June 28

TESCO
2019
Submitted By:
Anum Siddique
Submitted To:
Amna Quyyum
Mam Huma Bilal
Malik Sarmad Hussain
Shazeen Iftikhar
Executive Summary:

The objective of this report is to critically analyze the strategic issues of TESCO, UK’s largest
multiple retailer in Central Europe, Thailand and the more recent “Fresh and Easy store” in
United States of America as against the well-established logistic operations in the UK.

For the purpose of coming up with a strategic analysis, we have first studied the market
description of TESCO, starting with the initial company’s structure (Porters five forces analysis)
and identify the major strategic groups .Then we profile the key strategic factors with value chain
analysis, Next we evaluated the strategic issues facing the company to maintain and manage the
international operations and the challenges faced by Tesco to maintain a consistent global brand
image.

It was found that in order to maintain a consistent service delivery system across the globe;
Tesco has been making necessary changes in the service operations like international warehouse
management, continuous replenishment policy, and international logistics. The changes made
have been in accordance to the legal and cultural sensitivity of the overseas country.

The maintenance of international logistics has been critical for Tesco and with the geographical
expansion it is imperative for Tesco to adapt to intermodal intercontinental mode of
transportation. It is suggested that Tesco develop expertise in sea freight transport by developing
dock outs near to sea shore in overseas countries and then transporting goods from docks to the
respective central warehouse units. This will help in achieving economical and efficient freight
cost considering the scenario that Tesco sources both locally and globally.

Highly advanced Information Technology and IT systems have given Tesco a competitive
advantage over the competitors on an international platform and has helped Tesco in maximizing
the overall supply chain profitability. With the expansion happening across the continents it is
important for Tesco to maintain consistent service operations across the globe. This can be done
by developing remote station controlling and tracking of movement of goods by latest RFID and
satellite sensing technology. Tesco need to develop dual monitoring system both on national and
international level. With the usage of upscale Warehouse management system, international fleet
management systems and the ERP systems coupled with remote sensing technology, Tesco can
monitor and control international operations.
Background/history:

It is a British multinational groceries and general merchandise retailer with headquarters in

Welwyn Garden City, Hertfordshire, England, and United Kingdom. It is the third-largest retailer
in the world measured by gross revenues. Tesco was founded in 1919 by Jack Cohen as a group
of market stalls. It has 7817 shops and 517,802 employees around the world. The Tesco name
first appeared in 1924, The name came about after Jack Cohen bought a shipment of tea from
Thomas Edward Stockwell. He made new labels using the initials of the supplier's name (TES),
and the first two letters of his surname (CO), forming the word TESCO internet services. Mr.
Cohen made a profit of £1 from sales of £4 on his first day.

The first Tesco shop opened in 1931 in Burnt Oak, Barnet. His business expanded rapidly, and
by 1939 he had over 100 Tesco shops across the country. The brand continued its rise in the
1930s when Mr. Cohen built a headquarters and warehouse in North London and in 1932 Tesco
became a private limited company.

In 1947 Tesco Stores (Holdings) Ltd floated on the stock exchange with a share price of 25p.

During the 60s supermarkets started to expand rapidly by selling more products in ever larger
stores. Since the 1960s, Tesco has diversified into areas such as the retailing of books, clothing,
electronics, furniture, toys, petrol, software, financial services, and telecoms

In 1961 Tesco Leicester entered the Guinness Book of Records as the largest store in Europe and
in 1968 Tesco opened its first 'superstore' in Crawley, West Sussex.

Supermarkets revolutionized the way people shopped and by the 1970s Tesco was building a
national store network to cover the whole of the UK, which it continues to expand to this day,
while also diversifying into other products. In 1974 Tesco opened its first petrol stations and
would become the UK's largest independent petrol retailer. By 1979 total sales topped £1bn, and
by 1982 sales had doubled to more than £2bn.In the 1990s Tesco continued to tighten its grip on
the UK with more store openings and an aggressive marketing campaign in an attempt to
overtake Sainsbury's as the UK's leading grocer. In 1992, the company launched is slogan 'every
little helps', followed by the Tesco Value range in 1993. This was followed by the launch of the
Tesco Club card scheme in 1995, helping Tesco to overtake rival Sainsbury's as the UK's largest
food retailer.1996 saw the retailer introduce its first 24-hour store while it also expanded
overseas opening shops in Poland, the Czech Republic, and Slovakia. In 1997 Tesco appointed
Sir Terry Leahy as chief executive. Tesco.com was launched in 2000 and the supermarket
continued to expand its range of products, which now includes clothes, electrical and personal
finance products. In 2004 Tesco entered the broadband market. In 2006, the retailer announced
ambitious plans to open stores in the US under the name 'Fresh and Easy' and funded by existing
resources. Tesco now operates in 13 countries. In 2009 Tesco Bank was launched as a joint
venture with Royal Bank of Scotland. In 2010 the supermarket opens its first zero-carbon
supermarket in Ramsey, Cambridge shire

