Strategic Management: Tesco Analysis

This report provides a critical evaluation of Tesco's strategic direction, competitive advantage, and external environment using various frameworks. It analyzes the value of clear purpose, vision, mission, and objectives in setting strategic direction, assesses competitive advantage using the VRIO framework, and analyzes the external environment using the PESTLE framework. The report also applies Porter's Five Forces Model to evaluate Tesco's competitive position.

BSc (Hons) Business Management Top up
Cohort 2
BMP6002
Strategic Management
Strategy Evaluation
2019/2020
Spring 2020/Semester 1
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Table of Contents
Introduction......................................................................................................................................3
A critical evaluation of the value of clear purpose, vision, mission and objectives in setting the
strategic direction of organizations using examples from selected organisation.............................3
Assess the competitive advantage of the selected company, using the VRIO framework..............3
Using PESTLE framework analysing the external environment of the selected business..............3
Application of the Porter’s Five Forces Model for the selected organisation.................................6
A review of the selected organization’s strategy.............................................................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................7

Introduction
Strategies refer to various policies and rules formulated by an organisation which helps
organisation in functioning smoothly (Zuo, Wang and Corder, 2019). There are a number of
tools and analysis developed which help businesses in formulation of their strategies. There are
different tools to analyse internal as well as external environment of a business. In the following
report strategical analysis of Tesco is done. It is British multinational which deals in retailing. It
is one of the biggest supermarket chains in United Kingdom. The following report consists of
study of purpose, vision, mission and objectives of Tesco closely. In order to analyse the internal
environment of company VRIO analysis is performed. PESTLE is performed to know about
external environment of company. Other than this it is important for companies to know about
the competitive standing in market. To understand this porter five force analysis have been
performed on Tesco. At the end of the report a review of strategy of Tesco is also performed.
A critical evaluation of the value of clear purpose, vision, mission and
objectives in setting the strategic direction of organizations using examples
from selected organisation
Purpose: The purpose of Tesco is to champion for their customers so that they can help them in
order to enjoy a better quality of life and also an easier way of living. It is seen that customer
need great products and great values Tesco tries to deliver them all of these requirements.
Vision: The vision of company is to become the most valued business through serving
customers, operating in communities, loyalty of their employees and colleagues and also that of
their shareholders. There can be five basic elements derived from vision of Tesco which are:
 Growth in business with a number of opportunities.
 Diversified and extended business around the world.
 Winning locally and applying skill globally
 Inspiring and earning trust of communities, people, and colleagues.
 Innovative, modern and full of ideas.
Mission: Mission of company is simply to make what matters. They are aiming at business
which can make strategies based on departments.
Values: There are a number of values followed by Tesco which include the following
 Do not try harder for the customers

 Everyone is treated how they should be treated
 The scale of company is used for good
 Company create new opportunities for a number of young people throughout the world
 They are trying to reduce their impact on environment
 They believe in supporting the local communities
Objective: Tesco majorly aims at providing electronics, groceries and clothing goods along with
a number of services online. They aim to develop the online shopping experience of customer so
that they can attract more and more customers.
Assess the competitive advantage of the selected company, using the VRIO
framework
VRIO analysis is an analytical tool which is used by business in order to evaluate all their
resources and their competitive advantage to the company. VRIO stands for value, imitability
organization. This helps an organization to compare their resources with their competitors. VRIO
Analysis for Tesco is below mentioned below:
Valuable- This includes in analysing weather following resource adds some value to the firm or
not. In this various resource are studied so that they can exploit opportunities or defend the
organization against any threat (Grissom and Bartanen, 2019). Positive market situation and
reputation of Tesco is valuable for company. It helps company in generating a positive image in
mind of customer. Leadership team of company is also valuable for company as effective leader
helps to run an efficient team. The brand awareness of company is also a valuable resource for
company along with this customer rate company very highly which is another valuable resource
for company that makes it better than their competitors.
Rareness- Rareness refers to a factor where following resources can be acquired by only few
companies. Valuable resources and their resources provide company with temporary competitive
advantage. All the resources of company including positive market reputation, leadership team
and leaders, awareness about brand, high customer rating are there for company and they help in
providing temporary competitive advantage to Tesco over its competitors.
Imitability- This includes all those resources which cannot be copied by competitors of Tesco.
The high customer rating and positive market reputation of Tesco is imitable. Any competitor of
company can easily copy this resource. On the other hand, leadership team and awareness about

brand of Tesco cannot be copied by its competitors. There for these provide strong and
sustainable competitive advantage to the company.
Organization- The following factor specifies that resources could not themselves capture value
for the firm if they are not well organised. It is important for a firm to organise their processes,
system, policies and structure (Dogu and Albayrak, 2018). In context of Tesco all the resources
including positive market reputation, leadership team, awareness of brand and high customer
rating are highly organised by Tesco which help them in providing various competitive
advantages.
Using PESTLE framework analysing the external environment of the selected
business
Pestle analysis is conducted by businesses in order to analyse the external factors which
affect the functions and operations in a business directly or indirectly. This stands for political,

