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Title:The report of Tesco strategic management
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Table of content
Executive summary 1
1、The current situation of industry competition 1
1.1 PESTEL Analysis of Tesco 1
(1) Political factors: 1
(2) Economic factors 1
(3) Social factors 1
(4) Technical factors 1
(5) Environmental factors 2
(6) Legal factors 2
1.2 Porter’s 5 Forces Analysis 2
（1）Threat of substitute products and services 2
(2) Threat of entry of new competitors 3
(3) Intensity of competitive rivalry 3
(4) Bargaining power of buyers 3
(5) Bargaining power of suppliers 3
1.3 Industry Life cycle of Tesco 4
2、Strategic management 4
2.1 Strategic group analysis 4
2.2 Value chain analysis 5
(1) Supply chain management 5
（2）Marketing methods 6
（3）Customer relationship 6
（4）Location selection strategy 6
2.3 VRIO analysis 6
2.4 SWOT analysis 7
(1) Strengths 7
(2) Weaknesses 7
(3) Opportunities 8
(4)Threats 8
2.5 Strategic evaluation criteria--SAF 8
(1) Suitability 8
(2) Feasibility 9
(3) Acceptability 9
Conclusion 9
Reference 10
Appendix………...………………………………………………………………………………...11
Executive summary执行摘要
乐购是一家总部设在英国的跨国食品零售公司，截至2018年，它在全球拥有6800多家商店。在利润和收入方面，继沃尔玛之后，乐购被视为第二大零售商。乐购以销售食品和非食品产品而闻名，如提供金融、移动、保险和硬件服务。为了更好地理解ESCO的多平台国际零售商，它可以通过一个研钵、波特五力、SWOT、SOFWAYS找到自己的策略。
Tesco is a headquartered multinational food retailing company in UK and until 2018it has Over 6,800Shops around the world. After Wal-Mart,in terms of profits and revenues， Tesco is viewed as the second largest retailer. Tesco is generally famous for selling food and non-food productssuch as providingfinance, mobile, insurance and hardware services. In order to understand better ofTesco’s multi-platform international retailer, itcan find its’ strategies by through a PESTLE, Porter’s five forces, SWOT, SOF ways.
1、The current situation of industry competition 行业竞争现状
1.1 Tesco的Pestel分析
1.1 PESTEL Analysis of TescoTesco的Pestel分析
(1) Political factors:政治因素：
在全球范围内，乐购已经在世界各地的商店开展业务，包括欧洲、美国和亚洲。因此，该公司的业绩受到这些国家的政治和立法条件以及欧盟的影响的严重影响。In a global context, Tesco is already operating in stores around the world, including in Europe, the United States and Asia. As a result, the company's performance has been severely affected by the political and legislative conditions in these countries, as well as the impact from the European Union.
(2) Economic factors经济因素
这将影响公司的需求、支出、价格和利润，因此乐购非常关注这些经济因素，这些经济因素对企业的业绩和营销组合有着深刻的影响，很大程度上超出了公司的控制范围。It will affect the company's demand, expenditure, price and profit, so it is highly concerned by Tesco.These economic factors have a profound impact on performance and the marketing mix of enterprises, which are largely beyond the control of the company.
(3) Social factors社会因素
文化中有许多社会变化，如顾客的购物方式发生了变化，顾客更喜欢“一站式”和“批量式”的购物模式。因此，Fortesco需要增加非食品类商品的销售数量，另外，特易购专注于自身品牌共享的业务组合，改善供应链等运营，大大降低了公司的成本。There are many social changes in culture, like the shopping mode of customers has changed，customers prefer "one-stop" and "bulk" shopping model. So forTesco, they need to increase the number of non-food goods for sale.In addition, Tesco focus on its own-brand Shared business portfolio, improved supply chain and other operations has significantly reduced the company's costs.
(4) Technical factors技术因素
Capon(2016) mentioned that the emergence of new technology increases customer satisfaction makes service more personalized and shopping more convenient.Throughinformation technology, loyalty programs can discourage their customers from switching over to its competitors.
(5) Environmental factors
The office for National Statistics (2017) shows thatmore and more people realize the importance of environmental protection, they choose touse reusable bags from 71 to 74%. Tesco always try to reduce the overall cost.
(6) Legal factors
Since the government finances a huge budget deficit, ithas raisedthe VAT to 20%. Itaffects the Tesco’s non-food sectors selling.
According to PESTEL analysis, Tesco has been thriving in the past few years despite the economic downturn in the UK and the world，its food industry continues to take the lead position in market share. With more than one hundred years of business experience, Tesco has won great benefits and high respect from loyal customers. This has helped Tesco remain positive and profitable even during its difficult times.
1.2 Porter’s 5 Forces Analysis
（1）Threat of substitute products and services
John(2015) mentioned thatthe bargaining power of suppliers reflects the ability of suppliers, which will be affected by major supermarket chains, because large supermarkets are afraid of losing their business. So it reinforces the leadership of chains such as Tesco and Asda, which can negotiate better promotional prices with suppliers than smaller individual chains can match (Financial Times, 2017).
