BAA311 Business Strategy | Analysis of Tesco Supermarket

Introduction

The report helps in the entire investigation of the external along with internal environment analysis of Tesco Supermarket that is situated in London, United Kingdom. The analysis of the external along with internal environment of Tesco is required to be analysed with implementation of the different kinds of theories and tools which will be efficient in nature in managing the environment of Tesco.

Overview of Tesco

Tesco plc is one of the British multinational grocery stores along with general merchandise retailer which is headquartered in London, United Kingdom. The number of locations wherein Tesco is operating their business is more than 6553 and the revenue which has been earned by the company is £55.9 billion till the year 2017. Furthermore, this has been noticed that the number of employees working in the entire company is 476000 till the year 2017 and this has helped the company in enhancing the overall growth of the company in a positive manner as well(Tesco.com, 2018).

Mission, Vision and Core Competencies

The main mission of the Tesco Company is to be the most highly valued kind of business in the entire market and to provide the different customers with the variety of goods and services at an affordable rate. Furthermore, Tesco wants to serve the entire community along with stakeholders with the various kinds of products and services at an affordable rate and this will help in managing the different activities in an appropriate manner (Bromiley et al. 2015).

The vision of the company includes the growing of the business with full of different opportunities. Furthermore, Tesco wants to innovate the various kinds of products and services which will help the company in earning trust of the different customers in the market with proper implementation of different kinds of resources in the entire competitive market. Moreover, core competencies of Tesco are inclusive of different implementation of strategies which will be helpful for the company in becoming economical in nature in comparison to the other competitors in the entire United Kingdom market.

Objectives and Goals of Tesco

• To satisfy the different needs of the customers in the entire market with proper decrease in the prices of the products which are being sold by them in the entire market
  
  
• To innovate the different kinds of products in the market which will help the company in becoming more competitive (Armstrong et al. 2015)
  
  
• To offer the different customers with best value for money and most competitive kind of prices as well (Kotler 2015)
  
  
• To support the well-being of the community along with protection of the environment
  
  
• To work closely with the different suppliers in the competitive market to build long term relationships along with gaining huge share in the market as well

Issues Involved in Strategic Planning of Tesco

There are various issues which is involved in the strategic planning of Tesco Supermarket which is inclusive of the following:

• The company do not have adequate knowledge on the customers and culture
  
  
• There is perception of low quality which affects the overall profitability of the firm in a negative manner (Bresler and Lubbe 2014)
  
  
• There is huge competition in the market which is affecting the different operations of Tesco and this has created huge impact on profitability and growth of the firm (Baker 2016)

Effectiveness of Planning Techniques during Strategic Planning

Tesco needs to analyse the different kinds of effectiveness of the strategic planning techniques which will help in managing the different kinds of operations in an appropriate manner. The different planning techniques which are effective in nature are as follows:

• The setting of short term and long-term goals are effective for Tesco which will help the company in becoming more competitive with the different kinds of operations. With the effective planning technique.The effectiveness of the business model is essential to be adopted by Tesco in order to become more effective in their approaches (Chambers and Humble 2017)
  
  
• Creation of concrete objectives is the other planning technique which is effective and this can be adopted by Tesco wherein this has been seen that this will help the company in becoming specific about the goals and this will generate huge amount of revenue in the entire market as well (Chernev 2018).
  
  
• The brand image strategy is effective wherein they sell products to customers at high quality and cheap pricing strategy. Moreover, Tesco tried to aim on the low-income group customers wherein Tesco started selling various kinds of products at mid-range with store price tag (Di Benedetto and Lindgreen 2018).
  
  
• Lastly, the strategy related to globalization is powerful which has been analysed by Tesco as they tried to expand themselves in all over the different markets and this has increased their brand image as well (Keller and Kotler 2016).

Formulation of Business Strategy

Organizational Audit of Tesco

With the help of SWOT analysis, the different kinds of internal strengths and weaknesses along with external environmental threats and opportunities can be analyzed.

