Tesco Plc.'s Business Strategy: A Strategic Management Analysis

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BUSINESS STRATEGY
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Table of Contents
LIST OF FIGURES.......................................................................................................................4
INTRODUCTION........................................................................................................................5
LO1........................................................................................................................................... 6
P1 TO ANALYSE THE MACRO ENVIRONMENTAL FACTORS OF TESCO..................................6
M1 TO DETERMINE THE STRATEGIC MANAGEMENT DECISIONS.........................................9
LO2......................................................................................................................................... 10
P2 & M2 TO ANALYSE THE INTERNAL ENVIRONMENT OF TESCO AND ITS CAPABILITIES
AND TO IDENTIFY THE INTERNAL STRENGTHS AND WEAKNESSES OF TESCO....................10
LO3......................................................................................................................................... 14
P3 & M3 PORTER’S FIVE FORCES MODEL TO EVALUATE THE COMPETITIVE FORCES OF
TESCO AND TO PLAN THE STRATEGY TO OVERCOME THE CHALLENGES............................14
LO4......................................................................................................................................... 18
P4 TO APPLY PORTER’S GENERIC STRATEGIES AND BOWMAN’S EXTENDED MODEL OF
STRATEGY TO INTERPRET THE STRATEGY OF TESCO..........................................................18
M4 THE STRATEGIC MANAGEMENT PLAN REQUIRED TO BE IMPLEMENTED IN TESCO
WHICH AFFECTS THE STRATEGIC PRIORITIES AND OBJECTIVES.........................................20
CONCLUSION.......................................................................................................................... 23
REFERENCES........................................................................................................................... 24
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LIST OF FIGURES
Figure 1 Porter's Five Forces Model.......................................................................................14
Figure 2 Porter's Generic Strategies.......................................................................................18
Figure 3 Bowman's Strategy Clock......................................................................................... 20
Figure 4 Ansoff's Matrix Model..............................................................................................21
Figure 5 BCG Matrix............................................................................................................... 23
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INTRODUCTION
The process of developing the business standards and business objectives which helps to
encourage the present policies of the organization and evaluates the competencies of the
organization and also identifies the skills is known as Business Strategy. It evaluates the
mission, vision and goal of the organization for leading to the path of achieving the business
goals.
In this report, the emphasis will be led upon the vision, mission and objectives of Tesco Plc.
the leading grocery retailer of the UK and also provide financial services. It has more than
1000 employees employed in the organization and serves internationally. As a trainee in
Strategic Planning, under this report, the environmental analysis of Tesco is conducted for
managing the plan of strategic growth based on strategic tools of the internal and external
environment.
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LO1
P1 TO ANALYSE THE MACRO ENVIRONMENTAL FACTORS OF TESCO
Tesco is the UK based organization that deals in online shopping, insurance, banking and
various other services. It was established in 1919 and was founded by Jack Cohen. As a
trainee of strategic planning management, this report provides a detailed analysis of
internal and external factors the company (Tesco Plc. 2019).
Following are the vision, mission and objectives of Tesco that helps in forming the strategic
planning:
Mission:
Generally, the mission is a set of objectives that any organization has defined to meet the
expectations of the stakeholders. It identifies the process of business activities, customer
base, products and services and the quality service to be served (Tesco Plc. 2019).
For formulating the strategic planning the mission statement of Tesco involves:
 To generate customer value.
 To earn trust and loyalty.
 Expanding the market share (Tesco Plc. 2019).
Vision:
The vision statement of any organization describes the future image of the organization. It
also identifies the extensive growth of the organization (Tesco Plc. 2019).
Following is the Tesco’s vision statement:
 To get valued by the company’s stakeholders.
 To attain growth and development.
 To be the most innovative and creative company.
 To expand the services worldwide (Tesco Plc. 2019).
Objectives:
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The objectives of the organizations are the goals that a company desires to achieve within a
particular period. Objectives can be for a short term and goals are referred to as long term
objectives of the company (Tesco Plc. 2019).
The objectives of the Tesco are:
 To become a successful grocery retailer.
 To supply the best quality services to the customers.
 To develop the core business in retailing services (Tesco Plc. 2019).
The most important macro-environmental factor that affects the business operations of
Tesco and will help in forming the strategic planning in the organization is the PESTEL
framework:
PESTEL analysis of Tesco:
1. Political factor:
Tesco has establishes its business operations across the world. Due to this, there are various
political factors in different countries that affect regular business activities. These factors
involve tax rates, government norms and policies, legislation, and so on. Almost countries
permit Tesco company to operate its business it the country as it generates various job
opportunities to the unemployed people and also ensures loyalty and trustworthiness
(Aithal, 2017).
