Tesco's Strategic Management and Business Environment Analysis

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BUSINESS STRATEGIC MANAGEMENT
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Table of Contents
Introduction...................................................................................................................... 3
Discussion over the topic................................................................................................. 4
Conclusion..................................................................................................................... 15
Reference list................................................................................................................. 16
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Introduction
Strategic management process is considered as an ongoing process of multiple steps
that defines the way a company makes its strategy for accomplishing its goals. It is
concerned with setting out objectives, development of the strategic vision and
implementation of the strategy. It is basically a management technique used for
planning for the future; companies create vision through developing long term
strategies. It assists to identify vital procedures as well as resource allocation for
achieving these targets. Most of the successful companies like “Tesco plc” use
effective strategic management techniques to reach their organizations’ strategic intent.
“Tesco plc” is one of the most successful British multinational groceries and general
merchandise retailers across the UK premises. Over 100 years ago, in 1919, Jack
Kohen at Hackney, London, UK, founded it. The company has more than 460,000
numbers of employees to provide excellent product and services to wide global
customers. In 2018, the company generated £57,548 million revenue in business
(tescoplc, 2019).
In this paper, multiple aspects of strategic management of the specified organization will
be analyzed for overall understanding of the project.
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Discussion over the topic
Strategic management is regarded as an important function in business that plays a
major role in developing the strategic implementation capabilities of an organization
(Ansoff et al., 2018). Being one of the most successful retail companies across the UK
premises, “Tesco plc” must have effective strategic management system so that they
can face any kind of business difficulty with an ease. Strategic management is
considered as a core business function that directly links with the company’s success
and growth (Hill et al., 2014). Alternatively, strategic management allows gaining
competitive advantage for greater sustainability in this competitive market place. In
order to define strategies, companies like “Tesco plc” use multiple effective models.
Origins and various approaches to strategy
The market competition has allowed the origin of multiple strategies, which assists
organizations in differentiating their goods and services from other rival brands. In 1950,
strategic management process was established for the first time. However, Peter
Drucker, Micheal E. Porter, Igor Ansoff and others are regarded as main contributors
to the development of strategic management.
Strategic management is a process to set long-term targets and objectives relied upon
where employers’ want to see their organizations in the upcoming future. For an
instance, companies like “Tesco plc” must have appropriate strategic management
approaches for improving their both domestic and international business performance
(Wheelen et al., 2017). However, all the strategic decisions are made in order to
manage brand, build market reputation, increase sales and business profitability.
Multiple approaches are as follows:
Plan
Strategy can be utilized for developing the organizational work plans. Proper prior
planning will prevent poor business performance of “Tesco plc”.
Position
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Positioning strategy is used to locate the actual target customer base and modify the
existing goods and services according to the demands and expectations of the
segmented customer base.
Ploy
The process or strategy can outwit rival competitor. “Tesco plc” has been capable of
managing the market position through following this effective strategy.
Perspective
This strategy is beneficial to extend the ideological business perspective. “Tesco plc”
uses this for bringing positive changes within their business organization.
Complexity of the relationships between the organisation and its environment
Business environment is one of the main factors in business that directly reflects on
company’s sustainability, sales performance and profitability. Modern business scenario
is highly competitive so that it has become necessity for the ventures to conduct
appropriate analysis of the business environment in order to sustain and generate
higher profits in business. As per the consideration of modern market researchers,
business environment can be segmented into two different concepts; macro
environment and microenvironment. However, the concept of macro environment
consists of multiple factors, instead of a particular sector or region. Generally, it includes
trends in GDP, employment, inflation, spending, monetary and others (Lasserre, 2017).
Macro business environment always depend upon the political, economical, social,
technological, legal and environmental factors of the selected business location. “Tesco
plc” is a British multinational retail organization so that business environment of the UK
such impacts over the business performance and strategic implementations of the
specified organization.
On the other hand, micro business environment refers to the environment that is the
direct contact with the business firm as well as can affect the routine activities of
business straight away. Simply, micro environment analysis is referred to internal
analysis of the organization. Microenvironment directly affects the business decision-
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making (Chang, 2016). Micro business environment includes customers, competitors,
suppliers, employees, shareholders, media and social media and others. Being one of
the most successful British retail organizations across the UK premises, “Tesco plc”
must analyze both macro and micro business environment appropriately to better
understand their external and internal business conditions. Analysis of the macro
business environment of “Tesco plc” is as follows:
Political factor
Politically UK is unstable and associated with numerous political issues throughout the
countries. It is undeniable that political environment of UK is not suitable to perform
business activities. Apart from that, high taxation rate has decreased the profitability of
the ventures. Brexit is another major consideration hat has affected UK based business
ventures largely (Dhingra et al., 2016). Overall, the instable political business
environment can create multiple difficulties to ventures like “Tesco plc”.
