Assignment on: Business strategy. A scenario on Tesco Company.

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 Contents
Introduction:..................................................................................................................................4

Task-1: Understand the process of Strategic planning...............................................................4

1.1 Assessment of business missions, visions, objectives, goals and core competencies
inform strategic planning..................................................................................................4

1.2 Factors that must be considered in formulating strategic plans.............................5

1.3 Evaluation of the effectiveness of techniques used in developing strategic plans

for Tesco..............................................................................................................................6

BCG growth share matrix:................................................................................6

Profit impact of market strategy (PIMS).........................................................8

Task-2: Be able to formulate strategy..........................................................................................8

2.1 An organization audit for Tesco..................................................................................8

2.2 An environment audit for Tesco.................................................................................9

PESTLE analysis................................................................................................9

2.3 The significance of stakeholder analysis in case of formulating new strategy.....11

2.4 A new strategy for Tesco............................................................................................13

Task-3: Understand approaches to strategy evaluation and selection....................................13

3.1 The appropriateness of alternative strategies relating to market growth,

substantive growth, limited growth or retrenchment...................................................13

3.1.1 Market entry strategy:............................................................................13

3.2 An appropriate future strategy for Tesco................................................................15

Task-4: Understand how implement a chosen strategy............................................................15

4.1 The roles and responsibilities of personnel needed to implement the strategy....15

4.2 The estimated resource requirements for implanting a new strategy for Tesco. .16

4.3 Contribution of SMART targets to the achievement of strategy implementation

in Tesco Company:...........................................................................................................16

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 Importance of SMART target:........................................................................16

Conclusion:...................................................................................................................................17

Reference:.....................................................................................................................................18

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 Introduction:
Business strategy is a set of works that enable an organization to achieve long term objectives.
Business strategy is the process of identifying vision, mission and objectives of the organization
and developing plans and policies to achieve these objectives. It is a vital element of an
organization because without a business plan the organization cannot run its business
successfully. Here I choose an organization which name is Tesco, Uk and try to suggest strategic
planning for them. Tesco has elaborated its business around the world as a retail company. It
provides various types of services such as banking, online shopping, insurance etc.

Task-1: Understand the process of Strategic planning.

1.1 Assessment of business missions, visions, objectives, goals and core
competencies inform strategic planning
1.1.1 Mission:

Mission is a set of purposes that an organization desires to meet shareholders expectation. It

helps to identify how business run, their customer, range of products and services and their
service quality to customer.

Mission statement of Tesco that inform strategic planning are:

To create value for their customer

To earn loyalty
To expand market share

1.1.2 Vision:

Vision statement explains future outlook of an organization. It helps to identify potential benefit
and growth of the organization.

Vision statement of Tesco:

To be mostly valued by the customers, staff and shareholders

To be a growth company
To be a modern and innovative company
To apply their service globally.

1.1.3 Goals and objectives:

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Goals and objectives are general guidelines that an organization desire to achieve within a
specific period of time. Objectives are stages to achieve goal. Objectives refers to short term
plans and goals refers to long term plans of the organization.

The goals and objective of Tesco are:

To be a successful retailer
To grow the core business
To develop retailing services.

1.1.4 Core competence:

Core competences are special skills and qualities that helps to make the business exceptional
among competitors. It helps to create a brand image for customers and achieve their blind trust
on the business.

The core competence of Tesco is its retail network which would help to achieve its core purposes
successfully.

1.2 Factors that must be considered in formulating strategic plans

Strategic planning is the process by which an organization can define its strategy and make
decision about how to allocate its resources to pursue this strategy. It also provide guidelines to
implement this strategy.

Three factors must be considered in formulating strategic planning. They are:

The industry:

In case of strategic planning, evaluation of overall industry is essential. The market size, past and
potential growth, new market entrance, competitive profitability and future threats should be
considered when evaluate the industry. The change of these factors may have great impact on the
activities of an organization.

The competition:

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Analysis of competitors position is an important factor that must be considered in formulating
strategic planning. An organization cannot achieve success without understanding the nature of
competitors in marketplace. An organization should be able to determine the strengths and
weakness of the competitors and find out the way by which competitors meet the needs of their
customers.

