You are required to submit an individual report of 3,000 ±10% words, which can be based on an organization or idea of your own choice. The strategic analysis must be related to a recognised aspect of business policy, strategic management or the philosophical underpinning of a particular methodology within the public or private sector strategic management domain.?
According to Mintzberg (1978), strategy is defined as the pattern in the stream of the decisions. Strategy are the set of actions that are adopted b the organizations in order to excel in the performance. It is the direction and the scope that the organization has in order to achieve a long term advantage over the other companies. it makes the stake holder of the company meet the expectations so that they can take the company ahead (Birkinshaw, 2004). A good strategy is essential in making plans for the company. It is based on the theory and the application of the theory should be such that it can develop the business in the environment in which it is operating. In other words strategy can be said as the quest in order to gain and sustain the competitive advantage. The strategies should be different from the rivals. Strategy should be such that it will create value for the company and in turn will keep the cost under check.
Competitive advantages are achieved by the company for the superior performance that they have over the others in the market (Bitzi, 2007). A company with the help of the strategy needs to adopt the best plans so as to make them in a position that they can exploit and derive the benefits from. On many cases it is seen that the companies are in a competitive disadvantage as because they are under performers in the market as compared to the others.
Strategic planning is the process by which the company uses the resources in order to strengthen the operation of the company. It is to ensure that the employees are working towards the common goals that the organization have.
It is seen that there are various models that can be used for the company in order to have a strategic advantage in the market. These theories are used as a framework for the company to act in order to have success in the market (Bitzi, 2007). Competitive success is due to barriers to competition arising from the structure of the market referred to as mobility barriers. To achieve the goals that the company has in relation to the position implies that the company is located in a particular market space for a purpose. It was seen in the theory that was devised by Michael Porter on the competitive advantage and disadvantages are there in order to understand the nature as well as the source of the completion that the company has. The competitive advantage that the company has will be analyzed in this assignment using the value chain, five forces model and the generic strategy.
Tesco is a company that is based in the United Kingdom and they had their headquarters in Hertfordshire, England. It was started in the 1919 by Jack Cohen. There are currently 6784 stores that are spread throughout the world. They have supermarket, hypermarket and superstore.
The trend of globalization is the main problem that the retail chain faces nowadays. The global market has posses a great threat to the company mainly the retailers and the trend have been going for the past two years. The performance of the retailers in the market is mainly due to the behavior of the consumers, that are mainly related to the buying, spending taste and preference of the consumers (Birkinshaw, 2004). The above mentioned theory will provide an insight to the Tesco’s international market situation. These theories will help the management in making the correct strategic decision for taking a corporate and global strategic decision based on the retail market (Coaching delivers improvements for Tesco, 2010). There are many countries where the operations of the company are spread and it will help the company on dealing with the new customers as well as the competitors and the suppliers.
The people are more and more interested in the operation that are done b Tesco and it is due to the way that they carry out the business and they try to attract the customers so that more people shop with them (Barnes, 2011). Millions of people around the world have chosen Tesco as the shopping destination and there are more than ten million footfalls in the stores in each week. Tesco is truly an international company as they are fast growing in all the sectors and they are becoming a common name among the people (Clement, 2011). It is seen that the company have a very good strategy that they follow in the international market but still there are some problem that they face while they try to expand in a new market.
It was seen in the year 2002, it was seen that they faced difficulty in expending to the Poland market, since there were economic problem and that made the product at Tesco higher than the original market price. In another case in the Taiwan market in the year 2000 it was seen that they were facing problem from Carrefour a French giant. Thus due to the unsuccessful ventures that they had in the past made them think differently and they should be more careful in the as well as the competitive environment of the market (Community Awards Scheme: Tesco Charity Trust, 2014). Thus the Porter’s analysis is important for them in order to assess the competitive environment of the company in the current situation.
The framework of Porter can be applied in case of many organizations and it is applied to the examination of the external environment and focuses on the structure of the industry. The main aim of this type of analysis is to build up a strategy that will develop the firms in order to build up the opportunities to protect them from the threats (Foss, 2007). By doing so, they can lead to build up of opportunities and to protect them from the threats. Thus they can have a competitive advantage and a good position in the market. There are five forces on which the company are measured and are called Porter’s five forces analysis. The five forces of are:
Threat of new entrants
Threat of substitutes
The bargaining power of the suppliers
The bargaining power of the buyers and
The competitive advantage of the rivals
Source: internet
The threat of the new entrants- in case of the entry in the retail market or the super market it is seen that the entry barriers are very high. The entry to another county needs an initial investment as well as a high fixed cost hat can prevent the companies from entering to a new market in the home market as well as in the international market (Jeffs, 2008). Apart from this it is seen that the economies of scale that are also a problem that the company faces when they enter a new market. It is seen that companies like Tesco and other large supermarkets or hypermarkets are able to purchase the bulky goods at a lower price. On the other hands it is seen that that smaller companies have to spend a large amount of money in order to purchase a small quantity of good. It is seen that the small firms are aware if the fact that there are loyal customers, thus the threat for Tesco in case of new entrant are low, as they have a large market share.
