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University of Wales Proposal Tesco Plc Business Analysis and Future Growth and Development

Prepared by ........ Student ID....... Batch No.

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Contents 1. 2. 2.1. 3 3.1. 3.2. 3.3. 3.4. 3.5. 4. 5. 5.1. 5.2. 5.3. 5.4. 5.5. 5.6. 5.7. 5.8 5.9 6. 7. Tesco Plc Business analysis and future growth and development Tesco History Objectives Literature Research Business Analysis Strategy, internal and external Analysis Strategic Choices Diversification Ways to grow Research Questionnaire Methodologies Experiment Quasi Experiments Co-relational Study Longitudinal study Cross Sectional Study Interview Surveys Case Study Sample Size Ethical Study References

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1. Business analysis of Tesco Plc and future Growth and Development

2. History of Tesco: In 1924, Sir Jack Cohen founded the Tesco super market chain. Cohen invested his exservice gratuity of pound 30 in a grocery stall, thus inaugurating the first store. The Tesco name was used in 1929 for the shop in Edgware, London. The acronym presented the initials of the companys tea supplier T.E. Stock well and Cohens own. Following the Great Depression in 1932 Tesco was formally established as a private limited company. During the 1930s Tesco added more than 100 stores, mainly in London. After his visit to the USA to study the self supermarkets, Cohen developed Tescos pile it high and sell it cheap format, which was to become a central part of Tescos retailing strategy in the year to come. In 1956, the first Tesco self super market was opened in converted cinema. During the 1950s and 1960s Tesco grew primarily through acquisitions. They included 70 Williamsons stores in 1957, 200 Harrows stores in 1959, 212 Irwins outlets in 1960, and construction of new superstores in order to attract super market segments. Simultaneously, new systems and technology were introduced in sales and distribution, which would enable Tesco to be positioned across a range of stores formats and market segments. The oldest and most established Tesco superstores offer customers a wide range of goods, a pleasant shopping environment and a free car parking. These superstores have minimum selling surface of 26,500 square feet and display 25,000 to 30,000 SKUs. In the 1990s Tesco started to develop new stores concepts such as Tesco Metro, a city centre store meeting the needs of high street shoppers and the local community. Tesco is also Britain largest Petrol retailer. The latest store format is Tesco
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Extra a hyper supermarket offering a wide selection non food items as a compliment too, rather than as expense, of the food assortment. In 1995, Today, Tesco has ten million Club card members households. Tesco current CEO is Terry Leahy, who has worked for the company for 21 years. Much of Tescos recent success is credited to his leadership ability. Tesco online delivery service was initially launched in 1996-7. In so doing, Tesco become the first retailer in the UK to start this type of service, allowing customers to place orders by telephone, fax and via internet. On 25 June 2001, Tesco did, indeed, announce a deal with Safeway, Californias biggest food retailer. As part of this deal, Tesco is providing its technology and pound 22 million into Grocery Works, a loss making online retailer that is majority owned by Safeway. Tesco continues to build on strong UK based through a concerted move into non-food markets and major store openings in central Europe and Asia in addition with the partnership with the USA and Safeway. This international expansion may prove to be another opportunity for Tesco to roll out its successful internet-based grocery retailing. It seems that for this new, saleable online business, the sky is the limit. 2.1. Aims and Objectives:

The main aim of the research is to understand the growth and development of Tesco markets in UK. This study includes a well understanding of business analysis, marketing strategies for Tesco business, previous, current and future potential growth of the business; develop the retailing services as well as the talented and motivated workforce in order to achieve continuous business targets. The aim of the proposal to analyze the internal and external environment impacts on Tesco short term and long term strategy. To critically analyze the current position of Tesco in UK super markets comparing with competitors Critically analyze those factors which directly or indirectly influence the growth and development of Tesco. Analysis of strategic options available to Tesco Performing detail internal and external analysis of Tesco. To evaluate the combined integrated growth of different departments of Tesco Critically evaluate the value of money for Tesco customers

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3. Literature Review

3. Tesco future growth and development and business analysis The research will explore the strategic position of Tesco and its growth and development over the years. First we shall explore and look at what involves in business analysis and how its linked with growth and development. Any growth and development strategy have strong linkage and must aligned with organisation overall objectives. 3.1. Business Analysis

Business analysis involves analysis of business current position and making comparison with previous years to understand where business should be and whether the objectives and targets have been achieved. A business analysis allows management to develop new strategic options to support long term objectives. It provides tools, technique and skills to organisation to achieve its long term goals. A detail business analysis involves assessment of internal and external environment and its impact on organisation objectives. Tesco has clear set of objective to provide value of money at competitive price, meeting need of customers, providing shareholder return on their investment, human resource development, building strong relations with suppliers, policy development for food industry, social and environmental development. A clear set of objectives are necessary in order to form organisation long term strategy. According to Gary Hamel , the only reason of organisation that fails to achieve its objectives is not that it do not have resource or techniques; it is only due to it has no course of action. Organisation always needs timely reports of its performance and position in the market. To be remaining on track, it performs different types of position analysis. (Smith 2001)

