Tesco Plc
Strategic management “forms an important part of the overall business operation of the various business organizations” (Hitt, Ireland and Hoskisson 2012). The genre of strategic management not only involves the “formulation as well as the implementation of the strategies which are required to bring about the overall growth and the development of the business organization concerned but also involves the process of the analysis of the business market” (Hill, Jones and Schilling 2014). Therefore, it is often considered that effective strategic management policies often help the various business organizations “to bring about the overall growth as well as the development of their overall business organization” (Eden and Ackermann 2013). Therefore, the “term strategic management” can be defined as the process of “formulation and implementation of the major goals and initiatives taken by a company’s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes” (Hitt, Ireland and Hoskisson 2012). It is significant to note that the “advent of globalization and the recent developments in the fields of technology and innovations” have “drastically modified the way the various business organizations conduct their business in the present times” (Eden and Ackermann 2013). It is a reflection of this that the various business organizations in the present times often take the help of diverse innovative strategies not only to outrival their competitors in the business market but also enhance the amount of profit gained by them (Hill, Jones and Schilling 2014). This particular report will focus on the concept of strategic management and for this particular purpose it will take into consideration the business organization Tesco plc of the United Kingdom. The report will provide an overview of the concerned business organization on the basis of the PESTLE analysis, “Porter’s Five Forces” and SWOT analysis.
Tesco plc or more commonly called by the name of “Tesco” is not only one of the largest retail business organizations of the United Kingdom but also of the world as well (Tesco.com. 2018). The business organization was founded in the year “1919 by Jack Cohen” in the Hertfordshire district of the nation of England (Tesco.com. 2018). It is significant to note that the business organization currently is “third-largest retailer in the world measured by profits and ninth-largest retailer in the world measured by revenues” (Tesco.com. 2018). Although the major operations of the business organization is focused in the United Kingdom yet following the “path of globalization” the business organization has started several new ventures in seven countries across Asia as well as Europe in countries like “Ireland, Hungary and Thailand” (Tesco.com. 2018). In addition to this, “the concerned business organization is a leader in the retail business market of the United Kingdom and has a market share of more than 28.4%” (Tesco.com. 2018). The below given figure provides “significant financial details of the company”-
PESTLE Analysis
Figure 1: “Financial Statistics of the company Tesco”
Source: “Factset, Bloomberg, S&P Cap IQ; Forbes”
The major area of operation of the concerned business organization is in the retail sector. It is significant to note that the business organization initially started as a “UK grocer” however in the late 1990s the concerned business organization diversified its business operations and is currently providing services to the customers in the areas of “the retailing of books, clothing, electronics, furniture, toys, petrol and software; financial services; telecoms and internet services” (Tesco.com. 2018). Therefore, presently the concerned business organization operates as the “British multinational grocery and general merchandise retailer”. Furthermore, the concerned business organization is listed on the “London Stock Exchange and is a constituent of the FTSE 100 Index” (Tesco.com. 2018). It is a reflection of the effective business strategies adopted by the concerned business organization that it has emerged as one of the largest business organizations in the present times and also has been able to achieve a considerable success in the recent times.
