Tesco Strategic Management Plan and Analysis

The assignment begins with an introduction to Tesco, followed by a PESTLE analysis of the company's external environment. This is then complemented by a SWOT analysis of the internal environment, highlighting strengths, weaknesses, opportunities, and threats. Porter's five forces model is also applied to assess competitive forces in the market. Finally, Ans-off matrix is used to identify strategic directions available to Tesco. The assignment concludes with a discussion on business objectives and strategies for the company.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1) Application of Pestle Analysis to derive influence and impact of macro environment on
Tesco and its strategies...........................................................................................................3
TASK 2............................................................................................................................................6
P2) Analysis of internal environment and capabilities if Tesco with the help of Swot Analysis
and VRIO framework.............................................................................................................6
TASK 3............................................................................................................................................9
P3) Application of Porter's five forces model to evaluate competitive forces of retail sector on
Tesco.......................................................................................................................................9
TASK 4..........................................................................................................................................11
P4) Application of range of concepts, models and theories to devise strategic planning of
Tesco.....................................................................................................................................11
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy refers to a detail plan that describes course of action that company will
adopt for getting competitive advantage over other competitors. It helps the employer in
achieving the desired goals and objectives of the business. There are various types of business
strategy such as business level, corporate, functional level strategies. The Report will explain
internal and external analysis, strategic plan of Tesco.
Tesco plc. belongs to retail industry. It was founded in year 1919 by Jack Cohen. The
headquarter of company is located at Hertfordshire, England, U.K. Tesco is a multinational
company that deals in groceries and merchandise items. Company operates in different countries
such as United Kingdom, Thailand, Poland etc (Bentley-Goode, 2017). The key products of
Tesco are hypermarket, supermarket etc. There are various subsidiaries of the company such as
Tesco Stores Ltd., Tesco Ireland, Tesco Bank etc. Tesco is at third position in the world in terms
of revenue. The company has diversified itself in different areas such as financial services,
clothing, electronics etc.
TASK 1
P1) Application of Pestle Analysis to derive influence and impact of macro environment on
Tesco and its strategies
Macro environment is an important part of external environment of the company. It refers
to all those factors and forces that exists in the external environment of the company and
indirectly affects the performance of company. Macro environment includes different factors like
social, political, technological, economic, legal and environmental factors. The impact of various
factors and forces of external environment on Tesco are as follows:
 Political: Tesco is having its operations in more than 12 countries due to which, the
operations and strategies of the company is affected by different types of rules,
regulations and legislations of the government of different countries. There are different
types of political factors that may affects the business decisions as well as strategies of
Tesco such as instability in political environment, level of economic development of
different countries such as U.K. etc. Tesco deals in a wide range of goods and to
manufacturer such goods it has to import raw materials from other countries like China,

India etc. and it has to pay import duty on the raw materials. Import duty also affects the
level of price of various items (Buckley, 2016).
 Economic- There are various economic factors that affects the operations and various
strategies of Tesco such as economic development of the country, cost of labour, gross
domestic product etc. Tesco operates many supermarkets in different countries and to
provide services to customers it requires talented employees. Cost of labour in different
countries also affects the operations, profitability of the company. For example- The
regulations of government regarding minimum wage rate that has come in year 2018, has
require that company has to increase the rate of wages by 4.4% (Chiang,2016). This has
increased the cost for the company. Company can adopt diversification strategy to
increase the revenue and reduce the cost.
 Social-cultural- There are various social and cultural factors such as beliefs, attitude,
behaviour of consumers etc. that might affect the working of Tesco. Trends in shopping
by the customers are changing fast so, company should modify its strategy related with
production and delivery of goods therefore, company must understand the demands and
preferences of the customers and should provide facility of one stop shopping to the
consumers. Tesco is focussing on the issues related with attitudes and beliefs of the
customers. Nowadays, consumers are becoming more health conscious. Therefore,
company should develop strategy for determine the demand of consumers regarding
organic items.
 Technological- There are various technological factors that might affects the functioning
of Tesco such as, rate of change in technology, advancement in technology etc. Few
years ago, Tesco has faced issue such as horse-meat scandal etc. These issues has
affected the reputation of the company. And Tesco has made efforts for making
technological advancements so that it can regain the trust of customers (Ghemawat,
2016). Tesco has installed advanced technologies so that, company can improve the
experience of customers. Example of technological advancements made by the company
are identification of radio frequency, electronic fund transfer system etc. These
technologies have helped the company to improve production and distribution process.
 Legal- The factors of legal environment in which Tesco is operating the business is
affecting the performance of the company in different ways. For example- Food Retailing

