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K/508/0574 Business Strategy of TESCO

University: Nescot

  • Unit No: 32
  • Level: High school
  • Pages: 18 / Words 4608
  • Paper Type: Minor Case Study
  • Course Code:

    K/508/0574

  • Downloads: 389
Organization Selected : TESCO
Question :

There are the following questions that help in completing the given assessment:

  • Analyse the impact of external factors on the company and its business strategy.
  • Define the company's internal environment and capabilities.
  • Evaluate and use the outcomes of the analysis with the use of Porter's five forces in the specific market sector.
  • Apply theories and concepts in order to assist the understanding and interpretation of the strategic directions which are available to the company.
Answer :

INTRODUCTION

Business strategy is defined as the course of actions devised by a company with a view to gain competitive edge at market place. In other words, it can be said that it is the route map undertaken by a corporation to reach its goals as well as objectives within due course of time. Corporate strategy provides assistance to organisations across the globe in enhancing their market share by leveraging the opportunities presented by business environment (Bell, Bryman and Harley, 2018). Also, it serves a great deal in ensuring that the firm is able to combat the weaknesses as well as business threats.

The following report is done to gain an insight into the strategic analysis as well as management within the confines of TESCO. This is a well renowned retail corporation engaged in stipulation of products such as apparel, furniture, electrical items, lighting, home appliances, technological gadgets, beauty care, toiletries, baby toys, sports equipments, travel items and many more. Owing to its wide product portfolio, the entity enjoys extensive brand image within the boundaries of United Kingdom. The project contains internal and external analysis of business environment so as to identify the associated opportunities and threats. Further, the report consists of industrial analysis of the sector to which the respective firm belongs. Lastly, strategic management plan is devised for the growth and development of company.

LO 1

P1. Applying appropriate frameworks analyse the impact and influence of macro environment on a given organisation and its strategies

The business environment in which a company carries out its operations is regarded to be dynamic and turbulent. In this regard, it becomes important for a business entity to scan and examine the environment to which it pertains in order to identify the current situation of market. For this purpose, most of the companies across the globe make use of PESTEL analysis which is an effective framework that provides a critical overview of the different components of macro environment. The various elements of PESTEL are recognised to be political, economical, social, technological, environmental and legal. The examination of all these elements together provide assistance to a corporation in developing strong strategies which can render competitive edge to firm. Thus, PESTEL analysis of TESCO is presented as follows:-

Political Factors: This element encompasses aspects such as political stability, extent of corruption, foreign trade policies, governmental policies, trade regulations, labour laws and taxation rules. It is important for administration of TESCO to take into account the political state of business environment so that the operations of the company stay aligned with it. 

  • Positive: The political system prevailing within the confines of United Kingdom is multi party. Since the year 1920, only 2 dominant parties have been ruling the nation, namely, Conservative Party as well as Labour Party. This illustrates the consistency in policies of UK which provide aid to TESCO in gaining knowledge about the same and thereby, carrying out operations within the constraints of existing political regulations. 
  • Negative: Since the vote for British exit from EU named BREXIT has taken place, the political state of UK has been severely affected. As a result of this, the value of pound has fallen down, shaking the confidence and purchasing power of buyers (Tesco has it tough enough already without a no-deal Brexit, 2019). This has caused a downturn in all of the corporate sectors within the confines of UK. Retail sector being one of the most affected industries hold adverse influence over the demand for offerings of TESCO. To deal with this, entity should devise a strategy of providing products at affordable prices.

Economic Factors: This constitute aspects such as economic growth, inflation rate, exchange rates, interest rates, disposable income, extent of unemployment etc (Wheelen and et. al., 2017). It is essential for TESCO to study the economic aspects so as to ensure that the opportunities can be timely leveraged and adversities can be duly dealt with, to sustain in UK market for a long period of time. 

