Running Head: TESCO BUSINESS PLAN

TESCO BUSINESS PLAN

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Executive Summary
Tesco PLC is a British company that was established by Jack Cohen in 1919 in East End,

London. The company has its headquarters in Cheshunt, Hertfordshire, United Kingdom.

Initially, the company specialized in selling groceries but with time it branched into retail of

clothes, electronics, furniture, software, telecom and financial services. Tesco is one of the

biggest food retail companies in the world, operating over 6,000 stores internally and

internationally (Tesco, 2014). Tesco serves millions of customers every day. Outside the United

Kingdom, Tesco operates in Ireland, India, Malaysia, China, Poland, Czech Republic, Thailand,

South Korea, and the United States of America. According to Tesco’s annual report, the company

is the leader in grocery retail business in the United Kingdom. The grocery stores are the biggest

and most profitable division of Tesco PLC. The grocery division sells over 40,000 different food

products (Tesco, 2014).

The proposed strategies for Tesco U.K includes: increasing revenues to £65,000 million

by 2019; increasing trading profits to £4,000 million by 2019; increasing the number of Tesco

grocery stores in the U.K. from 3,378 to 4,100 in 2015; upgrading the online shopping website to

a more user-friendly and secure site; increasing the number of point of sale terminals in order to

increase the speed of transactions in the grocery stores; increasing their market share by

acquiring smaller grocery stores within the U.K. The proposed strategies are economically

feasible and fall within the vision, mission and core values of Tesco. It is recommended that

Tesco implements the laid out business plan so as to accrue optimal output.
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Tesco PLC and the Grocery Retail Business

Tesco’s grocery business is the largest division of the Group. The grocery retail business

generates more revenue than all other branches. The company offers a wide variety of food

products to customers (PremierFoods, 2014). Some of the products offered include fruits, baked

items, frozen food, beverages, baby food, pet food, milk products and household items. Tesco

Grocery serves both walk-in customers and online shoppers (Tesco, 2014). Online shoppers can

buy from the website and have the goods delivered to their homes or take the delivery from

selected collection points within the U.K.

Tesco’s Vision and Mission

Tesco U.K’s mission is to create value for their customers and to earn their lifetime

loyalty. Tesco’s vision is to gain a valuable position and trust among its customers, community

employees and shareholders. The company wants to grow into an innovative company offering

the best service to customers. Tesco aims at becoming the leading grocery retail company in the

world with strong customer loyalty (Tesco, 2014). The company aims at expanding its business

globally and offering new opportunities to the communities it serves. The firm aims at creating

new ideas and strategies to increase revenue and profit. It seeks to improve the range and quality

of its core products and positioning itself as the leading retail company in the U.K. Tesco

groceries also aims at offering stable and competitive prices to customers. Tesco aims to be an

environmentally sustainable company by 2050. The core values of the company are exceptional

customer service and establishing brand value. The company also focuses on using its position to

help the community.

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How Tesco Treats Stakeholders

Tesco delivers quality customer service to all consumers. The company’s main concern is

the satisfaction of customers and as such, customer feedback is given ample consideration. Tesco

delivers products to buyers on time. Tesco has a strong bond with its suppliers and distributors

ensuring efficient operational flow. Distributors and suppliers can give feedback through Tesco’s

Producer Clubs. Regular meetings with stakeholders help to strengthen bonds and increase trust.

Tesco regards all stakeholders highly and is committed to customers regardless of their country

of operation. The company offers shareholders with a high dividend ratio (Tesco, 2014). It also

engages in seminars and conferences with shareholders to comprehend their views on the

company’s corporate strategy.

Employees are adequately remunerated and incentives are offered to them for exceptional

service. The firm engages staff though annual viewpoint surveys, face-to-face briefings and store

forums. Tesco has maintained a healthy and safe working environment for employees in all

sectors of operation. The firm has initiated several projects to help the community, offering

educational grants to schools and disability centers. Tesco U.K offers employment to the local

community and helps in the regeneration of stalled projects (PremierFoods, 2014). Tesco is

accountable to all government regulation agencies and meets all the set standards of operation.

