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Strategic and Change Management Coursework

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Table of Contents
1.0 INTRODUCTION.................................................................. 2
2.0 INTRODUCTION OF PORTER FIVE FORCES
FRAMEWORK .............................................................................. 2
2.1 THREAT OF SUBSTITUTES ....................................................... 2
2.2 RISK OF ENTRY BY POTENTIAL COMPETITORS ......................... 3
2.3 BARGAINING POWER OF BUYERS ............................................ 3
2.4 BARGAINING POWER OF SUPPLIERS ........................................ 4
2.5 INTENSITY OF RIVALRY ......................................................... 4
3.0 PORTER FIVE FORCES ON CHOSEN
ORGANIZATION ......................................................................... 5
3.1 THREAT OF SUBSTITUTES ....................................................... 5
3.2 RISK OF ENTRY BY POTENTIAL COMPETITORS ...................... 6
3.3 BARGAINING POWER OF BUYERS ........................................... 6
3.4 BARGAINING POWER OF SUPPLIERS ....................................... 6
3.5 INTENSITY OF RIVALRY .......................................................... 7
4.0 CONCLUSION ...................................................................... 7
5.0 REFERENCES ....................................................................... 8


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1.0 Introduction

The word strategy came from the Greek word strategos, which mean
a general. According to Capon (2008), strategy in an understanding of the
external environment and the resources available to compete in the external
environment. Meanwhile, Shekar (2009) defined strategy as a systematic
approach to positioning the business in relation to its environment to ensure
continued success and total security. Strategy and change management
simultaneously adapt to the current situation so that the business can run in
continuous success, both in short and long-term.
2.0 Introduction of Porter Five Forces Framework

According to Henry (2011), Porter five forces framework is a tool of
analysis to assess the attractiveness of an industry based on the strength of five
competitive forces. In this framework, Porter argues that in order for a
company to get greater income depends on this five forces, the stronger each
forces will result in limited ability of a company in order to established the
goal. These are the following five forces:

2.1 Threat of substitutes

The first force is about substitutes, the word substitutes meaning that
the particular product can be found and at the same time replace easily. So
basically the threats come from the product that can come in similar needs
(McGuigan, 2009). This substitutes product idea is to help customer to switch
product in respond to several factors such as price increase, the more attractive
the price, the greater chance to control industry prices. With an-appealing
price, this substitutes product offers customers products with cheaper price,
but also lesser in quality (Orcullo, 2008). One example of substitutes product
is Mitsubishi Evolution X is one of the newest car from Mitsubishi, however,
proton also have the similar car came out, Proton Inspira, which come in lesser
price and lesser quality as well but on the same model (Yaohan, 2012).
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2.2 Risk of entry by potential competitors

Potential competitors are other business companies that have not yet
competing in the industry, but they have the capability to do so (Hill, 2009).
When an industries doing well in their business and earn great profit, this will
likely attract other business to enter into the industries. The common problem
for this situation is that other businesses are too easy to enter, the easier for
other business to enter will result in more intense competition between the
industries. This situation of course also depends on the barriers to entry such
as; switching cost, access to distribution channel, capital requirement, and also
economic of scales. If the barriers are high, then the threat will be low, so
does the opposite (Hill, 2007).

2.3 Bargaining power of buyers

Buyers / customers have several ways and ability to affect industry
profit, one of them is through the ability of force down the price, and also
increase the current quality with the same price (Schermerhorn, 2009). There
are several factors that can affect this bargaining power of buyer; number of
customer for, number of firms supplying the product, the size of the order, and
also the cost of switching. The lesser amount of customer will provide them
with greater power to control the price, same as well for the size of the order,
the larger the volume means greater bargaining power from customers.
Number of firms supplying the products also one of the factor, the smaller the
number of alternative suppliers, the less opportunity customer have for
shopping around (Ahlstrom, 2009). One of this case example it happened in
US, so apparently some of the banks in US charge customer for using their
ATM card to make a purchase. This obviously upset customer, and as a result,
many of the customer closed their bank account and change to other bank.
This is one of the clearest examples of bargaining power of buyers (Corkery,
2014).

