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Strategic Management

Executive Summary

Tesco plc. Remain a leading food retailing firm of UK and it has developed their operations in certain nations. The present time remains an ideal time for strategic success. When firms desire to attain development and long-term survival, they need to look across each step which the firm takes from a strategic context. The primary factors of development lie in formulating clear strategies for promoting enterprises development along with enhancing the sector’s competitiveness. Moreover, Tesco remains a leader in the retail industry of the UK, which is within top retailers of the world. Apart from the UK, the company Tesco is known to operate in 14 other nations. The report will reflect upon analyzing the expansion strategy and competitive approach of the UK. 

Table of Contents

1. Introduction. 4

Organizational Background. 4

3. Finding and Analysis. 4

3.1 Organizational structure and culture of Tesco. 4

3.2 Present business level strategies of Tesco. 6

3.3 Strategy of Corporate Level 7

3.4 Strategic analysis of Tesco. 8

PEST. 8

Five forces of Porters. 9

Analysis of SWOT (Internal) 11

4. Strategic Recommendations. 13

Marketing. 13

Research and Development 13

Business Operations. 14

Technological Infrastructure. 14

Financial Capability. 15

5. Conclusion. 15

Reference list 16

1. Introduction

The current report focuses on conducting a strategic analysis through strategic frameworks for providing insights around the present business approach of Tesco. The aim of the study is to demarcate a brief strategic analysis that indulges industry, macro and micro business environmental levels through the aid of strategic analysis accessories like SWOT, PESTLE and porter’s 5 forces.

 Organizational Background

Tesco PLC remains a primary merchandise retailer and multinational groceries of British which is headquartered in England. It proves to be the third-leading world retailer evaluated through gross revenues. The company was established by Jack Cohen in 1919 as a market stalls group in London. The business expansion occurred rapidly, and within 1939, Tesco had opened more than 100 shops throughout the whole UK.

In UK, the Tesco Company is known to operate a home service for shopping through the aid of Tesco.com website. As of 2006 November, Tesco remained the only retailer of food which made profitable online shopping. From 2006 onwards, the organization has operated several dark stores associated with fulfilling the groceries online orders. Tesco Club cards have been illustrated as a pivotal development concern to the firm’s progress towards emerging into the biggest supermarket chain of the UK. As every primary retailers enhanced their sales, Tesco company has relatively dominated the market share which accounts to about 27.9 percent of market (Tesco PLC Report, 2021). Tesco remain a prolific grocery retailers and company whose primary rivals are ASDA, Morrison and Sainsbury. These are often referred to as big four concerned to UK’s retail market. Waitrose is a big chain which trails those companies in footprint.   

3. Finding and Analysis

3.1 Organizational structure and culture of Tesco

Organizational culture of Tesco is one which employees feel encouraged to learn. The culture of organization illustrates the particular pre-described policies which are comprised of shared values, beliefs and assumptions. This approves the behavior of employees under the organization. Such underlying beliefs, values and assumptions attribute to the distinct and unique social and psychological environment. The Tesco’s vision statement is brief and to the mark. This implies that the firm has not utilized dialogues and long dialects for delivering its stance and opinion to significant stakeholders and public. Moreover, the statement for vision needs to be comprehensive and brief-it must communicate the business essence along with the forthcoming plans which will serve the stakeholders to assess the business strategy and business philosophy. The artifacts prove to be the outer layer as far as culture circle of Tesco’s organization is concerned. Moreover, the artifacts remain the visible and tangible aspects of company’s organizational culture. Certain instances of artifacts of Tesco are office layout, policy of open door and dress coding for employees. The core values of Tesco remain the shared principles, targets and standards.

Figure 1: Organizational Structure of Tesco

Figure 1: Organizational Structure of Tesco

(Source: Influenced by Etareri, 2018)

Accountability, quality, diversity, passion, collaboration, leadership and integrity are such core values of Tesco. The management of Tesco assesses the significance of communicating core values such that individual employee might modify and accept the behavior significantly. Assumptions remain deeply embedded philosophies and ideologies which generate the foundation toward organizational culture of Tesco. Moreover, employees primarily remain incautious of such underlying assumptions; however, they perform a significant role in visible behaviors and core values formulation. Analysis of company’s organizational culture demonstrates that the firm remains closely associated to work culture through tall structure and vertical hierarchy. This implies that management is responsible for withholding the authority of decision-making and controlling the work behavior of employees. The innovative and creative work behaviors are promoted through rewarding employees with certain non-monetary and monetary rewards. However, autonomy and empowerment is restricted because of the company’s inclination towards the strict discipline of work.    

