Strategic Analysis of Tesco: Business Report and Recommendations

This report provides a comprehensive analysis of Tesco's business strategy in the UK food retail market. It begins with a company profile, outlining Tesco's mission, vision, goals, objectives, and core competencies. The report then delves into the factors considered in strategic planning using the Ansoff Matrix, evaluating market penetration, development, and diversification strategies. It assesses the effectiveness of strategic planning techniques, including SWOT and BCG matrix analyses. Porter’s five forces are used to conduct an organizational audit, understanding the competitive landscape and strategic positioning. The report emphasizes the importance of stakeholder analysis in designing new business strategies and proposes a future strategy for the organization, justifying the chosen approach. It concludes with a discussion of strategy implementation, including roles, responsibilities, and the contribution of SMART targets. References are included.

Business Strategy
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Table of Contents
Introduction................................................................................................................................1
a. Company Profile.................................................................................................................1
b. Mission and Vision statement............................................................................................2
c. Goals and objectives...........................................................................................................2
d. Core competencies.............................................................................................................2
b. Factors which are required to be taken into consideration while formulating the strategic
plan by using the Ansoff Matrix................................................................................................3
c. Effectiveness of strategic planning techniques while developing the strategic business plan
....................................................................................................................................................4
Task 2.a Organizational audit by using Porter’s five forces in order to understand business
environment and strategic positioning.......................................................................................4
b. Importance of stakeholder analysis in designing the new business strategy.........................6
c. Represent a new strategy for the business organization on the basis of the audit of the
organization................................................................................................................................7
Task 3.........................................................................................................................................8
a. The appropriateness of the alternative growth strategies for entering into the market..........8
b. The future strategy for the organization and the justification to select that strategy.............9
Task 4.........................................................................................................................................9
a. Planning for the implementation of the strategy in respect of the following issues..............9
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i. Roles and responsibilities for the purpose of implementation of the strategy in the
organization..........................................................................................................................10
b. Contribution of SMART targets for the achievement of the strategy implementation........11
Conclusion................................................................................................................................11
Reference..................................................................................................................................12
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Introduction
The report is based on the food retail market of UK. The report discusses about the mission,
vision, goals, objectives, core competencies, different factors for developing the strategic
plan, the strategic planning technique, Porter’s five forces, importance of stakeholders, new
business strategy on the basis of the audit of the organization, future growth strategy of the
organization, effectiveness of the alternative growth strategy, requirements of the resource for
the implementation of the new strategy and the contribution towards the SMART targets for
the purpose of achievement of the strategy implementation.
Task 1.a
a. Company Profile
Tesco is considered as one of the biggest multinational company operating in the grocery
market of UK and it is operating in the merchandise segment of the UK market. In respect of
profit earning perspective the company Tesco has established itself as the second largest
retailer of the world. The strong presence of the company all over the world has made the
company as a dominant player in the grocery market (Tesco, 2012).
b. Mission and Vision statement
Vision of Tesco offers a proper direction to the company as vision is considered as the kind
of photograph which represents the future of the company. Tesco’s vision clearly emphasises
on the adoption according to the needs of the customers. Mission of the company Tesco on
the other hand emphasizes on what the company does and what are the products and services
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of the company (Tesco, 2012). Mission of Tesco deals with understanding the existing
opportunities of the environment and investigating those opportunities to make them in
favour.
c. Goals and objectives
Goals are the ways through which the organization can achieve the present mission and to
achieve the mission of the company, Tesco emphasizes on the goal of waste reduction. The
objectives of the company Tesco are as follows:
 To Offer the value to the customers by adopting competitive pricing strategy
 To satisfy the needs and expectations of the company by continuously asking for
opinion of the customers.
 To develop the talent pool for achieving the mission of the company.
