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Contents:

1. Introduction 2

2. School of Strategies overview 2

2.1. The Planning School 3

2.1.1. Definition 3

2.1.2. Discussion 3

2.1.3. Limitation 4

2.2. The Culture school 4

2.2.1. Definition 4

2.2.2. Discussion 4

2.2.3. Limitation 4

2.3. The Positioning School 5

2.3.1. Definition 5

2.3.2. Discussion 5

2.3.3. Limitation 5

3. Whittington - school of strategies 6

4. Global Retail Strategic Decision 7

4.1. Tesco Strategy overview 7

4.2. Porter's Five Force 8

4.2.1. Discussion 8

4.2.2. Challenges 9

4.3. Porter Diamond strategy 9

4.3.1. Discussion 9

4.3.2. Challenges 9

4.4. Porter's Generic Strategies 10

4.4.1. Discussion 10

4.4.2. Challenges 10
4.5. Product Life Cycle (PLC) 11

4.5.1. Discussion 11

4.5.2. Challenges 11

5. Conclusion 12

References 13

Bibliography 14
1. Introduction

Strategic management is one of the key pillars for any organization. Managing
strategies properly is vital to the success of any organisation. According to Mintzberg H. Quin B.
(1997, p39) "Strategy is the pattern plan that integrates an organizational goal, policies and
action sequences as a whole." Therefore, the top level management of an organization needs to
be very cautious when deciding upon the strategy for the business to implement it into the
market, to survive and to gain the competitive advantage.

In this project, the school of strategies which comprise of the planning school, the culture
school and the positioning school defined by Minztberg will be analyzed to show that these
strategies were put into action to help organization be an active participant in the global market.
This assignment also illustrates some international theories which are Porter's diamond, five
forces, generic strategies and product life cycle of an organization by analyzing Tesco Plc’

2. School of Strategies overview

It is unquestionable that strategic development is the key factor for the endurance and
success of every business. Apparently, each organization should have suitable strategies and
familiarize themselves with the circumstances that occur in a competitive market. Turner (2003)
stated that "In an attempt to guide those whose job it is to put strategy into practice, Henry
Mintzberg, el at (1998) described the process of a 'strategy safari' and has acknowledged ten
schools of thought in respect to development of strategies. These schools have varied in
popularity overtime". The ten different schools were divided into the groups of prescriptive,
descriptive and synthesis. The difference point between the prescriptive schools and the
descriptive ones is that the previous focus on strategy formulation whiles the latter emphasis on
strategy development. The three prescriptive schools are considered as the efficiency and
stability fundamentals which create directions as well as objectives for the development of
organizations. According to Stacey (2007), the three prescriptive schools are "the design school,
the planning school, the positioning school .These three schools become both fundamental and
preconditioned elements of strategic development for each organization. Added to these schools,
the different descriptive schools which are entrepreneurial school, the cognitive school, the
learning school, the power school, the cultural school and the environmental school give deep
insights in strategy formulation. All strategy perspectives recognize the relevance of
entrepreneurship. The last group is synthesis that consists of the configuration school, "which
integrates the views of all the other schools in terms of configurations or in term of
transformations" (Stacey, 2007). This school represents an attempt at integration which
definitively recognizes the complexity of strategy. This assignment has taken three schools to
analyze and apply to Tesco Plc. to show, how these models work and how an organization can
apply these models to achieve their goals & objectives and be triumphant in global market. The
schools discussed here are the planning school, the culture school and the positioning school.

2.1. The Planning School

2.1.1. Definition

The planning school is a member of the prescriptive school which is generally more
concerned with how the strategy should be formulated instead of how they should be comprised.
This model deals with issues such as budgeting, scheduling and programming. Every business
needs to have strategy for their growth and development, thus this model can be applied in many
firms such as Tesco Plc. to help them become a global organization.