Commission (FRC) has made regulations for the companies that they have to follow
standard pricing in their goods. It means that, if company wants to change the prices of
products it has to give prior notice to the commission. Another factor that has impact the
performance of Tesco is that in year 2016, some of the workers has filed a case against
the company because of the discrimination on the basis of gender of employees (Gürel,
2017).
 Environmental: There are various environmental issues that company should consider
for the welfare of the and benefit of the peoples that are living in the society. Tesco is
motivating their customers to buy products at tesco.com. so that, unwanted wastage can
be reduced. Company has developed strategy for using renewable sources to generate
electricity for carrying production process. Tesco is performing corporate social
responsibilities such as reducing the impact of carbon di oxide on the environment etc.
Figure 1: PESTLE Analysis
Source: (PESTLE Analysis, 2016)

TASK 2
P2) Analysis of internal environment and capabilities if Tesco with the help of Swot Analysis
and VRIO framework
Internal environment is consisting of all those factors that exists within an organization.
Company can control the impact of internal factors on the performance of the organization (Hart,
2016). Internal environment includes workers, behaviour of employees, culture, manager etc.
There are various frameworks for analysing the organizational capabilities. One of the
frameworks that Tesco can use to determine the internal capabilities of the company is SWOT
analysis.
Figure 2: SWOT Analysis
(Source: SWOT Analysis, 2017)
SWOT Analysis is a tool that helps an organization to determine its strengths,
weaknesses, opportunities and threats so that, it can modify its business strategies for
overcoming the weaknesses, to grab the opportunities etc. this will help the company in
achieving its goals and objectives.
Strengths- Major strengths of Tesco are as follows-
 Tesco is one of the top companies in retail sector of U.K. As compared to other retail
companies of Britain, Tesco is having higher sales. As per the annual report of year 2018,
the operating profits of Tesco has increased by 28% (Linder, 2017).

 Company is having large market share as compared to other 4 top retail supermarkets of
Britain that is Sainsbury, Asda, Morrisons and Aldi. Tesco is among top retail company
in Ireland.
 One of the major strengths of Tesco is that, it is having diversified business and company
is operating at global level. It has operations in more than 14 countries.
 The sales of Tesco is increasing day by day because, company is adding new store in its
chain of supermarkets. Tesco now operating more than 6900 stores worldwide (McAdam,
2017).
 Company has adopted diversification strategy and it has successfully diversified itself in
different areas such as financial services, clothing, grocery etc. The strategy has helped
the company to increase its market share.
Weaknesses- Major weaknesses of Tesco are as follows-
 Tesco has failed to perform export operations successfully in the market of Japan,
America due to which it has to close its operations in these countries that has affected the
revenue and sales of the company.
 Tesco had to pay high fines to the government in year 2017 because it has made wrong
declaration of accounting transactions and profits. This has negatively affected the
reputation of the company.
 In October 2018, the operating profits of Tesco has decline due to 9% fall in the share
prices of the company (Hart, 2016).
Opportunities- Major opportunities for Tesco are as follows-
 Company has launched a new store that is Jacks and it is performing well in various
countries. Tesco has an opportunity of further development in the store so that, it will
easily compete with other competitors like Aldi.
 Tesco has an opportunity of working with other top companies that will help Tesco to
deliver more innovative products to the customers.
 Company is already having its operations in developing countries. Tesco should expand
its operations in other countries such as Turkey, South Korea etc. This will provide an
opportunity to increase the profits of the company.
 Tesco has opportunity of entering in joint ventures so that, it can improve its performance
in the regions where company is currently underperforming.

