Strategic Analysis of Tesco PLC

This report provides a comprehensive analysis of Tesco PLC, including an environmental analysis using PESTLE, an organizational audit using SWOT, an analysis of strategic capabilities using the VRIO framework, evaluation of competitive forces using Porter's Five Forces model, and strategic planning using Porter's generic strategies and Bowman's strategy clock.

Unit Number & Unit
Title
Unit 32 BUSINESS STRATEGY
Project Title
Project Submission
Signature: ……………… ……………………… Date: ___________________

Contents
Introduction...........................................................................................................................................3
Activity 1b (This Activity provides evidence for P1 and M1)..............................................................3
1.1 An Environmental Analysis conducted on your chosen organisation using PESTLE. (P1)...3
1.1 Environmental Analysis (PESTEL).................................................................................................3
1.2 An Organisational audit conducted on your chosen organisation using SWOT (P1)..........4
Activity 2 (This Activity provides evidence for P2 and M2)................................................................5
An analysis of strategic capabilities of your chosen organisation carried out using the VRIO
framework.....................................................................................................................................5
2.2 M2 A critical evaluation of the internal environment (internal capabilities, structure and
skills set) to assess strengths and weaknesses of your chosen organisation ………………… using the
McKinsey 7-S Framework..............................................................................................................5
Activity 3 (This Activity provides evidence for P3 and M3)................................................................6
Applying Porter’s Five Forces model evaluate the competitive forces of a given market sector for
your chosen organisation (P3)...........................................................................................................6
Explain the Porter’s Five Forces Model..........................................................................................6
(M3) Appropriate strategies devised, using Ansoff matrix, to improve competitive edge and
market position of your chosen organisation based on the outcomes..............................................8
Activity 4 (This Activity provides evidence for P4 and M4)................................................................9
4.1 Interpret and devise strategic planning for your chosen organisation applying Porter’s
generic strategies (cost and price leadership strategy, differentiation strategy, focus strategy)
and the extended model of Bowman’s strategy clock (P4)............................................................9
And also recommend to apply one hybrid strategy based on Porters generic strategies............11
4.2 Based on the SWOT carried out in Activity 1(1.2), and from the diagram below, choose
and recommend two Growth Strategies for your chosen organisation. (P4)..............................11
Identify and Explain Each Chosen Strategy..................................................................................12
4.3 M4 A Strategic Management Plan for your chosen organisation that has tangible and tactical
strategic priorities and objectives....................................................................................................12
Reference list.......................................................................................................................................16

Introduction
There are different business strategies are used by the business organization
to gain success in the market place. This report is about Tesco PLC that was
established in year 1919 at Hackney, London, United Kingdom. Various micro and
macro analysis will be considered in report to evaluate the business environment for
the business organization. Different strategies that can be used by the business
organization will be explained and evaluated in the study.
Activity 1b (This Activity provides evidence for P1 and M1)
1.1 An Environmental Analysis conducted on your chosen organisation
using PESTLE. (P1)
 Explain briefly what is PESTLE.
 Include a diagram of the PESTLE of your chosen organisation, if any.
 Using PESTLE, critically analyse the impact and influence of the macro
environment, on your chosen organisation and its business strategies.
1.1 Environmental Analysis (PESTEL)
PESTEL Analysis
Political Factor
TESCO Company has huge impact of the political factor because this company is operating
their business more than 12 countries, including Europe and Asia. This exposed to the many political
factors which can be affect the operations of the TESCO Company. One of the political factor which
affect them is different tax structure which affect their profitability.
Economical
Economic factors like labour cost is an important economic factor which can affect the UK
supermarket. For examples, their annual wages bill us amounting GDP 4.5 billion In 2018 UK
Minimum Wage Rate is increased by 4.4% for 25 years old and onward (Pupo Kairuz, Ponce Ruiz,
Viteri Pita and Bustillo Mena., 2020). This upward shift has cost Tesco millions of pounds in UK.
Social
Customers shopping trends are constantly changing over the times. People have tough
schedules and want same day and fast delivery with a flexible goods return policy. They prefer one-
stop shopping. Tesco is relying on UK customers and must understand and provide the services to
meet these issues.
Technological

