Business Strategy Analysis: Tesco

This assignment requires a thorough analysis of Tesco's business strategy. Students need to identify Tesco's main competitors, examine their competitive environment, and discuss the impact of environmental factors on Tesco's strategic decisions. The analysis should draw upon provided academic sources and relevant online resources.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................2
1.1 Mission, Vision, Goals, Objectives and core competencies of Tesco..................................2
1.2 Factors to be considered while formulation of effective strategic plan................................3
1.3 Evaluation of the effectiveness used for developing strategic plans for Tesco....................3
TASK 2............................................................................................................................................4
2.1 SWOT analysis and Ansoff matrix for Tesco.......................................................................4
2.2 PESTLE and Porter's Five forces analysis for Tesco............................................................5
2.3 Significance of stakeholder analysis for Tesco.....................................................................6
2.4 Present a new strategy based on organizational audit and stakeholder analysis ..................7
TASK 3............................................................................................................................................7
3.1 Analyse the appropriateness of alternative strategies relating to chosen organization .......7
3.2 Justify the selection of new strategy for Tesco ....................................................................8
TASK 4............................................................................................................................................8
4.1 Assess the roles and responsibilities of personnel in charge of implementing the strategy .8
4.2 Analyse the estimated resource requirements to implement the new strategy .....................9
4.3 Evaluate the contribution of SMART targets to the achievement of the strategy
implementation ........................................................................................................................10
Conclusion.....................................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is the methodology for formulation, implementation and evaluation of
non-functional decisions. Through it an organization is able to achieve the long term objectives
that it has set (Bentley, Omer and Sharp, 2013). This long term planning that is done with respect
to business can also be termed as a strategic business-plan. The success of a business in future
depends upon whether strategic planning is effective or not. Furthermore, the method of
management followed by an organization for meeting the objective set by it, is termed as
strategic business-planning.
The organization that has been cited in the report is Tesco PLC. It is a grocery and
general merchandise retailer that is headquartered in England, UK. If considering the factor of
profits it accounts for being the third largest retailer. Now if the revenue parameter is considered
then, it accounts to be the fifth largest retailer in the world. The stores of Tesco are spread across
nearly 12 countries of Asia and Europe. While in UK, it the leader of grocery market. It does
retailing of clothings, books, electronics, furniture, toys, software and petrol. It also does services
in fields of finance, telecom and internet. Tesco superstores are the standardized stocking
groceries which supply small range of non-food items. It also has many in-store cafes but since
2013 it has been successfully establishing its own restaurants (Blackburn, Hart and Wainwright,
2013). On the other hand Tesco express is famous for its convenience stores for providing crisps,
chocolates, sweets, biscuits, fizzy drinks and processed-food along with some daily essentials.
Furthermore, Tesco Extra are large supermarket stores that provide long range products elated to
the clothing and home-ware sector. Moreover, it ha also established itself successfully in digital
marketing through creation of home-shopping service through Tesco.com website. It also has
established itself in a much diversified way by selling biofuels at its petrol stations. It also has
equal partnership with the Royal Bank of Scotland as Tesco Bank. In the field of telecom
industry, it also has successfully established its business by selling of mobile phones across UK.
Coming towards the competition from other organization, it is successfully serving in market as
tough competitor. Its main competitors include ASDA, Sainsbury's and Morrison's. These four as
a whole are the big four who have established themselves in UK. Apart from these three, Tesco
also faces stiff competition from Waitrose.
The report throws light upon the importance of the mission, vision, objectives and goals
that are set by the cited organization. Furthermore, the importance of effective strategic
1

formulation has been discussed. Also, how important it is for an organization to enhance its
positioning on basis of organizational audit, has been analysed. The importance of the effect of
external factors over the cited organization has also been evaluated. In order to do successful
business an organization needs to have some alternative strategies as well. So the report also
throws light upon the analysation, effectiveness ad appropriateness of alternative strategies for
the cited organization. Also, the SMART objectives' importance has been discussed for
organization.
TASK 1
1.1 Mission, Vision, Goals, Objectives and core competencies of Tesco
 Mission: These are the desires that an organization has in order to meet the expectations
of the people associated with the organization (Buckley, Burton and Mirza, 2016).
Henceforth, Tesco has set some of mission statements in order to form a strategic
business plan. They are:
1. Creation of value for the customers associated with it.
2. Earning the loyalty of customers.
3. Expansion of the market share associated with it.
 Vision: The potential benefits along with growth with respect to articular organization
can be identified with its help.
Therefore, Tesco has set the following visions:
1. Customers, staff and shareholders should value them
2. Serve as a company gaining growth everyday
3. serve as a modern and innovative company
4. Globally apply their services
 Goals & Objectives: An organization sets up certain guidelines which they desire to
achieve within a certain pan of time. These guidelines can also be called as the goals and
objectives that an organization sets. For achievement of goals, objectives are the stages.
Tesco has the following set of goals and objectives:
1. To serve as successful retailer.
2. To enhance the growth of business.
3. Development of the retailing services
2

