Strategic Management: Tesco's Approaches and Analysis

This report provides an in-depth analysis of Tesco's strategic management approaches and their effects. It covers topics such as comparative theory and practice, competitive analysis, and business environment analysis. The report also discusses the impact of political, economic, social, technological, environmental, and legal factors on Tesco's operations. Additionally, it explores Tesco's competition in the retail sector and analyzes the market using Porter's Five Forces model.

SRATEGIC
MANAGEMENT
STRATEGIC ANALYSIS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Compare theory of practice.........................................................................................................3
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic management refer to the formation of the business strategies on the basis of the
organization goal and objectives. The report will be done on the company of retailer Tesco in the
respect to its approaches to strategic management. Tesco is UK based retailer and is one of the
best retailers in the market. Started its business in 1919, Tesco deals in all type of product and
provide deals of high-quality food product, clothing and home products. The report will explain
the strategic management of Tesco and its effects, Emphasis on the comparative theory and
practise of the company. It will also include the competitive analysis of the company and the
analysis such as business environment will be conducted in the report (Chukhray,2018).
MAIN BODY
Compare theory of practice
Retail sector is among the one of the biggest markets in the global market. The demand
and the profit this market is making is huge all over the globe, as the retail sector comprises all
range of product in it from low price to high prices and according to the needs of the people. To
project the competitive analysis, business analysis and comparative analysis there are different-
different tools to target market.
Business Environment analysis
Business environment refer to the environment in which company conduct the operations
of business. External business environment refers to all the external sources which are a part of
business activity. It can be analysing by the PESTEl analysis tool. This tool help in supporting
the companies to get all the information relevant about market and its sector (Cherunilam,2016).
PESTEL analysis
PESTEL analysis is an analytical tool which covering all the factor which include in all
the external factors to the business. It is one of the best tools to check the influence in the market
to the business by the external environment (Šoltés,2016). PESTEL include the factors like
political, economic, social, environment, technological, legal etc. all these factors have a direct
influence on the external environment of the business and its outcome in the market. Working in
retail sector, Tesco is surrounded by all these factors and it is important to understand these
factors to get a better grip in the market and can perform better.
Political Factor: - Political factor is a factor included in the external environment of the
business, which influence companies’ operation. It includes the policies framed by the
3

government in related to the corporate and is part of political factor. Government supports the
organizations and also helps in operating the business operation of the firm. As corporate sector
helps in the economic growth to the country it is important for the government to make policies
so that corporate sector can help in getting more business and increase economic growth to the
society (Pan,2019). Retail sector gives all the comprises of basic product which are required and
they also attract the government interest in the growth & development of the sector. Retail sector
generate one of the most tax return because of the demand and in indirect forms as the demand is
keep on rising. This sector is for all the people from rich to lower middle class, they provide all
the varieties to the people according to their needs. Th retail sector areas is very wide which offer
government special interest of policy making in retail market. In recent time period BREXIT is
influencing the operations of Tesco in a negative manner, BREXIT have restricted the operations
of the company in England which result the company in reduction of demands in the retail
market products. Political stability is one of biggest factor which influence the operations of the
business and it also allow the companies to frame long term development and growth strategies.
Economical factor: - Economic factor is one of the most important factors for a business and is
a crucial factor in the business environment influencing the company. Economic factor explains
about the economic stability of the country the company is working in. it include factors like
currency rates, stability of currency, market value of currency in international market,
government economic policies, monetary and other policies etc. which were frame by the
government to give a strength to the economic environment as factor of business environment.
Such factors directly influence the sale of the company product in the market, and economic
condition also affect the pricing strategies of the product and which can affect the profit margin
of the company. The lack of selling due to the high pricing affect the tax return to the
government in the sector and cause a growth in the sector. Taxation directly affect the pricing
and increase the price of the product of the Tesco. Tesco is planning for a long-term business
plan for growth and strategic formation which can help the company in getting the goals.
Inflation in the economy is one of the factors to the economic factor in the business.
Social Factor: - Social factor involve different factors which affect Tesco in its operation in the
market and influence it. Social factors are dominating tools in relation to business growth and a
part of PESTEL analysis, It include the factor as religion, culture, trend, fashion, choice of
people and other various factor which directly impact the decision of purchase of the customer in
4