3.2 Present business level strategies of Tesco

Tesco have owed their growth to the current position to its business strategy and image. The company has persistently transformed its business image and strategy. The primitive feat was to appeal toward every market segment that indulges the upper, middle and lower classes. In the words of Indiatsy et al. (2014), the inclusive strategy was oriented to the vision for selling good quality products across reasonable rates. This is a vision which was attained through offering four varied levels of products. The retail format of Tesco contains six variable store formats varied through the size and products range. Apart from the stores, the company contains Internet retailing that was inducted in 1984 along with the consumer. The presence of Tesco’s Internet has become much dominant in the year 1994. The company has developed a music download and DVD rental service besides the cinema streaming service that enables shoppers in streaming chosen DVDs before buying. Advertising and marketing are a primary business approach which has performed predominantly in winning market share and customer loyalty of Tesco. The firm has utilized both indirect and direct approaches toward advertise. Throughout the years, the firm has utilized several television advertisements with particular themes. Even in 1980’s, Tesco have stressed on their comparatively lower pricing, for instance, adverts of 1982. Adverts of Tesco have indulged celebrities and pop culture’s fusion that includes Jane Harrocks and Spice Girls.

Figure 2: Graph demarcating global revenue of Tesco in last five years

Figure 2: Graph demarcating global revenue of Tesco in last five years

(Source: Influenced by Hill and Jones, 2017)

Tesco focuses on utilizing a segmented war that indulges store mode decreasing expenses, generating relationships, localization and procuring centers across certain nations. Tesco has never utilized mass media that indulge TV for promoting club cards. Several customers believed that they primarily receive letters of communication from big firms, such that the social status is enhanced. Tesco Company often engages with suppliers for promoting maintaining loyalty expense to suppliers. Suppliers focus on joining Tesco’s hands to attain a general win-win circumstance.

3.3 Strategy of Corporate Level

The corporate strategy of Tesco is strongly committed toward developing values of shareholder by innovative consumer centric approach that is based upon consumer service, products, consumer loyalty along with the stores. In the words of Palmer (2016), the phenomenal success of Tesco remains accounted the management strategies of customer that indulge selling large to existing consumers, exploring latest geographies and attracting customers. Moreover, Tesco has segmentation of product-customer that contains three primary segments, mid-market, less affluent and the up-market. Tesco’s products remain categorized under six categories that indulge mainstream (24%), price sensitive (16%), traditional (15%), convenience (9%), finer foods (19%) and healthy (17%). The healthy products and finer foods target up the market whereas the traditional, healthy, mainstream and convenience product focuses upon targeting mid-market. Lower market is known to target mainstream and price-sensitive product categories. With about 1200 lines, Tesco finest remains a brand that targets Tesco’s strategy and up the market. They focus on offering super-premium prices and products. This strategy primarily offers very limitedly to good value-added products along with directly addressing Marks and Spencer. Tesco organic offers fundamental and cheap products, which have the strategy for identifying limited assortments. Tesco Kinds has an approach of serving parents to develop diet along with offering products with artificial ingredients. Moreover, strategic expansion remains a business level approach which would become much significant for the prolonged success.   

Figure 3: Analyzing the chain value for Tesco

Figure 3: Analyzing the chain value for Tesco

(Source: Influenced by Hill and Jones 2017)

3.4 Strategic analysis of Tesco

PEST

The macroeconomic entities are such conditions which influence an organization and cannot be controlled or transformed. The analysis of PEST is a significant tool for addressing variables which likely have an external impact upon risk and viability of Tesco.

Political and Legislative drivers

The position of UK Government is energetic and critical; moreover, the policies of environment might remain effective in developing and shaping the sector in forthcoming time. Political transition tends to enhance the significance of biodiversity along with its adherence toward CO2 limits. In the words of Hill and Jones (2017), this imposes the burden over retail sector to decrease pollution effectively. Foreign and local policies, labor rules, political climates and legislation of tax might have effect upon productivity. Eliminating renewable energy incentives might have an influence upon revenue and increasing business expenses.

