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Diverse companies consist of dissimilar objectives and obtain different strategies to accomplish those requirements. The meaning of Business strategy indicates the understanding of a set of judgments taken by the advisors and entrepreneurs in attaining detailed organizational success. The ultimate intention of a proper business strategy has been proven to be beneficial in securing a competitive place in the industry through monitoring its operations (Rosnizam et al., 2020). Tesco has been considered as the leading food retailer around the globe containing proceeds in intemperance of almost £54 billion in 2009 and occupying more than 470,000 people. It has been observed that they function just about 4,331 stores in 14 nations worldwide specifically in the USA, Asia, and Europe.
The business aims to explore the key issues encountered by Tesco and to maintain a competitive advantage in the marketplace of the USA. The context will discuss the Macro Environment, Internal Environment, Porter’s Five Forces Model, and some important theories that are considered beneficial for the company to maintain its competitive advantage and revenue margin.
1. Detail Analysis of the Macro Environment upon the Organisation
The external environment has a huge impact on the sustainability and profitability of a business. Hence, comprehending the external environment helps an organization to anticipate challenges and opportunities and make efficient strategies to maintain a sound position in the market. To understand the external environment, the PESTLE analyzing tool is the most regarded one among all models (Perera, 2017). PESTEL benefits an organization in understanding political, environmental, technological, legal, and social factors. Macro environmental changes impact an organization directly. In this regard, the PESTLE analyzing tool will be applied to understand the macro-environmental impact upon Tesco in the US market.
Political
Economic
Political factors are very crucial for any business as it has a direct impact on the operation of an organization. Political factors include tax rates, political stability, economic recession, economic conditions, legislation, etc (Bismark et al., 2018). In the US market, Tesco’s revenue and profitability will be the most by the US government policies. Political regulations directly impact a nation’s economy and consumer buying habits. In addition to this, political regulations impact product export import, and sales in stores as well. Due to the rise of antitrust issues and data breaches all over the world, the US government has focused on scrutiny. The government is also being cautious about the process of how retail stores are storing data which is already impacting the retail industry of the US. These factors will likely impact the organizational operation and revenue in the US market.
A strong economy empowers consumers to buy anything they want apart from only essentials. It is only possible when the economy of a country will rise. On the other hand, in times of economic decline, people only save money to buy their essentials apart from luxury items. It happens when the unemployment rate of a country spikes highly. The Covid-19 virus has hugely impacted the US market, whereas, Tesco will likely face a huge economic decline due to the recession caused by the pandemic impact (Thorbecke, 2020). Apart from this, Tesco also has to be cautious about certain economic challenges like Government intervention in the free financial market, economic growth forecast, inflation, and interest rate, the labor cost of the USA.
Social
Technological
In the retail industry, social factors mainly impact consumer preference in buying decisions (Widodo et al., 2018). For example, people often enjoy buying items in bulk amount and the Costco premise use this strategy. This retailer does extensive market research to understand consumer behavior trends. Most US consumer is well educated and well-aware. They prefer to buy branded products with the logos of global brands. In this regard, Tesco needs to deliver its products in packets to make them hygienic and safe for consumers.
The present generation is driven by technology. To sustain in the highly competitive market, retail companies are using various technological items to gain a competitive advantage (Lola, Bakeev, and Manukov, 2019). The USA is a highly modern and tech-savvy country where retail companies implement multiple technological items on a day-to-day basis. The sales system and managing cash after sales are entirely digitally dominated. With the rise of technology retail companies are also adopting new technologies and software. The retail industry of the USA is taking major benefit from internet services most companies have their website and digital catalogue of products. Tesco needs to pay huge attention to its online service and delivery system as most of the giant retailers of the USA offer their products online.
Legal
Environmental
Regardless, in any country, a retail company need to follow legislative condition to open their operation within a country. Legal factors include taxation law, employment law, etc. To operate in the USA market, Tesco needs to meet the legislation requirements of the USA. If these requirements are not met, Tesco may face, multiple legal challenges like foreclosing or bankruptcy.
Most of the retail shops of the USA are offering food products. The environmental state of a nation impacts product quality and selection. In the USA, Tesco needs to maintain environmental standards like climate change, weather, endangered species, recycling, and water and air pollution.