Economic factor
UK is recognized as one of the most developed economic countries throughout the
globe, mostly just after USA and Canada. The GDP rate of UK is high and it is booming
up spontaneously. UK has developed economic structure and due to high rate of
currency, ventures can easily generate higher amounts of profits in business. However,
“Tesco plc” is highly depends upon the UK market place to meet their sales target.
Additionally, government of the UK takes multiple initiatives to support and assist the
UK business industry that alternatively fosters the business performance of ventures
(Du and Temouri, 2015). Therefore, the developed economic business environment of
UK is highly beneficial for high performance, profitability and growth of “Tesco plc”.
Social factor
Across the UK premises, more than 66 million people live and the overall social
condition of UK is developed. People are likely to maintain their high status and they
spend a huge amount of money on purchasing different products and services to make
their daily life better and easier. Hence, business organizations such as “Tesco plc”
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have great opportunity to capture attention of the customer base so that they can easily
meet their sales target and accelerate business profitability simultaneously. “Tesco
plc” can increase their market shares successfully by meeting the expectations of this
wide customer base.
Technological factor
Technically, UK is regarded as one of the most advanced countries around the world.
Technological advancement and adoption of technologies to improve business
performance across the UK has shocked the entire world. UK is a tech savvy country,
where the government invests huge amount of capital for innovations and technological
advancement (Cooke and Huggins, 2018). Hence, companies like “Tesco plc” can
adopt range of technologies within their firms for accelerating their production and
profitability together. In short, advanced technological atmosphere of UK is beneficial for
development, growth and betterment of the organization, “Tesco plc”. Already, the
company uses multiple technologies such as self-checkout machines, wireless devices,
radio frequency identification (RFID), intelligent scale, cloud computing, IoT, electronic
shelf labeling and others (tescoplc, 2019). All these have been adopted to accelerate
business performance of the specified organization.
Legal factor
Legal factors are extremely effective and these legal factors impacts on business
decision-making process as well. UK is famous for its numerous strict employee laws
and regulations in order to safeguard their employees from any kind unethical business
practices. Employment laws include Health and Safety Act, Equality Act and others
that UK based companies are bound to follow in order to continue performing business
practices throughout the UK premises (de Linde Leonard et al., 2014). Additionally,
taxation laws have been implemented by UK parliament that has reduced business
profits of ventures.
Environmental factor
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UK is highly concerned regarding environment safety. UK parliament has implemented
set of Environmental laws in order to reduce the pollution level and keep the UK
environment pollution free (Gray, 2016). Business ventures need to follow appropriately
environmental laws. The UK parliament has sent notice to MNCs like “Tesco plc” to
reduce down their carbon footprint by 50% by 2020. Overall, these environmental laws
might create some business challenges to “Tesco plc”. Hence, for continuing business
across the UK, “Tesco plc” needs to conduct all the business operations under the
environmental laws; otherwise, it might affect their business sustainability.
Apart from the macro business environment, “Tesco plc” needs to conduct micro
environment analyze to understand the internal condition and organizational position
in marketplace (Dobbs, 2014). In order to identify the micro business environment,
Porter’s five forces has been conducted in the below section.
Threats of new entrants
In Porter’s five forces, one of the most effective forces is threats of new entrants. It
refers to the new market entrants that can increase the market rivalry level effectively.
Across the UK premises, entrepreneurship is encouraged and UK government has
taken multiple initiatives to support and assist new ventures to start-up their
entrepreneurial career. On the other hand, retail business can be stated in short
amount of capital so that numerous numbers of companies are entering in market place,
especially in retail sectors (Wood et al., 2016). Therefore, threats of new entrants in this
industry are high.
Threats of substitutes
Threats of substitutes are another force that impact over business performance.
Companies like “Tesco plc” provide quality grocery and general merchandise products
too wide range of global customers at the most affordable price rate so that threats from
substitutes such as organic shop, small stores and others is low and does not affect the
organizational performance (Duan et al., 2015). Company has well-established brand
image and market reputation that they use to reduce the probability of substitute
products and services.
