Strategic Management of Tesco Explained

Home Strategic Management of Tesco Explained

Tesco is a multinational company established in 1919 by Jack Cohen in Hackney, London, England, UK.  Tesco is the third largest retailer in the world supplying general merchandise and groceries. The main hub of operations of Tesco is UK, Ireland, Hungary and Thailand, company dominates the market here. The grocery company expanded its business in 11 countries thorough out the world and also diversify its product range such as retailing of books, electronics, petrol, clothing, furniture, toys, software, internet services, telecom and financial services.

Strategic management is the formulation and implementation of the goals determined by the top management of the organization to achieve these goals. Various strategies and policies are formulated and allocate the resources to achieve such plans. Thus, in strategic management, the managers frame various plans and policies to achieve the mission and vision of the company and arrange the operations accordingly. The principles of the corporate strategies are as follows:

  1. To create a unique and valuable position of the company in the market.
  2. To ascertain the operations to do or not to do.
  3. To analyze the best fit of activities to achieve the objectives of the strategies formulated.

Thus, the corporate strategy provides solutions to the management on the various aspects of the business such as “what the business should do?”, “how should company deal with the competitors?”, “how should company improve its efficiency”.

To formulate the strategies, the company should conduct the SWOT analysis, experience curve, portfolio of the company, competition scenario, structure of the industry, value chain of the company and profitability of the company. All these factors influence the operations and outcomes of the business. Therefore, company considers all these factors to formulate new strategies for the business growth and development.

Tesco publish its strategic report annually which includes all the functional objectives of the company and the facts about the positions where the company wants to see itself and how it should increase the sales to earn more profitability to reach that level. Thus, all the future plans and activities are provided in the statement published by the company. The strategic report must always be in sync with the main annual reports of the company. To maintain the sync, the company has to conduct following analysis before formulating any strategies:

External analysis: the external environment has the major impact on the company, the factors influencing the operations of Tesco are as follows:

  1. the performance of the company is based on the political factors in the market such as taxation rates, legislation under various acts, stability in economy, employment rate and government initiatives. These factors influence the internal operations and decisions of the company.
  2. The economic stability in the market influence the profits and losses of the company as the market rates will determine the revenue generated by the company. in the financial year 2009 it has been seen the company’s growth rate was less than 10% because the economy was suffering from financial crisis.
  3. The changing patterns of the livelihood and social habits and culture also impacts the working of the company. As Tesco is grocery supplying company it gets effected directly with the changing patterns of the society which includes cooking and eating habits.
  4. With the advent of research and development various advancements in technology have been made which requires Tesco to upgrade their technology to produce and supply their products with automatic machines and providing home delivery to customer.
  5. The ecological environment influence decisions of management to comply with their corporate social responsibility Tesco has decided to reduce their carbon footprint up to 50% by the end of year 2020.
  6. The company has to formulate and implement all the policies and operations being under the authority provided by legal environment which will influence decisions taken by Tesco such as National minimum wage act 1998.

Internal analysis: the internal environment of the company consists of various resources required by the company for actual implementation of the plans and policies formulated by top management.

  1. Human resource is the actual implementer of the plans formulated by top management so it is the responsibility of the company to critically hire the human resource which can contribute towards achievement process of the goals determine. As Tesco is operating in more than 11 countries. It has almost 476000 employees out of which 88% of the total workers have been employed on the part time basis so the performance of the workers impacts the performance of the company.
  2. To acquire other resources of the company the most important resource is finance. Thus, financial resources determine the capacity of the company. the investment in existing or new products or in distribution channel will be determined on basis of financial reports of Tesco. Tesco adopts the VRIN model to consider the investments. VRIN stands for valuable, rare, inimitable and non-substitutable.
  3. The production of the company will be determined by the physical resources available to them. Tesco has 6849 stores all over the world and 2348 factories where the actual production of the company is done. The main strategy adopted by the company is the customer satisfaction. Tesco conducts the market analysis by conducting and analyzing needs and expectations of targeted customers. To create more value in the customer satisfaction and experience. To face the competition of the market Tesco has adopted various competitive strategies such as Price differentiation depending upon the demand of the product Tesco is famous to make available the products at low cost than their competitors but to increase the profitability company charge the premium charges for their differentiated products.

Conclusion: Tesco is a grocery supplying company which has adopted various strategies to get the competitive advantage and increase the profitability of the company.

References:

What is strategic management? - Definition from WhatIs.com. (2019). Retrieved from https://searchcio.techtarget.com/definition/strategic-management

Tesco: SWOT, PESTEL, Porter's 5 forces and Value Chain. (2019). Retrieved from https://www.ivoryresearch.com/samples/economics-essay-example-strategic-management-of-tesco-supermarket-pestle-analysis-porter-5-forces-analysis-critical-success-factors-swot-analysis-value-chain-analysis-tesco-strategic-options-core-comp/

Strategic Management Analysis. (2019). Retrieved from https://www.assignmentdesk.co.uk/strategic-management-analysis

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