Value Chain of Tesco

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“To further the analysis of competitive advantage, Michael Porter introduced the value chain as a tool to examine the activities of a business.” As seen in figure 2, “Porter distinguished a firm’s support activities from its operational or primary activities.”(Book) [pic][pic]

Support Activities
Firm Infrastructure
Human Resource Management
Peta Hay, Director of the Tesco Academy, commented: “We believe it is more important than ever to invest in our people as Tesco continues to expand both geographically and into new business sectors. Tesco has a proven track record of both nurturing internal talent and successfully attracting external senior executives”. (7)

Technology Development
Procurement

Primary Activities
Inbound Logistics
The overall cost leadership strategic management of Tesco is exhibited in its lean and agile inbound logistics function.  Drawing upon Abeysinghe (2010), the company uses its leading market position and economies of scope as key bargaining powers to achieve low costs from its suppliers.  The analysts have also highlighted the constant upgrading of their ordering system, approved vendor lists, and in-store processes to induce effectiveness and efficiency into the company’s inbound logistics operations.

Operations Management
Tesco has been praised by a number of supply chain management critics for its effective use of IT systems that facilitate the company’s low cost leadership strategy.  According to Tesco (2010), the company has invested over £76 million in streamlining its operations through their Tesco Digital program, which is a third generation ERP solution for the company.  The company has achieved £550 million in increased profitability during 2009 alone due to the introduction of this system.  This company -wide ERP system has also facilitated the minimisation of stock holdings within the company.

Outbound Logistics
Tesco holds leadership position in online and offline food retail segments, which is due...
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