Strengths Tesco is in the leadership position in the entire United Kingdom market The online operations are effective and appropriate in nature (Foxall 2014) The property portfolio is strong in nature at Tesco The club card which has been introduced by Tesco is strong kind of information tool (Martín-de Castro 2015)	Weaknesses The financial performance is weak in nature of Tesco Diminished kind of morale of the different employees in the organization Reliance in the United Kingdom market Serious damage to the entire brand image due to the commercial kind of income scandal in the year 2015
Opportunities Pursuing the international market position and expansion in the market This can have the opportunity to increase their overall presence in the financial aspects in the entire industry (Miquel-Romero, Caplliure-Giner and Adame-Sánchez 2014) Enhancing the overall effectiveness in the marketing strategy (Meyer,Neckand Meeks 2014)	Threats Fluctuations in the currency There is huge inability of the new leadership in order to turn over the business Emergence of the different ethics related issues in the business (Miquel-Romero, Caplliure-Giner and Adame-Sánchez 2014)

From the analysis, this can be analyzed that there are various types of internal strengths which helped in becoming more effective in nature. This can be seen and analyzed that in the year 2015, Tesco plc had statutory loss of GBP 6.4 million and this has pushed the entire amount of the net debt to GBP 8.5 million. Moreover, this has been identified that Tesco is one of the largest supermarkets in the entire United Kingdom market with a market share of 27.9 percentage. The closest competitor of Sainsbury has the share in the market of 16.6% and the share in market of Walmart owned ASDA which is equal to more than 17.6% (Charter 2017).

Environmental Audit of Tesco

PESTEL Analysis is the appropriate tool which can be used in order to analyze and identify the different kinds of environmental factors which will affect the overall effectiveness of the firm.

Political factorsare the first concern which is an opportunity for Tesco in the entire global market. Furthermore, this has been noticed that since Tesco operates in the global environment, the different political factors have created huge influence on the performance of Tesco (Lasserre 2017). The different political aspects are inclusive of rate of taxes, acts of legislation along with stability of the country in which the company is operating with their operations. Furthermore, as Tesco plays an essential role in creating opportunities for employment, this will help in increasing the demand for the different products and services (Litman 2018).

Economic factorsare the other aspect in which this is considered as the main concern for Tesco Supermarket which is inclusive of the leverage costs, demands along with profits and prices (Jarzabkowskiand Kaplan 2015). Due to this, the business should be aware of the different changes in the policies which is inclusive of change in the taxation policies. However, this has been seen that economic factors are outside the entire control of the company and the entire effect is on the performance and marketing mix of the company (Schaltegger, Burrittand Petersen 2017).

Socio-cultural factorsare the other aspect in which this has been analyzed that due to the variety of the social changes, the different trends have indicated that the consumers in UK market have tried to move forward one stop shopping along with bulk kind of shopping. Moreover, Tesco has tried to increase number of non-food items which are being offered for sale (Kleinaltenkamp, Plinke and Geiger 2016). The customers are becoming aware of the health issues wherein the approach towards the foods is changing constantly. Tesco is trying to adopt the changes by accommodating the demand for the different organic products (Galliersand Leidner 2014).

Technological factors are the aspect in which this has been noticed that advancements in the technology will bring various kinds of opportunities for Tesco and this helps in managing the different operations in an efficient manner. Furthermore, the self-check out system of Tesco has helped in managing the various kinds of operations in the retail market and gained huge opportunities from the same (Hill,Jonesand Schilling 2017).

Environmental Factors is the aspect in which there is increased pressure on the different organizations as this will help in addressing the different kinds of environmental pressures. Tesco is committed in reducing the carbon footprint by more than 50% by 2020 and this has helped the company in minimizing the wastes which has been produced in the stores by increasing the social conscience in the customers (Proctor 2014).

Legislative factorsare the other aspect in which the different government policies and regulations directly impact the performance of Tesco. For instance- Food Retailing Commission in the year 2004 suggested the code of practice should be introduced by current practices (Hitt and Duane Ireland 2014). Tesco tries to provide the customers reduction in the prices on the fuel they purchase along with the different kinds of promotional offers in an efficient manner (Wheelen et al. 2017).

Significance of Stakeholder Analysis

The stakeholder analysis has helped Tesco in managing the different kinds of aspects in an effective manner. The stakeholders of Tesco have influenced the strategic direction of the company wherein these groups are the individuals which affects the business directly or indirectly as well. With the large size of the organization along with global scope of the different kinds of operations of Tesco, the company has various stakeholders which is inclusive of employees, customers, investors and suppliers in the market as well (McDONALD 2016).

