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Strategic analysis plays a crucial part in the strategic decision-making process. Information regarding the company's internal and external surroundings, as well as its potential possibilities and risks, are often gleaned through this process. That's why a thorough strategic analysis is necessary for making decisions and running a successful firm. An organization's competitive knowledge is essential to determining a strategy that will make them an unstoppable force in their industry. This paper investigates Tesco Plc, the UK's largest retailer, for its innovative spirit, corporate culture, and executive leadership, as well as the shifting competitive landscape.
Company Background
In 1919, Jack Cohen, a Jewish immigrant from Poland, opened a stall in Hackney's Well Street Market and began selling war-surplus food items. Food, non-food, and other services are offered by Tesco Plc, a retailing corporation that serves clients (Johnson et al., 2018). Customers may get anything from fresh produce and baked goods to ready dinners and sandwiches at the supermarket. Tesco Finest and Tesco Value are two of the supermarket's food brands.
1. Strategy Analysis of the chosen company
Business strategy of Tesco
According to Tesco's business strategy, which may be summarised as cost-leadership, 'Every Little Helps' plays a significant role. Because of its enormous size, Tesco is able to take full use of the benefits of economies of scale (Alam and Raut-Roy, 2019). Tesco's business approach has always been to experiment with different areas of the company, and this strategy has had an impact on the retail market in the UK to some degree. This business strategy is designed to regain the trust of shareholders and consumers after Tesco's commercial income reporting crisis of 2015. The top management has said that this goal would be met by the following set of initiatives:
Focusing on accessibility, service, and pricing selectively
implementing a comprehensive reorganisation and tightening of financial controls
Renewing the brand's image by implementing a comprehensive rebranding strategy.
Tesco’s Marketing Strategy:
Tesco has always placed a high value on building long-term relationship with the customer and stakeholders. Its consumers come from all walks of life, from all walks of financial life (Rosnizam et al., 2020). So, it created two sub-brands: Tesco finest for the rich consumers and Tesco Everyday Value for everyone else. To maintain customer loyalty, Tesco also introduced the Club Card in 1995 as a membership card. Discounts and other perks like double data on Tesco Mobile are offered as part of the Card's point-based system. Tesco eventually surpassed Sainsbury's to become the top grocery retailer in the United Kingdom with 5 million members in the first year.
For gathering client information and tracking purchasing patterns, researchers turned to the Club-card approach. Analysis of this data allowed Tesco to put those proper goods on the shelves and eliminate the unpopular ones (Nastasoiu and Vandenbosch, 2019). Club Cards aren't simply a short-term promotional tool for Tesco; they are a promotion in and of itself. To make it distinctive and long-lasting, the “Tesco Club Card” was based on this.
They also understood that a “one-size-fits-all” brand image would not be effective after spending billions on conventional marketing efforts. It opted to focus on a select group of clients and build a relationship of trust with them (Awadari and Kanwal, 2019
Tesco has also completed a partial move to digital marketing, which is less expensive and has a considerably larger reach than traditional marketing. It let users construct professional-looking social media accounts across all platforms. It has far more than 15 Twitter accounts, one for each of its divisions, on the social media network.The Twitter customer service account is open 24 hours a day, seven days a week (Loonam et al., 2018). Tesco intended to set itself apart from the competition by promoting its own brand of high-quality, low-cost goods. Chef Jamie Oliver, the company's Health Ambassador, debuted a line of step-by-step recipes using goods found at any Tesco shop.
The Product Strategy of Tesco
As the company has grown, Tesco today offers a broad variety of items, from food to electronics to health to books to clothing to home and décor to party supplies to sports and fitness gear to cosmetics to jewellery to baby products (Fatricia, 2017).
Tesco’s Pricing Strategy
It's feasible for Tesco to sell items at reasonable rates since they have a well-oiled supply chain network. In order to keep their prices low, Tesco does not compromise with the quality.
Tesco's Distribution and Positioning Plan
It is estimated that there are more than 6,900 Tesco outlets in 15 different countries throughout the world. Stores in the Tesco chain sell a wide range of goods and services (Zhao, 2021). Specifically, Tesco Metro, Express, Extra and Superstore are all divisions of Tesco.
Tesco’s Promotional Strategy
Tesco is known for its cheap pricing, which it utilises to draw in new consumers. To reach existing and new customers, Tesco relies heavily on print and media advertising as a tried-and-true medium (Fatricia, 2017). In order to attract and keep clients, the business heavily depends on promotional deals.
