Strategic Management Report: Analysis of Tesco's Business Model

This report provides a comprehensive analysis of Tesco's strategic management, covering various aspects such as the types of strategies employed, external environmental factors impacting the business, competitive advantages, and internal capabilities. It evaluates the extent to which Tesco faces strategic drift and examines the alignment of its mission and vision statements with market demands. The report also delves into Tesco's internal capabilities using SWOT analysis and explores its business model canvas. Furthermore, it suggests possible strategies for defending its core business and analyzes the interrelationship between key resource areas. The report concludes with a critical analysis and application of a strategic implementation model, offering insights into how Tesco can improve its operations and resource utilization. This document is contributed by a student and available on Desklib, a platform offering study tools and resources for students.

Strategic management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Types of strategy that are used by Tesco in relational to school of strategy and strategic
concept.........................................................................................................................................3
TASK 2............................................................................................................................................4
Different model are used to review of external environment of firm..........................................4
Critical evaluation of company competitive advantages among its direct competitors..............6
Industry Scenarios.......................................................................................................................6
TASK 3............................................................................................................................................6
Extent to which firm is facing strategic drift...............................................................................6
Mission and vision statement aligned to market demand............................................................6
Internal capabilities......................................................................................................................7
Business model canvas................................................................................................................8
TASK 4............................................................................................................................................9
Suggestion of possible strategies that can be used by firm to defend its core business..............9
TASK 5..........................................................................................................................................11
Interrelationship between key resources areas of firm..............................................................11
Critical analysis and application of strategic implementation model........................................12
CONCLUSION..............................................................................................................................13

INTRODUCTION
Strategic management refers to several plans that are made by organisation in order to
make optimum utilisation of their resources for attainment of specific objectives. Company
through making effective strategies is able to cover large market share or gain competitive
advantages. Globalisation and digitalisation has increase level of competition in various industry
that have forced firms to provide better or best quality products or services in order to retained
maximum customers. This report is about Tesco which deals is products and services like food,
clothes, furniture, equipment and financial services with maximum market share in retail
segment. It discuss about past strategy of companies, impact of external environment on business
operation or strategy and the way it have gained competitive advantages. It also analysis firm
internal capabilities and strength which contributed in effective satisfaction of customers
requirements. At last few suggestions are given the way company can improve its operation and
evaluation of resources implementation.
TASK 1
Types of strategy that are used by Tesco in relational to school of strategy and strategic
concept
There are several strategy which have been used by Tesco to cover large market share in
retail segment and maximum amount of profit margin in near future. Mintzberg has suggest 10
school of though for strategy formulation that are used by manager of Tesco so that firm can gain
competitive advantages (Ethiraj, Gambardella and Helfat, 2018). Therefore several strategies that
are used by company in past 5 years to maximise its customers and profitability can be illustrated
as follow:
Design school: Top management have make use of SWOT model in order to identify its strength
and weakness that is internal factors at the same time wants to learn about external factors that is
opportunities and threats. By knowing opportunities that are available in market for firm is able
to make optimum utilisation of its capabilities and remove its weakness to grow and sustain in
market for longer term (Adegbile, Sarpong and Meissner, 2017). Such as Tesco have decided to
created a differentiate brand so that most of the people prefer products or services of firm rather
that other competitors in market.
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Planning school: Manager of Tesco have plan in advance about various strategies that need to
be followed by company in order to sustain its business operation. Thus, able to cope up with
external changes of environment such as preference of customers, technological development etc
and satisfy needs of customers beyond their expectancy.
Positioning school: Tesco has used differentiate positioning strategy to attract existing as well as
new customers to become part of organisation. Company have always make strategies to serve
customers in better manner for future growth and success of enterprise. Therefore, now Tesco
have it strong presence in mind and hearts of customers that lead to more profitability and sales
volume of firm.
Culture school: It can be stated that Tesco manager have created supportive and friendly
culture environment in work place so employees can be motivated to give their best for
achievement of company objectives (Ethiraj, Gambardella and Helfat, 2018). Encouragement of
employees view, idea and opinion has contributed towards brining continuous innovation and
better customers services.
