Critical Examination of Porter's Five Forces and Tesco's Relevance

STRATEGIC MANAGEMENT
(Critical examination of the porter’s five forces concerning the relevance of
Tesco)

EXECUTIVE SUMMARY
Each and every company strives to achieve many objectives and one of the vital
among them is survival and development for a longer period of time within the industry they
operate. Within the business corporation, the strategy involves long term plan of the company
for making sure that it has a competitive advantage as compared to rivals in the market.
Competitive advantage helps an organisation to differentiate itself from rivalry firms as well
as to maintain and improve its market share (Rothaermel, 2015). This supports the company
in cementing its position within the sector.
Further, the strategic management concept is required to be incorporated into the
leadership team for assuring that the firm will fulfil this purpose. The Porter’s five forces
model has been applied in this study to evaluate the strategy of Tesco and its competitive
advantage. The study will attempt to critically examine the relevance of Porter's five forces in
current marketing practices by taking example of Tesco case. The mentioned theory will be
discussed and compared. Practical example and application of Porter's model will also be
evaluated in the final section of the report.

Table of Contents
Introduction to the Company.....................................................................................................1
Overview of Porter’s Five Forces Model and Application to Tesco.........................................2
Bargaining power of the suppliers..........................................................................................2
Bargaining power of buyers...................................................................................................2
Threats of Substitutes.............................................................................................................3
Threats of New Entrants.........................................................................................................4
Competitive Rivalry...............................................................................................................4
Criticism of Theory and its Application to Tesco......................................................................5
Effectiveness of Porter’s Five Forces model to Tesco...........................................................7
Limitation of the model for Tesco..........................................................................................7
Recommendations to Tesco....................................................................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................8
List of Figures
Figure 1: UK Grocery Market Share..........................................................................................2

Introduction to the Company
Tesco plc is one of the largest grocery retailers not only in the United Kingdom but
the world. Founded in 1919, the company has more than £m 57,000 turnover and recorded
£m 992 as profits in FY 2018. Though Tesco has a commanding position in the market, there
are many firms and supermarket which give intense competition to Tesco. The majority of
these competitors are local retailers of the United Kingdom (Harrell, 2011). The company has
been growing fast from the past several years because of its better customer services. The
leading global brand currently has operations into more than 10 countries other than the UK
such as Ireland, China, Malaysia, India, Czech Republic, Poland and Hungary.
The customer-centric philosophy of the company helps it to provide excellent
shopping services to consumers for realizing company’s objectives. The company aims to
increase customer loyalty and overall consumer base. The key success factor behind realizing
these strategies are product range, service quality, competitive pricing and innovation such as
recently launched ‘Click & Collect’ services. Pertaining to this, the multinational retailer of
UK was able to gain an economic edge over the other rivalry firms operating in the same
market (Jenkins and Williamson, 2015).
Figure 1: UK Grocery Market Share
(Pettinger, 2014).
The above figure illustrates, the market share of Tesco and leading supermarkets of
UK’s grocery market industry. ASDA, Sainsbury and Morrisons have around 17, 16 and 11
percent of total market share. Tesco is the leader among all by having 29 percentage of the
1