Part 1 – Strategic analysis
Tesco plc runs its business operations as the name of Tesco. Tesco is a British multinational grocery and merchandise retail company. The main office of this company is in Welwyn Garden City, England. On the basis of gross profit, this company has gained the third position in the retail sector (Tesco PLC, 2020). On the basis of revenue, This Company has acquired 9th position in the world. Ken Murphy is the CEO of this company. In 2019, the amount of revenue of this company was 63.91 billion GBP (Tesco annual report, 2019). This company holds more than 450,000 staff for operating its worldwide operational activities (Tesco annual report, 2019). The main subsidiaries of this company include Tesco Mobile, Tesco Bank, and Tesco Ireland. This report analysis the strategic factors of Tesco elaborately. Firstly, it focuses on the retail industry analysis by the considering products and competitors of Tesco. Then, this report evaluates Macro-environmental trends and their impact on Tesco and UK retail industry. After that, this report prepares the industrial structural analysis to find the structure of Tesco. Then, it focuses on the nature of competitive structures of the retail industry including Tesco. Finally, it focuses on the future trends in the macro and industry environment that affect the future business activities of Tesco.
2.0 Relevant industry for analysis, products, and competitors
2.1 Industry for analysis
In the UK, the retail industry has become a popular business site for the entrepreneur. Smith (2020) stated that the profitability and sustainable growth of this industry are also lucrative. A large part of the market share of the UK is owned by the retail section. The retail industry assists in developing the economic condition of the UK by creating employment opportunities for the unemployed people of the UK. The retail segment of the UK is the source of entertainment, fashion, food, general merchandise, health and beauty, home, sport and leisure and technology (Smith, 2020). In the UK, the major retail company includes H&M, John Lewis Partnership, Marks & Spencer, Primark, Aldi, Asda, Lidl, Morrisons, Sainsbury’s, Tesco and Waitrose. The largest retail company of UK includes Tesco, Sainsbury’s, Walmart and Morrisons (Smith, 2020). Tesco and Sainsbury’s are holding 41.8% of the market share of the total retail sector.
Tesco is a British multinational grocery and merchandise retail company. The main competitors of this company include Sainsbury’s, ASDA, and Morrison’s. The main products of Tesco include 40,000 food products, clothes, and non-food grocery items. The main products of Sainsbury’s include groceries, Argos, Sainsbury’s Home and bank, Habitat and Nectar. The main products of Asda include general merchandise including clothes, home electronics, toys, homewares, health, and beauty products. The main products of Morrison’s include food, drink, clothing, and books.
Rahman (2019) noted that competitor analysis is a significant analysis of market assessment to find the strengths, weaknesses, threats and market opportunities. From the competitor analysis, the business firm can evaluate the competition from direct, indirect, and replacement competition. From the competitor analysis of Tesco, it has notified that Tesco holds 27.7% of total market shares whereas Sainsbury’s holds 15.9%, Asda holds 15.3%, Morrison’s holds 10.6%, Aldi holds 7.5%, Lidl holds 5.3% and Waitrose holds 5.1% of the total market share of UK retail sector (Statista, 2020). Tesco has a strong position in the UK retail sector than the competitors. However, Tesco has to consider the relevant issues of the market and competitors to create and utilize the market opportunities.
3.0 Critically analyze key Macro-environmental trends and impact on Tesco and UK retail industry
Decension (2019) noted that macroeconomic environment trends contain the outside factors that generally affect all organizations of a country. The macroeconomic trends can be positive or negative. Capron (2019) noted that the positive trends affect the business operations positively but negative trends affect negatively on sustainable business growth. The macroeconomic trends can be analyzed by PESTLE issues. Tesco is a worldwide retail business by which the macroeconomic trends affect the operations of this company.
Political issues contain the government pattern, system, and policies related to fiscal, monetary and taxation policy (Decension, 2019). These political issues have a significant effect on business operations. In the case of Tesco, the positive political condition of operating countries brings good outcomes whereas the negative political condition of operating countries hampers the sustainable growth of Tesco.
The economic issues are related to the monetary system of a country. Normally, these factors are determined on the basis of money supply, income level and several rates related to interest and taxation (Decension, 2019). In the case of Tesco, the good economic condition of operating countries brings good outcomes, but economic downturns affect negatively the profitability and growth of Tesco.
A significant part of society is business. The status and nature of society influence the structure and position of the business. Normally, social factors have contained the taste, lifestyle, religion, income and purchasing power of the customers (Decension, 2019). In the case of Tesco, the good society condition brings good outcomes but any change in the society affects negatively the profitability and growth of Tesco.
Tesco is performing outstanding performance with various aspects of retailing using different technologies. Tesco’s e-commerce site and social media promotions influence 43% of customers to buy online. Tesco e-commerce increased from 9% of total UK sales to 16% by offering 47,000 jobs during this Covid-19 (Rigby, 2020. Tesco is now using 3D imaging system/technology in its stores to manage customer queuing and numbers during this pandemic situation of Covid-19 (Coker, 2020). However, Tesco spent around £840 million to fit technologies in its business during this pandemic situation (Rigby, 2020).
The legal factors are settled by the government by which business firms can run their business in the legal way (Capron, 2019). The government has developed business regulations, rules, laws and related factors of doing business in the country. Tesco has operated business activities in the UK and other countries. Therefore, the legal issues must be fulfilled by this company to operate the business legally.
The environment can be led the business in the success path or failure path. The condition of a business depends on the condition of the environment. The polluted and bad environment is not good for the business operation (Capron, 2019). For this reason, Tesco Plc has to consider the environmental issues for protecting the environment from pollution and maintaining CSR functions to meet the demands of stakeholders.
4.0 Industrial structural analysis
The industrial structure can be analyzed by considering 5 important elements. The five elements include competitors, potential competitors, substitute products, customers, and suppliers (Murrell, 2019). An important model of industrial structural analysis is Porter’s five factors model. On the basis of this model, the five factors that affect the industry position, profitability and growth include the bargaining power of buyers, suppliers, and threats of a new entrance and substitute products and finally the rivalry among existing competitors (Martin, 2019). The following figure shows Porter’s five factors model……………….