Qualification - Higher National Diploma in Business
Unit Name - Business Strategy
Unit Number - Unit 32
Unit Level - Level 5
Assignment Title - Strategic Management Plan
Learning Outcome 1: Analyse the impact and influence which the macro environment has on an organisation.
Learning Outcome 2: Assess an organisation's internal environment and capabilities.
Learning Outcome 3: Evaluate and apply the outcomes of an analysis using Porter's Five Forces model to a given market sector.
Learning Outcome 4: Apply models, theories and concepts to assist with the understanding and interpretation of strategic directions available to an organisation.
Assignment Brief:
You have been recruited as a Corporate Strategy Manager by a well-known large global organisation [an organisation of your choice]. You have been asked to produce an environmental analysis and strategic growth management plan based on the use of recognised internal and external analytical tools.
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Introduction
Company management includes preparation and application of strategies in order to attain goals and priorities. The leading organisation designs and implements policies that have important consequences for its activities and production processes by analysing manufacturing conditions and behaviour(Stamevska, Dimitrieska and Stankovska, 2019). The mission, principles, corporate goals and priorities of TESCO Plc. are included in this article. Two key methods will be discussed and developed. The organisational solution can, on the other hand, be evaluated. The study also looks at the current strategic environment and analyses the organisation's vulnerabilities, capabilities, prospects and risks internally. The second section of the study would cover the implementation of an ambitious business strategy focused on the environmental performance of the TESCO plc, which also discusses the organisation's main goals and priorities.
Part A: you are to complete an internal and external analysis that provides a basis for strategic planning:
• Analysis will include a PESTLE and SWOT analysis of the organisation and an analysis of the organisation's capabilities.
• Analysis of the competitive environment using Porter's Five Forces model.
Solution:
1. Impact and Influence of Macro Environmental Factors on the Business Strategies
Tesco Plc. has branches in the UK, England, Hertfordshire and Chestnut, as a British multinational manufacturer of food and consumer goods. It is also the world's third largest store, collecting and sales, and the second largest supermarket (Sun and Runcie, 2016). Established in 1919, it now has outlets in 12 Asian and European countries and is the industry leader in the United Kingdom's operations. Tesco Plc. has geographically diversified its activities through bookshops, cloak and computing devices, financial services, telecommunications and internet technologies.
1.1 The Strategic Context of the Organisation
Aims:Tesco plc. is primarily aiming at becoming the world's largest and luxury supermarket. There are special and predefined priorities for the business which may be extremely important to the company's development and expansion (Vu, 2016). The company's senior managers often aspire to encourage all workers to accomplish their company's common and established objectives.
Vision: The vision phrase clarifies the cause of the growth of Tesco and reveals the potential optimism. The Tesco Plc.'s key goal is to sustain market leadership by increasing the consistency of its results, product range and distribution network (Vu, 2016).
Objectives: The key aim of TESCO Plc. is to provide consumers with a core product and satisfy customers' overall needs and concentrate on business activities in a manner that creates value for stakeholders (Vu, 2016).
1.2 Analysing the Macro Environment through Several Analytical Frameworks
1.2.1 Stakeholder Analysis
The key stakeholders of the TESCO Plc. are:
• Shareholders:Throughout the cash inflow of Tesco, shareholders play a vital role in the growth and management of the company as major investors (Fatricia, 2017). They also play a major part in the action development process and contribute to this. They are represented by the Management Board in Tesco.
• Suppliers: They are employees of the Tesco delivery chain and are important to their commercial operations. They trust in the key principles of their supply chain management framework (Fatricia, 2017).
• Customers:Tesco provides its consumers with value for money in terms of product quality or operation, lower prices, good safety requirements and an environmental impact (Fatricia, 2017).
• Local Communities:Tesco specialises in bringing communities to societal integration and business growth. They are committed to neighbourhood well-being and growth processes (Fatricia, 2017).
1.2.2 PESTLE Analysis
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Factors
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Descriptions
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Political
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- The company's sector is also affected by tax rates, regulatory regulations and stability (Farooq, 2018).
- It also increases rivalry for commodities and differentiated jobs. Tesco has a role to play in creating employment (Rosnizamet al., 2020).
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Economic
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- Globally, the organization is still growing; it remains strongly reliant on the UK sector with profit margins of approximately 30 percent (Aiello et al., 2020).
- Tesco has based more of its attention not only on selling their famous brands but on luxury goods, but on declining domestic incomers and disposable resources (Farooq, 2018).
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Social
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- Tesco also expanded the amount of non-food items offered for purchase. The selection of products and services desired by customers depends primarily on their basic beliefs and attitudes (Farooq, 2018).
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Technological
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- Tesco has provided numerous new prospects with the technological innovations. Firstly, two of the most respected are creation and execution of internet purchases for home distribution systems (Khin and Ho, 2019).