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Figure 1: Porter’s five forces
(Source: Dobbs, 2014)
Degree of rivalry
It is undeniable that market rivalry in retail industry is higher compared to other
industries. As numerous companies are entering in retail marketplace to meet the
requirements of the customers, it increases the market competition level as well. Being
one of the most successful and largest retail companies throughout the UK premises,
“Tesco plc” must have multiple rivals in market. The key competitors of “Tesco plc”
are Morrisons, Sainsbury’s, Primark, Asda, Waitrose and others those are creating high
competition in market place (tescoplc, 2019).
Bargaining power of customers
Customers are the most valuable assets of an organization so that bargaining power of
customers also impacts over business performance. Mostly, it has been observed that
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bargaining power of customers remains high (Fabbri and Klapper, 2016). Especially, in
retail industry, the market competition is such high as well as customers have numerous
options to meet their requirements. It has increased the bargaining power of customers.
Bargaining power of suppliers
Suppliers or those who supply raw materials and other vital elements to complete
business operations are also have bargaining power, which reflects on business
performance and market sustainability. In the retail industry, companies have multiple
supplier options so that the bargaining power of the suppliers in retail industry is low.
International/global strategic thinking
Strategic thinking is another key consideration in strategic business management. It
involves making a set of decisions regarding what actions the organization intends to
take for becoming more successful (Lasserre, 2017). An organization often goes
through a strategic planning process to improve their organizational strategies and
implement effective strategies in more effective manner. The ability to develop a global
strategy is known as strategic thinking. This global strategy is important for competing
with the challenges, posed by the global environment. Modern business scenario is
highly competitive so that MNCs like “Tesco plc” must focus on improving their global
strategic thinking for greater market sustainability. The company has more than 460,000
employees and over 7000 physical stores across the globe to perform their different
business activities. In order to manage this huge workforce unit and multiple stores in
appropriate manner, the organization will need to develop their strategic thinking. The
strategic thinking will assist business ventures like Tesco plc to achieve success in
business. Strategic thinking is all about thinking positively and logically for influencing
the growth and success of business ventures (Kopnina, 2017). Strategic thinking has
enabled companies like Tesco plc to use the resources in most effective manner as
well as advance the organization towards its business objectives. Apart from this, it
assists the company to avoid costly mistakes like entrance in a new market place before
conducting analysis of the selected location’s business environment (Slack and
Brandon-Jones, 2018).
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Moreover, change affects every business organization. Numerous companies are
entering in marketplace and accelerating the market competition level. Change in the
economy also affects the spending power of customers of a company. Therefore,
strategic thinking plays the most crucial role in achieving competitive advantage in
market place. Tesco plc uses strategic thinking for aligning their business objectives
with current business actions to achieve their expected business outcomes. The
customer purchasing behavior and the demands of the customers are rapidly changing
so that companies are required to focus on developing strategic thinking processes. It is
undeniable that the specified organization will be able to develop global strategies
through taking assistance of global strategic thinking. Tesco’s corporate management
team is responsible for global strategic development process. In present context, Tesco
plc is well-established enough to capture attention of customers and have proper
eligible team to manage different business functions. Strategic thinking process of the
Tesco starts from R&D department, where the actual issue is analyzed for determining
the most satisfying solution. Apart from this, the specified organization must have the
strategy to mitigate the issue and use strategic thinking in growth and development of
the business foundation.
However, the company uses BCG matrix to identify its strategic position in brand
portfolio as well as its potential (Whitehead, 2015).
Cash cows
Cash cows are those products that have high market demands and generate high
profits for the company. In Tesco plc, main cash cows is grocery and general
merchandise products. The company has been providing these grocery and general
merchandise products to customers since last 100 years and it still is generating higher
business profits. Thus, these products are considered as the cash cows of Tesco plc.
Stars
Start products refer to the most demanded products. It has been providing banking
services, loans and financial assistance to customers that are an emerging business
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(Palia et al., 2014). Customers are getting highly attracted to the banks so that it has
considered as the star products.
Figure 2: BCG Matrix
(Source: Mohajan, 2017)
Question mark
It refers to products those are reducing its market demand spontaneously. However, in
future, the market demand of these products most probably will be increased that will
generate profits for the company. Hence, companies like Tesco plc need to invest
money on dog category products as these products will help the company to maintain
profits in business. The company deals with food products as well. However, this type
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