Strategic Management: TESCO Case Study

This document provides a comprehensive analysis of strategic management decisions and analysis of TESCO, a globally renowned retail corporation. It covers topics such as PESTLE model, Porter Five Forces, alignment of mission and vision with market demands, and value chain analysis.

Question for
Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1...............................................................................................................................................1
PESTLE model.......................................................................................................................1
Porter Five Forces...................................................................................................................3
Task 2...............................................................................................................................................5
Alignment of Mission and vision with market demands........................................................5
Value Chain Analysis.............................................................................................................6
Task 3...............................................................................................................................................8
Strategic Directions available to a company..........................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic management can be comprehensibly said to be the set of decisions taken up by a
company with an aim of achieving a top position in market place. These decisions lead to the
stipulation of effective strategies through which the entity can gain an upper hand over the rival
firms operating within the confines of same corporate sector. Strategic management can thus be
seen as the pathway to development of strategies and tactics by which the overall working and
financial performance of company can be enhanced in the long run (Pham, Darabi and Wilmot,
2020). The present project is based upon TESCO. This is a globally renowned retail corporation
functioning within many parts of the globe and serving the customers with general merchandise,
footwear, accessories, home ware items, kitchen goods, food products, home decor and
furnishing items. This entity is headquartered within United Kingdom and enjoys market
leadership in the region owing to its excellent quality products and unmatchable services.
The below mentioned project is primarily categorized into 3 tasks. The first task consists
of review of external environment together with the industrial analysis. The second section
explores the alignment of mission and vision statements of organisation with demand in market.
Further, it talks about company strategic competencies and capabilities along with the manner in
which organisation develops, provides and captures value in retail market. The last task deals
with effective strategies through which the entity may be able to defend its core operations.
Task 1
PESTLE model
In the current era of mass competition it is necessary for every business to work in most
effective manner that is preferable by the market. The intent behind doing so can be to sustain in
respective corporate sector for a relatively longer time period. Every business strives to work in a
manner that is better than its rivals so that customers prefer to stay connected with the branded
for long run. Thus to analyze the need and demand of the market it is essential for a large retail
store chain like TESCO plc to undertake all the important factors of macro external factors of
environment. The study of these factors gives a 360 degree view of all the externals forces of the
business that determines its success or failure by affecting either directly or indirectly on to its
operations and procedures. The thorough study of these factors is important in order to ascertain
the opportunities and threats linked with them. This provides company with the chance to
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leverage the opportunity so as to inflate its existent positioning within the confines of market
place. Further, it also provides the company with the scope to deal with the threats identified in
macro factors to ensure least harm being caused to the business operations from the external
factors of business environment within which it operates.
Thus the analysis of PESTEL is the most effusive tool that can evaluate the facts and figures of
external market, this analysis certainly cover the major elements of political, economic, social,
technological, environmental and legal. These factors are elaborated in regards to TESCO as
follows:-
Political factors - The political factors comprise of the certain rules, policies that are
formed by and out of the political powers within a nation. As the TESCO PLC has a major
working area in United Kingdom the political factors within the country are quite helpful for the
effective growth of the business (Kanakaratne, Bray and Robson, 2020). Due to the long term
stability of a single political power, the enterprises like TESCO there get an opportunity to save a
lot of time in the planning of upcoming actions. This implies that they are able to run smoothly
within the confines of UK by exercising knowledge of the political rules and regulations.
Economic factors – These factors are based on the characteristics of financial and
monetary elements within the nation. The GDP, growth rate, per capita income, economy rate are
some of the economical elements that are evaluated by the management of TESCO plc. These
factors impact on the various decision of the business such as determination of price of a product
or the price of purchase of any raw material is generally based on the economical factors.
Therefore the economic factors in UK help the business to add on the sufficient margin in their
products.
Social factors - The social factors are those elements which affect the business on the base of
change in market trends, social behaviours, culture, beliefs, customer lifestyles etc. Being a
developed nation United Kingdom facilitates its citizens with flourished and growing lifestyles.
