Strategic Management: Tesco's Growth Strategies and Competitive Advantage

This report provides a detailed study on Tesco's strategies for growth and effective management. It includes an analysis of the external business environment, such as Porter's Five Forces and PESTLE analysis. The report also examines Tesco's strengths, weaknesses, opportunities, and threats through SWOT analysis. It highlights the company's mission and vision, as well as its valuable and rare resources. Overall, it offers insights into Tesco's strategic management and competitive advantage.

STRATEGIC
MANAGEMENT

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Porter five force model................................................................................................................3
Pestle Analysis.............................................................................................................................5
TASK 2............................................................................................................................................7
SWOT Analysis...........................................................................................................................7
VRIO Analysis.............................................................................................................................9
Rationale......................................................................................................................................9
TASK 3..........................................................................................................................................11
Strategic Advantage...................................................................................................................11
Porter’s Generic Model..............................................................................................................12
Horizontal and Vertical Integration...........................................................................................13
Bowman’s Clock Strategy.........................................................................................................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
It is very essential to determine all the factors which help business to increase its
efficiency to develop and achieve its objectives. Strategic management is the framework which
helps business organization to reduce threats and increase opportunities to compete in market
and increase their potential effectively. This report provides detailed study on strategies of Tesco
which helps the company to grow and manage all of its work effectively. Report also provides
effective understanding about external business environment analysis to determine competitive
advantage effectively. this also helps the company to develop effective strategies to grow and
expand in market and gain higher profit margins effectively.
TASK 1
Porter five force model
Porter five force refers as a strategic model which is used to analyse existing competition.
In other word, five competitors forces which gives shape to each industry and supports to
identify weaknesses and strength and weaknesses of organization. It is not only used to identify
structure of organization but also determine corporate strategy (Varelas and Georgopoulos,
2017). It encompasses five competitors forces such as competition is the industry, potential of
new entrants into industry, power of suppliers, power of customers and threats of substitutes. To
analyse external environment of Tesco chooses porters five model which is described below:
Bargaining power of suppliers (Low)
Tesco is a multinational company which retails groceries to customer across the world. it
has low bargaining power due to high presence of suppliers in the retail industry. So, non-
compatible suppliers can easily replace by other suppliers which is golden opportunity for
organization because they can get products or goods from suppliers at low costs for enhancing
their profit margin.
Bargaining power of customers (High)

Tesco is supermarket retail industry which has wide line of product portfolio and offer
goods and services in varieties such as financial services, mobile services, groceries, home
accessories, clothing and other items. As similar product offers by other companies i.e.
Sainsbury, Aldi, Morrison and Lidl. So, these companies are major competitors of Tesco because
they offer similar products on lowest cost. Due to high availability of supermarkets enhance
power of bargaining of customers (Vargas-Hernández and Garcia., 2019). To enhance selling
infrastructure of products offers products or services at different cost that becomes easy for
customers to switch Tesco to other competitors when they retail products at high cost. Highly
availability of similar product automatically decreases charge of products which enhances client
power to elect between competitors who retails products or goods in same price range.
Threat of substitutes (High)
Currently, Threats of substitutes is too high in grocery market for both food-item and
non-food item. Tesco can get face such kind threats which can come from other retailers in other
supermarkets. These markets can retail not only food items to customers but also non-food items
like clothing, financial services, home accessories and electronics. Apart from this, competitors
can create strong connection with customers by including non-food retailers and department
stores along with both scale and distribution for competing with Tesco. Competitive companies
are BHS, Primark, House of Fraser and Debenhams who can offer different item except groceries
and non-groceries item to compete with Tesco.
Competitive of rivalry (High)
The big four companies Morrison, Sainsbury and Asda are the supermarket companies
which gives intense competition to Tesco. Competition of these rivalries are too high because
they offer similar products i.e. groceries, clothing, electronics, furniture’s and highly relevant to
cost that automatically makes products to switch cost low. Where customer can easily shift
Tesco to other who offers product at lower cost along with good quality. It directly gives impact
sales infrastructure of Tesco. Due to similar products creates cut throat price war among big four
companies in term of products advertisement and product innovation. Currently Tesco faces
major competition from German discount Aldi and Lidl who offers high discounted product
along with good quality up to 40% which directly gives impact on Tesco’s market share.

