Business Analysis Strategy Tesco Plc

This article provides an analysis of the business strategy of Tesco Plc, a leading food retailer in the UK. It covers the internal environment analysis, organizational capabilities, industry analysis using Porter's Five Forces, and recommendations for the company's future success.

BUSINESS ANALYSIS STRATEGY TESCO PLC
Table of Contents
BUSINESS ANALYSIS STRATEGY TESCO PLC..................................................................1
1.0 Executive summary................................................................................................................1
1.1 Strategic Approach and Analysis...............................................................................................2
1.1.2 Resource Based View.........................................................................................................2
1.1.3 Tangible Resources.............................................................................................................2
1.1.4 Intangible Resources...........................................................................................................2
2.0 Organizational Capabilities.......................................................................................................3
2.1 Analysis of Tesco PLC with the help of Various Assessment Tools........................................3
2.1.1 The McKinsey 7-S Framework...........................................................................................3
3.0 Industry Analysis: Porter’s Five Forces....................................................................................5
3.1 Ansoff matrix.............................................................................................................................7
4.0 Conclusions and Recommendations..........................................................................................7
REFERENCES................................................................................................................................8
1.0 Executive summary
Business strategy plays a significant role in today's organizations. It is defined as the means to
which an organization attains their desired goals. To enhance successful completion of the
organizational goals and objectives, the management of the company uses corporate business
strategy to make corporate decisions. The strategy that companies adopt base their source from
its strength, competencies, the conditions in the market and the preference of the customers.
Strategic decisions applied in organizations enables it to compete in an ever dynamic business
environment.
Tesco Plc is among the world leading food retailers operating approximately 2,318 stores and
employing a vast number of employees. Tesco is incorporated as a UK company, the company
has wide network of supermarket chain for grocercies making its dominance in the online
markets through Tesco.com as its subsidiary. Moreover, tesco’s production is huge with huge
ouput sale in the food , cloth, and other commercial goods.
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Tesco initially ventured on pure grocery retail stores but since then the has diversified into other
sectors including insurance, travel agency and telecommunication. Therefore, analysis of the
business strategy of the firm shall be of great importance to understand the success factors of the
company.
1.1 Strategic Approach and Analysis
1.1.1Internal Environment Analysis
To assess the need of evaluating the internal environment of Tesco plc., the company value
creating competitive strategy using resource-based view. This model analyses the internal
capabilities that the company possesses which increases the competitive advantage of the firm.
Value chain analysis is another method used by the firm to analyse the internal company
resources and their contribution towards the company overall value.
1.1.2 Resource Based View
This model combines both the internal and external environment of the company for its analysis.
It provides a feedback of the processes of the company through measuring the contributions of
the resources that the company possesses. Tesco Plc have three key resources that enhances its
success in the industry. These resources include physical resources, intangible resources, and
organizational capabilities Madhani (2009).
1.1.3 Tangible Resources
Tesco Plc have been recording continuous improvement in their physical assets. The company
invest in huge capital expenditure to improve their business operationality. Tesco have initiated
an investment of huge initial capital outflow in a quest to refurbish UK stores, development of
new products, and repositioning, as well as delivering of better customer service (Prange, 2016).
1.1.4 Intangible Resources
Tesco has a graduate scheme which attracts fresh graduates for young graduate executives for
positive contributions to the management of the company(Sekhar, 2009). Moreover, Tesco has
achieved tremendous improvement due to continuous training on new employees before being
deployed in the organization. The aim of training programmes is geared toward improving the
customer service of the employees which is the core business of many organizations.
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According to Williamson et al. (2013), the company has invested in innovation strategy through
creativity in the retailing industry by being the first online retail company in the united kingdom.
The company furthermore, continues to invest in new technologies to reach customers and
improve the shopping experience. Customers through innovation can scan their products as they
shop and bill them.
2.0 Organizational Capabilities
The resource-based view model aims at the company’s assets which as either tangible or
intangible (Harvey and Jones, 2013). Therefore, the company core competencies that are
employed into the transformation of inputs to outputs is referred to as organizational capabilities.
Tesco entire management and its skills in the in the task job creates an innovative approach on
the services an products delivery. Moreover, employees training ensures effective branding of
products and adoption of technology in the transformation of inputs to output. The adoption of a
quality improvements program has also seen a considerable utilization of the available company
resources (Morden, 2012).
