SIM336 Strategic Management: Tesco Case Study, Recovery & Risk Plan

This report provides a comprehensive analysis of strategic management principles, contrasting theoretical frameworks with practical applications. It features a detailed case study of Tesco, examining the challenges the company faces in the retail industry due to economic factors, competition, and changing consumer preferences. The analysis includes a Porter's Five Forces assessment to understand the competitive landscape and proposes a recovery plan based on the Ansoff Matrix to address declining profitability. Furthermore, the report touches upon the importance of risk management strategies for Tesco to ensure long-term sustainability and success. Desklib provides students access to similar solved assignments for academic assistance.

Strategic management

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Compare theory and practice..............................................................................................1
2. A case study approach........................................................................................................4
3. A recovery plan..................................................................................................................5
4. A risk management strategy...............................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Strategic management is a process in which identification as well as description of strategies
in order to evaluate and control business in respective industrial sector is being done in a
continuous manner. It is also termed as diverse form of decision as well as act that are being
undertaken by manager in order to evaluate organisation competitive edge. In this process
identification of competitors and goals and objectives are being undertaken in order to fulfil
consumer and industry requirements. This will allow organisation to assure their long term
sustainability (Nakrošis, Šiugždinienė and Antanaitė, 2020). Strategic management is termed as
a decision making process through which company can identify their strategic position, it further
aid in evaluating future profitability and sustainability of entity. Present report has been
conducted on Tesco, company operate their services in retail Industry sector and was founded in
the year 1919. This enterprise offers their products through super store, supermarket, convenient
shop and hypermarket. In this report formative discussion has been made on Porter five forces
model in order to undertaker knowledge of maximum extent of competition prevailing in
industrial segment. In addition to this report also include recovery plan and risk management
strategy.
MAIN BODY
1. Compare theory and practice
Porter five force analyses allow an organisation to evaluate industrial structure in order to
identify opportunities for competitive advantage. This analysis allow Tesco to identify
competition prevailing in retail industrial sector along with examination impact of all the forces
like supplier power, competitive rivalry, buyer power, new entrant and more that have significant
impact upon company operations in supermarket industrial segment.
Threat of substitute products:
It has been evaluated that grocery retail market is facing low threat of substitute services
and product in terms for food items. In this industry majority of substitutes are from small chain
of convenience store, organic and off licences shops which is not posing major threat upon super
markets like Tesco (Tesco Supermarket: SWOT, PESTEL, Porter’s Five Forces and Value
Chain. 2020). This entity is already providing high quality services and products in an extremely
lower price range. However Tesco can face threat of substitute services and products in their non
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food item segment, to overcome this Tesco is required to undertake the strategy related to
conduct their operations with having service oriented approach rather than product oriented. In
addition to this company have proper understanding of consumer needs can also gain more
competitive advantage.
Threat of New Entrants:
Threat of new entrants in food Retail industry is relative low as in this it is essential for
new entrants to invest huge capital in order to establish their brand. It has been evaluated that this
industry is already captured with leading entities like Sainsbury, Asda, Morrison’s and they offer
high qualitative goods and services to consumer (Rascão, 2020). Thus, in order to make their
entry successful new entrants are required to offer the product and services in exceptional low
prices or with high quality. By taking opportunity from this Tesco can undertake strategy of
continuous innovation in their product and services segment and can retain their existing
consumers along with influencing new once. Tesco is also required to take advantage of strategy
in which they are required to engage in extensive research and development process in order to
disrupt respective industrial segment.
Competitive rivalry:
Food and grocery retail industrial sector is having high intensity of competition. Tesco is
facing competition from organisations like Morrison’s, Asda, Sainsbury and Waitrose those who
are offering their services and products by taking use of aggressive competition over promotion,
product and prices (Lim, Jee and De Run, 2020). This is having capability to impact upon Tesco
leadership positioning in retail industrial sector. In this Tesco is required to undertake strategy of
sustainable differentiation in which they are required to provide different and unique product and
services to customers in affordable price range. Tesco by also taking use of strategy of
collaboration with other competitors can enhance their market size that ensures their leading
positioning respective industry.
Bargaining power of buyer:
Retail Industry is having high bargaining power of buyers as there are number of
organisation who offer slightly different or more standardised product and services to consumers
in affordable price range. This indicates switching cost very low that allow buyers to change
their shift from one brand to another in easy manner. Customers now-a-days seeks towards high
quality product and services in low price range. Thus, it is essential for Tesco offer their services
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and products to consumers as minimum price as possible in order to ensure their long-term
profitability. Entity is also required to develop more powerful consumer base as it allow them to
reduce buyer bargaining power (Stoliarov, Shynkariuk and Stoliarova, 2020). In addition to this,
by taking advantage of rapidly innovation strategy and heavy discounts TESCO can also enhance
their market image along with maximum profitability.