Threats of rivalry (Low)
The threats of rivalry is very lower because big four supermarkets has given market
structure up to 69.8% of groceries market share. Where great competition among small stores
like Lidl, Aldi, Ireland and Waitrose which tries to achieve large market share that shows doesn’t
get chance for another new entrant. In case new entrant wants to expand their business in retail
sector have to offer high quality products along with competitive product price. In addition, this
strategy already has followed by German stores Aldi and Lidl and offers up to 405 price discount
a compared to other retail industries.
Porter five force Tesco Asda
Bargaining power of
suppliers Low Low
Bargaining power of
customers (High) High Low
Threat of substitutes High Low
Competitive of rivalry High High
Threats of rivalry Low Low
Pestle Analysis
It is a strategy framework which is applied to analyse and supervise the external
environmental factors that predominately gives impact on business performance. The main goal
to use this framework for understanding industries scenario which is faced by organization
within it’s existing market domains (PESTEL/PESTLE Analysis of The Retail Industry. 2018). It
is applied to analyse current scenario of retail industries in which Tesco operates. It is described
below:
Political factors: Currently Brexit gives impact on retail industry because it implements several
change in policies of foreign trade that impact the supermarket companies to achieve higher

revenue in market effectively. Due to political instability in UK declines the growth
opportunities for retail market. Overall scenario of retail market gives impact on Tesco because it
also operates in retail sector. Due to instability of foreign trade policies unable to trade product to
other potential client by Tesco that decreases revenue of business.
Economic factors: Currently Recession period has affected the economic infrastructure of United
Kingdom and enhance the inflation rate of the country. It directly gives impact on retail industry
where Tesco faces difficulty to survive with low cash flow at high interest rates. On the other
hand, Brexit also increases unemployment rate and enhance the foreign exchange rate of
currency in country (Hernández and Garcia, 2018). Due to high employment rate reduces
demand of customer that decline sales and profit margin of Tesco in supermarket for competing
and survives in retail industry.
Socio-cultural factors: Due to high unemployment rate reduces income level of people in
country. It gives impact on sales of retail industry because customer switches their lifestyle and
trends. Currently, Tesco have to decline product cost to influence purchasing behaviour of
customer as result doesn’t achieve profit margin on products. Apart from this, UK faces other
issues such as improve life expectancy rate ad decreases birth rate which increases majority of
the old age customers. It also gives impact on retail industry for example Tesco has product
range for youth segment in clothing industry and food industry. Due to old age population have
to change product range so that can meet old age customers objectives.
Technological factors
Due to continuous change in customer trends and purchasing patterns technology of
business has reduced capability to attract clients and meet their objectives in existing
supermarket. Most of the organization in supermarket continuously creates innovation new
technology that reduces market share of Tesco to achieve profit margin for improving its retail
business in UK and grow abruptly. Currently Tesco gets loss in economy due to adaption of new
technology again and again. It helps company to take competitive advantage in retail market but
leads uncertainty in business operations.
Environmental factors:

Environmental factor gives impact in the global retail market due to changes in
government norms for keeping safe environment. In addition, customer awareness enhances to
buy informatively. To comply with government norms provides effective information about
overall products and services which are offered by Tesco to customer. Organization aware
customer through effective marketing campaign so that they attract and improves selling scale of
Tesco. Due to adaption of the campaign strategy enhances cost of the company. Apart from this,
Tesco adapts corporate social responsibility activity within organization which improves it’s
brand image in retail market effectively but it affects profit margin of organization (Rastogiand
Trivedi, 2016).
Legal factors
Tesco operates in various countries which gives power to organization for expanding
their business. Currently it become difficult for organization to adapt different law and regulation
according to countries. Due to continuous change in trading policies by Brexit gets impact on the
potential of retail business for attaining higher competitive advantage and expand business
effectively.
TASK 2
SWOT Analysis
It is simple but quite useful tool for examining organization strengths and weaknesses,
opportunities and threats. It supports to build mission and vision of organization so that they
align to the demand of marketplace (Swot Analysis of Tesco Plc, 2016). It assists organization to
identify that what they do well and aware what organization locking for. In addition, this
framework supports to minimize risk and enhance greatest opportunities for success. To analyse
internalenvironment of Tesco applies Swot analysis model.
Mission and Vision of Tesco