 Core competencies: In order to differ from the competitors in terms of business an
organization possess certain special skills known as core competencies (Leonidou and
et.al., 2015).
The retail network of Tesco is its core competencies that will help it in achievement of its
purpose in successful manner.
1.2 Factors to be considered while formulation of effective strategic plan
With the aid of effective strategic planning an organization defines its strategy and
accordingly allocates the resources for persuasion of it.
There are basically three main factors that should be considered while formulating
strategic plans. Industry: It is important to evaluate the overall industry. This evaluation process involves
market-size, past & potential growths, brand-new market entry, profits through
competition and the threats involved in the future. So any sort of changes among these,
will greatly affect organization's activities. Competition: Analysing the position of competitor is of very much importance while
strategic planning formulation. Success cannot be achieved without understanding of
competitors nature within market place. Henceforth, it is necessary that an organization is
able to identify its strengths and weaknesses. It should also find out the way in which
customers are treated by competitors.
 Strength and weaknesses: SWOT is an effective tool for formulating effective strategic
planning. The strengths and weaknesses are the internal factors while external-factors are
opportunities & threats (Leonidou and et.al., 2017). Identification of the internal strengths
should be done by an organization and efforts should be made for increasing them.
Moreover, if an organization is successfully able to determine its weaknesses then, it
could make effective improvements to reduce them.
1.3 Evaluation of the effectiveness used for developing strategic plans for Tesco
Based on current market scenario, 2 techniques could be suggested for Tesco which are:
 BCG Matrix: According to it, Tesco might face four different situations:
1. Stars: Indication of high growth and market-share is there by it. Under this
situation, company requires large amount of money for making decisions about
sustaining market-growth & increasing market-share.
3

2. Cash cows: High market-share and low growth are an indication of it. Within this
situation, the growth of a company is low but the level of its market share is high
and as a result of this, it could generate revenues.
3. Dog: The market-share along with growth is low within it. When the company is
not able to face profits then, business should be stopped and new one should be
started. Unnecessary costings have to be excluded.
4. Question-marks: Low market-share and higher growth is indicated through it.
Considering the low market-share with respect to company, risk involvement is
definitely there which is clear indicator of loss. Newly made products within the
market are indicated through it.
 SPACE Matrix: In order to determine the strategic or competitive position of
organization within market, Strategic Position & Action Evaluation matrix (SPACE) can
be used by Tesco. It involves four quadrants that are aggressive, conservative, defensive
and competitive.
Tesco should pursue an aggressive strategy. The competitive position of Tesco is
strong so its needs to utilise its internal strengths for developing market-penetration and
market-development.
TASK 2
2.1 SWOT analysis and Ansoff matrix for Tesco Swot Analysis: Below is given the Swot analysis for Tesco:
1. Strengths: Tesco is the world's largest and leading retail company that
operates in different countries. High profits are earned and the policies for
generation of revenues are also effective (Mithas, Tafti and Mitchell,
2013). The success of Tesco is a result of its implementation of effective
business strategy.
2. Weaknesses: It is hugely dependent over the economies of UK & Europe.
Moreover, diversification in geographic terms is lacking. The prices that
Tesco offers are higher than those offered by local firms. Transportation
costs also high.
4

