Unit 7 Business Strategy Assignment - TESCO

Programme	Diploma in Business
Unit Number and Title	Unit 7 Business Strategy
QFC Level	Level 5

 

Introduction

Business strategy is the long-term action plan of any organisation generated to achieve a set of goals or objectives. In other words, business strategy is generally a document which outlines the direction a business will seek and the measures it will take in order to fulfil its goals. A classic business strategy matures in three stages: analysis, integration, and implementation. With the support of assignment help services, by Locus Assignments, you can better understand the nuances of business strategy and its practical application.

In this assignment help, business strategic tools and techniques have been applied to Tesco, a UK-based company. The report includes critical presentations in which the mission, vision, objectives, and competencies of Tesco have been provided. It also includes critical information on strategic planning and reliable issues related to it. The report has further provided different business strategy tools and techniques in the presentation. The study has been continued with proper implications of reliable strategies for the market development of Tesco in the United Kingdom. 

The SWOT analysis evaluates the organisational analytical strategic tools that have been adopted by the business entities. It has been assessed that these strategic tools enhance the internal environment and external forces that affect business operations. As per the analysis, Tesco’s strengths, weaknesses, opportunities, and threats are assessed as follows: The PEST analysis is the strategic tool introduced for the measurement and evaluation of the external environment of the company. It has been assessed that proper audits and evaluations enhance the industry scenario, performances, and influencing forces in which Tesco operates. The report has engaged in a critical assessment of the roles and responsibilities of Tesco’s management and employees to execute the selected strategies. It has also assessed the resource requirement, target, and timescale planning for the market development strategic implications for Tesco.

 

 

1.1 Explain Strategic Contexts and Terminology – Missions, Visions, Objectives, Goals, Core Competencies

Tesco Plc is a British multinational grocery and general commodity retailer with its headquarters in Chestnut, Hertfordshire, England. The company is also ranked the third largest retailer in the world based on profits and the second largest measured by revenues. It was founded in 1919 and currently has stores in 12 countries across Asia and Europe. Tesco is the market leader in the UK in its sector. The company has diversified its business globally in areas such as book retailing, clothing, electronics, financial services, telecom, and internet services, to name a few. Tesco Plc is listed on the London Stock Exchange and is also an essential part of the FTSE 100 Index.

In 2014, Tesco launched a ‘Healthy Living’ brand, featuring a range of healthy foods aimed at helping its customers lead a healthier lifestyle. In the same year, Tesco Finest, the UK’s fastest-growing premium food brand, was re-launched, with over 400 products announced. In 2012, Tesco’s UK sales figure was £42,248 million, making up over 60% of its group sales of £64,539 million, which indicates that the UK is the company’s core market among other markets worldwide. In the UK market, the retailer holds the largest market share of 34.4% in the grocery retailing sector, competing with other retailers such as Asda (17.9%), Sainsbury’s (16%), and Morrisons (11.9%).
 

Strategic planning at Tesco is an organisational management exercise used to set priorities, focus on energy and available resources, strengthen operations, and ensure that employees and other stakeholders are working towards a common goal. It is an acclimatised effort that produces fundamental decisions and actions shaping and guiding what an organisation is, who it serves, what it does, and why it does so, with a focus on the future.

In other words, strategic planning is a methodical procedure of visualising the future and converting the same into well-defined goals in a broader way and a set of related events to achieve them. It requires a systematically crafted plan for how to allocate the available funds, workforce, and time. The main purpose of strategic planning is to help determine priorities and fulfil the needs of its electorate. The plan should be concise and flexible while still serving as a guide in the implementation of various programmes. Strategic planning, execution, monitoring, and evaluation are essential for Tesco as they are fundamental to developing a results-based accountability system in the organisation.

The strategic context and terminologies of Tesco are as follows:

1. Mission: This is an integral part of Tesco as it encourages employees to work together as a team to achieve the company’s vision. It defines the critical goals and performance objectives of an organisation in the context of development and is described within the framework of organisational culture, vision, values, and principles.

The Mission Statement of Tesco:

• It believes in generating the capability of its enterprise in a globally competitive environment by delivering superior and sustainable value for its stakeholders.

• It aims to deliver world-class customer partnerships by strengthening the best operational systems and controls.

• It seeks to build transparency regarding long-term sustainability.

