Tesco Strategic Management Report

This report analyzes Tesco's strategic management using SWOT, PESTLE, Porter's Five Forces, and Bowmen's Clock models. It identifies strengths, weaknesses, opportunities, and threats, analyzes political, economic, social, technological, environmental, and legal factors, assesses competitive forces, and explores strategic positioning. The report concludes with recommendations for Tesco to improve its market position and achieve sustainable growth.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Company Background.................................................................................................................1
SWOT Analysis of the organisation...........................................................................................1
Pestle Analysis of Tesco plc.......................................................................................................3
Porter's Five Forces affecting Tesco Plc.....................................................................................5
Bowmen's Strategic Clock of Tesco plc......................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Strategic management is the process by which management decides the best possible
strategy for the organisation to achieve the organisational goal effectively and efficiently. Tesco
is the grocery company founded by Jack Cohen in the year 1919. Reports highlights the SWOT
analysis of the Tesco and then reports goes on to show the PESTLE analysis of the organisation.
Reports then shows the implementation of Porter's five forces theory on the organisation and in
the end it shows the implementation of Bowman's strategic clock.
MAIN BODY
Company Background
Tesco is the British multinational grocery company, Founded in the year 1919 by the
founder Jack Cohen, first shop was opened in the year 1931. Tesco headquarters is based in
Welwyn Garden City, Hertfordshire, England, United Kingdom. Tesco has more than total of
7000 store in the eight countries across Europe and Asia. Tesco currently has shops in Czech
Republic, Hungary, Ireland, Malaysia, Poland, Slovakia, Thailand and UK. There are more than
500,000 employees working for a Tesco world wide. Tesco is currently ranked 3 in the world on
its gross revenue basis and ranked 9 on its revenue basis in the global grocery market. Tesco is
the leading grocery company in the UK local market with the share of 28.4% of market. Tesco
offers variety of grocery product of top brands in the world to the customer in their store.
SWOT Analysis of the organisation
Strength
Sound Financial Position: Tesco is the leading grocery retailer in UK with significant cash
reserve and underdeveloped property in company name shows that Tesco has very sound
financial position to dealt with any unconditional situation in the coming near future (Leiber,
2018).
Quality: Tesco offers a product of a top brands and of a good quality in their store which has
helped the Tesco to have good name of the company in the eye of consumer and investor and
helped in gaining the customer attention toward the store.
Goodwill: Tesco has been awarded with the numerous of award in the past for their performance
in the market, which has resulted in creating a good image of the firm in the eye of viewer and
also helped in making good goodwill of the business (Menga and et.al., 2015).
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Wider area coverage: Tesco is able to cover a wider market area as compare to the competitor
with total of 3754 store across the UK till 2018 has resulted in touching more consumer in the
market as compare to the competitor.
Weaknesses
Low Pricing Strategy: Due to high number of competition in the grocery retailer market, it has
forced the Tesco to adopt the low pricing strategy which has helped in gaining the customer but
on the same time it has resulted in reducing the profit margin of the company.
Market assessment and research: Tesco is one of the successful company in the local market but
has faced the problem of growing in the global market due to not able to assess the global market
properly, which has resulted in departure of Tesco store from the country in the past (Gürel,
2017).
Decline in Profit: Tesco is over dependent on the performance of the store of UK and Europe as
Tesco is not able to earn that level of name in the global market which has resulted in decrease in
operating profit of the business and the price value of share was also fallen by 9% in the previous
year.
Opportunities
Joint Venture and Merger: Tesco has the opportunity to merge or joint venture with any local
organisation in the global market which can help Tesco to have a better knowledge of the culture
and market in which Tesco is looking to go. Tesco can go on with these strategy as Tesco has
very sound financial background (Hitt, 2017).
Emerging market: Tesco has the opportunity to grow the business globally by opening the store
in the developing country as it can help Tesco to have a first mover advantage. For e.g. Domino's
is the well known company to start business in emerging market and now Domino's is one of the
most successful company in their industry.
Online business: Tesco has the opportunity to grow the business services by providing online
shopping service system to the customer and also home delivery system as online business is
growing sector in today's market scenario. Firms in the food and beverage industry has received
a good respond after providing the online services to their customer (Lasserre, 2017).
