Tesco's Strategies for Market Stability

This assignment examines potential strategies for Tesco to achieve greater market stability. It delves into two primary approaches: a Corporate Social Responsibility (CSR) strategy and a focused marketing strategy. The analysis draws upon various academic sources to provide a comprehensive discussion of these strategies' effectiveness in bolstering Tesco's position within the competitive landscape.

STRATEGY, ENTERPRISE
AND INNOVATION

Table of Contents
INTRODUCTION...........................................................................................................................1
SECTION 1......................................................................................................................................1
a) Internal resources and capabilities of the organization...........................................................1
b) Key drivers of change from external environment.................................................................2
c) Impact of competitive forces having influence on entrepreneurial activities.........................4
SECTION 2......................................................................................................................................5
a) Strategic options that can be pursued by Tesco......................................................................5
b) Justification of strategies based upon sustainability, acceptability and feasibility.................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategy and innovation plays an important role in expanding the business and take it to
the new heights. These are two important factors that helps the entity to sustain in the dynamic
environment (Gawer and Cusumano, 2014). Tesco is one of the leading supermarket chain
functioning in UK. The report makes comprehensive discussion on assessment of internal
resources and capabilities of Tesco through VRIO model. The report further ponders on external
factors influencing the functioning of Tesco with the help of PESTLE analysis. In the end, two
strategies will be suggested and justified, adoption of which can help the business to grow and
expand.
SECTION 1
a) Internal resources and capabilities of the organization
Tesco is one the largest supermarket chain which is known for selling different consumer
products in UK. The company opts for low price strategy where products are offered to the
consumer at least possible prices which attract large number of customers towards it. The main
objective of the entity is to increase its customer base rather than maximizing its profits. The
internal resources that are used by Tesco helps has helped the company to increase its market
share (Johnson and et.al., 2013). The analysis of internal resources and capabilities can be
analysed with the help of VRIO model. A brief discussion on applicability of VRIO model on
Tesco has been provided below:
VRIO ANALYSIS
Valuable
The products offered by Tesco are valuable as these are basic
necessity products that are required by every individual. Further, it
also focuses on providing high quality products to its customers.
Rare
The products are not rare as these essentials are available at every
supermarket and store. However, the price range offered by Tesco is
rare and hence is able to attract large number of customers towards
it
Imitate The products offered are imitable and are available at every super
market store. Hence, there is nothing new provided by Tesco to its
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customers.
Organized
Tesco has various departments in the organization. Top management
is able to manage everything further utilizing all the resources
optimally. It has been able to organize buying and selling process in
effective manner.
Results
From the analysis through VRIO, it can be assessed that there is a
strong control on the operations of the business. It is further helping
the company to gain competitive advantage (Kalkan, Bozkurt and
Arman, 2014).
Apart for VRIO model, internal resources and capabilities of Tesco can be judged
through assessing the strengths and opportunities of the enterprise. It helps in enhancing the
innovation aspect of the enterprise as well. Therefore, the strengths and opportunities of Tesco is
as follows:
Strengths Opportunities
Tesco has always been able to maintain high
market share in the industry. The process opted
for shopping is customer friendly which helps
in giving relieving shopping experience to the
customers. Further, the company is also
involved in effective utilization of resources
which helps in reducing the overall cost of the
company as well.
Tesco have opportunity to expand in various
other countries where its outlet is not yet
present. It will help the company to grow its
business and become global (Grant, 2016). The
entity can also opt for advancement in its
existing technology by opting for application
based product ordering experience to its
customers. It will help the company to increase
its customer base all around the globe.
b) Key drivers of change from external environment
There are various macro economic factors that has helped the company to grow as well as
decline. It also has strong influence in the innovation and strategical planning of the enterprise.
In order to analyse the external environment, PESTLE analysis can be performed which is
described in brief below:
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 Political factors: Government policies are dynamic in nature and hence keep changing
based upon the prevailing environment. It can lead to bring change in the entire process
of company. Further, another importance factor that can affect the functioning is
employability rules such as change in the basic wage rates, health and safety rules etc.
Increase in the minimum wage range can lead to increase in the cost of the organization.
