Tesco is a large scale retailer that is working in different parts of the world, including UK, China, India, Hungary etc. Currently, there are more than 7800 outlets of Tesco in the international retail industry, with a larger segment of the sales being generated through its UK stores. The application of Boston Consulting Group Matrix on Tesco would help in analyzing the profitability and future prospects of the different businesses being managed under the label of Tesco. The BCG Matrix for Tesco is given in the following section:
Cash Cows
There are some business units of an organization that tend to be the main source of earning for that organization due to the high market share owned by the organization. The high income potential makes them a cash cow for the firm and despite the maturity stage of the industry, the products are able to fare well. Furthermore, the need for capital input for further growth of the market is low, therefore the cash cows are regarded as profitable for the company. For Tesco, the fresh meat section is the cash cow as these products are in high demand across the different Tesco stores. There has been an incident which has damaged the brand image of Tesco in the domain of the meat supplied by the retail giant, however, the management has taken necessary steps to rectify the situation (Sonne, 2013). The fresh meat unit is operating in a mature industry as there are other major retail stores supplying fresh meat products to the market, suggesting that the market is operating at a mature stage. The fresh fruits and vegetables also constitute a part of the profitable business unit, along with the high market share. The high demand of these products and significantly high market share suggests the potential of these products to create revenues for Tesco. The fresh produce market is already established, thus needing little investment for further development, making it a profitable avenue for cash generation in the long run.
Stars
Apart from the cash cows, there are some products or business units that create growth opportunities for the organization. In such a case, the market is characterized by the growth opportunities, which creates a supportive environment for the business unit to develop further. Another important feature of stars is that they can grow into cash cows once the market is able to stabilize and mature. As a Star these products may need more investment than the input needed for cash cows. Tesco has some products which can be identified as Star for the company as they are generating sufficient income for the company and have the chances to grow more. One of the examples of Star for the company is Tesco bank. According to Rojas (2014) Tesco bank has expanded its market presence by offering the customers current account facility along with other services such as insurance and loans. The banking industry has high growth potential, therefore it can be concluded that Tesco bank will gain a higher market share in the coming years. Tesco finest range is also a Star for the company as the selected premium products target the customers seeking premium quality products and are willing to pay more for them.
Question Marks
Not all business units being managed by an organization can work smoothly. There are some products or units that create lower revenues than expected by the organization and can’t be deemed as profitable. The future of these products is uncertain as the market conditions hint a possibility of attaining future growth. Therefore, the developing market environment can become a positive source of stability of these products. On the other hand, the market development may not have the desirable impact on the income generated by these products or their market share. Tesco has some products which are not operating to their full potential. Tesco lard cn be regarded as a question mark as the product is generating some cash for the company, yet it has not been able to create a major demand from the consumers. The sales of Tesco lard have been unsatisfactory over the years, creating pressure on the management to analyze whether it is feasible to continue with the production of the product or discontinue it.
Dogs
In the BCG Matrix, the last category of products that have been identified are termed as Dog. This category includes all those products whose present performance is not satisfactory for the organization due to the low return on investment. In order to keep managing the operations of these business units the organization has to invest, however the products continue to be a source of loss. It is also important to note that these products do not indicate any financial benefit for the organization in the coming years. The poor performance of these products and bleak future outlook necessitates careful speculation from the management as continued investment is not likely to create expected results. In addition, the low chances of growth of the industry makes these products a troublesome issue for the organization. The mobile segment of Tesco is a reflection of a business unit that has an uncertain future. There has been some improvement in the mobile segment of the company. However, the increasing debt on Tesco has made the management reconsider the decision to continue with the operations in the mobile industry (Garside and Butler, 2015). The mobile industry is marked by high competition and slow growth potential. Keeping this situation into consideration, the mobile business is a Dog for Tesco. The management has earlier made the decision to liquidate the broadband business as it was requiring greater investment than the return on the input. It shows that the broadband business has also been a Dog for the company, thus necessitating the decision to sell off the business to handle the financial issues. In a similar manner, the mobile business is also expected to be liquidated or sold off to interested parties to manage the financial aspect of the company.
References
Garside, J., and Butler, S., 2015. Tesco Mobile readies for sell-off to cut £22bn debt. The Guardian [online] June 10. Available at: <https://www.theguardian.com/business/2015/may/08/tesco-mobile-sale-debt-o2> [Accessed 29 September 2016].
Rojas, J. P. F., 2014. Tesco Bank: Grocer enters current account market. The Independent, [online] June 10. Available at: <http://www.independent.co.uk/news/business/news/tesco-bank-grocer-enters-current-account-market-9521330.html> [Accessed 29 September 2016].
Sonne, P., 2013. Tesco Drops Meat Supplier. The Wall Street Journal, [online] January 30. Available at: <http://www.wsj.com/articles/SB10001424127887323701904578273881508866780> [Accessed 28 September 2016].
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