Report: Competitive Strategy Analysis of Tesco's Business Development

This report provides a comprehensive analysis of Tesco's competitive strategy, focusing on key business development tools. The introduction emphasizes the importance of effective strategies in a competitive market and highlights the role of strategic tools in analyzing market conditions and identifying influential factors. The main body delves into three crucial tools: PESTEL analysis, Porter's Five Forces, and SWOT analysis. PESTEL examines external factors impacting organizational performance, including political, economic, social, technological, legal, and environmental aspects. Porter's Five Forces assesses industry structure, competition, and profitability. SWOT analysis evaluates Tesco's internal strengths and weaknesses, as well as external opportunities and threats. The report also covers the Ansoff Matrix, focusing on market penetration, market development, product development, and diversification strategies. The conclusion summarizes the findings, emphasizing the usefulness of these tools in setting future goals and the impact of various factors on Tesco's development. The report highlights Tesco's commitment to reducing carbon footprints and its strategic decisions in different markets.

Competitive Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...............................................................................................................................1
1) Analyzing The External Environment- PESTEL& 5 porter forces.........................................1
2.business Strategy - SWOT .......................................................................................................3
3.Competitive dynamics..............................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
In recent times it is important for business to develop effective strategies in such a competitive
environment. This is because it helps in sustaining for long term in the market and expanding
into other countries (Bayo-Moriones and et.al., 2016). The strategic tools enable in analysing
market condition. Moreover, it is useful in finding out factors that impact on business. Tesco is
the major brand retail serving a million of customers every week and turns to most profitable
organizational chain in world. This report will describe about 3 business development tools.
Also, it will discuss how these tools are used by business and support in developing strategy.
MAIN BODY
1) Analyzing The External Environment- PESTEL& 5 porter forces
Every business growth depends on strategies that are developed and implemented. In
strategy there are many elements included. It defines short and long term goals, process,
resources, etc. that are required in order to implement strategy. The strategies provide direction
in growth of business. By identifying the factors appropriate measures are taken so in future its
impact can be minimized. Therefore, different tools and techniques are available for this. The
various strategic development tools are as follows :-
PESTEL-
It is a tool which is used to evaluate and monitor external factors that directly impact on
organizational performance (PESTEL analysis, 2016). Basically, this tool is used when a
company wants to enter in foreign market. With help of it they are able to analyse what factors
are impacting them.
Political – It includes all factors related to government and how they can impact on
particular industry. Here, all factors are classified like tax policy, government stability, trade
policy, etc. These all enables business to analyse political situation of country before entering
into that country. Thus, it becomes easy to develop strategy accordingly. Tesco plays an
important role in developing employment opportunities as it bring increase in demand of their
products and have diversification in the work force (Pehrsson, 2017).
Economic – It includes all economic factors which determine country economic situation.
The factors include currency, foreign exchange rate, GDP, etc. Thus, any change in these can
have a long term effect company growth as price of products and services. So, by analyze all
company is able to identify their potential economic growth in that nation. As the company
1

Tesco is expanding internationally but there is more dependence on market of UK having market
share around 30%. As there is downfall in personal disposal income, Tesco has shifted from
branding luxurious product to advertising the value brands.
Social – They are those factors which represent demographic norms of country. It comprises
age, lifestyle, market trends, etc. From this it is easy for business to analyse target market and
their needs. As there is shift in trend, Tesco have increased there sale in non-food items. As the
customers are more aware about their health issues, so the approaches towards the food product
is constantly changing as they are more adapting more to accommodating of organic products.
Technological- It is most crucial factor which gives an insight about current
technological advancement of nation which can impact on business growth. The factors include
innovation, technology infra, R&D, etc. Thus, these factors may impact on strategies to expand
and technological investment needs to be done. There is continuous development of
technological advancement in Tesco to belong ease to their customers and R&D department to
reduce the carbon footprint's ans achieve the long term objective of organization.
Legal- Generally, legal factors are covered in political one but still it includes many other
laws such as employment, health and safety, consumer protection, etc. There is the continuous
impact of legal environment on Tesco. As to follow the certain legal regulation the company
used to provide reduction in customer price and the fuel they purchase as in accordance amount
spent in grocery store. The company also offered several promotions when the price are
lowered.
Environmental – They are emerging rapidly in recent times. This is because any change
in environment laws are highly impacting on business growth (Cho, Bae and Chung, 2018).
The factors include laws, policies, CSR activities, etc. which force company to maintain
sustainability. Therefore, it helps organization to evaluate those factors and develop strategy
accordingly. Tesco has a clear commitment of reducing the carbon footprints by the 50% by
year 2020 as company is trying to minimize the waste by creating awareness in their customers.
PORTER FIVE FORCES-
This strategic tool is used to analysed industry structure. It helps in measuring
competition level, attractiveness and profitability of market. Through this, competitive forces are
analysed and it supports in developing strategy. The forces are described below :-
2

