Strategic Management of Tesco

This report analyzes the strategic management challenges faced by Tesco in the context of emerging e-commerce and internet culture. It examines the company's SWOT analysis, PESTLE analysis, and Porter's Five Forces model to understand the impact of these factors on Tesco's business. The report also explores risk management issues related to e-commerce and outlines strategies Tesco has implemented to address these challenges.

Strategic Management
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Issues faced by Tesco with respect to emerging e-commerce and internet culture.....................3
Various models of strategic management....................................................................................2
Risk management issues related to E-Commerce........................................................................4
Strategies to resolve the risk........................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
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INTRODUCTION
Strategic Management refers to formulation and implementation of objectives which
company wants to achieve. This is done by the top management of an organisation or the owner
who wants to achieve objectives of a company. The present report is based on Tesco which is a
multinational British company who deals in selling of groceries and general merchandise. It was
found in 1919; today Tesco is a leading company in retail industry with the ninth position in the
world in terms of revenues earned by company and the largest retailing store in UK. In this
report, we will see the Risk Management in relation to an emerging E-Commerce and internet
culture. In this report will present the manner in which strategic management will be applicable
to the problem of e-commerce facing by Tesco. Further, it also entails risk management in
relation to emerging e-commerce culture and internet which can be used by Tesco for effectual
management.
Issues faced by Tesco with respect to emerging e-commerce and internet culture.
The e-commerce concept has brought a revolutionary change in the field of retail
industry. The retail industry initially shows boom in the starting period of this trend but slowly it
became a threat and starts reducing the profits of a company (Mathur, 2011). With emergence of
e-commerce business, European retailers’ faces problems like deteriorating external
environment, increasing fixed cost which leads to increased capital expenditure and eventually
brings down margins of these retail companies'. More-over companies are pushed to make huge
investments to develop new channels to keep in pace with updated technologies and to
effectively compete new entrants in these markets.
Tesco is a leading brand in the retail market, having huge size of business and varying
range of markets from Super markets to Hypermarkets and Convenience shops, it served in many
areas of the world. Unlike others, Tesco does not remain untouched by the e-commerce trend and
internet culture due to which the company has adopted to a policy of developing an online for
competing with the rival firms (Ferrell and Hartline, 2010). Tesco launches an official website
stating as Tesco.com in 2000. Even, though company is facing certain issues in relation to e-
commerce and internet culture.
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Some of them are:
 The security is the main motive when a customer’s shop online, it requires security for it
password details, account details and it transaction procedure. These security issues are
faced by the company as Tesco online mechanism is not as strong as it is other
competitors. This hampers the sales of the products/ services of company on these online
platforms.
 Products which are selling through website often do not match quality standards. This in
turn places negative impact on the satisfaction level of customers and thereby influences
brand image (Hyde, 2014). Tesco is a leading brand and have the finest quality products
for it sales, but the product which is sell off on online channels lacks the quality standards
of what Tesco offers to it customers due to this company suffers the sales. In addition,
products are been altered when due to shipment of them to other places or countries.
 Many parts of the world is still unaware of internet technology and do not use them for
their shopping needs. This issue creates a barrier for Tesco to reach these places and
expand its business over there.
 People in underdeveloped and developing nations suffers from band with, and internet
speed, they lack access to hassle free internet (Kiptoo and Mwirigi, 2014). This makes
loss to company as people will switch to local and tradition stores over online websites or
online shopping.
 The emergence of e-commerce in retail business has reduced needs of human resource as
brick, mortar shops are converted into official’s websites and here the company need not
required the staff which it requires in traditional shops. Tesco operation through online
platforms has created unfavourable environment within organisation has labourers in
organisation are on strikes due to their job terminations and increasing unemployment in
the economy thus leading a threat to working and production of company.
 Delivery issues are not new problems in the internet shopping. Customers must wait for
more than 6-7 weeks to get there ordered delivered. Tesco is a grocery retailer thus the
product ordered on websites is of daily use and needed to be delivered on time before
they get damaged (Njeru, Stephen and Wambui, 2014). These issues affect operations of
Tesco and demand a strong network for distribution channels.
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 Increasing financial and capital expenditure act as burden on company. There is a need to
be technologically upgraded and this demands in a new job roles in the organisation.
