Tesco's Strategy At The New Retail Market

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STRATEGIC MANAGEMENT Tesco’s strategy to compete in the new retail market INTRODUCTION Tesco, UK’s largest supermarket is facing a stiff competition from discounters (Aldi) and to a certain extent from the high-end supermarkets (M&S) since the past few years. Tesco’s share value fell from 321p in December 2013 to 168.15p in December 2014. (Yahoo, 2015) To add to this depreciating market value and low profits, Tesco has been in the headlines for a myriad of scams. Such a situation calls for a strategy overhaul. The shortcomings in Tesco’s strategy to deal with the competition and the overall situation of the retail market has been analysed in this report. Before analysing the current situation and devising a plausible strategy to deal…show more content…
FIGURE 1: PORTER 'S GENERIC STRATEGY ADAPTED FROM (UNIVERSITY OF CAMBRIDGE, 2015) THE CURRENT SITUATION In 2014, Tesco witnessed its worst financial year in decades with sales plummeting and its market share being lost to the discounters and upmarket supermarkets. The management team was overhauled and a new CEO, Dave Lewis, was appointed. Lewis shut 43 unprofitable stores and scrapped the development of 49 others. (Quinn, 2015) He also brought about various job cuts and sold some of Tesco’s subsidiaries such as the broadband. In his attempt to reduce costs by over a quarter of a million pounds per annum, he decided to close the Chestnut Headquarters and merge it with the Welwyn Garden City office, consequently reducing the management overheads (Shapland, 2015) These and other associated measures are very drastic cost cutting measures, but they alone cannot revive Tesco. It needs more than just reducing waste and overheads. In the words of Alastair Dryburgh “You can 't compete on price with someone who has systematically designed their business to be cheaper than you.” (Dryburgh, 2014) Tesco needs to cope and not compete, and this issue is highlighted in various contexts in the report. TESCO’S RESOURCES AND CAPABILITIES ANALYSIS Competitive advantage depends on the firms capabilities, which are linked to the firm’s resources. To stand apart and differentiate itself
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