3. Opportunities: It might see a rise in diversification area. The online and
home-delivery services will be adopted. The ability of providing products
and services of superior quality will offer more opportunities.
4. Threats: The recent increase in the unemployment rate has left Tesco in a
risky position in terms of growth. It continuously faces stiff competition
from other firms such as ASDA, Sainsbury's, Morrison's and Waitrose. Ansoff's matrix:it involves these four areas:
1. Market Penetration: In order for long-term growth in core UK, expanding
the retail industry at international level, strong food & non-food services
and excellent customer services, Tesco utilizes competitive pricing
strategies, advertisements & promotion of other existing services and
products to market.
2. Market development: In order to expand Tesco comes up with unique
product-dimension, distribution channels and other effective strategies for
attracting customers mainly of UK market.
3. Product Development: Growth strategy for Tesco is based on expansion of
non-food products (Rothaermel, 2015). It introduces services apart from
food.
4. Diversification: Tesco needs to understand risks involved with investing
over new markets through new-products. Effective utilization of Research
& Development efforts has to be done.
2.2 PESTLE and Porter's Five forces analysis for Tesco
 PESTLE Analysis:
1. Political factors: Tax rates , government polices and legislation are
included in the political factors that affect the business of Tesco which is
spread worldwide. However, since Tesco offers a wide range of job
opportunities to unemployed workers, many governments allow it to
establish its business within their country.
2. Economic factors: Demand of product/service, profit price are some
economic factors that have a major impact over Tesco. Any sort of
recession or slowdown in the market will have a negative effect over the
5

carrying out of business operations of Tesco. This could put Tesco at a
risky position in market (Verbeke, 2013). However, diversification and
internationalisation are responsible for huge success of Tesco.
3. Social factors: As a result of social change Tesco has tarted to offer non-
food products as well. In order to grab attention of customers within a
society, Tesco is adopting the changes in order to accommodate with
social changes.
4. Technological factors: advancement of technology has brought huge
success for Tesco. It has started online services and home delivery
facilities as well. This grabs attention of a majority of customers and
overall sales are increased.
5. Environmental factors: Tesco minimizes its waste produced in their
factories for saving the environment. By 2020 it promises to reduce carbon
footprint by 50%.
6. Legal factors: Policies of government and also the legislatives have a
huge impact over Tesco.
 Porter's Five forces analysis:
1. An ample of time is taken away by taking of government approvals.
Furthermore, establishing resource also takes away more time. So this
serves as obstacle (Scholes, 2015). Thus, threat of new entry by
competitors in retail is low for Tesco.
2. The intensity of rivalry from competitors is very high because of stiff
competition from ASDA, Sainsbury's, Waitrose & Morrison's
3. The bargaining power of buyers is quite high.
4. However, suppliers bargaining power is very low.
2.3 Significance of stakeholder analysis for Tesco
 Early stages risks are identified.
 With different people, identification of relationships & opportunities can be done.
 For making benefits, new strategies and approaches could be made.
 All the negative effects are reduced (Ryan Downie, 2015).
 Market-based knowledge is enhanced.
6

 New capacities and responsibilities are build up.
2.4 Present a new strategy based on organizational audit and stakeholder analysis
On the basis of organizational audit, it can be said that Tesco needs to develop different
strategies so that the business can manage all its functions in external market place. This is also
essential in terms of identifying the factors that greatly impacts the business services. Thus, on
the basis of organizational auditing, it can be said that Tesco needs to emphasize on competitive
aspects so that business can manage all its practices in effectual manner (Enders and et. al.,
2009). Thus, order to meet the external competition, it is crucial for Tesco to focus on marketing
strategies so that customer range as well as market potential can be enhanced appropriately.
Marketing strategies requires to be updated and new products should be included in the existing
product line so that customer’s needs can be fulfilled accordingly.
Thus, in this context Tesco can make use of Product Development Strategy in which
diverse new products are required to be included in the product line. Apart from this,
stakeholders should also be informed about all such changes so that they can make necessary
adjustments in decision making procedure (Ireland and et.al., 2008). Apart from that, it can also
be said that Tesco needs to focus on bringing competitive products so that customers can be
retained for longer time span. This is also useful in terms of managing business activities in
appropriate way. In this way, Tesco can undertake effective business decisions for internal and
external business practices.
TASK 3
3.1 Analyse the appropriateness of alternative strategies relating to chosen organization
As per the discussion, it is clear that Tesco needs to emphasize on Substantive Growth
strategies so that Tesco can manage all its business activities in appropriate way. The strategy
would be appropriate for Tesco in many ways such as it aids in enhancing market share along
with the management of company’s operational plans (Simerson, 2011). At the same time, the
subsequent strategy is also useful for Tesco since it can aid the business entity to become more
aggressive at the time of managing all the business activities. For instance- when a company gets
any benefit through the application of competitive policy, then it aids in getting many other
benefits as well like as- it gives them the right to dominate the market through bringing
necessary products and services.
7