2.1.2. Discussion

Tesco was founded by Jack Cohen in 1924 and with the course of time; Tesco has become
one of the largest retailers in the world, (http://www.tesco.co.uk). How have they become
successful like they are now? It is necessary for Tesco Plc. to have a superior strategy which is
based on forecasting and provides information about economic conditions, what they want to be,
what will be the market and so on. The answer for these questions can be found through the
planning school. In addition, the planning school looks back to the Ansoff Model which Tesco
used to analyze their market and products. They wanted to become a global company therefore
they started Tesco’s operations in many countries worldwide, where new products were launched
to develop new markets. For example, Tesco opened stores in Japan where people are inclined
towards buying fresh food every day; therefore, the current hyper market formats do not cover
the needs of local consumer. Tesco has also invested huge heavily on product development in
following Ansoff marketing strategies; Tesco is seeking to increase number of customer and
number of sales. This school also looks closely at the SWOT model, the internal strength
weakness as well as the external opportunities and threat as mention in Marko Makipaa (2004).
Tesco has also applied SWOT model which enables them to understand their strength such
as brand name, national store network to develop and gain competitive advantage. It also
identified their weakness pertaining to lack of global scale or threat of takeovers to assist them
find the method to repair it and to modify it in near future according to the requirements. They
realized that the outside opportunities for Tesco can be overseas market specially the developing
markets in Eastern Europe and Asia along with financial service which might be a good
opportunity to focus upon and to become an active participant in the global market. In addition to
that, another threat to Tesco is the entry of Walt-Mart, and the developing local Sainsbury, etc.
Therefore by using the planning school which relates to Ansoff Model and SWOT analysis, an
organization will understand the potential better and strategize for their new products and
markets, manage their budget, schedules and program, in order to select the best practices and
techniques to fit their armory in order to achieve their goals and objectives. This model also
prioritizes its strategies by chain of command. The long- term strategies are the ones, which are
at the top of the priority list which is followed by the medium and then by short-term plan.

2.1.3. Limitation

However, while implementing this model as a strategy, company might come across some
challenges as this model contains some issues which can affect the performance of an
organization. To begin with strategists may focus too much on generating new strategic
concepts, which might put the current objectives at sub standard level; this may divert the
concentration from the original purpose leading to fallacies. Risk is major factor in this model as
the strategists who apply these concepts may choose to attempt a competition against
competitors and thus generate fresh strategies, which could be very risky as stated by Sadler P.
(2003). The other aspect of the planning school is predicting future based on an all out forecast.
This forecast is based on current strategies and current trends of economy; though, which makes
it very complex and risky to take a decision and implement it in advance. Strategies and
decisions based on forecast, assumption and uncertainties could divert the organization's original
strategy and may also ignore the organizations requirement of strategy.

2.2. The Culture school

2.2.1. Definition

The cultural school is one of subclasses of descriptive schools. This school looks at strategy
formation as a collective process. "The approach of this school tries to involve the various
groups and departments within the company: strategy formation is viewed as a fundamentally
collective and cooperative process. The strategy that is developed is a reflection of the corporate
culture of the organization", (http://www.12manage.com). This model focuses on the vital role
the social processes, beliefs and values play an important role in decision making and in strategy
formation. In addition to this, it not only explains resistance to strategic changes but helps to deal
with prime values in organizations or in regions as well.

2.2.2. Discussion

The culture of Tesco plays a critical role in the company; as it is concernet the way in which
people in the organization interact with each other. If people don’t interact well with each other,
it could make decision making difficult and could lead to poor decision making. Tesco follows a
positive and customer driven culture. It is showcased at every business transaction and makes a
genuine attempt to improve customer service, market research and HRD. The business is trying
to update the technology. They also regard change as opportunity than not a threat. Besides this,
the culture of Tesco is considered to be a dynamic one. It is proved by the ways where the
business is continuously looking to change in order to improve the services and to appeal to new
customers with new ideas.

