Strategic Management Analysis Essay Example

cash at checkout. Like other companies around the world, Tesco has been affected by the technological revolution, which has greatly impacted their product development by making them easily accessible and providing personalized services that enhance convenience for shoppers. To effectively manage their food supply chains amidst these advancements, Tesco launched the Efficient Consumer Response (ECR) initiative. They utilize various technologies including intelligent scales, wireless devices, self-checkout machines, electronic shelf labeling, RFID (Radio Frequency Identification), electronic funds transfer systems, electronic point of sale systems, and electronic scanners to enhance their retailing activities like distribution and stocking through real-time communication with suppliers.In addition to environmental considerations, Tesco's operations have been influenced by corporate social responsibility expectations and government policies. To meet these expectations, Tesco has implemented regulations and corporate governance practices. The Food Retailing Commission (FRC) proposed a Code of Practice to prohibit certain practices, and government policies on monopolies and buyer power also affect Tesco's performance. In response, Tesco has introduced pricing strategies such as offering fuel discounts based on customer spending. As a reputable UK food retailer operating in various market segments, Tesco holds a 13% share of the retail market with expansion capabilities in both food and non-food sectors. As part of its growth strategy, Tesco plans to open 59 new stores in the UK. Through a significant investment in T, a convenience store group, in late 2002, Tesco solidified its position as the second-largest convenient retail store chain in the UK after Co-operative GroupTesco's international business segment has been steadily growing in Europe and Asia. In fiscal year 2003, their personal finance division reached a milestone with one million motor vehicle-related insurance policies,

making it the fastest-growing provider of motor insurance ever. This division also offered pet insurance for over 330,000 dogs and cats. Tesco Online is recognized as the world's largest online supermarket with over 270 stores nationwide.

In 2004, sales volume increased significantly by 29%, generating ?577 million in revenue for the group. Tesco's dedication to trustworthiness and innovation has enhanced its brand value in Europe and Asia. Although heavily reliant on the UK market (78% of revenues generated there in 2003), this does not currently pose a major issue for Tesco. However, changes in supermarket power within the country could potentially impact their long-term share.

Tesco's substantial capital expenditure program is a result of investments made in new stores, which limits available cash for other operations. The non-food retail segment presents significant opportunities for Tesco, expecting a sales increase of 13% by 2012 through hypermarket growth and improved merchandising skills.In addition, Tesco expects continued overseas growth to increase scale and earnings, facilitating business expansion. With ?7 billion in sales in the global non-food market, which accounts for 23% of total sales, Tesco is making progress towards its goal of maintaining a strong presence in this segment. They are applying the successful principles of choice, value, and convenience that have proven effective in the food sector to achieve their objectives.

In 2005, approximately half of the new spaces opened in the UK were dedicated to non-food products. Tesco's health, beauty, and telecoms ranges are growing as they offer a wide variety of popular products. Currently, Tesco owns nineteen stores that provide optician's services and nearly 200 stores with operational pharmacies.

The company anticipates further international expansion in Europe and Asia

driven by global hypermarket growth. This growth strategy has also been applied to Tesco's banking sector, creating promising prospects for the future by leveraging their brand.

However,a major threat arises from upcoming structural changes in the UK retail market that could lead to price wars as competitors offer better services at more competitive prices. Safeway poses a specific threat due to new ownership while Sainsbury faces a threat from a change in management.

When analyzing Tesco's situation, Porter's five forces model takes into account supplier power, barriers to entry, threat of substitutes,buyer power,and degree of rivalry involved.Tesco faces several factors that are important to consider, including the presence of substitutes, volume importance to buyers, supplier concentration, threat of forward integration, and input differentiation. Efficient supply chain management is crucial for Tesco's overall success. The company also encounters various entry barriers in the industry such as cost advantages, government policy, capital requirements, switching costs, expected retaliation, proprietary products,economies of scale,and brand identity. These barriers make it difficult for competitors to enter the market. Tesco heavily relies on economies of scale for profitability across all its retail outlets. However,the concern lies with the threat of substitutes as buyers may opt for alternative options over Tesco's offerings. To address this challenge,Tesco emphasizes product differentiation and brand identity to drive sales.Fortunately,Tesco does not face intense rivalry from many players in the sector due to the high capital investment required to establish similar businesses.The SMART analysis developed by IBM can be utilized by Tesco to predict technological failures and assess the potential success or failure of its operations.By conducting this analysis,Tesco can accurately identify weaknesses such as customer knowledge,culture, competition (existing and

new),ideal foreign brand characteristics,and market shifts due to globalization.Tesco PLC has the potential to enhance its strong brand reputation globally and domestically through effective management and marketing strategies, despite various challenges that could impact its future prospects. Nevertheless, there is a risk of decreased returns in international markets due to local competitors adopting new competitive strategies.