Business Strategy of TESCO

This report analyzes TESCO's business strategy, covering its macro environment, internal capabilities, competitive forces, and strategic planning. It utilizes frameworks like PESTLE analysis, SWOT analysis, Porter's Five Forces, Bowman's Clock, and Porter's Three Generic Strategies to evaluate TESCO's strengths, weaknesses, opportunities, and threats. The report also includes a detailed strategic plan for TESCO, outlining its vision, core values, and key strategies for achieving sustainable growth and profitability.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
L 01..................................................................................................................................................1
P.1 Analysing the impact and influence which the macro environment has on TESCO............1
A table is being presented to highlight the major points. ...............................................................3
.........................................................................................................................................................3
M.1 Critical analysis of macro environment to determine strategic decisions...........................4
L 02..................................................................................................................................................4
P.2 Appropriate frameworks analyse the internal environment and capabilities of TESCO......4
Strengths:.........................................................................................................................................5
M. 2 Critically analyse the internal environment to asses strengths and weaknesses of TESCO
internal capabilities' structure and skill set..................................................................................7
L 03..................................................................................................................................................7
P.3 Apply Porter’s five forces model and to evaluate the competitive forces of TESCO..........7
M.3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes................................................................................................................................9
L 04................................................................................................................................................10
P.4 Apply a range of theories, concepts and models, interpret and devise strategic planning for
a given organisation..................................................................................................................10
Conclusion.....................................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Business strategies are those plan of action which are designed and implemented so that
organizational objectives can be met through using the same. All the factors whether internal or
external are considered and analysed before making any strategy and planning. In this present
report TESCO has been chosen for assessment. TESCO is a British organisation which has many
supermarkets around the world. TESCO is a retail sector which deals in grocery items and
operates in many big Countries. This present report will cover the impact and influence of macro
environment on TESCO. It will also cover SWOT analysis along with porter's five forces in
detail. In addition to this, a range of theories, concepts and models, interpret and devise strategic
planning for TESCO will be covered in brief. Furthermore, range of theories, concepts and
models, interpret and devise strategic planning for TESCO will be discussed in detail.
L 01
P.1 Analysing the impact and influence which the macro environment has on TESCO
TESCO is a British multinational groceries company that deals all the products. It is a
leading brand which has expanded its supermarkets in 12 countries. Very high goals and
standards are set up by TESCO. It has many supermarkets all around the world.
Mission of TESCO: TESCO has a mission statement which is very important to the company as
it gives a direction to reach at a point. The mission statement is 'Creating value for customers, to
earn their lifetime loyalty'.
Vision of TESCO : There are majorly five elements of TESCO which described the vision
statement of the company.
Expand more of its business in all over the world.
It is a growing business which have many opportunities
Organization always plans to come up with new and innovative ideas.
Earning trust of people who are customers, colleagues and employees of company.
OBJECTIVES
TESCO has major objective of attaining higher growth along with customer satisfaction. In
addition to this, TESCO always have a long term objective of improving as much as the
organisation can.
PESTLE Analysis:
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It is an analysis which will show the depth analysis on supermarkets. In order to survive
in this competitive world an external analysis is required to be done. It will help TESCO in
knowing about the large big areas and factor that will affect the company in some or the other
way.
Political factors
TESCO is a big multinational organisation which has its outlets in 12 nations. Every
country has their own tax rate, laws, rules and regulation. Organisation has to operate as per the
nation economic condition and political conditions. Like import duties affect the pricing strategy
of the company due to the rate that is prevailing in the nation (Leonidou and et.al., 2017). As
while opening new retail supermarkets of TESCO, local retailers business got highly affected.
But on the other hand, it has provided jobs to many unemployed people. TESCO is retail sector
which give high employment and higher pay to people who works for the organisation.