Expand and conquer:

Tesco showed its expansionary zeal early on by buying up rival shops. In the 1950s the retailer
bought 70 Williams stores and 200 Harrow stores, followed by 97 Charles Philips stores and the
Victor Value chain in the early 1960s.

Statement of problems:

From various groups, including national organizations, trade bodies, individuals, consumer
groups and watchdogs, particularly since the early 2000s. One of the biggest criticisms it faces is
the perceived threat it poses to small private owned businesses due to the monopoly it imposes
over products. Other controversial areas concern the treatment of staff, trading deals with
suppliers and customer relations, as well as their approach to foreign businesses. There is also a
belief that they use aggressive tactics to gain land and/or planning permission for building new
stores.
Allegations against the company are varied, including:

 Chicken welfare controversy

 Dishonest corporate policy
 Eco-towns and the environment
 Faking price cuts
 Bullying suppliers and farmers
 Local opposition to new stores and corporate expatiation
 Financial affairs
 Health and safety issues
 Child labor accusations and other overseas cases
The Tesco supermarket chain is often involved in litigation, usually from claims of personal
injury from customers, claims of unfair dismissal from staff, and other commercial matters such
as the treatment of suppliers. The public perception of the company as behaving unethically has
led to the formation of pressure groups such as "No Tesco in Stokes Croft", minor consumer
product boycotts and several lawsuits.
Tesco has been subject to several claims of apparently out-of-date food being 'back-labeled' to
appear still to be within date, poor café hygiene and a staff member contracting legionnaires'
disease in the Wrexham store.

TESCO VISION STATEMENT:

To create value for clients to gain their lifetime loyalty by concentrating on the customers,
understanding and fulfilling their needs and showing responsibility on the community.

His company has some other long-tem objectives to achieve the core vision such as Tesco
ensures equal opportunity for all employees to get highest outcomes from them, provides
guidance to work like a team, and develops mutual understanding by exchanging their views to
give the highest satisfaction to the customers.

This statement also pointed out that all workers would be treated as part of a large family that
indicates Tesco always create excellent environment for the staff to jointly work together as a
team member, where they enjoy equal opportunities in terms of salary, pension, leave, and other
job facilities.

The vision encompasses more than one perspective by referring to innovation, way of doing
business, employees, customers and communities. It is also concise and easy to grasp by the
public. Tesco’s core purpose or mission is to “We make what matters better, together.” Its
values, mission and vision are interrelated and operate as a whole shaping the identity of the
company. Together with Tesco’s strategy, they have a key role in achieving success. KPIs The
vision, mission, values and strategy are meaningless tools if their impact is not monitored and
evaluated. Therefore, a wide range of key performance indicators (KPIs) are also used to
appraise the progress of the company.

TESCO MISSION STATEMNET:

‘Creating value for customers, to earn their lifetime loyalty’.

External analysis:

Porter five forces model analysis:

Porter Five Forces Analysis is a strategic management tool to analyze industry and understand
underlying levers of profitability in a given industry. Tesco Plc managers can use Porter Five
Forces to understand how the five competitive forces influence profitability and develop a
strategy for enhancing Tesco Plc competitive advantage and long term profitability in Retail
industry.

The Porter Five (5) Forces are -

 Threat of New Entrants

 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat from Substitute Products
 Rivalry among the existing players.

Porter Five Forces is a holistic strategy framework that took strategic decision away from just
analyzing the present competition. Porter Five Forces focuses on - how Tesco Plc can build a
\sustainable competitive advantage in Retail industry. Managers at Tesco Plc can not only use
Porter Five Forces to develop a strategic position with in Retail industry but also can explore
profitable opportunities in whole Consumer Services sector.

