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A strategic management of Tesco This paper describes the implication of theory in to practice of Tesco. The theory under consideration in throughout this report is the Porter’s Five Forces Model. The complete analysis of Tesco assessed through this report that to which extent they got success by the use of this model in the industry. They used the complete implication of Porter’s work in their company and this paper analyzes the effect of Porter’s strategies. Moreover, this report opts to evaluate the strategy of Tesco used for marketing in order to gain the competitive position through globalization internationally. That position is also based on the Porter’s strategy of competitive positioning. This allows revealing the fact that how Tesco become able to got success over its rivals name Asda and others through generic strategy. Finally, the five forces model is investigated that actually identify the competition Tesco faces as well as showed the gaps available for improvement. The data found for this report is collected from a variety of sources included books, media articles, annual report of Tesco, Tesco’s website and through other websites also. This information helped to discover that how Tesco get competitive advantage in the industry by using the Porter’s Strategies and theories. The theoretical model reflects its practice in Tesco with relation to the strategic analysis. In short, the success of Porter’s model is analyzed through real world example. That revealed the fact that how other companies can also get better position in industry through use of Porter’s model and competitive advantage strategy. Thus, the purpose of this paper is “To analysis the strategic implication of Porter’s Five Forces Mode as well as the use of competitive advantage in Tesco”.

According to Johnson, strategy is actually the scope and direction of organization which is based on long term of the business. Its basic objective is to get advantage through configuration of competencies and resources in rapidly changing environment. Generally, the levels of management are categorized into three types according to strategic point of view within an organization. The very first is associated with the top level where the corporate level of strategies are maintained that are build by keeping in mind the overall purpose and mission of organization. Second strategies are of business level that are of particular market as well as provide a way to compete in them successfully. Third types of strategies are for operational level which actually showed how successfully company delivers (Johnson et al, 2008). Firstly, the brief introduction of Tesco is described in following. Tesco started in 1919 when Jack Cohen opened a small stall in London’s East End. Then they started to trade in 1924 that showed that Tesco is serving the UK’s customers from a long period of time. In today’s world Tesco find itself much more than the weekly shop because they continuously introduced new products, services and ways for shop. This all happen by their philosophy of “Every Little Helps” (Tesco, 2014). Tesco has developed its business by becoming the third largest retailer of grocery in the world in last decade. They did this through their excellent services which they provide to its customers. Their growth strategy is based upon five parts which are non food, core business UK, retail services, the community and international (Tesco, 2014). The market share of Tesco was also continuously growing from its founding but it slows down in recent years due to strong competition and technological development (Leahy, 2008). There were anticipations that in 2012 by Institute of Grocery and Distribution (IGD) that Tesco would become the second largest retailer of world after Wal-Mart that comes true. The growth of Tesco spurred in markets by the international expansion like the US, India and China (Hall, 2008).

Tesco also take part towards the economic position of the country by employing more than 280,000 employees with more than 2100 stores in only UK. There are four different types of formats available by Tesco for their stores. These stores types include Express stores, Metro Stores, Superstores and Extra stores. The express stores were opened in 1994 and sell more than 7000 range of products through it. The first Metro store started its operations in 1992 that was built to bring the convenience to shop in city and town location centers. The Superstores of Tesco were opened in 1970 and it also offering some nonfood products like books and DVD’s from some years. The Extra stores began from 1997 and added a huge range of different products like furniture, electrical items, health products, clothing etc. Besides the non food and food products, Tesco provides retailing services. Tesco Personal Finance (TPF) provides 26 products of choice for their market. These are ranging from credit cards and savings s to travel insurances and cars. The growth strategy for Tesco has been consistent and well established that actually helpful in its large expansion. The real rationale for its strategy is that to enlarge the business scope to enable Tesco to deliver sustainable, long term and strong expansion (Tesco Strategy, 2008).

After getting information regarding Company, the second step is to know about the position of company into the context of its industry. This can be analyzing through competitive positioning of company because it is the basic tool of analysis especially in the industry context (Campbell et al, 2002 p.298). Competitive positioning is actually level of difference among choice of service or product against its rivals (Lynch, 2003). According to Porter’s point of view, the company can get a good position if it runs their affairs in accordance with current situation (Campbell, 2002). An organization can only get achievement if they become successful in accessing the minds of