Economic factors
People of every nation has different purchasing power and thus demand differs in every
nation as per the economic condition of the country. Lower purchasing power is due to
unemployment and low income levels of people. Thus, it will affect business of TESCO in some
or the other way. So organisation needs to plan as per the economic conditions of the country. In
the year 2008, United kingdom has declared recession where interest rates got reduced and
through that there has been a reduction in the employment. In addition to this, overall it has
reduced the spending power of the citizen of the country. It also can be said that consumer likely
to be spend less on high premium products due to low income and recession in the nation. But it
has a positive side too where people started eating out less due to low income. Thus, it has made
rise in the purchasing of groceries and hence business of retailer sector has grown.
Social factors
In today's world every one likes to do online shopping where they get delivery of
products at home. Due to the tough timings and schedule of people they like it more. This factor
has affected the decision making of company (Castellani and et.al., 2018). In addition to this,
TESCO has introduced online shopping through its website and application. Thus, the business
has expanded more by the same. Old age people also like to do online shopping more than they
feel less likely to step out and shop. Other than this, payments through cash and cheques are
made possible by TESCO.
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Technological factors
This is a factor by which customer trust can be gained by brining advancement in the
services and products. New various opportunities can be grabbed by implementing the same.
These factor helps in taking business on another level as it makes easy to run an organisation by
brining innovative tools and machineries (Fontana, Sastre-Merino and Baca, 2017). For example,
TESCO has brought RFID technology through which stock of the store can be counted
automatically. In addition to this, TESCO has introduced it sown application through which
consumers can pay online by using the same app. These factor has also made implemented
different advancement like loyalty points for customers.
Environmental issues:
Every company has to follow the responsibility towards the environment so that society
does not get harm and earn benefits. As every person should think about the environment
likewise, government has made different laws which are applicable on very organisation to keep
the environmental factors under consideration (Buckley, Burton and Mirza, 2016). In addition to
this, To meet the same TESCO has started a rule for the TESCO van drivers that they should use
fuel saving routes and must collect all the unwanted bags from consumers. These are collected
in order to recycle them again for future use.
Legal factors
Legal factors are the biggest factors that can affect a business and its objectives. It has
determined that employees can take legal action against those employers who discriminate in the
company. Along with this, It has been predicted that VAT would have to outgrowth to 20%
since the Government has to finance a big budget deficit. This will affect the non-food sectors of
TESCO, such as clothing. These different legal factors also affects the manager decision-making
while making policies and procedures.
A table is being presented to highlight the major points.
Particulars Highlights
Political factors TESCO has to operate as per the nation economic condition and
political conditions.
Economic factors TESCO should plan its new openings as per the economic conditions
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and purchasing power of the country.
Social factors TESCO has introduced online shopping through its website and
application (Weinrich,2017). As in today's world people like online
shopping
Technological factors TESCO has introduced RFID technology by which stock of the
store can be counted automatically.
Environmental issues It is the duty of every company to take care of environment. To meet
the same TESCO has started a rule for the TESCO van drivers that
they should use fuel saving routes and must collect all the unwanted
bags from consumers.
Legal factors This rule has been implemented by TESCO that employees can take
legal action against those employers who discriminate in the
company.
M.1 Critical analysis of macro environment to determine strategic decisions
As per Morelli (2018), Strategic all the factors such as political shows that if the
government is stable and democratic that it will be helpful for the organisation to operate its
business. Whereas, as per Peng (2017), if the nation has not stable government than it will be
difficult for the company to run in such a nation. TESCO operates in 12 nations and every
country has their own political aspects which should be considered by company. To make
decisions political factors helps to a great extent but on the other hand, it is difficult also to
consider every aspect and make strategic decisions.
L 02
P.2 Appropriate frameworks analyse the internal environment and capabilities of TESCO.
To determine the internal environment of the company, SWOT analysis will be carried
out so that organization can work on its weaknesses. Along with this, Opportunities will be kept
in mind so that it can be grabbed and help in future growth of TESCO.