 Economical factors: Change in the economic environment of the country can have
strong impact on the rules and policies of the organization. Some of the common changes
in the economy includes, change in the tax rates, inflation rates, interest rates etc. These
factors are not in the control of Tesco and hence can impact the prices of consumer goods
offered by it (Zhou and et.al ., 2013).
 Social factors: Change in the taste and preferences and lifestyle of the consumer
instigate the company to change its current policies and enhance it innovation and
creativity aspect. Constant change in the customer's demand leads to change in the
products offered by the company as well. Tesco have been involved in innovation since
years. In order to cope up with the constant change, Tesco have started to offer eco
friendly products' to its customers which has been able to enhance the loyalty of the
customers towards the company.
 Technological: Constant change in the technology in the environment compels the
company to enhance its current technology into a more upgraded version. Tesco have
been involved in providing innovative packaging of the products. However, the main
problem faced by Tesco is that it do not have online platform through which customer
can order their products and avail services. In order to do so, the company need to launch
its online platform for its customers (Hemmelskamp, Rennings and Leone, 2013).
 Legal: It is important to comply with all the food safety rules and regulation issued by
the government. It is one of the important aspect of food and beverages industry. Hence,
in order to perform this function, Tesco tends to maker changes in rules, regulations and
policies as and when it is announced by the government. It helps the entity to gain
competitive advantage.
 Environmental: It is a corporate social responsibility of every entity to take care of the
environment as it helps in sustenance of the business. In order to perform his function
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appropriately (Roper and Xia, 2014). Tesco have opted for eco friendly packaging units
so as to save the environment from dangerous fumes.
c) Impact of competitive forces having influence on entrepreneurial activities
Analysis of competitors plays an important role in preparing the strategies of the
company. Further, innovation strategies brought into action also helps in bringing competitive
advantage to the enterprise. There are various competitors available for Tesco in the market of
UK. These are Aldi, Sainsbury etc. By analysing their strategies, Tesco can prepare its own
strategy as well (Ruff, 2015). Further, innovation activities can also be taken into consideration
in order to enhance the business operations of Tesco. In order to make assessment of competitive
forces available to Tesco, Porter's five forces model can be used. A brief discussion of it is
mentioned below:
 Bargaining power of suppliers: There are various consumer goods providers in the
market and hence the bargaining power of the suppliers is less in the given scenario of
Tesco. Hence, Tesco is able to get the products at cost prices further delivering the
products at low prices to the customers.
 Bargaining power of buyers: The company owns low bargaining power of the buyers as
there are various other supermarkets in the industry that offer goods at higher prices than
Tesco. These are basic necessity and there is less force of the customer to bargain over
the prices of different products.
 Industry rivalry: There is perfect competition in the environment due to available of
large number of companies offering same products in the industry. Tesco has to offer the
products at competitive prices and slightly lower than the competitors. It reduces the
overall profits of the company (Klingebiel and Rammer, 2014).
 Threats of new entrants: Since, the company belongs to perfect competition market and
hence there is always a threat of new entrant in the industry. There is no restriction by the
government with respect to entry and exit and hence new companies can enter into the
league as and when required. It can affect the business operations of Tesco.
 Threat from availability of substitutes: There are various other companies same as that
of Tesco are functioning in the environment and hence if the customer is not satisfied
with the services of Tesco can switch to other company with the aim to satisfy his needs.
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Therefore, Tesco offer its products at the lowest possible prices so that it can compete
with the substitutes products available in the market.
SECTION 2
a) Strategic options that can be pursued by Tesco
The company can opt for various strategic option as it can help the entity to attain
competitive advantage over other companies available in the market. It gives opportunity to the
company to expand and enhance the market share. It also helps in building loyalty and trust of
the customers (Johnston and Bate, 2013). Hence, the two main strategic options that can be
adopted by Tesco in order to draw advantages over other companies are:
 Corporate social responsibility: It is one of the best strategies available in the market
which helps the organization to grow. It further helps in providing sustainable
development to the organization by taking care of the environment as well. Tesco can
form its policies and procedure through which it can inculcate any strategy that can help
in enhancing its involvement in CSR. CSR plays an important role in increasing customer
engagement and provide advantages to other stakeholders as well. The stakeholders of
Tesco includes, customers, employees, etc. The major disadvantage of the strategy is that
the return to the cost introduced in the project can be received after a prolonged period
(Strategy and innovation, 2016).
