Strategic Management Individual Assignment
Ba (honors) in business & management
Offered by Cardiff metropolitan university
Strategic management
Assignment 06 – tEsco
Word count - 1089
Submitted to: Mr. Shane De Silva
M.F.M.M Fazlan
ICBT/ BABM/07/30
BABM/07/30 Page 1
Strategic Management Individual Assignment
1. Introduction
Tesco was founded in 1924. Today it is Britain’s leading food retailer. Today, the Group
operates in 13 markets outside the UK, in Europe, Asia and North America. Over 180 000
employees work in Tesco’s international business, serving in 2026 stores and generating 700
million pounds profit. Over half of the company’s selling space is now outside the UK.
2. The Development Directions Followed by Tesco from its origins as a UK-
based grocery retailer.
Tesco as UK- based grocery retailer had followed the Ansoff Matrix which is developed by
Michelle Porter.
Figure 1 : Ansoff Matrix Strategy
They are operated within the UK borders for decades. However, since the mid-90s, the company
started investing in new markets overseas, seeking out new opportunities for growth and ways of
generating long term returns for shareholders. All these facts show how successfully the
company had penetrated into foreign markets, and how massive their international invasion is.
However, Tesco did not diversify only geographically, but also by product. The company started
offering products and services in the areas of clothing, electronics, financial services, telecoms,
home, health, beauty, car and dental insurance, retailing and renting DVDs, CDs, and music
downloads internet services, software, fuel, film making and sound recording.
BABM/07/30 Page 2
Strategic Management Individual Assignment
Considering Tesco’s tremendous variety in terms of both products and markets, it is obvious that
the company had followed the diversification strategic direction, and this is exactly what the
Tesco Company did- from a UK-based grocery retailer the organization became a worldwide
enterprise operating in various types of businesses.
3. The Development Strategies Available for Tesco
A = Most Suitable; B = Suitable; C = Unsuitable
Current Future Direction and the ways Strengths of Ran
strategy to Implement company king
Consolidation Continues Different scheme such as club card and Strong brand reputation.
expansion; value range loyalty scheme.
(Market
Wide range of resources.
Penetration ) Nationally and
Stable profit due to economic of scale.
internationally.
Increasing number of
Offering product with backward integrity customers.
Purchase large
volume of product.
in order to minimize the cost. C
The most appropriate method to pursue
Increase the
the strategy of consolidation would be
Purchasing power
through organic development.
of existing
customers.
Mergers and They are currently There are several other foreign markets They have experiences in
Acquisitions
to expand operating in Ireland that could be extremely lucrative for the investing in foreign
overseas sales (91 stores), Eastern retail giant. One of these markets is the markets.
Europe (272 stores) Australian one.
and Asia (450 They have enough
stores). Another and even more attractive capital to invest.
destination would be the Russian market. The brand is famous for
world wide A
Tesco could expand to are Central and
East America Tesco is currently
BABM/07/30 Page 3
Strategic Management Individual Assignment
(as Tesco is operating only on the West successful in 14 different
Coast) markets, and is the
world’s second largest
retailer in terms of profit
(after Wal-Mart).
Product
Developing Non- Focusing on the development of non- High growth market
Development
food products food products. share and revenue
Introduction of new product in existing
Good brand reputation
market.
Focusing on product development in
C
other countries where Tesco has
established
Diversificatio Emphasis in Tesco have been
n Non- food products
different sector like successfully using this
finance, method when penetrating
The Diversification can be achieved
telecommunication foreign markets for many
through mergers and acquisitions.
process. years
B
The company is currently
offering products and
services in numerous
areas, and no further
innovations are needed.
Table 1 : The Strategic Directions Available for Tesco
BABM/07/30 Page 4
Strategic Management Individual Assignment
4. Relative Merits of Each Development Methods (Internal, Acquisition or
Strategic Alliance)
4.1 Internal growth
Market Penetration. Market development
Join and use the existing marketing Market entry is considered as critical,
strategies. based on the internal venture.
Market expansion by improving the line of
products.