Technology trends provide huge profit to the TESCO Company where this helps to increase
their production and they were able to show their presence in the market as large retail store. To
stay in the competition it is necessary for the TESCO Company to follow those trends.
Environmental
Government institutes are forcing the companies to address the environmental issues and
they are liable to respond to these Issues to benefit to the society. Now this company also
encouraging their buyers to shop at their website. TESCO. This company drivers will not only use
Fuel-saving routes, but they also collect the unwanted plastic bags from the customers and recycle
them.
Legal
In 2016, Tesco 17 workers took legal action against the employer on the basis of age and
gender discrimination. Workers were extremely frustrated after noticed low pay rates for night,
weekend and bank holidays shifts.
1.2 An Organisational audit conducted on your chosen organisation
using SWOT (P1)
 Explain briefly what is SWOT.
 Include a diagram of SWOT of your chosen organisation, if any
 Using SWOT, critically analyse the impact and influence of the macro
environment on your chosen organisation and its business strategies.
Swot analysis of Tesco
Strength
 Tesco is known as biggest grocery retailer it has the highest revenue and sales.
 It has diversified product and market range such as home ware items, mobile phones
clothing range and many more.
 Tesco is known as the larger opportunity builder as it has around 743K jobs
opportunities for employees from all over World.
 Firm has diversified its business globally as it has 6800 stores within 14 nations,
Apart from North America and Europe.
Weaknesses
 Tesco has low cost strategy as it can decreased their profit margins.
 Tesco has facing poor operational performances as its few stores as well as grocery
outlets are unable to perform well within some nations.
Opportunities
 Tesco has the opportunity to grow its online shopping by home delivery services.
 Tesco has opportunity to grow its market within several developing nations such as
South Korea, Indonesia and many more.

 In some nations where Tesco is not performing well so Tesco has the opportunity to
grow fast by Joint ventures. The knowledge of the local provides the knowledge that
aids to improve the performance within such local regions.
Threats
 Due it its Christmas ad, Tesco has faced social media backlash as it is against the faith
of the Christianity.
 Due to the Economic crisis as well as credit crunches such as legal, credit crunches,
tax matters as well as economic upheavals that impact operational efficiency of
Tesco.
 Tesco was also accused as they misleading the consumers with the fake brand name's
food products.
Activity 2 (This Activity provides evidence for P2 and M2)
An analysis of strategic capabilities of your chosen organisation carried
out using the VRIO framework.
 What do you understand by strategic capabilities?
 Identify the key components of strategic Capabilities.
 Analyse strategic capabilities of your chosen organisation by using the VRIO
framework
2.2 M2 A critical evaluation of the internal environment (internal
capabilities, structure and skills set) to assess strengths and
weaknesses of your chosen organisation ………………… using the
McKinsey 7-S Framework
 Explain the McKinsey’s 7S framework.
McKinsey’s 7S
This is basically the framework which is used by the organizations to examine as well as
assess the key elements of business which needs changes and alignment with the strategic
goals. There are generally seven elements in this
 Include a Diagram

