Name Professor Class Date I. Introduction In an industry where increasing costs and tougher competition continues to squeeze a company’s margin and profitability (BBC Business 2011), it is imperative that Tesco should formulate and implement competitive business strategies that would ensure not only its survival in the short run, but also its long-term growth in the future…
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This development stresses the importance of crafting and implementing a competitive business strategy for Tesco’s to regain its market leadership. II. Company Overview: Tesco PLC Tesco is the largest retailer in Great Britain and the third largest supermarket in the world. Its market share in the UK retailing industry is 12.5% and it controls over 30% of the grocery market which is 75% dominated by four major players Tesco, ASDA, Sainsbury and Morrison (Dobson et al 2008). Tesco has 2,440 stores and has an employee of more than 4,000,000 people. Its online grocery store www.tesco.com is recognized as the world’s biggest online grocer in the world. It has its own-label products which accounts approximately 50% of its sale. III. Industry Analysis: PESTEL For any business enterprise to become more responsive to the changing demands of the market, it is imperative that it should be able to define its internal competence and resources and external environment as well so that it can devise a strategy where it can profit and regain its market position. The tools that will be used to define both the internal and external environment of Tesco are PESTEL, Porter’s Five Forces and SWOT Analysis. PESTEL Analysis a. Political factor The liberalization of trade allowed other competitors to enter into market to compete with Tesco which contributed to its sales decline. In a report by Lyall, “foreign discounter such as Aldi and Lidl combined with an increased domestic rivalries appears to have blunted the edge Tesco had” (2011). b. Economic factor – perhaps this is the most significant factor in Tesco’s external environment that contributed to its underperforming sale in the first half of 2011. In Mintel’s May 2009 survey, it reported that 43 percent of consumers say “trying to add to my rainy day savings/emergency fund” (ProgressiveGrocer 2010). This was corroborated by a recent survey conducted by Mintel, who also reported that consumers today are more price conscious than previous years (Mintel 2011a). These development in the grocery made consumers to become more receptive more with foreign discounters because they are now more price conscious than before. c. Social factors Due to the recent economic crisis, consumers are now scaling down on their luxury expenditures and became more conscious on cost. This shift in consumer behavior affects Tesco because some of its consumers are switching to foreign discounters to save on grocery costs. d. Technological factors Technology is an important organizational competence that can enhance a company’s competetiveness. It enhances a company’s competitiveness by being more responsive to customers’ needs and being more efficient. In the case of Tesco, its technological investment in 2009, particularly its in-house designed supply chain application enabled it to increase the availability of its stock and reduced warehouse stocking resulting in the more efficient operation of its warehouse. e. Environmental factors To date, Tesco does not have any environmental issues and this factor did not contribute to Tesco’s underperforming sale. f. Legislative factors If there is any recent legislative factor that has an utmost relevance to Tesco today, that would be the passing of the Tesco Law on October 06, 2011 which has been named after the chain store. The
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