Strategic Analysis of Tesco Plc

By: Henry Ford


The success of any company that operates in order to get profits lies on the capability of the companys management in positioning and establishments of products or services that are being provided in the market. Another basis of measuring success of a business is the capability of a company to maintain its competitive advantage in the market. This report is intended to analyze the strategic management and evaluation of the Tesco plc and indicate why the company has been able to gain increased market share not only in the United Kingdom but also in the global markets. This is done by analyzing the internal and external factors of the company by the use of strategic management models like SWOT analysis and PEST analysis. This analysis will indicate the competitive advantage of Tesco which have played a critical role in facilitating increased profits and productivities. Additionally, this report will include the strategic formulation of this company by indicating the strategy that has been used in order for the company to compete effectively with its rivals.

Tesco Company
Tesco plc is among the largest food retailers in the whole globe and it has its headquarters in Hertfordshire in the United Kingdom. This company has revenues in excess of 54 billion as of the year 2009 and has a total of over 470,000 employees worldwide. Tesco plc is a multinational company that operates in more than 14 countries with more than 4,331 stores. Tesco plc primarily operates in the United States, Europe, and Asia. As indicated by Ogbonna and Whipp (1999), this company sells approximately 7,000 products that include fresh foods at appropriate locations, about 170 metro stores which are used in selling a variety of foods in towns and city centers, and more than 450 superstores where both foods and non food items are sold that include DVDs and books. Additionally, this company has been able to reach customers in countries where it does not have stores by offering online retailing services through their website tesco.com and Tesco Direct. Tesco plc has diversified its markets and is now providing broadband internet connections as well as financial services through Tesco Personal Finance (TPF).

Tesco Vision and Mission
The company main mission is retaining their loyal customers by providing them with high quality products and customer services. Tesco would like to earn their lifetime loyalty by ensuring that their customers are adequately satisfied (Hammett and McMeikan, 1994, p. 4). The main vision of this company includes being the most valued and preferred supermarket to the community in which it is based and to the customers who use their products and services. This company would like to be an outstanding retailer both to store and online purchasers (Wrigley, 2000, p. 891).
Strategic Analysis
1) Internal Analysis
The internal analysis of Tesco plc can be explained by looking at its core competences and analyzing its strengths, weaknesses, opportunities, and threats.

a) SWOT Analysis
i) Strengths
a) Tesco plc is ranked as third largest grocery company in the whole world as it operates in more than 14 countries with more than 4000 stores. This shows that the company has been to reach as many people all over the world as possible. According to Clarke et al. (1994) Tesco has been able to achieve a larger market share in the United Kingdoms grocery market and hence has been able to generate a lot of profits.
b) The company is in a position to sell a lot of products through its website as it is the largest online supermarket in the whole world. Tesco.com has been able to reach as many people from all over the world as possible and as a result the company has increased its profit base.
c) The brand value of Tesco earns the company credits. In this case, people feel that they money are worth what they purchase. According to Palmer (2004, p.1075) Tesco has a very strong brand image which is heavily associated with good quality and trustworthy products and services.
ii) Weaknesses
a) The performance of Tesco Company has net been comparable with its competitors. I this case, in the year 2009 the company recalled a lot of products in the market resulting to increased losses and damage of its brands reputation (Tesco, 2010). According to Drejer. (2000, p. 206), Tesco has not been able to improve its brand in order to compete stiffly with its rivals.
b) This company concentrates most of its key operations in the United Kingdom retail sector and hence it lacks geographic diversification. It should be noted that Tesco plc has recorded more than 75% of its revenue during the year 2009, (Tesco, 2010), making it more prone to risks that would occur in this country.
iii) Opportunities
a) The introduction of tesco.com website is a clear indication that the company is in the move to expand in the whole world. By doing this, it would be able to capture more customers who would not be proximate to its retail outlets and stores (Finch, 2004, p. 183).
b) From the growth of the company in the United Kingdom, it can be seen that there is an opportunity of the company expanding into hypermarkets in the country (Flavin et al., 2002, p. 125). Tesco plc can use its strategy of high quality products and low prices in ensuring that it gains higher market share in the country. Taking the company into virtuous circle of growth, its earnings in foreign country will increase drastically (Graiser and Scott, 2004, p. 10).
iv) Threats
a) In the United Kingdom as well as in the whole world, Tesco is facing a stiff competition from its rivals like Sainsbury and Morrisons. This competition would reduce the amount of sales and profits received by the company (Lindgreen and Hingley, 2003, p. 328).
b) The decline in income earning and rise of unemployment in the United Kingdom has adversely affected the performance of Tesco Company to a great deal. This has reduced the purchasing power of customers as they do not have enough money.

External Analysis
The external analysis of Tesco Company may be done by analyzing political, economic, social, and technological factors influencing the business.

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