Strategic Management Plan: Tesco Business Strategy Analysis Report

This report provides a comprehensive strategic management plan for Tesco, a British-based general merchandise retailer. It includes an internal and external analysis using PESTLE and SWOT frameworks to evaluate the organization's resources and capabilities. The competitive environment is analyzed using Porter's Five Forces model, identifying Tesco's existing and potential competitive advantages. The report critically evaluates various strategic directions available to the organization, justifying the most appropriate growth platforms and strategies. Furthermore, it assesses methods for monitoring the chosen strategies to ensure success, concluding with key findings and recommendations for Tesco's strategic development. This document also highlights the impact of political, economic, social, technological, legal, and environmental factors on Tesco's operations and strategic decisions.

Unit Number and Title Unit 32 – Business
Strategy
Title Strategic
Management Plan
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Table of Content
Introduction 3
Part A: An internal and external analysis that provides a platform
for strategic decision making: 3-10
1. PESTLE and SWOT of the organisation and an evaluation of the
organisation’s resources and capabilities 3-7
2. Competitive environment analysis using Porter’s Five Forces model
7-9
3. Identification and justification of the organisation’s existing and/or potential
competitive advantage 9-10
4. Valid strategies and tactical objectives to achieve overall strategic
objectives 10
Part B: On the basis of this analysis critically evaluate and justify
strategic options for the organisation: 10-14
1. Critical evaluation of the different types of strategic directions available to
the organisation 10-12
2. Justification and recommendation of the most appropriate growth platform/s
and strategies 13
3. Evaluate ways and means by which the chosen strategy/ies can be
monitored in order to ensure success 13-14
5.0 Conclusions 15
References 16-17
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Introduction
A strategic management plan is basically considered to be a document that is
available in the company that helps and also ensures that the stakeholders and
employees are working in a effective manner towards achievement of organisational
goals and objectives. In this report, Tesco has been chosen as the organisation. It is
a British based general merchandise founded in 1919 and headquartered in Welwyn
Garden City, United Kingdom. In this report it involves the influence and impact of
the macro environment on the organisation with support of various business
strategies. In addition to that it involves the internal capabilities and environment.
Moreover,it includes the analysis of using the Porter's Five Forces model and also
involves the application of the theories, models and concepts for a better
interpretation and understanding of the strategic directions of the organisation.
Part A: An internal and external analysis that provides a platform
for strategic decision making:
1. PESTLE and SWOT of the organisation and an evaluation of the
organisation’s resources and capabilities
Pestle analysis
Pestle Analysis is basically a concept or framework that is used by the
organisation in order to a gain a proper image of the industry environment. The term
PESTLE basically stands for Political, economic, social, technological, legal and
environmental factors. This framework allows the organisation to create a opinion of
the factors that might have a influence on the industry and business. In context to
Tesco, the PESTLE analysis helps the organisation to analyse its brand tactics. It
also helps the company to examine various external factors such as Political, social,
economic and technological factors (Bratton, J. and Boak, G., 2020).In addition to
that this framework helps the organisation to have a better understanding of the
dynamics of the market and also helps in improving the operations of the
organisation in a constant manner. The Tesco PESTEL analysis involves:
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 Political Factors: The political factors basically involves the tariffs, tax policy,
political stability, environmental regulations and trade restrictions. As per the
political factors, it helps in analysing the extent to which government can
impact the organisation or industry (Timeea-Alexandra and Doina, 2018). In
context to Tesco, the company has its operations in various countries and is
considered to be one of the largest retailers and focuses on following the rules
and regulations in order to ensure safety and compliance of the products. The
organisation operates in various countries as so it need to make changes in
their business operations according to the political requirements of all the
countries it operates in. The changes in the policies and taxation among the
various countries can easily affect the overall performance and revenue of the
organisation. In addition to this, the operations of tesco is also affected by
consequences of brexit as the decision of European union would impact upon
the trade and tariff restrictions and regulations. The impact of brexit would
result in increasing regulations for the purpose of imports as well as exports. Economic Factors: These factors basically involves the consumer spending,
exchange rates, globalisation, consumer spending, economic decline or
growth and cost of living or interest rates (Shaulska and et.al., 2021). In
context to Tesco, the organisation need to focus on the various economic
changes that constantly occurs in the organisation. It is also very important to
take into consideration these economic factors as it will affect the profit,
revenue,distribution and sales. The organisation should be well aware of the
policies related to taxation. In addition to that the organisation need to keep in
mind the prices of its products. In context to Tesco, the organisation's
operations are affected due to change in consumer's tastes and preferences
and also due to impact of various cultural factors. In order for the company to
work smoothly it is important to develop products and services keeping in
mind the trends in societal influence and changing culture and also to provide
a variety of products and services that will help the consumer to make
changes. Social Factors: The social factors basically includes the factors such as
health, safety, cultural norms, population growth rates, expectations, age
distribution etc. All these factors plays a very important role in organisations
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as it helps in better strategy planning and marketing analytics. In context to
social factors , the organisation has attracted large number of customers with
promotion of organic products in order to increase the customer satisfaction.
