Tesco's Competitive Strategy: An Analysis using Porter's Five Forces

This case study provides an in-depth industry analysis of Tesco, a British multinational grocery and general merchandise retailer, using Porter's Five Forces framework. The analysis evaluates the threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, and competitive rivalry within the UK supermarket industry. It highlights that the threat of new entrants and bargaining power of suppliers are low for Tesco, while the threat of substitutes and competitive rivalry are moderate. The study also identifies Tesco's main competitors as Sainsbury’s, ASDA, and Morrison's, emphasizing the intense competition and price wars affecting the company's profit margins. By applying Porter's Five Forces, the analysis aims to identify Tesco's strengths and weaknesses, aiding in strategic decision-making and competitive positioning within the market.

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Industry Analysis
This is the evaluation and the analysis of all the important and the specific areas and
branch that focus on the manufacturing, trade and all the services. It is the changing dynamics of
the market and also the general compliance with the adaptive analysis managed to enforce and
maintain the identification of the core weakness and the strength of the company. this helps in
out bringing all the growing patterns, factors and the forecasting with which the industries can
gain growth in the market. Porters five forces is the analytical tool which helps to analyse the
company’s competitive environment as well as the affecting its performance. This Five Forces
focuses on measuring the company’s position like threat of new entrants, threat of substitutes,
bargaining power of buyers, bargaining power of suppliers and competitive rivalry.
Porter's Five Forces framework analysis helps to determine the present position in the
market which is based on factors like competitors, customers, suppliers, financial strength &
alternative solutions. In order to evaluate the core strength, the areas in which the company is
lacking there is required different effective tool with which the management and the competition
can be implemented. This tool provides the strategy which the company will have to opt in order
to manage the growth and also to generate the revenue with which they can frame an established
image of their industry. This tool analyses the factors and the operating environmental conditions
with which the competition in the organisation and all the micro level changes can be opted.
Porter's five forces model is based on the perception of an organisational strategy which should
be consider to encounter the opportunities and threats in the organisation's external settings. In
short Porter's five forces analysis is a framework which attempts to analysis the level of
competition in the industry and develop the businesses strategy.(Dağdeviren, and Yüksel, 2010)
Overview of the company
The organisation chosen in this report is Tesco which is the largest food retailers in the
world, which is operating around 2,318 stores and employing over 326,000 people. It is also
providing the online services to customers through its subsidiary, Tesco.com. Tesco is a British
Multinational groceries and general merchandise retailer. It was founded in 1919 by Jack Cohen
as a classification of market stalls in Hackney, London. Tesco headquartered in welwyn garden
city England. It is the third largest retailer in the world which is measured by gross revenues and
the ninth largest in the world which is measured by revenues. Tesco has stores in five countries
across Europe.

Porters Analysis of Tesco
1. Threat of new entrant- It refers to the Threats of the new competition or competitors to
beat the current players within an industry. In short when the new competitors entered
into the industry and offered the same products and services to the consumers in low cost
then it is risk for the current company. As Tesco is a British multinational retailer
industry which is focused on general merchandise. Which is one of the largest retailers in
the world. The main factors affecting the operations of Tesco is the threat which is by the
new entrants into the market. But for any new entrant it is difficult to set up the store and
starting its operation demands a lump sum amount of capital requirements in UK
supermarkets. Particularly coming into the UK supermarket industry the threat of new
entrants is LOW because of the capital requirement.(Hafezi, and et.al., 2020)
2. Threat of Substitutes- When companies within one industry are forced to compete with
industries which producing the substitute products or services. In other words, Threat of
substitutes refers to the availability of a product which is consumer can purchase instead
of the industry’s services and products. A substitute is defined as a product which is from
another industry that offers the same or similar product or services to the consumer
within the industry. The Threat of Substitutes in the Tesco is MODERATE. As it aims
to fulfil consumer needs and wants. It satisfies their consumer with their product. But as
we know that price is also play a virtual role in the industry for deciding the factor for the
regular customers of the product. If other company offered customer similar products and
services at lower price, then people can may buy from them.(Wen, and et.al., 2021)
3. Bargaining power of Customers- It is the pressure by the customer or consumer for the
product and services which is provide higher quality products and better customer
services at a lower price. This power force is LOW for Tesco as their main objective is to
manage the customers with friendly prices. Tesco offered with high quality products
which any other competitors cannot offered in the industry.
4. Bargaining power of Suppliers- it refers the pressure put on companies by the suppliers
by enormously increasing their prices, lowering their quality and reducing the availability
of their product in the market. This power force in Tesco is LOW, there are so many

suppliers who are usually feeds the retail stores with their products. Tesco has supplies
food and non-food items more than 1000 suppliers. Tesco can easily negotiate the price
of the product while selecting only those that offer products of the high quality.
5. Competitive Rivalry- It refers to the measuring of the competition among existing firms.
Or its the competition between the companies in the same industry or field. This power
force is MODERATE for Tesco. There are four big grocery firms and retailer in UK.
Tesco is one of them. The main competitors of Tesco are Sainsbury’s, ASDA, and
Morrison's which are called the big four firms in the United Kingdom. These competitors
spending lavishly on advertising and also in other market techniques. Tesco is the market
leader, the pressure from the nearest rivals is intense. Likewise, price-wars launched by
Aldi and Lidl are affecting Tesco’s profit margins.
Thus, Porters five forces helps in analysing all the factors through which the company
can identify all their basic weakness and can work accordingly on it. This also helps in
managing the effective management and basic compliance to strategies the conditions and the
significant working procedures.(Oral, and Mıstıkoglu, 2007).

REFERENCES
Dağdeviren, M. and Yüksel, İ., 2010. A fuzzy analytic network process (ANP) model for
measurement of the sectoral competititon level (SCL). Expert systems with applications,
37(2), pp.1005-1014.
Hafezi, and et.al., 2020. Iran in the emerging global natural gas market: A scenario-based
competitive analysis and policy assessment. Resources Policy, 68, p.101790.
Oral, E.L. and Mıstıkoglu, G., 2007. Competitive analysis of the Turkish brick industry—a case
study for developing countries. Building and Environment, 42(1), pp.416-423.
Wen, and et.al., 2021. Artificial Intellegence and Porter's Five Forces: An Integration.