STO307 Strategic Management: A Case Study of Tesco's Challenges

This case study examines Tesco's strategic management challenges, including operational issues like customer service, logistic costs, organizational disputes, external threats, and high delivery costs. It identifies the core issues affecting Tesco's profit margin due to competition and market changes. The study proposes strategies such as adopting the Prince2 methodology for project management and implementing e-procurement to reduce delivery costs and improve supply chain management. The analysis aims to provide actionable recommendations for Tesco to address its strategic issues and regain its market position, emphasizing the need for improved infrastructure, stock management, and customer service.

Running head: A CASE STUDY ON STRATEGIC MANGEMENT
A case study on strategic management
Name of the student
Name of the University
Author note

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Executive summary
The study intended to give a case study of Tesco Company. The company, being the most
extensive retail brand in the grocery market has been securing its place over the years.
However, due to certain issues, such as new entrants in the markets, competition with
existing competitors and poor strategic management, the profit margin of the company is
presently has been lowered. Therefore, a case study has been discussed in order to identify
the core issues that the company is presently facing and in addition to that, the suggestive
measures to address the issue are given as recommendations.

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Table of Contents
Background of the company......................................................................................................3
Operation issues of Tesco..........................................................................................................4
Customer service....................................................................................................................4
Logistic costs..........................................................................................................................5
Organizational dispute...........................................................................................................5
External threats.......................................................................................................................5
High cost of product delivery.................................................................................................6
A teaching note..........................................................................................................................6
References................................................................................................................................10

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Background of the company
Established in the year of 1919, Tesco started its journey as a market stall. In the year
of 1929, it opened its first retail store in the United Kingdom (Tescoplc.com 2014). The
company since then started achieving growth. The company became the leading brand by
offering quality goods at an affordable price. Therefore, the company has been able to build a
quality relationship with its customers. The company has gained the trust of its consumer,
which helped it being the largest leading brand, not only in the United Kingdom but also in
the whole world (Bizforum.org 2015). According to the market survey, Tesco currently
operates in twelve countries across the world. As per the records, the company presently has
530000 employees over its 2291 stores in different locations around the globe.
In the United Kingdom itself, the company has established over 780 stores (Bbc.co.uk
2014). The company every week satisfies around 10 million consumers across the country by
serving quality products. Tesco secures the highest position in the in the grocery retail
industry like ASDA and so on. The company mainly offers products out of which 30 % is the
grocery products in the United Kingdom only. However, the company has expanded its
product range and now offers garments, electronic goods, fuel energy, and financial services.
In the entire business sector, Tesco has become the largest group to be delivering goods as
well as services. In all part of the United Kingdom, the company has employed around
310000 workers over 780retail stores (Bbc.co.uk 2014). As per the statement of the Chief
Executive Officer of the company, it pulls 65% (Bbc.co.uk 2014) of the whole profit from its
business in the United Kingdom as it is based in the United Kingdom.
The company provides different channel services to the consumers. In the year of
1997, Tesco secured its place the first retailer, which served home-based shopping services to
its customer and pulled a significant amount of profit in their business. Since then, Tesco has

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been able to make itself as the most profit-making successful retail service provider. The sale
margin of the company is more than 2 million every month. The company offers online-based
purchasing facility to the customers through which the cust0mers can get the delivery of the
product at their suitable location. Special benefits like cub cards are given to the customers
those have been loyal to the company, which help the company in making its relationship
with the customers stronger. The company holds 30 % (Bbc.co.uk 2014) of the whole market
share grocery industry in the United Kingdom. Therefore, it can be said that Tesco is now the
largest brand as well as the leader in the market. Due to the rise of ALDI and LiDI, which are
the British discount chain of shoppers, the profit level of the company has been lowered. As
per the market report, Tesco’s market share has been lowered to 28.8 %, which was
previously at 29.6% (Bbc.co.uk 2014). Another factor that affects the growth of the company
is the competition in the market. Waitrose and Morrison are the some of the prominent
competitors in the industry, with which the company competes.
Operation issues of Tesco
The company now facing some of the major issues related to operations, which have
become threats to the further growth of the company (Wheelen et al. 2017). Some of the
major operational issues have been mentioned below that decreased the company’s market
share in the grocery market.
Customer service
Nature and demand of customers have been changing with time. Being the largest
brand in the retail grocery market in the United States as well as across the world, the
customer demand has been changed, rather it has increased (Eden and Ackerman 2013). Due
to high product demand from the customers, the company is seen failing to meet their
commitments in service area as well as in products.