 

2. Vision: The vision statement explains the reason for Tesco’s existence and reflects the aims it intends to achieve in the future. In other words, it is essentially the blueprint of Tesco. Generally, vision statements are generated based on the long-term goals of the company and its future operations. A vision statement is very effective and developmental for the organisation.

The Vision statement of Tesco is as follows:

• Tesco aims to hold its market leadership in the UK by incorporating quality in performance, its product portfolio, and its delivery network.

• They aim to create growing value in the UK economy.

• They aim to create an efficient supply chain network to strengthen the delivery system and raise their standards of customer service and operational transparency.

 

3. Goals: Goals define the general idea at Tesco of becoming the world’s premium grocery retailer. They usually act as the harbour of the firm and also serve as circumstantial planning to achieve the predefined targets. The senior management at Tesco Plc decides the goals of the company, and every employee will follow the plan to complete the goals.

The goals of Tesco are:

• Tesco’s efforts to create multiple drivers of growth by developing an excellent business portfolio and capabilities.

• Their effort to create technological expertise to build benchmarks in their fuel quality.

• Their effort to strengthen and refine their corporate governance by building accountability.

 

4. Objectives: Objectives are the steps to attain goals, which means objectives are part of a goal, but goals are not a part of objectives. The company’s objectives define the critical issues and business goals and build a common trust source with its customers, partners, and governing bodies.

Tesco’s objectives are as follows:

• Tesco’s objectives define the outline to meet their core desired outcomes of developing a customer-focused and high-performance-oriented company that creates value for its stakeholders.

• They strive for excellence and innovation in creating better processes, products, services, and management practices.

 

5. Core Competencies: Core competencies are the critical factors Tesco uses to deliver a competitive advantage over other competitors. These reflect their strengths in the industry and build the confidence of their suppliers and customers in their capabilities.

The core competencies of Tesco are:

• Expertise in technological and functional knowledge.

• A strong commitment to strengthening supply chain efficiencies by cutting costs and delivering quality in their products and services.

• Efforts to drive their business forward by applying diverse skills and expertise to deliver growth and performance.

• Dedication to offering a competitive edge in the market (Martin, 2005).

 

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1.2 Review the Issues Involved in Strategic Planning

Strategic planning is a systematic process of envisioning a desirable future and translating it into well-defined goals and objectives. It paves the roadmap to consistent success and performance in the dynamic market. It helps to stimulate the changing business environment and formulate realistic and achievable business objectives to satisfy suppliers, stakeholders, and customers, thereby ensuring progressive growth and continuous improvement in critical thinking and strategic operations.

The key issues in strategic planning that can arise in Tesco are:

• Lack of effective planning – The business should focus on building efficient systems, enhancing staff expertise, optimising resources, and reflecting a positive image in the market.

• Lack of effective response – The business should be dedicated to delivering its promise to stakeholders to ensure desired outcomes.

• Lack of communication – The business planning should be simple and easy to understand to ensure better performance in delivering the respective roles and responsibilities.

• Lack of control – The business should focus on evaluating its process and performance measures by ensuring an efficient monitoring system in its functions.

• Lack of participation – The business should motivate an environment that adopts an inclusive growth model and encourages involvement in critical decision-making.

• Lack of leadership – The business should be capable of driving performance and productivity through strong leadership.

 

Strategic planning is an integral part of Tesco's success. The company had faced issues in applying innovative cultures as the workforce was not comparatively stronger. However, later on, an efficient understanding of the business and the increasing competition helped them emerge as a market leader. The inability to adapt to changes affects the profit ratio of any business, which can also lead to its end. In the case of a shortfall of resources and a lack of focus on problems related to the business environment, negative outcomes might be generated, which can adversely affect Tesco (L. Draft, 2008).

 

1.3 Explain Different Planning Techniques That Facilitate Strategy Formulation

Strategic planning at Tesco focuses on better operational efficiency, safety, and performance. They focus on delivering value in their supply chain and customer network to ensure a competitive advantage at lower prices. They value their shareholders to maintain capital inflows and resource allocation. They focus on developing their research initiatives to grow exploration and innovation projects. They are committed to ensuring high quality in their products and services. They also focus on strengthening relationships with their suppliers, partners, and customers.

