Introduction
Nowadays, the majority of organizations choose to engage in strategic planning as a means to enhancing productivity and optimizing the allocation of resources. Strategic planning is a part of strategic management that can be defined as a process of making, implementing, and evaluating decisions as aligned with organizational goals (Ansoff et al., 2018). A strategic decision is another crucial concept with the study of strategic management. It is a large-scale decision that potentially determines a firm’s performance in the long-run because it draws on data that describes the whole environment in which the entity is operating. Furthermore, strategic management requires environmental scanning (internal and external) for which the body of literature has plenty of methods to offer (Ansoff et al., 2018). This report describes how methods such as SWOT and PESTEL can help Tesco achieve competitive advantages in the international market.
SWOT & PESTEL
Emerged in management literature in the 1960s, the SWOT method is as old as strategic planning itself. SWOT is an abbreviation that stands for strengths, weaknesses, opportunities, and threats. A UK-based multinational grocery and general merchandise retailer, Tesco is now present in eleven countries around the globe (Rosnizam et al., 2020). Hence, an inarguable strength of Tesco lies in its decades-long experience of international expansion. The ninth-largest retailer in the world as per revenues, Tesco has a lot of resources at its disposal (Rosnizam et al., 2020).
In addition, the company has been successful in diversifying its portfolio and adding books, clothing, furniture, electronics, and other categories. For all its strengths, Tesco is suffering from the decreasing quality of its products and services, which led to the 2013 horsemeat scandal – one of the biggest food frauds of the 21st century.
On the brighter side, Tesco’s Jacks, a new discount store, has already proven to be a rival to Aldi and Lidl, which means that the company can assume an advantageous position in a new market segment. Moreover, Tesco has the resources to tap into more emerging markets, such as South Korea and Indonesia. As for threats, the UK retailer will have to withstand tough competition with other giants like Walmart and Carrefour. Besides, Brexit may render some of Tesco’s established business schemes impossible.
The PESTEL instrument serves the same goal as SWOT; however, it adds more dimensions to the external environment that it is scanning. PESTEL stands for political, economic, social, technological, environmental, and legal which are all elements of the context in which Tesco is running its business operations. From political and legal standpoints, Brexit has created a problem for importing ready meats and fresh fruits (“Tesco: Brexit disruption”, 2020).
The Covid-19 pandemic has wreaked havoc on the UK economy, which has already resulted in a 533 million pound loss for Tesco (Sillars, 2020). Still, Tesco has a potential for a quick recovery due to its commitment to selling more healthy foods, which is aligned with the broader social trend toward fitness and healthy living (“UK’s Tesco commits to healthy food sales”, 2021). Moreover, amidst the pandemic, Tesco leveraged the need for online shopping and offered convenient platforms and applications.
The Principles of Strategic Management and the Role of Stakeholders
The use of the SWOT and PESTEL instruments together helps with putting together a fuller picture of both internal and external contexts. Therefore, the output of these two methods can guide strategic management at Tesco. What also informs strategic decisions is the opinion of stakeholders – internal (employees, shareholders, and executives) and external (customers and the government).
These days, customers are concerned with ethical practices at big corporations, which means that organizations have to work on reputation corporate social responsibility. SWOT and PESTEL analysis showed exactly that the social image might be Tesco’s weak point. For this reason, the retailer should continue its trajectory, introducing healthy foods, which may be complemented by collaborating with ethical brands.
Another direction for further development emerging from the analysis is further expansion into emerging markets. However, at this point, Tesco might have a conflict between executives and shareholders because the latter might vote against a high-risk high-reward venture. While implementing any of the strategic decisions, Tesco needs to comply with one of the most important principles of management, which is to leverage its strengths. The company is better off using its resources and international presence to support further achievements.
Conclusion
Tesco is a UK-based multinational grocery retailer that now has reached an important point in its development. On the one hand, the company is rich in resources and has established customer bases across the world. On the other hand, it suffers from reputation issues, stagnancy, and decreasing quality of products. Instruments, such as SWOT and PESTEL, can provide meaningful insight into the internal and external environment in which Tesco is operating. Taking into consideration the company’s stakeholders, it seems that the company might want to enhance its image and leverage social and environmental trends by introducing more healthy foods. It may also take a leap and tap into emerging markets, thus expanding its global presence.
References
Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2018). Implanting strategic management. Springer.
Rosnizam, M. R. A. B., Kee, D. M. H., Akhir, M. E. H. B. M., Shahqira, M., Yusoff, M. A. H. B. M., Budiman, R. S., & Alajmi, A. M. (2020). Market opportunities and challenges: A case study of Tesco. Journal of the Community Development in Asia, 3(2), 18-27.
Sillars, James. (2020). Coronavirus: Tesco takes ÂŁ533m hit from crisis costs but profits still surge. Sky News. Web.
“Tesco: Brexit disruption ‘is a challenge not a crisis’”. (2020). BBC News. Web.
“UK’s Tesco commits to healthy food sales target after shareholder pressure”. (2021). Reuters. Web.