Strategic Management for Tesco: Internal and External Environmental Analysis

This report provides an analysis of the internal and external environment of Tesco, along with the implementation of different strategies. It includes an action plan, stakeholder analysis, and evaluation of approaches for strategy implementation.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author note

1STRATEGIC MANAGEMENT
Executive Summary
The report has helped in the entire analysis of the different internal and external
environmental analysis of the company Tesco. Furthermore, the different strategies
implementation has been done for Tesco which helped in understanding the various kinds of
approaches which are required in order to become more effective in the different approaches
which have been adopted by them. The action plan along with strategic implementation has
been done wherein the stakeholder analysis has been conducted in order to understand the top
priority of the company in the market.

2STRATEGIC MANAGEMENT
Table of Contents
Introduction................................................................................................................................4
Overview of Tesco.................................................................................................................4
Mission, Vision and Core Competencies...............................................................................4
Objectives and Goals of Tesco...............................................................................................5
Issues Involved in Strategic Planning of Tesco.....................................................................5
Effectiveness of Planning Techniques during Strategic Planning.........................................6
Formulation of Business Strategy..............................................................................................7
Organizational Audit of Tesco...............................................................................................7
Environmental Audit of Tesco...............................................................................................9
Significance of Stakeholder Analysis..................................................................................10
Evaluation and Selection of Approaches for Evaluation of Strategy.......................................13
Strategic Direction Implementation at Tesco...........................................................................16
VRIO Analysis of Tesco..........................................................................................................16
Action Plan...........................................................................................................................18
Conclusion................................................................................................................................19
References................................................................................................................................20

3STRATEGIC MANAGEMENT
Introduction
The report helps in the entire investigation of the external along with internal
environment analysis of Tesco Supermarket that is situated in London, United Kingdom. The
analysis of the external along with internal environment of Tesco is required to be analysed
with implementation of the different kinds of theories and tools which will be efficient in
nature in managing the environment of Tesco.
Overview of Tesco
Tesco plc is one of the British multinational grocery stores along with general
merchandise retailer which is headquartered in London, United Kingdom. The number of
locations wherein Tesco is operating their business is more than 6553 and the revenue which
has been earned by the company is £55.9 billion till the year 2017. Furthermore, this has been
noticed that the number of employees working in the entire company is 476000 till the year
2017 and this has helped the company in enhancing the overall growth of the company in a
positive manner as well(Tesco.com, 2018).
Mission, Vision and Core Competencies
The main mission of the Tesco Company is to be the most highly valued kind of
business in the entire market and to provide the different customers with the variety of goods
and services at an affordable rate. Furthermore, Tesco wants to serve the entire community
along with stakeholders with the various kinds of products and services at an affordable rate
and this will help in managing the different activities in an appropriate manner (Bromiley et
al. 2015).
The vision of the company includes the growing of the business with full of different
opportunities. Furthermore, Tesco wants to innovate the various kinds of products and

4STRATEGIC MANAGEMENT
services which will help the company in earning trust of the different customers in the market
with proper implementation of different kinds of resources in the entire competitive market.
Moreover, core competencies of Tesco are inclusive of different implementation of strategies
which will be helpful for the company in becoming economical in nature in comparison to
the other competitors in the entire United Kingdom market.
Objectives and Goals of Tesco
 To satisfy the different needs of the customers in the entire market with proper
decrease in the prices of the products which are being sold by them in the entire
market
 To innovate the different kinds of products in the market which will help the company
in becoming more competitive (Armstrong et al. 2015)
 To offer the different customers with best value for money and most competitive kind
of prices as well (Kotler 2015)
 To support the well-being of the community along with protection of the environment
 To work closely with the different suppliers in the competitive market to build long
term relationships along with gaining huge share in the market as well
Issues Involved in Strategic Planning of Tesco
There are various issues which is involved in the strategic planning of Tesco
Supermarket which is inclusive of the following:
 The company do not have adequate knowledge on the customers and culture
 There is perception of low quality which affects the overall profitability of the firm in
a negative manner (Bresler and Lubbe 2014)