  • Positive: Being a developed nation, UK provides excellent infrastructural and other facilities for companies operating within its confines. This renders aid to the market leading retailer, TESCO, to capitalise upon the developments in the nation and inflate the existing share of market place. 
  • Negative: The unemployment rate within United Kingdom is acknowledged to be 3.8% as of the quarter July - Sept 2019 (Why is UK unemployment still low? We are working longer hours, 2019). This implies that most of the individuals pertaining to the respective nation are employed and the remaining skilled ones can be procured by TESCO only by providing them higher wages. To deal with this, it is important for the respective retailer to opt for cost effective ways of recruitment and selection so that the overall cost of operations can still be maintained lower.

Social Factors: This encompasses elements such as population growth rate, age distribution, career attitudes, safety emphasis, health consciousness, consumer lifestyles, attitudes etc. This is an important component of business environment which is required to be examined by TESCO to gain knowledge of the latest as well as emergent patterns and trends of consumers.  

  • Positive: The population of UK has shifted its preference towards one stop as well as bulk shopping. Looking upon this trend, the management of TESCO has recently enhanced the quantity of non food items. Also, organic products have been launched in relation to edible product section. This helps the entity to meet the health conscious consumer behaviour of a noticeably large segment of UK's population. 
  • Negative: It is recognised that the population of UK is hyper aware and thus any new trend is immediately identified by the people of this nation. An adverse shift in the consumer purchase patterns or lifestyle has an adverse impact over the demand for offerings of TESCO. To deal with this, the respective retailer needs to constantly research upon the market and take measures to leverage the latest trends and opportunities.

Technological Factors: This includes elements such as level of innovation, automation, R&D, technological awareness etc. This is a factor which facilitates an entity to gain edge over rival firms pertaining to same sector. It is important for the administration of TESCO to identify the latest technological trends and implement the same within organisational premises to retain the top position in domestic market. 

  • Positive: TESCO is a well known retail firm which implements the latest techniques, processes and systems to maintain its superiority over key market players in retail industry. Looking upon the emergent tech trends, TESCO came up with online delivery as well as self-service checkout points. Both of these are implemented to ensure savings of time and facilitation of convenience for the customers. 
  • Negative: The retail sector in United Kingdom is quite wide and consists of a large number of top notch firms which pose threat to the market positioning of TESCO. This inflates the probability of exploitation of an emerging technological trend by competitors ahead of the respective retailer (Veit and et. al., 2014). To deal with this, TESCO should constantly implement innovations and new technologies within the operational systems. This will ensure business efficiency as well as timely accomplishment of corporate goals.

Environmental Factors: This encompasses aspects such as weather, climate, environmental policies etc. It is significant for each and every firm to conduct activities within the constraints of environment. TESCO is a multinational company and thus it is imperative for this form to gain an insight into the positives and negatives of environmental factors. 

  • Positive: Looking upon the growing awareness among people regarding environmental protection, TESCO has initiated to decrease the carbon releases by around 50% by the end of 2020 and to minimise waste in all of its outlets. This serves as a significant step towards protection of environment. It leads to increase in goodwill of corporation at global market place. 
  • Negative: The step taken by TESCO to undertake environmental friendly initiatives needs extensive investment on the part of management. To deal with this, it is essential for the respective firm to assign a proportion of its monthly budget to implementation of sustainable practices.

Legal Factors: This constitutes laws such as discrimination, anti trust, consumer protection, employment, copyright and health & safety. Being a globally renowned retailer, it is significant for TESCO to ensure compliance with all such legislations. 

  • Positive: The management of TESCO ensures abidance with all the essential legislations pertaining to retail sector so that the goodwill of company at global scale does not get hampered. 
  • Negative: An instance of non compliance with any of the retail legislations would prove to be adverse for TESCO. This would harm the goodwill as well as market positioning of the respective retail firm.