social, economic, technological, environmental and legal factors which have an effect on
working of a business. in order to understand multiplatform international retailer Tesco, below
mentioned is its pestle analysis:
Political factor- Tesco operates in a number of countries worldwide. There for the global
political factors have a great influence on performance of the company. Some of the factors
included in this hour are various acts of legislation, tax rate, stability in economy of a country in
which company is operating. Due to these various financial instabilities across the world and
number of governments are encouraging retailers to start business in their countries as they
provide employment to the population of the country (Aranha and et. al., 2019). Tesco also plays
a major part in creating various employment opportunities in a number of economy due to which
the demand for company and its product is high. It also diversifies its workforce. There for none
of the economy in world create barriers in part of Tesco when they expand their business in
different countries.
Social factor- There are a number of social changes as well as trends which prove that the
customers around the world and in United Kingdom have shifted towards shopping in bulk and
also one stop shopping rather than visiting to stores daily. This has resulted in a number of
changes brought by Tesco as well. Company has now efficiently increased the number of non-
food items which are offered by them with various promotional tools such a sale. It is often seen
that the goods which are demanded by customer depend upon their attitudes and beliefs which
are result of social conditioning. Therefore, it is essential for Tesco to make sure that they are
adapting and accommodating these needs of customers effectively.
Economic factor- Economic factors are important for Tesco as they help in leveraging cost,
profit, demand as well as prices of products offered by the company. it is important for company
to be aware of various changes in policies taking place around the world such as taxation foreign
exchange rates, interest rates and so on. This includes all the factors that affect the accessibility
of finance for the company. It is essential for company to know that although the business is
internationally growing company still depends on United kingdom's market as 30% of its share is
in that country. Tesco have successfully used diversification and internationalization or
globalization as the major keys for strategic success over a number of years. This is the major
reason for success of company throughout the world. However due to decline in disposable
income of a number of household’s company is shifting their focus on valuable brands rather

than just luxurious brands. It will help company to grab major market share through you people
who are falling in medium income level.
Technological factor- advancement in technologies have brought in a number of new
opportunities for various companies including Tesco. There are a number of innovations brought
in some of which have adversely affected the business of Tesco. One of which is introduction of
e-commerce and online shopping in which Tesco provide home delivery. It has majorly affected
company and its revenues. This is profitable change for company. Along with this self-service
checkout points developed are also proven to be convenient for customers. It is not convenient
for customers to shop easily and they do not need to wait in long queue for billing. It is a great
success for Tesco as well because they do not need to spend more on employees now. They have
saved labour cost through this technology. It is also seen that Tesco is investing in different
energy projects in order to fulfill sustainable requirement and reduce the carbon footprint of
company in the environment.
Environmental factor- order to profitably stay in market today the companies have to address
and number of environmental issues. It is seen that there are a number of ways companies can
adopt in order to make sure they are not harming the environment and surrounding and also
benefiting it in one or other way. it is clearly mentioned that Tesco is committed to reducing its
carbon footprint by 50% in 2020. This is a major step taken by Tesco towards environment. They
are also so trying to reduce their waste in stores full stop other than this various measure are
taken by Tesco so that they can develop social science and customer regarding waste
management and recycling.
Legal factor- It is seen that there are a number of government legislation and policies which
have a direct impact on companies. Similarly, a number of such legislations are directly affecting
performance of Tesco. Food retailing commission have suggested a number of quotes hand
practice which are needed to be followed by company (Xin, 2018). This include changing in
current practices by company as well as also a number of changes in price. This may result in in
conflicts with the suppliers of the company. in order to make sure that all these policies are
followed by company Tesco is providing the customers with reduced priced full stop in this way
there are also a number of others laws which effect company directly or indirectly. Labour law,
Consumer protection law, laws regarding advertisement and so on are some of the other laws
which Tesco needs to follow.