(2) Threat of entry of new competitors
Lynch(2016) said that due to the huge fixed costs and highly developed supply chain it is difficult for new entrants to raise sufficient funds. This supports the idea of huge investments through large chains, such as Tesco’s advanced checkout technology and inventory management systems, which affect new entrants and incumbents.In addition, by Tesco and Asda, the implementation of other obstacles, such as economies of scale and product differentiation (in terms of providing a product or service, its perceived value higher than the competition, reflected in its positive product development, promotion and better distribution of operational strategies.#p#分页标题#e#
(3) Intensity of competitive rivalry
This highly competitive market to increase the speed of development level, causing such a situation: the British food store grocery retailers have to innovate to maintain and build market share, these innovations can see in the development of a series of trading patterns, the main changes in consumer behavior. The response of dominant market leaders has been to refocus on price and value while strengthening the value-added elements of their services.
(4) Bargaining power of buyers
It is rather higher. Meeting customer needs, customizing services, ensuring lower prices, better choices and regular in-store promotions are the basis for brand stores like tesco to control and retain their customers. Lynch(2016) has mentioned the more standardized or undifferentiated the product, the lower the conversion cost, so the buyer has more bargaining power.
(5) Bargaining power of suppliers
Stahl&Grigsby(2012) mentioned that the bargaining power of suppliers reflects the ability of suppliers, which will be affected by major supermarket chains, because large supermarkets are afraid of losing their business. So it reinforces the leadership of chains such as Tesco and Asda, which can negotiate better promotional prices with suppliers than smaller individual chains.
1.3 Industry Life cycle of TESCO
The industry life cycle is used to analyze the development stage of the industry, which can be divided into initial stage, growth stage, shakeout, maturity stage and recession stage.
Initial stage, growth stage, shakeout, maturity, recession
For UK’s retail industry, it is now in its maturing to a recession process. The retail sector has been shrinking since 2010, as costs have risen and wages have risen, as well as e-commerce competition, which predicts 910,000 jobs will be lost by 2025. The BRC said the number of retail outlets in the UK had fallen by about 40,000 so far in 2010, from a peak of 3.2 million in 2008 to 3 million in 2014, while 15 per cent of online sales have pushed retailers down further.
Asda, together with Tesco,Sainsbury's and Morrisons, are the UK's four leading supermarkets. The company was acquired by wal-mart. And Tesco,Sainsbury's and Morrisons have all had layoffs in the past few years.
2、Strategic management
2.1 Strategic group analysis
The analysis of strategic groups in the industry is to divide enterprises into different strategic groups according to the differences in strategic positions of enterprises in the industry. The analysis of strategic groups in the industry is to divide enterprises into different strategic groups according to the differences of strategic positions of enterprises in the industry, and to analyze the relationships between groups and enterprises within the group, so as to further understand the industry and its competitive situation.
In retail market, the requirement for the formation of a strategic groupfor companies must at least satisfy these characteristics during the procedure of Strategic Group Analysis (SGA), including product diversity or geographic coverage. Following are the set of characteristics, which are satisfied by Tesco, ASDA, Sainsbury's and Morrison, so they can be classified as part of same strategic group.
April 30, 2018, Britain's grocery market will be reordered after a major retail earthquake.Sainsbury's and Asda's merger will overtake Tesco as the UK's biggest supermarket. Earlier this month, Tesco completed its acquisition of food wholesaler Booker Group Plc (bok.l) in a move seen as an inflection point in the increasingly competitive British grocery industry.
2.2 Value chain analysis
(1) Supply chain management
By adopting centralized purchasing strategy, Tesco can not only generate economies of scale, but also increase the space for price negotiation.In logistics, professional logistics companies are entrusted to implement third-party logistics, which reduces the human cost, inventory and capital backlog.In addition, the selection of suppliers is extremely strict, and good credit must be required. Johnson&Scholes(2012) said supply chain management is one of the key factors for the success of chain supermarkets.
（2）Marketing methods
Tesco deeply understands that marketing is the most important activity in the retail industry. The purpose of marketing is to understand what consumers need，how to achieve the final profit and promote consumers to buy goods marketing methods is another major success factor.
（3）Customer relationship
Tesco firmly believe that good service can increase the value of a commodity in the consumers' mind, also can drive the word-of-mouth to attract new customers, for large supermarket industry competition is intense, product difference, the service is the focus of the enterprise differentiation.
（4）Location selection strategy
Wit&Meyer(2016) said that location right plays an important influence in merchandise sales, decided to the size of the customers and sales of high and low, a good location can often be store profits. Tesco attaches great importance to this. It has been proved that choosing the right position has helped Tesco create a high turnover for many years.
2.3 VRIO analysis
Explanation: Tesco's marketing activity ability, purchasing ability and logistics basic ability are its competitive advantages. Among them, logistics basic ability is its core competitiveness.