Illustration 1: McKinney 7S model
(Source: McKinsey 7s Model, 2013)
 Conduct a critical Evaluation of the internal environment using The McKinsey 7-S
Framework
Shared values
Shared values are basically the core values of organizations and shows the work culture as
well as work ethics. Tesco mainly aims to inculcate a sense of teamwork within their
employees along with reinforcement of the motivation.
Strategy
It corresponds to the methods which are being adopted by organizations for achieving goals.
For example- Tesco uses cost leadership strategy and focuses on economies of the scale.
Structure
This mainly relates with infrastructure of organizations and the hierarchical positions. Tesco
has a highly imperative hierarchical structure where it has layers of the management ranging
from store sales to CEO.
Systems
This is basically the procedures as well as processes which characterizes that how a
particular job is done. This supermarket has now planned to simplify its organizational
systems and thus uses the steering wheel for achieving the pre-determined strategies (Salvarli
and Kayiskan, 2018).
Style
This is primarily the approach which management uses in leading the organization and
influence productivity of employees. Tesco mainly uses steering wheels to accomplish its
objectives. The major areas considered in this are customers, financial, operations.
Skills
This corresponds to the distinctive capabilities as well as core competencies of the
organizations. Tesco mainly provides the efficient training as well as knowledge to their
employees for working effectively and efficiently.
Staff
This is predominately personnel of company and relates with the number of the staff within
organizations. Tesco currently have more than around 400000 employees which are spread
across the various locations.

Activity 3 (This Activity provides evidence for P3 and M3)
Applying Porter’s Five Forces model evaluate the competitive forces
of a given market sector for your chosen organisation (P3)
Explain the Porter’s Five Forces Model
Porter five forces
This is the tool which helps the organizations to analyse the competition as
well as understand their competitive position within market

 Include a diagram
Porter five forces
(Source: Porter's 5 Forces. 2020)
 Produce an industry analysis for your chosen organisation using Porter’s Five Forces model
New entrant threat
This threat is generally low for Tesco as or entering the retail industry a high amount of
investment and capital is required. Due to requirement of such high amount, there develops a
barrier for new entrants and is much low for company.
Supplier’s power
There are generally large numbers of suppliers in the retail industry and thus they do not have
much control over the prices of products. Therefore, this threat is low for Tesco as due to large
number they can easily switch to other suppliers wherever they feel suppliers are charging
high price (Grebenshchikova and Yakushev, 2017).
Buyer’s power

The level of differentiation is generally high in the retail industry and due to this high
differentiation, customers avoid switching to other competitors. Thus, their bargaining power
is low for Tesco due to low influence over prices.
Substitute threat
Although, a large number of products of Tesco are highly differentiated but there are still
various products and services whose substitute are available in market like Kids clothing.
Thus, this makes the threat moderate for Tesco as some of the substitutes are sold by
competitors at low prices.
Competitive rivalry
The competition in retail industry is intense and fierce. Due to the strong and powerful
presence of the competitors like Sainsbury, Asda, Tesco might face a great brunt in its
operations and customer base.
(M3) Appropriate strategies devised, using Ansoff matrix, to
improve competitive edge and market position of your chosen
organisation based on the outcomes
 Explain the Ansoff Matrix
Ansoff matrix
This is predominately the framework and tool which helps the organizations to devise various
strategies for their future growth.
 Include a diagram for your chosen organisation if any.
Ansoff matrix
(Source: Ansoff matrix, 2019)
 Apply the Ansoff Matrix to devise appropriate product/market strategy for your chosen
organisation.