Vision:The vision of Tesco to broaden scope of the business across the world and build and to
build value for customers to generate their lifestyle loyalty (Mission Statement of Tesco Essay.
2018).
Mission: there are several mission statements which are given by Tesco to gain Vison of
company over the period. Mission is to become a successful retailer. To enhance market share of
company in UK. To become strong in non-food item and food item in supermarket. To upgrade
positioning in global market.
Strength: Tesco has high brand image in global market and famous as leading retailer in the
world.it has 27.2% market share in the UK’s retail market. Tesco offers their services around the
world through their subsidiaries which are operated in different countries like India, Poland,
china, Ireland and others countries that biggest strength of business. Organization has loyalty
card and club card where club card supports organization to understand behaviour of customers
while loyalty card is used as marketing tool by Tesco to build trust of customer on brand.
Weakness: Organization failed to expand their business in japan and USA which demonstrate
that organization has weaknesses in understanding certain market. Organization implements low
cost strategy to become cost leader in the UK market but it gives negative impact on economical
scale because they unable to generate high profit margin on products.
Threats:Tesco has major competition in the UK’s grocery market because most of the companies
retails similar products. Organization is a market leader because it has contribution up to 27.8%
market share in UK while other companies like Asda, Morrisons, Aldi and Lidl tries to close the
gap with 15.8% market share. Pricing policies of Aldi and Lidl gives significant impact on
business profile.
Opportunities: Tesco has opportunities to explore their business in different countries i.e.
Indonesia, Turkey, Mexico Brazil and other countries. These are emerging economies countries
which can generate high revenue when Tesco offers innovative products. Strategic alliance with
other MNC’s strategy is also a golden opportunity for organization because it helps to attract
customers to buy products and helps to attracts best talent for applying job.

It can be analysed through Swot analysis model that Tesco’s mission and vision
statement has aligned to demand of marketplace.
VRIO Analysis
It is a strategic tool which is used to determine capabilities, resources of organization
which can lead competitive advantage in business (Zachary Edward,.2018). This model is
applied to analyse resources and capabilities of Tesco which is explained below:
Valuable: Tesco has good financial position which is highly valuable for organization it supports
to investing for external opportunities that arises as per the market situation. Employees are
valuable resource for Tesco which helps to lead more productive output for company. Patents are
valuable resources which permits business to sell their product without competitive interference.
Rare: There are various resources which are rare for Tesco such as financial resource,
employees, patent and distribution network(Huang, 2019). These resources are rarely used by
other competitors and supports Tesco to gain competitive advantage.
Imitable: There are various resources of Tesco which can easy to imitate by competitors such as
financial resources, employees. Distribution network, food items and patents are difficult to
imitate because it is too costly which is major strength of Tesco.
Organization: Financial resources of organization are well organized for capturing values which
is determined by the VRIO analysis. Patents for trading products are not well organized in Tesco
which is examined by VRIO analysis. When organization starts up top selling patented products
before expiry patent can create sustainable competitive advantage.Distribution network is well
organized which supports organization to meet customer objectives by offering desirable product
on time.
Rationale
It is very essential for Tesco to determine all the internal and external factors which helps
the company to increase the productivity in designing in productivity and providing better