“PESTLE Analysis” is a strategic tool which is used by the various business organizations to analyze the environment in which they operate (Srdjevic, Bajcetic and Srdjevic 2012). In other words, PESTLE analysis can be defined as “a framework of macro-environmental factors used in the environmental scanning component of strategic management” (Srdjevic, Bajcetic and Srdjevic 2012). Therefore, it is often used by the various business organizations to analyze the external environment in which they operate and also is useful for them during the process of “when conducting a strategic analysis or doing market research, and gives an overview of the different macro-environmental factors to be taken into consideration” (Hooley, Piercy and Nicoulaud 2012). Furthermore, it is generally seen by the various individuals as the strategic tool which provides them with significant information about the “market growth or decline, business position, potential and direction for operations” (Hooley, Piercy and Nicoulaud 2012). The various components of this particular tool include “political, economic, social, technological, legislative and environmental factors (Hooley, Piercy and Nicoulaud 2012). An analysis of the business organization Tesco Plc on this particular strategic framework would reveal the following facts-
The political factors “play a significant role in the business process of the various business organizations and it is generally seen that a stable political environment is required for the conduct of the business operations of the various business organizations” (Wheelen et al. 2017). It is significant to note that the “political climate of the United Kingdom is a very stable one with the Queen being the symbolic head of the dominion and the Prime Minister leading the government in the name of the Queen” (Campaignlive.co.uk. 2018). Furthermore, the nation in the recent times has not been facing any major political turmoil or union disputes. The government of the United Kingdom takes various initiatives for the promotion of the trade and commerce. Therefore, it can be said that these conditions are very congenial for the business operations of the concerned business organization. The overseas branches of the organization have also been set up in nations which enjoy sound political environment and the government of those nations takes special interest in the growth of trade and commerce in those nations. Therefore, it can be said that the concerned business organization enjoys a political climate in the dominion of the United Kingdom which is very congenial for trade and commerce (Wheelen et al. 2017). However, the factor which is “likely to affect the prospects of the concerned business organization in a negative manner is the recently concluded Brexit deal”(BBC News. 2018). It is significant to note that in the opinion of many people the deal is likely to affect the political status quo of the European nations in a significant manner and this can affect the “prospects of the concerned business organization in a negative manner”.
Porter’s Five Forces Analysis
In the opinion of many leading economists “the world at the present moment is facing an economic recession which is likely to have a negative impact on the business operations of the various business organizations” (Evans, Stonehouse and Campbell 2012). In addition to this, the recently concluded Brexet deal which finalized the exit of the United Kingdom from the European Union “is likely to affect the prospects of the concerned business organization” in a significant manner. However, “it is significant to note that the economic system of the United Kingdom” is a “very stable one” and is “highly developed and market-oriented” (Evans, Stonehouse and Campbell 2012). Furthermore, it is “significant to note that the economy of the United Kingdom” is the “fifth-largest national economy in the world measured by nominal gross domestic product (GDP), ninth-largest measured by purchasing power parity (PPP), and nineteenth-largest measured by GDP per capita, comprising 3.5% of world GDP” (Stokes et al. 2014). In addition to these, the United Kingdom is the “the tenth-largest goods exporter in the world and the fifth-largest goods importer and also the second-largest inward foreign direct investment and the third-largest outward foreign direct investment” (Stokes et al. 2014). Therefore, it can be said that the concerned business organization enjoys a fairly congenial economic environment in the dominion of the United Kingdom. It is interesting to note that the nations or countries in which the concerned business organization has opened its subsidiary branches also provide stable economic conditions to the concerned business organization (Rothaermel 2015). The business organization in a bid to mitigate the adverse effects of the economic recession has diversified its area of business and thus presently the concerned business organization offers a range of services as well as products to the customers (Rothaermel 2015). Therefore, it can be said that by the use of this particular strategy the concerned business organization has been able to successfully able to combat the adverse effects of the economic recession.
The society of the United Kingdom is a very liberal one and very open to the recent developments not only in the “field of technology as well as the recent innovations” but also in the other sectors as well(Gamble and Thompson 2014). However, it is significant to note that the “social structure of the United Kingdom has historically been highly influenced by the concept of social class, with the concept still affecting British society today” (Gamble and Thompson 2014). Furthermore, as per the recent findings the “social class in the United Kingdom vary and are highly controversial, most are influenced by factors of wealth, occupation and education” (Gamble and Thompson 2014). Therefore, it would be apt to say that the society is very much driven by the various factors related to class. It is significant to note that the business organization under consideration here uses the social class division system prevalent in the society for the purpose of the expansion of their business (Campbell, Coff and Kryscynski 2012). It is a reflection of this the business organization provides a range of products as well as services to the customers depending on the class of the various customers. Thus, it can be said that the business organization under consideration here does not have a fixed customer base for all its products unlike the other business organizations of the world. Thus, the wide range of the products as well as the services offered by the concerned business organization have different customer base depending on the kind of the product or the service the concerned business organization is offering and also the reason for which that particular product or the service have been designed (Campbell, Coff and Kryscynski 2012). Therefore, it can be said that the concerned business organization utilizes the social class division of the society of the United Kingdom to enhance its business operations and also its annual profit.
