Comprehensive Strategic Report: TESCO's Vision, Competitive Advantage

This report provides a strategic analysis of TESCO plc, evaluating its mission, vision, and objectives in setting its strategic direction. It assesses TESCO's competitive advantages using the VRIO framework and analyzes the external environment through the PESTLE approach and Porter's Five Forces Model. The report reviews TESCO's organizational strategies based on these analyses, examining factors such as the bargaining power of buyers and suppliers, industry rivalry, the threat of new entrants and substitutes, and the impact of political, economic, social, technological, legal, and environmental factors. The analysis highlights TESCO's strengths in social responsibility, brand image, supplier relationships, globalization, risk management, and cultural adaptation, as well as its focus on quality, cost control, and technology upgrading.

Strategic management
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Table of Contents
INTRODUCTION ..........................................................................................................................3
Evaluation of the Purpose, Vision, Mission and Objectives in setting the strategic direction of
TESCO ........................................................................................................................................3
Assessing the competitive advantage of TESCO using the VRIO framework............................4
Analyzing the external environment of TESCO using PESTLE approach ................................6
Assessing the competitiveness of TESCO using the Porter’s 5 Forces Model............................7
Reviewing the TESCO's organizational strategies based on the analysis...................................8
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................11
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INTRODUCTION
Strategic management is the method through which a company sets its goals and
objectives in order to make it more compatible in the market (Hunger, 2020). It manages the
resources to attain the goals and the objectives of the organization. In this report TESCO plc will
be analysed by its mission, vision and objective statements to evaluate its strategic management.
How these vision, missions and objectives when integrated helps the company in formulating its
strategies for growth and development will be evaluated. VRIO model which is used to analyse a
company's competitive advantage over its competitors will be used to study the competitive
advantages of TESCO over its competitors in the market. External and internal environment of
the chosen company will be analysed through PESTLE and Porter's 5 Model Approach. How
these approaches helps in accessing the competitiveness of the chosen company will also be
discussed.
Evaluation of the Purpose, Vision, Mission and Objectives in setting the strategic direction of
TESCO
TESCO is Britain's most profitable, oldest and largest retail supermarket chain operating
globally. It sells products like homeware, consumer electronic, beauty products and groceries
and many others. It has physical stores and it operates on online platforms too. It also offers
banking products like loans, savings accounts and credit cards.
Purpose: A purpose of a company is the reason because of which it is standing in the market. It
is the affirmation for which the company decided to corporate in the first place. The purpose of a
company never changes rather, it goes along as the company grows, develops and diversify. It
binds the whole organization together (Fuertes and et al., 2020).
Purpose of TESCO is to serve its customers better and good products and services. It
wants to give its customer a better experience every time they buy something from them. It try to
provide a better and easier standard of living to its people and customers.
Vision: Vision of a company is what or how the company view's itself in the future. A vision is
long term goal of an organisation. Day to day activities are performed to achieve the mission in
the ultimate future. Vision is achieved through missions. It is a roadmap for the company which
the company follows and focuses on.
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The vision statement of TESCO is to be highly valued business by its people i.e. its
customers, employees, shareholders and communities in which it operates. It wants to be the
high valued company by its customers and to be appreciated by its stakeholders.
Mission: Mission is the short term goals of a company. It describes what exactly the business is
about. It generally gives the answer of how the company will be achieving its visions in the
future. A mission statement is what the employees try to attain each day in the company.
The mission statement of TESCO is to make the things/products which matters the most
to the people. It also wants to achieve customer loyalty.
Objective: Goals are the steps to attain vision of the company however, the Objectives of a
company are brief time bounded targets that are performed to attain goals of the company. They
are achievable, measurable, and relevant in nature. Objectives are more specific than goals
(Ansoff and et al., 2018).
TESCO have many objectives, some of which are to increase its market share, product
development and product diversification, increasing profits and sales, providing products at
cheaper rates and developing its digital coverage.
Mission, vision and objectives of a company are inter-related. Mission and vision of a company
are the means to communicate its purpose to its stakeholders. If the employees can understand
the purpose of the organization clearly, then only they can perform its mission and vision. They
formulate strategies of a company. In vision statement, mission is explained as to guide the
strategy. The strategy formulated by the company is evaluated on the basis of how well the
mission and vision of the company are attained. Mission and vision statements of a company
provides direction for achieving goals and also, reveals the success of these strategies.