5STRATEGIC MANAGEMENT
 There is huge competition in the market which is affecting the different operations of
Tesco and this has created huge impact on profitability and growth of the firm (Baker
2016)
Effectiveness of Planning Techniques during Strategic Planning
Tesco needs to analyse the different kinds of effectiveness of the strategic planning
techniques which will help in managing the different kinds of operations in an appropriate
manner. The different planning techniques which are effective in nature are as follows:
 The setting of short term and long-term goals are effective for Tesco which will help
the company in becoming more competitive with the different kinds of operations.
With the effective planning technique.The effectiveness of the business model is
essential to be adopted by Tesco in order to become more effective in their
approaches (Chambers and Humble 2017)
 Creation of concrete objectives is the other planning technique which is effective and
this can be adopted by Tesco wherein this has been seen that this will help the
company in becoming specific about the goals and this will generate huge amount of
revenue in the entire market as well (Chernev 2018).
 The brand image strategy is effective wherein they sell products to customers at high
quality and cheap pricing strategy. Moreover, Tesco tried to aim on the low-income
group customers wherein Tesco started selling various kinds of products at mid-range
with store price tag (Di Benedetto and Lindgreen 2018).
 Lastly, the strategy related to globalization is powerful which has been analysed by
Tesco as they tried to expand themselves in all over the different markets and this has
increased their brand image as well (Keller and Kotler 2016).

6STRATEGIC MANAGEMENT
Formulation of Business Strategy
Organizational Audit of Tesco
With the help of SWOT analysis, the different kinds of internal strengths and
weaknesses along with external environmental threats and opportunities can be analyzed.
Strengths
Tesco is in the leadership position in the entire
United Kingdom market
The online operations are effective and
appropriate in nature (Foxall 2014)
The property portfolio is strong in nature at
Tesco
The club card which has been introduced by
Tesco is strong kind of information tool
(Martín-de Castro 2015)
Weaknesses
The financial performance is weak in nature of
Tesco
Diminished kind of morale of the different
employees in the organization
Reliance in the United Kingdom market
Serious damage to the entire brand image due to
the commercial kind of income scandal in the
year 2015
Opportunities
Pursuing the international market position and
expansion in the market
This can have the opportunity to increase
their overall presence in the financial aspects
in the entire industry (Miquel-Romero,
Caplliure-Giner and Adame-Sánchez 2014)
Enhancing the overall effectiveness in the
Threats
Fluctuations in the currency
There is huge inability of the new leadership in
order to turn over the business
Emergence of the different ethics related issues
in the business (Miquel-Romero, Caplliure-
Giner and Adame-Sánchez 2014)

7STRATEGIC MANAGEMENT
marketing strategy (Meyer,Neckand Meeks
2014)
From the analysis, this can be analyzed that there are various types of internal
strengths which helped in becoming more effective in nature. This can be seen and analyzed
that in the year 2015, Tesco plc had statutory loss of GBP 6.4 million and this has pushed the
entire amount of the net debt to GBP 8.5 million. Moreover, this has been identified that
Tesco is one of the largest supermarkets in the entire United Kingdom market with a market
share of 27.9 percentage. The closest competitor of Sainsbury has the share in the market of
16.6% and the share in market of Walmart owned ASDA which is equal to more than 17.6%
(Charter 2017).
Figure 1: Changes in PBT of Tesco
(Source: Chernev 2018)