Bargaining power of supplier:
Suppliers are key element for an organisation especially for those who mainly detail in
food and grocery industrial sector. Power of supplier in this industry is low as most of the
suppliers are mainly included towards operating their services with leading organisation dealing
in food and grocery sector. Tesco is a large Supermarket thus, this offer them strength to
negotiate with suppliers (Rafiq, Naz and Maqbool, 2020). However Tesco is required to maintain
bargaining power of suppliers with efficient strategies like building maximum supply chain with
different suppliers and are also required to take advantage of experiment in strategy in which by
engaging in the process of product designing by taking use of diverse material company can
conducted process in smooth manner as if a price of a raw material goes up it provide entity to
have easy shift to another without affecting their process in a maximum extent.
According to the above evaluation it has been identified that by having proper
consideration of all the five competitive forces Porter five force analysis Tesco can undertake
strategic measure through which they can identify impact of all factors upon organisation
operations in retail industry. With the help of this they can gain significant opportunity and can
shape those forces in profitable opportunities.
Practical example
According to findings it has been evaluated that undertaking, that has been done with the
assistance of Porter five force models are only for short period of time. In addition to this, as
Tesco operate their functions in different business segment, that they are required to undertake
porter five forces for each business segment and then amalgamate. This can have significant
impact upon company cost and time. In addition to this it is also essential for Tesco to evaluate
external environmental elements in order to apply this model in entity workplace structure.
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2. A case study approach
Case Study of TESCO
Tesco a British multinational groceries and general merchandise conduct their operations
in retail industrial sector with having it’s headquarter in England United Kingdom. They provide
wide range of product and services to their customers with having 4, 50,000 employees and 6800
shops. It has been evaluated that company is facing number of issues in retail industrial sector
due to many factors like economic recession, instability in economy, aggressive competition
among leading organisations and more. It is affecting entity profitability and overall revenue
generation capability. However company under take advantage of different strategies like, they
provide heavy discount to consumers on festive occasions in order to gain more competitive
advancements comparatively to their rivals. However it has been evaluated that company is
failing in the market segment of America and Japan in which they measure dis-satisfaction
among consumers and it is impacting upon their overall profitability and sales ratio. In addition
to this company is also facing challenge to continue their work with health organisation,
government and other industry bodies in order to formulate common standards to abide
nutritional labelling (Bodrud-Doza, Islam and Rahman, 2020). Corporate policy is also having
negative impact on entity operations. Further it has been evaluated that safety concern is also
affecting organisational profitability as it creating dissatisfaction among staff members. Along
with this it has been evaluated that change in consumer taste and lifestyle or also having
significant impact upon entry operations. To overcome all these challenges it is essential for
management of Tesco to undertake use of different strategies to overcome these challenges.
According to the above mentioned case study of Tesco, this has been evaluated that health
and safety measures are one of the most affecting challenge of Tesco that play a significant role
in decreasing their overall profitability and productivity. It is impacting on employee’s
performance along with consumer satisfaction level. In this entity is required to overcome them
by having proper concern towards nutrition label and health factors by having collaboration with
health organisation. Entity is also required to remove extensive amount of saturated fat and salt
in their products as to offer healthy food and eating’s to consumers. In addition to this
management of Tesco is also required to implement the essential and necessary safety law and
legislations in their workplace structure and provide all the essential beneficiaries to their
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employees as to increase their job satisfaction, as this will facilitate their performance towards
accomplishment of entity goals in best effective manner.
3. A recovery plan
Recovery plan:
According to the evaluation it has been evaluated that, Tesco is facing continuous decrease
in their profitability due to closure of their business operations in Japan and USA. Thus, my
advice to Tesco is that, they are required to implement strategy to overcome the actual causes
that lead towards there in- efficiency of operation that created dis-satisfaction among consumers
(Drumaux and Joyce, 2020). In order to enhance efficiency of their operations entity is required
to undertake use of strategies and measures with the assistance of Ansoff matrix, it provide
management an aid through which they can evaluate their efficiency level through which they
can enhance their performance level.
ANSOFF matrix
Ansoff matrix is a strategic framework that allows an organisation to expand their
business in different market and product segment by evaluating their planning and strategy of
growth. With the help of this matrix company can maximize their market operation efficiency
while evaluating risk that is associated to strategy.
