Tesco Business Strategy

This document provides a comprehensive analysis of Tesco's business strategy, including its mission, vision, objectives, goals, and core competencies. It also discusses the factors to consider when formulating strategic plans, conducts an environmental and organizational analysis using PESTLE analysis and Porter's 5 forces, and explores the strategic position and significance of stakeholder analysis. Additionally, it examines Tesco's substantive growth strategy and implementation of market penetration strategy.

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TESCO BUSINESS STRATEGY
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Contents
Task one:.....................................................................................................................................................3
1a. Use of Mission, Vision, Objectives, Goals and Core Competencies in Strategic Planning................3
Vision..................................................................................................................................................3
Mission................................................................................................................................................4
Goals and objectives............................................................................................................................4
Core Competencies..............................................................................................................................4
1 b. An analysis of factors that have to be considered when formulating strategic plans.........................5
Engagement of employees.......................................................................................................................5
Effective communication.........................................................................................................................5
Innovation................................................................................................................................................5
Task Two.....................................................................................................................................................6
2a Tesco Environmental and Organizational Analysis............................................................................6
PESTLE Analysis................................................................................................................................7
Porters 5 forces....................................................................................................................................9
2b. Strategic position and significance of stakeholder analysis.............................................................10
Task Three.................................................................................................................................................11
3. Tesco Substantive Growth Strategy...................................................................................................11
Task 4........................................................................................................................................................13
4a. Market penetration Strategy Implementation.......................................................................................13
4b.Smart targets.....................................................................................................................................15
Increase Tesco’s sales by 4% in six months......................................................................................15
Increase market share by 5% in one year...........................................................................................15

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Task one:
1a. Use of Mission, Vision, Objectives, Goals and Core Competencies in Strategic Planning
Strategic planning is a core management function contributing greatly to long-term
success in organizations. A strategic plan plays a significant role in the alignment of the
organization's objectives to its goals. Additionally, it increases operational efficiency by aiding in
decision making on aspects such as determination of budget and resources needed to achieve set
objectives. Strategic planning is, therefore, a management activity aimed at aligning
organizational resources and resources towards the realization of common goals. It is also aimed
at ensuring that the workforce and stakeholders are focused on the realization of common goals.
Tesco is an international groceries and general merchandise retailer based in the United
Kingdom. It is currently ranked as the grocery market leader in the UK with a 28% market share.
The organization can make use of its mission, vision core competencies, goals and objectives in
strategic planning to improve its competitiveness.
Vision
"To be the most highly valued business by the customers we serve, the communities in
which we operate, our loyal and committed customers, colleagues and of course, our
shareholders” (Business-LLP, 2019).
The company’s vision is centered on its colleagues, shareholders and customers. By
considering what it intends to achieve with each of these groups; the company may use its
mission to make strategic decisions. It may also use its mission to inform the decisions it takes in

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its operations (Business-LLP, 2019). The vision of the company needs to remain constant in the
face of changing the corporate world.
Mission
“We make what matters better together” (Business-LLP, 2019).
The mission of the company is quite simple. However, in its simplicity, the mission
denotes the overall business purpose. It also communicates the purpose of the business to
stakeholders. Creating awareness on the reason for the existence of the business may help in
strategic planning by ensuring that decisions arrived and the undertaking of the company do not
deviate from its core mission (Business-LLP, 2019).
Goals and objectives
The following are some of the goals and objectives of the company.
"Understand customers."
"Be the first to meet customers' needs."
“Act responsibly for communities “(Tesco 2019).
Based on its goals and objectives, the company aims at understanding its customers, meet
their needs and act responsibly. The company may consider the opinions and use the knowledge
gained from their customers to plan on what can effectively meet their needs (Tesco 2019). By
seeking to meet its objectives of being ethical, the company may also plan for the inclusion of
the most sustainable practices in its operations.
Core Competencies
Some of Tesco’s core competencies include
"Making a positive contribution to the community."

