Strategic management analysis - TESCO

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Strategic direction that the TESCO has followed in past............................................................1
TASK 2............................................................................................................................................2
Appropriate model in which review consider on external environment analysis.......................2
Porter's five forces analysis to analyse competitive drivers and their impact on competitive
position of the company..............................................................................................................3
Presenting the probable industry scenario facing TESCO in its existing market domain..........5
TASK 3............................................................................................................................................5
Presenting the strategic drift........................................................................................................5
Mission and Vision statement which are aligned to the demand of marketplace.......................6
Strategic capabilities...................................................................................................................6
Using Business canvass Model that describe the rationale how company deliver and capture
the value......................................................................................................................................6
TASK 4............................................................................................................................................8
Presenting the possible strategies which TESCO should follow................................................8
TASK 5..........................................................................................................................................10
Resource implication of selected strategy.................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic management is about knowing the different strategies that can be implemented
by managers in order to achieve objectives of the organisation (Hill, 2017). It is the branch which
deals in development of such aims, objectives, mission and vision so that company can grow
more in future and attain a different market position. In this present report TESCO has been
chosen for assessment. It is a British multinational grocery's organisation which serves in 7
countries. Organisation has around 6000 supermarkets in all around the world. This present
report will focus on strategic Direction that the TESCO has followed in the past. In addition to
this, the possible strategies that firm follow to defend its core business will also be discussed in
brief. Furthermore, internal and external factors that will affect the company will be covered in
detail.
TASK 1
Strategic direction that the TESCO has followed in past
TESCO is a multinational company which is a retail based organisation that serves in
different nations. It is the biggest supermarket in United Kingdom that offers variety of products
to customers. It is a customer- centric organisation which operates as per the needs oft customer.
It is really hard to carry business without any vision and objective likewise, TESCO has also
developed its vision that is “ We make what matters better, together”.
Other than this, TESCO has achieved higher growth in past years which is more than any
other supermarket in the world. It gave tough competition to other competitors and gained 12.3
per cent of £3.8 bullion from its outside sales from abroad. In Asia the company has enhanced its
performance in the past. The supermarket chain of Tesco was now around over £ 2.5 billion in
profits.
In past TESCO has developed many strategies in order to attain higher growth and market
position. It has made a strategy that assists in growth of its overall business. These can be
covered under four parts which are described below:
 A powerful UK core business,
 Non-profit,
 Better retailing services
 International expansion
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These all were the for major areas which has been focused more on. Company has gained
major benefits by concentrating on keeping its prices low so that consumers can get higher
benefits and sales of the organisation can be increased. Services are being offered in the best
possible way. Along with this, TESCO has given people good saving offers which encouraged
them to buy more.
TESCO has developed its property market in past with its self-advertising website. It has
also specialisation in food market and along with this it has developed its business in different
areas as well. Major areas of business of TESCO were electronic items, Music system and many
more. In last five years TESCO has changed its strategies and has controlled 30% market in
groceries in entire United Kingdom. This all expansion has helped the organisation in growing to
a great extent. Different strategies has benefited the company in majority of its expansion in past
years.
TASK 2
Appropriate model in which review consider on external environment analysis
Tesco is multinational business which deals in different areas of the world. With this
consideration, following elements of external environment mainly create impact on overall
effectiveness: Political factors: As Tesco operates in different areas of the world. Therefore, global
political factors greatly impact performance of the business. It includes taxes, acts of
legislation, stability in the country, etc. Ongoing financial instability in the world also
encourages retailers to create jobs for the domestic population (Rahman, 2016). Hence,
Tesco plays its part to create employment opportunities which increases demand of its
products and diversify workforce as well. Economic factors: These factors are main point of concern for the chosen business as it
is more likely towards leverage costs, demand, profits and prices. As a result, company
must be aware of any changes in policies such as changes in taxation and other factors
that affect accessibility of finance. In addition to this, it can be stated that
internationalisation and diversification are successful key strategies that pursued in the
business over the years. This is the major reason for getting successful results at
workplace. Moreover, due to decline in disposable income level, household incomes, the
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chosen business shifted to create more focus towards advertisement of its different
products (Hammad, 2015). Social factors: Due to changes in social perspectives, the latest trends and outcomes
indicates that the customers in UK moved towards bulk shopping and one stop shopping.
