Business Strategy and Analysis Report: Tesco's Competitive Advantage

This report provides a comprehensive analysis of Tesco's business strategy, examining its operations and competitive position within the retail industry. It begins with an introduction to business strategy and highlights Tesco's position as a multinational retailer. The report then delves into the external environment using PESTEL analysis to assess political, economic, social, technological, environmental, and legal factors influencing Tesco's operations. The internal environment is analyzed using SWOT and VRIO models to evaluate Tesco's strengths, weaknesses, opportunities, threats, and core capabilities. Porter's Five Forces model is applied to understand the competitive dynamics of the retail sector. Additionally, the Ansoff matrix is employed to explore strategic growth options. The analysis covers supply chain, brand image, employees, and product offerings, providing insights into Tesco's competitive advantages and challenges. This report offers a detailed overview of Tesco's strategic approach and its ability to navigate the complexities of the retail market.

BUSINESSES
STRATEGY

INTRODUCTION
Business strategy defines to the making of plan that gives direction to the operation of
company. It provides assistance to an organisation along which the activities to be performed
with an aim of achieving the set goal. In the following assignment. Tesco which is a
multinational retailer dealing in segment like clothing, furnitures, software, financial services etc
is taken. It stands at third position in the name of retailer in the world measured in the terms of
gross revenue (Amran and et. al., 2016). This report discusses about business strategy and its
contribution toward the success of an organisation. The report also draws the effect of macro
environmental factors on business strategy by applying the PESTEL analysis. SWOT as well as
VRIO analysis is also done in order gain an insight into operation capabilities. Apart from this ,
the report also includes Porter's Five Force Model for analysing the industrial competitive
situation. Further more Ansoff matrix has also been used to study the available plan of action.
Task 1
P1 Analyse the impact and influence which micro environment has on the organisation
External environment defines as the factors that exist outside the environment and have a
impact on the operation of a company. To conduct business operation successfully in a effective
manner, organisation is required to understand the impact of macro environment. For the proper
functioning of Tesco, it conducts a PESTEL analysis that discuss about the major changes that
which affect the operations of a company.
PESTEL Analysis
It is a tool that is used to analyse the external environment and its impact on the
organisation. The company uses this tool as the time of starting a new tool is often used at the
time of starting a new enterprise or at the time of entering into an international market. PESTEL
commonly stand for Political, economical, social, technological, environmental and legal factors
(Anwar and Hasnu, 2016). It is very crucial for the TESCO to know whether the impact has
positive or negative on the environment. Below is the PESTEL analysis of TESCO :
 Political factors: Tesco has its operation throughout the world and there are some factors
that affect the performance of company. It include the factors like government policy, tax
etc. Government is encouraging the retail company to create job opportunities and Tesco
plays a great role in creating the employment opportunities. If political factors are
1

implemented in efficient manner this will help the organisation to carry out the business
operations in effective manner. It help the organisation to ascertain tax benefits.
 Economical factors: It include the factors like economic growth, inflation, interest rate
and so on. The impact of Brexit has a negative influence on economy of the organisation.
To handle this situation Tesco need to provide its product at reduced price to its
customers. This situation has a big impact on the business operation as Tesco need to cut
price of the product and services in order to sustain in the market. Trade was suffered a
lot due to the brexit impact which has lower down the sale of Tesco.
 Social factors: Factors which include here are population growth, social trend, culture
norms etc. These are the factors that include the shared belief of the population. The
culture of UK is changing at a fast rate which creates an opportunities for Tesco to
present new products in the market ( Boyd and et. al., 2017). As customers are now so
health conscious so the company is now focusing on the demand for organic product. By
focusing more on customer required it has a opportunity ofr the Tesco to attract large
number of people.
 Technological factors: Advancement in technology proved to be very beneficial for
Tesco. Introduction of online shopping has enable the company to attract the customers
and also give them facility to shop at any time or any place. This will result in developing
of customer base. Adoption of new technology is expensive as Tesco has also invested
in carbon efficiency project which affect their financial plan.
 Environmental factors: It refers to the factors that affect the environment and one has
no control over it. In includes factors such as climate change, scarcity of raw material etc.
Tesco is making a step to build a clean environment. Tesco is committed to drop their
carbon foot print use by 50% The company is also committed to use renewable sources
and generate 100% of electricity b 2030. By this the company is able to manufacture the
product which are Eco friendly.
 Legal factors: These are the laws which are formed by government and must be followed
in order to work effectively. Tesco must conduct its practice according to the food
retailing commission which suggest that price of product cannot be change without
notice. Earlier the company has faced some legal action on the basis of age and gender
discrimination. Tesco must look after its employees and treat them equally. This will
2