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"Helping to reduce wastage of food globally by ensuring that surplus food goes to those in need."
“Sourcing sustainable, affordable and quality products” (Tesco 2019).
The company may consider these key competencies during the planning process to ensure
that its strategic plans do not deviate for the essentials of its key competencies (Tesco 2019).
1 b. An analysis of factors that have to be considered when formulating strategic plans
The development of operational plans is a common practice for many organizations
across the globe. However, the successful formulation of strategic plans needs to be carefully
done considering specific factors likely to affect the realization of the future vision.
Engagement of employees
Employees are an integral component of organizations. The consideration of employee's
input during the formulation of strategic plans can be quite helpful. As the people responsible for
carrying out daily operations in their organization, they are well informed of the day to day
issues, challenges, and concerns affecting their organization (Young, 2019). Their engagement
can, therefore, give the management insights into what they need to focus on the strategic plans.
The engagement of employees can also lead to the inclusion of more innovative ideas into
strategic plans.
Effective communication
Formulation of strategic plans is a process that brings together different stakeholders
within an organization. For this reason, the adopted communication needs to be impeccable.
There is a need to communicate clearly to employees that the process is starting, and that the
input of each is required (Young, 2019). Effective communication is needed to bring everybody
on board.

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Innovation
Innovation is also one of the factors that need to be considered in the creation of strategic
plans. There is a need for organizations to come up with aggressive plans. Being innovative calls
for the trial of something risky and whose outcome is not quite known. While improving on what
has been done in the past is safer, it cannot lead to greatness. Many strategic plans also fail due
to a lack of innovation.
Ansoff Matrix model is a planning tool used by organizations in the formulation of
strategies for future growth. The model offers alternatives, lays out possible growth strategies,
sets out objectives, aims forces the management to think of potential outcomes for each course of
action. On the other hand, the BCG matrix model helps in the identification of growth
opportunities. By applying this model, businesses analyze their product portfolio to decide where
to develop or discontinue. It also facilitates investment decisions. The application of the two
models can, therefore, make the development of strategic plans at Tesco more effective.
Task Two
2a Tesco Environmental and Organizational Analysis
Organizational and environmental audit are basic organizational processes. An
environmental audit is a type of evaluation carried out by organizations to discover compliance
with environmental laws and identify gaps in the implementation of a management system. An
environmental audit is aimed at minimizing and eliminating chemical waste as a way of
controlling pollution. On the other hand, an organizational audit is the analysis of the capacity of

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an organization in each operational area. While environmental audit falls into the classification
of an external analysis, an organizational analysis is an internal function.
An internal analysis explores the competitiveness, cost position, and competency. Any
internal analysis explores the strengths, weaknesses, opportunities, and threats of an
organization. Porter’s five forces analysis tool will be used for internal analysis. The tool
accesses competitive rivalry, supplier power, buyer power, the threat of substitution and threat of
new entrants for an organization.
An external analysis, on the other hand, analyzes the external factors in the wider
business environment that affect an organization. The PESTLE analysis tool is used for external
analysis. It looks into the political, economic, social, technological, environmental and legal
factors affecting business.
PESTLE Analysis
Political factors
The leading retailer has 6800 shops around the world. With its operations in both the UK
and 11 other countries around the world, the retailer is bound to deal with multiple political
factors affecting its operations. Some of these factors include tax rates in different countries,
political instability countries economic conditions and unemployment rates. Some of its supplies
are imported from Asia and China. Therefore changes in import duties in these countries can
affect its operations (Hammad, 2015).
Economic factors
Some of the economic factors likely to affect the operations of Tesco are labor costs,
profits, cost of inventories and prices. For example, the United Kingdom's minimum wage

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increased by 4.4% for people aged 25 and above. This increase has cost Tesco millions of money
in additional remuneration (Fidrmuc and Tena, 2018)
Social factors
Consumer states and preferences are constantly changing necessitated by certain social
factors. Due to tight job schedules, customers may prefer fast deliveries or one-stop shopping.
Also, the demands for goods and services is also affected by consumer's attitudes and beliefs.
The prevalence of lifestyle disease is also an issue affecting business operations. Failure to
consider these aspects can affect the demand for Tesco's goods (Sawyer, 2019).
Technological factors
Constant technological changes are issues that organizations have to deal with. The
failure by an organization to keep up with technological changes in its industry can have adverse
effects on its operations. For example, horse meat scandal and poor customer experience issues
faced by Tesco were linked to a lack of technological advancement within the organization.
However, the organization was able to gain the trust of its customers by improving its
technologies (CC, 2016).
Environmental factors
It's a requirement by many Governments that organizations minimize their impact on the
environment by addressing environmental issues. Companies are therefore responsible for
ensuring that they do not negatively affect the health and wellbeing of the people around them.
As part of this responsibility, Tesco has dedicated itself to recycling plastics collected from
customers. Also, company drivers are also required to use fuel-saving routes. The company has
also committed to the use of renewable sources and the reduction of carbon emissions (Tesco,