Tesco has also increased number of food items that offered for sale. Type of goods and
services demanded by consumers are mostly influence with belief and attitude.
Furthermore, it is also turned to influence social conditioning because customers are
becoming more aware of health issues. Due to this, approach towards foods is changing
constantly (Stümke, 2017). Tesco focuses on these changes by accommodating demand
for organic products Technological factors: Technological factors highly impacts on operations and activities
of business. Advance technology in the chosen organisation assists to increase new
opportunities for the enterprise. In this way, two benefits implemented such as
development and introduction of online shopping with facilities of home delivery.
Another is self-service which consider checkout point that increase convenience and ease
for customers. Legal factors: Government policies and legislations also create direct impact on the
performance of chosen business. For instance, code of practice must be introduced which
has been ban many current practices such as changing prices without any notice or
demanding payment from suppliers. In Tesco, facilitate these policies assists to provide
customers price reduction.
 Environmental factors: In order to increased pressure on companies, it is important to
address environmental issues that can be adopted in many ways in operations that create
benefit to the society (Stümke, 2017). Tesco is clearly committed to reduce carbon
footprint by 50% till 2020. Hence, they are also minimised social conscience among
several customers.
Porter's five forces analysis to analyse competitive drivers and their impact on competitive
position of the company
In order to identify effective sources of competitive advantage it is important to analyse
structure of the industry in which the cited organisation is operating. Porter's five forces analysis
has been used in order to identify the various drivers and their impact on Tesco's competitive
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position (Dobbs, 2014).There are five forces or elements that affects competitive position of an
organisation, these forces are described as below -
1. Threat of substitutes products and services – The threat of substitutes within the
grocery retail market is medium to high for non-food items and low for food items. In the
food retail market the substitutes for major retailers of food are small chains of
convenience stores, organic and off licences organic shops. These shops are not a threat
for supermarkets such as Tesco as they offer high quality products at low prices.
Furthermore, Tesco is competing with these shops by establishing express stores in local
city centres and towns making it difficult for the substitutes to enter into the market.
2. Threat of entry of new competitors – The threat of new competitors entering into the
food retail industry is low. It needs a huge financial or capital investment in order to
establish a brand name and be competitive. Big brands that have already achieved a good
position in market are Asda, Tesco, Sainsbury etc. Hence, new entrants needs to produce
products which are considerably low in price and high in quality to develop market value.
3. Intensity of competitive rivalry – This force in the grocery and food retail industry is
extremely high. Tesco faces high competition from its major competitors such as
Sainsbuy's and Asda. These organisations are competing with each other on the basis of
products, promotion and price (Napshin and Marchisio, 2017). Increasing market share of
these competitors is threatening market leadership position of Tesco.
4. Bargaining power of buyers – The bargaining power of buyers is also high, in situation
where there is slight differentiation in standard of products and the switching cost is low,
the buyers can easily switch to another brand. Tesco needs to ensure that their products
are unique and are available at reasonable prices. It has been observed that customers are
highly attracted towards the low prices and with the availability of online retail shopping
the prices of products can be compared and selected easily by customers.
5. Bargaining power of suppliers – The bargaining power of suppliers is very low,
suppliers are inclined towards major grocery and food retailers & do not want to lose
their business contract with big supermarkets. Therefore, the market position of large
retailers such as Asda, Tesco and Sainsbury's is very strong and negotiation with the
suppliers are positive for getting lowest possible price from them.
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All the above forces are driving competitive position of the organisation in the market, it
is important for Tesco to manage and control these elements to sustain its market position for
long term.
