two-way symmetrical communication produces better long-term relationships with publics than do the other models of PR. Symmetrical practitioners are loyal to both their employers and to the publics of their organizations” (Botal et al, 2006).
It is helpful to have an understanding of the Four Models of Public Relations as evolved by Grunig, which describe the evolution of different PR practices such as Two-Way Symmetric communication, Two-Way Asymmetric communication, Public Information and Press Agentry. There are different objectives that pertain to every model which makes it necessary to have varied strategies for evaluation for each of them (Grunig, 1984).
|Purpose||Propaganda||Dissemination of |
|Scientific persuasion||Mutual |
|Nature of |
|One-way, truth not |
|One-way, truth |
|Two-way imbalanced||Two-way balanced|
|Research||Little, press |
|Little – readability |
|Formative research |
|Historical figures||PT Barnum||Ivy Lee||Edward Bernays||Bernays, educators|
|Where practiced||Sports, theatre, |
|Government, nonprofit |
|Competitive business||Regulated business |
and modern flat
|% of market||15%||20%||50%||15%|
Source: James E. Grunig, and Todd Hunt, Managing Public Relations, Holt, Rinehart & Winston, Inc., 1984
A major challenge faced in evaluating public relations pertains to the nature of the practice being multi disciplined. The different relatives of public relations such as business relations and public affairs comprise of divisions such as relations between employees, with the media, shareholders, government functionaries, community relations and so forth. The practice also makes use of different means of communication that includes sponsorships, events, audio visual programs, publications and publicity in order to effectively communicate with the target audience.
Tesco is the largest retailer in the UK with operations in twelve countries globally. Although the company is primarily engaged in the retail sector it has also diversified into some other unconnected functions such as insurance, home mortgage, telephone services and internet. In recent years Tesco along with other big retailers has come under attack for adversely impacting local shops, maneuvering food supply chains, and exploiting labor. The company was founded in 1919 by Jack Cohen on a very small scale and his first store was opened in 1929. Tesco Stores Limited came into being after it was incorporated in 1932 and in 1947 it was listed on the stock exchange. The company opened several stores in UK during the 1960s and during the next twenty years expanded by opening stores across Europe and in other countries such as Taiwan, Thailand and Korea. It also expanded its operations in non food items, mobile hand sets and personal finance. Starting from 2000, Tesco launched its organic fair trade food items and clothing products and in 2006 entered the American market.
Tesco follows a long term strategic approach for its business which is founded on four distinct functions comprising of its core UK operations, international expansion, focusing on both food and non food items and meeting customer expectations in retail operations. Tesco’s biggest market is the UK and the company aims at providing its customers with the best possible value and choices. In operating globally, Tesco focuses in giving local consumers what they desire from a retailer. Its vision is to succeed in selling non food items such as clothing, books and audio and video equipment as much as it has succeeded in selling food items. Tesco aims at meeting customer aspirations in keeping with the changing preferences of consumers for goods and services.
History of PR in Tesco
All large corporations have to deal with several external entities in meeting its business and corporate objectives which requires that the best possible practices must be used by any company in order to function with the minimum hurdles nationally and internationally. In keeping with global patterns Tesco too has been facing problems within the UK as also in Europe in regard to government regulations and customer dissatisfaction at times. It has been making attempts through its PR to organize lobbying and to establish close ties with the government and regulatory bodies to dilute the restrictive practices arising from regulation and pressures from consumer groups and the media.
Tesco regularly makes contributions towards sponsoring political events and has been regularly funding the Labour party, Conservative party, Liberal democrat party, Plaid Cymru, Fianna Fail. It also gives financial support to USDAW (Union of Shop, Distributive and Allied Workers) which is the main union for employees of Tesco. During the late 1990s at least six Tesco executives were nominated on task forces of the government. The company CEO Terry Leahy was on the Competitiveness Advisory Group of the Board of Trade. Michael Wemms, Tesco’s Retail Director was a member of the New Deal Task Force. Presently the Tesco technical director John Longworth is on the Government Advisory Committee on Packaging Waste and Recycling as also amongst the commissioners of the Health and Safety Commission. Tesco had spent £12 million on sponsoring the Millenium Dome which is believed to be part of a deal to garner support in getting favours from the Labour government. Tesco has also been occupying a prominent place at conferences of the Labour Party. It funded the National Reception at the Labour Party Conference in 2002 and in the next year paid for the welcome reception of Constituency delegates while at the same time organizing a debate titled Promising the Earth, Food, Farming and Rural Communities in attempts to highlight its efforts in wooing the farmers and rural communities in the UK.
It is known that Prime Minister Tony Blair was much charmed with corporate superiors such as Terry Leahy who received knighthood in 2002. Supermarkets have to undergo immense pressures in seeking permission to set up stores and it is in the agenda of Tesco to influence the government in this regard by using appropriate PR interventions. The company is an active member of the New Local Government Network (NLGN) whereby it can seek to bring changes in the public services and refresh upon the political leaderships in empowering the local community. Tesco is an active member of various lobby groups major amongst them being the Freight Transport Association, British Retail Consortium, Scottish Retail Consortium, Institute of Grocery Retailers and Confederation of British Industry.
The company is a prestigious funding organization for cancer research and was a leading sponsor for the annual fundraising campaign of UK’s Cancer Research Race for Life in 2002, whereby it generated on its own, funds amounting to £17 million. In the same year Tesco carried out a large recruitment drive using media such as TV and radio whereby women were encouraged to apply. The campaign organized by Tesco to raise funds for cancer research increased the awareness amongst the company’s customers from 14% in March 2002 to 39% in September the same year. The education initiatives by Tesco that commenced in 1990 achieved a commendable status which made the British Prime Minister to openly appreciate the company efforts by desiring that schools in the country should be managed like Tesco stores. The company also started with a millennium project called Tesco Schoolnet in 2000 which was seen as being the largest internet project in the world for schools. Under the program, over 8000 schools in the country participated in creating an exceptional record related to community life in the country. It is noteworthy that Tesco enabled the provision of support for curriculum materials, counsellors and 340 internet centres at its different stores.
