Business Strategy of Tesco Plc: A Strategic Management Plan

Desklib provides past papers and solved assignments for students. This report analyzes Tesco's business strategy and competitive landscape.

BUSINESS STRATEGY

TABLE OF CONTENTS
Introduction......................................................................................................................................1
Task 1...............................................................................................................................................2
Prepare internal and external analysis including PESTLE and SWOT of organisation and an
analysis of organisation’s capabilities.........................................................................................2
Also prepare analysis of competitive environment of organisation using Porter’s Five Forces
Model...........................................................................................................................................7
Task 2.............................................................................................................................................10
Include an evaluation of different types of strategic decisions available to organisation.........10
Justification and recommendation of most appropriate growth platform and strategies...........13
Produce a strategic management plan with strategies, objectives and tactics...........................16
Conclusion.....................................................................................................................................19
References......................................................................................................................................20

LIST OF FIGURES
Figure 1: Tesco market growth........................................................................................................3
Figure 2: Ansoff's matrix for Tesco.................................................................................................5
Figure 3: Organisational audit of Tesco..........................................................................................6
Figure 4: VRIN framework.............................................................................................................8
Figure 5: Five forces of Porter.......................................................................................................10
Figure 6: Balanced score card framework.....................................................................................12
Figure 7: Strategic model of Bowman...........................................................................................13

LIST OF TABLES
Table 1: External analysis of Tesco.................................................................................................3
Table 2: Strategic management plan..............................................................................................16

Introduction
Business strategy is identified as action course developed for achieving measurable and specific
goals. The strategies are established by organisation’s top management and initiated by middle
level managers for achieving missions, goals and objectives through strategic thinking. The study
will aim at analysing business environment by using SWOT and PESTLE in reference to Tesco.
Further, it has evaluated the internal capabilities that help in assessing weakness and strengths.
Moreover, report has initiated Porter’s five forces for analyzing competitive forces for preparing
strategies of market positioning through strategic planning supported by tactical strategies for
development of strategic management plan.
1

Task 1
Prepare internal and external analysis including PESTLE and SWOT of organisation and an
analysis of organisation’s capabilities
Business Scenario – Tesco Plc is determined as British multinational general merchandise and
groceries retailer headquartered in England UK. Calculated by revenues it is 3rd largest retailer
across world by holding market share of 28.4% by employing 476000 people worldwide. It was
founded in 1919 by Jack Cohen that is giving tough competition to Carrefour and Wal-Mart by
situating at various locations in banner name of Tesco Express, Tesco metro, Tesco superstores
etc.
Mission – It says “We make what matter better together” that outlines urge of senior managers
for shaping organisation’s identity with required strategies for acquiring highest growth (Akter,
et.al, 2016).
Vision – It decides organisational direction and strategies for becoming highly valued business
across world by satisfying customers, communities, committed colleagues and shareholders.
Objective:-
 It aims to offer valuable products for money through competitive prices.
 Aims at supporting community well-being and environmental protection.
 Conducting business operations closely with suppliers for enhancing relationships on
terms of price criteria and strict quality.
2

Figure 1: Tesco market growth
(Source: Rachel Rickard Straus, 2015)
Business strategy is determined as summary that contains firm’s objectives that are prepared for
fulfilling consumer demands for sustaining market competitiveness. The preparation of strategies
boosts growth aspects of organisation by increasing profits and revenues. It is essential for Tesco
to analyze external and internal business factors that affects business growth. The factors that are
present outside business are macro or external factors that cannot be controlled by management
and factors that affects business from inside includes micro or internal aspects that are managed
by firm by improvement (Leonidou, et.al, 2015). The audits have been played major role in
determining firm’s growth, thus it is important to describe PESTLE and Ansoff’s Growth Matrix
for identifying internal and external factors that affects the growth. With this analysis, the
organisational audit for market positioning by SWOT will be done for identifying the capabilities
of objective achievements.
Tesco PESTLE
Table 1: External analysis of Tesco
Political Factors The retail organisation is conducting operations globally that impacts by political
factors. It consist of tax rates, economic stability and legislation acts. The reason
of financial instability the country’s government motivates retailers to provide
employment for domestic population. Hence, Tesco give huge employment
opportunities by boosting product demand for workforce diversification.
3