8STRATEGIC MANAGEMENT
Environmental Audit of Tesco
PESTEL Analysis is the appropriate tool which can be used in order to analyze and
identify the different kinds of environmental factors which will affect the overall
effectiveness of the firm.
Political factorsare the first concern which is an opportunity for Tesco in the entire
global market. Furthermore, this has been noticed that since Tesco operates in the global
environment, the different political factors have created huge influence on the performance of
Tesco (Lasserre 2017). The different political aspects are inclusive of rate of taxes, acts of
legislation along with stability of the country in which the company is operating with their
operations. Furthermore, as Tesco plays an essential role in creating opportunities for
employment, this will help in increasing the demand for the different products and services
(Litman 2018).
Economic factorsare the other aspect in which this is considered as the main concern
for Tesco Supermarket which is inclusive of the leverage costs, demands along with profits
and prices (Jarzabkowskiand Kaplan 2015). Due to this, the business should be aware of the
different changes in the policies which is inclusive of change in the taxation policies.
However, this has been seen that economic factors are outside the entire control of the
company and the entire effect is on the performance and marketing mix of the company
(Schaltegger, Burrittand Petersen 2017).
Socio-cultural factorsare the other aspect in which this has been analyzed that due to
the variety of the social changes, the different trends have indicated that the consumers in UK
market have tried to move forward one stop shopping along with bulk kind of shopping.
Moreover, Tesco has tried to increase number of non-food items which are being offered for
sale (Kleinaltenkamp, Plinke and Geiger 2016). The customers are becoming aware of the

9STRATEGIC MANAGEMENT
health issues wherein the approach towards the foods is changing constantly. Tesco is trying
to adopt the changes by accommodating the demand for the different organic products
(Galliersand Leidner 2014).
Technological factors are the aspect in which this has been noticed that
advancements in the technology will bring various kinds of opportunities for Tesco and this
helps in managing the different operations in an efficient manner. Furthermore, the self-check
out system of Tesco has helped in managing the various kinds of operations in the retail
market and gained huge opportunities from the same (Hill,Jonesand Schilling 2017).
Environmental Factors is the aspect in which there is increased pressure on the
different organizations as this will help in addressing the different kinds of environmental
pressures. Tesco is committed in reducing the carbon footprint by more than 50% by 2020
and this has helped the company in minimizing the wastes which has been produced in the
stores by increasing the social conscience in the customers (Proctor 2014).
Legislative factorsare the other aspect in which the different government policies and
regulations directly impact the performance of Tesco. For instance- Food Retailing
Commission in the year 2004 suggested the code of practice should be introduced by current
practices (Hitt and Duane Ireland 2014). Tesco tries to provide the customers reduction in the
prices on the fuel they purchase along with the different kinds of promotional offers in an
efficient manner (Wheelen et al. 2017).
Significance of Stakeholder Analysis
The stakeholder analysis has helped Tesco in managing the different kinds of aspects
in an effective manner. The stakeholders of Tesco have influenced the strategic direction of
the company wherein these groups are the individuals which affects the business directly or

10STRATEGIC MANAGEMENT
indirectly as well. With the large size of the organization along with global scope of the
different kinds of operations of Tesco, the company has various stakeholders which is
inclusive of employees, customers, investors and suppliers in the market as well
(McDONALD 2016).
The stakeholder groups of Tesco are inclusive of the following:
 Customers
 Employees
 Suppliers
 Investors
Investors – They are the top priority in the Tesco supermarket wherein this has been
seen that Tesco tries to prioritize their investors in their different kinds of strategies. This is
one of the reasons why Tesco helps in minimizing the different costs with the help of
minimization of the wages. The theory helps in suggesting that the primary objective of the
business is to generate profits and there would be no business at all and this helps the
company in prioritizing the primary objective of the business in an efficient manner.
Customers- The different customers are included in the stakeholder group in the
business of Tesco as this has been analyzed that the customers of Tesco are interested in low
kind of prices or the affordability of the different products and services which will be helpful
in managing the overall profitability of the firm (Rothaermel 2015).
Furthermore, Tesco tries to address the various kinds of interests of the different
customers as the different stakeholders and the organization tries to maintain the cost
leadership strategy which includes the different offerings to the customers at the lowest
possible price. Additionally, the company is famous for the different kinds of low price