The company also exchanges valuable information with the government in order to improve

public policies.

SWOT Analysis

SWOT Analysis refers to the structured planning technique used in evaluating strengths,

weaknesses, opportunities and threats in a business venture or project. Strengths and weaknesses
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are usually internal t an organization; whereas, opportunities and threats relate to the external

factors (Nickels, McHugh & McHugh, 2011).

External Environment

 Political and legislative factors: Government employment regulations within the United

Kingdom demand that Tesco groceries provides jobs from highly skilled and highly

paying jobs to low skill and locally-based jobs. Tesco also has to meet the requirements

of demographics segments such as parents, students and senior citizens. The enterprise

also has an employment quota for disabled people. The Code of Practice regulates aspects

such as demanding payment from suppliers and altering prices without notice are revered

by the organization. Tesco is expected to provide politically correct prices in line with

pricing policies. The legislation regarding advertising fatty foods has been implemented

by the organization (Parliament, 2014).

 Economic factors: Economic factors influence demand, costs and profits (Ireland,

Hoskisson & Hitt, 2008). High unemployment rates reduce purchasing power and

consequently the demand for grocery decreases. Economic factors are beyond Tesco’s

control but the company is keen to market itself and ensure consumer retention amidst

any adverse economic conditions that may affect business operations such as soaring

inflation rates (Economics, 2014).

 Environment factors. Environmental stakeholders require companies to be

environmentally sustainable and to offer more eco-friendly services. Tesco aims at

supplying zero-carbon products and reducing wastage from its retail stores. Tesco has

plans to avert environmental pollution from its stores to zero by 2050.

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 Social-cultural factors: Tesco has to evaluate the influence of customer culture within the

U.K. Customers have shifted from single purchases to bulk purchases in order to save

money. Tesco has begun offering higher packages for food products that were previously

not sold in bulk (Economics, 2014). Population factors such as the increasing percentage

of elderly citizens and the increase in the number of women workers have prompted

Tesco to offer added-value services and products to consumers in the U.K. Customers

have increased their health awareness, causing a shift towards food product with

cholesterol. Tesco has complied with all socio-cultural changes appropriately.

 Technological factors: Technological advancements have changed the way Tesco

operates. Consumers are shifting towards online shopping and Tesco has improved its

website to comply with this trend. Tesco has introduced various electronic points of sale

terminals in all grocery stores in the U.K. The implementation of Electronic Funds

Transfer Systems has improved the customer buying experience. Tesco grocery stores

also utilize wireless devices, electronic shelf labelling, and intelligent scales. Many

people in the U.K. especially young shoppers prefer to shop online. The Tesco website

has a provision for online shopping and delivery.

Opportunities

Tesco has entered strategic partnerships with different suppliers to provide high-quality

groceries. Rapid advancement in technology has led to an increase in the number of people

shopping online. The online shopping arena is a growing market segment that Tesco is

exploiting. Tesco has opened new grocery stores or added more stores in various cities across the

U.K. By opening more stores, it is in a position to serve more customers every day. The
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increasing population and the increased purchasing power of the U.K is also an opportunity that

Tesco can exploit (Sharda, Aronson & King, 2008).

Threats

Tesco groceries faces competition from various retail companies in the U.K. Its main

competitors include Asda, Sainsbury’s, Morrison’s and Co-op. Competitor mergers and trade

agreements such as Walmart with Asda, put pressure on Tesco’s market share. New entrants into

the market provide lower prices; thus eating into Tesco’s market share. The fluctuating taxes

adversely influence Tesco’s financial performance. In addition, increasing costs of raw materials

lead to increase in operating expenditure, higher prices for consumers and reduced profits.

