Name

Strategic Management SIB7501-B

Corporate Analysis

Tesco Internal & External Analysis

 Table of Contents
Executive Summary......................................................................................................... 1
1. Introduction............................................................................................................... 2
1.1. A Brief Introduction to Tesco PLC.......................................................................2
1.2. Industrial Sector & Competing Firms..................................................................3
1.2.1. Sainsbury..................................................................................................... 3
1.2.2. ASDA............................................................................................................4
1.2.3. Morrison....................................................................................................... 4
1.2.4. Waitrose....................................................................................................... 4
1.2.5. Aldi............................................................................................................... 4
1.2.6. Lidl................................................................................................................4
1.3. Business Strategy...............................................................................................4
1.4. Corporate Governance....................................................................................... 5
1.5. Stakeholders Management & Social Reporting..................................................6
1.5.1. Stakeholders of Tesco..................................................................................6
1.5.2. Social Reporting...........................................................................................6
2. Internal & External Analysis......................................................................................9
2.1. Internal Analysis..................................................................................................9
2.2. External Analysis.............................................................................................. 12
3. Discussion & Conclusion........................................................................................ 14
3.1. The usefulness of Theoretical Framework in Achieving Sustainable Competitive
Edge 14
3.2. Recommendations Based on Strategic Position...............................................14
References.....................................................................................................................15
 Executive Summary
Tesco is a leading grocery retailer outlet in the UK which not just provides its clients with
groceries but also several other non-food items which are provided by Tesco, including
toys, electronics, furniture, and much more. The report identifies in detail the previous
history of Tesco, its competitors in the market, governance techniques, and the
disclosure within its annual reports of Tesco. Three key competitors of Tesco, including
ASDA, Sainsbury, and Morrison, are identified in the present research. Along with this, it
has been identified that Tesco doesn’t have a board of directors with similar surnames.
Tesco follows the governance code of the UK and discloses all the efforts it performs to
be a socially responsible company.
The research performed an internal and external analysis of Tesco where internally, all
the resources of Tesco were evaluated, where the company was found to have gained
a significant edge in the market. Moreover, based on external analysis, the threat of
suppliers' bargaining power, new entrants, and substitutes is less, whereas the threat of
competitors and the bargaining power of buyers were identified to be very high. Overall,
the research findings represent that Tesco has successfully gained an edge in the
market while utilizing resources and low prices to gain a leading position in the market.

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 1. Introduction
1.1. A Brief Introduction to Tesco PLC
Tesco is a British multinational company that works on providing groceries and general
goods and services while having its headquarters in “Welwyn Garden City, England”.
Tesco was formulated in 1919 in Hackney, London, by Jack Cohen, who started selling
the “war surplus groceries” from streets at Well Street Market, Hackney. The initial
brand name, Tesco, emerged in the market in 1924 when Jack Cohen purchased tea
from “Thomas Edward Stockwell,” where supplies initially included Tes and his name
initial Co were merged to form Tesco. The figure below represents the history of Tesco
(Tesco, 2022a).

1919-1920 1930 1940

Tesco was made in Jack purchased the land A self-service first was
London. and expanded the introduced.
business.

1950 1960 1970

A rapid expansion in Tesco started putting Tesco increased value at
Tesco emerged. stamps on things tills and pumps; Jack
Cohen passed away.

1980 1990 2000

checkout 82 cuts reduced every little help as Tesco growth helped in bringing
significant customer price. goes global more value to clients

2010
Tesco placed customers
at heart of everything.

(Tesco, 2022b)
Tesco provides its clients with
i. supermarkets,

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 ii. hypermarket: extra large shops often out of town which incorporate all the
products and services of Tesco. The largest area for the hypermarket
iii. superstore
iv. and convenience shop services
to its clients within 11 countries around the world. Tesco has a diversified portfolio of
“books, clothes, electronic equipment, software related products, toys, and
furniture items, financial services, telecommunication and internet related
services” and a wide range of other products and services. Tesco is a publicly listed
company with a presence on the London Stock Exchange and the FTSE100 index
(Tesco PLC, 2022a). The key brand of Tesco includes
i. OneStop
ii. F&F
iii. Booker
iv. Makro
v. Premier
Tesco presently has its presence in 4.752 locations around the world in 11 counties
while working with 354,744 employees in all these locations (Tesco, 2022c). As of 2011,
Tesco was the third biggest retailing company worldwide for having the highest gross
revenue compared to the other companies working in the market.

