INTRODUCTION TO STRATEGIC MANAGEMENT
Strategic management is overall examination of existing strategy along with its efficiency and capabilities by means of which successful organization can be created. This course of action is concerned with formulation of strategy for business enterprise by carrying out extensive research of business as well as environment in which it is operating (Aaker and McLoughlin, 2010). The retail sector of UK has employed over 10% of UK workforce and contributed around £17.5 billion taxes within nation. Due to this London has been made shopping capital of world and draw attention of large number of international brands for inward investment (Hooley, Piercy and Nicoulaud, 2012). Here, in this present report strategic management analysis of Tesco plc is going to be studied.
It is a multinational grocery and merchandise retailer which was founded in year 1919 by Jack Cohen in UK. It is third largest retailer in terms of profit and second largest in terms of revenue all across the world. Retail giant has around 6784 stores and has employed 597,784 people in its outlets. It also deals in number of products and services such as Tesco bank, Tesco mobile and so on (Merat and Bo, 2013). The competitive position of retailer is quite favorable as compared to its rivals and has attained huge market share (Tesco Plc: Company Profile, 2004). The company is even listed on London Stock Exchange and is a constituent of FTSE 100 Index.
The study has laid emphasis on market environment analysis of business enterprise by means of various analytical tools. In addition to this, its internal environment is going to be evaluated by focusing on its core competencies and resources. The statement has been followed by evaluating strategic fit of Tesco plc by determining its strength and weakness in terms of opportunities and threats prevailing within market place.
TASK A MARKET ENVIRONMENT ANALYSIS
The concept of market environment analysis is concerned with determining external as well as internal elements prevailing in market that can affect performance of organization in long run. Tesco is market leader and it has attained competitive position by making best possible use of their competitive advantage to compete on grounds of pricing and distribution strategies (Abraham, 2012). Macro and micro are two types of tools by means of which analysis can be carried out.
Macro environment analysis
They are uncontrollable external forces that affect overall operations of business and demand changes in operation, management, production and so on at regular interval of time. Macro environment analysis of Tesco plc is mentioned as under:
Political: The government of UK has encouraged fair business practice and competition which has proved to be of great use in enhancing growth of company at fast pace. Various rules and regulations have been framed by governing body with the help of which they are operating smoothly. As per OFT- Office of Fair Trade 2007 Tesco has played a major role in anti-competitive practices and fined heavily for same (Yannopoulos, 2011).
Economic factor: They are very crucial for retail giant as they tend to influence demand, costs, and prices along with profits. International business is growing at fast pace and it is highly anticipated to contribute greater amount to profit of Tesco in coming years. Business enterprise is highly dependent on market of UK and it can get easily affected by slowdown is exposed to market concentration risks (Radnor and O'Mahoney, 2013).
Social factors: They are highly concerned with lifestyle pattern and living standard of people along with their taste and preference. In recent time, current trend has indicated that British customers have moved towards one stop and bulk shopping because of social changes. This has increased availability of sale of non food item. Consumers have become more health conscious as a result to which their attitude towards food is constantly changing (Ranchhod and Marandi, 2012).
Technological factors: It is one of the most significant factors that have influenced the overall development of majority of products of Tesco plc. Adoption of new and improvised technology has benefitted the both company and consumers as it has made shopping convenient and personalized in nature. The introduction of Efficient Consumer Response (ECR) initiative has proved beneficial in management of food supply chains. Wireless devices, intelligent scale, self check out machine, RFID, electronic point of sale and so on are some of the advanced technology which is being adopted and use by retail giant (Johnson and Scholes, 2008).
Environmental factors: Best effort has been made by Tesco by using concept of recycling for appealing to its target market in order to become environmentally responsible organization. For this, they have announced £500 million five years plan for taking environmental initiative. Likewise, they provide home delivery services by means of fleet of zero emission vans (Hooley, Piercy and Nicoulaud, 2012).
Legal: Number of legislations and policies has laid direct impact on overall performance of Tesco. For example, Food Retailing Commission (FRC) has advised enforceable code of practice to be set up so that it can ban varied current practices in terms of demanding payments from suppliers, changing agreed prices and so on (Sigalas, Economou and Georgopoulos, 2013).
Micro environment analysis
Micro environmental factors are the elements that influence decision making of company and are under control of business enterprise. The micro environment analysis of Tesco plc is enumerated as under:
Customers: They are the final or end users of goods and services which are being produced by retail giant. In order to retain them for longer duration of time it is essential on the part of retail giant to produce services as per their taste and preference. They also provide club cards for gaining their loyalty and they have 35 million club cards holder all across the globe. They have also set up stores at different locations so that adequate convenience can be provided to customers and at the same time they provide home delivery which has enhanced their customer base (Aaker and McLoughlin, 2010).
