Tesco's Strategic Management: Ansoff, McKinsey, SAF Framework Analysis

This report provides a comprehensive strategic analysis of Tesco, a leading multinational grocery enterprise. It examines Tesco's current strategies, including market-oriented approaches and expansion into new markets, utilizing the Ansoff Matrix to assess market penetration, development, and product diversification. The report evaluates these strategies using the SAF framework (Suitability, Acceptability, and Feasibility), recommending market development and cost leadership as effective options. Furthermore, the report discusses strategic evaluation through acquisition and organic growth, evaluating their suitability, acceptability, and feasibility. The proposed strategy involves the GE matrix to maintain customer loyalty. The report concludes with recommendations for Tesco to leverage its competencies for future growth, emphasizing market development and leadership through strategic frameworks.

Running Head: Matrix 0
Tesco
Strategic management
6/24/2019

Matrix 1
Introduction
Tesco was established in 1919, which is the largest multinational grocery enterprise situated
in Chesunt, United Kingdom. The organization ranked third largest amongst the merchandise
retailer and global grocer depending upon its revenue and profitability. Their main purpose is
to serve Britain’s shopping every day, enhance profitability levels, sales, marketing efforts to
attain the short-term goal and long-term organizational objective. The mission of Tesco is to
be the champion for clients and assisting them to enjoy an easier of living and better quality
of life. They have expanded its operation in respect of products or services delivered to the
customer. Tesco is currently operating in 14 nations with over 487000 employees and 4987
stores, which involves retailing products or services such as clothing, petrol, software,
offering financial services, telecom, music downloads, books, furniture, electronic, and DVD
rentals (Wood, Coe and Wrigley, 2016). In the following report, an effort has been made to
discuss the current strategies and proposed strategies with the utilization of Ansoff’s matrix,
McKinsey Matrix, and SAF framework.
Current strategies
The organization maintains a strategy to improve customer recognition by market-orientation
strategy by offering high-quality goods at a reasonable price according to the preferences and
desires of the clients (Nguyen et al., 2017). In the prospective five years, the strategic options
for Tesco can be well enlightened by the strategic framework as stated below-
Ansoff Matrix

Matrix 2
(Schawel and Billing, 2018)
The Ansoff matrix describes the organization can plan to depend upon the four different
product-market combinations (Sadler and Evans, 2016). Tesco follows a strategy to market
penetration being a dominant brand in the U.K is not realistic and neither diversifying to new
products with new markets is a risky venture.
 Market development: It is a strategy, which is used by Tesco diversifying to new
markets such as China, Japan, and the U.S. It is stated that entry to new markets will
act as a key success driver in Tesco’s profits. In addition, Tesco has diversified to
Asian markets, which will provide a competitive advantage to the organization as
Asian markets are indicating an increase in expending of the consumer in a
prospective market. However, for new market expansion, they should start new and
innovative stores in Asian nations such as Japan, China, Singapore, India, and so on
(Chiang, Chen and Ho, 2016).
Tesco operates in 15 nations and mainly concentrates in U.K. markets cooperating
78% of the total market share. It is quite evident that entering new markets is an
approach of internationalization by the joint venture and the strategic alliance, which
would empower them to capture the cash flows and global resources on a greater
scale. This strategy would improve the international market share of the organization
and its brand value across borders.
 Product development: It is a strategy of Ansoff utilized by Tesco to offer new
products in the prevailing market. It is quite evident that it indicated risks in initiating
new product but if it is introduced with proper care and research, it can bring greater
returns. The retailing business is recently going through overcapacity and
modernization, which is the significant driver of success and development.
Diversifying Tesco product mix can be a cost-effective strategy for the organization.
However, executing this strategic option needs to concentrate on investment,
technologies, strong research & development, and professional team. The success
factor is highly depending upon the attractive brand recognition in the prevailing
markets (Gurcaylilar-Yenidogan and Aksoy, 2018).

Matrix 3
Critical evaluation of the organization strategy
A company needs to assess a list of strategic options with appropriate standards to choose to
be evaluated for the efficient and effective productivity of the company. For evaluation of the
above-depicted strategic options, suitability, feasibility, and acceptability are to be judged for
each option (Brannen, Piekkari and Tietze, 2017).
SAF framework
In respect of the above strategic options, market development and cost leadership are working
to deal with the situation. They need to come up with innovative product and market
development, which is an effective option for future development.
 Suitability: Market development is appropriate because it is taking benefit of external
opportunities, which will reduce the risk of extensive competition and low sales. It is
significant to note that this strategy will evaluate the organization’s environment and
the strategic implication of the company in an economy. It is utilized to incorporate
the strengths and weakness of the organization for effective execution of the
approaches. It is stated that operations of Tesco are constantly modernized to deal
with the dynamics of the environment. The environment and the market-oriented
operations of Tesco offer a platform to execute the tactics of market development and
cost leadership largely. This approach can also be built on the internal strengths of the
organization of effective operation, price efficiency, and supply chain management
(Nawaz and Koc, 2018).
 Acceptability: It is stated that with high brand value in the U.K. markets, Tesco
would not carry a long time to execute the approaches effectively. The organization’s
financials are professed to grow promptly with the execution of a suitable strategic
option. The cost-benefit depicts benefit in a case where the organization has an
updated knowledge operating at its stores and the market-oriented approach develops
customer reliability. Cost leadership and Market development would be less risky and
less costly to be imposed (Zeng and Zio, 2017).
 Feasibility: This aspect is associated with the competencies and capabilities of Tesco
depending on the internal analysis as it has been observed that Tesco has potential
abilities that will assist the organization. It is stated that the company effectively
utilized hybrid business strategy and assess depending upon its financial feasibility to
execute the strategy effectively. It is stated that other factors such as internal abilities
and competencies maintain the strategic option. Tesco with a robust financial