their consumers and this thing become them able to gain the competitive advantage on their enemies (Darling, 2001). One strategic model is used for the relationship of the company and its environment that is also a way for getting competitive advantage. That is based upon the Generic Strategy Framework of Porter (Campbell et.al, 2002). In the third step, the application and identification of Porter’s models and theories is assessed within Tesco. Porter’s five forces model is basically useful to companies in order to judge the competition because it serves as a starting point in most organizations for the strategic investigation (Campbell et.al, 2002). The five forces model of Porter means that it is an industry’s structural characteristics that identify the relative failure or success of firm. Porter believes on the fact that the competition with in an industry roots in its core economic structure (Jenkins et. al, 2002). According to Johnson, five force can be define as 1) Threat of new entry within an industry 2) Threat of the substitutes in services and products of industry 3) Power of the buyers in the services or products of industry 4) Power of the suppliers within industry 5) Extent of the rivalry among competitors of industry. The criticism of Porter’s five force model is that this model does not differentiate between the status of competitors of a firm or company. However, this criticism is not true because the five forces model is actually related to macro environment. Therefore there is only a need to view the macro environment on continuous basis as this model is not constructed to be applied on isolation basis (Campbell et.al, 2002). The application of five forces model in Tesco is also related to analyze the external environment of the company. Tesco also put huge barrier for the new entry in the industry along with its competitors like Sainsbury, Asda etc, (Research Papers, 2007). One example about the accomplishment of Tesco is that it provides an advantage to buy in bulk through cheap products

which become them able to get economies of scale besides the new supermarket (321 Books, 2007). The buyer’s power in Tesco force them to down the prices of products because if they does not do so there are definite chances that they can move to other supermarkets. Therefore there is need to adopt a balance approach to setting its prices as the supermarkets are trying to destroy each other. The power of suppliers in case of Tesco is used for their own benefit. Yet the prices are demanded through its suppliers in other case the retailer is not ready to provide the good’s delivery for selling (Research Papers, 2007). This results in the form of creating bad relations with the suppliers. The Tesco has a benefit because its major market is to provide goods to the smaller shopkeepers who always are ready to pay the demanded prices. It is their need to get themselves ready to pay on demand because otherwise they cannot fine way to run their business on continuous basis. The rivalry of Tesco in the food sector is very strong and it always involve in the competition with Sainbury’s Waitrose and Asda. These competitors have competition on the basis of their products, promotions and prices regularly (321 Books, 2007). For the purpose of getting more opportunities Tesco has to improve and expand their categories of products because in this way it can actually involve in to the intense competition among Supermarkets of the UK. However, there is also another strategy that is most important in today’s world is online facility for the stakeholders. Tesco has actually this competitive advantage over its competitors that it manages and sustains this technological strategy from very beginning (Hackney et.al, 2006). In fourth step, after analyzing the application of the porter’s five forces model there is a need to know about the position of Tesco through its competitive advantage. For this purpose, the generic strategy of Porter is being used here. This Generic strategy approach of the Porter is from

of the oldest approaches. According to which, there is a need to analyze the external analysis first and then to get the desirable position strategically (Campbell et.al, 2002). The concept of generic strategy is based on the differentiation, cost leadership, differentiation focus and cost focus (De Wit et.al, 2004). According to concept OF Porter, the businesses should have an ability to get something which is extraordinary and which is not usual and this happened through cost leadership and differentiation strategy (Campbell et.al, 2002). For broad segment of industry, the competitive advantage involves differentiation and cost leadership strategies whereas for narrow segment of industry there is a need to achieve cost advantages that involves differentiation focus and cost focus. However, this concept varies from industry to industry or for generic strategy should be construct in accordance to the specific industry (De Wit et.al, 2004). The generic strategy useful for Tesco is to adopt the cost leadership and clothing is an example of this in which they have chances to charge the price where they have differentiate its clothing line successfully (Johnsons et.al, 2007). The criticism of this strategy is by Bowman. According to which, the competitive advantage is more successful in that organization as compared to its competitors where customers are providing with which they need or want and not with which they adopting above strategies. Thus, Bowman proposed a new strategy clock against this. This strategy clock suggested that competitive advantage and positioning can be achieved through managers. And the managers are required to get them aware of the market requirements, changing and customers’ choices (Johnson et.al, 2008). In accordance with strategy clock, Tesco adopts hybrid strategy because it kept the elements, differentiation and cost leadership (Campbell et.al, 2002). This strategy allows them to achieve simultaneously lower price against its competitors and differentiation (Johnson et.al, 2008). It is

