1.

INTRODUCTION

Tesco Public Limited Company (plc) is a British international grocery and general merchandising retail chain headquartered in the Tesco House in Cheshunt, Hertfordshire. It is the UKs largest supermarket chain. The chain was founded by Jack Cohen in 1919. The brand first appeared after Cohen bought a shipment of tea from T.E. Stockwell and he used those initials and added the first two letters of his own surname. The first Tesco Store was opened in 1929 in Burnt Oak, Edgware, Middlesex. During the 1950s and the 1960s Tesco grew organically and also through acquisitions, until it owned more than 800 stores. Tesco originally specializing in food and drink and has diversified into areas such as clothing, electronics, and health. Tecsos international expansion strategy has responded to the need to be sensitive to local expectation in other countries by entering into joint ventures with local partners, such as Samsung Group in South Korea (Samsung-Tesco Home Plus), and Charoen Pokphand in Thailand (Tesco Lotus). Tesco also makes small acquisitions as part of its strategy for example, in its 2005/2006 financial year it made acquisition in South Korea, one in Poland and one in Japan. In September 2005, Tesco announced that it was selling its operations in Taiwan to Carrefour and purchasing Carrefours stores in the Czech Republic and Slovakia. Both companies stated that they were concentrating their efforts in countries where they had strong market positions. Tesco opened its first store in Malaysia in May 2002 with the opening of its first hypermarket in Puchong, Selangor. Tesco Malaysia currently operates 34 Tesco and Tesco Extra stores.

1.1

OBJECTIVES

Tesco has a well-established and consistent strategy for growth, which has allowed them to strengthen their core UK business and drive expansion into new markets. The rationale for the strategy is to broaden the scope of the business to enable it to deliver strong sustainable longterm growth by following the customer into large expanding markets at home and new markets abroad.

The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco's success in recent years. Tesco continued to make good progress with this strategy, which has five elements, reflecting their four established areas of focus, and also Tesco's long-term commitments on community and environment. Importantly, the momentum which it has given the business has allowed the Group to continue to grow well through the economic downturn. The objectives of the strategy are:

To be a successful international retailer To grow the core UK business To be as strong in non-food as in food. To develop retailing services - such as Tesco Personal Finance, Telecoms and Tesco.com To put community at the heart of what we do. PHILOSOPHY

1.2

Tescos shopping philosophy is to offer the customer the best shopping trip in their town by fulfilling the listed criteria as followed: The price are good I can get what I want The staff are great I dont queue Shopping is easy and enjoyable

2.0 2.1

STRATEGIC POSITION Environment scanning

Environment scanning is one of the major activities in external analysis to understand the changing in external environment that may impact the organization. Environment scanning enable organization to identify changing trends and patterns, monitor specific trends and patterns, forecast the future direction of these changes and patterns, and assess their organizational impact. It is important for organizations to know the position of their company in the industry to adapt the companys direction and strategies needed.

Tesco is operating around 2,318 stores with employees over 326,000 people. Tesco now operates in six countries in Europe which are the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland, and also operates in Asia which is in South Korea, Thailand, Malaysia, Japan and Taiwan. In 2009, Tesco is ranked number four in the top 250 global retailers after Wal-Mart, Carrefour and Metro with group revenue of $90,435 million. It is the largest British retailer by both global sales and domestic market share, with profits exceeding 3 billion, and listed as the third largest global retailer based on revenue, after Wal-Mart and Carrefour and second largest in profit behind Wal-Mart in 2005. Tesco online store, www.Tesco.com is recognized as the worlds largest online grocer, with a customer base of little less than 1 million and more than 250,000 orders a week.

2.2

PESTEL Framework

The PESTEL framework is designed to identify different macro-environmental factors that may affect business strategies. This framework also used in order to assess how different environmental factors may influence business performance now and in the future. The PESTEL Framework includes six types of important environmental influences which are political, economic, social, technological, environmental and legal.

2.2.1 Political Factors Tesco operating in a globalized environment with stores around the globe which are in Europe in addition to the UK; the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland. It also operates in Asia specifically in South Korea, Thailand, Malaysia, Japan and Taiwan. Tesco's performance is highly influenced by the political and legislative conditions of these countries, including the European Union (EU).

For employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and

centrally-located jobs (Balchin, 1994). In addition, Tesco also meets the demand from population categories such as students, working parents and senior citizens. Tesco understands that retailing has a great impact on jobs and people since the new store developments are often seen as destroying other jobs in the retail sector. Thus, Tesco employs large numbers of student, disabled and elderly workers who being often paid lower rates. In an industry with a typically high staff turnover, these workers offer a higher level of loyalty and therefore represent desirable employees. 2.2.2 Economical Factors Economic factors are big concerns to Tesco, because they are likely to influence demand, costs, prices and profits. One of the most influential factors on the economy is high unemployment levels, which decreases the effective demand for many goods, unfavorably affecting the demand required to produce such goods. Even these economic factors are largely outside the control of the company but their effects on performance and the marketing mix can be reflective. Although international business is still growing, the company is still highly dependent on the UK market. Hence, Tesco would be badly affected by any slowdown in the UK food market and are exposed to market concentration risks.

2.2.3 Social Factors Current trends indicate that British customers have moved towards one-stop' and bulk' shopping, which is due to a variety of social changes. Therefore, Tesco have increased the amount of non-food items available for sale. UK retailers are also focusing on added-value products and services due to demographic changes such as the aging population, an increase in female workers and a decline in home meal preparation. In addition, from now onwards, Tescos focuses on the own-label share of the business mix, the supply chain and other operational improvements, which can drive costs out of the business. National retailers are increasingly reticent to take on new suppliers (Clarke, Bennison and Guy,1994; Datamonitor Report, 2003).

The type of goods and services demanded by consumers is a function of their social conditioning and their consequent attitudes and beliefs. Consumers are becoming more and more aware of health issues, and their attitudes towards food are constantly changing. For instances, Tesco

adapting its product mix in order to accommodate an increased demand for organic products. The company also is being the first one to allow customers to pay in cheques and cash at the checkout. 2.2.4 Technological Factors Technology is a major macro-environmental variable which has influenced the development of many of the Tesco products. The new technologies benefit both customers and the company as customer satisfaction rises because goods are readily available and services can become more personalized and shopping become more convenient. The launch of the Efficient Consumer Response (ECR) initiative by the company has provided the shift that is now apparent in the management of food supply chains (Datamonitor Report, 2003). Tesco stores also utilize the technologies: such as wireless devices, intelligent scale, electronic shelf labeling, self check-out machine and Radio Frequency Identification (RFID). The adoption of Electronic Point of Sale (EPoS), Electronic Funds Transfer Systems (EFTPoS) and electronic scanners seems have greatly improved the efficiency of distribution and stocking activities, with needs being communicated almost in real time to the supplier (Finch, 2004). 2.2.5 Environmental Factors According to Lindgreen and Hingley, 2003, there has been increased pressure on many companies and managers to acknowledge their responsibility to society, and act in a way which benefits society overall. The major societal issue threatening food retailers was environmental issues, a key area for companies to act in a socially responsible way. Hence, by recognizing this trend within the broad ethical stance, Tesco's corporate social responsibility is concerned with the ways in which an organization exceeds the minimum obligations to stakeholders specified through regulation and corporate governance (Johnson and Scholes, 2003). Graiser and Scott (2004) state that in 2003 the government has intended to launch a new strategy for sustainable consumption and production to cut waste, reduce consumption of resources and minimize environmental damage. The latest legislation created a new tax on advertising highly processed and fatty foods. The so-called fat tax' directly affected the Tesco product ranges that have subsequently been adapted, affecting relationships with both suppliers and customers

2.2.6

Legislative Factors

Various government legislations and policies have a direct impact on the performance of Tesco. For example, the Food Retailing Commission (FRC) suggested an enforceable Code of Practice should be set up banning many of the current practices, such as demanding payments from suppliers and changing agreed prices retrospectively or without notice (Mintel Report, 2004). The presence of powerful competitors with established brands creates a threat of intense price wars and strong requirements for product differentiation. The government's policies for monopoly controls and reduction of buyers' power can limit entry to this sector with such controls as license requirements and limits on access to raw materials (Mintel Report, 2004; Myers, 2004). In order to implement politically correct pricing policies, Tesco offers consumers a price reduction on fuel purchases based on the amount spent on groceries at its stores. While prices are lowered on promoted goods, prices elsewhere in the store are raised to compensate.