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Strengths:
 TESCO is a big multinational organisation which has received many excellence awards
and a great leadership position in United Kingdom. It helps the organisation in enhancing
its brand image which leads to gain trust of people.
 It is one of the most famous and profitable organization and this higher earning of the
establishment allows in growing more in different countries. As, it needs higher
investment to expand and open new stores in different nations.
 Various technology are used by company which has also helped it in growing and
attaining a different position in the market. Such as online payments, home delivery
services etc.
 It has more than 3000 stores in Entire United Kingdom. It is a high strength as many
outlets helps in gaining position and creating brand image of TESCO.
 Throughout the world TESCO sales all the varieties of products which make a strong
portfolio of the company. This is a great way to handle competition of different firms in
the same industry.
Weaknesses:
 TESCO has faced a huge brand damage due to the scandal that has happened in the year
2015. Other than this, various small scandals has happened in past years which has
damaged the image of company.
 Various employee morale has got low due to the various discrimination and low job
satisfaction which they face in the company while working.
 Along with this, TESCO faces high cost of inventory due to consumer does not buy
some kind of products and that are required to kept in stock by the company. Along with
this, It is a big loss for the establishment.
 Entry of Reliance is a big threat for the company. To meet the same it has to make many
other policies.
Opportunities:
 TESCO has various opportunities such as it can grow online shopping more and attracts
maximum consumer through the same. It is a big opportunity for the company to cover its
targeted market in different countries. As TESCO deals in so many products which are
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for the daily purpose. So online shopping will take the organisation sales to a higher
level.
 Organisation needs to follow the technological system more so that it can help in earning
competitive advantages. This new ideas can take TESCO to another position in retail
sector.
 Increasing non food range is also a big opportunity for TESCO to grow its business.
Also, it will not involve higher inventory cost due to its non perishable nature higher
technology is not required to preserve non food items.
 Financial service sector is a big opportunity for TESCO to attain success and higher
earnings and profits.
Threats:
 As the company operates in many countries, it faces currency fluctuations which is a big
threat for the organisation.
 Different ethics and culture related problems are being faced by TESCO along with many
other issues in culture and organisation. Due to its operations in many nations TESCO
has major difficulty of aligning with all at large. As differences in culture and religion is
main reason behind.
 Due to rise in the cost of raw material company has faced many problems in its pricing
policy (Leonidou And et.al., 2015). It has affected the profitability of the establishment in
great way. So high prices has made low sales ans this is a big threat for the company.
 There are many activities in the company which can damage the business of TESCO in
long run. Like There is always a risk on oil and gas industry and that is an operation
which is carried out by TESCO.
 As TESCO is a retail sector threat of new entrants is the biggest one that is faced by the
company. It is easy to enter in retail sector as in comparison to any other sector it is easy
to trade in this. This is a big threat that is faced by TESCO that any new competitor can
come up with any new policy or rules which can attract people.
The McKinsey 7-S Framework
This model is developed in 1980 where the 7-s are defined in brief the internal environment and
capabilities of TESCO.
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Strategy: It is a plan that is being used to maintain and gain competitive advantage over the
industry and market.
Structure: It will help in knowing about the running pattern of organisation and the way
TESCO will operate and how better it can be made.
Systems: the daily activities and procedures that staff members engage in to get the job done.
Shared Values: called "superordinate goals" when the model was first developed, these are the
core values of the company that are evidenced in the corporate culture and the general work
ethic.
Style: the style of every leader that is working in TESCO will be covered and analysed in brief.
It will help in knowing about the working patterns and motivating styles of leaders in the
organisation.
Staff: the employees and their general capabilities will be analysed that are working for
TESCO.
Skills: the actual skills and competencies of the employees working for the company.
M. 2 Critically analyse the internal environment to asses strengths and weaknesses of TESCO
internal capabilities' structure and skill set.
