Write competitive environment and business level strategy for a chosen strategic business unit within a larger corporation.
This paper will highlight the different concepts associated with competitive environment and business level strategy for Tesco. Various literatures will be drawn in relation of the concept of corporation, business unit identification, product and service line, business unit revenue, Pestle, meaning of competitive advantage and strategic direction. Further, it will direct how Tesco has achieved its objectives in relation to this concepts.
In a complex business environment, there are multiple small and big companies that are continuously assessing the compatibility of the particular strategy for a product or service. This planning is done according to the needs, objectives and the available resources of the organisation. It is necessary for the shareholders to hold a sustainable part in the business organisation (Pulver 2012). There are different organisations that are trying to expand their product line or services and thus enter into a new business line or portfolio model that have gained more acceptance. The organisations area also trying to adopt standardized strategies and approaches and thus usually concentrate on the share and growth of the market that will offer flexibility in the business organisation (Craig and Campbell 2012). This paper will highlight Tesco’s product and service portfolio and the revenue centre of this organisation. It will also conduct external environment analysis and find out the different sources of competitive advantage of Tesco. Further, recommendations for the improvement of strategic directions are also discussed in the paper. It will also draw important literature and thus highlight the concept of corporation, service or product portfolio, strategic business unit, product line and service line, revenue, operating environment, political, economic, social, technological, legal and environment and strategic direction.
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According to Levy and Palpacuer (2017), corporation is considered to be a form of business entity that is guided by group of officers who are considered to be the board of directors of the organisation. The corporate structure is considered to be the most advantageous way in starting a business entity. The corporations are generally owned by the shareholders and thus they play an important role in the generation of profit and loss for the particular organisation. In a corporation, the ownership can be transferred from one owner to another. Tesco, as British multinational retailer and grocery with its headquarter in England, UK is the third largest retailer in terms of profitability. It has stores across more than 12 countries and thus is considered to be a leader in the grocery market (Tesco 2018).According to Aas, Breunig and Hydle (2017), product portfolio refers to the collection of different products by the organisation. It also includes the different categories of products, management of different product lines and the different products. It is necessary for the management of a particular organisation to play an important role in the management of particular product lines. The classification of products is also done with the help of BCG matrix and thus it helps in classification of the product on the basis of market share. The product portfolio of Tesco includes food and beverages, clothing, home appliances, electronic appliances (Tesco 2018).
Business Unit Research
Business Unit identification
According to Krush, Sohi and Saini (2015), it can be said that strategic business unit is considered to be a profit centre that lays emphasis on the market segment and the different types of product in the market. This strategic business unit might include a marketing plan, marketing campaign and analysis of competition even if they are considered to be a larger part of the business entity. In certain cases, it can be said that a strategic business unit might be considered to be within a larger corporation or within a different branch. The strategic business units also affect different types of factors that help in influencing the performance of the organisation. It can be said that different companies use different types of segmentation and division when dealing with strategic business units. Tesco has chosen to pursue strategic business unit structure across different areas and this helps in maximizing the area and degree of competitiveness in the market. The strategic business unit of Tesco includes the strategic foundation, products and services sold, brand identification, service quality, distribution outlets and the targeted market. There are four major strategic business units of Tesco i.e. handling the grocery products, handling international products, handling the sales of electronic goods and home items and also managing the sales of other non-food items of Tesco (Tesco 2018). It is also vital to analyse the financial services and the telecom services that was provided by the company. The company has started to start its strategic operation since 1992 and it has overcome different difficulties and thus has expanded over the passage of time.
Identification of product Line and Services
According to Jacobs, Chase and Lummus (2014), product line refers to the group of selected product that is sold under a single brand by the same company. There are multiple product lines that are adopted by different companies from time-to-time under different brand names. It is often found that the companies try to expand the offerings of their products by adding new products and services to the existing product or service line. This is because the consumers will prefer to purchase more products from the brands with which they are familiar rather than purchasing from the new brand. Michalek et al. (2011) has stated that this product lines or service lines are created by the companies as an important marketing strategy so that it becomes easier for them to capture the consumers who are already the customers of that brand and respond positively towards it. Tesco is trying to expand its product line and the company is trying to create its own brand for chewing gum with new and varied flavour. The company has decided to do this after analysing the market structure and determining the desires of the consumers accordingly. On the other hand, the company has also created a mood board that played an important role in terms of product identity. This has helped in giving inspiration for the entire design and the overall feeling to the customers. It has also helped in encapsulating the ideas of the company in a better way. It has been found that the flavoured chewing gum that has been launched by the company has increased the overall share in the market and thus it has helped Tesco to be in direct line with its competitors. This has also helped in drawing attention of the customers towards a particular flavour and thus making it more interesting and dynamic.
