Strategic Management Report: Tesco's Competitive Advantage Analysis

This report provides a strategic management analysis of Tesco, a major British multinational retailer. It examines Tesco's position in the market, utilizing Porter's five forces and generic model to assess its competitive landscape. The report delves into the overview of the company, the application of Porter's five forces to evaluate the threats of substitute products, bargaining power of suppliers and customers, rivalry among existing firms, and the threat of new entrants. Furthermore, it applies Porter's generic model to identify Tesco's competitive strategy. The analysis highlights the challenges and opportunities faced by Tesco in the retail sector, offering recommendations to enhance its competitive advantage and navigate market dynamics. The report emphasizes the importance of strategic management in the retail industry and the impact of external factors on Tesco's performance, including market trends and customer behavior.

STRATEGIC
MANAGEMENT

EXECUTIVE SUMMARY
In this report various topics are going to be discussed that are required for strategic
management. It is very important for the organisations to implement effective tools that are
required to perform organisational activities effectively. There are two different types of
strategies that are going to be used in this report for the purpose of getting competitive
advantage. Both the strategies are Porter's five force and generic model. Recommendations to the
company is going to be provided that may help attain competitive advantage in the market.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAINBODY....................................................................................................................................1
Overview of the company...........................................................................................................1
Porter's five forces.......................................................................................................................2
Porter's generic model.................................................................................................................5
CONCLUSION................................................................................................................................8
RECOMMENDATIONS.................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Strategic management refers to the process of planning, analysing, assessing and
monitoring all the organisational activities so that all the organisational goals can be acquired
and effective strategies can be formulated to get huge success in market. Emerging market trends
and new technology affect the perception and demands of customers and it is very important for
all the organisation to keep appropriate information of such factors (Doz, 2017). Leaders and
managers of the company may get the information of organisation's actual position and image in
the market with the help of strategic management. It help to analyse the effectiveness of the
decisions that are going to be implemented in upcoming period. Organisation chosen for this
report is Tesco which is executing its business activities in UK. The whole project is based on
the strategic analysis of Tesco which is going to be completed with the help of Porter's five
forces and generic model.
MAINBODY
Overview of the company
Tesco is a British multinational retailer company who deals in grocery and general
merchandise retail items. Its headquarter is in Welwyn Garden city, Hertfordshire, England,
United Kingdom. According to its gross revenues it is the world's third largest retailer. It is the
ninth largest retailer in world plumbed by its revenues. It has various stores across Europe and
Asia. Tesco is the market leader in UK, Hungry, Ireland and Thailand with the market share of
28.4%. it was founded by Jack Cohen in year 1919 as a unit of sales booth (Eden and
Ackermann, 2013). The name Tesco was first appeared in year 1924 after purchasing the
shipment business of tea by its owner. The business of the company have started to attain success
since year 1939. The organisation have started to operate business operations in 11 different
countries sine year 1990. According to the study in 2018 the organisation have started to acquire
growth with higher percentage. Tesco has been listed on London Stock Exchange and also a
constitutional of FTSE 100 Index. The business enterprise had market capitalisation of 18.1
Billion Pound in year 2015. Tesco is the 28th largest company with a primal listing on London
Stock Exchange. The company is also investing its funds in a small film studio for the purpose of
producing exclusive DVD's of Tesco. Currently the organisation is operating business with
440000 colleagues who serves million of customers all around the world.
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Various issues and challenges have also been faced by the company. According to a
market research Tesco was pulling out of the market of US in which fresh and easy stores get
highly affected. It has resulted in 1.2 Billion pound loss for the organisation. Tesco has two
options sell the business or come back with a new idea. Second idea have been chosen by the
company and in September 2013 in which tablet computers were launched for the first time by
Tesco. Currently business is executing it business with 3433 shops in the world (Evans,
Stonehouse and Campbell, 2012).