As per Peng (2017), TESCO is a most famous retail sector organisation which earns higher
profits due to its products and services. And this higher earning of the establishment allows the
establishment in growing more in different countries. The biggest strength of TESCO is that it
has more than 3000 stores in Entire United Kingdom. It helps in gaining position and creating
brand image of TESCO. Whereas, As per Brewster (2017), TESCO deals in many kinds of
products which has leads to high cost of inventory due to consumer does not buy some kind of
products and that are required to kept in stock by the company. Other than this, TESCO operates
in retail sector which is highly competitive in nature as it is easy to enter in retail industry.
L 03
P.3 Apply Porter’s five forces model and to evaluate the competitive forces of TESCO.
Porter's five forces of TESCO
Threats of new Entrants: As in retail sector it is very easy to get entry and along with that new
entrants bring innovative ideas, low prices so that they can survive in competitive market. This
all puts pressure on big companies like TESCO because of their different ideas and low prices.
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But on the other hand it is difficult to create such a big brand name as TESCO (Fontana, Sastre-
Merino and Baca, 2017).As it requires huge capital investment to enter in market and build big
company like TESCO. There are some ways through which TESCO can deal the threat of new
entrants. Following are described below.
 Company should come up with new products which are unique in their own way. It will
help the organisation in attracting more customers because new and innovative products
are liked by every person. This will give a major benefit to the TESCO in handling threat
for new small or bug ventures. Along with this, organisation has attained higher profits
and attaining higher success in retail industry.
 TESCO should focus more on spending money on making research and development.
Thus, more of it will help in covering large market which will result in a big threat of
new entrants. In addition to this, As it is not easy for a new venture to establish in a
dynamic market where already big ventures like TESCO are operating.
 TESCO is a well established in terms of finance so it can do planning to open more stores
in different cities where the new entrants are focusing on. TESCO has other
opportunities by major focusing on online shopping more and attracts maximum
consumer through the same. It will be a big threat for new establishments to capture
market as TESCO is already a big brand name in its own self.
Thus, this all factors will help the company in dealing with the threat of new entrants and
establishing its business in more innovative and better way.
Threat of substitute product or services: As the company sales wide range of products it is
less likely for the organisation to have a threat of substitute products. Like TESCO deals in many
products where it has low threat for food items. But threat for non food items is relatively high.
In order to handle the threat of substitute TESCO can go through following ways.
 TESCO management should concentrate more on services so that people can get attracted
towards its better services (Hubbard, Rice and Galvin, 2014). As products can be made
available by any kind of retailer but being good at services is not possible by every
company. Proper planning and management is required to implement the same.
 To deal with the same TESCO can increase the cost of switching for the consumers. It
will be difficult for people to switch to other products and organisation will earn the
benefits.
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Bargaining power of suppliers: It is comparatively low, because every supplier wants to get
connected with big companies so that they can sale products at large. It will be easy for supplier
to make deals with big supermarkets as their products will be sold under one roof. Suppliers sale
at lower prices due to the bulk of quantity is purchased by big supermarkets like TESCO. This
results in enjoying fairly low prices by supermarket and earn profits by selling it to consumers.
To deal with the same TESCO can use the following strategies:
 TESCO should deal with many supplier so that it will be a threat in mind of suppliers and
will not increase their prices.
 Management of TESCO should be such that it should deal with third party manufactures.
Just like Nike and Walmart has formed third party manufactures. It will help in dealing
with suppliers and thus it will create formulation of sole dependent business.
Bargaining power of Buyers: Every buyer do complete analysis before purchasing of products.
They like to buy which gives them maximum possible benefits in terms of quality, services and
pricing. TESCO is a retail company in which such products are available which are easily
available at small vendors and retail shops. So bargaining power of buyers is high in retail
industry. In case of companies which has some standard product they enjoy the benefits of low
bargaining power of buyers. But TESCO faced high bargaining power of buyers but in order to
tackle the same following measures can be taken by TESCO.
 By brining new products which are available at every store. Different items will help in
gaining new customer base. It will help in limiting the bargaining power of buyers.