Furthermore, it can also be said that Tesco will be able to manage all the business
activities in cost effective manner which can also aid in enhancing profitability and success
facets (Immordino, 2009). Thus, it can be said that in order to grow in the competitive market
place, it is vital for Tesco to focus on exponential growth so that it can aid the business to attain
more success and growth. Along with this, Tesco will be able to manage complexity aspects in
the business with the help of such strategy. Value of employees can also be encouraged at the
same time to ensure growth and prosperity aspects. If Tesco looks up on success from a larger
societal perspective, then the achievement of substantive growth is the major justification for its
existence.
3.2 Justify the selection of new strategy for Tesco
On the basis of above discussion, it is clear that Tesco should select substantive growth
strategies and under that product development strategy could be adopted as this will not only
enhance the success and profitability aspects, but also it will help the entity to bring more
opportunities of customer management (Cave and Shortall, 2011). Therefore, it can be said that
Tesco will be able to delegate roles and responsibilities to the employees in the best possible
way; henceforth this increases the chances of getting the work completed in limited time period.
Therefore, in the present study as well, Tesco will be able to carry out all its activities according
to the marketing strategies and that can bring new opportunities of development to the entity.
It can also be said that through the achievement of substantive growth, a business not
only enriches its owners and employees, but also it increases the wealth of the business in the
society at large. New product development strategy is being recommended to Tesco since
through that product line can be enhanced and due to that, different needs of the customers can
be met accordingly (Enders and et. al., 2009). With the help of new product development, Tesco
can persuade other customers as well that can contribute in company’s long term development
and competitive advantage. Henceforth, along with good management of services, Tesco will be
able to emphasize on other processes; thus it could underpin all the practices of the business
entity.
TASK 4
4.1 Assess the roles and responsibilities of personnel in charge of implementing the strategy
At the time of implementing any strategy in the business, it is crucial for Tesco to clarify
the roles and responsibilities of the employees so that all can manage organizational activities in
8

the best possible manner. Therefore, it can be said that while implementing substantive growth
strategy, Tesco needs to ensure that all the responsibilities are being delegated to different
departments in suitable manner (Haley and Haley, 2006). Thus, in this respect, three major
departments are accountable to handle the activities such as operational, tactical and managerial.
All the three departments are required to handle diverse activities and they should also ascertain
the areas of improvements and developments. Operational department has to analyse the
operational requirements of Tesco; hence on that basis strategy implementation procedure can be
managed. This also aid in managing all the business functions in the best possible manner.
Apart from this, managerial department has to ensure that all the employees as well as
managers are performing their roles in effectual manner (Hansen and Smith, 2006). They are also
required to monitor and control the practices so that areas of improvements can be ascertained.
Moreover, through this, Tesco can also carry out all their activities and practices as per the
requirements of the strategy. Moving on to the responsibilities of tactical department, it can be
said that managers have to ascertain if all the departments are working according to the strategic
aspects. Moreover, this is the best way to identify what needs to be done in order to enhance
success facets. Effectiveness as well as value of the strategy can also be identified at the same
time.
4.2 Analyse the estimated resource requirements to implement the new strategy
In order to implement the strategy, it is essential for managers of Tesco to make
arrangement of different resources and the major are discussed in the below section: Human resource requirement: Human resource of an organization needs to be updated
so that to enhance the efficiency of work forces and such can be enhanced with the help
of training and development sessions (Immordino, 2009). Therefore, in this contest it can
be said that human resource management is essential because they conduct all the work
processes according to strategic requirements. They are also required to manage all roles
and responsibilities. Financial resource requirement: Finance is the core important resource without which
no activity could be performed (Ireland and et.al., 2008). Hence, according to that Tesco
is required to make arrangement of financial resources so that all the requirements of
strategic implementation process can be met. Financial manager of Tesco are required to
allocate finance as per the budget so that resource capability can be maximized.
9

