Strategic Management: Tesco Case Study

This case study explores the strategic management of Tesco, including resource capability evaluation, strategic fit analysis, and identification of strategic options.

Strategic
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
LEARNING OUTCOME................................................................................................................1
1. Critical evaluation of resource capability and identification of strengths and weaknesses.....1
2. Strategic fit of the organisation................................................................................................4
3. Identification of two strategic options available to organisation.............................................6
4. Application of theoretical model for feasibility, acceptability and suitability.........................9
5. Suitability, Feasibility and acceptability analysis of Market expansion:...............................11
6. Challenges faced by organisation while implementation......................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Strategic planning can be defined as the process of controlling, monitoring and analysing
all the operational and executional activities so that all the long term business goals could be
achieved. With the help of it a business can become highly disciplined and organised. It is
considered as a bridge between organisational performance and incentives or benefits to the
employees according to their efforts (Bryce, 2017). Main purpose of it is to outline different
decisions and actions which allows a company to attain objectives. The enterprise which is
selected for this project report is Tesco. It is one of the largest supermarkets which are executing
business all around the world and established in United Kingdom. Its headquarter is in Welwyn
Garden City, England. It was founded by Jack Cohen in year 2003.
This report covers various topics such as application of different analytical tools, review
of strategic fit, strategic options available to the organisation etc. Apart from this, application of
theoretical model to evaluate feasibility, stability and acceptability and challenges regarding
implementation are also covered under this assignment.
LEARNING OUTCOME
1. Critical evaluation of resource capability and identification of strengths and weaknesses
Tesco is one of the largest retail stores companies which are operating business all around
the world. There are some capability and resources through which individuals can get to know
about conducting activities. It is important and relevant for managers to determine ways through
which strategies are formulated for proper analysis of industry. So RBV analysis and VRIO
analysis is used.
RBV analysis
There are two different types of resources which are acquired by Tesco and all of them are
described below:
Threshold: All the resources which are required by Tesco in order to meet expectations
of clients are considered as the part of them. With the help of all of them larger market share
could be acquired because it helps to meet expectations of customers. It includes high quality
products, good services etc.
Unique resources: All the elements which are required for a business to compete in the
market and attain long term business goals are considered as unique resources. Tesco is also
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having some of these resources which includes high competitive advantage, strong marketing
activities etc.
Resources Name of
resource
Strengths Weaknesses
Threshold Good
services
Tesco always make sure that all the
services which are rendered to the
clients are good so that their
satisfaction level could be
enhanced.
In order to deliver good
services high man power is
required which creates high
cost of recruitment for the
organisation.
High quality
products
All the items which are sold by
Tesco in It retail stores have high
level of quality which helps the
organisation to attract large number
of customers.
Cost of high quality products
is very high which affect the
market share because lower
class customers are not able to
pay very high amount.
Unique Competitive
advantage
Tesco is having high level of
competitive advantage which helps
it to compete it in the market in
appropriate manner (Hambrick,
2015).
When a company is having
high competitive advantage
then it is very important for it
to remain at this level and it is
creating difficulties for Tesco
because the competitors are
trying to capture its market
share.
Strong
marketing
activities
Strong marketing activities are
beneficial for Tesco as it helps to
aware all the customers to be aware
about different products which are
sold by the company to them.
Cost of conducting marketing
activities is very high which is
creating problem of low
profitability ratio for the
company.
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In order to evaluate resource capabilities of the organisation VRIO model could be used
as it helps managers of the companies to determine such elements which are unique. With the
help of VRIO model, it will be easy to determine which resources are easily available and which
has to be cured, hence it will easy to plan activities properly. It is important and significant for
people to determine and evaluate resources properly and used for organisational performance.
VRIO model: It is business analysis model which is used by managers of companies to
determine their capabilities which can help them to attain growth in future. There are four
different elements of it which are evaluated by enterprises to form strategic decisions for further
improvements (Frynas and Mellahi, 2015). These are value, rare, inimitable and organised. In
order to determine all the unique resources and core competences of Tesco it could be used. All
the components of it, in the context of the entity are discussed below:
Resources Valuable Rare Inimitable Organised
High man power ✓ ✖ ✖ ✖
Profitability ✓ ✓ ✖ ✖
Technological
Advancement
✓ ✓ ✓ ✖
Market image ✓ ✓ ✓ ✓
Valuable: Tesco have various resources such as high man power, productivity, strong
marketing activities, competitive advantage and market image. All of them are valuable for the
company because with the help of them organisation try to reach the long term business goals.