 The Best quality services should be given to consumers which will help in attracting
consumers. As even every product is available with many retailers but best services can
not be given by every company. So it will help in lowering the bargaining power of
buyers.
Rivalry among existing firms: It is very high in retail sector as this is a very competitive
industry. In this the cost of advertising due to higher competition has major effect on competition
between the firms which are dealing in retail sector. In addition to this, Consumer does not have
high switching cost which is also a reason for increase in competition between the existing firm.
Even after this much of competition TESCO has maintained its brand image and it the leader in
retail industry.
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TESCO can follow the majors in order to deal with the competitions. Below are the ways for the
same:
 TESCO can plan to collaborate with its competitor so that market size can be increased
rather than forming a competition for small area of market.
 A scale can also be build in order to compete better.
M.3 Devise appropriate strategies to improve competitive edge and market position based on the
outcomes
TESCO can follow major strategies of lowering its cost and product differentiation in
order to gain competitive market position. As lowering the cost will result in low prices and
gaining maximum of the targeted market (Leonidou And et.al., 2015). The best strategy is to
offer those products and services which are being availed by the competitors. Product and
service differentiation will help in offering those products which are not available in the market..
TESCO operates in 12 nations and every country has their own political aspects which should be
considered by company. To make decisions political factors helps to a great extent but on the
other hand, it is difficult also to consider every aspect and make strategic decisions. These both
strategies are appropriate for TESCO in order to gain competitive advantage in long run.
L 04
P.4 Apply a range of theories, concepts and models, interpret and devise strategic planning for a
given organisation.
Bowman's clock strategy – This theory say that it is a good thing to know about the market
position of the company. TESCO should know its position in comparison to its other competitors
in retail industry. The basic and first step is to know about the competitor. It includes the
procedure of knowing the characteristic, analysing and selecting the leading competitors. After
that the second step is to develop competitive marketing strategies which will help the
organisation strongly position itself against the competitors. Like such there are eight steps
which are used to know evaluate current strategy (Bowman's strategic clock, 2018). It will help
TESCO in improving its current market position. TESCO can be better than its competitor by
following things, starting at the top and it is rotating clockwise.
Position 1. Low price and low added value – TESCO is a multinational retail company in the
market which has a strategy of selling products at low prices. It clearly shows that means lower
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margin. This will help in gaining competitive advantage by keeping low p;rices company can
attract maximum number of customers.
Position 2. Hybrid – In this Company follows combination of two strategies where it will focus
on keeping low prices of its product along with some product differentiation. TESCO is doing
the same where it is keeping its prices low to earn competitive advantage. In addition to this,
acceptable products are being differentiated.
Position 3. Differentiation – This strategy focuses on giving best and different kind of product
to that of competitors. When people get anything new and different they get attracted towards it.
It will help TESCO in creating its own brand name (Bowman's strategic clock, 2018). Quality
and differentiation helps in earning higher sales. Thus, it will help in obtaining competitive
advantage along with objectives.
Position 4. Focused Differentiation: Generally this policy is adopted by luxury brands, who
keep their prices high in order to increase sales. People buy goods and services just because of
their high value and prices. Apple is the best example of focused differentiation. But in context
to TESCO, it keeps some products which are high in range so that people can buy those and give
profits to TESCO.
Position 5. Risky high margins : Many a time, organisation make policies of keeping high
margins for better quality or monopoly products. But it is an uncompetitive strategy because
customers can easily switch on getting same product at lower prices. Even of customers get
better quality at low prices this will be risky for the company. So high margins are always risky
in order to grow and attain objectives.
Position 6. Monopoly pricing: When a company operates in such a market where that is the
only business which offers that products in the market. It leads to no fear of competition and they
have all the rights of analysing and determining the prices that will prevail in the market.