The organisation truly believes in local hiring and also providing benefits to
the society and thus creating employment opportunities for various
individuals. For instance, the preferences of consumers are inclined towards
quality and fresh food as people are growing health conscious individuals.
This would help in increasing sales of the company as consumers seek
products of a renowned brand known for quality. Technological Factors : These factors basically involves the government or
institutional research, rate of technological change and evolution of the
infrastructure. The technological trends are changing at the faster pace and it
is very important for the organisation to stay updated with the latest
technology. In context to Tesco, the organisation has adopted various
advanced technologies that basically involves the promotion through social
media and online shopping (Wills, 2020). . In addition to that, the organisation
has adapted various online shopping trends and provided services of home
delivery. Beside this, the company has been able to take advantage of
automation which has enabled the organisation to attract large customer base
and generate high revenues. The company has adopted high tech software
helping in automating services and reducing manual efforts of employees
while saving time and ensuring accuracy at the same time. Legal Factors: It basically involves the changes to legislation that impact or
influences the taxation, quotas, access to materials, impacting employment
etc. These basically involves the internal and external sides. In context to
Tesco, the changes in the policies of government majorly have a major impact
on the company. For a organisation to perform its operations smoothly it is
important to follow the international and local market laws. In context to
Tesco, the organisation was sued because of unequal pay among the male
and female employees of the organisation.
 Environmental Factors: It basically involves the factors such as parasites,
temperature, sound, food, pollutants and population density. In context to
Tesco, the organisation has taken various initiatives for the purpose to create
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a sustainable society and also focusing on improving the environment. In
addition to that, the organisation has taken various initiatives and measures
to reduce and remove the non-recyclable plastic and also focusing to explore
new opportunities. In the past years the organisation has changes around 800
products and are focusing on the recyclable process.
It has been concluded after performing the pestle analysis that TESCO has great
influence of environmental factors on its functioning which have direct or indirect impact on
its overall performance. The politician restraints and worsening situations of Brexit could be
dealt by consolidating the supply chain management of the company to reduce the threat of
growing restrictions on trade. The company stand tough in the market due to its
implementation of high and modern techniques in the production processes. The legal issues
faced by company could be overcome by improving its wages structure ensuring fair
treatment irrespective of gender. Employees should be paid according to their competence
and potential and should not be discriminated on gender basis.
VRIO Analysis
In Context to Tesco, the organisation uses this framework for the purpose to look into
the internal resources. The analysis also helps in identifying the resources which helps in
identifying the resources which needed improvement for the purpose to achieve a competitive
advantage. In context to Tesco, the valuable resources involves financial resources.
Employees, local food products and patents. In context to Tesco the rare resources involves
local food products, financial resources etc. The imitable involves employees, financial
resources and local food products. In context to organised, the resources involves financial
resources, patents and distribution.
Swot analysis
It is a strategic business framework which is used by organisations to
evaluate internal strengths and weaknesses as well as external opportunities and
threats (Kapassa, Touloupou and Themistocleous, 2021). Swot analysis helps an
organisation to formulate effective strategies through gaining understanding
regarding their current position in the market. The identification of swot factors in
context to tesco is stated below.
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Strengths Renowned brand in the market: Tesco has been successfully maintaining
its sustenance in the market from a very long time. It is one of the most
remarkable brand which has grabbed worldwide attention of audience and
achieved high profitability margins (Leiblein, Reuer and Zenger, 2018)
 High market share: The company has its influence over 25 percent share in
the market which indicates huge availability of its goods and services to
consumers. The organisation carry its operations 2318 stores approximately
which denotes high revenue generation of the company.
Weaknesses Issues regarding financial decisions: The company face barriers in its
progress due to their credit card liabilities and huge amount of debts, which
denotes shortcomings in their financial strategies.
