Strategic Management: Theory, Practice, and Case Study of Tesco

This document explores the theory and practice of strategic management in the context of Tesco. It includes a comparison of theory and practice, a case study of Tesco, and a recovery plan to overcome challenges. The document also discusses the Ansoff matrix and its application in Tesco's recovery plan.

Strategic Management
1

INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Compare theory and practice..............................................................................................3
2. A case study approach........................................................................................................6
3. A recovery plan..................................................................................................................7
4. A risk management strategy...............................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
2

INTRODUCTION
Strategic management is a systematic process in which activities of an organisation get
access in order to fulfil determined goals and objectives with higher efficiency. In simple terms
strategic management is mainly concerned with the development of company’s strategic vision,
framing objectives, developing and implementation of strategy and undertaking corrective
measures as to accomplish organisations strategic intentions (Ahammad, Glaister and Gomes,
2020). Main aim of this process is to ensure higher competitive advancements by outperforming
other competitors. Strategic management act as a guide to company that allow them to survive
the changes in business environment.
Present report is been made on Tesco which is conducting their business services in retail
industrial sector. Company was established in the year 1999 and offer a wide range of qualitative
products and services to consumers. Present report include discussions upon comparison between
theory and practice, for this Porter five force analyses is being done in report. Along with this
case study evaluation of Tesco and recovery clan is also included in this project. Lastly risk
management strategy is being mentioned through which entity can control and monitor their risk
effectively.
MAIN BODY
1. Compare theory and practice
Porter five force analyses assist company to identify competition prevailing in respective
industrial sector in which they are operating their functions. With the help of this entity can
identify opportunities and can further take competitive advantages from them. With the
assistance of Porter five forces evaluation management of Tesco can identify changes that can
affecting their organisation functions and can develop strategies against them to assure the
leading image in super market industrial segment:
Threat of substitute products: Low
By evaluating grocery retail sector it has been identified that this market segment is
facing low threat of substitution in terms with services and products of food items (Beirman,
2020). As number of substitute goods in this industry are from organic and off-licensing shops,
small chain of convenience store which is not posing any form of major threat upon leading
3

companies like Tesco. Respective company offers high quality product as well as services in
affordable price range to consumers. However it has been underlined that TESCO can face threat
of substitution of services and products in their non-food item segment. Thus, in order to
overcome this threat Tesco management by taking use of strategic measures like, conducting
their operations with having service oriented approach rather than product oriented and
determining the actual needs of consumers can assure higher competitiveness.
Threat of New Entrants: Low
By evaluating food retail industrial sector it has been determined that, threat of new
entrants is low in this sector as new entrants require high capital investment to establish their
company in marketplace. Along with this has been identified that, this market segment is mainly
captured with supermarkets like Morrison’s, Sainsbury, Asda, Tesco and more who are
satisfying needs and demands of customers with high quality and low price services and products
(Alstete and Beutell, 2020). This makes new entrants to provide their organisational offerings in
exceptionally low price range compared to the leading entities. This enhances the opportunity for
Tesco to gain large number of consumer base and retain them for long period of time. For this
continuous innovation in the services and product segment will assist TESCO to assure
maximum market shares in this sector. Along with this entity also needs to conduct extensive
research and development process in order to bring destructive products and services in this
segment.
Competitive rivalry: High
There is high competitive rivalry in food and grocery retail sector. It has been identified
that Tesco is mainly facing high competition from other leading entities like Sainsbury’s,
Morrison’s, Waitrose, Asda and more. These organisations are providing relatively low price
services and products to consumers. This develops aggressive competitive environment in this
sector which is affecting profitability and leadership positioning of Tesco (Randrup and Jansson,
2020). Thus, respective company by taking advantage of sustainable differentiation strategy can
offer wide range of unique services and products to customers in competitive price range. This
will allow entity to gain more competitive advantages compared to other rivals. TESCO can also
undertake advantage of collaborating with small scale convenience stories, this strategy will
facilitate company go to expand their market reach and gain more market share holdings.
4

