Introduction to Organizational Strategic Choice
Strategies are formed in the organization for accomplishing required goals and objectives of the business in successful and effectual manner (Rachet, 2014). It is assertive that companies should adopt systematic approach for making action plans for business so that long term competitive growth of the enterprise can be ensured.
(a) Strategic purpose and introduction of the organization
Tesco is a leading retail firm of UK that offers superior quality products and services for its business consumers. Wide variety of goods are offered by company and millions of consumers are getting benefited by it. Retail industry of UK is getting highly competitive and many organizations are executing their operations in this sector.
External Environmental Analysis
Political :- Rules and regulations that have been formed by government of state are mandatory to be followed for all the organizations. Government of nation forms norms that are mandatory to be followed for all the organizations that are working in the country (Balasopoulou and Geitona, 2016). It is assertive that all the business activities in the Tesco organization should be performed as per the norms. It will help for carrying out required business activities in legal and lawful manner.
Economical :- Different changing situations of nation gives impact on the different operational activities that are performed in the company. Inflation and deflation situations of nation gives influence on the purchasing power of people and due to that business activities of the Tesco entity gets affected (Mkude and Wimmer, 2015). For example if there is inflation situation in nation than due to that purchasing power of people reduces and they feel difficulty in buying products that are at a higher price rates.
Social :- All the products of the company are developed by keeping the expectations and needs of buyers into consideration. Tesco company considers needs and expectations of buyers while selling and designing and developing the products of the enterprise. Buying behavior of people gets influenced and due to that impact is observed on the purchasing behavior shown by them.
Technological :- Science has done rapid advancements and innovations and new techniques that are happening in technical sector gives impact on the overall activities that are performed in the entity. Rival firms that are working in retail industry are taking advantage of this opportunity and due to that impact is observed on overall business activities that are performed in the enterprise. It is vital for Tesco to adopt new technology to execute their required business functions (Grünig, and Kühn, 2015).
Environmental :- Different types of climatic change activities such as changes in environmental conditions. Temperature change situations also gives impact on the various business activities that are performed by the Tesco business organization. Natural disasters and climatic changes situations also gives impact on the operational activities of the company and logistics and supply chain activities of the enterprise gets influenced due to it (Kuitunen, 2014). It is assertive that proper analysis of all the external market situations should be done so that necessary functional activities of the enterprise can be performed without facing much difficulties.
Legal :- It is critical that all the business activities of Tesco company should be performed in legal and lawful manner so that required goals and objectives of the enterprise can be accomplished without facing much difficulty. It is assertive that norms that have been formed by government should be followed properly. For example taxation policy of the state needs to be followed by the company (Grünig and Morschett, 2017). All the regulations and policies that have been formed by government of UK needs to be complied with. Legal guidelines changes from one nation to another nation and it it vital that rules of one particular country should be followed properly.
Competitive Industry Analysis
It is critical that competitive industry analysis should be properly done so that opportunities available for a company. Challenges that organization is supposed to face in international market area can also be analyses and it will help for making better and effective strategies for Tesco company. Various techniques and action plans that have been adopted by rival firms for gaining huge market share can also be analyzed and it will help for making better strategies for gaining competitive advantage for the business (He, 2015). Porter's five force analysis can be used for carrying out competitive industry analysis for Tesco organization.
Bargaining power of buyers :- Buyers have many options for purchasing their products as many retail organization are offering superior quality products at lower price ranges. It is required that need, preferences and expectations of buyers should be fulfilled so that sales of the entity can be enhanced.
Bargaining power of suppliers :-Bargaining power of Suppliers is low as Tesco company has many suppliers for selling their products. Company does bargaining with buyers for reducing the prices of the products that are being supplied by them.
Threat of new entrants :- Retail industry of UK offers huge success and growth opportunities. It is the major reason for which many companies are trying for starting new ventures in grocery retail sector. Threat of new entrant is high and it create challenge for the Tesco company. New entering companies required to invest huge capital for carrying out their operations in this sector and prior permission from government and other regulatory authorities is also required to be taken. There are many existing players in retail industry that are already carrying out their business successfully (Burgenmeier and Mucchielli, 2013). New entrant firms required to adopt strategic approach for facing the challenges that have been created by existing market players of grocery retail industry. Threat of new entrants is medium and Tesco company needs to be awrae about challenges craeted by new entrants.
Competitive rivalry :- There are many rival firms that are operating their functions in retail industry and it includes Iceland, Lidl, Aldi, Waitrose, Morrisons and Sainsbury's. All the companies adopts different strategies for selling their products in market. All firms tries for gaining big market share and due to that competitive rivalry becomes high. It becomes assertive for Tesco to adopt innovative and strategic approach for gaining competitive advantage for the business (Antonioli, Mancinelli and Mazzanti, 2013). Grocery retail industry of UK is facing tough competition and due to that it has become challenging for gaining a good position in industry market area.
