Strategic Choice Evaluation: Tesco Business Strategy Report

This report provides a comprehensive analysis of Tesco's strategic choices, starting with an introduction to the organization's strategic purpose. It then delves into the external environmental analysis, covering political, economic, social, technological, environmental, and legal factors impacting Tesco. A detailed competitive industry analysis follows, utilizing Porter's Five Forces to assess the retail landscape and Tesco's position. The report includes a SWOT analysis to evaluate Tesco's strengths, weaknesses, opportunities, and threats. It explores strategic choices, specifically cost leadership and differentiation strategies, evaluating their suitability, acceptability, and feasibility through SAFe analysis. The report concludes with a justification of the optimum strategy for Tesco, highlighting how these choices can lead to competitive advantage and long-term success.

ORGANIZATIO
NAL
STRATEGIC
CHOICE

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
(a) Strategic purpose and introduction of the organization .........................................................3
(b) Strategic choice for the organization business strategy ........................................................6
(c) Critical evaluation of strategic choices ..................................................................................7
CONCLUSION ...............................................................................................................................8
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INTRODUCTION
Strategies are formed in the organization for accomplishing required goals and objectives
of the business in successful and effectual manner (Rachet, 2014). It is assertive that companies
should adopt systematic approach for making action plans for business so that long term
competitive growth of the enterprise can be ensured.
(a) Strategic purpose and introduction of the organization
Tesco is a leading retail firm of UK that offers superior quality products and services for
its business consumers. Wide variety of goods are offered by company and millions of
consumers are getting benefited by it. Retail industry of UK is getting highly competitive and
many organizations are executing their operations in this sector.
EXTERNAL ENVIRONMENTAL ANALYSIS
Political :- Rules and regulations that have been formed by government of state are mandatory to
be followed for all the organizations. Government of nation forms norms that are mandatory to
be followed for all the organizations that are working in the country (Balasopoulou and Geitona,
2016). It is assertive that all the business activities in the Tesco organization should be performed
as per the norms. It will help for carrying out required business activities in legal and lawful
manner.
Economical :- Different changing situations of nation gives impact on the different operational
activities that are performed in the company. Inflation and deflation situations of nation gives
influence on the purchasing power of people and due to that business activities of the Tesco
entity gets affected (Mkude and Wimmer, 2015). For example if there is inflation situation in
nation than due to that purchasing power of people reduces and they feel difficulty in buying
products that are at a higher price rates.
Social :- All the products of the company are developed by keeping the expectations and needs
of buyers into consideration. Tesco company considers needs and expectations of buyers while
selling and designing and developing the products of the enterprise. Buying behavior of people
gets influenced and due to that impact is observed on the purchasing behavior shown by them.
Technological :- Science has done rapid advancements and innovations and new techniques that
are happening in technical sector gives impact on the overall activities that are performed in the
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entity. Rival firms that are working in retail industry are taking advantage of this opportunity and
due to that impact is observed on overall business activities that are performed in the enterprise.
It is vital for Tesco to adopt new technology to execute their required business functions (Grünig,
and Kühn, 2015).
Environmental :- Different types of climatic change activities such as changes in environmental
conditions. Temperature change situations also gives impact on the various business activities
that are performed by the Tesco business organization. Natural disasters and climatic changes
situations also gives impact on the operational activities of the company and logistics and supply
chain activities of the enterprise gets influenced due to it (Kuitunen, 2014). It is assertive that
proper analysis of all the external market situations should be done so that necessary functional
activities of the enterprise can be performed without facing much difficulties.
Legal :- It is critical that all the business activities of Tesco company should be performed in
legal and lawful manner so that required goals and objectives of the enterprise can be
accomplished without facing much difficulty. It is assertive that norms that have been formed by
government should be followed properly. For example taxation policy of the state needs to be
followed by the company (Grünig and Morschett, 2017). All the regulations and policies that
have been formed by government of UK needs to be complied with. Legal guidelines changes
from one nation to another nation and it it vital that rules of one particular country should be
followed properly.
COMPETITIVE INDUSTRY ANALYSIS
It is critical that competitive industry analysis should be properly done so that
opportunities available for a company. Challenges that organization is supposed to face in
international market area can also be analyses and it will help for making better and effective
strategies for Tesco company. Various techniques and action plans that have been adopted by
rival firms for gaining huge market share can also be analyzed and it will help for making better
strategies for gaining competitive advantage for the business (He, 2015). Porter's five force
analysis can be used for carrying out competitive industry analysis for Tesco organization.
Bargaining power of buyers :- Buyers have many options for purchasing their products as
many retail organization are offering superior quality products at lower price ranges. It is
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required that need, preferences and expectations of buyers should be fulfilled so that sales of the
entity can be enhanced.
Bargaining power of suppliers :-Bargaining power of Suppliers is low as Tesco company has
many suppliers for selling their products. Company does bargaining with buyers for reducing the
prices of the products that are being supplied by them.
Threat of new entrants :- Retail industry of UK offers huge success and growth opportunities.
It is the major reason for which many companies are trying for starting new ventures in grocery
retail sector. Threat of new entrant is high and it create challenge for the Tesco company. New
entering companies required to invest huge capital for carrying out their operations in this sector
and prior permission from government and other regulatory authorities is also required to be
taken. There are many existing players in retail industry that are already carrying out their
