Identification of Strategic Position
I would like to undertake the analysis of the firm TESCO, which is the market leader in UK. I would like to determine the Strategic Position of TESCO with respect to its capability, culture, purpose, and environment. It is important for TESCO to utilize its resources optimistically in order to continue its market dominating position in a given London Market scenario. They, however, need to improve upon their work culture and define a specific purpose so as to serve the different needs of the internal and external environment.
For this purpose, they can look down upon different available strategic choices from Corporate, Business, International, Acquisitions & Alliances, and Innovation Perspective. And, finally, after deciding upon one strategy they can look out for the implementation of that strategy in various processing parameters of the organization. The different phases for the implementation of the strategy will include organizing, evaluating, processing, changing, and practicing in a given environment.
- Undertake an analysis of the strategic position of your organization (TESCO-UK)
Since, we are determining the strategic position for TESCO from four perspectives I would like to provide certain important inputs from PESTEL Analysis. TESCO has been doing well in the local UK markets, and hence, holds a good strategic position in the UK Market. However, in order to utilize more of its capabilities and also serve additional purposes for its stakeholders, it can make a strategic choice of starting the trading operations in China. China has been promoting free flow of foreign trades. The political barriers seem to be less in this nation, which will thereby, help Tesco to achieve the objectives of expansion in the Asian markets (Diederichs, 2008).
Further, if we look at the internal environment of UK, people seem to be demanding more and more from TESCO. Hence, TESCO needs to look out for business and acquisitions strategic choices so as to increase its presence in UK. Recently, from the economic perspective, the consumers of UK seem to have increased their purchasing power. Due to their better financial conditions, and their confidence in the UK Economy, the consumers are likely to spend more on the products offered by Tesco. Tesco thereby needs to utilize this opportunity and plan accordingly to serve all of its customers.
There is no significant trend observed from the social perspective, as the UK population comprises more of the retired people than the young generation. As a result, they do not encourage such food items and they will not go to such supermarkets to buy the items (Hawkins & Wing, 2007). But, we have observed a positive growth trend related to technologies in the retail markets in UK.
It has been found that, nearly 70 per cent of the UK population is accessing to Internet, and hence Tesco can utilize this opportunity in various ways. In addition, since there are majority of the retired people, they will not prefer to go to the physical stores; instead, they would prefer to buy the products from online mode (Bates, 2005). Tesco, thereby, needs to invest into technologies so as to launch the online buying portal for its customers (Lamb, 2008). TESCO can thereby, make its strategic position strong both from culture and capability perspective.
In order to make its strategic position stronger from the environmental perspective, it can serve various needs of both the internal and external environment. It can take initiatives that will help the people not from the product perspective, but from the service perspective. In addition, TESCO can include customers in the strategic planning so that they will feel valued by the organization. They will provide their reviews and opinions on the basis of which, the organization can improve further.
Thus, before implementing any strategy, Tesco needs to analyze the internal and external environment and accordingly, plan and design the marketing strategies. It is important to not only consider the choices and preferences of the customers, but also to adhere to the guidelines, norms, and rules of the external environmental factors so as to make the strategic position strong from the capabilities and culture perspective (Velioglu & Argan, 2007).
Looking from the capability perspectives, it seems that, TESCO has built good infrastructure for its retail markets, warehouses, storage locations, and other supporting infrastructure for the daily operations. In addition, they are hiring candidates on the basis of not only knowledge or experience, but both; since, they believe more in serving appropriately to the customers. The top-level management is also considering the requirements of all the stakeholders so that they can build their strategic position strong in the market.
The various stakeholders for Tesco include the buyers, workers, management, suppliers, and the government. I would like to draw a stakeholder matrix so as to include all the stakeholder entities associated with TESCO. In the stakeholder matrix, there are two parameters associated with it. First one is influence, and second one is importance. For each of these two parameters, there are two dimensions, which include high and low. We, accordingly get four types of stakeholders’ groups, which include Protect, Good Relation, Low Priority, and Monitor. The importance of each of these groups is explained below, which is further, followed by which stakeholders will be placed in which groups.