The stakeholder groups of Tesco are inclusive of the following:

• Customers
• Employees
• Suppliers
• Investors

Investors – They are the top priority in the Tesco supermarket wherein this has been seen that Tesco tries to prioritize their investors in their different kinds of strategies. This is one of the reasons why Tesco helps in minimizing the different costs with the help of minimization of the wages. The theory helps in suggesting that the primary objective of the business is to generate profits and there would be no business at all and this helps the company in prioritizing the primary objective of the business in an efficient manner.

Customers- The different customers are included in the stakeholder group in the business of Tesco as this has been analyzed that the customers of Tesco are interested in low kind of prices or the affordability of the different products and services which will be helpful in managing the overall profitability of the firm (Rothaermel 2015).

Furthermore, Tesco tries to address the various kinds of interests of the different customers as the different stakeholders and the organization tries to maintain the cost leadership strategy which includes the different offerings to the customers at the lowest possible price. Additionally, the company is famous for the different kinds of low price strategy which has been adopted by the company in an effective manner (Helfatand Martin 2015).

Employees- The employees are the third priority of Tesco who play an essential role in the entire decision-making process. The employees at Tesco have two major interests which is inclusive of the job security and higher wages. The job security among the different employees helps in guaranteeing that Tesco will be keeping the different employees as part of the business and high wages which will be provided to the different employees will motivate the employees in performing the different kinds of activities in an efficient manner.

Suppliers- The Suppliers of the organization are the least kind of priority of Tesco in which this has been seen and mentioned that suppliers of Tesco are interested in receiving more products in a much profitable manner. The different interests include the selling of the similar kinds of products at a less price which will be beneficial to the suppliers of the company (Robson 2015).

Therefore, from the stakeholder matrix, this can be analyzed that the Tesco is effective and efficient in addressing the different kinds of interests of the group of the stakeholders such as investors along with the different customers of the company. In order to improve the overall efficiency of the firm Tesco, Tesco needs to implement few changes in the entire process which will help the company in improving the relationship between the different suppliers and the company in order to become more effective in the different approaches and gain more competitive advantage in the overall market which is competitive in nature (Hill 2017).

Additionally, this has been noticed that from the entire internal and external analysis of Tesco, this can be analyzed that the company is required to implement the differentiation strategy in the Ansoff’s matrix wherein this can be analyzed that this strategy will help the company in including the different kinds of unique products and services which will be launched in the market and the main focus will be on the low cost strategy and this will enhance the overall effectiveness of the organization as well.

Evaluation and Selection of Approaches for Evaluation of Strategy

With the help of the different kinds of marketing related strategies, the Tesco Company needs to analyse the different position of the other competitors in the market which will provide a brief overview on the various kinds of threats or the bargaining power of the suppliers in the market as well.

Threats of the different substitute products in the grocery stores is considerably low for the different food related items and this is medium or high for the non-food related items. The threat from the substitute is low in nature as the company tried to create their distinctive kind of brand identity.

Threats of the different competitors in the Tesco Company is high and this is one factor for which the company is required to be worried about. The other major competitors of Tesco are inclusive of the different kinds of brands such as ASDA and Morrison which have been able to create huge level of competition for the cited organization.

Bargaining power of the buyers is the other aspect wherein due to the different availability of the retail stores, the bargaining power of the buyers have increased and this has become high in nature. Furthermore, Tesco is trying to keep their prices of the different products low and reasonable in nature as this will help the company in capturing the major chunk of the entire competitive market.

Bargaining power of the suppliers is the other aspect in which this has been noticed that Tesco is still struggling as there is huge competition and this can enable the suppliers to get edge of the company as well. Furthermore, this has been noticed that retail global giant has been able to create healthy kind of relationship with them and on a competitive kind of pricing technique as well.

Threat of entry is the low aspect which is required to be analysed in an effective manner in which this has been noticed that entry barriers are low in case of Tesco. In the future, this has been seen that threat of entry is next to impossible in nature in case of Tesco and with the help of the overall analysis, the entire environment of the industry is required to be analysed in an appropriate manner.

From the entire analysis of Porter’s Five Forces Analysis, this can be analysed and identified that there are various kinds of issues and risks in the bargaining power of the different buyers is the major threat. Moreover, the company is successful in the other approaches which will help them in becoming more competitive in nature in contrast to the competitors in the entire market as well.

