Tesco Business Strategy: Competitive Environment and Strategic Options

This report provides a comprehensive analysis of Tesco's business strategy, employing various strategic management tools and frameworks. It begins with an internal and external analysis, utilizing PESTLE, SWOT, Porter's Five Forces, and VRIO analyses to assess Tesco's position in the market. The report then evaluates the competitive environment and explores strategic options using the Ansoff Matrix, Porter's Generic Strategies, and Bowman's Strategy Clock. It critically evaluates and justifies strategic directions for Tesco, offering recommendations and methods for evaluating the success of these strategies. The analysis considers factors such as political and economic influences, social trends, technological advancements, legal requirements, and environmental concerns. Ultimately, the report aims to provide a robust understanding of Tesco's strategic landscape and potential pathways for future growth and sustainability.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
PART A: Internal and external analysis that provides a platform for strategic decision making:. .3
PESTLE ANALYSIS: ................................................................................................................3
SWOT ANALYSIS: ..................................................................................................................4
Analysis and critical evaluation of the competitive environment...............................................5
PORTER'S FIVE FORCES: ......................................................................................................5
VRIO ANALYSIS: ....................................................................................................................6
ANSOFF MATRIX: ...................................................................................................................7
PORTER'S GENERIC STRATEGIES: .....................................................................................8
BOWMAN STRATEGY CLOCK: ............................................................................................9
PART B- critically evaluate and justify strategic options for the organisation:............................10
Strategic directions for the organisation:..................................................................................10
Recommendations: ...................................................................................................................12
Methods for evaluating the success of the strategies:...............................................................12
CONCLUSION ...........................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business can be defined as an activity which focus on making money by offering goods
and services in the market. It is very essential to formulate business policies for properly
managing the working of the organisation. It develops a framework through which the company
can achieve its objectives within the specified time period(Cao, Chen and Lee, 2022). The report
will be on Tesco which is a British International organisation which deals in retail industry. The
company was founded by Jack Cohen in the year 1919. The headquarter of the business is in
Welwyn Garden City, Hertfordshire, England, UK. This report will discuss the various models
and strategies which can be used by the businesses. The internal and external analysis of business
environment is also examined in the report. The different strategic management tools are
discussed which will help the company in its business operations.
MAIN BODY
PART A: Internal and external analysis that provides a platform for strategic
decision making:
PESTLE ANALYSIS:
This is a tool which assists the organisation in analysing the external environment of the
business. The PESTLE analysis of Tesco is discussed below:
 Political factors :- This factor involves changes in the taxation policy and other political
norms which can impact the working of the business. Tesco is a multinational company
and political factors greatly influence the performance of the organisation. The company
operates mainly in UK which has a very politically stable economy and it is benefiting
the business in various ways. The organisation does not need to change its strategies due
to the fixed political policy of the UK(Chen and Keung, 2019).
 Economic Factors: These factors are related to the inflation rates, tax rates and
fluctuations in the currency. Tesco should be aware of the changes in the policies since it
can make a huge impact on demand and prices of the products. The company has focused
on two essential strategies which are diversification and internationalization. These have

the biggest reason for the success of the organisation in UK. The business has shifted its
focus on advertising of brand rather than selling luxury items.
 Social Factors: It is related to the changes in the tastes and preferences of the consumer
over a period of time. It largely affects the demand and supply of products in the market.
Tesco has analysed that nowadays customer's are doing shopping of all products from
one store(Dalwai and Salehi, 2021). The company has increased its range of products to
cater the needs of every section of society in the UK. Another thing which is
implemented by organisation in business is increasing the supply of organic products
which are in high demand these days.
 Technological Factors: This factor is related to the new technology and advancements.
Tesco should adopt modern technology in order to reduce the cost and improve the
quality of its products. This will help the company in attracting a large number of
customer's which will be very beneficial for the business. The organisation can also
provide greater online experience to the customer's.
 Legal factors: There are various laws which are to be followed by the businesses to run
their operations smoothly. Tesco should try to follow all the rules and regulations which
are applicable on the company. This will create a positive image of the organisation in the
market. If the business does not comply with these laws, then it has to face legal
obligations which will make a negative impact on the working of organisation(Fraser,
2019). The company has to stay updated regarding the changes in these laws and
regulations.
 Environmental factor: This factor involves the climate and weather that affect the
business. The pressure is increasing day-by-day on the companies to address the issues of
the environment for making contribution to the society in UK. Tesco is very committed
to reduce its carbon footprints by 50% by the year 2025. The organisation has also
undertaken various measures for minimising the waste produced by their stores all over
the world. This can be done by increasing social conscience in customer's.
SWOT ANALYSIS:
It is a tool which helps in identifying the various aspects of the business. It is a model
which assists in analysing internal factors that can affect the working of the business. It helps the