Threats
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Competition: As there is high number of company in the grocery retailer market, Tesco always
faces the threat of the competitor in the market as Big giants like Walmart and Aldi always tries
to gain the market share by using different policy and strategy.
Legal and Political factor: As Tesco is overdependent on the success of the UK and Europe
stores any change in the Political and legal policy can force the business to change the company
strategy as it can harm the companies profit (Charfeddine, 2017).
Labour cost: Regular rise in the employment wage rate of the country can prove to be big threat
for the company as it reduces the profit of the company. Tesco has more than 500,000 employee
across the globe working for the company.
Raw material: In the competitive market Tesco uses the low price strategy to gain the customer
but increase in the price of the raw material at regular basis affecting the profit margin of the
company (Fozer and et.al., 2017).
Summary
After going through the report it has been summarised that Tesco is doing well in the
Local market but facing some difficulties in growing globally as Tesco is not able to assess the
foreign market properly but at the same time Tesco is financially good company which provides
Tesco with variety of strategy to increase their global market share. Tesco also need to make
regular change in their local policy as the competition level is very high in the market.
Pestle Analysis of Tesco plc
The external analysis of the firm helps in suitable assessment and evaluation of business
measures. It leads to effective identification of the factors that can affect overall performance
level of an organisation. This supports in identifying the macro environmental attributes which
supports a good planning of strategies in order to mitigate the risk factors in more effective way.
The Pestle analysis of Tesco plc is as follows:
Political: The governmental attributes like tariff rates, employment and trade policies are
certain factors which are required to be looked after by Tesco plc. In order to handle the
objectives and operations related to growth and development of enterprise, international support
is must. Besides this, lack of a stable government and business environment and FDI will also
adversely affects the revenue generation of organisation on a wider scale. Supporting of Foreign
Direct Investment will help the firm to enter in a market. On the other hand, if the FDI is
opposed,it may hamper operations of enterprise (Rosenberg Hansen, 2016).
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Economic: The inflation rate, currency rates and custom duties covering the cost of
import and export are certain financial factors which affects the sales and overall functioning by
enterprise. These factors also impacts the sales and establishing operational measures which
assists in establishing a stability in operation by Tesco plc. Lack of suitable financial policy will
affect the revenue generation and profitability of enterprise. As the interest rate increases,
operation cost raises, affecting productivity of firm.
Social: Purchasing power of customers, cultural operations like festival based shopping
and demographical attributes are certain measures which affects the social aspects of an
enterprise. These attributes have a very significant role in improving the revenue generation and
profitability which is achieved by organisation. All these factors affects the business operations
and execution of policies in more effective and significant way. Change in customer demands
may affect the sales and revenue of firm (Haselwanter, 2016).
Technological: This is a very important attribute that affects the business activities in
more effective way. Inability to imply different technological advancement and any sort of
technical glitch may affect following out of retail operations. The use of social media platforms
is a beneficial tool to market the products and services which are developed by organisation.
Use of advance technology affects the activities which are followed by merchandising entity.
Environmental: The high pollution and carbon footprint rate of organisation is a major
concern which affects its profitability. Tesco plc is required to follow operations in order to
manage the environmental policy of retail enterprise in a very effective way. On the other
hand,use of organic products and recycling increases sales and revenue. Besides this, the firm is
required to look after manufacturing and developing environment friendly products
(Phadermrod, 2019).
Legal: Lawful obligations are required to be monitored and followed to observe smooth
functioning of organisation. Laws like employment act, Safety at workplace act etc which
supports the proper planning and execution of retail operations. Any sort of judicial restrictions
based on these industrial regulations may hamper the profit generations of enterprise.
On the basis of this analysis, it can be said that external factors of business organisation
influences their performance. As Tesco plc is facing the crisis in earning and sustaining
profitability, it has to evaluate and develop suitable strategy in order to execute its retail
functions in an effective way (Fozer and et.al., 2017).
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Porter's Five Forces affecting Tesco Plc
The Porter's five force model of organisation plays a very deep and significant role in
executing the business operations in an effective way. This supports in identifying the
competitive conditions that are prevailing in retail market. Tesco plc see through these factors in
order to execute the functions with a higher efficiency. The Porter's five force analysis of Tesco
plc is as follows:
Threat from New Entrants (Low): Retail sector is one of the fastest growing industry in UK.