Tesco needs to implement a proper strategic approach which will help them in becoming more competitive in the competitive marketing environment. Moreover, this has been noticed and identified that nature of the strategic evaluation is important which is required to be analysed and identified which will help in appraising the different kinds external and internal factors which are the root of the present kinds of strategies.

From the PESTEL and Porter’s Five Forces Analysis, Tesco is one of the major retailers in the United Kingdom with a market share of more than 27.9 percentage. Tesco tried to first analyse the online channel of sales with high level of the competency. The high level of dependence of the company on the entire market of UK has tried in affecting the share of the market. Due to this, in order to circumvent the weakness of the organization, they should lower the level of dependency in the entire UK market and look at the broader market environment as well.

Moreover, in order to capitalize the different kinds of opportunities in the market, Tesco requires to focus on the different kinds of growth strategies of the health along with beauty ranges in the private labelled market and this will help them in expanding their market share in an efficient manner. Furthermore, this can be analysed from the environmental and competitor analysis that Tesco will be able to manage the various kinds of threats by offering the price cuts on the different products such as by providing special offers to the customers as this will help the supermarket in not threatening the growth of Asda as well.

Strategic Direction Implementation at Tesco

Tesco is the company which is more voluminous in terms of acquisition of revenue and customers which is exceptional in case of the other grocery stores in United Kingdom. This will be helpful in maintaining the current standard along with creating wide margin in the market which will help the company in achieving the different objectives. The different strategies or the direction of strategies which is required to be implemented by Tesco in order to become more competitive in nature and include the differentiation strategy in the organization is inclusive of the following:

Firstly, Tesco plc is required to divert the customer attention from the different non-food products to the food products. To do this, they need not concentrate much on the non-food products advertisements, however the company needs to create more focus on the different kinds of food products and encourage the customers in eating more sea food along with vegetables and fruits. The management of Tesco needs to put the different quality staffs into the entire consideration by arranging different kinds of training programs in the organization as this will be helpful in analysing the performance of the different employees in an efficient manner.

VRIO Analysis of Tesco

Resource/Capability	Value	Rarity	Costly to Imitate	Exploited by the Organization	Value Creation
The labourers are of specialised kind	Yes	Yes	Yes	Yes	Sustained
High Quality raw materials along with specialised kind of output	Yes	Yes	Yes	Yes	Sustained
Expertise in technology	Yes	Yes	No	Yes	Sustained
Reputation	Yes	No	Yes	No	Competitive Parity
Ability to become innovative	Yes	No	No	No	Competitive Parity
Effective distribution Network	Yes	Yes	Yes	Yes	Sustained
Product customization	Yes	No	No	Yes	Competitive Parity

The company should emphasis more on the different kinds of sales promotion activities of the different own labelled products on advert as this will re-direct the customer’s usual kind of orientation of the products which are branded in nature. In order to achieve the high sales level at Tesco, the company needs to penetrate the market and this will help them in maximising the level of profitability of the company in a positive manner. The Tesco company needs to provide with the entire ability to offer valued added services to the different customers wherein the cost advantage along with high value products than the competitors and this will be implementation of the diversification and differentiation strategy (Hollebeek,Conduitand Brodie2016).

Action Plan

Activities	Person Responsible	Cost	KPI	Time Frame
Increase in Sales	Marketing Department	$50,000	This will be measured by increase in the amount of the revenues along with gaining huge profit in the market	3 months
Targeting large number of customers	Marketing Department	$65,000	Net Profit Margin will be increased by increasing the number of customers in the company	2 Months

From the table, this can be analysed that these are the major KPIs which are required to be analysed by Tesco in becoming competitive in comparison to the other competitors in the market. The entire action plan will be helpful in analysing the budget of the company which will be required in completion of the tasks within the specified deadline and there are no such risks involved in the same.

Conclusion

Therefore, this can be concluded that the different kinds of internal and external environmental analysis have been done for Tesco Company. The different kinds of aspects of generic strategies are required to be adopted by the company in order to become more effective and efficient in nature. Furthermore, with the implementation of the differentiation strategy, the company tried to improve the different kinds of marketing activities which were performed by them and this helped the company in becoming more effective in the different kinds of operations.

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