 Threats of New Entrants

The threat of entry of new competitors in the food industry retail is low. New entrants in Retail
brings innovation, new ways of doing things and put pressure on Tesco Plc through lower pricing
strategy, reducing costs, and providing new value propositions to the customers. Tesco Plc has
to manage all these challenges and build effective barriers to safeguard its competitive edge.

One needs from big investments of capital in order to be competitive and to establish a mark.
The principal marks that have already captured the food market retail are Tesco, Asda,
Sainsbury’s and Morrison and that there represents 80 % of all the buys in the United Kingdom
(Mintel, 2010). Therefore, the new operators have to produce something at an exceptionally low
price and / or of high quality to establish his value of market. To obtain authorization of the
planning of the local government takes a considerable quantity of time and resources to establish
new supermarkets and this is therefore a considerable obstacle for the new inlets

It requires huge capital investments in order to be competitive and to establish a brand name..
  Threat of substitute:

Small departmental stores or convenient stores can create trouble for the company is they might
fulfill the demands of customers. But here the threat for Tesco is very low as they have created
their distinctive brand identity.

 Threat of competitors:

It is something which is worried factor for the company. Other retail giants like Sainsbury,
Morrison’s and ASDA has created huge level of competition for the cited organization.

 Bargaining Power of Suppliers

All most all the companies in the Retail industry buy their raw material from numerous suppliers.
Suppliers in dominant position can decrease the margins Tesco Plc can earn in the market.
Powerful suppliers in Consumer Services sector use their negotiating power to extract higher
prices from the firms in Retail field. The overall impact of higher supplier bargaining power is
that it lowers the overall profitability of Retail.

The power of negotiation of the providers is quite low. Fits to point out that the providers incline
towards the most important and retail food of food and the fear of losing his commercial
contracts with the big supermarkets. Therefore, the position of the retailers as Tesco, Asda and
Sainsbury’s becomes stronger moreover and the negotiations are positive in order to obtain the
price as low as possible of the providers.

The bargaining power of suppliers is fairly low.

It should be noted that the suppliers are inclined towards major food and grocery retailers and
dread losing their business contracts with large supermarkets. Hence, the position of the retailers
like Tesco, Asda, and Sainsbury’s is further strengthened and negotiations are positive in order to
get the lowest possible price from the suppliers.

Here also Tesco is struggling as due to high competition the suppliers might get edge on
company. The retail giant has to build healthy relationship with them with respect to get products
on competitive price.

 Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price as possible. This put pressure on Tesco Plc profitability in the long run. The
smaller and more powerful the customer base is of Tesco Plc the higher the bargaining power of
the customers and higher their ability to seek increasing discounts and offers.

The power of negotiation of the buyers is quite high. In the cases in which the products have a
differentiation set sail and they are standardized more, the cost of change is very low and the
buyers can change easily one mark to other one. It has been proposed that the clients feel
attracted towards the low prices, and with the availability of buys retail in line, the prices of the
products are easy to compare and to select this way.

Due to availability of substitute and other retail stores the bargaining power of customers is
high. The Tesco is required to keep the price low and reasonable with respect to capture the
major chunk of market (Jeffs, 2008).

 Threat from Substitute Products

Small departmental stores or convenient stores can create trouble for the company is they might
fulfill the demands of customers. But here the threat for Tesco is very low as they have created
their distinctive brand identity.

The threat of entry of new competitors in the food industry retail is low.

One needs from big investments of capital in order to be competitive and to establish a mark.
The principal marks that have already captured the food market retail are Tesco, Asda,
Sainsbury’s and Morrison and that there represents 80 % of all the buys in the United Kingdom
(Mintel, 2010). Therefore, the new operators have to produce something at an exceptionally low
price and / or of high quality to establish his value of market. To obtain authorization of the
planning of the local government takes a considerable quantity of time and resources to establish
new supermarkets and this is therefore a considerable obstacle for the new inlets.

When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example services like Drop box and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from present offerings of the industry.

 Rivalry among the existing players.

If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. Tesco Plc operates in a very competitive
Retail industry. This competition does take toll on the overall long term profitability of the
organization.