Market penetration
This is the strategy in which organizations takes their existing products and promotes them in
the already established market. Tesco can use this strategy for its expansion and can increase
the promotion of existing products like groceries to attract customers.
Product development
In this, organizations capture market share by developing new products and taking them to
the existing markets. Tesco can rely on this by either investing heavily in R&D or by
acquiring rights of competitor’s products for creating new one (Cleberg, 2019).
Market development
In this, organizations generally promote the products and services within new market or cater
the needs of new customer segment. Tesco can take its established products like organic food
into new regions or target the different customer segment like gym lovers.
Diversification
This is the strategy in which organizations develops new products and then takes them to the
entirely new market. Tesco can utilize this strategy and enter the entirely new product line like
renewable energy and target the new customer segment.
Activity 4 (This Activity provides evidence for P4 and M4)
4.1 Interpret and devise strategic planning for your chosen organisation
applying Porter’s generic strategies (cost and price leadership strategy,
differentiation strategy, focus strategy) and the extended model of
Bowman’s strategy clock (P4)
 Explain Porter’s generic strategies.
Porter generic strategies
This is the tool which organizations use for identifying niche market where they have to or can
gain the competitive advantage.
 Apply the Porter’s strategy and Bowman’s Strategy Clock to devise strategic
planning/strategic directions for your chosen organisation.
Cost leadership
This mainly involves gaining the competitive advantage through lowering down cost of
products and services. Tesco can utilize this strategy to expand the market share and for
targeting middle class people which will eventually help in preserving market leadership.
Differentiation
In this, organizations mainly seek for appearing unique by making products and services
highly distinct from competitors. Tesco can use this strategy by focusing much on innovation
and advancements as well as extending the product line.
Cost focus
In this, organizations mainly emphasizes on cost advantage within smaller market segment.
Tesco can develop the low-cost advantage by fulfilling the needs of niche market or targeting
small local shops (Islami, Mustafa and Latkovikj, 2020).
Differentiation focus

In this, organizations mainly seek to differentiate its products from their competitors within
target segment. Tesco can differentiates themselves by bringing changes in packaging,
designing or product attributes within small market
 Apply the Porter’s strategy and Bowman’s Strategy Clock to devise
strategic planning/strategic directions for your chosen organisation.
Bowman’s strategic Clock is used by the business organization to define proper
strategies that can be used by the business organization to improve the performance
and profitability of the organization in market place (Gaganis, Pasiouras and
Voulgari, 2019). There are eight different strategies are suggested in the bowman’s
strategic clock to improve the performance of the organization in market place.
Figure 1 Bowman Strategy Clock
(Source: Bowman Strategy Clock, 2018)
There are two dimensions are used in this process which are price of the product and customer’s
perceived value. On basis of these dimensions eight strategies are formed for the business strategy
of company
Low price and Low Added Value- It is not considered as best strategy for business organization like
Tesco PLC. The price and value of product both are low in this strategy. This strategy can be used by
Mass Production Company.
Low Price- In this strategy organization keep the price of the product low for the customer. This can
reduce the marginal profit of organization that can affect the overall profit of company. Cannot be
consider as effective strategy for Tesco PLC.
Hybrid- In this strategy organization can keep the value of product high with keeping the price of the
product effectively low. This strategy is good to improve the customer satisfaction.

Differentiation- in this process organization focuses on the high quality of the product and try to
focus on the process that can help them to promote their products as services in market place
(Eling and Schaper, 2017). Strategy is effective form business organization.
Focused Differentiations- In this strategy is highly focused on the high perceived value of the
product. Organization use to develop best quality product and implements STP plan in order to
increase the customer of the organization. This strategy is good for the organization who are more
Risk High Margin- This strategy is consists of the high marginal profit. In this strategy organization try
to keep price of the product too high as compared to the manufacturing cost of the product. This
strategy is not good for the long term business of the organization.
Monopoly Prioing- This strategy is used by the organization that is developing product which is only
produced by them in market place. Organization who have monopoly in market only can use this
strategy. Organization can decide price of the product as much as they want and it will not affect the
business of organization because they do not have any other competitor in market place.
Loss of Market Share- Organization that is not capable to produce valuable product are considered in
this category.
And also recommend to apply one hybrid strategy based on Porters
generic strategies.
The most appropriate strategy which Tesco should use among all these is differentiation focus.
Company should bring changes in its products and services firstly for small market segment.
This is because bringing differentiation and targeting only small segment will help company to
know whether the product or other aspect is being linked by the customers or not. Once the
differentiation is successful in small market, company can then target larger segment (Islami,
Mustafa and Latkovikj, 2020).
4.2 Based on the SWOT carried out in Activity 1(1.2), and from the
diagram below, choose and recommend two Growth Strategies for your
chosen organisation. (P4)
SWOT
Strengths
 One of the largest supermarket in UK
 Leading market share in UK market
 Geographically diverse organization.
 Number of stores of organization are growing.
 Large customer base in UK
Weaknesses
 Have failed in Japan and USA