SWOT Analysis
The dominion of the United Kingdom is a fairly advanced dominion in terms of the technological field. It is significant to note that the United Kingdom was the place where the “Industrial Revolution” actually began in the 19th century (Madsen and Walker 2015). Therefore, it can be said that the United Kingdom and the industries in this particular nation are familiar with the use of modern technology as well as the recent innovations for the purposes of the business operations. It is a reflection of this the business organization under consideration here takes the help of the various “forms of recent advancements in the field of technology as well as innovations to cater to the needs and the requirements of the customers in the most effective manner” (Madsen and Walker 2015). Therefore, in the present times, “the business organization under consideration here takes the help of the online services in a bid to reach out to a larger number of customers”. It is significant to note that the online services provided by the concerned business organization have been much appreciated by the various customers. Furthermore, the overseas nations in which the concerned business organization has recently expanded its business operations are also fairly technologically advanced (Madsen and Walker 2015). Furthermore, the broadband and internet services provided by the concerned business organization have been much appreciated by the customers. Therefore, it can be said that the technological climate of the United Kingdom is very congenial for the business operations of the concerned business organization.
The various nations of the world have developed several legislations for the conduct of the business “of the various business organizations”. It is significant to note that the government of the United Kingdom also has certain legislations related to the effective conduct of the business of the various business organizations in that particular nation (Goetsch and Davis 2014). Furthermore, the various legislations can be imposed by the government of the United Kingdom or the legislative bodies belonging to the European Union. However, most the Brexit deal the various legislative bodies related to the European Union has no power over the various business operations of the various business organizations. The business organization under consideration here also needs to abide by these laws as well as legislations for the conduct of their business operations. The most important legislations which the business organization under consideration here needs to follow are “Employment law”, “Consumer protection” and the “Competition law” (Tesco.com. 2018). The most significant “Employment laws” which the business organization under consideration here needs to follow are “Health and Safety at Work Act 1974”, “Equal Pay Act 1970”, “Sex Discrimination Act 1975”, “Race Relations Act 1976”, “Employment Protection Act 1978” and various others (Tesco.com. 2018). The legislations under the “Consumer protection” which the business organization under consideration here needs to follow are “Sale and Supply of Goods Act”, “Trade Description Act”, “Consumer Credit Act” and others (Tesco.com. 2018). The legislatives related to the “Competition law” which the business organization under consideration here needs to follow are the ones given by the “Competition Commission (CC)” and “Office of Fair Trading (OFT)” (Tesco.com. 2018). It is significant to note that these legislatives actually act as potential threats to the business organization here as “it is seen that if the business organization under consideration goes on to follow all these legislations then that is likely to significantly affect the business of the concerned business organization”.
Strategic Positioning and Business Strategy
In the recent times the emphasis of the various nations about the environment has increased significantly. It is a reflection of this “that the various business organizations in the present times need to take into consideration the various legislations related to the environment” like the “Environmental Protection Act” and others (Lasserre 2017). Furthermore, as per the various precepts of these legislations the diverse business organizations not only need to curb the level of damage that they do the environment during the course of their business activities but also needs to make a positive contribution to the environment (Lasserre 2017). It is a reflection of this that the business organization under here has prohibited the use of non-recyclable materials for the packing of the materials sold by them. In addition to that, the concerned business organization has devised several strategies for making a significant contribution towards the environment like the plantation of green trees and others.