Strengths and weakness:

SWOT analysis is crucial in order to formulate strategic planning. Strengths and weakness is
internal factors and opportunities and threats are external factors of an organization. An
organization should determine its internal strengths and try to increase these strengths. On the
other hand it is also important to identify its weakness. By identifying its weakness, the
organization may be able to make adequate improvement and can reduce its weakness.

1.3 Evaluation of the effectiveness of techniques used in developing strategic

plans for Tesco
Here two techniques are suggested for Tesco:

BCG growth share matrix:

This matrix presents four types of situation that may be faced by a company. According to BCG
matrix, Tesco would face the following four types of situations:

1. Stars: It indicates high growth and high market share. In this situation, company needs large
amount of money in order to make decision about how to sustain growth in market and high
market share.
2. Cash cows: It indicates low growth but high market share. In this situation, company may
face low growth in market but at the same time it will have high level market share from
which it can generate revenue.
3. Dog: It indicates low growth and low market share. In this situation, the company have to cut
off its unnecessary costs. When product stops to make profit, the company should close its
business and start a new one.
4. Question marks: It indicates high growth but low market share. In this situation risk is
involved because low market share indicates loss to the company. It indicates mainly newly
made product in the market.

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Advantages of BCG matrix:

This matrix helps a company to understand-

When to invest
When to divest earning from market section
When to focus on a new business.

Other advantages of BCG matrix are:

It helps to assess companys current portfolio balance.

It is a simple model and easy to follow.
It helps to make decision about future action.

Disadvantages of BCG matrix:

It avoids synergies effect among business units.

Success of the company cannot only be indicated by high market share. It also depends
on other factors.
Market growth is not the only factor that indicates market attractiveness.
Difficult to get data about market growth and market share.
Here the term market is not defined clearly.
Sometimes Dogs can earn money even more than Cash cows.
Sometimes a market with high share can indicate lower profitability.
Sometimes low market share can indicate higher profitability.

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Profit impact of market strategy (PIMS)
Profit impact of market strategy helps to sustain competitive advantages by providing evidence
to assist policies and procedures. So Tesco would be able to make accomplishment and
implementation of policies and procedures.

PIMS strategy considered following facts:

Nature of business environment

Production process structure.
Business competitive position.
Budget allocation
Strategic development
Operating activities

Task-2: Be able to formulate strategy.

2.1 An organization audit for Tesco
An organization audit for Tesco can be conducted by SWOT analysis. SWOT analysis helps to
identify companys internal strengths and weakness and companys external opportunities and
threats. It helps to figure out a companys strategic positioning.

Here a SWOT analysis of Tesco is given below:

Strengths of Tesco:

Worlds largest retail company operating in different countries.

Has a sound profit and revenue generation policies.
Has a good business strategy.

Weakness of Tesco:

Dependent largely on UK and Europe countries.

Lack of geographic diversification.
High price of Tesco compared to other local firms.
High transport cost

Opportunities of Tesco:

Possibility of increase area diversification.

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 Fostering online sales and home delivery services.
Able to provide superior products and services.

Threats of Tesco:

The growth of the company is at risky position because of increase unemployment rate in
recent years.
High competitive market.
Decline in income which badly effects the companys sales.

Considering its internal strengths and external opportunities, it is found that Tesco has a great
competitive advantages. Though experiencing highly competitive market, Tesco is expending its
business in Asian countries that increase the possibility of diversifying internationally.

2.2 An environment audit for Tesco

In order to carry out an environment audit of Tesco, here PESTLE analysis is carried out.

PESTLE analysis of Tesco:

i. Political factors:

Tesco operates its business worldwide. As a result global political factors effects its business
operations. Those factors are tax rate, government policies, legislation etc. Many countries allow
Tesco to operate retail business in their countries because Tesco offers many job opportunities to
their unemployed workers and also ensures trustworthiness.

ii. Economic factors:

Economic factors like demand, profit price etc. have a great impact on Tesco. Any slowdown in
market can negatively influence the business operation of Tesco which will indicate that Tesco
will be at a great risk. Internationalization and diversification are the main reasons for success of
Tesco.

iii. Social factors:

