Business Strategy
Business Strategy
cultural links. Most attention has been given to trade in goods because it has the most immediate
(or most obvious) consequences, but the capital, in itself, has played an even greater role. trading of
material goods.
In the current contemporary business scenario, business strategy is one of the major decision
making that helps the organization to compete in the current business scenario. Formation of
business strategy needs planning , time and other resources in order to implement within the
company (Analoui and Karami, 2009).
In today business scenario, strategy is one of the main factor that help the organisation compete and
survive the harsh market. The formation of a business strategy requires planning, time and resources
to be done. (Farhad Analoui, 2003)Tesco, as a 2nd largest global retail company as well as the biggest
retail organisation of United Kingdom, will be discuss in this report about their current business
strategy and analyse the problems Tesco faces and willsuggest future strategic plan.
Task 1:
1.1
Mission:
Mission is a common representation for the overall purpose of the organization, ideally suited to the
values and expectations of key stakeholders and related to the scope and boundaries of the
organization.
- “To be the champion for customers, helping them to enjoy a better quality of life and an
easier way of living” (Tesco, 2019)
- Develop new markets and countries.
Vision:
Vision or strategic intent is the future state of the organization. It is a desire around which a
strategist, perhaps a chief executive, can find ways to focus the attention and energy of the
members of the organization.
- Understand customers
- Responsible to communities
- Globalise service
Goal is general aim to mission which is the desire to achieve something. Objectives refers to step by
step plan to achieve goal.
- To be a successful retailer
- Become a “protagonist” in market business
Core competencies:
Core competencies are and advantage of a business which include resources and strategic,
specifically knowledge and technical capacities.
The core competencies of Tesco is it retail connection, both the goods and services and the sale
exclusive of certain products.
1.2
Strategic Planning is a process of making decision about on how to allocate man power and
resources base on the corporate mission and major goals, provide guidelines for company.
Though the successful of Tesco Company, there are also some time that the strategy plans making
problems. One of it is not understanding the environment as the company not pay attention in
business environment. Second is ignoring marketplace fact and thirdly is the competition for
customers and resource. Example of Tesco aim to satisfy customers and build up loyalty between
them, but in recently 2014, with the Clubcard that collect shopper data have been used in wrong
way as they drive everything in a deals, the slogan “Every little help” become an advertising tagline
and Tesco forget about customer value. As the former chief executive Terry Leahy said: “Focused
too much on what it isn’t, rather than remembering what it is” (Hickey, 2014)
The problem of planning strategy can be evaluate within either internal analysis, external analysis or
business level strategy. As example of internal analysis is identify strategic strength and weakness in
company’s operation such as how quantity and quality of resources and capacity. The company's
strengths lead to good performance in these specific areas, while the company's weaknesses turn
into poorer performance. Fail to identify this factor will affect the strategy planning process. (Charles
W. L. Hill, 2008)
There are several planning techniques such as BCG matrix, SPACE, PIMS, stakeholder mapping… and
this paragraph will list out two techniques suggested for Tesco:
BCG matrix: is a framework created by Boston Consulting Group, which is used to identify the
strategy position of business and it potential. In general purpose to understand which firm need
invest in and which one should divested.
Question Marks: indicate low market share but has potential high growth and incurring risks and
may cause loss to the company, therefor it need closer consideration. A newly produce just release
may be an example on Tesco.
Stars: Stars function as a high market share and high growth rate. It is a primary factors which need
invest large amount of money in order to make a decision about maintain high market share and
growth in market.
Cash cows: can be seen as the most profitable brand and should be exploit as much as it can. The
cash gained should invest into Stars for further development. It is expected on low growth in market
but high market share.
Dogs: hold low market share and slow market growth rate. Supposedly provide low or negative
profit. This is where the company should cut down the unnecessary costs. Example of products that
no longer make profit, the company need to remove it and replace a new one.
There are some advantage and also draw back of BCG matrix.
Advantages:
Disadvantage:
- Market growth and market shared are not the only factors of profitability.
- Denies the synergies effect on different units.
- “Market” does not define correctly, some business can be classified as cash cows or vice
versa.
- Other external factors does not list in as it may change the situation completely.
Profit impact of market strategy (PIMS): The PIMS is “a collection of statistically documented
experiences drawn from thousands of businesses, designed to help understand what kinds of
strategies work best in what kinds of business environments.” Specifically, policies and produces for
Tesco strategy.
PIMS strategiesinclude these important core metric below which Tesco will gain access and orientate
incoming strategy.
Task 2
2.1
SWOT analysis is a basic component of the process of strategic planning. It identify and analysis of
internal Strength and Weakness also as well external factors Opportunities and Threat of a company.
(Morden, 2007)
Tesco’s Strengths:
- Recognised trademark as a 2nd World’s largest retail company and 1st supermarket in UK.
- Various store location: more than 6800 stores in 14 countries.
- Diversity of service: Tesco Homeplus, Tesco Extra, Tesco Express and more.
Tesco’s Weakness:
- Low cost strategy which leading financial errors, reduce company’s profit margin compare to
local retailers.