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2019). Any changes in the existing environmental laws can, therefore, affect the operations of
the organization
Legal factors
Changes in the existing laws can also significantly affect the operations of an
organization. In the same way, failure to comply can also hamper operations. In 2016 for
example; Tesco was sued by its some of its employees as a result of gender and age
discrimination against them. In addition, the organization was also sued for misleading its
investors and an accounting fraud that cost them GBP 12 Million (Hope, 2019).
Porters 5 forces
Competitive Rivalry
Tesco faces direct competition from other players such as Morrison's, Sainsbury's, Asda
and Waitrose. This, therefore, means that there is a highly competitive rivalry in the industry
(Fern Fort University, 2019).
Threats of substitutes
Small chains are considered the main substitutes for convenient stores such as Tesco,
however, considering the high quality of products offered by Tesco, the threat of substitution can
be considered low(Fern Fort University,2019).
Buyer power
Buyers can demand a lot from an organization. With the reduced cost of switching between
alternatives in the retail industry, buyer power is fairly high (Fern Fort University,2019).

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Threats of new entry
New entrants in the industry bring improved qualities, innovations, lower prices as well
as improved quality of goods and services. Tesco is therefore faced by a threat of new entrants
(Fern Fort University, 2019).
Bargain power of suppliers
A wide range of suppliers supplies the retail industry' raw materials. Their higher number and
dominant position enjoyed by some gives them a high bargaining power (Fern Fort University,
2019).
2b. Strategic position and significance of stakeholder analysis
Based on the above analysis, Tesco enjoys a strategic position within the retail industry. The
company is currently operating in 11 countries and has over 440,000 colleagues. Additionally,
Tesco is the leading retailer with a wide range of high quality products for its customer’s.
Although other retailers are offering similar products; the organization's products stand out
because of their high quality.
Stakeholder analysis is an integral process to maintain long-term organizational success.
It can be used by organizations to win the support of their stakeholders. Stakeholder analysis is,
therefore, a tool that identifies and clearly defines an organization's key stakeholders with the
aim of understanding where they stand and establishing cooperation with them.
Stakeholder analysis
Stakeholder
name
Level of
interest/Influence
The frequency of
information
sharing
Type of
Information to be
shared
Internal or
external to the
organization.

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Shareholders High Monthly General External
Customers High Daily Product and
services related
External
Employees High Weekly General Internal
Government High Annually Tax and
compliance
External
Local
community
Low Regularly Welfare External
Suppliers Low Daily Purchase and
payments
External
Financers Low Regularly Financial External
Task Three
3. Tesco Substantive Growth Strategy
With the current competition in the retail industry, the necessity of the adoption of
appropriate growth strategies has become inevitable. Part of the strategies adopted by the
organization is venturing into international markets through acquisitions and mergers. Tesco
understands the importance of growth for its long term success and competitiveness. The
organization has successfully used acquisitions and mergers to enter into new markets. Some of
the strategies used by organizations include retrenchment strategy, limited growth, substantive
growth and market entry (Chon,2012). Market entry strategy involves the delivery of goods and
services to markets in which an organization has not been operating before. Substantive growth,

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on the other hand, entails ensuring success against competitors. Limited growth, on the other
hand, enables organizations to avoid huge debts associated with rapid growth strategies.
Retrenchment strategy is a strategy used by businesses to minimize expenses to increase
financial stability (Chon,2012). Through retrenchment strategy, organizations withdraw certain
products and services not considered economically viable to make a beneficial turnaround.
Part of the organization's growth efforts includes the takeover of Booker in 2018 at the
cost of £3.7bn. Through this takeover the organization aimed at creating the leading food
business in the United Kingdom. Part of this effort was also to improve the satisfaction of
shareholders, colleagues, suppliers, customers by opening up new opportunities. The merger
with Booker signaled the start of a new empire for Tesco (Quinn, 2019).
Substantive growth is appropriate for Tesco because of several reasons. The substantive
growth strategy is the best for the exponential growth of business (Reader, 2017). By utilizing
this strategy, therefore, Tesco is assured of future growth. The organization can use the revenues
earned from its expansion to fund future projects, therefore, achieve more growth in the future.
Also, achieving substantial growth is a perfect way of maintaining a competitive edge
over competitors. More competitiveness means more revenue for the organization (Reader,
2017). This additional revenue can be used in funding other projects, therefore, increasing the
market share for the organization
The sole reason for the existence of any organization is the creation of wealth for both its
owners, employees and the community in which it operates (Reader, 2017). Substantive growth
helps organizations to realize this objective. Through substantive growth, Tesco is, therefore,
able to create wealth for its various stakeholders.

