Business Strategy for TESCO

This document provides an in-depth analysis of the business strategy of TESCO, a leading supermarket chain in the UK. It includes an overview of the company, a PESTEL analysis to analyze the macro environment, a SWOT analysis, the use of Porter's five forces model, and strategic planning for TESCO.

BUSINES STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................2
LO 1.................................................................................................................................................2
Overview of chosen company......................................................................................................2
PESTEL model to analyze macro environment...........................................................................3
Mendelow’s Stakeholder Matrix..................................................................................................4
LO 2.................................................................................................................................................5
SWOT analysis............................................................................................................................5
VRIO framework.........................................................................................................................7
LO 3.................................................................................................................................................8
Porter’s five forces model use in context of TESCO...................................................................8
Ansoff’s matrix............................................................................................................................9
LO 4...............................................................................................................................................10
Strategic planning for TESCO...................................................................................................10
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy is defined in either varied paragraphs or be written as set of strategic
statements. It is conclusion of how firm can achieve their aims, meet consumer’s expectations
and sustain within market place to gain competitive advantages in specific marketplace. It is
simply as a company’s high degree plan for reaching and achieving specific business aims &
objectives. The current study is based on TESCO which fall under category of leading
supermarket chain in UK. This report will explain appropriate frameworks use to analyze macro
environment for company. It will justify internal environment and abilities of firm by using
effective methods or concepts and describe Porter’s five forces model use to examine
competitive forces of retail market sector in context of organization. Furthermore, this
assignment will explain range of concepts, models and theories that will help in creating strategic
plan for firm in effective manner at last in the study.
LO 1
Overview of chosen company
TESCO is considering as leading retailer in UK with over 400,000 workers who are able
to serve millions of buyers every week in online and their outlets, organization brand first
appeared in 1924. The vision of this company is to increase scope of business to allow
management to deliver strong and effective sustainable long term progress by following
consumers into wide expanding markets at new markets across UK and home. Mission statement
of this firm is to create greater value for target market to earn their lifetime loyalty as well as
trust. The main objective of enterprise is to offer a large range of services and products from
groceries, clothing to insurance and household items. Firm business was build with a simple
mission that is to the best retailer for people helping them to enjoy good quality of life as well as
an easier way of living. The goal of TESCO is to become leading retail supermarket and sustain
their position by providing good quality items and services at affordable cost.
PESTEL model to analyze macro environment
Political factor-

Political stability is one of this factor that put positive impact on TESCO business
practice and sales (Mercer, 2017). Firm home market is United Kingdom where political
atmosphere is stable though Brexit has developed a lot of uncertainty. In UK all of their overseas
markets are politically stable. So, it can be said that company is operating in those environment
that are usually conductive to organization.
Economic factor-
As the worldwide economies have been severely impacted by COVID-19, it is expected
that many local people earnings are goes down and many individual may lose their jobs (Drake,
and et.al., 2020). It can be said that after considering current situation government put pressure
on TESCO to hire people which makes their life normal.
Social factor-
Changes in buying behavior of consumers are one of the social factors that put negative
impact on sales and productivity of TESCO. In recent time, most people prefer to purchase
organic products because they think it makes their life health which is quite beneficial for them.
Due to this company feel more pressure and need to take appropriate action (Ramanathan,
Subramanian and Parrott, 2017).
Technology factor-
Technological development and advancements over the years provide the best
opportunities to TESCO. Company gain great benefits from this factor, they can reach at target
consumers by using digital marketing platforms which helps to gain attention of new buyers
towards purchasing products offer by firm (Walton, Petrovici and Fearne, 2017).
Environmental factor-
Retailers in UK, European union and in fact, many nations around the world are facing
high pressure from governments to consider environmental problems. This pressure is not from
UK government only, but also from consumers who are highly concerned about environment. It
do not put negative impact on TESCO, because firm already take number of initiatives,
management reduce their carbon foot print.