Internal Environment

Strengths

Tesco is the largest grocery retail firm in the U.K. Currently; Tesco holds a 30.7% market

share of the grocery market in U.K (PremierFoods, 2014). The company has the highest number

of online grocery shoppers in the U.K. The company’s brand is associated with reliability, value

for money and superior quality. The financial meltdown did not adversely affect Tesco groceries

as evidenced by the growth in all levels of business. The revenues for Tesco groceries grow each

year. The continued growth is a proof of Tesco grocery’s strategic competence. Tesco’s flexibility

is its other strength. Tesco has been able to improve its brand by a carefully planned packing.

The branding strategy has become inimitable by competitors (Tesco, 2014).

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Figure 1: U.K. Retail Market Share. Source: Premier Foods

The company offers exceptional customer service to all buyers. Walk-in customers are

attended to with professionalism, friendliness and urgency from the moment they walk into the

store. Online shoppers have their purchases delivered punctually. Tesco has specialized customer

services to carter for every individual customer. The company has come up with creative ways of

improving the shopping experience in stores (KPMG, 2014). Tesco has a wide network of

distributors and suppliers; therefore, increasing the variety of goods in the grocery stores. A

broad variety of grocery meets the assorted tastes of consumers. The company has built a strong

loyal customer base due to its loyalty card program that offers discounts and redeemable points

to customers who shop regularly. Tesco grocery has been able to offer groceries in line with the

market demands. Tesco’s online presence in social media has increased the information flow to

customers (Prospects, 2014).

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Weaknesses

Increasing Tesco’s geographical spread makes it difficult for the company to focus on a

specific market or demographic. High fuel costs lead to increased transportation costs. High

transport costs increase Tesco’s operating expenses and reduce profit. Due to Tesco’s rapid

expansion internationally, the groceries arm of the company in the U.K has little financial

resources for expansion. The broad assortment of customers means that some services could

displease some people, causing customer defections (KPMG, 2014).

Areas of major concern

Business Stream Level

Market penetration- Tesco will establish new grocery stores in unexploited areas such as North

Scotland, parts of Northern Ireland and North West England. Tesco also plans to revive large

grocery stores in order to increase market share in the U.K. Tesco groceries has plans for the

acquisition of independent family businesses in order to increase the division’s profits and

increase its market share (Copestake, 2012).

Product development- Tesco groceries plans to increase customized branding for new goods.

The company will increase the variety of products available in stores in order to give customers a

wider product range to choose from.

Market development- Tesco plans to invest £150 in the online business to improve the shopping

and user experience (Economics, 2014). Improving the online business will increase online

purchases; thus, increasing the company’s grocery market share. The company will have the

capacity to exploit new markets.

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Diversification- Tesco grocery plans to take over Giraffe, a consumer business with a chain of

restaurants in the U.K. The company plans to invest as a shareholder in Euphorium (a bakery)

and Harris and Hoole (a coffee shop). Tesco aims at providing new grocery products for the

existing market.

Expansion Strategies

 Increasing number of Tesco grocery stores in the U.K. from 3,378 to 4,100 in 2015.

 Expanding the online store to include an eclectic range of products.

 Increasing market share by acquiring smaller grocery stores within the U.K.

 Setting up more stores in unexplored regions especially in Northern Ireland, Wales and

Scotland.

 Customer feedback will be gathered though a support desk and from social media

interactions (Chesbrough & Appleyard, 2007).

Implementation

Tesco will require huge financial resources to fulfill the proposed strategies. The

strategies that will need the highest investment are: building new grocery stores; paying

employees to work in the new stores; acquiring smaller retail stores in areas that Tesco does not

serve and increasing the number of point of sale terminals in all stores. Tesco should form a team

to evaluate the progress of implementing the strategies (Reece, 2014).

