Business Strategy: A Study of Tesco

This study explores the business strategy of Tesco, including its mission, values, SWOT analysis, PESTLE analysis, and Ansoff matrix. It also discusses the company's operating structure and its position in the market.

Business Strategy

Executive summary
Business strategy is made by the company to achieve goals of the organizations. This
present strategy is based on Tesco. This study of Tesco outline the mission that is to be
champion of its customers by giving them better quality life in an easier way. Companies use
organization structure to perform all its activities. By evaluation information related to the swot,
pestle and Ansoff model is given. Lastly strategic position of the company is properly discussed.

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Introduce the brand ...................................................................................................................3
Business operating structure of Tesco .......................................................................................5
Business model of Tesco ...........................................................................................................6
SWOT analysis of TESCO..........................................................................................................7
PESTLE of Tesco........................................................................................................................8
Ansoff matrix of Tesco ..............................................................................................................9
Porter's five forces analysis.......................................................................................................10
Porters Generic strategies..........................................................................................................11
CONCLUSION..............................................................................................................................12
Recommendation ..........................................................................................................................12
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14

INTRODUCTION
Business strategy is referred to as type of scheme that is made by the organizations to
achieve desired goals. The chosen firm for this report is Tesco. It is multinational retailer and
Grocery Company which operate in 14 countries with 7000 stores. It deals in products like
furniture, books, financial services and food. The study will explain the history, mission, values,
products and services of the company. It will further present the customers analysis on segments,
motivations and demographics. The report will also discuss the current business operating
structure of Tesco. Along with this it will evaluate the SWOT (strength, weakness, opportunities
and threats) PESTLE (political, economic, social, technological, legal and environmental
factors), Ansoff model and porters 5 force model of Tesco. At the end it shall reflect that what
are the porters generic strategies used by Tesco. The limitations of the research are limited time.
The research of the project is secondary.
MAIN BODY
Introduce the brand
Tesco is public limited company and multinational grocery retailer. The company was
founded in year 1919 by Thomas Edward Stockwell and Jack Cohen. Tesco was started by
focusing on dry goods that is branded tea and it was continued till ten years (Apopiy and
Dmytrenko, 2017). In 1958 Tesco have opened its first superstore in Maldon with new product
launch that is cheese and meat counters. In year 1960 they have launched home electronics for
their larger stores. In 1994 they have started advertising their products in televisions and
newspaper. Between 2000-2017 they have started their internet shopping business. Tesco was
first retailer to offer online service to its customers. It deals in various products and services that
are furniture, food and financial services.

Famous supermarket chain of UK that operates in 14 countries with 7000 stores and
around 450000 employees. F&F was the first push towards fashion retailing. In 2010 it was the
first company to launch club card app for their zero carbon stores. In 2016 revenue of the
company was £54 billion. Tesco supermarket has around 40000 product lines from which 25000
are food and beverages.
The aim of Tesco is to provide their customers online services that are related groceries,
clothing and electronics. They are also aiming to develop online shopping experience which will
result in attracting large numbers of customers and will also help in achieving objectives of
Tesco. The smart objectives of Tesco are to make profits and increase their sales by 1.36%
annually, enter into untapped customer market globally. Tesco objective is to grow retail services
in all markets, expanding in new arenas.
The vision of Tesco is to be advanced valued business for their customers and
communities they serve, services in which they operate by giving loyal commitment to their
shareholders.
The mission of Tesco is to be champion of its customers by giving them better quality life in an
easier way.