Strategic management for Tesco is very important because a small mistake or a wrong
decisions may affect the profitability of the organisation. It may help the managers to evaluate
the result of their decisions and strategies in advance so that their appropriateness can be
measured. Proper strategies are used by the managers of Tesco so that business can be operated
effectively. These strategies are Porter's five force and generic model.
Porter's five forces
Porter's Five Force Model: It was introduces and developed by Michael Porter to
analyse attractiveness of the sector that may help to determine profitability. It is used by
businesses as a strategic management tool that may guide the organisations to evaluate the
external market so that competitive advantage can be achieved. It help to determine the
competition which is available in the market. It guides the companies to identify those factors
that are related to industry and impacting businesses whether positively or negatively (Ginter,
Duncan and Swayne, 2018). Organisations may implement core competencies at their workplace
in order to enhance their profitability. All these forces may help the managers of Tesco to
analyse all the forces that may affect the business and its operations. Direction for the
formulation of effective strategies can be acquired by this model in which marketers, leaders and
managers of the organisation may decide to overcome market issues. All the forces are described
below:
Threat of substitute products or services: Substitute products are used by organisations
to fulfil same needs of customers so that large market share can be captured. If an organisation is
selling a product on higher price and another company is selling the same product on less price
than customers get attracted toward that product as they always try to buy products on less price.
Sometimes this may also affect the brand loyal customers who have been retained by the
company from a long period. This force can also affect the profitability of Tesco as there are
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various substitutes available in the market who may reduce sales by attracting customers. While
managers of Tesco are willing to increase price of its products than it should make sure that the
price is pocket friendly for the customers or not. If a similar product is meeting the needs and
demands of customers than it make the industry suffer as the profitability will definitely going to
be affected (Grunig, 2013). Tesco is dealing in large rage of items like home appliances and
electrical, toys, clothing and jewellery, baby and toddler, garden and health and beauty care. This
range is extremely comprehensive and same products are also provided on less price that may
affect the future sales of Tesco and also going to affect profitability in future. All of them can be
dealt with the help of effective strategies like enhancing switching cost for the consumers, to be
service oriented rather than to be focused on product, identify the main need of the customers
etc.
Source: Porter's Five Force Model, 2016
Bargaining power of supplier: It can be defined as the market of input. Suppliers
provide raw material and other components that are required to manufacture or produce the
products. If there are few suppliers in the market than they may sell the goods on high price and
the companies may not have any other choice to buy goods form others (Hill, Jones and
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Illustration 1: Porter's Five Force Model, 2016

Schilling, 2014). On the other side if there are end number of suppliers than it may help the
business entity to buy goods on less price. This may help to increase profits and save monetary
resources so that operational activities can be performed effectively. Bargaining power of Tesco
with its supplier is low as organisation is buying products from limited suppliers who assure the
quality of goods hence the organisation is not able to bargain with them as there are limited
suppliers. It is very important for the companies to have good relations with their suppliers so
that it may benefits them in future. Tesco may deal with such type of forces by building effective
supply chain with different suppliers, try experiments by selling good with multiple materials
etc.
Rivalry among existing firms: Rivalry in retail and food and beverage sector is
extremely high and organisations have to face competitions with other companies who are
operating business under the same sector. It is very important for all the companies to have
information of their challenger so that appropriate policies can be implemented at workplace to
ignore competition. Having information all the available rivals in the industry may help to use
effective methods to market products and services to grab attention of the customers. A business
enterprise should have knowledge of competitor's marketing strategies so that more effective
strategies can be used to deal with all the challenges that have been occurred due to high
competition. Tesco is having a tough competition with companies like Sainsbury's, ASDA,
ALDI and other who are operating their business in the same industry (Porter's Five Force
Model, 2016). High competition may result in increased cost of marketing, promotions and
advertising activities as Tesco have to use more appropriate strategies that may help to acquire
more profits as compare to other companies. It is also very important for Tesco to retain its
customers by providing them good quality products this will help to enhance profitability. Tesco
is currently operating business with higher market share but organisation is also having threat of
a merger of Sainsbury's and ASDA because after this merger 30% of share is going to be acquire
by them. This merger can also affect profitability of whole organisation.