The “advent of globalization and the recent advancements in the fields of technology as well as innovation has drastically changed the way the various business organizations conduct their business operations in the present times” (Porter 2008). Furthermore, the emergence of the various new business organizations every year has greatly enhanced the amount of competition faced by the various business organizations in the present times. Therefore, it is seen that the various “business organizations take the help of the various strategic frameworks to not only analyze the competition faced by them but also to devise effective strategies for the mitigation of the amount of competition faced by them” (Porter 2008). It is here that the framework of “Porter’s five forces” comes into significance. It is significant to note that this particular tool is used by the various business organizations “for analyzing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability” (Porter 2008). An analysis of the business organization under discussion here will reveal the following facts-
In the present business world it is seen that almost every year thousands of new business organizations enter the business market with the inherent motive to monopolize it someday. However, it is often seen that these business organizations fail to sustain for a very long time with only a handful them surviving for more than one year (West, Ford and Ibrahim 2015). The business organization under consideration has been in business for more than 80 years and takes the help of various effective strategies for the sustainability of their business operations (Tesco.com. 2018). However, the various new business organizations, on the other hand, fail to meet even the basic requirements of their business operations in the initial phase of their business and also the amount of risks faced by them is considerable (West, Ford and Ibrahim 2015). Therefore, it can be said that the business organization under consideration here “faces a very low level of threat from the various new entrants in the market”.
Conclusion
The major rivals of the business organization under consideration here are Asda, Sainsbury’s, Morrisons, “The Co-op”, Waitrose and others (Tesco.com. 2018). However, “it is significant to note that the business organization under consideration here holds almost 28% of the market share in the dominion of the United Kingdom” (Tesco.com. 2018). This can be seen as a reflection of the various effective strategies used by the business organization under consideration here not only for the promotion of the products as well as the services offered by them but also for the management of their business operations (West, Ford and Ibrahim 2015). Therefore, it can be said that the business organization under consideration here faces a very level of threat from its various competitors.
According to Porter, “if the bargaining power of the various buyers related to a particular business is high then that is likely to affect the prospects of a particular business organization in a significant manner” (Porter 2008). It is significant to note that the business organization under consideration follows the policy of price competition and also provides various attractive offers to the customers in addition to the regular discounted sales which they offer (Galliers and Leidner 2014). Furthermore, it is to be noted that the same products offered by the other business organizations in the nation of the United Kingdom have a higher price in comparison to the price of the products offered by Tesco. Therefore, it can be said that the “bargaining power of the buyers” is very low.
As opined by Porter, “if the bargaining power of the suppliers is high then that is likely to affect the business of a particular business organization in a negative manner” (Porter 2008). It is significant to note that the various suppliers business organization under consideration here are the ones who provide the various grocery products sold by the business organization. Therefore, to reduce the bargaining power of the suppliers the business organization under consideration here takes the help of multiple suppliers (Galliers and Leidner 2014). This particular system not only helps the business organization here that to reduce the bargaining power of the suppliers but also to ensure that the business organization regular supply of the products sold by it to the customers. This also helps the concerned business organization to ensure that they regular and timely supply the materials sold by them. Therefore, it can be said that the bargaining power of the various suppliers related to the concerned business is very low.
Rivalry forms an important part of the business market and the concept of rivalry is often seen as an opportunity by the various business organizations. As already mentioned the primary rivals of the business organization are Asda, Sainsbury’s, Morrisons, “The Co-op”, Waitrose and others (Tesco.com. 2018). However, the business organization under consideration here takes the help of various effective strategies “not only to bring about the overall growth as well as the development of the business but also to outrival their competitors”. It is a reflection of the effective strategies followed by the concerned business organization that the business organization currently holds almost 28% of the market share in the retail market of the United Kingdom.
“SWOT Analysis” is a tool which is often used by the various business organizations to analyze the internal environment of their business (Srdjevic, Bajcetic and Srdjevic 2012). It is significant to note that this particular framework often helps the various business organizations to find out the strength as well as the weaknesses of their business (Srdjevic, Bajcetic and Srdjevic 2012). Furthermore, this particular tool also provides valuable information about the threats as well as opportunities which galore the various business organizations (Srdjevic, Bajcetic and Srdjevic 2012). An analysis of the business organization under discussion here on this framework would reveal the following fact-
The business organization Tesco is one of the largest as well as the most popular brands not only of the United Kingdom but also of the world. The business organization under consideration here has been in business for more than 80 years and offers a range of products to the customers not only of the United Kingdom market but also of the other nations of the world (Tesco.com. 2018). Furthermore, as already mentioned the business organization under consideration here is “third-largest retailer in the world measured by profits and ninth-largest retailer in the world measured by revenues” (Tesco.com. 2018). These in short are some of the key strengths of the business organization under consideration here.
