Tesco PLC Business Strategy: A Comprehensive Analysis

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BUSINESS STARTEGY
TESCO PLC

Table of Contents
INTRODUCTION............................................................................................................................. 3
TASK 1............................................................................................................................................ 4
P1 Application of framework to analyse the impact of the macro environment on Tesco and
its strategies...............................................................................................................................4
M1 Critically analyse the macro environment to determine and inform strategic management
decisions.................................................................................................................................... 9
TASK 2.......................................................................................................................................... 11
P2 Analyse the internal environment and capabilities of a given organization using
appropriate frameworks..........................................................................................................11
M2 critical evaluation of internal environment to assess the internal capabilities, structure
and skill set of Tesco................................................................................................................ 13
TASK 3.......................................................................................................................................... 18
P3 Apply Porter's Five Forces model evaluates the competitive forces of a given market
sector for Tesco....................................................................................................................... 18
M3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes...........................................................................................................................19
TASK 4.......................................................................................................................................... 21
P3 interpret and devise strategic planning for Tesco...............................................................21
M4 Produce a strategic management plan for Tesco..............................................................23
CONCLUSION............................................................................................................................... 26
REFERENCES.................................................................................................................................27
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List of Figures
Figure 1 Mendelow’s Stakeholder Matrix......................................................................................6
Figure 2 Mckinsey’s 7s Model......................................................................................................14
Figure 3 Tesco’s Steering Wheel..................................................................................................16
Figure 4 Ansoff Matrix................................................................................................................. 19
Figure 5 Porter’s Generic Strategies............................................................................................ 21
Figure 6 Bowman’s Strategy Clock Model....................................................................................22
Figure 7 BCG matrix..................................................................................................................... 24
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INTRODUCTION
Actions and activities are to be planned out by every organization to ensure growth in business,
gain a strong competitive position in the market and have strong financial performance. It is a
course of action that focuses on carrying outs its operation to satisfy the customer
requirements and also achieve the goals desired by them. This assignment develops the
awareness regarding the use of different forms of strategy to be used in different roles such as
operational, tactical and strategic for any organization (Wood et al., 2016). This assignment
takes into account the Tesco a UK-Based company to understand the contribution of an
effective and efficient strategy to develop operation direction and plans for Tesco. This
assignment demonstrates the assessment of macro environment to identify its impact on
business strategies. Also, it includes the assessment of the internal environment and
capabilities of Tesco. At last, different models, theories and concepts were applied to devise
and interpret the strategic planning for Tesco.
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TASK 1
P1 Application of framework to analyse the impact of the macro environment
on Tesco and its strategies
Tesco is one of the largest retail chains in the UK and around the world that generates about 60
per cent of all the profits and sales within the UK market. Tesco has positioned itself in such a
way that it has become a leading brand that reached to Czech Republic, Ireland, Hungary,
Malaysia, China, India, and Poland (Tesco PLc, 2019).
MISSION OF TESCO: mission defines the set purpose desired by the organization to meet the
expectations of its stakeholders (Peeroo et al., 2015). The mission of Tesco is to be the
champion of its customers thereby helping them to an easier way of living and enjoy a better
quality of life.
VISION OF TESCO: vision statement defines the future outlook of the organization in order to
identify its potential in organization benefits and growth. The vision of Tesco comprises five
core elements. These are is aspires to be wanted and needed around the world, be innovative,
modern and full of new ideas, become a growing business that has full growth opportunities
(Peeroo et al., 2015). It also aspires to become a winner in the local market through its skilled
employees and also inspires, earn trust and loyalty for its customers, colleagues and
communities.
OBJECTIVES OF TESCO: goals and objectives are general guidelines desired by an organization in
order to achieve within the specific time period. The smart objectives of Tesco are to make
profits from its sales and lead in business by earning the majority of market share and also
increase its customer base by offering quality goods and services to be leading retail company
in the world (Soltanizadeh et al., 2016).
There is a link between the role of strategy and achievement of goals and objectives of the
organization. For example, the strategic purpose of Tesco is to provide goods and services at
great prices to its customers. Here the value of Tesco is designed in such a manner that it puts
its mission into practices by formulating the strategy.