1.1 Critical Analysis of the Macro Environment to determine Strategic management Decision
The PESTLE analysis has drawn out multiple macro factors that are impacting the organization called Tesco. The main issue they will be facing in the US market is intense competition and inconsistency in online shopping. As The US market is already dominated by some reputed supermarket chains, it could become a great danger for the company. In this regard, Tesco can implement the backward integration strategy which will help the organization to become a part of the supplier management team and can deliver a quality product at a reasonable price to their consumers. Inconsistency in their commercial site will become a huge concern for the company as most of the US consumers rely on commercial sites (Karim, Nisa, and Imam, 2021). Instead of the fact they have invested a huge amount in their IT segment, there are still some issues in their processing order which has led to an increase in the number of complaints from the consumers. In the context of this issue, Tesco should implement the right vision in IT implementation. Furthermore, a reliable external consultant is required to identify the exact issue to get a remedial measure.
2. Analysis of the Internal Environment and Capabilities of the Organisation
Strength and weakness are the two dimensions of a company which one hand allows a company to identify their potential area and overcome their areas of weakness. This model benefits in evaluating the environmental elements of the organization. Furthermore, SWOT analysis and comparison of organizational resources and capabilities in a comparative environment (GURL, 2017). To understand Tesco’s strengths weaknesses and opportunities and threat a SWOT model will be applied.
2.1 SWOT
Strength
Weakness
Biggest Grocery of UK: Tesco is the leading and No. 1 grocery shop in the UK. As per its annual report Tesco, their annual profit rose by 28% (Taqatqa, 2021).
Global Presence: This leading company has 6800 stores in 14 different countries in the world.
Diversified product range: The brand has different and diversified stores including, Tesco Metro, Tesco Extra, Tesco Express, and Tesco Superstores.
Accounting Scandal: Due to a false accounting scandal Tesco has been charged with fines in 2017
Low-cost Strategy failure: It is undoubtedly agreeable that Tesco is the market leader because of their low pricing strategy but in the long term run, it can lead to face loss and can reduce their profit margin (Adamyk, 2019).
Unfair Business Practice: Tesco has been accused multiple times of various unethical practices within the organization. It has recently been heard that Tesco is preventing landlords from renting properties to other supermarkets.
Opportunity
Threat
Strategic Alliance with other companies: Developing alliances with other reputed organizations can offer multiple opportunities for the company.
Online Shopping facilities: All around the globe, people are more inclined to online facilities. Mostly all the purchasing decisions are carried out online (Adamyk, 2019).
Christmas Controversy: In 2017, the Christmas ad created a huge media backlash for Tesco which was due to the cause that it showed Tesco is against the Christian faith.
Competition: The biggest competitors of Tesco, Walmart, Aldi, and Carrefour, are growing and becoming more powerful day by day which is becoming a threat for the company.
2.2 VRIO:
Valuable
Rare
· Local foods of Tesco are considered as the valuable product of the company.
· Well-trained employees of Tesco are also a valuable resource for the company as their productivity results in high revenue (Setiawan et al., 2021).
· Along with this, their distribution network benefits in reaching more consumers which assures great revenue for the company.
· Tesco operates in multiple countries around the world which has allowed them to build a strong consumer base around the world.
· The organizational culture of Tesco foster problem-solving skill and creativity within the workforce which benefits the company in long run.
Inimitable
Organization
· The high quality of the product is Tesco’s main source of brand appeal.
· In all stores of Tesco, products are easily accessible which develops high visibility for the brand (Whittington et al., 2020).
· The high financial strength of the company facilitates exploring new product development and product launches (Mahadevan, 2019).
· Technological integration has facilitated this British grocery chain to enable smooth management.
2.3 Critical Evaluation of the Organisational Internal Environment
After analyzing the strengths, weaknesses, and capabilities of the organization through the implication of the model SWOT and VRIO, it can be analyzed that apart from, multiple weaknesses and threats, the number of strengths shows the company has a bright future ahead. It has been considered that their low-cost strategy can become a failure in the run, in this regard, the company can lower their operation cost by implementing and applying various strategic plans and more technological items. Along with this, unethical business practices have become a major concern for the company, in this regard, Tesco can display their recent approaches to mitigate these issues and bring a loyalty program to bring consumer trust back in Tesco products.
3. Application of Porter’s Five Force Model to Comprehend Competitive Force and Strategic Plans
3.1 Porter’s Five Forces Model
Porter's Five Forces have been considered a holistic strategic structure that acquires deliberate judgments away from investing in the current competition. The implication of Porter’s five forces analysis will be extremely accommodating to analyze and discover the effective sources of competitive advantage of Tesco.
Bargaining power of the buyers or customers of Tesco
It has been observed extensively that the bargaining power of the consumers is comparatively high in terms of the perspectives of the retail industries in the UK. Given offers on the particular product and prices of such retailers and channels are quite equivalent, consequential in a noteworthy level of buyer power (Rachapila and Jansirisak, 2013). Furthermore, if the products contain a slender separation and are additionally standardized, the switching cost is a bit low and the buyers might simply exchange from one company to another. In terms of Tesco, the condition is quite exceptional but still, the brand has to offer some cheap products due to sustain its potential customers.
