Tesco Ireland was established in 1997 by an alliance between Tesco and Associated British Foods. In Ireland, Tesco keeps its brand and opens five supermarkets under the name “Tesco Extra” and “Tesco Express”. In order to expend its operations, Tesco uses the Internet marketing as a source of additional profits. Differentiation now costs little more than standardisation: so Tesco (similar to other retailers) has entered the age of 'mass- customisation' in which it is possible to tailor products to the specification of individuals. Expension to Ireland in 1997 was caused by numerous factors including limited home markets opportunities and a need to develop its business. Today, Tesco Ireland is the largest food retailer in this state with 13,500 employees and revenue of about €3.15 billion (2008) (Tesco Ireland Home Page, 2010). In spite of stable market position and favorable macroeconomic conditions, Tesco is faced with some weaknesses in Ireland
SWOT: Weaknesses and Opportunities
In Ireland, public policy is not in favor of the growth and expansion of medium and large-sized retail companies like Tesco. The homeland of most European retail companies presented a legal environment especially detrimental to the growth of many leading industrial enterprises, both manufacturing and trading. In Ireland, Tesco acquires nearly monopolistic position, so it is attacked by small retailers and trade unions accusing the company in unfair marketing and HR policies (Tesco Ireland Home Page, 2010).
The weaknesses of Tesco Ireland cannot be considered in isolation from the EU economic situation. Ireland is a member of the EU since 1975. Retail enterprises encountered a variety of barriers, such as discriminatory treatment meted out to retail companies in the matter of investment grants, depreciation, and other allowances, stiffer planning and zoning regulations, and so on. The main purpose of such regulations is to protect small retailers, to maintain a balance between commercial and noncommercial activities, and to protect residential areas from the hazards of business expansion. The economic situation in Ireland started to deteriorate during last 3 years crisis and the ensuing inflation. The EU held out promise to its members and was instrumental in strengthening the economy of member countries; however, inflation and unemployment plagued these economies seriously and affected adversely the spirit of coexistence that had been built. The group feeling among member countries began giving way to individual selfish interests causing imposition of a new series of regulations and barriers in many member countries (Drejer, 2002).
The main weakness of Tesco Ireland is high prices a result of devaluation of the pound sterling. Tesco Ireland continues to seek strategic positions to expand internally and also establish linkages with Europe for supplemental growth. Much will also depend on how overseas retailers perceive the homogenized ecopolitical environment in ireland. Some may still consider it unpalatable and inhibitory to growth with little incentive for active involvement, especially in the wake of alternative opportunities. The late 1990s saw an internationalization trend in retailing when hypermarkets and superstores from the north moved to the south. The 1990s movement in Europe is from west to east, as retailers rush to capitalize on consumers (Tesco Ireland Home Page, 2010).
Tesco is accused in unfair advertising and steeling of a Unicef’s brand, “Change for Good”. This situation creates a negative publicity and negative image of the food stores in minds of consumers. While conflicts can undoubtedly arise, for instance, between customers' needs and those of shareholders, in the long run, shareholders' needs are best fulfilled by satisfying customers' requirements. Without a market for its product or service, a firm has no reason to exist; a firm that continues to deliver the worth and cost combination that customers need will inevitably be able to maximize shareholder wealth as well.
For Tesco Ireland, the Irish market provided a number of compatibilities in culture, language, nationality, level of economic growth, terrain, and climate. It also offered in abundance what Tesco missed most at home: a vast landscape and an economy that valued free enterprise and equality of opportunity. Investment candidates in Ireland also preferred takeovers by outside foreign companies. In some cases, the entrepreneurs or founders were ready to retire and wanted to hand over the business to capable hands. They were particularly encouraged to do so when the prospective buyers were more interested in making a good investment and apparently had no intention of interfering in the existing management style, policies, and programs. Top management in the candidate Ireland companies saw in foreign offers a twofold promise: financial revitalization and retaining the individual identity of the chain (Tesco Ireland Home Page, 2010).
In Ireland, there is always a risk of losing identity and degenerating into a small division in the event a retail chain acquired by a domestic corporation. Thus, the chief executives retail chains see better prospects for maintaining the status quo (including their own jobs) with ownership being transferred to Europe, rather than to a large domestic company. Tesco has the assurance of capital inflow that is badly needed to finance long-overdue crisis programs . The economic factors included macro-level environmental factors such as the economic decline and political changes seen in Ireland, overcrowding and resultant cut-throat competition among retail business firms, and stiffer planning and zoning laws enacted in Ireland that run counter to the expansion and growth programs of leading retail firms. The governments join with traditional retailing institutions to prevent the modernization of retailing and slow down the growth of such companies that are moving ahead to respond to emerging socioeconomic forces. The negative factors also include internal or microlevel factors such as the saturation point reached by many companies, resulting in the need for new directions of growth, spreading the risks, and exchanging trading and managerial skills with retail food chain. Besides cross-border expansion, large food retailers like Tesco Ireland have also formed limited purpose buying groups. This development has since resulted in a number of retailing groups or strategic alliances. The consolidation implied significant changes in procurement, production, and selling strategies and posed a threat to retailers' negotiating power. The retailers were thus forced to make parallel consolidatory moves to maintain the balance of power and a competitive environment (Drejer, 2002).