The primary weakness of the business organization under consideration can be said to be the fact that with the “recent advancements in the field of technology as well as the innovations and the changes in the pattern of the business style of the various business organizations” the business organization under consideration under consideration has not much changed the style of management of its business or the way it transacts its business in the United Kingdom (Daley 2012). Furthermore, the lack of usage of the platform offered by the internet is adversely affecting the prospects of the business organization under consideration here. These in short are some of the weaknesses of the business organization under consideration here.
As already mentioned the business organization under consideration here takes the help of traditional form of management for the management as well as the operation of their business. Therefore, the concerned business organization can take the help of various modern styles of management for the operation as well as the operation of their business process (Marchi, Maria and Micelli 2013). Furthermore, the use of the various platforms offered by the social media as well as the other forms of electronic media will boost the prospects of the business organization under consideration here. Moreover, the business organization under consideration can also take the help of various other forms of promotional methods for the promotion of the products as well as the services offered by them (Marchi, Maria and Micelli 2013). The business organization under consideration is operational in seven other countries apart from the United Kingdom therefore expansion in the other nations of the world is another opportunity which the business organization can take the help of.
The various business organizations in the present times face wide range of threats than the business organizations of the earlier times (Johnson 2016). It is significant to note that the major threat which the various business organizations face including the one under consideration here is the threat from the various competitors of the concerned business organization (Johnson 2016). The business organization under consideration here has several competitors not only in the market of the United Kingdom but also in the market of the other countries in which they are operational. Moreover, every year several new business organizations emerge which pose a considerable amount of threat to the business of the concerned business organization (Johnson 2016). Furthermore, these new business organizations use various innovative strategies for the operation of their business which pose a significant amount of threat to them. In addition to this, the concerned business organization also faces a significant amount of threat on the basis of the economic recession which the world is facing at the present moment. The recently concluded “Brexit deal is also likely to affect the business of the concerned business organization in a significant manner”(BBC News. 2018). These in short are some of the major threats which the concerned business organization is facing at the present moment.
It is true that the business organization under consideration here is one of the largest retail companies not only the United Kingdom but of the entire world. However, it is significant to note that there is still much room for improvement which the business organization under consideration can utilize to bring about the overall growth as well as the development of its business process. The business organization under consideration here can take the help of the new as well as innovative forms of business management styles to further enhance its business prospects. In addition to this, the business organization under consideration here can also take the help of the various platforms of not only the social media but also of the other forms of electronic media to reach out to a much wider customer base. Furthermore, “the digitalization of the business process of the concerned business organization is likely to boost the prospects of the business organization here in a significant manner as in the present times it is often seen that the various customers like to take the help of the digital services”. Effective promotion is another aspect on which the concerned business organization can focus on. It is significant to note that many business organizations take the help of various effective forms of promotion not only to reach out to a much wider audience but also to bring about the overall growth as well as the development of their business operations. These in short are some of the recommendations which the concerned business organization can utilize to enhance the growth rate of its business.
Conclusion
To conclude, strategic management forms “an important part of the entire business process of the various business organizations”. The process of strategic management not only “helps the various business organizations to formulate as well as implement the various strategies which are for the business organizations” but also helps them to bring about the “overall growth as well as the development of their business organizations”. It is reflection of this that the “various business organizations often take the help of the various strategic frameworks to not only analyze the level of competition faced by them but also to devise effective strategies for their mitigation”. The various strategic tools also provide an overview to the diverse business organizations about the changes which they need to make in their business organizations.
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