LSBM306 - Strategy, Enterprise, and Innovation: Tesco Case Study

This report provides a comprehensive strategic analysis of Tesco, a British multinational retailer, focusing on enterprise and innovation. It examines both the internal and external environments using tools such as SWOT and VRIO to assess Tesco's strengths, weaknesses, opportunities, and threats. The internal analysis highlights Tesco's financial turnover, market share, and innovative products, while also addressing weaknesses like quality control issues and inventory management. The external analysis utilizes the PESTLE framework to evaluate political, economic, social, technological, environmental, and legal factors impacting Tesco. Furthermore, Porter's Five Forces model is applied to analyze the competitive landscape, including bargaining power of buyers and suppliers, the threat of new entrants and substitute products, and rivalry among competitors. The report concludes that Tesco's potential stems from a thorough examination of its internal and external environments, enabling it to maintain its market leadership despite intense competition.

STRATEGY,
ENTERPRISE AND
INNOVATION

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................1
REFERENCES................................................................................................................................2

INTRODUCTION
The strategy, enterprise and innovation is the subject that equips an individual to develop
necessary ideas that helps the firm in order to get strength with the help of entrepreneurial start-
ups to varied well-established firms along with government entities in order to help them grow
better (Cusumano, Gawer and Yoffie, 2019). Innovation within any organization simply means
to apply something creative in order to come in front of certain unique ideas. In order to explain
various aspects within the report, Tesco company will be chosen which is a British multinational
retailer firm headquartered in England.
This study will describe the analysis in both contexts such as internal as well as external
environment. Apart from this, competitive analysis will also become explained in detail with the
help of appropriate model that enable to illustrate the conception in detailed manner.
MAIN BODY
Analysis of internal environment
Internal environment analysis consists of systematic approach by considering all the
necessary factors of any organization that helps them in order to manage their resources in most
appropriate manner (Jnr, 2020). With the help of this specific analysis, the establishment is able
to identify their strengths, weaknesses, their potential opportunities as well as various threats
within the market space. It helps the firm to identify company limitations as well as
potentialities. This particular concept helps to identify Tesco their specific things which enables
them to perform better in competitive world. This will be explained with the help of certain
models below:
SWOT Analysis
Strengths
There are various strengths due to which the Tesco will able to advance in competitive
world such as the company shares huge amount of financial turnover within the market space.
The company has an operating profit margin of around £2 billion according to the annual report
of last year. Tesco has share huge amount of market share in Great Britain as the firm are having
various competitors such as Sainsbury, ASDA, ALDI, etc. who are dealing in similar kind of
services (Puyt and et.al., 2020). In the critical situation of pandemic, company are able to
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perform better as they perform strongly and registered a considerable growth of around 11%.
The growth comes from Tesco boosting online sales. The company hires huge amount
employees which is approximately 18000 people who cater the establishment towards the
expansion and growth according to the demand of the situations. The firm offers various
innovative products who are appropriate enough to adapt adverse situations such as Covid
conditions in highly optimistic manner. Even during the adverse situations, it has been evaluated
that the Tesco stores perform outstanding because of their effective and appropriate strategies in
order to sustain within the market space.
Weaknesses
Tesco have various competitors who act as barriers for the firm in order to grow r expand
within the market premises. With the changes within the organization, such as leadership
changes highly affects the overall reputation of the firm in somehow manner as at the time of
adopting changes, company was already facing certain difficulties. Apart from this, Tesco needs
to self-praise demanding quality control as the firm faces many complaints from their consumers
over the quality f their goods and services. In order to sustain the quality as well as maintain the
shortage of the goods and services within the market space company starts apportioning within
few of their offered items. In context of inventory management, it also have been identified that
sometimes company fails to sustain their level and displaying products even 15 days post their
expiry dates. This is the major reason that company also faces food safety issues within the
market environment.
Opportunities
In order to describe the opportunities that has been evolved by the Tesco includes growth
of online grocery sales as this particular step prevent people from stepping outside as much as
they earlier used to in order to purchase grocery products. Because of this opportunity, the
company will able to sustain their sales even during adverse conditions. Apart from this, UK are
facing huge unemployment issues and hence due to this, the company can get lots of people as
supermarkets are the places who require lots of people and this specific facility will enable the
firm to perform better with huge resources (Alteri and et.al., 2019). With evolution in
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technological changes, company can improve their operations as well as overall productivity
with the help of artificial intelligence and machine learning.
