Analysing Tesco Plc: A Strategic Management Theory and Practice Report

This report provides an analysis of Tesco Plc using strategic management principles, comparing theoretical models with real-world practices. It employs Porter's Five Forces to evaluate Tesco's competitive position within the retail industry, assessing the threat of new entrants, bargaining power of suppliers and buyers, the threat of substitutes, and competitive rivalry. The analysis indicates that Tesco faces a low threat of new entrants and low bargaining power of suppliers, but high bargaining power of buyers and a high threat of substitutes and rivalry. Furthermore, the report uses the Ansoff Model to formulate strategic recommendations for Tesco to improve its productivity and profitability, focusing on market penetration, market development, product development, and diversification. The report concludes with recommendations for Tesco to leverage its strengths and address its weaknesses in the competitive landscape. Desklib offers a wealth of similar solved assignments and study resources for students.

Report

INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................2
Topic: Compare theory and practice ...............................................................................................2
Porter’s Five Force Model...........................................................................................................2
Ansoff Model...............................................................................................................................6
CONCLUSION................................................................................................................................8
RECOMMENDATION ..................................................................................................................8
REFERENCES .............................................................................................................................10
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INTRODUCTION
Strategic management is the process of managing business resources of an organization to
accomplish its aims and targets (Ansoff and et.al., 2018). It includes setting goals, examining the
competitive market, analysing the internal organisation, determining tactics, and determining that
strategies are enforced through the organisation by management. By designing strategies and
policies intended to accomplish goals and then allocating resources to execute the plans, strategy
formulation provides overall guidance. In the end, strategic leadership is for companies to
achieve a competitive advantage over their rivals.
Tesco Plc is chosen for this report which helps in proving better understanding of strategic
management concepts. Tesco, which operates about 2,318 stores and employs over 326,000
employees, is among the world's largest food distributors. Via its subsidiary, Tesco.com, it
supplies online services. The UK seems to be the biggest market for the brand, where it works
underneath the four Extra, Superstore, Metro and Express banners. This assessment based on the
compare theory and practices such use Porter’s Five Forces Model to identify company’s overall
performance and position in the market. In addition, by using Ansoff model formulate strategies
for further actions to improve productivity as well as profitability.
MAIN BODY
Topic: Compare theory and practice
Porter’s Five Force Model
Porter's Five Forces is a tool for market analysis which seeks to clarify why different
sectors are capable of sustaining varying levels of profitability (Ferreira, Mueller and Papa,
2018). "This model was presented in 1980 in the book by Michael E. Porter,". He mentioned in
that book about the importance and usage of Porter five force in business term Porter defined
five unavoidable powers, with certain limitations, which provide and helps to guide by
generating information related with substitute product, industry rivalry, threat of new entrant,
bargaining power of supplier and buyer in company perspective as that helps to sustain in
marketplace for long time. This is an important element for analysing the powers within about an
industry that form competition. It also is beneficial to help them change their approach and
increase the potential benefit to suit their business climate. This analysis is based on the Tesco
Plc which is UK based retail sector organization and one of leading company of UK that offer
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retail products & services. This is well known brand of supermarket stores and it has major share
in the market. With the help of Porter’s Five Force Model, management of Tesco Plc ab;e to
evaluate the forces and make further strategies to grow and maximise their market share,
customer value, productivity or profitability as well. It is a model that is used by an organisation
in order to develop better framework by which higher economy of scale is developed in better
manner. In this working intensity is enlarged so that rate of productiveness and profitability is
getting advanced.
Threat of new entrants:
It has been identified that Tesco is facing low threat of new entrants, as in order to
operate make entry in retail industrial sector it is essential for new entrants to make heavy
investments and provide more competitive goods and services comparatively leading
organisations. With the help opportunity TESCO can advantage of this approach to serve
customers with more innovative and unique products and services through which they can
maintain their leading positioning.
