Introduction Of Strategic Management
In the modern era, there exist high amount of competition in the market place that essentially makes an impact over the performance and competency of the firm. Moreover, these scenarios also make an impact over the profit margin and market share and hence management has to develop sound strategy in this regard so that they able to sustain in market for longer along with attainment of objectives (French, 2009). For this, strategic management of all activities is required so that equilibrium can be maintained in business practice and overall corporate goals can be attained. With this scenario, strategic management can be understands as a procedure that supports in evaluating and analyzing the external as well internal environment in order to gain better and favorable results out of it (Groucutt, 2010). Present report is prepared in order to gain better knowledge of strategic management in practical aspects and writing an assignment on it. For this, Tesco is being taken into account as it is being viewed that they attained success in their market place and certainly conquer higher market share.
Environmental And Competitive Analysis
Tesco Plc is a multinational grocery retail company of English with its head office in Hertfordshire, England, United Kingdom. Company stands on second position throughout the globe in terms of profit and is the second largest retailer when being calculated with context to revenue. Moreover, they possess highest market share in that stood around 30% of retail market. Tesco has large amount of satisfied customer that essentially supports them in gaining an edge over their rivals (Johnson, Whittington and Scholes, 2011). Also they offer different sort of tailed services in their operations from which better attaining of the customer satisfaction is being done.
Pestle Analysis For Environmental Competitive
With a motive to conduct environment analysis of Tesco, Pestle analysis is being taken into account. These are as follows
- Economical Factors: Economical factors possess high amount of influence over the operations of Tesco because profit margin, demand of products, price employment rate and other related attribute in certainly depends upon economical factors only (Brown, 2003). This hampers the growth of company also due to change in foreign exchange rate, inflation, economical downturn in country and certain others.
- Social Factors: It involves influences and affects from demographic changes and difference in consumer behavior that persist at different counties. Tesco consider it in an effective manner due to their nature of operations (Hooley, Piercy and Nicoulaud, 2012). They obtain ideas about social changes in order to offer better products and services to their target audiences.
- echnological Factors: They utilize different types of technological advancements in their operation in order to gain high customer satisfaction. They involve technological like electronic shelf labeling, electronic fund transfer system, Radio Frequency Identification, etc (Johnson and et. al. 2012). This offers convenience to customer and aids them in making their shopping experiences more comfortable and convenient.
- Legal Factors: Performance of Tesco is affected by the legal factors and hence they consider different Act in this regard in order to ensure sustainable development. They are being enforced by Food Retailing Commission for standard pricing of products and they conduct the same for better results (McGee and et al., 2010).
- Environmental Factors: Company is concerned for social responsibility and entails necessary steps in this regard so that better development of society can be done. They check over their wastage and its dumping in order to manage the environmental damage.
With this discussion, it can be state that Tesco certainly possess a sound operational activity and also they able to gain high amount of support from different external factors also. They perform their duties and roles on time and in better manner from which they able to gain an edge over their rivals in different market (Morrow, Hitt and Holcomb, 2007). This strategy of Tesco is much favorable and will essentially support them in gaining continuous development over a period of time. However they can indulge it more of CSR activity for the purpose of gaining support from society and also to attain their objectives in better manner.
Porter’s Five Forces Analysis
- Intensity of Competitive Rivalry (High): There exists high competitive rivalry in the retail sector of. This is so because there are wide ranges of players available in this sector that offer more or less standard products to similar target audience.
- Bargain power of Suppliers (Low): Due to high availability of suppliers to retail organization, therefore supplier possesses low bargaining power. Also, switching cost is also not high between suppliers for Tesco and hence this is a beneficial point to company (Porter, 2008).
- Bargaining Power of Customers (High): Buyer possess different options for purchasing of product and this situations offers high bargaining power to the. Also, there exist low switching cost, highly undifferentiated products and various other related factors which also aids in this regard.
- Threat of New Entrants (Low):retail market is highly dominant by few of the giant firm only and this situations leads to low motivation for new entrants in this sector. Also, high economies of scale restrict new players in this regard.
- Threat of Substitutes (Low): This force possess low influence as local stores are more expensive and also company operates their own on local stores (Rumelt, 2009).
With this, it can be state that company is enjoying a significant place in retail industry and also able to gain high amount of efficiency in their operations. But with the rise in rivalry, Tesco possessing threats and hence to manage it, they can incorporate different sort of differentiation or diversification steps so that they able to attain high amount of efficiency. However, they belong to successful strategic group in which they compete with organizations that have same business format. These include Sainsbury, ASDA, Morison’s, etc. Company certainly possess high market share and also they incorporate sound strategies in their operations from why they able to gain long term business (Murthy, Atrens and Eccleston, 2002). But there involve certain threats in their operations such as high rivalry, low profit margin, small room for growth, change in taste and preference of consumers, acquisition of customer by rivals, low customer situation and various others.