Application of the Porter’s Five Forces Model for the selected organisation
Porter's five force analysis is a tool which helps to examine all the forces of competitive
environment for stop this include five forces through which the competitive standing of company
in the market can be judged. Below mentioned is porter’s five force analysis performed for
Tesco:
Bargaining power of buyers- Tesco is serving every week through its stores and online services.
It is seen that bargaining power with customer of Tesco is high because they are well organized
and they can easily shift to some other brands for retailers offering similar products. it is seen
that bargaining power of grocery customers in United Kingdom is high as there are a number of
customers who can easily shift to some other brand. Therefore, it is required by Tesco to keep
their prices low and competitive as per their competitors.
Bargaining power of suppliers- It is seen that Tesco works with more than 2500 suppliers which
are in UK and a number of them are in different countries. These suppliers do not have any
power over Tesco because there are a number of suppliers with whom company can deal.
Company takes various efforts to negotiate with their suppliers in order to increase their profit
margins. However, Tesco cannot believe their suppliers in order to increase their profit margin.
Therefore, company can efficiently bargain with suppliers as the bargaining power of suppliers is
very low.
Threats from new entrants- it is seen that the threat for Tesco from the new retailer
supermarkets entering in industry is very low. The reason behind this is huge initial investment
required by companies to setup such a big retail store. Therefore, Tesco do not worry about any
new entrants in the industry and they enjoy their position through economy of scale and various
core competencies they have developed over time. It is also seen that the distribution network of
Tesco is very well formed, which is difficult for any other competitive to copy.
Threats from substitute- it is seen that Tesco have a wide range of products. Most of the
substitute of product of Tesco is sold by Tesco itself (Shen and et. al., 2018). Tesco sells milk
they also sell condensed milk, milk powder and various other varieties of milk. Therefore, which
have a substitute the customer wants they will definitely buy it from Tesco itself. Therefore, this

prove that the threats from substitute for Tesco is very low as basically Tesco do not let any
substitute for their products arise in market.
Rivalry among competitors- there are a number of competitors present in market for Tesco in
United Kingdom. it is necessary for Tesco to take care of their promotion and market
communication because its competitors are investing a lot in advertising and marketing their
products. Although Tesco is a market leader but there are a lot of pressure built on company by
the nearest rivals. Price wars often occur between ALDI and LIDL which affects profit margins
of Tesco as well.
A review of the selected organization’s strategy
Tesco was founded in year 1919. Company basically deals in retailing with United
Kingdom and many other countries. Core value of company includes their commitment for using
economics of scale and being a responsible retailer (Alikhani, Torabi and Altay, 2019). Company
has also opened a zero-carbon supermarket. They aim at improving the customer loyalty through
providing them a better shopping experience and fulfilling all their needs and requirements.
Various sources driving strategies of company are price, equality, innovation and range of
products provided by them.
Tesco is focusing on enjoying success for a longer period of time. It is clear by the core
vision of company which is constant as the business practices and various strategies of company
are continuously changing and adopting as per the environment around the world. According to
the clearly competitive environment in business worldwide it is necessary for business to create a
clear vision because without a clear vision business lack a direction and they cannot survive. It
has been analysed that Tesco has divided its division into various parts and successfully achieved
all of them.
It has been analysed that company aims at different functional areas of business and also the
strategies are based on different departments to achieve their goals. The vision and mission of
company help them in in strategic planning process as well. It provides inspiration to senior
managers and also provide general expression to purpose of the business overall. Along with this
it also helps in communicating the goals and objectives of business to the stakeholders. Through
this this stakeholder can be motivated and inspired towards the objectives of business.
Tesco is seen focusing on community and global business. Corporate social responsibility is
important to attain good position and brand image in the market. Company is dedicated towards

society and through this they are generating loyal customers in the market. Tesco also works
with a number of its communities which differentiate it from its competitors. The strategy of
company can be basically divided into 7 parts which are mentioned below:
 To grow in United Kingdom- Company is increasing their staff in United kingdoms and
also paying more focus on their customers through training their staff.
 To create higher value for brands- Tesco is developing their own label brands. They are
trying to provide customers with all the quality products along with competitive price
range.
 To become an outstanding retailer internationally- Tesco is generating international
business and group profits threw including new brands in their stores around the world.
They have set up new stores in middle East, Saudi Arabia, Kazakhstan Georgia,
Azerbaijan and Armenia.
 To grow the retail services in all markets- Tesco is generating high revenues in order to
focus on the potential growth for future markets wherever they can sell their retail
services (Cheng, Humphreys and Zhang, 2018).
 To pay back to the communities they serve- Tesco face major attention in serving the
communities in which they are working. They are demonstrating corporate social
responsibility through serving the communities in which they survive.
 To build a team in order to create more value- The most important asset for Tesco is there
people and human resources. They are trying their best to train their human resources in
order to make them good future leaders and also make sure that they fulfil all the
requirement and needs of customers effectively.
 To be strong in everything they sell- Tesco have proven that food is its Heritage but it is
necessary for company to diversify regularly in other products as well as they do in food.
Conclusion
From the following report it can be concluded that development of a strategy in order to run
a business includes a number of steps. The following report clarifies that Tesco have to analyse a
number of factors in order to make sure that they do not leave any scope for error in their
strategy. They start with development of a purpose, vision, mission and objective for company.
Then a scrutiny of internal, external as well as competitive factors is performed in order to study
about the upcoming opportunities and threats in companies’ way. After all this analysis company

can bring in various changes in its strategy and policies in order to perform better in future and
attain all its objectives within a given time period.

References
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