Tesco's Strategic Analysis: A Comprehensive Report

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Strategic Analysis
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Contents
Introduction......................................................................................................................................3
Key features of the external environment and their impact on the organization.............................4
The internal organization's responses to these factors.....................................................................8
An appraisal of the strategic solutions that the organization could use...........................................9
A critical evaluation of the organization’s strategy..................................................................11
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
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Introduction
Strategic analysis is the most important aspect of any organization. It assesses the organization to
make decisions based on its business environment. With the help of strategic analysis,
organizations can implement various strategies in the company to fulfill the aims and objectives
of the association. This report shows the various significance of strategic analysis and the role of
strategic analysis on the success of the company Tesco. This report shows the various strategies
of Tesco and the importance of these strategies on the success of the organization. The company
can do the PESTEL analysis and also implement Porter's five forces and strategic group to
determine the external environment of the association.
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Key features of the external environment and their impact on the organization.
The strategy is a process through which any organization can implement its planning process in
the company to accomplish its goals and objectives. Tesco Company can analyze the various
external environment to implement best strategies so that the organization can accomplish its
goals. Tesco Company can implement various strategies to enhance their sales and to lower
down the cost of its products so that the company can generate more profits. With the help of
proper strategies, Tesco can gain a competitive advantage in the market. Effective use of proper
strategies plays an important role in the success of any association (Gürel, and Tat, 2017)
Tesco can also use the process of strategic positioning to expand its business in the international
market. With the help of strategic positioning, Tesco will be able to enhance their sales more
which will assess the company in the enhancement of their revenue.
Strategic positioning is an appropriate approach of any organization through which the company
can implement strategic planning in the corporation. It is a more systematic approach through
which Tesco can implement various strategies in their company to generate more profits and to
expand their business more in the country and all over the world. With the help of proper
strategic positioning, an organization can differentiate their company with its competitors.
Strategic positioning provides more value to the company and assesses the organization in its
development (Bull, et. al., 2016).
There are many key features of the external environment and their effect on the performance of
the organization are mention below:
PESTEL analysis
PESTEL analysis is a marketing tool which can be sued by the organization Tesco to determine
the external forces of the association. PESTEL analysis consists of various factors which are
Political factors, Economic, Social, Technological, Environmental and Legal factors. To
implement marketing strategies in the organization, it is essential for the company to examine the
PESTEL environment of the market. This will give a clear idea about the conditions of the
market and the company will be able to respond to those changes by implementing various
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marketing strategies. PESTEL analysis of the company Tesco are mention below (Zott, and
Amit, 2013):
Political factors
Tesco Company is operating its function n in various nations which includes Asia and Europe.
There is a high possibility that political factors affect the growth of the business as every country
possess different political factors which includes instability of political condition of the country,
high tax rates of the country, recent legislation of the nation, high rate of unemployment, and the
various economic condition of the country. These are the various political factors which affect
the growth of the business in the country. To develop their business more, Tesco has to import
their inventory outside the country due to which political factors have a big impact on the growth
of the company.
Economic factors
In the country UK, especially in the field of supermarkets, cost of labor is the most essential
economic factor. Labor cost is the most significant factor which will affect the growth of the
company Tesco. With the rise in labor cost, there is a decrease in the profits of the company.
Many other economic factors which affect the profit of the company Tesco are the price of the
raw materials. The company needs to more focus on their strategies to increase their profits
more.
Social factors
With the change in the lifestyle of the people with the passing time and change in the consumer
shopping trend, customers are more concern about their health and fitness. Due to which
company Tesco need to more focus on delivering healthy food to their customers. Tesco needs to
provide more organic food to their customers to enhance their sales and to attract more
customers. According to a survey, customers of UK are more loyal which means Tesco need to
provide the quality and healthy food to their customers in order to increase the customer
retention rate of the organization (Tsangas, et. al., 2019).
Technological factors
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In the last few years, Tesco Company was facing various issues which were related to bad
customer experience and the scandal of horsemeat. With the rise in the technology and the
presence of various techniques, Tesco Company can gain the trust of their customers once again
with the help of new techniques. Technology has provided more opportunities for the company
to expand its business (Gould, and Desjardins, 2015). With the introduction of latest technology
like RFID technology, the company will be able to enhance the customer's experience within the
store. Tesco has manufactured its unique mobile payment system named as PayQwid. Through
this app, customers can pay their amount to the company. Customers can also get various loyal
points after doing their payment through this app. Company has also introduced the feature of
scan as you shop through which customers can check their loyalty points.