Economic drivers

Such factors remain the primitive concern for the company, since they have the tendency of leveraging expenses, profits, prices and demand. Thus, the firm needs to be cautious of any transformation in policies that indulge transformation in taxation or other entities that might impact the finance’s accessibility. In the view of Hill and Jones (2017), since the business is enhancing globally, the firm remains dependent upon the market of UK where it holds share about 30%. Diversification and internationalization remain two primary strategies which are pursued by Tesco for many years. Because of the reduction in household incomes and disposable incomes, Tesco has switched its emphasis towards advertising brands of value.

Social factors

Because of variable social transformations, trends demonstrate that UK consumers have switched towards one-stop shopping and bulk shopping. Hence, Tesco has enhanced the count of non-food items which remain offered for the sale. In the words of Adamyk (2019), the genre of services and goods demanded through customers is influenced through their attitudes and beliefs that are affected by social condition. As consumers are becoming much aware of health, their approach over foods is transforming continuously. Moreover, Tesco focuses on adapting to such transformations through accommodating organic products demand.

Technological attributes

The progresses in technology have insured certain new scopes for Tesco. One of the unique aspects is the introduction and development of shopping through online mode with home delivery facilities. Checkout points of self-service have generated convenience and customers ease, which in process, have decreased the costs of labor. Tesco focuses upon investing a viable amount over energy efficacy projects which will fulfill the long-term target for decreasing carbon footprint.  Tesco primarily focuses on technological development for the prolific customer service. The firm is trailing latest go and shop technology which enables consumers to pay and scan for the Smartphone groceries. Moreover, the Co-op has inducted the technology named pay-in-aisle. Eye contact develops associations which facilitate openness. Thus, video proves to be a crucial            vendor’s tool in concern to business development.

Five forces of Porters

Five forces of porter remain a significant tool utilized for macro-environmental factors which fuel rivalry and influence over organization’s credibility to advantage. Such framework remains a primary tool since it illustrates on significant factors which can impact Tesco’s capacity in making profits and serving its consumers. It emphasizes over reassessing the marketplace provided the total transformation in sector information.

Threat of Substitutes

Tesco is known to offer the consumers with wide attribute of products. Tesco considerably sells alternatives of the product’s majority. Moreover, it sells condensed milk, powder milk and fresh milk. It becomes easy to claim that threat for services and substitute products remain mostly insignificant.

Threat of New Entrants

The hindrance toward entry needs to be evaluated for assessing the threat to potent entrants. In the words of Indiatsy et al. (2014), the threat for latest entrants developing under supermarket industry is particularly much low. Tesco is not required to worry regarding new market entrants since it enjoys scalable economies, which have its own competencies. However, capital remains not the issue since retail products might be developed according to needs of latest entrants which could be on medium or small level. The necessity of floor space might remain an obstacle to new startups entry. This enhances healthy competition between companies because of the retail sector’s nature. Therefore, the likelihood for new entrant is large.

Power if the customers

The bargaining strength of consumers in retail sector is large since there remain certain market vendors. The prices for outlets and groceries are comparable, leading to important level for buyer strength. The consumer awareness has enhanced because of internet channels about the offers and product prices that impact consumers buying behaviour. Moreover, the consumers awareness has enhanced because of internet channels about the product offers and prices, that impact consumers purchasing behaviour. Customers have greater impact from the retail industry’s perspective.

Power of the suppliers

The strength of bargaining suppliers remains lesser to moderate due to the existence of various suppliers in sector, that primarily have less effect upon companies. As stated by Muli (2019), individual suppliers have decreased impact upon the big retail organizations. Apart from that, certain suppliers compete for limited room across outlets of retail. The developed supplying capacity remains tough for suppliers in order to have an influence on the firm’s successful growth. Therefore, bargaining supplier power in concern to UK’s retail sector is lesser to moderate.

Threat from the substitutes

Tesco has many effective and powerful rivals in UK. Such rivals incur lavishly on other marketing procedures and advertising. Although, Tesco remain the leader of market, pressure from nearest competitors seem to be intense. Moreover, price-wards inducted through Lidl and Aldi might impact the profit margins of Tesco. Tesco focuses upon exploring suitable solutions for tackling the issue pf competitive intense under market. The performance remain poor through job losses, disappointing sales and lesser stores. 

Analysis of SWOT (Internal)

The analysis of SWOT remains a procedure utilized in forms for management and strategic planning. This might be utilized generating both competitive and corporate approaches. It also treats how this rivalry is transforming such setting.