The intensity of the competitive rivalry in the industry of food and groceries retail is very high.
Tesco faces the intense competition of his direct competitors, including Asda, Sainsbury’s,
Waitrose and Morrison, who compete between yes on the price, products and promotions of
intermittent form. Therefore, it is necessary to emphasize that Asda is one of the principal
competitors in this segment with an increase of quota of market of 16,6 % to 16,8 % during the
fiscal year 2010 / 09, whereas Sainsbury’s has demonstrated an increase of 16,1 % from 15,8 %
and Morrison to 11,6 % of 11,3 % across the same period (Euro monitor, 2010). The slow
growth of the market means essentially that these quotas of every time major market of the
competition there has been intensified the rivalry of the market, which is threatening the position
of leadership on the market of Tesco. • In the rural zones, where the most nearby supermarket
can be a certain distance, some primary consumers are attracted by the retailers like Somerfield
and Co-op. shops of hard discount as Aldi and Lidl have taken possession of the market in times
of recession. During 2008 there registered a growth of the selling of more than 25 % .

PESTLE Analysis of Tesco

The majority of threats to the players in the industry come from existing main players rather than
new entrants(lack of information about new entrants). Especially for Sainsbury. It is because
Sainsbury keep copying Tesco’s strategies. In addition, it is also important to be noted that in this
industry there are more opportunities rather that treats meaning that it is a competitive industry
and each of the player need to struggle in order to stay ahead.

 Political factors
This company is operating in 12 countries including Asia and Europe. It is exposed to
many political factors that can affect the operations of Tesco. These factors include Tax rates,
current and impending legislation, political instability, unemployment rate, economic condition
of the countries where it is operating.
For example, import duty on goods can affect Tesco because it imports some inventory from
outside UK like China and East Asia.

Tesco Chairman Johan Allan an outspoken person and business leader told that what political
factors can affect the business. He added that EU referendum is greatly creating a risk factor for
investors and the British Economy is passing through hard times.

The tax on large supermarkets known as “Tesco Tax” was proposed by the local council but UK
government refused this initiative mainly to avoid price hike. Similar initiatives in the future can
affect Tesco negatively.
  Economic Factors
Labor cost is an important economic factor that can affect UK supermarkets. For example, its
annual wage bill is amounting GBP 4.5 billion. In 2018 UK Minimum Wage Rate is increased by
4.4% for 25 years old and onward. This upward shift has cost Tesco millions of pounds in UK.
There are many other factors that affect Tesco i.e. cost, prices and profits. The company should
focus on the increasing borrowing cost in UK. It can increase the costs and prices and decrease
its profits. It can affect the brand reputation and cost leadership strategy.

Diversification and presence in international market are the two important strategies in past years
and reasons for success of the company. It is worth mentioning that Tesco is still dependent on
UK market with a 27.7% share in the UK grocery market.
Social Factors
Consumers shopping trend are constantly changing over time. People have tough schedules and
want same day and fast delivery with a flexible goods return policy. They prefer one-stop
shopping. Tesco is relying on UK customers and must understand and provide the services to
meet these issues.
The demand for goods and services is related to the consumer beliefs and attitudes which is
another focused issue.

Obesity is another issue in the in society and customers are more concern about their health.
Tesco must consider changing behavior and demand for organic food.
According to PWC report 65% UK shoppers are loyal shoppers. Tesco should avail this
opportunity by developing close ties and one to one connection with customers.

 Technological Factors
Few years back Tesco was facing issues like poor customer experience and horsemeat
scandal. Technological advancement brought new opportunities to Tesco to regain the customer
trust.
Tesco embrace advancement in technological as opportunity by adopting available retrial
technologies.

They introduced RFID Technology to increase in-store experience for customers. It

automatically counts stock and remove it after sales. This information is also helpful for supplier
of the store and replenish when required.

Now customer can pay as they want, Tesco have developed its own online mobile payment
system called PayQwid. From London to Edinburgh 524 Tesco stores are using this app.
Customer can download the app and link it with Club card and NFC technology. Customers can
pay for shopping and get loyalty points.

For those who love convivence shopping, they introduced “scan as you shop” check points.
Customer’s shop and tag products. It saves time and labor cost as well.
  Environmental Issues:
. Many companies are facing immense pressure from government agencies to address
environmental issues. Companies are liable to respond these issues to benefit society.