services and quality products to increase customer base and gain higher profit margins
effectively (Carroll, Primo and Richter, 2016). Tesco has identified different customer segments
which increase the value proposition to gain higher profit margins effectively. Company also
uses the effective distribution channel to deliver the products with low cost and high
commitments. This also helps to increase the customer relationship and increase the productivity
of the company effectively. Tesco provide better information to customer which increase their
value to become loyal in the market and company also focuses on innovation of products and
services which also helps the company to attract more customers and satisfy them effectively.
This is also very essential for the company to decide all the factors to develop the effective
understanding about all the innovation and also train employees to increase their skills and
knowledge to motivate and develop effective healthy working environment effectively. Tesco
has improved their stores by improving all the factors which as the quality to maintain all the
information and develop better opportunities for the companies effectively. Tesco has adopted
technology which improved the information collection framework to formulate effective
strategies and increase their satisfaction effectively and also make them loyal to the company to
increase the sales and compete in market effectively. due to increase in demand and high
competition in market Tesco has developed online stores to foster all the services with the use of
technology to increase the efficiency of the company attract more customer (Witcher, 2019).
Tesco is also effective in implementing all the corporate social responsibility which helps to
improves awareness in the society about all the environmental factors. This also increase brand
value of company And motivates many investors to increase their trust and invest in the
company so that Tesco can expand in market and increase the value of its customers. Due to
increase in customer demand it is very essential for the Tesco to analyse all the behaviour and
develop customer oriented strategies and also improve workforce by training and development
which helps to increase customer engagement level in the company to increase salsa effectively.
it is very essential for company to become more effective and understand the behavioural
patterns of customers to enhance its services and quality of products according to needs and
wants of customers. This helps to fulfil the gap between current ad expected resources in the
company for customer satisfaction. Company has also used many different models and theories
to attract more customers by increasing the quality of services and products. With the help of
innovation and commercialisation strategies Tesco improved its retail store network by

formulating effective internal and external analysis which help to understand all the factors.
Tesco also uses direct distribution channel which also increases the profit margins of the
company reduces the cost of delivery to its customers this type of delivery system is very
effectively in develop effective perceived value and positioning Tesco as a brand in UK market
effectively.
TASK 3
Strategic Advantage
Strategic advantage is the combination of different types of strategies which are
formulated by busies organisation to attain competitive advantage and increase its productivity in
market effectively. This is also very essential for Tesco to examine all the factors to increase the
performance in market and also attract more customers effectively. Company has implemented
many strategies which has increase the potential of the company and increase competitive
advantage in market effectively.
Innovation
Innovation strategy has helped Tesco to become more effective in increase it s performance and
attracting more customers (Steinbach and et.al., 2017). Innovating more products and services
has helped to motivate all the factors which help to increase the potential of the company and
helps to gain higher profit margins effectively. With the innovation of new products ad services
Tesco also improved the opportunity to increase satisfaction of customers like installing kiosk
machines at checkout counters to reduce billing queue after the purchase at the store effectively.
This has also helps the company to retain maximum customers in the company and increased
profit margins effectively.
Training
Tesco has adopted training strategy to increase the potential of their workforce which can
attract more customers and also provide effective information about the behavioural pattern of
the customers this also helps to change the policies and strategies according to market trends and

increase the efficiency of the company. This is also very essential for the company to develop
better workforce which also reduces the cost of operation and develop effective decision making
to resolve issues and problems of customers to increase their satisfaction level. This in return
helps to increase the brand value of Tesco in market to receive higher premiums generated from
brand equity of each product.
Price
This strategy helps Tesco to target on lower and middle class customers to increase
customer base and increase sakes of the stores.. as the demographic composition of developing
countries and developed countries are maximum upper middle class and lower middle class
which can afford to buy from store. By develop effective marketing strategies Tesco increase the
base and increase the opportunity to become more effective in the market effectively.
Porter’s Generic Model
Porter’s generic model is formation of different strategies which helps the business to
adopt any one according to their strengths and market opportunities to achieve competitive
advantage in the market effectively. This also helps Tesco to increase the profitability to invest in
business with lower risk,
Cost Leadership Strategy
This strategy focuses on low cost efficiency of business to attract more customers and
provide the low prices products and services (Bromiley and Rau, 2019). This also increases the
competitive advantage of the company and increases the profit margins effectively. Tesco need
to adopt this strategy as it helps to improve the market share by cost efficiency which also
attracts more lower and middle class customer segment to increase sales effectively. This
strategy helps business to become leaders of the market by reducing its cost to attract more
customer and increase sales. However this strategy is not effective as being the low cost sellers
in the market also has higher risk of competitors to bring more low cost with new innovation
this can reduce the efficiency of Tesco in market and also impact its profit margins negatively.
By increasing the external market analysis company can understand all the current trends to