 Physical resource requirement: Physical resources are also essential because through
that different activities can be carried out (John, 2005). With the help of physical
resources, manager of Tesco will be able to meet the requirements of strategy. Apart from
this, manager should also emphasize on physical resources because this is one criteria
through which aim of strategy can be met.
4.3 Evaluate the contribution of SMART targets to the achievement of the strategy
implementation
While implementing any strategy, it is crucial for manager of Tesco to develop SMART
objectives as that will also assist in meeting the aim and objectives of the organization. SMART
objectives for the strategy implementation process are being discussed in the below section: Specific: According to the strategy implementation process, Tesco expects to bring more
development in the market share due to enhancement of product categories (Karami,
2012). Measurable: Growth and success aspects of the company will be increased on the basis
of identifying the number of customers that have added to the business. Thus, on the
basis of market potential, capability of Tesco will be identified. Achievable: Market share of Tesco is expected to rise with 3%; hence then only
feasibility of the strategy would be defined (Simerson, 2011). This is yet another
objective that lies under the criteria of achievable. Realistic: In terms of realistic dimension, it can be said that implementation of
substantive strategy would aid Tesco to proper more in terms of product and business
expansion.
 Time bound: Substantive growth strategy has been suggested to implement in Tesco
because that aids in enhancing marker share (Yemeshvary, Upadhyay and Palo, 2013).
Therefore, the strategy is expected to bring appropriate results within the period of 12
weeks. Through this, Tesco will be able to derive numerous benefits.
Conclusion
With reference to the report, it can finally be concluded that the mission, vision, goals,
objectives set by an organization helps it to enhance their overall performance in market.
Effective analysation of organizational and environmental audit ensures that strategies have been
implemented affluently. Introduction of online services and home delivery facilities will
10

definitely prove a boon for Tesco. It will positively affect the sales growth. Furthermore,
effective strategy implementation and achievement of all SMART targets set by Tesco will
definitely enhance its market share and its performance in retail industries as well.
11

REFERENCES
BOOKS AND JOURNALS
Bentley, K. A., Omer, T. C. and Sharp, N. Y., 2013. Business strategy, financial reporting
irregularities, and audit effort. Contemporary Accounting Research. 30(2). pp.780-817.
Blackburn, R. A., Hart, M. and Wainwright, T., 2013. Small business performance: business,
strategy and owner-manager characteristics. Journal of small business and enterprise
development. 20(1). pp.8-27.
Buckley, P. J., Burton, F. and Mirza, H. eds., 2016. The strategy and organization of
international business. Springer.
Cave, M. and Shortall T., 2011. The extended gestation and birth of the European Commission's
Recommendation on the regulation of fibre networks. Info. 13(5). pp.3-18.
Enders, A. and et. al., 2009. Towards an integrated perspective of strategy: The value-process
framework. Journal of Strategy and Management. 2(1).pp.76 – 96.
Haley, V.C.U. and Haley, T. G., 2006. The logic of Chinese business strategy: East versus West:
part II. Journal of Business Strategy. 27(2). pp.43 – 53.
Hansen, F. and Smith, M., 2006. The ethics of business strategy. Handbook of Business Strategy.
7(1). pp. 201-206.
Immordino, M. K., 2009. Organizational Assessment and Improvement in the Public Sector.
CRC Press.
Ireland, D. R. and et.al., 2008. Understanding Business Strategy: Concepts and Cases. 2nd
edition, Cengage Learning.
John, R., 2005. Global Business Strategy. Cengage Learning EMEA.
Karami, A., 2012. Strategy Formulation in Entrepreneurial Firms. Ashgate Publishing, Ltd.
Leonidou, L. C., and et.al., 2015. Environmentally friendly export business strategy: Its
determinants and effects on competitive advantage and performance. International
Business Review. 24(5). pp.798-811.
Leonidou, L. C., and et.al., 2017. Erratum to: Internal Drivers and Performance Consequences of
Small Firm Green Business Strategy: The Moderating Role of External Forces. Journal of
Business Ethics. 140(3). pp.607-607.
12

Mithas, S., Tafti, A. and Mitchell, W., 2013. How a Firm's Competitive Environment and Digital
Strategic Posture Influence Digital Business Strategy. Mis Quarterly. 37(2). pp.511-536.
Rothaermel, F. T., 2015. Strategic management. New York, NY: McGraw-Hill.
Scholes, M. S., 2015. Taxes and business strategy. Prentice Hall.
Simerson, K. B., 2011. Strategic Planning: A Practical Guide to Strategy Formulation and
Execution. ABC-CLIO.
Verbeke, A., 2013. International business strategy. Cambridge University Press.
Yemeshvary, A., Upadhyay, A. and Palo, S., 2013. Engaging employees through balanced
scorecard implementation. Strategic HR Review. 12(6). pp.302 – 307.
ONLINE
Ryan Downie, 2015. Who Are Tesco's Main Competitors?. [Online]. Available through:
<http://www.investopedia.com/articles/markets/092315/who-are-tescos-main-
competitors.asp>. [Accessed On: 24th March 2017]
13