- Efficient only on Europe, lack of diversify on another area.
- Clubcard backlash in January 2018 from customers.
- Reduced operating profits due to Brexit Referendum.
Tesco’s Opportunities:
Tesco’s Threats:
2.2
PESTEL framework provides a comprehensive list of influences on the possible success or failure of
particular strategies. PESTEL stand for Political, Economic, Social, Technological, Environmental and
Legal. (Gerry Johnson, 2008)
Political factors: highline the role of government such as tax rate, legislation, policies. As Tesco
provide workplace for a country workers so they receive authorize from government to operate.
Economic factors: refers to macro-economic like business cycles, exchange rate and economic
growth rates globally. These aspects will greatly impact on Tesco’s profit, the decline in market
nowadays would put Tesco in great risk.
Social factors: changing cultures and demographicswill be the important matters for every company.
Recognised the fact that society influence business activities, Tesco start provide non- food items for
consumers, adapting on changes and improve operation and supply chain management in order to
increase business performance.
Environmental factors: stand specifically for pollution and waste rate of company. Tesco aim to
minimize the wastes that is produced in order to save environment, commit that the company will
reduce carbon footprint by 50% by 2020. Also Tesco launched a campaign to reduce plastic usage
and motivate customers to use friendly- environment bag.
Legal factors: embraces legislatives constrains or changes, such as health and safety or restrictions
on company acquisition. Tesco is directly influenced by government legislatives and policies.
2.3
Stakeholder are the individuals or groups whose depend on a company to fulfil their own object and,
in turn, the organisation depends. Stakeholders can be the directors, investors, employees, supplier
or the government and the community from which the business draws its resources.
Stakeholder analysis is the process of measuring potential changes of a system which is relevant to
stakeholders. The analysis information is used to assess how the interests of those stakeholders
which should be addressed in to future plan, policy or other action of a company.
Stakeholder analysis is the key part stakeholder management, which is the important part of forming
new strategy, those are:
Task 3:
3.1
- Organic growth is the growth rate can be achieve by enhancing sales internally, seeks to
maximize growth from within.
- Growth by merger is one of the inorganic growth strategy, merge is a process of combine
two difference organisation into one entity.
- Acquisition also an inorganic growth which is the company purchase ownership of another
company.
- Strategic alliance is an act of cooperate between two or more company to work together for
common goals.
Substantive growth strategy:
- Related diversification: is a process of expands business which offer another produce lines
but similar to those the company currently offers.
- Unrelated diversification: a diversification that company add new or unrelated product lines
into market.
Retrenchment:
- Turnaround: is a strategy followed by the wrongly decision been made earlier and it need to
be undone, resolve financial crisis and recuperate its performance.
- Divestment: a strategy use to eliminate unrelated, unprofitable operations in order to
concentrate to services that had a competitive advantage.
- Liquidation:taken when the company reach the last stage of it life cycle. Close down business
and sells all of company assets and used them to pay creditors
3.2
Tesco Plc was found by Jack Cohen in 1919s. Tesco is one of the largest retailer in UK and also
second largest after Wal-Mart in term of sales. Tesco has been open up in 14 countries with more
than 6800 stores and several difference services like Tesco Express, Tesco Home-plus, Tesco Metro
etc. With advantage of being a strong brand and excellent commercial standing and having a large
amount of loyal customers, but facing various problems toward geographic diversification and the
effect of recent politic change like Brexit and the risk of increase unemployment rate.
Based on both advantage and disadvantage Tesco currently having, the future strategies for Tesco
would be:
- Market penetration: The UK market is the biggest market for Tesco, it has got many loyal
customers so that Tesco must try to make the best revenues in this market. It is important
that Tesco not to lose their brand loyalty to UK consumers. Keep in touch with trending
produce and provide more offer better produces from Tesco producer along with discount,
or bundles. Concentrate on what Tesco strongly in would be best choice so market
penetration strategy is important for future development of Tesco.
- Diversification: Tesco has opportunity to open up more store in new market and with new
produce. To do so, Tesco need to set their objective is to be successful in food as well as
non-food items.
- Strategy alliance: Tesco can join other companies through adopt the diversification strategy.
This should help Tesco get familiar with new marketplace quicker so that Tesco can expand
further strategies, develop Tesco’s unique products and increase revenue.
- Divestment: Having a large amount and various products, this strategy also important for
Tesco. Analyse what products/services is important and which are not doing well and pull it
out of it shelf. It is very important to do so in order to reduce company’s finance lose and
spend the same in the areas or products which are giving good return.
Task 4
References
Charles W. L. Hill, G. R. (2008). Essentials Of Strategic Management. USA: Cengage Learning .
Farhad Analoui, A. K. (2003). Strategic management in small and medium enterprises. London:
Thomson Learning.
Gerry Johnson, K. S. (2008). Exploring Corporate Strategy. England: Pearson Education Limited.
Costa, C. (2012). Evaluating Product Lines Using the BCG Matrix (VIDEO). Available at:
http://www.youtube.com/watch?v=Uuuxs9gO8C0