Swot Internal Analysis
Strength: Tesco possess high market present which essentially aids them in attracting large pool of customer on their side. Also they have high brand awareness through which they enjoy more of response from customer in their operational market. Apart from this, they have high performance in retail sector that essentially makes them different from other. They also possess effective customer handling approach by the use of technology and their skilled manpower from which they able to gain high customer satisfaction and loyalty (Witcher and Chau, 2010). In addition to this, they also offer products and services to their customers from their online stores and this boost their market share in an effective manner.
Weakness: Tesco’s major operation is confined till market only and this is one of the biggest setbacks which company possess. Also, series of acquisition and reduction of debt in another matter of concern for Tesco (Mutch, 2008). They also has weak inventory turnover in their operations from which overall operating cost of company increases substantially. Also, issues of poaching and employee hiring by their rival company is also increasing that possess weakness for Tesco. They have to reduce it in order to gain favorable return from their business objectives.
Opportunities: Moreover, rising in tend of online shopping in different region of word essentially aids Tesco in initiating their operations in other part of country also with online presence only. Also, rise in demand of quality and nutritional food is another market on which Tesco can concentrate upon in order to further boost their market share and profitability (Trutnevyte and et al., 2012). Also they can indulge more of cosmetic and beauty products in their portfolio for the purpose of gaining high amount of response from their target markets. Further, emerging market is another level at which Tesco can focus upon in order to raise their operational fields. This will essentially aids them in boosting their business activity (Ingram, 2012).
Threats: Competition from retail giants like Wall-mart, Sainsbury and other related is one of the key threats to Tesco. Also, if they expend in the international market, then they possess a threat of low response from target customer in that region. This will essentially lead to high amount of losses to company. Also, economic downturn is another factor that may affect the profitability and success of the company.
With this analysis, it can be state that Tesco possess different set of strength in their operations from which they able to gain high amount of competency in their operational market and also able to manage their operations in much effective manner. Their approach towards technology certainly helps them in gaining high customer satisfaction and it also aids them in gaining an edge over their rivals (Price, 2009). They emphasis more over performance in their culture and this supports them in gaining high efficiency from which better meeting with the diverse need of customers can be done by them. This has positive impact over their operations and also aids them in making their strategy more competent.
7s Model Of Strategic Management
In order to further evaluate the key commence and to identify the relationship between their culture and strategic capabilities, 7S Model in being taken into account. These are as follows:
Strategy: They incorporated the strategy of offering high quality service and products to their clients with the help of their physical and online store so that they able to survive in market in much effective manner. This essentially aids them in gaining high amount of resources and offers strategic capabilities in their operations (Whittington, 2006).
Structure: They possess hierarchical structure in which different types of layer of authority is there. Under this different department are being created so that better distribution of work can be there and also sound management can be attained. This essentially supports Tesco in meting out with their objectives in much effective manner.
Systems: Every employee are being demonstrated with their roles and duties that to be performed on daily basis so that mismanagement in the operations can be reduced ad better result can be drawn from it (Robertson, 2008). With this, Tesco able to able to offer better services to their clients.
Shared Values: This reflects core value of the company that includes fair employment opportunities, no discrimination, favorable HR policies and several others. With this, they able to develop a culture that supports in offering effective working environment to employee. This aids tem in gaining strategic capabilities.
Style: Apart from this, managers at Tesco follow different types of leadership style in order to manage their workforce in an efficient manner and also to gain high amount of productivity from their side (Kapferer, 2008). They follow participative style at tactical level in order to gain different sort of ideas and support from their employees. Moreover, autocratic leadership style is being implemented at operational level so that better working can be conduct at this stage.
Staff: Tesco recruits highly skilled and qualified employees in the workforce so that they able to perform with their full capacity in order to ensure success of the company and also to achieve organizational goals in a set time frame. This policy of company essentially supports them in developing work oriented culture (Kang, 2005).
Skills: Apart from this, Tesco also focus upon skills and competency of their employee so that they can offer better service to their customers. This essentially supports them in developing a culture in organizations from which better strategy to attain organizational goals is developed.
Alternative Strategies For Break Away
It is being viewed from above analysis and discussion that Tesco possess high amount of efficiency in their operations and also possess strategic capabilities that essentially supports them in gaining high competitive edge over their rival firm. Moreover, they also possess considerably high market share that essentially leads to raise in profit margin every year and better attainment of success. However, company can further boost their business by implementing any other form of strategies also in their operations so that they able to develop their own unique image in the market place (Lync, 2010). This will essentially aid in boosting their market share and operational field. In this regard, different types of models and techniques can be utilized by Tesco in order to gain opportunities of new market also.