Environmental Factors-
Many organizations are facing a lot of pressure from the agencies of the government in order to
fulfill the issues related to the environment. Association has to respond to such issues in order to
provide various benefits to society. Company has organized a new feature in which the
customers can shop from the site tesco.com. This will not only save the time of the customers but
also save their fuel and money. Company has also decided to stop the use of plastic bags in order
to save the environment. Tesco Company has also decided to make the most use of renewable
sources in order to generate electricity. The company is avoiding all the factors which will
impact the growth of their business (Phadermrod, et. al., 2019).
Legal factors
It is essential for the organization to stay cope up with the government rules so that it will not
affect their business in the future. Many times, change in the law not only affects the growth of
the business but also possess a big impact on the development of the business. In the year 2016,
employees of the company Tesco filed legal action against the other employers of the company
as they were getting harassed based on their gender and age. In order to overcome such legal
issues, it is necessary for the company to follow all the legal laws of the government so that the
company does not have to face any legal action from the government side in the future.
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These are the PESTEL analysis and the impact of these factors on the growth of the business.
Tesco Company needs to analyze the other environmental factor like Porter's five forces and
strategic groups in order to implement the various marketing strategies.
Porter’s five forces is a marketing strategy through which the company can identify the
competition in the market so that the company can implement new strategies in order to generate
their profits. With the help of this model, Tesco Company can identify various factors which are
affecting the profits of the company. With the help of this model, Tesco can also manage their
strategies in order to improve their performance in the market (Pan, et. al., 2018).
Porter five forces model was developed by Michael Porter in order to examine the company
profits and strength and weakness of the industry. This model is the most famous business
strategy which can be implemented by the company Tesco in order to determine the competitive
environment. Explanation of Porter's five forces are mention below:
Competitors in the market
With the help of this model, the company can find out their number of rivals or competitors in
the market. This will give a clear idea about the strength of the company and number of a
competitor which are currently present in the market. Tesco can also find out the strength of their
competitors and also the quality of the products of the competitors. The company can implement
various strategies in order to attract more customers in the market so that the company can
generate more profits. The company also need to focus on their suppliers and buyers and provide
them good deals so that the buyers and suppliers of the association stay connected with the
organization (Gould, and Desjardins, 2015).
Power of Suppliers
With the presence of a large number of competitors in the market, suppliers can easily switch
from one organization to another. As a result, the supplier can easily increase their prices in order
to earn more profits. This is why it is necessary for the organization to choose those suppliers
which will remain connected with the company and will not demand higher prices. This will
assess the company in generating more profits as there will be a low production cost. Association
has to make sure that they have different suppliers so that the company has to luxury to choose
the suppliers according to their price (Rothaermel, 2013).
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Power of Buyers
Tesco has to make sure that their buyers will remain connected with the company. Tesco can
provide various offers and deals to their buyers so that those buyers will remain connected with
the organization. In this era where the market is full of competitors, it is necessary for the
organization like Tesco to generate more customers or buyers. Company's success mostly
depends on their buyers. More the customers on the company more will be the sale of the
organization and more will be the growth of the association. If the company have more buyers
then that company will have more power in the market as compared to their competitors which
have fewer buyers.
The threat of substituting of products
Whenever a company launches a new product in the market, there is always a threat that some
other company will produce a substitute for that product at a low price in order to attract the
customers. Customers are the one who is always looking to purchase the products of those
company which charging less amount (Kara, 2018). Whenever a big company launches a unique
product in the market then there is a risk that some other company will develop a substitute for
that product. A substitute product will lower down the profits of the company and the
organization has to implement some innovative techniques in order to enhance their profits.
Threats of New entrants
Whenever a company doing great business in the market, there is always a threat of new entrants
in the market. This new entrant not only lowers down the profits of the organization but also
steal their customers as well. With the arrival of new entrant, the company's position in the
market gets affected by that. In order to remain strong in the market, Tesco needs to possess
various innovative techniques so that their customers will remain connected with the
organization.
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The internal organization's responses to these factors.
In order to respond to the external environment, the Company Tesco can examine Swot analysis.