Threats- Major threats to Tesco are as follows-
 Tesco is facing intense competition from other top companies such as WalMart, Aldi etc.
This has impact on the existing market position of Tesco.
 Various regulation of Government, economic development of certain countries can affect
the performance of supermarkets, stores of Tesco.
 In year 2017, Tesco has launch Christmas ad and people of Christian community has
consider the act of company as disrespectful and company has faced negative reactions of
the peoples.
VRIO ANALYSIS
Valuable Rare Imitate Organised Result Resources
Yes, valuable
as the SCM of
company is
focused on
sustainability
goals
Yes There is a risk
of copying
the supply
chain of
company.
Smooth flow
of each
activity from
production to
final delivery
as per
division of
functional
units
Competitive
advantage
Supply chain
management
Yes No Yes Allocation
and
distribution of
funds
according to
budget
Temporary
competitive
advantage
Financial
resources
Yes Yes There is a low
risk of
copying the
rights
Agreements
for every
innovation
Long run
competitive
advantage
Intellectual
property
rights
Yes Yes, it is rare
as it changes
Cannot be
copied by
Yes Competitive
advantage for
Leadership of
the company

as per
changing
business
situations
other
companies.
temporary
time.
Yes, it will
help to
maintain loyal
customers
Yes, it is rare Cannot be
imitated
because the
firm has
strong control
over buying
power of
buyers.
Loyal buyers Long term
competitive
advantage
Brand identity
TASK 3
P3) Application of Porter's five forces model to evaluate competitive forces of retail sector on
Tesco
Porter's five forces model
The model was developed by Michael E Porter. It is a tool that helps an organization to
analyse the level of competition in the industry and its impact on the performance of the
company. The model helps to determine the strengths of the business. It also helps to analyse the
feasibility of new product or service of the company. Company can use porter's five forces
model to identify the weaknesses of the business in different areas.
Tesco will use porter's five forces model to evaluate various competitive forces-
 Rivalry among competitors: The main factor behind competition in the industry is
number of competitors. The degree of competition in the market is affected by number of
companies selling goods or services to the customers. Companies compete with each
other for increasing their market share. If the cost of switching for customers is low then
rivalry in the industry will be high. Generally, competition in retail industry among
different competitors is high. High level of competition results in decrease in the prices of
goods and also affects the profitability of the companies. Threat from competitors to

Tesco is high as retail is considered as most competitive industry and therefore impacts
the profitability and growth of the company. Tesco face the intense competition and
therefore company focuses on differentiation strategy. Tesco should collaborate with
other companies for increasing the market share.
 Threat of new entrants- Not only existing competitors pose a threat to the companies
but, new entrants may affect the level of competition in the industry. There are various
barriers that may restrict the entry of new entrants in the industry. Government plays an
important role in restricting the entry of new entrants through various actions, regulations
etc. Patent rights of existing companies also restrict the entry of new entrants in the
industry. Threat of New entrants in retail industry is high because focus of new retailers
is on innovation. To manage threat of new entrants’ company is focusing on managing
innovation in existing products and services so that customer base of the company will
increase. Tesco should increase its scale of operations so that, it will receive benefits of
economies of scale. Company should invest funds in research and development activity
so that, new companies will discourage to enter in the industry.
 Bargaining power of buyers- The bargaining power of buyers refers to how easily
customers can influence the company to sell the goods at low prices. Bargaining power of
buyers is high as customers always want to buy high quality of the product at minimum
price (Rugman, 2017). Tesco is continuously focused on bringing innovation in the
products so that bargaining power of buyers will reduce. Further, Tesco has strong brand
identity which helps the organisation in minimizing impact of high bargaining power of
customers.
 Bargaining power of suppliers- It refers to how easily suppliers can increase the prices
of raw materials. It depends upon the number of suppliers available in the market, cost of
switching for the company from one seller to another, uniqueness of the raw material,
strength of the seller etc. Suppliers in dominant position can decrease the margins Tesco
Plc can earn in the market which denotes low bargaining power of suppliers. Tesco buy
raw material from various suppliers. If, the suppliers have power of influencing Tesco
then it will affect the profitability of the company. Tesco should adopt different ways in
which the overall business of the supplier will be dependent on the company. Company
should use different raw material so that, it can easily shift from one supplier to another.

