Analyzing Tesco’s Business Context: Internal And External Environment, Change, And Culture

Key Components of Tesco’s Industry Sector

This report analyses the business contexts of Tesco with analysing the internal and external environment of the company. It further includes discussion on the impact and influence of change and culture. There is an application of a range of models showing understanding the management practices in response to a business context and therefore, recommending business strategy as a part of a post-pandemic plan. In relation with Tesco, it is one of the leading British grocery and general merchandise retailers that operate globally. The company was founded in 1919 and currently, has its presence in nearly 12 countries. In its 2020/2021 financial year, the yearly revenue of Tesco determined to nearly 53 billion British pounds in the U.K. and the Republic of Ireland (Bedford, 2022). Some of the key internal and external issues of Tesco encompass intense competition, Brexit, the threat of cyber-crime, fast changing expectations of consumers, various controversies impacting brand goodwill and low emphasis on global expansion.

The key components of the industry sector in which Tesco operates include competition, bargaining power of customers and suppliers, the threat of new entrants and threat of substitutes. In relation to competition, Tesco competes with the convenience stores, which are achieving popularity with meet consumer taste shift over time. Some of its key competitors include Asda, Sainsbury’s, Morrison, Aldi and Lidl. However, in 2020, while all key retailers amplified their sales, Tesco has sustained to dominant in the market share i.e. for 27.9 % of the market in the UK. In the case of Tesco, the bargaining power of suppliers is also low due to having a network of extensive scale of suppliers’ network (Hill, 2022). However, the bargaining power for customers is high due to the presence of a number of retailers offering a cost advantage similar to Tesco. In contexts to threat of substitutes, it is medium while the threat of new entrants is medium as despite of solid financial capacity, there have been various new start-ups growing meeting new generation needs through delivering organic and grocery products and the government is also supportive in this case.

In an uncertain economic environment with fast-paced changing cultures and contexts, companies currently can seem a problematic and complex world to understand (Worthington, Britton and Thompson, 2018). Red and blue ocean strategies are implemented in Tesco business to raise market opportunity and build a competitive nature compared with other retailers. At the moment, Tesco, being in the red ocean is seeking its best to survive while surrounded by various rivals that are challenging to compete with. A rational prospect for Tesco is to develop a Blue ocean where it could establish a whole new market and nurture being the pioneer. In order to create a blue ocean strategy, there is a need to redefine the boundaries and think beyond contemporary demands. For example, the company Fresh Food Brands represent the best execution of blue ocean strategies that aid in creating a competitive nature in marketplace (Wood, Coe and Wrigley, 2016). This will help the company to execute strategy-achieve value innovation. With Tesco, the blue ocean model could allow the organisation to discover new market spaces while also not being actively utilized by players prevailing in the current business environment.

Blue Ocean Strategy for Tesco

Tesco employees are operating globally, and individual groups are further taking care of needed service delivered to customers even during the pandemic Covid-19 situation. Meanwhile, health and safety are playing a substantial role for both customers and employees of the organisation and it is aiding to upkeep or create the business and communities of Tesco. For instance, the company Covid-19 associated costs comprised £58m spent on safety equipment, £369m on employment and £173m on bonuses for forefront employees (nfuonline.com, 2021). O’Rourke and Ringer (2016) further stated that customers now want to connect and shop with more sustainable brands and therefore, companies are now being more transparent to realize higher prioritization in a competitive business. For example, Tesco has condensed its GHG emissions by 54 percent associated to its 2015 starting point (nfuonline.com, 2021).

Internal Factors and Company Competence

A core competence could exist in in a specific area of knowledge and expertise, a particular technology or operating system or even an effective system of customer care (Needle and Burns, 2019). Customer focused strategy reflects one of the core competencies of Tesco where like the company Clubcard scheme enables to accumulate, analyse and comprehend their customers very well. It uses the information and adapts its services to the native market, therefore adding value to the consumer experience. The next core competency of Tesco is its updated supply chain system that has also been credited as a key asset to be used as a higher percentage of rail to allocate its products than any other food retailer in the United Kingdom. From a future perspective, the company is also directing to have a complete electric home-delivery fleet in the United Kingdom by 2028 (Donati, 2021). Similarly, Tesco brand value further considered its core competency as the company uses its scale to create a positive influence in its communities when it uses the scale to work with their suppliers and employees in a collaborative way to improve the quality and value of the product that is being delivered to the customer.

This model has been applied below to attribute on the various internal elements in order to identify different challenges and opportunities for the company.

Tesco is confronting intense competition though company strategy, styles and shared value supporting company sustainable position and the skill set further empower employees to grow and learn in order to support the company stance in Blue Ocean. In the current time, it is necessary for the company to be more sustainable and it requires Ken Murphy to reinforce company systems and shared values to increase their competitiveness in the industry via higher brand equity.

Kurt Lewin’s established a three step change process, which would support Tesco in applying positive changes in its practices. Taking an example of the change that can be implemented for Tesco due to Brexit change like –

Unfreezing – This level requires Tesco to “unfreeze” themselves as the uncertainty of Brexit has already been affecting substantial impacts on the company right at this very moment (Casadei and Iammarino, 2021).

