Business Strategy for Tesco: PESTLE, SWOT, Porter's Five Forces Analysis and Strategic Directions

This report provides a comprehensive analysis of Tesco's business strategy, including PESTLE and SWOT analysis, Porter's Five Forces model, identification and justification of Tesco's existing competitive advantage, and tactical objectives to achieve strategic objectives. It also discusses different strategic directions available for Tesco, including low price and low added value, low price, hybrid, differentiation, focused differentiation, risky high margins, high price and low value, and monopoly.

BUSNISS STRATEGY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Pestle analysis of Tesco..............................................................................................................3
SWOT analysis...........................................................................................................................4
Porter's five forces model ...........................................................................................................5
Identification and justification of Tesco existing competitive advantage...................................6
Tactical objectives to achieve the strategic objectives ...............................................................7
Part B...............................................................................................................................................8
Different type of strategic directions ..........................................................................................8
Justification and recommendation for the growth platform and strategies.................................9
Ways to monitor the implemented strategies............................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Business strategy consist of all the activities and actions which are involved within the
business to reach the common goal of the company (Lim, Chalmers and Hanlon, 2018). As the
competitive in the market is being very high and make the business strategies more important
there are different strategies which are must for the business that are planning, evaluation of
strength and weaknesses and analysis the efficiency and effectiveness of the business. Tesco is
UK based retailing company deals in grocery and other retailing products and having one of the
largest retailer internationally. This report will evaluate the detail related to PESTLE and SWOT
analysis of Tesco which will show the potential and resource of the company. Further the
competitive environment is being analysed and competitive advantage of the Tesco. Moreover,
the different type of strategies are determined which are available for the Tesco. Justification is
presented for growth strategies and ways to monitor the strategies for success of the company are
determined.
Part A
Pestle analysis of Tesco
Tesco is one of the largest multinational retailing company and one of the lead company
in the market of retailing (Matzembacher and Meira, 2019). This analysis uses to help the
company to know its external factors which are having impact of the growth of Tesco. The
different factors are:
Political factor: The retailing industry of UK is highly influenced with the changes in the
political environment of the country. As the retailing industry usually deals in more than one
nation, and they have to follow the policies and procedure of more than one nation. As the Brexit
which was occurred in the market of UK has created number of uncertainties in the business
community and the retailing industries as impact negatively. They have to work as per the trade
policies which is created by government after Brexit (Wahyuni, Fahada and Atmaja, 2019).
Economic factors: The economic condition of UK is being badly influenced due to pandemic
period of COVID-19 and the retailing industry also not able to perform its activities. There are
many things which are totally changed and Tesco also not selling their product with their
physical stores. They are only able to sale its products through online platforms with this the
economy of UK is also faced the recession as people got unemployed due to pandemic period.

Social factor: The people in UK are regularly changing their preferences and the retailing
industry have to offer the product accordingly to remain more competitive in the market. As
earlier people are not prefer the vegan products and mostly prefer the meat-based food and Tesco
also need to offer the same to remain sustainable in the market. As the single store concept is
more common and people need collection of things together at same place so Tesco also develop
large variety of things in the form of supermarket so that their customer can buy different things
collectively.
Technological factor: The retailing industry need to change their technology as per the customer
demand in the market. As people in the market are always wanted something new from which
they are using previously. In the pandemic period when the physical stores are being closed at
that time company also have to change its process to sale the product, so they have make use of
digital technologies to reach its customer base (Chen and Keung, 2019).
Legal factor: As all the government in different countries are also having different laws and
regulation develop by government and the retailing industries also need to work as per the laws
develop for them. Tesco also have to work as per the laws that different country's government
had made for retailing company. Further when there is any change in the laws then Tesco also
need to change its process accordingly.
Environment factor: To work according to the environment is also being very important to
sustain in the market. As the companies who are taking care of environment are being more
sustainable in the environment and people also prefer those on priority basis. Tesco is also
making efforts so that they make their process more sustainable.
SWOT analysis
Tesco is leading company in the market, yet they are also had their internal strength as well as
weaknesses that are effectively understood with the help of SWOT analysis (Liu And et. al.,
2020).
Strength:
 Tesco is having an effective profitability and turnover in each year and with this the
market shares of the company also increasing rapidly.
 Tesco performance is also remarkable in the pandemic period when other companies are
facing loss.

