Strategic Management Report: Tesco's Competitive Position Analysis

This report provides a comprehensive strategic management analysis of Tesco, a leading supermarket chain. It begins with an introduction to strategic management and its importance, followed by an in-depth examination of Tesco's internal and external environments using tools such as PESTLE analysis. The report then assesses Tesco's strategic position within the market, utilizing Porter's five forces model to evaluate competitive dynamics. The impact of various strategies on the organization is discussed, along with an analysis of Tesco's strategic capabilities, including a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The report also identifies different types of stakeholders and concludes with recommendations for future strategic improvements. This analysis highlights Tesco's ability to adapt to a changing environment and maintain a competitive edge in the retail industry.

Strategic management

Table of Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
Analysis of Internal and External environment of Tesco............................................................1
Analysis of organization's Strategic position with the competitors in the market......................3
Impact of the strategies on the organization...............................................................................4
Strategic capabilities of Tesco....................................................................................................4
Types of the various stakeholders ..............................................................................................6
CONCLUSIONS..............................................................................................................................8
RECOMMENDATIONS.................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Strategic management is the continuous process of planning, monitoring and analyzes the
various aspects which are necessary for any organization to meet the goals and objectives. This
report critically evaluates the various elements which are needed to analyze the various elements
of the environment in which the organization operates (Witcher and Chau, 2010). Tesco is the
largest supermarket chain in the retail industry which also diversifies in various other sectors to
meet the goals and objective. It also provides the online services through the subsidiary. Tesco
has been chosen to review and analyzes the various environment factors and forces which help
them to design the proper framework which defines the organization objectives and policies and
goals which are attained with the proper strategy adoption (Beer and et.al, 2005). They also
adopt the various unique methods and strategies to sustain in the industry for the long run and
accomplish the goals and meet the expectations of the various stakeholders by delivering the
valuable outcomes to them. They restructure the strategies to compete with the competitors to
achieve better outcomes by meeting the demand of the customers.
MAIN BODY
Analysis of Internal and External environment of Tesco
Environment analysis is the strategic tool which identifies the internal and the external
elements which are necessary to align the strategies. As per the today's work environment
organization faces lots of changes every day (Chrisman, Chua and Sharma, 2005). There is major
diversity in the work environment which determines the various factors which are beyond the
control of the organization. Tesco is influenced by the various environmental factors and
constantly analyze the work environment to accept the changes to meet the objectives.
There are many strategic analysis tools that can be used by the organization to attain the
goals and objectives. The major analysis tool which is used by Tesco to determine the external
elements of the environment is the PESTLE analysis.
PESTLE analysis consists of the various factors which influence the work environment of
Tesco. They affect the functioning in one or the other manner (Nag, Hambrick and Chen, 2007).
It is discussed in six common factors which influence the external environment:
Political factors: These factors determine the extent to which they have political aspects
influence the functioning of the organization. There are various aspects which refer to the
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stability of the environment and the various attributes. These factors reflect the various tax
policies and the government policies that are to be followed by the organizations. Tesco has to
follow the set pattern to flourish in the market by following the rules and regulations.
Economic factors: These factors determine the economic structure which includes the
various aspects related to the investment and the other factors to determine the growth. These
factors determine the rates at which they formulate the economy of the organization. Tesco
determine the various economic factors to enhance their efficiency to meet the requirement of the
target market as well as the availability of the finance.
Social factors: These factors determine the structure in which the organization operates.
Tesco ascertain all the aspects such as age distribution, culture attributes, and the trends to meet
the requirement of customer. They also modify their strategies to adapt to the trends which are
distinctive and influence the work environment.
Technological factors: As the technology is advancing on the larger span. It influences
the working environment of the organization (Schilling, 2005). Tesco adopts the changes to stay
updated with the changes in the technology to meet the present trends.
Legal factors: These are those aspects which affect the environment in which the
organization operates with the legal obligations. Tesco also follow regulations to operate and
properly analyze the legal factors and formulate the business strategy which compliance every
aspect of the business.
Environmental factors: These factors involve the changes in the environment in which it
operates. Changes in the climate also affect the trade. Tesco properly manage the various aspects
to meet the changes of the customer need as per the change in the environmental conditions.
Internal environment analysis determines those aspects which are executed to meet the objectives
which are ascertained by the organization. Tesco has the various internal factors which determine
its functioning for the attainment of the goals.
Organizational and operational factors: It includes the factors which affect the
performance of the organization internally by the various operations which are carried out. Tesco
properly evaluate all the aspect which determine the operations and does not affect the supply
chain and smoothly carry out the functioning to meet the requirement of the customers.
Innovation factors: In order to sustain in the long run they have to bring innovation for
being a step ahead. Tesco adopts the various innovative aspects to ascertain the growth by
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improving the work environment and formulating the strategies to meet the requirement of the
customers in an innovative manner.