Suppliers: There are number of suppliers of Tesco at both national and international level and retail giant provide assistance to them by making timely payment to them. Most of raw materials and products have been bought at cheap prices and they focus on increasing their market reputation. This has proved to be of great use in gaining maximum satisfaction (Merat and Bo, 2013).
Competitors: Asda, Sainsbury, Morrison, Saefway, Waitrose etc. are some of the major competitors of Tesco in recent time as they provide similar products and services to general public. In order to retain competitive edge against rivals retail giant has focused more on delivering quality products and services and that too at comparatively less prices as compared to Tesco (Fitzroy and Herbert, 2006).
Distributors: They are the one that sell as well as distribute goods and services to different group of customers along with target market by means of using various channels of distribution. They provide assistance in undertaking promotion of company and Tesco is a company that directly sells to final users with little inputs from local and regional distributor for the purpose of gaining large part of market share (Zajac and et. al., 2000).
TASK B RESOURCE AND CAPABILITY ANALYSIS
In order to demonstrate unique resources along with core competencies of retail giant such as Tesco plc, evaluation of internal environment is to be carried out. By means of this management will be able to undertake extensive review of each and every aspect of company and take decisions accordingly (Gupta, 2013). This will prove to be of great use in identifying as well as evaluating resources, capabilities along with core competencies by taking into account vision, mission, and strategic objective of company in mind. In regard to this, business enterprise can make best possible use of value chain analysis with an aim to evaluate internal environment (Tan and Platts, 2005).
It is referred to as chain of activities which is being carried out by company in retail sector for the purpose of delivering valuable product and service within market place. This tends to provide assistance to management in developing activities with the help of which they can create competitive advantage along with creating value to shareholder (Acur and Englyst, 2006). It basically comprises of two main set of activities namely primary and support that offer level of value to customers that exceeds cost of activities (The Value Chain, 2010). The value chain analysis of Tesco plc is enumerated as under:
Primary value chain activities
Inbound logistics: It is concerned with receiving and warehousing of raw materials along with their distribution. The retail giant has made best possible use of its leading market position and economies of scope for the purpose of achieving low cost from its suppliers. In order to induce effectiveness and efficiency in inbound logistic to company administration has upgraded their ordering system along with it approved in-store processes as well (Ranchhod and Marandi, 2012).
Operations management: This course of action is referred to as transforming of inputs into finished products and services. In regard to this, Tesco has been appreciated by various supply chain management as they have efficiently used IT system that has facilitated low cost of business enterprise (Radnor and O'Mahoney, 2013).
Outbound logistics: It is all about storing and distributing of merchandises that has been manufactured. It has been seen that due to its adequate and effective outbound logistics, Tesco has attained considerable position in online and offline food retail segment. In the similar manner, they have also formulated number of types and formats of stores so that they can attain maximum amount of customer exposure. It majorly comprises of Express, Metro, Superstores, Extra and Home plus as per their target population (Zajac and et. al., 2000).
Marketing and sales: In this determination of customer need along with generation of sales has taken care. In order to retain potential clientele for longer duration of time Tesco has introduced the concept of club card. In addition to this, they have also introduced Greener Living Scheme for advising customers on environmental issues so that food wastage along with carbon foot prints can be reduced (Snyman and Kruger, 2004).
Services: They are the support of customers that they give after they got products and services and in this context, Tesco is complying with dual strategy of cost leadership and differentiation which has enhanced the significance of customer service (Tan and Platts, 2005). They have provided customer care services in order to retain customers for longer duration of time and provide them ample benefits for drawing their attention at regular interval of time.
These set of primary activities are being supported by some other supportive that are mentioned as under:
Infrastructure: The infrastructure of Tesco plc is adequate and has supported its functions in adequate manner. It basically comprises of organizational structure along with control system as well as company culture. In this administration carries out range of activities such as accounting, legal, finance, public relations, quality assurance and so on. The stores and outlets of Tesco are very well structured and designed which has provided immense convenience to customers and made their shopping experience memorable (Hooley, Piercy and Nicoulaud, 2012).
Human resource management: It is one of the most important supports that helps in further growth and development of retail giant. In this entire course of action recruitment and selection of employees take place and at the same time training and development is provided to them so that they can carry out their set of duties diligently. Tesco gives appropriate compensation to its existing workforce so that they attain maximum satisfaction level. They have large number of persons employed within place of work that look after various functioning. They are being constantly motivated by means of various monetary and non monetary benefits which has keep them motivated throughout their tenure (Sigalas, Economou and Georgopoulos, 2013).
Technology development: They are referred to as technologies that assist in activities that create value. In the context of Tesco, they have used new and improvised technology for grabbing attention of large number of customers and providing convenient shopping experience. They have also provided options like home delivery, online shopping, self check points; club cards etc. so that maximum customer satisfaction can be provided to them (Johnson and Scholes, 2008).