2. “Innovation, creativity, change, culture, and leadership within the chosen company”
Innovation Process at Tesco:
Within six weeks after the initial conception of a project, Tesco's innovation team aims to produce an MVP. During hackathons organised by the firm once or twice a year, over 350 people work together to create working prototypes for business problems. Angela Maurer, CEO of Tesco Labs, spoke at the recent CIO Summit in London on Tesco's innovation approach (Sultan, 2020). Customer requirements and future forces are the first two kinds of feedback, she said. Internal departments and shops, as well as consumers, are all customers. Future trends encompass technological, social, fashion, and demographic changes. From this, they brainstorm with a wide range of people from different backgrounds to develop a big number of creative ideas. The greatest ideas are quickly vetted and put into action. Customers provide feedback on the ideas. Prototyping and testing follow, this time with consumer input. The innovation team at Tesco aspires to create a minimum viable product in only six weeks from scratch (Innes, 2020). The Tesco Corporate Innovation initiative also includes funding for external start-ups. Tesco works closely with a select group of small business owners. Tesco organises speed dating events where start-ups meet Tesco executives from various divisions for a few minutes at a time.
Management of Change:
There are many ways to think about incremental change, but the most common definition is that it involves making tiny adjustments to what is already in place. This definition emphasises the fact that this kind of organisational change, also known as first order change, does not impact the core of an organisation in any significant way. It is possible to make very minimal changes to pre-existing systems, structures, models, services, and processes via the use of incremental change (Sparks, 2019). To describe a dramatic alteration in an organization's procedures, products, culture, conventions, etc., we use the term radical change. “As their business progresses and their management system grows, TESCO requires the “ADKAR model”. TESCO may also benefit from this approach (ADKAR) by maintaining a firm foundation and facing the catastrophes of contemporary industry that might hurt the organisation (Pugna, Du?escu, and St?nil?, 2019). For a corporation like TESCO to remain competitive in today's market, they must constantly be ahead of the curve when it comes to managerial skills and behaviour.
Precautionary procedures related change management are necessary for TESCO's success and participation in the competitive market. Taking the appropriate steps may assist them in receiving favourable market feedback and reaching high levels of client satisfaction (Minkov and Kaasa, 2020). They require a well-thought-out strategy for adapting to the current market conditions. Both the organisation and its personnel must be prepared to deal with new developments as part of an effective change management strategy. As a result, Tesco must adapt to new ideals and have a clear understanding of how things are changing.
Culture:
The “Hofstede cultural model” and its numerous elements have been regularly employed by Tesco in the past. More significantly, Tesco's corporate culture represents the company's worldwide and multinational ethos, which can be found across the company's different branches and offices.
“POWER DISTANCE INDEX” (PDI)
Tesco as a whole is characterised by a limited tolerance for long-distance communication (PÎRLOG, 2021). Tesco has a more decentralised method of making decisions inside the company. If regional teams have the authority to do so, a global strategy may be tailored to match local needs and wants.
“INDIVIDUALISM VS. COLLECTIVISM VERSION” (IDV)
Tesco's organisational culture promotes maximum employee performance and corporate success by maintaining a good balance between individuality and collectivism. Employees at Tesco are routinely and repeatedly challenged by the company's demanding work practises (Pelau and Pop, 2018).
“MASCULINITY VERSUS FEMININITY” (MAS)
A less egocentric corporate culture is fostered and promoted by Tesco. Since it hasn't harmed the company's team dynamics or relationships among employees, this has been a positive development for the firm. Female employees are just as honoured as their male counterparts for their achievements (PÎRLOG, 2021). It is Tesco's policy not to promote gender-specific employment duties and tasks, as well as gender-specific job descriptions.
“UNCERTAINTY AVOIDANCE INDEX” (UAI)
Again, Tesco's culture is a blend of both with a preference for lower risk avoidance ratings. Tiles aren't a big deal at Tesco since the company fosters a more egalitarian structure. As a result, the organisation places greater emphasis on merit-based behaviour and honours individuals who do not succumb to stress.
“LONG TERM ORIENTATION VERSUS SHORT TERM NORMATIVE ORIENTATION” (LTO)
Tesco puts a strong priority on the principles and rights of individuals and diverse groups in society and communities, especially minorities. As an inclusive workplace, the corporation gives equal chances to every group in all aspects of the company and its personnel polis.
“INDULGENCE VERSUS RESTRAINT” (IVR)
Tesco focuses about the well-being of its employees. The atmosphere within the company is laid-back and fun. In the presence of their co-workers, employees feel more at ease and at ease with one other (Minkov and Kaasa, 2020). As a result, the company is content and places a high emphasis on its workers' well-being. Employees at Tesco are allowed to express themselves freely. Employees are free to express themselves in a respectful and civil way.