 Adoption of appropriate marketing strategy: Marketing plays an important role in
increasing the profitability of the organization. Adoption of appropriate marketing
technique can help Tesco in improving its customer base. However, the major limitation
to the activity is that it can add up to the cost of the organization.
b) Justification of strategies based upon sustainability, acceptability and feasibility
Corporate Social responsibility
Suitability: The strategy is suitable for Tesco as the market of food and beverage has
heavy fluctuations. The strategy can help the company in maintaining its operation and flow of
finance as well (West and Bogers, 2014).
Acceptability: Minimum risk with respect to acceptability is present in CSR strategy as
people tends to adopt and prefer the products that is making social contribution as well. It also
helps in gaining the loyalty of stakeholders as well.
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Feasibility: The strategy is moderately feasible as the company as the cost is introduced
in bulk and return is received in the future. However, it can help in bringing business to the
company via innovation.
Marketing Strategy
Suitability: Since, Tesco is existing in highly competitive market it is suitable for the
company to opt fro appropriate marketing strategies. It will help the company to develop its
customer base
Acceptability: The acceptability to the strategy is higher as adoption of promotional
activities help the company to assess its strength and weakness through feedback. It can help in
promoting the changes that has been brought by Tesco in its functioning (Slater, Mohr and
Sengupta, 2014).
Feasibility: The option is feasible as the marketing strategy can be altered as per the
budget available with the company. The company owns limited distribution channel which has
attracted the company to opt for this strategy. Hence, it will prove to be helpful for the company
in increasing its business functions.
CONCLUSION
Based on the above report, it can be concluded that, strategies and innovation are
important and should be adopted by Tesco in order to enhance its current market position. The
company's major strength in its low price strategy where it provide products to its customers at
lowest possible prices. Moreover, the report outlined that major competitors of Tesco are Aldi
and Sainsbury and hence innovation strategy is important to gain advantage over the companies.
In the end, report made a comprehensive discussion regarding two main strategies that can be
adopted by Tesco. They are Corporate Social responsibility strategy and marketing strategy
which will help in gaining better stability in the market.
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REFERENCES
Books and Journals
Gawer, A. and Cusumano, M.A., 2014. Industry platforms and ecosystem innovation. Journal of
Product Innovation Management. 31(3). pp.417-433.
Grant, R.M., 2016. Contemporary Strategy Analysis Text Only. John Wiley & Sons.
Hemmelskamp, J., Rennings, K. and Leone, F. eds., 2013. Innovation-oriented environmental
regulation: theoretical approaches and empirical analysis (Vol. 10). Springer Science &
Business Media.
Johnson, G. and et.al., 2013. Exploring strategy text & cases (Vol. 10). Pearson.
Johnston, R.E. and Bate, J.D., 2013. The power of strategy innovation: a new way of linking
creativity and strategic planning to discover great business opportunities. AMACOM Div
American Mgmt Assn.
Kalkan, A., Bozkurt, Ö.Ç. and Arman, M., 2014. The impacts of intellectual capital, innovation
and organizational strategy on firm performance. Procedia-Social and Behavioral
Sciences. 150. pp.700-707.
Klingebiel, R. and Rammer, C., 2014. Resource allocation strategy for innovation portfolio
management. Strategic Management Journal. 35(2). pp.246-268.
Roper, S. and Xia, H., 2014. Innovation, innovation strategy and survival. ERC Research Paper,
(17).
Ruff, F., 2015. The advanced role of corporate foresight in innovation and strategic management
—Reflections on practical experiences from the automotive industry. Technological
Forecasting and Social Change. 101. pp.37-48.
Slater, S.F., Mohr, J.J. and Sengupta, S., 2014. Radical product innovation capability: Literature
review, synthesis, and illustrative research propositions. Journal of Product Innovation
Management. 31(3). pp.552-566.
West, J. and Bogers, M., 2014. Leveraging external sources of innovation: a review of research
on open innovation. Journal of Product Innovation Management, 31(4), pp.814-831.
Zhou, Z. and et.al ., 2013. Technology innovation development strategy on agricultural aviation
industry for plant protection in China. Transactions of the Chinese Society of Agricultural
Engineering. 29(24). pp.1-10.
Online
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Strategy and innovation. 2016. [Online]. Available through <https://hbr.org/strategy-
innovation>.
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