Environmental school: There are several changes in strategies of Tesco as per environmental
situation which have lead to growth in profitability and market share of firm in retail sectors.
Such as make changes in its products or the way services needed to be delivered so that large
number of individual are motivated to make purchased of Tesco products or services.
TASK 2
Different model are used to review of external environment of firm
Pestle Analysis is effective model that can be used to analysis external environment of
Tesco that helps in planning several strategies so that firm can retain its market share and
profitability. There are several factors in business environment such as policies of government,
preference of customers, technological development and economic condition of country that
impact adversely on strategy and operation. Therefore, Pestle analysis of Tesco helps in
identifying external environment of business such as:
Political factors: There are several changes in policies of government such as free trade
regulation which have provided opportunity to Tesco to enter into new market in order to expand
its business operation and achieve its objectives (Veselovsky and et.al., 2019). On the other hand
Brexit is another policies of government that have lead to decreased in overall sales and
profitability of enterprise as most of the import and export of UK was with EU. Therefore, Tesco
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by planning to enter into international market have cope up with impact of brexit on sales
volume of firm.
Economic factors: Various elements of economic factors are interest rates, disposable income of
people, exchange rates, demographical factors and education level of individual that are living in
society. It can be stated that Brexit one of the most crucial factor that have resulted in decreased
in economic growth of UK that have impacted sales of most of the organisation. Therefore Tesco
have used affordable price strategy in order to meet customer expectancy and expand its business
in UK.
Social factors: Tesco main objectives are to provide better services to customers so that they can
be motivated to select specific products or services for fulfilment of their requirements. Due to
increasing several health issue such as diabetes or obesity people have become more concerned
about their health and safety (Bramblett, 2017). Therefore, demand organic food products to stay
healthy and fit for longer time so Tesco in order to meet social changes have launch organic food
products which leads to increase in customers satisfaction and brand loyalty.
Technological factors: Due to globalisation competition level in industry have increased that
leads to use of innovative technologies to manufacture and delivery of products and services to
end customers. Such as most of the younger generation likes to have online shopping as they can
easily book or select a products or services while staying at their homes (Leiblein and Reuer,
2019). Thus, Tesco by offering its products information on official website of firm is able to
create strong brand awareness and better services by delivery of products at their doorsteps.
Environmental factors: There are limited resources in environment and most of the companies
are making ineffective use of resources in order to increase their overall profitability. Therefore,
government and consumers are forcing firms to take initiative to preserve resources so that future
generation can also make use of these for their satisfaction of their needs (Shewmake, Siegel and
Hiatt, 2020). Tesco have decided to take crucial steps to protect environment and limited
resources by reducing amount of wastage. Innovative technologies and highly trained and skilled
employees helps company to make optimum utilisation of resources and minimise wastage
production for environment conservation.
Legal factors: Government have made various legal laws such as health and safety, minimum
wages, working hour and equality act or discrimination to ensured safety of employees. Tesco
manager have followed all legal laws that is it have provided equal opportunities to various
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individual in organisation while promoting or sharing their information so that they are happy
and satisfied. Manager by considering all legal laws have protected company from fines and
penalty or extra cost thus development of strong brand image in competitive market.
Critical evaluation of company competitive advantages among its direct competitors
Tesco is one the largest company in retail industry as compared to other direct
competitors such as ALDI, ASDA and Sainsbury. It can be critically evaluated that company
have get competitive advantages by manufacturing unique and differentiate products at
affordable rates. It by giving prirority to give maximum value to customers is able to grow and
sustain in market for longer period of time and achieve its objectives. Despite the fact that ADLI
and ASDA provide products at lower rates most of the customers prefer Tesco due to its strong
brand image and reputation of rendering qualitative products at reasonable rates.
