Strategic Management Analysis

It is a multinational grocery and merchandise retailer that was founded in 1919 by Jack Cohen in the UK. It is the third-largest retailer in terms of profit and the second-largest in terms of revenue all across the world. The retail giant has around 6784 stores and has employed 597,784 people in its outlets. It also deals in a number of products and services, such as Tesco Bank, Tesco Mobile, and so on (Merat and Bo, 2013). The competitive position of retailers is quite favourable as compared to their rivals and has attained huge market share (Tesco Plc: Company Profile, 2004). The company is even listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

The study has laid emphasis on the market environment analysis of business enterprises 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 the strategic fit of Tesco plc by determining its strengths and weaknesses in terms of opportunities and threats prevailing within the market.

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Task A Market Environment Analysis

The concept of market environment analysis is concerned with determining external as well as internal elements prevailing in the market that can affect the performance of an organisation in the long run. Tesco is the market leader and it has attained a competitive position by making the best possible use of its 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 the overall operations of businesses and demand changes in operation, management, production, and so on at regular intervals of time. The environmental analysis of Tesco plc is mentioned as under:

Political: The government of the UK has encouraged fair business practices and competition, which has proved to be of great use in enhancing the growth of the company at a fast pace. Various rules and regulations have been framed by the 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 was fined heavily for the same (Yannopoulos, 2011).

Economic factors: They are very crucial for retail giants as they tend to influence demand, costs, and prices along with profits. International business is growing at a fast pace and it is highly anticipated to contribute a greater amount to the profit of Tesco in the coming years. The business enterprise is highly dependent on the market of the UK and it can get easily affected by a slowdown and is exposed to market concentration risks (Radnor and O'Mahoney, 2013).

Social factors: They are highly concerned with the lifestyle patterns and living standards of people, along with their tastes and preferences. In recent times, the current trend has indicated that British customers have moved towards one-stop and bulk shopping because of social changes. This has increased the availability of the sale of non-food items. Consumers have become more health conscious, as a result of 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 the majority of products of Tesco plc. The adoption of new and improved technology has benefitted both the company and consumers, as it has made shopping convenient and personalised in nature. The introduction of the Efficient Consumer Response (ECR) initiative has proved beneficial in the management of food supply chains. Wireless devices, intelligent scale, self-checkout machines, RFID, electronic point of sale and so on are some of the advanced technologies that are being adopted and used by retail giants (Johnson and Scholes, 2008).

Environmental factors: The best effort has been made by Tesco to use the concept of recycling to appeal to its target market in order to become an environmentally responsible organization. For this, they have announced a £500 million five-year plan for taking environmental initiatives. Likewise, they provide home delivery services by means of a fleet of zero-emission vans (Hooley, Piercy, and Nicoulaud, 2012).

Legal: The number of legislations and policies has had a direct impact on the overall performance of Tesco. For example, the Food Retailing Commission (FRC) has advised an 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).

Microenvironment analysis

Microenvironmental factors are the elements that influence the decision-making of a company and are under the control of the business enterprise. The microenvironment analysis of Tesco plc is enumerated as under:

Customers: They are the final or end users of goods and services that are being produced by retail giants. In order to retain them for a longer duration of time, it is essential on the part of retail giants to produce services as per their taste and preference. They also provide club cards for gaining their loyalty and they have 35 million club card holders 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 a number of suppliers of Tesco at both the national and international level and the retail giant provides assistance to them by making timely payments to them. Most 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 times as they provide similar products and services to the general public. In order to retain a competitive edge against rivals, the retail giant has focused more on delivering quality products and services and that too at comparatively lower prices as compared to Tesco (Fitzroy and Herbert, 2006).

Distributors: They are the ones that sell as well as distribute goods and services to different groups of customers along with target markets by means of using various channels of distribution. They provide assistance in undertaking the promotion of the company and Tesco is a company that directly sells to final users with little input from local and regional distributors for the purpose of gaining a large part of market share (Zajac et. al., 2000).

Task B: Resource and Capability Analysis

In order to demonstrate unique resources along with the core competencies of retail giants such as Tesco plc, an evaluation of the internal environment is to be carried out. By means of this, management will be able to undertake an extensive review of each and every aspect of the company and make decisions accordingly (Gupta, 2013). This will prove to be of great use in identifying as well as evaluating resources, capabilities, and core competencies by taking into account the vision, mission, and strategic objectives of the company in mind. In regard to this, business enterprises can make the best possible use of value chain analysis with an aim to evaluate the internal environment (Tan and Platts, 2005).

It is referred to as a chain of activities that is being carried out by a company in the retail sector for the purpose of delivering valuable products and services within the market.. This tends to provide assistance to management in developing activities with the help of which they can create a competitive advantage along with creating value for shareholders (Acur and Englyst, 2006). It basically comprises two main sets of activities, namely primary and support, that offer a level of value to customers that exceeds the cost of activities (The Value Chain, 2010). The value chain analysis of Tesco plc is enumerated as under:

Primary value chain activities

Inbound logistics is concerned with the receiving and warehousing of raw materials along with their distribution. The retail giant has made the best possible use of its leading market position and economies of scope for the purpose of achieving low costs from its suppliers. In order to induce effectiveness and efficiency in inbound logistics, company administration has upgraded its ordering system along with its approved in-store processes as well (Ranchhod and Marandi, 2012).

Operations management: This course of action is referred to as transforming 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 systems that have facilitated low cost of business enterprise (Radnor and O'Mahoney, 2013).

