Tesco's Strategic Management, PESTLE & SWOT Analysis Report

This report provides a comprehensive analysis of Tesco's strategic management, focusing on its business strategies and the impact of the external environment. It begins by defining strategic management and its importance in achieving organizational goals. The report then examines Tesco's business strategy, emphasizing its cost leadership approach and its historical experimentation with various business dimensions. A PESTLE analysis is conducted to assess the political, economic, social, technological, legal, and environmental factors affecting Tesco's operations, highlighting the challenges posed by Brexit, the Covid-19 pandemic, and the Ukraine war. A SWOT analysis identifies Tesco's strengths, weaknesses, opportunities, and threats. The report also applies the Ansoff matrix to explore potential growth strategies, including market penetration and market development. Recommendations are made to enhance Tesco's competitive advantage and address potential pitfalls in its strategic changes. The report concludes by emphasizing the importance of adapting strategies to the dynamic business environment to ensure long-term success.

Strategic management

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Business Strategy.........................................................................................................................3
PESTLE analysis.........................................................................................................................4
SWOT analysis of Tesco.............................................................................................................6
Ansoff matrix...............................................................................................................................7
Recommendation.........................................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The term strategic management can be defined as the process of providing overall direction by
formulating sustainable plan and policies so as to attain organisational goals (Barney, 2020). It
facilitates in gaining competitive advantage as well as improves brand equity of firm. Having an
effective strategic management contributes in offering direction which leads company towards
attainment of goals. It is important to frame effective strategy so that company can easily attain
short term and long term objectives. Due to dynamic business environment, most of the
companies are changing rapidly and strategic management is the only approach which
contributes in foreseeing various potential issues along with evolving opportunities. Strategic
management also facilitates financial advantages. Most of the companies had to change their
business strategies during Covid-19 and the way in which they operate. There can be seen a reset
of work and workforce itself. All things become virtual due to restriction on tour and travel
across the world. Conferences, interviews and decision making becomes virtual and held on
Zoom and Google meet. Covid 19 has permanently reshaped business strategy and two drivers
emerge which are supply chain resilience and flexible work. Brexit, Covid-19 and Ukraine world
way have negatively impacted almost every industry and lowers profitability. many businesses
are still struggling from the crisis and negative impact of pandemic. Recently, retail industry has
affected drastically as it was operating uniformly but now it had to bring changes so as to deal
with pandemic. This project report is based on Tesco, a multinational retailer chain
headquartered in Welwyn Garden City, United Kingdom. It will highlight existing strategy of
company and effects of internal and external environment on existing business. Further, it will
cover Ansoff matrix so as to highlight changes which can be applicable to existing strategy. At
last, it will cover justification to changes in order to explain any pitfall in new strategic changes.
TASK
Business Strategy
Business strategy can be defined as clear set of actions, plans, goals which outlines how an
organisation would compete within a specific market with its products (Barbosa, Castañeda-
Ayarza and Ferreira, 2020). It is important for company to frame effective business strategies so
that it would become easier to accomplish objectives. It will also lead company in gaining
competitive advantage. In relation to Tesco, it opts cost leadership with a motto “Every Little

Helps”. Economics of scale can be considered as one of the crucial competitive advantage which
is extensively exploited by Tesco because of vast scale of operations. The business strategy of
Tesco has traditionally involved experimentation with various dimensions of business and this
effective strategy changed entire retail industry of UK (Potyshniak and et.al., 2019). For
example, Tesco was the first company who introduce 24-hour shopping experience and today it
has thousands of Click and Collect points within the country. The short term business strategy of
Tesco is to regain stakeholder’s trust in general whereas customer trust in specific commercial
income. Objective of business strategy of company are discussed below.
 To focus on availability of service and selectivity on pricing.
 To undertake a significant programme for restructuring as well as for financial discipline.
 To launch a programme for renewal to regain trust of internal and external stakeholders.
Tesco ran a multi-channel and agile campaign which facilitates in building trust and
positively reacted to new shopping patterns during pandemic in order to drive sales.
Company tries to deliver quality products at minimum price during Brexit and boost its
production so that it can meet every requirement of customer. Along with this, it follows
all protocols framed by UK government. Ukraine war also affected business strategy of
company as they changed the way of working with its partners and agencies. This
strategic approach of company shortened the timeline and the conversation chain
(Afanasieva and et.al., 2020). Tesco aligned its existing campaigns with market trends so
that it can restore trust of customers. Earlier company was not much active on social
media and emphasise on face to face interaction with its customers which strengthen
relation. But due to pandemic, it has to opt social media marketing so that it can target
large number of customer and it benefitted company in various terms such as generation
of high profit, more sales and enhanced brand equity over internet. The supply chain also
disrupted from Ukraine war and it is needed to make some alteration in existing strategies
so that it can achieve maximum efficiency.
PESTLE analysis
PESTLE analysis can be referred as the framework which helps company in
understanding market dynamics as well as improves business (Jafari and Othman
Soleiman, 2020) There are various extrinsic forces which may impact company’s