Industry Scenarios
Retail industry play an important role in growth and expansion of UK economy as it has
generated £381 billion sales in 2018 and employee’s three million people. There are various
rapid changes in retail segment which have to be faced by Tesco to meet customers’
requirements and enhance its profit margin (Owusu, 2020). Digitalisation, innovation and
increase in level of competition in terms of quality provided or price of products so company
needs to introduce new products or innovates its method of delivery by use of new technologies
to satisfied customers requirements in most effective manner.
TASK 3
Extent to which firm is facing strategic drift
There are numerous changes in external environment so Tesco is facing high strategic
drift such as customers are demanding more organic products for satisfaction of their
requirements. They want new and innovative technologies to delivered services to them thus
manager have to changed its strategies for growth and sustainability of business in competitive
market condition.
Mission and vision statement aligned to market demand
Tesco mission statement is “ we make what matter better, together” that means company
think each individual have equally contributed in growth and success of firm. It have taken steps
that are beneficial for all such as investors, employees or may be customers by offering
distinguished quality of products to improve their lifestyles and health. On the other hand vision
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of enterprise in to become one of the most valuable businesses by serving best to customers and
communities in which firms operates. Therefore it can be stated that mission of firm related to
market demand as customers likes to make purchased for firm that ensured that health and safety.
Due to less disposable income and more demand of customers Tesco have statement from its
vision that it will provide maximum value to people so that their requirements are fulfilled
beyond their expectancy.
Internal capabilities
SWOT analysis is an effective tool which helps company to know their strength and
capabilities that can be used to make optimum utilisation of opportunities and overcome external
threat of business. Therefore SWOT analysis model can be used to identify key capabilities and
strength of firm that contributed in gaining competitive advantages. Such as:
Strength: Strong brand image of Tesco in mind and heart of customers is biggest strength that
helps company to easily enter into new market segment or attract new customers to select
products of form for better satisfaction of their requirements (Kunz, Siebert and Mütterlein,
2016). Large product portfolio and qualitative, unique and differentiate products is another
strength of company which helped in retaining customers loyalty.
Weakness: Tesco has limited presence in international market because it is highly dependent on
UK market for sales and profitability. Therefore company needs to enter into new market to
grow and sustain in retail industry. Misrepresentation of profit or account have impacted on
brand image, customers loyalty and lead to extra charges so it needs to takes steps to regained
customers satisfaction.
Opportunities: Transformation in technology have provided opportunity to Tesco to easily
expand its market share such as Tesco by use of digital platform can easily market or promote its
products and service to large number of individual. It will lead in saving time, money and efforts
to influenced diverse people to prefer Tesco in comparison with other competitors (Youn and
et.al., 2017). It has also opportunity to enter into international market because of globalisation
and digitalisation which can maximise profitability of firm.
Threat: There are rapid changes in external environment and rising competition level which is
one important threat for Tesco growth and sustainability. Tesco in order to cope with increasing
competition have differentiated its products and offer it at reasonable prices so that maximum
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numbers of people are motivated to select company (Owusu, 2020). Continuous monitoring and
analysis of external environment have lead to formulation of strategies to overcome threat of
business.
Business model canvas
Key partner: Jack Cohen is founder of Tesco have created enterprise to delivered best quality
products and services to customers for long term growth and success of firm.
Key activities: It have conducted various key activities in order to retained customers
satisfaction is that build strong relationship with customers, brand loyalty and effective
distribution channel so that products can be delivered within limited time frame (Carmichael,
Chen and Luo, 2018).
Value Proposition: It can be stated that Tesco have set core values to provide maximum
benefits to individual or customers in order to effectively achieve its objectives. Company have
provide products and services for each individual that is from kids to adult, men to women for
earning maximum profitability.
Customer’s relationship: Digital medium, personal selling and qualitative services have
contributed in building strong relationship with customers. Tesco by innovating its products and
offering it at affordable prices is able to build and retained strong relationship with large number
of customers.
Customers segment: It have segmented customers on basis of demographical, geographical and
psychological factors in order to formulated effective strategies to induce them to make purchase
for growth and sustainability of enterprise. Social media is used to build relationship with
younger people that mostly like to make shopping through online medium.
