Strategic Management: TESCO's Direction, Analysis, and Recommendations

This report provides a comprehensive strategic analysis of TESCO, a major player in the retail industry. It begins with an introduction to strategic management and its application to TESCO, including the company's founding and financial performance. The report then delves into TESCO's strategic direction, outlining its vision, and the strategies it has employed over the past five years. An industry analysis, utilizing the PEST framework, assesses the external environment, including political, economic, social, and technological factors impacting TESCO's operations. The report explores TESCO's competitive advantages, applying Porter's Generic Model to identify cost leadership, differentiation, and focus strategies. The concept of strategic drift is discussed, highlighting challenges TESCO faces. The report examines TESCO's mission and vision statements, and its strategic capabilities are evaluated using VRIO analysis. A Business Canvas Model is also presented. Finally, the report considers potential strategies for TESCO to defend its core business and concludes with recommendations. The report provides a detailed examination of TESCO's strategic position and provides valuable insights into the company's operations and challenges.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Strategic direction in past years and development of strategic thinking.....................................1
TASK 2............................................................................................................................................2
Industry Analysis to review external environment.....................................................................2
Company's competitive advantages among its direct competitors..............................................3
TASK 3............................................................................................................................................5
Strategic drift of TESCO.............................................................................................................5
Mission and Vision statement of TESCO...................................................................................5
Companies strategic capabilities.................................................................................................5
Business Canvas Model..............................................................................................................6
TASK 4............................................................................................................................................7
Possible strategies that the company could follow to defend its core business..........................7
TASK 5..........................................................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Strategic management is a process through which various management techniques are
used and introduced in business organisation so that planning for future can be done. This helps
organisations to create a vision by developing long-term strategies. This process helps in
identifying necessary processes and resource allocation in future in such manner so that goals
and objectives can be achieved in long run. This helps business organisations to become
competitive and enhancing their strengths and support their core competencies. Objectives are
set, competitive environment is analysed, internal environment is accessed and various strategies
are assessed for effective management (Ertek and et. al, 2017). In this project report TESCO
organisation is considered to elaborate the concept of strategic management. This organisation
was founded in the year 1919 by Jack Cohen in London, England, UK. TESCO deals in
supermarkets and other stores and operated through 450000 employees and earning a net income
at an average of 1320 million euros.
This project report includes strategic direction that company follow with detailed analysis
of industry in which TESCO operates. Organisations strategic capabilities with various tools and
techniques and its discussion is mentioned. Evaluation of the resource implications and
recommendations for organisation is mentioned in this report.
TASK 1
Strategic direction in past years and development of strategic thinking
Strategic direction includes the planes and actions that needs to be put in place to work
towards vision of the organisation for enhancing its future. Strategic direction is important
because it provides a senses of direction and outlines measurable goals. This helps managers of
TESCO to guide in their day-to-day decision making process for evaluating progress and
changing approaches when moving forward (Hong, Shin and Lee, 2016).
TESCO is working with a vision to be most highly valued by the consumers served, the
communities in which they operated, loyal and committed staff and shareholders, growth of
company. A Morden and innovative company and winning locally and applying global skills.
The strategic direction that TESCO has followed in the last 5 years in process to achieve
strategic direction are as follows-
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 TESCO become creator of highly valued brands so that maximum amount of satisfaction
can be provided to consumers form quality products.
 TESCO followed a strategic through which they become strong in everything they sell.
 They build a team that helps them to create value and through which loyal and hard-
working employees are employed in organisation (Johnsen, 2016).
 To achieve the vision to be highly valued by consumers and community in which the4y
operated then in that case growth the UK core is made.
 Services and goods that are offered by TESCO in that case they served with heart to all
for their goods and services in which they operate.
Strategic thinking is a process that defines the manner in which people think about and
leads to create future for themselves and others. The strategic direction leads TESCO to aim to
be a Zero-carbon business by 2050. Mangers and operators of business are providing their main
focus on enhancing consumers experience in such manner so that aims are achieved. In future
pricing strategy that will provide a message of “Every little help” is introduced. This will aim to
reduce purchasing cost and operational cost through which business is benefited through
economies of scale. This will provide cost advantage to consumers when compared with other
units in the market.