 They are continued in doing innovation and attracting its customer on regular basis to
enhance the growth.
Weaknesses:
 As the competitors in the market are having large shares all over in UK market.
 The product quality of Tesco Product are not being standardized this is leading to several
complaints from customer side (Christodoulou and Cullinane, 2019).
 The food product of Tesco are yet facing the safety issues.
Opportunities:
 Tesco can effective in online selling, so they can expand their digital market which will
help to reach more customers.
 Company can also provide wider employment to the people as the unemployment is
common issue after pandemic situation.
Threats:
 The relation of Britain with EU market are totally change after Brexit as the supply chain
of Tesco is completely disturbed.
 The economy of UK is also having high recession rate so the customer in the market are
not having much money to invest.
Porter's five forces model
Tesco is one of the British company who is one of the biggest retailing company having
various supermarket and superstores all over the country (Zahari and Romli,2019). This tool will
help to analysis the competitive environment for Tesco.
Competitive rivalry in market (high): The community uses to increase its demand and supply of
goods and services to reach the needs. As to deal with this there are many companies have
acquired the market to offer the customer more effective products and variety of products. There
are number of competitors in the market who are offering the similar products as Tesco is
offering.

Threats of substitutes (Low): As the retailing industry is having low substitute in the market to
meet the customer demand for the grocery and other retailing products (Samad, 2018). As there
are certain availability of substitute, yet they are more expensive than Tesco commodities. With
the use of technologies and impact of digital marketing has totally changed the way to do the
business. Therefore, the risk of substitute products for Tesco is low.
Threat of new entrant (High): As the emergence of store is being simple and easier to enter the
market. The capital is not characterized as an issue in this industry as per the need as small
business need less capital as compare to medium and large companies. The retailing sector is
effective for the new companies to enter an compete with existing companies so Tesco is having
an higher threat for its new entrants.
Bargaining power of suppliers (Low): there are number of supplier in the retailing sector and
Tesco is also having different suppliers which are providing the raw matrial to Tesco. The
individual supplier of market can not able to reduce the margin of the company because when
they will try to do so then Tesco can easily change its suppliers. They can also make use of
alternative raw material which is less costly and offering similar level of satisfaction to its
customers. As the supplier chain of Tesco is already big so it becomes more challenging for the
supplier to increase its price (Simon, 2020).
Bargaining power of buyers (high): The customer are the king in the market and retailing
industry also various vendor in market so the customers can buy what ever they want. The
products of Tesco must be sold at comparable price to remain connected with the existing
customer in the market because when the prices of the commodities are more than the
competitors then customers will change their preference and move to some other brand. Their is
no binding for customer to buy from an particular retailer in the market so when the price is more
than buyer easily change their preference.
Identification and justification of Tesco existing competitive advantage
Tesco is dealing in the retailing industry as to enhance the growth and more market share
company has highly involved in digital marketing and selling of its products. The company is
having maximum of its sells using the internet platform and this is acting a competitive
advantage in the market. With the help of this Tesco can enhance its growth a revenue in the
international market. Further the company is also making use of effective advertisement and

marketing practises in the market to attract the customers. The majority of its customer are
available on internet so the company is effectively reaching to its target customer base and this is
making them involved with Tesco (Hanafi and et. al., 2017). The company also making use of
social media platform and TV advertisement to attract the customers. Tesco is more active on the
social media to reach its customer base and with this majority of its buyers are influenced and
remain with the company. The effective marketing of Tesco is being helping the brand to sustain
in the market in more creative way. The digital marketing is the only tool in the current market
that can maximize the competitive advantage for Tesco and people also get quickly influenced
with this easily.
The potential that Tesco can achieve to get competitive advantage is that involvement in
organic products is more effective for the company. As many people in the market are willing to
buy such product which are health and having a positive impact on health. As there are very few
companies who are involved in the organic market and customer are taking their product on
priority basis when they are purchasing the products. Furthermore, the company can also use an
effective pricing strategy as per the customer and the market they are operating in to attract the
customer. As after the pandemic period the buyers in the market are trying to purchase such
products which are less in price and high in quality that can satisfy customer needs. So the
company have to make its products in a way that have low cost of production and higher
customer satisfaction. When the respective approach will be use in Tesco then the company can
effectively achieve its competitive advantage in the international market. Therefore, Tesco can
reach its best potential that competitive benefit can be achieved within the given time frame. This
competitive advantage for Tesco is being one of the most effective as lower pricing is being
effective in the current market because buyer need to maximize the satisfaction and this can be
easily done through lowering the price of the products.
Tactical objectives to achieve the strategic objectives
Tesco is enhancing its business continuously and for that they need to work on certain
areas to achieve the objectives that are:
To enhance the sales of grocery products by 30 percentage till the of Dec. 2021.
To reach the wider audience in the international market by making use of digital platforms.