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The use of substantive growth also enables organizations to prioritize. Through the use of
substantive growth technique, Tesco can prioritize particular goals based on their ability to
contribute to substantive growth of the organization. Substantive growth, therefore, makes it easy
for strategists in the organization to plan (Reader, 2017).
Alternative strategies might also be used at the organization to achieve growth objective.
Diversification is one of the key strategies that can be used by the organization. Diversification
strategy would require the organization to introduce new products and services in completely
new unknown markets (Brussels, 2019). Although this is quite risky for organizations, a
reputable organization like Tesco would stand to benefit through it.
In the same way, market development can also be used. Market development would
require the organization to increase the sale of its products and services in market explored
previously (Brussels, 2019). To achieve this, however, market analysis of how the organization's
products and services would be sold in the targeted markets.
Product development strategy may also be applicable. This strategy would require Tesco
to launch new services and products in markets where it is already operating. For this strategy to
succeed; however, the organization must invest in marketing research and development
(Brussels, 2019). Additionally, Tesco may also choose to buy and brand products from other
companies or acquire rights to produce a product by other companies.
Finally, a market penetration strategy can also be used. By using a market penetration
strategy; Tesco will be able to increase its market share. Market penetration will require the
organization to increase the sales of its products and services in the markets that it is already
operating (Johnson et al.,2011) This can be made possible through increasing the purchase
frequency of existing customers or attracting customers attached to competitors (Brussels, 2019).

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Market penetration can be achieved through price differentiation, the takeover of competing
brands and an increase in distribution and promotion efforts.
Therefore Tesco may make use of any of the above strategies depending on what it wants
to achieve (Brussels, 2019). Usually, the appropriateness of a strategy to an organization is based
on the organization’s risk perception and approach for its products and services.
Task 4
4a. Market penetration Strategy Implementation
Strategy implementation is perceived to be much more important than the actual strategy.
Therefore, it might be easy to come up with a strategy for an organization, but the success of that
strategy is dependent on how well the strategy is implemented. The inclusion of key stakeholders
in the implementation of a strategy is one of the factors determining the success of a strategy
(Ragui and Gichuhi, 2013). Bringing on board members from the entire organization gives room
for teams to offer suggestions, alternatives, and reactions on the proposed strategy. An inclusive
approach also enhances implementation success by making the implementation to be clearly
understood by the members (Lynch, 2013). Successful Implementation of the strategy would
require the collective efforts of the manager, employees.
The manager would play a critical role in the successful implementation of the strategy.
Part of the responsibilities of the manager includes creating a sense of urgency in the
organization and explaining to the members of staff why the implementation of the strategy is
necessary for the organization (Radomska, 2015). Also, the manager would also be required to
provide the necessary financial resources required for the implementation of the strategy.
Similarly, monitoring and evaluation of the status of the implementation would also be an
important role for the manager (MacLennan,2010). Business unit managers would be required to

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define the approach for their units to ensure successful implementation. Depending on the
personal preferences made by managers, managers can make employees more rigorous or fail to.
For example, if a manager prefers engaging their subordinates and doing regular follow-ups, they
are likely to motivate their teams to realize the intended outcomes and vice versa (Radomska,
2015). In the same way, if the manager of the organization does not follow up with the
implementation process, the chances are that unit managers will also fail to make follow-ups.
Most importantly, the execution of the strategy is the sole responsibility of employees.
They are the people responsible for carrying out various deliberations needed for successful
implementation of the strategy. They will, therefore, need to be actively involved in the entire
process to increase their understanding of the strategy and ability to deliver (Eyceoz, 2009).
Failure to include employees often leads to unsuccessful implementation.
Therefore the organization will require all the human, time, financial and material
resources for the successful implementation of the strategy. Time needed for implementation will
range from six months to one year. Additionally, it will require the efforts of all human resources
to implement the strategy successfully. It will also require an adequate amount of financial and
material resources
4b.Smart targets
Increase Tesco’s sales by 4% in six months
Successful market penetration will also depend on the number of products sold.
Increasing sales by 4% mean that the organization will have more returning and new customers.
To achieve these sales targets, the organization will have to do more promotions which means
that it will get reach out to more customers.

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Increase market share by 5% in one year
To increase its share of the market, the organization will have to double its efforts in both new
and existing markets. An increase in market share by 5% means that the organization will have
expanded its operations.
Current market share

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