Innovation Strategy for Tesco: SWOT, VRIO, PESTLE, Porter's Five Forces and Game Theory Analysis

This report provides an analysis of Tesco's internal and external environment using SWOT, VRIO, PESTLE, Porter's Five Forces and Game Theory. It highlights the importance of innovation strategy in the current competitive business environment.

STRATEGY, ENTERPRISE,
AND INNOVATION.

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Evaluating internal analysis of TESCO.......................................................................................3
Evaluating external environment of Tesco..................................................................................5
Analysing the competitive factor with industry..........................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Innovation strategy is concerned with developing and effective approach so that ability
to coordinate with prevailing circumstances can be derived. In the current era, it is important for
business to pay attention on having innovative strategy so that effective way to conduct business
practices can become possible. For building strategy it becomes essential to have pay attention
on conducting micro & macro analysis in turn information regarding relevant aspects that need to
be s focused s can be included. The current report is based on TESCO which is one of the
successful company operating in retail market that offers groceries, etc products to its targeted
audience. Present report will involve SWOT, VRIO, PESTLE, Porters five forces model so that
significant information can be derived.
MAIN BODY
Evaluating internal analysis of TESCO
Analysing internal environment aids company to obtain information regarding the circumstances
prevailing inside the business so that higher ability to identify irrelevant aspects that can hider
organizational performance. TESCO as being international organization require focusing on
executing internal evaluation in order to recognize internal resources and capabilities can become
possible. It can be done by paying attention on SWOT and VRIO analysis as follows:
SWOT analysis
It is one of the crucial technique that can help TESCO to obtain information regarding
strengths, weaknesses, opportunities, and threats (AKMAN, 2020). TESCO can effectively
concentrate on deriving information related with its internal strengths and weaknesses so that
appropriate approach to overcome lacking areas can become possible.
Strengths
 The one of the significant strength of
TESCO is the biggest grocery store
which helps it to pay attention on
having major competitiveness by
making sales.
 Efficient network of suppliers allows so
that highest markets sharing obtaining
Weaknesses
 There are few lacking areas that are
needed to be specified for gaining
significant knowledge so that suitable
course of action can be taken the major
limitation that hinder internal
processing involves accounting fraud
scandal in turn it has affected financial

has become for TESCO.
 Diverse retail store is another strength
of TESCO that helps it to have higher
growth in both terms monetary and non
financial (Gupta, Guptaand Gupta,
2019).
 Company has skilled labour that has
allowed it to derive advanced
technology in its internal processes so
that higher competitiveness can be
achieved.
 There is as well availability of having
diverse range of products so that
attracting larger number of customer
through maintaining innovativeness can
derived.
management activity of company.
 There are few financial errors are as
well found in overall processing can be
achieved.
 There is presence of less operating
profit due to weak performance of
enterprise that hamper its smooth
functioning of company.
 Low cost technique is available in
TESCO which is largely affecting
competitiveness of enterprise.
Opportunities
 Emergence of digitalization can help
firm top pay attention on expanding its
operational practices so that higher
profitability & substantiality can be
achieved.
 Alliance with other brand and joint
venture has become possible for the
specific organization which can
increase revenue and competencies of
TESCO.
Threats
 There are various competitors emerging
in retail industry that is inclining
difficulties in for the company. It might
create availability of substitute products
that affect business processing.
 Brexit deal, national economic crises,
fame farm, etc. are other threats
VRIO analysis

TESCO can gain significant information regarding its resources and capabilities through
focusing on valuable, rare, imitable and organization so that information regarding competitive
advantages can derived.
Resource/
capabilities
Valuable Rare Imitable Organization Competitive
advantages
Higher
customer
satisfaction
rate
Yes - - - Long term
competitive
advantages
Brand
awareness
Yes - - Yes Sustainable
competitive
advantage
Positive
market
reputation
Yes Yes Yes Yes Strong
competitive
advantage
Leadership
team
Yes - - Yes Sustainable
competitive
advantage
Supply chain
management
- - Yes Yes Moderate
advantage
On the basis of above technique it can be identified that these are resources, capabilities,
strengths and weaknesses. These mentioned course of action is helpful in having reliable,
relevant and crucial aspects that contribute in gaining success by formulating suitable strategies
according to these aspects (van Dam, 2021). This as well aid in having innovativeness in internal
process that can cope up with these mentioned factors.
Evaluating external environment of Tesco
Macro environment is highly required to be emphasized by paying attention on various
factors like political, economical, social, technology, environmental, legal, etc so that relevant