Analysis of organization's Strategic position with the competitors in the market
Strategic position is concerned with the aspect that how the strategies influence the
framework in which the organization operates (Henry, 2011.). Tesco consider various
environmental aspects which determine the capabilities to fit in the designed framework. They
imply various elements to determine the strategic position in the business environment. Porter's
five forces model analysis also help to analyse the information to formulate the strategies to
attain the objectives. With the model, critical analysis of the market is done to ascertain their
position to compete with the other competitors (Schot and Geels, 2008.). Tesco have many
competitors who operate in the same sector. This reflects the marketing mix which they adopt to
maximize their appeal to the large number of the customer and build up strong strategic position
in the market. The goal of the strategic position is to differences as per the customer preference.
The strategic position analysis consist of the competitors analyze as it is the critical
aspect which help to determine the competencies to perform various function in the market. It is
the critically consider the 5 aspects which affect the business are:
Supplier power: As it is the essential element on which the functioning of the
organization is determined. Tesco ensure that they get the essential resource from the effective
suppliers to meet the demand of the customer. They concentrate that they have the efficient
supplier which are able to provide the resource on time (Lees, 2008). As they help in holding the
customer and not let them go and adopt the products of the competitors.
Buyer power: Tesco ensure to provide to meet the requirement of the customer to the
greater extent as they can easily switches from the one product to another which they are
offering. They have to properly evaluate what are the requirement and effectively formulate the
growth strategies to meet the requirement so they sustain in long run and also offer various
schemes so that they does not switches to the competitors products.
Competitive rivalry: Tesco operates in the large competitive market as Asda and
Sainsbury also operates in the same sector. The major competition occurs on the price as they are
offering the same product and services to the customers. Tesco formulates its policy in order to
be more unique in offering the product which will enhance their customer loyalty and would be
able to maintain the position.
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Threats of substitution: As there is intense competition in the market and the buyer have
the alternatives. Tesco also faces this threat as Asda and Sainsbury also make the availability of
the products and services as per the requirement of customers which weakens the position of
Tesco. Proper diversification strategies should be formulated with the forecasting of the demands
of the customers to sustain in long run.
Threat of new entrants: As the market is growing at a wider span and the industry is
becoming attractive for the new entrants. Tesco has the threat of the new entrants as the customer
frequently switches between the competitors. As new business easily enter and weak the
performance of the organization which are leading in the particular sector. The firms are
attracted by the profits and this make the involvement of new firms in the market. Tesco needs to
establish the brand equity to retain its market for long period by adopting the acquisition strategy
in order to gain the competitive advantage.
Impact of the strategies on the organization
Tesco has the very influencing impact on the various aspects which are ascertained to
meet the requirement of the customer on the various criteria to determine the objectives are
attained in an effective and efficient manner. Tesco ensure that the product and services which
they are offering is suitable to the needs and requirement of the customer. The proper evaluation
of the diversification strategy is done to ensure that they are able to meet the requirement of the
customer. They also adopt the growth strategy to ensure that they provide the customer with the
more diversified products and services. They find the place in which they can effectively
accomplish the requirement of the customer. The acquisition strategy also entitles to acquire the
competitive advantage by satisfying the customer (Thompson and Martin, 2005). The strategy
implementation ensures the long run of the Tesco. They also modify the supply chain by offering
the free home delivery of the product which helps to expand the customer interest to sustain as
they are provided with different facilities. They also ascertain the various aspects related to the
price as they offer a wide range of the product and accordingly the customer can obtain it. This
also impacts the sustainability of the customer as they are able to acquire the product at a single
space.
Strategic capabilities of Tesco
In order to find out the strategic capabilities of the Tesco we are going to do Swot analysis
of the Tesco. In this strength, weakness, opportunities and threats of the company is analysis and
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are the necessary measure taken by the company in order to overcome the problem and what
measure company considered order to grab the opportunities and increase its strength (Postma
and Liebl, 2005.).
STRENGTH(S)
Following are the major strength of the company:-
 Tesco major strength is that it is widely spread in various markets of Europe, Asia, South
and North America, North Africa.
 Compare to other companies stores Tesco stores are relatively large selling broader
variety of non-foods products. Some of the products sold out by the Tesco are books,
electronics, petrol, apparels, telecom and internet services and many more.
 Strength of the company is that it uses Multi Format strategy. Multi Format strategy
means that it has opened variety of supermarkets, hypermarkets, hard discount stores and
convenience stores.
 One of its major strength is that it builds its own brand image and sale out various
products in its own name.
WEAKNESS (W)
Following are the major weakness of the company.
 Recent controversies faced by the company affects its brand image.
 Tesco profit making level has also decreases due to the bad debts, household insurance
demand and credit card debt.
 Tesco weak presence in the UK has also reduces its profit generating margin.
OPPORTUNITIES (O)
Following are the major opportunities of the company.
 One of the major opportunities for the company which he should grab is that it starts
focus on increasing its brand image.
 They should tries to enter into the emerging markets through the acquisition of tie-ups or
by forming smaller chains
 Another opportunity which can assist the company to necessary its profit margin is that it
should tries to boost its non-food product sales.