Assessing the competitive advantages of TESCO using the VRIO framework
VRIO is a composition of 4 elements: value, Rarity, Imitability and Organization. It is
used to reveal and protect the abilities, strengths and resources which provide the competitive
advantage to a company (Chatzoglou and et al., 2018). It is created after the company have
developed its vision statement. It helps the company in formulating the strategy through which it
will approach the market.
TESCO uses the VRIO structure very frequently to formulate competitive advantages
upon its competitors.
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Value: Value answers if the organization is providing value to its customers or not? It explains
the strengths that the company have to use for grabbing an opportunity or to balance the
competition in the market (Geraldes, da Costa and J Geraldes). These values are the one which
help the organization in growth and development.
TESCO's values that helps it in counter balancing its competition and gain competitive
advantages are
 TESCO is consistently involved in social responsibility functions and makes them visible
to everyone including its stakeholders through its websites and annual reports.
 TESCO has earned a unique brand image through continuous efforts over a long time. It
shows honesty and trust of the company.
 The brand is recognized world-wide. The company's relationship with its suppliers is healthy which keeps its suppliers loyal to
the company.
Rarity: The strengths which are scarce and unique and are only inherited by few of the
organizations, builds rarity to the company.
TESCO's strengths that are scarce in nature are
 Globalization of the company has helped in building a wide consumer base in all over the
world and generate huge revenues through it.
 The company always analyse and then take calculative risks for its growth and expansion.
 Its work culture is problem solving which promotes team spirit and creativity. The company has achieved the ability to adapt the cultural diversity at the workplace very
efficiently.
Imitability: The inability of the competitors to copy or imitate the features/strengths of a
company helps in building a great competitive advantage. If the resources of the company are
unaffordable then it builds an unused competitive advantage for the company (Hernández and
Garcia 2018).
TESCO's strengths that formulates the imitability of its resources are
 TESCO provides high quality products at low prices which results in repetitive buying
by consumers.
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 The company has build its stores in majority of the states and rest of them are operated
digitally.
 It always focuses on customers to provide them quality and experience that is
unforgettable. The company have achieved controlled costs over the years that maintains competitive
pricing of the products.
Organization: The products or processes that are developed by the organization and can be used
by them only are included in this element.
TESCO's resources which have no substitutes, has helped it in gaining a unique competitive
advantage and helped it in attaining the opportunities for the growth of the business.
 TESCO maintains technology upgrading regularly.
 It enjoys solid financial strength that helps it in grabbing the new opportunities.
 Regular training programs provided by the company helps in expertise of employees in
their jobs.
 The company manages cultural diversification at workplace very effectively.
Analyzing the external environment of TESCO using PESTLE approach
It is a method to analyse the external environmental factors which influences the working
of an organization in a certain way. Pestle analysis is a flexible approach which can be used
however the organization wants (Perera, 2017).
PESTLE analysis is very useful for big organizations like TESCO to understand the
external forces, market changes and competitors.
Political factors: TESCO operates world-wide with its headquarters being in UK. Regulations
by government changes from state to state which means it has to keep track of those regulations
very precisely. This makes it difficult for the business to operate. If the country has political
stability it will be an opportunity for the business or vice-versa. The government have increased
Trade tariff taxes due to Brexit Deal in the country. The tariff rates in both the countries have
been increased which have affected TESCO's revenues.
Economical factors: The elements/factors that determine the performance of an economy are
economical factors of a company. Even though the business of TESCO is spread all over the
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world but its largest revenue is attained from UK. The increasing rates of unemployment and
decrease in demand have hit TESCO's revenue generation. The company deals majorly in
necessity goods which were increased during the COVID-19 pandemic situation (Adamyk,
2019).
Social factors: Factors that directly relates to the consumers, their demands and tastes are social
factors. Tesco took risk from past few years to respond to the social factors like demands and
changes. Due to increase in demand of halal meat in Muslim community, the company
introduced the branded halal in some of its stores in UK. TESCO is also selling Kosher products
to fulfil the demands of its Jewish customers.