2.2.3. Limitation
A shared commitment to beliefs encourages consistency in an organization’s behavior, and
therefore by discourages changes in strategy. It is culture that deeply held beliefs and tacit
assumptions that act as powerful internal barriers to fundamental change. Also, the vague of this
model is main reason leading to resistance to change. It can be missed to justify the status-quo.
Therefore, each organization’s attention has also been directed at how to overcome the strategy
limitation of organizational culture.

2.3. The Positioning School

2.3.1. Definition

The Positioning school is where the organization can develop its strategic position within the
industry. In other words positioning is oneself in competitive strategy. This model sees strategy
structure as an analytical development. Porter (1980) was the founder of the positioning school;
he focused on the constitution of industries and their effect on strategies. The positioning
approach looks at the company's situation in the economic market lay whose goal is to
distinguish the organization from others within the equivalent field. (Steward C, el at, 2005)

2.3.2. Discussion

This model has been applied in many firms such as Tesco to help them to positioning itself
in the market so that they will situate out among the rest, and how to attain high revenue than
other firms through market position. Tesco use Porter’s five force analysis to understand the
competition. Porter’s Five Forces Model implies that business are being influenced by five forces
that is supplier power, threat of substitutes, buyer power, barriers to entry and rivalry. This
model also implies that business necessity be able to be aware of the industry circumstance in
which they operate.
For TESCO, their main competitor is ASDA. The competition is firm between the two food
retail companies as healthy as with others like Sainsbury. ASDA is owned by Wal-Mat which is
the leading grocery succession in the United States. They are notorious for low priced items.
This is one of the reasons why people tend to go to their stores for then-shopping needs. When
they expanded in the United Kingdom, they brought by way of them their cost leadership
strategy. This resulted to the similar success that they have in the United States. However,
TESCO was competent to prevent ASDA last year. How Tesco conquer ASDA using Porter
strategy is explained as follows According to Porter (1985), a business position is based on its
strength and strength is classified into two - cost advantage and differentiation. When these
strengths are applied, it wills consequence to three generic strategies - focus, differentiation and
cost leadership strategy. Out of these three generic strategies, cost leadership strategy plays a
significant task in the accomplishment of TESCO's competitive advantage over ASDA. Cost
leadership strategy means that the business is the low cost manufacturer or supplier of a definite
quality item in a specified industry.

2.3.3. Limitation

When looking at the positioning school, manager or an organization must aware of some
limitation and taking into concern regarding it. Firstly, the top level in hierarchy of an
organization will be the one who formulate the strategies whilst implementation will be done by
the lower level. This may cause the problem such as inconsistency. Managers might have sets of
the ideal but they fail to translate these ideal to lower levels and due to the unsuccessful
implementation. It also creates the de-motivation for their employees. (Susanne R.2005)

The other problem of this model is its focus. It is too much narrow in that it is only interested
in the data that is either economic or quantifiable. The social, technological or political which is
very important data have not taken into account. This model also based on the prediction of
future trend by extrapolating the present trend which changes rapidly in the period of time for
variety of reason. If the past and present trends are the only source used to predict the future
trends, the strategies are very risky to fail in implementation.

3. Whittington - school of strategies


In opinion of Whittington, schools of strategies are four-types and it will be inadequate if we talk
about the strategic management without mentioning the theories of Whittington. Each theory
expresses the differences about human capacity to think reasonably and act more effectively.
Once each manager directly faces with these differences, s/he will be better able to test their own
action and finally decide which basic theory is most suitable with their demands. Therefore,
these four perspectives are regarded as the impotent tools for strategic management of each
business. Let look at the figure below, we will see the summary about the four basic theories:

It can be easily to see that Tesco stay in evolutionary pat because their strategy is to keep cost
low, do promotion and their option open which can attract more and more customer come to
them. Comparing the price of ASDA, Sainsbury with Tesco, it always shows that the price in
Tesco is much lower and they also do more promotion than their competitor. Moreover, people
who come to Tesco to buy something cheaper not only buy those items but they also buy the
other things which they need. Thus, even do more promotion and the prices cheaper, Tesco still
remain their sales and budget. Therefore, using this strategy is the right way for Tesco and they
can be more and more successful in the future. However, from a systemic perspective, there is no
one best way of strategy: just play by the local rules". It is obvious that the four approaches to
strategy widely differ in their advice to management. Understanding and know how to apply
each approach in the business system are the key factors which motivate each organization to
take pat more actively in the global

market. The next pat will be some strategies which Tesco applied or can be applied to achieve
then-goal and objectives.