Market penetration:
In this organisation is required to have their focus upon maximize their sales of existing
services and product in market segment (Hill, Schilling and Jones, 2020). In this Tesco is
required to undertake use of different tools as well as strategies to enhance sales of their existing
services and products in marketplace. In this with the assistance of market penetration strategy
Tesco can bring unique and innovative and can further take advantage of different advertising
techniques to enhance their business performance. It has been evaluated from the above case
scenario that company is facing bad performance in some of the geographical market segment.
Thus, they are required to take use of ad campaigns, competitive pricing strategy to provide
special offer on different services and products as to maximise sale of their existing services
through which they can enhance their profit margin.
Product development:
According to the strategy entity is required to introduce new service or product in
existing marketplace. In this company by launching new product with new facility and feature
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can influence consumer purchasing behaviour in respective industrial sector. It has been
identified that Tesco is operating their business function in global scale and operate their services
in different market economy. Thus, by evaluating need of every economy related to product and
service entity can launch a new product by identifying consumer needs and fulfil the same
accordingly (Sasaki, Ravasi and Vaara, 2020). In this Tesco by having strong negotiation power
with supplier in profitable market segment and having their own version of product and services
with affordable cost can maximize their profitability.
Market development:
In this organisation is required to undertake diversification in order to launch their
services and products in new market segment. These products are mainly organisation existing
products that an entity is launching into new market segment as to expand their business range.
In this according to the above case scenario it has been evaluated that in order to assure success
in new market Tesco is required to engage in extensive research and development process as to
identify trend, factors and elements that are prevailing in the market. In addition to this Tesco
can also undertake proper evaluation from the business failure in Japan in American market
segment.
Diversification:
This has been evaluated diversification can somehow acts as difficult strategy to
implement as this entity is required to offer their new product and services new market segment
to new customers. It has been evaluated from the above mentioned case study that Tesco have
failed in some of their diversification strategy for instance their failure in America and Japan.
Thus, this strategy is somehow proves to be unfavourable for Tesco, as it can have significant
impact upon the profitability productivity and global international market image.
As per according to the above mentioned evaluation it is essential for Tesco to implement
market penetration strategy as it mainly aim towards organization success with having formative
structure. By having proper understanding of all the factors ansoff matrix management of Tesco
can effectively adopt change manage stress, gain knowledge and can further move towards
internationalization (Keding, 2020). In order to diversify their business company is required to
engage in more extensive research and development process and are required to innovate new
product and services in order to gain more competitive edge over rivals. By evaluating failure of
the business Japan and America, company can undertake efficient strategies through which they
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can overcome those factors. Tesco is required to engage in development of strategies and modify
existing product and services with additional features in existing market for success. Thus, it has
been evaluated that market penetration proves to be effective for Tesco through they can enhance
their business growth. In this entry by taking advantage of attractive advertising campaigns and
competitive price strategy can overcome extensive competition and can further provide their
customers high quality services and products with special offer, through which they can enhance
their sales and profit generation capability.
4. A risk management strategy
In order to achieve success Tesco is required to evaluate all the possible risk that are
associated and prevailing in internal and external environment to gain more competitive strength.
It has been identified that these issues have significant capability to impact of organisation
profitability and further impact upon their international image. It has been evaluated that
business strategy is having number of risk associated with it; in this it is essential for entity to
reduce the stress as to enhance their chances of success. In this organisation is required to
undertake advantage of risk management as to enhance their profitability.
Risk identification:
Is the initial stage in which organisation is required to evaluate all the possible risk that
are linked with business strategy. In this it has been evaluated by Tesco that mainly is facing risk
of losing of their shares in new market place that can impact upon their current profitable
operations and can further impact upon chances of growth are required to identify all the risk and
take measures as to enhance chances of their success and future growth.
Qualitative risk analysis:
According to this stage of risk management procedure entity is required to have proper
understanding of qualitative risk that are linked with organisational performance with the use of
business strategies. It has impact upon performance of organisation which is having further
capability to decrease their success chances.
Quantitative risk assessment:
In this entity is required to evaluate risk with the use of qualitative method in order to
identify the extent at which the risk and effect organisational profitability. It is having capability
to impact on revenue generation growth of organisation. In terms with Tesco company is having
higher risk of adopting strategy in which there are required to improve their existing services and
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product in existing marketplace, then company will get the loss of revenue around 6 billion
dollars because of low market rate as well as decline in share because no future growth.
