Business Strategy Analysis and New Product Development for Tesco

This report provides a comprehensive analysis of Tesco's business strategy, covering key elements such as organizational values, mission, vision, goals, and core competencies. It evaluates factors crucial for strategic planning and monitoring effectiveness, emphasizing the involvement of different management levels. The report then delves into generating innovative product ideas, specifically proposing a budget smartphone, and includes an opportunity evaluation using SWOT analysis. The report outlines the stages involved in new product/service planning, from idea generation to development, and highlights market research and prototype development. The report also gives insights into the smartphone market and its potential for Tesco, addressing the challenges and opportunities within the competitive landscape. This assignment is designed to provide a clear and actionable overview of strategic planning and product development within a leading retail organization.

1

Introduction
Set of activities that assists the company in achieving the objectives are termed as business
strategy. Organizations through business strategy identify mission, vision and objectives and
based on these mission and vision develop plans and policies to accomplish the objectives.
Business strategy is essential and important for organization as with proper strategy and plan
business cannot operate successfully. To achieve the objectives of this assignment the
organization selected is Tesco. It is leading retail chain in the UK and operates in different
countries around the world. In this assignment different concepts of business strategy will be
discussed and a new innovative product will be developed for Tesco.
Task 1
1.1 Evaluate the role of organizational values, mission,
vision, goals and competencies in strategy formulation.
Strategic planning can be defined as a process that identifies the strategy and direction of the
company and assigns the resources to achieve the set goals and objectives. It is important to
understand the current situation and future of the company to determine the direction of the
company. Few main elements are included in strategic planning and preparing a strategic plan
without these elements is impossible.
Mission: Mission statements defines the main objective of the company. The purpose of
company’s existence and how is achieves its vision is stated in it. For the company mission
statement is significant and motivates the employees to work as a team to achieve the vision
and objectives of the company. There must be a synchronization between mission stamen and
operation of the company. For instance mission statement of Tesco indicates that its aim is to
offer value to its customer so that lifetime loyalty of these customers can be earned
Vision: Vision statement defines what organization desires to be in future, or the objectives it
wants to achieve in given time period. Usually, vision is developed based on the long term goals
and operations of the company in future. For every organization vision is inspirational and
2

motivating. For example the vision statement of Tesco defines that it wants to be highly valued
by the customers and communities in which it operates, by the employees and other important
stakeholders.
Goals: The desires of the organization are its goals or it is a particular target. Goals are short-
term objectives of the company and are used to assess and review the performance of the
organization. Goal can be defined as the ultimate destination that an organization wants to
achieve. Goals are developed by the top management and are communicated to all the
employees of the company. Strategic plan are then developed to achieve these goals. For
instance in Tesco the top management develops the goal and plans for accomplishing the goals.
Employees then according to the developed plans. When developing goals of the organization
management must align the personal goals of the individuals with the organizational goals.
Objectives: Objectives and goals are often treated as one and as synonyms by managers most
of the time, however they are two different concepts. Objectives can be used by the
organizations to measure the progress needed to reach a specific target. On the other hand
goal provides the detail of the target. Steps necessary to achieve the goals are the objectives.
Hence it can be said that objectives are part of goal however goals cannot be considered as a
part of objective.
Core competencies: Core competencies helps the achieving the success of the company.
Company gains competitiveness through its core competencies. Competitiveness helps the
company to successfully penetrate the market. For companies like Tesco, customer service and
effective processes are the core competencies. For manufacturing companies core
competencies can include manufacturing process, supply chain, effective procurement
procedure and product development. Core competencies provides cross functional business
process hence they are necessary element for organizations to achieve success. Cost, quality
and outcomes must be measured by the cross functional business process.
3

1.2 Choose/select an organization and analyze factors to
be considered when deciding its strategic planning and
monitoring of effectiveness.
To achieve the goals of the organization strategic planning is significant as they direct the ways
to reach the targets set by the company. Strategic planning has some important factors and
these factors must be analyzed properly and must be prioritized based on time and importance.
Members involved in planning process
All the members within the company must be involved in the planning process. Involving all the
members helps in covering all the areas in the planning process and also helps in effective
development and implementation of the plan. Planning process is performed by the top
management of the company and middle management executes the plan (Batt and Nohara,
2009). Daily operations are performed by the low level employees to accomplish the goals and
objectives of the company.
 Top level: Senior executives are included in the top level and they develop plans in
Tesco. Different factors like employee engagement, organizational growth and
development are considered by them. In planning process important role is played by
the senior management level.
 Middle level: Middle level management is responsible for the implementation of the
plan developed by the senior management. To effectively execute the plan middle
managers ensures that there plans are effectively implemented within the company.
 Lower level: In the planning process lower level employees are also involved as they
perform daily operations related to the plan which are directed by the middle managers.
This operation include, purchasing, inventory management and production etc.
Short term and long term targets
Tesco Long term objective is to constantly meet the needs of customer by obtaining their
perspectives about innovation, product quality, store services and facilities and choices and
accordingly take actions. To provide customer with products and services at an affordable price.
4

