Strategy and the Global Competitive Environment in Food Retail

This report provides an in-depth analysis of the food retail industry, focusing on the strategic responses of Tesco and Walmart to external environmental factors and market forces. The introduction highlights the challenges posed by changing consumer habits, government regulations, and technological advancements. The discussion section examines the implications of these factors, including reputational damage and supply chain disruptions, and emphasizes the need for proactive strategies and technological solutions. The report identifies key industry forces such as buyer power, supplier power, competition, barriers to entry, and the availability of substitutes. A comparative analysis of Tesco and Walmart reveals their strategic directions, including Tesco's focus on maximizing sales through customer retention, acquisition, and market expansion, along with Walmart's cost leadership strategy. The report assesses the impact of social, political, and economic factors on both companies, concluding with insights into their ability to navigate challenges and capitalize on opportunities within the dynamic global competitive environment. The report is a valuable resource for students studying business development, strategy, and market analysis, and is available on Desklib, a platform providing study tools and past assignments.

Running head: STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
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1STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
Introduction
The retail food industry is highly consolidated by large supermarket chains and
expansion into hypermarkets; it exerts more power, control and influence over the
competitors. However, as per arguments and research it has been identified that the retail
food industry will be facing number of challenges and obstacles in the future years due to the
changes habits, needs, tastes and preferences of the consumers. The purpose of this report is
to analyze and evaluate the external environmental trends and challenges in the food retail
industry sector and its affect on the two selected organizations, Tesco and Walmart. It
analyzes the strategies adopted by the two selected organizations in order to comply with the
changes in the food retail industry sector. It report will be comparing and contrasting the two
selected companies and the strategies adopted by the two companies.
Discussion
As mentioned in the article ‘A digital approach to Environmental Monitoring’ by
David Hatch (2019), the food retail industry sector is being challenged due to various
external factors such as changes in the tastes and preferences of the consumer, alternations in
the legal and regulations of the government and the transformation of technology and other
advancements in the industry sector. The organizations in the food retail sector are being
challenged to implement techniques, strategies and procedures to meet the requirements of
FSMA. The transformation of the industry is driven by changes in the government
regulations as well as the standards certification requirements. The consumers are
increasingly focusing on health and wellness and safety standards of the government are two
of the major drivers for changes that are seen in the food retail sector. These regulations and
standards emphasize on the responsibility of the suppliers and the producers of the companies
to ensure food safety and protect the consumers. Further, there are changes in the technology

2STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
and change in the consumer trends and habits of food intake. This can led to profitability
risks of the organizations in the food retail industry. As mentioned in the article by David
Hatch (2019), it is easier for the organizations to overlook Food safety program due to the
risk involved in the production process cause by safety issues. There are major implications
due to the external environment changes such as reputational damage, interruptions in the
supply chain, decline in the sales and profitability of the organizations if necessary steps are
not taken to prevent it. Therefore as stated by David Hatch (2019), planning in the business
organization and effective strategy implementation is highly essential. As suggested by David
Hatch (2019), the companies in this sector must implement proper technological solutions
and implement a smart and automated approach towards addressing the external
environmental changes and challenges. It needs to ensure that there are proper preventive
control measures and automated EMP process, which might improve the strength of the entire
organizations as well as the stakeholders involved.
David Hatch (2019) focuses on modernizing the environmental monitoring program
of the companies. As mentioned by the Food experts at the World Health Organizations
Headquarter in Geneva, the nature of ensuring food safety is critical across geographical
boundaries. Therefore, it is essential to implement better approach towards monitoring the
environment and ensure success in the organization. The companies in the industry are
leveraging to valuable software solutions in order to improve the processes, minimize the
level of inefficiencies, simplify the multifaceted compliance, improve its process and protect
the reputations of the company. This might ensure value and long term success of the food
industry.

3STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
Industry forces (The external environment factors affecting the organizations)
As per Kanter (2011), it has been identified that there has been growth in the larger
supermarket chains and hypermarkets in the food retail industry, which implies that thereby
are more exerting power, influence and control over the small organizations in the industry. It
has been further identified that the economic recessions pose to be a challenge for the
organizations operating in the food retail industry market. According to Porter (1989), there
has been an expansion in the regulatory frameworks of the government concerning food
safety; it involves wider requirements and standards for the labours in the food business. The
tight regulations and expansion of regulatory framework can be a challenge to the
organizations operating in this sector. The complexities can reduce the profit margin of the
companies. Further, According to Kampf (2017), there is a growing trend for healthy food
products and items, increase in the level of health conscious customers which can be an
opportunity as well as a challenge for the companies operating. However, In the opinion of
Stankevičiūtė, Grunda and Bartkus (2012) , there has been an increasing cost of labour due to
growing demand for employees and higher governmental expectations. This might impact
the profitability of the business organizations. Moreover, as per Warnaby et al. (2013), there
has been increase in automation and technological advancements such as robots in the food
industry. Therefore, the external environment of food retail industry has various challenges
and opportunities.
The following points determines the market forces that affects the retail industry sector
Bargaining power of the consumers: According to Collis and Rukstad (2008), there is an
increase in the competition in the market, therefore there the buyer power of the consumers
are high in the market. Therefore, the operations need to lower the prices of the products
offered to meet the demands of the consumers.

4STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
Supplier power: As mentioned by Prahalad and Hamel (1997), The power of the suppliers
are high in the market, they provide raw materials and other suppliers to the companies.
Although there is wide range of suppliers in the market, there might be issues and challenges
such as supply shortages, ethical concerns and issues and other pricing disagreements which
might negatively impact the operators. For example, Tesco’s had faced claims against their
supplier policy.
Prevailing competition in the market: According to Best (2019), there is high level of
competition prevailing in the market sector. The entire retail industry sector is dominated by
major players. There is stiff competition in the market which negatively affects the
profitability of the business organizations.
Barriers to entry: The barrier to entry is low. The entry and exit costs of the companies are
comparatively low which encourages new players in the markets.
Availability of substitutes in the market: The threats of substitute products are high in the
market. The demand of the products and services are affected by the change in the price of
the substitute products in the market. Therefore, as mentioned by Kahn (2018), the firms are
directly affected by the change in the price and the easy availability of substitute products in
the market. This directly affects the profitability of the business organization.
Comparative analysis of Tesco and Walmart
External environment affecting Tesco and its strategic directions
It has been identified that there are various social factors and the changes in the tastes and
habits of the consumers as well as changes in the governmental regulations and frameworks.

5STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
According to Bonanno and Goetz (2013), the taxation policies of the government have been
changing which affects the smooth functioning of Tesco. Dibb et al. (2015), indicates the
present position of the company in the market industry, the inflation rate of the food prices is
low, the stiff competition in the market lowers the profitability of the organization. It faces
direct competition from the Walmart and other large supermarket chains operating in the
market. However, As argued by Warnaby et al. (2013), the company has strategically
planned to utilize its strengths and positions to overcome the arising challenges and issues
faced in the business organization. The company is highly outcome oriented. The strategic
direction of Tesco Private limited is divided into subcategories. According to Kampf (2017),
the company mainly plans to focus on maximising sales in the business organization. It is the
strategy of the company to focus on three main aspects of its business operations that is
investing time and money on retaining loyal customers in the market, acquiring new
customers in the organization and by introducing geographies development. However, it has
been argued Stankevičiūtė, Grunda and Bartkus (2012), that the strategies aim for business
growth and expansion rather than focusing on addressing the forthcoming challenges and
issues. The strategies and the tactics of the organization do not support the profitability of the
organization. Therefore, it has been suggested by Bonanno and Goetz (2013), that the
organization need a new strategies plan to penetrate the market. The strategies implemented
by Tesco for market development is strategic alliance and joint development. This helps the
business organization to enhance the strength of the organization and increase the
profitability of the organization. In the opinion of Oraman, Azabagaoglu and Inan (2011), it
considers market expansion strategy to gain new customers and hold the position in the
market. The company has strategically brought forth improvements in the business process
and operations such as undertaking immediate projects on time to time basis.

6STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
As mentioned by Rachapila and Jansirisak (2013), in order to address the health
consciousness among the consumers and the change in the tastes and preferences, it has
considered sale of organic products. It has implemented several technologies, advancements
and automations such as intelligent scale, Electronic Point of Sale, wireless devices and other
electronic scanners. According to Smith and Sparks (2013), this enables the organization to
improve the effectiveness of the organization. The company has undertaken polices for
promotional offers and decrease in the fuel prices in order to comply with the policies of the
government. The company utilizes its reputation and brand image to overcome the threats
from substitute products and services and face stiff competition in the market. As mentioned
by Kahn (2018), it strategically overcomes the buyer power of the customers by offering low
priced products and services and offering online transaction facilities. This helps the business
organization to attract and retain the customers in the organization. The company undertakes
innovative methods for retaining loyal customers such as offers and gifts. Further, the
company has introduced various price campaigns to offer high quality products and services
at low cost.
According to Ma, Ding and Hong (2010),Tesco effectively implements a dual strategy
of cost leadership and product differentiation in the market along with effective customer
services. This strategy has enabled the business organization to maintain a top position in the
market. Therefore, Smith and Sparks (2013), by analyzing the strategic fit of the organization
in terms of the threats and challenges prevailing in the market, it has been determined that the
strong brand image and reputation of the company can help the organization to overcome
majority of the issues and challenges faced such as increased levels of competition in the
market. Changes in the consumers tastes and preferences has also been identified as the major

7STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
challenge of the organization, however, it has strategically introduced innovative food
products and items in order to address the changing needs and preferences of the consumers.
External environment affecting Walmart and its strategic directions
From research and analysis, it has been identified that there are various political
pressures for minimum wages for the labours. Since Walmart focus on cost leadership
strategy, it is a challenge for the organization as it impacts the overall profitability of the
organization. However, as mentioned by Dibb et al. (2015), there is a political support for
globalization which is an opportunity for the company for global business expansion. The
global economic changes are a cause of significant pressure on the company. It directly leads
to affects the revenue of the company. However, As argued by Best (2019), there are
opportunities such as stable economy. Considered the social and cultural changes in the
market environment, the healthy lifestyle trend among the potential consumers, and change in
cultural diversity are an opportunity for Walmart. As mentioned by Kampf (2017), it can
increase the range of products and services offered to the customers and increase its array of
healthful product and food items. According to Umali‐Deininger and Sur (2017), the
company has undertaken measures to address the changing needs and preferences of the
consumers in the market. It has been adjusting its strategies accordingly to take advantage of
the prevailing opportunities in the market. As argued by Carroll, Lewis and Thomas (2013),
the technological changes in the external market environment pose to be a challenge as well
as an opportunity to the business organization. Increasing trend in business automation, big
data and analytics is an opportunity for the company, as it can enhance the operations and the
activities of the business organization. However, according to Smith and Sparks (2013),
investing in the latest technologies and advancements in the organization might require
additional training and development of the employees and implementing technology in the

8STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
company increases the operational costs of the company. However, it has been analysis that
Walmart has strategically exploited the opportunity and boost its online presence, while
focusing on online marketing and online promotions.
According to Bonanno and Goetz (2013), the core strategy of the company is to offer
high quality products and services at lower costs. The cost leadership strategy of the
company is one of its biggest strengths, which enables the organization to overcome various
threats and challenges in the business organization. The company adds value to the products
and services offered as there differentiation strategy. As mentioned by Carroll, Lewis and
Thomas (2013), this helps the business organization to overcome the threats of the
competitors in the markets. Further, it implements product development strategies and offer
innovative products and services in order to overcome the threats of the new products in the
markets. Walmart forms strategic alliance with the key suppliers of the organization in order
to increase the barrier to entry. As argued by Warnaby et al. (2013), this strategy helps the
business organization to overcome the threat of new competitors in the markets. Moreover, in
order to retain loyal customers and acquire new competitors in the market, its offers
additional benefits along with fresh food items. Further, as argued by Kahn (2018), it
strategically utilizes its strengths to overcome the threats and challenges in the organization.
It aims to build its brand image which in turn helps the organization to build credibility and
ensure that the products are provided as per their tastes and preferences.
Conclusion
Therefore, from the above analysis, it can be concluded that both the companies
utilize their extensive marketing strategies to overcome the threats and challenges prevailing
in the external marketing environment. Both the companies, Tesco and Walmart use data for
operational improvements and increase the profitability of the organization. However,

9STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
Walmart focus on cost leadership strategy and implements marketing tactics to retain the
loyal customers in the organization, while on the other hand, Tesco focus on sales
maximisation and is highly outcome oriented. However, as per analysis, both the companies
have been taking actions to overcome the drastic change in the consumer tastes and
preferences as well as the changes in the governmental regulations. As per criticisms and
arguments, Tesco needs to alter the traditional strategies of marketing its products and
services especially in the highly competitive market environment. It needs to focus on the
customer’s needs and preferences rather than focusing on maximising sales. The report has
analyzed the external environment factors prevailing in the food retail sector and its impact
on the business organizations. It has comparatively analyzed the Tesco and Walmart and its
strategies.

10STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
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