approach for proper implementation of appropriate strategy for overcoming competition can
become possible.
Political Factors
Political stability, tax, tariff, trade restrictions, etc. are few political factors that are
required to be focused by TESCO. The specified organization operates in both national and
international platform that get highly affected from prevailing political situation in both positive
and negative way. (PESTLE analysis, 2021) There is requirement to follow various regulations
imposed by countries for having smooth functioning. The change in tax policy as well influence
profitability of the company.
Economic factors
The economic factor involves GDP, interest, saving, inflation, purchasing power rate etc.
are few crucial components that affect the function of TESCO. Inclination in interest and
inflation, etc. declines the profitability of TESCO. The cost structure and profitability margin of
TESCO is highly dependent on economical factor of external environment. Few crucial actions
can be taken by TESCO as Brexit and other factors are influencing its processing. Diversification
& presence in international market is providing assistance to TESCO to overcome this negative
impact.
Social factor
Change in taste & preferences, attitude, belief, demographic factor, etc. are few social
aspects that are required to be focused by specific organization to cope up with market forces
(Achinas and et.al., 2019). To be successful in industry it becomes essential for TESCO to
concentrate on aspects that are changing market trend so that implementing innovative practices
to gain competitiveness can become possible. It operates in international environment which
keeps on changing so that focusing on these can help in attaining knowledge for understanding
market trend in turn launching demanded product for meeting customer preferences can be
helpful in having larger number of customer. From the evaluation it can be identified that there
are variety of social factor which are properly studied by firm that positively influence
operational practices.
Technology factor
Technological factor keeps on changing that are needed to be focused by specific firm for
having relevant ability that can assistance in coordinating with industrial law, regulation, etc.

TESCO bought new technological advancement to gain trustworthiness among customer
regarding quality, innovativeness, etc. The specific organization is getting favourably affected
from the technology factor of external environment (Perera, 2017). TESCO as being
international organization focuses on executing effective technologies so that higher
effectiveness can be derived.
Legal factors
Government rules & regulations, industrial laws, employment, international
standardization, etc are few crucial aspects that play role of influencing business practices.
TESCO as being international organization required to pay attention on complying with these
stated rules and regulation so that higher ability to overcome prevailing legal obligation can
become possible. While operating in global platform firm require to focus on having relevant
ability to adhere these prevailing law so that negative impact can be avoided.
Environmental factors
There are various environment related rules and regulation which are needed to be
focused by TESCO for having smooth functioning. TESCO pay attention on declining
[pollution, carbon footprint, etc. so that positive influence on environment can be conducted.
On the basis of this, it can be identified that there are a variety of external factors that are
required to be focused for formulating appropriate strategy in turn higher profitability and
sustainability can be derived to lead in industry.
Analysing the competitive factor with industry
There are a variety of techniques that can be taken into consideration for evaluating different
kinds of factors prevailing in industry. Porters five forces model is one of tool that can be taken
into consideration for evaluating competitive factor includes bargaining power of buyers,
suppliers, threats of new entrants, rivalry among existing competitors and substitute products.
TESCO can use this particular technique to obtain crucial information regarding components of
retail industry that has impact on organizational process.
Threat of new entrants affecting TESCO
Growth of retail industry is facing inclining trend which require firm to pay attention on
threat of new entrant (Kun, Yuenan and Yingxue, 2021). In the current time there are various
new players that are participating in industry that need specified organization to focus these that
might affect in adverse manner in terms of declined profitability, market share, etc. in addition