Company needs to developed hardware to support the upgrades; there will be a training
session to make existing employees aware about new technologies. This all results in
burden over company and it reduce the investments for other important areas.
 Further, the company needs to have a secure website, which means websites of company
should be free from viruses, if websites of a company is been backed by any viruses or
cookies it may hampers it performance (Abraham, 2012). As these viruses can attack the
personal computers of the consumers and causes harms to their data.
Various models of strategic management
To show the impact of emerging e-commerce and internet culture on Tesco, various
models of strategic management such as SWOT analysis, PESTLE analysis, Porter's Five
Models have been used.
SWOT Analysis
 Strengths: Tesco enjoys 31.6% market share which makes it third largest in the world
and biggest retail company in UK. It means company has power to turn out competition
in its favour and gain huge revenue. The strength of Tesco comes from its strong data
collection network, it collects details about customers through club cards offered to its
customers. In addition, Tesco is not only a leading brand but also a trusted brand with a
strong customer loyalty.
 Weaknesses: The reach of company is limited in few parts of Europe and UK. Tesco is
not entering in the emerging markets of Asia and US regions which in turn recognized as
its main weaknesses (Allison and Kaye, 2011). This hampers revenue generation of
company. The weak inventory management is another main issue which is facing by
Tesco. Opportunities: Tesco has opportunities to gain revenue through online retails which is
emerging globally. The company can introduced itself through other promotional
channels. Further, company penetration into Asian markets of India and China who are
globally emerging economies (SWOT analysis of Tesco, 2018). Introducing of the private
label concept can be the opportunity to boost sales.
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 Threats: Tesco posses a threat of increasing cost of operations due to small framing
markets of UK and it increasing dependencies on imports. There is an increasing
competition faced by Tesco from brands like Sainsbury, Morrisons in traditional
shopping and threat from Walmart in online markets.
PESTLE Analysis: Political: Tesco suffers from many political issues some of it size, operations and market
share. The government in UK is having a regular check on the market shares of company
as Tesco is using it influential power in order to turn down many local shops in regions
(Carlson, Harris and McLeskey, 2013). Company also suffers because of it size and
operations in other parts of Europe and legislation of European Union is also imposed on
Tesco. Economical: The prevailing economic crises like; recession, negative influence of
inflation on the retail market, fall in retail price index, etc. are hampering growth and
performance of Tesco. Further, inability of Tesco to meet increasing demands of new
Asian markets. Growing trend of convenience store over supermarkets. Online platform
are struggling for revenue due to ongoing recessions in many parts of world. Social: There is an influence of social -cultural norms on business of Tesco. From age
factor of UK demographic to the ethical role of company towards consumers and social
responsibility of company are some social factors influences Tesco. Online operations of
Tesco has showed unethical behaviour and has increased it customer grievances towards
company. Technological: Company has introduced may technologies in it stores. Development of
online websites, paperless operations, self checkout machines, etc. they prove to be better
resources to company but these resources work on power supplies, shortage or lack of it
can harm it operations (Dameron and Durand, 2013). Further customers are need to give
manual guidance for usage of these technologies. Legal: Tesco faces many legal obligation that regulates within retail market of UK and
Europe. The company needs to follow certain laws in regulation of it operations both
online and offline. Also, tough competition from increasing competitors needs to regulate
price in accordance to the laws.
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 Environment: The increase pressure to follow the norms in regulation to keep
environment clean and safe, Tesco is undergoing to keep it products more eco-friendly
and make use of eco-friendly practices for it production, of cutting waste, encouraging
recycled raw materials (Muller, 2012).
Porter's Five Model Threat of New Entrants: The retail market of UK is predominately hold by the Tesco ans
some of it competitors like Sainsbury, AS DA. Tesco enjoys huge market share within
these markets. But, with changing trends there is a threat of some new entries, thus
increase competition in market. Also, entry of Tesco in online platforms makes it
vulnerable to threats of ongoing companies' competition. Bargaining Power of Suppliers: Company enjoys huge size of business which give it
competitive advantage in suppliers. Tesco has huge numbers of suppliers the company
can bargain with these suppliers to have cheap raw materials. Also, company can switch
to other suppliers for attaining economies of scale (Wright, Paroutis and Blettner, 2013).