Interpretation
2.1 Tesco PLC Assessment Tools Analysis
2.1.1 The McKinsey 7-S Framework
To ensure the efficiency of the organizational processes and activities, this model is applicable. It
assists the company to analyze the extent to which the objectives and goals of the organization
have been achieved. This Assessment tool is one of the best to analyze the position of the
company in the market. The elementary model of this assessment tool have seven internal factors
that a company needs to align to enhance its business strategy (Egner, 2009). The alignment is
required to:
 Improve the performance of the company
 Examine the effect of internal factors to the management of the company
 Enhance implementation of proposed strategies
Strategy- Tesco uses marketing communication to pursues cost leadership business strategy. It
assists in the organization of the processes of the supermarket chain. The use of strategy
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improves the use of excessive exploitation to augment economies scale. Furthermore, it enhance
bargaining power to deal with suppliers in securing low purchasing costs.
Structure- Tesco has a hierarchical structure in place which includes many management levels
from the stores sales persons to the top management and the CEO. The company has a work
ethic where there is no ‘one leader’ as work is done through the different hierarchy levels to
achieve successful strategies.
Systems-Tesco supply chain depend on wide and spread a variety of systems in meeting the
daily demands. In the determination of its strategies, the company uses a navigation wheel
smartly applied to command a better future.
Style- The working style of the company emphasizes the employee performance, customers,
operations, and customers.
Skill- Tesco manages comprehensive wealth of skills that enable the employees of the company
to discharge their duties effectively and efficiently. The skills has enabled the employees and the
management to meet the set code of standards in the of Tesco Company.
Other strategies are the shared values across the organization and the employed staff that works
for Tesco Plc.
1.2.3 Tesco Plc Balance Scorecard Analysis
This is a tool for performance measurement utilized in key administration to enhance distinctive
inner elements of the organization and their subsequent outside outcomes (Kaplan and Norton,
1995). The core function of the balanced scorecard is to attempt measure and afterward give
criticism on various internal capacities to the organization to aid the execution of procedures and
goals. Balance scorecard measures the following:
Customer Perspective
Tesco uses steering wheel that helps appeal to all the targeted segments of the market rather than
focusing on a particular market segment. The company has more staff which helps in improving
service delivery. The company also create many jobs and careers that encourage excellent
customer services (Williamson et al., 2013).
Internal Business Process Perspective
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Tesco plc measures the success of the organization based on the metrics of the internal business
perspective. This perspective emphasis on the internal processes that the company desires to
attain its customer objectives and financial strategies. There are many processes used to identify
the strategies that takes place in this strategy. The internal processes include innovation
processes, operation processes and after services processes (Prange, 2016).
Operations Management Processes
Tesco relies on managing its retail processes through local businesses. The connection of the
company to the locals through jobs creation and services allows build relationship with
customers. Tesco company works closely with the local farmer in improving the standards of the
farm produces in terms of ethics before being made available to the entire retail stores chains.
Learning and Growth Perspective
Tesco plc is a learning company as it comes to customer services and convenience. Tesco
believes in innovation by initiating a technology to curb the concept of shop liffting that it
follows to provide amenities to its customers. Learning and growth propels the company to
makes sure that every worker of the firm is conscious of their role in providing customer services
(Pham-Gia, 2009).
3.0 Industry Analysis: Porter’s Five Forces
The threat of New Entrants
Few competitors majorly dominate the United Kingdom retail food industry as major brands
including Asda, Tesco, Sainsbury’s and Safeway. The following companies command around
70% market share while other firms command the other percentage.
The entrance of new investors in this market is quite difficult due to the high initial investment in
the market. Furthermore, investment in large chains integrated with advanced technology such as
investments done by Tesco is quite expensive (E. Dobbs, 2014).
Bargaining Power of Suppliers
The purchasing power of supplier for Tesco Plc is low due to a huge number of suppliers across
the UK who are ready to sell their products in the supermarket. Due to high number of suppliers
in the market interested in supplying Tesco Plc, the company has a high bargaining power of the
suppliers (Takeda, 2016).
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Bargaining Power of Customers
According to Porter, customers bargaining influences the pricing of products and services.
Therefore to reduce the bargainning power of the customers, products ought to be standardized
to reduce the probability of switching cost which increases the purchasing power of buyers.
Tesco’s strategy in meeting their customer needs, customizing service, low pricing, innovative
varieties of brands and continual flow of in-store promotions have enabled the company to build
a strong customer base. The significant demands of food products by consumers in the
supermarkets have changed the retailing business in the UK. Moreover, Tesco have diversified
into banking, new markets and pharmacies etc. Therefore, consumers being aware of the
business environment about fair trades and infuences of consumers expectation in the western
world it raises expectations of customers (Sekhar, 2009).