Key resources: All resources are important in delivery products, maintaining relationship with
customers and increasing revenue of firm (Zhen and Yaghoubi, 2016). Such as Tesco have
highly skilled and talent employees that manufacture better products which satisfied
requirements of customers beyond their expectancy.
Distribution channel: Tesco have strong distribution channel, stores, warehouse at different
geographical location so that customers can easily get their products within limited time frame
and cost.
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Cost structure: Technologies and human resources are two important resources that are mostly
costly which contributed in delivering of unique and differentiate products to end users.
Revenue Stream: Strong brand image, quality of products and unique are key features of
products that motivates several individual to take decision to make purchased from Tesco thus
contributed in increasing overall revenue (Abatecola, 2019).
TASK 4
Suggestion of possible strategies that can be used by firm to defend its core business
There are several possible suggestion which can be used by enterprise to defend or
sustain its business in retail industry to earn more profit margin in future circumstance. It can be
illustrated that recently business environment is highly competitive and preference or taste of
people changes as per changes in prices, availability of substitute products. Therefore Tesco have
to overcome all such changes of external environment to retain its market share or competitive
positioning in retail industry (Garzella and aele Fiorentino, 2017). Porter generic strategy force is
a model which helps in suggesting following strategies which can be used by enterprise to attain
its respective objectives. Such as:
Cost leadership strategy: There are two main competitors such as ASDA and ALDI in cost
leadership strategy which created threat on grow or sustainability of Tesco. These firms offer
products at lower discount that encourages large number of people to select products of it as
compared to Tesco. Therefore, company by reducing its cost of products or services is able to
meet customers expectancy and retained their loyalty. Different techniques or innovative
technology could be used by Tesco in order to manufacture products at lower cost or bring
economic of scale so that maximum value is delivered to end user. Proper training and
development program organised by Tesco can also contributed in optimum utilisation of
resources and reduction in amount of wastages, error and mistake so that qualitative products can
be delivered to maximum people living in society (Veselovsky and et.al., 2019). Cost
leadership strategy helps in increasing market share of enterprise as large number of customers
are interested to have branded products at reasonable rates. UK have large population and
number of enterprise are operating its business in retail sectors so they have more power to
bargain due to availability of alternative option therefore Tesco needs to make use of cost
leadership strategy to attract existing as well as new customers within organisation.
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Differentiate leadership strategy: It is second alternative essential or important strategy that
can be used by manager of Tesco to defend and grow its core business in competitive market
condition. Company by differentiating its products or the way services are delivered to end users
is able to develop strong brand image, customers loyalty and gain competitive positioning in
retail sectors. Tesco can differentiate its product in terms of quality, features, packaging or
design of products which easily attract people to have such products for fulfilment of their
respective requirements. Company needs to spend huge amount of capital in research and
development departments in order to manufacture or introduce new products or services for
fulfilling unsatisfied wants of customers. Differentiate strategy can helps Tesco to charge
premium or competitive pricing from customers as it deals in highly qualitative and unique
products that are beyond customer expectancy (Witek-Crabb, 2016). Digital media is one the
platform that offer better experienced to customers so Tesco needs to post various information
about promotion offers, or launch of new products in order to created strong brand awareness
among customers. Tesco focus needs to be provided best services or products rather than
reduction of prices in order to sustain its business for longer period of time. Effective marketing
strategies such as use of social media that is facebook, twitter to promote products and services
of firm to number of customers within limited time frame and cost. Therefore Tesco by
continuous innovation in the way products are delivered and manufacture, packed and design is
able to grow and expand business internationally.
Focused low cost leadership: It is types of strategy in which company plans to reduce prices of
products and services for few customers only so that they can make purchase of products for
fulfilment of their respective requirements. Number of people belongs to middle class so Tesco
by planning to offers products to customers that are highly price sensitive or belong to middle
class is able to enhance sales volume and profitability of firm (Busch and Shrivastava, 2017).