organisation's in standardise its business and improve the performance in comparison to its
competitors. The analysis of Tesco is discussed below:
STRENGTHS WEAKNESSES
 Tesco is the biggest grocery retail chain
in UK. It has captured the market
which is the reason for its success.
 The company is doing business in more
than 15 countries across Europe and
Asia which has created a huge
customer base(Galletta, Mazzù and
Naciti, 2021).
 The organisation is not able to clear its
image after facing various legal issues
and lawsuits. This has affected the
reputation of the company negatively.
 Tesco is having limited presence in
developing countries as compared to its
competitors in the market.
OPPORTUNITIES THREATS
 Tesco can improve its sales and profits
by acquiring or collaborating with the
smaller chains. This way the
organisation will be able to achieve its
objectives and targets.
 The company has to focus on
advertising with the help of social
media platforms. This will help in
expanding the reach to the international
audience.
 Tesco deals in retail products which are
easily imitated by the competitors. This
can be a potential threat on the
performance of the company.
 The organisation operates in many
countries and any changes in the
government policies and taxation can
result in reduced demand of
products(Kong, Jiang and Zhu, 2022).
Analysis and critical evaluation of the competitive environment
PORTER'S FIVE FORCES:
It is a process which focuses on evaluating the position of the business on the basis of various
factors. This analysis covers the competitive landscape and the factors affecting its industry.
These five forces on Tesco are discussed below:

 Threat of New Entrants: Tesco is an international company which operates in various
countries all across the world. The scale of business is very large which makes it difficult
for the new entrants to enter into the market. For setting up a new business, large amount
of capital and a proper team of marketing and sales(Liu, Wu and Chan, 2021). The new
players can not compete with the existing organisation's due to lack of economies of
scale. Therefore, it is a weak force for the company.
 Threat of Substitutes: There are lot of products which are substituted by the competitors
in the market. Tesco offers products which meet the basic needs of the customer's. All the
players in the market provides similar products at a similar price range(Liu and Kong,
2021). But the company is known for offering best quality products which retain the
existing consumers. It provides a competitive advantage in the market to the organisation.
Therefore, it is a moderate force affecting the operations of Tesco.
 Bargaining Power of Customer's: The players in the market are offering similar
products. The customer's will choose to buy from the company which is providing good
quality at a reasonable price. The consumers do have not have much option to shift to
other stores since similar products are offered by all the businesses. Thus, the bargaining
power of customer's is a moderate force for Tesco.
 Bargaining Power of Suppliers: There are various suppliers in the market which offers
almost similar products. Tesco has a large distribution channel which involves different
suppliers. The power of suppliers is very less since company will purchase from the
supplier which will offer minimum price of the goods and services. Switching from one
supplier to another is not a big task for Tesco. Therefore, it is a weak force for the
operations of the company(Madhushree, Kumar and Aithal, 2018).
 Competitive Rivalry: There are various big organisation's in the market which are
offering similar products just like Tesco. The biggest competitors are Walmart, Sainsbury
and ASDA. The major difference which the companies try to create is by performing
advertising and promotions of the products. There are also price wars which often results
in economies of scale. It is a strong force for the business of Tesco.

