Business canvas model Report (Assessment)

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Business canvas model for Tesco

Key Partners
  • IT service providers
  • Branded suppliers
  • Overseas suppliers
Key Activities
  • Product sourcing
  • Operational management (Making it simple for the staff)
  • Financial and insurance service provision
  • Marketing
  • In-store shelf organization
  • Support services
Value Proposition
  • Sell items for less
  • Appeal to all
  • Provide value for money
  • Provide more variety to existing clients
  • Find new customers in new channels
  • Explore new geographical opportunities
Customer Relationships
  • Created a lifetime loyalty program for Tesco clubcard holders
  • Being helpful to clients
Customers Segments
  • Mainstream shoppers (24%)
  • Traditional shoppers (15%)
  • Convenience shoppers (9%)
  • Health conscious shoppers (17%)
  • Finer food shoppers (19%)
  • Price sensitive shoppers (16%)
Key Resources
  • Huge asset base that allows continuous expansion
Channels
  • Internet
  • In-store sales
Cost Structure
  • The company employs a combination of both value-driven costs and price-driven cost structures
  • Innovation, and acquisition of new assets accounts for the largest cost structures
Revenue Streams
  • In store-sales-Fixed pricing that is dependent on product features and customer segments
  • Online sales
  • Insurance services
  • Financial services
  • Telecommunications services

In terms of its key partners, the organization uses IT services in order to handle daily service operations, such as intelligent scale, internet selling, electronic shelf labelling, check out machine usage, and utilization of the company extranet, which contains vital information on its operations.

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Its suppliers were initially sourced from large brands in the United Kingdom. However, now, the organization gets its products from overseas markets as well and this gives it great value for money.

In his article “Building brands webs: customer relationship management through the Tesco Clubcard loyalty scheme”, Rowley makes a detailed analysis of the Tesco Clubcard (2005).

With regard to its value preposition, the company has dominated the retail industry through low prices that are achieved by continuous expansion, buying in bulk and selling products at cheap prices (Coriolis research, 2011). Tesco has a wide variety of customer segments and strives to satisfy each one of those categories.

It endeavours to offer more products and services to its customers through private-label brands and expansion of non foods. It has also ventured into the service sector through financial and telecommunications services like insurance and banking. Tesco’s various brands are designed to meet the needs of these various brands in the market.

Business canvas model for John Lewis

Key Partners
  • IT service providers
  • Branded suppliers
  • Overseas suppliers
Key Activities
  • Product sourcing
  • Operational management
  • Financial and insurance service provision
  • Marketing
  • In-store shelf organization
  • Support services
Value Proposition
  • Superior service quality
  • Appeal to affluent tastes
  • Controlled or reduced geographical expansion
  • High quality products associated with a strong brand identity
  • Great internet sales services
  • Sustainability through the business and the environment
Customer Relationships
  • Effective customer support
  • Loyalty program
Customers Segments
  • Upper middle class shoppers
  • Affluent shoppers
  • Health conscious shoppers
Key Resources
  • Its employees
  • Brand
Channels
  • Internet
  • In-store sales
Cost Structure
  • Uses value drive n cost structures
  • Innovation
  • Investment in company staff through bonuses, loyalty programs and other incentives
Revenue Streams
  • Instore-sales-Fixed pricing that is dependent on product features and customer segments
  • Online sales
  • Insurance services
  • Financial services

John Lewis’ major value proposition is its ability to partner with its staff members to own a little bit of the company’s asset and financial portfolio. This means that employees are personally interested in developing and growing the business (Attwood, 2007).

Such a perspective is seen by the way they treat clients, their customer support services, and their need to innovate. The organization targets affluent clients, and is hesitant about very fast expansion; this makes its strategy highly focused. John Lewis has focused on the growth of its internet services, and this has made its sales figures grow tremendously (Lewis, 2011).

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The company has utilized multi-channel retailing in order to achieve this. Its fashion retailing and home ware segments explain why the organization keeps doing so well. The slowing housing market has led to a need to redecorate interiors rather than purchase new homes.

The organic industry has grown immensely in the market, and this has provided a ready market for the company’s focus on sustainability.