 Company also have faced fraud trial that is negative for their image in market
place.
 Operation profit of the organization is less.
 Low cost strategy is not good for business organization.
Opportunities
 Business expansion is a process that can be used by the business
organization to generate higher profit.
 Joint venture can be considered for organization in order to generate higher
benefits in new emerging market.
 Online shopping is a process that can be implement by the organization to
offer continuous services to the customers.
Threats
 Competitors of organization are main threat to their business.
 Economic crisis and drawbacks of Brexit are also crucial for organization.
Identify and Explain Each Chosen Strategy
There are various business strategies are selected by the organization in order to run
organization effectively in market place. According to porter generic and bowman strategic clock
organization can use focused differentiation process to run organization effectively in market place.
Through this process Tesco PLC can generate larger customer base with effective marginal profit.
 Justifications for recommending these strategies
There are different processes and strategies can be used by the business
organization in order to generate higher benefits in market place. To effectively
implement this strategy organization can develop proper process that is aimed to
provide higher benefits to the organization in market place. Better market research

and effective resources of information need to be considered in order to implement
business strategy in effective manner (Prajogo, 2016). The best suitable business
strategy for Tesco PLC is Hybrid strategy in which company can implement pricing
strategy. This will attract larger customer base and help the organization to perform
business effectively.
4.3 M4 A Strategic Management Plan for your chosen organisation
that has tangible and tactical strategic priorities and objectives.
 What is a strategic management plan? 3 Explain how this Strategic Plan will be
used to implement the recommended strategies in Activity
Strategic management plan is considered as the business management strategy that
is used by the organization and the plan that is used to implement particular
business strategy in organization is considered as strategic business management
plan. In this process organization have to make changes to the pricing policy in order
to reduce the cost of the product to the effective lower value that can help the
company to generate minimum required profit (Hamilton and Webster, 2018). This is
how various processes can be implemented by the business organization to
generate higher benefits in market place and develop larger customer base.
Aim Objectives Resource
s
Required.
Allocation
of
responsibility
Target
dates
Review
dates/
review
point
Deviation
diagnosis
and
corrective
action
dates
Revised
target dates
if applicable
1) Reduce the
price to the
minimum
effective
value
Accounting
tools and
computer
system
Account
department
20/08/
2020
01/09/2
020
10/09/202
0
12/09/2020
2) Improve
the quality
of goods
and
services
Better
productio
n and
monitorin
g tools
Operation and
research and
development
department
13/07/
2020
20/08/2
020
01/09/202
0
05/09/2020

4.4Distinction Drawing information from Activity 1,2,3,4 you are required to Critique
and interpret information and data applying environmental and competitive analysis
to produce a set of valid strategic directions, objectives and tactical
To achieve a Distinction, you will be required to: -
Compare your chosen organisation with its key competitor(s) using charts and
graphs to provide comparison of sales and profits for a period of time i.e 2-3 years.
A comprehensive Competitor Analysis is required.
Conclusion
. This report is concluding the information of business strategy that can be used by
the business organization to meet all the requirements in the market place. Micro
and macro analysis for the organization has been performed in the report in order to

evaluate the business environment for the organization. To know the internal
capability of the organization VRIO frame work has been used to get better over view
of the internal condition of the organization. Various strategies that can be used by
business organization has been used in the report in order develop different
business strategies for organization. Porter competitive model also has been studied
in the report that can help the organization to get competitive analysis of the
company in market place. SWOT analysis has been performed in order to analyse
the internal capabilities to implement various strategies that can help organization to
meet long term goals. Different strategic business approaches also has been
analysed for Tesco PLC in report. A strategic management plan has been developed
in the report to implement various strategies to improve the performance of the
organization in market place.

Reference list
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