Bargaining power of the suppliers of Tesco
Tesco consists of approximately 2,500 suppliers in the UK along with various grocery shops in foreign countries. The Bargaining power of suppliers in the business is measured to be a bit little too reasonable due to the reason of the occurrence of a massive rate of suppliers in the business. In some cases, Suppliers in the overriding situation might be competent to diminish the limits Tesco Plc can make in the marketplace (Adelakun, 2020). However, it is said that Tesco bargains in a deliberate manner to augment its revenue margins with the suppliers. The most considered factor above all is the amplified level of supply capability that formulates its demands in terms of the suppliers to have a significant consequence on the successful augmentation of the brand.
Competitive Rivalry in the Market
Tesco Plc functions in an incredibly aggressive retail marketplace. Morrisons, Sainsbury’s, Aldi, and Asda, are considered as the biggest competitors of the brand and it has been observed that these opponent companies also expend sumptuously on promoting and developing other marketing strategies. Furthermore, these competitors compete within themselves over products, prices, and promotions occasionally (Rachapila and Jansirisak, 2013). It is consequently be tinted that Asda has been measured as one of the major competitors in the marketplace along with within an enhancement of market share approximately 16.6% to 16.8% in the meantime of the fiscal year 2010/ 09, whereas Sainsbury’s has revealed an amplify to 16.1% from 15.8%. This competition has been proven to be responsible for a toll on the entire long-term prosperity of the brand (Adelakun, 2020).
The threat of entry of new competitors
The new competitive entrance in the Retail industry conveys improvement, and innovative ways of implementing strategies, and puts enormous heaviness on Tesco Plc to subordinate the rate of pricing approaches, dropping costs, along with offering new worth suggestions to the consumers (Graf, Braun, and Graf, 2018). However, attainment of planning approval from the local government requires a substantial amount of time and effective resources to ascertain new supermarkets and this is consequently an extensive barrier in terms of the new competitors. Thus, the threat of new entrants has a low impact on the profit margin of Tesco.
Threat of Substitutes
The distinguishing factor of a restricted assortment of substitutes makes it complicated for consumers to change away from branded products. Tesco tenders a broad variety of products along with retailing of substitutes for mainstream products. For instance, it manufactures both margarine and butter. Nevertheless, the ultimate intimidation of substitutes in terms of non-food kinds of stuff, such as clothing, is comparatively elevated (Graf, Braun, and Graf, 2018). Therefore, so long as the economic downturn overcomes; consumers will be disposed of near inexpensive prices that are why Tesco is considered a danger to the specialty shops.
3.2 Development of Efficient Strategies for improving Market position and building a Strategic Plan
The development of efficient strategies will not be complicated as Tesco is a well-achieved organization and contains enough market potential. However, some major issues have been found after the investigation in the above discussion of Porter’s Five Force Model. After the analysis of some of the challenging issues, assortments of efficient strategies have been presented to mitigate the concerns and to sustain its competitive advantage along with the maintenance long long-term profitability in the marketplace.
The way Tesco might tackle the bargaining power of the customers
Through the procedure of inventing new products rapidly, it might be possible as Customers habitually search for discounts and offerings on recognized products subsequently in the case of Tesco Plc maintaining the emergence with the latest products then it will be advantageous to restrain the bargaining power of the consumer.
Structuring a massive base of customers will be exceedingly advantageous both in decreasing the bargaining power of the customers and it will be able to supply a chance for the company to modernize its revenue and manufacturing progression (Graf, Braun, and Graf, 2018).
The way Tesco might tackle the bargaining power of the suppliers
Through researching various product blueprints utilising diverse materials will be helpful in the process of the prices going up of one major raw material afterward company might be able to move to a new one.
It is indeed obvious that improvising committed suppliers whose business is based upon the company Tesco Plc might be trained from Nike and Wal-Mart is the way these brands urbanized third party manufacturers and their selling exclusively based on them accordingly generating circumstances where these third party manufacturers have considerably a smaller amount bargaining power contrast to Wal-Mart and Nike.
The way Tesco might tackle the competitive rivalry in the market
Through the construction of scale and sustainable differentiation to compete superiorly (Unser, 2019).
Working together with the competitors to boost the market dimension rather than immediately competing in terms of a diminutive market.
The way Tesco might tackle the threat of a new entrance
Via structuring economies of scale to subordinate the amount of predetermined price per unit.
The way Tesco might tackle the Threat of Substitutes products
As a result of being service-leaning rather than immediately product-oriented.
Through the indulgence of the ultimate necessity of the consumer rather than what the consumer is purchasing.