4. Global Retail Strategic Decision


One of the most problematic trends in today's retail industry is globalization. The global arena
has proved extremely difficult for many retailers over the past two decades. Retailer's
performance in local market is highly influenced by variation in consumer behavior. Entrants in
market such as Brazil, Indonesia and Thailand find pronounced differences in consumer testes,
buying behavior and spending. Many retailers have tried and failed to establish themselves into
Global markets. This pat of essay will assist in understanding and the formulation of global
strategy for Tesco Plc. The essay will use Porter 5 force, Porter Diamond strategy, porter generic
and PLC model analysis to provide an insight into Tesco's situation in the international market.
This will help management in making to correct strategic choices in terms of corporate and
global strategy to avoid the problem which may come from unfamiliar of new environment of
each country that Tesco expand into it, such as new customer, new supplier and new competitor.

4.1. Tesco Strategy overview

The way Tesco grow profits is by trying to make Tesco more attractive to customers, so that
more people choose to shop with them. They are doing well for one simple reason: globally,
millions more customers have chosen Tesco - with 10 million more visits a week to then- stores
around, the world. In 1997, when Tesco first presented their four-pat strategy; a strong UK
business, non-food, retailing services and international .Now they are a truly international
retailer, with growing strength in non-food and retailing services. It seem like Tesco have chosen
a very good strategy for international market, In fact Tesco still have problem when they expand
business into some countries , for example in 2002 ;Tesco had experienced difficulties with
expansion in Poland, Tesco faced with the economic problem and that make their cost higher to
market presences. Another example in Taiwan (2000), Tesco was facing competition from the
French giant Carrefour. These days, there are speculations about Tesco's withdrawal from
Taiwan. From these unsuccessful experience, Tesco realized that expanding into new
international markets is more difficult, Hence Tesco should be aware more about market
competitive environment. Porter’s analysis is still useful in assessing the competitive
environment of firms these days.

4.2. Porter's Five Force

4.2.1. Discussion
According to Porter (1980), this framework can be applied to many organizations. It involves the
external environment examining and focusing on the structure of the industry. The aim of this
type of analysis is to develop a strategy that will enable firms to build up opportunities and
protect them from threats. By doing so, can lead firms competitive positioning. This concept is
dividing by 5 force call Porter's 5 forces.

• The threat of entry of new competitors (New Entrants); in supermarket retailing,


barriers to entry are high. High initial investment and fixed costs are likely to
prevent many potential newcomers. Another barrier to entry is economies of
scale. Tesco and other large supermarket are able to purchase large volumes of
goods in a lower price. In contrast, smaller new entry companies are more likely
to buy smaller volumes at higher prices. New firms also have to be aware that
Tesco already have loyal customers.

• The threat of substitutes; Which, Tesco threat of substitutes is high because


product that Tesco sell same with to the other retailing shop, which is Tesco
should analyze to what extent it is possible for customers to switch to the
substitute. In such cases, Tesco should make sure that customers Satisfied on their
products or services. On the other hand, other companies in the same industry
may choose to compete on price, which will reduce profit margins.

• The bargaining power of suppliers; In general, most people have a choice between
different supermarket chains, who compete on price and various promotions. This
can make supplier have high bargaining power. However, Tesco is controlling the
situation by not just order from one big supplier but by having a number of
smaller ones. In contrast, the bargaining power of Tesco is increased. If a
particular supplier is charging too much, Tesco can switch to another supplier.

