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Strategy analysis Report : Tesco

Task:

Understanding Strategic Management (USM)

The main aim of this assignment is to give each student the opportunity to choose freely a company that is of particular interest to them and to apply suitable strategic management tools/models demonstrating the skills of analysis, evaluation and synthesis.

Write the report as if you were working for an external management consultancy firm, reporting to the Board of Directors of your chosen company.  The report should contain sections that address ALL of the main aspects of the module syllabus: that is the report should cover both strategic analysis (internal and external) and strategy formulation.  It is essential that in undertaking your research and writing your report you make appropriate use of the strategic management tools and models to conduct internal and external strategic analysis and strategy formulation that you have encountered in this module.Credit will be given for analysis, evaluation and synthesis, and the appropriate selection and use of strategic management tools and models.


Answer

Executive summary

Strategic management of any organization is associated with the strategic analysis of the strategic models that are followed by the business organizations. In order to understand the importance of the strategic analysis in order to recommend appropriate strategic plan for the company, analysis of the business market of Tesco has been commenced. In order to implement a proper a plan both external and internal environment analysis of Tesco have been done.

Introduction

Development and progress of any organization require regular scrutiny and analysis of the organizational strategy. It is a significant factor as far as the growth of any company is concerned as the organizational strategy is subjected to change according to both the internal and external environmental factors and their effect over the enterprise. This current study is subjected to be reported at an external management consultancy firm regarding the strategic analysis and the required strategy formulation of an organization. In order to commence the study properly TESCO has been considered as the subject of the analysis and accordingly the background of the company is provided along with the strategy analysis and the strategy formulation of the company.


Figure: Tesco Logo

(Source: www.tesco.com, 2017)


Background of the company

Tesco PLC is a British multinational retailer which chiefly operates as Tesco. As far as the profit is concerned Tesco is considered to be the third largest retailer of the world. It operates globally and has stores in twelve other countries including g countries in Asia and Europe.

Tesco originally started its journey as a grocery retailer then it delved into other areas of retail as well. It has a unique appeal to the customers of different social groups with their services such as “Tesco value” and “Tesco Finest” range. In fifteen years it has increased its number of stores from 500 to 2,500 (Wood et al. 2016). Tesco has a huge market capitalization globally. Founded by Jack Cohen the primary business motto of this organization was to pile the things high and sell goods in cheap prices and it has significantly motivated the sales force of the organization. After its inclusion in the internet retailing in USA Tesco has significantly obtained 35% stake in the grocery retaing of the country.

Strategic analysis

The strategy analysis of any business organization is associated with the critical examination of the business strategic models like Porter’s 5 forces model or the marketing mix model. The external environment analysis of any organization can be done with the mentioned tools along with PESTLE as well. As opined by Peteraf, et al. (2014), the internal environment analysis can be done using SWOT as a functional tool. In the study Porter’s 5 Forces model has been used in order to analyze the external environment of the company and in order to understand the internal environment a SWOT analysis has been provided.

Internal environment analysis

SWOT

A suitable evaluation of the internal factors of the business environment of Tesco can be achieved through the integration of SWOT analysis which has been depicted below:

Strength: An expanded period of market operation of Tesco has been reflected by an acquisition of the consumer responses. The achievement of the largest number of outlets or store base in UK is expected to promote a necessary advantage over its nearest competitor. The measure of consumer satisfaction which may be attributed to a normal alignment with the virtues of resources management can be considered as the fundamentals of its market operations.  

Opportunity: An interest to the marketing activities has been seen developing in the course of business operations concerning the value based segments of the consumers. The identification of these needs and a segregate attempt for a nominated and strategic penetration may promote a resemblance to the cost effective modules of market operation. The inclusion of a suitable strategies can be promoted in the through course of business sustainability and resource upgradation.  

Weakness: The gaining competition from the various organization and the respective drives of other trade entities in the retail industry is expected to increase the competitive ambience within the domains of the business operations. The increasing conflict in the achievement of the goals of stakeholder management has been an issues that has hindered the operational course of Tesco PLC.  The influence of a rapid market expansion contrasting the achievement of suitable resources for market management has been an ideal hindrance in the achievement of the basic objectives of market sustainability and business growth. 