1.2. Industrial Sector & Competing Firms

Tesco PLC operates in the retail business sector of the UK, where the company
provides the final users with goods and services for consumption rather than reselling
purposes. Tesco is among the largest grocery stores in the UK, where the key
companies competing with Tesco in UK retail market include
i. Sainsbury
ii. ASDA
iii. Morrison
These three companies, altogether with Tesco, form the big four retail companies
serving the people of the UK. Similarly, these companies, Waitrose, Aldi, & Lidl, have
also emerged as strong rivals of Tesco in the UK grocery retail market (Downie, 2021).
Along with the grocery market, Tesco also competes with the “convenience stores,”
which are gaining increasing attention in the UK market due to a change in behavior
and preferences of the clients towards “more trips for fewer items.” As of 2020, Tesco
was the market leader, having 27 percent of the market share within the UK among the
grocery retail stores while giving tough market competition to its competitors in the UK
market (Downie, 2021).
1.2.1. Sainsbury
Sainsbury is the next biggest store after Tesco in the UK, having its products in nearly
1418 locations and a rough distribution of the stores among the “supermarkets” and the
“convenience stores.” As per the clients of Sainsbury, it is one of the finest qualities of
grocery stores within the UK, due to which Sainsbury charges its clients a premium
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amount even though the company has adopted a low-price strategy to gain a
competitive advantage recently. Sainsbury has adopted different store layouts to
provide its clients with a more useful experience in stores (Sainsbury's, 2022).
1.2.2. ASDA
ASDA has been a subsidiary of Walmart since 1999, which Zuber and Mohsin Issa
purchased in 2020; it is the third largest retail store in the UK while having 635 store
locations, including 584 supermarkets. The operational activity of ASDA includes a
supermarket format where retail items, including clothes and furniture, are also
available, along with groceries for the clients. Due to the low-price competitive strategy
of ASDA, the company has successfully placed itself among the top 4 biggest retailers
in the UK (ASDA, 2022).
1.2.3. Morrison
Morison comes fourth in the position among the top 4 largest retailers in the UK, with
492 supermarkets and 50 convenience stores, and the two biggest food producers in
the UK, with 18 food-producing facilities in the area and eight distribution centers of all
the food produced. Morrison also incorporates different farmers for sourcing fresh
poultry and meat-related products for its clients within the UK (Morrison, 2022).
1.2.4. Waitrose
Waitrose is a UK-based grocery retailer which competes with Tesco and other top
brands within 336 locations in the UK while having many supermarkets in all these
areas. Waitrose provides clients with premium quality products while having highly
skilled staff dealing with clients efficiently. Waitrose adopts several price reduction
techniques to compete with the lowest prices of Tesco rather than being a highly
expensive food provider (Waitrose, 2022).
1.2.5. Aldi
Aldi is a Germany-based retailer with 10,000 retail outlets within 19 countries; while is a
niche grocery market providing clients with products at lower prices while being labeled
under highly quality private labels. Aldi does not usually accept manufacturer coupons;
however, the company provides its clients with weekly discounts on groceries and other
items (Aldi, 2022).
1.2.6. Lidl
Lidl is another Germany-based retail outlet with a presence in 29 countries with 11,200
working as a retail store providing groceries and other products at great discounts but
doesn’t prioritize the clients' experience. To ensure reduced expenses for the company,
Lidl focuses on keeping as much as possible lesser staff and has a lesser focus on the
private brands in contrast to Aldi (Lidl, 2022).