Tesco’s Core Competencies

Changing – At this level, the management and decision makers of Tesco requires to execute various initiatives to drive the organisation out of instabilities triggered by Brexit. It could be contacting of local food retailers, stockpiling of more inventory to deal with the custom challenges and communicating of new industry policies with regulatory bodies.

Refreezing – It is vital that the company experiences the last stage of “refreezing” in order to ensure that the new implementations within the retail chains are safe from reversion.

The theoretical framework of Edgar Schein signifies the self-efficacy insights and situational resistance within the company culture at the period of identification of barriers (Coghlan, 2021). As per this model, the company must be prepared for a long-time of observation and adaptation activities to subsist in internal and external environmental changes where the newly recruited personnel’s has to face challenges so that to fine-tune with the changing work structure.

In relation to the above figure, Artefacts imitates the properties and principles of Tesco can be evidently noticed. As an instance, the organisation can have has definite rules regarding the shifting time for their personnel. Meanwhile, Espoused Values of the personnel are the company culture that works within the work procedure and plays an important role like how the members represent the company both to themselves and to others (Grogaard and Colman, 2016). Lastly, basic assumptions, represent an unconscious level of culture at Tesco, at which the underlying values have, over a time period, been changed and are in use for granted as a structurally satisfactory way of seeing the world.

Quality Systems are established to watch and incessantly enhance the performance of key processes. Eliminating process variability is vital to creating foreseeable results. TESCO can analyse the meter shop operations and build an action plan to eradicate errors and flaws. Six Sigma methods can be used to scrutinize process performance, to comprehend process capability, and to cultivate solutions to remove variability (Gholami et al, 2021). Meanwhile, Tesco can support in developing the basis for continual enhancement by eradicating the sources of quality issues.

In order to create stakeholder mapping, there is a need to identify stakeholders first and then analyse stakeholders so that to figure out how relevant they are to the project (Zingraff-Hamed et al, 2020). Afterwards, there is a need to map stakeholders and prioritize like on how one will engage with the stakeholders over the course of the project.

Conclusion

Ultimately, Tesco must understand the impact and influence of culture and change to best match its internal strategies with the external environment. It will help the company to better achieve long term sustainable advantage through operational effectiveness, stakeholder prioritization, and implementing appropriate change whenever required.

Planning is the procedure of setting up goals and stating the actions needed to attain the objectives. At the time of formulating strategy, planning helps in guiding for action and when actions are synchronised on definite outcomes, they will be higher effective. Moreover, planning could help Tesco in improving resource utilization by supporting management to identify where resources are most required to be allocated in order to reap higher benefits. Planning further helps in setting performance standards and also enables higher flexibility (Wolf and Floyd, 2017). As of the dynamic and inter-connected internal and external environments, there is an increased organizational challenge, to constantly meet customers and regulatory requirements, and concurrently addressing the actual and future needs and expectations of relevant stakeholders. Tesco with proactive planning can help meeting customer needs with adequate strategy formulation.

With the help of PDCA (plan-do-check-act), it signifies a 4 stage model for constant improvement in business process management. This model helps the work process from repetitive mistakes and further stimulates continuous improvement of processes and people (Johnson, 2016)

• Plan – It is planning that Tesco can change their business management and utilize certain key management theories and operational models in order to achieve definite objectives in the business environment. Isniah, Purba and Debora (2020) recommend the SWOT model for determining business opportunities and threats and this could help Tesco to plan the resources effectively to achieve both current and future strategies. For example, Tesco can lower the competition from Asda, Sainsbury’s, Morrison, Aldi and Lidl through emphasizing on bringing healthy life food trends.
• Do – With the help of Mckinsey’s 7S’s model and VRIO framework, Tesco have the opportunity to develop the consistency and work efficiency of the company employees and profits in the present situation. With the help of several growth strategies, the company can create a plan and vision for customer service and expectations while also ensuring training for personnel in contexts to new service skills and retail the target market segment customers.
• Check – It needs the senior management to analyse the implementation results of models and theories that support in fast decisions making through comparing the past and current growth rates of Tesco. Hence, it is assessing that market and business management of Tesco must embrace on product development and growth strategies where it also helps in increasing the stakeholders’ demand and raise the brand awareness as well as market share.
• Act – It is the last stage in the PDCA cycle, it there supports with identifying the impacts of change management on the people and the present business environment of Tesco. In addition, Tesco would Act by continuously enforcing and improving the supplier manual and their standards of product quality. It can be applicable to adopt the whole plan if goals are met.

Conclusion

In the contexts of the above discussion, it can be said that Tesco is facing strong competition, and a change in consumer expectations where the company competes with the convenience stores, which are achieving popularity with meet consumer taste shift over time. Majorly, Tesco embraces on red ocean strategy and in response to the Covid-19 pandemic, the company found to implement several significant measures. Customer focused strategy, aligned supply chain system and brand value reflect as company core competencies benefitting the organisation in the attainment of competitive advantage in the retail sector. Mckinsey’s 7S’s model further has been used to support Tesco in applying positive changes in its practices. The impact and influence of change and culture further have been identified with the application of Kurt Lewin’s model, Edgar Schein model, and stakeholder prioritization. The client report further states the benefits of planning when formulating strategy in setting performance standards, higher flexibility and setting performance standards. Future strategic recommendation has also been proposed such as using the SWOT model, embracing growth strategies and continuously enforcing and improving the supplier manual and their standards of product quality.

Reference List

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