Tesco Strategic Analysis: Resource Capability, Fit, and Options

This report provides a comprehensive strategic analysis of Tesco, a leading global supermarket chain. It begins with a critical evaluation of Tesco's resource capabilities, utilizing RBV and VRIO analysis to identify strengths and weaknesses related to threshold and unique resources. The report assesses Tesco's strategic fit through value chain and EVR framework analysis, examining primary and support activities. It identifies two strategic options available to Tesco, employing TOWS analysis to explore internal and external factors. The report further applies theoretical models to evaluate the feasibility, acceptability, and suitability of market expansion as a strategic option, considering potential challenges during implementation. Ultimately, the analysis aims to provide insights into Tesco's strategic positioning and potential pathways for future growth and competitive advantage. The document is available on Desklib, a platform offering study tools and solved assignments for students.

Strategic
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
LEARNING OUTCOME................................................................................................................1
1. Critical evaluation of resource capability and identification of strengths and weaknesses.....1
2. Strategic fit of the organisation................................................................................................4
3. Identification of two strategic options available to organisation.............................................6
4. Application of theoretical model for feasibility, acceptability and suitability.........................9
5. Suitability, Feasibility and acceptability analysis of Market expansion:...............................11
6. Challenges faced by organisation while implementation......................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Strategic planning can be defined as the process of controlling, monitoring and analysing
all the operational and executional activities so that all the long term business goals could be
achieved. With the help of it a business can become highly disciplined and organised. It is
considered as a bridge between organisational performance and incentives or benefits to the
employees according to their efforts (Bryce, 2017). Main purpose of it is to outline different
decisions and actions which allows a company to attain objectives. The enterprise which is
selected for this project report is Tesco. It is one of the largest supermarkets which are executing
business all around the world and established in United Kingdom. Its headquarter is in Welwyn
Garden City, England. It was founded by Jack Cohen in year 2003.
This report covers various topics such as application of different analytical tools, review
of strategic fit, strategic options available to the organisation etc. Apart from this, application of
theoretical model to evaluate feasibility, stability and acceptability and challenges regarding
implementation are also covered under this assignment.
LEARNING OUTCOME
1. Critical evaluation of resource capability and identification of strengths and weaknesses
Tesco is one of the largest retail stores companies which are operating business all around
the world. There are some capability and resources through which individuals can get to know
about conducting activities. It is important and relevant for managers to determine ways through
which strategies are formulated for proper analysis of industry. So RBV analysis and VRIO
analysis is used.
RBV analysis
There are two different types of resources which are acquired by Tesco and all of them are
described below:
Threshold: All the resources which are required by Tesco in order to meet expectations
of clients are considered as the part of them. With the help of all of them larger market share
could be acquired because it helps to meet expectations of customers. It includes high quality
products, good services etc.
Unique resources: All the elements which are required for a business to compete in the
market and attain long term business goals are considered as unique resources. Tesco is also
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having some of these resources which includes high competitive advantage, strong marketing
activities etc.
Resources Name of
resource
Strengths Weaknesses
Threshold Good
services
Tesco always make sure that all the
services which are rendered to the
clients are good so that their
satisfaction level could be
enhanced.
In order to deliver good
services high man power is
required which creates high
cost of recruitment for the
organisation.
High quality
products
All the items which are sold by
Tesco in It retail stores have high
level of quality which helps the
organisation to attract large number
of customers.
Cost of high quality products
is very high which affect the
market share because lower
class customers are not able to
pay very high amount.
Unique Competitive
advantage
Tesco is having high level of
competitive advantage which helps
it to compete it in the market in
appropriate manner (Hambrick,
2015).
When a company is having
high competitive advantage
then it is very important for it
to remain at this level and it is
creating difficulties for Tesco
because the competitors are
trying to capture its market
share.
Strong
marketing
activities
Strong marketing activities are
beneficial for Tesco as it helps to
aware all the customers to be aware
about different products which are
sold by the company to them.
Cost of conducting marketing
activities is very high which is
creating problem of low
profitability ratio for the
company.
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In order to evaluate resource capabilities of the organisation VRIO model could be used
as it helps managers of the companies to determine such elements which are unique. With the
help of VRIO model, it will be easy to determine which resources are easily available and which
has to be cured, hence it will easy to plan activities properly. It is important and significant for
people to determine and evaluate resources properly and used for organisational performance.