their decision making towards the product and services. These factors influence the buying
decision of the customer. Trends in the clothing sector is one of the huge factors to the
purchasing decision of the customer and it directly influence the sales of the company. To
overcome the trends and fashion in the market the company marketing team is making a lot of
different innovation and efforts with new strategies to make the product of the company look
fashionable and try to connect to as much as audience they can. Company always try to attract
the decision of the customer in retail by channelling an marketing campaign, social factor is one
of the most dominant factor in the business and directly affect the influence of the buying
behaviour of the customer towards the market.
Technological factors: - Technologies factor are the advancement in the techniques of the
company and the technologies company use in the operation to make the working more easier for
the company and can utilise more time to other resources. This factor helps in guiding the
company in all the advancement in technologies and development. It is one of the key factors in
the business environment which can transformed the corporate sector. Technologies and its
advancement helped Tesco to introduce online retailing to its customer and help in getting a
wider range of customer. Technologies also help in the different activities in the functions of the
organization and hierarchy of company. The hierarchy of the company include the finance,
marketing, it and public relation and other operation functions which directly operate in the
technological equipment. Technologies helps in product development of the company and
innovation in new products for the company. Selling of product ofline and online both are
important in todays market and Tesco is working in both the field, the online retailing inclusion
is on different level and for that the strategies are being made by the company. Online retailing
by Tesco helped the company in stability in the market and customer can easily connect the
company anytime and it also helps in providing better services to the customer and if in case
there are any issue then the company can easily track and solve the problems of the customer and
it helps in the market value of the company.
Environment factor: - Environment factor is also a part of the analytical tool PESTEL in the
business environment. This factor gained a huge emergence after the awareness in the
environment started and all the companies need to provide this factor as major and need to
manage the awareness regarding the environment health. The development of eco-friendly
products and the protection to the environment includes in this factor of business environment.
5

People now adays are more likely to consume eco friendly product and are attracted towards
them to spread the awareness in the society, and to maintain that the company Tesco also make
products which are totally eco-friendly and does not damage the environment. Tesco is also
including itself in many of the social activities to help the environment and is working in many
of social activities like water harvesting, plantation, saving of energy and other forms of the
activities in the social environment awareness. Corporate social responsibility enables the
contribution of the companies in the corporate sector responsibility. There is government
restriction in the corporate organization as a part of the policies of government protection to the
environment.
Legal factor: - Legal factor is an important factor of business environment associated with the
PESTEL analysis. This factor of business environment indicates all the laws and legislation of
rules which are part of the corporate sector and the industry. To conduct the best of the
operations Tesco, need to cope up with all the legislation of the government policies and the laws
of the government in the sector. Laws includes different sections regarding the employments,
labours timing etc. in the business platform and the company need to manage all these to work
properly and better in the market. Legal factor guides the company in the respect to the
legislation and law’s requirement company need to get full fill in the business expansion.
All the above factors mention in the business environment influence the operational
activities of the company and its potential growth in market. All these factors cover all the
different uncertainties in the business. PESTEL analysis is a tool to find all the factor analytic of
the external environment of business.
Competitor Analysis
Tesco is working on a huge level in the retailer industry sector and is one of the best
retailers in UK and is on top. The retailer is one of the biggest market sectors to work in and
Tesco is leading the industry in UK with majority of share ration in market. The company is
providing a lot of variety product including the food, home products, clothing’s and many more
product to its customers. Tesco is focus on providing the range of different product with different
price categories to its customer to capture variety of audience and can make them stay rely on the
company itself. Tesco is providing the best quality and service to its customer and this is the
reason customer rely on Tesco and help the company reach to its top place. Tesco is also
6

providing its customer the low-price product for those customers who can’t afford the expansive
products and this help the company in getting more of the customer. This market sector is in very
demanding sector for competition and is keep on increasing the values in the market. The growth
sector in the UK is by 5% which shows a great threat for the Tesco but it is also giving more
opportunity because Tesco is working in this industry from a long time and have a good base and
goodwill in the market.
The competition of Tesco is Sainsbury’s which is giving a good competition in the
market to Tesco and Sainsbury is working in the same sector of retail market. The competition
between Sainsbury and Tesco in the country and globally on both stages.
Tesco is opening new stores in different-different locations which is a great option for the
customer to access the company easy and can connect more audience. Internet is giving a huge
advantage to the companies and is helping Tesco in giving the strength in the online market and
the online working. The huge demand in the market of online services gives a growth to the
company as the services is been given by the Tesco to its customer is being accepted by the
customer and they are satisfied by the services of the company.
Porter’s Five Force model
This is a very important framework for the organization and all the companies need to
use this to find Out the competition in the market for them. There are different forces which are
making the organization productivity to reduce and market share in decreasing because of the
competition’s company need to take better decision regarding the analysing of the competitive
market and need to make strategies according to it (Nurmi,2018).
Competition in industry: - (High)
The market competition in the retail sector to Tesco is high but due to its long run in the
market Tesco have a great stability in the market and is giving a great competition to new
companies (Hamilton,2018). There are many new competitions to the company in recent time
period as the retail is growing in a huge advantage and is keep on getting new competition but
Tesco gets advantage as it already have a great market captured with them. Tesco have taken a
lot of decision regarding the competition and have change a lot of strategies of the company to
get the strength in the market and knockout the competitor. Tesco is losing its loyal customer in
the recent time and the market share which company have gained over the year, so in this case
7