But, when company is operating on internet culture there is the need to have on time
delivery, if the suppliers do not give proper delivery or if company forgone a good and
huge supplies it can harm it working and operations. Further, Tesco needs to keep it
suppliers satisfied. Bargaining Power of Customers: with increase competition customers enjoys great
barraging powers in relation to retail sectors. Tesco needs to maintain product
differentiation and standardisation of it products that are available in market. Further, it
has tough competitors like Walmart in e-commerce business which has more diversified
products. Threat of Substitutes: To survive in market company needs to introduced substitutes in
production. The shifting of retail industry to small scale shops like Metro, Express are
new trends in the market (Beynon-Davies, 2013). Company can introduced new trends in
there non-food items as it important for it survival in both offline and online platforms.
 Competitors rivalry: The retail industry faces high amount of competition as there are
many companies who provides a substituted product for existing product. Tesco faces a
huge competition with some of leading brands like; Sainsbury, AS DA, Morrisons, etc.
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who offers identical products. There is a threat to company from online competitors who
have strong internet culture and mechanism.
Risk management issues related to E-Commerce.
 Create secured websites: The websites of a company is used by many people,
thus it should be assured that the company websites are free from viruses and
other internet problems like cookie, this will reduce risk to customers computer
and promote better and proper transaction between customers and company.
 Trained staff for e-commerce: Company should trained it existing staff about
how to operate and work on e-commerce platform, trained employees to detect
the risk and frauds prevailing over internet. The employees should able to resolve
these issues (Guffey and Loewy, 2012). Also, training of existing employees will
reduce the company capital expenditure and it saves the time of company from
recruiting new job roles. Tesco has employed young people so that it can be
trained easily as they are are more known to the technologies.
 Developed fraud detection system: The company should developed a fraud
detection system to avoid losses occur due to frauds. The risk management should
combined with adequate control over transaction, to minimise the frauds.
 Use fraud prevention tools: To avoid frauds between the transactions company
should use fraud tools like Address Verification Service (AVS), the Card Security
Codes (CVV2,CVC 2 and CID), these are been verified by Visa and MasterCard
secure code. This helps in reducing the risk exposure to the company.
 Strong distribution channel: the company should adopt strong distribution
channel to make it products available to there customers on time, this will bring
along the faith and brand loyalty in the customers. Tesco can make it channel of
distribution strong by getting on time supplies from suppliers.
 Assurance of quality: the issues occurred by the customers on online service in
relation to the products/ services, quality should be checked and assured so that
customers get the best products. Tesco needs to adopt this because it is leading
brand and quality issue can hamper it performance.
 Build attractive Content: the content should be attractive which pursue the
customers to opt or buy the products/services of the company.
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 Mention essentials on content: Company should maintain it essentials like there
privacy policies, return and refund policy, shipment policy, clearly so that there
will be no conflicts afterwards. It should be clearly mentioned and company
should adhered to it.
 Strong and right payment process: development of proper and right payment
process so that the loss incurred can be minimised. The company should develop
the proper processing of it debit and credit card transactions.
 Grievance mechanism: The customers sometime come across problems with
products/ service they opt for. Company needs to build a strong mechanism to
look over these problems. Customers problems and queries should be handled
properly. To avoid the switch of customers to other company.
 Strong Network: As many people cannot access to internet hassle free so there is
need to build a strong network in these regions. The company can do this in
collaboration with mobile operators this will bring more customers and increased
revenue.
 Manual guidance to customers: Technology up gradation becomes barrier for the
old people introduction of new technologies like self check out machines, wireless
devices, etc. are new company should give guidance to there customers for how to
use them. Tesco needs to employ to guide people to use there companies
technologies.
Strategies to resolve the risk.
The company needs to build up strategies to overcome the problems and risk which is
threatening and hampering it growth and work. Tesco has established techniques to overcome the
threats of e-commerce and internet culture. The company has introduced:
 Strong network: The company has introduced strong network in UK with mobile
app and 70 stores in line in Britain who help the customers to do online shopping
through there mobiles or personal computers and get groceries at home.
 Build up a single website: Instead of building of different websites for different
region Tesco has made a template which can be used for international websites.
This enables it to gain more customers in a cost effective way.
