My case analysis of Tesco Plc. Shows that Tesco has a well-established and consistent strategy for growth. Tesco’s clear strategy is cost leadership.
I gathered data and information on Tesco Plc. by referring to their website; I also used a number of newspaper articles including The Telegraph and The Times to gather information about the company’s strategic position and the macro environment of the food industry. All this information was used to analyse Tesco using porter’s five forces.
Tesco’s have a unique position in the food industry. This is the cost leadership strategy which played an important role in the achievement of Tesco’s competitive advantage over Asda. Their ‘unique position’ “protects the firm against all five competitive forces” (Porter, 1980). Tesco’s market share on 21st February 2009 was 30.4% (George MacDonald, retail-week.com). This is very high compared with other food retailers and is crucial to Tesco sustaining a low overall cost position. Tesco have recently increased the amount of non-food items available; this is in response to trends showing that British customers have moved towards ‘one stop’ and ‘bulk’ shopping, while rising unemployment due to the current recession has decreased demand for many goods. These to factors (social and economic) are the key macro-environmental drivers in the industry. Considering Porter’s five forces model, it is clear that the factors directly increased buyer’s power. Tesco’s customers have a relative degree of bargaining power. A buyer group is powerful if it faces few switching costs (Porter, 1980), Tesco’s customers can easily switch to a competitor like Asda and Sainsbury’s if prices are too high and so they posses a certain degree of power; however on a macro-environmental level Tesco posses far greater shopping floor area which will decrease the bargaining power of Tesco’s competitors. Tesco’s suppliers have little bargaining power; this is shown by the...
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