Bargaining power of customers: It refers to the power of customers that may influence
the company to change the prices as customers are not satisfied with the price that industry is
charging for a particular product. The bargaining power of them can be controlled by whole
sector if it is having idea of few factors like buyer density to firm concentration ratio, switching
cost of customers, appropriate information about the substitute products and price sensitivity of
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buyers. Tesco is dealing with high bargaining power of customers as there are various retail
stores available and they feel like king of the market. If there are end number of same companies
are available in the market than buyers will definitely bargain as they have different options and
they will choose that company who is providing products on lower prices (Hill, 2017).
Threat of new entrants: It refers to the launching of new companies in the same
industry. New and innovative ideas are continuously launching in retail industry in which threat
to the existing company has been increased. As old companies are using traditional techniques in
their companies and the new companies are launching with new techniques because they have
more creative ideas in the industry. Tesco is also dealing with the same force as it has the threat
of new entries in the same sector who may target the acquired market of Tesco. Tesco may tackle
these threats with the help of using innovative techniques in supply chain and use new market
trends retain all its existing and attract prospect customers. It can also be resolved by building
effective economies of scale to lower the fixed cost per unit of production. Tesco may invest
more in the activities of research and development so that market information can be gathered
and products can be modified according to perception of customers (Hitt, Ireland and Hoskisson,
2012).
All the above mentioned forces are affecting the business on retail, food and beverage
and supermarket sector because of increasing competition in the market. For Tesco it is essential
to have all the information about the industry as this may help to formulate effective strategies to
deal with challenges. Customers and supplier's bargaining power may impact upon the marketing
and other promotional activities of the company. Organisations are trying to grab attention of
customers and acquire higher market share with the help of effective policies.
Porter's generic model
Porter's Generic Model: This model is used to identify the position of the business in the
industry. It also directs the companies to analyse that profitability of one company is higher or
lower than industry average. Competitive advantage and long term sustainability can also be
measured with the help of this strategy. Managers of Tesco may also use this model to get the
idea of organisational performance and market image as there are four different type of strategies
in this theory (Porter's Generic Model, 2018). All of them may help to identify that organisations
is operating its operations effectively or not. Management of Tesco is using Porter's Generic
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model to evaluate position and performance of the business and its competitive advantage in its
sector. All of them are explained below:
Cost leadership: Porter has introduced this strategy to gain competitive advantage and
long term sustainability in the market. It is possible with the help of proper market research. It
guides the companies to be a low cost seller or producer in the industry so that higher market
share can be acquired. Tesco needs to be more customer oriented so that it may offer products to
the customers according to their budget (Keupp, Palmié and Gassmann, 2012). If the
organisation is offering products on lower prices than large number of individuals get attracted
toward the company and this will result in increased sales of the organisation. Cost can be
reduced by effectively managing all the monetary resources and the process of selling. Cost
leadership can be acquired with the help of mass production in which large number of products
are stored and all of them are sold on lower prices. This step of Tesco may help to increase its
contribution in the industry's profit and meet the industry average.
Source: Porter's Generic Model, 2018
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Illustration 2: Porter's Generic Model, 2018

Differentiation: In this strategy the organisations launch a new product in the market
with new and innovative products or some unique features so that attention of the customers can
be grabbed to acquire higher market share. This may help to be more competitive in the market
and attractive in the market (Meyer, Neck and Meeks, 2017). It is very important for the
organisations to provide some new and innovative products or services to the customers so that
they may be retained for future perspective. Tesco is a leading retailer and supermarket of UK
and it is providing good quality products or services to its customers which is beneficial for the
company as it may help to retain them and also pull new and prospect consumers. Differentiation
element is very beneficial for the company because it can result positively for the company as
most of the individuals look for this factor in products and services and than make buying
decision.