benefit the Tesco as by this more people wants to join the organisation which will help in
growth and success of an enterprise. (Buckley and Ghauri, 2015).
TASK 2
P2 Analyse the internal environment and Capabilities of Tesco
Internal environment defines as the factors which are found inside an organisation and
has a impact on the activities and decision of the organisation. SWOT analysis and VRIO
analysis must be conducted by Tesco in order analyse the internal environment in order to know
their ability in effective manner.
SWOT Analysis
It refers to a tool that an organisation uses in order to identify the strength, weakness,
threat and opportunities of the company. Strength and weakness are present inside an
organisation which can be controlled where as on the other hand threat and opportunities are
present outside the organisation and can be minimised but cannot be controlled (Scholes, 2015).
Below is the Swot analysis of Tesco:
Strength
 It has a renowned brand name in the
market that helps to pull large number
of customers.
 It has large number of product range as
it is dealing in clothing, home products,
financial and telecommunication
services and so on.
 It is one of the leading supermarket in
the world and has also received
numerous award for its customer
service.
Weakness
 Availability of substitute in the
marketplace which is dealing in the
same product and selling at low cost.
 Due to insufficient market research ,
some of the outlet of Tesco are not able
to perform well.
 Earlier the company has its operation in
US and Japan but due to the poor
operation , Tesco was forced to close
the operation.
Opportunities
 Tesco being operating in almost all the
developing countries but by expanding
its operation to small country can be a
Threat
 The major competitors of Tesco are
Marks and Spencer, ASDA and many
more.
3

profitable opportunity to the company.
 Tesco can also introduce the new
product range.
 By upgrading the online services or by
updating the new feature on company's
website Tesco helps in increasing the
opportunity of growth.
 As Britain a no longer part of European
union, it affect the trade of its product
which in turn is a biggest threat for
Tesco.
 As the value of pound decreased , it
results in the high price of Tesco.
VRIO Model
In order to identify the capabilities of the company, Tesco uses the VRIO model . It is a
technique which is used by the company in evaluating the resources. VRIO model of
Tesco is mentioned below
Factors Valuable Rarity Inimitable Organized What is the
result?
Brand image Brand image - - - Competitive
Disadvantage
Products Products Products - - Partially
competitive
Employees Employees Employees Employees - Competitive
advantage on
temporary
basis
Supply chain Supply chain Supply chain Supply chain Supply chain Competitive
advantage
For identifying the ability of Tesco The following resources have been used namely
Brand image, product, employees and supply chain (Chen and Jermias,2014).
4

Valuable: It refers to the element that add value to an organisation and plays a effective role in
achieving the goals as well as objective of the organisation.
 Brand image: The image of Tesco is very strong. It helps in increasing the competitive
advantage.
 Product: Products of Tesco are made using latest technology. This assist in building a
proper customer base.
 Employees: The workforce of tesco are trained in a style which helps the organisation in
achieving the goals.
 Supply Chain: the supply chain of tesco is very large which help is supplying the
products from one place to another.
Rarity: It defines as the feature which are uncommon and render competitive advantage at the
market place. Brand image is not found to be rare because there are many competitors in the
market and are also having a good brand image. Rare resources are as follows:
 Product: Product offered by tesco are following the latest trend , and it is very hard to
copy by other competitors.
 Employees: The employees of tesco are very skilled and confident. They are trained in
such a manner that they can cope up with any adverse situation.
 Supply chain: The suppliers, distributors share product information with each other that
helps in resource organising, distribution as well s production.
Inimitable: It defines to those resources which cannot be copied by the rivals. For Tesco, this
feature is not hold by Product as with the trend and technology rivals can copy this product.
 Employees: The skill and knowledge of employees are unique as they are provided with
timely training which will help the organisation to attain success.
 Supply chain: The supply chain also undergone some of the changes with the
advancement of technology. Again suppliers and distributor communicate with each
other if they feel that something need to be change or developed. If supply chain is
managed properly it would have a advantage to Tesco to carry out the operation
effectively.
Organized: It defines as the element which need to be organised in a order to attain the
company's goal and objective (Forsgren and Johanson,2014). Employees has to be trained on a
regular interval to meet the need of the organisation. Measures should be taken to maintain the
5