To improve the marketing practises of Tesco and attract the customer in creative manner through
physical and online ways.
To enhance the revenue of the company by 25 percentage with the end of Dec 2021.
Part B
Different type of strategic directions
There are varieties of strategic directions are available for Tesco, company can
effectively make use of this direction as per their situation and suitability (Pascoe and et. al.,
2019). This direction can be easily characterized with the framework named as Bowman's
strategy clock in this model there are number of direction available for Tesco and with this
company can position its commodities. There are basically eight dimension of Bowman's clock
that are:
Low price and low added value: In this strategy Tesco can make use of low pricing to its
competitors in the market and the value that individual product have is also not provide the
higher value. With this the customer who are not having adequate amount to buy the
commodities of Tesco are also able to buy at lower pricing policies of the company.
Low price: Here Tesco can reduce the pricing of the product and tend to increase its production,
yet when the price of the products are less profit is being generated. In this approach Tesco have
to fully focussed on to minimize the price and quicker the production.
Hybrid: When Tesco follow this strategy then they will try to develop its product and
differentiate it from other in the market. This will develop the value of product in the customer
mind with this Tesco also going to reduce its price so it will go to influence customers to
purchase its buyers (Nagle and Müller, 2017).
Differentiation: Tesco can make use of this strategy with this approach company can provide its
products with high quality with an affordable price. This strategy uses to provide its customer
higher value which is easily identified in the market. This approach helps the company to make
their more reliable in the market and with this approach Tesco customer get ready to pay more
for the products.
Focussed differentiation: As the product category of Tesco also involve some luxury and
exclusive product that provide high as per the quality which are sold at comparatively higher

pricing. The marketing practises are being mainly focussed, and they also keep their prices
usually higher than the competitors in the market.
Risky high margins: When the prices of Tesco are high when it compares to the mediocre value
this approach is comparatively had high risk factors (Yuliansyah, Gurd and Mohamed, 2017). In
this approach organization usually face failure when it comes to use this approach in long-term.
As customer always prefer those products in the market which lesser in price and higher in
values.
Monopoly pricing: this approach make Tesco to positioned as monopolistic leader, and they are
only the supplier of that particular product. When the company has such unique commodity then
they are not having fear of any rivals in the market. Here in this market customer are not having
any second option, and they have to buy the particular product when they are in need of it.
Loss of market share: Tesco can use this strategy when they not need to offer their products in
the market which are valued by the customers in the market. As when the company will offer its
product at extremely high price then customer are not indulged to purchase those products.
From the above different strategy Tesco can make use of most effective strategy as
hybrid is going to the most suitable strategy for retailing company. In this approach can will
focus to improve the product quality and also similar try to minimize the prices of the product so
this will help Tesco to reach its customers base.
Justification and recommendation for the growth platform and strategies
Tesco is a multinational retailing company operating in retail sectors and to enhance its
business in international market and to attract the audience of international market Tesco can
make use of strategies that are Hybrid and focussed differentiation this both approach are helpful
for Tesco to attract the customer towards the products of the company (Al Shobaki and Abu-
Naser, 2017). Hybrid is one of the commonly use strategies in big firm because in the current
market customer are always wanted such products which offers high value and available at
comparatively low price.
Ansoff matrix
The company can identified the growth platform with the respective matrix in this model
as there are four types of matrix that Tesco can use to grow its business (Cınar, 2021).