TASK 2
Industry Analysis to review external environment
Industry analysis is a process through which business function is completed by business
owners and other individuals to assess the current business environment. In order to review
external environment PEST analysis is done (Kantur, 2016). This analysis is a management
method whereby an organisation can access major external factors that influences its operations
so that more competitive advantage can be enjoyed. PEST analysis if TESCO is elaborated as
follows-
Political: TESCO deals in retail industry and operates at international level that leads to
provide impact on operations of organisation through global political factors. Tax rates, acts of
legislations and of courses and the political stability of organisation in which business is operated
is affected positively or negatively. As governments that supports retail industry to grow and
develop enhances TESCO to create employment opportunities.
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Economic: Analysing the external environment of retail industry economic factor needs
to be considered more appropriately. As leverage cost, demand, profits and prices must be in
aware of any changes in policies. As economic factors affects buyers behaviour and still 30% of
UK market is concerned by TESCO and financial conditions their in the market must be
considered so that focus can be mad on creating value brand (Kleibrink, Gianelle and
Doussineau, 2016).
Social: Changes in UK's social culture is recorded over a period of time and consumers
have shifted towards bulk shopping and one-stop shopping. TESCO to survive in this changing
environment of the industry has introduced many non food products for sale in stores. This helps
to satisfy large number of demands for consumers through offering them variety under on roof.
As consumers in the current environment is becoming more conscious for consuming healthy
products then introducing organic products will help TESCO to met demand of their social
environment.
Technological: Advancement of technology in the industry has introduced TESCO with
new opportunities. Firstly development and introduction of online shopping facilities for home
delivery helps in attracting more and more consumers with new service. Secondly self-service
checkout points have been provided to consumers for their convenience and ease for consumers
which in turn leads to reduction of labour cost. Both these technological changes in the industry
helps TESCO to energise efficiency to fulfil long term objectives.
Company's competitive advantages among its direct competitors
Porter's generic model is a strategic that describes how a company pursues competitive
advantage across its chosen market scope (Kunz, Siebert and Mütterlein, 2016). This concept is
described by Michael Porter in 1980. Through this model firms relative position within its
industry is determined to analyse whether it is above or below industry standards. The
fundamental concept in relation to this model is to access average profitability in the long run to
verify sustainable competitive advantages. Their are two type of competitive advantages a
organisation can enjoy that are low cost or differentiation. Three generic strategies are used to
achieve above average performance in an industry such as cost leadership, differentiation and
focus. TESCO has the capacity to achieve its competitive advantage through the differentiation
of its products and services from those of its competitors through inclusion of low cost approach.
Organisation will take into consideration the generic strategies that would help in enjoying
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competitive advantage in relation to cost leadership, focus and differentiation. These are
described as follows-
Source: Porters Generic Model, 2016
Cost leadership: Through following cost leadership TESCO is considering to becoming
one of the low cost producer in the industry. As the lowest cost producer TESCO will enjoy
competitive advantage by earning high amount of profits when no other competitor can compete
in terms of price offered. Focusing on being a cost leader in the market TESCO is trying to
reducing its cost in each possible manner. This is hindering the quality of products offered over a
period of time (Porters Generic Model, 2016).
Differentiation: TESCO is aiming to bring some difference in the products offered form
that of its competitors. As premium price is charged for products and services that are better in
quality which are served by competitors in the industry. Serving with better quality will help to
ensure that performance of goods and services is better and helps in satisfying buyers in better
manner form that of competitors. For differentiation an extra cost will be incurred so that
effective brand image can be created that will help organisation to sustain in long run and enjoy
some privilege over others.
Focus: As per this strategy an organisation can make focus on being cost effective or on
seeking differentiation in the target market (Martinsons, Davison and Huang, 2017). The target
market can have buyers with unsatisfied need or exploited by charging higher prices for products
offered. Based on the market selected focus is generated by TESCO.
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Illustration 1: Porters Generic Model, 2016

In existing market domains TESCO is facing competition form various organisations that
are operating in the same industry and using competitive tools to meet competition. ASDA,
Sainsbury's and Morrisons is serving greatest competition for TESCO.