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background and huge capital investments in technology can concentrate on market
development, strategic options, and cost leadership to demonstrate Tesco at a
dominant position internationally. However, to execute such approaches, the
organization needs to concentrate on its core abilities by hiring more staff that is
competent.
The operational efficiencies and the organizations’ environment are indicating the market
development strategy to be suitable to generate a strategic fit for the organization. The market
development strategy is adopted as the organization deals with attractive products and
services. It is stated that the market development strategy for the organization covers a varied
assortment of products and services will deliver an increase to the client purchase rate.
Therefore, the market profitability of the organization is contributed to enhancing the success
rate of Tesco to the top from the third-largest ranking in profitability towards their aim of
generating client value (Moulton and Sandfort, 2017).
Strategic evaluation
It is stated that dual strategies are recommended to Tesco as per their vision and satisfy the
changing needs of the clients. These dual options are stated as diversified organically and
acquire a competitor. In this segment, the chosen strategies are analytically evaluated
utilizing Suitability, Acceptability, and Feasibility framework.
Growth by Acquisition-
 Suitability: Tesco might plan to acquire with its smaller-scaled opponents in the
prospective five years. This approach is appropriate for them as the superstore
productively implemented it in the past. However, Tesco needs to operate all-
encompassing market research in this respect. It is stated that the growth by
acquisition strategy utilizing horizontal incorporation is suitable when small stores are
struggling to survive and recession impacts are high (Wood, Wrigley and Coe, 2016).
 Acceptability: It is stated that acquiring an opponent will open new doors of potential
opportunities for Tesco, which will add a substantial share to the extent of superstore
success. Growth by acquisition deals with medium risk as the professed cooperation
should not be difficult due to horizontal incorporation. In addition, shareholders will
contribute to this approach because of the present low level of success in a limited
product line.

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 Feasibility: It would be reasonable for Tesco to execute an integrated approach in
respect to attain determined objectives of acquisition. Tesco is economically sound
and able to acquiring an opponent. In addition, the superstore has a competent staff
and employs innovative technology to maintain its day-to-day operations and
effective resources (Wrigley et al., 2019).
Organic Growth-
 Suitability: Organic growth strategy is appropriate as needs to be well maintained
with the existing strategy of Tesco, which has been implemented by Tesco to generate
success and profitability. While, Tesco is the supreme leader in the United Kingdom
as their superstore is dealing with less profitability in some food and non-food items
for contending with its main rivals i.e. Morrison, ASDA, and Sainsbury. However,
this strategy is purposefully effective for Tesco with respect to retaining its leadership
position to enhance profitability (Alo, 2017).
 Acceptability: It is stated that this approach faces with the growth of core business
activities, so Tesco will not have to deal with major risk in embracing and executing
this approach. Additionally, shareholders need to accept the strategy as they are fully
aware of the growth of the industry. Therefore, primarily, some main costs of
extensions might impact the overall productivity and profitability extents.
 Feasibility: It is stated that as compared to other strategic options, organic growth is
the easiest option for Tesco with respect to technology, HR, and finance. The
superstore has greater human, funding, technological, and economic resources to
execute this strategy. This strategy is also realistic because of average gearing ratio as
it is not difficult for Tesco to invest capital for growth activities (Iqbal and Keay,
2019).
Recommendation
GE Matrix-Proposed strategy
The proposed strategy has been utilized by the Tesco is GE matrix, which states that market
attractiveness of the prices of the Tesco products in the local as well as global markets. For
instance, if the products are somehow costly, the buyers cannot afford to purchase then they
will automatically buy from other retail shops as Sainsbury, which is a significant competitor
of Tesco in the economy. This demonstrates that the market is well-organized and in the

Matrix 6
future prices need to be disciple and well-organized. It is highly recommended that the GE
matrix assist in developing interaction & relationships and makes the Tesco able to eliminate
the market in the profit war. On the other hand, supplier power is a very significant part of the
GE matrix. It is stated that suppliers are the key people who demand that the retailers should
pay them their dues at a specific price for certain products or services supplied at a definite
time (Channon and Caldart, 2015).
(Management.net, 2019)
 Tesco needs to use the current strategies i.e. Ansoff matrix in order to develop and
expand in several foreign places.
 Tesco needs to use the proposed strategy i.e. GE matrix in order to maintain loyal
customers in the future.
 Tesco should be always continuous in the events dealing with clients so that they can
identify the clients’ needs and desires.
 They need to expand their services and effective operations in order to reach
prospective clients and adhere to the current strategies and effectively maintain the
strategies in the future (Grover et al., 2018).
Conclusion
In conclusion, it is stated that Tesco is the dominant retailer in the United Kingdom as their
current strategy is Ansoff matrix to lead the market and diversify the market opportunities.
They need to utilize their competencies to contribute directly or indirectly towards economic
development in the UK. They need to concentrate on the proposed strategy i.e. GE matrix to
generate future growth and development. From the above critical evaluation, SAF framework
is utilized as the best strategic option in order to develop the marketing as well as a leadership

Matrix 7
position. Therefore, the market development strategy is suitable for the shareholders and
realistic with respect to a quick return.

Matrix 8
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