 To build up association with the suppliers for maintaining quality in the products
(Tesco, 2012).
d. Core competencies
Core competencies are considered as the special skills achieved by the organization or the
knowledge base of the organization which cannot be copied very easily by the competitors of
the company. In this respect it is to be noted that Tesco has able to build up the core
competencies on the basis of the human resource related skills of the organization, the
financial capability of the organization, the quality products of the organization are known as
the core competency of the organization.
b. Factors which are required to be taken into consideration while formulating the
strategic plan by using the Ansoff Matrix
Ansoff Matrix refers to the matrix where four possible options are present and those are
product development, market development, market penetration and diversification. Ansoff
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Matrix represents the directions in which the organization can proceed. Market penetration
strategy refers to the strategy which talks about putting huge efforts in the promotional
aspects to regain the actual position of the company. After introduction of the club card
promotional strategies Tesco could establish itself as the largest market player in the UK
market and it crossed the sales of Sainsbury and Asda. In the present scenario, the
competitors of Tesco is introducing the price cut strategy and the German player like Aldi
and Lidli and apart from that the biggest player of the market including Waitrose are the
competitors of Tesco. All these big players of the market are competing with Tesco on the
basis of the price competition. The market development strategy also is considered as a
fruitful strategy for Tesco. Tesco can consider the opportunities lies in the international
market in terms of the demand of the products in the international market and also the
affordability of the consumers in the international market. Tesco can move to the
convenience stores in all over the world. The expansion of Tesco in the international market
is late and in this respect it is noted that expansion in the developing countries would be
considered as the right strategy for Tesco. Product development refers introduction of new
products in the product mix of the company. Introduction of the financial products of the
company and the introduction of the healthy food products are considered as the product
development of the company. In the diversification strategy Tesco can introduce in the new
markets especially in the international market with the diverse product base.
c. Effectiveness of strategic planning techniques while developing the strategic business
plan
Understanding the effectiveness of business plan depends on several tools including SWOT
and BCG matrix analysis.
SWOT strategy: The existing segmentation, targeting and positioning strategy adopted by
Tesco and the prevailing marketing mix of the company helps to understand that the brand
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Tesco is able to maintain its image among the customers and in the competitive market
scenario the promotional strategies adopted by the company is well enough to manage the
competition of the market. The online marketing promoted by the company is a step to go
ahead towards the future competition of the company. The market penetration strategy
adopted by the company is successful.
Implementation of BCG matrix framework would help to understand that the new products
including Green Chocolate, fresh meat and the black chocolate help to engage the company
in shaping itself with the changing behaviour of the consumers. All the food products are in
the stages of cash cow or star and there is no product which is known as question mark but
the market share and market growth of saucer crisp is not good enough and it is the only dog
of the product mix of the company.
Task 2.a Organizational audit by using Porter’s five forces in order to understand
business environment and strategic positioning.
The organizational audit through the Porter’s five force analysis would help to understand the
nature of competition in the market and in light of the “threats of new entrants”, “bargain
power of the consumers”, “ Bargain power of the suppliers”, “ Threats of substitutes”, “
existing competition in the market’ and “ the threats of substitute products” are the five
different dimensions of understanding the competitive business environment of the
organization.
Threats of substitute: Large competitors are present in the market and the existing
competitors of the market can provide the similar kinds of products to the consumers and in
this respect it can be said that though Tesco believes to provide customized products but in
the food products there is no real substitutes of the products.
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Threats of entrance of new player: The entire UK market is dominated by the number of
players of the market and those are Safeway, Asda, Tesco and Sansbury and it is observed
that the entire market is influenced by the large market players which comprises the market
share of 70%. Among the small retail stores Somerfield, Waitrose and other companies like
Budgens are significant but the grocery market concept has become less important in the
context of UK market because the supermarket has dominated the entire grocery market. The
cost structure of the supermarket is high and the entry for barriers for the small grocery
players are high because the big retailers operate in the high scale. The high fixed cost in the
retail grocery sector is the main barrier for entrance of the market players (Thompson, 2001).