Consumers remain with one choice in case of monopoly market whether they should buy the
product or not. Here the organisation is not dependant on the consumer, whereas people are in
need of the products. In context to TESCO, it is a retail sector which does not have any such
product which is not available in market.
Position 7. Loss of market share: At this position organisation faces loss of customers due to
high market share. Therefore, in order to run in long run TESCO has adopted the policy of
standard pricing.
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(Source: Bowman's strategic clock. 2018)
Porter's three generic strategies – These shows that every company can determine its position in
market by knowing its profitability that it is above or below industry average. Average profits of
the company helps it in staying in long run. This is the biggest competitive advantage for the
establishment. . Along with this, organisation has attained higher profits and attaining higher
success in retail industry. Majorly there are two types of competitive advantage in which the first
one is low cost and the another one is differentiation. In order to attain the same TESCO has
combined it with focus factor. Below are all the three factors described in brief.
 Cost leadership – TESCO can focus on dealing with more suppliers so that cost of
products will be reduced. As suppliers are in big competition to crack deals with big
supermarkets. TESCO is a big brand name where which is leading in retail sector. This
has helped the company in increasing its sales and profits. As people get attracted more
to low prices as those of other supermarkets. Cost leadership is an effective way of
attaining competitive advantage and a above average position in the industry.
 Differentiation – This plan of action will also be helpful in completing objectives
mission and vision of TESCO by using innovative technology and methods. In this the
administration can deal in new products which can assist it to differentiate itself form
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Illustration 1: Bowman's clock strategy

other big supermarkets like Walmart etc. This all will result in giving it a uniqueness in
market and helps in gaining benefits of premium pricing.
 Focus – This strategy aims to create a price advantage for the organisation, TESCO can
thin down its market rather than focusing and dealing in a broad market. In addition to
this, It involves concentration on cost by targeting on small groups which will help in
dealing with customers at large. This has also helped the organisation in gaining profits
and attaining higher success in retail industry.
Strategic Plan
Strategic planning is the identifies gap between a current and desired future state. It helps
to close all those gates and start the new redressing targets to make the good impact on the
overall business environment. Present strategic plan will be presenting on Tesco that helps
company to fill the gap between all challenges and requirements of the business goals.
Executive summary
Strategic planning helps to ensure the organisation good profit revenue that helps to be
able to maintain the company productive outcome growth. Tesco has spread its business across
the world. It is headquarter in UK. Tesco has overall 2975 stores in UK which generated good
amount of profit approx £64.539 billion. Tesco also supplying services such as Banking, Online,
Shopping and insurance.
Tesco Vision and core values
In order to meet out the goals in order to sustained the long term goals. Vision of the
company is to gain a valuable position by its customers they serve, community, committed and
loyal staff shareholders.
Value of the company is that Tesco always deliver their best to their potential clients
Corporate strategy
Tesco is one of the leading retail value of shareholders though innovation and focus on
the satisfaction needs of clients.
SWOT analysis of Tesco
Strength
 Tesco has number of potential clients
 It has high rated client satisfaction and
emerging market value.
Weaknesses
 Tesco has subsidiaries are not operating
as well as the are more vulnerable to
certain external factors.
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 It has new emerging leading goals and
provides the best source outcomes.
 It also helps to make the managing
effective business.
Opportunity
 Tesco has opportunity expand the
business growth.
 It is another measuring business growth
in order to meet out the target.
Threats
 Economic recession
 Food Prices are on the rise world.
Conclusion
From the above report it has been summarized that there are various internal and external
factors which affects the environment of business. To understand all the factors SWOT analysis
has been made so that strength and weakness of the organisation can be determined. In addition
to this, TESCO should come up with new products which are unique in their own way. It will
help the organisation in attracting more customers because new and innovative products are liked
by every person. Furthermore, lowering cost and differentiation is the best strategy to gain
competitive advantage and market position can be attained by the same. On the other hand,
TESCO has various opportunities as it can grow online shopping more and attracts maximum
consumer through the same.
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