Threat: The exposure of the consumers to differential opportunities in the varying course of business operations and the reluctance of the management for investing in the CSR strategies has degraded its public reputation (Hill et al. 2014). The gaps on the identification of the competitors can be nominated as a virtual aspect of business downfall. 


External environment analysis

Porter’s 5 Forces model

The business strategy model as the ability to analyze the competitive environment of any organization. As per this model five different factors that has huge impact over the service market of the organization are analyzed. In the structural analysis of Tesco five effective sources which are associated with the competitive advantage of the company have been evaluated.


  • Threat of the substitute services and products

As far as Tesco is concerned as a grocery retailer the threat of substitute is significantly low in respect to food and beverage products and medium high in respect to the n on-food products. The substitutes in the food retail market are the small suppliers who have small market chains and the convenience stores. Organic food retailers are emerging as new substitutes (Peppers and Rogers, 2016). But considering the product quality and the price of the products in Tesco the threat is considered as low. Tesco with its Express stores is significantly gaining control over the small retail stores and it challenges new entries from entering the market. In respect to the non food products for instance clothing, the treat of the substitute is high.


  • Threat of new market entries

As entering into food retailing and marketing require enormous amount of investment the treat of new market entries is low because Tesco is an already established brand which is globally recognized and acknowledged.


  • Competitive rivalry

The major competition of Tesco comes from the direct competitors of the retail industry like well-established retailers such as ASDA , Morrisons and Sainsburry’s. Recession and Brexit have significant impact over the market of Tesco as heavy discounters like Aldi has potential to take over the market.


  • Bargaining power of the suppliers

As per the market analysis of Tesco the suppliers in this case has considerably lower bargaining power as the suppliers of such huge food retailers are significantly afraid to lose their business contracts (Baker, 2014). Therefore as a big and well established supermarket Tesco has the ability to participate in positive negotiations with the suppliers.


  • Bargaining power of the  buyers

The switching cost in the food retail industry is considerably low and the buyers have high bargaining power. Because of availability of several other options and attractive online food retail stores the bargaining power of the customers is significantly high.


Figure: Porter’s Five Force

(Source: Dälken, 2014) 

Strategy formulation

An interception through the active operations proposed for the development of a business module is ideally influenced by the strategic framework implemented in the course. The monitoring of the business activities concerning the achievement of sustainable standards can be promoted as an invariable component of the marketing blend. The resemblance of the products position to the market normally to the identified desires of the consumers can be an extensive foundation for the achievement of the sustainable business objectives.


The prevailing market standards provides a standards justification for its scale of management strategies. The impact of its emphasize on consumer satisfaction has been applauded by the consumer base which may be projected as an indispensable component of the proposed strategies on market sustainability (Peppard and Ward, 2016).  The relation between the nominated modules and the adapted analogues of strategic management has been backed up by the analytical abilities and the individual comprehension abilities of the targeted market concerning the management of Tesco. 


Figure: Tesco Outlets Forecast

(Source: www.statista.com, 2017)

The company has indicated to a steady development in the UK market which may be justified by the subsequent expansion of Tesco concerning the business territories. In 2014, the company had 3618 outlets in differential business areas around UK. It showed an increase of 3% in 2017 reaching to a landmark of 3793 outlets. The increasing demands of the product portfolio and various reflection of consumer beneficiary components in its marketing mix can be justified for successful achievement. The projection of Tesco’s number of outlets in 2019 reflects a figure of approximately 4000 outlets in UK. The inclination of a steady market place along with the identification of the intangible elements of marketing strategy can be promoted as a necessary element in the nominated case conceding Tesco PLC. The nomination of a cross consumer relation and a through scrutiny over its market positions can be identified as the beneficiary elements in the composition of the company’s marketing strategies.  

Conclusion

An integration of the various aspect of modern day business reflects an acute demand for time that may justify the virtual achievement of business sustainability. The strategic achievement of through proper plan and integration of resources to their respect capabilities in the market credential of Tesco has been discussed in this report.  The importance and the fundamentals of several of strategic management has been reflected through the learner’s skills of interpretation, documentation and analysis.





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