1.3. Business Strategy

Tesco works in the UK and global market by providing its clients with high-volume
products at low cost while including the low-cost “Tesco value” and the premium quality

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“Tesco finest” product categories. Tesco has worked on this strategy since the 1990s
and has been very successful in the global market. The key strategies of Tesco include:
i. Growing and expanding in the UK market.
ii. Becoming an outstanding international retailer store in the physical and digital
market.
iii. Being strong in all the offerings of Tesco.
iv. Growing and expanding all the retail services of Tesco.
v. Putting responsibilities to communities at heart.
vi. Becoming a highly valuable product brands producer.
vii. Building a team that can deliver higher value to clients around the globe
(Tesco PLC, 2022b).

1.4. Corporate Governance

Tesco complies with the corporate governance code issued by the UK while following all
the rules and regulations concerning the working and directing of the company. The
board of directors of Tesco as of 2021 includes:
Non-exectiove Chairman
John Allan CBE
Group Chief Executive Officer
Ken Murphy
Chief Financial Officer
Alan Stewart
Independent Non-executive Director
Mark Armour
Melissa Bethell
Stewart Gilliland
Byron Grote
Steve Golsby
Mikael Olsson
Simon Patterson
Alison Platt CMG
Lindsey Pownall OBE
Bertrand Bodson
Thierry Garnier
Karen Whitworth
Chief Financial Officer Designate

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 Imran Nawaz
Senior Independent Director
Deanna Oppenheimer
Group Company Secretary
Robert Welch
As the list represents, none of the surnames among all of these has been repeated,
thus representing a diversity of directors running the company rather than a single
group of people having complete hold of the positions in the company (Tesco, 2021).

1.5. Stakeholders Management & Social Reporting

1.5.1. Stakeholders of Tesco
There are two types of stakeholders in a company, internal and external. The internal
stakeholders of Tesco include the employees and individuals working in all the stores
of Tesco, members of the committees and directors of all the boards of Tesco, and the
shareholders of Tesco who have invested their money in the company. Similarly, the
external stakeholders of Tesco include the clients of Tesco, its suppliers of all the raw
materials and other goods, rival firms of Tesco, all the pressure groups which can
influence the working of Tesco, and the governments along with society (Rahman,
2022a).
1.5.2. Social Reporting
Within the financial reports issued by Tesco, the company includes four sections; where
in the first section, the company incorporates the strategic information of Tesco as
shown in the figure below.

(Tesco, 2021)

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Similarly, in section 2, Tesco reveals corporate governance-related information, as
shown in the figure below.

(Tesco, 2021)
Likewise, section 3 of the annual report of Tesco includes the company's financial
information, as shown in the figure below.

(Tesco, 2021)
Finally, the last section of the annual report of Tesco includes other information
concerning the company, as shown in the figure below.

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 (Tesco, 2021)
This represents that Tesco not just reveals the financial information within its annual
report but also discloses information concerning the activities of Tesco, which it
performs to support society and play a responsible role in the community.

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 2. Internal & External Analysis
2.1. Internal Analysis
Resource-based view is a method of analyzing the company's internal capabilities while
determining the company's resources, which can facilitate the company in gaining an
edge in the market. As per the resource-based view, efficient utilization of all the
company's resources facilitates gaining an edge in the market in contrast to the
competitors.