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Logistic costs
The company primarily emphasizes on physical distribution of their products.
However, the existing competitors like Morrison focus on e-logistic strategy in order to
delivery of their products (Hill, Jones, and Schilling 2014). Because of the incident, the
company loses 30% of its sales value.
Organizational dispute
Organizational disputes can be considered as one of the major issues of the
operational issues of the company. The working culture of the company is discouraging the
employee motivation and as a result, poor performance has been noticed in its business (Hill,
Jones, and Schilling 2014). The culture of the company being complex affects the
management as well as the overall business of the company.
External threats
Like other industry retail, grocery market has been changing day by day. Therefore,
the external environments, which regulate the business of the organization, excessively
pressurize the growth of the company (Wheelen et al. 2017). As the market scenario has been
changed and more brands have been entered in the retail grocery market, the company
experiences losses. These companies, which have entered in the industry aim in order to
provide high quality products at a very low price range. This puts additional pressure on the
company. The LiDI and ALDI and their growth in the market are one of the major threat to
the company.
High cost of product delivery
The largest company in the retail grocery market in the United States, the company
itself acquires major part of the market share within the industry (Eden and Ackerman 2013).
In order to reach out to more customers, the company has started selling its products over the

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internet. Delivery of the product to the home of the customer indeed was an important
measure taken by the company. However, due to top un-appropriate implementation of the
strategy, the company failed to bring back the lost profit margin of the company. High
product delivery cost is one of the major reasons that the company has lost the reputation of
the company.
Therefore, two questions can be framed in order to give the recommendations for the
existing operation issues. The questions are mentioned below:
Q.1. what are the new strategies can be suggested to be taken in order to address the strategic
management issues.
Q.2. what are the areas that the company need to improve?
A teaching note
After analyzing the case, it has been noticed that the company is currently facing
some major issues in terms of strategic management. As the company owns over 780 stores
in the retail market along with its private commercial website through which the company
provides home-based shopping facility, the main issue that the company is presently facing is
that all the stores of the company receives frequent orders, but it lacks the essential
infrastructures in order to manage them (Shalashova 2013). In addition to that, Tesco have
lack management to keep the track of stock of products for both online and physical
delivering. This issue has made the company unable to implement the best management
strategy in their business. Information regarding stores and the product range is not
mentioned by the management system. However, the company has its stores in all the major
countries in the world; it should expand its stores more across the world. The

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If Tesco expands its business over the world, the Princ2 methodology can be adopted
for the purpose of its business strategic management. This method will benefit the company
in the top line of strategic management as well as the bottom line of the strategy (Edwards
2014). The prince2 methodology is a type-structured management of project methodology.
The methodology is a standard that the government of the United Kingdom uses. It is a
largely recognized among the private business sector both internationally and in the United
Kingdom (Eden and Ackerman 2013). The Prince 2 method defines what the company wants
to define and what are the ways through which it can be done better. The method orders the
project and therefore makes it arranged and logical. It is well known that poorly arranged
projects have a tendency to become disastrously wrong. Therefore, structured management
method, Prince2 is there, which prevent such projects to be wrong. According to the Prince2
framework (Edwards 2014), before starting a new project it is necessary to planned and
organized. After starting the project successfully, during the middle the project, it should be
kept well organized and finally, the end of the project must be controlled as well organized.
Prince2 methodology helps in creating business standards and proper roadmap for further
growth in future. The method saves money too by deploying the process of reassessment and
the updates that are most essential core points of business (Edwards 2014). The prince2
method can help in Tesco in order to deliver quality service to its customers. Through product
oriented planning, changing controlling process, revising the roles and duties of the
management personnel as well as of the employees the company can be able to become
largely benefitted.
In the strategic management system of Tesco, E-procurement can use the volume,
which decreases the high cost of delivery (Fine 2013). The term e-procurement refers to the
procedure of selling services or goods over the electronic medium that is the internet. The
method can be regarded as the alternative of the procurement process that is done manually