Strategic planning techniques are used to gather and interpret the information required to structure the process in Tesco. They help structure the resources needed to improve the business's performance and productivity. They also assist in analysing critical issues and developing creative and effective solutions to address concerns. Furthermore, they help measure the impact of performance and strategic planning to maintain sustained growth and positive business outcomes.

Key strategic planning techniques:

• The Boston Matrix

• SPACE Matrix

• PIMS Strategy

• Directional Policy Matrices

 

Boston Matrix

Initially developed in the early 1970s, the Boston Matrix assists managers in deciding which business units to invest in. In modern times, it is also used to decide which product lines should receive investment and which should be discontinued.

The BCG Matrix categories are:

a.  Cash Cows – These business units easily meet their profit targets and generate high capital, allowing reinvestment into product portfolios in the maturity stage.

b. Dogs – These business units struggle for growth due to low investments. Expensive turnaround plans might be required to generate cash flows and revive the business. In cases of persistently low cash generation, asset liquidation may become necessary.

c. Question Marks – In this stage, businesses face affected cash flows due to increased demands and low returns. The primary focus is on cash generation and increasing market share.

d. Stars – These businesses generate large cash flows and are market leaders.

The BCG Matrix helps Tesco efficiently allocate available resources and acts as a scientific tool for marketing, product management, and strategic and portfolio analysis.

The effectiveness of the BCG Matrix at Tesco:

• It helps managers evaluate the balance in Tesco’s portfolio across Stars, Cash Cows, Question Marks, and Dogs.

• It is applicable to companies focused on volume and economies of scale.

• The model is straightforward and easy to understand.

• It provides a base for management to prepare for future actions.

• Tesco uses the experience curve to its advantage, creating and selling new products at lower prices to gain market share leadership. Once a product becomes a Star, it is designed to be profitable.
 

 

SPACE Matrix – The Strategic Position and Action Evaluation (SPACE) Matrix

The SPACE Matrix is a strategic planning tool that determines strategic thinking, focusing on the competitive position of a business strategy. The SPACE Matrix is divided into four principal components: aggressive, conservative, defensive, and competitive.

 

 

The SPACE Matrix Dimensions

The SPACE Matrix has two dimensions:

• Internal dimensions: Financial strength and competitive advantage.

• External dimensions: Environmental stability and industry strength.

The evaluation of the SPACE Matrix for Tesco:

• Tesco uses an aggressive strategy to maintain its competitive position and rapid market growth by enabling strengths to develop market penetration and market development strategies, such as product portfolio development and acquisition of competitors.

• Tesco has strong financial stability in terms of high return on investments, turnover, working capital, and cash inflow generation.

• They have excellent utilisation of innovation and creativity in their strategies, ensuring customer loyalty, product and service quality, market share, and a strong competitive edge over others.

• They have favourable environmental stability, such as economic conditions, price elasticity, technology, competitive barriers, and industry growth potential.

 

PIMS Strategy

The function of PIMS is to highlight the relationship between key strategic decisions and their results. When analysed adequately, the data can help the manager gain a better understanding of their business environment, identify analytical factors in improving the position of the company, and develop strategies that will facilitate them in creating a continuous advantage. PIMS principles and the data are widely used in academic research. As a result, PIMS has influenced business strategy in companies around the world.

 

PIMS seeks to address three questions in general:

1. What is the typical profit rate for every business type?

2. As per the current strategies of a company, what are the future operating results likely to be?

3. Which strategies are likely to help in developing future operating results?

 

The effectiveness of PIMS at Tesco can be evaluated as follows:

• It helps to identify the relationship between key strategic decisions and their impact on the business environment.

• It helps to develop critical factors that can improve market position and help to gain a competitive edge over other competitors.

• It evaluates performance and measures quality to capitalise on new market opportunities.

• It helps in better utilisation of resources to create business outcomes that are achievable and measurable (Grieves, 2006).

 

 

Directional Policy Matrices

This matrix evaluates the market conditions and the strengths of a business to sustain in the changing conditions by outlining the strategies for future investments, such as decisions related to investing, growing, harvesting, or divesting.
 

 

The evaluation of the Directional Policy Matrix for Tesco:

• Tesco can make decisions related to investing if their market attractiveness and business strengths are both higher by directing the utilisation of resources to increase their strengths.