Threats
The relations among the UK and Europe has become the biggest threat for the Tesco as it
restricts the businesses among both the countries by applying Brexit effects. It greatly affects the
overall supply chain management of the organization and does also contribute their part in
economic recession in the overall economy of UK. However, after these, the pandemic situation
also effects the firm in most drastic manner although, the firms can manage their resources with
their advanced technologies. Furthermore, huge number of competitors within the market space
acts as the biggest threat for the Tesco due to which they perform their tasks with certain
limitations.
VRIO
This is another tool to measure internal environment through which the Tesco can sustain
their market share and do improvements for further future.
Resources Value Rare Imitation Organization Competitive
Advantage
Local and
global
presence
Yes Yes Yes Yes Providing
strong
competition
Sales force Yes No Yes Yes Potentiality
still exists.
Brand
awareness
Yes Yes No Yes Sustainable
Pricing
strategies
Yes No Yes Yes Temporary
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Financial
resources
Yes No Yes Yes Temporary
Customer
community
Yes Yes No No Strong
competition
Analysis of external environment
The external analysis of the Tesco has been explained with the help of Pestle reasoning
as it enables the firm to compete effectively in external atmosphere. It will include political,
social, environmental, technological, legal and economic factors in order to describe the concept
in detailed manner below:
 Political
As Tesco operates worldwide, global political factors greatly affects the company as it include
large number of taxes of diversified places, acts, laws and legislations, the stability of the firm
under which they operate, etc. (González-Granadillo, González-Zarzosa and Diaz, 2021) It has
been identified that because of financial instability within the economy, company also faces
certain drawbacks in order to generate job requirements for the domestic population.
 Economic
This is the major point to concern for Tesco, as the firm are most likely to purchase costs, prices,
profits as well as demand. The company is highly aware about the changes in policies such as in
taxation, or any other things that affects the accessibility. Due to decline in disposable income
levels, Tesco shifted its majority part of focus towards advertising its valuable brands rather than
luxurious goods.
 Social
Company faces various social changes as according to recent trends customers within the UK
have moved towards majority shopping along with non-stop shopping. Hence, Tesco has
enhanced the food products that have been offered within their stores. The company offers huge
amount of goods and services that are according to the requirement of customers along with
other products that generate awareness regarding good eating habits among individuals.
 Technological
With the advancement in technology, Tesco is able to compete in highly competitive
environment in which various other organizations are also working effectively (Chofreh and
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et.al., 2020). The foremost technology that has been introduced by the firm are providing online
platform to the establishment in order to approach large number of people living within the
society.
 Environmental
With the expansion of pressure over the organizations to address issues that are related to the
environment so that the company will able to provide certain advantages to the society. In order
to address this concept, Tesco reduces the waste production by eliminating various wastage of
goods and services and other harmful chemicals that can harm the atmosphere as well as the
overall society. For this, company reduces their carbon footprint by almost 60% by last year and
furthermore they are trying their best to reduce it further more. They highly increase their social
conscience in consumers with their appropriate actions.
 Legal
Tesco have to follow all the necessary rules and regulations that create a direct impact over the
performances of employees of the organization. For instance, the company is selling various
food items thus, the act related to the food preservation and food retailing commission act must
be fulfilled by the firm while they want to spread their products within the market space
(Klumpp, 2018). In order to facilitate these policies, consumers price reductions must be applied
by the firm to promote their products. Apart from this, other promotional offers also have been
adopted by Tesco in order to popularize their goods and services within the market environment.
Analysis of competitive forces within the industry
The major aim of porter's five force analysis is to examine the impact of five forces over
the company. In context of Tesco, the competitive analysis has been considered by applying this
model below:
 Bargaining power of buyers (Low): Tesco is a firm that serves millions of consumers
in offline as well as online manner. But it has been identified that within the UK the
bargaining power of buyers are low as they are not in organized format. It is unlikely that
they can be better off if they switched to other competitive firms. This particular thing
makes the whole industry very attractive for Tesco (Isabelle and et.al., 2020). But in
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order to sustain in market place, Tesco adopts low pricing strategies that impacts their
profit margin in great manner.