TASK 3
Strategic drift of TESCO
Strategic drift is defined as a gradual deterioration of competitive action that results in
failure of an organisation to acknowledge and respond to change in business environment. This
results when organisations are unable to keep pace with the changes taking place in their
immediate environment. TESCO is expanding its business in UK and in international markets for
which large stores are operated (Mazouz, Rousseau and With the collaboration of Pierre-André
Hudon, 2016). These huge stores leads to rise in operating cost of the and under this pressure
shoppers gets shift to online purchases and to other local purchaser. This strategic drift is faced
by TESCO to a grate extend and its operations are suffered in great extend.
Mission and Vision statement of TESCO
TESCO organisation is serving with a core mission to “We make what matters better,
together”. Through this mission TESCO is to create value for customers to earn their lifetime
loyalty. TESCO is serving number of products so that highest amount of satisfaction can be
provided to all the targeted consumers.
In long run TESCO is working with a vision “To be most highly valued business by the
consumers they serve, the community in which they operate, loyalty towards employees and
shareholders”. For this all form of stakeholders whether internal and external are served with
best quality of products and services as per their demands (Molter and et. al, 2016).
Companies strategic capabilities
To analyse strategic capabilities of TESCO organisation, VRIO analysis is performed
through which all the internal resources one by one to assessed to provide sustained competitive
advantage.
Valuable: As per VRIO analyses financial resources, local produces, human resource,
patents, distribution network of TESCO organisation is valuable. As all these resources helps in
investing well, serving consumers with best product and employees retention and loyalty level is
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high. Competitive interference is minimised by reaching to more and more number of consumers
is achieved with these resources.
Rare: Financial resources, human resource, patents and distribution network of TESCO
is rare as availability of these resources are unique for TESCO. Local food products are not to be
found rare as these are easily available with any of the competitors. This resource will not
provide competitive advantage to TESCO as they are valuable but not rare (Steinbach and et. al,
2017).
Imitable: Financial resources available to TESCO are hard and costly to imitate as they
are established over the years. Patents of TESCO are hard to imitate as no one is legally allowed
to imitate patents. Distribution network is developed over the years and significant amount and
time is invested to establish this and it is hard to imitate. Human resource of TESCO can be
imitated by its competitors by providing training over a period of time.
Organised: Financial resources of TESCO are well organised as they are invested in
right place to grab opportunities and minimise threats. Distribution network of TESCO is well
organised as this helps organisation to reaching to all the targeted consumers in minimum time
duration. Patents in TESCO are not well utilised as they are not use to provide results with full
potential.
Business Canvas Model
This is defined as an strategic management start-up for developing existing and new
business models. Through this model a business concept and idea is communicated in quick and
easy manner. Through this most important actions that needs to be undertaken to become
successful is performed to operate successfully and more profitable manner. In TESCO's
business canvas key partners of organisation with key activities to perform is mentioned
(Sullivan, Thomas and Rosano, 2018). Value proposition, consumer relationship and
segmentation of the business is mentioned. Channels of distribution, key resources, cost structure
and revenue streams is mentioned. All this information is represented in bullet points so that it
can easily understood and interpretation can be made in accurate and appropriate manner.
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TASK 4
Possible strategies that the company could follow to defend its core business
Organisation operates in industry with some aims and objective and it is important and
significant for managers to understand and determine changes properly which affects
organisational growth and development. When there is change in business, strategies, then it will
be easy for people to make changes properly and evaluate it specific manner. There is
requirement of specific changes in industry such as change in consumer demand, so in this case,
there will use of some strategies to know want changes affects TESCO PLC. This organisation is
well brand in retail industry because of their quality and innovation (Szwejczewski, Sweeney and
Cousens, 2016). Managers of TESCO PLC make regular strategies with which they can ascertain
the changes properly and take actions to deal with it. There is requirement of proper planning
and strategies with which it will be easy for implementing changes. In order to understand and
determine strategies Ansoff Matrix is used. Ansoff Matrix is also known as Market expansion
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grid because it provides specific way to expand business and perform operations in better and
effective manner. In this matrix, there are four categories through which expansion can be easy
and give more opportunities to TESCO PLC. The categories of Ansoff Matrix is as under-
Illustration 2: Ansoff Matrix, 2019
Source: Ansoff Matrix, 2019
Market Penetration- In this the quarter in which product and market both are existing for
organisation. This is the most common and safe way with which managers of TESCO PLC can
perform operations properly. With change in business strategies it will be easy for people to
understand and defend operations properly because they have knowledge about culture and
regulations of conducting operations in existing country.