Analysis of Tesco’s business environment in the next 5-10 years

Key Partners
  • Greater inspection of overseas suppliers’ products, but greater cooperation with them
Key Activities
  • IT optimization of stock control and delivery records due to internet sales and the need for more efficiency
  • Better financial and insurance service provision
  • Better branding and advertisement
  • Product life cycle management
Value Proposition
  • Sell items for less
  • Appeal to the ethical and ecological demands of consumers
  • Provide more value for money through innovation and provision of better quality goods.
  • Providing more variety through introduction of new services.
  • Improvement and expansion of the internet selling portfolio, or provision of a greater online presence
Customer Relationships
  • Greater customer support
Customers Segments
  • Greater focus on its core competence, which consists of mainstream shoppers
Key Resources
  • IT resources
  • Greater asset base
Channels
  • Internet
  • In-store sales
Cost Structure
  • Pursuance of more value driven cost structures
  • More innovation
Revenue Streams
  • In store-sales to be IT drive and driven by efficiency
  • Online sales
  • More service provisions

A look at the industrial forces in the country reveals that the grocery market in the UK does not have too many competitors –Asda, Safeway, Sainsbury, and John Lewis are some of the major sellers.

Grocery markets are now dominated by supermarket business that focus on efficiency and one-stop shopping. In the next 5 years, it is likely that Tesco will wield even greater power in the industry because of economies of scale. This will make it difficult for new entrants to come in, and the organization will keep growing.

Continued globalization may increase sourcing of commodities from other suppliers from around the world. Local suppliers will be constrained and their relationship with Tesco is likely to reduce.

Consumers are becoming increasingly informed about fair trade and supply chain issues. In the next five to ten years, more of them will demand greater ethical and ecological responsibility from Tesco.

These consumers are likely to target producers from Third World countries. They may require greater scrutiny of their manufacturing practices as well as their treatment of workers. Such a trend may cause Tesco to become increasingly vigilant about its supplier choices (Joost, 2005).

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Since the United Kingdom is perceived as a flat-growth market, it is likely that the concerned organization may result to greater innovation, and even greater expansion in order to maintain its position as a leader in the retail sector. It will need to add more value for money.

Although the organization has invested continuously in the growth of its online services, it will need to revamp them as more clients will opt for the use of the internet for purchasing rather than in-store purchases.

However, a large segment will still want to enjoy the feel and selection of a wide selection of services in the stores. In this regard, they will need to invest in stock control, delivery records and business transaction management through the use of IT.

Tesco is likely to add more variety to its product portfolio through diversification as this is the best strategy for a company that focuses on mature markets (Yip, 2004). The organization is likely to provide more services in the future.

Tesco is growing and expanding rapidly. This will create new challenges with regard to the organization’s strategy. It may face more pressure from competitors to lower their prices. This may necessitate the pursuance of a cost-leadership strategy, which involves increasing efficiencies and appealing to the masses.

Alternatively, if the competitors focus more on value addition, then the company will have to employ a differentiation strategy. Currently, the company is inclined towards the cost-leadership side as it is already looking for methods of cutting down on inefficiencies in operations. In the next five to ten years, the organization may keep doing more of this (Myers, 2007).

At the end of it all, Tesco will need to work on its core competence. Most of the activities that take place in this organization are garnered towards improving the firm’s performance. Over time, this company has developed an area of expertise that centres on its product offering.

This concept is likely to remain the main centre of concern in the company. Sustaining trust in the Tesco brand is likely to be a major area of focus because this directly affects its sales. Such a need will be necessitated by competitor increments in the market.

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References

Attwood, K. (2007). John Lewis and the taste of Success. The Independent, 13.

Coriolis research (2011). Tesco case study in supermarket excellence. Web.

Lewis, J. (2011). Official Company Website. Web.

Joost, W. (2005). Supply Chain integration in the food industry. Executive Outlook, March 1, 20-27.

Myers, H. (2007). Trends in food retail sector across Europe. European Retail Digest, 41, 1-3.

Rowley, J. (2005). Building brands webs: customer relationship management through the Tesco Clubcard loyalty scheme. Retail and Distribution Management International Journal, 33(3), 194-206.

Yip, G. (2004). Using strategy in changing your business model. Business Strategy Review, 12(12), 17-24.

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IvyPanda. 2020. "Business canvas model." May 15, 2020. https://ivypanda.com/essays/business-canvas-model/.

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