2.3

Strategic Gap

The strategic gap is the difference between the firm's current position and its desired position. Operationally, the gap is a measure of the difference between the stated target values and the current values of the firm's primary objectives. Within the gap are the critical issues that must be resolved to move the firm from its current position to its desired position. There are several areas that could use the strategic gap analysis. Below are the areas:

2.3.1 Customer loyalty In developing the Tesco Clubcard, the desired state defined by the business gap analysis was greater customer loyalty. From there business gap analysis showed that loyalty could only be achieved if there is something to keep customers returning to Tesco. The Clubcard has two advantages here: (i) It is a permanent, physical reminder in the customer's wallet. (ii) The customer can only make significant amounts of Clubcard points by returning frequently to Tesco.

It is also important to determine the risks involved through using a business gap analysis. For instance, some customers dislike carrying lots of cards around. Therefore, in order to promote the use of the Clubcard, Tesco has to spend their budget for the advertising campaigns on the benefits of using the Clubcard at Tesco. 2.3.2 Human Resource Human resource is one of the successful factors of the business. A high priority for senior management should be to find out how human resource management can use business gap analysis. For supermarkets, like Tesco, human resources (HR) are of the highest priority. Business gap analysis can be used to determine the gap between the current and desired skills sets of employees. This can be used to enhance employee development. The starting point for HR gap analysis is the CV of the staff member. This provides the best objective knowledge of the current state of the employee. For particular skills, from mental arithmetic to customer empathy, specific tests and questionnaires may have to be developed. These can supplement the information in the CV.

2.4

Critical Success Factors

Critical success factor (CSF) is the term for an element that is necessary for an organization or project to achieve its mission. It is a critical factor or activity required for ensuring the success of a company or an organization. The term was initially used in the world of data analysis, and business analysis. For example, a CSF for a successful Information Technology (IT) project is user involvement. Critical success factors are those few things that must go well to ensure success for a manager or an organization, and, therefore, they represent those managerial or enterprise area, that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization's current operating activities and to its future success. Outlined in Table 4.4 below is a Critical Success Factors analysis to identify the factors that matter most to be successful in TESCO.

Critical Success Factor Success Factor 1. Branding and Reputation 2. IT Integration Description Importance to build trust of the customers in own brand. With the simultaneous entry of retailers the market it is vital to have differentiated approach. Work with many different suppliers around the world.

3. Supplier Management

Table 4.4: Critical Success Factor for TESCO 2.4.1 Branding and Reputation Tesco is a company that have always understood that they are selling brands before the product. Tesco is a brand and also serves as the core strategic advantage. The company is spreading like wildfire transforming the generic into brand-specific, largely through carefully branded packaging and the promotion of an every penny counts environment. The company has a strong brand image and is associated with good quality, trustworthy goods that represent excellent value. Every produced item is supplied to a strict quality specification, which has been drawn up and agreed based on what the consumer want. This is to ensure the consistency of product and value for money for the customers. Quality and life of products are monitored constantly all the way through the supply chain from grower to store assistant. Processes such as Would I Buy It are employed which empowers anyone involved with the product from harvesting to packing and on the shelf, to reject any products which they themselves feel either has fallen below specification or as a customer they would be dissatisfied with. 2.4.2 IT Integration Tesco also sells online, delivering products to the customer's door, by refrigerated truck, if necessary. At Tesco stores worldwide, technology is the key driver that helps streamline the total floor operations. The key is to have technology facilitating quicker and cheaper shopping, fresher stocks and speedy replenishments. To make this happen, a committed team of IT professionals

work round-the-clock at Tesco HSC. Whilst researching and understanding the latest retail trends in the market, this team develops and sustains innovative solutions towards enabling the customers to buy what they want, when they want it, and choice of channels they want to buy in. Primarily, IT at Tesco HSC contributes to the success of Tesco PLC in two broad areas which are: Providing enabling solutions and Bringing in transformation through continuous innovation

The team aims at providing the best and most sophisticated answers to Tesco stores across the globe with a pool of skilled and talented IT professionals. These technologists continue to work on developing real-time business solutions to understand the needs of the customer better and enhance their shopping experience. Technology in retail universe offers a host of exciting opportunities. The Tesco HSC IT team is committed to provide a competitive and stimulating environment to its people to help them shape their career in complete harmony with their visions and skills. 2.4.3 Supplier Management Tesco, like many other grocery chains companies, sources its goods from overseas manufacturers who are more competitive on price and volumes. For many years Tesco has been supporting British jobs and expertise by encouraging large branded suppliers to develop exclusive production facilities. But in recent years the company has realised the need to look abroad for products no longer available in UK, bud tried to do it through long-established UK partners. The foods continued to be heavily UK-based due to the very successful range of prepared foods. As a major retailer selling diverse product range, they work with many different suppliers around the world, with employees from many different cultures and ethnic groups. Therefore, it is the company policy and company's main approach to have unique relationships with suppliers. Applying advanced technology in its communications and cooperation with the suppliers, the company aims to control the work of its suppliers and heavily relies on their efficiency. The direct suppliers use a number of sub-contracted suppliers, selected to be best in class in their

country. Tesco has established close relationships with the contractors believing that regular and long term orders promote the investment necessary to improve conditions in the supply chain. Being an international company, Tesco develops various supplier management programmes to survey key suppliers and franchisee satisfaction. The company also takes part in the Ethnical Trading Initiative.

