Strategic Analysis of Tesco: Applying VRIO, PESTLE, and Porter’s Model

This report provides a strategic evaluation of Tesco, a multinational company, using various frameworks. It begins with an overview of Tesco's mission, vision, and purpose, emphasizing its customer-centric approach. The report then assesses Tesco's competitive advantages using the VRIO analysis, identifying high customer rating as a core competence. Furthermore, it analyzes the external environment through the PESTLE framework, considering political, economic, social, technological, legal, and environmental factors impacting Tesco's operations. The attractiveness of the industry is examined using Porter's Five Forces, highlighting the bargaining power of buyers and the competitive intensity. The report concludes by reviewing Tesco's strategies for future betterment, emphasizing sustainability and technological advancements. Desklib provides access to similar solved assignments and study resources for students.

Strategic Management
- Strategy evaluation

Table of Contents
INTRODUCTION...........................................................................................................................................3
Main Body...................................................................................................................................................3
Purpose, Vision, Mission in context of organization...............................................................................3
Evaluate competitive advantage by applying VRIO analysis..................................................................4
Using PESTLE framework to analyze external environment of selected business entity........................6
Analyze attractiveness of industry by Porter’s five forces.......................................................................8
Review organization’s strategy..............................................................................................................10
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13

INTRODUCTION
Strategic management is application of suitable policies and strategies in order to make
optimum use of available resources. Main aim of strategic management is to get competitive
edge in market place. It is a process of setting goals, procedures with an aim to make company
more competitive. Strategic management is related with strategic evaluation, internal analysis of
organization and execution of those strategies throughout the business entity (Heino and
Tuunainen, 2018). For present report TESCO is being considered as a company. It is a well-
known company based on UK. It offers variety of items such as groceries and other general
items. It was started in 1919 by Jack Cohen. It is considered as one of the largest supermarket
chain across the world. The present study is about mission, vision and purpose of organization.
Here, external environment is analyzed with application of PESTLE analysis. Further, VRIO
framework is also applied in order to evaluate internal environment and capabilities of
organization. Competitiveness of business entity is also examined through Porter’s five forces
model. At end, the report illuminates strategies applied by organization for future betterment.
Moreover, strategic management is administration of suitable tools with an aim to attain set goals
and objectives in an efficient manner.
Main Body
Purpose, Vision, Mission in context of organization
Overview of company: TESCO is a British multinational company which offers groceries
and other general items to customers. It was established in 1919 and currently known as the third
largest retailer across the globe. The company was started in England but enhanced its presence
over the period of time. At present, TESCO is operating in nearly 11 countries. It has nearly
5000 stores globally. In addition to this, organization has also diversified in different areas such
as clothing, software, financial services, electronics and more. In addition to this, company is
listed in stock exchange of London. Diversification in different areas will help business entity in
meeting with requirements of different customers. In terms of market positioning, TESCO is
regarded as the quality products provider. According to the current scenario, company has been
shifted towards online business. They are offering products through online mode. Here, great
plunge is recorded in online sales of company. It is found that online sales add £2.8 billion in
overall sales record of organization (Paul Skeldon, 2021). TESCO is a prestigious company

which is earning significant profit. In 2020, organization earned profit of 1.7 billion pounds.
(Annual statutory operating profit or loss of Tesco in the United Kingdom (UK) and Ireland from
2014/15 to 2020/21). It is identified that strategies of respective entity are really effective which
allow it to stand in competition in an effective way.
 Mission: Mission of company is “to make better products to in order to offer value to
customers”.
 Vision: Vision of organization is “to be champion for customers by helping them to enjoy
better and quality life.”
 Purpose: TESCO is a company who value their customers thus main purpose of business
entity is to serve customers in best possible way. In this context, they offer value to
buyers by offering them quality products at affordable price.
It is analyzed that TESCO is a prestigious company which formulates significant strategies
in order to attract new customer and retain existing ones. Mission, Vision of company is also
structure by considering maximum benefit of buyers. In addition to this, managers and leaders
modify the strategies in timely manner in order to stay in competitive market place for longer
period of time.
Evaluate competitive advantage by applying VRIO analysis
In current scenario, competition has become a part of business. Each and every business
entity has to face competition. There are several strategic tools which are applied in order to
analyze the effectiveness of competition. Here, VRIO analysis is a tool that helps in analyzing
internal environment and capabilities of organization. This model is helpful in identifying
internal resources of business entity that can further use in order to get competitive edge in
market place (Capriello, 2018). In addition to this, it enables a business entity to identify its core
competency which can strengthen their position in market. TESCO is a multination company that
works in highly competitive environment. Here, it is required to maintain strong brand image in
order to ensure long term survival.
Resources Value Rareness Imitability Organization