Looking at the opportunity of expansion, many new organisations are entering into the market
and thus affecting marketing share of enterprise in an effective way. However, as Tesco Plc is
one of the biggest merchandising firm, it is least susceptible to get affected from the entry of new
companies penetrating in market. This helps in increasing R&D and manufacturing of for more
customer centric, high quality, innovative product by Tesco plc. It supports the firm to ensure
sustainability in market (Gürel, 2017).
Bargaining power of Suppliers (High): The raw material are the important attribute which is
essential to monitor within retail sector. As the organisation is required to see through the
developing and maintaining of good relation with their material providers. If the suppliers are in
good position, they hardly negotiate with firm. This can affect the overall profitability of
enterprise. In order to tackle such situations, a good supply chain is required to maintain. Besides
this, Tesco plc can opt for having more than one supplier to avoid unwanted condition in market.
Bargaining power of buyers (high): Customers are important asset for an enterprise. Hence,
their bargaining may have an impact on operations of organisation. The consumers are required
to be managed from bargaining as it causes them to look after discounts and offers implied by
retail firm. The shorter and dominating user base leads the firm to look for more discounts and
lower price, affecting their revenue. In order to handle such conditions, Tesco plc can develop a
larger customer base and improve the supply chain on a larger level (Leiber, 2018).
Threat of substitutions (Moderate to high): Tesco plc offers a premium quality products on a
reasonable price. However, with increasing number of competitors, there are been similar items
on much lower price tag. This has affected the sales of Tesco plc to a greater level. This
substitution can affect the value proposition of company and may also affect the sales and
revenue. To mitigate this risk, firm can opt to develop the products as per customers needs and
offer them at a better price strategy.
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Rivalry with existing competitors (Very high): As many rival companies are increasing in
market of UK, the profitability and market share of organisation can be affected to a greater
extent. In order to observe suitable assessment and evaluation measures which are followed by
the firm. This can also cause the entity to reduce or shut down its subsidiaries or outlets affecting
the sales and revenue of the retail entity. For handling such operations, Tesco plc is required to
see through rise in its market share. Besides this, monitoring the sales and competitive presence
of organisation is observed.
On the basis of the Porter's Five force assessment, this is observed that Tesco plc is
greatly susceptible to face a stiff competition in UK as well as global level. This can affect their
market share and may cause decrease in sales. However, the developing of a strategic planning
supports a rise in sustainability of organisation. This assists in execution of the operations which
are followed by firm and assists in improving their relations with their customers. Hence, it
affects the overall operational capability of Tesco plc to meet the consumers needs and pertain
their productivity (Menga and et.al., 2015).
Bowmen's Strategic Clock of Tesco plc
It is a model or strategic framework that is followed within Tesco plc to have a
competitive advantage and improve their market position. It focuses on the positioning of
enterprise within marketplace in an effective way. The product development which is carried out
by firm is based on two constraints, price and value creation. It contains 8 strategic stages which
assists an organisation to have a sustainable market presence. The Strategic Clock of Tesco plc is
as follows:
Low price and Low value added: It is not a much beneficial strategy for organisation.
In this stage, the products that are developed by organisation are not differentiated and a low cost
and value based product is offered. It has a bargain statement and only helps in prevention of
undercutting by competitors and staying low key. Hence, it should be avoided by Tesco plc.
Low price: It is quite similar to previous approach but the strategy focuses on
establishing themselves as a low cost market leader. The strategic minimising of product cost is
required to be planned in order to have a economies of scale. The approach is based on the
nominal pricing of products or services that are manufactured and keeping its production to be
high to cover the manufacturing cost and generate a decent revenue (Hitt, 2017). However, its is
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prone to high level of intense competition. Thus, it can lead to a price war in market. Tesco plc is
required to avoid this strategic method as it is not full proof for generating revenue in
comparison to its market competitors.
Hybrid: It is a physical and psychological strategy which affects the sales of enterprise to
greater extent. This involves the approach of keeping the pricing low to reasonable but also adds
to product differentiation or valuation. This strategy is followed in order to convince the
customer with the fact that a value addition is been observed within firm. It offers the
organisation to manufactures a quality product in a nominal or reasonable rate. It can be proved
out to be beneficial for the organisation to have a good market position, if the product
differentiation is followed on a consistent rate (Lasserre, 2017).