being recommended that the Tesco’s products prices should not to be decreased if they used the differentiation strategy. Because the prices of Tesco should be equal to its competitors like Morrisons and Asda to obtain benefit especially for being the market leader (Johnson et.al, 2008). According to Johnson, the hybrid strategy is in the favor of Tesco for many reasons which are discussed in following: The market share standard of Tesco in UK is very high because it achieved greater volume over its competitors. The hybrid strategy is also used as the entry strategy in market where the competitors are fully established already. This strategy was made by Tesco when they are developing the global strategy. This is helpful for them in entering the new markets with their superior products of low prices. In order to analyze the company’s strategy there is need to identify it market segmentation and is discussed in fifth step. The segment of market is the customer’s group with similar needs but varies from the customers’ needs of other market or areas (Johnson et.al, 2008). The bases of market segmentation are in stated here. First, is the geographic variable that includes difference by region, country, and type of neighborhood / housing? Second, is Demographic variable that includes stages of life cycle of the family, age difference, gender, occupation, income, race, religion, education? Third, is behavioral variable like attitudes towards brand loyalty, consumption occasions, and frequency usages? Fourth, is the psychographic variable that exploits personality, lifestyle and intelligence difference among people (Campbell et.al, 2002). The good thing in the market segmentation of Tesco is that they provide products to all the market groups related to low income to the high income class (McNeilly, 2008). The ranges of Tesco products is very high that have diversity like health products to fashion, organic products to furniture, electrical items to special healthy snacks for kids etc. This showed that Tesco segment them successfully and their profit is the evidence of it (McNeilly, 2008). However,

there are some gaps in the market segmentation of Tesco that if fulfilled then it has no threats from its competitors. These are also related to some products offering or packages that are offered by its competitors. The globalization factor is also involved in the offering of product and services. Lasserre (2007) suggested that globalization is phenomenon of industries’ transition from the multinational to the global along with change of competitive structure. Industries like processed food, telecommunications, retail and personal care are in globalization process. It is related with constancy of practices and products along with high integration and coordination in activities of value chain of Tesco (Lasserre, 2007). Inkpen and Ramaswamy (2006) stated that companies that serve globally must recognize what are the customers’ needs from perspective of international and domestic standard (Inkpen et.al, 2006). In last sixth step, the analysis of Tesco will be based on the porter’s generic strategy of global basis, and diamond theory of Porter. The Porter’s generic strategy in global conditions suggested five alternative strategies of what should be used by a business in the international operations. These alternatives are based on elements like to which extent business is being globalised or with the scope of competitors in industry. The global strategy of Porter’s stated, “competitive advantage results from the global scope of an organization’s activities and the effectiveness with which it coordinates them’ (Campbell et al, 2002). He argued that competitive advantage on global basis is depends upon configuration and coordination of the value-adding activities. Tesco have competitive advantage in global basis that it enable its customers to get or shop all things from one place or under one roof. However, the Yip’s driver globalization framework actually develops concept of the global strategy which is mostly preferred in place of porter’s generic strategy globally. This is because it examines the both level of globalization in industry with

description of industry’s features which are less or more global naturally. Yip believes that this framework actually recognizes the aspects of industry that are varied from local to global level (Campbell et.al, 2002). The above discussion is based on the developing of competitive advantage. However, the sustainability is as important as the development of competitive advantage. This is the basic threat to every business when it enters to new market that they are at risk. This risk can be minimized through developing a competitive advantage. Thus, the sustainable competitive advantage is the assurance of success for any organization. Tesco is an example of this and it also have sustainable competitive advantage in several different markets like Asia, the US and Europe. The example of Tesco is actually completely fit in the diamond theory of Porter because Tesco has sustainable competitive advantage against its competitors that are not actually so successful. There is more than ten years of experience is involved in the Tesco’s international strategy and that includes six factors in it. These six factors are become flexible, maintain focus, develop capability, act local, multi format usage and build brands. These are the main reasons because of which Tesco become able to sustain it’s competitive and is now the second largest supermarket in whole world (Tesco, 2008). Consequently, it is obvious from above discussion that porter’s work is still useful in today’s businesses of world. In this report, the brief description of porter’s work is described along with real world example of Tesco that how it becomes successful against its competitors by utilizing porter’s model. The findings of this paper showed that the Porter’s models and theories are relevant to grocery industry of today in accordance to its competitive positioning. However, it can also be utilized in

all other industries for success like Tesco. All porter’s strategies become helpful for Tesco to become the second largest grocery retailer in not only the UK but in whole world. The important point of consideration in this analysis that comes for the success of a company is that the sustainability and consistency is significant for the usage of any strategy. Tesco is regularly changing its policies according to the requirement of its customers and by utilizing the porter’s competitive strategies. However, the growth is that which is essential and comes after regular reviewing of strategies according to rapidly changing world. Tesco is continuously investing for his thing which is good and helpful for it on long term basis. Tesco can also achieve first place through more investing on their strategies according to changing requirements. References Johnson et.al, (2008), “Exploring Corporate Strategy”, eight edition, Essex, Pearson Education Limited Tesco, (2014), “Tesco PLC” retrieved from: http://www.tescoplc.com/

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