Strategic Management at Tesco: Analysis of Strategies and Capabilities

This report offers a comprehensive strategic management analysis of Tesco, a multinational retailer. It begins with an introduction to strategic management and an overview of Tesco's operations. The report then delves into Tesco's past strategic direction and its evolution, followed by a PESTLE analysis to assess the external environment. It critically discusses Tesco's competitive advantages, probable industry scenarios, and the extent of strategic drift. Furthermore, the report examines the alignment of Tesco's mission and vision statements, its strategic capabilities, and utilizes the Business Canvass Model. It concludes with a discussion of potential strategies to defend Tesco's core business and analyzes the resource implications of these recommendations.

STRATEGIC MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
OVERVIEW OF COMPANY.........................................................................................................4
TASK 1............................................................................................................................................4
Strategic Direction that Tesco has followed in the past and the way in which
strategic thinking has developed within the past 5 years...........................................................4
TASK 2............................................................................................................................................5
PESTLE Analysis of TESCO to review the external environment.............................................5
Critical discussion of Tesco's competitive advantages among its direct competitors
.....................................................................................................................................................8
Probable industry scenarios facing by Tesco within its existing market domains......................9
TASK 3..........................................................................................................................................10
Extent to which the company is facing strategic drift
...................................................................................................................................................10
Whether their mission and vision statement are aligned to the demand of the marketplace
...................................................................................................................................................10
Company's strategic capabilities
...................................................................................................................................................10
Use the Business Canvass Model to portray and describe the rationale and core logic...........11
TASK 4..........................................................................................................................................14
Discussion of possible strategies that TESCO could follow to defend its core business........14
TASK 5..........................................................................................................................................16
Analyse and evaluate the resource implications of recommendations that the company has to
address.......................................................................................................................................16
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Strategic Management is concerned with the overall assessment including the designing,
monitoring and evaluating of the operations and its relative conceptual framework towards

attainment of the business's objectives and goals. It is necessary for analysing the enterprise's
present conditions at the global competitive marketplaces to understand prior the cross functional
decisions. This is done for optimisation of utility of resources that later assist in accelerating the
growth of implemented strategies. Moreover, its impact helps in formulation of plans actively to
measure the degree of strategic shift in the business environment of an organisation.
This assignment put insights on Tesco's approachability towards this management by
employing various tools and techniques that involves elemental key-points of environmental
scanning with formulation of strategy, its execution and evaluation. It will describe about the
usage of tools that has allowed Tesco to mitigate the risks by avoidance of issues through
grabbing opportunities as per prevailing situations.
OVERVIEW OF COMPANY
Tesco is one of the multinational merchandiser and groceries retailer which was founded
by Jack Cohen in the year 1919. Its headquarters is at Hertfordshire, UK which is Tesco's largest
market, where it is operating under four banners of Express, Metro, Superstore and Extra.
Nonetheless, it is operating in 12 countries worldwide with Tesco.com is one of its subsidiary
alliance provides online services (Imrie and Dolton, 2014). This enterprise' strategic planning
involves reassessing their positive contribution towards the welfare of society with growing
mutual businesses to enhance the experience of their shoppers in leaps and bounds. Their driving
forces in gaining competitiveness by strategic management consists of quality, innovation,
pricing and variety.
TASK 1
Strategic Direction that Tesco has followed in the past and the way in which
strategic thinking has developed within the past 5 years
Tesco has dominated the retailing sector in UK for around 25 years, however it has lost
its sheen after the economic recession that impacted the entire industry in negative aspects. This
impacted the customers to move towards the other retailers who offered better offers than Teco.
Its future was in turmoil state due to rise of its competitors like Asdi, Lidl etc. In the year 2014,
then CEO, Philip Clarke announced its resignation from his post, which came sooner than
expected and thus left Tesco's future at stakes again, which was at the lowest point of the