Procurement: By means of this supporting activity, retail giant can acquire goods and services through external sources. In this course of action Tesco plc has purchased inputs along with other materials for the purpose of carrying out their production process such as materials, suppliers, tools and equipments and so on with an aim to attain competitive edge against rivals (Fitzroy and Herbert, 2006).
TASK C STRATEGIC FIT ANALYSIS
Strategic fit is the degree to which business enterprise matches its resources along with capabilities with that of opportunities prevailing in external environment. It is a sort of situation which takes place at the time when any project that is adopted by retail giant is seen as adequate in terms of overall objective of company (French, 2009). Tesco plc has used this concept for the purpose of evaluating prevailing strategic situation along with opportunities to further grow and develop in near future (Gupta, 2013). It has been seen that retail giant Tesco is one of the leader in retail sector of UK as a result to which it consist of number of strength and weakness. In the similar manner, it has made best possible use of every single opportunity for the purpose of minimizing threat up to great extent. It has been seen that business enterprise has made efforts to fit the opportunities and threats in regard to strength and weakness with an aim to adjust in market environment (Aaker and McLoughlin, 2010).
The first and foremost strength of company is that it has attained leadership position in market place of UK along with this it complies with effective marketing strategy. In the similar manner, it has attained solid cash reserve with high and adequate amount of sales. The retail giant deals in number of products and services such as bank, insurance, groceries and so on as a result to which it has attained considerable amount of market share as compared to its rivals. It has strong financial performance over the years with generation of adequate amount of profit and revenue within industry (Merat and Bo, 2013). The international business segment of retail giant is growing steadily which has acted as an added advantage. It has also started offering online services through Tesco.com which is world’s biggest online supermarket. While on the other hand, there exist number of weakness from which business enterprise is going through. In regard to this, one such is over dependence to home market of UK and due to this they are not paying attention on international expansion and operations (Radnor and O'Mahoney, 2013). In addition to this, due to huge investment in space for new stores company has initiated large capital program as a result to which they have little cash for undertaking any other operations. This has highly impacted their profit level by means of bad debt. Controversies that have taken place in recent time have led to negative media coverage along with bad brand image with public (Snyman and Kruger, 2004).
There has been number of opportunities that are being available and used by Tesco for ensuring its smooth flow. It has now started focusing on private label growth to mark its presence all across the globe. Management has taken steps for entering into market place by getting hold of acquiring small chains as well as tie ups (Barksdale and Lund, 2006). They are using innovative digital media advertising and promotions with an aim to rebrand their stores for their target market. In order to cover large part of market they are now diversifying their services so that need and demand of potential clientele can be satisfied (Cravens, 2010). Their range of health and beauty products are continuing to grow and it is one of fastest growing skincare retailer in market. They have also formed a strategic relationship with US supermarket Safeway Inc. in order to draw attention of large number of people towards them (Archer and Yuan, 2001).
Tesco plc is facing threats from due to increasing competition from other retailers of UK as they are also offering similar products and services to potential clientele. Rising prices of raw materials cost from food and non food has also negatively impacted their profitability ratio up to great extent (Ranchhod and Marandi, 2012). Due to situation of crisis and recession in UK their sales has been declined that has posed difficulty in maintaining their image within market place that has directly and indirectly raised cost of operations. The international growth is quite expensive in nature as it requires heavy investment and marketing along with operational expense. This has raised debt ratio of Tesco along with amount of risk associated with it (Sigalas, Economou and Georgopoulos, 2013).
By summing up facts from above mentioned research report, it can rightly articulated that strategic management analysis has proved beneficial in understanding strategic position of business enterprise. With the help of carrying out micro and macro environmental analysis of Tesco plc, analysis of market has been done from which decisions for further growth and development can be taken. Value chain analysis has provided assistance in evaluating internal environment in which Tesco is carrying out its operations. With the help of this, resource as well as capability of retail giant has been analyzed which has demonstrated its core competencies. Last but not the least; strategic fit has helped a lot in identifying strength along with weakness of Tesco plc so that they can make best possible use of opportunities and threats to strategically fit within market place.
- Aaker, D. A. and McLoughlin, D., 2010. Strategic Market Management: Global Perspectives. John Wiley and Sons.
- Abraham, S. C., 2012. Strategic Planning: a practical guide for competitive success. 2nd ed. Emerald Group Publishing.
- Acur, N. and Englyst, L., 2006. Assessment of strategy formulation: how to ensure quality in process and outcome. International Journal of Operations & Production Management.
- Archer, N. and Yuan, Y., 2001. Managing business-to-business relationships throughout the e-commerce procurement life cycle. Journal of Internet Research.