Business Unit Revenue
According to Chesbrough (2011), revenue can be referred to as the income for the particular business activity that is generated through the purchase and sale of goods in the organisation. It is also referred to as turnover or sales of a particular organisation. It can be said that profits or net income implies the total revenue minus the total expenses of an organisation. According to Luca (2016), revenue is also defined as the income that is received from the organisation either in the form of cash equivalent or in the form of direct cash. According to the report published by the Statista (2017), it has been found that the amount of international revenue for Tesco was 11.4 billion British pounds in 2016-2017. On the other hand, according to the annual report of Tesco, the total sales of Tesco amounted to 55.9 billion British pounds in 2016-2017. It has been found that the annual revenue of Tesco has decreased to 43.5 billion British pound from 201a5 to 2017. According to the report of The Independent (2017), it has been found that Tesco has made an annual profit of £1.28bn and the company has attained full growth in 2010.
External environment analysis
According to Cantwell, Dunning and Lundan (2010), it has been found that operating environment denotes the political, social, cultural, legislative and the natural environmental factors that lays significant impact on the implementation of the business environment. It is necessary that these factors must be considered under continuous planning so that it becomes easier to ensure that the organisation is fit and can operate under the local conditions. This co-operation is considered to be successful only when the different factors of operating environment are taken into consideration. Therefore, in an operating environment it is always necessary to do the right things in the right way with the correct choice of product and people. Hillson and Murray-Webster (2017) has stated that the political factors display how and to what degree government intervention plays an important role in the economy. This also includes political and economic stability, foreign trade policy, tax policy and the environmental laws and trade restrictions. The economic factors also lay significant impact on the business and how it is profitable for the organisation. It includes different factors such as exchange rate, inflation, disposable income and the interest rate. On the other hand, Newton (2014) has stated that the social factors involve different areas that include shared beliefs and the common attitude of a particular group of population. This factor lays direct impact on the economy and it becomes easier for the marketers to understand the different processes in a quick span of time. Eva et al.(2014) has stated that the technological factors also displays how efficiently an individual can deal with the product and what are the different methods that are adopted for the production and distribution of goods in the market. Moreover, the environmental factors have also become important and it becomes important to understand and analyse the scarcity of raw materials and pollution targets as well as carbon footprint in the organisation.
The Pestle analysis of Tesco is important to understand the economy of UK. The government of UK has adopted different tax measure and this has affected Tesco to a large extent. The UK government has also shown positive signs of recovery from the financial crisis and this was considered to be a positive sign for Tesco (López López 2017). On the other hand, the number of elderly people in UK has been increasing due to the baby boom generation. This has changed the tastes and preferences of the individual and Tesco has also adopted online marketing strategy to consider the other mobility issues that are faced by the elderly people who purchase different products of Tesco. It can be said that technology also plays a crucial role for the supply chain management of Tesco. The retailers who are involved under Tesco are trying to develop different competitive strategies in order to attain cost efficiency (Ndungu 2011).
Sources of Sustainable Competitive advantage
According to Reuter et al. (2010), it can be said that the four important factors of sustainable competitive advantage are the effective management of the supply chain, product differentiation, cost leadership and organizational responsiveness. This sustainable competitive advantage comes from the dynamic interplay between the different firms and the external environment. There has been further development and advancement in the different theories that involves competitive advantage in the economy and the different strategies are classified into generic strategies accordingly. The sustainable competitive advantage of Tesco is the distribution system of the organisation. The strategies that are adopted by Tesco are not influenced the model stated by Porter and the company tries to adopt low cost and the differentiation strategies so that it can sustain in the long run. This process also helps in differentiation of its customers and thus helps in building a community based approach.
According to Rumelt (2012), strategic decisions are concerned about the environment in which the organisation operates and it deals with the entire resources and the people who form an important part of the organisation. The organisations has major resources proposition and thus it becomes easier to take important decisions for reallocation of new resources accordingly. It can be said that the framework and the tools for the particular strategy are the most important factors for the success of the organisation. The employment base of Tesco is affected by two important factors i.e. the primary market objective and the diversification and development of new product in the market. Therefore, it is necessary to improve the market development strategy that is considered to be a key growth driver for the success of the organisation.
Therefore, it is necessary for the different organisations to highlight the branding and the valuable service that has to be delivered by the organisation for the long run growth and success. A proper strategy formulation is regarded as a continuous process of improvement and thus it is necessary for Tesco to adapt to the changing structure accordingly.
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