Tesco has made praiseworthy efforts in working towards the welfare of children and providing opportunities for better education. It is believed by marketing experts that if children are introduced early in life to the recognition of brands they will be hooked to them for life. In order to increase company visibility several companies have begun to move into schools in offering material for education, sponsoring competitions and providing schools with high technology equipment.
Tesco was in the news in 2000 when it took commendable PR initiative in instructing its farmers to refrain from growing crops on land that was formerly used for testing plants that were genetically modified. This was viewed as a PR coup amongst super markets. Tesco was able to gain a lot of favorable publicity because the efforts were hailed by groups such as Greenpeace in saying that it was a victory for consumer power. Through its PR efforts, Tesco has also attempted to ward off criticism and allegations that it represses customer choice, follows policies so that independent shops go out of business and pressurizes its suppliers and discourages consumers from visiting shopping centers. To make such efforts effective Tesco invited customers to express their views in regard to any of the alleged repressive policies on its part as circulating in the media. It abundantly publicized its attempts to give a voice to the consumer during the inquiry conducted by the Competition Commission in 2006 (Mesure, 2006).
The present happenings are not too encouraging for Tesco in view of the attacks and criticisms against its trading practices. It has been held responsible by Hugh Fearnley-Whittingstall for having supplied chicken to its customers that are far below the standards set by The Royal Society for the Prevention of Cruelty to Animals (RSPCA). Tesco has been charged with exploiting employees in India and for over sourcing vegetables from Zimbabwe. Tesco has been accused of importing several tons of agricultural products from the crisis ravaged Zimbabwe where people are suffering from extreme food shortage. In this context the company has been compared to ‘hungry sharks who are feeding on the carcass of a dead country’ (Smith, 2008). The company’s practices have been questioned by Barack Obama in regard to its trade union practices in the USA. Such developments have brought about a flood of adverse publicity for Tesco. In April 2008 Tesco initiated legal proceedings against three media persons in Thailand for having expressed doubts about the company’s intention. Such an action was dubbed as ‘grossly disproportionate’ (Smith, 2008) by prominent media personalities in Britain. They denounced the company for using uncalled for law suits to suppress critics and impressed upon Tesco to ‘impress your critics with the force of argument, not the threat of imprisonment’ (Smith, 2008).
In addition to the flood of disappointing news stories, a number of deep rooted problems have started to adversely impact the public image of Tesco. It is seen as the prime villain by activists who have held it responsible for compelling local shops and small businesses to move out of villages and towns. Tesco has over 2100 stores in the country and is blamed for making use of its strength and clout in getting permission to set up stores regardless of protests from local residents. According to the Tescopoly Alliance, which is an association comprising of pressure groups, unions and NGOs, more and more people are becoming wary of new Tesco stores opening up in their localities.
Many of Tesco’s actions are seen as unethical, uncaring and irresponsible and secondly, consumers are increasingly becoming greener while Tesco continues to lag behind in this regard. Tesco thus requires a re-look at the way it conducts its business, especially in the context of the rapidly changing environment and the preferences of consumers. It must develop an appropriate PR and communications strategy if it is to come out of its present problems. It can think of first addressing the local needs by using video blogs in all its stores to communicate effectively with customers. It should also introduce high-class newsletters for all its stores and compile a data base of clients who can be contacted at short notice. Local community groups can be publicized by way of banners and display boards in all stores. Tesco needs to adopt a green strategy that is more in keeping with the expectation of customers for which it must evolve a new PR strategy that takes up the issue with the public. Although Tesco has restricted its supplies to reduce binge drinking, it must take action in doing something about carbon labelling.
Advocacy is an issue that becomes essential for Tesco in bypassing the media and directly reaching its customers. PR strategies have to be introduced to extract benefits of email, direct online marketing and blogs. It is important to set up a platform so that customers can interact and connect while building a network of advocates for the company. A good PR and communications strategy can greatly improve the business practices. Hence Tesco must rethink about the stand it has taken on chicken, change its policy in regard to Zimbabwe and reformulate its policies in India. It is high time that the company introduced appropriate PR strategies in America to check its declining business in the country.
Strengths and Weaknesses
The core strengths of Tesco relate to its having a diverse range of products. Most of its stores are open twenty four hours a day and the cash flow position of the company is very strong. The turnover has been increasing steadily over the years with good profits in trading and the balance sheet of the company continues to remain strong. Tesco is the biggest supermarket chain in the UK and is gradually proving to be a challenge to supermarket giants Wal-Mart and Carrefour. The company has great brand awareness with human resources being competent and well trained. Tesco provides options of shopping online and above all it has the capability to transform its resources into advantages. A major weakness faced by Tesco is the increasing perception amongst customers and the public at large about the low quality of Tesco value and brands. In having global operations the company is not able to judge and handle situations in the best possible way because of lack of awareness about local culture and customers. Most customers in foreign countries view Tesco as a foreign brand. In recent times Tesco’s middle and high priced goods have started suffering a set back due to the economic slow down.
Tesco is very well placed in having distinct opportunities as compared to its competitors. It has the potential to develop its brand awareness internationally into new markets. With increasing globalization Tesco is in a strong position to make a favorable shift in its global operations. There is increasing awareness for health products and Tesco is already well established in this area thus opening wider opportunities in attracting more customers. It has the ability to make further innovations in keeping with the needs of the markets and is strongly placed to form alliances within the UK and globally. It has the privilege to grow its brands at comparatively lower cost and can conveniently diversify in view of its vast experience over the decades in setting up stores across different countries. A big opportunity lays waiting for Tesco by way of its potential in selling non food items at higher margins, the market for which is not yet tapped fully. Threats exist for the company in the form of present and new competition that is ever increasing. Due to the changing economic scenario throughout the world there is extreme volatility in the price of raw materials which makes it difficult to have a consistent pricing policy. The economic recession has to be tackled in meeting the ends of growth and profitability which has become very difficult in view of the complications arising from retail markets shifting towards globalization and bids for takeover. The low cost of brands in the Far East is posing severe problems for Tesco in maintaining its quality and pricing, and the increasing competition to woo customers and source raw material at competitive prices is making the entire situation very challenging for Tesco.