Now Tesco encourages its consumer to shop at tesco.com. Tesco Van Drivers will not only use
fuel-saving routes but also collect unwanted plastic bags from customers and recycle them.
Also, Tesco is committed to use renewable sources and generate 100% of its electricity by
2030. The company promises to minimize upto 50% carbon footprint by 2020.

 Legal Factors:
In a business legal environment, don’t undermine key areas where law changes that can affect
your business performance to achieve your objectives.
In 2016 Tesco 17 workers took a legal action against employer on the basis of age and gender
discrimination. Workers were extremely frustrated after noticed low pay rates for night, weekend
and bank holidays shifts.

Tesco also faced legal action for accounting fraud and misleading the investors, lastly, agreed to
pay GBP 12 million to settle the legal action.

Tesco must conduct its operation accordance with Food Retailing Commission (FRC) strict code
of practice.

We performed Tesco pestle analysis, hope the discussion will give you a better understanding
retail industry external factors affecting their business environment.

Competitor analysis of TESCO:

 Strengths:

Tesco is still the biggest and most popular supermarket in the UK. A Mintel (2017) survey found
that 60% of UK grocery shoppers use Tesco, compared to rivals Sainsbury’s (44%) and Asda
(42%).

One of the top 10 most valuable brands in the UK.

Tesco boasts the highest trust rating of any of the grocery retailers in a Mintel survey carried out
last year, having now largely repaired the reputation and brand image damage arising from
debacle such as the accounting scandal of 2014 (Mintel 2017)

 Weaknesses:

Loss-making Tesco Direct, the website, which sells items including toys, consumer electronics
and household goods, will cease trading on July 9 and the fulfillment centre that handles Tesco
Direct orders will also close with 500 staff at risk of redundancy (Eely 2018).
  Opportunities:

Purchase of wholesaler Booker Group for £3.7bn is opportunity to increase Tesco’s buying
power, revenue and cost synergies and further extend its reach into food and drinks retailing

Current consumer-focus on healthy foods and beverages can be opportunity or threat depending
on how Tesco reacts

Growth of plus size fashion an opportunity for Tesco’s F&F clothing offer

Rise of superfast delivery is fast becoming the norm and opportunity to create competitive
differentiator

 Threats:

Merger of Sainsbury and Asda (Sainsdas) will squeeze market share and put pressure on Tesco
margins

Current consumer-focus on healthy foods and beverages can be opportunity or threat depending
on how Tesco reacts

Rise in weekly top-up shopping is opportunity for convenience but a major threat for Tesco’s
superstore format

Consumer demand for zero food waste is putting pressure on supermarkets to change

New UK “sugar tax” levy is threat

New living wage regulations adding costs

The below mentioned VRIO analysis presents the difference between the unique and basic
resources of the company:

Resources Valuable Rare Imitable Organisation Advantage

IT integration Yes No Yes Yes Temporary

Supply chain
Yes No No Yes Temporary
management

Workforce Yes Yes No Yes Permanent

Club Card Yes Yes No Yes Permanent

Unique Store
Yes Yes No Yes Permanent
Format

Cost efficiency Yes Yes Yes Yes Permanent

STREGHTNS WEAKNESSES

1.Today Tesco is the clear 1Porter and J managing

market leader director IanMacLaurin
abandoned the 'pile it high
2: In the 1990s, Tesco strongly
and sell it cheap "philosophy
expanded overseas by
of Cohen, which had left the
increasing investments in
emerging markets such as Company stagnating with a
Hungary, the Czech Republic, bad image
Thailand, and South Korea.
2: Began in the late 1970swith
3:“An inclusive offer” is how the purchase of a small
company in the Republic of
SWOT Tesco describes its aspiration
Ireland. The small scale
to appeal to upper, medium-,
nature of this first foray was
MATRIX and low-income customers in
seen as a weakness, and the
the same stores.
company was eventually sold
in themid-1980s.
4- Tesco regularly continues to
make acquisitions to expand its
international business