According to this force is provides possibility about new competitor enters in market
which can surpass or having ability overtake the business revenue in efficient way (Köseoglu
et.al., 2019). For existing businesses within the sector, a strong and durable barrier to entry is
preferable because the business will be able to earn premium rates and obtain better terms. The
UK supermarket market is mainly dominated by a few rivals, including four big Tesco, Asda,
Sainsbury's and Safeway brands with such a market share of 70% and regional Somerfield,
Waitrose and Budgens chains with an additional 10%. According to Ritz.
Due to operational performance of Tesco Plc, one-stop purchasing and substantial
marketing-mix investment, the number of big chains has developed their power. This strong
force had such a great influence on the typical small shops, such as butchers, bakers, etc.
Therefore, it already has a high obstacle for new businesses who wish to penetrate the grocery
industry. For instance, because of massive fixed costs and highly advanced supply chains, it
becomes very difficult for firms to raise enough money (Deephouse, Gardberg and Newburry,
2019). That's also apparent in the enormous investments made by major chains, such as Tesco, in
innovative checkout technologies and stock management systems that affect existing and future
entrants. Other obstacles include economy of scale and competitiveness achieved by Tesco and
Asda through their vigorous organisational strategies in product growth, promotion strategy and
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better distribution (in the supply of goods or services with a greater perceived value relative to
competition).
Bargaining power of supplier:
It has been identified that bargaining power of suppliers is low in retail Industry sector as
suppliers wants to conduct their business operations with leading organisation like Tesco. This
enhances the possibility for Tesco to undertake advantage of negotiation strategy and conduct
business operations in cost effective manner.
It is depicts about supplier competency wher etehy bargaining when demand of
manufacturing product get increased and time duration of supply process commands more inputs
cost.(Lynch, 2018). For shortage of supply towards business and then greater the reliance of a
market on a supplier. As a result, the producer has more leverage and therefore can increase the
cost of input and press for other trade benefits. But at the other hand, a business can keep its
production costs lower and increase its profits because there are multiple suppliers or low
switching costs among competitive offerings.
This force illustrates the high power of distributors that can be impacted by large grocery
store chains and the threat of losing their company to the big supermarkets. This centralises the
top positions of supermarkets such as Tesco in negotiating discount rates from vendors who were
unable to match with smaller local chains. In exchange, UK-based distributors are also
challenged by the increasing capacity of large retailers to obtain cheaper deals for their goods
from abroad. In restricting the strategic independence of the company and affecting its margins,
the partnership with sellers may have similar consequences. For retail chains and manufacturers,
the forces of global competition have decreased profit margins. As the company must have
manage the working standards and it is based in the basis of its retailing competitors such as
Aldi, Lidl etc. by which they get differentiate their services with others as by making clear
comparison. It has huge impact over the business performance as with this profit margin of the
company get advanced and for this various strategies are implies systematically.
Bargaining power of buyers:
Bargaining power of buyers is high in retail industrial sector due to the presence of many
competitive organisations like Siansbury, Asda those who are offering same or similar form of
goods and services in affordable price change to customers. Thus, it is essential for Tesco to
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undertake advantage of more innovative strategy and technology in order to conduct business
operations to enhance their overall profitability.
One of the five powers is the capacity of customers to push rates lower or their level of
control. It is influenced according to how many buyers or clients a business has, how important
and client is, and how much it will cost a business to find new clients or markets for its
production. A smaller and larger base of customers means that each customer has more leverage
to bargain for lower rates and better offers. In order to maximise profitability, a business that has
many, smaller, independent clients would have an easier time charging higher rates.