Outbound logistics: It is all about storing and distributing merchandise that has been manufactured. It has been seen that due to its adequate and effective outbound logistics, Tesco has attained a considerable position in the online and offline food retail segment. In a similar manner, they have also formulated a number of types and formats of stores so that they can attain the maximum amount of customer exposure. It majorly comprises Express, Metro, Superstores, Extra, and Home Plus as per their target population (Zajac et. al., 2000).

Marketing and sales: In this determination of customer need along with the generation of sales has taken care. In order to retain potential clientele for a longer duration of time, Tesco has introduced the concept of a club card. In addition to this, they have also introduced the Greener Living Scheme for advising customers on environmental issues so that food waste along with carbon footprints can be reduced (Snyman and Kruger, 2004).

Services: They are the support of customers that they give after they get products and services and in this context, Tesco is complying with the 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 a longer duration of time and provide them ample benefits for drawing their attention at regular intervals of time.

These sets of primary activities are being supported by some other supportive activities that are mentioned as under:

Infrastructure: The infrastructure of Tesco plc is adequate and has supported its functions in an adequate manner. It basically comprises of organisational structure along with a control system as well as company culture. This administration carries out a 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 is one of the most important supports that helps in further growth and development of retail giants. In this entire course of action, recruitment and selection of employees take place and at the same time, training and development are 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 levels. They have a large number of persons employed within the place of work that look after various functions. They are constantly motivated by means of various monetary and non-monetary benefits, which has kept 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 to grab the attention of a large number of customers and provide a convenient shopping experience. They have also provided options like home delivery, online shopping, self-checkpoints, 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 giants 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 equipment, and so on, with an aim to attain a competitive edge against rivals (Fitzroy and Herbert, 2006).

Task C: Strategy Fit Analysis

Strategic fit is the degree to which a business enterprise matches its resources and capabilities with those of opportunities prevailing in an external environment. It is a sort of situation that takes place at the time when any project that is adopted by a retail giant is seen as adequate in terms of the overall objective of the company (French, 2009). Tesco plc has used this concept for the purpose of evaluating the prevailing strategic situation along with opportunities to further grow and develop in the near future (Gupta, 2013). It has been seen that retail giant Tesco is one of the leaders in the retail sector of the UK, as a result of which it consists of a number of strengths and weaknesses. In a similar manner, it has made the best possible use of every single opportunity for the purpose of minimising threats to a great extent. It has been seen that business enterprises have made efforts to fit the opportunities and threats with regard to strengths and weaknesses with an aim to adjust to the market environment (Aaker and McLoughlin, 2010).

The first and foremost strength of the company is that it has attained a leadership position in the UK market, and along with this, it complies with an effective marketing strategy. In a similar manner, it has attained a solid cash reserve with a high and adequate amount of sales. The retail giant deals in a number of products and services such as banks, insurance, groceries, and so on, as a result of which it has attained a considerable amount of market share as compared to its rivals. It has had strong financial performance over the years with the generation of an adequate amount of profit and revenue within the industry (Merat and Bo, 2013). The international business segment of the retail giant is growing steadily, which has acted as an added advantage. It has also started offering online services through Tesco.com, which is the world's biggest online supermarket. On the other hand, there are a number of weaknesses which business enterprise is going through. In regard to this, one such is overdependence on the home market of the UK and due to this, they are not paying attention to international expansion and operations (Radnor and O'Mahoney, 2013). In addition to this, due to huge investment in space for new stores, the company has initiated a large capital program, as a result of 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 times have led to negative media coverage along with a bad brand image with the public (Snyman and Kruger, 2004).

Also Read: Importance of management of the company

There have been a number of opportunities that are being available and used by Tesco to ensure its smooth flow. It has now started focusing on private label growth to mark its presence all across the globe. Management has taken steps to enter the marketplace 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 a large part of the market, they are now diversifying their services so that the needs and demands of potential clients can be satisfied (Cravens, 2010). Their range of health and beauty products is continuing to grow and it is one of the fastest-growing skincare retailers in the market. They have also formed a strategic relationship with US supermarket Safeway Inc. in order to draw the attention of a large number of people towards them (Archer and Yuan, 2001).

Tesco plc is facing threats due to increasing competition from other retailers in the UK, as they are also offering similar products and services to potential clientele. Rising prices of raw materials from food and nonfood have also negatively impacted their profitability ratio to a great extent (Ranchhod and Marandi, 2012). Due to the situation of crisis and recession in the UK, their sales have declined, which has posed difficulty in maintaining their image within the market and has directly and indirectly raised the cost of operations. The international growth is quite expensive in nature as it requires heavy investment and marketing along with operational expenses. This has raised the debt ratio of Tesco along with the amount of risk associated with it (Sigalas, Economou, and Georgopoulos, 2013).

CONCLUSION

By summing up facts from the above-mentioned research report, it can be rightly articulated that strategic management analysis has proved beneficial in understanding the strategic position of business enterprises. With the help of carrying out micro- and macro-environmental analysis of Tesco plc, an analysis of the market has been done from which decisions for further growth and development can be taken. Value chain analysis has provided assistance in evaluating the internal environment in which Tesco is carrying out its operations. With the help of this, the resources as well as the capability of the retail giant have been analysed, which has demonstrated its core competencies. Last but not least, the strategic fit has helped a lot in identifying the strengths and weaknesses of Tesco plc so that they can make the best possible use of opportunities and threats to strategically fit within the marketplace.

REFERENCES

• 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.

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