5. Tesco is the most customer-


OPPURTUNITIES
1.Recent trends, such as health 1.Relying on its own
and wellness and ethical
concerns, have opened
opportunities, even in the
saturated food category;
however, most food retailers'
growth is expected to stem
from non-food items.
2:Toward the end of the
1990s,both firms targeted
Online distribution channels
that promised large growth
potential
3:Non-store retailing growth
rates were expected to be
higher than store based rates,
as online usage gained
popularity among British
consumers
4:Following these predictions,
the United Kingdom has
focused business that I have
ever worked for. They are
absolutely obsessed with the
customer.
SO WO
1-Tesco could use the
reputation and experience and opportunities of online
applying new opportunities distribution channel as the
such as beauty and healthiness way for overcome the
products based could guarantee weakness of” the small scale
success of Tesco in other nature ”in order to get ready
industries(S1,O1) to compete with major players
in the industry(W2,O2)
2-Tesco strongly expanded
2-Focus on healthy industries
overseas and as a market
to recover the current
leader UK Tesco can used the
weakness (w2o1)
opportunity of the internet to
target the growth of the
potential customers
(S1,O2,O3)
3- Tesco which is most
customer focused business
should grab the opportunity to
a new market segment in order
to add more target market or
consumers.(S5 ,O1)
evolved into

a leader of internet retailing in

Europe, and growth is
continuing.

THREATS ST WT

1. At the beginning of 1-Tesco could use its 1.Regarding the pressure

the1990s, the U.K. retail
market slowly became more
competitive
2:While service offerings
today are quite similar,
therivals' distribution
strategies differ significantly.
3:In the mid-
1990s,competition intensified
as a price war among these
dominance in expanding its
empayar to overseas in order to rivals , Tesco, should
penetrate anew market and
minimize competitive
advantages of its
competitors(S2,T3)
2-Tesco should continue the
strategy of acquisition of its
small competitors in order to
neutralize their threat of
exerted from foreign and local
intelligently managed itself,
increased product
diversification and change
some procedures in order to
cut costs in order to stay
ahead in the industry and at
the same time meet demands
of the industry(W2,T1,T2,T3)

players emerged, resulting in cutting prices (S4, T3)

squeezed margins and cost

cutting. It is not surprising that
this also had an adverse
impact on the service level
these corporations provided.
Internal Factor Evaluation (IFE) Matrix

Item Key external factor Weight Rating Weighted

score
Strengths
1 Tesco is the most customer-
focused business that I have
ever worked for. They are 0.10 4 0.40
absolutely obsessed with the
customer. (Pg. 335,para4)
2 In the 1990s, Tesco strongly
expanded overseas by
increasing investments in
emerging markets such as 0.07 3 0.21
Hungary, the Czech
Republic, Thailand, and
South Korea. (Pg. 337,para5)
3 The stole appeals to wide
reaching demographics
across the country and has
built up a heritage of
reliability and trustworthiness 0.08 3 0.24
which keeps shoppers
returning to its store. (Pg.
334,para3)
4 Tesco has responded to the
need to be sensitive to local
expectations in foreign
countries by entering into
Joint ventures with local
0.08 3 0.24
partners, such as Samsung
Group in South
Korea(Samsung-Tesco
Homeplus), and Charoen
Pokphandin Thailand (Tesco
 Lotus) (Pg. 338,para3)

5 ln 2005 and 2006, the

company covertly sent an
advance team consisting of
executives in disguise to 0.07 4 0.28
conduct intelligence on
potential competitors. (Pg.
339,para2).
6 Tesco paired its marketing
strength with the expertise of
existing telecom operators. 0.06 3 0.18
(Pg. 337,para3)
7 Tesco was the first to Launch
a Clubcard system. (Pg. 0.08 4 0.32
335,para4)
8 Tesco implemented the 0.08 4 0.32
Clubcard rewards program to
gather customer information,
which is then used to cater to
specific potential customer
needs and wants. When
shoppers sign up for the card,
they automatically submit
their ages, genders, and
incomes. Tesco segments
their shoppers on the basis of
these factors. (Pg. 335,para4)
9 In 2003, Tesco.com’s then- 0.08 4 0.32
CEO,John Browett, received
the Wharton Infosys Business
Transformation Award for
the innovative processes he
used to support this online
food service (Pg. 336,para2
10 it has succeeded in building 0.09 4 0.36
an image on providing good
value at Low Prices. (Pg.
 340,para7)

Weaknesses
1 Tesco Superstores are the
standard large grocery
supermarkets, with a much
smaller range of non-food
0.04 2 0.08
goods than Extra (Pg.
333,para5)