Economic Factors Tesco is highly impacted by labour cost that affects supermarket revenue chains.
The bill of annual wage accounted for GBP 4.5 billion, in case labour cost
increase with 1% that organisation have to incur labour cost for 45 million that
hits profits too badly. The fiscal policies, inflation rate, economic situation and
credit availability are some other factors that impacts economy (Chang, 2016).
Social Factors The social culture and habit have been changed as men and women are equally
managing their livings standards that eliminate extra time to do operations like
meal preparation or grocery shopping. Therefore, products should be developed
according to consumer demands by fulfilling their lifestyle issues that helps in
saving the efforts and time related to shopping and cooking.
Technological
Factors
The revenues have increased by 10% as Tesco has invested in technology to
develop its website. It has also increased its customer online experiences by
improving system for checking out at stores. CCTV cameras are also installed for
identifying defaulters within customers and staff to provide more improvement
and security at stores.
Legal Factors The legislations and policies developed by government affects Tesco business.
For instance, FRC (Food Retailing Commission) has mentioned practise code in
2004 that included changing pricing strategies without notice or asking money
from suppliers. Hence, promotional offers and fuel discounts are provided to
Tesco customers by maintaining legal laws (Razak, et.al, 2016).
Environmental
Factors
The country’s government has forced firms to address environmental issues for
initiating strategies for improving and benefitting society. Tesco is highly aimed
for minimizing carbon footprint with 50% till year 2020. It has also targeted
customer social conscience for reducing the produced waste in stores.
Tesco Ansoff’s Growth Matrix
It is essential for Tesco to determine market area for initiating the strategies for growth. Ansoff’s
growth matrix is best tool for deciding market and product growth strategies. It helps to explain
that business must focus on attempts that are beneficial for marketing existing or new products.
The model carries four parameters for determining growth strategies of Tesco that consists of:
4

Market Penetration – It aims at boosting market share by selling current products. Tesco
majorly enhances the market share and growth through competitive strategy of pricing, adding
promotion campaigns that helps in comparing prices from different competitor on TV
(Gurcaylilar-Yenidogan and Aksoy, 2018).
Product Development – The new product is launched that is to be sold in existing market. The
Tesco initiate the strategy of providing discounts to new products that are bought in market for
selling for attracting customers.
Figure 2: Ansoff's matrix for Tesco
(Source: Elly, 2011)
Market Development – The strategy plans to sell existing goods in new markets. Tesco has
managed the strategy by targeting new geographical markets such as the products are exported to
new countries.
Product Diversification – It aids in product development by two ways that have either better
understanding of market for new product or completely fresh one. The example of Tesco is very
useful as organisation understand financial and banking service effectively (Murdock, 2017).
Tesco SWOT
5

Figure 3: Organisational audit of Tesco
(Source: Tesco SWOT Analysis, 2018)
6

Also prepare analysis of competitive environment of organisation using Porter’s Five Forces
Model
The analysis conducted above initiate the strategies for maintaining balance between existing and
new market. Tesco requires boosting consumer loyalty by using Club card system of rewards. It
is essential for organisation to maintain regular communication with firm’s stakeholders that has
long and short term targets. The strategies and planning should be done effectively that helps the
stakeholders to understand the corporate plan by using stakeholder’s mapping. The business is
highly affected by internal environment that consist of corporate culture, management as well as
employees. It is organisational manager’s duty to determine internal capabilities for initiating the
strategies without impacting current business functioning (Hao and Song, 2016). The strategic
capabilities in business are known as skills that help in establishment of competitive plans for
sustained business growth.
Tesco as largest retail organisation deals with regular market competition that impacts internal
functions. Hence, it is essential for organisation to understand internal strategic capabilities that
helps in dealing with market competition by considering the framework of VRIO/VRIN. It was
introduced by Barney for providing necessary changes to VRIN model. It helps in analyzing the
internal capabilities of organisation by studying resources for increasing competitive survival in
market. It is prepared for strategizing vision, objective, choices, strategic execution and analysis
of environment. The resources in organisation are of two types that includes tangible resources
that depicts land, equipment, plant money of Tesco and intangible resources that derive goodwill,
administrative level, brand name etc (Spillan, et.al, 2018). Following are competitive forces that
are essential to understand for growth of Tesco that includes:
7

Figure 4: VRIN framework
(Source: Rameez Sydeek, 2017)
Valuable – The model put question if organisation carries valuable resources for production as it
helps in minimizing business threats for Tesco. The organisation has the answer with yea due to
product differentiation and low pricing strategies that increases consumer interest. The quality of
resources is essential to maintain. It will be beneficial for producing diversified products by
using creativity that will easily reduces market competition faced by Tesco.
Rare – The rare resources are not associated with all organizations as many firms cannot invest
to purchase rare resources. The Tesco finds beneficial is valuable and rare resources are not
purchased by competitors due to low understanding and knowledge. As retail organisation, it
faces huge competition as better quality of products are being produced by Wal-Mart that aims at
eliminating Tesco as market competitor (Pisano, 2017). The pricing and diversified strategy has
made success to Tesco that can be enhanced by bringing rarest resources for production.
Inimitable – The best and quality products cannot be copied by rivals or competitors in market
as they have to purchase precious and rare material. The resources are copied in two ways such
as delicacy and substitution. The best part is rare and valuable resources cannot be copied by
8