• The degree of rivalry between existing competitors; as we seen in the market in


nowadays that all major players in Global market as Carrefour and Wal-mat
trying so hard for increases their market share. Consequently, the grocery market
is particularly competitive.
4.2.2. Challenges

Tesco's strategy, structure and rivalry are based on the model. It's strategy is clear, with growth
being pursued from four areas-the core UK grocery business, non-food, international expansion
and retailing services such as financial services, the dotcom business and telecommunication
packages. Basically, Tesco is using its strong stable core to keep the business ticking over while
it forges new riskier areas growth.

4.3. Porter Diamond strategy

4.3.1. Discussion

With this strategy, the objective is to become the lowest-cost producer in the industry. Tesco's
segments in the industry are supplied with the emphasis placed minimizing costs. If the achieved
selling price can at least equal (or near) the average for the market, then the lowest-cost producer
will enjoy the best profits. This strategy is usually associated with large- scale businesses
offering "standard" products with relatively little differentiation that are perfectly acceptable to
the majority of customers. Occasionally, a low-cost leader will also discount its product to
maximize sales, particularly if it has a significant cost advantage over the competition and, in
doing so, it can further increase its market share. (www.bizcovering.com). Tesco has launched a
new low-cost food line in its supermarkets as it gears up to take on discounters Alde and LidL
(www.retail-week.com). Tesco have to launch its own versions of the discounters1 products
within its existing stores. This way it hopes it can keep its existing customers happy while
hopefully attracting new ones.

4.3.2. Challenges

As the company faces novel situations and makes small mistakes through trial-and-error
expanding, management form more realistic perceptions of the foreign market. The need for
learning-by-doing at the local spatial level indicates that learning from the internationalization
process will often be a gradual, reiterative process .( Fernie J. 2005) Tesco experienced that the
opportunity to develop a large scale business in France was unlikely to be realized under the
current environment where planning permission is difficult and acquisition valuations are high.
Therefore, Catteau was becoming less strategically important. Tesco have learned that advisors
can only advise but that's all. Do not trust any investment bank (www.prnewswire.co.uk)

Nowadays, when new decreasing, especially in EU or UK markets demand is bigger and bigger,
overall oil price and credit crunch will deepen and that will pull demand back. Tesco is grocery
retailer, so in general food and agriculture industry faces cost increase and even peoples
continuing to feed their natural necessity. Maybe Tesco need to invest more to future food
supplements. The other challenge for them is about technology as all major technology today is
base oil or gas or coal. Tesco like companies will close their door like last winter another UK
retailer. Even could be E-commerce focus for Tesco.

4.4. Porter's Generic Strategies

4.4.1. Discussion

Tesco's pricing strategy, though, is considered to be among the most effective versus Wal-Mart
and holds out hope for U.S. food retailers. According to Daniels (2007) because of very rapid
innovation, have extremely shot life cycles, a factor that makes it difficult to achieve cost
reductions by moving production from one county to another. Many U.S. supermarkets are
making efforts to close price gaps with Wal-Mat, convinced that there is a golden price range.
The expression refers to pricing that even if Wal-Mart is cheaper, it is sufficiently attractive that
other benefits, whether convenience, service or assortment, will compel many consumers to shop
the supermarket despite the availability of a supercenter. One of the models that Tesco can use to
analyses and position itself in purpose to achieve high profitability is Generic strategies
framework. Which has been present in Competitive Strategic by Michael Porter ,he presents
three basic strategic to improving competitive power in environment force to achieve a
competitive edge in which a company can achieve the most advantageous ; The three basic
strategies are cost leadership, differentiation and focusing. According to Porter (1985) "Each of
the generic strategic involves different route to competitive advantage, the cost leadership and
differentiation strategies seek competitive advantage in a broad range of industry segment, while
focus strategic aim at cost advantage (cost focus) or differentiation(differentiation focus) in a
narrow segment."