the company is taking a lot of decision which can help the company in the market. Decision
regarding the online tools and providing new techniques to the customer so that they can give
better services to its customer (Arora,2020).
Potential of new entrant in market (Medium)
The new entrants need a lot of investment and because of that the threat of new
competitor in the competition to the Tesco is very medium. Which also help the company in
getting the goals and the stability of company is helping in making its competitor a huge
disadvantage. Stakeholder demand and the responsibilities of the Tesco are increasing day by
day as the market competition is increasing rapidly (Liu,2017).
Power of suppliers (low)
Tesco is in the market of the retailer sector is from a long time and this why its important
for the company to have an effective functioning because experience is essential. Better
experience helps the company in the market making for the company and helps in better
functioning for themselves (Ortega,2019). There is no dependency on the products and the raw
material from the suppliers in the company as Tesco keep shifting the suppliers and change the
suppliers according to the situation so that the power of the supplier remain low to the company
and company can be in power to the suppliers. There is requirement of a lot of the network in the
market which the company create to have better functioning & trends and fashion to match the
customer expectation (Lichter,2017).
Power of customers (Medium)
The need of demands and wants of the customer is increasing which has to be well
maintained so that the organization can have better functioning. Tesco has developed a
reputations and brand image in the market because they understand their customers effectively
and make the changes in the organization according to them. Customers need the best of quality
of products but at low price and that is going to help the company be able to have loyal
customers and the economy of the organization can be maintained effectively. The demands are
increasing due to which the productivity and operations in Tesco are also taking place according
to this factor (Bindra, Parameswar and Dhir, 2019). Customers have to be informed about all the
measures which are being taken for them so that there is a trust which Tesco can develop in the
customers and that is going to be very helpful for a long run and profitability. Tesco has
expanded themselves in a lot of countries because they have a good experience in dealing with
8

the customers which helps the organization to be able to maintain the customers in the
organization.
Threat of substitute products (Medium)
The competition in the market is high therefore Tesco will have to take legal actions for
the innovation and inventions which are being done in the products so that they can have loyal
customers. Customers always appreciate new products and services and that would get in a good
functioning for the organization as well which is going to be very helpful for a long run. The
pricing of Tesco is very less so that they can make the customers be satisfied and the
organization can have a stable functioning and operations (Jabbar and Hussein, 2017). The
products and services are well maintained which is going to be very good for the brand image of
the organization which would help the company to have a higher reputations. The company is
having a good availability of pricing which makes the company have a good reputation and the
customers are going to be present without shifting to other brands or companies which are
present in the market. There are a lot of retail competitors which are present in the organization
therefore it is very essential for them to be able to maintain that factor by getting in a unique
identity for the organization. This is going to help the company be able to maintain their
standards and quality of the products which makes the customers be loyal.
CONCLUSION
From the report it is concluded that the need of the analysis in the organization are important for
better result and understanding the market in the wider form. The report explains the importance
of the external and internal factors of the business environment to take decision according to the
resources and understanding of the environment better. The increasing in the market growth and
the competition in the market need to be understand for the performance of the company to
check all the strategies and ways to work on the issues a company can face in the performance.
Tesco works in all the analytical tools to get the understanding of the market situation to get the
best result in the company and to make the better response to the competition (Song,2017).
9

REFERENCES
Books and Journals
Arora, A., Srivastava, A. and Bansal, S., 2020. Business competitive analysis using promoted
post detection on social media. Journal of Retailing and Consumer
Services, 54, p.101941.
Bindra, S., Parameswar, N. and Dhir, S., 2019. Strategic management: The evolution of the
field. Strategic Change. 28(6). pp.469-478.
Cherunilam, F., 2016. Business environment. Himalaya Publishing House.
Chukhray, N.I. and Mrykhina, O.B., 2018. Theoretical and methodological basis for technology
transfer from universities to the business environment. Problems and
Perspectives in Management, 16(1), p.399.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Jabbar, A.A. and Hussein, A.M., 2017. The role of leadership in strategic
management. International Journal of Research-Granthaalayah. 5(5). pp.99-
106.
Lichter, A., Pestel, N. and Sommer, E., 2017. Productivity effects of air pollution: Evidence from
professional soccer. Labour Economics, 48, pp.54-66.
Liu, Y. and Tyagi, R.K., 2017. Outsourcing to convert fixed costs into variable costs: A
competitive analysis. International Journal of Research in Marketing, 34(1),
pp.252-264.
Nurmi, J. and Niemelä, M.S., 2018, November. PESTEL analysis of hacktivism campaign
motivations. In Nordic Conference on Secure IT Systems (pp. 323-335).
Springer, Cham.
Ortega and et.al., 2019. Pestel analysis based on neutrosophic cognitive maps and neutrosophic
numbers for the sinos river basin management. Infinite Study.
Pan, W., Chen, L. and Zhan, W., 2019. PESTEL analysis of construction productivity
enhancement strategies: A case study of three economies. Journal of
Management in Engineering, 35(1), p.05018013.
Šoltés, V. and Štofková, K.R., 2016, September. The impact of business environment on regional
disparities. In CBU international conference proceedings (Vol. 4, pp. 187-
191).
Song, J., Sun, Y. and Jin, L., 2017. PESTEL analysis of the development of the waste-to-energy
incineration industry in China. Renewable and Sustainable Energy
Reviews, 80, pp.276-289.
10