Introduction to Tesco: Industry Analysis and Strategic Group Analysis

This presentation provides a comprehensive analysis of Tesco's competitiveness in the UK retail market. It begins with an introduction to Tesco, highlighting its market position and historical context. The presentation then delves into an industry analysis using Porter's Five Forces framework, examining factors such as consumer behavior, competition, and the bargaining power of suppliers. It further explores strategic group analysis, categorizing competitors based on their retail strategies and market share. The analysis includes a detailed examination of Tesco's direct and indirect competitors, their resources, and capabilities. The presentation concludes with a summary of the competitive dynamics within the UK retail market and the factors contributing to Tesco's performance. The presentation is supported by various references from academic journals, industry reports, and market data to support the analysis.

Tesco competitiveness
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Introduction
Industry analysis
Strategic group analysis
Competitors’ analysis
Conclusions
Contents

Tesco the internationally recognized retail chain was founded
in 1929 in East London.
Currently, it represents the largest retailer in the UK market.
It is the highest employer in the private job market.
Source: Nwagbara (2010)
Introduction

Tesco is currently dominating the UK grocery market with a 30% market
share (Hassan et al., 2014).
Based on Porter’s Five Forces framework, the industrial factors shaping the
structure of UK retailing sector are analyzed as follows:
Bargaining power of consumers
The consumer behavior has changed over recent years
The emergence of new players and competition among rivals
The market is open for new entrance to take their market share.
Source: (Deloitte, 2018; Tesco, 2018; Rhodes, 2018; Plowman & Rawlins,
2017; Xie, 2013; Office for National Statistics, 2019)
The five forces model of UK retail industry
Industry analysis

Availability of substitute products at a lower cost
Customers look for high-quality goods at a lower cost.
Negotiating power of suppliers
The negotiating power of suppliers is strong, because they deal with
both large retailers and convenience stores as well.
Rivalry
The high competition among rivals is due to similarity and high
quality.
Source: (Deloitte, 2018; Tesco, 2018; Rhodes, 2018; Plowman &
Rawlins, 2017; Xie, 2013; Office for National Statistics, 2019)
The five forces model of UK retail industry
Cont.
Industry analysis

The industry witnesses a high completion that is mainly driven by
large retailers in response to customer needs (Ghrmay, 2017).
The industry structure has reshaped competition in the
recent past
Industry analysis
The nature of competition in the industry
This resulted in an increased purchase behavior from the small
retailers that lack retail labeled products. This trend is expected to
increase in the future (Ghrmay, 2017)

Strategic group refers to firms that follow similar retail strategies that
differentiate them from other groups.
• The large scale players group
It accounts for 75% of the retail sales.
It includes Tesco, Sainsbury, Asda, Morrison and Marks and Spencer.
Source: (Murthy et al. 2013; Rhodes, 2018; Hansen et al., 2013)
Strategic group analysis

• The discounters/ small scale group
It includes (Aldi and Lidl).
This group has witnessed significant growth in its market share over
the last years.
• The least market share Group
It includes companies like Waitrose.
Source: (Rhodes, 2018; Hansen et al., 2013; Millar & Rigby, 2015;
Keeffe, n.d.)
Strategic group analysis
Cont.

• Competition
• Resource position barrier
• IT capabilities
Source: ( Millar & Rigby, 2015; Keeffe, n.d.)
Mobility barriers that restrict movement to most profitable
group
Strategic group analysis
Cont.

Tesco fines brand is the highest important premium brand. It is
directed to direct competitors like Marks & Spencer.
Tesco discounted brands are directed to price-sensitive shoppers to
attract them from convenience retailers who are considered indirect
competitors like Aldi.
Source: (ASDA Group Limited , 2013; Keeffe, n.d.; Zhao, 2014)
Description of the direct and indirect competitors
Competitors’ analysis

Tesco is characterized by resources and capabilities responsible for its
superior performance that are difficult to identify by the competitors.
The strategic business unit (SBU) at Tesco implements complex
activities that are difficult to be replicated by competitors.
Source: (Marcia, 2013; Department for Business, Innovation and
Skills, 2013; Schumacher, 2016)
Description of market commonality and resource similarity with a
chosen SBU and direct competitors
Competitors’ analysis

In the first half of 2018, the UK market witnessed an
inflationary pressure.
Tesco protected its customers against this risk.
The retail market in the UK is highly competitive
The large scale players group accounts for 75% of the retail
sales.
Conclusions

ASDA Group Limited, 2013. Our business @ Asda. UK: ASDA Group Limited.
Deloitte, 2018. Global Powers of Retailing. UK: Deloitte.
Department for Business, Innovation and Skills, 2013. A strategy for future
retail. UK: Department for Business, Innovation and Skills.
Ghrmay, T., 2017. Tesco: Losing ground in the UK case analysis. European
Journal of Business and Management, 9(34), pp.109-17.
Hansen, A., Thelle, M. & Lindén, E., 2013. Barriers to productivity growth in
the retail sector. Denmark: Copenhagen Economics.
Hassan, S., Sistani, A. & Raju, R., 2014. Top online shopping e-companies and
their strengths and weakness (SWOT). Research Journal of Recent Sciences,
3(9), pp.102-07.
References

Keeffe, M., n.d. Fresh food category management: leveraging strategic
options. UK: Agriculture and Food Council of Alberta.
Marcia, M., 2013. Management of the E-retail Supply and Distribution
Network: a Resource-based View of the UK Grocery Sector. UK: The University
of Bolton.
Millar, J. & Rigby, C., 2015. Business strategy and the environment: TESCO
plc's declining financial performance and underlying issues. Review of
Business & Finance Studies, 6(3), pp.91-103.
Murthy, S., Mahalakshmi, M. & Reedy, P., 2013. Conceptual study on
marketing strategies of retailers. Asia Pacific Journal of Marketing &
Management Review, 2(1), pp.62-70.
References
Cont.

Nwagbara, U., 2010. Managing organizational change: Leadership, Tesco and
Leahy's Resignation. e-Journal of Organizational Learning and Leadership,
8(2), pp.30-52.
Office for National Statistics, 2019. Retail sales, Great Britain: January 2019.
[Online] Available at:
https://www.ons.gov.uk/businessindustryandtrade/retailindustry/bulletins/re
tailsales/january2019
[Accessed 20 Oct. 2019].
Plowman, K. & Rawlins, B., 2017. The case for envirocare: Prioritizing
stakeholders for public relations. Case Studies in Strategic Communication, 6,
pp.1-30.
Rhodes, C., 2018. Retail sector in the UK. UK: House of Commons.
References
Cont.

Ryu, J. & Simpson, J., 2011. Retail internationalization: Lessons from “Big
Three” global retailers’ failure cases. Journal of Business and Retail
Management Research, 6(1), pp.1-8.
Schumacher, J., 2016. Competitive dynamics in the wholesale sector: A
qualitative comparative analysis. Berlin: University of Twente.
Tesco, 2018. Strategic report. UK: Tesco.
UK Trade & Investment, 2014. UK trade & investment-International action
plan. UK: UK Trade & Investment.
References
Cont.

Xie, Y., 2013. Information technologies in retail supply chains: A comparison
of Tesco and Asda. International Journal of Business Performance and Supply
Chain Modelling, 5(1), pp.46-61.
Zhao, S., 2014. Analyzing and evaluating critically Tesco’s current operations
management. Journal of Management and Sustainability, 4(4), pp.184-87.
References
Cont.