PGBM16: Corporate Global Strategy Assessment - Tesco Analysis

This report provides a comprehensive analysis of Tesco's corporate global strategy, focusing on its approach to external innovation, internationalization, and localization. The analysis incorporates Porter's diamond model to evaluate external innovation strategies, exploring factors such as factor endowment, related industries, demand conditions, government influence, and chance. It critically assesses the merits and demerits of internationalization and localization, considering factors such as market adaptation, customer satisfaction, and supply chain complexities. The report also examines Tesco's leadership principles and their impact on the organization's strategic direction, including the role of the CEO and senior leadership team in driving organizational performance. The report concludes with recommendations for Tesco to maximize profitability through a low-cost leadership strategy, emphasizing supply chain adjustments and local market engagement to enhance customer satisfaction and international sales. Secondary sources, including company websites, journal articles, and books, support the analysis and provide a basis for personal reflection on the overall assessment.

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Corporate global strategy
Tesco

CORPORATE GLOBAL STRATEGY- TESCO 1
Executive summary
The purpose of the report is to critically evaluate the corporate global strategy of the Tesco. With
the global strategy, it will evaluate how external innovation, internationalization, and localization
help the company to increase the profitability of the organization. The report will cover the
porter’s diamond model to evaluate external innovation. It will also provide the benefits and
limitations of internationalization and localization for Tesco. In addition, it will cover the
leadership theories and principles to understand the CEO and higher leadership team’s strategy
towards the organizational purpose. Personal reflection will demonstrate the knowledge of this
overall assessment. The overall assessment will be covered by the secondary sources which will
include the website of the company, journal articles, and books.
Contents

CORPORATE GLOBAL STRATEGY- TESCO 2
Introduction.................................................................................................................................................3
Question1....................................................................................................................................................4
Factor endowment...................................................................................................................................6
Related and supporting industries............................................................................................................7
Demand conditions..................................................................................................................................7
Governments...........................................................................................................................................8
Chance.....................................................................................................................................................9
Question2....................................................................................................................................................9
Recommendation...................................................................................................................................10
Reasons.................................................................................................................................................11
Question3..................................................................................................................................................11
Strategic management of Tesco.............................................................................................................11
Leadership team....................................................................................................................................12
Question4..................................................................................................................................................14
Reflection..............................................................................................................................................14
Conclusion.................................................................................................................................................16
Bibliography..............................................................................................................................................17

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Introduction
In this modern world, every business owner thinks to expand the business to a global extent.
However, this seems challenging for many businesses. A global strategy helps the company to
compete in the global market and expand through collaboration with the external environment
factors (Cuervo‐Cazurra, 2019). Overall an organization pursues global strategy when they want
to expand the business internationally. A global strategy includes various terms such as a wide
and detailed plan for how a business can be successful at the international level (Cuervo-Cazurra,
2019).
Tesco is the Leading multinational organization operates internationally, which is founded in
1919. The organization is the grocery retailer and has various stores globally as well as engages
in the wholesale business. Additionally, its activities include retail banking and other insurance
services. Tesco mainly based on the UK. The organization operates through 6800 stores globally
and also conducts sales transaction online. AS a leading retailer the organization has 450000
international colleagues (Tesco, 2019).
The main objective of the report is to understand the Tesco’s corporate strategy that assesses the
open innovation with the support of porter’s diamond model. It will critically analyze the merits
and demerits of meeting the demand for internationalization and localization and also provide a
recommendation to the company to maximize the profitability. In addition, the report will also
include Tesco’s business purpose and social responsibility and how leadership team direct
organizational performance with the great leadership style. It will also cover the personal
reflection of the understanding of the overall strategy and including limitations and benefits of
external innovation, internalization, organizational purpose and contribution of the senior
management in increasing the profitability.