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 Ease in payments: To help the customers to make payments Tesco adopted to
local paying options. Also, it provides cash on delivery i.e. customers will asked
to pay after they received there orders.
 Provide large varieties to choose from: Tesco offers around 17000 products to
choose from it websites to each of it operating nations. This makes company
stronger because now customers can buy there all necessary goods from one stop.
 Secular website formation: As Tesco operates in so many regions and areas the
language can become a barrier to it sales for this Tesco adopted to use the option
of language conversion, this enables the customer to choose it local language and
if customer want it can again rest it language to English.
 E-Mail Marketing: Through e-mail company can send information about it
products/ services to potential customers (Gora and Bauer, 2013). Tesco realized
the opportunities of it online marketing. This enables it to earn 60% online
revenue.
 Expanded it business: The company with changed strategies tries to expand it
business to emerging markets of Asia. It started to operate it business in Malaysia,
China and India. This brings in more revenue due to there stable and growintg
economy.
 Build a Strong Management Team: To handle and operate the business over e-
commerce Tesco maintains a strong management teams which efficiently handle
the working of e-commerce. They check and control the frauds and risk and find
strategies to tackle them. The strong management of Tesco proves out to be there
greatest assets.
CONCLUSION
The strategic management is essential tool for the company as it helps to formulate
goals/objectives of a company. The risk management involved with the emerging e-commerce
and internet culture is a big issue for the organisation. Company like Tesco find it difficult to
cope and perform on the online platforms. There are certain issues face by Tesco in relation to e-
commerce like, threat of viruses, distortion of customer details, strike and lockouts from
employees, etc. These issues hampers the performance of Tesco. Models analysis like SWOT,
PESTLE and Porter's five problems help us to see the emerging problems faced by the company.
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These issues can be solved with the help of risk management of e-commerce like, creating of
essentials over websites, secured and saved website, protection through fraud detection tools, etc.
Strategies adopted by Tesco enables it to make a global organisation and helps it to earn mo0re
revenue and expand it business.
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REFERENCES
Books and Journals
Abraham, S. C. 2012. Strategic planning: A practical guide for competitive success. Emerald
Group Publishing.
Allison, M. and Kaye, J., 2011. Strategic planning for non-profit organizations: A practical
guide and workbook. John Wiley and Sons.
Beynon-Davies, P., 2013. Business information systems. Palgrave Macmillan.
Carlson, S.L., Harris, M. and McLeskey, N., 2013. Strategic planning for organizational
effectiveness during dynamic change. Geriatric Nursing, 34(4). pp.335-338.
Dameron, S. and Durand, T., 2013. Strategies for business schools in a multi-polar world.
Education + Training. 55(4/5).pp. 323-335.
Ferrell, C. O. and Hartline, D. M., 2010. Marketing Strategy. 5th Ed. Cengage Learning.
Gora, W. and Bauer, H., 2013. Virtuelle Organisationen im Zeitalter von E-Business und E-
Government: Einblicke und Ausblicke. Springer-Verlag.
Guffey, M. E. and Loewy, D., 2012. Essentials of business communication. Cengage Learning.
Hyde, M., 2014. Technology is reinventing your business. Strategic Direction. 30(4). pp.1 – 2.
Kiptoo, J. K. and Mwirigi, F. M., 2014. Factors That Influence Effective Strategic Planning
Process In Organizations. IOSR Journal of Business and Management. 16(6). pp. 188-195.
Mathur, U., 2011. Global Business Strategies: Text and Cases. I. K. International Pvt Ltd.
Muller, E., 2012. Innovation interactions between knowledge-intensive business services and
small and medium-sized enterprises: an analysis in terms of evolution, knowledge and
territories (Vol. 11). Springer Science & Business Media.
Njeru, N. E., Stephen, M. A. A. and Wambui, M.A., 2014. Analysis of factors influencing
formulation of strategic plans in Embu North District, Embu. Global Business and
Economics Research Journal. 2 (5). pp. 116-129.
Wright, R. P., Paroutis, S.E. and Blettner, D. P., 2013. How useful are the strategic tools we
teach in business schools?. Journal of Management Studies. 50(1). pp.92-125.
Online
SWOT analysis of Tesco. 2018. [Online]. Available through: <
https://www.marketing91.com/swot-analysis-of-tesco-corporation/>.
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