Tesco Plc has been chosen for this strategic analysis because of its global presence and significant growth over the recent years, with operations speared in the US, Asia, and Europe. Evidence from the company’s financial annual report (2015) shows that it operates in food and non-food products, with its strategic business ventures, including Tesco Telecoms, internet web portal, and Tesco Bank. The diversification caters for the needs of its customers.
Tesco Plc operates in a diverse cultural environment whose analysis is guided by the application of PESTLE and Porter’s Five Forces tools. Using political, economic, socio-cultural, and technological (PEST) framework, the political environment of Asia, North America, and Europe are cited to vary greatly. Evidence of the company’s Annual Report (2016) shows that political risks factors in these markets are significantly low and thus provide the business with more room to realize growth. Nonetheless, some sections of Asia appear to be risky but governmental support has encouraged the growth of this business even in such areas. Economically, businesses globally experience challenges due to escalating inflationary situations and Tesco Plc have not been spared. The global economy is currently on its path to recovery, especially after the experience of 2008/09 financial and mortgage crisis in the United States whose impacts infiltrated to other sections of the world. The sovereign debt problem in Europe is so severe that most people have been rendered jobless and thus cutting down on the consumption of this company’s products. On the socio-cultural sense, consumers from these market areas posses diverse cultures and the company has developed its products in such a way that they meet the local demands of these different groups of consumers. Moreover, the analysis of technological forces of internet marketing, customer relationship management (CRM), e-commerce, enterprise resources management, and online purchases have rendered this business more competitive and efficient in its operations.
The application of Porter’s Five Forces framework is key in this strategic analysis of Tesco Plc, citing that is a crucial complement of the PEST tool in analyzing profitability and viability factors. Firstly, the analysis of competitors’ rivalry confirms that the business faces other giant retailers such as Wal-Mart of the US, Carrefour of France, and AEON of Japan. To counter this completion threat, the business has banked on customer acquisition and retention through quality and strategic pricing. Secondly, the retailer’s bargaining power is often high since its customers do not need to bear any costs of switching from one retailer to another as they make their purchases. This conforms with the buyer’s premise of price consciousness or sensitivity while making purchase decisions. Thirdly, suppliers’ bargaining power of Tesco is high in the sense that they purchase their products for manufacturers who work hard to have their goods on shelves. This is contrary to Wal-Mart of the US, Carrefour of France, and AEON of Japan whose products’ manufacturers have to pay them certain fees before their products are placed on shelves. Fourthly, Tesco Plc faces low threats of substitute products because it makes sure that its customers obtain the necessary products. It also achieves this through the establishment of specialty online stores, which also cuts the challenge of rising online stores. Fifthly, Tesco Plc cuts the threats of new entrants through the establishment of strong retailing environment. This strategy goes alongside the establishment of a big network of distribution chain that may take a great deal of time before the new entrants set businesses.
Internal Analysis of the Enterprise