Tesco strategic management

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Introduction 2

I. Tesco Environment Analysis 3

A. PESTEL Analysis: 3
1. Political and legal factors 3
2. Economical factors 3
3. Socio-cultural factors 3
4. Technological factors 4
5. Environmental factors 4

B. Porter’s Five Forces Analysis 5
1. Barriers to entry 5
2. The threat of substitutes 5
3. Competitive rivalry 6
4. Thebargaining power of suppliers 6
5. The bargaining power of buyers 7

C. Opportunities and Threats 7

II. Tesco’s Resource Capability Analysis 9

A. Tesco value chain 9
1. Primary activities 9
2. Support Activities 10

B. Strengths and weaknesses: 11

III. Tesco strategic fit 13

Conclusion 15

Bibliographie 16


TESCO is the undisputed leader infood retailing in the UK since 1995. It realized in 2006/2007 a turnover of 64.5 billion euros (+ 10.9% compared to the previous year). The core business is in the UK. Nowadays, it has 1988 outlets.
Furthermore, TESCO is increasingly becoming abroad: thus it has nearly 639 outlets in Europe (excluding UK) and 636 outlets in Asia. The expansion of the group in the coming years will take placemainly in Central Europe and in Asia (China, Japan, Malaysia, Korea, and Thailand).

The group operates through multiple store formats including Extra, Superstore, Metro, Express and hypermarkets.

In this study, we will analyze Tesco strategy in UK. First of all, we will focus on the environment in which Tesco operates and the different factors which have an influence on the market, then we willanalyse Tesco resource capability, in particular the value chain, and finally we will study its strategy fit in the market.

I. Tesco Environment Analysis

A. PESTEL Analysis:

I am going to focus on the PESTEL analysis to scan the external macro environment in which Tesco operates.

1. Political and legal factors

Concerning the political factors, we can retain that the environmentalprotection laws affect the activities of retailers greatly. For example, politicians decide about the land-use planning system. It is a question of keep green field development in town centre. Government also affects the supply side of retailers via taxation business (VAT, fuel tax, road pricing). We can also quote other political and legal factors which also have a big impact.
For exemple, thenational minimum wage has an impact on customers’purchases. EU working time directives have an impact on the time to shop. Competition Commission can regulate business competition and trading conditions. Finally, there is a safeguard of consumer interests and public policy which tightens regulation on food stores (health and safety executives).

2. Economical factors

Economical factors areimportant insofar they can influence on the consumer buying behaviour.
The economic situation of the UK is rather stable since 1997. Last year (in 2006), British economic growth was +2,8%. This is due to the fact that household consumption has increased but also to the employment situation. Indeed, the British unemployment rate is one of the lowest in Europe with an average rate of 5% since 2001 (4,9%in 2006).
About the inflation, it stagnates around 2%. The main threat at the moment comes from a possible fall in the housing market, which might lead to a recession.

3. Socio-cultural factors

The costumers’ expectations change according to the age, the gender, the social environment etc…Indeed, nowadays, people do not have time to do shopping because of work and want to enjoy their sparetime. Busier lifestyles increased the demand for convenient foods/ ready meals. So, Tesco has taken into consideration all of this. Moreover, the UK population is becoming more and more older; the median age is 38.8 in 2005. So delivery service can be a strength to develop.
Concerning ethnics’ food, there are different from English food. Supermarkets have to satisfy each consumer’s needs, such...