In general, Tesco Ireland takes into account that fact that the critical role retail alliances play in keeping enterprises competitive, and the different forms in which these alliances have come to operate, has posed a challenge to EU competition authorities who have to maintain a competitive environment. They have to ensure that these alliances do not give retailers an excuse for unlawful practices such as price collusion, territorial agreements, tie-ills, and reciprocal agreements. Many manufacturers are concerned about this new development although big companies like Unilever, Kellogg, and Cadbury think that they have strong enough brands to cope with the private label buying power of the alliances (Vignali, 2001). Alliances have proved beneficial to manufacturers who are able to achieve economies of scale by being able to make more products to standard specifications. EU members, for example, order generally identical products from suppliers/manufacturers. Buying groups require considerable cooperation and administrative coordination between member companies that sometimes have little in common. These companies operate in different ways and use different strategies at home. Too many divergent interests exist. Retailers no doubt may gain access to new international markets, but by the same token, they lose part of their independence (Tesco Ireland Home Page, 2010).
In spite of a great number of weaknesses and criticism, Tesco Ireland successfully operates for many years in this region. The specialty retailing is flourishing in Ireland at that time. Leading retailers are seeking outlets in other parts of the region to serve their affluent clients. This is the second wave in the overseas growth of retailing. A number of stores selling food branched out to metropolitan centers, taking their distinctive merchandise concepts to major cities (Drejer, 2002). In spite of its small population (5 million people), Ireland has no extended and developed food chains life Tesco. In Ireland, Tesco is motivated by a desire to self-actualize, to become all what it is capable of becoming and achieving. Having a presence in the Irish market and acquiring prestigious food chains are very much a part of such self-fulfillment for them (Vignali, 2001). This motivation is predominant among early investors such as Tesco. Tesco Ireland is inspired by the desire to build an international image. The opportunity to understand the Irish market and learn new retailing skills is also important motivations for Tesco (Deresky and Christopher, 2008).
In Ireland, Tesco has good financial indicators and stable market position. Although the learning of new skills was not perceived to be the primary objective of these investments, it turned out to be a worthwhile secondary objective. As the investor, Tesco has a keen eye on what the new acquisition could contribute to the improvement of operations: what new techniques could be brought home, and, in turn, what could be given back to the Irish operations. Collaboration with the local producers often result in an exchange of know-how and enriched the partner's experience, starting completely new learning curves. In some cases, the retailer is on the receiving end and benefited from systems and methods introduced by its partner. Synergistic advantages result from the cooperation between specialized retailing businesses abroad (Tesco Ireland Home Page, 2010).
Another opportunity in Ireland is the Internet marketing and broadband technology. In 2000, Tesco established a new service, Tesco.ie for Dublin consumers. Electronic point of sale information is allowing Tesco to capture important market information (Vignali, 2001). Applications of Direct Product Profitability and Just-in-Time delivery systems are only fully operational with a unified EPOS system. EPOS has penetrated food distribution systems more than nonfood distribution, the major reason being that the food industry has been more successful in establishing a universal standard for coding the information. In the food area, producers and distributors in national organizations have cooperated to determine a coding standard. Even small chains and independent groups have developed a systematic equipment policy. Being an outsider to the system will be a limitation as EPOS strength. The importance of value-added wholesalers who will relabel imported merchandise with scanning codes could become a more important part of the industry (Deresky and Christopher, 2008).
In 2007, Tesco established Tesco Mobile prepay handsets and “piggy-backing”. Tesco sees an opportunity to maximize returns, spread risks, and retaliate against competitors invading their home markets. The mobile marketing offers Tesco an opportunity of "concentrated internationalization" within Ireland, saving Tesco from the bother of widely dispersed geographical expansion that many took as their growth strategy in earlier years with mixed results (Vignali, 2001). Taking the long-term view, the development of market share versus profit maximization, requires an adjustment on accountability and decision-making. To attack small segments of consumers in economically advanced regions of Ireland, industry groups have taken steps to develop Eurobrands and to standardize their ad campaigns. Tesco has not changed its brands into more globally familiar and recognized brand names. The removal of subsidies and barriers inhibiting the free flow of goods should enable Tesco to develop Pan-European brands (Tesco Ireland Home Page, 2010).
Position of Tesco in Ireland is affected by current economic weaknesses and unlimited opportunities in this geographical area. For Tesco, geographical diversification was the response of many retailers to compensate for the loss in market share. Market saturation at home should continue to drive large retailers to look out as they may not find long-term growth opportunities in the domestic market. Tesco Ireland will seek growth opportunities outside the home country. Tesco is believed to be exploring expansion within the EC region. Corporate managements began to realize the importance of programs of the Internet an mobile marketing. Mergers and acquisitions began to be considered effective means of securing new portfolios, which would ensure sustained corporate growth. Tesco’s interest in Irish retail companies can be explained by the large size of the market, its potential buying power, and the lesser vulnerability of its retail industry to recessionary trends. Plans to obtain stable position in Irish market also represent a retaliatory move on the part of retailers whose domestic market share is being eroded by foreign rivals in competing product lines. The worsening economic situation and the stifling legal environment prevailing in Europe led most large business firms like Tesco to adopt a strategy of planned growth. Much of the success in marketing comes not just from established, process-orientated, new product development environments, but from entrepreneurs "outside the system". For Tesco, both the quantity and quality of accumulated knowledge about markets created by innovation and the marketing of innovation, as well as other entrepreneurial activity directly dependent on marketing, is relatively scarce and in comparison with other areas, deficient.