Tesco Short term target is to develop the skills and capabilities of the employee’s by training
then and also develop the core competencies of the company.
Appropriate timing for the planning
Planning is a continuous activity however plans must be developed within a specific time. In the
planning process all the objectives are separated in short, medium and long-term objective so
that all objectives must be achieved in time.
Task 2
2.1 Generate ideas for an innovative product or service.
Focus on the following key steps:
Idea generation
Idea generation can be defined as process through which new creative ideas are identified by
the company to develop innovative product and services. In idea generation many ideas are
brought up in group discussion, then good idea or ideas are selected, plans are developed to
implement the idea, and feasibility of the idea are assessed. The ideas generated at this stage
can be either tangible (something that has physical presence and can be touched) or intangible
(something that cannot be touched). Techniques like brainstorming can help the company in
creating many ideas for the new product or service of the company. Ideas are not assessed or
analyzed in the brain storming stage. Hence employees can freely and easily share their ideas
without fearing critics. In brainstorming all ideas good or bad are accepted.
Tesco is willing to introduce to introduce new innovate product or service, this the idea of
launching a budgeted smartphone is generated. The budgeted smart phone of Tesco will
compete with the leading brands in the smart phone industry like Apple and Samsung. The
operating system of Google android will be used by the Tesco Smartphone. Other built-in
service that will be included in the smartphone are Blinkbox, movie and music streaming and
internet shopping and may more.
Touchscreen smartphone were invented and are being used by people for just nine year,
however it has already completely penetrated the market. Societal and commercial impact of
5

Smartphone was massive and no other personal device had such impact. At initial stage Tesco
smart phone will be launched in the UK only and will also operate in UK only. The current
trends in the mobile industry were analyzed by the UK mobile consumer survey and some of
the main findings are listed below:
 Individuals belonging to the age bracket of 18-24 years have a habit of checking the
mobile at midnight.
 Fingerprint reader is included in 27% of smartphone and 76% individuals use these
fingerprint reader.
 2% of adults own smart lights and smart appliances, this indicates that connected home
devices are still used by majority of people.
 By the mid of 2016, half of the adults in the UK had access to one entertainment
product or service.
 The adoption rate of 4G doubled from 25% to 54% in 2016.
 No traditional voice calls are made by 31% smartphone user. This percentage was 4% is
2012.
 The users of smartphone are expected to grow to 45m in 2017.
Opportunity evaluation and SWOT
SWOT analysis is a strategical tool that is used by the organization to assess its internal strong
points and weak points and external opportunities and threats.
Strength
Strengths are internal traits and resources of the company that provides it advantage over its
competitors in the industry.
 Products and services offered by Tesco are innovative and have unique design.
 Low cost of production allows the company to compete on price in the industry.
 Good image and reputation of the company due to its focus on the environment
 Market share of Tesco is large
 There are many loyal customer of Tesco.
6

 In its day to day operations Tesco follows industrial standards
 Inventory management system of the company is strong and effective
Weaknesses
Weaknesses are the internal attributes that can negative influence the company and its
operations. They can also reduce the competitiveness in the market.
 Tesco does not have its own operating software
 There is too much variation is the product
 Lack of focus on core competency of the product
 Strong competition is faced by Tesco in smart phone industry from leading companies
like Apple.
 profit margin are low
Opportunity
Opportunities are the external factors that can be exploited by the company and can help in
gaining sustainable competitive advantage.
 The market of smartphone is raising
 Growth in the industry due to increasing interest of people in portable devices
 The demand of quality processors is growing rapidly
 Patents can be gained through acquisition.
Threat
Threats can hinder the business and operation of the company and are mainly external factors.
Threats like weaknesses can decline the competiveness of the company in the market.
 The growth rate of smartphone market is slow in developed countries
 Changes in the technology are taking place rapidly
 Intensive level of competition
 In hardware production margins are declining.
7

New product/service planning
There are different stages involved in the development of new product, which are discussed in
detail below:
The Idea: The first step of product development is the idea. Idea can be simple that leads to
development of new product that is similar to current products of the company or it can be
unique or revolutionary. For example the idea of smartphone by Tesco is unique and
revolutionary. Product ideas can be generated by seeking the help of employees, particularly
the employee who often interact with the customer. Customer survey can also be performed
from creating new idea as it helps in understand the needs and wants of the customers.
Organizations can also research the market to see if there are any gaps that can be fulfilled by
new product development. Companies like Tesco can use social media to perform online survey
of customers. In the process of idea generation many ideas can be developed however
management must assess all the ideas and pick only good ideas and drop bad ideas.
Research: After selecting the best idea/s the next step that Tesco must follow in search the
market. Marker research will help Tesco is better understanding of the industry and customer
expectation. Needs and wants of the customer can also be assessed by the company through
market research
Development: Development of the product is the next stage of new product development.
Prototypes are develop which can be modified until the manufacturing stage so that finished
product is the one that customer is willing to buy.
Testing: Before the product is actually launched in the market, new product is tested within
small group of customer. This helps in testing the viability of the new product and any
modification that must be made in the final product.
Analysis: Results of the testing in the previous stage are analyzed and necessary changes are
made if necessary. These results are also used to develop marketing strategies of the company.
The company decides how the new product will the introduced in the market. Pricing and
promotion strategies are also decided at this stage.
8