3.2. Strategy, internal and external Analysis Firstly, a strategy always concerns with organisation resource and its capabilities in the development of organisation. To understand these resources and capabilities, Tesco needs to perform a complete internal analysis that consist of Strength and weakness analysis, resource audit, value chain analysis and gap analysis to understand its current position. Secondly, the strategy also concerned with the external environment. External environment significant impacts organisation growth and development. Tesco is subject to external forces that can significantly affect its goals and objectives. There are different tools and techniques that Tesco can use to understand external environment.
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Those tools and techniques are PESTEL, Porters Five Forces, Opportunity and threat analysis. Tesco can use these analyses to evaluate its performance. Both internal and external environment analysis can help Tesco in to create new strategic options to grow. Tesco has expanded its business worldwide and that require a closer look at current position in order future investment decision. An internal and external might require Tesco to change its generic strategy. (Hitt, Ireland and Hoskisson 2008) Tesco has achieved tremendous growth and has become global player. The liquidity position is very strong that could be paid to shareholders or reinvested in business to expand. 3.3 Strategic Choices Tesco has four options to grow and each option has detrimental impact on investment, market shore, return, competitive position and level of risk. Those options are market penetration, product development, market development and diversification. According to Ansoff, the end result of any strategic decision will be mixture of market and product. Tesco has an option to do not change its current product and market strategy. That means penetrating in the market without changing its previous strategy to expand its market share. Such a strategy is low cost strategy and does not bring significant risk, however, except the risk from competitors remains there as they have an opportunity to outperform their rivals. Second option for Tesco is product development that involves developing new product in existing market and divestment. Introducing a new product would require high level of investment. So far, Tesco has been successful in producing its own product e.g. Tesco Finest. Third option is market development. Tesco has availed this option successfully. Tesco Metro is good example of market development where it optioned to offer same products to new market. For Tesco it is a low risk strategy as it has got experience in entering in new market, the management fully understand the culture problems, financial issues, operational problems etc. Finally, diversification which involves offering new product into new market. Such strategic choice is very risky as it involves a new product and new market. It also requires in depth research of the market and succession planning of product. (Mintzberg 1994)

3.4 Diversification The selection of any strategy options depends on strategic objectives of Tesco. Diversification provides organisation more power to influence market, economy of scope, economy of scale and help organisation to build more reliable image. (Grant 1991)

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Diversification is split into related and unrelated diversification. Related diversification occurs when company moves into similar market into which it operates. It could be horizontal diversification or vertical diversification. Unrelated diversification occurs when a company invest and move into totally different market. Tesco has strongly pursuing related diversification to make greater usage of it worldwide distribution channels and outlets. Tesco has successfully invested in successfully in food and non-food items. In related diversification, upward diversification provides Tesco competitive edge. Upward diversification involves the organisation become its own supplier as in case of Tesco, it start producing items itself instead of buying from other suppliers. Tesco maintained its alliance with other brands and put itself at their position that has enhanced competition and has provided more option for customers at competitively low price which has increased the growth of Tesco. Upward diversification provides a guaranteed supplies, better control over production, problems are resolved quickly and minimise intermediaries cost. Unrelated diversification is moving into new business which is totally distinctive to current business in which organisation is operating. In Unrelated diversification, it has no relation with current business, different structure and system will be required to operate. Such diversification is also known as conglomerate diversification. Organisation takes to improve the portfolio and to spread its unsystematic risk. It is high risk decision. Such decision is result of saturation of existing market, low growth and spreading portfolio risk. (Henry 2008)

3.5 Ways to Grow Although there are different options are available for an organization to grow e.g. Alliance, franchising, licensing etc. However the methods to grow are organic growth or merger and acquisition. So far Tesco has maintain its growth organically which is expanding its business on its own. Where as a rapid method to growth is merger and acquisition. Both growth strategies have their own benefits and limitations.

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4. Questionnaire What is Tesco long term strategy and analyse the current strategic position of Tesco plc? Analyse the current internal and external position of Tesco plc. What are strategic options available to Tesco plc? What are the reasons of Tesco investment in food items? What are cost/benefit of related and unrelated diversification to Tesco plc? How the organic growth and growth through merger or acquisition will help Tesco plc in achieving its long term objectives? Evaluate and assess the value chain management in providing value to customers. Assess and evaluate the strategic growth options arise from internal and external analysis Assess and measure the diversification of Tesco plc Analyse and evaluate the cost involved in growth and development and benefits. Assess and evaluate the growth option available to Tesco plc and its impact on longterm objectives.