Threat of Substitutes
The threat of substitution can reduce the demand for products from the customers. Customers
will either change the products preference or look for substitute products. Tesco grocery industry
has witnessed a range of various products that can be substituted by consumers is prices and
quality of the products fails. Tesco uses the strategy of acquisition of existing small-scale
retailers and operators to curb the problem of substitute products (Wiedemann, 2013).
Bargaining Power of Competitors
The market of operation of Tesco Plc has witnessed significant growth in the size and market
dominance of groceries vendors. This has led to an increase in players and greater retail
concentration which leads to high level of competition in the industry. Moreover, the purchasing
power of the food-retailing sector is focused on a moderately insignificant number of retail
buyers. These operators carry-out their business in a developed, flat market where growth is
robust, and consumers are progressively demanding and sophisticated. This makes large food-
chains industries as Tesco to survey consumer information which is useful in communicating
consumer needs to the products developments(Morden, 2012).
3.1 Ansoff matrix
Ansoff Matrix is a method of performance evaluation which changes the nature of the business
plan and strategy to achieve the set objectives (Fortin, 2017). According to this, strategy, the
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company will able to evaluate the sales and marketing development of existing products as well
as decide to diversify the communication and entertainment products into another category. This
matrix gives the knowledge to the target customer needs. Ansoff matrix applies the analysis of
the customer feedback and market survey reports to devise strategies of marketing.
4.0 Strategic Planning
Tesco Plc growth strategies identified above are key to enhancing a market competitive
positioning of the company. The firm utilize all the available organizational resources to gain a
large market share. Considering the competitive market in the UK supermarket industry, Tesco
adopt a hybrid strategy to compete favaourable with the giant supermarkets such as sainsbury’s.
Initially Sainsbury’s was a dominant supermarket with differentiated supermarket retailers,
however, Tesco used a price market penetration strategy to register its presence in the market.
Tesco’s strategy changed significantly after adopting increased size and number of stores and
still selling cheap as compared with other competitors. Consequently, Tesco breakthrough is due
to its high-quality products but still perceived as cheaply priced as compared to the other
competitors. This is the hybrid strategy that has significantly assisted the company gain
dominance in the market (Johnson et al., 2009).
Using the generic porter’s strategy, Tesco have much more negotiating power of its suppliers.
This high bargaining power is a major source of pressure for the company to obtain high quality
products with fair prices from its suppliers.
Using the Pestel analysis, it is evident that the success of Tesco Plc is not the external
environment components but rather a large percentage on its internal environment. The internal
strategic capabilities have enabled the company to achieve a superior performance in comparison
with its competitors. Tesco’s retail sites, the management and their experience enable the
company to achieve competitive advantage. This is so because these capabilities cannot be
replicated by its rivals. The concept of internal organization capabilities assists in producing
products at lower cost and generating a superior product or service at reduced costs in
comparison with companies with inferior capabilities (Kim and Mauborgne, 2015).
The strategic change in the vison of the company aided in the success of its penetration in the
market. Tesco adjusted its strategies from Food to No-food products, then Tesco retailers in a
variety of products and services. This led to differentiation which increased the competitiveness
of the company in the market.
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5.0 Conclusions and Recommendations
Tesco is one of the leading grocery retail company in the current global market. The company
has employed many strategies to keep afloat in the competitive industry in which it thrives.
Tesco plc has applied strategies such as generic porter strategies, balance scorecard, Pestel
analysis, Ansoff model, McKinsey 7-S, etc. This assignment conducted the various analysis to
know the exact position of the company. By applying the balanced scorecard, McKinsey 7-S and
Porters 5 forces, it is evident that the company business strategies are crucial to market
positioning.
The company is successively efficiently but it is having its significant market share in the UK,
and with the declining economic condition of the UK economy it is necessary for the company to
look for some other options to central its progress, profit, and leadership in the market. Tesco
financial strategy is robust with various investment projects and strategies which is forecasted to
provide high returns in future.
References
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Analysis Templates. Competitiveness Review, 24, 32-45.
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Madhani, P. M. 2009. Resource Based View: Concepts And Practices, Icfai University Press.
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Springer International Publishing.
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Sekhar, G. V. S. 2009. Business Policy And Strategic Management, I.K. International Publishing
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Singapore.
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