Managers within the enterprise try to maintain them so that it can help to execute all the
operational and executional activities in appropriate manner.
Rare: High man power is not rare for Tesco because there are various other companies
such as Sainsbury's, Waitrose Limited etc. which are having high man power. Other resources of
the company are rare for the organisation because it is not possible for all the entities to generate
high profits, conduct strong marketing activities, attain competitive advantage and establish a
good market image. With the help of all these rare elements managers in Tesco formulate plan
for future growth of the company (Gamble, Peteraf and Thompson, 2014).
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Inimitable: Technological changes are very fast and frequent in TESCO because they
regular analyse market and perform activities through which they can determine and understand
ways to conduct operations properly. RFID technology is initially launched by TESCO through
which there is improvement in their working operations and possibilities of getting higher return
are more. When supply chain is proper and appropriate, then it will be easy for managers to keep
consumers satisfied.
Organised: The marketing activities are not organised by Tesco in appropriate manner
because market situations changes with time which affects the process in which plans for them
are formulated. Market image and competitive advantage are organised by the company in
appropriate manner so that the challenges which may take place in future could be dealt
effectively.
From the above analysis it has been assessed that unique resources and competences of
the company are competitive advantage and market image because all of them are valuable, rare,
organised and inimitable for the company (Ginter, Duncan and Swayne, 2018).
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2. Strategic fit of the organisation
For determining and understanding strategies with which operational efficiency can be
achieved, there will use of value chain analysis (Karadag, 2015). In this study, there will study of
primary and other subsidiary activities through which organisational activities will be completed
within specified time. Value chain analysis is introduced by M. Porter in 1985 which provides
information about all the activities through which operations can be performed properly.
(Sources: Porter's Value Chain Model, 2019)
There is use of different primary and support activities through which organisation gain
good profits. For TESCO there are inbound logistics, operations, outbound logistics, marketing
and sales and services are considered under primary activities. With the help of these activities,
there will complete and specific operations which assist in completing task properly.
While secondary activities are human resource management, procurement, firm
infrastructure and technology which assist in achieving targets. Hence it will be easy for people
to understand and determine changes properly. With both these activities, there will completion
of targets and activities are performed for achieving targets(Jenkins and Williamson, 2015).
EVR Framework
In this model, there is more emphasise on understanding and determining environment,
values with operations and resources which can be provided with working in organisation. It is
important and relevant for managers of TESCO PLC to determine ways through which
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Illustration 1: Porter's Value Chain Model

individuals can perform activities properly. In order to evaluate and making changes properly
through which activities that they can maintain long term existence in society. As there are many
legal regulations regrading providing services, so it will be easy for organisation to sustain in
industry. There will requirement of change in working style, through which environment will get
less affected, value from operations will be more.
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3. Identification of two strategic options available to organisation
There is much scope of growth and development of retail organisation because they are
working in appropriate and specific manner,. It is important and relevant for people to
understand and determine changes properly through which operations are conducted for getting
proper outcome. There is change in business activities also, hence TOWS analysis is used to
study internal factors of the association.
TOWS analysis: It is a tool which is used for the purpose of strategic planning which is
beneficial for the company to reach all the long term objectives of the company (Hill, Jones and
Schilling, 2014). An analysis for Tesco is also conducted which is as follows:
Internal factors
External
factors
Strengths Weaknesses
Opportunities  High competitive
advantage
 Good services
 High quality of products
 Strong marketing
activities
 High cost of marketing,
recruitment and products
could be reduced by
formulating strong
strategies.
Threats  Competitors are creating
difficulties by reducing
prices of their products
due to high competitive
advantage of the
company.
 Continuous reduced in the
price may reduce market
share and number of
customers of Tesco.
SO: As Tesco is having high level of competitive advantage, good quality of products
and strong marketing activities then it can help to attract more and more customers so that
profitability could be enhanced. With the help of it large market area will be covered by the
company.