2 Tesco emphasized its low-

price private label ("Value")
and continued to cut price 0.04 3 0.12
(Pg. 333,para3
3 Porter and J 0.05 2 0.10
managing director Ian
MacLaurin abandoned the
'pile it
high and sell it cheap"
philosophy of Cohen, which
had
left the company stagnating
with a bad
image(pg.332,para4)

4 Began in the late 1970swith 0.03 2 0.06

the purchase of a small
company in the Republic of
Ireland. The small scale
nature of this first foray was
seen as a weakness, and the
company was eventually sold
in the mid-1980s. (Pg.
337,para5)

5 Sainsbury’s online shoppers 0.05 2

bought more items per order, 0.10
with both averaging 69 units
 Compared to 58 units for
Tesco(Pg. 336,para3).
Total 1 3.33

Conclusion

IFE matrix shows the information related to strategy formulation Tesco. Tesco achieved an
overall of 3.33 total weighted score based on the 1-4 scale. From here we can realise that the
company is success internally. I considered Sainsbury in this case as Tesco main competitor for
the internal analysis

7 The External Evaluation Factor (EFE)

Item Key external factor Weight Rating Weighted

score
Opportunity
1 Following these predictions,
the United Kingdom has
evolved into a leader of
internet retailing in Europe,
0.09 4 0.36
and growth is continuing.
(Pg.335,para5

2 Toward the end of the 1990s,

both firms targeted online
distribution channels that
promised large growth 0.08 4 0.32
potential(Pg.335,para6)
3 Non-store retailing growth 0.08 4 0.32
rates were
expected to be higher than
store based rates, as online
usage gained popularity
among British consumers.
(Pg.335,para6)

Tesco then analyzed

countries for expansion,
4 Putting high emphasis on two 0.07 3 0.21
dimensions: the market
Potential for growth and the
competitive situation in the
market. Only if a market was
characterized by relatively
high
growth potential and relatively
low rivalry was it considered a
real target market and
approached in an orderly
fashion. (Pg.337,para1)

5 Recent trends, such as health 0.07 3 0.21

and wellness and ethical
concerns, have opened
opportunities,
even in the saturated food
category; however, most food
retailers' growth is expected to
stem from non-food
items. (Pg.341,para2)
6 Sainsbury's decided that a 0.08 4 0.32
separate brand was no longer
needed. Over the following
years, these stores were
converted to the regular
Sainsbury's superstore format
and, subsequently, Sainsbury's
retreated from hypermarkets
and changed its store formats.
(Pg.333,para4)

In the
aftermath of World War l,
7 food supplies were low, so he
0.08 4 0.32
bought damaged goods from
other stores and re-sold
them at reasonable prices.
(Pg.332,para4)

Threat
8 This was helped by the trend
of consumers to increasingly
combine bargain shopping
with purchases of
luxury products or services
This "schizophrenic" 0.06 3 0.18
shopping
behaviour blurs Previously
separate boundaries
(Pg.340,para6)
9 Sainsbury's emphasized
price reductions on the
standard private 0.06 4 0.24
labels(Pg.333,para3)

10
At the beginning of the
1990s, the U.K. retail
0.06 4 0.24
market slowly became more
competitive(Pg.332,para5

11 While service offerings 0.05 3 0.15

today are quite similar, the
rivals' distribution strategies
differ significantly.
(Pg.335,para2)

12 At the beginning of the 0.05 3 0.15

1990s, the U.K. retail
market slowly became more
competitive(Pg.332,para5)

13 In the mid-1990s, 0.05 4 0.20

competition intensified as a
price
war among these players
 emerged, resulting in
squeezed
margins and cost cutting. It is
not surprising that this
also had an adverse impact on
the service level these
corporations
provided. (Pg.333,para2

14 In 1975, Sainsbury's 0.06 3 0.18

Launched the "Sainsbury's
SavaCentre hypermarket
formal as a joint venture with
British Home Stores. This
was the first attempt in the
United Kingdom to launch
supermarkets with a large
non-food range
(Pg.333,para4
16 Sainsbury's targeted 0.06 3 0.18
the upper price segment,
positioning itself between
mass market and high end.
P333. Par 1
Total 1 3.58