Social and cultural change is a very crucial matters for every organizations. Due to social change,
Tesco begin to provide non-food items for customers. The behavior and attitude of customers

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within society influence the business activities of Tesco. For this reason Tesco is adapting
changes to accommodate with the social changes and concentrating on operation improvement
and supply chain management in order to increase overall business performance.

iv. Technological factors:

Technological factors also have great impact on organization. Tesco always concerns about
various technological change. Advancement of new technology bring significant success for
Tesco. Now Tesco is offering online shopping and home delivery services to its customers by
using advance techniques. Tesco is trying to provide services so that customer can be satisfied
and benefited. It has also introduced self -services points for the customer ease and that has
reduced labor cost also.

v. Environmental factors:

Environmental factors also affect the business activities of Tesco. Doing business in an ethical
way is important condition for every organization. Tesco is highly concerned with corporate
social responsibilities. Tesco is also concerned with how to satisfy its stakeholders. Tesco is
minimizing the wastes that is produced their factory in order to save environment. Tesco is also
make a commitment to reduce carbon footprint by 50% by 2020.

vi. Legal factors:

The performance of Tesco is directly influenced by the government policies and legislatives.

From the above it is found that PESTEL analysis provides proper information about the factors
that influence Tescos business environment.

2.3 The significance of stakeholder analysis in case of formulating new

strategy
Stakeholder refers to a person, group or organization that has an involvement with organization.
Creditors, employees, directors, shareholders, suppliers, government, unions, community all are
known as stakeholders.

Stakeholder analysis is a technique which is used to identify the people who support business
activities.

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Importance of stakeholder analysis for formulating new strategy are:

Get important opinions from stakeholders.

Obtain support from powerful stakeholders.
Understand their nature by making communication.
Able to estimate peoples reaction about their business.

The steps of stakeholder analysis for Tesco is given below:

Step-1:

The first step of stakeholder analysis is to figure out people who are involved and affected by its
business operations.

Step-2:

The next step of stakeholder analysis is to identify the power, interest and influence of
stakeholders. For this purpose Tesco should build a stakeholder grid.

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 Figure: Stakeholders Grid

High power, high interested stakeholders make the greatest effort to satisfy, influence
strategies and promote product.
High power, low interested stakeholders also influence the strategies but they become bored
with the company early.

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 Low power, high interested stakeholders should be kept informed because they are very
helpful for the company.
Low power, less interested stakeholders have not much influence over the organization so
that company should give minimum effort to monitor them.

Step-3:

The final step of stakeholder analysis is to develop a good understanding of the most important
stakeholders for the company in order to get their feedback and sufficient support.

2.4 A new strategy for Tesco

Tescos principle strategy is to create value and focus on satisfaction of their customers. Tesco
can adopt a new strategy that is new product development. This strategy can enable Tesco to
meet various needs of their customer through offering a new product. This strategy would help
Tesco to generate their revenue and create further opportunity for expansion.

Task-3: Understand approaches to strategy evaluation and selection.

3.1 The appropriateness of alternative strategies relating to market growth,
substantive growth, limited growth or retrenchment
3.1.1 Market entry strategy:
Organic growth: When an organization conduct development over its own organization as the
same way it had done at the beginning, it is called organic growth.

Merger: Merger is the process by which two organizations combine together and acts as a single
entity.

Acquisition: Acquisition occurs when a company buy 100% ownership of another company.

Strategic alliance: when two or more businesses share their assets in order to accomplish their
objectives, it is called strategic alliance.

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Licensing: It is the design through which a parent company allows another company to use its
trademark in exchange of a specific fees. Here the parent company is called licensor and another
company is called licensee.

Franchising: Under franchising, parent company not only provides trademark but also provides
other facilities like maintenance cost, formula, strategy etc.

Substantive growth:

Related diversification: When a company makes diversification that is closely related to the
product line, it is called related diversification.

Unrelated diversification: When a company makes diversification that is different from the
existing one is known as unrelated diversification.

Horizontal integration: When different companies involved in businesses at the same stage of
production in same or different industries is called horizontal integration.

Vertical integration: When different companies involved in different stage of production in

same industry is known as vertical integration.

Limited growth:

Market penetration: It means penetrating the existing market by increasing market share of
existing product or fostering new product this can be done through different strategies such as
advertising, discount etc.

