Business Strategy Analysis on Tesco Plc - Case Study Example

Tesco Business Strategy Report of Table of Contents Executive Summary………………………………………………………………………….4 1.0 Strategic Analysis …………………………………………………………………..…5 1.1 Tesco PLC and the grocery retail industry…………………………...……………. 5 1.2 Organizational Purpose .………………………………………………………….…. 5 1.2.1 Tesco’s vision and mission…………………………………………………….……....5 1.2.2 Tesco’s Vision and Mission Analysis……………………………………………..…. 6 1.2.3 How Tesco treats its stakeholders………………………………………..………….. 6 1.3 Financial Analysis …………………………………………………….…………..….. 7 1.4 External and Internal environment ……………………………………………..….. 8 1.4.1 External Environment …………………………………………….…..………….….. 8 1.4.2 Internal Environment ………………………………………………………….…… 13 1.4.3 Competitive Environment ………………………………………….………….…… 13 1.5 Basis of Competition ………………………………………………………..….…… 13 1.6 Key Success Factors ……………………………………………………….…...…… 15 2.0 Strategic Development …………………………………………………………….….. 15 2.1 Existing Strategies ………………………………………………………………..…. 16 2.1.1 Business Stream Level ……………………………………………………………… 16 2.1.2 Corporate Objectives and Strategy...………………………………………………. 16 2.1.3 Operational Level ……………………………………………………………………16 2.2 Strategy Generation ………………………………………………………………….17 2.2.1 Financial Objectives……………………………………………………….………….17 2.2.2 Expansion Strategies………………………………………………………………….17 2.2.3 Value Chain Analysis…………………………………………………………………18 2.2.4 Resource and Capabilities ………………………………………………...…………18 2.2.5 Ansoff’s 9 Box Matrix- Proposed Change in Strategy…………………...…………19 2.2.6 BCG Matrix …………………………………………………………………………..20 2.3 Choice of Strategies ……………………………………………………………...…….. 21 2.4 Present priorities ………………………………………………………………………. 21 2.5 Strategic position ………………………………………………………………………..21 2.6 Interest cover ratio ………………………………………………………………………21 3.0 Implementation…………………………………………………………………………. 22 Recommendations ………………………………………………………………………….. 24 Executive Summary Tesco PLC is a British company that was established by Jack Cohen in 1919 in East End, London. The company has its headquarters in Cheshunt, Hertfordshire, United Kingdom. Initially, the company specialized in selling groceries but with time it branched into retail of clothes, electronics, furniture, software, telecom and financial services. Tesco is one of the biggest food retail companies in the world, operating over 6,000 stores internally and internationally. Tesco serves millions of customers every day. Outside the United Kingdom, Tesco operates in Ireland, India, Malaysia, China, Poland, Czech Republic, Thailand, South Korea and the United States of America. According to Tesco’s annual report, the company is the leader in grocery retail business in the United Kingdom. The grocery stores are the biggest and most profitable division of Tesco PLC. The grocery division sells over 40,000 different food products. The proposed strategies for Tesco U.K included: increasing revenues to £65,000 million by 2019; increasing trading profits to £4,000 million by 2019; increasing the number of Tesco grocery stores in the U.K. from 3,378 to 4,100 in 2015; upgrading the online shopping website to a more user-friendly and secure site; increasing the number of point of sale terminals in order to increase the speed of transactions in the grocery stores; increasing their market share by acquiring smaller grocery stores within the U.K. The proposed strategies are economically feasible and fall within the vision, mission and core values of Tesco. It is recommended that Tesco implement its laid out business strategy to accrue optimal output. 1.0 Strategic Analysis 1.1 Tesco PLC and the Grocery Retail Business Tesco’s grocery business is the largest division of the Group. The grocery retail business generates more revenue than all other branches. The company offers a wide variety of food products to customers. Some of the products offered include fruits, baked items, frozen food, beverages, baby food, pet food, milk products and household items. Tesco Grocery serves both walk-in customers and online shoppers. Online shoppers can buy from the website and have the goods delivered to their homes or take the delivery from selected collection points within the U.K. 1.2 Organizational Purpose 1.2.1 Tesco’s Vision and Mission Tesco U.K’s mission is to create value for their customers and to earn their lifetime loyalty. Tesco’s vision is to gain a valuable position and trust among its customers, community employees and shareholders. The company wants to grow into an innovative company offering the best service to customers. Tesco aims at becoming the leading grocery retail company in the world with strong customer loyalty. The company aims at expanding its business globally and offering new opportunities to the communities it serves. The firm aims at creating new ideas and strategies to increase revenue and profit. It seeks to improve the range and quality of its core products and positioning itself as the leading retail company in the U.K. Tesco groceries also aims at offering stable and competitive prices to customers. Tesco aims to be an environmentally sustainable company by 2050. The core values of the company are exceptional customer service and establishing brand value. The company also focusses on using its position to help the community. 