Leadership Practices at Tesco:
This “participation leadership” approach is used by Tesco management when making choices, which implies that staff are involved. As a result of Tesco's strong leadership, the company has continued to deliver excellent customer service (Brannen, Mughan, and Moore, 2020). Tesco's management style is democratic; therefore, the company's operations are decentralised, and information is transmitted down through upper management to lower levels of the organisation. Everyone is encouraged to speak out and provide suggestions for improving the company. Tesco's top executives see its workers as a vital part of the organisation.
TRANSFORMATIONAL LEADERSHIP AT TESCO
In light of the fact that Tesco is dealing with a variety of societal challenges, the company's representatives are unable to carry out their duties effectively, and customers are losing faith in the company. When used in conjunction with Tesco's transformational leadership model, executives can develop a crystal-clear vision and effectively communicate it to their workforce (Jensen, Poto?nik, and Chaudhry, 2020). Transformational leadership, when integrated into an organisation, creates a strong bond between employees and leaders.
Transactional Leadership at Tesco
The Tesco may be linked to transactional leadership in order to raise the degree of inspiration among employees, as it is essential that workers be reimbursed for their labour since they will experience an abnormal feeling of fulfilment and incredible inspiration when their work is compensated (Uddin and Ferdous, 2020). Directors have a responsibility to provide methods for evaluating the performance of employees and compensating them appropriately. Chiefs must also pay reps and provide useful comments for employees who aren't doing brilliantly, and these employees should be provided proper training or rejected for their bad performance, as is their obligation.
3. “Analysis of company’s competitive business environment”
Customers' Buying Power
Every week, Tesco stores and Tesco.com serve a large number of customers. Buyers in the United Kingdom have limited bargaining leverage, and it is unlikely that they would be better off switching to Asda or Sainsbury's rivals. Fresh technology advancements have provided Tesco with new opportunity to recover the confidence of its customers by dealing with concerns such as poor customer service and the horsemeat crisis (Scott et al., 2019)..
Bargaining power of the suppliers of Tesco
Tesco works with more than 2,500 businesses in the UK and throughout the globe. Due of the large number of vendors, no one can have much of an effect on Tesco. Increasing Tesco's profit margins necessitates aggressive bargaining with its suppliers (Omri, 2020). As a consequence of the United Kingdom's withdrawal from the European Union, Tesco now confronts trade and cost challenges. On the other side, Tesco has been accused of pressuring its suppliers to decrease their costs. Some have equated the company’s tactics of pressuring suppliers to those of a “mafia”.
Threat of new entrants affecting Tesco
Even while new entries to the UK grocery market are feasible, the likelihood of their doing so is quite low. Tesco has no worries about new competitors because of its size and in-house expertise (Scott et al., 2019). It is possible that prospective competitors lack the resources and contacts to do thorough research into the UK grocery market. Tesco, on the other hand, should exercise caution when setting its prices, since competitors may offer cheaper costs.
Threat of substitutes
Tesco offers a wide range of products from which to choose. In addition, it provides generic substitutes for a number of the products. Butter and margarine, for instance, are both available here. Powdered milk is also available, as is fresh milk. As a result, Tesco's rivals' products and services provide a little threat (Dana et al., 2021). Despite this, Tesco's market domination may be threatened by WalMart's acquisition of ASDA, Carrefour, and Aldi, the three major Tesco competitors.
Rivalry
Tesco faces dozens of new powerful competitors in the United Kingdom. These competitors place a high value on advertising and other types of promotion. Retail and supermarket shops run by Tesco have been failing in a number of nations. That's simply another issue that the company has to deal with on a daily basis. Despite Tesco's market dominance, rivalry from the company's closest rivals remains severe. The price wars between Aldi and Lidl are also harming Tesco's profit margins.
4. Dynamic and changing nature of the company’s competitive environment
“TESCO’S MACRO ENVIRONMENT”
Government regulation, financial situation, change in technology, change in demand, and demographic change all have an influence on the dynamic of the business environment. PESTLE analysis may be used to collect various features into a single figure.
Political and legal considerations
Government regulation: here is where regulations are set for enterprises to behave fairly. The UK Government increased its presence and encouraged fair trade practises and fair competition (Eeckhout and Patel, 2017). Large UK retailers (the big four), including Tesco, have been penalised over £116 million for colluding and engaging in anti-competitive conduct in relation to milk prices, as per OFT-Office of Fair Trade (2007).
Economic factor
Disposable income is decreasing as the UK economy shrinks (the Credit Crunch), which has a negative impact on people's ability to spend, since they are more concerned with saving money than spending. This will have an impact on Tesco (Uddin and Ferdous, 2020). Using its huge discounter, Tesco has reported its worst UK sales performance since the last crisis in order to allow customers to buy it, but this has drawn more customers than ever before.