Conclusion
Based on External Factor Evaluation Analysis, Tesco achieved 3.58 which shows that the
company is responding in an outstanding way towards the opportunities and threats in its
industries. As a matter of fact, we can clearly see that Tesco external strategies have successfully
take advantage of existing opportunities and at the same time struggle to reduce the threats.
Competitive Profile Matrix (CPM) Analysis
Key Tesco ASDA Sainsbury’s
SUCCESS Weight Rating Score Rating Score Rating Score
FACTORS
Brand Value 4 1.72 4 1.72 3 1.29
& Reputation 0.43
IT Integration 4 1.48 3 0.11 4 1.48
0.37
Supplier 0.20 3 0.60 3 0.60 4 0.80
Management
Total 1 3.8 3.43 3.57

Conclusion:
From the CPM analysis we can see that Tesco CPM value is 3.8 which is ahead of the other
competitors such as ASDA and Sainsbury. It is clear to know that Tesco is the industry leader.
From this analysis we can see that Sainsbury’s is the closest competitors for Tesco. On the other
hand, because of the lack information about ASDA, I will going to take Sainsbury’s as the main
competitor for the internal analysis. In fact, there are not so much differences between
Sainsbury’s and ASDA in terms of their position in the industry.

Value chain analysis is a useful tool used to increase the overall value of the organization
considering all weakness and strengths of the organizations. On the other hand, value chain is
used to link between key value adding activities and their interface with the support activities
that increase the total value of the organization (Hutt and Davidson, 2012). Here the value chain
of Tesco Plc is shown in the following figure; Figure: Value Addition in Value Chain of Tesco

Inbound logistics:
to have the strong bargaining power from the suppliers so that Tesco can have the supplies at
lower costs, the company uses its leading market position and economic of scope. On the other
hand, Tesco has upgraded its ordering system and approved the vendor lists (Piercy &
Nicoloulaud, 2008).

Operations Management:
Tesco has a strong supplies chain management to produce the products effectively. On the other
hand, the company has been able to reduce the cost through the efficient IT system. The
company has recently invested almost 80million pound for streaming its operations. This is a
third generation REP solution for the company.

Outbound Logistics:
Because of its efficient Outbound Logistics, Tesco has been able to build a strong relationship
both in online and offline food retail segments. Company has developed different store formats
to get the maximum customer exposure
(Hill and Jones, 2012).

Marketing and Sales:

To increase the sales volume, Tesco has efficient marketing strategy like Tesco Clubcard
introduced through the Information technology advances to bring the more customers from the
competitors.

Services:
Tesco is operating the business activities emphasizing on the dual strategy to be the cost leader
and product differentiation. Tesco tries to capture more customers in this ways. So, besides being
the cost leader, Tesco has been able to bring more diversified products for the customers creating
more value compared to other competitors.

Recommendations:
Looking at results from supermarket shoppers that were asked what they would change about
their favourite supermarket, significant amount of people chose selected improved availability,
improvement of a loyalty scheme, improvement in the quality of fresh foods, waiting times at
checkouts and ease of store navigation. Arguably, for a customer it is highly essential to find all
the products they need within a single store, at a reasonable price and without wasting too much
time. In order to correctly choose marketing strategies Tesco has to look at customer desires so
that they have a broader view on demand and thus investment or new strategies will be
implemented in the right sector. It is essential that the company succeeds in anticipating trends
and market changes in order to keep its current advantage of being the market share leader.

CONCLUSION:

The success of the Tesco shows how far the branding and effective service delivery can come in
moving beyond splashingones logo on a billboard. It had fostered powerful identities by making
their retailing concept into a virus and spending it out into the culture via a variety of channels:
cultural sponsorship, political controversy, and consumer experience and brand extensions. In a
rapidly changing business environment with a high competitors pressure Tesco have to adopt
new expansion strategies or diversified the existing in order to sustain its leading market position
in an already established retailing market. The company must constantly adapt to the fast
changing circumstances. Strategy formulation should therefore be regarded as a process of
continuous learning, which includes learning about the goals, the effect of possible actions
towards these goals and how to implement and execute these actions. The quality of a formulated
strategy and the speed of its implementation will therefore directly depend on the quality of
Tesco’s cognitive and behavioral learning processes. In large organizations as Tesco strategy
should be analyzed and implemented at various levels within the hierarchy. These different
levels of strategy should be related and mutually supporting. Tesco’s strategy at a corporate level
defines the businesses in which Tesco will compete, in a way that focuses resources to convert
distinctive competence into competitive advantage.
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