Bargaining power of buyer: High
In Retail Industry there is high bargaining power of buyers due to the availability of
various organisations who are engaged in the business operations of providing same or similar
type of standardized services as well as product to customers in price effective range. It allows
buyers to easily shift their intent in order to make their purchases. It been evaluated that
nowadays customers undertake purchasing decision by focusing on two aspects namely low price
and high quality. This makes Tesco to satisfy large base of customers by providing them
products and services by focusing on these two approaches. It helps company to have a powerful
consumer base for long period of time through which they can later reduce bargaining power of
buyer. Along with this, in order to retain customers with company can undertake use of
innovative strategy, heavy discount and affordable price segment. With the help of this, Tesco
can maximize their company profitability at great extent.
Bargaining power of supplier: Low
Suppliers are important individuals for any organisation irrespective of their size and
scope and industry (Cheng, 2020). Especially in food and grocery industrial segment suppliers
play a major role, however it has been evaluated that bargaining power of supplier is relatively
low as large number of suppliers mainly prefer to conduct their business services with market
players like Tesco. It enhances opportunity for Tesco management to acquire raw material and
other products in negotiable price range. However it is essential for Tesco to undertake
advantage of strategies like building maximum supply chain with various suppliers in order to
buy raw materials and other services. This will not only enhances company opportunity for
future competition but also facilitate them to engage in low cost reduction with high quality
goods that automatically increase consumer satisfaction and company profitability.
According to the above evaluation it has been identified that by having proper
consideration of all the five competitive forces Porter five force analysis Tesco can undertake
strategic measure through which they can identify impact of all factors upon organisation
operations in retail industry (Carter, 2020). With the help of this they can gain significant
opportunity and can shape those forces in profitable opportunities.
Practical example
5

As per the above mentioned discussion it has been underlined that TESCO management by
having proper understanding and knowledge of different factors and elements of Porter five force
analyses can identify impact of these factors upon company business and profit earning
capability. Along with this Tesco management is also required to undertake Porter five force
evaluations for their different business sector and further amalgamate them in order to identify
the factors impact upon entity time and cost. Respective entity must also conduct external
environment elements assessment as to make application of this model in company workplace
structure for more profitable opportunities.
2. A case study approach
Case Study of TESCO
Tesco is operating their functioning as a British multinational general and groceries
merchandise with having its leading positioning in retail sector. Company performs their
business operations with more than 4, 50, 000 employees. By evaluating business environment of
retail sector it has been identified that this segment is facing different type of issues in terms of
instability in economy, aggressive competition, economic recession and more. All these issues
are having direct and indirect impact upon entity profit generation capability. This makes
organisation to formulate strong strategies in order to assure their long term sustainability in
market (Aula and Mantere, 2020). Due to the leading competitors like Morrison’s, Asda,
Sainsbury and more Tesco is losing their customers on continuous basis, as these organisations
are offering low price services and products to customers. Thus, to overcome this issue Tesco by
taking advantage of innovation, unique price strategy and by providing their customers with
heavy discounts can regain their competitive position in market place. According to the
evaluation has been identified that TESCO faces loss in Japan and America in terms of losing
consumer satisfaction. This issue is affecting company overall sales and profit earnings
capability. Further it has been evaluated that Tesco also faces issues in terms of continuing their
business operations by making effective alliance with government, health organisation and
industry. Along with this, corporate policy also affects Tesco number of operations. In addition
to this company is also being affected by safety a concern which is creating dissatisfaction in
their employees. Another challenge which is affecting Tesco is related to dynamic change in
lifestyle and taste of consumers. Thus, it is essential for Tesco management to evaluate all these
issues and identify strategies to overcome them in order to regain their position in retail market.
6

By evaluating above mentioned case analysis of TESCO it has been determined that health
and safety issue is a major challenge which is affecting business functioning and operations. As
employees acts as key resource of revenue generation thus dissatisfaction among them lead
entity towards lower level of productivity which in turn decreases company profitability. This
issue is not only affecting employee’s performance but also impacting satisfaction level of
consumers. As dissatisfied employees cannot serve customers effectively thus, it is essential for
Tesco to effectively overcome this issue by assuring collaboration with health organisation and
respective government agencies (Suriyankietkaew and Petison, 2020). Entity is required to
provide their employees with a healthy workplace environment with proper safety and health
measures. In addition to this company is required to make proper alliance with health
organisation as to have proper nutrition label on the product. For this it is essential for
management of Tesco to eliminate extensive amount of salt as well as situated fat from their
products. It will allow them to satisfy their customers with healthy food and eating’s. Along with
this, with the implementation of important legislations and safety laws in entity workplace
TESCO can maximize employee job satisfaction which automatically maximizes employee’s
performance and contribution towards company goal, which is to serve their customers with best
services.
3. A recovery plan
Recovery plan:
Due to the closure of organisational operations in USA and Japan Tesco is facing with
the issue of continuous decrease in profit rations. Thus to overcome this, risk management
strategies is being advised to be implemented along with effective measures and strategies in
order to identify actual cause which is leading dissatisfaction among consumers and employees.
However to identify accurate strategy and measures Ansoff matrix will proves to be an effective
model through which entity can maximize their performance at great extent:
ANSOFF matrix
It is a strategic framework through which organisation can maximize their product and
market segment. With the help of this matrix entity can effectively conduct proper planning and
implementation of strategies through which they can also maximize their market operations
efficiency while identifying risk factors:
Market penetration:
7