Swot analysis is a marketing tool through which the company Tesco can determine its strength,
weakness, opportunities, and threats. This analysis will give the company a clear vision about
their future growth and the company will be to implement strategies according to that. SWOT
analysis of the company Tesco are mention below:
Strength- The biggest strength of the company is that Tesco is the biggest retail store of Grocery
in the national UK and also the leading supermarket in the country. The company possess the
highest sale in their supermarket and have the highest revenue as compared with the other
supermarkets. The other strength of the organization is that it possess the highest market share in
the nation as compared with the other supermarkets. Tesco has around 4% market share in the
overall retail stores of grocery in the country. In Ireland, Tesco is the most famous supermarket.
Tesco is expanding its business at a rapid pace in the international market and has approx. 7000
retail stores of grocery globally which is also another strength of the company (Bagheri, 2016).
Weakness- The biggest weakness of the company is that the company fails to perform in the
country of the US and Japan. Despite the No 1 supermarket in the country UK, Tesco fails to
attract the customers in the country of the US and Japan which is the company's biggest
weakness. Because of the weak performance in those countries, it has forced the company to
close its stores over there. In the year 2017, Government of UK charged a big amount to the
company as a penalty because the company gives the wrong details of their profits and showed
wrong accounting. Due to this scandal, company reputation in the market got affected and the
sales of the company got decreased. The other weakness of the company is its low-cost strategy
due to which the company is not able to generate more profits (Ho, 2014).
Opportunities- In order to overcome the company's low-cost strategy, Tesco is decided to in
traduced news tore in the country which is known as Jacks. This store provides various discounts
to the customers and has shown greater growth in the market. There is also a various opportunity
for the company in the form of joint ventures, Company can do the joint ventures to enhance its
sales in that region where the organization is failed to attract customers. The company can also
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provide the option of online shopping to its customers so that the association will be able to
generate more profits by building more customers in the company. The company can also
expand its business in emerging countries so that the organization can earn profits globally
(Aithal, 2016).
Threats- With the rise in the competition of the supermarket, the biggest threat for the company
Tesco is the good performance of the company WalMart and Aldi. These companies are the
Tesco's biggest competitors and their good performance in the market is the biggest threat for the
organization. The other threat for the company is the change in the laws of the government
which will affect the efficiency of the company in the country.
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An appraisal of the strategic solutions that the organization could use.
In order to possess a strategic solution, Tesco can implement the VRIN framework in order to
gain a competitive advantage in the market. Company' success and strategies mostly depend on
their resources, In order to have unique resources, Tesco needs to implement the VRIN
framework in their functions (Aiginger, and Vogel, 2015). These resources will assess the
company in gaining a competitive advantage in the market. The company can discover these
characteristics of the resources by finding out various VRIN qualities which are mention below:
Value- Company need to choose those resource which brings more value to the organization.
This will support the company in order to gain a competitive advantage in the market.
Rareness- Company need to choose rare resources so that the other company cannot use the
same resources. This strategy will support the company in bringing more customers to the
organization.
Imitability- Company needs to choose those resources which cannot be accessed by the other
competitors in the market. This will enhance the profits of the company in the country
(Papulova, and Gazova, 2016).
Non-substitutable- The organization needs to choose those resource which cannot be substituted
with the help of any other resources.
Adopting the VRIM framework not only enhance the profits and sales of the organization but
also provide a competitive advantage to the company in the market.
In order to expand their business more, Tesco needs to adopt the CSR strategy in order to reveal
their performance of the month. There are various benefits of adopting the CSR strategy as it will
possess various benefits on the value of the business (Tan, and Carrillo, 2017). CSR not only
boost the sales of the company but also assess the organization in increasing the customer
retention rate of the association. Employees also saw to be more motivated while working in the
company after the adoption of CSR strategy in the organization.
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Proper implementation of strategies after analyzing the various environmental factors not only
enhance the sales of the company but also enhance the overall revenue of the organization.
Effective strategies have a huge role in the success of any organization. With the help of
effective strategies, Tesco not only accomplishes their goals and objectives but also expand their
business at the international level. It is essential for the company to determine the various
environmental factor before implementing any strategy in the company because it gives the
company a clear vision about the financial condition of the market and also the company will be
able to determine the position of the competitors in the market (Gould, and Desjardins, 2015).
With the help of this analysis, the company can determine their strength and weakness and
according to that implement various effective strategies in order to develop the growth of the
organization at the international level. With the implementation of proper strategies after
analyzing all the environmental factors carefully, Tesco can achieve all the goals and objectives
and also enhance their overall revenue in the market. It is essential for the company to provide
effective services to their customers which can only be done by implementing various strategies
in the company. Thus it is necessary for the organization Tesco to implement effective strategies
in order to bring more customers in the organization and to enhance the sales of the company
more.
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