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STRATEGIC PLANNING TECHNIQUES FOR TESCO
There are various strategic planning models that can be used by Tesco in order to devise its
strategy. These are a balanced scorecard, strategy map, Swot analysis, Pestle analysis; Gap
planning, blue ocean strategy, Porter's five forces and VRIO framework. Tesco must utilise at
least one of the strategic planning model in order to develop an effective strategy and cope
with competition and changes in the macro environment, and be sustainable and expand in the
business market.
STAKEHOLDER ANALYSIS:
A stakeholder is a term generally used for the individuals, groups or the companies that are
concerned with or have an interest in any organization. Stakeholder comprises customers,
employees, suppliers, shareholders, community, investors and government and so on.
Stakeholder analysis is referred to as the range of techniques or methods to identify as well as
understand the needs plus requirements of the stakeholders within and outside the
organization (Power, 2016). It is the first step in planning strategic activities on the
organizational level as it is essential to have support from the stakeholders to ensure the
success of the business.
This approach is useful for Tesco as it helps in improving the quality of strategies to achieve
goals and objectives, helps in getting more resources such as time, people and money.
STAKEHOLDER MATRIX AND STAKEHOLDER MAPPING:
Stakeholder mapping is the process used to identify the key stakeholders and their level of
interests related to the company. It is essential for Tesco to identify its key stakeholder in order
to get valuable insights and achieve its aim and objectives (Krykavskyy and Mashchak, 2017).
The key stakeholders of Tesco are shareholders, employees, suppliers, customers, local
community, and government and trade union.
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Mendelow’s Stakeholder Matrix is used to analyse the stakeholders of Tesco on the basis of
power and interest. It is a four-quadrant grid that identifies the importance of stakeholder
through their power and interest.
Figure 1 Mendelow’s Stakeholder Matrix
Source: Power, 2016
High power, highly interested people (Manage Closely): The stakeholders such as owners and
shareholder have high power and are highly interested in Tesco (Power, 2016). They have
invested their money and times for business growth and also focus on increasing business
profit.
Low power, highly interested people (Keep Informed): trade unions and suppliers are said to
have low power and high-interest people (Power, 2016). The suppliers of Tesco want stable
orders and quick payments while trade union wants to provide higher wages and proper
working conditions for its employees.
High power, less interested people (Keep Satisfied): customer and employees are stakeholders
with high power and low interests as customer just wants high-quality products and services
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that are value for money and the employees in Tesco needs all the means that secure their
necessities of life such as job security, rewards and recognition and so on (Power, 2016).
Low power, less interested people (Monitor): local community, media and government are the
stakeholder who have limited or no interest and have low power. The aim of the community is
to get a desirable environment such as build school and employment opportunities, protect the
local environment and so on (Power, 2016). The government wants Tesco to ensure the welfare
of the local community and abide by the legislation and rules of government.
PESTLE ANALYSIS:
Political: the most tangible political effect on Tesco was due to Brexit referendum which
resulted in an increase in the price of food and groceries (Krykavskyy and Mashchak, 2017). The
import from the UK suppliers instead of EU suppliers resulted in a dramatic increase in the food
prices ranging from pre-Brexit deflation to post-Brexit inflation.
Economic: the economic consequences of Brexit were the decline in the value of pound sterling
and a decline in consumer spending. This was resulted due to rising inflation and slow growth
after Brexit (Krykavskyy and Mashchak, 2017). The merger between Sainsbury's and ASDA
affected Tesco in terms of margin and market shares in a determined price war.
Social: increased consciousness among the individuals towards healthy food and beverages
affected its demand among UK citizens as Tesco offers processed foods and beverages. Also,
the change in the shopping habits of the consumers affected Tesco business as the consumers
prefer to carry smaller top-up shops in comparison to regular big basket shopping (Harrison et
al., 2016). There is an increase in obesity among both men and women which provides an
opportunity to target the plus-size consumers through its F&F clothing range.
Technological: advanced technology allowed this supermarket giant to offer automated and
superfast delivers in order to attract a large customer base. Also increasing the use of mobile
apps allowed Tesco to deliver the groceries and other items at the door of customers (Harrison
et al., 2016).