The retail industry is highly competitive. The Tesco Group competes with a wide variety of
retailers of varying sizes and faces increased competition from other major retailers in the UK
and overseas. According to Tesco annual report (2008) "Failure to compete with competitors of
Tesco is on areas including price, product range.

4.4.2. Challenges

In generic model, Porter suggests that if want to be successful, a company needs to pursue one of
the strategies and must not be 'stuck in the middle'. There are two areas of competitive
advantage, differentiation and low prices which, Tesco does not seem to fall in any single
category. They do pursue both differentiation and low-cost strategies at the same time. Tesco
does not offer discount shopping and is not even the cheapest among the main supermarkets.
Instead, offers Tesco basic foodstuffs as well as Tesco Finest. Tesco, being one such company,
uses low costs to provide greater differentiation. Another pat of Tesco's strategy that could be
seen as differentiating is its building of community. As far as Tesco's customers are concerned;
again; they cannot be ranked as belonging to a certain social group. By providing both cheap and
expensive groceries, it offers products for people with limited budgets as well as those who are
better off.

Retailers have variety of product, which available on the market continues to increase
significantly each year. In virtually all sectors, from the food industry to home building products,
retailers have to make decision over which products to stock. Retailers must deal with seasonal
changes that affect number and types of products they carry. If the company has retail outlets in
difference country, its product offering must reflect any difference in style, weather, income and
culture.
4.5. Product Life Cycle (PLC)

4.5.1. Discussion

The PLC model is useful in explaining production patterns for some types of products; such as
standardized consumer goods, but is less useful in predicting future patterns, especially in
industries dominated by a few global players. (Morison J., 2003) The model demonstrates
dynamic comparative advantage. The country that has the comparative advantage in the
production of the product changes from the innovating (developed) country to the developing
countries. (Hill & Charles, 2007)Tesco is ever expanding its business in order to keep up the
competition to a very high level, so therefore, it is vital that Tesco invest in new services and
products so that customer's demands are met. Tesco is an example of a large supermarket chain
can use their customer loyalty to diversify and extend their product range. Groceries are always
going to be the core product for Tesco but in their website or in their stores, it can be seen to find
information on arrange of other products completely unrelated to groceries. Tesco is developing
these new products and selling to their existing customer base to be able to enter these new
markets. There is Tesco Finance and Insurance where access to apply for the Tesco credit card
and savings account, products that in the past you would have approached the bank for. Tesco
Direct is a catalogue shopping service and is seen as taking on established catalogue brands like
Argos. By understanding the product life cycle, Tesco is able to identify new areas to move in
(www.accaglobal.com)

Currently Tesco has an electronic range of goods and services that they offer, but one thing they
lack is affordable laptops. So far, Dell and PC World is the leading retailer’s of affordable
laptops. Tesco needs to buy quality laptops at a competitive price to maximize sales and increase
productivity (www.bizcovering.com).

4.5.2. Challenges

According to Daniels (2007) due to very rapid innovation, have extremely shot lifecycles, a
factor that makes it impossible to achieve cost reductions by moving production from one county
to another. As it has been told Tesco is a global retail market and still being globalized around
the world. Therefore, Tesco needs to move some products to a new market and an environment.
In this case Tesco challenges it rivals by reducing its cost and removing products. There are
plenty of difficulties in this competition such as making good research about environment to
make a perfect prediction about the best products which can be used to beat the competitors in
the global market.

5. Conclusion

Strictly speaking, all strategy schools and models are regarded as a tool for strategic information
from an organic perspective and as a process for perceiving a number of different futures for an
organization. Strategy is created at the topmost level of an organization. This level sets the
organization’s goals and decides on its investments and the deployment of its resources. Thanks
to applying strategic models in performance, Tesco has participated more actively in the global
market. It has proved through the success and development of Tesco in many counties in the
world.

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