2. Economic Factors:
The economic factors involve demand and supply, profit price, etc. and impacts highly on
Tesco. Any ups and down in the market can bring high influence in the business activities of
Tesco which indicates either the risk or benefit for the Tesco. But mainly globalization and
diversification are the important reason behind the success of Tesco (Aithal, 2017).
3. Sociological Factors:
For every organization changes in social factors matter a lot. Change in social factor leads
Tesco to provide the customers with the facility of non-food products. The business
activities of Tesco are highly affected due to the behaviour of the customers in the society.
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Due to this, Tesco is trying to accomplish with such changes and concentrates on improving
the operations and supply chain management which will increase the overall business
performance of Tesco (Aithal, 2017).
4. Technological Factors:
It is the most important factor of the PESTEL framework that highly impact the business
operations of Tesco. The new technological advancement has brought significant success in
the Tesco Company. Tesco has started the online shopping facility and home delivery
services to the customers with the help of advanced technologies. Tesco has also initiated
with the self-service option at the superstore which has reduced the cost of labour in the
company and has at the same time benefitted and satisfied with the customers (Aithal,
2017).
5. Environmental Factors:
The business activities of the organization like Tesco are also affected by environmental
factors. For every organization conducting the business in an ethical manner is very
essential. Tesco Company is always a concern for corporate social responsibilities. It also
concerns about satisfying the key stakeholders. It also focuses on eliminating the waste and
has committed to reducing the carbon footprint up to 2020 by 50% (Aithal, 2017).
6. Legal Factors:
The government rules and regulations and policies directly influence the business
performance of Tesco. Reducing the trade entry barriers in China has made Tesco enter and
expand its business in several other countries (Aithal, 2017).
Thus with the help of the PESTEL framework, the proper information of the Tesco's
environmental factors is identified (Aithal, 2017).
Business Strategy of Tesco:
The main strategy of Tesco is to generate value for customers and satisfying the needs of
the customers by providing the best quality services. For this Tesco has started focusing on a
new strategy for developing the new products (Kourdi, 2015). This strategy will ensure the
company to meet various challenges in fluffing the needs of the customers by offering new
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products. It will also help in generating revenue and will develop future opportunities like
expansion plans for Tesco (Kourdi, 2015).
M1 TO DETERMINE THE STRATEGIC MANAGEMENT DECISIONS
The main objective of Tesco is to become a successful retailer all over the world. to meet
this objective Tesco has to adopt the strategy of market development. In this strategy, Tesco
will be able to expand its business in Switzerland by providing both food and non-food
products (Chang, 2016). Along with this strategy, Tesco can also form an alliance with other
companies and merge with other companies in Switzerland. Through this strategy, Tesco
can expand the strategies for future objectives and will enhance the revenues. Thus after
getting entered into the new market, Tesco has the option to adapt the product
differentiation strategy so that it can differentiate the products from other companies
(Chang, 2016).
In Tesco, there is the requirement of three types of resources to be implemented for
forming a new strategy.
 Human Resources:
For implementing the strategy successfully, Tesco has to consider human resources. As
human resources are the key element for the strategy and the performance of the company
also depends on it. For Tesco, there is the need of the employees who have technical
knowledge and productivity skills (Cassidy, 2016).
 Financial Resources:
The financial resources deal with the finance strategy of Tesco that will be more effective for
achieving the objectives. For this, the financing can be done in two ways either through debt
or through equity. But in the case of Tesco, equity will be more preferred due to no bearing
of interest on principle cost (Cassidy, 2016).
 Time and Material Resources:
For implementing any strategy, there is always a limitation on time and the requirement of
materials that will be utilized in the projects. For this, Tesco should always use the best
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quality technology and machines that will help in fulfilling the development strategy
adopted by Tesco (Cassidy, 2016).
LO2
P2 & M2 TO ANALYSE THE INTERNAL ENVIRONMENT OF TESCO AND ITS
CAPABILITIES AND TO IDENTIFY THE INTERNAL STRENGTHS AND
WEAKNESSES OF TESCO
To identify the internal strengths and weakness of the organization, the organizational audit
is required to be conducted which also helps in boosting up the business operations of the
company (Phadermrod et al., 2019).