 Threat of substitutes- In every market, threat of substitute product is high as every
retailer in business sin focusing on achieving competitive advantage (Shuen, 2018).
Therefore, Tesco makes efforts for understanding the needs of customers so that, it can
develop differentiated products having different features as compared to competitors.
TASK 4
P4) Application of range of concepts, models and theories to devise strategic planning of Tesco
Evaluation of strategic directions
Tesco will use Ans-off matrix for evaluating different strategic directions available to the
company. The tool was developed by Igor Ans-off. It is a tool that helps the organization in
developing future strategies so that, business will grow. It describes four different strategies for
growth of the business.
 Market penetration- Tesco can adopt market penetration strategy in which it can sell
existing products in the existing market. So that, company can increase its market share.
This strategy involves lowest amount of risk for the company.
 Market development- Company can also consider market development strategy in
which it will sell existing products or products with few modifications to new
geographical markets. Tesco can offer its products in new geographical segments, foreign
markets etc.
 Product development- Tesco can adopt product development strategy in which it will
make efforts for developing new products and services. To develop new products, Tesco
will have to conduct extensive research activity (Teh, 2015).
 Diversification- Tesco should consider diversification strategy for selling new products
to new geographical markets. Diversification strategy is the riskiest among all the other
strategies.
Justification and recommendation for appropriate strategy
JUSTIFICATION
Market development: Tesco can choose market development strategy to offer its existing
products such as grocery items, electronic items in new geographical segments. Tesco is already
delivering goods and services in approximately 14 countries in U.K. This accounts for 71% of
the total revenue of the company. Tesco is having an opportunity to enter in new geographical

markets other than U.K. such as South Korea etc. This will help to increase the market share of
company at global level.
Diversification: Tesco should adopt diversification strategy for offering innovative products in
new markets. Company is already having diverse range of products in its portfolio like electronic
items, grocery stores etc. Tesco can diversify itself by opening restaurants in different countries
through entering in partnership with top companies. This will help to improve the revenue and
growth of the company.
RECOMMENDATION
Tesco should choose market development strategy for launching new stores in different
parts of Europe so that, profitability of the company will improve. It should double space of
stores in overseas markets of Turkey.
Strategic management plan-
Strategic management refers to a process in which an organization coordinates all the actions for
achieving goals and objectives. Strategic planning refers to a method in which company set up
priorities for optimum utilization of resources. Company will use product development strategy
for offering organic products to targeted customers.
Clarity of vision- For developing strategic management plan, Tesco should have clarity
regarding the vision of company. Vision of Tesco is to become a top retail company in the
industry and highly valued by the communities, customers, shareholders.
Clarity of mission-
Tesco must have clarity regarding the mission of the company for achieving the vision. The
mission of Tesco is to deliver valuable products to the customers for providing them never
forgettable shopping experience.
Business objectives-
 There are various business objectives of Tesco. The main objective of company is to
increase the sales to maximise the profits of the company through reduction in the cost
and by opening new stores of the company.
 Another objective of Tesco is to offer new organic food items in its existing range of
products (Zinovchuk, 2016).
 Company also aims to provide online services for grocery items, clothing etc. This will
help Tesco to maximise the sales and revenue.

Strategies-
 After conducting SWOT and PESTLE analysis, Tesco will determine various strategic
options or achieving desired goals. Tesco will develop strategy for developing innovative
products in its existing range of products as well as for innovative channel of distribution.
 Tesco will implement new business models for improving the facilities of supermarkets.
Tactics-
 Tesco will modify its pricing strategy so that, it can easily compete with competitors.
 Company will expand the range of products on the basis of consumer demands and
preferences. Example- Tesco is focussing on introducing organic food in existing range
of food items.

CONCLUSION
The above Report has described the impact of political, economic, social, technological,
legal and environmental factors on Tesco through PESTLE analysis. Further, the Report has
explained the analysis of internal environment that includes strengths, weaknesses, threats and
opportunities for Tesco through SWOT analysis. Moreover, the Report has explained the impact
of competitive forces on Tesco with the help of Porter's five forces model. Further, the Report
has described the strategic directions available to Tesco with the help of Ans-off matrix.