Presenting the probable industry scenario facing TESCO in its existing market domain
After using the porter's five force model and PESTLE analysis, it has been analysed that
TESCO is still faces some issues regarding the high competition in market. There are so many
rival companies that affect the prices offered by Tesco and therefore, as a result, it needs to lower
down the rates of their offering products. It has been analysed that the new entrant is another
problem faces by the company such that the retail sector have a high threat from new entrant in
the market. Therefore the exact scenario is also concluded that in UK, the company also affected
from the political condition, social and economical factor and this can be overcome only by
following the exact rules and regulation of the country.
The customers shifting values also creates some problem for TESCO and as result, the
industry faces issues in their existing market domains. As the market changed, the company also
faces some hard issues regarding the offered products to their customers.
TASK 3
Presenting the strategic drift
Strategic drift is the gradual deterioration of the competitive action that cause result in the
failure of an organization. TESCO also faces some strategic drift and this are mentioned below:
 Price: TESCO is one of the oldest and largest company that also met with some financial
crisis and due to high competition in market, company faces some issues related to their
prices which leads to decline in sales of its products (Sammut-Bonnici and Sammut-
Bonnici, 2014).
 Shifting values: As the market trend changes, it has been analysed that customers also
changes their taste as well as find new store which help them to buy new products as per
their taste. For TESCO, as the market trend change and There is a wide range of products
and as the shift of their customers are also affect as their demand changes.
 Club card issues: It is another strategic drift which the company actually faces. The club
card issue is another problem that is actually faces by TESCO and due to lack of
collaboration between their team members, they also not deliver the best service to their
customers.
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Mission and Vision statement which are aligned to the demand of marketplace
Mission: The mission of the company is to provide the best quality of products to their
customers and help them to enjoy their shopping. It has been analysed that the mission is aligned
with the demand of the market place and it has been proved that the mission of the company is
fulfilled by the TESCO because it actually provided the best quality of products (Cook, 2017).
Vision: The vision of the company is to operates its unit at global level and make the
business growing and have full of opportunities. The company also have modern as well as
innovative ideas which it deliver to itscustomers. TESCO also introduce new products and
inspire as well as earn the trust and loyalty of their customers and colleagues which help it to
deliver the best products and services to them. Hence, it has been analysed that the vision of the
company is aligned through the market.
Strategic capabilities
The strategic capabilities for TESCO is classifying the stakeholders and the main concern
of their stakeholder. Therefore, the business should grow in order to producing the customer
market to sponsor development as well as progress of an organisation. The company has good
service deliverance and also deal with international trade market. The company also have the
best quality of service which is offered to them in order to sustain their brand image as well as
keep attract their new customers towards them (Quirke, 2017).
At the time of delivering the high quality of service, the company also produce the
innovative products and uses different factors in order to keep monitoring the performance of
their employees as well as company. The HR of a company also make the stronger connection
with their employees so that it will help them to enhancing their production level.
Using Business Canvass Model that describe the rationale how company deliver and capture the
value
Business canvass Model is a strategic management or a simple document which describe
the firms and product values as well as infrastructure. it also assist that the firm is aligning all
the key activities or not (Joyce and Paquin, 2016). The model is helpful to determine the values
as well as key stakeholders of the company. It comprises some points which are as mentioned
below for TESCO:
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 Key partners: Key partners of TESCO are suppliers of business which deal with
regional as well as local level. Joint ventures as well as association are another key
partners for TESCO.
 Key activities: The key activities of TESCO is buying as well as selling consumer goods
and effective distribution system. Company also take regular feedback from their
customers and also make necessary changes. Warehousing and logistic is another key
activity of TESCO.
 Value proposition: Provide 24 hours shopping facility to their customers and have a safe
and online buying facility, also provide home delivery and convenient shopping and
operates its unit at global level.
 Customer relationship: maintain long term relation with their customers as well as
suppliers, through clubcard system, it also retains their loyal customers and attract more
number of customers. They also listen to their customers and then apply different strategy
in order to attract them.