Product development Diversification
Innovation is necessary. Diversification is difficult due to current
Products should be improved with the help knowledge and skills.
of knowledge and skills in order to meet
the customer’s needs and demands.
4.2 Acquisition
Market Penetration Market Development
Expanding the range of products. Penetration to new market.
Developing market share. Development of new segments.
Product Development Diversification
Use the competency in order to develop Focusing on the new market.
new products and innovations. Application of horizontal integration in
Improving the position in the market. order to have an access immediate access
to the new market.
BABM/07/30 Page 5
Strategic Management Individual Assignment
4.3 Strategic Alliance
Market Penetration Market development
Expand the range of products Global expansion
Develop market share Focusing on new segments
Product development Diversification
Application of new technologies with Substitution of vertical integration
improved knowledge and skills
Risk of seasonal and cyclic fluctuations in
Adding resources for innovation and product demands
developing market share
Focusing on the competition
The Most Suitable by Applying Criteria of Acceptability and Feasibility
In our view, there are four relevant strategic directions available to Tesco in the future. The most
suitable one would be to Mergers and acquisitions to expand overseas sales. When applying
the criteria of acceptability and feasibility to evaluate the possible strategic directions for Tesco
in the future, it was determined that the “expand overseas sales” direction appears to be most
suitable. In terms of feasibility, we suggest that the company will have enough capabilities
(capital) to deliver that strategy, since Tesco had undertaken foreign markets entries numerous
times. In terms of acceptability, it is concluded that it is very likely that the company will
succeed in its foreign expansion and the outcomes of their strategy will be more than
satisfactory, because Tesco had already conquered 13 foreign markets.
BABM/07/30 Page 6
Strategic Management Individual Assignment
Conclusion
Tesco is also strong in the area of business diversification. Business performance Tesco is
market leader in UK and 3rd largest retailer in the world after wall mart of US and France
Carrefour. They are quite successful in understanding and satisfying their customers demand.
They have been successful in delivering right product at right price considering different
technological and demographic changes. They have been following their strategy to expand
globally that gives them advantage of increased sales and ultimately economies of scale that
enable them to offer low prices which is one of their strength in competition. Old method for
growth (diversification) is continued but a tool of joint venture and strategic alliances may use to
reduce the risk of failure. The mergers and acquisitions can be listed as increased value
generation, increase in cost efficiency and increase in market share, may generate tax gains, can
increase revenue and can reduce the cost of capital.
Recommendations
It is recommend for Tesco to focus more on mergers and acquisitions for foreign markets,
because they are more dependent on its UK market. Therefore Tesco has to increase the sales in
the countries where they already exist and they do also need to find some new country to invest
to reduce dependence on the UK market. Especially considering current situation where
economic status of UK people has badly affected by current economic crisis.
When looking for foreign opportunities it is recommended for Tesco to focus most lucrative
markets. There are several other foreign markets that could be extremely lucrative for the retail
giant. One of these markets is the Australian one, another and even more attractive destination
would be the Russian and other attractive foreign markets that Tesco could expand to are Central
and East America (as Tesco is operating only on the West Coast) and Western Europe, which is
mainly represented by the profitable retail industries of Spain and Portugal. Therefore those
markets are recommended for Tesco.
BABM/07/30 Page 7
Strategic Management Individual Assignment
References
Nwagbara, Uzoechi , 2010. Managing Organizational Change: Leadership, Tesco and Leahy's
Resignation, [Online].2 - 5 . Available
at:http://academia.edu/1478810/Managing_organisational_change_TESCO_Leadership_and_Le
ahys_Resignation[Accessed 03 July 2013].
Jim Riley , (2012), Ansoff Matrix [ONLINE]. Available
at:http://www.tutor2u.net/business/images/Ansoff%20Matrix%20w500.gif [Accessed 03 July
13]
Compare Info base Limited. 2013. Benefits of Mergers and Acquisitions. [ONLINE] Available
at:http://finance.mapsofworld.com/merger-acquisition/benefits.html. [Accessed 03 July 13]
BABM/07/30 Page 8