The company can use its strengths in making the maximum benefits from the available opportunities. Tesco is a strong brand that is gaining popularity all over the world in view of its ambitious expansion plans. The company can build on its brand image in other countries by collaborating with well established local brands so as to reap mutual benefits. Tesco enjoys good financial health and can thus afford to fund its expansion plans by using the most effective marketing strategies. The opportunities can also be used by Tesco to address the weaknesses. The company’s rising brand awareness all over the world can gradually take care of the lack of local knowledge by collaborating with well established local brands which will enable local staff and managers to take part in the local marketing and service efforts. Appropriate PR strategies can be used by the local partners in addressing the needs of the local customers. By entering into alliances with local partners Tesco can improve its information about local markets and customers which will eventually prove to be a winning situation for both parties. The main threats can be reviewed by Tesco and its strengths used in reducing the adverse impact from them. The prevailing competition in the global markets implies that Tesco will have to use the financial resources of its local partners in creating and sustaining the required high profile PR and marketing campaigns. This will improve the image of Tesco in the respective countries and introduce and reinforce the brand amongst customers in the coming years.
After the implementation of the European and Free Trade Agreements, the markets have vastly opened up in creating more opportunities for British companies in Eastern Europe. The retail sector is not drastically impacted by the recession as compared to other sectors and is also not much susceptible to interest rate changes. Events that followed September 11 made the world economies to suffer heavily, stocks markets crashed and prices fell considerably. However opportunities are now again appearing for the retail sector since consumers appear to be confident thus creating a bright picture for the retail industry once again. There are immense opportunities for the retail sector because of the changing pattern of consumer lifestyles and tastes. The changing pattern of more sales taking place via the internet is an added opportunity for companies such as Tesco to tap exhaustively in extracting maximum benefits from the changing preferences.
Public Opinion about Tesco
Public opinion about Tesco is largely in its favour although there is always room for criticism and the presence of some customers who are not happy. Tesco is undoubtedly very successful and the biggest and most admired supermarket in the UK. Tesco is flexible enough in being able to effectively respond to the changing demand in the market economy environment that characterizes today’s businesses. Most consumers are of the opinion that Tesco provides a wide range of products without compromising on quality thus giving exceptional value for money. Tesco has the ability to keep up with customer aspirations since the present environment is not conducive for people to visit several shops to buy their requirement of goods and services. It is known that most of the criticism that is directed against Tesco is due to feelings of envy amongst its competitors and some vested groups. It is also known that critics of Tesco continue to shop in its stores.
However there are some points of criticism that Tesco cannot deny in being reasonable objections to the way it carries out its operations. Tesco has been criticized for destroying town centres by opening its convenience stores in several locations thus putting the local stores out of business. Tesco is known to have adopted arm twisting tactics in bullying its suppliers by pushing down prices in stark misuse of its almost monopolistic position in the market. Tesco makes claims of being environmentally responsible but its practices of keeping supplies of seasonal foods throughout the year, that are sourced from different parts of the world indicates a contradiction in what it declares to be vouching for. Tesco restrains competition which proves to be wrong for customers in the long run. In this regard, the Competition Commission has condemned Tesco for having followed dominating policies by creating Tesco towns (First Post, 2009).
However the wider public opinion of the biggest retailer in the UK cannot be damaged by Tesco’s critics. For the second year in succession the retailer has been declared as the most favourite store by Retail Week and the annual consumer poll conducted by TNS. Of the 15000 customers that were surveyed, 34% were in total favour of Tesco as being the most favourite in providing value for money spent by them. The biggest advantage of Tesco that makes it immensely popular amongst shoppers is the close proximity it provides to shoppers whereby its stores are located at convenient locations within easy reach of most customers. In having such a widespread existence Tesco is able to guarantee for itself a devoted customer base. According to Retail Week, “not only has the retailer found favour with consumers of differing budgets, the survey also shows Tesco’s appeal transcends both sexes and all age groups (under-35s, 35- to 54-year-olds and 55s and over). TNS Worldpanel Fashion research manager Elaine Giles says: “Tesco’s popularity is staggering. The fact that the larger stores act as a one-stop-shop for many people certainly helps, as does the fact that it caters for people of varying budgets.” (Hardie, 2008).
The fact that the broader offers by Tesco appeal to customers of all segments and budgets has greatly consolidated Tesco’s market position especially in times of the present recession when consumers have started showing signs of tightening their budgets. In hard times customers first expect value for their money and have displayed confidence towards the prices, services, convenience and range of goods offered by Tesco. The survey by Retail Week has amply proved that Tesco has found favour with the customers from different segments. TNS has opined that customer service has been of immense help to Tesco in lifting opinion in its favour. The company’s staffs that numbers over 300,000 has been very well trained to cater to the needs of customers. This is possible because Tesco takes care of its staff and makes them feel that they are very important. Leadership training is provided to all store managers which makes them effective leaders even in the smallest of stores, which certainly affects the customer’s opinion in a positive way. Tesco has been consistently focussing on availability of stock which has a direct bearing on the client in making him come back for more shopping. Tesco has established an excellent PR framework by way of appointing community champions who have been given the responsibility of spending time in expanding the links of the supermarket chain in local areas. This way people have come to believe that Tesco is gradually becoming a part of them and their community.