same brand image. Some new innovative practices and training to be provided as regular course
so that employees can be benificial to the organisation.
From the above study it has been observed that internal environment of Tesco has certain
advantage and disadvantage. Supply chain is the most important resource for the company as it is
most valuable, rare, imitable and organised.
TASK 3
P3 Porter's five force model to evaluate the competitive force of retail sector
It defines as the framework used by the company to ascertain and examine the
competition available in the market (Rugman and Verbeke,2017). Tesco has adopted this model
in order to measure the competitive market condition in the company. The five forces which are
used in the model are elaborated below:
 Bargaining power of suppliers: Here the suppliers has low bargaining power. As
suppliers are the individual that provides raw material to the company. Being one of the
large retailer company, it has large number of suppliers that deliver the raw material at
reduced cost. Therefore Tesco must build a efficient supply chain with number of
suppliers .So at the time when one supplier ask for high rate, the company can switch to
the other supplier who supply the product at low price.
 Bargaining power of buyers: Here the buyers of Tesco has very high bargaining
power . There are so many similar companies which exist in the market and offers
similar kind of product. So in that case customer always switch to the one that provide
the services at cheap rate. Thus Tesco must provide best quality of product to customers
at nominal cost (Kellermanns, Dibrell and Cruz,2014). This assist the company to
achieve sustainability at the marketplace.
 Threat of substitute: As there are large number of competitors in the market, so the
threat of substitute is very high. There are so many similar companies are providing
same type product and also at cheap rate. The companies which are in competition with
Tesco are Asda, Walmart and Marks and Spencer. In this context Tesco is required to
focus upon the need of customers. This assist the company in influencing the customer
interest toward them which will help in developing of effective customer base.
6

 Threat of entry: It refers to a situation that shows how well an organisation could enter
into a specific industry. Investment to enter in the retail sector is high that results in the
low threat of new entry. With the advancement of technology, company is required to
make changes that will incur additional expenses for the company. Moreover the cost of
infrastructure is also very high at the initial period (Lai Melloni and Stacchezzini, 2016).
Therefore it is not possible for any company to arrange fund in a less span period.
 Industry rivalry: The competition from existing player in context of Tesco is relatively
very high. The companies which are in competition with Tesco are Asda, Walmart etc. It
is required for the Tesco to develop some of the unique product so that other company
cannot copy them. This will result in generation of profit effectively.
The above mentioned five forces of Porter’s helps both the managers and leaders of Tesco in
processing proper plan of action which will help company in enhancing their sustainability at
marketplace.
TASK 4
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning for
a given organisation.
Ansoff matrix can be the key factor in context of TESCO for enghancing their busienss
performance. The four strategies of this matrix helps the company in attaining of the success.
This method is used in order to know about the opportunities prevailing in the market so one can
increase the sales against the product or service offered.
 Market penetration: It is the first quadrant of Ansoff matrix. The main focus of this
strategy is on improving the current service or product delivered by the company. Tesco
can maintain its performance and try to connect with more number of people in their
existing market (Quirke, 2017). This help the company in rising the performance and
increase the profitability of the concern.
 Market development: Here in this strategy, Tesco is more focused toward toward the
new entry in the market. By doing this Tesco is able to capture a new market which
increase the profit maximisation of the concern.
 Product development: In this strategy, a new product is introduced in the market for the
expansion of the company. This strategy will enable the company to find new customers.
7

(Madsen and Walker, 2015). Under this strategy, Tesco must come up with the product
which are on the basis of customers demand.
 Diversification: In market a new product is introduced under the strategy. This will in
turn increase the growth opportunities for the company. It is not always possible that if
company comes with new project it will bring success. Sometimes it can be very risky
too.
Justifying and recommending the most appropriate growth strategies
From the above discussed strategies of Ansoff matrix, it can be concluded that strategies
play a different role in every organisation. Any strategy adopted by Tesco will provide advantage
in the market. But the best suits among them all is the strategy of market penetration. This
strategy helps in raising the market share in existing market. Organisation is already cognizant
about the products in which it is dealing and it is very easy for the company to make further
improvement if required. This strategy will make the customer more satisfied which ultimately
will increase the sales of the company and would also increase their profitability.
Produce a strategic management plan with strategies, objectives and tactics.
A strategic plan is a written document that help the company in communicating the goals,
objectives, vision and mission to the desired customers. The plan of action of Tesco is mentioned
below
Aim: To increase the standard of business activity within the existing marketplace.
Vision: To be the most highly valued business by: the customer we serve, the communities in
which we operate, our loyal and committed colleagues and of course our shareholder.
Mission: to offer high quality of product with the aim of maximisation of customer satisfaction.
Values: Tesco is one of the leading brand which has beliefs, values and ethical priorities
(Malerba and et. al., 2015).
Strategies and Tactics: Tesco will use the strategy of Market penetration to attract the attention
of large number of people. This will help in improving the performance and also increase the
profitability of the concern. The tactics used by Tesco is to supply advanced quality of product at
nominal cost which can be easily used by every customers in the world.
8

CONCLUSION
As per the above discussed report it can be said that business strategy plays a essential
role in any business enterprise as it helps in achieving of the desired objectives. For
implementing the best action plan company is needed to perform PESTEL as well as SWOT
analysis so that company can determine about the internal as well as external factors. Porters five
force model helps Tesco in knowing about the position which it is holding in the market. Further
more after considering all the risk factors in the market place Ansoff model is used.
9

REFRENCES
Books and Journals
10