(Harvey, 2020)

i. Tangible Assets
A company's tangible assets are the assets that have physical existence and are easily
identifiable by the other companies and their competitors. Following are the key tangible
assets of Tesco as of 2021. Tesco's property plant and equipment are £17,211 million,
including the lands of Tesco, its plants for packaging and warehousing purposes, and
the equipment that Tesco owns for manufacturing and packaging purposes. Equipment
includes several improved technologies which Tesco has adopted to provide its clients
with the quickest and finest services. Moreover, the tangible assets include the supplies
of Tesco and the facilities available within the production unit of Tesco along with its
offices and other supporting buildings (Tesco, 2021).
Similarly, the revenue of Tesco as of 2021 was £57,887 million, whereas the net profit
of Tesco was £1,013 million. The sales of Tesco decreased in 2021 compared to 2020
due to the emergence of a covid-19 outbreak, which has greatly influenced the working
of all businesses globally. The increasing emphasis of Tesco is on providing its clients
with improved services, due to which the company is continuously adopting improved

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technologies which can help Tesco in providing improved services to its clients. (Tesco,
2021).
ii. Intangible Assets
A company's intangible assets represent the assets that do not have a physical
presence but work as resources for the company having a significant influence on its
working. The intangible resources of Tesco as of 2021 were £5,393 million compared to
£6,078 as of 2020, where a decrease has been due to covid-19 outbreak, which has
influenced the working and resources of Tesco to a great extent. The key intangible
asset of Tesco includes its good reputation (number one grocery retailer in the UK), its
intellectual property rights which prevents the offerings of Tesco from being copied, and
patents and copyrights of Tesco have improved the potential of Tesco against the
imitations (Tesco, 2021).
iii. Heterogenous Characteristics of Resources
The heterogeneous assumption of the resource-based view represents Tesco’s skills
and abilities considering human resource-related activities, which reveals a diverse
combination of the resources that play a key role in the success of Tesco in the global
market. The immobility aspect of the resource-based view reveals that all the company's
resources are not mobile and cannot be transferred from one company to another. The
intangible resources of Tesco are immobile and heterogeneous, which cannot be shifted
from one company to another (Harvey, 2020).
iv. VRIO Analysis
For achieving competitive advantage, heterogeneity and immobility are not just
sufficient and VRIO analysis can play a sufficient role in understanding the company's
ability to gain competitive advantage. The VRIO analysis is shown in the figure below.

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 (Harvey, 2020)

VRIO
Competitive
No Resource
Inimitabl Advantage
Valuable Rare Organized
e
Competitive
1 Land of Tesco Yes No No Yes
parity
Competitive
2 Equipment of Tesco Yes No No Yes parity

Competitive
3 Materials and Supplies of Tesco Yes No No Yes
parity
Competitive
4 Infrastructure & facilities of Tesco Yes No No Yes
parity
Brand reputation & Goodwill of Competitive
5 Yes Yes Yes Yes
Tesco advantage
Competitive
6 The intellectual property of Tesco Yes Yes Yes Yes
advantage
Competitive
7 Patents & copyrights of Tesco Yes Yes Yes Yes
advantage
Tradename, patents, software
Competitive
8 and database, and trade secrets Yes Yes Yes Yes
advantage
of Tesco
9 Customer & Supplier connections Yes Yes No Yes Temporary

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 competitive
of Tesco
advantage
Competitive
10 HRM skills and expertise of Tesco Yes Yes Yes Yes
advantage
(Source: Self-made)
v. Competitive Advantage
Competitive advantage incorporates the condition where the possession and utilization
of all the available resources can facilitate the company's superior position compared to
all others working in the market. Tesco's resources mentioned above have facilitated
the company's success in the UK while outperforming all the other competing firms in
the region (Harvey, 2020). Since all the resources owned by Tesco are immobile and
heterogeneous, they successfully meet the majority of VRIO criteria leading to the
formation of different forms of advantages, as shown in the table below.

Criteria Explanation
Includes all the resources of Tesco that are not
Competitive disadvantage
valuable and can lead to decreased performance.
The valuable resources of Tesco are not rare but
Competitive parity facilitate the company to achieve average outcomes
from the market.
All the valuable and rare resources of Tesco can
Temporary competitive
facilitate Tesco in gaining a temporary advantage
advantage
which is not sustainable.
When the resources meet all the VRIO requirements,
possession, and utilization of all these resources help
Competitive advantage
the company in gaining an edge in the market, which is
sustainable in the long run.
(Harvey, 2020)
By utilizing all these resources and low pricing strategy, Tesco has gained a competitive
edge in the market.