Market development: It is a strategy under which a company offers existing product or service
in a different marketplace.

Product development: product development means designing, creating and marketing brand
new products according to customers needs. It helps to increase revenue.

Retrenchment:
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Turnaround: Turnaround strategy is used to convert an underperforming company to a
profitable company. It is applied on sick or distressed company in order to resolve financial crisis
and improve its financial performance.

Liquidation: This strategy is taken by a company when it reaches the last stage of its life cycle.
Through this strategy company closes down its business and sells all its valuable assets and
return from those assets is used to pay creditors.

Divestment: Divestment strategy involves selling business to another company.

3.2 An appropriate future strategy for Tesco

Main objective of Tesco is to be a successful international retailer. To accomplish this objective
Tesco should adopt market development strategy. This strategy will assist Tesco to begin its
business activities in Switzerland by offering both food and non-food retail items. Tesco can also
join other companies and strategic alliance in Switzerland through adopting this strategy. This
strategy would help Tesco to expand further strategies that can help to increase revenue. After
entering new market, Tesco can adopt product development strategy to differentiate it from other
competitors.

Task-4: Understand how implement a chosen strategy.

4.1 The roles and responsibilities of personnel needed to implement the
strategy
The strategy implementation requires a person who can lead over other personnel and divide
work among employees according to their role and level in the organization. The employees of
Tesco who are charged to implement the strategy must have some roles and responsibilities. For
implementing successful strategy, these roles and responsibilities of personnel should have to be
defined clearly. CEO of Tesco must be responsible to communicate strategy related information
to employees and other parties. He is also responsible to guide strategic planning.

In case of strategic planning, the personnel of Tesco who are charged for strategy implementation
should have responsibility to maintain proper record. It is very essential for strategic planning
and helps to avoid legal responsibilities. To maintain ethical and legal standards is also a vital
responsibility of employees for strategy implementation. Proper monitoring is required to

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implement strategy successful. Monitoring and controlling means taking a periodic overview of
activities. Its helps identify that whether actual and proper steps are taken by employees to
implement the strategy. It allows essential corrective action if requires. It encourages overall
performance of strategic planning.

4.2 The estimated resource requirements for implanting a new strategy for
Tesco
There are three types of resources required to implementing a new strategy. They are:

Human resources
Financial resources
Time and material resources

Human resources:

In order to successful strategy implementation human resources have to be considered by Tesco.

Human resource is key to implement a strategy as well as companys performance depends on
much more in HR. For Tesco given strategy its need the HR who have enough technical
knowledge and productivity.

Financial resources:

Financial resource means how Tesco finance their strategy to make it more effective. Finance can
be done in two way- Debt or equity. Equity is more preferable as there is no interest bearing cost
on principle.

Time and material resource:

For any strategy there is a specific time limit and there is some material required for
implementing the project. Tesco should use High qualified technology, machine for fullfilled
their adopted development strategy.

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4.3 Contribution of SMART targets to the achievement of strategy
implementation in Tesco Company:
By Smart targets we mean that the target or goal which is fixed by Tesco that must be specific in
nature, measurable with established criteria, that is attainable in time and that must be realistic.

Importance of SMART target:

i. If targets are not specific that what they wanted to achieve then all the efforts will go in
vain for haphazard situation.
ii. If target are not measurable in accordance with the established targets then it is not
possible to identify ant leakage
iii. If Tesco set a targets that is unattainable in nature then how they can attain it anyway? So
they must set their target which can be attain.
iv. If target is imaginative then this is not possible to attain as imaginary things are vague. So
target should be realistic with this world.
v. Everything has a time limit. So a target should have a time and by this time this is attain
by Tesco.

Conclusion:
An effective implementation of strategy depends on proper analysis of external environment.
Tescos main business strategy is to create value and satisfy its customers around the world. Here
it is suggested that Tesco can expand its business operation into more geographic regions. For
this purpose more profound analysis should be required. Tesco can use product development
strategy in their target market in order to operate successful business internationally and attract
their customers. Effective implementation of business strategy mainly depends on existing
conditions of target market. So Tesco have to be aware of this conditions.

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