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Legal
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- Tesco's efficiency is often affected explicitly by federal policy and legislation. In 2004, the Food Retailing Council (FRC) proposed that certain current practises be banned with the adoption of a code of ethics, including price changes without notice and vendor payments (Farooq, 2018).
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Environmental
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- With stronger pay demands in order to solve the environmental issues and to implement initiatives which could support society, Tesco has a firm pledge to cut its carbon emissions by more than 50% by 2020 (Weston, 2019).
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1.2.3 Porter's Five Model
• Threat of new entrance (Medium): In particular because of capital needs, the possibility of new entrants into the UK retail industry is very limited. As Tesco has economies of reach and its own main competencies, it does not thinking about any potential entrants(Kung'u, 2017). Likewise, the expected rivals do not even have the resources to investigate the British retail sector, access to logistics networks and skills.
• Threat of substitute products and services (Low): There is a small chance that new competitors will penetrate the food retail industry. Everyone needs major investments in the resources to thrive and build a brand. The largest business market leaders currently owned in the food service industry are Tesco, Asda, Sainsbury, and Morrison, holding 80 percent of all the UK shares(Salas, 2016).
• Intensity of competitive rivalry (High): The food and drug industry is very strongly facing economic uncertainty. Tesco has a massive competition amongst its direct rivals - amongst others Sainsbury, Asda,Morrison,Waitrose, etc. These companies also content in offering discounts, merchandise and deals with each other(Salas, 2016).
(Source:Kung'u, 2017)
• Bargaining power of buyers (Medium): When it comes to products with a distinguishing symbol and more commodity adaptation, the conversion costs are incredibly low and the user can quickly switch between the marks(Salas, 2016).
• Bargaining power of suppliers (Low): Suppliers had too little bargaining leverage. It should be recalled that producers are inspired by the broad retail food and are worried by the disappearance of the largest retailers in exchange(Kung'u, 2017).
1.2.4 Ansoff's Growth Vector Matrix
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Existing Products
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New Products
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Existing markets
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Market Penetration:
Tesco has developed a long-term strategic strategy focused on four key elements. In an attempt to extend the retail industry internationally, the organisation opens other sites with funding from its goal of expanding within the UK centre by leveraging innovative marketing tactics, publicity promotions and other advertising activities to promote current goods or services to new markets(Loredana, 2017).
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Product Development:
The possibility of the arrival of new goods or services on the present market is endless(Loredana, 2017). For Tesco, its non-food production growth strategy is an example.
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New Markets
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Market Development:
To transform the current industry environment, Tesco targets primarily for the sourcing of products and developing a competitive market with a different product layer, a distribution network and other strategies(Loredana, 2017).
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Diversification:
Throughout emerging sectors, diversification expands in innovative products/services. Tesco should be conscious that there are dangers to this approach. The Diversification needs to be efficiently achieved through intense research and development (R&D) activities(Loredana, 2017).
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1.2.5 SWOT Analysis
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Strengths
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Weaknesses
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- Set up communications strategy, European advertising advertisement, media plan.
- Knowledge of domestic and international market needs
- Very optimistic liquidity degree
- Britain's largest, deep consumer market
- Constant and accurate marketing expertise accumulated over the years with great inventiveness.
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- Poor brand awareness and confusion with Tesco in Asian and Eastern markets
- Owing to intense competition, low prices and customer loyalty, the range of demand for Tesco goods is highly dynamic.
- The UK economy depends on its foreign diversification to be sustained.
- Any countries are competing with major multinational firms.
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Opportunities
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Threats
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- In order to offset the volatility on the UK economy, economies in other countries such as Asia and its prosperous socio-economic leaders are appealing.
- Sales per capital rises in the countries of South Korea and BRIC (India, China, Brazil and Russia).
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- Increased market rivalry could lead to the price of penetration of Tesco.
- Economic developments will contribute to poor global consumer demand.
- Variations of cultural preferences and desires, lifestyle, structures of manufacturing, alliances and customer views hamper activity in the international markets.
- WalMart is the multinational rival of TESCO, leading firms such ASDA.
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Part B: devise a strategic plan based on the environmental analysis and findings:
• Evaluation of the different types of strategic directions available to the organisation.
• Justify and recommend the most appropriate growth platform and strategies.
• Produce a strategic management plan with strategies, objectives and tactics.
2. Assessing the Internal Environment of the Organisation
2.1 Analysing the Internal Environment of Tesco through Several Frameworks
2.1.1 McKinsey's 7S Model
• Shared Value: Tesco is optimistic that its complex management strategy will boost the efficiency of basic processing organisations and walk through the supply chain to the north.
• Strategy: Tesco generally employed different strategies in the Controlled Scoreboard (BSC) method.
• Structure: In the view of the CEO of Tesco, a whole community of people collaborating on plans from above to below does not need one boss.