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2.4 Bargaining power of suppliers

Bargaining power of supplier is basically the opposite of bargaining
power of buyers, while customers have their way to drive the price, the
industry also have several ways to reducing the quality of purchased goods
and services including reducing the price. There are several factors that can
determined how much power the supplier have such as; number and size of
firm supplying the resources, uniqueness of the input supplied, and
competition for the input from other industry. Number and size of firms
supplying the resources means that a few large suppliers can exert more power
over market prices that many smaller suppliers each with a small market share.
Meanwhile, uniqueness of the input supplied means that if the input is
essential to the buying firm and no close substitutes are available, and then
suppliers are in powerful position (Magretta, 2013). Examples of strong
suppliers are Microsoft, for dominating the market of personal computer
operating system. And also AMD and Intel, for dominating the market for
chips and processors.

2.5 Intensity Of Rivalry

The purpose of intensity of rivalry is to determine in which level the
overall competitive state industry having. When an industry having high level
of rivalry, this can lead to decreasing in profitability of the company itself.
Rivalry can be in quality or quality form, but mostly its based on the product
price. The higher the rivalry will make company to compete more
aggressively on prices. Capacity utilization, market size and growth prospect,
number of competitor in the market, and exit barriers, are several factor that
can determined the degree of competitiveness. There are a lot of intents rivalry
between companies such as Apple and Samsung, Nike and Rebook, and also
Coke and Pepsi (Fortune, 2014).


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3.0 Porter Five Forces on Chosen Organization





Tesco PLC is a British multinational general merchandise and grocery
retailer. As of 2011, Tesco is the third-largest retailer company in world
measured by profit, just after Walmart and Carrefour (Tesco To Outpace
Growth At Global Rival, 2011). As of 2014, Tesco have 6,784 stores
worldwide and more than 500.000+ employees in 12 different countries such
as South Korea, Ireland, Turkey, Thailand, Poland, India, Czech Republic,
Slovakia, Malaysia, Hungary, and China (Tesco Key Facts, 2014).

3.1 Threat of Substitutes

For big company such as Tesco, the threat of substitutes in grocery
retail market especially in food items is considerably low in UK and
worldwide. This is because Tesco offer good quality product in a wide range,
and come with low prices too. However, in Malaysia Tesco threat of
substitutes is fairly medium. In 2012, Giant has take over the leading of
Malaysian favorites hypermarket (Borneo Post, 2012), and followed by
massive increase in customer from AEON in the recent years (The Edge,
2013). Leaving Tesco in the third in hypermarket listing in Malaysia as of
2013 (Marc Affirm Its Rating On Tesco, 2013). Moreover for Tesco, non-
food items the threat of substitutes is quite high. This is because customers
still favor the specialty of the items shops. For example, electronic shops at
Lowyatt and clothing brand such as H&M & Uniqlo.
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3.2 Risk of Entry By Potential Competitors

The threat of potential competitors for Tesco is currently low. To enter
into food grocery retail market need a huge capital investment in order to
compete with the current leading competitor such as Tesco, Giant, and AEON
is the leading brand right now in Malaysia (Lindsay, 2012). Moreover, for new
entrants who want to enter the market must have proper strategy to overcome
this situation, either producing high quality products and/or low prices. Not
the mention the amount of time to get resources and planning authorization
from local government to establish new supermarket, and some can get up to
years. Therefore, this is considerably barrier to new entrants.

3.3 Bargaining Power of Buyers

The bargaining power of supplier for Tesco is fairly high. In some
cases where the goods and products are standardized and have slightly
differentiation, this whats make the switching cost low and drive customer to
change product unpredicted and easily from one brand or shops to another. Its
a logical decision that customers will always attract to lower price, and with
current technology and ease of online retail shopping customers can easily
compare thus buying the products. In Tesco case, 2014 is not the best for them
after MARC announce to lower Tesco ratings in Malaysia (Marc, 2014). This
is because intense price competitions between major supermarkets Malaysia
like Tesco, Giant, and AEON, resulting the ability for customer to change
shops once the price increase. Despite the intense competition around the
world and in Malaysia, Tesco still ranked third both globally and in Malaysia.

3.4 Bargaining Power of Suppliers

For a big company such as Tesco the bargaining power of suppliers is
fairly low. Most of major food suppliers will always inclined to make a
contract with large supermarket, so that both parties can get the best price as
possible in long-term. For big company such as Tesco, Tesco tends to build
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strong relations ship with their suppliers, giving them benefits that other big
supermarkets didnt give as said in Tescos website (Suppliers, 2013). Tesco
offer and promise benefits to suppliers such as giving them certain and
growing market for their product, Tescos commitment to share understanding
of customers and changing in consumer behavior, payments on time and also
regular payment (Tesco Supplier, 2005). With these benefits, highly
unlikely that supplier will play with the prices for Tesco.