declination began in 2010 (Vandervelde, 2016). However, before leaving, he implemented many
turn-around strategies to reverse their market positioning at global markets.
In regard to their expansion plans in the international markets, they capitalized on its EU
integration as their good positioning shifted them and placed in the single door location to tap the
emerging opportunities. However, they employed their domestic planning on their operations at
overseas projects which were not beneficial for them. Thus, they changed their strategic
approach and incorporate concepts based on the regionalism and requirements needed in the
specific location. Along with this, they used a multichannel mix tactic in relation to technological
advancements with innovative and enhanced models. They also move to mobile applications and
reduced their investments in large superstores for non-food items as their overall relevance is
superseding with emergence of internet and IT.
With reference to above, Tesco has improvised their strategic thinking from past 5 years
through making changes in the hope of sustainable sales volume. In addition to this, organic
development was employed to achieve their ambition of reduced costs by £1.5 billion, with
generation of £9 billion by improvising the operating margins by 2019/20 in between 3.5 percent
and 4 percent (Tesco Strategic Report, 2018). Also, they laid a plan for sustainable business in
terms of customized product of varied ranges with a couple of formats. For internationalism
strategic expansion plan, Tesco collaborated with South Korea's Samsung and also took over
Home-plus chain of hypermarkets and the express stores. Moreover, this supermarket seek a deal
to buy O2 out of their 50:50 joint venture to gain competitive advantages. Further, this led Tesco
to enhance their retailing services of online shopping and assisted in consumption of energy
price.
TASK 2
PESTLE Analysis of TESCO to review the external environment
This model encompassed political, economic, social and technological factors for
understanding the current market positioning of Tesco. It is useful in performing any expansion
or launch or application of innovative product or service for better sales and profits generation.
Political Factor: This company is operative in more than ten countries and must undergo each
country's political scenarios and relative components. It involves employment legislations,
stability of political parties, taxation regulations, current and impending rules and legislation.

When import duty gets fluctuated, it affects Tesco's operations as their inventory is imported to
countries like East Asia, China, etc. Also, invention of Tesco Tax has been refused by UK's
council to avoid the hiked prices.
Economic Factor: Tesco has a major market shares in the UK's market of groceries and is highly
dependent on their international expansion with diversification. Also, labour costs has an effect
on the supermarkets. As per UK's Minimum Wages Rate which has been increased recently by
4.4 percent and has incurred millions of pounds losses. Along with, they are concentrating to
enhance the borrowing cost.
Social Factor: Demographics of UK indicate ageing population, increased female workers with
no home meal preparation concept is in vogue and resulted a shift for Tesco to value added to
their products, especially the non-food items. Additionally, people are becoming health
conscious and thus, this enterprise adopted organic products. They also promoted the provision
of pay-in through cheques with cash payment at checkouts.
Technological Factor: This provided that additional boost which gave Tesco a platform for
initiation of ECR (Efficient Consumer Response) with inclusion of EPoS (Electronic Point of
Sale), electronic scanners and EFTPoS (Electronic Funds Transfer Systems) that has helped in
gaining profits and high revenues. They included self checkout machines, wireless devices and
electronic shelf labelling and more (Hitt and Duane Ireland, 2017). It not only saved time and
energy but minimised the manual workload in keeping records and handling materials at
warehouses etc.
Legal Factor: There are many policies and regulations by the government that needed to be
followed. When Food Retailing Commission (FRC) enforced a Code of Practice and put a ban on
list of materials, this affected the working practises at Tesco. Along with, they provided low
prices on purchasing of fuel in relation to the total amount spent on their grocery stores.
Environmental Factor: This company is completely devoted to reduce the carbon footprint by 50
percent up till 2020. In addition to this, they also adopted few approaches like compositing,
recycling, ban on plastic etc. for sustainable decomposition of generated waste so that their loyal
customer base becomes socially conscience and aware in context to use environmental friendly
products.

Critical discussion of Tesco's competitive advantages among its direct competitors
The groceries' supermarket environment of Tesco has seen a significant competition in
last decade. Their innovative concepts such as bringing loyalty cards system, special days
discount offers etc. that led to the path of establishing a customer base. Moreover, they adopted
the cost leadership strategy which gave them upper hand from their competitors because of their
low cost prices with a diversified broad products range.
On the other hand, they did not gauge the local markets by engaging the local
communities during the planning of their extensive plans of constructing supermarkets and this
led their competitors to gain valuable incentives. Alongside,Tesco's marketing team did not
spend much on the advertising tools, which has slipping effects on their performance in the
Illustration 1: Pestle Analysis of Tesco
Source:PESTLE Analysis with Mind Map Tools, 2018)

market and currently, it is on the third spot. This enterprise has been beaten by Aldi for the first
time in the brand value management as well (Davidson, 2015).
Interpretation: As per the above illustration, it is clearly demonstrated that Tesco's is struggling
with staggering low feedback of consumer's insights in context of store's cleanliness, availability
of products, staff etiquette, speed of checkout and specialised services in the stores.
Probable industry scenarios facing by Tesco within its existing market domains
Tesco has been in the news for both good and worse. The famous horse-meat scandal
which put off their customers and put them in the bad light. Their products were tested and found
around 60 percent of this meat and therefore, Tesco withdrawn 26 of its products from all their
supermarkets and superstores (Lawrence, 2013). This created an upsurge because of indifferent
attitude shown by Tesco towards cultural values and religious beliefs. In addition, there was a
£22 million project at Chatteris which hindered the natural resources of that location. It re-routed
a river and constructed an underpass and later impended this project, citing few legal issues. This
tarnished their reputation as they left those inhabitants without this supermarket. Subsequently,
they deactivated their official photo site under the precautionary measures for security purpose.
However, few workers put a legal notice on the discriminatory basis in terms of gender and age
as they were underpaid despite doing night shifts on public holidays and weekends. It made
Tesco realise the significance of employees' engagement and they took steps to combat it
effectually.
Illustration 2: Composite Loyalty Index
(Source: Davidson, 2015)