• System: Tesco uses an automated learning framework to support its workers in the future to accomplish its previously established techniques.
• Staff: The number of workers in the business is reported. Personnel. Tesco hired over than 400,000 workers around the country.
• Style: Tesco has used handlebars to meet its goals. It has 90 degree ranges spanning four major fields: the market, the customer and the productivity of industry and workers.
• Skill: Tesco provides its staff with detailed knowledge in order to operate securely and effectively within the organisation. It offers workers the right to work according to Tesco specifications.
(Source:Dudovskiy, 2016)
2.1.2 VRIO Analysis
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Resources
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Value
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Rarity
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Imitability
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Organisational
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Competitive Advantage
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Positive Market Reputation
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Yes
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Yes
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Yes
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Yes
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Long-term
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Leadership Team
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Yes
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Yes
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No
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Yes
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Strong
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Awareness of Brand
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Yes
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Yes
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No
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Yes
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Sustainable
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High customer rating
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Yes
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Yes
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Yes
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Yes
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Realised
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2.1.3 Evaluation and Benchmarking Of Organizational Capabilities
As the business expands rapidly, Tesco serves Europe's second largest retailer and is gradually targeting other large retailers.
I. Location: There are a total of 8500 TESCO stores worldwide. In the macro-location phase, every Tesco shop launched earlier has been strategically assessed (Teixeira, Puffal and Ferrazza, 2020). The selection of a store position is probably the most important factor to decide and is necessary for a retail organisation's progress.
II. Store layout: Every successful dealer abroad has an essential part of the shop layout. Three elements are at risk in the vision of the client of the shop concept. Tesco is based on its friendly target demographic for its own brand of stores (Teixeira, Puffal and Ferrazza, 2020). Another approach to examine the retail style of Tesco is through the Methrabian-Russell model.
III. Performance of the market: According to Nielson Media Analysis, Tesco spent £ 62.9 million, including advertisements for its own business items. Tesco invested € 34.8 million on advertisements, which is usually indicated by its willingness to promote its own brand properly and to improve consumer loyalty and not to trick the sector.
2.1.4 Value Chain Analysis
I. Inbound logistics: In its global cost control approach, Tesco has a streamlined and agile inbound logistic regression model. The firm uses its share of business in Abeysinghe and size ecosystems as the key negotiating capabilities to achieve its providers' cost-effectiveness.
II. Operation management: A number of supply-chain management experts applaud Tesco for the efficient usage of IT processes that help low costs for the sector. Tesco estimates that Tesco invested more than £76 million on streamlining its operations with the Tesco Internet, an ERP strategy for the third generation (Stamevska, Dimitrieskaand Stankovska, 2019). The business itself achieved £550 million in output in 2009, as a consequence of the introduction of this initiative.
III. Outbound Logistics: Thanks to the efficient and secure outbound logistics that Tesco offers, it plays a significant role in on and offline food delivery. Based around Mintel and carefully planned to maximise market experiences, the business created a range of retail outlets and categories.
IV. Sales and Marketing: Customers would have been prevented from entering through rivals by digital infrastructure advancements by providing fellowship programmes such as Tesco Club pass.
V. Services: Tesco utilises a dual cost control and distinction process, which would improve the quality of customer support (Stamevska, Dimitrieska and Stankovska, 2019). This dual strategy is based on Keynote and is expressed by the introduction of self-service kiosks, financial facilities, focused advertising and sales activities.
2.1.5 Cost Benefit Analysis
The growth of Tesco gives the local community jobs, particularly as construction takes place outside the area, as grocery stores normally operate their families; thus only a few jobs go to people outside, but Tesco does not plan to do so while young individuals and senior generations work. Indeed, because of size reductions, Tesco's pricing ranges are less pricey than comfort shops. Tesco will procure more than grocery retailers, reducing the quality of Tesco's goods at reduce costs. This also offers Tesco more money that can be used to raise salaries and thereby enable workers to provide quality facilities to their customers. However, since the reputation of Tesco is big but does not want to ruin it, they guarantee that their products are of the finest standard to discourage public humility.
3. Evaluation and Application of the Results of Porter's Five Forces within the Context of Tesco
3.1 Implication of Balance Scorecard by Tesco
The Company introduced a performance scorecard for its numerous policies and activities in the mid-1990s. The approach chosen by Tesco was divided into four categories and is primarily focused on industry, finance, customers and communities. This integrated scorecard approach has been utilised to accomplish long-term targets of consumer satisfaction and confidence in the enterprise. The association launched a fifth section of the society, officially named for managing this scorecard, from which it inspires workers to become outstanding people and thus helps improve connectivity (Rosnizamet al., 2020). It also allows the company to make a better effort to build the consumer base in terms of knowledge gathering, interpretation and consumer study and choosing.