3.5 Intensity of Rivalry

The intensity of rivalry for Tesco right now is extremely high. In
global scale, Tesco competitors are Waitrose, Lidl and Aldi, and Morrisons, in
which theyre competing over products, prices, and also continuous promotion
(BBC News, 2014). Just recently, Tesco market share has shrink to the lowest
level in almost a decade, as of 2 March 2014 Tesco market share was 28.7%
compare last year 29.6% (Wood, 2014). Total -1.71% for just 6 weeks as of 1
August 2014 for the recent Tesco Market shares (BBC News, 2014). All of
these recent events were a result of surprisingly increase interest from
customer for Waitrose and also Lidl and Aldi supermarket. Over the past three
years, they manage to get 3.5 combined market share, this equal to 4.4bn in
sales, per year (Wood, 2014).
4.0 Conclusion


In light of above analysis, it cans summaries that Tesco still remain
one of the strongest competitors in retail food and grocery business despite the
entire struggle Tesco facing. Companies are required to pursue both
differentiation strategies and also cost leadership, and Tesco has been able to
achieve both and overcome the five porters analysis with help of strategic use
of information technology, along with agile and lean supply chain
management.
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5.0 References

Ahlstrom, D., & Bruton, G., (2009), International Management: Strategy and Culture in the Emerging
World, Cengage Learning.

BBC News: Tesco and Morrison See Sales Slides, (2014), retrieved August 2, 2014, from
http://www.bbc.com/news/business-25664398

Capon, C., (2008), Understanding Strategic Management, Pearson Education Limited.

Corkery, M., (2014), Regulators Still Find Problem in Overdraft Fees. Retrieved August 2, 2014, from
http://dealbook.nytimes.com/2014/07/31/regulators-still-find-problems-in-overdraft-
fees/?_php=true&_type=blogs&_r=0

Fortune: The 50 Greatest Business Rivalries Of All Time, Retrieved August 2, 2014, from
http://fortune.com/2013/03/21/the-50-greatest-business-rivalries-of-all-time/

Ganesan, V. (2014), The Edge: AEON Looks at Third Malaysian Listing, retrieved July 18, 2014, from
http://www.theedgemalaysia.com/highlights/271188-highlight-aeon-looks-at-third-malaysian-
listing.html

Henry, A. (2011), Understanding Strategic Management, Oxford University press.

Hill, C., & Jones, G., (2007), Strategic Management: An Integrated Approach, (8
th
Ed), Mason, OH:
Cengage Learning.

Hill, C., & Jones, G., (2009), Strategic Management Theory: An Integrated Approach (9
th
Edition),
Mason, OH: Cengage Learning.

Lindsay, E. (2012), Borneo Post: Giant Hypermarket Remains As Shopper Favorite, retrieved July 18,
2014, from http://www.theborneopost.com/2012/08/19/giant-hypermarket-remains-as-shoppers-
favourite/

Magretta, J., (2013), Understanding Michael Porter: The Essential Guide to Competition and Strategy,
Harvard Business Press.

Marc Affirm Its Ratings On Tesco Stores Malaysia, (2013), retrieved July 18, 2014, from
http://www.marc.com.my/ratbase/pub.press.detail.php?aid=4464

McGuigan, J., & Moyer, R., & Harris, F., (2010), Managerial Economics: Application, Strategy and
Tactics (12
th
Ed), Cengage Learning.

Orcullo, N., (2008), Fundamentals of Strategic Management, Rex Bookstore.

Schermerhorn, J., (2009), Exploring Management (2
nd
Ed), John Wiley & Sons.

Shekar, S., (2009), Business Policy and Strategic Management, International Pvt Ltd.

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Tesco Key Facts, (2014), retrieved July 17, 2014, from http://www.tescoplc.com/index.asp?pageid=71

Tesco To Outpace Growth At Global Rivals Study, (2011), retrieved July 17, 2014, from
http://www.reuters.com/article/2011/02/17/tesco-igd-idUSLDE71F1LR20110217

Wood, Z., (2014), The Guardian: Tesco Market Share Shrink To Lowest Level In Almost A Decade,
retrieved August 2, 2014, from http://www.theguardian.com/business/2014/mar/11/tesco-market-
share-shrinks-lowest-level-decade-aldi-supermarket

Yaohan, S., (2012), 2012 New Proton Inspira 2.0 CVT Executive Launched In Malaysia, retrieved 26 July
2014, from http://www.livelifedrive.com/malaysia/news/view/1589/2012-new-proton-inspira-2-0-
cvt-executive-launched-in-malaysia

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