While Tesco makes its way up the popularity ladder despite the odd shortcomings observed in its products and services it is helpful to look back at its past performance in been engaged in funding a number of projects. People have at times been disgruntled at the opening up of Tesco stores in their localities in apprehending that the serenity of the surroundings will be disturbed. When Tesco made application to open a store in Bristol at Golden Hill there were 16,664 people who made written objections. In addition, the Avon Country Council and the Bristol City Council were against granting permission for the store and so were the MP and MEP including local politicians, church and other community leaders. However Tesco managed to influence authorities and was able to get permission to open the store.
In 1993 Tesco’s application to build a superstore near Monmouth was rejected on the grounds of preventing the viability and vitality of the city town centre. In the face of intense opposition Tesco again applied to build the super store along with a hotel and again the permission was refused by the Council. Although Tesco has made an appeal against the decision the concern for the ultimate welfare of the community prevailed and the case continues to be under public enquiry. Tesco is known to mangage getting permission for its stores by using a form of bribery that uses the mechanism of planning gain. Planning gain refers to the proportion of cost provided for by the planning authorities that is to be borne by the developer in being the public cost of its private developments. An example in point is the construction or widening of a road to provide for the extra traffic emanating from the development. Although planning gain is a good means to fund public developments it is sometimes misused in getting incentives from the authorities for developments that may not be related with the development in question.
Tesco is known to make very hectic efforts in getting permission for building its stores but has had to do with rejections in a number of cases. In 1995 it had to face rejection of its application to build a store in Witney despite having offered to fund a link road to reduce traffic problems. After the Secretary of State rejected its application Tesco appealed to the House of Lords which again set aside the appeal in keeping with the reasons given by the Secretary of State.
There was a partnership between Mid Glamorgan County Council, Cynon Valley Borough Council and the Welsh Development Agency in 1992 in regard to a joint venture for regeneration and they wanted to sell some land in Aberdare. Tesco was given the privilege to make a late bidding and then to submit a higher offer. The land was sold to Tesco but it later came to light that as a matter of coincidence the then Chairman of the Welsh Development Agency, Dr. Gwyn Jones was a director in Tesco and David Malpas, the Managing Director of Tesco was a Director in Welsh Development Agency. There were innumerable allegations of irregularities in the matter as adopted by Tesco and its directors. The Ludlow case of 1992 reveals how the law was made favourable for the developers. Tesco’s application to build a store in 1993 at Ludlow was rejected since the design was not in keeping with the requirements of the authority. Having redesigned the plans and again applied in 1995, a public enquiry was conducted by John Gummer who again rejected the application on the same ground. Tesco had spent a lot in preparing for this application and it came as a big set back to the company especially when its retail impact arguments went unheard. Tesco has not given up on this account and is again preparing to make an application with the required amendments.
Tesco is not a popular company with its rivals who are jealous about its dominating position in grocery trading and are making attempts to reduce the rate of its expansion and put a break on its strategy of supplying some products that are priced at costs lower than their cost. The company is also unpopular with small agriculturists who feel torn off by the company due to its alleged policies of pushing them out of business. It is also not well received by people who have suffered losses on account of closure of their small shops due to the increasing number of Tesco stores that have started to appear in every nook and corner of towns and villages. Sometimes Tesco customers are very critical of the company due to its practice of supplying cheap food items for only a few varieties as compared to promises made in this regard.
Some unions have alleged that Tesco is unpopular amongst its workers also who are not well rewarded for their hard work and are frequently made to undergo abuse and bullying in addition to being highly underpaid. As compared to other giant retail companies Tesco has dealings with a few big and single culture farms throughout the world. Consequently small agriculturists in developing countries have to either make significant changes in their production process or suffer heavy losses. In keeping with the common practice amongst supermarkets, Tesco is ruthless in exploiting its monopoly position by making food producers to compete against each other and ultimately buying from those that offer the least prices. Consequently workers that work with producers of food throughout the world are paid very less wages.
Worker associations have pointed out that Tesco employs about 330,000 throughout the world and 240,000 in the UK. In comparing that Sir Terry Leahy gets paid £4 million annually, an average worker at Tesco is paid marginally more than the minimum wages. The hourly rate for workers in non urban areas is £6 which again is just marginally more than workers of other retailers. These wages are actually at the lowest 10% amongst wages for non manual work. Most of these workers are unable to provide money for National Insurance contribution and hence are not included in the pension schemes and related benefits. Almost 2/3rd of the workers in the retail sector work part time, majority amongst them being women. Workers have complained that the bonus payments accruing from working on week ends and Sundays have been curtailed significantly. There have been regular campaigns organized by the National Group of Homeworkers in UK aiming at putting an end to exploitation of workers in supermarkets such as Tesco. It is common knowledge that labour employed by industrial farms and contracted by supermarkets exploits migrant labour to a great extent.
Tesco workers feel that in view of the deal struck between Tesco and the Union of Shop, Distributive and Allied Workers (USDAW), they have been deprived of many of their rights over the years and have been given a raw deal. A discreditable outcome of the deal has been the introduction of a revised sickness policy that makes Tesco workers to loose their claim for sick leave during the initial three days of absence due to sickness. The grievance is aptly evident from the statement made by a worker:
“At first 70 union reps were involved in negotiating with the company and making decisions. But when we didn’t agree with the management they tried to bully. USDAW officials wanted to go along with the company. The following year when we negotiated the pay deal the group was split up. Again we didn’t agree to the offer. So the following year just five or six worker representatives became responsible for making decisions — on working parties. Ordinary union reps have no say in negotiations. The rumour is that Tesco will no longer even collect union dues. The erosion of agreements and rights happens everywhere. The bonus system in Express was agreed to three years ago. They changed it without any negotiation. There are lots of abuses that go on, bullying, making us work harder for the same pay, but we are not able to do anything about it. When we approach the USDAW officials about this, or any other grievances, they just don’t want to know. They don’t support ordinary members. Grievances mean nothing to the management” (Worker’s Liberty, 2005).