• They can make strategic decisions to build strong competitive advantages, such as product portfolio development, creativity and innovation of store design to facilitate customer convenience or experience, and a strong delivery system if the market attractiveness is higher in comparison to their business strengths, to maintain their market leadership and sustainability.

• Tesco can maintain profitability with its strong market position and core competitiveness if market attractiveness is lower in comparison to its business strengths.

• Tesco can focus on its product line segment and overhead costs to remain profitable if both the market attractiveness and the business strength are low.

 

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2.1 Produce an Organisational Audit for the Chosen Organisation

An organisational audit serves as a programme that helps the organisation operate by aligning the internal structure, processes, and systems to strategy in accordance with the rapidly changing business environment. The audit process can help Tesco by identifying and verifying the organisational strategy and key business units, identifying and designing core business processes with the support of the competent team, identifying and allocating resources to optimise the system, designing coordination and development schedules with the support of the management structure, and efficient planning and implementation of new design strategies (Mackenzie, 1986).

The various approaches to organisational audit that can be adopted by Tesco are:

 

SWOT Analysis of Tesco:

 

STRENGTHS: • Established brand identity, and high brand publicity in European markets. • Diversified resource base • Awareness of local and  international customer needs • High and stable liquidity ratio • Strong core UK market, which represents its main market • Constant and accurate knowledge, as well as experience in retail, learned over the years, with great inventive capacity

WEAKNESS: • Low brand consciousness and bewilderment with the Tesco brand in the • Asian and Eastern markets • Tesco’s price flexibility of demand is highly resilient due to high competition, low customer’ switching costs and loyalty. • Dependency on the UK market to finance its international diversification. • Some struggles amongst economies regarding large foreign firms • Inactive or negative sales growth of GRM in the developed European countries.

OPPORTUNITIES: • Alluring international markets, such as the Asian markets and their stable socio-economic position, to counter intensity in the UK market. • Rising per-capita income in markets of South Korea and BRIC countries (i.e. Brazil, Russia, India and China) • Growth in the diversification of retail other than edible products. • Growth of Tesco in healthcare and cosmetic products.

THREATS: • Aggressive market competition could lead to a price war for Tesco. • Changes in the economic condition can result in low international demands. • Differences in local tastes and preferences, lifestyle, business structures and relationships and customers’ outlook in International markets • Global competition from high-end market leaders like ASDA, Walmart • Euro-zone debt crisis and global political and economic reform may threaten Tesco’s finances and operations.

 

Value Chain Analysis for Tesco

It describes their internal processes such as product design, market segments, delivery system, and strategic after-sales support. It even includes warehousing, outbound logistics, and operations activities that reflect their desired output condition. Moreover, it includes support activities like technology, human resources, and infrastructure development decisions.
 

 

The value chain analysis of Tesco outlines strong customer satisfaction and loyalty, high product quality, differentiated product offerings, timely delivery, and improved customer benefits that illustrate the high value and strong financial stability that are primary for Tesco’s growth and survival (Phillips, 2003).

 

Product Position Analysis for Tesco

Developing an understanding of Tesco’s product positioning process and external perception to measure success is critical to creating strong customer perception and market identity relative to other competitors in the market.

• Organisational analysis: Evaluating by organisational analysis to accurately design services and capacities that offer unique experiences to their customers for sustainable competitive advantage in the long term.

• Initiatives for high performance: Facilitating initiatives for high performance at Tesco by communicating their unique selling proposition and compelling benefits for their customers (J. Leo, 2007).

 

2.2 Carry out an environmental audit for chosen organisations

Environmental auditing is a tool that includes a systematic and objective assessment of how smoothly a firm, the management, and types of equipment function in the context of environmental safety. The sole purpose of conducting this kind of audit is to provide safety to the surrounding environment as well as reduce the risks that might be generated for humanity. By including environmental auditing in its programme, Tesco has adopted its international responsibility and agreements on keeping the environment protected.