This keeps the business at a high competition in the market. The continuous changes of the social
factor in the market companies like TESCO get the opportunity to evolve its functioning with the
changing course of trends and times. By this it will get an effective market capturing as well as
better mouth publicity (Jones and Comfort, 2020). This will also instil a sense of trust and loyalty
within the customers towards the offerings of TESCO, thereby enhancing the loyal customers for
the retail corporation.
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Technological factors – The continuous transformation in the techniques of work and
certain advancements in the technologies of operations are the main elements that comes under
technological factors these affects the business of TESCO as it also give the opportunity to
Adapt these changes and grow beyond the competitive level of market. In UK there is so much
emphasis on the working smoothness and security of the people, so TESCO PLC can implement
the technologies of artificial intelligence in its operations to achieve the corporate goals and
objectives.
Environmental factor – The environmental factors are comprised of the current and
upcoming climatic condition of the working background and external environment’s landscape.
The existing condition of environmental factors are not that well in United Kingdom .Thus it is
the duty of the TESCO firm being a large retail company to work in a way forward to solve the
environmental issues and eliminate the risks from it to the business . This will certainly boost the
image of the company in the people as well as it is more beneficial for the brand image of the
company itself.
Legal factors – The legal factors are those that include numerous acts, legal laws and
legislations that are being formulated with a view to provide a legal framework to the business
(Scarborough and et. al., 2020). This helps the company to perform the operations and other
trading activities under certain guidelines. TESCO plc holds the reputed position in the market
and it will not be prove as good to violate any law or regulation of business although following
all the laws and work according to certain legislations boost the moral and loyalty of its very
own employees as this will give an effective and genuine brand image to TESCO.
Porter Five Forces
Industrial analysis is crucial for each and every corporation in order to gain knowledge of the
situations that prevail within the confines of the market place. This provides assistance to the
corporation in developing such strategies through which it can attain or sustain a top position in
market. TESCO is a renowned retailer which recognises the significance of screening the
industrial scenario with a view to ascertain its relative position within retail sector. This will
allow the company to ascertain the ways through which firm can tap the minds of customers and
appeal to them in an effectual manner (Shin, Kim and Kim, 2020). Through this, the entity will
be able to ensure that customers stay loyal to the company for a long period of time. The analysis
of the industry done by the organisation, act as a route map for it to attain an edge over the rival
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firms in market place. As a result of this, the respective retail corporation will be able to ensure
that it sustains in market for long duration, offerings consumers high quality goods to gain
extensive satisfaction from them.
In this relation, to execute the analysis of retail industry, the management of TESCO is
leveraging the use of Porter Five Force Model. This model will provide overall knowledge of the
retail sector to the firm so that the entity can introduce changes within it as per the market
analysis. With this the entity will be able to stipulate sound business strategies and course of
action to inflate its competitive edge over the rivals prevailing in market place.
Porter Five Forces Model
It is a strategic management which is executed by companies across the globe so as to
ascertain the extent of rivalry prevailing within the confines of an industry. This framework
provides firms with knowledge regarding the substitution effect that can be witnessed within the
corporate sector along with the power that is held by suppliers as well as buyers to negotiate the
prices with the organisation. By comprehensibly applying this model, TESCO is intending to
ascertain the ways through which its top positioning within retail sector can be maintained for a
long period of time in future context. Thus, the industrial analysis in the light of TESCO is
presented as follows:-
Threat of new entrants: The risk posed by the entry of new companies within the confines of a
corporate sector is referred to as the threat of new entrants. In this relation, this force is
moderate. The moderateness of this threat owes to the vast regulations that need to be followed
by the corporations intending to gain entry into the markets of retail industry (Jones and
Comfort, 2020). Further, it is seen that the capital required to be invested within this industry is
quite high. Both of these reasons inflate the threat of new entrants. This creates opportunity for
TESCO to sustain in market place for a long duration of time period.