The internal analysis of Tesco is done with the help of analysing SWOT analysis which is
described as under:
Strengths of Tesco:
 Tesco has been awarded many times as the best retailer, for the best customer
service and for overall shopping experience (Phadermrod et al., 2019).
 Tesco is considered to be the world’s largest and most successful supermarket in
retail industry which many other companies try to compete with Tesco.
 Tesco has significant cash equivalents in its portfolio and huge property which
describes the strong financial stability of the company (Phadermrod et al., 2019).
 Tesco has a brand image in the world because of its best quality products and
services.
 As it has been established from past many years, it is seen that it will be surviving in
the global market in the future also (Phadermrod et al., 2019).
 The stores of Tesco serve the needs of the customers in the local areas with the best
services (Phadermrod et al., 2019).
Weaknesses of Tesco:
 There are some subsidiaries of Tesco that are not operating properly due to the
external factors. During the crisis in the UK, the profit levels of Tesco were highly
affected and are still overcoming from the same (Gürel and Tat, 2017).
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 Due to the lack of research being done by Tesco, the retail stores of the company are
being affected.
 Being the high cost of the products, the consumers many times ignored buying the
expensive products of Tesco (Gürel and Tat, 2017).
 The retail stores of Tesco highly depend on its sales in the UK and Europe and have
not invested in developing the subsidiaries of the company (Gürel and Tat, 2017).
Opportunities for Tesco:
 Tesco has various opportunities to form alliances with other companies and
enhance the customer base by providing attractive products and services (Gürel and
Tat, 2017).
 It is the opportunity for Tesco to improve the performances in the countries where
they are underperforming by doing market research with the help of local
companies.
 Tesco has many opportunities to increase online shopping and to offer home
delivery services (Gürel and Tat, 2017).
Threats for Tesco:
 The financial crisis and recessions issues have continued threatening the market
share and profit levels of Tesco across the world. This has reduced the purchasing
power of consumers (Phadermrod et al., 2019).
 There are other competitors coming from the global market that are offering the
products at lower prices and wide varieties being more innovative.
 Tesco has been suffering from threats of labour turnover, is the demand for an
increase in wages has disturbed the pricing strategy of the company (Phadermrod et
al., 2019).
 The changes in the government legislation and political pressures have increased the
expenses of the Tesco as they have to change the business operations as per the
required political and economic factor.
 The pressure from stakeholder which relates to the environment and corporate
social responsibility highly affects the cost structure of Tesco (Phadermrod et al.,
2019).
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Internal Capabilities of Tesco:
Tesco is the leading retail company and merchandise grocery retailer in the global market.
Tesco operates more than 14 supermarkets and the biggest chain of the superstore is
located in the UK. The primary source of Tesco is the human resource. There are more than
4,50,000 people employed globally. The staff room of the company is designed by the
employees of Tesco (McLean, 2018). The profitability of Tesco is positively impacted on the
basis of the internal resource of the company. The research-based approach of Tesco has
enabled the company the superior systems that enhance profitability. This strategy has
reduced the cost and enhanced the quality and performance of the company by making
available the resources. Tesco has continuously focused on gaining the advantage among
the competitors. For this, Tesco delivers the products and services at lower prices and takes
advantage of differentiation to gain a competitive advantage (McLean, 2018).
The capabilities of Tesco emphasizes mainly on strategic and dynamic factors. Dynamic
capabilities focus on areas such as the factor of production, process and procedures of the
organization, and the core competencies. Factors of productions include the resources that
are specific for the Tesco Company (McLean, 2018). The profitability of Tesco mainly
depends upon the capabilities and resources of the organization. According to research,
information technology plays a vital role in developing the growth of the business by
expanding the corporation's operations. The information technology has helped the
company to track the business operations that the company operates in every region.
Another internal ability of Tesco is that it maintained the cost of leadership by sourcing the
operations universally (McLean, 2018).
The main competency factors of Tesco are strong financial assets and goodwill in the
market. Tesco has developed the cross-docking operations and utilized the plans,
replenishment and forecasting collaboratively to support the management of inventory
(McLean, 2018).
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The below table represents the difference between the different and basic resources of
Tesco as per the VRIO analysis (Bryson, et al., 2018):
Resources Valuable Rarity Imitation Organization Benefit
Integration of
Information
Technology
Yes No Yes Yes Temporary
Supply Chain
Management
Yes No No Yes Temporary
Workforce Yes Yes No Yes Permanent
Club Card Yes Yes No Yes Permanent
Unique Format
of Store
Yes Yes No Yes Permanent
Cost Efficiency Yes Yes Yes Yes Permanent
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