 

Environmental Audit Guidelines for Tesco’s Operations

The environment audit guidelines, regarding Tesco’s operations, by the PESTEL analysis process include:

• Efficient use of energy, water, fuel resources, and transport at the manufacturing terminals of Tesco

• Effective management of wastewater and other wastes generated in their production facilities

• Guidelines to prevent polluted emissions and hazardous substances at their facilities

• Measures to prevent land use contamination and groundwater pollution

• Effective prevention measures to control major incidents and their management at Tesco’s facilities

• Providing training and awareness programmes in the internal processes of Tesco to create environmental best practices (Kim, 1996)

 

Key Environmental Impacts Highlighted in Tesco’s Environmental Audit Report

• Political, Economic, and Social Impacts:

a. Impact on the land use pattern, e.g., agriculture, fishing, and unplanned exploitation of natural resources

b. Changes in local population levels due to increased immigration

c. Increase in uneven socioeconomic patterns due to income differences in local population levels

 

• Technological Impacts:

a. New ways of producing goods and services

b. New ways of distributing goods and services

c. New ways of communicating with target markets

 

• Environmental Impacts:

a. Exploration and production operations result in harmful atmospheric emissions such as carbon dioxide, carbon monoxide, methane, sulphur dioxide, hydrogen sulphide, etc.

b. Depletion of the ozone layer due to substances like halon

 

• Legal Impacts:

a. Regulates the formation and proceedings of cartels by firms

b. Prevents the abuse of a firm’s inherent market position at the national or local level

c. Prevents the intentional practice of collusion between firms and promotes healthy competition

d. Prevents price fixing or sudden price hikes by a firm’s independent decision (Slamming, 2013)

 

Implementation of Porter’s Five Forces Model for Environmental Audit in Tesco Plc

The Five Forces include:

1. Capacity of the supplier: This includes the number of suppliers for every essential input, the size and strength of the supplier, and the cost of switching from one to another.

2. Capacity of the buyer: It includes the number of potential buyers in the open market and the ultimate cost of switching them.

3. Healthy rivalry: The main source is the number and capacity of the surrounding competition, providing attractive services.

4. Risk from substitutes: Consumers tend to lean towards substitutes of a product if prices increase, reducing the power of suppliers.

5. Risk of a new entrant: New entrants are always attracted to profitable markets, which. gradually reduces profit margins (Roy, 2011).

 

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2.3 Assess the significance of stakeholder analysis when formulating a new strategy

 

Key Stakeholders for Tesco

 

• Shareholders: Shareholders play a critical role in Tesco’s capital inflow as they are major investors who set up and run the business. They contribute to the strategic decision-making process and play a crucial role in implementation. They are represented by a board of directors in Tesco.

• Employees: Tesco and its employees influence each other. The standard of work, health and safety concerns, and excellence are priority factors. This has a positive influence on employees and helps Tesco sustain market leadership.

• Suppliers: Suppliers are Tesco’s partners in the distribution network and are crucial to its operations. Core values are reflected in their supply chain management.

• Customers: Tesco offers customers value for money in terms of quality products and services, lower prices, high safety standards, and eco-friendly practices. Its R&D functions strive to improve core functions, ensuring satisfied and loyal customers.

• Local Communities: Tesco believes in giving back to society for inclusive development alongside business growth. It supports community development initiatives.

• Interest Groups: Tesco collaborates with interest groups such as the government, NGOs, business leaders, academic institutions, and the financial community to promote effective regulation and a positive market image (Freeman, 2010).

 

Significance of Stakeholder Analysis at Tesco

• Helps in building transparent and critical strategies to ensure customer satisfaction, product development, and a positive reputation

• Aids in building strong employee relationships and coordination by meeting expectations and needs

• Integrates corporate social responsibility to maintain a favourable image

• Facilitates better collaborations with strategic partners and suppliers, ensuring efficiency in supplies and distribution networks for seamless operations (W. Wessis, 2014)

 

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References

Freeman, Edward, R. (2010). Strategic management: A stakeholder approach.Cambridge University Press
Grieves (2006). Product Lifecycle Management. Tata McGraw-Hill Publishing Company Limited.
Hill, Charles (2009). Strategic Management Theory: An Integrated Approach. Cengage Learning.
J.Leo, Donald (2007). Engineering Analysis of Smart Material Systems. John Wiley & Sons,Inc
Kim, Unhee (1996). Environmental and Safety Auditing: Program strategies for Legal, International and Financial Issues. Library of Congress cataloging- in publication data
L.Draft, Richard (2008). The New Era of Management. Cengage Brain
Leontiades, James C (1987). Multinational Corporate Strategy: Planning for world markets. Lexignton Books.