ST: As Tesco is having high level of competitive advantage so this strength of the
company is creating threat for the organisation because the competitors are reducing price of
their products so that they can capture its market share (Hill, 2017).
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WO: Cost of marketing and other business activities of Tesco is very high. If all of them
are reduced by the organisation then it can help to attract more customers and increase
profitability ratio.
WT: Due to high level of competitive advantage of Tesco competitors are reducing price
of their products which can affect Tesco in future by affecting its market share and number of
customers.
In order to analyse different competences of the organisation value chain and networking
analysis could be used. It is a strategic management tool which is mainly used to asses internal
activities of the organisation. Main goals of it is to analyse the activities which are contributing
in the attainment of competences and competitive advantage (Hitt, Ireland and Hoskisson, 2016).
In Tesco it is also used by managers to determine that the factors which can help to reach long
term business objectives. All the elements of it are discussed in following table:
Primary activities Distinctive
competences
Support activities Competitive
advantage
Marketing and sales Strong promotional
activities
Human resource
management
High level of
productivity
Retail Good quality items
and services
Procurement Cost saving
Operations Customer relationship
management
Technology
development
Enhanced brand equity
of Tesco
Inbound logistics Good management of
supply chain
Infrastructure Attract large number
of customers
Outbound logistics Good relations with
suppliers and other
stakeholders
Global operations Result in increased
profits
By analysing all the above activities discussed in above table it has been assessed that
there are various competitive advantages and competences of Tesco which are acquired by the
company with the help of its primary as well as secondary activities. All these activities are
marketing, sales, retailing, inbound and outbound logistics, operations etc. Support activities
includes procurement, infrastructure, technological development, global operations and human
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resource management. All these activities are beneficial for the organisation because all of them
help the company to attain growth and long term business objectives (Hubbard, Rice and Galvin,
2014).
Business growth and development for TESCO is important because there are many other
organisation operating. So managers of TESCO thinks of understanding and determining ways to
evaluate and understand policies properly. Two different options which are selected by the
organisation are market expansion and penetration.
Market expansion: In present context, the strategy that Tesco is going to utilise for
business expansion in a country like Japan i.e. Market development because this approach is best
fitting in the situation. Strength of this approach is that, a detailed research analysis could help
Tesco in reaching to new heights in specified time frame and might gain competitive advantages
as well. Along side this, it can also be said that utilising this strategy would lead Tesco in
improving customer base and would improvise its market share as well (Lasserre, 2017).
Another reason that came in front of utilising this strategy is that, Japan in present time is
carrying high growth rate and coming under the countries that are looking forward to improve its
economic conditions. With the help of this, it can easily be said that Tesco would launch its
existing (tried and tested) products in Japan. But this is carrying higher risks as well, because
United Kingdom's culture is totally different from Japan and it will be required for Tesco's
research and development department to look into the dynamic market of Japan and then perform
different range of analysis in order to gain the attention of targeted customers of Japan.
Market Penetration: It introduces to the successful selling of a product or service in a
particular market. It is a best and effective growth strategy which will be used by an organisation
in order to introduces its existing products in existing market. It will be follow in developing
accurate strategies to maximise the market share of a specific product or service in existing
marketplace. Along with this, TESCO will be use market penetration as its pricing purpose,
which will be setting the prices from the opening whereby consumer can afford. Currently,
TESCO following discount orientation pricing method by which they target middle segment
market as their target market. In order to increase market penetration, TESCO must attract large
number of customer away from rivals, increase usage by existing customers, encourages non
buyers to buy, gain market share at the expense of rivals, increase usage by existing customers,
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devise and encourages new applications etc. All these are consider as a biggest opportunities for
TESCO to gain competitive advantages within given time period (Morden, 2016).
There are different ways for using market penetration growth strategy in successful
manner. For this, TESCO must use different type of promotional channels such as Facebook,
Twitter, Instagram etc. All these are consider best medium which will help an organisation in
promotion of its existing products in existing market. As it will support an enterprise by
increasing customer base and improving brand image in marketplace as well as in mind of
customer. Along with this, market penetration strategy will be effective for the success and
growth of company. It will further help an organisation in achievement of competitive benefits
within given time duration. Main aim of an organisation for using market penetration strategy is
to improve customer loyalty, customer value and increase market share growth (Morschett,
Schramm-Klein and Zentes, 2015).
