Strategic Management Report: Tesco Analysis, VRIO, and Expansion

This report provides a strategic analysis of Tesco, a multinational grocery and merchandise retailer, focusing on its business management and potential improvements. It includes a Porter’s Five Forces analysis, evaluating the bargaining power of buyers and suppliers, the threat of new entrants and substitute products, and the rivalry among existing competitors. A VRIO analysis assesses Tesco's valuable, rare, inimitable, and organization-specific resources, highlighting strengths like finances and distribution networks. The report also examines Tesco's core and distinctive competencies, such as customer focus and supply chain management, and discusses the company's organizational culture, including power and role cultures. Furthermore, it suggests feasible internationalization strategies, like foreign direct investment, for expanding into new foreign markets and proposes business strategies, such as low cost or differentiation, to gain a competitive advantage. The report concludes by emphasizing the importance of strategic adaptation to maintain market position and competitive edge.

STRATEGIC MANAGEMENT

EXECUTIVE SUMMARY
The purpose of this report was to analyze the management of the business with implementation
in right strategic manner. It is important that company makes some changes in their procedures
to keep up with the trends of market and new competitors as there are areas in which they are
getting negative reviews which is affecting their performance. But with the right evaluation they
can surely keep them behind and retain their position.

Contents
INTRODUCTION...........................................................................................................................4
Porter’s five force analysis of Tesco...........................................................................................4
VRIO Analysis.............................................................................................................................5
Core competencies and distinctive competencies........................................................................6
Organizational culture of company.............................................................................................7
Two feasible internationalization strategies which can be adopted if the company wants to
expand their wings to a new foreign market................................................................................8
The Business strategy to be adopted for the new product – Low cost/ Differentiation/ Hybrid
in order to gain a competitive advantage.....................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Strategic management is the ongoing planning, monitoring, analysis and assessment of all
necessities an organization needs to meet its goals and objectives. Changes in business
environments will require organizations to constantly assess their strategies for success. Tesco is
a British multinational groceries and general merchandise retailer headquartered in Welwyn
Garden City, England. It is the third-largest retailer in the world measured by gross revenues and
the ninth-largest in the world measured by revenues. This report contains issues such as Porter’s
five force analysis of Tesco, VRIO Analysis and Core competencies and distinctive
competencies. Organizational culture of company. Two feasible internationalization strategies
which can be adopted if the company wants to expand their wings to a new foreign market. The
Business strategy to be adopted for the new product – Low cost/ Differentiation/ Hybrid in order
to gain a competitive advantage (Teece, 2019).
Porter’s five force analysis of Tesco
Bargaining power of buyers-
Tesco has to deal with many people in the market be it in retail channel or online channel.
Still the bargaining power of buyers in UK is not on a high level and the reason behind that is
known to be organization of business. Due to high level of competition in market also this factor
comes into force but if they are able to remove their competition then they can make this sector
attractive for them. bargaining power is increasing due to high level of competition because they
want more reasonable goods for which company has to reduce their profit margin (Sullivan,
Thomas and Rosano, 2018).
Bargaining power of suppliers-
Company maintains operations on a large scale which is why they have to deal with
around 2500 suppliers and many more if international markets are considered. Due to dealing
with them and their availability on a high level, this leaves them with no choice of having more
power over company. Still they keep their dealings more convincing so that they can maintain
their margin. Many suppliers of company calls them mafia because they squeeze them in order to
cut price.
Threat of new entrants-

Company does not worry about this factor because they operate their business on a large
scale and they have the insight for that no company can easily enter into their market and reach
on their scale. For that they would need to invest huge amount of capital. They are known for
their own economies of scale and their own competencies. They have set up their own network
of distribution and the experience they have gained will not be there with new entrants in market
(Siegel and Leih, 2018).
Threat of substitute products-
Tesco offers range of products to their customers. This include substitute for many of the
products. For instance they provide both bread and butter. With the help of this statement it can
be clearly understood that this threat is not relevant for them.
Rivalry among Tesco's existing competitors-
Company has big scale competitors who operates on the same level they does. In order to
beat each other they use different tactics such as invest heavily in advertising . Even though they
are considered to be the leaders of company they have to face high amount of competition. This
is why they are working on solutions and exploring other options through which they can retain
their position.
VRIO Analysis
Valuable
Some of the valuable aspects of Tesco are their finances. This is because they never miss out on
any external opportunities and with the help of that the reduce their threats. Their employees are
believed to be their valuable aspect. As they are highly trained, loyal and part of their business
for a long period of time. With the help of this they have been able to generate more output.
There are some other things in this aspect such as their network of distribution. With this there
are some areas which are not known to be valuable such as their R&D sector and structure of
cost (Schilling and Shankar, 2019).
Rare-