Cost focus: In this step organisations launch a product with low cost in a small market
segment so that reaction of the customers can be recorded and this will help to make future
decisions. Tesco can also use this strategy to be more competitive in the industry because it may
get the idea of customer's reaction to its products by launching them in a small market segment.
This strategy is mainly focused with cost in which existing products are provided to a new and
small market on low cost. It is very beneficial for Tesco because this may result in increased
market share and number of customers. Mainly the niche market is targeted in this type of
strategy by the company as it is the best way to record feedback of the customers on the products
or services. While thinking for expansion it is the best strategy that can be implemented by the
organisation as response of a small market segment may help to take appropriate decisions about
the marketing and launching in new market activities (Ward, 2012).
Differentiation focus: In this strategy companies mainly focus on addition of un9ique
features in their products for the purpose of expansion of business. This strategy is very
beneficial for the companies because unique things always help to attract customers. Tesco may
also use this strategy by launching an innovative or unique product or service in niche market to
analyse that it is able to achieve competitive advantage in the market or not. It is essential for
Tesco to formulate such strategies to that may help to be more competitive in the market. Brand
loyal among customers can be spread with the help of differentiation focus technique because a
unique product which is made according to perception of customers can help to increase sales
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and also retain consumers for a long period in future. Strength and competencies of the company
may help to choose the right strategy that may help to attain organisational goals and objectives.
All the above mentioned strategies can be used by the management of Tesco because it is
very important for the company to expand it business in different geographical locations so that
different type of customers can be attracted. If Tesco is willing to be more competitive in the
industry than it is essential for the company to have idea of market conditions and the trends so
that a new product on a new location can be launched to acquire large market share. From all the
strategies differentiation focus strategies should be adopted while expanding business as Tesco is
having good market image and this may help to attract customers (Wheelen and et.al., 2017).
Positive marketing image and unique features of services and products of the organisation can
help to expand the business more effectively.
CONCLUSION
From the above project report it has been concluded that strategic management may help
an organisation to determine the result of the actions that are going to be implemented in the
future. Companies may use two different tools for strategic management these are Porter's five
force model and generic strategy. Both of them may help to analyse the forces and factors that
are affecting whole industry. This will also affect the business on the enterprises who are
operating business under that particular sector. There are various external factors that may result
negatively for the businesses. These factors are competitors, perception of customers and their
needs.
RECOMMENDATIONS
It is recommended to the managers of Tesco to implement effective strategies so that the
business can be expanded all around the world. The organisation may use Porter's five force and
generic strategies to be more competitive advantage. As there are various competitors in the
market than it is essential for the company to use effective tools and techniques to get less
affected due to their business activities.
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REFERENCES
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(pp. 229-248). Routledge.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management.
Sage.
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tourism. Taylor & Francis.
Ginter, P. M., Duncan, W. J. and Swayne, L. E., 2018. The strategic management of health care
organizations. John Wiley & Sons.
Grunig, J. E., 2013. Furnishing the Edifice: Ongoing Research on Public Relations as a Strategic
Management Function. In Public Relations and Communication Management (pp. 41-
66). Routledge.
Hill, C. W., Jones, G. R. and Schilling, M. A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2012. Strategic management cases:
competitiveness and globalization. Cengage Learning.
Keupp, M. M., Palmié, M. and Gassmann, O., 2012. The strategic management of innovation: A
systematic review and paths for future research. International Journal of Management
Reviews. 14(4). pp.367-390.
Meyer, G. D., Neck, H. M. and Meeks, M. D., 2017. The entrepreneurship‐strategic management
interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.
Ward, K., 2012. Strategic management accounting. Routledge.
Wheelen, T. L. and et.al., 2017. Strategic management and business policy. Pearson.
Online
Porter's Five Force Model. 2016. [Online]. Available through:
<https://research-methodology.net/tesco-porters-five-forces-analysis/>
Porter's Generic Model. 2018. [Online]. Available through:
<https://www.toolshero.com/strategy/porters-generic-strategies/>
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