11STRATEGIC MANAGEMENT
strategy which has been adopted by the company in an effective manner (Helfatand Martin
2015).
Employees- The employees are the third priority of Tesco who play an essential role
in the entire decision-making process. The employees at Tesco have two major interests
which is inclusive of the job security and higher wages. The job security among the different
employees helps in guaranteeing that Tesco will be keeping the different employees as part of
the business and high wages which will be provided to the different employees will motivate
the employees in performing the different kinds of activities in an efficient manner.
Suppliers- The Suppliers of the organization are the least kind of priority of Tesco in
which this has been seen and mentioned that suppliers of Tesco are interested in receiving
more products in a much profitable manner. The different interests include the selling of the
similar kinds of products at a less price which will be beneficial to the suppliers of the
company (Robson 2015).
Therefore, from the stakeholder matrix, this can be analyzed that the Tesco is
effective and efficient in addressing the different kinds of interests of the group of the
stakeholders such as investors along with the different customers of the company. In order to
improve the overall efficiency of the firm Tesco, Tesco needs to implement few changes in
the entire process which will help the company in improving the relationship between the
different suppliers and the company in order to become more effective in the different
approaches and gain more competitive advantage in the overall market which is competitive
in nature (Hill 2017).

12STRATEGIC MANAGEMENT
Figure 2: Stakeholder Analysis
(Source: Hill 2017)
Additionally, this has been noticed that from the entire internal and external analysis
of Tesco, this can be analyzed that the company is required to implement the differentiation
strategy in the Ansoff’s matrix wherein this can be analyzed that this strategy will help the
company in including the different kinds of unique products and services which will be
launched in the market and the main focus will be on the low cost strategy and this will
enhance the overall effectiveness of the organization as well.
Evaluation and Selection of Approaches for Evaluation of Strategy
With the help of the different kinds of marketing related strategies, the Tesco
Company needs to analyse the different position of the other competitors in the market which
will provide a brief overview on the various kinds of threats or the bargaining power of the
suppliers in the market as well.
Threats of the different substitute products in the grocery stores is considerably low
for the different food related items and this is medium or high for the non-food related items.

13STRATEGIC MANAGEMENT
The threat from the substitute is low in nature as the company tried to create their distinctive
kind of brand identity.
Threats of the different competitors in the Tesco Company is high and this is one
factor for which the company is required to be worried about. The other major competitors of
Tesco are inclusive of the different kinds of brands such as ASDA and Morrison which have
been able to create huge level of competition for the cited organization.
Bargaining power of the buyers is the other aspect wherein due to the different
availability of the retail stores, the bargaining power of the buyers have increased and this has
become high in nature. Furthermore, Tesco is trying to keep their prices of the different
products low and reasonable in nature as this will help the company in capturing the major
chunk of the entire competitive market.
Bargaining power of the suppliers is the other aspect in which this has been noticed
that Tesco is still struggling as there is huge competition and this can enable the suppliers to
get edge of the company as well. Furthermore, this has been noticed that retail global giant
has been able to create healthy kind of relationship with them and on a competitive kind of
pricing technique as well.
Threat of entry is the low aspect which is required to be analysed in an effective
manner in which this has been noticed that entry barriers are low in case of Tesco. In the
future, this has been seen that threat of entry is next to impossible in nature in case of Tesco
and with the help of the overall analysis, the entire environment of the industry is required to
be analysed in an appropriate manner.
From the entire analysis of Porter’s Five Forces Analysis, this can be analysed and
identified that there are various kinds of issues and risks in the bargaining power of the