VRIO ANALYSIS:
This analysis will examine the internal resources which are available in the business. It is
done to assess whether these resources will help the organisation in gaining a competitive
advantage. The analysis on Tesco is discussed below:
 Valuable: The financial resources and employee's are a valuable asset for the company.
Tesco realises the importance its workers in the success of the company in the market. A
majority of the workforce of the organisation is highly skilled and trained which helps in
achieving high level of productivity in the business. The financial resources enable Tesco
in investing in external opportunities that arises in the market(Magerakis and Habib,
2021).
 Rare: The distribution network of Tesco is a rare resource. The other competitors will
require a lot of time and investment to compete with the company. The patents which are
registered by the organisation are very rare in the market. This helps the company in
taking the advantage of using patents in any manner it wants. This allows the company to
implement these in business without taking permission from any authorities.
 Imitable: The products which are offered by Tesco can be easily imitated by the
competitors. This can affect the sales and profits of the company in the market. Tesco
cam innovate new products to diversify its products range and maintain its dominant
position in the industry. The organisation needs to pay more attention on the R&D
department for launching new products.
 Organisation: The resources which are essential for Tesco need to be invested in right
places for its efficient usage. The company has to make strong and important decisions
regarding the investment of these resources. This will help the organisation in meeting its
objectives and targets within the specified time period(Maniora, 2018).
ANSOFF MATRIX:
It is a marketing strategic tool which is used to plan the activities through which the
opportunities can be optimised. The analysis of Tesco is discussed below:
 Market Penetration: It is very essential for every business to penetrate in different
markets to find new opportunities. Tesco started its business from grocery retailer but
later it expanded its markets. Currently, the company has diversified in areas of books,

clothing, furniture, electronics and other financial and internet services. The organisation
identified the customers which prefers brand over the product. This helped the business in
penetrating in new markets. The company take the help of various advertising strategies
to gain the loyalty of the customer's and expand its business.
 Product Development: It is considered an essential aspect which assists the business in
expansion and growth. Tesco has introduced new products at regular intervals which has
helped the company in maintaining its dominant position in the market. The organisation
identified the changes in preferences of consumers and shifted its focus on providing
organic and environment friendly products. This assisted the business in catering to the
needs of every section of the society. Tesco is also looking forward to pay attention on
the needs and requirements of the customer's of the middle east(Nayak, Bhattacharyya
and Krishnamoorthy, 2019).
 Market Development: It is considered very important aspect in making a business
successful. Tesco has focused on expansion of its business in international markets to
build a strong customer base. The company acquired various companies to develop its
market internationally. The organisation is dominating in the markets of UK and now it is
planning to grow its business in middle east and Asia. The business is also focusing on
identifying the trends of customer's in new areas to be able to meet the requirements.
 Diversification: This factor relates to introducing new products in the market. This helps
in diversifying its product range which will attract a lot of customer's. The organisation
started its business from a small retail store but currently it has expanded to a huge scale.
The company is now selling books, electronics, furniture, rental services, financial
services, etc. Tesco has also diversified itself in health and beauty products. This policy
help the business in mitigating the risk of loss in one division by another unit.
PORTER'S GENERIC STRATEGIES:
This framework determines the way which be used by the businesses to gain competitive
advantage in the market. The analysis of these strategies on Tesco are discussed below:
 Cost leadership : This factor involves the businesses become the low cost producer in
the market. Tesco uses economies of scale, unique technology and preferential access to
raw materials for achieving the cost leadership advantage. The organisation has focused

on providing reasonable price to the customer's in order to retain them in the business.
This is the reason, the company is performing well in the market. Tesco is able to
implement this strategy because of the substantial amount of investment, efficient
logistics and low costs of material and labour(Salehi and Arianpoor, 2021).
 Differentiation : The businesses tries to innovate new products for standing out in the
industry. Tesco makes its products exclusive and attractive as compared to other products
which are offered in the market. The R&D department of the company innovates new
products along with high quality. This helps the organisation in performing marketing
activities effectively and efficiently. The business follows a creative policy and gets
prepared for the changes due to the flexibility.
 Cost Focus : This is related to targeting a segment of customer's from the target market
and offering the lowest possible price to them. Tesco understands the dynamics of the
market which help in identifying the needs and wishes of customer's. The company tries
to retain these niche consumers by providing products at a reasonable price. This makes a
positive impact on the sales and profits of the organisation.
 Differentiation Focus: This strategy involves strong loyalty among the customer's.
Tesco tries to launch the unique products so that it can maintain its dominant position in
the market. This allows a competitive advantage over the competitors in the market. The
company focuses on its strengths and follow its strategies properly to achieve good
results(Teirlinck, 2020).
BOWMAN STRATEGY CLOCK:
It is a strategy which is used by the businesses to make proper positioning in the market on the
basis of cost and value. There are various factors which are involved in this strategy. The
analysis on Tesco is discussed below:
 Low price and Low value added - It is related to dealing in low cost along with low
value on the goods and services. Tesco provides products at a low price to the customer's
which offers high volume of returns to the company. It attracts a large of consumers since
they feel highly valued and satisfied with the prices offered by the business.