 Customer segments: Target low- middle level income and easy going traditional
lifestyle people, students, housewife and older people.
 key resources: IT infrastructure, website and account of various digital platform
warehousing and logistics.
 Channels: it operates through their physical store, social media, its own website, mobile
application and dedicated website too.
 Cost structure: T infrastructure, warehousing and logistics, capital Expenditure and
staff.
 Revenue streams: Home delivery system as well as sales of good is the main source to
earn a revenue.
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TASK 4
Presenting the possible strategies which TESCO should follow
By using Ansoff growth vector matrix, TESCO can also use in order to expand their
current business such that this model helps to determine the exact competitive advantage of the
company and this consist of four basic key aspect such as market penetration, product
development, market development as well as diversification and this are discussed below:
Market Penetration: In this market strategy, the organization is tries to grow their
existing offerings which are actually offered to the customers. The company adopt this strategy
in order to increases the market share and in the current market ratio. can be attain by decrease
the price of their products and increases the promotion and distribution support, acquire the rival
in the same market and provide best and refine products to their customers. Market penetration is
the most simple method which TESCO may opt in order to raise their current sales and provide
the best quality of products through more additional promotion as well as distribution system.
It is the strategy which many large firm actually focus in their market in order to know
the market in more well manner. It is the strategy that is used to provide wide range of
information for their competitors and also analyse the needs of their customers in order to invest
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Illustration 1: Ansoff growth vector matrix
(Source: Ansoff growth vector matrix, 2018)

much in the new market research. In addition to this, to maintain the market share of the current
products it can be achieved by the combination of pricing strategies, advertising as well as sales
promotion.
Market development: it is the second quarter of the Ansoff growth vector matrix and the
name is given to growth strategy because it seeks to sell their existing products into new market
(Gurcaylilar-Yenidogan and Aksoy, 2018). Though this strategy is considering the risky as
compared to market penetration because to invest in completely new market with existing
products is quite difficult and it can be achieved by different customer’s segments, invest into
foreign market and new area or region about the country.
But on the other side, this strategy is most successful for those firms where a company
offer unique product technology and it can leverage in a new market and thus benefit for the
economies of scale that help to increases the output. If the company is ready to invest into such
then it will be helpful to it when there is a proper research has been done in order to determine
the market is beneficial to maximize the profit or not. TESCO can use this strategy in such a way
that a company export their product in totally new country and through new packaging and
dimensions it can sell their products. If the company have different distribution channels that
help to deliver the fastest service, then it will be helpful for them.
Product development: It is the third quadrant of Ansoff growth vector matrix and in this
strategy, the company is tries to create new products as well as services that is actually targeted
in order to achieve the market growth (Zamberi Ahmad and Rahim Abu Bakar,2018). This
further involves the extending of products in such a large range that is available to the
company's existing products. This can be achieved through investment in research as well as
development of additional products or can be acquire different rights in order to produce
someone else product. This strategy can be adopted by TESCO with an aim of introducing new
product as well as service in existing market.
In addition to this, a strategy of the product development is more suitable for those
business in which the product is needed to be differentiated so that it will remain competitive.
The most successful product developing strategy will take places only when the company have
good researching and development strategy and the product is first time introduce in a market.
Diversification: It is the last strategy of Ansoff growth vector matrix and also consider
the most risky among all. That is why many companies do not use this strategy in order to grow
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their current business (Dawes, 2018). The strategy is considering risky because the business is
moving into those market which is completely new and also offer new products as well as
services and also they did not know about that market and have little experience. This strategy is
mostly applied when the business has enough amount of money in order to invest into new
business so that if the business faces financial loss then only there will be no issue for the
company. This strategy is also helpful to grow their current business without any relationship to
each other and the strategy for growing up in the market, this can be used.