Availability of substitutes :- Wide variety of products are supplied by Tesco company and other retail firms that are operating in UK also supply different variety of products. There are many substitute products that are available in market that can be used by consumers. All the substitute products are available in following categories including clothing and jewelry, health and beauty, home appliances, tops and baby products, home electrical products and health and beauty care products. Wide variety of products that are offered by Tesco are in comprehensive range. There are many substitutes available in market that can be used by consumers. Other than this rival firms are offering many varieties for buyers. Threats of substitutes is high.
Strategic Capability Analysis
SWOT analysis helps for evaluating opportunities and threats that are available for business. It assists the organization in making better and effective action plans.
Strength :- Tesco company holds big market share in grocery retail industry of UK and efective supply chain and logistics operations. Effective consumer information tool is used by the company and it helps for making stronf property portfolio.
Weaknesses :- Recently Tesco company observed weak financial performance and due to that overall profitability and sales of the enterprise got affected. Financial scandal that happened in the year 2015 also created negative brand image of the organization. In addition to that employee turnover rate is high in the company which also is a weakness for the organization.
Opportunity :- Globalization has provided an effective medium for the company to expand its existing operations in international market area. Company can also enter into financial service industry and increase its non food retail range (El-Masri, Orozco and Tarhini, 2015). Company can also enhance its marketing strategy for gaining competitive advantage for the business.
Threats :- Economic fluctuations in market and inability of the company to sustain its existing market position is big threat for the organization.
(b) Strategic choice for the organization business strategy
Cost leadership strategy :- This strategy can be used by Tesco company for expanding its existing business operations and gaining big market share as compared to rival firms. This strategy will help the company for gaining long term competitive advantage and it will also help for ensuring long term growth and success for the business. In this method price sensitive consumers can be targeted by the company for selling products and services of the entity (Aithal, 2016).
Differentiation strategy :- in this technique Tesco company can differentiate its existing products in market so that consumers can be attracted for selling the products and services that are being offered by the company (Aithal, 2016). Target consumer segment is not price sensitive under this method and innovative and attractive concepts can be used by the enterprise for differentiating the products in market.
(c) Critical evaluation of strategic choices
SAFe analysis is conducted by companies for assessing the effectiveness of strategic choice that have been selected by Tesco company. It supports the firm in evaluating whether the strategies selected by the company are suitable and feasible for gaining required goals and objectives of the business in effective manner.
SAFe analysis for Tesco company is as mentioned :-
Suitability :- Tesco company has adopted differentiation strategy for differentiating their products from the goods that are offered by rival firms in market area. It provides opportunity for the company to enhance its existing consumer base by offering new and different variety of products in market area (Tao and Hinton, 2014). Research and development department of Tesco company has potential for adding attractive features and attributes in existing price ranges. Other than this cost leadership strategy is also an advantage for the organization and it will help for offering products that are available at affordable price ranges.
Acceptability :- The strategies that have been selected by Tesco company will help for meeting with the requirement and expectations of business consumers. Proposed strategies have been disclosed to all the key stakeholders including employees, shareholders and top management people are agreed with the strategies that have been chosen by the the firm. Consumers have accepted the products that have been supplied by the company at an affordable price ranges.
Feasibility :- The proposed strategy of Tesco that includes cost leadership strategy and differentiation strategy are feasible. It is possible to implement the strategy in actual practice. Other than this it is required that proper feasibility test should be done before implementing the strategies in actual practice (Burgenmeier and Mucchielli, 2013). It is possible to accomplish the required objectives of this strategy. Tesco company have all the required resources that are needed for implementing the strategy. It reflects that both the chosen strategies are feasible for the organization.
Justification of optimum strategy :- Tesco is a leading grocery retail firm and it holds big market share in UK retail industry. Cost leadership strategy will support the company for targeting price sensitive consumers and it will also help for targeting price sensitive consumers for selling products and services of the organization. Other than this Differentiation strategy will support for differentiating the products of the enterprise in the market. Both the strategies will support the company in gaining competitive advantage for the business (Aithal,2016). Other than this long term growth and success of the business can also be ensured through this. Profitability and financial revenues of the company can also be increased by making use of this approach and it will help the Tesco company to leading ahead with its rival firms.
Summing up the present report it can be concluded that strategies and action plan that have been formed by the enterprise supports in gaining required goals and objectives of the business in successful way. It is assertive that competitive industry analysis should be done so that opportunities and threats that are available for the business can be identified.
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