Product development- In product development, there will launching of new product or
services for existing market,. In this case, proper market study and research will be done through
which it will be easy for people to understand and relevant to understand changes properly.
When sales of TESCO PLC will get down, then this strategy is best to retain same brand image
in industry (Vitolla, Rubino and Garzoni, 2017).
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Market Development- When organisation enters in new market with their existing
products and services, then they lie in this category. In order to expand in other countries, this
strategy is important. This strategy assist in competing with international brand and change in
possible with external market.
Diversification- This is the last quarter in Ansoff Matrix. There is launching of new
product in new market. This is most risky approach because if people does not prefers to use this
approach, it will be easy for managers of TESCO PLC to expand and diversify business activities
(Ansoff Matrix, 2019).
TESCO PLC accept market development in which they will enter in emerging market
where there is less competition and organisation have to compete with local people. In
developing and emerging markets, political parties are ready to get investment from other
countries. Managers of TESCO PLC have to understand and determine changes proper with
which they can operate in other countries as well. Managers of TESCO PLC are thinking to
expand in Chad which is a country in Central Africa. For expanding in this market, managers
have to collect complete and specific knowledge about it. Business activities have to altered
because here is difference in cultural and regional values so activities will have to be considered
properly. There are four types of strategies such as functional level, business level, corporate
level and business expansion strategy which has to be followed by mangers of TESCO PLC for
entering in new market. These strategies are discussed as under in detail-
Functional level- With expansion of business in new market, organisational functions of
TESCO PLC will get changed. Marketing department have to use new and innovative
approaches for understanding external market and it will be easy to attract consumers.
Production department have to maintain EOQ level so waiting time and maintenance cost can be
maintained. There is requirement of proper communication among different departments, so it
will be easy to distribute operations and make workers accountable and responsible for their
actions. With different functions of TESCO PLC are performed as per planning then it will be
easy to provide satisfactory services to consumers.
Business level- Business level strategies are better and appropriate because activities
have to be performed in lieu of understanding Chad market. This level contains information
collected from different departments so overall organisational performance of TESCO PLC can
be improved. At this level, business operations are specific and appropriate because this is the
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way through which activities are clear to workers. This level makes operational efficiency of
TESCO PLC up to the marks and it will be easy to compete with other brand as well. There are
local brands operating in Chad, so it is important to analyse their working style, market strategies
with which growth scope will enhance (White and et.al, 2016).
Corporate level- These are the strategies which are framed to not only improve working
style but also to understand and evaluate changes. There is requirement of specific and correct
strategies with which expansion is also easy. This is the most important strategy with which
people can determine and understand policies in effective and relevant manner. With change in
business strategies, it will be easy for people to understand and determine the business growth
and development strategies properly. TESCO PLC can operate in industry because they have
proper knowledge about local markets, competition, consumer trends, etc. which they acquire
with this level of planning and regular market analysis.
Business expansion strategy- Lastly, there is business expansion strategy in which main
core planning is done related to expansion. As there are many departments working in the
TESCO PLC such as marketing, research and development, sales, purchase, etc. so it is essential
that there must be synchronisation in their activities. This makes ease in evaluating and
understanding changes properly and determine which strategy is better for existing and growth.
As Chad is developing country, so growth prospects for TESCO PLC in this market is more but
managers have to understand and evaluate changes properly. There is requirement of way to
enter in new market such as franchise, partnership, collaboration, etc. so it will be easy for
people to understand and determine changes properly.
Above mention strategies are important and specific because with change in business
operations, there will ease in determining and understanding changes properly. TESCO PLC can
operate in new country, when they have proper knowledge about factors which affects
operations,. There is requirement of employees involvement as well because this is the best way
to come with new and effective approaches. With change in business operations, there is
requirement of change in working style, then it will be easy and specific for understanding
changes. Market development is possible because alterations in business activities can be
implemented with analysis and determining changes. With understanding and evaluating external
market, researcher will get to know about policies through which actions can be taken.
Expansion will be fruitful when managers of TESCO PLC are ready to accept changes and
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