Resources that are concerned with finances are known to be rare. As not many companies will be
able to reach on this position. Employees hired and retained by their business are highly rare
because it is not easy to achieve this position without them. Patents and network of distribution
of company are their rare resources. If they need to add their value then they need to offer more
more range in food products, this way they can gain advantage over others.
Imitable
It is not easy to imitate their financial aspects as it takes time, right decisions and efforts to
achieve that. No new entrants can take over this that easily. Skills of employees and their
experience cannot be imitated as it takes years of practice to achieve that. There is a slight risk
though if competitors offer them with better packages then they can get them. Products offered
by them can be easily copied off as they are not differentiated or unique. If competitors want to
get the same level of distribution network then they need to invest highly to set it up (Leskaj,
2017).
Organization
They organize their financial resources in such a way through which they can gain value. As they
explore and invest in viable options which makes them successful and more profitable. Other
than this their chain of distribution is identified to be successful as because of that they have
been able to keep up with the requirement of customers. This is why these aspects are organized
so that they can increase and sustain their advantages. It is the patents of company that are not
organized which states that company is not using it up to its limit. If they use it they can increase
competitive advantage in market (Hitt and Duane Ireland, 2017).
Core competencies and distinctive competencies
Core competencies help business to use their skill and expertise in the area so that they
can gain advantage over others in the market. in order to do this company needs to make sure
that their customers are getting the benefit, products offered by them are difficult for others to
imitate and to reduce the chances of core competencies getting transferred to other business.
Tesco is known for their strategy of focusing on customers. They have initiated some schemes
for that which is club card reward system so that they can collect, assess and understand the
mindset of customers. This form of information is then used so that they can adapt their services

to local regions and markets there. This way they will be able to add value to their customers.
With the help of their club card program they were able to get a capability which was distinctive
so that they can understand the preferences of customers. This helped management to understand
the behavior of customers and offer them things as per that so that they can stay ahead from their
competition. Tesco has also designed and implemented systems of supply that are linked with
existing shops, even though online business was initiated by their competitors they made it better
by offering a better interface. This has helped them to increase their performance in different
markets. Apart from that due to their strong image in market it was easy for them to serve more
customers due to which they were able to get more results in terms of sales and profits. Tesco
has established them as a successful brand in the market which is why they keep focusing on
different segments of market and enables them to establish a strong leadership in the industry of
food retail sector. They have been recognized as best in the market because they have been able
to provide customize and efficient services. This states that with the achievement of core
competencies they have been able to manage their relationship with customers. There is only a
slight difference between both of these competencies and that is core is concerned with
enhancing the capabilities and activities that generates value. On the other hand distinctive
competence is concerned with visibility of customers, superiority in other firms, comparison in
competencies and must be difficult to imitate (Durand, Grant and Madsen, 2017).
Organizational culture of company
Tesco believes in looking after their colleagues and maintain trust and respect as they
believe that it is necessary action for success. Where colleagues of company feel that they are
getting the deserved recognition and rewards as per that and where they are in support of their
development which is why they try their hardest in order to keep their customers convinced.
Tesco works as per the vision and belief they have set to point which states that company. This
states that they do not have to use their dialects in order to deliver their opinion which can be
public or relevant. They have set their vision in a comprehensive manner so that they can easily
communicate the aspects of business with others. This will help them to assess their future plans
so that they can convince the stakeholders of business to understand their strategy and retain
them for a long period of time. Other than this they have some core values in their business such
as goals that needs to be shared with each other, standards and principles, being accountable,
work with a more diversified approach and collaborate among leaders so that they can work with

integrity. They modify the behavior of employees as per the core values so that they can
communicate in the right manner.
There are different types of organizational culture
Power Culture-
This culture allows to have power with only few of members and only they can take
decisions. The position they have earned in the company is believed to be most important. They
distribute their work to others and they have to follow their orders (Trigeorgis and Reuer, 2017).
Task Culture-
This culture is followed just for the purpose of solving an issue or problem. For this
company forms up special teams and fit members as per their expertise so that they can complete
it before deadline.
Person Culture-
Some employees in company believes that they are more important than company an
company which follows this form of culture is known to be person culture. Tesco does not
appreciate this form of culture as they believe that this is less productive and if this comes into
force everyone will suffer.
Role Culture-
In this form of culture company allocates them role and responsibilities as per their area
of expertise, their interest and things which only they can do best. This is determined ti be an
effective culture as because of these decisions there are less errors in work and everyone is clear
about their role and responsibilities (Bryson and George, 2020).
Tesco follows power culture as they believe not everyone is eligible to take decisions on a higher
level and since they operate their business on that level it creates a risky aspect for them.
Two feasible internationalization strategies which can be adopted if the company wants to
expand their wings to a new foreign market.
Foreign direct investments-