 Company should focus on rebranding its High-grade stores. This can be done by using
various promotional methods like advertising, sales promotions, publicity and so on.
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THREATS (T)
 Increasing cost of raw material of both food and non-food products will affect the overall
profit margin of the company.
 Another threat which is faced by the company is increased number of its competitors in
lieu of other companies retail store formats.
 Continuous change in the buying behaviour of the customers affects the working of the
company. Company is further required to analysis the market properly.
The weaknesses and threats are the major key mechanism that affects the working of the
company. Similarly, the opportunities are the key directions that company can grab in order to
achieve its desired goals, while strength are those elements which turn out to be one of the
competitive advantage for the company (Nerur, Rasheed and Natarajan, 2008.). Therefore, Tesco
should tries to grab the various opportunities present in the market in order to increase its brand
image and profit margin. Company can use various types of promotion tools like advertisement,
sales promotions, direct marketing and many more in order to communicate with the customers
and create brand awareness among them. This is turn will help the company to increase its brand
image which was lost due to the recent controversies faced by the company. Similarly in order to
overcome its threats company should focus on reducing its cost of raw material. In order to
reduce its raw material Cost Company should developed various strategy which will assist them
to develop different stores format. New and different stores format will aid the company to beat
its competitors. Therefore, Tesco should take into consideration following measures in order to
solve the various problems and increase its brand image which was clashed due to bad debts and
insurance claims by the customers.
Types of the various stakeholders
Stakeholders are the individuals who are interested in various operations of the
company. They may get affected by the various activities that are taking place within and outside
the organization (Freeman, 2010.). Types of stakeholders are available in every business
organization i.e. internal and external stakeholders. Internal stakeholders get affect with the
organization internal activities whereas external stakeholders are affected by the operations that
are taking place outside the business organization. Therefore, various types of stakeholders are
explained below:-
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 Employees: - Employees are the person who works for the company in order to achieve
the organization desired goals and target. They simple want security of their livelihood.
They want their employment security, compensation, respect and fair communication
from the managers and its employer. Employee attitude and behaviour can also affect the
sales and profit margin of the company both in negative and positive way.
Therefore, Tesco has tried to take all necessary measures which in turn will satisfy the
employees working in the organization. Company has started conducting various types of
training sections in order to motivate its employee to work properly within the organization.
 Shareholders: - Shareholders are the person who is interest in investing in the company.
They simple want return on their investments and dividend. They want that company
should on continuous basis in order to increase its profitability. Shareholders decision can
affect the appointment of the board members. They have the right to vote for or against
the entry of board members. They also have the right to take decision on various
necessary matters.
Therefore, Tesco has taken all essential factors into consideration in order to increase its
profitability which in turn will satisfy the shareholders.
 Government: - Government wants that every business unit should grow at an increasing
rate. They also want that company should generate more and more employee
opportunities, work for the betterment of the society and pay taxes on time. Introduction
of fiscal policy by the UK government affects the profit margin of the company.
Therefore, as Tesco is the growing company, so it is easily able to satisfy the demand of the
government.
 Local communities: - Local communities want that they should live a healthy life. They
simple want that no type of pollution is made by the company which affects their day to
day living. They want that company should create less noise and disturbance. These
demands of the local community can affect the sales and profit margin of the company.
Moreover, Tesco has tried to take all the indispensable measures into consideration that
satisfy the society. They have tried to reduce the various type of pollution that affects health of
the individual present in the society as a whole.
Henceforth, it is not easily to satisfy all the stakeholders demand. Different stakeholders have
different interest. It is natural that the entire time one or the other conflict will be faced by the
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company. For example-if Tesco tries to satisfy the demand the local communities than it will
cause reduction in sales. Reduction of sales will reduce the profitability which in turn dissatisfies
the shareholders.
CONCLUSIONS
The following report emphasis on how the internal and external environment of an
organization affects its working. The report also concludes the strategic position of the Tesco and
how its Strategic position is different from its competitor’s position. It also shows how these
strategies affect the working of the company. By conducting the Swot analysis strategic
capabilities of the Tesco are also discussed. It is also discussed that how different types of
stakeholders demand affect the working and decision making power of the company. In order
satisfy the stakeholders demand company's sales and profitability is also affected. At last,
suggestions are also provided to the company in order to improve its strategic position.
RECOMMENDATIONS
In order to improve the strategic position of the company, company should take into
consideration the cost leadership strategy. By using this strategy Tesco will be able meet all the
expectations of its stakeholders. Company can also follow policy of acquisition in order to
increase its sales. Similarly, other major strategy which company can take into consideration is
change management. Change management must be a key concern when changing strategic
direction. The process of change management can create the feeling of uncertainty among the
employees. Therefore, in order to overcome this problem effective change management should
be implemented in order to ensure optimal performance from the old and new employees. Thus,
company should adapt change management process in order to mitigate the potential issue of the
culture clash, which has negatively affected the company’s sales.
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Thompson, L. J. and Martin, F., 2005. Strategic Management: Awareness and Change.
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