Technical factors: With the changes in technology the company has managed to keep it
upgraded with technology in the company. Upgrading technology have been proved in
generating revenue. The company's self checkout points have gained popularity because of its
convenience to the customers as they do not have to wait in queues for checkouts. TESCO have
paired up with Amazon to create a new technology.
Legal factors: The government policies and laws that affect a business are included in legal
factors. They may be laws related to employment, wages, labours, consumer rights or food
commission (Shetal and et al., 2018). The company operates internationally which means it has
to follow the rules of all the governments locally and internationally as well. One of the factors
affecting TESCO is that the EU and UK laws have prohibited the anti-competitive activities,
which means TESCO cannot buy any other supermarket of its size in the UK. If it does so, the
Competitive Market Authority can restrict those movements.
Environmental factors: Today the businesses have to follow Corporate Social Responsibility or
the business can be restricted. Also, the customers are becoming environmental protective which
means they prefer to buy products that are compatible in maintaining sustainable environment.
TESCO have launched its plan described as remove, reuse, recycle and reduce policy. It means
the company will research new ways through which it can minimize the use of plastic in its
products and packaging. The company have vowed to reduce 1 Billion plastic packaging pieces
by the end of the year.
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Assessing the competitiveness of TESCO using the Porter’s 5 Forces Model
Porter’s Five Forces Model helps the company in determining its strengths and weakness
using factors such as: bargaining power of buyers, bargaining power of suppliers, industrial
rivelary, entry of new competitors and threat of substitutes. It also helps in companies in
formulation of their strategies (Goyal, .2021).
TESCO uses Porter's five forces to analyse the strengths and possible threats that it can
attain in the future.
Bargaining power of the buyers: TESCO deals with its customers world-wide through internet
(Adelakun, 2020). TESCO's customers/buyers have low bargaining power over the company as
the consumer sector is very unorganized in UK. The products offered by the company are very
cheap in prices so the customers are unlikely to shift to other companies (James and Cooper).
Bargaining power of the suppliers: TESCO have thousands of suppliers in the world and around
2500 of them are in UK. Because there are a number of suppliers from where TESCO can buy
the materials, so it gives very little control in the hands of the suppliers. The company's
bargaining with the suppliers is very strict which is sometimes criticized by many suppliers. But
even though, suppliers do not shift to other companies because TESCO can shift to other
suppliers for materials. The scale of production of the company is very high and profit margin is
comparatively high, which makes it difficult for suppliers to shift to the other competitors.
Threat of new entries: TESCO is large supermarket with a lot of investments that are impossible
for new entries to invest. This means the company do not have to worry about the threat of new
entries anytime soon. Even if a new company starts its business in the same line as TESCO, it
will take years for that company to grow to the size of TESCO. The market is already dominated
by a huge number of big buyers including lot of barriers which makes the threat of new entries
very low.
Industrial Rivalry: TESCO faces an intense rivelary with the competitive industries. Even tough
the company is largest in its business line but it still faces the pressure of competition very much.
The competitors are spending huge amounts on promotions of their brands to grab the share of
market which is causing trade wars to TESCO. The company is working on exploring solutions
to cut down its competition and remain constantly on the top of the market.
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Threat of substitutes: The products offered by TESCO have substitutes from the company itself.
This makes the threat of substitutes to TESCO non applicable. Even if the company have any
threat it is from the small local stores. The company deals in variety of products of same nature
or same type, which gives the buyers a variety of choices to buy from. This way the customers
are unlikely to shift to other companies. One of the factors that reduces the threat of substitutes is
costs of products of TESCO. The products offered by the company are generally of high quality
and less costly. This is the reason why numerous number of customer base prefers TESCO
products upon all the competitors.
Reviewing the TESCO's organizational strategies based on the analysis
Organizational strategies are the structures through which a company attains its goals and
the objectives (Andriani and et al., 2019). These strategies helps the organization to survive in
intense competition and gain maximum revenues out of it.