VRIO model: It is business analysis model which is used by managers of companies to
determine their capabilities which can help them to attain growth in future. There are four
different elements of it which are evaluated by enterprises to form strategic decisions for further
improvements (Frynas and Mellahi, 2015). These are value, rare, inimitable and organised. In
order to determine all the unique resources and core competences of Tesco it could be used. All
the components of it, in the context of the entity are discussed below:
Resources Valuable Rare Inimitable Organised
High man power ✓ ✖ ✖ ✖
Profitability ✓ ✓ ✖ ✖
Technological
Advancement
✓ ✓ ✓ ✖
Market image ✓ ✓ ✓ ✓
Valuable: Tesco have various resources such as high man power, productivity, strong
marketing activities, competitive advantage and market image. All of them are valuable for the
company because with the help of them organisation try to reach the long term business goals.
Managers within the enterprise try to maintain them so that it can help to execute all the
operational and executional activities in appropriate manner.
Rare: High man power is not rare for Tesco because there are various other companies
such as Sainsbury's, Waitrose Limited etc. which are having high man power. Other resources of
the company are rare for the organisation because it is not possible for all the entities to generate
high profits, conduct strong marketing activities, attain competitive advantage and establish a
good market image. With the help of all these rare elements managers in Tesco formulate plan
for future growth of the company (Gamble, Peteraf and Thompson, 2014).
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Inimitable: Technological changes are very fast and frequent in TESCO because they
regular analyse market and perform activities through which they can determine and understand
ways to conduct operations properly. RFID technology is initially launched by TESCO through
which there is improvement in their working operations and possibilities of getting higher return
are more. When supply chain is proper and appropriate, then it will be easy for managers to keep
consumers satisfied.
Organised: The marketing activities are not organised by Tesco in appropriate manner
because market situations changes with time which affects the process in which plans for them
are formulated. Market image and competitive advantage are organised by the company in
appropriate manner so that the challenges which may take place in future could be dealt
effectively.
From the above analysis it has been assessed that unique resources and competences of
the company are competitive advantage and market image because all of them are valuable, rare,
organised and inimitable for the company (Ginter, Duncan and Swayne, 2018).
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2. Strategic fit of the organisation
For determining and understanding strategies with which operational efficiency can be
achieved, there will use of value chain analysis (Karadag, 2015). In this study, there will study of
primary and other subsidiary activities through which organisational activities will be completed
within specified time. Value chain analysis is introduced by M. Porter in 1985 which provides
information about all the activities through which operations can be performed properly.
(Sources: Porter's Value Chain Model, 2019)
There is use of different primary and support activities through which organisation gain
good profits. For TESCO there are inbound logistics, operations, outbound logistics, marketing
and sales and services are considered under primary activities. With the help of these activities,
there will complete and specific operations which assist in completing task properly.
While secondary activities are human resource management, procurement, firm
infrastructure and technology which assist in achieving targets. Hence it will be easy for people
to understand and determine changes properly. With both these activities, there will completion
of targets and activities are performed for achieving targets(Jenkins and Williamson, 2015).
EVR Framework
In this model, there is more emphasise on understanding and determining environment,
values with operations and resources which can be provided with working in organisation. It is
important and relevant for managers of TESCO PLC to determine ways through which
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Illustration 1: Porter's Value Chain Model

individuals can perform activities properly. In order to evaluate and making changes properly
through which activities that they can maintain long term existence in society. As there are many
legal regulations regrading providing services, so it will be easy for organisation to sustain in
industry. There will requirement of change in working style, through which environment will get
less affected, value from operations will be more.
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3. Identification of two strategic options available to organisation
There is much scope of growth and development of retail organisation because they are
working in appropriate and specific manner,. It is important and relevant for people to
understand and determine changes properly through which operations are conducted for getting
proper outcome. There is change in business activities also, hence TOWS analysis is used to
study internal factors of the association.
TOWS analysis: It is a tool which is used for the purpose of strategic planning which is
beneficial for the company to reach all the long term objectives of the company (Hill, Jones and
Schilling, 2014). An analysis for Tesco is also conducted which is as follows:
Internal factors
External
factors
Strengths Weaknesses
Opportunities  High competitive
advantage
 Good services
 High quality of products
 Strong marketing
activities
 High cost of marketing,
recruitment and products
could be reduced by
formulating strong
strategies.
Threats  Competitors are creating
difficulties by reducing
prices of their products
due to high competitive
advantage of the
company.
 Continuous reduced in the
price may reduce market
share and number of
customers of Tesco.