 Low cost strategies: Tesco implements the strategy of low cost to attract
more consumers towards its goods and services (Kumar, Dabas and Hooda,
2020). The company has to make compromise through reducing their prices
in order to increase their customer share.
Opportunities Expansion of operations: The company has expanded its magnitude of
operations through development of new offline store. It has recently opened
Jacks, which serves as an excellent opportunity in the growth and progress of
the organisation. Due to its high popularity and goodwill, consumers are tend
to readily purchase from any store of Tesco.
 Fostering online market: The expansion of online market is a favourable
factor in the remarkable growth of businesses nowadays. During lock-down,
the company has provided home delivery services which were widely
appreciated by their consumers. The indulgence of audience into online
marketing is encouraging businesses to foster their online market. The
expansion of online purchasing will immensely increase the revenues and
profitability of the company.
Threats
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 Competitive Rivalry: The significant emergence of globalisation has lead to
growth and development of various business entities. The market is
constantly expanding due to establishment of new business ventures which
increase the availability of alternatives to potential buyers (Sakolnakorn and
et.al., 2020). Tesco face tough competition from popular companies like
Morrisons and Sainsbury's which affect its earnings. Due to the availability of
various substitutes, consumers have wide range of choices and they are tend
to shift their preferences when prices gets higher.
 Uncertainties in external environment: External environment in which
businesses operate are full of uncertain changes and factors which cannot be
ascertained. A business is influenced by various factors as discussed above
in pestle analysis. These external environmental factors influence the
operational activities of the company. The threat of uncertainties affect the
formulation and development of strategic planning as the formation of plans
are conducted keeping in mind these uncertainties. Natural disasters or major
changes in government policies and economic factors could critically impact
upon the performance of the organisation.
2. Competitive environment analysis using Porter’s Five Forces model
Porter's five forces model is a business framework which helps organisations to
evaluate their competitiveness in the market. It aims to identify obstacles and
ascertain possible factors that are reducing the scope of expansion and progress of
a company. The model covers the following factors which decides the viability of a
company. Threat of new entrants (low): The emergence of new business ventures are
tend to influence the pricing strategies of existing retailers. The established
brands have to rethink their pricing decisions because new brands usually
start their ventures with lower prices. In context to Tesco, the extent of this
threat is low as the retail brand is maintaining its sustenance in the market
from a long time (Beynon-Davies, 2021). The standards and reputation that
the company maintain is very difficult to compete with. The organisation's
loyal customers are not likely to shift their preferences to newly emerging
business ventures.
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 Competitive rivalry (high): The level of competition among retailers are
increasing day by day with growing significance of globalisation. The factor of
competitive rivalry affect the strategical decisions and policies of firms. With
increasing emergence of companies, the availability of options are increasing
to the prospective buyers (Godina, O.V. and et.al., 2018). In context to Tesco,
the company face major competition form renowned firms like Morrisons and
Sainsbury's. These brands have high market share and are well established
brands existing from a long time in the industry. Threat of substitute products (high): Due to the extent of competitive
rivalry, the availability of substitutes is major in the market. The varieties of
options existing makes it easy for consumers to switch their preferences if the
products are expensive. In context to Tesco, the products offered by the
company are embedded with the availability of substitutes which increase the
extent of competition for the organisation (Şafak, 2021). The threat of
substitute products is high for the brand as there are numerous brands
dealing in supermarket industries, which provides consumers with amount of
huge alternatives. Bargaining power of suppliers (low): Business entities procure raw
materials from suppliers which determine the amount of costs incurred in the
process of production. Prospective and potential suppliers are tend to
negotiate to charge higher for the inputs that they provide. The bargaining
power of suppliers increase the manufacturing cost and reduce the amount of
profitability margins. In context to Tesco, this threat is quite low due to the
high availability of suppliers (Capriello, A., 2018). The company acquire their
inputs from numerous suppliers which makes accessibility of raw materials
convenient for the organisation.
 Bargaining power of consumers (moderate): Consumers are becoming
more aware regarding the consumption of products both in terms of quality
and quantity. A rational consumer always prefer the product which tends to
provide highest utility to them and is affordable to the buyer. Due to the vast
availability of alternatives, consumers are likely to avail goods and services
which are lower in prices (Hamilton, 2018). In context to Tesco, the risk
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associated with this factor is moderate as the company provide audience with
best quality and maintains high brand image in the market. Although,
consumers demand maximum utility at lower prices but Tesco maintains huge
base of loyal customers who continues to avail their products and services.