Bargaining power of customers: In the food retail market it is considered that the bargaining
powers of the customer are medium in nature. In the one hand Tesco is able to provide
sufficient amount of quality to its customers in relatively lower price level and on the other
hand there are other existing companies present in the market which offers the same kind of
products even in lower than price than Tesco. The loyal customer base will always remain
with Tesco but the price sensitive customers can move away from the company.
Bargain power of the suppliers: The large supermarkets like Tesco always exercise high
power on the suppliers of the company and the supplier will not prefer to lose a customer like
Tesco as it is being an honour for any supplier to become associated with Tesco and the bulk
purchase policy of Tesco provides financial satisfaction to the company.
Competition in the market: Looking at the competitors of Tesco it is observed that there are
few competitors present in Tesco as the UK retail market in concentrated in nature but the
concentration remains within the few market players named Asda, Sansbury, Safeway and the
international players like Aldi and Lidli. All the players are strong from every aspect and the
market players have the power to apply economies of scale.
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b. Importance of stakeholder analysis in designing the new business strategy
The increasing importance of the stakeholder analysis in the formulation of the business
strategy has become an important aspect of the business strategy. Every organization has two
types of stakeholders including the internal stakeholders and the external stakeholders. The
internal stakeholders of the company are the customers who are affected by the strategic
decision of the company (Hitchcock and Davenport, 2000).
Fig: Stakeholder Analysis
The external stakeholders are the persons who influence the organization’s activity outside of
the organization. The external stakeholders are the NGO’s, government body, the customers,
shareholders, suppliers, local community members who are affected by any kind strategic
plan undertaken by the company (Skourtos, 2000). The major stakeholder of the company are
the customers who possesses the interest and have interest in the framework of the
organization and on the other hand the government is informed about all the activities going
on in the context of Tesco and the extent of exercise of power is less of the government
(Tesco, 2012). The customers, suppliers and the shareholders of the company have both the
power and the high level of interest in the activities of the organization. Medias and NGO’s
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are the institutions who keep high interest in the framework of the company(Hitchcock and
Davenport, 2000).
c. Represent a new strategy for the business organization on the basis of the audit of the
organization
On the basis of the audit of the company and looking at the current business scenario of the
organization it is observed that Tesco is observing a declining amount of share from the last
few years and the declining share in the growth of the company occurs due to the entrance of
the big market players and the economic recession which has been taken place in the market
of UK. The introduction of Waitrose, Aldi and Lidli all the threats in the company and the all
the market players fixes their price to attract the customers. All the market players including
Sainsbury, Asda and Safeway are competing in the market with the low pricing strategy and
Tesco needs to adopt the market penetration strategy to regain the position and to recover the
market share in the market. Tesco should use both the push and pull kind of promotional
strategy in order to regain the market share. In the market penetration strategy the companies
introduce an integrated promotional mix so that, the awareness about the brand and
awareness of the products rise in the market. Sometimes the competitors of a brand take part
in the market share of a leading brand but the aggressive promotional mix used by the
company can improve the position of the company. From, the stakeholder’s perspective and
from the perspective of the management of the company Tesco, the market penetration
strategy is feasible, suitable and adoptability approach (Kotler, 2011).
Task 3
a. The appropriateness of the alternative growth strategies for entering into the market
The alternative growth strategies which can be applicable in the context of the organization,
Tesco are the substantive growth strategy, limited growth strategy and the retrenchment
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strategies (Hoovers, 2011).. Substantive growth strategy is the strategy which refers to the
horizontal integration and the vertical integration. The horizontal integration strategy is
undertaken with the mergers and acquisitions in the international field. In entering into the
Chinese market the company has undertaken the merger and acquisitions (De Kluyver and
Pearce, 2003). The related diversification in this case can be a good option for the company
because in case of related diversification the company goes on the horizontal diversification
in the related product area. The vertical integration is applied in terms of Tesco through the
control of supply chain management. Tesco has established itself as the cost leader in the
market by reducing the cost of the supply chain of the company. The limited growth strategy
engages the market penetration strategy, product development strategy and the market
development strategy (Suh, 2009). The retrenchment strategy refers to divestment strategy
and the cost reduction strategy. The divestment strategy refers to selling off the assets for
establishing the new infrastructural development of the company or the introduction of the
strategic plan of the company. Second option is the cost reduction strategy where Tesco
operates in the lower cost of operation in the context of the organization. In terms of Tesco
the market development strategy is considered as an effective strategy as the international
market comprises huge growth and opportunities (Hitt, et al, 1999)..