TESCO is maintaining good relations with the working force and the buyers. The workers are the backbone of the organization, and they are providing the necessary inputs to achieve desired outputs for the organization. On a similar note, the buyers or the end customers will be buying the products from the organization. It is important to maintain good relations with them so as to increase the market share and achieve the decided objectives of the organization (Balasubramanian, Karrh, & Patwardhan, 2006). And, for this purpose, TESCO has been focusing more upon the service perspective rather than the product perspective.
Further, the organization with its good financial performance is providing good returns to all the stakeholders who have invested their money into the organization. However, it seems that, the organization can improve further if its works out on its strengths and weaknesses and accordingly, utilizes the opportunities from its competencies perspective.
The organization has already built the necessary infrastructure, has the required skilled workforce, and is also working well from the organizational cultural perspective. Now, it needs to establish its global presence in other international markets as well. And, for this purpose, it needs to assess different strategic choices and then work upon the best strategic option so as to expand globally (Callahan, 2004).
Further, if we look at the cultural web of TESCO, it seems to be uniform across UK, and hence, it can carry the same across the world. For this purpose, it does need to change its way and approach of working or dealing with the customers. It has an established brand presence, which seems to be working good enough in the present-day world. Now, it just needs to capitalize upon its resources and competencies so as to establish its strategic position in the entire world. But, for that, it needs to analyze the SWOT Analysis, so that they can get an idea regarding their strengths, their areas of improvement, their opportunities and threats in a given retail industry scenario.
The biggest strength for Tesco is its market leadership in a given UK Market. In addition, they are ranked as the third largest grocery retail stores in Europe, US, and Asia. The market share of Tesco in UK is around 30 per cent. The organization has been doing well from the financial perspective (Strydom, 2007). Thus, it can utilize its additional finance and competencies in investing into the global markets. They can plan to expand into the untapped Asian markets and mark their presence. But, for that they need to carefully analyze the environment, the technology and innovation parameters, and the needs of the end customers.
In addition, if we look at the weaknesses for Tesco, the major one is the way of overcoming the market competition. There are no specific differentiated products and services that could make TESCO stand different from the rest in a given market. Hence, it will be easy for the people to substitute products and services available from the competitors of TESCO. They are also lacking in geographical diversification (David, 2011). Tesco, thereby, needs to work upon such issues in order to overcome the challenges posed in a given market scenario.
However, TESCO is already in a sustainable position since it has opened around 600 plus stores in 2009, and opened more than 500 stores in other parts of the world in 2010. In addition, people have now become aware of the Tesco products, and hence, Tesco can plan for the geographical expansion. They can now view the Indian market, and can target the people of this nation. Similarly, they can even target the Australian markets in the near future. They are already trying to expand in China, and hence, sooner or later, they should utilize the wide range of opportunities available in the Asian territories.
TESCO however, needs to be aware of the threats before jumping into these international markets. They need to scan the environment and accordingly, formulate the strategies so as to serve the needs of the customers. In addition, they also need to remain prepared for the technological advancements and new initiatives so as to lead the market from the front (Thompson & Strickland, 2003).
Further, consider the following figures, obtained from TNS in 2008. We can find, TESCO is leading the market, but there has been increased competition from ASDA, Sainsbury’s, and Morrison’s (Brennan, 2008). Hence, they should start planning for various strategic actions such as either going for new technological implementations or forming strategic alliances with the local players or can even think of other international acquisitions so as to fulfill the international objectives.
Source: Taylor Nelson Sofres reports (2012). Market shares of UK Grocery Stores
- Using your analysis of the strategic position of the organization, identify and evaluate the main alternative strategic options available to the organization, selecting and justifying what you consider to be the preferred strategic option.
There are various strategic options available for TESCO to expand internationally on a global basis. TESCO has been moving in the right direction in the local markets of UK, but is still failing to deserve the appropriate market position in the global markets. Hence, it is important to analyze various parameters and find out the strategies to achieve the desired objectives at an international level. However, we first of all need to take into considerations the inputs of the various frameworks and models obtained from section – A, and also consider the Ansoff Matrix, to determine the available strategic alternatives.
Ansoff Matrix Framework
I would like to provide the Ansoff Matrix Framework to discuss the strategic position for TESCO, and at the same time determine the strategies that will help TESCO to overcome the existing competition and other key challenges of a given scenario. The following first figure of the Ansoff Matrix provides an idea of the current strategies of TESCO.