Legal: 3 former executives of Tesco faced trials by the Serious Fraud Office over the accounting
scandal of the company in 2014 in which the profits were overstated. The UK government will
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levy sugar tax by 2020 with the aim to reduce sugar content in drinks and impact on processed
beverages of the supermarket. Also, the UK government introduce a new rule to ban the
advertisement of high fat, sugar and salt content in food and drinks for children less than 16
years affecting Tesco’s marketing and promotional efforts (Harrison et al., 2016).
Environmental: the rise of ethical and environmental consciousness among the consumers
forced Tesco to adopt practices such as the use of recycled materials and paper packaging. Also,
consumer aimed for zero waste supermarkets as food waste is the crucial environmental
challenge for the retail industry.
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M1 Critically analyse the macro environment to determine and inform
strategic management decisions
Pestle analysis is one of the most popular methods used by the organizations to understand the
macro environment so as to devise the plan of actions for the future. This helps in reducing and
minimising business threats and able to gain valuable advantages (Wood et al., 2016). It helps
Tesco to increase its success and growth during idea generations, product development, and
launch of products, content strategies for marketing and other factors.
ADVANTAGES OF PESTLE:
Through pestle analysis, Tesco is able to identify the direct and indirect impact of the factors of
the macro environment on its business and operations. It is a cost-effective method that
requires just time to analyse the surrounding market. Tesco can be analysed using pestle
analysis in the broad and narrow sense. It alerts the organization such as Tesco and raises
awareness regarding any potential threats (Son et al., 2018). The external or macro
environment is studied through this analysis so as to help in identifying opportunities and
strengthening the business models of Tesco.
DISADVANTAGES OF PESTLE:
Also, pestle analysis is a primary tool for strategic planning; there are certain limitations in it. Six
external factors are investigated in pestle analysis however strategic planning requires more
than these factors thus offering only outside perspective. It does not include internal factors
and competition. Sudden and drastic change may occur in any or more factors of the macro
environment which makes it difficult to forecast the Tesco’s future. It prepares quick lists of the
discoveries from the macro environment however it leaves the chances for too much
imagination and shallow representation (Evans and Mason, 2018). It is difficult to obtain data or
information and also not often trustworthy. It just offers shallow information which needs to be
researched thoroughly taking more time.
PORTER’S FIVE FORCES MODEL AND THEIR INVOLVEMENT IN MANAGEMENT DECISIONS
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Companies use Porter's five forces to determine their competitive environment that affects
their profitability. The ability of Tesco may be affected by the bargaining power of buyers as
well as suppliers to increase and manage the costs of products and services. New competition is
attracted by the entry barriers while industry rivalry tends to be higher as various competitors
aim to cater to the same customers. It is a useful tool that allows the company to take a
management decision based on the bargaining power of the consumer and supplier (Wood et
al., 2016). At the same time, it considers the competitive factor not only from existing
competitors but also from new competitors. Also, it focuses on alternative products similar to
the product offered by Tesco. This helps the Tesco in making effective management decision
during their strategic planning.
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TASK 2
P2 Analyse the internal environment and capabilities of a given organization
using appropriate frameworks
STRATEGIC CAPABILITIES AND ITS KEY COMPONENTS
Due to intense competition in the retail industry, it has become essential for the company to
maximise its capabilities to increase its market share and revenue. Strategic capabilities are
referred to those abilities of the business in order to attach its capabilities, skills and resources
and gain competitive advantage (Tesco PLc, 2019). Major components of strategic capabilities
are its physical, financial and human resources.
One of the major strengths of Tesco is its 440,000 colleagues who serve millions of customers in
their around 80 million shopping trips in over 6,800 stores and online medium around the
world. This defines the strength of human resources of the company and its efficiency to
manage a large number of footfall in their supermarkets (Tesco PLc, 2019).
Another noticeable capability of Tesco is its strong financial assets and goodwill in the market.
The group generated sales of £51.0 billion for the years 2017/18 as compared to £49.9 billion in
2016/17 (Tesco PLc, 2019). Other physical but intangible assets owned by Tesco are a brand
name, consumer information, corporate culture and reputation and technology. Another
strategic capability is the cost efficiency of Tesco as it enjoys economies of scale in its product
marketing. The club cards launched by Tesco helped in increasing the customers’ interests.
Tesco is primarily involved in offering customer friendly environment and logistics (Tesco PLc,
2019).
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