The threat of substitutes- it is seen that the threat of Tesco form the substitutes are high as there are other supermarkets in the market. Superstores like Asda and Sainsbury are the likely to have the affect of substitutes on Tesco. It is because the products of Tesco are sold by the competitors also and there are chances that the customer may switch to the substitutes. Thus the strategy of Tesco should be to see that the customers that they have are satisfied with the services and the products that they give. On many cases the substitute product may be of the same quality but they can be offered at a lower price and thus there can be an impact on Tesco.
The bargaining power of the suppliers- in many cases there are choices that the customers have in terms of the stores and the supermarkets. It is because there are differences in the prices of the products and the different promotion strategy that they adopt. Keeping these in the mind it is seem that the supplies have a high bargaining power. In these cases it is seen that Tesco is in a situation to control the suppliers as they do not place the order from just one big supplier but there are number of smaller suppliers that also supplies to Tesco. Thus it was a good strategy on the part of Tesco in the sense that the bargaining power of Tesco is increased (Kim and Hallsworth, 2015). This strategy was adopted by Tesco so that the suppliers are not in a controlling situation, and Tesco can switch the suppliers if the performances of the suppliers are not good.
The bargaining power of the buyers- in most of the cases it is seen that the buyers have an influence on the price of the product. It is seen that if a particular food item in Tesco say for beans are expensive in Tesco it is seen that the buyers are likely to shift their preference from Tesco and move to may be Sainsbury or Asda. It is a good sign for the company as there are not too many superstores or hypermarkets that can provide the substitute to the people thus the buyers have little choice to shift (Kotler and Armstrong, 2012). Thus the strategy of Tesco needs to be such that they should keep the price competitive as they may lose the customers. Thus the bargaining power of the buyers is important in keeping the price under check and Tesco can offer a reasonable price.
The competitive rivalry among the competitors- as the market has become global the companies have competitors from throughout the world (Parker, 1986). There are companies in the local market like Sainsbury and Asda and others in the international market like Walmart, which affect the functioning of Tesco. The competitors affect the strategy that Tesco needs to take in order to keep them competitive in the market.
Thus it can be seen that there are various factors that Tesco needs to identify in order to have a competitive advantage in the market. A competitive advantage is necessary since there are many competitors in the market and loosing the market share means that Tesco will lose the customers and eventually lose the market share that they have (Robotic potato handling for Tesco, 2002).
The pricing strategies that Tesco follows are considered as the most effective in relation to the others like the Walmart, Asda and Sainsbury. The pricing strategies that they follow help the food retailers in the US market to have an advantage (Rogers, Ghauri and George, 2005). The rapid innovation in the technology made the life span of the items short and thus it has become difficult for the company to achieve cost reduction by shifting the production process in different countries. it is seen in the US that the companies are trying to reduce the price gaps that are there with Walmart since it is known that the price at Walmart are cheaper and there are other benefits that will compel the consumers to shop in the supermarket.
Thus Tesco need to adopt strategy so that they can have a high profitability in the market. It will help them (Ryans, 2008). Tesco can use the generic model of Porter in order to analyze and position it profitably in the market. It was said in the generic model by Porter that there are three basic strategies called the cost leadership, differentiation and focusing. As it was said by Porter that these three strategies will help the company in order to improve the competitive power in the market place or the environment in which they operate so that they can be advantageous (Sadler, 2003). It is seen that the cost advantage and the leadership are used to find the competitive advantage in the broad industry segment, while the differentiation strategy are used in the narrow range.
It is seen that there are many competitors in the market place and they pose a great to the company. There are both large and small competitions that they face in the UK and in the overseas market. According to the generic model it is seen that in order to be successful, a company needs to embrace a strategy and they should not be stuck in the middle of two strategies (Smith, 2006). The three strategies that are there in the generic model and Tesco follow two of the strategy together. There are both differentiation and the low cost strategy that the follow together at the same time. Thus it is seen that they do either offer discounts to the customers and they are not the cheapest among the competitors.