implement cost efficiency and Adopt technology. Tesco can also adopt effective logistics to
reduce the cost of delivering goods from manufacturing to stores or directly to customers.
Differentiation Strategy
Differentiation strategy focuses on the innovation of the products and services by te
business organisation which increases its features to attract more customers and compete in
market effectively. This also help the company to motivate their employees to increase their
knowledge and support mission of company to increase product range and retain customers as
innovation increases the product ranges of Tesco and reduces the bargaining power of customers
too increase the profit margins of the company effectively. This also help the company to
compete in the market effectively and motivate customer to become loyal. By implementing
different types of benefits this also helps customers to increase perceived values of the company
to increase its brand value in the market effectively.
Cost Focus Strategy
In cost focus strategy Tesco target one market to with low cost strategy to increase the
competitiveness in the market and increase the productivity to increase profit margins in the
effectively (Honggowati and et.al., 2017). This also helps the company to understand all the
external market factors and policies which can helps Tesco to reduce overall operational and
production cost of the company to decease the price of goods and services. This also helps the
company to become more effective in increasing customer satisfaction level in the market
effectively.
Differentiation Focus Strategy
Differentiation focus strategy helps Company to understand the specific needs and wants
of a particular market to increase the quality of services and products. Tesco uses this strategy to
attract more customers in one market segment this also helps the company to evaluate effective
opportunities to develop base in that market and increase profit margins. As all the markets have
different resources it is very important for the company to differentiate every products according
to market competition and archive better scale to become leader in the market effectively.
Horizontal and Vertical Integration

Horizontal Integration
Horizontal integration is the procures of any business organisation to develop effective
production activities to produce quality product and services at the supply chain to increase the
size of business and gain better opportunity to increase profit margins effectively. Horizontal
integration can help Tesco to increase the expansion of the business by collaboration with other
business in the same market which also helps to increase the customer base and gain higher
profit margins effectively. This also increases the information of Tesco to make effective
decision with the help to other collaborated business. Company can also implement acquisitions
by purchasing other business in the market which have the treat to reduce potential in market
effectively.
Vertical Integration
Vertical integration is the process of growing and expanding business in the supply chain
and collaborating with different businesses which helps to reduce the cost of company (Meyer
and Xin, 2018). Tesco can use vertical growth strategy by integrating businesses which are
present in the supply chain like, logistics, retail, manufacturing, distribution. This also reduces
the cost of the company and provides a better opportunity of the company to increase profit
margins to invest and attract more customers and increase their satisfaction effectively. There are
two types of vertical integration, forward and backward strategy. This helps to provide better
control as Tesco has already a retail store which is directly selling products to its customers can
adopt backwards integration in which the company has to invest in the manufacturing and
distribution of the products and services to reduce cost and increase profit margins in the market
and compete in market effectively.
Bowman’s Clock Strategy
This strategy is the part o marketing strategy which helps to increase the potential of
business to compete in market and increase profit margins in the market effectively. This
strategy helps the Tesco to position its brand in market by analysing strategy and positioning of
competitors in the market to increase its efficiency (Höglund and et.al., 2018). This strategy help
tom increase the potential to attract more customers and also gain higher profit margins. Tesco
uses this strategic model to position its products in the market and attain higher market share. As

the best and effective strategy which is used by Tesco is differentiation positioning which helps
to increase the perceived values due to high quality of products and services.
CONCLUSION
In this report it is concluded that it is very essential for business to analyze its external
and internal environment factors which could also impact the productivity of company to attain
competitive advantage. Report discussed external analysis and examined different types of
resources which helped business to gain competitiveness in market. Report highlighted different
strategies which were used by Tesco to increase its productivity in market and also increased its
profit margins to attract more customers effectively.

REFERENCES
Books and Journals