M1 Critical analysis of macro-environment to communicate strategic decisions

The PESTLE analysis of TESCO exhibits that there are certain negative elements linked to macro-environmental factors. In this regard, Brexit influences TESCO with respect to political and economical factors. Adverse shifts in consumer lifestyles (social), increased cost of operations (technological), non-compliance with retail legislations (legal) and extensive investment requirement to act in an environment friendly manner (environmental) are the critical influences of other macro-environmental factors upon the enterprise. In this regard, it is important for administration of respective retail company to devise effective strategies through which the negative macro environmental influences can be effectively dealt with.

LO 2

P2 Analyse the internal environment and capabilities of a given organisation using appropriate frameworks

In order to effectively conduct evaluation of internal business environment TESCO undertake use of VRIO and SWOT analysis, as with the help of this company can effectively helps to gain knowledge related to their internal capability:

SWOT Analysis:

Strength

Weakness

  • Tesco hold strong brand image in marketplace due to quality of products they offer to customers with innovative techniques that have been used in the manufacturing process (Lawton, 2017).
  • With the effective positioning in online market company effectively increase their revenue and profit in best effective manner.
  • Tesco lacks in utilising effective and strong marketing plans as well as strategies in order to make enhancement in their consumer base and further increase sense of loyalty among them.
  • Organisation also lacks in effective initiative as to increase high-stakes within Marketplace.

Opportunities

Threats

  • Tesco have ability to conduct expansions in unexplored and unique geographical locations with the help of which customer base can be significantly increased along with high source of revenue generation.
  • Tesco hold the potential to undertake effective and strong marketing plans in order to maximize their profitability as well as sales ratio as to gain more competitive image.
  • Tesco significantly have capability to make introduction of innovative as well as new products that further lead them to gain more developing opportunities as to significantly make enhancement in their profit and revenue ratios.
  • Tesco face threat of other competitive Rivals in retailing sector that focusing on increasing their competitive presence such as Marks and Spencer, John Lewis, ALDI, LIDL and more.
  • Products and services that have been offered by Tesco have close substitute within Marketplace this lead rivals to sell their products and services at reasonable price that mainly attracts loyalty of customers.

 

VRIO Model:

Resources

Valuable

Rarity

Inimitable

Organized

What is the result?

Global presence

Global presence

-

-

-

Competitive Disadvantage

Products

Products

Products

-

-

Moderately competitive

Software

Software

Software

Software

-

Competitive advantage on temporary basis

Employees

Employees

Employees

Employees

Employees

Competitive advantage

To ascertain the internal capabilities of TESCO., four resources have been duly considered, namely, global presence, products, employees and software. 

Valuable

Global presence: Tesco hold exceptional Global presence in international market with the help of which they gain more competitive edge as compared to their rivals.

Products: Company offer qualitative products and services to their customers with the use of innovative Technologies to ensure their trust for long duration of time.

Employees: Workforce within TESCO operates business operations in well effective manner that simultaneously aid company to accomplish their goals and objectives in best effective manner.

Software: Company undertakes use of Paragon’s Live Management software as to effectively manage their business operations in well defined manner as to further increase their workplace efficiency.

Rarity

. Global presence is not rare for TESCO as there are many firms within the retail sector which possess a global presence

Products: Products and services that have been offered by Tesco such as General merchandise and groceries are according to the lifestyle of people and current trend within market place; these products are hard to be copied by competitive Rivals.

Employees: Tesco have workforce who have unique skills, competency and knowledge that are hard to be copied by other individual firm.

Software: With undertaken of software Tesco effectively conduct their operation and manage their business with the help of which they satisfy customers need in Unique Manner.

Inimitable

Products do not hold this characteristic as the unique and advanced technologies used to design these can be utilised by rivals also.

Employees: Competency, skills and knowledge of employees within Tesco are unique as they have strong educational background and attain high end training within enterprise that makes them to perform in best effective manner that can further not be easily copied by competitors.

Software: With the help of Paragon’s Live Management software organisation fulfil business demand which is hard to be copied.