Evaluation will be done in the following ways:

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Goal based Evaluation: Monitoring the implementation of the objectives. The company will

constantly evaluate which goals have been met, which goals are nearly completed and which

ones have failed. In this regard, the company will be able to know which goals need massive

funds and which goals do not need funding (Baye & Beil, 2006). This will go a long way in

avoiding wastage of funds and resources since completed goals will give room for the

uncompleted goals to be completed also.

Outcome based evaluation: When implementing the strategies, the company will evaluate the

outcome of the implemented goal (Zack, 2009). This is extremely important since it will help the

company to know whether the intended goal has been achieved. This acts as the scorecard since

it will help the company’s executives know whether their strategies were a success or an exercise

in futility.

Regular reports: Setting up a monitoring team that will submit reports on a regular basis to the

management. Regular reports will play an integral role since it will help the monitoring team to

keep track of their progress. This is important since it will help in immediate realization of any

laxity in the strategies’ implementation (Zack, 2009).

Meetings: Having regular meeting between the teams working on implementing the strategy

(Barney & Hesterly, 2009). This is important since the teams will be updating one another on the

progress of the strategies’ implementation every time they meet. Updating one another will help

in identifying areas that have problems and need immediate attention. Consequently, regular

meeting and updates of the progress will play an integral role in assessing which strategy is

doing well; thus, should be given minimal time and resources, so as to give room for the other

strategies which are performing dismally.

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Recommendation and Conclusion

The business strategy proposed is a thorough analysis of the internal strengths,

weaknesses, opportunities available and threats posed by external factors. All the necessary

factors have been given significant consideration. Tesco groceries should implement the business

strategy in its entirety. The strategy will increase the market share of Tesco, increase customer

satisfaction, increase profits and increase revenues. The strategies are in line with Tesco’s

mission, vision and core values.

Since Tesco has already captured the retailing industry in the UK, it should lay more

emphasis in increasing its international presence. For it to be a world leader, it should focus on

capturing more markets in several other countries. Tesco has the capability of developing

effective strategies that can easily penetrate other markets. Through implementation of the

market development strategy, Tesco has the capability to easily grow and achieve high revenue.

These new markets acts as high opportunity markets for the company, and by Tesco taking part

in international alliances, it stands a high chance of being a world leader (Tesco, 2014).

In order to acquire the novel markets, Tesco needs to keep the prices of its goods lower

than its competitors. This is important since more customers will be attracted to buy groceries

from Tesco’s stores and not from its competitors’. In Tesco’s strategy of capturing international

markets, it can take advantage of its large scale model of operations to maintain low prices

(Economics, 2014). Additionally, since it is strong and large brand, Tesco can easily catch the

attention of new customers in the international markets and make numerous sales.
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Tesco Company became extremely geared in the year 2009 (Tesco, 2014). This implies

that they face risks and that they are paying exceptionally high finance costs and this is reducing

its profits. Therefore, it is imperative for Tesco to minimize its gearing level by minimizing the

debts it has a result of borrowing. In order to continue succeeding as a leading retail business in

the U.K, it is recommended that Tesco grocery implements the proposed business strategy.

References

Barney, J. B. & Hesterly, W. S. (2009). Strategic Management and Competitive Advantage. New

York: Pearson Education.

Baye, M. & Beil, R. O.(2006). Manegerial Economics and Business Strategy. 5th ed. New York:
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McGraw-Hill.

Chesbrough, H. W. & Appleyard, M. M. (2007). Open Innovation and Strategy. New York:

Routledge.

Copestake, J. (2012). The Future of UK Retail from 2013. Retail Week.

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Ireland, D., Hoskisson, R. & Hitt, M. (2008). Understanding Business Strategy: Concepts and

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http://www.prospects.ac.uk

Reece, D. J. (2014). Business Model, Business Strategy and Innovation. New York: Elsevier
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Sharda, R., Aronson, J. E. & King, D. N. (2008). Business Intelligence: A Managerial Approach.

London: Pearson Prentice Hall.

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