Socio-cultural variables
It is impossible to predict a location's cultural value based on anything other than an uncontrollable characteristic. As a result of the "Credit Crunch," people's spending habits have been greatly affected. Health-conscious eating will encourage consumers to shop at supermarkets and cook their own food at home, which is both more affordable and healthier.
Technological factor
Entrepreneurial innovation refers to new products and services that emerge as a consequence of technological advancements that affect the dynamic character of the business environment (Omri, 2020). As a result, the sector's productivity and competitiveness will be changed. "Online shopping" is another commercial opportunity that Tesco has taken full use of as a result of the internet. In order for Tesco to benefit from these innovations and acquire a competitive edge, the organization must be informed of the latest technologies and how they might affect their firm.
Environmental factors
It focuses on how human activity affects the ecological systems and resources enterprises rely on. For the sake of preserving both energy and other renewable sources of power. For firms like Tesco, recycling is the most important action in terms of the environment they must operate in. In 2007, merchants such as Tesco took advantage of this trend in order to portray themselves as environmentally friendly companies, as Tesco unveiled a £500 million strategy over five years for green projects (Brannen, Mughan, and Moore, 2020).
Tesco aimed to gradually roll out self-checkout systems to reduce opposition to change and improve its competitive position. To execute change initiative strategic management has selected Kotter’s change model since the change initiative needs to implement comparatively in short period progressively. The following are the changes made by Tesco.
“Create sense of urgency”
To maintain its position as a market leader, Tesco concluded after studying its competition that it needed to boost its competitive strength and enhance its level of customer care. Consequently, it searched new technologies that may lower cost and enhance customer service since technology is changing swiftly (Minkov and Kaasa, 2020). Tesco kept a keen eye on the new self-checkout system Market & Spencer introduced in 2002. So, Tesco opted to use self-checkout technology as a transformation initiative.
“Form a power coalition team”
It created group comprising area manager, director and representative of trade union with adequate power and authority to make the change significant.
“Create a clear vision”
Be competitive, deliver superior customer service, and embrace cutting-edge technology are all part of our new business mission statement.
“Communicate the vision”
The team utilised the corporate website to cascade a message from the area manager to the supervisor, and the supervisor held meetings with other employees to discuss what the objectives meant (PÎRLOG, 2021). They also used the website to share their vision.
“Empower other to act on vision”
One way that change managers work to overcome resistance is by implementing a system of self-checkouts. Special education session has been offered to staff who was making hurdle to move forward. Company awarded prizes to personnel from each location who assisted to go ahead to make the objectives actual.
“Create short-term wins”
Tesco posted a report on the trail project and headlines about it on their website and in the press after its completion.
“Consolidate improvements and producing still more change”
Put the new methods into practise.
5. Identification and discussion of factors that could influence change in the company
“Internal Factors affecting organization”:
Organizational change is influenced by a number of internal causes, including those listed below.
Vision
There are certain organisations that have a long-term perspective(Mayer and Roberta, 2017). Such organisations are constantly adapting to reach their goals.
Organizational Culture
The destiny of an organisation is strongly influenced by its culture. Change may be accepted and implemented if the workplace culture is energetic, active, and leadership fosters innovation.
Leadership
Organizational transformation may be sparked by a shift in leadership. An organization's leadership team is always evolving as it adapts to the needs of its new bosses.
Employees
It is the mindset and abilities of its personnel that determine whether or not a firm has the confidence to undergo a transformation (Alam and Raut-Roy, 2019). Change management is more likely to be effective if people are open to and embrace change, and if their abilities are also aligned with the planned change.
“External Factors Affecting Change in Organizations”:
“New Opportunities”
“New business prospects arise as a result of an expanding economy. Organizations grow when they take advantage of new market possibilities”.
“Competition”
In today's business climate, competition is becoming fiercer. Innovating new marketing tools and methods disrupts the market's overall trend (Kotlar et al., 2018). As a result, every industry participant must adapt and devise its own plan to stay relevant and prosper in the market.
“Technological Innovation”
Changes are also shaped by technology, which is a significant force. For businesses to stay competitive in today's digital environment, they must improve their technology.
“Politics And Economy”
Politics and the economy, both at home and abroad, have a significant impact on business. A country's economy may be severely harmed by a single occurrence. Organizations must keep a careful eye on political and economic developments and make adjustments as necessary (Kotlar et al., 2018).
Conclusion
To sum up, it can be said that for decades, Tesco has put a high priority on establishing long-term business relationships with its customers and other key stakeholders. Tesco has always been at the front of the pack when it comes to innovation, leadership, and company culture because of its use of democratic leadership, cutting-edge concepts, and a focus on the needs of its employees
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