CORPORATE GLOBAL STRATEGY- TESCO 4
Question1.
Open innovations are those innovations which opening up beyond the company. Which’s
purpose is to develop the company’s innovation strategies through the strategic use of the
external environment. While on the other side closed innovation is only developed by the
organization it and the area of the innovations are within the company. Many organizations are
investing in their research and development department to develop and establish closed
innovations (Chesbrough, 2018).
However closed innovations are less productive than open innovations as internal factor plays a
minor role and market trends are more important. Hence while comparing the internal and
external factors, externals are more important to collaborate and they can create long term
advantages (Thomas, 2018).
When it comes to Tesco, The Company produces open innovation through its collaborative
strategy with the suppliers and other subsidiaries. Also, the organization develops these
innovations with the interaction with the internal and external sources. For instance, the
company strengthens the relationship with its partners, supplier’s government and employees.
With the closed innovations, Tesco has a research and development team that helps Company’s
closed innovations; for instance, develop the technology to produce various solutions (Tesco,
2019).
Porter’s diamond model assessed some factors that impact the organization overall strategy, here
are the factors:

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Factor endowment
As the factor endowment theory states that various countries have different ratios for labor to
capital, and can have a comparative advantage with which it is heavily endowed (Luong, 2018).
Hence Tesco will have more opportunity to invest and funding in such a country which has a
comparative advantage in terms of money land and labor. It straightly affects company approach
to external innovation as the company would invest in large factor endowment country.
However, the theory does not assess the legal factor. In some cases, high Factor endowment
countries have huge legal barriers for instance if a country has a large amount of human resource
and land may have various legal norms. Hence Tesco also has to identify the large factor
endowment country with the least legal barriers to drive the external innovations.

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Related and supporting industries
Collaboration with the partners and suppliers across countries helps companies to drive the
external innovation (B2U, 2018). According to the report of the company strategic relationship
with international suppliers supports the company to invest in improving the quality and value of
products. This helps the company to increase the efficiency in the supply chain. The company
has 358 suppliers across countries with 1800 products (Tesco , 2019). A great relationship with
suppliers and other industries the company makes its products healthier and sustainable. This can
be seen that this straightly impacts the company’s external innovation.
However, this leads to create issues for the company as some time as due to strong competitions,
the relationship between partners and supplies gets affected and this lead to create many
challenges. There are language difficulties and diverse business culture brings issues. To Deal
with different countries, the leaders of the Tesco has to change the entire thinking and way of
communication. Else this can cause offense to the supplier; and as result, this leads to create
dramatic issues. Also, diverse legal and regulations practices will impact the innovation of the
company (Dubey, 2019).
With the comparison of the positive and negative impacts, more benefits drive external
innovations.
Demand conditions
The presence of sophisticated demand conditions also forces company to bring innovations and
improve quality (Fang, 2018). The priority of the company is to serve a better experience to the
customer first and in order to do that the company fulfill the customer's demand. In the report of
the company, it is stated by the leader that the company continues to focus its customer on

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providing better quality and service. To meet the customers’ expectations, the company develops
the products, as according to the report Tesco relaunched more than 10000 products in the UK.
This includes 8 new products in Tesco. And customer of the company responded very positively
about the innovated products. Apart from that the company also asks feedback from the
customers this also helps the company to make amendments as per the demand of the customers.
Hence demand conditions of the local an international customer also straightly impact the
company’s external innovations (Tesco, 2019).
However, there are various challenges the company has often face. A larger market creates a
huge challenge, for instance, the company has a large number of stores in various countries. This
lead to an increase in the customer base of the company and larger customer base with the
different culture and perspective lead to increase the issues (De Mooij, 2019). The company has
to make amendments with the products according to the demand of the different segment.
Yet it can be concluding that demand condition leads to creates various opportunities for the
company to grow in the international market and grow by increasing the better quality of service.
Governments
The role of Government in driving the external innovation is not that important yet the
government must encourage Tesco to serve better service and innovate their product. They also
help in raising aspirations and move forward to a larger market. Tesco collaborating with the
government for many years, in 1930 the government help Company on some point for equality.
Tesco collaborate with government by fulfilling social responsibility. In order to fulfill the social
requirement and changed the packaging system for a sustainable environment. To achieve this,
the government plays an essential role (Tesco, 2019).

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However, with the regulatory framework and changes in government lead to creating various
loop hole and company has to change the strategy with the external innovations (Santini, 2018).
Strict regulatory framework of different countries let Tesco create a different strategy for every
subsidiary. For instance, the Thailand market of the company is highly competitive and
challenging due to government welfare cards. And this impacted company’s sales in Asia by 1.2
percent (Tesco, 2019).
Yet the company is continues to engage with the government and regulatory bodies and
contribute the essential environmental laws. And by fulfilling, Tesco is serving the great brand
image.
Chance
Chance defines those opportunities that arise due to sine natural events or disasters. This can
negatively impact or benefit the country (B2U, 2018). For instance, Brexit impacts the company
huge time as Brexit-driven a collapse in the pound is forces high prices. Hence these events are
not in the control of the governments and company. This discontinuity leads to creates benefits
and limitations as well. Hence this impacts the company external innovation straightly.
Question2.
There are various merits of meeting the internationalization demand For instance; the company
has 6800 stores in various countries. Tesco does not need to assess the every country culture and
their choice and also they do not need to invest the huge fund in the development of the product
and the store according to the choice of the local people. However The Ghana model of
internationalization and localization states that it is difficult to gain the profitability without
understand the local market to expand the business (Dodgson, 2018). On the other hand with