Overall power of buyers is high but Tesco maintain good their good place in their mind
through loyalty program (Makadok, Burton and Barney, 2018). Porter theorised the more generic
or unchanging goods, the low cost of switching, and thus, so more power is provided to Porter
M. buyers (In 1980). The prominent loyalty card from Tesco-Clubcard remains the most
effective customer satisfaction strategy that dramatically improves the profitability and
profitability of the Tesco's business. Customizing service, maintaining low costs, great options
and continuous flow from in-store promotions in satisfying customer needs helps brands such as
Tesco to create and direct their customer base. A substantial shift in food retailing has occurred
in recent years due to a huge demand for customers doing the bulk of their grocery shopping,
which indicates a stronger need for retailers to offer non-food goods. It has also offered
supermarkets an appropriate marketing expansion into new banking, pharmaceutical, etc.
markets. Consumers seem to have become increasingly aware of issues concerning fair and
equitable trade and of the impact of foreign brands on producers perceptions and aspirations. The
processing of consumer goods such as tea, coffee and cocoa is environmentally friendly and
morally justifiable, and these items have become commonly accessible in the number of big
chains. There are a lot of customers of Tesco as within their stores and at online platform as well
through which it is required that adequate management is addressed in order to switch its
customers with its competitors. For this Tesco sold different products and services at cheaper
prices by which rate of productivity is enhanced.
Threats of substitute:
Threat of substitution is high in retail Industry sector due to the aggressive competition.
Thus, in order to overcome this threat it is essential for Tesco to undertake best pricing strategy
and provide high quality goods and services to customers.
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Substitute of specific products which can be assort to instead of effective brand of an
organization pose a threat (Mavi et.al., 2019). Companies producing goods or services which not
take other product replacement. It will have much more power to raise prices and lock in
favourable terms.
Common substitution is capable of reducing demand for a specific product, since there is
a possibility that customers will turn to alternatives. This is shown in the food sector in the
region of good or service-for-product or need-substitute and is again undermined by new
developments, including the introduction of national stores of retail outlets in the market. In this
situation, Tesco, Asda and Sainsbury's are seeking to buy established small-scale businesses in
local towns and city centres and open Metro and Express stores. As the company is well
established and having wider value and image within the competitive marketplace so that its ratio
of profit is enhanced over continuous period of instance. In this to get fight with its competitors
Tesco induce timely based strategies through which effective distribution of services as with the
usage of better distribution channel.
Rivalry firms:
Threat of rivalry is high in the segment of retail Industry as Tesco faces threat from
rivals like ASDA and Sainsbury as these organisations engages in the operations of attracting
large base of customers with attractive prices and techniques. In this it is essential for Tesco to
undertake advantage of diversifying their products and services and provide affordable price
range to customers with high quality.
The higher number of rivals, the lower the power of the company, together with the
number of equivalent goods and services they sell. Whether they are willing to deliver a better
deal or lower costs, manufacturers and customers check out a company's competitiveness.
Conversely, a business has more leverage to charge higher prices while competitive competition
is low and negotiate the rules of offers to gain higher revenue and profits. The scope and
consumer influence by the big players, with wider store size, expanded distributor intensity, and
the use of a variety of formats, which are now popular characteristics of the industry, have seen a
very substantial increase throughout the supermarket environment. The buying power of the
food-retailing industry, as described above, is placed in the hands of a relatively limited number
of retail buyers.
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As Tesco accumulates vast volumes of customer knowledge that could be used to interact
with the consumer, it operates in a developed, flat market whereby development is difficult (a
catalyst of diversifying towards non-food regions), and people are increasingly selective and
knowledgeable (Meyer and Xin, 2018). This high level of competition has fostered an increased
level of growth, leading in a circumstance in which, in order to sustain and develop market share,
UK supermarket chains had to be creative in order to run their business operations highly
competitive market. Throughout the development of a variety of trading formats, in reaction to
changes in customer behaviour, such creativity can be seen. Through focusing attention on
quality and price, while stressing the additional benefit elements of their service, the powerful
leading companies have responded. Tesco have powerful competitors and with this they have
manage their resources and working standards as per marketing analysis. In order to manage
intense competition it is required that business manages its performance and opened new stores
to enhance market level competition.
With the help of above analysis, it has been analysed that there are few major competitors
of Tesco Plc such as ASDA, Sainsbury’s etc. It helps in examine current position and factors
which affect the organization and management need to take necessary actions for it.