The values set by Tesco are that they treat their customers in the way they want to be treated
(Our values, 2021). They believe that a little help can turn into big differences. Lastly they think
that nobody effort harder for their customers.
The various products and services that are offered by Tesco are retailing of books, electronics,
furniture, petrol, internet services, clothing, electronics, toys and financial services (Edwards and
et.al, 2019).
Customer analysis
Segmentation: It means breaking groups in to several groups which are related to the customer
shares. The segmentation of Tesco is that they provide goods and services to all age groups as
per need and desire of them. Tesco have divided their segmentation on the basis of geographical,
behavioural and psychographic bases.
Motivation: With the help of Maslow's & Herzberg theory Tesco motivate their staff to pay
attention towards achieving organizational goals. They can motivate the customers by
promoting their brand on social media with unique way.
Unmet needs: Tesco cannot meet all the desire and needs of the customers as they offer them in
limited segments.
Demographics: They are the type of segmentation that is categorized into gender, age, education
and family size. The expansion of Tesco is less as compared to its competitors like Sainsbury
and Ads. This affect the company growth as consumer will prefer to buy goods from their
competitors as their price that are more effective then Tesco. The company have not expanded
their business much in rural areas.
Business operating structure of Tesco
Tesco follow hierarchical organizational structure. That means obligations and positions
are divided into different parts that will result in efficiently and smooth work.

They use this structure because the organization is large and have different multiple layers.
Tesco have thousands of workers it is not possible for the head of company to keep eye on every
one so they make heads for different department. So that all the work is completed on time
without any mistakes. This includes activities related to supervision, coordination, direction and
task allocation. This also make easier for employees because their problems are solved timely.
Structure also allows workers to be aware of the responsibility without wasting time for
supervision to give any instructions (Fatricia 2017).
Business model of Tesco
The business model of Tesco mainly focuses on how to attract large number of customers
by fulfilling their needs and desire. By using this model company sell and distribute their
product to the customers.

The main four components of business model of Tesco are:
Product: The Company focuses on the fair and mutual relationship towards its suppliers. They
production team work in best way to provide quality and good products as per the need of the
customers.
Channels: The channel of Tesco works from the small shops to large shops. As it will help the
company to find out what are needs at different sources. Even the company invest in channels to
make it more efficient and convenient for customers.
Customers: The Company first listen what are the needs of customers. Then they act on the
important things that are related to price, service, range and availability.
Reinvest: The Company reinvest in their jobs that they provide to its customers for improving
the sales of company.
SWOT analysis of TESCO
It is study done by the business to find out external and internal factors that are used to
find out competitive positions of company (Swot analysis of Tesco 2020: Detailed
Overview, 2021).
Strength of Tesco
 It is the number one supermarket in UK and leading grocery retailer.

 Tesco have covered around 27% of market share in grocery that is the biggest strength
for the company.
 They have around 6800 stores across the world with 423,092 employees.
 The company follow very simple business model that result in reducing cost and having
efficient waste management system (Guo and Wang, 2019).
Weakness of Tesco
 Company have opened their business in japan and US to expand business but they failed
because they were not able to export operations.
 To increase the sales and profits the company have started new innovation their strategy
that has resulted in lack of costs.
 The operational performance of Tesco is very low in few countries that are they do not
have good market strategy for attracting large customers.
 Tesco provides high debts and credit card liability to its customers which have affected
the profits of company.
Opportunities of Tesco
 The biggest opportunity for Tesco is that they can expand their business in rural
areas.
 The company can also come in partnership or joint venture with the firms that are
situated in areas which are underperforming (TESCO SWOT Analysis 2019 | SWOT
analysis of TESCO, 2020).
 Tesco have opportunities by growing and expanding their business online as well can
provide home delivery services to its customers.
 They also have opportunities to invest in training, production houses that will lead to
new innovative techniques within products and services.
Threats of Tesco
 The impact of Brexit has affected the supply chain as well as revenue and income of
company in UK.
 Tesco have launched Christmas ad in funny way but people have claimed that this is
disrespectful act against Christmas faith.
 Market position of company can be threatened with the rising growth and performance
of companies like Walmart and ASDA.