 Low price – In this business strategy, the organisation's becomes the lowest cost option
for the buyers in the market. Tesco rely on process efficiency and cost reduction for
achieving the objectives of the business. This ensures increase in the revenues of the
company through high quantity levels.
 Hybrid – It is a strategy which involves both low price and differentiation. Tesco ensures
that it maintains competitive price and promotes the added value in the products. The
company aims at maximising the profits by making a balance between the cost and
differentiation.
 Differentiation – It involves focusing on differentiation in the products or services from
competitors. Tesco develops uniqueness in the existing product by adding new features.
The organisation develops the range of its goods and services to satisfy the needs of the
customer's.
 Focused Differentiation: It is about providing high value at a high price in the market.
Tesco targets the niche audience who tends to prefer buying valuable products for
developing image and status. This helps the company in earning high profits margins in a
short term.
 Risky high margins: This strategy aims at offering high price point without any added
value in the product. Tesco uses the advantage of its brand to attract the customer's for
buying high priced goods and services. It helps the organisation in increasing its revenues
and profit margins. This ultimately lead to fulfilment of business objectives and targets.
 Monopoly pricing - It involves only a single company dominating the market and
controlling the supply of the products. Tesco is the leading retailer in UK and it enjoys
the benefits of its brand and popularity. The company also keeps an eye on the external
factors like demand, competitors and other essential elements.
 Loss of market share – It is a very bad situation to be in for the business. Tesco should
immediately stop the activities which are not giving rewards to the business. This will
make a negative impact on the market share for a short term but will help the company in
sustaining for a long period of time in the market.

PART B- critically evaluate and justify strategic options for the organisation:
Strategic directions for the organisation:
Summary Tesco is a international brand which deals in grocery retail business.
The company provides employment opportunities to many workers all
across the globe.
Vision The vision of the organisation is to become a leading brand in the retail
industry and become top company in the world.
Mission The mission of the Tesco is attain global reach and become a
household name among the customer's. The aim is to accelerate the
brand value in the global marketplace.
Objectives  To widen the country of business activity of the institution.
 To create more and more outgo.
Tactics  Product - Tesco provides best quality products to the
consumers.
 Price - The company offers goods and services at a reasonable
price.
 Place – The organisation is operating in more than 10 countries
all across the globe.
 Promotion - Tesco uses various social media platforms for
promoting its products and in reaching large number of
customer's.
Controlling and
Monitoring Evaluation
There are various tools which are used by the company to evaluate the
performance. Tesco properly measures the productivity of employee's
which gives the organisation benefit of employing various trainings
and development programs.

Implementation:-
It is very essential for the organisation to properly execute the plans for achieving objectives
of the business. Tesco can utilize all the available resources for effective and efficient working of
the organisation.
Recommendations:
The best strategy for the company will be focusing on differentiation. Tesco should follow this
strategy to perform well in the market. The company should make development in its existing
products and innovation in launching new products in the market. It will help the organisation in
increasing the brand loyalty and also builds the equity of the brand. It will assist in recalling the
value of the goods and services. Tesco can gain competitive advantage in the market over its
competitors by using this strategy.
Methods for evaluating the success of the strategies:
There are various tools through which the company can measure the success of its strategies.
Tesco can use some methods which are discussed below:
 Financial Performance Index: It is considered a very essential parameter to measure the
success of any strategy. Tesco should evaluate the changes in the revenues and profits
after adopting the strategies. This will give an idea whether to continue the existing
policies or follow any new strategy.
 Internal Process Quality: It involves measurement of the quality of the operations in
producing or manufacturing the goods and services. Tesco should evaluate that the
standards which are set are fulfilled or not. The actual performance of the business is
measured to check the progress and success of existing strategies.
CONCLUSION
From the above report, it can be concluded that strategies are very essential for every business
to achieve results and success. Tesco can analyse the internal and external business environment
with the help of PESTLE and SWOT analysis. This will help the company in taking important
decisions properly. The organisation can evaluate its capability of resources with the assistance