to this, focusing on these may help the TESCO to have sufficient knowledge regarding new
competitors that can influence business processing.
Bargaining of buyers
Buyers are considered to king of market as business processing is highly dependent on
the purchasing decision of its customer. If there are larger number of buyers for the products and
services offered by company then their purchasing decision will not affect much to the
company's operational practices. On the other side, if TESCO has the low number of customers
then purchasing decision will highly affect the processing of specified organization. In addition
to this, it can be interpreted that firm has covered larger market share that has allowed it to have
grater number of customer that possess low bargaining power.
Bargaining power of suppliers
There are larger number of suppliers which includes 25000 approx in UK that allow it to
give properly conduct its operational practices. On the basis of this, it can be articulated that
there are variety of supplier which has less bargaining power. The reason behind underlying the
fact that having greater number of buyers might not influence operational process.
Threat of substitute products affecting TESCO
The specified organization pay attention on offering different product line which helps it
to attain productivity and sustainability. (Porter's Five Forces, 2021) There are possibilities to
offer the same kind of product consisting similar feature that can negatively impact the revenue
generating capacity of mentioned organization. The particular organization has enough
capability to meet the changing requirement of customer with maintaining quality traits which is
helpful for the organization to overcome this specified negative aspect.
Rivalry among existing competitors
In UK and in international market there is presence of strong competitor that has impact
on business process. TESCO has being one of the successful organization largely pay attention
on gaining competitiveness by having significant approach of marketing and its operational
practices. It aids the TESCO to focus on attaining on getting appropriate ability to have
capabilities to attract clients for increasing profitability to have stronger position in sector.
On the basis of this, it can be articulated that this particular technique provides assistance
in building framework for analysing competitive environment.

Game theory
It is one of the tool that is useful in building framework for buyer and seller interactions
and negotiation. TESCO can sue this tool to have theoretical framework to conceive social
situation among the competing players and producing optimal decision through focusing on
competing actors in strategic setting (Başar and Zaccour, 2018). In UK retail industry there is
major requirement to concentrate on deriving cost and leadership quality in company so that
higher quality and other productive aspects for achieving success can become possible. TESCO
offer grocery products to its targeted audience which need to firm to adapt cost leadership
technique for having competitive advantages in terms of liquidity so that leading in UK has
become possible.
It permits firm to have strategic interaction with the rational decision-making. This
provides assistance in having ability to attract and retain clients for longer duration that
contribute in meeting overall objective which includes higher market share, greater sales
revenue, etc.
CONCLUSION
From the above report it can be concluded that having innovative strategy is essential in
current competitive business environment. In addition to this, present report has given emphasis
on analysing internal factors through applying SWOT and VRIO techniques so that capabilities,
resources, strengths, etc. can be recognised. The current study has concentrated on conducting
external analysing through PESTLE technique which aids to derive significant knowledge
regarding uncontrollable factor affecting company. For doing industry analysis Porters five
forces and Game theory has been implemented that indicates smooth function of firm in retain
sector.

REFERENCES
Books and Journals
Achinas, S. and et.al., 2019. A PESTLE analysis of biofuels energy industry in
Europe. Sustainability, 11(21), p.5981.
AKMAN, M.K., 2020. DEFENCE MANAGEMENT AND PESTLE ANALYSIS. ANTE
PORTAS, p.93.
Başar, T. and Zaccour, G., 2018. Handbook of dynamic game theory. New York City, NY,
USA: Springer International Publishing.
Gupta, A., Gupta, N. and Gupta, M., 2019. British Airways-A SWOT and PESTLE Analysis-
The impact of Europe 2020 policy. NOLEGEIN-Journal of Corporate & Business Laws,
pp.1-11.
Kun, Q., Yuenan, L. and Yingxue, L., 2021. Analysis of Dandong 99 strawberry market
competitiveness Based on Porter's five forces model. In E3S Web of Conferences (Vol.
253. p. 03058). EDP Sciences.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
van Dam, B., 2021. VRIO Analysis: Why iOS is America. Available at SSRN 3898201.
Online
PESTLE analysis 2021. [Online]. Available
through:<https://www.cipd.co.uk/knowledge/strategy/organisational-development/
pestle-analysis-factsheet#gref>
Porter's Five Forces. 2021. [Online]. Available through:
<https://www.mindtools.com/pages/article/newTMC_08.htm>