In case of Tesco it is seen that they are one such company who uses the low costs in order to provide a greater differentiation (Special Issue of Strategic Organization: “Strategic Management Theory and Universities”, 2015). Another differentiation that are seen of the company is that the fact that they are building community. They offer goods for both the rich and the not so rich people this target customer of the company could not be found out. It can be seen that they provide both cheap as well as expensive groceries to the customers, with limited budgets and those who are well off.
The retail outlets have a wide variety of products that they keep and the product line increases each year (Temporal, 2001). There are new additions in the product line in all the segments be it in the product from home building to food items and lifestyle item. Thus it is upon the customer’s needs and the demand that influence the amount and the kind of the stock that they will keep in the retail outlets. In order to be different in the offerings of the product and the services, it is seen that Tesco need to have different product offering for the different country and those need to be based on the weather, income and the style of the country where the company have their retail outlets (Tesco develops new learning portal, 2010).
In the values chain analysis it is seen that the company in the market needs to create value either in the form of cost or differentiation in the market. It is a very costly model that the firm needs to adopt in order to make them sustain in the market. There are certain things that are used in order to find the strategy that the company should adopt in order to have ad advantage over the competitors.
Inbound logistic- the inbound logistic are the main thing that the company need to like after, it includes the receipt of the goods from the suppliers, the handling of the transportation and the internal placing of the goods in the store (Tesco.com, 2015). It is seen that Tesco keep the product at convenient places in the stores and are arranged according to the orders according to the choice of the customers. They also try to improve the efficiency of the delivery of the company.
Operation- it is seen that the production element that Tesco have service oriented in nature and they need to deliver the services to the people so that they are loyal to the expectation of the people. One more thing that they need to consider in the strategy that the need to increase the working hours of the and can open new metro stores as well as express so that they can add value to the operation that they have.
Outbound logistic- it is seen in the outbound logistic that Tesco follows is the delivery of the products to the customers (Williams, 2009). It is seen that the company try to add value to the way that they provide the services to the customers. They have added delivery service under their umbrella so that they are able to offer the best services to the people. More over the trolley deposit services that they have keeps the floor area tidy and they enable the customers to move freely in the floor space.
Marketing and sales- it is an important part of the company and the need to adopt the best marketing plan and strategy so that they are able to create a value for them and have a competitive advantage among the others in the market (Barwise and Meehan, 2004). They can give the ads in the national Television about the services and the products that they have. Apart from that the highlighting of the offers that they have needs to be conveyed to the people so that the customers are aware of it.
Apart from these there are certain support activities that they have like the infrastructure, human resources management and the technology development that also make the company seek competitive advantage from the other in the market. Tesco has a good infrastructure that help them in order too attract the people to the store and as a strategy they have kept the floor place free so that the people can move freely in the stores (Seth and Randall, 2005). The employees of the company keeps track of the sales that take place and places the renewal of stock so that the right product are available to the people at the right time and at the right place. The employees of the company also assist the customers in case the customers face any problem in the stores. They have well developed technology that took them in a competitive position in the company. they have mobile apps and they have Tesco store that from where they can take the delivery at their convenient position.
Conclusion
All the strategic models of Porter are regarded as the strategic tool by which the information from a perspective can be obtained for the organization that can be adopted in the future implementation. The goals and the strategies of the company needs to be such that they meet the criteria of the company and they are able to have a competitive advantage over the others in the market. In the light of strategic analysis it can be seen that Tesco can be benefitted in the market and they are in a advantageous position (Milligan and Smith, 2002). They are successful in all the country in which they operate and they hope that they will keep up the position in the market like they are having it now.
References
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Barwise, P. and Meehan, S. (2004). Simply better. Boston: Harvard Business School Press.
Birkinshaw, J. (2004). Strategic management. Cheltenham, UK: Edward Elgar Pub.
Bitzi, B. (2007). Luxury Brand Extensions in Mass-Markets. St. Gallen.
Clement, M. (2011). Rage against the market: Bristol’s Tesco riot. Race & Class, 53(3), pp.81-90.
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Rogers, H., Ghauri, P. and George, K. (2005). The Impact of Market Orientation on the Internationalization of Retailing Firms: Tesco in Eastern Europe. The International Review of Retail, Distribution and Consumer Research, 15(1), pp.53-74.
Ryans, A. (2008). Beating low cost competition. Chichester, England: John Wiley & Sons.
Sadler, P. (2003). Strategic management. Sterling, VA: Kogan Page.
Seth, A. and Randall, G. (2005). Supermarket wars. Basingstoke [England]: Palgrave Macmillan.
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Special Issue of Strategic Organization: “Strategic Management Theory and Universities”. (2015).Strategic Organization, 13(2), pp.163-165.
Temporal, P. (2001). Branding in Asia. Singapore: Wiley.
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