Under the circumstance most workers wish to leave the union but that would give the signal that they have become weak. Workers are aggrieved about scrapping of Bank Holidays and have made attempts to resolve the issue by making a petition that was signed by almost the entire staff but it was entirely ignored by the personnel department of the regional office of Tesco in UK. Workers feel that the sickness amendments brought about by USDAW and Tesco were a plan to demoralize workers in invading their privacy. The entire policy may be effective for Tesco in desiring to dissuade pretenders but it becomes a big problem for those who are actually sick. The following comment of an aggrieved worker speaks a lot about the repressive policy being followed in this regard by Tesco:
“I had five weeks off with a slipped disc and got a written warning. I took all my doctors’ notes and physio appointments and letters and had a union rep with me. They didn’t speak and agreed with management. I am under hospital with it and the doctor actually said how he doesn’t know how they get away with it. He said ‘Have Tesco managers been through university and studied medicine? No, I don’t think so.’ The sickness scheme is just another way for managers to show their authority. One of our section managers is a union rep. How does that work? (Worker’s Liberty, 2005).”
Tesco’s Management of Media Criticism
There has been considerable media criticism against Tesco and the most serious charge against the supermarket chain relates to the risk that it poses to businesses that have been running as small shop establishments for decades. The threat is perceived due to the monopoly that Tesco enjoys in a number of products in supplying them at lower prices as compared to other establishments. Tesco has also been criticized for using aggressive means to buy land from authorities for launching new stores. Controversies also thrive in regard to the treatment of workers and consumers as also in regard to the company’s approach towards its international operations.
Just as it happens with all large companies, Tesco too is engaged in a number of litigations, most of them pertaining to personal injury claims by customers, claims by staff of unfair removal from service and other business issues. Criticism against Tesco is gaining ground in regard to the adverse impact the supermarket has on agriculturists, dealers and other small competitors. There are claims of unhealthy relations with workers especially in regard to rules for sick leave. The company has been accused of using and exploiting cheap and child labour in underdeveloped countries such as Bangladesh. As per an article that appeared in the Guardian on 8th December 2006, some of the workers have explicitly narrated their woes that are inflicted upon them consequent to the work that they do for Tesco:
“Nazmul, 24, whose job is to stick pins into shirts, said he regularly worked more than 80 hours a week, with only one day off a fortnight. With overtime he makes 2,400 taka (£17) a month. “If a big order comes in we have to work. [In Britain] you get three-for-two offers. It is we people who have to make the third shirt for you. There’s no choice. We just get shouted at. There are others who will take my place if I do not work” (Ramesh, 2006)
“Salma, 21, lives with two other girls in a tiny room in Begun Bari slum. Her basic wage is 1,150 taka a month for 48 hours a week as a shopfloor assistant making Primark clothes. By working to 3am she can double that. A factory job is one of the few socially acceptable ways for a woman to earn a living in a conservative Muslim country. “It is a hard life. I am shouted at. I prefer this to the village where [women] are not allowed to work” (Ramesh, 2006).
“There are dangers, however. After garment factory collapses and fires in Bangladesh left nearly 100 workers dead this year, safety has become an issue. War on Want claims emergency exits are often locked. Louise Richards, the charity’s chief executive, said UK prices were at “rock bottom” only because of exploitation. “The companies are not even living up to their own commitments” (Ramesh, 2006).
The media has strongly criticized the supermarket for adopting tactics of bullying farmers in forcing them to reduce their prices to levels that are entirely unsustainable. The company has been criticized on such issues in countries such as Hungary, Ireland and Thailand.
Inquiry in regard to the UK grocery market was entrusted to the Competition Commission in 2006 and in its report it expressed concern about supermarkets assuming monopolistic roles in rendering other small retailers to be unable to compete healthily in a market. Accusations were made against Tesco that it was using its land bank in controlling almost half the grocery retail trade in the country and that dealer’s profits were being tightened by the company. Tesco has been charged by the media for repressing healthy competition because of forcing upon the consumers new store developments without heeding to their needs and desires and the adverse consequences to the local community. Tesco has been accused of using unethical practices by violating planning laws and of literally dumping the UK government sponsored eco town that is slated to come up in Cambridge. The media has outlined several cases in regard to taxation and disputes in pertaining to intellectual property, personal injuries and service laws that Tesco is embroiled in.
Tesco was embroiled in two scandals in 2006 concerning the treatment of factory workers in Bangladesh. The first pertained to an investigation conducted by Channel 4 News whereby children were found being exploited in four factories that were supplying material to Tesco. The second issue concerned a report that was printed by an organization named War on Want wherein allegations were made against Tesco for paying wages as low as five pence an hour to workers in Bangladesh who were made to work for more than eighty hours per week. In defending itself against these allegations Tesco clarified that, “All suppliers to Tesco must demonstrate that they meet our ethical standards on worker welfare, which are closely monitored. Our suppliers comply with local labour laws, and workers at all Bangladeshi suppliers to Tesco are paid above the national minimum wage (Ramesh, 2006). However critics have analyzed that the minimum wages in Bangladesh are extremely low and hence the monitoring system relied upon by Tesco is entirely irrelevant. Tesco was accused by the Muslim Council of Ireland of instigating hatred amongst Muslim youth against the Jews by selling to customers in Ireland, literature that made derogatory remarks against the Jewish community. Tesco apoligised for the ill will created by the literature and took immediate remedial measures by withdrawing the same, which it said was entirely unintentional.
The media had taken Tesco to task for having adopted pricing tactics whereby consumers were mislead in the name of getting price cuts that were actually not realistic. The modes operandi in this regard was to increase the price of a product and then decrease it to its initial value while advertising the same as a cut in price. It is also held responsible in popularizing the offer of buying one and getting a second item free, which led to consumers buying food items in excess of what they required, eventually to be thrown away as waste, thus contributing to the national loss. In July 2008, Tesco was held responsible by the National Consumer Agency of Ireland for having failed to properly display prices of products in its stores.