14STRATEGIC MANAGEMENT
different buyers is the major threat. Moreover, the company is successful in the other
approaches which will help them in becoming more competitive in nature in contrast to the
competitors in the entire market as well.
Tesco needs to implement a proper strategic approach which will help them in
becoming more competitive in the competitive marketing environment. Moreover, this has
been noticed and identified that nature of the strategic evaluation is important which is
required to be analysed and identified which will help in appraising the different kinds
external and internal factors which are the root of the present kinds of strategies.
From the PESTEL and Porter’s Five Forces Analysis, Tesco is one of the major
retailers in the United Kingdom with a market share of more than 27.9 percentage. Tesco
tried to first analyse the online channel of sales with high level of the competency. The high
level of dependence of the company on the entire market of UK has tried in affecting the
share of the market. Due to this, in order to circumvent the weakness of the organization, they
should lower the level of dependency in the entire UK market and look at the broader market
environment as well.
Moreover, in order to capitalize the different kinds of opportunities in the market,
Tesco requires to focus on the different kinds of growth strategies of the health along with
beauty ranges in the private labelled market and this will help them in expanding their market
share in an efficient manner. Furthermore, this can be analysed from the environmental and
competitor analysis that Tesco will be able to manage the various kinds of threats by offering
the price cuts on the different products such as by providing special offers to the customers as
this will help the supermarket in not threatening the growth of Asda as well.

15STRATEGIC MANAGEMENT
Strategic Direction Implementation at Tesco
Tesco is the company which is more voluminous in terms of acquisition of revenue
and customers which is exceptional in case of the other grocery stores in United Kingdom.
This will be helpful in maintaining the current standard along with creating wide margin in
the market which will help the company in achieving the different objectives. The different
strategies or the direction of strategies which is required to be implemented by Tesco in order
to become more competitive in nature and include the differentiation strategy in the
organization is inclusive of the following:
Firstly, Tesco plc is required to divert the customer attention from the different non-
food products to the food products. To do this, they need not concentrate much on the non-
food products advertisements, however the company needs to create more focus on the
different kinds of food products and encourage the customers in eating more sea food along
with vegetables and fruits. The management of Tesco needs to put the different quality staffs
into the entire consideration by arranging different kinds of training programs in the
organization as this will be helpful in analysing the performance of the different employees in
an efficient manner.
VRIO Analysis of Tesco
Resource/Capability Value Rarity Costly to
Imitate
Exploited by
the
Organization
Value
Creation
The labourers are of
specialised kind
Yes Yes Yes Yes Sustained
High Quality raw
materials along with
specialised kind of
output
Yes Yes Yes Yes Sustained

16STRATEGIC MANAGEMENT
Expertise in
technology
Yes Yes No Yes Sustained
Reputation Yes No Yes No Competitive
Parity
Ability to become
innovative
Yes No No No Competitive
Parity
Effective distribution
Network
Yes Yes Yes Yes Sustained
Product
customization
Yes No No Yes Competitive
Parity
The company should emphasis more on the different kinds of sales promotion
activities of the different own labelled products on advert as this will re-direct the customer’s
usual kind of orientation of the products which are branded in nature. In order to achieve the
high sales level at Tesco, the company needs to penetrate the market and this will help them
in maximising the level of profitability of the company in a positive manner. The Tesco
company needs to provide with the entire ability to offer valued added services to the
different customers wherein the cost advantage along with high value products than the
competitors and this will be implementation of the diversification and differentiation strategy
(Hollebeek,Conduitand Brodie2016).
Action Plan
Activities Person
Responsible
Cost KPI Time Frame
Increase in Sales Marketing
Department
$50,000 This will be
measured by
increase in the
3 months

17STRATEGIC MANAGEMENT
amount of the
revenues along
with gaining
huge profit in the
market
Targeting large
number of
customers
Marketing
Department
$65,000 Net Profit Margin
will be increased
by increasing the
number of
customers in the
company
2 Months
From the table, this can be analysed that these are the major KPIs which are required
to be analysed by Tesco in becoming competitive in comparison to the other competitors in
the market. The entire action plan will be helpful in analysing the budget of the company
which will be required in completion of the tasks within the specified deadline and there are
no such risks involved in the same.
Conclusion
Therefore, this can be concluded that the different kinds of internal and external
environmental analysis have been done for Tesco Company. The different kinds of aspects of
generic strategies are required to be adopted by the company in order to become more
effective and efficient in nature. Furthermore, with the implementation of the differentiation
strategy, the company tried to improve the different kinds of marketing activities which were
performed by them and this helped the company in becoming more effective in the different
kinds of operations.