 The trade deals and price dull have imposed a threat for Tesco.
 The other threat that is faced by Tesco is its market shares were taken by its competitors
that are Aldi and Lidl at the time of super market war.
PESTLE of Tesco
It is the framework which is used to analyse key factors that affect organizations from
outside (PESTLE Analysis of Tesco, 2021).
Political factors
It is Retailer Company that operates worldwide few factors like tax rates and different
legislature affects performance of company. If there is more stable political environment, then it
will result in opportunity for them to carry out trade services. Thus, Brexit will bring new
regulation will result in new challenges and decreasing the sales of Tesco. They can also expand
their business by creating good relations with political parties.
Economic factors
Tesco must keep an eye on economic changes that can affect the revenue, sales and profit
of company. Labour cost that is an important factor that can affect the supermarkets. The
company should be aware of taxation policies for benefit of organization. The main focus of
Tesco is towards its advertising rather than providing more luxurious items. The company should
focus on the increased borrowing cost which can affect the brand reputation and cost leadership
strategy. After covid-19 there are many people who have lost their jobs, that may have resulted
in less spending of customers and started using cheaper brands (Lehn, 2020).
Social factors
Today lifestyle of people is very busy in changing era of market trends the customers
want to buy everything in one go. Tesco have also provided facility for its customer to purchase
products online. By the changing trends people have shifted towards organic products and Tesco
have started promoting that for satisfaction of customers. Tesco is adapting these changes to
meet the demand of the customers. Tesco believe in giving benefit to the society by generating
more employment opportunities in various countries.
Technological factors
Currently trends are changing on day to day basis it is the duty of company to change its
technology. The company can use technologies for promoting themselves by online shopping
and social media promotions. As per the recent information Tesco is pairing up with amazon

which will result in new technology for cashier less billing. Tesco have also developed new
technology that is energy efficiency which will reduce carbon footprint for long term.
Legal factors
Legislations and government policies have direct impact on the performance of Tesco.
Company have to follow both local and international markets laws to continue with smooth
operations. As per law workers of the company cannot be discriminated on the basis of age and
gender. The company cannot pay fewer wages to the employees that are set by government.
Laws say that company cannot sell alcohol to the underage customers otherwise they will be
sued for not following the rules.
Environmental factors
For companies it is pressure from government as well as public to deal with the
environmental issues. Tesco have taken several initiatives to respond this pressure that is they
have removed one billion pieces of plastic from their packing. The members of Tesco not only
use fuel-saving routes but they also collect plastic bags from customers and recycle them for
future use (Tirawatnapong and Fernando, 2018).
Ansoff matrix of Tesco
It is an important strategic tool that helps company in revenue growth through new
markets and product development.
Market penetration
Whenever company make new strategy to operate they must see and find what the new
opportunities for growth are. As Tesco was dealing only in grocery but after seeing the markets
they have expanded their business by financial services, software and petrol. They have also
increased their market share by introducing Tesco club card points, which have resulted in
success of company in gaining customers loyalty.
Product development
This is important and major opportunity for the company to grow. Tesco have started
offering organic food after seeing the change in taste and preference of customers. Company
have also introduced biofuel in place of petrol and diesel, even they are trying to improve the
quality of that. The firm is also trying to develop their product in sectors like mobiles and tablets.
Market development

It is important force of model. Tesco uses this to expand their business with new products
and markets. By using different strategies, production dimensions and distribution channel they
can attract new customers. They have also developed strategies by selling existing products in
new markets or regions (Keiningham and et. Al, 2020).
Diversification
It is related to diversifying multiple products in new markets. As Tesco have diversified
its product from food to non-food items. Tesco was leading in grocery but later it has diversified
its business into books, furniture, garments and financial services. The company have introduced
its own brand that is F&F in their clothing department.
Porter's five forces analysis
This is an analysis which is made to find out impact of buyer power, supplier power and
threat of new entrants in super markets.
Threat of substitute products and services
In retail market the threat of substitute is low for food and high for non-food items. For
example, food retail markets have substitute which are small chains and are not seen as the threat
for Tesco who has high quality products at lower prices. The company is opening express stores
in local towns to create a barrier for its substitutes to enter the market (Hussain, Anis and
Alatar, 2020).
Threat of entry of new competitors
Entry of new competitors is very low in food markets as compared to others. In this
companies require huge capital to be competitive and have his own good brand name. Likewise,
Tesco have already captured their name and reputation in retail markets of UK.
Intensity of competitive rivalry
The competition level is very high in food and grocery industry. Tesco have to face high
competition from Asda, Sainsbury which compete on the basis of price, products and promotion.
Tesco can intense rivalry by building a sustainable differentiation, collaborating with competitors
to increase the market size.
Bargaining power of buyers
The bargaining power of suppliers is very high. It is the pressure that customers put on
company to provide higher quality products at reasonable price. For example, customers are able