In this strategy company is required to have their main emphasize upon enhancing their
existing base of sales of services and products in different market segment. For this management
of Tesco by taking advantage of various tools and strategy can make increase in sales of existing
products as well as services in different market segments. For this market penetration strategy
will allow company to offer innovative and unique organisational offerings to consumers. Along
with this with the assistance of attracting advertising techniques TESCO can maximize their
market reach (Lebrón, Sanford and Ellison, 2020). With the evaluation of above mentioned case
it has been identified that TESCO is facing bad organisational performance in certain
geographical market segment. Thus, in this entity must undertake advantage of competitive
pricing strategy, attractive marketing campaigning’s and offering special offers services to
consumers in order to increase their existing organisational sales.
Product development:
This strategy states that development of product or service is required to be made by an
organisation in order to remain in competition. Tesco is required to enhance their market
visibility, for this entity management must come up with new facilities, products and services
along with attractive features. With the help of this they can influence purchasing behaviour of
consumers. TESCO is conducting their business operations in global segment and in different
market economy thus, it is essential for company to launch their services and products according
to every economy and taste and preferences of customers. With the help of this company can
have strong base comparatively to other competitors which will also allow them to serve
customers with affordable price offerings.
Market development:
According to this strategy it is essential for an entity to maximise their market reach by
providing their services and products in new segment of market place. In this company can offer
their existing as well as new products in different market. It will facilitate company to expand
their market reach through which they can assure more profitability. By evaluating above case
scenario of Tesco this has been determined that, in order to enhance their profitability company
can undertake use market development strategy. For this extensive research as well as
development process is required to be made by management of company in order to evaluate
factors Trends and element that are prevailing in respective market segment. Along with this it is
also essential for company to have proper understanding of the elements that lead towards their
8

business operation failure in American and Japan market in order to develop strong strategies
against time for future development.
Diversification:
This strategic somehow proves to be difficult to be implement by an organisation, as in this
entity is required to provide new services as well as product in a new segment of market to new
consumers (Almutairi and Sriramesh, 2020). According to the evaluation of above case study of
Tesco this has been evaluated that, company faced failure in effectively implementing
diversification strategy, for example in Japan and America. It is not an effective strategy and can
somehow turn out to be unfavourable for Tesco productivity profitability and global market
image.
According to the above mentioned analysis this has been evaluated that TESCO
management with the implementation of penetration strategy can assure high success. Along
with this, it is essential for entity to properly identify the factors or elements that affect company
business operations in American and Japan market. Along with this, TESCO research and
development team are required to engage in extensive research in order to have proper
understanding of factors that can affect their growth. This will allow companies to develop
strategies against the with the assistance Ansoff matrix analysis. By evaluating all the factors of
this analysis market penetration strategy will be effective for company growth and success.
4. A risk management strategy
Business environment is inclusive of different type of factors and elements that can affect
functioning and profitability of organisation in adverse way. However, proper evaluation of
business environment will allow organisation to gain competitive advantages. It has been
evaluated that it is essential for Tesco to evaluate different type of risk that are prevailing in
internal and external environment in order to maximize their growth profitability and
international image (Rascão, 2020). For this by taking use of risk management company can
maximize their profit earning capability.
Risk identification:
Risk identification is a primary stage which is essential to be undertaken by an
organisation. With the help of this they can identify possible risk that can affect their business
strategy and growth. By evaluating above mentioned case study, it has been identified that risk is
associated of losing of share in new market segment. This risk is having tendency to adversely
9