Risk response planning:
Risk response planning is that step of this process where company have to plan that how
it have to response to the risk which are arise within the organization because of opting the
strategy (Golensky and Hager, 2020). According to Tesco company have a proper plan to
execute while adopting the strategies, company have proper planning and execution techniques
which can be used to minimize the risk and respond it in current time. Dear company use
effective planning techniques as well as different methods which can help company in reducing
the risk of area in operation and future growth (McCann and Schwab, 2020). As company
improve its product within the current market which will help organization in reducing the
liabilities of the firm as well as increasing the sales in the current market which can match the
revenue of market expansion techniques.
Risk monitoring and control:
In this company is required to undertake use of different tools and techniques to overcome
the risk that they have identified in the stages of risk management process. In this it is required to
have continuous monitor and control upon planning and executing each and every operation as to
have formative control upon risk. It allows entity to reduce negative impact of risk on
organisational profitability. Tesco is required and recommended to continuously monitor and
control the different functions in which they are required to implement plan to diversify their
product and services in new market segment as to enhance their profitability and shareholding in
marketplace.
CONCLUSION
As per the above mentioned report in been evaluated that strategic management aid an
organisation to discover and create new strategies in order to conduct organizational operation.
This strategy mainly includes internal and external stakeholders, people, program, processes
policies, vendors and every possible element that forms an entity. With the help of this company
can effectively evaluate their strength and can further takes use of measures through which they
can ensure maximum growth. In addition to this it is essential for an organisation to engage in
the process of plan, monitor, evaluate and exchange of all essential elements that are required by
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an organisation to fulfil their objective. For this purpose Porter five forces aid organisation to
ensure their strategic edge. In addition to this means of Ansoff matrix also allow entity to
enhance their market image and maximize their overall profitability at great extent.
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REFERENCES
Books and Journals
Nakrošis, V., Šiugždinienė, J. and Antanaitė, I., 2020. New development: Between politics and
strategic planning—the management of government priorities in Lithuania. Public Money
& Management, 40(4), pp.299-303.
Golensky, M. and Hager, M.A., 2020. Strategic leadership and management in nonprofit
organizations: Theory and practice. Oxford University Press.
McCann, B.T. and Schwab, A., 2020. Bayesian analysis in strategic management research: Time
to update your priors. Strategic Management Review.
Keding, C., 2020. Understanding the interplay of artificial intelligence and strategic
management: four decades of research in review. Management Review Quarterly, pp.1-
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Sasaki, I., Kotlar, J., Ravasi, D. and Vaara, E., 2020. Dealing with revered past: Historical
identity statements and strategic change in Japanese family firms. Strategic Management
Journal, 41(3), pp.590-623.
Hill, C.W., Schilling, M.A. and Jones, G.R., 2020. Strategic Management: An Integrated
Approach Theory. Cengage Learning Asia Pte Limited.
Drumaux, A. and Joyce, P., 2020. New development: Implementing and evaluating government
strategic plans—the Europe 2020 Strategy. Public Money & Management, 40(4), pp.294-
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Bodrud-Doza, M., Shammi, M., Islam, A. and Rahman, M., 2020. Strategic Assessment of
COVID-19 Pandemic in Bangladesh: Comparative Lockdown Scenario Analysis, Public
Perception, and Management Perspectives.
Vishwanathan, P., van Oosterhout, H., Heugens, P.P., Duran, P. and Van Essen, M., 2020.
Strategic CSR: a concept building meta‐analysis. Journal of Management studies, 57(2),
pp.314-350.
Rafiq, M., Zhang, X., Yuan, J., Naz, S. and Maqbool, S., 2020. Impact of a Balanced Scorecard
as a Strategic Management System tool to Improve Sustainable Development: Measuring
the Mediation of Organizational Performance through PLS-Smart. Sustainability, 12(4),
p.1365.
Wenzel, M., Stanske, S. and Lieberman, M.B., 2020. Strategic responses to crisis. Strategic
Management Journal.
Lim, W.M., Jee, T.W. and De Run, E.C., 2020. Strategic brand management for higher education
institutions with graduate degree programs: empirical insights from the higher education
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Stoliarov, V.F., Shynkariuk, O.V. and Stoliarova, V.V., 2020. Orhanizatsiino-metodychne
zabezpechennia uzghodzhenoho stratehichnoho upravlinnia sotsialno-ekonomichnym
rozvytkom rehioniv ta derzhavy v transformatsiinykh umovakh [Organizational and
methodological support of coordinated strategic management of socio-economic
development of regions and the state in transformational conditions.]. Stratehichni
priorytety sotsialno-ekonomichnoho rozvytku Ukrainy/Strategic priorities of socio-
economic development of Ukraine.
Rascão, J.P., 2020. Strategic Management and Entrepreneurship. International Journal of
Strategic Decision Sciences (IJSDS), 11(1), pp.35-55.
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