1.2.2 Tesco’s Vision and Mission Analysis The mission statement is short and clear. It is consumer-focused and is inspiring. The mission states in comprehensible terms how the business intends to be viewed by customers. The vision statements describe clearly what the business aims to achieve. The targets are achievable and visible. The vision and mission outline the targeted relationship with all stakeholders especially customers, staff and shareholders. The vision also lays down the targets that the company hopes to achieve in regards to domestic and global markets. The vision and mission convince customers and all stakeholders of Tesco’s commitment to them. 1.2.3 How Tesco Treats Stakeholders Tesco delivers quality customer service to all consumers. The company’s main concern is the satisfaction of customers and as such, customer feedback is given ample consideration. Tesco delivers products to buyers on time. Tesco has a strong bond with its suppliers and distributors ensuring efficient operational flow. Distributors and suppliers can give feedback through Tesco’s Producer Clubs. Regular meetings with stakeholders help to strengthen bonds and increase trust. Tesco regards all stakeholders highly and is committed to customers regardless of their country of operation. The company offers shareholders with a high dividend ratio (InvestmentWeek, 2004). It also engages in seminars and conferences with shareholders to comprehend their views on the company’s corporate strategy. Employees are adequately remunerated and incentives are offered to them for exceptional service. The firm engages staff though annual viewpoint surveys, face-to-face briefings and store forums. Tesco has maintained a healthy and safe working environment for employees in all sectors of operation. The firm has initiated several projects to help the community, offering educational grants to schools and disability centers. Tesco U.K offers employment to the local community and helps in the regeneration of stalled projects. Tesco is accountable to all government regulation agencies and meets all the set standards of operation. The company also exchanges valuable information with the government in order to improve public policies. 1.3 Financial Analysis The grocery business in the U.K. is highly competitive. The retail industry has experienced financial challenges in recent years. However, Tesco has managed to grow its grocery retail business achieving increase in revenue and profits. Tesco has held off competitors in the U.K. to become the leading firm in the grocery sector. Currently, Tesco holds a 30.7% of U.K.’s grocery retail market share. Tesco is operating at a higher margin of profit than the retail industry average of 2.2%. Below are the financial performance analyses for Tesco UK for the past 5 years (Financials, 2014). Fiscal year ends in February. All figures in Great Britain Pounds in millions. 2010 - 02 2011 - 02 2012 - 02 2013 - 12 2014-02 Revenue excluding IFRIC 39,104 40,766 42,803 43,582 43,570 Trading Profit 2,413 2,504 2,478 2,272 2,191 Operating Profit Margin 6.0% 6.4% 6.5% 3.7% 4.1% Return on Capital Employed (ROCE) 12.1% 12.9% 14.7% 14.5% 13.6% Total Shareholder return 9.5% 6.7% (3.0)% 2.1% 3.7% Number of Stores 2,507 2,715 2,979 3,146 3,378 Revenues by Employees 198,897 202,850 207,931 204,319 200,637 Weekly sales per square foot 25.22 24.95 24.86 24.15 23.33 Table 1: Tesco UK 5-year financial analysis. Source: Morning Star – Financial. Return on Capital Employed (ROCE) reflects the overall return on the capital flowing in the company. ROCE measures a firm’s profitability and the rate at which capital is employed. ROCE comprises of equity and debt. Tesco U.K’s ROCE has risen from 12.1% in 2010 to 13.6% in 2014. Tesco is operating above the weighted average cost of capital of 8% – 10% in 2014 (Microaxis, 2014). 