Analyzing Competitive Advantage of Tesco Plc

Running head: ISSUES IN MANAGING MULTINATIONALS
ISSUES IN MANAGING MULTINATIONALS
Name of the Student
Name of the University
Author’s Note

1ISSUES IN MANAGING MULTINATIONALS
Introduction
The purpose of this study is that analyze competitive advantage of one of the
multinational enterprises in the globe. Competitive advantage signifies the recognition that the
enterprise delivers quality goods at lower cost or provides services at higher value than
competitors (Amini et al., 2012). The selected MNEs for this study is Tesco Plc that deals in the
retail industry in supermarket operation chain across the globe. The study focuses on the main
source of competitive advantage for Tesco Plc. The strategic objectives that this enterprise
addresses is also highlighted in this study.
About Tesco Plc
Tesco plc is one of the UK- based retailing organization that supplies consumers with
groceries and other services. The company has near around 476000 employees and 6553 stores
worldwide. The stores of Tesco ranges from Tesco Express, Tesco metro and Tesco petrol
stations. The core purpose of Tesco Plc is to offer their customers proper service in order to help
them enjoy better way of living (Core Purpose and Values., 2018). The enterprise also believes
in providing their consumers with the reward systems to attain their loyalty and trust. Tesco plc’s
business strategy is to experiment with different aspects of business and attain competitive
advantage over their rivalries.
Example of competitive advantage of Tesco
Tesco introduced 24 hours of shopping experience to their customers and at present it has
several of Click and Collect points across the nation. In addition to this, their distribution system
also helps Tesco to gain competitive advantage (Schaltegger, Lüdeke-Freund & Hansen, 2012).
Even with the advanced supply chain system across the globe, they have the ability to deliver

2ISSUES IN MANAGING MULTINATIONALS
right good to right store at appropriate time in timely and cost –effective manner. This helps the
enterprise to sustain the business by integrating diversified and value- oriented approach in
retailing.
Source of competitive advantage of Tesco Plc
Tesco has attained bench mark of high profits through proper customer service, high
product quality and low product cost. The company’s competitive advantage makes commodity
preferable over other products by the customers. One of the major source of competitive
advantage of this company is economics of scale owing to its huge scale of business operations
(Barney, 2012). Economies of scale refers to the cost advantages which the companies attain
owing to their scale of business operation along with cost per unit of total output declining with
increasing scale. As their businesses grow and output increase, they benefits from declining in
average production cost. The total cost of producing products increases with rise in output but its
cost of manufacturing per unit decreases as output increases. The economies of scale of this
company are their capital cost of production, friction loss of industrial equipment and
transportation (Urbancova, 2013). Tesco’s source of economies of scale occurs in its possibility
of buying various inputs for producing products at low per-unit cost. One way in which this
enterprise attains benefit from scale economies is expanding their business by opening new
stores across the globe (Finster & Hernke, 2014). Building large stores also provides them
benefit from scale economies as the government provides them huge cash incentives for building
new supermarkets. This company attains competitive advantage from scale economies under
numerous categories. One of their internal scale economies is purchasing of inputs. As this
enterprise continues to expand their business, they tries to increase their order size for the raw
materials. This outcomes in decrease in cost of the component purchased. As a result, the