impact company overall profitability thus, it is essential for management of entity to identify all
the factors and elements that can affect their success and growth in order to develop strategies
against them.
Qualitative risk analysis:
The factor states that it is important for company to have proper knowledge and
understanding of quality risk associated with performance of company. By undertaking
advantage of this strategy TESCO can access qualitative risk that can affect performance and
profitability through which entity can face major decrease in their market share holding.
Quantitative risk assessment:
By taking advantage of qualitative method business organisation can evaluate risk
through which they can identify the extent at which can have negative impact upon profitability
of company. Risk can have negative impact upon revenue generation capability of company that
can also affect their future growth (Randrup and Jansson, 2020). It has been identified that Tesco
is facing risk related to implementing strategy for this it is essential for entity to improve their
existing product and services in existing marketplace.
Risk response planning:
In this entity is required to conduct proper planning with an aim to undertake measures to
respond to the risk. It has been identified in context with TESCO that, by taking advantage of
strong plan entity can effectively execute their strategies with the help of different techniques. It
will allow them to lower down the impact of risk upon their organisational functions in time
effective manner (Aydın, Nyadera and Önder, 2020). Company by making improvement in their
products and services in existing marketplace can enhance their overall sales of organisational
offerings. As company improve its product within the current market which will help
organization in reducing the liabilities of the firm as well as increasing the sales in the current
market which can match the revenue of market expansion techniques.
Risk monitoring and control:
According to this, organisation is essential to take advantage of various techniques as well as
tools to respond to risk in effective manner in order to ensure overall success (Bratton and Boak,
2020). Proper control and monitoring is required to be undertaken by Tesco in order to have full
control over risk. With the help of this they can minimise negative upon company productivity.
Management of Tesco is being recommended to implement risk control and monitoring
10

techniques in order to assure success of their plan to expand their market growth and
profitability.
CONCLUSION
According to the above mentioned report it has been concluded that, strategic management
allows an organisation to effectively overcome and gain opportunities from the changes that are
prevails in business environment on continuous basis. With the help of strategic management
entity can outperform their rivals and can achieve higher business growth. There are different
types of factors in internal and external business environment that are affecting organization
activities and functioning. For this it is essential for company take advantage of different theories
and practices such as Porter five forces analysis, Ansoff matrix, risk evaluation and more. This
will facilitate organisation to maximize profit earning capacity while overcoming challenges in
effective manner. Also it will assist company to enhance their profitability and long-term
sustainability in respective industry.
11

REFERENCES
Books and Journals
Ahammad, M.F., Glaister, K.W. and Gomes, E., 2020. Strategic agility and human resource
management. Human Resource Management Review, 30(1), p.100700.
Michaud, V. and Tello‐Rozas, S., 2020. Integrating normative values and/in value creation: A
strategic management decision aid tool for social enterprises' values practices. Nonprofit
Management and Leadership, 30(3), pp.377-398.
Almutairi, T.M. and Sriramesh, K., 2020. Strategic management of public relations in
Kuwait. Corporate Communications: An International Journal.
Lebrón, M.J., Brannon, D., Sanford, D. and Ellison, L., 2020. Applying Theory to Practice:
Implementing a Live Case Competition in a Capstone Strategic Management
Course. Journal of Management Education, 44(1), pp.66-100.
Suriyankietkaew, S. and Petison, P., 2020. A Retrospective and Foresight: Bibliometric Review
of International Research on Strategic Management for Sustainability, 1991–
2019. Sustainability, 12(1), p.91.
Aula, P. and Mantere, S., 2020. Strategic reputation management: Towards a company of good.
Routledge.
Cheng, E.C., 2020. Knowledge management for improving school strategic
planning. Educational Management Administration & Leadership, p.1741143220918255.
Alstete, J.W. and Beutell, N.J., 2020. Delivery mode and strategic management simulation
outcomes. Journal of International Education in Business.
Aydın, G., Nyadera, I.N. and Önder, M., 2020. Strategic Management in Turkey’s Public Sector:
Reforms and Application Issues. Public Organization Review, pp.1-16.
Randrup, T.B. and Jansson, M., 2020. Strategic management of urban open spaces. In Urban
Open Space Governance and Management (pp. 190-203). Routledge.
Bratton, J. and Boak, G., 2020. STRATEGIC MANAGEMENT, INNOVATION AND
LEADERSHIP. Organizational Leadership, p.35.
Met, İ., Uysal, E.U., Özkaya, K.S. and Orç, E., 2020. Key Success Factors for Strategic
Management in Digital Business. In Digital Business Strategies in Blockchain
Ecosystems (pp. 283-304). Springer, Cham.
Rascão, J.P., 2020. Strategic Management and Entrepreneurship. International Journal of
Strategic Decision Sciences (IJSDS), 11(1), pp.35-55.
Warren, K., 2020. Engineering of Strategy: A General, Unified Theory of Performance and
Strategic Management. System Dynamics: Theory and Applications, pp.69-89.
12

Carter, W.R., 2020. Tackling Weaknesses in Students’ Financial Analysis Capabilities: A Value-
Based Exercise for Strategic Management Courses. Management Teaching Review,
p.2379298120909513.
Beirman, D., 2020. Restoring tourism destinations in crisis: A strategic marketing approach.
Routledge.
13