2.2. External Analysis

For evaluating the external environment of Tesco, the present report incorporates the
five forces model to understand the role of external factors being a threat to Tesco's
success in the global market. The five forces for Tesco are discussed below.

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 High
bargaiing
power of
Buyers

Low Bargaining Low Substitute

Power of Threat for food
Suppliers and high for
non-food items
Tesco

Low New High

Entrants Competitors
Threat Threat

i. The threat of new entrants to Tesco

The grocery and retail market occupied by Tesco in the UK is the biggest marketplace
in the UK, where Tesco, along with three other key companies, including ASDA,
Sainsbury's, and Morrison, captures around 80 percent of the grocery retail market
(Downie, 2021). Moreover, the global market of Tesco and other grocery retailers work
in an oligopoly, due to which the entry of a new entrant to the market is quite difficult
and low. There is a need for a great sum of money and expertise to enter the market to
compete with Tesco and other top companies working in the retail market in the UK.

ii. The threat of competitors to Tesco

The competitive market for Tesco is very tough as Tesco directly competes with ASDA,
Sainsbury's, and Morrison, who are providing the clients with competitive prices to
Tesco to attract an increasing number of clients and gain an edge in the market. Due to
this reason, the threat of competitors is very high for Tesco in all the activities Tesco
performs or comes up with something new (Downie, 2021).
iii. The threat of substitutes to Tesco
Since Tesco sells food, groceries, and other supermarket products, focusing more on
selling non-food products, fewer substitutes are available for the food items. Since
Tesco is increasing its focus on convenience stores, the company will have sufficient
control over the substitutes of the products coming against Tesco. However, the threat
of non-food items will be very high as several companies are providing different
products at very low prices while creating problems for Tesco (Rahman, 2022b).
iv. The threat of client’s bargaining power to Tesco
There are several options for the clients in the market where they can purchase
products from different sellers, and due to this, they can create problems for Tesco
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while demanding a significant decrease in the price of Tesco compared to others. If the
prices of products at Tesco are higher and ASDA offers lower prices, buyers can
threaten Tesco while demanding prices or shifting towards ASDA (Downie, 2021).
v. The threat of supplier’s bargaining power to Tesco
There are more than 2500 suppliers with which Tesco is working in the UK market, and
suppliers have very lesser power to demand a change in prices or influence Tesco while
becoming a threat to the company as Tesco can easily switch towards the other
alternative options available in the market (Rahman, 2022b).

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 3. Discussion & Conclusion
3.1. The usefulness of Theoretical Framework in Achieving
Sustainable Competitive Edge
The resource-based view represents that efficiently using all the company's resources
has facilitated Tesco in successfully gaining the market's edge. Tesco has adopted
improved technologies, efficient utilization of all resources, and adoption of the low
pricing strategy has facilitated Tesco in gaining an edge in the UK market, due to which
the company is presently the leading retail company in the UK while around 27 percent
of the share in the UK market (Downie, 2021).

3.2. Recommendations Based on Strategic Position

Tesco is the leading grocery and supermarket retailer in the UK while providing great
quality services to its clients in the UK. Tesco has positioned itself in the market as the
“valuable products and services at low cost” provider, due to which Tesco has been
successful in the UK market while leading the market (Downie, 2021). However,
increasingly decreasing the prices of Tesco will eventually reduce its revenue of Tesco,
which will not be good for the company in the long run. Based on this, this research
recommends that management pay attention to the cost strategy and ensure that
decreasing the cost strategy should not reduce the revenue of Tesco. Moreover, the
adoption of increasingly advanced technology can facilitate Tesco in gaining an edge in
the market.

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