Threat of substitutes: The effect of substitution implies the risk of being replaced by an
alternate brand or product. The extent of this force with regards to retail sector is ascertained to
be high. This is because several companies dealing in products of same nature are there within
the confines of retail sector. This tends to create risk for TESCO to sustain in market for long
duration. Thus, it is important to adopt a strategy through which the cost of production can be
significantly reduced and thereby the surplus amount can be invested in development of
innovative products and services.
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Bargaining power of customers : The extent to which a customer can negotiate the prices of
offerings is referred to as the bargaining power of customers. It has been identified that the
magnitude of this force in relation to retail sector is high. This is due to the presence of large
number of companies dealing in similar category of products. This put pressure upon TESCO to
launch products at reasonable prices so that these can be afforded by people belonging to all the
sections of society (Porter, 2020).
Bargaining power of suppliers : The power held by a vendor to negotiate the prices of
raw materials provided by them to the corporation is referred to as the bargaining power of
suppliers. In relation to retail sector, the magnitude of this element of industrial analysis is
acknowledged to be low. This is because TESCO is a large scale firm which maintains contact
with several vendors. This presents the company with the opportunity to shift to an alternate
supplier in case one of them is charging high from the retailer for the raw materials supplied by
them.
Competitive rivalry : The number of companies operating within the confines of a corporate
sector tends to define the extent of competitive rivalry. With respect to this, it is determined that
the magnitude of this force in context of retail sector is quite high. The presence of top notch
retailers such as Sainsbury’s, Morrisons, Marks & Spencer, ALDI and ASDA inflates the threat
for TESCO of being replaced as the market leader. Thus, the entity needs to come up with
market disruptive offerings which can tap the attention of people prevailing in market (Aiello
and et. al., 2020). This will assists the respective retail firm to secure their position in the
confines of market place for a long period of time in future context.
Task 2
Alignment of Mission and vision with market demands
TESCO is a renowned retail corporation enjoying market leadership within the confines
of UK. The mission and vision statement of this entity are discussed as follows:-
Mission : The mission statement given by TESCO is “To make what matters the most to
people, together”.
Vision : The vision statement given by TESCO is “To become the most valued company
in the eyes of customers, community and stakeholders”.
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The mission and vision statements of TESCO depict the customer centred nature of the company
(Walters and Helman, 2020). This implies that the entity is highly focussed towards adopting
such policies, procedures, systems and activities which are congruent with the needs and
demands of people. In the long run, this ensures the sustainability of retailer in market place for a
long period of time. Through this, TESCO meets the market demands and enjoy market
leadership within the boundaries of United Kingdom.
Value Chain Analysis
The management of TESCO is making use of Value Chain analysis in order to provide
knowledge of the way in which the retailer develops, deliver and capture value within retail
market.
Porter Value Chain Analysis
This is a model that is put to use by companies across the globe in order to stipulate
information regarding the chain of activities which are executed by a firm functioning within a
specific sector for delivering a valuable offering to customers in the market place. This model
divides activities of a firm into 2 main categories, namely, Primary and Secondary Activities.
Primary Activities
These are the activities which are associated with physical development, sales and up gradation
of the offerings of a company. These activities are discussed in light of TESCO as follows:-
Inbound logistics :
This constitutes the supply of offerings of TESCO to around 7900 outlets across the
global periphery. Hereby, the economies of scale tend to create value for the organisation (Pham,
Darabi and Wilmot, 2020).
Operations :
The operations of the respective retail firm is categorised in 3 segment, named, retail,
manufacturing and banking.
Outbound logistics :
Hereby, cost effectiveness as well as flexibility of delivery creates value for TESCO.
Also, the option of home delivery is provided within certain outlets.
Marketing and sales :
‘Every Little Helps’ is the marketing message for the respective market leader in retail
industry of UK. The entity focuses upon its superior quality products in marketing campaigns,
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thereby gaining the attention of large number of individuals and satisfying them with the
products offered by the entity at market place. TESCO leverages the use of offline as well as
online channel for doing sales.