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4. Application of theoretical model for feasibility, acceptability and suitability
Suitability
It is define as method which is generally adopted by a company in order to identify
whether alternative strategy is effective for the situation or issues that is related to strategic
position of an organisation at a marketplace. In order to identify effectiveness of market
penetration plan TESCO may adopt various strategies such as value chain analysis,
environmental audit, etc. which help them in identify their strength through which they can grab
opportunities for penetrating at their potential marketplace. In this respect of respective company
have several strength through which they can retain themselves at potential market as well as
gain huge profitability ratio. For example they have skilled and experience manpower, effective
research and development department, huge financial, advance technology, loyal customers, high
quality products and services and many more (Simon, Fischbach and Schoder, 2014). These all
strength of respective firm will help them in grabbing opportunities by which they can sustain in
marketplace for a long time duration. Such as through huge finance TESCO can increase their
advertisement and promotional activities which help them in attracting large numbers of services
users. Along with this respective organization also have skilled and experience employees who
develop effective strategies and plans which help them in attaining customers by offer same
products and services such as food and beverage products, clothings, electronics materials and
many more.
Acceptability
It is define as study which will preoccupied with excerpted or standard work performance
outcome of a particular strategies and plans. In order to conduct acceptability analysis TESCO
can adopt stakeholder analysis through which they able to know or understand their power as
well as interest (Stead and Stead, 2014). This is so because for execution of strategies of market
penetration respective company required huge funds which is possible through stakeholder and
their provided funds. Along with this these peoples directly and indirectly impact on decision
making of respective company. There are several type of stakeholder who are connected with
TESCO such as investors, customers, Employees, government and many more. All these
stakeholder have diverse range of power distribution, which is given below:-
Level of Interest of Stakeholder
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Level of
stakeholder
power
High Low
High Employees, Investors Legal Bodies
Low Potential service users Suppliers of products and
services
By above table it can be determine that different different stakeholder have diverse level
of power, which are explain below:-
 Customers: These are those stakeholder who have high interest level but they have low
level of power. In respect of TESCO market penetration strategies, if respective company
adopt this strategy they need to analysis customers need and requirement so that company
fulfil it in effective manner.
 Investors: For conducting each and every activities in effective manner TESCO required
funds for which they can contact as well as convince them to invest on their selected
strategy. Such as respective company want to penetrate their business at their potential
marketplace for which they need to conduct huge promotional activities and for this they
required huge investment. In this case respective company management develop a plan
and try to convince their investors because they have huge power as well as interest in
company's profitability.
 Employees: These stakeholder are consider as backbone of a business or company, they
have high interest as well as high rate of power. If respective organisation adopt market
penetration strategy then they required skilled as well as experienced employees who will
develop appropriate strategies and plan which help TESCO in retaining at potential
marketplace for a long time duration (Steiss, 2019).
Feasibility
Through this an organisation able to identify whether they are have effective resources as
well as capabilities in order to conduct their strategies in effective manner that leads to
attainment of goal as well as objective properly. At this stage TESCO management will conduct
analysis or evaluation of their strength such as finance, skilled and experienced employees, loyal
customers and many more which help them in grabbing opportunities in effective manner. At
this stage they will also evaluate market penetration strategy is effective for them or not. They
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also also ensure that company resources , process and structure is effective in order to retain at
market properly.
5. Suitability, Feasibility and acceptability analysis of Market expansion:
Suitability
Through this a firm able to adopt strategies as well as plans which help them in
conducting work in effective manner and leads to attainment of goal as well as target in
impressive manner. Market expansion is refers as the key consideration of a business, thus
organisations are widely concern over expansing their business operations for the purpose of
attainment of higher growth and success (Thorsøe and Noe, 2016). Market expansion is
recognised to be the most suitable area of Tesco as it is the most leading and famous
multinational retail firm which has its global presence and higher brand reputation within the
global market. The availability of resource of Tesco is reliable which helps the firm in expansing
its operations at new area, so the suitability of market expansion is high for Tesco, there for the
firm has attained higher benefit and competitive edge through expansion of business or its
operations at wider level.