The evaluation of porter's five forces examine the competitive edge of the company
through determining major factors affecting its position. It has been analysed that the threat
of new entrants is not likely to affect the performance of Tesco which is an internal strength
of the organisation and can be used against its weaknesses. The high competitive rivalry and
large availability of substitutes implied the organisation to bring customisation in the
products and services of the company. The moderate power of suppliers and consumers
implies favourable position of the company but to consolidate it the company must focus on
formulating discounting strategies to induce its customer base and adopt mass production to
lowering the supplier power.
3. Identification and justification of the organisation’s existing and/or potential
competitive advantage
The factor of competitive advantage enables a company to differentiate it form
other brands and make it look stand out in a market full of potential rivals. To
determine and effectively establish competitive advantage, an organisation needs to
evaluate constructive strategies which induce consumers to avail its goods and
services (Zunnunova, U.G., 2019). The relevant competitive advantages identified in
context to tesco are mentioned below: Effective pricing strategies: The company has benefited from the adoption
of low cost strategy in their production process. It enables the company to
offer reasonable and affordable prices to the audience due to which it
maintains high base of loyal consumers. People are tend to shop from tesco
due to its worldwide recognition and suitable prices. Providing consumers with best quality: Tesco has became the leading
supermarket brand and the quality that it offers is one of the most relevant
reasons for its global popularity. Effective use of IT advancements: The firm make efficient use of internet
and technology to manage routine activities of the enterprise. Tesco use
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software for the purpose of inventory management, process control and to
perform other important functions (Lynch, 2018). The company also advertise
their products frequently through effective techniques of digital marketing.
 Constructive supply chain management: Tesco has established its course
of operations properly in the business environment. The company has
developed strong relations with associative supply chain partners which
ensures its readily availability of goods and services at all times. The
company operates in numerous stores and offer wide range of products
through maintaining efficiency in its supply chain management.
4. Valid strategies and tactical objectives to achieve overall strategic
objectives
The process of Strategic planning determine the actions and policies which
are implemented to attain long-term goals and objectives of the company. Tactical
planning relates to the process of devising short-term plans and targets to
accomplish long term objectives stated in the strategical planning. In context to
tesco, the company conducts market research frequently to analyse its position and
the scope for progress (Pasch, 2019). The company conducts and performs
application analysis of various strategic tools like Swot, Pestle, Porter's five forces,
ansoff matrix and other such evaluative models. In addition to this, the company
adopts various methods of promotion and techniques of digital marketing in order to
increase its influence over the market.
Part B: On the basis of this analysis critically evaluate and justify
strategic options for the organisation:
1. Critical evaluation of the different types of strategic directions available to
the organisation
Ansoff matrix
It is a strategic tool also known as Product-Market Expansion Grid used by
the marketers of a company to study and design the strategies for the growth of the
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business. This matrix is combined with various alternatives plan of action which help
the organization to analyse the risk associated with each strategy(Dawes, 2018). For
this analysis, Tesco has been considered which is multinational groceries and
general merchandise retailer in England. This matrix helps in analysing its internal
strength and weaknesses and its external business environment to research growth
opportunities accordingly that has been depicted below: Market penetration: This is the first quadrant of Ansoff matrix that provides
least risk among the four growth option. Here market penetration is carried out
by Tesco where it promotes its products in the existing market. It adopts the
strategy to offer discounts to its customers or simply lowering the prices of the
products. This strategy help the company to increase its market share, sales
and revenues. Market development: This is the second quadrant where an existing product
is introduced in the new market. Whenever Tesco launches its existing
products in new market then it develops its market in number of ways. The
primary way is to create attractive packaging of its products and expand
geographically in new market. It can also advertises its product with the help
of celebrities or sportsmen to create a brand reputation and loyalty among
customers. Product development: This area is slightly more risky because a new
product is introduced in an existing market. For this, Tesco develops good
number of its own label products to sell in existing markets. It also carries an
extensive research and development to create new products that offer
especial durability(Khajezadeh and et. al., 2019). This allow the company to
take advantage of grater sales and revenues associated with new products.
 Diversification: This is the riskiest among the four option as a new product is
introduced in an entirely new market. For this, Tesco has diversified its
operations into different markets such as food brand, selling books,
electronics, financial services and clothing. This strategy help the company to
mitigate the risk of loss in one division also helpful in generating revenues by
selling different product lines to the customers.
BCG matrix
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