Service :
TESCO strives to provide excellent customer services despite implementation of cost
leadership strategy by the company which focuses on elimination of additional expenses to
reduce the overall cost of operations.
Secondary Activities
These are the activities which provide support as well as aid to the primary functions
defined above so that those can be carried out in an effective manner. These activities are
analysed in the light of TESCO as follows:-
Procurement :
TESCO leverages the development of healthy relations with a number of vendors so that
the procurement of raw materials can take place in a timely manner on reasonable rates (Jones
and Comfort, 2020). This provides assistance to the corporation in meeting the demands placed
by market in due course of time. Further, this facilitates TESCO to come up with new products
in marketplace to impress the customers.
Technology development :
With the rapid upgradation taking place within the domain of technology, TESCO
undertake measures to invest in latest as well as emergent technologies. This provides assistance
to the corporation in sustaining its top position within the market place and implementing cost
leadership within the organisational premises. TESCO being a large scale organisation realises
the significance of investing extensively within R&D so as to obtain comprehensibility of the
market trends that can be leveraged by the retailer to gain growth in market place.
Human resource management :
The management of TESCO realises the significance of investing in human resources as
it is the most important asset of the corporation. To empower and strengthen their skills, the HR
department holds regular training session for the new as well as old employees. This provides
staff with the opportunity to acquaint themselves with the knowledge of company’s culture and
ethical practices to make the company reach to top position in market.
Firm infrastructure :
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TESCO maintain QC systems and mechanism with the sole aim of ensuring that the
working goes as per the industrial standards (Grindrod, 2020). Further, it also leverages usage of
balance score card for the purpose of ensuring orderly execution of operations during the
introduction of new products in market place. This aids TESCO to work in a manner such that its
goals and objectives can be duly achieved.
Task 3
Strategic Directions available to a company
Strategic planning is the base upon which the existence and growth of business is dependent. In
this regard, it has been acknowledged that it is important for a company to devise effective
course of action or strategies through which it can successfully be able to defend its core
business. Looking upon this, the management of TESCO is applying 2 strategic management
models which will provide possible strategic directions to the company (Amankwah-Amoah and
Osabutey, 2020). Those 2 models are identified to be Ansoff Matrix and Porter’s Generic
Strategies. Both of these models contain certain strategies which are applied as per the
organisational motives or objectives. Thus, a discussion over both of these frameworks is given
as follows:-
Porter Generic Strategies
This is a strategic model applied by organisations with a view to determine a strategy
through which it can attain competitive advantage in market place. With respect to this, the
different types of strategies belonging to this model are explained in a brief manner in the light
of TESCO as follows:-
Cost leadership : It is a strategy whereby an organisation seeks to attain an edge over
rival firms by reducing the overall cost of operations and becoming a cost leader. This is
facilitated by implementing latest technologies and systems through which cost to the company
can be saved. The implementation of this strategy within the confines of TESCO would imply
the attainment of cost advantage by the retailer, assisting the corporation in maximising its profit
margins. This would provide aid to the respective retail corporation in investing the surplus
funds in other profitable domains or areas of business.
Differentiation : This is acknowledged to be a strategy whereby an entity seeks to
incorporate unique features or characteristics within the product so as to make them stand
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distinct within the products offered by rival firms (Köhler, Ehmke and Campbell, 2020). This
even inflates the value of products as perceived by customers prevailing in market place. This
strategy if executed by TESCO would imply creation of a unique image of TESCO in the minds
of customers which will persuade them to make a purchase. This would instil loyalty and trust
within people towards the concerned retail firm. This indicates an overall enhancement in the
loyal base of customers for the retail corporation, thereby inflating its competitive edge over
rival firms in market place.
Cost Focus : While pursuing Cost Focus within the company, TESCO concentrates upon
development of internal efficiencies which provides assistance in withstanding the external
pressures from the business environment in which it functions.
Differentiation focus : The implementation of this strategy by TESCO implies that company
will totally emphasize upon differentiating the products from its rivals so as to gain an edge over
competitors in the market place (Kanakaratne, Bray and Robson, 2020).