1.4 External and Internal Environment 1.4.1 External Environment Political and legislative factors: Government employment regulations within the United Kingdom demand that Tesco groceries provides jobs from highly skilled and highly paying jobs to low skill and locally-based jobs. Tesco also has to meet the requirements of demographics segments such as parents, students and senior citizens. The enterprise also has an employment quota for disabled people. The Code of Practice regulates aspects such as demanding payment from suppliers and altering prices without notice are revered by the organization. Tesco is expected to provide politically correct prices in line with pricing policies. The legislation regarding advertising fatty foods has been implemented by the organization (Parliament, 2014). Economic factors: Economic factors influence demand, costs and profits. High unemployment rates reduce purchasing power and consequently the demand for grocery decreases. Economic factors are beyond Tesco’s control but the company is keen to market itself and ensure consumer retention amidst any adverse economic conditions that may affect business operations such as soaring inflation rates (Economics, 2014). Environment factors. Environmental stakeholders require companies to be environmentally sustainable and to offer more eco-friendly services. Tesco aims at supplying zero-carbon products and reducing wastage from its retail stores. Tesco has plans to avert environmental pollution from its stores to zero by 2050. Social-cultural factors: Tesco has to evaluate the influence of customer culture within the U.K. Customers have shifted from single purchases to bulk purchases in order to save money. Tesco has begun offering higher packages for food products that were previously not sold in bulk. Population factors such as the increasing percentage of elderly citizens and the increase in the number of women workers have prompted Tesco to offer added-value services and products to consumers in the U.K. Customers have increased their health awareness, causing a shift towards food product with cholesterol. Tesco has complied with all socio-cultural changes appropriately. Technological factors: Technological advancements have changed the way Tesco operates. Consumers are shifting towards online shopping and Tesco has improved its website to comply with this trend. Tesco has introduced various electronic points of sale terminals in all grocery stores in the U.K. The implementation of Electronic Funds Transfer Systems has improved the customer buying experience. Tesco grocery stores also utilize wireless devices, electronic shelf labelling, and intelligent scales. Many people in the U.K. especially young shoppers prefer to shop online. The Tesco website has a provision for online shopping and delivery. Opportunities Tesco has entered strategic partnerships with different suppliers to provide high-quality groceries. Rapid advancement in technology has led to an increase in the number of people shopping online. The online shopping arena is a growing market segment that Tesco is exploiting. Tesco has opened new grocery stores or added more stores in various cities across the U.K. By opening more stores, it is in a position to serve more customers every day. The increasing population and the increased purchasing power of the U.K is also an opportunity that Tesco can exploit (Sharda, et al., 2008). Threats There is stiff competition from other retail stores such as Asda and Sainsbury. Competitor mergers and trade agreements such as Walmart with Asda, put pressure on Tesco’s market share. New entrants into the market provide lower prices; thus eating into Tesco’s market share. The fluctuating taxes adversely influence Tesco’s financial performance. In addition, increasing costs of raw materials lead to increase in operating expenditure, higher prices for consumers and reduced profits (Ruddick, n.d.). 1.4.2 Internal Environment Strengths Tesco is the largest grocery retail firm in the U.K. Currently; Tesco holds a 30.7% market share of the grocery market in U.K (PremierFoods, 2014). The company has the highest number of online grocery shoppers in the U.K. The company’s brand is associated with reliability, value for money and superior quality. The financial meltdown did not adversely affect Tesco groceries as evidenced by the growth in all levels of business. The revenues for Tesco groceries grew each year during the five years under evaluation. The continued growth is a proof of Tesco grocery’s strategic competence. Tesco’s flexibility is its other strength. Tesco has been able to improve its brand by carefully planned packing. The branding strategy has become inimitable by competitors (Tesco, 2014). Figure 1: U.K. Retail Market Share. Source: Premier Foods The company offers exceptional customer service to all buyers. Walk-in customers are attended to with professionalism, friendliness and urgency from the moment they walk into the store. Online shoppers have their purchases delivered punctually. Tesco has specialized customer