2.4 SWOT analysis
(1) Strengths
One of Tesco’s main strengths is that it has been Britain's biggest supermarket chain for years. Despite rivals such as ASDA and Sainsbury's, Tesco still leads the UK in market share profits.Another advantage of Tesco is its financial strength, and its financial support is absolutely admirable. Tesco's money comes from a mix of investors and profits, which encourages it to invest and return on investment.Tesco's innovative approach to improving shopping's customer experience and its foray into finance and insurance has also taken advantage of its brand image.
(2) Weaknesses
Watson &Reossmer (2017) mentioned that one of Tesco’s main weaknesses is that it remains highly dependent on the UK market. Tesco has a big capital expenditure plan, largely because of the huge investment it has made in new stores. Because of Tesco’s aggressive expansion, there is less cash to do anything else.
(3) Opportunities
Increasing international competition has forced Tesco to become a hypermarket, which has had a positive impact on its growth in the UK. Tesco has formed strategic partnerships with American supermarkets, such as Safeway’s use of tesco.com's home shopping model in the us market, although the result has been a dead end to its plans. Tesco could rethink its strategy and win some profits from the American market. To develop mass retail services, Tesco’s latest investment strategy focuses on telecoms while continuing to invest in the banking sector using the Tesco brand.
(4)Threats
Threats are everywhere, especially in retail, and Tesco is not immune. Now Tesco’s biggest and most dire threat is competition. The costs of international growth are high. Entering a new market with a new brand requires a lot of investment and marketing, land prices (which are currently low), and additional distribution and operating costs.
It can be summarized the abridged SWOT analysis of Tesco in the following illustration:
2.5 Strategic evaluation criteria--SAF
(1) Suitability
To assess the suitability of the proposed strategy to the organizational situation identified in the strategic analysis, it can maintain or improve the competitive position of the organization.
Tesco can now use the advantages of the organization or the opportunities provided by the environment to formulate feasible strategic plans, and find the resource disadvantages or environmental threats in the strategic analysis. For example, chain operation is one of the ways for Tesco's success. In the UK, at least one pound is spent in Tesco's chain stores for every eight pounds the British spend. About 60% of the British public comes to Tesco at least once a month.Tesco has also implemented a global strategy to address the limitations and saturation of the UK domestic market. Only the realization of international operation can achieve the sustained growth of sales.
(2) Feasibility
It is used to analyze whether the strategy can be successfully implemented, that is, the sustainability of the organization's resources.
Tesco's strategy has strong financial support, and its financial support is absolutely admirable.Tesco's financial support comes from a mix of investors and profits, which encourages it to invest and return on investment.In addition, it also has the ability to meet the required level of operation (such as quality level, service level), as well as constantly updated technical support.#p#分页标题#e#
(3) Acceptability
Over the past few years, Tesco’s profits in Europe, Asia and Ireland have grown by 78 per cent, with 38 per cent coming from its own label.Tesco is now as the Britain's leading online storewith more than 270 stores across the country, accounting for 96 per cent of the UK's online business.Tesco's online services have been used by more than a million households across the UK, giving the company a strong platform for further revenue channels.
Conclusion
From the above analysis, it can be summarized that as the headquartered multinational food retailing company, within the highly turbulent retail segment Tesco continues to keep its leadership position.But the retail industry, it is now in its maturing to a recession process, so that if Tesco want further success, it is important for them to pursue both differentiation strategies such as supply chain management，marketing methods, customer relationship and location selection strategy. Besides, Tescostill needs tofull use of the advantages of the organization or the opportunities provided by the environment to formulate feasible strategic plans, and find the resource disadvantages or environmental threats in the strategic analysis.The Tesco core competencies have been seen to be aligned with the business environment and it viewed as a positive future outlook for the company.
Reference
1. CaponC.(2016).StrategySemesters1&2. ModuleInformation. StaffordshireUniversityBusinessSchool.17-21.
2. Euromonitor, (2017). Online available fromhttp://www.euromonitor.com/
3. Financial Times.(2017). Tesco,Sainsbury,Asda,Safeway,&Morrison
4. JohnsonG.&ScholesK.(2012). ExploringCorporateStrategy,London, Vol6,PrenticeHall/FT.
5. JohnL.(2015).StrategicManagement–awareness&change. London,Vol2,Chapman&Hall. 24-53.
6. LynchR.(2016). CorporateStrategy. London, Vol2,PrenticeHall/FT, 188-194.
7. StahlM.&GrigsbyD.(2012). StrategicManagement-totalquality&Globalcompetition,London, Vol1, Blackwell. 480.
8. Tesco Group, （2018）Annual Report and Financial Statement PLC, online available from www.Tesco.com
9. Watson, G. &Reossmer, S.C. (2017). Developing skills for business leadership. London: Chartered Institute of Personnel and Development, 85-90.
10. WitB.&MeyerR.(2016). Strategy:process,content,context:aninternationalperspective,Vol2,Paperback
Appendix
1、 Tesco's main business division
Appendix
2、Tesco’s seven strategies
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