b. The future strategy for the organization and the justification to select that strategy
The future strategy which is feasible in the context of the organization is the market
development strategy. The UK market has become saturated because huge competition
already exists in the framework of the UK market and the recession has hampered the UK
economy to a large extent (Sadler, 2003). Due to the recession the UK economy is facing
huge problem regarding the inflation and unemployment. The unemployment problem affects
the purchasing power of the consumers and thus the demand of the consumers. The demands
of the consumers are largely affected by the unemployment problem of the country and the
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competitors of Tesco are operating in low price in the market which has influenced the
company to cut down the price of the company. In this situation it is also found that, the
external international environment especially the environment of China, India and other
developing nations have improved a lot. The recession has shifted the economic power of the
world economy from the developed nations to emerging nations. The rise in the supermarkets
in the market of China and India provides huge opportunity to the organization to establish
their business in the international market and for doing this the horizontal integration can be a
fruitful way. Because, going into the joint venture or going for the merger and acquisition
with the local companies can provide advantage to the company like Tesco as the company
can operate in large scale and it can use the market knowledge of the local companies
(Mintzberg, et al, 1998). .
Task 4
a. Planning for the implementation of the strategy in respect of the following issues
i. Roles and responsibilities for the purpose of implementation of the
strategy in the organization
The roles and responsibilities of the organization will be changed after the strategic
implementation of the new entry strategy. In case the market development plan is being
undertaken in the context of China market then the strategic plan will be implemented in the
corporate level (Johnson and Scholes, 1999). The formation and implementation of the
strategic plan is done in the corporate level and the strategic formulation changes the
hierarchy of the organization and the company needs to reform the organizational structure.
The roles and responsibility of the employees and managers will be influenced by the head
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office of the company which is situated in UK. There will be a country head office in China
and that will be subsidiary and the subsidiary will be responsible for taking independent
decisions except any decisions from corporate level. The country head will be responsible for
carrying on all the activities of the company and the regional managers will be heading the
regional business models of the company in a centralised manner.
ii. The resource requirements for implementation of new strategy for Tesco
Different kinds of resources are required in the implementation of the strategic plan of the
company. The financial resource, the human resource and the material resource are the three
major sources of the strategic plan.
The financial resource: The financial resource consists of the capital investment accounts for
$ 500000000. The work in capital out of this financial resource comprises of 30, 0000000.
The human resource: The human resource comprises of 2,0000000 $.
The material resource: The material resource comprises of 20, 0000000 $.
Initially, all the above mentioned resources will be required to establish the new set-up in
China.
b. Contribution of SMART targets for the achievement of the strategy implementation
The SMART targets for achievement of the strategy are:
 The introduction of 5 stores in the market of China within 1 year.
 Expand the distribution within 30 stores including supermarket, hypermarket and the
independent stores of China
 Grab 10 % of market share within 1 year in China.
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Conclusion
Tesco Plc is one of the dominant player of the UK market but it has become a major
weakness for the company, Tesco that the company is concentrated in the UK market only.
The company has the huge opportunity to establish itself in the international market and in
this respect the company Tesco can undertake two different types of strategies; one is
applicable in the UK market through which the company can regain its market share and the
strategy is market penetration strategy. The second one is the market development strategy
which is undertaken in the market of China.
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Reference
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