Looking from the above figure, we can assume that, TESCO has been implementing several strategies so as to sustain its market position. They have started capturing the markets at a global level, but still they need to consider various parameters and then decide upon the strategic choices.
Formulation & Evaluation of different strategic choices
- They can penetrate into the Asian markets of India and China with their existing products and also introducing the products that are more demanding in these local markets.
- Secondly, they can focus upon new product development and infrastructure development by considering the Asian markets as separate territories. They can even plan of introducing new technologies at this stage.
- Thirdly, they can create an altogether a different market space so as to distinguish them from the rest of the players in these markets. For this purpose, they need to introduce new products, new services, and new brand image as compared to what has been in the UK.
- And, finally, they can also plan for either product diversification or product extension depending upon the requirements of the end customers of these regions.
A similar analysis is shown in the below figure using the Ansoff Matrix. This figure describes the strategies, which TESCO should implement in order to beat the competition and sustain its market position in a given market scenario. It needs to think out-of-the-box, and diversify itself into new territories, bring in new products, extend the existing product lines, and invest into marketing campaigns so as to expand the customer base.
However, if we look at the SWOT Analysis summary, we notice that, the resources and competencies are the key strengths for TESCO. They just need to utilize them in an optimistic manner so as to achieve the desired objectives at a global level. In addition, they need to also formulate strategies that will help them in overcoming their biggest challenge of market competition.
In addition, the top-level management of Tesco should take note of the following factors. Consumers are powerfully influenced by the people they interact with, and these people are known as reference groups. According to Kotler & Armstrong (2010), within social groups, there are also people known as opinion leaders and they exert social influence on others because of certain skills, knowledge as well as other attributes like personality (Callahan, 2004; Lancaster & Reynolds, 1994).
In addition, with the changing times, TESCO also needs to focus upon technological advancements and provide sophisticated services in order to earn positive word-of-mouth amongst the customers (Velioglu & Argan, 2007; Davidsson & Honig, 2003). They need to analyze various environmental factors of the new territories and only then introduce their strategies to capture the given markets.
Choosing the best Strategy for TESCO
Thus, considering all the various analysis from the models, frameworks and discussion, we can narrow down the strategic choices from the Ansoff Matrix to two options for TESCO. They can either focus upon new product development and infrastructure development by considering the Asian markets as separate territories. Or else, they can create an altogether a different market space so as to distinguish them from rest of the players in these Asian markets.
In my opinion, I would better go off with the strategic option of creating an altogether a different market space, as it will help in better market recognition for TESCO. People of these markets are not so aware of TESCO and hence, they can first choose this strategy so as to establish in the given markets. Further, they can implement the other strategies so as to beat the competition. For the purpose of this new strategy, they need to focus heavily upon building the infrastructure, creating an attractive look of the stores, offer various products and services, which are not available with the competitors, and finally, focus upon the pricing strategy so as to drag the customers to their stores.
They need to monitor the performance of this strategy, and accordingly, modify it as per the needs of the changing scenario (Bird, 1989). They can then utilize their all competencies and resources so as to capture more market share. They should try to create a culture that will attract the customers of this new market just like it attracts the people in UK. Further, they can plan to implement technological solutions and build an online portal so that they can deliver all these products at free of charge. In addition, it will provide an easiness element to these customers (Munkvold, 2006).
For any given product or service of Tesco, it is important to communicate the right targeting strategy to the desired target audience (Robson, 1997). Consider for example, we are targeting the service strategy to the intended target audience. The strategy should be to not only serve them with appropriate product, but also to provide them with the services such as – takes lesser time while standing in the queue, all the desired products are available and are not out of stock, are provided with entertainment means so that they do not get bored while shopping, and finally, taking the reviews of the product (Meroño-Cerdan, Soto-Acosta, & López-Nicolás, 2008; Bekker & Staude, 1988).
At the same time, additional services of assisting them in each and every process will turn out beneficial (Woolcock & Narayan, 2000). The customers will be impressed and they will definitely visit the store for the next time. Finally, as discussed, TESCO has the advantage of strong brand image, and also has the strength of required capabilities; it just needs to utilize them in the right direction in the given Asian markets. They can select the given strategic choice and implement them after scanning the respective environment of the Asian markets, which will help them to gain substantial market share in a given scenario.
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