2.5

Cultural Web

The cultural web is an effective technique in order to help managers faced a challenge of strategy driven cultural change. This phenomenon happened because of changes in organizational culture such as changes in political, symbolic and structural aspect of the company. Based on paper written by Gerry Johnson, culture is represented as that which is taken for granted in organization. Therefore, the cultural web can be a tool in order to generate managers own perceptions of the cultural aspects. In additional, there are seven components of the cultural web which are paradigm, symbols, power structures, organizational structures, control system, rituals and routines, and stories (Johnson and Scholes, 2001). These components can be illustrated in the form of set. It is because they are related among each other. The cultural web also presents the hint about the taken-for-granted assumptions. It is really related to the strategy development for the organization. The paradigm is the set of assumptions about the organization which is held in common and taken for granted in the organization. While the routine is the best actions of the members of the organization in order to provide a distinctive and beneficial organizational competence. The ritual is the important activities that they do in the organization especially to the organization that related to the retailing industry. What they can do such as training program to the staff, promotion and assessment of the product and etc. For the stories component, it is the way how the community members of organization told each other and to the outsiders about the history of organization. Therefore, the organization become more familiar and will be known. The symbolic aspects is a trademark of the organization to be known such as logos, titles, or the type of language used. All these can represent of the nature of the organization. The next component

is the control system which is used to emphasize what is important in the organization especially for what activity of the organization should do. The power structures are to be associated with the paradigm component which is associated with core assumptions and beliefs about what is important. The organizational structure is the important component in the cultural web. The organizational structure is likely to reflect power structures. Besides that, delineate important relationships and emphasize what is important in the organization. According to the cultural web, for the paradigm, Tesco provide a good service towards their customers. Because of they have professional managers in the Tesco, they can solve a problem that they faced in a short time. For the symbols, they use a simple language especially for their motto which is Every Little Helps. Besides that, their symbol (TESCO) is easy to memorize and simple. It can make customers remember about the existence of the Tesco. While, for the ritual and routines, Tesco have staffs that behave towards each other and towards those outside the company that can make up the ways people do things. The rituals of the company's life are the special events, corporate gatherings, which Tesco emphasizes what is particularly important and reinforce the way things are done. Organizational structure is very important in the Tesco. They have a good communication among each other (companys hierarchy) and always ongoing meeting. The control systems and measurements are constantly under the management review to monitor the efficiency of the staff and managers' decisions. They also alert with a budget of the company. Besides that, Tesco also try to adapting their product mix is to accommodate an increased demand for organic products. The company was also the first to allow customers to pay in cheque and cash at the checkout.

3.5 BCG Matrix The BCG Growth-Share Matrix is a portfolio planning model based on the observation that a companys business units can be classified into four categories. Those categories are combinations of market growth and market share relative to the largest competitor, hence the name growth-share. Market growth serves as a proxy for industry attractiveness while relative market share serves as a proxy for competitive advantage. Thus, the growth share matrix locates the business unit positions within these two important determinants of profitability. BCG Growth-Share Matrix

The combinations are represented by four different categories which are: Dogs Dogs have low market share and low growth rate and thus neither generate nor consume a large amount of cash. Question marks Question marks are growing rapidly and thus consume large amounts of cash but they do not generate much cash due to low marker shares. Stars Stars generate large amounts of cash because of their strong relative market shares but also consume much money because of their high growth rate. Cash cows Cash cows exhibit a return on assets that is greater than the market growth rate and generate more cash then they consume.

Strategic Action Plan

Key Performance Indicators Key Performance Indicators are quantifiable measurements, agreed to beforehand that reflect the critical success factors of an organization. It must reflect the organizational goals. Tesco could develop their key performance indicator such as: Sales increase by 20% for the next subsequent year. The number of Clubcard member boost for every branch of Tesco.