18STRATEGIC MANAGEMENT
References
Armstrong, G., Kotler, P., Harker, M., and Brennan, R. 2015. Marketing: an introduction.
Pearson Education.
Baker, M. J. 2016. What is marketing?. In The Marketing Book (pp. 25-42). Routledge.
Bresler, M., and Lubbe, I. 2014. Marketing management.
Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk
management: Review, critique, and research directions. Long range planning, 48(4), pp.265-
276.
Chambers, I., and Humble, J. 2017. Plan for the planet: a business plan for a sustainable
world. Routledge.
Charter, M. (Ed.). 2017. Greener marketing: A responsible approach to business. Routledge.
Chernev, A. (2018). Strategic marketing management. Cerebellum Press.
Chernev, A., 2018. Strategic marketing management. Cerebellum Press.
Di Benedetto, C. A., and Lindgreen, A. (2018). The emergence of Industrial Marketing
Management as the leading academic journal in business-to-business marketing. Industrial
Marketing Management, 69, 5-12.
Foxall, G. 2014. Strategic Marketing Management (RLE Marketing) (Vol. 3). Routledge.
Galliers, R.D. and Leidner, D.E., 2014. Strategic information management: challenges and
strategies in managing information systems. Routledge.

19STRATEGIC MANAGEMENT
Helfat, C.E. and Martin, J.A., 2015. Dynamic managerial capabilities: Review and
assessment of managerial impact on strategic change. Journal of Management, 41(5),
pp.1281-1312.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing
function. Macmillan International Higher Education.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship, pp.45-63.
Hollebeek, L.D., Conduit, J. and Brodie, R.J., 2016. Strategic drivers, anticipated and
unanticipated outcomes of customer engagement.
Hutchinson, K., Donnell, L. V., Gilmore, A., and Reid, A. 2015. Loyalty card adoption in
SME retailers: the impact upon marketing management. European Journal of
Marketing, 49(3/4), 467-490.
Jarzabkowski, P. and Kaplan, S., 2015. Strategy tools‐in‐use: A framework for understanding
“technologies of rationality” in practice. Strategic Management Journal, 36(4), pp.537-558.
Keller, K. L., and Kotler, P. 2016. Marketing management. Pearson. (Keller & Kotler, 2016)
Kleinaltenkamp, M., Plinke, W., and Geiger, I. 2016. Business Relationship Management and
Marketing. Springer-Verlag Berlin An.
Kotler, P. 2015. Framework for marketing management. Pearson Education India.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.

20STRATEGIC MANAGEMENT
Litman, T. 2018. Parking Management Strategies. In Parking Management Best
Practices (pp. 86-225). Routledge.
Martín-de Castro, G. 2015. Knowledge management and innovation in knowledge-based and
high-tech industrial markets: The role of openness and absorptive capacity. Industrial
Marketing Management, 47, 143-146.
McDONALD, M.A.L.C.O.L.M., 2016. Strategic marketing planning: theory and practice.
In The marketing book (pp. 108-142). Routledge.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic
management interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.
Miquel-Romero, M. J., Caplliure-Giner, E. M., and Adame-Sánchez, C. 2014. Relationship
marketing management: Its importance in private label extension. Journal of Business
Research, 67(5), 667-672.
Proctor, T., 2014. Strategic marketing: an introduction. Routledge.
Robson, W., 2015. Strategic management and information systems. Pearson Higher Ed.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Schaltegger, S., Burritt, R. and Petersen, H., 2017. An introduction to corporate
environmental management: Striving for sustainability. Routledge.
Tesco.com. (2018). Tesco :: Online Groceries, Banking & Mobile Phones. [online] Available
at: https://www.tesco.com/ [Accessed 15 Sep. 2018].
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy. pearson.