Legal factor-
Equality Act 2010 put high pressure on company but in positive manner, TESCO provide
fair change to their workers for developing their personal as well as professional career in
effective manner. Firm pay their staff minimum wages set by the government which makes them
to retain skilled applicants for long period of time.
Mendelow’s Stakeholder Matrix
This framework helps firm or management to make their business easier and more
focused by analyzing their potential stakeholders. It is really very important for TESCO to
determine their shareholders which makes them able to manage their activities according to their
needs.
Figure 1 Mendlow's Stakeholder Matrix
(Source: What Is Mendelow’s Matrix And How Is It Useful, 2020)
High power and high interest (Manage closely)-

In this category, government is considered as the main stakeholder who has high interest
in success of TESCO and hold power to change business practices (Soltan, Mittal and Poor,
2018). Organization effort to manage business functions by following principles and rules of
local as well as national authority.
High power and less interested (Keep satisfied)-
Consumers hold power to put pressure on company to change their pricing structure
according to buyers needs and take decision in their favor related to products price or quality.
TESCO keep satisfying their target customers which is really very important in this competitive
business environment.
Low power and high interested people (Keep informed)-
Suppliers hold low bargaining power but they are highly interested to work with TESCO.
Suppliers do not put any pressure company to increase their service cost but still firm to build
strong bond with them informed about further changes within business operations (Klein, 2017).
Low power and less interested individual (Monitor)-
Workers in TESCO do not hold high power and they are also less interested in success &
growth of organization because in market employment opportunities are accessible which makes
employees able to switch their current position.
LO 2
SWOT analysis
Strengths-
Cost effective strategy of TESCO is one its biggest strength as it makes them capable to
gain attention of more buyers towards them (Buchan and Wang, 2018). Organization offer
services and their products at affordable and reasonable prices which is quite beneficial for
business in term of increasing consumer base as well as sales more than competitors. It is the
leading grocery provide and no one supermarket in UK. Firm has higher revenue and sales as
compare to other supermarket chains in nation. Among the wide four retail supermarkets,
company dominates grocery retail market of Great Britain with 27 percent.

Weaknesses-
Poor operational performance in particular markets is one of TESCO weak point that put
negative impact on its overall business practices and operational efficiencies. Few grocery stores
and outlets of company are not working and performing in effective manner in certain nations.
Organization before entering into new market place do not carry out sufficient investigation
which makes their business enable to sustain for long in intense competitive environment.
Furthermore, another weakness of firm is that they switched to club card scheme without giving
any information or notice to potential buyers. They face a massive backlash from angry
consumers which is not good for its brand image (Fatricia, 2017).
Opportunities-
Organization by using digital marketing tools gain many benefits, they can sell products
across UK. Firm can sell their products online which makes them more stronger and capable to
satisfy their consumers in effective manner. They can be available for people at online outlets
which is one of the biggest opportunity for company that they can use to become global leader in
retail industry. Moreover, it can be said that by expanding their business across UK with quality
products or services TESCO gain competitive benefits and give tough competition to business
rivals effectively.
Threats-
Retail supermarket sector has intense competition, with rising performance and growth of
ASDA, WalMart, Marks & Spencer and Lidl as the biggest competitors of TESCO. They all are
quite stronger and able to give tough competition to firm and put negative impact on their market
position that can be threatened company. Another threat is economic crisis, government
regulations, tax matters, economic upheavals, legal matters etc. can impact on firm performance
and operational efficiency in negative manner that is not suitable for its growth. At that
movement, company feels high pressure to overcome this situation.
VRIO framework
It helps to uncovers sustained competitive benefits; it is acronym for a four key questions
concepts of value, rarity, Imitability and organization.

Valuable-
TESCO is able to build positive market image or reputation across nation in effective
manner by satisfying their consumer. Management within company do a lot of things, they
identify target market needs and changes production process accordingly which makes them able
to retain potential buyers for long and also allow to drive new one as well. Firm has effective
team at workplace who are able to beat their competitors by producing and manufacturing
quality products for consumers effectively and efficiently.
Rare-
With positive brand image TESCO is capable to enter into new market place where they
can gain attention of people rather than before. Not all retailers are able to build their strong
brand image within market place and not capable take their business to the height, it is rare. In
case of TESCO, firm is able to do so as they provide good quality products or services which
make their business more successful rather than its competitors. Rare things or resources are
those that are possessed by one or few companies. Valuable assets possessed like workers and
effective organization culture by company can be source of gaining competitive advantages or
sustained competitive benefits.
Imitability-
Rare and valuable assets may be source of achieving business objectives and competitive
advantages. TESCO product quality and skills workforce are essential and most valuable
resources which is extremely difficult to imitate by their competitors operating within same
sector since for so long.
Organization-
TESCO has high consumer rating, they cater valuable services to target buyers according
to their preferences and needs, as it makes organization able to retain potential consumers and
allow management to gain attention of new people in effective manner.