CONCLUSION
From the above discussion it has been observed that, with the help of Porter’s Five Forces
Model organizations able to make strategies to minimise buyers and suppliers power. In addition,
need to offer unique products & services to ensure that helps in reducing impact of substitute
products. Higher the market share or customer based helps in competing with their rivals and
maximise their profit margin. This model helps in evaluating current position of organization in
the market. On the other hand, by using Ansoff Model organization is able to make strategy that
in which market area they has to expand and which is more beneficial for them among all
options. AS per the COVID-19 situation, market penetration is good option for the Tesco.
RECOMMENDATION
In order to improve the overall efficiency and effectiveness in the operational function of
Tesco Plc, there are some recommendations which are mentioned below:
 Due to COVID-19 situation, several people suffer specially suppliers, employees,
organizations etc (Wan et.al., 2019). Initially management of the organization need to
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formulate strategies to recover their losses and back to the track with full safety from
virus by following WHO guidelines.
 Money owed to creditors should be charged in accordance with the terms and conditions
of payment and unilateral deduction shouldn't be made by Tesco Plc. Supplier-identified
data processing errors should be fixed promptly and Tesco have to provide transparency
and accountability in its interactions with suppliers. In the research results from the
inquiry, Tesco financial department and buyers need to be trained.
 Tesco has built a management performance called the Corporate Steering Wheel to
deliver its plan and maximise operational efficiency. Such performance methodologies
are essential tools to align everyone with a single company's objectives and enable
businesses to monitor and manage the implementation of the plan.
 Get people out of their comfort bubble or processing facilities and have them operate on
the very same project with individuals from other departments. Working together would
contribute to increased productivity since their experience and insight will be added to
each member. Prior to actually establishing such a team, however, please ensure that they
are evident on what role they should play who is responsible for what. No space for
misunderstanding should be left. In order for team members to match their experience
with goals set for them, task leader(s) must specifically indicate their expectations and
standards.
 Whether there are cross-functional players in the team, then the possession of at least 2
leaders who would drive individuals to deliver is vitally valuable. Those who must work
together and ensure that the teams also collaborate at the same time.
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REFERENCES
Books & Journals
Ansoff, H. I. and et.al., 2018. Implanting strategic management. Springer.
Deephouse, D., Gardberg, N. and Newburry, W. eds., 2019. Global aspects of reputation and
strategic management. Emerald Group Publishing.
Deephouse, D., Gardberg, N. and Newburry, W. eds., 2019. Global aspects of reputation and
strategic management. Emerald Group Publishing.
Ferreira, J., Mueller, J. and Papa, A., 2018. Strategic knowledge management: theory, practice
and future challenges. Journal of knowledge management.
Köseoglu, M. A. et.al., 2019. Intellectual structure of strategic management research in the
hospitality management field: A co-citation analysis. International Journal of Hospitality
Management, 78, pp.234-250.
Lynch, R., 2018. Strategic management. Pearson UK.
Makadok, R., Burton, R. and Barney, J., 2018. A practical guide for making theory contributions
in strategic management. Strategic Management Journal, 39(6), pp.1530-1545.
Mavi, R. K. et.al., 2019. Ranking factors influencing strategic management of university
business incubators with ANP. Management Decision.
Meyer, K. E. and Xin, K. R., 2018. Managing talent in emerging economy multinationals:
Integrating strategic management and human resource management. The International
Journal of Human Resource Management, 29(11), pp.1827-1855.
Schilling, M. A. and Shankar, R., 2019. Strategic management of technological innovation.
McGraw-Hill Education.
Sullivan, K., Thomas, S. and Rosano, M., 2018. Using industrial ecology and strategic
management concepts to pursue the Sustainable Development Goals. Journal of Cleaner
Production, 174, pp.237-246.
Wan, W. M. K. F. B., et.al., 2019. Strategic management in fatwa-making process. Academy of
Strategic Management Journal, 18(4), pp.1-6.
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