Tesco has been criticized for infringing upon the rights of farmers and small dealers. The company responded to the allegations by claiming to follow the best industry practices in sourcing locally in suiting the demands of customers. The Office of Fair Trading came to the rescue of Tesco in declaring in March 2005 that there were no official complaints received against the supermarket but critics have at the same time alleged that suppliers were influenced into not sending any complaints in order to retain their business with Tesco. The Office of Fair Trading also concluded in regard to Tesco that its compliance of the Code of Practice was in order.
Tesco has been criticized by the media for having adopting policies that exploit the work force. The retailer had reduced sick pay from May 2004 onwards in attempts to reduce the high incidence of sick leaves being taken by employees, which resulted in some cases whereby employees had to continue to come to work despite being sick or else suffer loss of pay on account of the absence. There are allegations by American trade unions that there is a lot of difference in the manner that Tesco treats its workers in the USA and UK respectively. Some MPs from UK produced evidence that four of the largest supermarkets in the UK were enjoying almost full monopoly in retail. Amongst the problems narrated by them was the building of stores without proper permission from the planning authorities. Tesco was also criticized for violating the privacy of customers by using RFID tags that sought information from them about movement of products in the main stores belonging to it. In essence critics believed that the tags were actually aimed at collecting shopping habits of customers.
The media also highlighted incidents of tax violation by Tesco. There were reports that the company had sued The Guardian for having given false information about Tesco having developed a complex set of bank accounts in the tax haven of Cayman Islands. The newspaper had claimed that such arrangements would benefit Tesco by way of saving on taxes amounting to over £1 billion. According to The Guardian such attempts were made by Tesco so as to save taxes on profits that arose from the sale of its properties and to save on taxes that accrued on profits from it store operations, since there is nil rate of corporate tax in the Cayman Islands.
The BBC in its program dated 22 may 2007 had blown the lid off the claims made by Tesco in regard to the high quality of hygiene maintained by it since the BBC Whistleblower program showed undercover footage that detailed contravention of rules for food hygiene. The breach included the selling of goods even after their date of expiry, manipulation of temperature records, and the selling of inadequately cooked shredded meat mingled with uncooked variety of the same. The Food Safety Authority of Ireland has on different occasions ordered the recalling of Tesco products. One Tesco store was ordered to be closed in Dublin after Environmental Health officials found the store to have breached the Food Hygiene Regulations on a number of counts.
Newsline, the current affairs program telecast by BBC in Ireland, had reported on 16th April 2007 that the Newtownbreda High School in Belfast desired that Tesco should not sell the energy drink Kick which was believed to have led to behaviour amongst children that was directly relate to caffeine. The school had disallowed its students to bring the drink to school. Kick has also been associated with problems related to insomnia and caffeine addiction. However Tesco had ignored the claims made by the school in saying that the drink contained just the same amount of caffeine that is present in a cup of coffee. The company also justified its claim on the basis of there being no legislation or regulation that bans the sale of the drink to children. However Tesco attracted considerable negative publicity on this account and its reputation has further suffered because of recent claims that youngsters use it to avoid becoming drunk after taking excessive alcoholic drinks in parties.
Tesco has faced a number of problems in its overseas operations which have been critically highlighted by the media. Tesco is understood to be the biggest food supermarket in Ireland with more than 10,000 workers. The retailer has for the last five years been under lot of criticism for having charged comparatively higher prices from its Irish customers. Tesco had clarified about the higher prices in Ireland being prevalent on account of the higher cost of transportation of the goods from Great Britain to Ireland. The autonomous retailers association RGDATA also alleged that customers were being charged much higher by Tesco to the extent of 3% in several products. The national Consumer Agency of Ireland indicted Tesco in July 2008 for having failed to display prices as required. Tesco has been heavily criticized by the media for having parking systems in some stores that are inflexible and highly bureaucratic.
However the large number of criticisms directed against Tesco is normal as is the case with any large corporation. In being a very large business, it is primarily motivated by efforts to make the maximum amount of money. Obviously supermarkets are not supposed to be altruistic and charitable institutions in conducting social welfare programs. As per a report by Dispatches, Tesco has displayed immense ruthlessness and efficiency in getting planning permissions for its stores by literally bullying councillors and local authorities. Tesco is known to have lobbied with MPs also in getting positive response for its cause. The company has been involved with a number of tax scams, but all such involvements are common practice with most big businesses, hence it is not considered proper by analysts to single out Tesco in this regard.
The fact remains that Tesco’s success and its omnipresence in the provision of retail services is thought to be adversely impacting local communities and imposes a stifled and high sense of homogeneity into the concept of shopping in supermarkets. There is actually no conclusive evidence that Tesco is responsible for the closure of small shops and in going a step further some analysts have pointed out that supermarkets such as Tesco create opportunities that have a positive impact on nearby retailers. The critics who hold Tesco responsible of the adversities in the retail sector are actually the ones who do not wish to be treated as everybody else. In criticizing Tesco they are just scorning at being made to be a common part of modern day society in undertaking what thousands of people do alongside with them everyday. The homogeneity factor for which Tesco has been held responsible is incorrect since the company sells a varied selection of superior products at competitive prices. Critics fail to recognize that by focussing on the one stop concept Tesco is actually saving precious time for consumers otherwise they would be required to trudge along to different shops to buy their different requirements of goods and services.