4. Application of Theories and Models to develop a Strategic Planning
To develop strategic planning, there will be a requirement for proper theories and models to illustrate the solution in a superior way. The appliance of these specific models will be extremely accommodating in smoothening the process of strategic management.
Maslow’s hierarchy theory: Maslow’s hierarchy is frequently exhibited as a pyramid. This particular theory essentially describes the basic requirements of humans and through fulfilling these needs an organization will benefit in obtaining their organizational success and enhancement of their efficiency at the workplace (Fadeyi, 2020). The theory consists of 5 significant steps which are Physiological Needs, safety needs, Love and belongingness needs, esteem needs, and self-actualization needs. Tesco implements Maslow’s hierarchy of needs theory to encourage their employees to obtain better productivity as well as revenue margin. It is indeed true that the brand offers salary and essential facilities such as drinks and snacks as foodstuffs which are considered as Physiological Needs. Therefore, the staff is being provided health protection-related facilities which cover the second stage. Generating an incomparable atmosphere in the workplace and maintenance of exceptional communicational channels permits the company to operate in teamwork effortlessly (Zaihan et al., 2020).
The final stage has been fulfilled through the making available of the imperative program to expand the career of their employees and place in the company and to obtain their gratitude and status.
Herzberg’s Two-Factor Theory: This theory has been considered incredibly appropriate in terms of the brand which encounters difficulties in preserving their employees and requires enhanced proficiency at work from them. The theory is dependent on the two factors which are hygiene and Satisfaction. The ultimate focus of Tesco is to inspire its employees through motivating both by paying concentration in terms of hygiene factors and by allowing satisfaction. For instance, it has started inspiring and empowering its staff using suitable and opportune communication, through handing over accountability and connecting employees in the procedure of decision-making (Takacs, 2018). It tends to clutch forums each year where employees might be an essential part of the consultation in the case of pay increases. Therefore, it demonstrates acknowledgment of the workplaces; the employees of Tesco do and appreciate them.
Porter’s Five Forces Model: Porter’s Five Forces model has been measured as a premeditated management model to explore the industry and comprehend fundamental levers of revenue margin in a specified industry (Unser, 2019). Tesco Plc managers have exploited Porter's Five Forces to comprehend the way the five aggressive forces persuade prosperity and extend a strategy for enhancing Tesco Plc’s competitive advantage in terms of long-term prosperity in the upcoming future in the Retail industry.
From the entire evaluation in the above section, it has been observed that the appropriate implications of these significant models and theories might be able to convey a competitive advantage along with the maintenance of profit margin. Maslow’s hierarchy theory and Herzberg’s Two-Factor Theory describe that the company has been successful in providing requirements to its employees which will be extremely beneficial for the company to sustain its revenue margin through increasing its working efficiency. The Porter Five Forces model facilitates sustaining the competitive advantage of the company.
5. Critical Interpretation of the Gathered Data to Create a Strategic Direction
The report has thoroughly elaborated related all the aspects of strategic management decisions. In this, the report has identified various factors of the Tesco Company. Certainly, the range of external factors in the USA that seems to be impacting Tesco in one place is positive, in another place it is negative. The evaluation has enabled us to make strategic decisions and remedial measures to overcome these challenges. Again, the strengths are the capabilities that will help them to build a competitive edge in the market and the identified weaknesses will assist in initiating adequate actions to amend the areas of rectification. Porter’s five analysis has identified multiple factors and the strategies evaluated, like, continuous innovation in products and the approach of building a relationship with other branded companies will benefit the company in a massive amount. Firstly, Tesco will be able to retain their consumers and secondly, relationship building will help them to gather more consumers which will increase their revenue.
Strategies:
Product Innovation and Product Diversification (Are, 2017).
Partnership Approach building
Objective
Resources
Timeframe
Customer retention and increasing customer base
In this case, Tesco will require experienced employees, Technological implementation, a skilled research and development team, and financial support
6-10 months
Service extension geographically
Human resource and capital.
6-12 months
Conclusion
The entire report has focused mainly on the strategic management decision and in this regard, various aspect associated with the development of strategic planning has been evaluated. In the first place, the report has displayed the impact of the macro-environment upon the organization Tesco. The following section has included the analysis of the organizational internal environment and capabilities, in this case, SWOT analysis and VRIN analysis have been drawn out. After the analysis, it can be stated that the organization is filled with potential opportunities despite several weaknesses. The following section has applied Porter’s Five Force Model to determine appropriate strategies for making a better position in the market. In a nutshell, the analyzed potential resources of this unicorn company can be utilized to enhance its brand presence and increase its customer base in other regions of the world.
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