services to carter for every individual customer. The company has come up with creative ways of improving the shopping experience in stores. Tesco has a wide network of distributors and suppliers; therefore, increasing the variety of goods in the grocery stores. A broad variety of grocery meets the assorted tastes of consumers. The company has built a strong loyal customer base due to its loyalty card program that offers discounts and redeemable points to customers who shop regularly. Tesco grocery has been able to offer groceries in line with the market demands. Tesco’s online presence in social media has increased the information flow to customers (Prospects, 2014). Weaknesses Increasing Tesco’s geographical spread makes it difficult for the company to focus on a specific market or demographic. High fuel costs lead to increased transportation costs. High transport costs increase Tesco’s operating expenses and reduce profit. Due to Tesco’s rapid expansion internationally, the groceries arm of the company in the U.K has little financial resources for expansion. The broad assortment of customers means that some services could displease some people, causing customer defections (KPMG, 2014). 1.4.3 Competitive Environment Tesco groceries faces competition from various retail companies in the U.K. The main competitors include Asda, Sainsbury’s, Morrison’s and Co-op. Porter’s five forces regarding Tesco are analyzed below (Nickels, et al., 2011). (I). Threat of new entrants: A few competitors dominate The U.K. grocery market. The huge profits in the retail sector have lured new companies into the market. However, it is difficult for new entrants to raise adequate capital because of highly developed supply chains and large fixed costs ascribed to the market (Euromonitor, 2014). (II). Bargaining power of suppliers: The fear of losing business to other suppliers means that Tesco is able to consolidate its suppliers and bargain for prices. U.K suppliers are threatened by the ability of Tesco groceries to import products from other countries. The bargaining power of suppliers is hence low. (III). Bargaining power of customers: Tesco’s loyalty card is a successful method of retaining customers. Customers have adequate information regarding various products and the prices offered by different stores for that product. The consumer power is moderate (Humby, et al., 2012). (IV). Threat of substitutes: Substitution reduces the demand for a particular grocery. Changing needs can cause the customer to change grocery stores. Product-for-product substitution however does not affect Tesco because of the wide variety of products on offer. The threat of substitution is moderate (Zack, 2009). (V). Bargaining power of competitors: The competitive rivalry is high. The grocery market has experienced an increase in size and market share growth for large retail companies. Competitors can build larger stores, increase retail specialization and utilize a range of formats. Increasing or operating with a flat market share is difficult due to the stiff competition in the market (Economics, 2014). 1.5 Basis of Competition Tesco grocery holds the largest market share in the U.K. The company holds a competitive edge due to its excellent customer service, flexibility, variety of products and a quality brand. The factors that consumers consider when choosing a grocery store are price, accessibility, customer service, loyalty reward and variety (MarketingWeek, 2014). 1.6 Key Success Factors The key success factors for Tesco groceries include its loyalty club card; the exceptional customer service, quick delivery to online customers; superior quality of products available; and the variety of provisions. 2.0 Strategic Development 2.1 Existing Strategies 2.1.1 Business Stream Level Market penetration- Tesco will establish new grocery stores in unexploited areas such as North Scotland, parts of Northern Ireland and North West England. Tesco also plans to revive large grocery stores in order to increase market share in the U.K. Tesco groceries has plans for the acquisition of independent family businesses in order to increase the division’s profits and increase its market share (Copestake, 2012). Product development- Tesco groceries plans to increase customized branding for new goods. The company will increase the variety of products available in stores in order to give customers a wider product range to choose from. Market development- Tesco plans to invest £150 in the online business to improve the shopping and user experience. Improving the online business will increase online purchases; thus, increasing the company’s grocery market share. The company will have the capacity to exploit new markets. Diversification- Tesco grocery plans to take over Giraffe, a consumer business with a chain of restaurants in the U.K. The company plans to invest as a shareholder in Euphorium (a bakery) and Harris and Hoole (a coffee shop). Tesco aims at providing new grocery products for the existing market. 