In order to expand their market in different countries with this approach they will have to
acquire a company there. There is another way to do this and that is to directly making an
investment and buying out the whole company or partial business that has made their
establishments abroad. Cost of working with this approach is high only companies such as Tesco
who have sufficient amount of capital can work with this method and enter in different markets.
Although by buying out that business they reduce their risk of entering into that market because
with their business they will get their customers too. By investing in a established business they
will be making an safe investment to enter into different markets. It is upon the attributes and
behavior of management which will determine the rate of success of that venture. There is
another form of direct investment which is available and require a lot of capital and that is to
open a new branch, consortium or subsidiaries which can be in the form of green investment
also. In order to form up a new business they will have to spend more in those markets so that all
the necessary commercial activities can be carried out. Although company has to keep in mind
that their cost will be more than investing in a existing business (Bindra, Parameswar and Dhir,
2019).
Franchising-
In this model companies such as Tesco have to be an affiliate that is franchisee, in return
they have to pay a fee to the franchisor. Franchisor has the authority to sell their products and
services abroad with this option or the system of business. Companies that choose this option
have to make sure that in order to be successful they will have to work with same approaches,
quality of product, customer service and maintain the standards in different department as per
their guidelines. Those who opt for this strategy have to look out for all the alternatives as many
times franchisee is not satisfied because they do not have any authority to take decisions or make
any changes in their procedures which ultimately affects their mindset. Also the royalty charged
on using their name and products is sometimes high. Still many people and companies consider
this option viable because of goodwill of the brand and their image in the market which increases
their rate of success (Barbosa, Castañeda-Ayarza and Ferreira, 2020).
The Business strategy to be adopted for the new product – Low cost/ Differentiation/ Hybrid in
order to gain a competitive advantage.
Low cost strategy-

In this form of strategy companies such as Tesco will have to offer lowest cost among all
the market players. Companies who deals and offers products that are identical have to be sold at
same price. This gives them advantages as well as options through which they are able to
increase their share. They have the option to invest more in marketing and pay for positions that
are better through which they can beat their competition in retail sector. They can reduce their
price through which they can earn by taking the margin and profit of competitors. They can
invest more in the area of research and development through which they can improve their
performance. This states that companies who offer high cost to their competitors have to stay
with sole discretion in market. the reason behind that is if low cost retailer reduces their price
then in order to cover up high cost retailers will have to sell their products at loss which will
keep their place safe but they will incur huge losses. Company needs to analyze the high cost
competition and the percentage on which market is stable and dependable on price. Chances of
increasing their profits depend on how continuously they can reduce them. For that they have to
standardize their goods as this will help them to keep them cost effective.
Differentiation-
This strategy focus on keeping the value of their products higher to their customers, it
must be driven to innovate them continually on the basis of their needs and wants. Main focus is
on building the image and position of company in market. for instance there are many companies
such as Apple and Toyota who sell their products at high prices but they still keep on dominating
their market. in order to do that companies have to commit to their offerings and customers as
this way they are able to gain competitive advantage. Apart from that if they want to keep their
position retain in the market they need to work with updated trends and perception of people.
Hybrid-
This strategy works with the combination of both strategies because many of the
companies who work with this approach are able to increase their performance in comparison
with those who are only using one approach. The motive of this strategy is to work with both so
that they can stay ahead of their competition. This way customer of company is at benefit. This
strategy allows them to sell high quality products at low cost. The reason behind that is
companies wants to gain competitive edge with this approach. As behavior of consumers are

different because they need to satisfy their expectations which are high by paying less with
features having differentiated attributes. This strategy is used by companies who play on an
international level. With this companies such as Tesco can offer differentiated attributes in order
to stay ahead of their competition by focusing on economies of scale, loyalty of customers
(Altukhova and Semko, 2018).
CONCLUSION
From the above studies it has been concluded that companies such as Tesco have to gain
insight about their relationship with suppliers and buyers and rivalry with their competitors in
market so that they can develop their approaches on the basis of that. Other than that they need to
keep up with other analysis of market which tells the resources that they possess are important
and the resources that can be easily imitated. This is necessary so that they can make the required
change in order to keep the competition behind from them. This report has also studied the core
and distinctive competencies of Tesco with the organizational culture which highlights that they
treat their customer as king and put their needs first so that they can retain them for a long period
of time. Other than that it is beneficial for Tesco if they use hybrid strategy and implement it in a
better way as they can achieve better results with the help of that.

REFERENCES
Books and Journals
Altukhova, L.A. and Semko, I.A., 2018. Strategic management of competitive agribusiness
organizations model. International Journal of Advanced Studies, 8(2), pp.9-21.
Barbosa, M., Castañeda-Ayarza, J.A. and Ferreira, D.H.L., 2020. Sustainable strategic
management (GES): Sustainability in small business. Journal of Cleaner Production, 258,
p.120880.
Bindra, S., Parameswar, N. and Dhir, S., 2019. Strategic management: The evolution of the field.
Strategic Change, 28(6), pp.469-478.
Bryson, J. and George, B., 2020. Strategic management in public administration. In Oxford
Research Encyclopedia of Politics.
Durand, R., Grant, R.M. and Madsen, T.L., 2017. The expanding domain of strategic
management research and the quest for integration. Strategic Management Journal, 38(1),
pp.4-16.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship, pp.45-63.
Leskaj, E., 2017. The challenges faced by the strategic management of public organizations.
Revista» Administratie si Management Public «(RAMP), (29), pp.151-161.