On the basis of above discussion, it can be analysed that cost leadership is the best
strategy for the respective retail corporation as it will allow the firm to become a market leader
and thereby reduce its overall cost of operations. This also implies maximisation of profit
margins for TESCO.
Ansoff Matrix
The Ansoff matrix is firstly devised by Igor Ansoff with a view to develop the marketing
skills of the firm in order to attain its objectives, it is used to analyze the respective alternative
that are chosen by the organization with the most appropriate approach of them to their
respective product and market. This matrix will give the 4 key alternatives for the growth of
TESCO Plc in the various fields of the market. These are described as follows:-
Market penetration – This is acknowledged to be the first and foremost matrix that
emphasizes upon the introduction of the existing products in to the existing market. This strategy
provides assistance to an enterprise in enhancing its stake in domestic market. If this strategy is
adopted by TESCO, it would imply the increment of its loyal base of customers. This means an
enhancement of their overall market share within the confines of UK. This will render them an
irreplaceable position and brand image in the minds of people of the domestic market.
Market development – This is identified to be an effective strategy whereby an entity seeks to
gain entry into new markets by offerings its current products and services to people. Through the
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application of this strategy, a company is able to enhance its overall reach among the public at
large. The implementation of this strategy within the confines of TESCO would imply the
networking of the corporation with a larger base of individuals, thereby enhancing the scope for
company to improve its ranking within global retail sector. When the entity gains access into
new markets with its existent offerings, the risk is also moderated as the retailer already possess
knowledge of the response to those products in domestic market (Scarborough and et. al., 2020).
Product development – This is recognised to be a strategy wherein a company launches
new products within the confines of existent markets. This provides edge to the firm in gaining
the attention of people prevailing within the confines of market place. The implementation of
this strategy within the premises of TESCO would imply an increment in customer base. This
would happen if the new products provided by the company are of superior quality and hold the
capability to cater to the needs and demands of people in market place. Thus, product
development would aid the entity in enhancing its competitive edge over the rival firms carrying
out operations in retail sector.
Diversification – This is a strategy whereby the company strives to tap access into new
markets by leveraging the introduction of new products within their confines. Diversification
involves extensive risk as the new products developed and offered by entity in new markets may
not be able to tap the hearts of people and thus cause dissatisfaction and disappointment to them.
This would imply a decline in goodwill of the corporation at international scale (Shin, Kim and
Kim, 2020). This strategy if applied by TESCO would hold equal chances of success and failure
depending upon the market and the consumers whereby it seeks entry.
It can be inferred that diversification would be the best strategy for TESCO. Although
this strategy contains a lot of risk yet the probability of its success is no less. The goodwill of
TESCO in domestic market implies the capability of company to tap the minds of people within
new markets. Thus this strategy will render aid to the entity in enhancing the base of customers
along with the revenues as well as profits.
CONCLUSION
On the basis of above discussion, it can be said that strategic management is a process by
way of which an entity undertakes such actions as well as decisions which provide aid in
attainment of competitive edge at market place. In addition to this, it has been analysed that the
proper formulation as well as execution of a strategy takes place only when an entity
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successfully takes into account its external and internal business environment. The concerned
company seeks to create and deliver value to customers by way of its superior quality offerings
and exceptional customer service. Further, market development is a strategy that can be adopted
by the company to tap entry into new markets while being sure about the products as current
offerings of organisation are offered to customers within this strategy. Porter Five Force analysis
depicts that the competitive rivalry within retail sector is intense. On the basis of VRIO, it can be
seen that human resource is the most important asset of the corporation which fulfils all the 4
criteria. PESTLE analysis exhibits that BREXIT is a factor that needs to be taken into
consideration by the firm in order to ensure least harm to its smooth functioning and sales
figures.
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REFERENCES
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global marketplace: learning from developed-country multinationals’
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Retailers. In Handbook of Research on Contemporary Consumerism (pp. 57-71). IGI
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