 Bargaining power of suppliers (High): Tesco works with various people within the UK
as well as in other locations. Tesco negotiated really very hard with the suppliers in order
to enhance their profit margins. Although it has been identified that lots of competitive
firms bully the Tesco for their price cutting strategies and squeezing other suppliers by
their actions that appropriately helps them to become succeed within the external
environment.
 Threat of new entrants (Low): The threat of new entrants for Tesco has become low as
the supermarkets and retailer business requires huge amount of capital even at primary
instance (Bhatt and Singhi, 2020). This is the major reason that Tesco never gets
concerned about their new entrants as the firm enjoys their economies of scale and their
core competencies. Likewise, their competitors are unable to compete with Tesco
because of lack of resources as well as capital amount to invest in these effective
measures.
 Threat of substitute products (Medium): Tesco offers huge amount of goods and
services within the market place and hence they are not feeling that much pressure with
respect to offering similar kind of goods within the market place. For instance, the
company selling varied diary products, so that they have the possibility to margin their
profit from one or more products by supplying any specific item over less price cost.
Therefore, the threat of substitute product from Tesco is highly negligible.
 Rivalry among competitors (High): Tesco has huge number of competitors, and thus
the firm lavishly spend their amount over their advertising strategies and other marketing
techniques in order to get maximum advantage for their firm. Hence, the company is
considered as the market leader but the pressure they are facing is extremely intense in
nature (Pervan, Curak and Pavic Kramaric, 2018). For pricing strategies, company is
competing with other competitive firms such as Aldi and Sainsbury for their profit
margins.
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CONCLUSION
From the above report, it has been concluded that Tesco is able to work with their
various competitor because of their high amount of potential. This potentiality has been
generated because of proper examination of internal as well as external environment analysis.
This is the major reason that the firm has become the market leader. In order to compete
effectively with their competitors, company appropriately complete their competitive analysis
with effective models that enables them to act accordingly and sustain their brand value over
other competitors. Hence, the firm is highly successful in the market because of their awareness
about certain things that helps them to act better.
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REFERENCES
Books and Journals
Alteri, A., and et.al., 2019. Assessment of pre‐implantation genetic testing for embryo
aneuploidies: A SWOT analysis. Clinical genetics. 95(4). pp.479-487.
Bhatt, I. and Singhi, R.A., 2020. New framework to revive industries with the help of advanced
technology used as marketing tool. International Journal of Engineering Technology
and Management Science. 4(4). pp.1-11.
Chofreh, A.G., and et.al., 2020. Development of guidelines for the implementation of
sustainable enterprise resource planning systems. Journal of Cleaner Production. 244.
p.118655.
Cusumano, M.A., Gawer, A. and Yoffie, D.B., 2019. The business of platforms: Strategy in the
age of digital competition, innovation, and power. New York: Harper Business.
González-Granadillo, G., González-Zarzosa, S. and Diaz, R., 2021. Security information and
event management (siem): Analysis, trends, and usage in critical
infrastructures. Sensors, 21(14), p.4759.
Isabelle, D., Horak, K., McKinnon, S. and Palumbo, C., 2020. Is Porter's Five Forces
Framework Still Relevant? A study of the capital/labour intensity continuum via mining
and IT industries. Technology Innovation Management Review. 10(6).
Jnr, B.A., 2020. Examining the role of green IT/IS innovation in collaborative enterprise-
implications in an emerging economy. Technology in Society. 62. p.101301.
Klumpp, M., 2018. How to achieve supply chain sustainability efficiently? Taming the triple
bottom line split business cycle. Sustainability. 10(2). p.397.
Pervan, M., Curak, M. and Pavic Kramaric, T., 2018. The influence of industry characteristics
and dynamic capabilities on firms’ profitability. International Journal of Financial
Studies. 6(1). p.4.
Puyt, R., and et.al., 2020. Origins of SWOT Analysis. In Academy of Management
Proceedings (Vol. 2020, No. 1, p. 17416). Briarcliff Manor, NY 10510: Academy of
Management.
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