Tesco managers before adapting focused low cost strategy need to conduct deep research about
niches market in order to understand respective needs and wants of customers for sustainability
of enterprise in future circumstance. Company by adopting focused low cost leadership is able to
build strong reputation as it have satisfied needs of each individual belonging to different taste,
preferences or interest. Manager needs to put extra efforts to reduce overall cost of products and
services for target customers in order to achieve objectives of firm in best possible manner.
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Focused differentiate: It is a last alternative choice of strategy that can be utilised or
implemented by manager of Tesco in order to maximise market share and profitability of firm.
Company in order to cater needs of few individual can manufacture highly qualitative, luxury
and unique products so they are ready to pay extra for satisfaction of their requirement (Ethiraj,
Gambardella and Helfat, 2018). Such as Tesco by delivering unique and qualitative products to
people that belong to high class or having more interested in quality rather than prices can easily
enhanced its profitability. Focused differentiate means company deals in highly valuable
products which is limited in quantity and can be purchased or utilised by some of the customers.
Tesco can charged high prices from target customers for rendering unique products or
experienced beyond their expectancy thus it contributed in enhancing share of profitability and
brand image of enterprise. But it is narrow market coverage so company may use other strategies
to gain competitive advantages and achieve its objectives.
Therefore from above analysis and evaluation of several strategies for
sustainability of business it can be stated that Tesco can may use of differentiate strategy to
increase its market share in retail industry. Company have to train its employees and motivates
them to bring new and creative ideas to fulfil customer’s expectancy so that overall objectives of
firm can be attained (Li, 2018). It also needs to set standard policies and procedure that needed to
be followed by each individual so that similar quality of products can be render at different stores
of firms operating across worldwide. So, it is best strategy to cope up with future uncertain
events, increase level of competition and satisfaction of customers needs as per their expectancy.
TASK 5
Interrelationship between key resources areas of firm
Interrelationship between key resources areas of Tesco have contributed in effective
completion of task and achievement of common objectives of firm. There are various key areas
resources of firm that have strong interrelationship such as Human resource, technology,
marketing and finance etc. Such as:
Human resource: It can be stated that for marketing or promotion of products and services
highly skilled, qualified and knowledgeable employees are required therefore marketing
coordinate with human resources to fill skills gap with firm (Somov, 2018). Human resources
are also required for operation so manager of Tesco needs to identify actual skills and
capabilities required for performance of respective task.
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Operations: Tesco operational manager in order to allocate resources or implementation of
strategies have to coordinate with marketing to know about existing taste and preferences of
individual. There is strong interrelationship between operation and Human resources of Tesco
which helps in requirement or availability of skilled and qualified individual or recruitment of
right candidate for right job within firm. For effective operation of business finance is needed so
operation coordinate with finance to have sufficient fund to complete task and achieve
objectives.
Finance Company needs finance or capital to operate or run its business operation such as
planning and implementation of marketing strategies for inducing individual to make purchased
of Tesco products (Kunz, Siebert and Mütterlein, 2016). Therefore marketing, operation and
human resources coordinate with finance to set their actual budget for performance of several
activities so that firm achieve its objectives.
Critical analysis and application of strategic implementation model
Managers have to planned in advance the way various strategies of firm needed to be
implemented so that company can attain its respective objectives. Stonich model of strategic
implementation can be used by Tesco to implement its plan for growth and success of firm. This
strategy mostly focused on four elements that is organisational structure, management process,
human resources and culture for effective achievement of objectives (Leiblein and Reuer, 2019).
As per this model managers need to put efforts to match and fit together various five elements
that can contribute in driving success of firm. Various elements of system model used by
manager for effective implementation of strategy are as follows:
Organisational culture: Tesco needs to have friendly and supportive culture in order to
effective implemented new strategies and motivates several individual to accept changes. It
needs to encourage employees to share their creative and innovative ideas so that firm can make
necessary changes and satisfied customer’s requirements in effective manner. Individual that are
working in firm have ability to take risk and high skilled, knowledge to resolve several problem
faced by organisation.
Organisational structure: Manager of Tesco have to spend its time, efforts and energy to
design structure of firm in order to remove conflict and confusion among various individuals. It
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