functioning. It is important for business to assess those external forces which can
negatively impact on company’s profitability and productivity (Alanzi, 2018).By doing
this, company can frame effective strategy so that corrective measures can be taken in
order to mitigate negative consequences. In relation to Tesco, PESTLE analysis is
discussed below.
 Political factors- This factor relates to political interventions which may influence
company’s operations. As Tesco have headquartered in UK and operates in various
countries. It has to follow rules and regulations and ensure compliance of it. Company
has to keep a tab on dynamic political circumstances in all countries in which it operates.
It has been observed that company can trade better if there is political stability. For
example, due to Brexit, there can be seen dilemma which relates to new rules and
regulations that may affect sales of company (Teoli, Sanvictores and An, 2019). Change
in political policies and tax rates among supply chain countries may affect company’s
profitability. Pandemic and Ukraine world war has negatively affected supply chain of
Tesco.
 Economic factors- Tesco consist of varied range of products and economic factor plays
an important role in consumption of various products. It is important for company to keep
an eye for economic changes in which it operates. It may affect sales, revenue, profit and
distribution of company and thus needs to be taken into consideration. Company should
be aware of various taxation policies so as to leverage same. Changes in UK policies can
lead to major change in delivery model of company and the additional cost of redesigning
company may be massive (Cheng and et.al., 2021). Increase in prices along with lower
rise in disposable income can cause reduction in sale of product. Prices of essential
commodities rise due to pandemic and Ukraine world war die to disruption in supply
chain and change in tax policies within UK.
 Social factors- Due to fast pace of life, customer prefers to buy in one go. Tesco has
switched from its major food products to cum non-food model. Products which are highly
demand among customers has more social influence. Choice of products also depends on
several cultural factors. Change in taste and preference of customer may affect business
operations. After pandemic, people are more conscious about process than product. They

have started to follow healthy lifestyle and avoid packed food items. This drastically
decrease sales of company and incurs huge loss.
 Technological factors- The technological trends have been changing at fast pace and it is
needed to stay relevant in today’s time. It is imperative for company to keep up with
changing technology so that competitive advantage can be taken (Rahman and Rahmah,
2018). Tesco experiments with various aspects of retailing and achieved success in few
endeavours. Social media promotion and online shopping are part of influencing
customer which provides various technical benefits. In recent time, company has shifted
to online trend and analysed that 47% of customers are from online channel. Company
has announced regarding pair up with Amazon go so as to create technology for cashier
less billing. By this, company can evade long queues and saves time, cost.
 Legal factors- Change in government policies can affect operations of company and it is
needed to follow local and international market laws so as to promote smooth functioning
of business. There are various rules and regulations laid by Food Retailing Commission
which needs to follow by all members of retail segment. Various allegation regarding
gender and age bias has been imposed on Tesco and this had affected brand equity of
company. Once a company lose its credibility, it becomes expensive for organisation to
get back to same position.
 Environmental factors- There are various initiatives which are taken by Tesco which
helps in improving and in creation of more sustainable society. Tesco has launched its
phase two of Remove, reduce, reuse and recycle plan. It focusses on eliminating non-
recyclable plastic to minimal level and explore new opportunities in order to use residual
plastic. Over the past years, it has been analysed that company has changed 800 products
and helped in minimising waste of 4200 tons of plastic waste.
SWOT analysis of Tesco
Strengths Weaknesses
 Tesco has approximately 27% of
market share in Britain and its
closest competitor holds 13.9% of
total market share. The dominance
 Company regularly focus on quality
control and a disturbing complaint
from a single customer can create

of Tesco in market is unchallenged.
 During pandemic, company
registers 10.5% growth in last three
months to October. This growth
comes from boosting online sales.
 In response to Covid-19, it
triggered various restrictions on in-
store purchase. It able to double
delivery capacity to 1.6 million
slots and earned 28.7% higher
profit than 2019.
room for improvement.
 In order to prevent shortage from
panic buying, sometimes it does not
have adequate stock level which
disappoints customers.
Opportunities Threats
 Company can expand its operations
in other countries where there is
low competition and it can take
advantage of first mover.
 Tesco can use machine learning and
AI in order to deliver and predict
street level requirements that can be
game changer for company.
 Adoption of new rules and
regulation can be threat for
company due to EU-UK relations.
 Ukraine war could affect 25% if
imported food sold in supermarkets
and it would negatively impact on
company’s profitability.
Ansoff matrix
This matrix is also called market/product grid and a two by two framework used to plan
and assess growth initiatives (Heru and et.al., 2021). In addition to that, it helps
stakeholders in evaluating level of risk associated with various growth strategies. In
relation to Tesco, following are some development strategies framed by company in
order to expand its operations.
 Market penetration- In this strategy, company focus on selling existing products in
existing markets. Since its inception, Tesco able to expand its business. This strategy will
help company in enhancing market share. Currently company opts sales advertising,
banners and TV commercials so as to expand current market share. It is being