business successfully (Burgenmeier and Mucchielli, 2013). New entrant firms required to adopt
strategic approach for facing the challenges that have been created by existing market players of
grocery retail industry. Threat of new entrants is medium and Tesco company needs to be awrae
about challenges craeted by new entrants.
Competitive rivalry :- There are many rival firms that are operating their functions in retail
industry and it includes Iceland, Lidl, Aldi, Waitrose, Morrisons and Sainsbury's. All the
companies adopts different strategies for selling their products in market. All firms tries for
gaining big market share and due to that competitive rivalry becomes high. It becomes assertive
for Tesco to adopt innovative and strategic approach for gaining competitive advantage for the
business (Antonioli, Mancinelli and Mazzanti, 2013). Grocery retail industry of UK is facing
tough competition and due to that it has become challenging for gaining a good position in
industry market area.
Availability of substitutes :- Wide variety of products are supplied by Tesco company and other
retail firms that are operating in UK also supply different variety of products. There are many
substitute products that are available in market that can be used by consumers. All the substitute
products are available in following categories including clothing and jewelry, health and beauty,
home appliances, tops and baby products, home electrical products and health and beauty care
products. Wide variety of products that are offered by Tesco are in comprehensive range. There
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are many substitutes available in market that can be used by consumers. Other than this rival
firms are offering many varieties for buyers. Threats of substitutes is high.
STRATEGIC CAPABILITY ANALYSIS
SWOT ANALYSIS
SWOT analysis helps for evaluating opportunities and threats that are available for
business. It assists the organization in making better and effective action plans.
Strength :- Tesco company holds big market share in grocery retail industry of UK and efective
supply chain and logistics operations. Effective consumer information tool is used by the
company and it helps for making stronf property portfolio.
Weaknesses :- Recently Tesco company observed weak financial performance and due to that
overall profitability and sales of the enterprise got affected. Financial scandal that happened in
the year 2015 also created negative brand image of the organization. In addition to that employee
turnover rate is high in the company which also is a weakness for the organization.
Opportunity :- Globalization has provided an effective medium for the company to expand its
existing operations in international market area. Company can also enter into financial service
industry and increase its non food retail range (El-Masri, Orozco and Tarhini, 2015). Company
can also enhance its marketing strategy for gaining competitive advantage for the business.
Threats :- Economic fluctuations in market and inability of the company to sustain its
existing market position is big threat for the organization.
(b) Strategic choice for the organization business strategy
Cost leadership strategy :- This strategy can be used by Tesco company for expanding its
existing business operations and gaining big market share as compared to rival firms. This
strategy will help the company for gaining long term competitive advantage and it will also help
for ensuring long term growth and success for the business. In this method price sensitive
consumers can be targeted by the company for selling products and services of the entity (Aithal,
2016).
Differentiation strategy :- in this technique Tesco company can differentiate its existing products
in market so that consumers can be attracted for selling the products and services that are being
offered by the company (Aithal, 2016). Target consumer segment is not price sensitive under this
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method and innovative and attractive concepts can be used by the enterprise for differentiating
the products in market.
(c) Critical evaluation of strategic choices
SAFe analysis is conducted by companies for assessing the effectiveness of strategic choice that
have been selected by Tesco company. It supports the firm in evaluating whether the strategies
selected by the company are suitable and feasible for gaining required goals and objectives of the
business in effective manner.
SAFe analysis for Tesco company is as mentioned :-
Suitability :- Tesco company has adopted differentiation strategy for differentiating their
products from the goods that are offered by rival firms in market area. It provides opportunity for
the company to enhance its existing consumer base by offering new and different variety of
products in market area (Tao and Hinton, 2014). Research and development department of Tesco
company has potential for adding attractive features and attributes in existing price ranges. Other
than this cost leadership strategy is also an advantage for the organization and it will help for
offering products that are available at affordable price ranges.
Acceptability :- The strategies that have been selected by Tesco company will help for meeting
with the requirement and expectations of business consumers. Proposed strategies have been
disclosed to all the key stakeholders including employees, shareholders and top management
people are agreed with the strategies that have been chosen by the the firm. Consumers have
accepted the products that have been supplied by the company at an affordable price ranges.
Feasibility :- The proposed strategy of Tesco that includes cost leadership strategy and
differentiation strategy are feasible. It is possible to implement the strategy in actual practice.
Other than this it is required that proper feasibility test should be done before implementing the
strategies in actual practice (Burgenmeier and Mucchielli, 2013). It is possible to accomplish the
required objectives of this strategy. Tesco company have all the required resources that are
needed for implementing the strategy. It reflects that both the chosen strategies are feasible for
the organization.
Justification of optimum strategy :- Tesco is a leading grocery retail firm and it holds big
market share in UK retail industry. Cost leadership strategy will support the company for
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targeting price sensitive consumers and it will also help for targeting price sensitive consumers
for selling products and services of the organization. Other than this Differentiation strategy will
support for differentiating the products of the enterprise in the market. Both the strategies will
support the company in gaining competitive advantage for the business (Aithal, 2016). Other
than this long term growth and success of the business can also be ensured through this.
Profitability and financial revenues of the company can also be increased by making use of this
approach and it will help the Tesco company to leading ahead with its rival firms.
CONCLUSION
Summing up the present report it can be concluded that strategies and action plan that
have been formed by the enterprise supports in gaining required goals and objectives of the
business in successful way. It is assertive that competitive industry analysis should be done so
that opportunities and threats that are available for the business can be identified.
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