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localization also have the merits as the development of the product according to local people’s
choice leads to an increase the customer satisfaction which will help increasing the international
sales. Also this requires large funding in demand planning.
However, there are various demerits of the internationalization that affect the sales of the
company. For instance, if Tesco would adopt the internationalization, that might affects the
company’s profitability as every country culture has a different choice, perspective, and thinking
(Saito, 2018). For instance, if Tesco would sale the nonveg food in all countries, then the sales
would be lower in those countries where the majority of people are vegetarian.
Also with localization the company has to invest a large amount of money to understand the
county’s culture which can be lengthy and costly to the company to adopt the localization. Also,
one more demerit is that the company has to forecast the demand of the various countries and
forecasted demand is most misunderstood and often has uncertainty, hence it leads to increase
the complexity in the various processes such as supply chain, import and export as well (Zhang,
2018).
Recommendation
However, the company needs to adopt a strategy to meet the localization demand with the
utilization of low-cost leadership. Low-cost leadership strategy allows the company to sell its
products at a lower price (Eva, 2018).
Tesco has various stores in different countries hence the company needs to make changes in the
supply chain process. With the low-cost leadership, the leaders have to assess the local market
and then they have to buy material at a lower rate from the local SME’s. The company can
collaborate with them and can gain knowledge of the local market so that the products can be

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developed according to the local demand. Also, the company can hire low skilled labor and then
trained them rather than hiring experienced staffs. These strategies help the company to reduce
the operational cost hence this enables the company to allow the customer to purchase cheap
products. Also providing cheap products can create demand for the products. Hence this leads to
an increase in the increase the international sales and products profitability in return.
Reasons
(1) The company can provide the products according to local customer demand and meet their
requirement. Also, localization demand leads to create mutual understanding and it is the way
that the Tesco can show that they care about the choice of the local customer and this can help
Tesco to build trust. Also adopting the local culture to develop the product can increase the local
customer satisfaction (Dodgson, 2018)
(2) Risk reduction is the major reason for adopting this model of demand. With the
internationalization, the company create culture conflicts and also various other cultural issues,
for instance in some countries like India people worship the cow and there are various selling
beef is banned in India. Hence it very essential for the company to adopt the localization while
expanding the business in the local market and this will only help the company to increase
organizational profitability (Dodgson, 2018).
Question3.
Strategic management of Tesco
Tesco’s core purpose is to serve a little better each day. The organization has the mission to be
the choice of the customers by helping them and providing them better quality service and make
their life easy. It also has the purpose of deliver service in a way so that they can meet the

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exactions of the customers (Tesco, 2019). With corporate profitability, the company has a strong
financial image with the increment of the profit ratio. The company’s operating profit is for the
year 2019 is around 2bn euros. And the groups operating margins reached at 3.45 percent. The
Balance sheet of the company states strong data on profit (Tesco, 2019).
In order to keep the value of the company and sustain the profitability for long-term, the
organization develops the strategy with the organizational setting. And many authors state that
the application of strategic management includes fulfilling the environmental responsibility
which is based on the social and political process by which the company commits and influence
the purpose (Ansoff, 2018).
It can be said that the Tesco serve strong profitability by establishing the best principles of
management. The company has teams which play an essential role in terms of social
responsibility. According to the report, the company has a code of conduct which helps it to
fulfill the social norms and serve an ethical environment. And with corporate governance, the
company directs its leaders and stakeholders to shares the company’s ethical culture and values
(Mintzberg, 1998). And corporate responsibility committee contributes to social responsibility
(Tesco, 2019).
However, sometimes the management of the company failed to deliver the objectives and many
leaders are exploit the guidelines and employees often face illegal behavior at the workplace. As
a result, this leads to an increase in the unethical environment.
Leadership team
The leadership team and Dave Lewis (CEO) established effective management and stewardship.
The chairman promotes the culture of openness and effective communication between