Most of the critics are surprised at the ability of Tesco to be the best and the biggest. It is indeed commendable to see how the company was able to reverse the trend of ailing fortunes towards being the most successful retailer in the UK. The drive by Tesco to be bigger, better and stronger certainly motivates the customer and instead of criticizing the company’s policies, they can be used as an effective tool to motivate society as a whole. However in other matters such as wages for the over 250,000 workers, the company can rethink in evolving a more realistic and satisfying remuneration that matches the workers’ expectations and competencies. The intense lobby that has come up against supermarkets ought to measure the consequences of their actions and criticism since the logical outcome of closure of supermarkets will imply unemployment for millions of people. Millions of customers have favored Tesco for the cheapness and convenience enjoyed by them. It is very well known that most of the people who criticize supermarkets actually shop at them. Just as people denounce travel by air and other facets of consumerism, criticism of Tesco also becomes a means to express the irritation of the media who are in search of opportunities to make issues.
Role of Sir Terry Leahy
Sir Terry Leahy, the present CEO, had joined Tesco in 1979 immediately after he graduated from the University of Manchester Institute of Science and Technology. He joined the company as a marketing executive and made his way up to the board of directors of Tesco in 1992. By the time he reached the age of 40 in 1997, he had become the chief executive of the company. Under the leadership of Sir Terry Leahy, Tesco has been able to significantly increase its share in the UK market which is now 26%. Tesco has been able to dramatically expand in new areas both physically and in terms of goods and market segments. The international expansion of Tesco has made it to be present in several markets in Asia, Eastern Europe and Ireland. Tesco has been able to get a stronger foothold in the UK consequent to the constant spree of acquisitions by the company in the convenience stores market.
Under the leadership of Sir Terry Leahy new markets have been accessed by entering new ventures such as DVD rentals, insurance, flight offers, telephony, finance deals and holiday packages. The Tesco Extra Hypermarkets that sell electrical products, furniture and clothes also assist in pushing the chain’s £100 billion worth of non food market. The presence of Tesco in the non food market is increasing rapidly and the visionary offer of some items such as the sale of jeans at £4 sets the retailer apart in offering value to its customers. The initiatives taken by Sir Terry have impressed investors a great deal which has also led the share price of the company to ascend consistently. Not only the shareholders but also employees have benefited greatly by way of the newly offered schemes of saving introduced for them. As a result workers were able to save for themselves an amount of £250 every month for a period of five years. Ultimately employees can get their money back at the end of the five years period or can opt to buy company shares.
Sir Terry has been named by Fortune magazine as the European Businessman of the Year while he was named as the most admired leader in the country by Management Today. However Sir Terry does have his critics who are not very praiseworthy of his methods. The Office of Fair Trading was approached by Proudfoot, a small retail chain and asked to probe the matter of predatory pricing by Tesco. The matter pertaining to the £54 million takeover of Adminstore by Tesco was also taken up by the Office of Fair Trading in being urged by competitors to do away with the distinction provided between convenience stores and supermarkets.
Sir Terry Leahy was knighted in 2002 soon after he was given the honour of Freedom of the City of Liverpool. This was a big honour for a boy from Liverpool who had struggled to make his way up the success ladder. Sir Terry was the third eldest amongst four brothers and was the only fortunate one to get higher education.
International Expansion by Tesco
The massive expansion of Tesco in the UK is indeed commendable and with the markets in this country becoming increasingly saturated, the company has started to make efforts in expanding to overseas locations in order to speed up growth in the competitive environment as new entrants continue to throng the retail sector. This strategy is an entirely new ball game since it brings into the picture intense competition amongst larger retailers from other countries such as Wal-Mart and Carrefour. Tesco had started its international expansion program during the 1990s and now has several outlets in most parts of the world. Leading supermarkets have expanded their product ranges and now offer a high quality and a diverse range of products of its own brands of clothing which are gaining increasing credibility. It is believed that there is considerable scope in this ever-growing market for Tesco in launching new brands specialising in low priced but cutting edge evening wear. Tesco has customers in all segments and keeps trying in knowing them better in order to diversify its product offerings by switching from the commonality of offering homogenous products and in turn differentiating itself from other supermarkets.
Sales continue to increase in most of its Asian markets along with profitability. The normal practice adopted by Tesco globally is to purchase an existing retail operation or to buy the majority stake in such companies by transforming it into a subsidiary of the company. Tesco then commences with using its usual tactics and strategies such as aggressive pricing, launching loyalty schemes, undercutting local traders, opening stores for 24 hours and so forth. Tesco is known to have been in favor of setting up large format hypermarkets since it is easy to get permission to set up this way in most countries. The hypermarkets so set up by Tesco focus on non food items so that 55% of the area is allocated for them in Asian countries while 50% is allocated in European markets. Tesco has taken initiatives in opening petrol stations in some countries such as Thailand, Ireland and Hungary. Instead of making expansion plans for Western European countries, the company has focused on the former Soviet nations and some countries in South East Asia. Supermarkets from developed markets must expand as is aptly narrated by David Hughes, who teaches food marketing and agri-business at the Centre of Food Chain Research, Imperial College in London:
“they’ve got nowhere else to go. Their domestic markets are saturated, so they are looking for countries with large populations, high population growth, per capita GDP edging toward consumer levels, high income growth, and low supermarket presence. Countries with all five of these characteristics are a good bet, and companies rush to get there before everyone else” (Finnegan, 2008)
The entry of Tesco and other international chains has made the retail patterns in the world to change drastically. According to Corporate Watch:
“A survey from the International Food Policy Research Institute suggests that farmers in Asia are having a hard time getting used to the procurement systems supermarkets set up. Rather than growing their produce and taking it straight to a market, they have to deal with a new chain of middlemen such as procurement officers, wholesalers and so on. They also have to deal with supermarkets’ standards of uniformity in shape and size, meaning that a lot of produce is rejected. Once the food has been grown, and if the supermarket chooses to accept it, farmers can also have trouble with transporting it. Payment is then often delayed for up to 60 days after the product has been delivered, too long for many people to wait.” (Corporate Watch, 2009).