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5. Methodology

1. Qualitative Method Qualitative results comes from three types of data collection those are i. ii. iii. Interview Direct observation Interveiw

2. Quantitative Method Quantitative results comes from i. ii. iii. iv. v. Surveys Tests Experiments Secondary data Quasi Experiments

A Short Guide to Some Common Types of Research Methods There are many different types of research methods, also called research designs that are used by psychologists in trying to find things out about behaviour. This is just a quick aid to the identification of research designs. In real life, some studies may combine the features of several research designs or may contain elements not included below. 5.1. Experiment:

An experiment is a process in which controlling input variable, holding balanced control on other constant and measure the effect on an output variable as a result of change. Participants randomly assigned to different groups being studied. Groups are treated differently in one or a few very specific ways--the independent variable. Behaviour resulting from this treatment difference is measured--the dependent variable. Conclusions can be taken to designate a cause and effect relationship between the

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independent and dependent variables. Because of this, the experiment is in a class by itself and it is a very special type of research procedure. 5.2. Quasi-experiment:

Participants achieve membership in different groups as a result of characteristics other than random assignment, for example: gender, age, socioeconomic status, athletic ability, or ethnic identification. A link may be found between one or more of these characteristics and some outcome variables, but cause and effect relationships are not clearly identified. Without random assignment to groups, a researcher cannot clearly demonstrate cause. 5.3. Co-relational study:

In the most general sense, a co relational study investigates the relationship between two variables. Usually the data are reported as correlation coefficients. Strength and direction (positive or negative) of relationships can be demonstrated by co relational studies but causal links remain an open question.

5.4.

Longitudinal study:

A longitudinal study follows a group composed of the same people across a period of the life span. The behaviour of these individuals is observed and/or measured at several intervals over time in an attempt to study the changes in their behaviour. Longitudinal studies may cover a short time, such as a few weeks, or a long time, such as the entire life span. Longitudinal studies may additionally employ other methods, such as quasiexperimental or correlation approaches, but the defining characteristic is that the same people are studied repeatedly across time. 5.5. Cross sectional study:

A cross sectional study usually examines groups of different people who belong to different age groups as a means of studying behaviour development across part or all of the life span. These studies can usually be done more easily and quickly than longitudinal studies but the resulting data may be of lower quality. More rarely, the term cross sectional may be used to describe studies which divide and examine segments of society based on variables other than age, such as income, educational level or family size.

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5.6.

Interview:

An interview may be highly structured or it may involve less structured narrative. It may include survey methodology. It usually involves people responding orally to questions or talking about their thoughts on a topic. 5.7. Survey:

This is another vital method which I will use in my project appraisal and preparation. Under this method I will prepare structured questionnaires and present it to different groups of peoples belong to different age group and different income groups. I will conduct written questionnaires, on some occasion I do conduct oral method of extraction data, like face to face interviews with peoples including telephonic interview of some professional personals. As this is cost effective approach for obtaining the large volume of data for analysis as I can use large numbers of people. In this approach quality of data is lower than other approach because people do not always answer question accurately. 5.8. Case study:

This is another important method of observing actually it is extensive observation of few individual rather than widely taken peoples in which data can be collected in large volume but less qualitative. In this method I will select important personal who made extensive research and implement the successful operations basically is this method I will use retrospective approach to use prior research that had already been done use them to make my planning not only retrospective but prospective approach my own expertise which I had obtained in my work experiences as well. Usually case studies are in use where the behaviour or situation is so rare that other method, involving larger groups of participants, is not possible. 5.9. Sample size

It will comprises of number people will be interviewed, surveyed, tested etc. The size will be dependent on the type of method. People will be choosing on the basis of gender, age, lifestyle and background to understand their buying behaviour and pattern of purchase. Their ideas and thoughts will be used to assess viability of growth and development. Data will be collected and analysed.

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6. Ethical Consideration

The research will notify the individual who is participating in research about the aim, objective, problems, if any, and benefits During the research no one will be enforced to participate in the research. People and participants will be invited to provide information voluntarily. The identity of participants will be kept secret. The identity information will be destroyed at the end of research. The participants personal information will not be disclosed in any report. In case of children as participant, special ethical care will be taken out; they will not allow participating without the parents or guardian permission.

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References Ian Smith I 2001, Strategic Analysis, Growing a private company: commercial strategies for building a business, page 1. Hitt M A, Ireland D A, Hoskisson R E 2008, internal and external analysis, Strategic Management: competitiveness and globalisation: concept and cases Page-71 Mintzberg H 1994, Strategic choice, The Rise and fall of Strategic Planning. Page-43, 4th edition. Grant R M 1991, Motives of Diversification, Contemporary Strategy analysis by, Page-444 5th edition. Henry A 2008, Related and unrelated diversification, Understanding Strategic Management by Anthony Henry page 224 Hess E D, Kazanjian R K 2006, Ways to grow, The search for organic growth by Edward D. Hess page 226 Patton M Q 2002, Qualitative and Quantitative research method, Qualitative research and evaluation methods. Page 13.

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