Market penetration: This matrix is effective to grow Tesco business in the existing market with
the help of existing products. When Tesco use this matrix to grow business then they make use
of their existing commodities to serve the new and previous customers of Britain. In this they
make use of innovative marketing and advertisement way to attract the customers in the existing
market (Abbas, 2020). Tesco also will provide different type of discount to increase the sale and
enhance the profitability.
Market development: Tesco can make use of this matrix to achieve its grow in the international
market as in this process company is going to offer its existing commodities in other market.
With this approach Tesco can easily expand in other nations around the world. This matrix has
low risk and company can efficiently do this to develop market with existing market. The
company can increase its customer with this practise and target large area as well (Plotz and
Roth, 2017).
Product development: This matrix includes development of the product in the existing market
which will help to attract the previous and new customer in the particular place. This approach is
also being one of the most effective strategy that company can make use of to grow its business
in the existing market.
Diversification: This approach is comparatively more difficult and having lots of risk to
implement. Selling of new commodities and new market is not an easy task so Tesco need to
take huge risk to make use of this matrix in company (Tumbas, Berente and vom Brocke, 2017).
As it is unpredictable to know the new commodity is effective in that market or not whether
customer will provide positive feedback to that commodity, or they will not like that product.
When the company is expanding in international market then they can make use of
growth platform such as market development. In this particular platform Tesco will grow its
business with low level of risk as the company only going to offer those products which they are
earlier using to sale in existing market. In this process Tesco can easily expand its customer base
and international market presence because when the company will offer its product to
international customer then they are going to know about Tesco. The market development is one
of the most suitable practise that company can make use of as the country where the retailing
business are less. Tesco can expand its business in that of country more easily because of less
competition and higher customer interact will make Tesco more reliable and effective company.

Tesco can gain higher revenue by doing more production because when the production is higher
than cost of production will go to reduce (Beyer, Löwe and Wendler, 2019).
Ways to monitor the implemented strategies
Their are different type ways that can be used by Tesco to implement its strategies within
the company. The implementation of strategy is basically done to turn the plans into the main
action to reach the desirable goals (Elsbach and Stigliani, 2018). There are number of ways that
can be used to inspect the effectiveness of strategies within Tesco are:
Benchmarking: This is an effective way to compare the practises of the company with its
competitors in the market. With the help of this technique Tesco can measure its performance
and grow according to the change. There are different type of benchmarking:
Performance benchmarking: This process involve collection and further compare the quantitative
data in this process Tesco is going to inspect the performance gaps and work on it.
Practise benchmarking: This process include a conduction activities which is done through
people as well as technologies. For this process the process mapping is done to compare the
qualitative information.
Internal benchmarking: In this comparison is being done to within the company according to
the product line, units (Alkan and Bullock, 2020. In this the need is related to shared metrics and
this is an effective way to make use of current standard of business.
External benchmarking: When the internal comparison is done then the aspects are compared
to other companies in the market to check the effectiveness of the company. In this comparison
is done for more the one company and in this involvement of third party is done to collect the
data.
KPI: This is one of the effective way to measure the effectiveness of strategies that are
implemented in Tesco. This is a key performance indicator which show the strategies which are
used in Tesco are being used effectively, and they have positive impact on the company. In this
process Tesco uses to make a standard and work accordingly and try to measure the effective that
are cause due to strategies used in the company (Dryden, Khodjamirian and Padilla, 2020). As
Tesco has been used hybrid approach to expand its business in the new market and further when
it is used by company then KPI is used to check this approach is effective for the company or

not. This way to check the strategy implementation is more effective because the enhancement of
sales and profitability is identified in this.
By following this Tesco can easily monitor the success of the strategies which are used in
the company. In this they create the goal and defining the variables for that and in this the
common mistake are related to personal growth. To achieve the goal Tesco assign the roles and
responsibilities and set an expectation from the employees. The employees are provided relevant
information that is need to complete the allotted task (Mariani and Wamba, 2020). As all the
employees are working so the leaders and managers uses to delegate the work so that they can
achieve the success. Each employee's performance is being monitored and try to give them
support so that their goal can achieved effectively. While implementation of strategy the
corrective action are being taken because it is long termed process (Si, Wang and Zhou, 2020).
Therefore, the sales and revenue of Tesco is also being inspected to check the success of the
strategy that is used by company.
CONCLUSION
This report concludes that business strategy is being one of the most crucial term that is
helpful for the company to reach its common goal. Without an effective business strategy action
of the Tesco can not be performed with better efficiency and effectiveness. Further it concluded
that Tesco is highly influenced with the political and economic environment available
international because they also have to change its practise when there is change in the external
factors. Tesco is one of the large market share holder who is having effective market presence
and customers of this company are positive with company. Furthermore, there are different
competitive environment which are influenced Tesco, the competition is being higher and the
customer are having higher power to regulate the price. The strategies are helped to achieve the
overall objectives of Tesco. It also concluded different approach of direction which can be used
by Tesco to enhance the productivity and profitability. The recommendations are being
presentation that will help Tesco to grow in the market with effective way without any
misconduct of things.

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