Introduction: Introduction is the last stage in which the product or services are introduced in
the market and are available to the customers. After the product is launched in the market,
Tesco must effectively manage the product life cycle
Market research for the new idea.
There is a rapid growth in the smartphone industry. In next two year the smartphone market of
the UK will succeed with increase in the unit sales set by 5.5% to 25m in 2018. In 2015 the sales
of smartphone was 23.7m which increased to 24m in 2016 and these figures are expected to
rise by one million in the coming two years. By the end of the 2017 it is expected that UK will
be ranked as fourth valuable market by worth of $13.1bn just behind India ($ 14.8bn), japan
($16.2bn), US ($70.0bn) and China ($117.8bn). 71% of overall market was accounted for the
sale of 4G unit in 2015 in the UK. This reached 77% in 2016 and is expected to reach 82% this
year and 91 % next year.
In 2015 73% was the penetration of smartphone in the UK and is expected to increase to 76%
by the end of 2017. This means that smartphone will be owned by more than three quarter
users.
In the UK most rapidly growing market will be the SIM-free market. In 2016 3miilion units were
sold.
Market Share
99.1% of the smartphone market is accounted for the iOS and Android. With Android leading
the market. Window 10 Mobile make 0.6% of the market where as BlackBerry OS makeup 0.1%
of the market. Even tough new phone are still being made by Window, this platform is being
backed out ty Micro sot. At the same time Blackberry is developing Android devices which are
bundled with the legacy application of BlackBerry. However the smartphone market is being led
by the Apple and Google.
9

TASK 3
3.1 Identify, then evaluate a target market for the new
product and select an appropriate market segment.
Target Market
Wide range of customers use smartphone in daily activities which can be targeted by Tesco. The
main target group of Tesco for the smartphone will be customers falling in the age group 20-50
as they are well aware of the functions of smartphone. Whereas people in older age find it
difficult to adopt new technology.
Young Generation to early adults from age 14 to 25 years will be the target market of Tesco
smartphone as this age group is technology savvy. The spending power of this age group has
increased from the power they had in past.
Large portion of target market for the smartphone of Tesco can be formed by the Adults
belonging to the age group 26 to 50 years. This target group are more capable of procuring the
products and service of purchasing the smartphone of Tesco. In coming years there will be an
increase in this target customer.
10

SEGMENTATION:
Market Segmentation is one of the main principle of marketing. In segmentation entire market
is divided in groups of customers. Within the group the individuals are similar to each other and
two groups differ from each other. Different types of segmentation strategies are used by the
organizations. Two best segmentation strategies for Tesco smart phone is demographic and
behavioral segmentation. These are discussed in detail below:
Demographic Segmentation
Age: customers can be segmented based on their age. For Tesco smartphone teens, young
adults, adults in early and mid-30’s will be the age segment targeted by Tesco.
Income: The individuals from middle and high income class will be income segment of Tesco.
Family Life: In this segment young single, married or divorced with and without children will be
targeted.
Gender Segmentation: In this segment both males and females will be targeted as smartphones
are not gender specific.
Psycho graphic Segmentation
In physiographic segmentation the Tesco will target individuals in teens to late 30’s who adopt
new technology and have the financial resource to buy it.
3.2 Construct a sound business proposal for the new
product/service.
THE COMPANY
Grocery retail stores are operated by Tesco Plc. Tesco also operates in retail banking, financial
and insurance industry. Tesco operates in different countries including UK, Turkey, Poland,
Slovakia, Republic of Ireland, Hungary, Thailand, Czech Republic and Malaysia. Tesco considers
that innovation is most essential element for gaining and retaining customers along with the
success of business. Tesco focuses on the innovation of both product and the process. The
focus of Tesco in managing the margin is the key element of innovation at the company. Low
11

prices are offered by the company by efficiently managing all the processes. New innovation of
the company is smartphone.
THE PRODUCTS
The product line of mobile phone at Tesco will include different versions and designs of
smartphones and different mobile phone accessories like ear sets, headphone, holsters and
cases.
CORPORATE STRATEGY
Corporate strategy of Tesco has five key elements. These elements are filling the diverse needs
of customer in one place, in the market getting a head start, developing a brand identity rapidly
, forming strategic alliance with OEMs( original equipment manufacturer, effectively main the
website traffic and lower the operating cost by using external service provider and CRM
solutions and cloud ERP.
MISSION AND GOALS
To lead the smart phone industry through cost leadership by 2018. Tesco Smartphone objective
is by 200% increase the revenue from this product line in next five years.
ORGANIZATION AND MANAGEMENT
This product line will be managed by separate department with five key employee who will
report to the head of the department. The hierarchical presentation of this department is given
below:
12