TASK 3
Extent to which the company is facing strategic drift
The extent is much in terms of constant pressure that has been building up due to its
constant competition at the marketplaces. These companies such as Alsi, Lidl, Amazon were
once upon a time were flourishing at local level and could not have been considered as Tesco's
rivalries. However, with poor strategic management and the global economic recession, it turned
the table upside down for Tesco in the worst manner. Although, their positioning was unsteady
yet their profits were always manageable but their brand value saw a dip which needed a
strategic drift to rise again. This has laid the benchmark to sustain in the growing market by
directing through a clear vision to fulfil the statement of mission for long term success and
consistent building of customers.
Whether their mission and vision statement are aligned to the demand of the marketplace
Mission: “We make what matters better, together”
Vision: This has five elemental components which are as follows:
 Wanted and needed around the world
 A growing business, full of opportunities
 Modern, innovative and full of ideas
 Winners locally whilst applying our skills globally
 Inspiring, earning trust and loyalty from customers, our colleagues and communities
This can be easily inferred that the demand of marketplaces must be in alignment with
the vision and mission statement of Tesco for proper implementation of their strategic planning
and directions. However, Tesco’s management has the ability to identify and recognise the key
part in understanding the phases to lay its mission, vision and strategies has an important role in
maintaining its success rate with the use of key performance indicators (KPIs) for efficient
monitoring and evaluating its performance.

Company's strategic capabilities
This includes various strategic capabilities of Tesco to understand the significance of this
management for longer term effectiveness in order to know the value added services in context
of future preferences. Innovation is the keyword that lay a strong foundation of conceptual
framework on a broad range of products and services. It has played an imperative contribution to
connect with their customers'. For example, Tesco pay with the help of digital wallet has proved
beneficial in garnering the consumers' attention on their official mobile application. Along with
this, a proper application of risk management has supported this company in differentiating their
adopted approaches and methodologies to monitor their principal tasks in order to maintain and
mitigate the robust risks.
Additionally, they have an aim of achieving an operating margin of 3.5 percent till 4
percent by the end of financial year 2019-2020. For this, Tesco has already started using a
combination of deliberate decisions that includes cost-effectiveness, volume and mix. Also, they
are in process of expanding their space to offer varied benefits to their clients' by gradually
concentrating on increasing their property (Hill, Jones, and Schilling, 2014). However, they are
also into re-development practices of their store layouts at high end locations for better
implementation of their resources that allow in retaining their trading methodologies in effective
approachability. This has assisted in creating value and worth in the minds of their investors,
distributors, employees and customers'.
Furthermore, this strategic capability is in equal oversight of the uncertainty due to Brexit
and its effects on the business environment both internally and externally. The overall
responsibility has been undertaken with the establishment for combating the risk management
that directly engage in the measurement of mitigation of risk appetite in proper assessment. Here,
it is understandable that they need to have an update on their competitors marketing strategies so
that they can mould or re-invent some driving forces to withheld their targeted markets along
with improved customers profile.
Use the Business Canvass Model to portray and describe the rationale and core logic
Business Canvas Model is a well known tool to understand the formal structure and
informal representation of the core aspects of the business. This includes a broad framework of
purpose, target customers, sourcing, infrastructure, practises of trading and other related

operational offerings. This model is useful for putting emphasis on the customers' interface,
strategic resources, value networking and core strategy.
In addition to the same, Tesco employed this for gaining competitive edge over its
rivalries and to improve its brand value with image makeover at the global competitive markets.
This model has explained that translational process of making profits and increased revenues
through creativity and understanding of entire environment with the following changes:
Online shopping system: Tesco was the first organisation to sell its products online and made it
successful and profitable. However, they need to use new techniques and internet tools for better
productivity.
Dynamical Model: Their international and national expansion has led them to understand the
strong networking required by outshining their weaker competitors so that they can establish new
stores with grand layouts positively.
Self-Producing: This company has built an empire of making their own products and thus, their
affordability in dealing with pricing strategies has been in cooperation with several grocery
products portfolios and bio-frames that has affected their quality with proper standards of
regulatory bodies.
Diversification: They readily accepted their flawed system with sincere apologies in context of
number of controversies that plagued this company and tarnished their reputation globally. With
introduction of Tesco express and Tesco Metro, they explored their options in strategic direction
by successfully keeping a tab on the exact situations of its operations at all over the world.

Illustration 3: Components of Business Model Campus
(Source:Business Model Canvas,2010)