LO 3
Porter’s five forces model use in context of TESCO
Bargaining power of suppliers-
Degree of this force is low because availability of major suppliers in retail sector gives
TESCO chance to change their suppliers who are start bargaining with them. This force is
comparatively low; suppliers within UK supermarket retail industry have threat of losing their
business when they make higher bargaining. In such a situations suppliers makes positive
negotiations for obtaining goods at most possible low price.
Bargaining power of consumers-
Extent of this force is high because consumers have many options in market which they
can use instead of purchasing products from TESCO. It put negative impact on production and
sales of firm. Buyers are attracted towards better quality with low prices and with accessibility of
online retail shopping prices of items are easily compared. To overcome negative affects firm
can needs to serve according to consumers needs.
Threat of new entrance-
Degree of this force is low because this practice requires huge capital investments by
companies who want to enter into UK retail industry. Major firms that have already captured
good retail market are ASDA, TESCO, Morrisons and Sainsbury’s and they account for 80
percent of all shopping in the United Kingdom. Low threat put positive impact on company as
they can sustain for long.
Threat of substitute products or services-
Extent of this force is low for food products and medium for non-food goods. In
supermarket industry, substituted of major supermarket chains are small chains of convenience
outlets, organic shops and off licenses which are not considered as threat to TESCO that provide
high quality items at considerably affordable prices. Firm is further obtaining hold of these
outlets by opening express stores in local areas.
Competitive rivalry among existing companies-

Intensity of competitive rivalry in supermarket sector and grocery retail industry is very
high (Byun and et.al., 2020). Organization faces intense rivalry from their direct competitors
including Waitrose, Sainsbury’s, ASDA and Morrison’s which are competing with each other
over products, promotions and price. At this situation TESCO need to conduct market research
and identify current market trends which make them able to satisfy consumers and gain
competitive advantages.
Ansoff’s matrix
Market penetration-
TESCO accordant to this strategy sell their current products into existing markets as it
knows their consumers, has established channels and so on. It termed Market penetration
strategy, it is only possible where company is still growing and prepare to utilize other
components of marketing mix additional advertisement activity and price discounting strategy to
penetrate market at expense of business rivals. This strategy makes advantage of reduced costs to
upsurge items demand and increase current market share which is quite beneficial for TESCO.
Product development-
Among list of many strategies, it is one of the best and most beneficial strategies that can
be utilized by TESCO. It is the procedure of bringing new product or innovation to buyers from
concept to testing through distribution. It looks at improving current items to serve an existing
buyer or create new goods that market seeks to purchase. For example, company can develop
their website for consumers where people can ask any question related to product and place
further inquire related to services and items.
Market development-
It is growth strategy that determines and creates new market segments for existing goods
offered by Tesco. It targets non purchasing consumers in recently targeted segments; it also
targets new buyers in new segments. It is one of the best strategy firm can use to gain attention of
consumers and competitive advantages. It is considered to be riskier more than other strategies
can be use in regards to firm. To sell their products Tesco needs to target new segment which is
quite beneficial for company in term of increasing sales.