Differentiation: It is an approach which is relatively based on the high value addition
within the firm. As the good quality products are manufactured and offered to the customers,
which is perceived by them, a good sales is observed. The brand image and quality of product
that is manufactured and offered assists the organisation to have a strategic position in market.
Along with this, the marketing and brand awareness plays a very crucial role in generating the
loyalty within customers. High quality products and services that are available on a relativity
reasonable price helps in attracting customers and obtain a sustainability. Tesco plc can opt this
strategy as it helps organisation to have a strong and loyal customer base. Besides this, it adds a
value to differentiated products.
Focused differentiation: This strategy is usually utilized by the firm offering the
products of high price level and lead the customers to perceive expensively priced commodities.
It leads to a targeted segmentation,promotion and distribution measures (Ansoff and et.al., 2018).
As it has a higher cost which limits its customer base to premium buyers. Although, it includes a
good brand imaging and raise in awareness, it is dependent on quality of product to be effective
for a long run. Tesco plc might look after this approach to launch luxury based goods and
services.
Risky high margins: It is high risk approach or strategy that is very susceptible to
failure. Setting a high price without offering any additional value to the product or service. If
customers willingly buys it on higher price,it leads to a good profit share. However, gradually the
sales decreases and a better product replaces the existing one, with a lower rate. For a long run, it
is not beneficial and is tough to follow in competitive market.
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Monopoly pricing: It is a strategy to offer a unique product or service and the value
creation perceived by customer in a product. It is not customer based and offers the buyer an
opportunity to either make the purchase or not. Their is no other alternative for them to go for. It
is based on strict regulation and is hardly followed.
Loss of market share: It is undertaken when a low value product or service is
moderately priced in order to generate sustainable customer base. This is very prone to be turned
down by customers and should be avoided by Tesco plc (Wheelen and et.al., 2017).
Based on this assessment, it can be said that the strategic approach of hybridization or
differentiation is the best approach to be followed by Tesco plc. This will help in improving the
sales and have a strategic market position supporting in revenue generation.
CONCLUSION
As the effective assessment is observed within retail firm, this can be said that a strategic
management is very important for improving sales and revenue generation of firm. Effective
assessment of internal and external factors using SWOT and PESTLE is followed. Also, the
competitive conditions are evaluated using Porter's five force model to develop suitable
strategies for growth of revenue. Besides this, suitable operational strategies to generate and
increase the revenue is observed using Bowmen's Clock model.
Recommendations:
Various recommendatory measures that are taken in consideration by Tesco plc are:
 Effective researching should be observed prior to implementation of strategic approaches
within Firm.
 Before the major implications,strategies like Hybridization or differentiation can applied
on small scale.
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REFERENCES
Books and Journals
Ansoff, H.I. And et.al., 2018. Implanting strategic management. Springer.
Charfeddine, L. and Mrabet, Z., 2017. The impact of economic development and social-political
factors on ecological footprint: A panel data analysis for 15 MENA countries. Renewable
and Sustainable Energy Reviews. 76. pp.138-154.
Fozer, D. and et.al., 2017. Life cycle, PESTLE and multi-criteria decision analysis of CCS
process alternatives. Journal of cleaner production. 147. pp.75-85.
Gürel, E. and Tat, M., 2017. SWOT ANALYSIS: A THEORETICAL REVIEW. Journal of
International Social Research. 10(51).
Haselwanter, S., Muskat, B. and Zehrer, A., 2016. Strategic Planning in Micro Businesses:
Adapting the Strategic Clock for Micro Firms.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship, pp.45-63.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Leiber, T., Stensaker, B. and Harvey, L.C., 2018. Bridging theory and practice of impact
evaluation of quality management in higher education institutions: a SWOT
analysis. European Journal of Higher Education. 8(3). pp.351-365.
Menga, E. and et.al., 2015. Ranking alternative strategies by SWOT analysis in the framework of
the axiomatic fuzzy set theory and the ER approach. Journal of Intelligent & Fuzzy
Systems. 28(4). pp.1775-1784.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Rosenberg Hansen, J. and Ferlie, E., 2016. Applying strategic management theories in public
sector organizations: Developing a Typology. Public Management Review, 18(1), pp.1-19.
Wheelen, T.L. and et.al., 2017. Strategic management and business policy (p. 55). Boston:
pearson.
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Appendix
SWOT analysis
Pestle Analysis
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Porter's Five Force Model
Bowmen's Clock Model
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