Acceptability
There are several aspects which are needed to be consider while adopting acceptability
method such as risk related to finance, expected profitability of selected option or strategy,
impact of environmental factors like stakeholder and many more. This is also a key aspect of
SAF, the acceptability can be determined through analysing the power and interest of
shareholder. For the reason of determining the acceptability their are different stakeholder like
Investors, Customers, Employees, Government and Suppliers which are effectively analysed:
Level of Interest
Level of Power High Low
High Investors, Employees Government
Low Customers Suppliers
The above mentioned table defined that there are three major stakeholders groups which
are significantly affected through the projected strategy are Employees, Investors or customers of
the firm. Investors are the key aspect of business, thus they are more concern over the strategies
proposed by the business and how it could be beneficial in attainment of higher profitability, so
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the idea of market acceptance is acceptable by the investors of Tesco as the company is having
high market share and good brand reputation which helps the firm in capturing a new market
segment with higher profitability. Employees are also considered to be the another key aspect of
business as the growth of business is based on the performance of employees and the company is
having wide employee range who are contributing their significant efforts in global expansion of
business, so the employees are also providing their acceptance regarding the proposed strategy of
market expansion. Customers are the crucial stakeholder group that will be affected indirectly
through market expansion. This could be resulted in capturing a wider area for the business in
fulfilling the desires of people at global level, thus the idea behind the strategy of market
expansion is effective for Tesco in achievement of higher profitability and growth (Trigeorgis
and Reuer, 2017).
Feasibility
This will generally help them in develop strategies, plans, process and budget which are
based on their resources as well as capabilities of its staffs. It will also help in develop training
and development programmes and arrange for resources according to requirement of strategies.
At this stage TESCO will analysis their resources or strength which required for adopting market
expansion strategy for the marketplace of Japan. They are conducting this strategies so that they
can develop effective polices, strategies, plans and process for expanding market at respective
place. By this they able to gain various opportunities such as expanding customers base , gaining
huge profitability ratio, enhance market shares and many more. Feasibility help TESCO in
determining that their strategy for expanding market at Japan is effective and help them in
grabbing opportunities in successful and impressively.
By analysing both the strategies that is market penetration and market expansion strategy
for TESCO most effective method is market penetration. In market penetration respective
company will develop strategies as well as plans in order to conduct business operations and
functions at their potential marketplace. For this respective company may may adopt several
strategies such as they can enhance their promotional and advertisement techniques, they can
introduce new and effective discount or coupons and many more. Through this they able to
attract more customers as well as this will also help them in increasing their profitability ratio
along with market shares.
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6. Challenges faced by organisation while implementation
There are some major challenges which is faced by TESCO in adoption of market
penetration growth strategy. Lack of management focus, no additional benefits for shareholders,
missed opportunities, poor company image, lowering industry prices, lack of results, saturated
market etc. All these are biggest challenges of market penetration which will negatively impact
on business and its market reputation. Along with this, market penetration strategy take more
time on an organisation which will negatively effect on business growth and development in
marketplace. Price-conscious customers may only make buy based on how much the goods costs
while placing less focuses on quality and brand recognition. These customers mainly are not
loyal to a good as well as brand unless it incessantly offers the lowest price. Along with this, An
ineffective market penetration policy could output in reduced profitability which will influence
on brand image of an organisation.
Apart from this, in order to overcome above mentioned all challenges of market
penetration, TESCO must use different types of promotional techniques. As it will help them to
introduce their existing products in exiting market. It will further help them by maximising
customer base and also increasing market growth. Company will also use time management
strategy which will support them to expand their business in same market with the use of existing
product. Thus, promotion is a best and effective way for overcoming all challenges and gaining
competitive advantages within given time period.
CONCLUSION
From the overall analysis of the report it has been concluded that in the modern business
era competition within market is so high and the key motive of a business is to attaining higher
growth and success at market place and for this businesses are concern over taking effective
strategic step to moving ahead in a right manner. Suitable selection of strategy is required for a
business in attainment of growth and success. Competitive advantages is the primary objective of
a business, thus organisations are focuses over analysing market for effective implementation of
business strategies that is effective in assisting the business operations in right manner. THe idea
of market expansion is the key consideration for the businesses in today's scenario, this it is
beneficial for businesses of its stakeholder in attaining benefits in monetary and non- monetary
terms.
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