SO: As Tesco is having high level of competitive advantage, good quality of products
and strong marketing activities then it can help to attract more and more customers so that
profitability could be enhanced. With the help of it large market area will be covered by the
company.
ST: As Tesco is having high level of competitive advantage so this strength of the
company is creating threat for the organisation because the competitors are reducing price of
their products so that they can capture its market share (Hill, 2017).
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WO: Cost of marketing and other business activities of Tesco is very high. If all of them
are reduced by the organisation then it can help to attract more customers and increase
profitability ratio.
WT: Due to high level of competitive advantage of Tesco competitors are reducing price
of their products which can affect Tesco in future by affecting its market share and number of
customers.
In order to analyse different competences of the organisation value chain and networking
analysis could be used. It is a strategic management tool which is mainly used to asses internal
activities of the organisation. Main goals of it is to analyse the activities which are contributing
in the attainment of competences and competitive advantage (Hitt, Ireland and Hoskisson, 2016).
In Tesco it is also used by managers to determine that the factors which can help to reach long
term business objectives. All the elements of it are discussed in following table:
Primary activities Distinctive
competences
Support activities Competitive
advantage
Marketing and sales Strong promotional
activities
Human resource
management
High level of
productivity
Retail Good quality items
and services
Procurement Cost saving
Operations Customer relationship
management
Technology
development
Enhanced brand equity
of Tesco
Inbound logistics Good management of
supply chain
Infrastructure Attract large number
of customers
Outbound logistics Good relations with
suppliers and other
stakeholders
Global operations Result in increased
profits
By analysing all the above activities discussed in above table it has been assessed that
there are various competitive advantages and competences of Tesco which are acquired by the
company with the help of its primary as well as secondary activities. All these activities are
marketing, sales, retailing, inbound and outbound logistics, operations etc. Support activities
includes procurement, infrastructure, technological development, global operations and human
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resource management. All these activities are beneficial for the organisation because all of them
help the company to attain growth and long term business objectives (Hubbard, Rice and Galvin,
2014).
Business growth and development for TESCO is important because there are many other
organisation operating. So managers of TESCO thinks of understanding and determining ways to
evaluate and understand policies properly. Two different options which are selected by the
organisation are market expansion and penetration.
Market expansion: In present context, the strategy that Tesco is going to utilise for
business expansion in a country like Japan i.e. Market development because this approach is best
fitting in the situation. Strength of this approach is that, a detailed research analysis could help
Tesco in reaching to new heights in specified time frame and might gain competitive advantages
as well. Along side this, it can also be said that utilising this strategy would lead Tesco in
improving customer base and would improvise its market share as well (Lasserre, 2017).
Another reason that came in front of utilising this strategy is that, Japan in present time is
carrying high growth rate and coming under the countries that are looking forward to improve its
economic conditions. With the help of this, it can easily be said that Tesco would launch its
existing (tried and tested) products in Japan. But this is carrying higher risks as well, because
United Kingdom's culture is totally different from Japan and it will be required for Tesco's
research and development department to look into the dynamic market of Japan and then perform
different range of analysis in order to gain the attention of targeted customers of Japan.
Market Penetration: It introduces to the successful selling of a product or service in a
particular market. It is a best and effective growth strategy which will be used by an organisation
in order to introduces its existing products in existing market. It will be follow in developing
accurate strategies to maximise the market share of a specific product or service in existing
marketplace. Along with this, TESCO will be use market penetration as its pricing purpose,
which will be setting the prices from the opening whereby consumer can afford. Currently,
TESCO following discount orientation pricing method by which they target middle segment
market as their target market. In order to increase market penetration, TESCO must attract large
number of customer away from rivals, increase usage by existing customers, encourages non
buyers to buy, gain market share at the expense of rivals, increase usage by existing customers,
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devise and encourages new applications etc. All these are consider as a biggest opportunities for
TESCO to gain competitive advantages within given time period (Morden, 2016).
There are different ways for using market penetration growth strategy in successful
manner. For this, TESCO must use different type of promotional channels such as Facebook,
Twitter, Instagram etc. All these are consider best medium which will help an organisation in
promotion of its existing products in existing market. As it will support an enterprise by
increasing customer base and improving brand image in marketplace as well as in mind of
customer. Along with this, market penetration strategy will be effective for the success and
growth of company. It will further help an organisation in achievement of competitive benefits
within given time duration. Main aim of an organisation for using market penetration strategy is
to improve customer loyalty, customer value and increase market share growth (Morschett,
Schramm-Klein and Zentes, 2015).
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