Employees Yes No No No
Leadership Yes Yes No No
Brand
reputation
Yes Yes Yes No
High customer
rating
Yes Yes Yes Yes
Valuable: It show how expensive is resource and ease to obtain such resource. Here,
resources are considered valuable if they help company in increasing perceived value of
customers. In case of TESCO, employees are valuable resources as they can provide valuable
experience to customers (Berman, Evans and Chatterjee, 2018). If employees are polite, they can
easily address the queries of customers in right manner. In addition to this, other resources such
as brand reputation, leadership, high customer rating are also valuable which will help in
strengthening competitive edge of company.
Rare: Resources which are not available to each and every company are rare. These
resources cannot be obtained to any product or service provider rather provided by few
organizations(Boyd, 2020). In case of TESCO, leadership, brand reputation and customer rating
are rare resource of business entity. It enhances the capability of organization by making it
different from others. These resources can also help a company in achieving higher level of
performance.
Inimitable: It is costly to imitate this kind of resources. There is no option to buyers to
purchase such resources from some other company. This element allows a business entity to
charge premium price from buyers due to lack of availability of substitutes (Alves, de Sousa
Jabbour and Mariano, 2019). In context of TESCO, brand reputation and higher customer rating
are some resources which cannot imitate by other companies. These resources enhance the
position of respective company in market.

Organization: It is the last element of VRIO model as per which resources are required to
organize in proper way. In TESCO, they make sure to organize resources in an efficient manner.
Proper organization of resources is helpful in smooth functioning of business.
With above information, it is identified that high customer rating is the most valuable
resource for TESCO. It is considered as the core competence of business entity. It does not only
add value in business but also rare and cannot easily imitate by rivals. In addition to this,
resources of entity are highly organized which allow it to make a positive position in market.
Using PESTLE framework to analyze external environment of selected business entity
PESTLE analysis is a combination of several elements such as political, economical, social,
technological, legal and environmental. It is tool which is applied in order to examine micro
environment. Here, this framework is used to analyze such factors which are present outside the
business environment yet put a great impact over business entity (Gursel and et. al., 2019). In
addition to this PESTLE analysis also helps in formulating significant strategies in order to meet
with future situations in best possible way. In this context, pestle framework is applied by
TESCO so that they can evaluate external environment in an efficient manner.
Political Factors: These factors are concern with political parties, government of particular
country. Changes in political environment cause change in current policies that will have direct
impact over business entity. It is important to evaluate current political environment of country
in order to run business smoothly. In context of TESCO, they operate business in different
countries hence it is required to follow regulations and compliances prevail in respective nations.
Brexit is one of the crucial political events which affected performance of company in profound
manner.
Economic factors: It includes elements such as interest rate, inflation, demand, supply and
more. It is found that economic conditions of countries not remain same all the time. Here,
change in economic conditions put a profound impact over business performance (Ritter and
Lettl, 2018). In context of TESCO, they are required to analyze the changes which are coming
within economies of different countries. It is required for organization to stay aware with
taxation policies of various nations. Market of UK is considered as the major source of revenue

of TESCO. It is found that changes in economic conditions of UK will affect profitability of
business entity.
Social factors: These factors are related with personality, attitude, behavior of buyers. It is
important to understand the mind set of customers so that company can offer suitable products to
them. In case of TESCO, they have opened a lot of stores at different places in order to meet
with requirement of buyers. In addition to this, company offers products to buyers as per the
latest trend. They analyze the current market situation and then produce best products in order to
meet with requirement of potential buyers. Apart from this, TESCO has been shifted towards
production of organic products so that they can meet with enhanced requirements of customers.
With this approach, they are able to manage higher level of customer satisfaction. Additionally,
TESCO also hired potential candidates in different countries which help in generating
employment opportunities.

Technological factors: According to the current scenario, technology and advancements
have become a crucial part of business. It is required to embark new, unique & creative
techniques in business in order to ensure smooth functioning in future period of time (Garasyim
and et. al., 2020). Technology helps in facilitating ease in business so that all the necessary
activities can be performed with greater efficiency. In reference of TESCO, they make sure to
work parallel with changing technologies. For this purpose, they are also offering feature of
online shopping to customers. In addition to this, they are also looking forward to use robotics
and other such advancement techniques in business. Services of online payment are also being
offered by company that will help in dealing with the issues of long queues at stores.
Legal factors: These factors are about implication of rules, regulations so that business
entity can function in a systematic way. Here, laws are formulated by higher authorities and need
to obey by companies. Main aim of these regulations is to run business in an appropriate way
(Greenwood, 2020). In case of TESCO, they are affected with policies, regulations prepared by
government. Being in food business, they need to imply regulations laid by food retailing
commission. It is found that TESCO has been allegations of gender biasness in 2016. Apart from
this, there are also legal allegations of unequal payment. Hence, company is required to follow
all the necessary rules in order to run business without any hassle.
Environmental factors: TESCO has been taken ample of initiatives for environmental well-
being and creating a sustainable society. In addition to this, they also take significant steps in
order to reuse, recycle products. Appropriate steps for waste management are also taken by
business entity. They also focus on minimizing use of plastics with an aim to ensure sustainable
growth and development in future period of time.
Analyze attractiveness of industry by Porter’s five forces
There is several companies work together in an industry. It is integral to understand the
level of competition within industry before starting actual business. Here, Porter’s five forces is a
model that is applied with an aim to analyze different elements that affect level of competition
within industry. In context of TESCO, forces of Porter’s model are mentioned below:
Bargaining Power of buyers: It is found that bargaining power of customers of TESCO
is really higher as there are a lot of other firms such as Aldi, Sainsbury and more present in