Among all, it has been concluded that diversification is is the appropriate strategy for
firm in order to develop into new market, though it is considering as the riskiest strategy but by
this strategy, the market of TESCO will be helpful to support their market and promoted
products as well as services through different variety of promotion (Ansoff and et.al., 2018). The
promotion strategy must include clear and true information about goods. This will also help in
attracting huge number of customers and their wish to make reaching the large mass of the
public. However, on the other side, it has been critically evaluated that this strategy is very time
consuming. Therefore, TESCO has to analyse the trends by researching on it and then plan for
diversification and later implementation on the plan. Hence it has been conclude that opting
diversification can be very useful for TESCO in order to grow the business at next and further
level of success.
TASK 5
Resource implication of selected strategy
Tesco must adopt diversification strategy. This will help business to expand and also
diversify in other selected markets (Ethiraj, Gambardella and Helfat, 2018). In order to expand
their business, they have to undergo various measures. The key resource areas has been
discussed as per below context.
 HR- the department of human resource must recruit and select those candidates that have
high skills and also has good experience in hotel. Thus, for this they have to undertake
training sessions that is related to awareness in terms of customers demand. They must
have training and development sessions that will help the Tesco to diversify business in
different market.
 Finance- If Tesco wants to apply this strategy, the company must have adequate amount
of fund that will help them to expand or diversify their business by researching on the
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market and also by taking surveys related to the trend. The cited company must have
complete knowledge in order to fulfil requirements of customers that are completely
based on the trend of market.
 Marketing- Marketing also plays important role to make diversification successful
(Lasserre, 2017). The company must market their services and products by promoting
them in the market. The promotion strategy must include clear and true information about
goods. This will also help in attracting huge number of customers and their wish of
reaching the boost will be fulfilled.
 Technology- Technology plays the most important role in terms of diversification.
Nowadays people are highly rely on technology, so the company must have updated
websites that contains all information regarding product. This will help them in attracting
large number of customers. The websites must also include the information regarding
discounts and offers for a particular product so that customers may feel easy to compare
products with competitors. In addition to this, it will help the cited company to meet the
needs and demands of the customers easily.
Thus, the recommendations, that is mentioned will help in order to apply diversification
strategy that will lead the cited company to deal with customers of different areas in easy and
unique way. This will help company to achieve long term success and also leads in running
business in smooth manner.
The negative thing of this strategy is that it is very time consuming (Morschett,
Schramm-Klein and Zentes, 2015). The company has to analyse the trends by researching on it
and then plan for diversification and later implementation on the plan.
CONCLUSION
From the above report, it has been concluded that managing strategy is very much
important in order to achieve long term success of business and also make company to reach the
boost. Furthermore, the strategy that has been adopted by company has also been analysed with
help of certain framework that will help in maintaining competitive position of the company. In
addition to this, the external factors and competitive advantage analysis that come in the way of
business has also been analysed with help of Pestle analysis and Porters Five forces model.
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REFERENCES
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Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), pp.32-45.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2018. Theory in strategic management. Strategic
Management Journal. 39(6). pp.1529-1529.
Gurcaylilar-Yenidogan, T. and Aksoy, S., 2018. Applying Ansoff’S Growth Strategy Matrix To
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Hammad, A., 2015. Strategic Change and Its Management to Expand Business Through
Implementation of Models: A Case Study of Boots UK.
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Napshin, S.A. and Marchisio, G., 2017. The challenges of teaching strategic management:
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Quirke, B., 2017. Making the connections: using internal communication to turn strategy into
action. Routledge.
Rahman, M.M., 2016. Critical analysis of the influence of discount retailers on Tesco plc in the
UK. GRIN Verlag.
Sammut-Bonnici, T. and Sammut-Bonnici, F. F. U. T., 2014. Strategic Drift. Strategic
Management. 12.
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Stümke, L.I., 2017. Business Diplomacy: The elucidation to ease multinational corporation’s
business risk in developing countries and conflict-prone zones (Master's thesis,
University of Twente).
Zamberi Ahmad, S. and Rahim Abu Bakar, A., 2018. Emirates Dates: a case of growth strategy
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