The organizational strategies of TESCO are Differentiation: TESCO is working to achieve and maintain the brand differentiation in
its variety of products and their range. It also aims to provide the consumers great
shopping experience which might turn them into loyal customers. TESCO believes in
providing quality products at cheap rates which itself creates a brand differentiation for
it. It recently simplified its online ordering systems and regular deliveries so that the
customers remain engaged with the company. It also offers brand quality guarantee to the
premium brands so the consumers don not have to worry about prices. Reduced costs: TESCO is working continuously to decrease its operational costs on a
large scale. The company reviews its entire costing base and takes it into consideration
for deciding from where the costs can be reduced. This will help in making a lot of
savings for the company in the future. The company have removed some of its food
channels because of which it can provide the food from its stores only. It will provide
consumers fresh food and it is cost effective for the company too (Wood, Wrigley and
Coe, 2017). Revenue generation: Money is the driving force for not just TESCO, but for every
company. TESCO focuses on generating cash through retailing. To achieve this the
company has set a goal to produce 9 Billion pounds from its retail business in upcoming
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3 years. The company also working in assorting the products and channels in such a way
that will reduce product holding. It is also working to free its cash flow to maximize its
returns on investments. Maximizing Marketing Mix: The company invests a lot in its R&D department. It is
now focusing on finding new products to diversify its product range, its distribution
channels and business as well. The company invests regularly in new area to serve the
consumers a variety of product range. Value maximization from poverty: The company is maximizing its property value in
estate. It carefully analyses the opportunities so it can save itself from increasing rents in
the future. It repurpose the property which will increase customer offer. It also ensures to
provide customers larger parking spaces while shopping in their stores or malls.
 Innovations: The company spends a lot in analysing the market demands and trends. By
considering these trends the company can bring innovations in the products and its
channels of distribution to maintain its customers (Rosnizam and et al., 2020). The
company decreased the levels of sugar, fat and salt from many of its products to help
consumers life a healthy life style.
CONCLUSION
It can be concluded that strategic management is the means through which a company
achieves it objectives. TESCO is a British company having its roots in all over the world. The
mission, vision, purpose and objectives of TESCO are all related to a single factor i.e. to provide
its consumer better products and being valued by all the stakeholders. In VRIO analysis of the
company, it was found that the company is quite compatible when it comes to grabbing
opportunities to attain competitive advantages upon its competitors. Because the company is
enrooted in all over the planet its operations and profits get influenced by various factors like
politics, economic situations and technology etc. In the Porter's 5 forces model it was discovered
that the company utilizes its strengths in such a way it is free from threats. The organizational
strategies of the company include reducing costs, generating cash, innovations and
differentiation etc.
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REFERENCES
Books and journals
Adamyk, K., 2019. PESTLE Analysis on Tesco PLC.
Adelakun, A., 2020. Should Porters Five Forces have value in Businesses today. Computing for
Business (BSC) Aston University Birmingham.
Andriani, M. and et al., 2019. Knowledge management strategy: an organisational development
approach. Business Process Management Journal.
Ansoff, H.I. and et al., 2018. Implanting strategic management. Springer.
Chatzoglou, P. and et al., 2018. The role of firm-specific factors in the strategy-performance
relationship: Revisiting the resource-based view of the firm and the VRIO framework.
Management Research Review.
Fuertes, G., and et al., 2020. Conceptual framework for the strategic management: a literature
review—descriptive. Journal of Engineering.
Geraldes, R., da Costa, R.L. and Geraldes, J., VRIO FRAMEWORK-STATIC OR DYNAMIC?.
Goyal, A.(2021). A Critical Analysis of Porter’s. 5.
Hernández, J.G.V. and Garcia, F.C., 2018. The link between a firm s internal characteristics and
performance: GPTW & VRIO dimension analysis. Revista de Administração IMED.
8(2). pp.222-235.
Hunger, J.D., 2020. Essentials of strategic management.
James, A. and Cooper, B., The Impact of Relationship Marketing On Customer Loyalty At
Tesco Plc, UK.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Rosnizam, and et al., 2020. Market Opportunities and Challenges: A Case Study of
Tesco.Journal of the Community Development in Asia (JCDA). 3(2). pp.18-27.
Shetal, T. and et al., 2018. Methods of analysis of the external environment of business activities.
Wood, S., Wrigley, N. and Coe, N.M., 2017. Capital discipline and financial market relations in
retail globalization: insights from the case of Tesco plc. Journal of Economic Geography.
17(1). pp.31-57.
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