Organised

Company ensure that the software within organisational structure are updated on continuous manner according to the market trend and customer demand in order to fulfil their needs in well effective manner.

Employees: With the assistance of skilled, efficient and competitive employees Tesco effectively conduct their operations in global Marketplace that lead them to ensure long sustainability in market. It also aid company to make significant increase in their sales and profit ratio.

M2 Critical analysis of internal environment

It has been identified that internal advancement of Tesco provides numerous form of advantage and shortcomings. In relation with employees it has been identified that they are the most important resource of organisation as workforce of company is valuable, rare, inimitable and organised (Davies, A., 2016). Organisation mainly lacks in undertaking best effective marketing initiative as well as strategic market plans in order to increase their sale of reach. In addition with is there is an immense rivalry within retailing sector of companies like Marks and Spencer, John Lewis, ASDA and ALDI that create threat of sustainability for Tesco.

LO 3

P3 Porter Five Force model to evaluate competitive forces of market

It is significant for an organisation to take into due consideration the competitive forces of market in order to develop strategies in accordance with it. In this relation, the administration of TESCO is making of Porter Five Force analysis which will provide information about the extent of rivalry prevailing within the confines of retail sector. 

Porter Five Force Analysis

This is a simple yet effective business tool that is applied by an enterprise with a view to gain comprehensibility of the magnitude of rivalry within a sector (Laudon and Traver, 2016). This model provides aid to an entity in identifying the forces of industrial environment which tend to have a significant impact over the profitability of corporation. It is as per this that a firm can make adjustments in the corporate strategy. Looking upon this, TESCO has conducted industrial analysis which is presented as follows:-

Threat of new entrants: The magnitude of this force with respect to retail sector is acknowledged to be low. This is because extensive investment is required in the form of capital to gain entry into this hyper competitive industry. In addition to this, there are several retail laws as well as legislations which need to be abided by the enterprises pertaining to this industry. Thus, TESCO can leverage the advantage of launching new products at rapid intervals to significantly appeal to customers and thereby the existing level of revenues as well as profits.

Threat of substitutes: With respect to the concerned corporate sector, it can be acknowledged that the extent of this factor is quite high. This is because of the presence of several companies which deal in similar product line, such as Sainsbury's, Marks & Spencer, John Lewis and many more. With their strategy of offerings products at low cost, such top notch retailers can solicit the individuals belonging to loyal base of customers for TESCO. This implies that the respective retailer needs to diversify its offerings on a regular basis in order to inflate its durability at market place.

Bargaining power of customers: The magnitude of this force in relation to retail industry is high. This is because a large number of companies dealing in similar products prevail within the confines of this sector. This gives potential buyers the option to switch to another brand in case they find the prices of TESCO higher. This inflates the risk for respective retail firm as its offerings can be substituted by those of another company.

Bargaining power of suppliers: The extent of this factor is recognised to be low in retail sector. This is because the key market players within the concerned sector, such as TESCO, leverage strong networking with a number of vendors. This provides them with the opportunity to negotiate prices with suppliers or switch them with others if they do not agree to lower down the prices of materials.

Competitive rivalry: The magnitude of this force in relation to retail sector is regarded to be immensely high. This owes to the presence of key market players such as Marks & Spencer, ALDI, LIDL, Morrisons, H&M, John Lewis and Sainsbury's. All of these companies render products and services to customers at affordable prices. This tends to pose threat to the sustainability and leading market position of TESCO within the domestic territory.

M3 Strategies to enhance competitive advantage and market position

On the basis of above discussion done over industrial analysis, it can be said that the promotion and marketing practices of TESCO have not been much effective in establishing a strong connection with the people at market place. This implies that the entity can leverage the application of robust marketing strategies as well as techniques to enhance its positioning at global level. In this regard, the most effective strategy for the respective retail firm would be social media marketing which would allow the company to create awareness among the population about the unique and diversified offerings of TESCO. Yet another strategy that can be capitalised upon by this entity is promotion by way of using broadcast media such as TV, radio etc. Further, to gain competitive edge over rival firms within the confines of retail sector, TESCO can launch new products by incorporating new technologies and innovation within them.