Strengths Effective supplier network Largest share of market Multiple holders of award Diversified stores of retail Largest grocery store of UK Weakness Financial errors Low operational profit Sudden switching of clubcard Weak operational performance Technique of low-cost
Opportunities Latest emerging markets Joint Venturing Online store for shopping Expanding Jack’s store Partnership with brands Threats Brexit dealing Supermarket rivals The scandal of Christmas Fake farm  Crisis of national economy

Figure 4: SWOT Table

(Source: Influenced by Gurrel, 2017)

Analysis

Suppliers perform a prominent role in any business operations. TESCO company is known to adopt an effective business model and focuses on decreasing expenses through having effective system of waste management. It tends to develop an efficient association with suppliers, who is known to deliver on-time products. As a significant grocery and supermarket retail store, Tesco has become popular among the Irish people too. Moreover, Tesco has dominated the market of UK through holding majority share market of almost 27 percent. The performance of Tesco remains not only confined to statistics and fans; however, it focuses on winning certain awards. ‘Favorite British Supermarket” award remain a significant one. Grocer’s Food and Drink Awards were being awarded about 25 times. Under Tesco’s umbrella, it has introduced several stories for covering greater demographics of total market. Similar to the superstores of TESCO, it has opened Yesco Extra, Tesco Express, Tesco Metro, One Stop, Jack’s business and HomePlus of Tesco. Tesco focuses on capturing UK market in the context of revenue. It is a top leading supermarket and grocery store in UK. It’s yearly revenue in 2018-19 was 63,911 million GBP combined both in Ireland and UK. Moreover, the yearly profit has generated through about 11 percent in the year 2018-19. However, with simplified model of business, Tesco has decreased incurring expenses along with effective management policies of waste. It has developed an effective and reliable network of supply chain. Moreover, the organisation bears profitable associations with the suppliers.   

The profit of Tesco remains affected seriously due to large debt of credit card. Moreover, organizations utilize debt for their benefit through generating the profit in case the debt decreases profit. This implies that one might not utilize debt in a right fashion. The referendum of Brexit has been influencing the firm’s performance, and Tesco currently generating low profit dye to it. Thus, the firm’s market price share has deepened by about 9 percent. This is a very disappointing news since it might not attract latest investors. In the year 2018, Tesco focuses on transforming the Club card without customers information. This is because consumer remains furious. Moreover, disappointed consumers remain a poor sign for business since they may look for certain other brands.

Tesco has enhanced the operations of business in 14 nations. There prove certain emerging markets that indulge Indonesia, South Korea and Turkey. Such markets might generate a huge potential to develop. There remain few stores of Tesco which are not well performing. On partnering with local businesses, Tesco can develop the knowledge regarding local market. Thus, Tesco must consider it as a scope and they should approach towards partnering up with businesses locally.Tesco contain mobile application for shoppers of online. It needs to upgrade the application along with adding the home delivery feature. Moreover, it might attract greater investors towards Tesco.

The exit of British from Europe is known by the Brexit. When such trade deal occurs, it might create a serious effect upon the Tesco’s business, thereby posing huge threat to the business. Moreover, Tesco is known to run the operation of business across certain European nations. Giant supermarkets of Tesco indulging Carrefour, Aldi and Walmart are the primary rivals of Tesco Company, and they are developing. In the year 2017, the marketers of Tesco have introduced an advertisement for Christmas, which was believed to be funny. However, it had offended many audiences since it was a disrespectful and direct attack over the Christian faith. Moreover, commercials and TV ads needs to remain free from every demographic criticism.

4. Strategic Recommendations

Marketing

It is identified that the management of Tesco has focused on the identification of the exact requirements of the consumers and developed the information to engage consumers with the existing products and services. The management has created low pricing and focused on the advertisement on different types of print and digital media to create awareness among the target consumer base (Tesco Business Process, 2021). It is recommended for the organization to develop new product bases and create encouragement among the potential consumer base in different operating markets.

It is further recommended for the organization to enhance the digital marketing process in different markets, especially in this recent COVID-19 pandemic situation. The enhancement of the digital marketing process can help the management of the organization to create engagement of different products among the proper group of consumers which can help in the sales of different retail products.

Research and Development

The research and development process are a crucial factor for the growth of any kind of retail organization. The management of Tesco has focused on the development of new types of products, technologies and ideas for the optimum growth of the organization (Tesco Innovation, 2021). The management of the organization can strengthen the R&D team to identify the shift in market demand and develop innovative ideas for the optimum engagement of the consumers. It is recommended for the organization to identify the demands and requirements of different consumer segments in different operating markets and develop proper ideas for the optimum efficiency in the business activities.