Porter Generic Model: This includes cost leadership, focus and differentiation. Tesco has increasingly diversified geographically and into areas such as the retailing of books, clothing, electronics, furniture, petrol and software and many more. They have large number of satisfied customers and have high brand awareness. With this situation in general, Tesco can focus on strategy which includes elements that emphasize how their brand can differs from the products of competitors that are available in the market. The differences are services of the value proposition and position brand in the market place (Svensson, 2006). For example, they can emphasize on cost effective but their quality is superior to competing brands with slogan telling customers that they get high quality at affordable price. Analytical played an important role in creating a more constantly agreeable customer experience that can drive profitability. Analytical can help customer to change their mind set through a wide network performance metrics and then define and measure network quality and the associated customer experience.
Innovation and Entrepreneurship: Tesco can take support of innovation in order to gain opportunities of new market in much effective manner. In this regard, they can involve innovation in any of their business with a motive to attain an edge over their rivals. One such innovation can be self payment system for customer at their physical outlet so that they able to offer high customer satisfaction to their clients and also able to produce their queue time. This will certainly help them in attaining an edge over their rivals and able to boost their market share. In addition to it, this advancement in payment mechanism will also aids in gaining high amount of attention from different customer base which will lead to meeting out with their organizational objective in much better manner (Barney, 2002). Apart from this, they can involve innovation in other set of activities also so that better attracting of customer can be done.This will essentially support organizations in position themselves as different to that of their rivals like Sainsbury, ASDA by not only just offering consumer product but also by offering quality services along with product. With this, they able to acquire the customer of their rivals also in a significant amount of time frame. This situation will essentially lead to a situation of Blue Ocean for a specific time frame till their competitors doesn’t involve this sort of innovation in their operations. In this time frame, they able to gain response from different customer and this will certainly support in retaining majority of them. However, this innovation poses threat to company if any mishaps or system break down occur (Amason, 2010). Moreover, this may also became an issue of criticism of better and effectual results not attained from it as were mentioned. If something of this sort happens then whole efforts and capital will be wasted and may end by hammering the corporate image of Tesco also.
Global Strategy: Tesco can use Global strategy for develop its business globally. Tesco operates in 14 countries worldwide, with 65 percent of its revenue coming the U.K and the remaining coming from Asia, Europe, and the U.S while Tesco continuous to develop its business and services globally. For this the company is investing most heavily in international expansion as the key to achieving its goal of double-digit growth.
Ansoff Matrix: Apart from Innovation, Tesco can even consider Ansoff matrix for the purpose of developing strategic operation so that they can gain high amount of edge and gain opportunities of new market also. This matrix involves 4 main components namely, market development products development, market penetration and diversification. Since, Tesco possess high market growth and also own high amount of market share, therefore it is not advisable that they implement the strategy of market penetrations. This will not aids much in their growth rate. Instead they gains relatively high growth rate in their operations with that of their rivals. Further, they are not into production line therefore other operations of new product development will also not aid them much and hence they have to engage something different so that they able to sustain in much effective manner along with boosting of their share (Cesnovar, 2006). However, market development is one of the operations that can be implemented by Tesco in order to gain fruitful results from it. In this regard, they can focus upon different market as it is being seen that they possess more of operation in region only. By developing new market will essentially support them in gaining more of growth opportunities and profit margin over a period of time. For this they can focus upon various emerging market such as India and surrounding countries, China, African region, Gulf and various others so that more of response from target customer can be gained. In this regard, they can merge with local players of these countries so that they able to sustain effectively in those market and can gain best out of it. Moreover, franchise is another operation that can be utilized by Tesco in order to enter into various foreign markets. With this, they essentially able to gain more of operational market from which higher revenue can be generated (Jarzabkowski and Spee, 2009). This will also support them in boosting the efficiency and aids them in gaining an edge over retailed like Wall-mart and others.
With this report, it can be synthesized that strategic management possess wide scope in the organizational setting and it essentially supports them in drawing better results out of it. It supports in conducting external and internal analysis so that every factor can be focus adequately before entailing new set of strategies in their operations. Tesco possess different types of strategic capabilities in their operations from which they able to gain high amount of efficiency in their business activity. In addition to it they can consider various other strategic operations and strategies in order to gain break away and attain opportunities of new market.
- Amason, A., 2010. Strategic Management: From Theory to Practice. Taylor & Francis
- Barney, J., 2002. Strategic Management: From Informed Conversations to Academic Discipline. The Academy of Management Executive
- Brown, P., 2003. Seeking success through strategic management development. Journal of European Industrial Training
- Cesnovar, T., 2006. The impact of strategic management on business outcomes – Empirical Research. Journal for East European Management Studies
- French, S., 2009. Critiquing the language of strategic management. Journal of Management Development