LO 4

P4 Strategic planning for organisation

Ansoff matrix is a strategic planning tool with the help of which an organisation can able to frame and formulate best effective form of strategies in order to ensure more business growth. Four strategy of this Matrix has been further evaluated in relation with TESCO:

Market Penetration:

It is a growth strategy that focuses on the provision of existing products within current market of organisation. With the help of this Tesco acquire strategic edge as they already have large base of loyal customers in UK those who are not willing to switch to other substitute products. With the help of market penetration organisation can effectively increase their market shares.

Market expansion:

It is also termed as marketing development. Market expansion strategy aims towards offering existing products within new market place. With the help of expanding market areas company can effectively able to attract new customers towards their organisation that further ensure high sales and profitability.

Product expansion:

Product expansion strategy is focused on new products in existing market place. With the help of product expansion Tesco can effectively satisfy needs and demand of individual in existing Marketplace and further ensure their long-term sustainability. That lead organisation to increase their goodwill and sales ratio in market. TESCO can undertake product expansion strategies as to gain access into perfume segment as with the help of this company can make significant increase in the customer base within UK.

Diversification

Diversification growth strategy tends towards new products within new market. It is a risky strategy in which company may lead towards failure (Cavusgil and et. al., 2014). This strategy further may prove to be expensive for Tesco as in this company is required to conduct marketing plans and campaigns as to make promotion of new product offering of organisation in new market place.

As per according to the above define strategy it has been evaluated that market penetration strategy turn out as an most effective strategy for Tesco in order to attain long sustainable business growth, as organisation already have loyal customer base thus, with the help on focusing on their existing products within current market place lead Tesco to gain more developing opportunities in order to ensure more market shares as well as revenues.

M4 Strategic management plan

TESCO devised strategic management plan as to communicate new business strategic growth to the stakeholders which is further been discussed below:

Aim: To increase the overall level of business operation in domestic market place.

Vision: To ensure their number one Positioning within global Retail Industry for long duration of time.

Mission statement: To provide high quality products and services along with value addition as to further satisfy people with best.

Goals and Objectives: The short term goal that has been undertaken by Tesco is to give due consideration to price and quality of products. While long term goal that has been hold by company is to maximize their Global positioning in emerging markets.

Strategies: Tesco will undertake market penetration as to make enhancement in profitability and sales ratio in domestic market.

Tactics: Tesco launch their new products along with Value additions and further offer them to customers in affordable price range that are available to all income groups.

D1 Interpretation of data to conduct competitive analysis

 

Illustration 1: Leading 10 retailers based on sales in the United Kingdom (UK) in 2017/18

According to the above mentioned graph it has been identified that Tesco, leads the index of growing retailers based on sales in UK. As the overall ratio of sales that has been generated by this organisation in the year of 2017- 18 was £38.7 billion. This states that market penetration strategy that has been undertaken by Tesco effectively aid entity to make enhancement in their profitability and sales ratio in domestic market (Brewster, C., 2017). This further benefit them to ensure their No 1 position in retailing business sector for long duration of time. Further company can make introduction of new products by undertaking tactics of value addition that can effectively able to attract large base of customers in domestic market. In addition with this, with help of before-mentioned strategy as well as strong marketing strategies Tesco can ensure their number one place for long duration of time in retailing business index.

CONCLUSION

As per the report it has been concluded that, business strategy effectively aid organisation to gain more competitive edge within marketplace as compared to their rivals. It is a route map that benefits entity to accomplish their goals and objectives in well defined manner in perfect framework of time. With the help of best effective form of business strategy organisation can ensure their long term sustainable growth. There are different type of Framework such as pestle analysis, VRIO and SWOT with the help of which organisation can identify their strength and weakness and further apply strategy through which they can attend high end business growth.

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