The governments of Malaysia and Thailand have begun to reduce the power enjoyed by Tesco in introducing legislation which aims at reducing the influence of supermarkets. These countries are now faced with the complicated issue of encouraging foreign investments to boost the country’s economy on the one hand and allowing the supermarkets to take away business of local traders on the other. But these countries cannot impose many restrictions on the operations of the retailers in view of the provisions set by the World Trade Organization (WTO). Tesco is however very particular about implementing its plans of sourcing from local markets in foreign locations. But local sourcing gives way, for example to intensive farming of agricultural produce to be sold by Tesco, which in turn proves to be at the disadvantage of small farmers who use traditional farming techniques. In sourcing produce locally, the suppliers are not treated very well by retailers such as Tesco. Tesco cannot claim to gainfully influence the local economies although it may increase the total flow of money within the economy of a country where it sets up its stores. The supermarket is known to have created a culture where people desire to buy more and get encouraged to spend on goods and services which they may not have felt necessary before. Only a small percentage of the money generated with the activities carried out by the supermarket stays within the country primarily in the form of wages given to workers and payments made for local sourcing. Majority of the profits are diverted in benefiting the shareholders and directors of the company.
The Tesco Approach
In being a leading supermarket chain throughout the UK and a major player in global markets, Tesco believes in rewarding the behaviours that it seeks. The Company has designed a club card mechanism of reward which entails the mailing of coupons to valued customers and thus improving the quality of customer service. Tesco is an established retailer selling both food and non-food items. It has been seen from research that Tesco clothing brands are the fastest growing in the UK. The best demonstrated strategy for Tesco so far has been the Tesco Approach whereby value is created for its customers in earning their lifetime loyalties. Its two core values remain, ‘no-one tries harder than we do for customers'(http://www.tescocorporate.com/) and ‘we treat people the way we like to be treated’ (http://www.tescocorporate.com/). However such values are more focused on shareholders and customers rather than on small competitors and farmers. During the more than 80 years that Tesco has been in existence, it has acted in response and taken advantage of the drastic changes taking place in patterns of lifestyle, which is the key factor for the consistent success of Tesco. Changes include amongst other things, the involvement of more women workers, higher levels of wages, lesser efforts on cooking meals and introduction of weekly shops which has been made further convenient with the increasing use of personal cars. The cheap food policy as introduced in the UK after the Second World War has also made the transformation faster and realistic.
This chapter presents a summary of what has been discussed and analyzed in regard to answering the two questions,
- What is the effectiveness of evaluating Public Relations in improving the level of quality
- What are the different roles of public relations in improving the quality levels
In addition to providing the necessary information and research in answering and clarifying on the questions attempts have been made to provide an exhaustive spectrum about the entire purview of public relations and interventions required to make the research a success. The analysis has widely covered the entire theory about public relations and the study of public relations as prevalent in Tesco, the top supermarket chain in the UK and one of the biggest in the world.
Just as any giant corporation is faced with several internal and external problems, so too is Tesco. The company has its own strengths and weaknesses. It is in several ways embroiled in controversies about the way it functions and about the strategies it uses in annoying certain sections of business and society. Nevertheless the company has made a commendable ,ark in using strategies of public relations in making its way through hurdles and bureaucratic wrangles that invariably come in the way of any entity aiming at providing services in making profits so as to provide good returns to its investors and other stakeholders. The paper has delved into all aspects of Tesco operations and highlighted the company’s weaknesses in recommending the areas where appropriate and effective public relations techniques are required to be used in order to make a credible impression and bring about higher levels of confidence in the way it operates.
The company’s history has been traced from its humble beginnings and how it rapidly surged forward in providing value to consumers. Ultimately the company’s success depends upon the utility gained by customers and Tesco has over the decades made strides in not only improving its services but also in providing more variety and better quality of goods and services to its customers. All its achievements are primarily related to the success of its PR efforts in appealing to the interests and aspirations of the public at large and in successfully tiding over the numerous problems it has faced over the years from the government, public, customers and unions.
Tesco has used its PR strategies in amply demonstrating that by regularly evaluating its public relations strategies it has immensely improved upon the quality of its operations and the results that it has achieved for itself in terms of customer satisfaction and growth. Depending upon the prevailing circumstances and the market position public relations plays different roles in improving upon the quality levels that the company operates in. While dealing with customers and to enlighten them on the advantages of patronising Tesco, the company has used different PR strategies to woo customers. Tesco has introduced several schemes for customers whereby they get opportunities to discuss different issues related to the stores on TV, radio and on blogs via the company website. It addresses employee issues by providing platforms where they can highlight their problems in anticipation of getting them resolved by the management.
The company’s PR efforts have brought immense benefits in tiding over the controversies that have engulfed Tesco on several occasions. In matters that can have serious adverse consequences in terms of social and economic issues raised by the media, Tesco has abided by the verdict as given by way of customer preferences and proceeded in meeting to their expectations by making required amendments in its policies and procedures. Nevertheless the company has had to dole out compensation and damages as and when certain adverse implications from its operations have been highlighted by the media.
Tesco CEO Sir Terry Leahy is a highly proactive leader in using flexibility to alter public relations roles in improving the quality of the company operations. He has brought about schemes to pamper employees and to indulge consumers in generous offers to give the unique sense of care and concern in making them his loyal patrons. Without the flexibility in using different roles in public relations the company could never have succeeded in profitably running operations as the biggest supermarket chain in the UK and in over thirteen countries worldwide.
It is indeed a tedious job to handle several government and social organizations in obtaining permissions to set up stores within the UK and in different countries. Every country has different rules to comply with and for a foreign company it is only the technique of public relations that can be used with different entities such as customers, local partners and government authorities. In meeting consumer aspirations in foreign countries Tesco has successfully used PR techniques that appeal to the authorities and public in making them to accede to the offers made by it. Such strategies ultimately work towards meeting company objectives of consistent growth and profitability in the face of an ever increasing competition as more and more new entrants in retail compete to take a share of the pie from this sector.
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