Competitive Advantage and Value Creation of Tesco's E-Business

Running head: E-Business 1
E-BUSINESS
Student Name
Institution

E-Business 2
Table of Contents
Introduction.................................................................................................................................................2
Overview of Tesco supermarket..................................................................................................................2
1. Competition at industry level based on Porter’s five forces model.....................................................3
1.1 The threat of new entrants................................................................................................................3
1.2 Threat of substitutes..........................................................................................................................4
1.3 Bargaining power of customers.........................................................................................................5
1.4 Bargaining power of suppliers...........................................................................................................5
1.5 Industry rivalry...................................................................................................................................6
2. Evaluation of Tesco’s value creation based on Amit and Zott’s value creation model........................7
2.1 Efficiency............................................................................................................................................7
2.2 Complementarities............................................................................................................................8
2.3 Lock‐in...............................................................................................................................................8
2.4 Novelty..............................................................................................................................................9
3. Rebuttal.............................................................................................................................................10
4. Recommendations for improvement.................................................................................................10
4.1 Competitive advantages recommendations....................................................................................10
4.2 Value creation recommendations....................................................................................................11
Conclusion.................................................................................................................................................12
References.................................................................................................................................................14

E-Business 3
Introduction
E-business remains one of the most competitive industries that have attracted a number of
businesses within the UK’s market. The industry has many different companies that have devised
ways to have a competitive advantage in the market. The competitive advantage of a business
can be analyzed based on the Porter’s five force model. Value creation, especially through e-
business, is one of the areas that enable the company to compete in the retail market. Amit and
Zott’s value creation model gives the drivers that sued to understand the value creation of a
company. Tesco is the largest business with both online and offline business and commands
more than 28.4% UK market share. In order to understand the e-business strategy, the
competitive advantage and value creation strategy need to be analyzed. The following paper,
therefore, evaluates the competitive advantage of Tesco using Porter’s five force model and also
evaluate the company’s value creation using Amit and Zott’s value creation model.
Overview of Tesco supermarket
Tesco is UK’s grocery and general merchandise retail supermarket that is based in
Welwyn Garden City, Hertfordshire, England, United Kingdom. Tesco is the largest supermarket
in the United Kingdom with a market share of 28.4% (Butler 2014). Tesco was formed in 1919
as a group of stalls from where it grew up to become one of the largest e-business in the country.
The business has diversified its products to form a wide range of products and services and these
include books, toys, electronics, clothing, furniture, petrol, and software; telecoms financial
services and internet services (Tesco.com 2018). Tesco has a number of stores that include
Croydon, Aylesford, and Greenford among other stores. The company has expanded its branches
to other 11 countries outside the United Kingdom. Some of the branches of the company that

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forms its international operations include United States of America, Thailand, Ireland and South
Korea. Currently, Tesco has remained one of the largest online retailers within UK's market.
Evaluation and analysis of Tesco can be based on the company’s competitive advantage and
values creation through its e-business (Thorpe 2010).
1. Competition at industry level based on Porter’s five forces
model
Tesco remains competitive despite the stiff competition within the retail supermarket and
online business industry. The evaluation of the company's competitiveness at the industry level
can be conducted based on Porter’s five forces model. Porter’s five forces model gives five
various factors of competition and these include the threat of new entrants, bargaining power of
customers, bargaining power of suppliers, threats from substitutes and industry rivalry. The
competitive advantage of the Tesco can be evaluated based on Porter's five forces model (Porter
2008, pp. 78-93).
1.1 The threat of new entrants
The threat of new entrants is medium since the industry has attracted many different
companies that each has its competitive strategy. Many young companies are entering the
supermarket retail industry and particularly the e-business industry of the country. Tesco is one
of the largest retailer supermarkets in the country and has positioned itself in the market
increasing its competitive advantage (Ryle 2013, pp. 58-74). Firstly, the company’s reputation in
the market is a factor that makes the business receives a low threat from new companies.
Diversification of the company’s products line is another area that has helped the company to
remain competitive despite new firms entering the industry. Diversification of products sweeps