recommended to company to opt competitive pricing strategy and ad campaign while
framing market penetration strategy. Adding to this, Tesco comes up with special offers
which captures attention of customers. But along with increased sales, the profit margin
of company gets squeezed. It is imperative for company to frame effective marketing
penetration strategy so that it can gain competitive advantage within target market.
 Market development strategy- In this strategy, company focus on selling existing product
to new market. In 2019, it announced to open 750 stores in Thailand in next three years.
In some instances, this strategy does not seem beneficial as company had not conducted
market analysis of US, China and Japan which leads to closure of outlets. It is important
for company to conduct market research so that it can deeply understand what customer
are seeking for and how their expectation can meet (Liu and Kong, 2021). By doing this,
it can offer existing product and creates sustainable position in a new region. After this,
marketers of Tesco conducted market analysis so as to know about trend, culture and
custom and makes company successful in Thailand. Adding to this, it can offer free
samples of its products and take feedback so that right decision can be made regarding
market development strategy. It can opt digital marketing tools and can use social media
marketing so as to connect with audience.
 Product development strategy- In this strategy, company focus on bringing innovation
and modification to products in existing market. Company has its own brand and sells
both versions in order to cater different market segments. Company regularly brings
innovation to its products and analyse market research so that it can meet customer
expectation. In addition to that, it operates as per market trend and makes alteration in its
existing products. Tesco believes that brining innovation to existing product is cheaper
than developing a new product. So with this approach, company can able to bring down
its overall cost and offer best possible price to its customers.
 Diversification strategy- In this strategy, company focus on entering in a new market
with new product. This strategy seems difficult to implement and selling new products to
new customers is not an easy thing. Tesco initiated as a grocery business and diversified
in various areas. Insurance products, mortgages and credit cards are some example of
Tesco.

Recommendation
From the above presented information, it has been justified that company should use
social media marketing as it cheaper and most effective marketing tools which assist
company in driving positive changes within marketing strategy. Adding to this, it can
improve brand equity in existing as well as in target market. With social media presence,
it can form goodwill and build trust among potential customers. It is imperative for
company to conduct market research in order to understand customer needs and wants as
well as identifies product is capable enough to meet expectation. Without market analysis
it is similar to shoot in dark and company has to face consequences. With product
development strategy, company can bring innovation to existing product rather than
developing new product. It will save time and cost of company and it can offer best price
to its customers. It will also help company in getting larger customer base and contributes
in generation of higher profit. It is important for company to produce product which has
potential to meet requirement of customer. Company owns its own brand and it can easily
modify product which customers are selling for and makes company unique from its
competitors. With market development strategy, company can enhance market share
within existing market share and capture larger customer base. Tesco can opt influencer
marketing as it becomes easier to influence customers through this strategy. It can offer
special discount to its customers which makes them loyal towards company but the major
drawback of this approach is that it shrinks profit of organisation. Market analysis is a
time consuming and costly method and sometimes due to irrelevant collection of data
leads to creation of wrong insights which result in ineffective decision making. This can
be due to low employee engagement and collected data from non-reliable sources. So it is
important for company to collect data from reliable source which provides credible
information and can be found helpful in decision making process. Tesco can diversify its
operations in other fields too so that it can cater other essential and cost effective services
to its customers. Adding to this, it can expand its business in that country in which there
are less competitor and company can take advantage of it. Collection of data from non-
reliable sources can negatively affect company’s success so it is needed to opt that source
which offers reliable and correct data. All the above changes are need to be evaluated in

terms of advantages and disadvantages and create insight for further decision making.
One wrong move can collapse business plan of company.

CONCLUSION
From the above project report it was concluded that strategic management can be defined as the
process of giving direction to workforce by framing of suitable plans and policies that takes
company towards fulfilment of goals. Business is full of uncertainties and it is needed to frame
strategies so that risk can be mitigated by taking prevention measures. Having proper strategic
management helps company in maximising overall efficiency of company and in gaining
competitive edge in market. It encompasses with various activities with optimum utilisation of
resource which makes organisation successful. Whereas business strategy can be referred as set
of actions and plans which facilitates in outlining how an organisation has to operate and how
objective can be achieved effectively and efficiently. PESTLE analysis is a framework which
assist in identification of those external forces which may impact company’s operations directly
or indirectly. With PESTLE analysis, company can make effective decision that leads to
attainment of objectives. SWOT analysis of Tesco is being discussed in this report and there are
various opportunities which company can grab so as to create sustainable position in market.
There are various market development strategies such as market penetration, market
development, product development and diversification by which company may promote growth.
With market penetration, it can enhance market share by selling existing product in existing
market. Along with this, Tesco can influence customer of other countries too by opting social
media marketing and eventually sells product to a new market. Various recommendations are
proposed in this project report which can improve brand positioning of company. It will help
Tesco in generation of more profit by capturing audience of existing as well as of new market. It
can cater new market with development strategies and promote growth. It is imperative for Tesco
to conduct market analysis so that it can understand customers in a better way and can fill gap of
cultural difference by producing unique product that customers are seeking for.

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