Competition in industry – This force refers to number of competitors in industry and
level of competition among them. Also, business is able to identify types of products, price,
customer base, etc. of industry. Thus, if rivalry is low it is easy to enter but on contrary if it more
than alternative market is identified. There is intense competition among the firms the company
is lowering the price against its competitors and decreasing the profitably.
Threat of new entrant- It enables business to determine threat that can attract new
entrants to enter in industry (Goode and Negoro, 2018). They are able to analyse barriers, cost,
etc, that require new entrants to enter. It provides an overview and on that basis strategy is
formulated. There is high level of risk as the Tesco in dealing in retail industry so there is the
pressure on company by lowering price and reducing the cost.
Threat of substitute- this force is similar to new entrant but here it is identified the
number of substitute that can be used in replace of particular goods and services. Thus, it is easy
to identify substitute available and rate at which customer switch from one company to another.
The threat of substitute for Tesco is irrelevant as the company used to produce a wide variety of
product which is highly comprehensive.
Power of buyers- It deals with buyers of market and how they drive down prices of
product. It helps in analysing how many buyers a company has, their taste, trends, etc. So, by
analysing power of buyer it easy to set price, strategy, etc. that how they can be targeted. Tesco
has smaller and stronger customer base so there is higher bargaining power of buyers and high
level to seek the discounting the offers.
Power of suppliers- In this it gives insight about power of supplier and how they drive
down prices. The company is able to analyse that how much other businesses are dependent on
suppliers, cost to switch, etc. therefore, strategy is developed to evaluate suppliers. There are lot
of buyers in retail sector so there is less control over cost by suppliers and this makes the supplier
bargaining power weak in company Tesco.
2. Business Strategy - SWOT.
SWOT-
It is the most common strategic tool that is used to evaluate company competitive
position and to develop plans and strategies (Adamides and Karfaki, 2017). In this internal
factors are analysed that how it impacts on business growth and development. SWOT provides
real time and accurate data and information of industry.
3

Strengths – As name depicts it describes what are the strengths of an organisation in
market. It shows which factor separate company from others. The factors can be strong customer
base, product, price, etc. Then, it is analysed that how strength can be maintained and how
investors can be attracted. Tesco has been considered as the largest and most profitable
supermarket in retail industry along with brand equity and global recognition in terms of quality,
selection and customer service.
Weakness – It describes those factors due to which company is not able to compete in the
market with rivals. With it, business is able to identify area in which they need to improve. The
areas can be brand image, quality of product, lack of capital, debt, etc. Tesco has operated with
failed operation in country of US and Japan. In 2017 the company was charge with fines for the
declaration of false accounting and misinterpretation of profits.
Opportunity – It refers to those areas or factors through which business can grow and
expand in the market. The areas may include entering in new market, development of product,
increasing sales, etc. it enables business to develop strategy by taking this into consideration. The
company has the opportunities in expanding in emerging market of South Korea, turkey and
Indonesian. The company has also introduced with new discount store Jack with significant
growth.
Threats — With help of it, company is able to evaluate potential threats that may highly
impact on their growth and development (Llanes, 2019). Moreover, by this it is easy to take
proper measures accordingly so that impact can be minimized. There is major threat to Tesco is
about Brexit referendum and competition with supermarket giants the company is facing the
economic crisis due to change in government policy and credit crunches.
So, it can be analysed that business uses strategic tools in order to develop strategy. They
are able to identify the factors that impact on their growth. Alongside it, the tools analyse market
trends, gather data and info, etc. Each tool is used for different purpose and support in
formulating strategy. From each tool various factors are analyse. It provides variety of data and
info., facts and figures, etc. However, sometimes short and long term plans are formed which
provides specific direction to organization
3. Competitive dynamics.
ANSOFF MATRIX
4

This matrix help development of growth strategy of the company. The matrix used to
suggest that hoe the business is growing with the development of new and existing product.
There are 4 major part that has to be discussed in Ansoff matrix with the relevance of company
Tesco-
Market penetration- The main objection of market penetration is increase in market share of
current or existing produc (Llanes, 2019)t. By the application of competitive strategy Tesco is
maintaining the market share of current products along with huge ad campaign and sales
promotion.
Market development- The objective of this strategy is to increase the share of existing in new
market. By developing the new geographical market the company has implemented this strategy
as they have starting the export business of existing product in new country.
Product development- As to develop the market share of new product in existing market. Tesco
has implemented this by selling new products in existing market at discounted rates or offers,
Diversification- Developing the market share of new product in new market. The company
Tesco has turned out to a very perfect example as they have started dealing in banking and
financial sector.
CONCLUSION
It can be concluded that the business strategy tools are useful in setting future goals. It
provides data and information on basis of which strategies are developed. By the implementation
of various strategy analysis the external environment it was concluded that there is major impact
of legal and political factor on the company . The company has committed to reduce the carbon
footprints by 50% in 2020. Tesco has failed the operation in Japan and US but have the
opportunities to expand in countries like South Korea, turkey and Indonesia. The company is
perfect example for the diversification strategy as they have successful increases the market
share of the new develop sector. So the company is properly analysed and it will help in further
development of company.
5

REFERENCES
Books and Journals
Adamides, E.D. and Karfaki, E., 2017. How initiatives renew operations strategy and its linkage
to competitive strategy: a micro-level perspective. International Journal of Services and
Operations Management, 26(2), pp.141-161.
Bayo-Moriones, A. and et.al., 2016. Competitive strategy, performance appraisal and firm
results (No. 10041). IZA Discussion Papers.
Cho, M.H., Bae, J. and Chung, J., 2018. Competitive strategy and challenges for the chaebol.
In Strategic, Policy and Social Innovation for a Post-Industrial Korea (pp. 58-67).
Routledge.
Goode, S. and Negoro, T., 2018. Can Competitive Strategy and Open Business Strategy
Coexist?.
Llanes, G., 2019. Competitive strategy for open and user innovation. Journal of Economics &
Management Strategy, 28(2), pp.280-297.
Pehrsson, A., 2017. Foreign subsidiaries’ competitive strategy: the impact of corporate support
and local competition. European Business Review, 29(6), pp.606-627.
Online
PESTEL analysis, 2016. [online] Available through :
<https://www.business-to-you.com/scanning-the-environment-pestel-analysis/>
.
6