to check the prices of different companies through different online sites. With the help of this
products are easily compared and selected by buyers (Hänninen, Kwan and Mitronen, 2021).
Bargaining power of supplies
This refers to the pressure or degree of control that supplier put on companies which are
related to raising their prices, lowering quality etc. For example, building efficient supply chain
with suppliers they can tackle bargaining power of suppliers.
Porters Generic strategies
Porter’s strategies are related to the plan that is adopted by company to gain competitive
advantage. They are related to the scope that company want to achieve. This also helps Tesco
to compete with its competitors that are related to the products and services. The four generic
strategies of Tesco are:
Cost leadership: This type of leadership is made by company to become low-cost producer in
the industry. This leadership is performed by Tesco as per the corporation between different
areas of business. The different ways that are used to achieve the objectives of Tesco are:
 They use high level of productivity
 Use of technology is effective in the production process.
Differentiation: This is another strategy that is used by Tesco to take competitive advantage.
The company uses this to expand their business and featuring unique products. In this the brand
logo of company is used to set differentiation basis. If brand image or logo of the company is
unique then it will create strong brand image towards its customers (Gure and Karugu, 2018).
Focus strategy: This is the last strategies of porter’s generic that is related to encouraging the
resources for achievement of targets segments. Tesco adopts this strategy to offer their customers
best value in goods and services. The company uses this to bring continues changes which are
related to design and packaging of products as per needs of the customers.
Tesco have used different option for its future that they will still aim to expand their business by
generating strong and sustainable long term growth by fulfilling all the needs of the customers
along with the expanding their business at cheaper price. The option are related to the they want
to grow their business in the core of UK along with that they also want to become successful
global retailer around the world. The company have also made the long term strategy that is to
expand their business in the new markets that in the countries like Asia and Europe. Further
making the strategy that is related to developing their banking and finance services for their

growth by delivering community friendly approach which will result in fulfilling all the needs,
aims and value of Tesco. Company is focusing on the multi domestic international structure to
successful implement the strategy that are made for expanding their business on the international
grounds.
CONCLUSION
From the above report it has been concluded that business strategy is plan of action that
are used by company to achieve organisational goals. Tesco is the largest supermarkets chain of
UK which serve their customers with different products and services that are grocery, food and
financial services. The above study reflected the history, mission that is to serve goods and
quality products to its customers, and products and services that are provided by the Tesco. With
the assistance of above report also the segment and motivation was discussed along with
hierarchy organizational structure and business model that is related to customers and reinvest of
Tesco are given. By evaluation of above report SWOT, PESTLE and Ansoff model of the
company is written which have direct impact on growth of Tesco. Lastly by the evaluation of
study porters 5 force model along with generic strategies that is related to cost and
differentiation are given. As per the possible investment shares of Tesco in London will gain on
the earning boost in the time of virus worries cap gains.
Recommendation
 Tesco must implement several of online segments to attract large numbers of customers
on social media platforms.
 Tesco must provide correct information and transparency to the suppliers and customers.

REFERENCES
Books and journals
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Online
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values>
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<https://www.marketingtutor.net/tesco-pestle-analysis/>
Swot analysis of Tesco 2020: Detailed Overview. 2021. [Online] Available through:
<https://www.swotanalysistemplate.com/swot-analysis-of-tesco/>
TESCO SWOT Analysis 2019 | SWOT analysis of TESCO. 2020 [online] Available through:
<https://bstrategyhub.com/tesco-swot-analysis-2019swot-analysis-of-tesco/>