market. In addition to this, customers in retail industry are also price sensitive. They can easily
switch over one brand to another in search of affordable product. Hence, it is important to
maintain difference in order to sustain in market for longer run.
Bargaining power of suppliers: In context of TESCO, it works with several suppliers in
UK and across the world. Here, vendors do not have any upper power as they are huge in
number. Hence, company can easily negotiate with then for price. It is found that TESCO really
negotiate high with vendors thus able to get raw material at lower price (Ivanov, 2019). Due to
strong brand image, it is easy for business entity to get supplied at relatively lesser price.
Threats of new entrants: Retail industry of UK is acquired by some well-known players
such as Sainsbury, Asda, Morrisons and more. These companies are large and multinational.
Customers also have high faith on such organizations. In addition to this, there is requirement of
huge capital investment in order to enter into such a competitive market place. Hence, entry
barriers in retail industry are lower which make it easy for TESCO to operate business
successfully.
Threat of substitute products: In case of TESCO, threat of substitutes are higher as there
are a lot of other organizations that are offering similar products. Customers have option as they
can easily switch over one brand to another (Bravo and et. al., 2018). Due to huge availability of

substitutes, customers have option to purchase the same product from some other retailer at
different rate. It is integral for respective entity to prepare effective strategies which will help in
attracting more number of customers for longer duration.
Industry rivalry: In retail industry, demand of products is higher thus it is important to
maintain high flow of supply in order to meet with existing level of demand. In order to meet
with increasing demand of customers, companies also produce goods in higher quantity. For
TESCO, industry rivalry is really higher as they need to face extensive competition with
Sainsbury, ASDA, ALDI and more. However, TESCO is facing extensive competition but their
position as market leader will help in addressing the competition in an efficient manner.
With above discussion, it is analyzed that retail industry is full with competition thus
bargaining power, threat of substitute, industry rivalry is really high. In addition to this, high
number of suppliers also lowers down their bargaining power. In addition to this, entry barriers
in retail industry are really higher thus there is lower threat of new entrants for company.
Review organization’s strategy
TESCO is a well known brand that is also known for its marketing strategies across the
globe. It offers quality products to buyers at relatively lower price which really help in order to
stay in market place for longer run. In addition to this, company is looking forward to add some
new products in its existing market mix. Increasing product line will help in addressing needs of
different customers in an efficient manner. Now, TESCO is working in diversify fields such as
financial services, food, clothing and more (Humenyuk and et. al., 2020). Working in diversify
field will assist organization in facing competition in an efficient manner. Further, TESCO is
also shifting towards digital marketing practices. They are using SEO, website, content
marketing strategies so that more and more customers get attracted towards products. Being a
market leader, company also highly invested in traditional marketing channels such as TV, radio
and more. Over the period of time, they realize the significance of online medium (How Tesco
refreshed their marketing strategy to get back on track, 2017). As a result, they are using digital
techniques for attracting millions of audience at a same time. However, they do not ignore the
importance of traditional marketing. Here, they spend significant amount on traditional
marketing strategies.

Customized media strategies have also been applied by TESCO. In this context, they are
likely to forward customize emails, messages to customers. Here, organization offers deep
discount to customers and send personalized messages to buyers. Customization is regarded as
the key of success in current market situation. Now, marketers understand that making positive
relationship with customers is important rather making generic image in market place. Here,
TESCO follows that same approach with an aim to maintain realistic bond with buyers (How
Tesco refreshed their marketing strategy to get back on track, 2017).
Expansion has always been a crucial strategy of respective entity. They stared first store
in 1919 in England and then keep on expanding. As a result, company owns nearly 6000 stores
across the globe. Apart from this, they also target customers through online mediums. At present,
TESCO is present in nearly 11 countries. This wide presence helps organization in meeting with
needs of customers in an efficient manner. Company did not settle down with the image of
grocery store rather they keep on diversify in different areas. Diversification really helps
organization to enjoy higher sales. Organization is known as the lower cost service provider. It is
perceived as a company which offers quality goods at relatively lower price. Main aim of
TESCO is to build such a company where they offer all the things which are desired by
customers at a price which customers can easily afford. Customer acquisition strategy is also
applied by business entity. For this purpose, they also run green shield stamp promotional tools
with an aim to get maximum information from customers (Marketing Strategy of Tesco | Tesco’s
Marketing Objectives, 2019). Hence, the strategies of organization are really effective which will
help them in grow & succeed in future period of time.

Conclusion
It is summarized with above mentioned information that strategic management is a
process wherein goals are set and strategies are prepared in order to attain those goals. Strategic
management is really crucial for business as it helps in formulating strategies for business growth
and success. Discussion has been carried out about mission, vision, purpose of TESCO. It is
concluded that company is highly affected with external environment that is measured by
application of PESTLE analysis. Further, higher customer rating is identified as core competence
of business entity. It is summarized that company is working in highly competitive environment.