3.2 Analysis of Porter's five forces of Tesco
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Factors
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Descriptions
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Bargaining Power of Buyers
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Tesco Plc. serves millions of consumers in a week throughout its efficient way of business operation. All of their consumers always are satisfied by purchasing for their product. However, in UK, there are some other organisations like, Sainsbury, Asda, etc., which provides various services and has grabbed a vast range of market throughout their efficient operation of low cost. In this aspect, the bargaining power of the consumers is high; whereas, the consumers have the numerous options for purchasing to fulfil their needs (Salas, 2016). Therefore, Tesco Plc. has compelled to minimise their cost of products to grab the potential consumer base across the country.
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Bargaining Power of Suppliers
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Now-a-days, Tesco Plc. operates its entire business with 2500 suppliers in UK. However, the suppliers are not be able to assert any essential power on Tesco Plc. as there are some other retail organisations that also operate their businesses in the same market. Moreover, Tesco Plc. potentially negotiates with its suppliers to measures an extensive profit margin for business (Rahman, 2020). Therefore, the suppliers always co-operate with the organisation. In this aspect, the bargaining power of suppliers is low than the organisation due to its provision of adequate profit to its supply chain management services.
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Threats of New Entrants
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The effectiveness of new entrants is very low for Tesco; whereas the new entrants have the needs of capital requirement in their initial stage of business (Kung'u, 2017). Thus, the Tesco Plc. has no worry about the entry of new retail organisations; because of, its holds a vast scale of economic stability throughout its effective business operation.
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Threats of Substitute
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During the business operation of Tesco Plc. the organisation provides a wide range of product/service to its consumers with numerous variations. Through this way, the organisation has been able to extend its market value and profitability throughout the country. In this aspect, the threats of substitute product are irrelevant for Tesco Plc. Moreover, the organisation also provides different kinds of services like drone service, online service through dealing with the outbreak of corona pandemic. Thus, the organisation satisfies its consumers since its initial stage of its business.
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Rivalries
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In the market of UK, Tesco Plc. has the most potential competitors like, Sainsbury, Aldi, Lidl, Asda, etc. which are able to provide the potential competition to Tesco Plc. However, due to the effective brand image of Tesco Plc. most of the consumer prefers their branded products to meet with their needs. However, the other brands like, Sainsbury, Aldi, Lidl, Asda, etc. also provides their product with a very low cost and provide many discounts on consumer purchasing (Rahman, 2020). Thus, Tesco Plc. has a strong competition with these organisations during its business operations.
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4. Applying Different Models and Theories to Interpret the Strategic Direction of Tesco
4.1 Porter's Generic Strategy
I. Cost Leadership strategy: This approach lowers the expense of goods and services for the company on the sector. It will enable the company, which gives Tesco a competitive edge, boost its capacity to monitor the cost of the goods and produce profit (Cavaleri and Shabana, 2018).
II. Differentiation strategy: This strategic technique allows a company to offer multiple forms of consumer expectations programmes and goods with creative functionality. This will also allow Tesco to attract the focus of the consumer to its goods.
III. Strategy of focus: This approach incorporates the above technique for leadership and makes the company concentrate on some given sector.
4.2 Bowman's Strategy Clock
"Bowman's Strategy Clock" aids Tesco in giving its rivals the strategic benefit of business placement. This approach often allows the company to determine behaviour that lead to the interest of the client (Echchakoui, 2018). Tesco frequently analyses the success in terms of the Company's consolidated commodity and principles by utilising the Techniques "Lower prices, lower value, hybrid diversification and more."
4.3 Hybrid Strategy
In the reduced low price tactics, a hybrid strategy with the Bowman plan clock allows the company to execute the operations. By enhancing competitive advantages, the hybrid approach will allow any contribution to broad marketability (Echchakoui, 2018). It will also add to Tesco's rise in revenue volumes and generate a new project.
4.4 Diversification Approach
Tesco has been pushing forward various plans for diversifying its company in different areas of the world, to expanding its sector and bringing a great many investments into it.
4.5 Vertical/Horizontal Integration
Like other supermarket supply chain companies, Tesco Plc practices vertical integration (Echchakoui, 2018). This effectively allows the company to extend the supply chain by actually sourcing the goods, delivering a higher commodity service delivery and conveniently satisfying consumer needs across the open supply chain.
5. Conclusion
The strategic potential goals of Tesco are very relevant and crucial for their global presence. We can see why Tesco deals with discount chain Wal-Mart in the near future. Their success over the last 12 years has demonstrated to reach the world market and to behave like coca cola in the foreseeable future. Yet, as their market share continues to rise and competition is still behind Tesco, it seems under threat. Competitiveness with competing competitors is the main challenge to this business. Tesco is nevertheless perhaps the industry's strongest consumer intelligence and customer support, enabling it to incorporate innovative inventive organic items and other programmes that are ultimately adopted by consumers.
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