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and the e-procurement is considered as the more effective policy than manual procurement
process (www.siam.org 2015). Nowadays, most organizations are opting e-procurement
process in order to increase the further growth of their business. The main purpose of
adopting e-procurement is to curb the unnecessary cost and other associated issues like
irregularities. As supply chain management plays the crucial role in any business, companies
invest a lot of money as well as other resources in the procedure of procurement of products
and services along with raw materials. Therefore, an effective and well-structured
procurement procedure is required in order to benefit the business (Boone 2013). The
procurement procedure makes the whole process automated. It makes the process free from
the hassles and other irregularities, which are part of the manual procurement process. In an
e-procurement process, a portal is created and therefore, users are required to register either
as buyers or as the seller of products or services in order to take part in the tender.
The E-procurement process will largely benefit Tesco, as it will create an appropriate
structure so the relationship between supplier and buyer as well as the quality of service
improve (Khachidze 2013). The process organizes the information regarding tender such as
purchase, order processing, and payments and so on. Even more, the process will ensure fair
contracts with its customers. The e-procurement process will enable Tesco to use some
essential technology-based process like an electronic request for information in order to make
the transaction hassle free (Esper and Russell 2014). With the help of e-procurement process,
Tesco will be enabled to show its customer that they provide quality products at best price in
the market. As per the present scenario, the manual delivery process consumes huge time,
whereas e-procuring process will reduce the time that is consumed in the manual process.
Another important feature of e-procurement is the transparency (Khachidze 2013). Through
which Tesco can remain transparent to its customers as it provides all the details on the e-
procurement portal. As the process consumes less time, therefore, by using this method Tesco

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will be able to reach out to more customers. The malpractices observed in the manual
delivery process are less in case of e-procurement process. Cost cutting feature is another
prerequisite of e-procurement process; therefore it can be said that with the help of this
process Tesco can reduce the additional costs associated with a manual delivery process
(Esper and Russell 2014). Finally, it can be said that as per the observation, e-procurement
process simplifies the steps, which are involved in the tender. Tesco, therefore, will be able to
provide its customer best service and will be able to maintain its position in the entire retail
grocery market in the United Kingdom as well as across the world.

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References
Bbc.co.uk, 2014.Tesco Market Share. Available at:
https://www.bbc.co-.uk/news/business-16817254
Bizforum.org, 2015.Reverse logistics a supply chain opportunity. Available at:
https://www.bizforum.org/whitepapers/CSC-3.htm.
Boone, L. 2013. Contemporary marketing, 2013 update. [s.l.]: Cengage learning custom
p.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic
management.Sage.
Edwards, J. 2014. DOD's 2010 Comprehensive Inventory Management Improvement Plan
addressed statutory requirements, but faces implementation challenges.Washington, DC:
U.S. Govt. Accountability Office.
Esper, T. and Russell Crook, T. 2014.Supply Chain Resources: Advancing Theoretical
Foundations and Constructs. J Supply Chain Manag, p.n/a-n/a.
Fine, C. 2013.Intelli-Sourcing to Replace Offshoring as Supply Chain Transparency
Increases.J Supply Chain Manag, 49(2), pp.6-7.
Hancock, D.R. and Algozzine, B., 2016. Doing case study research: A practical guide for
beginning researchers.Teachers College Press.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach.Cengage Learning.
Huang, D. 2016. Intelligent computing theories and applications.Berlin: Springer.

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Khachidze, V. 2013.Contemporary research on E-business technology and
strategy.Berlin: Springer.
Shalashova, N. 2013.Logistic system azov seaport and waysto optimize. The Russian
Academic journal, 25(3).
Tescoplc.com, 2014 History of Tesco. Available at: https://www.tescoplc.com/index.-
asp?pageid=11
Thomas, G., 2015. How to do your case study.Sage.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy.pearson.
www.siam.org, 2015. The role of transportation in logistics chain. Available at:
https://www.siam.org/journals/plagiary/1657.pdf