2.1.2 Corporate Objectives and Strategy The company believes that the objectives are achievable and reflect the company’s mission and vision. The company has plans to own a majority share in the U.K retail store market. Tesco grocery plans to accrue higher profits from local operations. The company hopes that by acquiring new businesses such as Euphorium, it will effectively diversify its products and offer consumers a wide assortment of products. Tesco intimates that the acquisition of new family businesses will increase its revenues and market share. The company has invested in improving the online business section in order to add new consumer demographics and increase revenue. The company seeks to improve the management of the grocery stores by recruiting experienced and result-oriented managers. 2.1.3 Operational Level The company plans to improve customer service by providing customer-specific services. Online shoppers will have goods delivered to their residences or collection points punctually. Faster deliveries will be possible through the acquisition of speedier vans and by responding promptly to customer demands. Collection points will be located near residential estates in order to increase customers’ accessibility to their purchased products. Products will be priced at competitive prices in order to increase profits. Tesco will establish agreements with various suppliers and distributors in order to provide broader varieties of products in grocery stores (Ireland, et al., 2008). 2.2 Strategy Generation 2.2.1 Financial Objectives Tesco aims to increase its revenues from £43,570 million in 2014 to £65,000 by 2019. It also plans to increase the Return of Employed capital from 13.6% in 2014 to 20% in 2019. Tesco will achieve this by targeting new buyer demographics such as teenagers. The company will also increase its online trading volumes and increase the variety of products provided. The company will also enter strategic collaborations with other companies on sharing distribution chains (Baye & Beil, 2006). Increasing trading profits from £2,191 million in 2014 to £4,000 million by 2019 and increasing operating profits margins from 4.1% to 8.0%. The company will achieve this by increasing trading volumes and offering competitive prices on products. The company will also source suppliers for the best quality goods for the lowest prices. 2.2.2 Expansion Strategies Increasing number of Tesco grocery stores in the U.K. from 3,378 to 4,100 in 2015. Expanding the online store to include an eclectic range of products. Increasing market share by acquiring smaller grocery stores within the U.K. Setting up more stores in unexplored regions especially in Northern Ireland, Wales and Scotland. 2.2.3 Value Chain Analysis Improving the speed of delivery of ordered products. Increasing the number of store attendants in order to offer more assistance to customers. Increasing the number of point of sale terminals in order to increase the speed of transactions in the grocery stores. Continued implementation of the Tesco Club card. Offering better offers on point redeeming schemes. Establishment of self-service kiosks. Direct marketing adverts and promotions. Increasing the number of store ranges and formats in order to entice targets more sections of the demographic. Improving the technology in use within the grocery stores in order to speed up operations. Customer feedback will be gathered though a support desk and from social media interactions (Chesbrough & Appleyard, 2007). 2.2.4 Resources and Capabilities Tesco has 3,378 stores within the U.K. The company has 440,000 employees. Tesco UK has revenue of 43 billion pounds and operating income of 2.191 billion pounds. The intangible resources possessed by Tesco are brand uniqueness; service innovations; wide comprehension of the retail industry; a user-friendly website; and excellent customer service. Tesco has a competitive edge due to its loyalty Club card, knowledge integration and a broad knowledge of the retail industry (IGD, 2014). 