M115LON: Strategic Management Report on Tesco's Strategies

This report offers a comprehensive strategic analysis of Tesco, a leading British multinational retailer. It begins with an executive summary and introduction, outlining Tesco's operations, strategies, and financial standing within the competitive retail industry. The report examines the state of the UK's retail sector, highlighting the impact of economic factors on consumer behavior and market share. It then delves into Tesco's market strategies, including its focus on product development, diversification, and market penetration. The Ansoff Matrix and BCG Matrix are used to evaluate growth opportunities and portfolio management. The report assesses the suitability, acceptability, and feasibility of Tesco's strategies, and concludes with recommendations for future strategic direction.

Running head: STRATEGIC MANAGEMENT
Strategic Management
January 4
2019

STRATEGIC MANAGEMENT 1
Executive Summary
An organization requires direction such that it can have a plan to arrange its key activities. If
the company does not set the objectives by the process of strategic management, then it
means the company is operating is a reactive mode. The strategic management is used to plan
principles and arrange a course for the business and to invest the resources of the business in
different ways that will support in attaining the objectives. Concentrating on the direction
also support in reducing wastage. The intent of this study is to represent the strategic
direction of Tesco in the competitive market. The study has presented the company’s
operations, strategies, financial situation, and the state of the sector in which it is operating. It
has evaluated the strategies of the company in terms of suitability, acceptability, and
feasibility.

STRATEGIC MANAGEMENT 2
Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
State of Retailing Industry.....................................................................................................3
Strategies of Tesco in Market................................................................................................3
Strategic Position of Tesco in Retailing Industry..................................................................5
Market Share......................................................................................................................5
Investors’ Expectations......................................................................................................6
Ansoff Matrix.........................................................................................................................6
Product Development Strategy..........................................................................................7
Diversification Strategy.....................................................................................................7
Market Penetration Strategy...............................................................................................7
Market Development Strategy...........................................................................................8
BCG Matrix............................................................................................................................8
Cash Cow...........................................................................................................................9
Stars....................................................................................................................................9
Question Marks..................................................................................................................9
Dogs.................................................................................................................................10
SAFe Framework.................................................................................................................10
Suggested Strategy 1........................................................................................................10
Suggested Strategy 2........................................................................................................10
Suitability.........................................................................................................................11
Acceptability....................................................................................................................11
Feasibility.........................................................................................................................11
Conclusion................................................................................................................................12
Recommendations....................................................................................................................12
References................................................................................................................................13
Appendix..................................................................................................................................16
Appendix 1...........................................................................................................................16
Appendix 2...........................................................................................................................16

STRATEGIC MANAGEMENT 3
Introduction
Tesco Plc. deals in general merchandise and groceries business as a British multinational and
traded as Tesco. The United Kingdom is the location selected by the company to place its
Headquarter. In 1919, the company was introduced in the market. In the world, Tesco is
known as the third leading retailer in case of gross revenue and the ninth leading retailer in
case of revenue (Tesco Plc., 2018). Tesco possesses shops in seven countries across Europe
and Asia. The segment of Tesco comprises Republic of Ireland and the United Kingdom. The
brand portfolio of the company comprises Everyday Value, Technika, Finest, and Chokablok.
Every day and Finest are the two United Kingdom’s brand of the company. The key
competitors of the company are Sainsbury’s, ASDA, ALDI, etc. Tesco’s annual revenue in
Northern Ireland and the UK in 2017/2018 amounted to around 45 billion British pounds
(Statista, 2018).
State of Retailing Industry
In 2017, the entire retailing sector of the United Kingdom reflected a slow and steady growth,
because of the influence of Brexit referendum. The succeeding economic ambiguity led
numerous customers to control their spending habits because they have become price
sensitive. The key retailers of grocery continued to remain at the foremost position in the
retailing industry during 2017 (Euro Monitor International, 2018). However, Asda and J
Sainsbury have lost their market share due to increasing competition from the online players
and discounters.
Strategies of Tesco in Market
A strategy is said to be a plan that helps in setting the deployment of resources to attain the
objective. Some of the implemented strategies of Tesco are:

STRATEGIC MANAGEMENT 4
7 Part Strategy Focus and Tactics
To become an inventor of extremely
valued brands
This comprises creating its private label
brands like Tesco Finest and F&F clothing in
order to offer consumers quality services at
reasonable prices.
To increase the number of retail services
in every target market
In 2012, earning revenue of around £1
billion, Tesco Bank is a principal portion of
the potential for forthcoming development in
the services of retailing.
To develop the United Kingdom core This comprised increasing the number of the
workforce to around 20,000 in two years,
renewing prevailing stores, and presenting
more campaigns. The key motive of this
strategy is to make customers feel respected.
To become the strongest player in all the
areas it serves
Food is the heritage of Tesco but the
company is constantly diversifying its
product range, by adding numerous types of
services and products in its online and in-
store.
To place their accountabilities to the
societies they serve at the heart what they
do
In 2011, Tesco shifted its complete focus
towards the development of the society with
the help of “Three Big Ambitions’ program
(Business Studies, 2018).
To become an outstanding worldwide
retailer at the online platform and in
In 2012, the global business of Tesco
generated around 30% profit of the group, the