Diversification-
Along with above strategy, it is also recognize as most effective and useful tactic
company can use in order to achieve their business aims & objectives in systematic manner. It is
strategic that TESCO can adopt for development of their business. Firm can enter into new
market place where they can gain attention of new consumers and satisfy them appropriately.
Furthermore, with this strategy company can create new items for new market as well.
LO 4
Strategic planning for TESCO
Executive summary-
The entire study is based on TESCO, which may adopt many strategies to gain their
business aims and objectives and to gain all benefits in retail industry.
Vision-
The clear vision of TESCO is to serve their consumers in effective manner and to gain
loyal buyers in new market place as well as existing one.
Mission-
The mission of company is to provide better goods and services to buyers in effective
manner.
Objectives-
 To enter into new market place such as UAE
 To drive potential buyers towards purchasing
 To gain competitive advantages
 To become market leader at international level.
Porter’s Generic strategies-
Cost leadership strategy-

Organization can use this strategy by reducing products cost that allow management to
gain attention of new buyers within UAE.
Differentiation strategy-
TESCO can cater people unique products or item with something different features that
help to drive people towards purchasing which in return increase sales of company and
profitability as well.
Cost focus strategy-
According to this strategy, TESCO can compete with good price to target a narrow
market, instead of charges low prices.
Differentiation focus-
TESCO can provide innovative product with better quality and pricing structure that
can help to gain competitive benefits.
Bowman’s strategy clock-
Low price and low added value-
TESCO can use this strategy by keeping their products prices low and also add low value
more than other retailers.
Low price-
Firm by using this strategy gain competitive advantages by offering low cost items that
leads to low profit margin in single products but provide high volume of output.
Hybrid-
It is very effective when Tesco added value of goods is consistent in nature and offered
on continual basis.
Differentiation-
TESCO can put important attempts on branding making their business a reliable one to
retain loyal set of consumers.

Focused differentiation-
Tesco with this strategy can achieve business aim and objectives; they can deliver quality
products and sold at high price.
Risky high margins-
It is very risky for company to gain all benefits with this strategy which makes firm
unable to increase profitability.
Monopoly pricing-
When firm offer specific type of item instead of bulk products they can sustain in new
market place.
Loss of market share-
By setting high prices company may loss their market share and less productivity which
is not beneficial.
PESTLE analysis-
Political factor-
High taxation rate put negative impact on TESCO business strategy as it creates barrier
for firm to enter into new marketplace such as UAE.
Economic factor-
With good income source people in UAE able to purchase products with set price that
affect sales and productivity of TESCO in positive manner.
Social factor-
Changes in buying behavior of consumers will put negative impact on marketing and
production process of TESCO which is not good for its business.
Technology factor-
Digital technology and marketing tools put positive affect on firm as it make them able to
reach at target market within short term period.
Environmental factor-

Consumers concern for environment suitability put high pressure on TESCO and impact
positively because firms is famous for taking essential step towards reducing carbon foot print.
Legal factor-
Management is capable to identify existing and new workers and cater facilities to them
without making any differences which is beneficial for TESCO.
SWOT analysis-
Strength-
Superior technology usage is the biggest strengths of TESCO, as it permits management
to deliver services or products more faster than before. Firm uses technology in the best way to
increase shopping experience of their potential buyers. Company has introduced new RFID-
enables barcode program to count items automatically it help to reduce pressure over staff.
Weakness-
Low cost strategy is the weak point of company which makes them unable to satisfy their
buyers due to this many people can consider products as poor quality items.
Opportunities-
Technology advancement and market entry are two different opportunities which can be
use by Tesco to gain competitive advantages. With these chances company can enter into new
place where they can sell quality items.
Threat-
Intense competition is one of the biggest threats for Tesco which they face while entering
into new market where existing companies already build their strong brand image in effective
manner.
Tactical actions-
To achieve all above objectives and aim TESCO must use differentiation and hybrid
strategy which makes them able to enter into new market place where millions consumers are

seeking to purchase products from good & well reputed brand. They can give unique feature to
their items which catch eye of buyers.
Evaluation-
There are varied techniques or tools available in market which can be use by Tesco when
they enter into new market place and use to identify success of strategic plan. They can use
Benchmarking and KIP as cost effective methods.
CONCLUSION
From above analysis it has been concluded that TESCO gain competitive advantages and
enter into new market by using different strategies such as hybrid and differentiation. With cost
effective approaches they can analyze success of business plan. By using SWOT, PESTLE and
other models company can identify external & internal factors and then take action accordingly.

REFERENCES
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Online
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