2.2.5 Ansoff’s Growth Matrix – Proposed Change in Strategy Market Development Targeting new geographical areas especially in places that have few grocery retail stores. Improving online sale channels by building a more user-friendly website. Increasing direct sales. Targeting new groups of buyers such as teenagers and senior citizens. Diversification Introducing new customers to the retails stores. Increasing the variety of products offered in all grocery stores. Selling grocery products to different markets. Market Penetration Increase market share by increasing diversity of products. Vigorous advertising to increase customer awareness about grocery products offered by the company. Offering discounts for bulk purchasing of groceries. Increasing the Tesco Clubcard rewards. Offering competitive prices for food products. Product Development Packaging existing Tesco-branded products in new ways. Offering bulk purchases on various items. Offering new more improved products to replace old brands. Introducing product line extensions. Improving customer service and quality. Table 2: Ansoff’s Growth Matrix 2.2.6 BCG Matrix Market Growth Question mark: Tesco groceries cannot be considered a question mark. All the sectors are making profit and display potential to grow. Star: Tesco grocery is a star with the largest share of the retail market and high market growth. The company has the potential of generating huge profits. Tesco should invest more money to realize its potential. Dog: Tesco groceries cannot be considered as a Dog because it generates income. Cash cow: Tesco groceries could be deemed to be a cash cow because of the high market share. Tesco has exceptional customer service, wide distribution networks and a superior brand in the U.K. Tesco needs to adopt a new strategy to increase brand awareness. Market Share Table 3: BCG Matrix Analysis 2.3. Choice of Strategies The following strategies have been selected for implementation in the next five years and beyond. Increasing revenues from £43,570 million in 2014 to £65,000 million by 2019. Increasing trading profits from £2,191 million in 2014 to £4,000 million by 2019. Increasing number of Tesco grocery stores in the U.K. from 3,378 to 4,100 in 2015 and venturing into new international markets. Upgrading the online shopping website to a more user-friendly and secure site. Increasing the number of point of sale terminals in order to increase the speed of transactions in the grocery stores. Increasing market share by acquiring smaller grocery stores within the U.K. 2.4 Present priorities Tesco’s main challenge is maintaining a balance between staying on course with their strategies while maintaining their market grip. It is important for Tesco to meet all the challenges brought by economic downturn and entry of strong competitors in the market. In regard to this, Tesco’s main priority is finding resources that it can invest for its customers by keeping a firm grip on cash and costs. Additionally, the company aims at exploring avenues of sustaining its investments for future growth. Therefore, the company should invest in the right opportunities, protect itself from capricious capital markets, and trade in sustainable ways in order to face off with economic downturn and entry of strong competitors in the market. 2.5 Strategic positioning Positioning plays an integral role in a marketing plan. This is ascribed to the fact that correct positioning strategy can help a company gain a huge market share. Position denotes a service or product’s position in the minds of customers. Tesco grocery concentrates extensively on its customers and have several strategies aimed at enhancing customer relationship and satisfaction. Some of these strategies include online shopping, Loyalty card, just to mention but a few. Tesco’s tagline, “To create value for customers in order to earn life-time loyalty,” successfully illustrates its positioning strategy. 2.6 Interest cover ratio Interest cover ration plays an important role in determining how easily a company is capable of paying its finance costs on outstanding debts. Low interest cover ratio implies that the company in question has lots of debt expenses. In addition, an interest cover ratio of 1.5 and below shows that a company’s ability to pay its finance cost is extremely weak. In 2007, Tesco’s interest cover ratio was strong at 13.28 times; however, in 2009, it sharply declined to 7.18 times. This implies that its ability to pay interest expenses had reduced in the years preceding 2009. This problem was attributed to the significant increase in Tesco’s debt borrowings which resulted to high interest expense; thus, reducing the ratio. 