It is recommended for the business organizations to focus on sustainable approaches in different business segments. The R&D team of Tesco is recommended to focus on the shift in the consumer requirements and product sustainable approaches in different food items, especially during the COVID-19 pandemic.

Business Operations

It is identified that the main purpose of the business operation of Tesco is to provide better service to the consumers, communities and planet every day. The management of the organization has focused on the delivery of quality products for the betterment of the consumers. It is identified that the management has further focused on the development of a safe environment for the consumers and employees in this current COVID-19 pandemic (Tesco PLC Business Principles, 2021). It is recommended for the management of Tesco to identify the safety principles allocated by the government in different operating nations and design the supply chain programmed accordingly. It is crucial for the supply of quality products in different stores and development of positive response among the potential consumer bases. It is also recommended for Tesco to deliver optimum accuracy in different sustainable actions such as sustainable agriculture system, affordability and sustainability in the food system and development of proper environment for the healthy living of wider communities.

Technological Infrastructure

It is identified that the management of Tesco has focused on the development of technological infrastructure for the enhancement of the efficiency and productivity of the business operations. It is recommended for Tesco to identify the trends in the technological practices in the retail sector and implement them for the betterment of the organization in this current pandemic situation (Tesco Approach, 2021). It is identified that the major technological activities which are used by the management of the retail organizations are IoT, AI, robotic practices, cashless payment system, augmented shopping and voice commerce. It is recommended for the organization to implement robotic operation and cashless payment system for the maintenance of healthy practices in different business activities. It is further recommended for the organization to include IoT, AI, augmented shopping and development of voice commerce systems for the development of positive reputation among the existing consumer bases.

Financial Capability

It is identified from the annual report of Tesco of 2021 that the organization faced a loss of £365 million in different exceptional items and amortization of acquired intangibles (Tesco PLC Report, 2021). The organization also witnessed a reduction in the sales volume of different retail items. It is recommended for the management of Tesco to identify the main activities which are creating losses for the organization. The financial professionals of the organization are required to address the major losses and lack in the efficiency of the performance and design proper practices for the improvement in the financial parameters. The process is crucial for the organization to develop their standards in financial performance. The enhancement of the financial capability can help in the optimum development of the financial stability for Tesco in different operating markets.

Figure 3: Analyzing the chain value for Tesco

Figure 5: Strategic Recommendations for Tesco

(Source: Influenced by Indiatsy et al., 2014)

5. Conclusion

Based on the above observation, it can be concluded that Tesco’s expansion strategy and competitive strategy is inclined towards paying attention to satisfaction of consumer along with adapting to local businesses. From market perspective, one focuses on selecting emerging markets and thereby develop steady expansion through shareholding processes. The forthcoming development of Tesco might continue toward differentiating benefits, maintaining low-cost benefits, management approaches and marketing, while empowering development of greenest retailers along with strengthening CSR in future. From 1960’s onwards, Tesco have focused on diversifying into raw areas of clothing, book retailing, furniture, electronics, software, petrol, toys, telecoms, financial services along with internet services.In order to explain the business analysis, certain tools like SWOT analysis, PEST analysias and Porter’s five forces have been conducted. 

Reference list

Adamyk, K., 2019. PESTLE Analysis on Tesco PLC.

Etareri, L., 2018. A Critical Analysis on Strategic Management.

Gurrel, E. (2017) ‘SWOT Analysis: A theoretical review’, Journal of International Social Research,10 (51), pp.994-1006.

Hill, C. W. L and Jones, G. R. (2017) Strategic Management Theory: An integrated approach. Seventh edition. New York: Houghton Mifflin Company.

Indiatsy, M. C., Mwangi, M. S., Mandere, N. E., Bichanga, M. J., and George, G. E (2014) ‘The Application of Porter’s Five Forces Model on Organization Performance: A Case of Cooperative Bank of Kenya Ltd’, European Journal of Business and Management, 6(16), pp.75-85. 

LON, N., 2016. Marketing Planning.

Muli, A.N., 2019. STRATEGIC FINANCIAL EVALUATION AND ANALYSIS OF TESCO AND BENEDICT CO.

Palmer, M., 2016. International retail restructuring and divestment: the experience of Tesco. Journal of Marketing Management20(9-10), pp.1075-1105.

Payandeh, S.J., 2017. Organizational Change Management.

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