STRATEGIC MANAGEMENT 5
stores new strategy comprises opening up around
fifty new stores of F&F franchise in the next
5 years in Saudi Arabia, Azerbaijan, Middle
East, Kazakhstan, Armenia, and Georgia.
To develop a team to create more value The key asset of Tesco is its people, who
comply with all the values and rules of the
company to serve customers with the best
offering. In order to be highly valued, the
company has promised to offer effective
training in all the areas (Business Studies,
2018).
Strategic Position of Tesco in Retailing Industry
Tesco is placed at the healthiest position, among four big supermarkets with quarterly sales
up 2.2% yearly. This reflects that the market leader outperformed from its competitors i.e.
Morrisons (up 1.4%), Asda (down 0.1%), and Sainsbury’s (up 1.2%) (Gwynn, 2017).
However, there is different KPI of Tesco that assists in evaluating the position of the
company in the market in comparison to its competitors that are:
Market Share
Tesco and Morrison reflect diverse characters in the industry of grocery retailing. As Tesco
perform as a leader of the market among all the players, its price of the share represents how
they affect the entire grocery market. On the other side, Morrison performs, as a follower in
the market may act vulnerable in front of Sainsbury and Tesco.

STRATEGIC MANAGEMENT 6
From the last 25 years, Tesco is the leading retailer in the grocery market of United Kingdom.
It owns around 3000 stores in the market of UK, and take up around 28% market shares
(Tesco Plc., 2017). Tesco offers diverse grocery services to fulfill diverse demand, which
comprises supermarket, hypermarkets, convenience stores, and superstores.
Morrison is comparatively vulnerable to Tesco and Sainsbury. It is presently a follower in the
market because of its low market share.
Investors’ Expectations
As one of the key chain of supermarkets in the United Kingdom, Morrison offers
comparatively fewer assortments of products to its customers, ultimately results in
moderately low investors' expectations. Morrison's initial entry to the market of a
convenience store was around a half-decade behind from Sainsbury and Tesco. Moreover,
like Tesco, Morrison has yet not developed its online store of grocery, which is considered to
be very essential in today's market.
Ansoff Matrix
Ansoff Matrix is majorly used for strategic marketing development where it could be applied
to recognize the possible opportunities to increase revenue for the organization by
introducing new products or entering into new markets. Therefore, in place of Ansoff Matrix,
it is many times called as ‘Product-Market Matrix’ (Bachmeier, 2013). This strategy is
majorly concentrated towards the growth of the business, which reflects that it is the most
broadly utilized model of marketing. In addition, it is also used to analyze the present
opportunities for the company in the existing or new market in order to increase sales. The
Ansoff Matrix is comprised of four strategies that are product development strategy,
diversification strategy, market development strategy, and market penetration strategy (Craig
and Campbell, 2012). (Refere to Appendix 1)

STRATEGIC MANAGEMENT 7
Product Development Strategy
In product development strategy, business put its efforts to make new products aimed at
existing markets to attain growth (Ansoff, 2019). Tesco is presently offering a broad range of
product portfolio in its existing market by giving strong competition to its rivals due to this it
is able to attain a leading position in the industry.
Diversification Strategy
Under diversification strategy, a business put its efforts to increase its share in the market by
establishing new products in the new market. It is considered as one of the riskiest strategies
since both market and product development is essential (Ansoff, 2019).
Market Penetration Strategy
Under market penetration strategy, the company attempts to grow by utilizing its existing
products in the prevailing markets. In other words, it attempts to upsurge its share in the
market in the current scenario of the market. This comprises a growing market share in the
existing segments of the market. This could be attained by bending extra products to existing
consumers or by identifying new customers in the existing markets. At this point, the
organization looks at increasing the sales of its existing products in the existing market with
the help of aggressive distribution and promotions (Gianos, 2013)
Tesco is the leading organization of the United Kingdom's grocery and retail industry. It is
offering a variety of products to target almost all customer segments, which support it in
increasing its market share as well as sales (Reuters, 2018). Tesco must try to shift its focus
towards enhancing its advertisement and different promotional activities in order to attract
more and more customers. The company must market its product quality at affordable prices
in the promotional campaign such that customers can get aware of the present offering in the
market.