3.0 Implementation Tesco will require huge financial resources to fulfil the proposed strategies. The strategies that will need the highest investment are: building new grocery stores; paying employees to work in the new stores; acquiring smaller retail stores in areas that Tesco does not serve and increasing the number of point of sale terminals in all stores. Tesco should form a team to evaluate the progress of implementing the strategies (Reece, 2014). Year Task 2015 2016 2017 2018 2019 2020 2021 Increasing revenues to £65 billion Increasing trading profits to £4 billion Increasing grocery stores to 4,100 Upgrading the online shopping website Increasing the number of point of sale terminals Acquiring smaller grocery stores Figure 3: Gantt chart for implementation of the business strategies. Evaluation will be done in the following ways: Goal based Evaluation: Monitoring the implementation of the objectives. The company will constantly evaluate which goals have been met, which goals are nearly completed and which ones have failed. In this regard, the company will able to know which goals need massive funds and which goals do not need funding. This will go a long way in avoiding wastage of funds and resources since completed goals will give room for the uncompleted goals to be completed also. Outcome based evaluation: When implementing the strategies, the company will evaluate the outcome of the implemented goal. This is extremely important since it will help the company to know whether the intended goal has been achieved. This acts as the scorecard since it will help the company’s executives know whether their strategies were a success or an exercise in futility. Regular reports: Setting up a monitoring team that will submit reports on a regular basis to the management. Regular reports will play an integral role since it will help the monitoring team to keep track of their progress. This is important since it will help in immediate realization of any laxity in the strategies’ implementation. Meetings: Having regular meeting between the teams working on implementing the strategy (Barney & Hesterly, 2009). This is important since the teams will be updating one another on the progress of the strategies’ implementation every time they meet. Updating one another will help in identifying areas that have problems and need immediate attention. Consequently, regular meeting and updates of the progress will play an integral role in assessing which strategy is doing well; thus, should be given minimal time and resources, so as to give room for the other strategies which are performing dismally. Recommendation The business strategy proposed is a thorough analysis of the internal strengths, weaknesses, opportunities available and threats posed by external factors. Ansoff’s growth matric and BCG matrix were applied to evaluate the strategies. All the necessary factors have been given significant consideration. Tesco groceries should implement the business strategy in its entirety. The strategy will increase the market share of Tesco, increase customer satisfaction, increase profits and increase revenues. The strategies are in line with Tesco’s mission, vision and core values. Since Tesco has already captured the retailing industry in the UK, it should lay more emphasis in increasing its international presence. For it to be a world leader, it should focus on capturing more markets in several other countries. Tesco has the capability of developing effective strategies that can easily penetrate other markets. Through implementation of the market development strategy, Tesco has the capability to easily grow and achieve high revenue. These new markets acts as high opportunity markets for the company, and by Tesco taking part in international alliances, it stands a high chance of being a world leader. In order to acquire the novel markets, Tesco needs to keep the prices of its goods lower than its competitors. This is important since more customers will be attracted to buy groceries from Tesco’s stores and not from its competitors’. In Tesco’s strategy of capturing international markets, it can take advantage of its large scale model of operations to maintain low prices. Additionally, since it is strong and large brand, Tesco can easily catch the attention of new customers in the international markets and make numerous sales. Tesco Company became extremely geared in the year 2009. This implies that they face risks and that they are paying exceptionally high finance costs and this is reducing its profits. Therefore, it is imperative for Tesco to minimize its gearing level by minimizing the debts it has a result of borrowing. In order to continue succeeding as a leading retail business in the U.K, it is recommended that Tesco grocery implements the proposed business strategy. References Barney, J. B. & Hesterly, W. S., 2009. Strategic Management and Competitive Advantage.. s.l.:Pearson Education. Baye, M. & Beil, R. O., 2006. Manegerial Economics and Business Strategy. 5th ed. s.l.:McGraw-Hill. Chesbrough, H. W. & Appleyard, M. M., 2007. Open Innovation and Strategy. s.l.:s.n. Copestake, J., 2012. The Future of UK Retail from 2013. Retail Week. 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