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Diploma in Business
Unit Number and Title
Unit 7 Business Strategy
Tesco PLC is multinational company which deals in grocery products and general merchandise. The UK Company is a public limited company with its headquarters in Chestnut, England. The company was started in 1919 by Jack Cohen in the form of market stalls (Audu, A. A., Hassan, D. N., & Aboki, H). The company has grown over the years and now operates in around 12 countries world-wide giving employment to over 530,000 people around the world. The company focuses on providing excellent customer service and is committed to provide them with best shopping experience. Tesco PLC is the second largest retailer in the world after Wal-Mart in terms of profit making and Revenue generated by the company. According to the latest statistics, Tesco is listed as 28th largest company in the London Stock Exchange list. The below report will focus on the vision, mission and objectives of Tesco. The report will also focus on the various analyses like SWOT, PEST, and Porter five force analysis used by Tesco to formulate new business environment and strategies. The report will also talk about various stakeholders of the company and how stakeholder analysis affects formulating new business strategies and plans of the company.
Market Entry Business Strategy: As discussed in the BCG analysis, the company has telecommunication sector in the region of Question Mark because of the existence of big companies like Samsung who is operating in Asian countries for the last ten years. Therefore, it is suggested that the company should look for merger or acquisition with these companies to hold their telecommunication business in these countries. Also, the company should look to work as a franchisee in developing nations which are run by small retail shops and companies instead of setting up their own stores (Lowe, 2010).
Substantive growth: Also known as Diversification according to Ansoff Matrix (Obereder, 2012). Tesco should look to involve itself in selling new products in new market to gain optimum profit. Diversification may be risky but will yield very high profits for the company. For example: Tesco new business in Petrol in the UK market has been a success story and has yielded high returns to the company.
Limited Growth strategies: Limited growth strategies highlights the current retail business Tesco is running in European market. Considering the market structure of retail sector in UK, Tesco has limited scope to grow because of Oligopoly nature of market structure.
Retrenchment: Tesco should immediately stop its banking unit in USA and should sell its capital being utilize in this sector. The company then should channelize the funds in more productive and profitable areas like the Asian countries.
The chosen strategy is expansion of retail stores in Asian countries like India. The justification of this strategy is as follows:
Sustainability: From growth perspective, these nations offer wider range of growth to Tesco. Tesco known for creating surplus job opportunities will help the unemployment issue that prevails in these countries. With increase in purchasing power, people will prefer quality products which are offered by Tesco. Farmers in India are exploited. With coming up of Tesco, farmers will be given their due share by the company which will be beneficial to them as well.
Acceptability: Tesco has been into the market for nearly 100 years now. The main reason for the long term sustainability of the company has been its innovative ideas and high quality products and excellent service towards its customers. It is essential that to start its business, Tesco promotes its stores so that people are aware about the company. With high amount of agricultural land in India, Tesco will enjoy low cost of raw material and hence the cost of product will be less, thus it will be widely accepted.
Feasibility: Most people in underdeveloped nations have low income and hence their shopping experience is limited. People purchase only necessities in limited quantity. However, in developing nations, the income of common people is on continuous rise thus improving their purchasing power. The lack of supermarkets also favours Tesco in terms of feasibility and provide with great opportunity to set its foot in these markets to become a successful global player.
The roles and responsibilities of various stakeholders are discussed below:
Top Management/Board Member of Tesco: The main responsibility while entering into opening new stores in new countries comes on the shoulder of the Board members as they need to get the funds for investing and also permission for running up of new store. Board members need to convince the government of that country about the various job opportunities and other benefits which their people will get from the running up of the organization. They also need to inform their investors about the returns that will come from opening up of new stores so that investors provide them with funds. Board members also need to make sure that apart from business strategy of expansion of retail business, CSR strategy is also laid down and implemented to make sure that their operations are harmless and have minimal affect on environment.
Employees: Employees should be ready to accept new challenges and new requirements of people in the new region where the company looks to establish the store. Experience people should be ready to share their experience with young and new hires, while new people selected from that region should be active in understanding the requirement of people from that place.
Human Resource: The human resource management of Tesco should be able to hire enough human resource required to work in the new store and should train them well so as to develop their skills required to work effectively in those stores.
Sales and Marketing Team: The most important aspect is the sales and marketing team which should be able to promote the coming up of new store through proper advertisements and marketing techniques.
Middle management: Middle management should be able to convert the strategy into SMART goals and should be able to divide the budget accordingly.
Resource requirement to implement new strategy of setting up of business in Asian countries:
Finance/Funds: The key to start or expand any business is finance. As mentioned, Tesco should look to get investment for setting up of new retail store from its investors and banks.
Land: Tesco should look to open supermarket in urban area where people are willing to come and in the heart of the city where maximum people can reach out. It is also beneficial to run online business as free home delivery can be done covering maximum areas.
Human Resource: People with required skills from the local region should be selected through recruitment process and then should be trained to learn practical knowledge and Tesco’s values and culture.
Infrastructure/Technology: Proper infrastructure and Tesco’s common theme which is followed in its UK market should be followed. Technology like Security systems, RFID, acceptance of cards, electronic labelling on shelves, self check out, etc. should be use to improve quick transactions.
SMART targets help an organization to understand its goals better and work them under strict deadlines which improves efficiency of the company. SMART goals are measured easily and hence help to maintain transparency while evaluating performance of employee and organization as whole.
SMART targets which Tesco should set while implementing its strategy of opening new store are:
Gathering information: Understanding market and identifying proper geographical location to open new store is essential. It also involves fund raining from the investors and resource requirement. This might take about 2 months time.
Construction: Construction of supermarket is time consuming. With high labour also, Tesco would require 1 year time to construct new store.
Infrastructure and finishing: Once store is constructed, it should be fitted with electrical appliances, electronic appliances, tables, chairs, washroom facilities, etc. required inside the supermarket for the convenience of customer. The store should also be filled with retail and grocery products. This step may take around 2 months time for completion.
Hiring and Training: Hiring new employees and training them required about 6 month’s time.
Marketing and Promotion: Tesco should look to advertise their new store through newspaper, television, radio as well as through social networking websites. This process will take 2 months time.
Audu, A. A., Hassan, D. N., & Aboki, H. The Conquering Strategies of Oligopoly Firms. A review on entry Strategies of Tesco Company Plc in the UK and beyond.
Bather, A., & Tucker, R. 2011. Legitimacy Theory and a Compliance Analysis of Tesco’s 2008 Business Review. International Review of Business Research Papers, 7(2), 137-156.
Dyson, R. G., Bryant, J., Morecroft, J., & O’Brien, F. 2007. The strategic development process. Supporting Strategy: Frameworks, Methods and Models, 3-25.
Haerifar, P. 2011. Performance Management in Tesco.
Hambrick, D. C., MacMillan, I. C., & Day, D. L. 1982. Strategic Attributes and Performance in the BCG Matrix—A PIMS-Based Analysis of Industrial Product Businesses1. Academy of Management Journal, 25(3), 510-531.
Lowe, M., & Wrigley, N. 2010. The “continuously morphing” retail TNC during market entry: Interpreting Tesco's expansion into the United States. Economic Geography, 86(4), 381-408.
Lowe, M., George, G., & Alexy, O. 2012. Organizational identity and capability development in internationalization: transference, splicing and enhanced imitation in Tesco’s US market entry. Journal of Economic Geography, lbs016.
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