STRATEGIC MANAGEMENT 8
Market Development Strategy
In the strategy of market development, a company attempts to expand its operations in new
markets by using its existing products. This could be attained by diverse consumer segment,
industrial customers for a product that was formerly vended only to the households, new
country’s regions or areas, and international markets (Chartered Institute of Management
Accountants, 2014).
Presently Tesco is performing effectively in the market to remain at the leading position
among all the supermarkets. However, in the coming future, it will be very tough for Tesco to
maintain its leading position due to the entry of new companies and intense competition from
the existing players in the market. Hence, in order to maintain the leading position and
increase market share, the company must adopt a market development strategy. The company
can expand its operations in the Singapore market due to the presence of market development
opportunities. In spite of the limp economic climate and increasing rivalry from online
retailers of grocery, store base retailers of grocery in Singapore endures flourishing as
customers are spending more amount in the supermarket. This drift is being determined
majorly by the increasing groceries cost, increasing the wealth of the middle class population
of Singapore and the increasing interest in home cooking (Euro Monitor International, 2017).
BCG Matrix
The BCG matrix is known as the Boston Consulting group matrix of the product portfolio.
This matrix is created to assist business in long-term strategic planning, to assist business in
looking at opportunities of growth by revising its product portfolio to select where to invest,
to cease or create products. BCG Matrix is also called as Growth/Share Matrix. It is
distributed into four quadrants depending on the examination of market growth and
comparative market share (Pruschkowski, 2018). (Refer to appendix 2)

STRATEGIC MANAGEMENT 9
Tesco is a huge scale retailer that is functioning in diverse areas of the world, comprising
China, Hungary, United Kingdom, India, etc. (Adamkasi, 2016). The BCG matrix of Tesco
has been presented below:
Cash Cow
There are few of the units of Tesco that incline to be the key earning source because of the
higher market share possessed by the organization. The potential of high-income makes them
a cash cow and despite the industry’s maturity stage, the offerings are capable to serve well.
Moreover, the requirement for the capital for added growth is low, so the cash cows are
considered as lucrative for the organization. Considering the case of Tesco, its section of
meat is included in the cash cow because these offerings are in the demand in the different
stores of Tesco (Adamkasi, 2016).
Stars
Apart from cash cows, there are few of the units that make growth opportunities for the
business. In this case, the industry is determined by the opportunities for growth, which make
a supportive environment for the organization to grow further. In the portfolio of Tesco, there
are few of the products that can be recognized as Star for the organization company because
they are making adequate income and possess the chance to develop. The instance of a star
for Tesco is Tesco Bank (Adamkasi, 2016). The market presence of Tesco bank has been
expanded by providing consumers facility of current account with different facilities like
loans and insurance.
Question Marks
In the market, there are products that make lower revenues than predicted by the company
and cannot consider as lucrative. These products’ future is indeterminate because the
conditions of the market hint an opportunity of achieving future growth. The product of

STRATEGIC MANAGEMENT 10
Tesco that come under question mark is Tesco Lard. Since, the product is making little cash
for the business, but it is not capable to generate high demand from the consumers
(Adamkasi, 2016).
Dogs
This sort comprises all the products that have low performance in the market because of the
low return on investment. Tesco’s mobile segment is an image of a business that possesses an
undefined future. The company is making its maximum efforts to enhance its mobile segment
(Adamkasi, 2016). However, the increasing debt of the company is shifting the focus of the
management towards ceasing its mobile segment operations.
SAFe Framework
SAFe Framework is established as a tool to recognize the strategic possibilities in the
industry. Kevan Scholes and Gerry Johnson introduce the framework. The framework is
comprised of three major criteria that are suitability, acceptability, and feasibility (Oxford
College of Marketing, 2018).
Suggested Strategy 1
With the increasing competition in the market, it is very important to bring some changes in
the advertising strategies of the business in order to increase the market share in the existing
market with the help of existing product. Therefore, Tesco is suggested to adopt a market
penetration strategy
Suggested Strategy 2
It is known that increasing competition in every industry is raising hurdles in front of the
survival of the leading business such as Tesco. Being a market leader, the company deals
with numerous challenges that affect its operations as well as performance in the industry. In
order to expand the business operations, it is suggested that Tesco must adopt Market

STRATEGIC MANAGEMENT 11
development strategy, as it will support it in targeting a new market and introducing new
products.
Suitability
The market penetration strategy is suitable for Tesco in the United Kingdom market but it
will not work in the new market because with the changing location or place the demand and
preferences of the customers also changes. On the other hand, a market development strategy
is suitable for the company, as it will allow the company to offer similar products in the new
market.
Acceptability
The customers and employee both will accept both the strategies because it will offer
numerous numbers of benefits to them.
Feasibility
Considering the market penetration strategy, the company does not need to invest more in the
promotion of existing products in the existing market. On the other side, market development
will also offer increased revenue to the company, which reflects that the strategy is feasible.
SAFe Framework Strategy 1 (Ranking out of
5)
Strategy 2 (Ranking out of
5)
Suitability 3 5
Acceptability 5 5
Feasibility 5 5
Total 13 15
The above table reflects that Strategy 2 is better than Strategy 1