(iv) Long-term Objectives

Long-term objectives are important for any company to achieve long-term success for
their business. To secure long-term growth, Tesco refocused their firms operations and
capital investment. Their long-term objectives were mainly to growth their business in
UK core business, to expand their business internationally out of the UK home market
and to increase strength in non-food products and retail services such as personal finance,
online shopping channels and telecoms.
(v) Key strategic issues identified (Generic and Grand Strategies)
Generic Strategy
Generic strategy is about how firm gain competitive advantage in the marketplace based
on the chosen market. Initially Tesco implemented cost leadership strategy but they
implemented differentiation focus strategy due to the transformation and reposition of
Tesco. They had changed from discount roots into mass-market customer focused retailer.
They using different store format to differentiate its products. Using the example in
case, Tesco run new store concepts in UK by introduced Tesco Metro and Tesco Express.
Tesco Metro is a type of small city centre store format for local shoppers while Tesco
Metro was operated with petrol station linked convenience store format. Besides, they
also entered into convenience neighbourhood market by opened Fresh & Easy stores.
Grand Strategy
Grand strategy is a master long-term plan that provides basic direction for major actions
for achieving long-term business objectives. Tesco pursued market development as one
of their grand strategy. Initially, Tesco was an UK domestic retail corporation but now
they had transformed to a major multinational corporation which their operation are all
over the world. According to the case, 65% of Tesco operating space was outside UK.
The countries that they operated in are such as the emerging market- Central or Eastern
Europe and Asia and mature market-USA. Tesco also develop their markets with new
store concepts such as small city centre store format and convenience store format which
are Tesco Metro and Tesco Express. Moreover, Tesco also entering non-food stores

market such as introduced Homeplus in UK and also entered the virtual store market
which tapping into Koreas huge use of smartphones.
Next, Tesco also used joint venture as one of their grand strategies. Tesco entered South
Korean market by partner with Samsung who urgently seek for cash injection due to the
economic crisis. Tesco acquired 51% stake from Samsungs retail chain, Homeplus.
Tesco had expanded Homeplus successfully.
In addition, another grand strategy applied by Tesco is innovation. It is basically means
the strategy used that seek to obtain the premium margins associated with the introduced
of new creation of new product or services. There are two innovation can be found in the
case. Firstly is the customer loyalty card, Tesco Clubcard which launch in year 1995. It is
the first customer loyalty card being introduced in UK. It gives them a first moving
advantage as the loyalty card provides a platform for Tesco to gather customer
information and selling supplementary customer services to the customers. The second
innovation is Tesco had launched the worlds first virtual store together with Samsung
which the smartphone users can scan the electronic displays of 500 popular products in
Seoul subway station in order to obtain delivery service at home at the same day.
Furthermore, Tesco also used product development strategy by creating new products
that different with their previous products which focus on fresh and chilled preparedmeals products. Using example in the case, Tesco operated its first Fresh & Easy Store in
Southern California at the end of the year 2007. The products were served by short lead
time, integrated food preparation and distribution system. Nevertheless, they make some
amendment such as introduced fresh coffee due to American consumers uncomfortably
for some of their offers.

what is their problem, issue, wrong strategy

Generic Strategies are characterised by an individual retailers response to the industry
structure. For a giant retailer, such as Tesco, to obtain a sustainable competitive
advantage they should follow either one of three generic strategies, developed by Porter.
The first strategy of cost leadership is one in which Tesco can strive to have the lowest
costs in the industry and offer its products and services to a broad market at the lowest
prices. This strategy will be based on the Tescos ability to control their operating costs so
well that they are able to price their products competitively and be able to generate high
profit margins, thus having a significant competitive advantage. If Tesco uses another
strategy of differentiation, than it has to try to offer services and products with unique
features that customers value. Tesco will be able to create brand loyalty for their
offerings, and thus, price inelasticity on the part of buyers. Breadth of product offerings,
technology, special features, or customer service are popular approaches to
differentiation.
The last strategy of focus can be either a cost leadership or differentiation strategy
aimed toward a narrow, focused market. In pursuing a cost leadership strategy Tesco
focuses on the creation of internal efficiencies that will help them withstand external
pressures. Therefore, it appears reasonable to think that Tesco will have frequent
interactions with the governmental/regulatory and supplier sectors of the environment. In
accordance to this framework, while both overall cost leadership and differentiation
strategies are aimed at the broad market, Tesco may also choose to confine their
product to specific market areas or may choose to offer a smaller line of products to the
broad market, thus pursuing a strategy of focus or niche (Porter, 1980). In other words,
Tesco pursues a strategy of cost leadership or differentiation either in a specific market or
with specific products.
The danger some organisation face is that they try to do all three and become what is
known as stuck in the middle. In case of Tesco it is not appropriate, as they do have a
clear business strategy with a clearly defined market segment.
7.0 MARKET OBJECTIVES AND STRATEGIES IMPLEMENTATION
Strategy frameworks and structuring tools are key to assessing the business situation.
Risk and value trade-offs are made explicit, leading to concrete proposals to add value
and reduce risk. Explicit plans for action, including effective planning need to be
developed by Tesco as the strategic alternative.
From the generic strategies discussed above, Tesco is likely to employ two strategic
options that are also likely to be primary market objectives of focus on market
development though partnerships and diversification through new product development.
Market Development Strategy: Joint Developments and Strategic Alliances
By entering new markets like China and Japan it can serve as a key growth driver of the
companys revenues and expansion strategy. Tescos interests in Japan are likely to
continue growing in due course, as Asian markets are showing an increase in consumer

spending and increased trend towards retailing. These new markets are also
demographically high opportunity markets.
In the case of Tesco, one of the suggested strategic options is in international alliances
with the local retailers in Asian markets. It will be considered as a method of
development and may be formed to exploit current resources and competence. By
entering into joint ventures or partnerships, in order to gain a larger economy of scale and
larger market presence, Tesco will draw on the extensive local knowledge and operating
expertise of the partner whilst adding its own supply chain, product development and
stores operations skills to deliver a better shopping experience to customers. However,
given the huge scale, potential and complexities of these markets, Tesco may feel that
being the first mover is not necessarily an advantage. The success of the partnership will
be related to three main success criteria: sustainability, acceptability and feasibility.
Sustainability will be concerned with whether a strategy addresses the circumstances in
which the company is operating. It is about the rationale of this expansion-market
development strategy. The acceptability relates to the expected return from the strategy,
the level of risk and the likely reaction of stakeholders. Feasibility will be regarded to
whether Tesco has the resources and competence to deliver the strategy.
Product Development: Diversification
Johnson and Scholes (2003) believe that changes in the business environment may create
demand for new products and services at the expense of established provision. Ansoffs
matrix also suggests that if new products are developed for existing markets, then a
product development strategy has to be considered by the management level of a
company. In expanding and diversifying Tescos product mix, it is also crucial to
implement internal development when new products are developed. The nature and the
extent of diversification should also be considered in relation to the rationale of the
corporate strategy and the diversity of the portfolio. By following the changing needs of
the customers Tesco can introduce new product lines. This may require more attention to
R&D, leading to additional spending.
The retailing industry is experiencing overcapacity and innovative services and products
being the major competitive advantage. Therefore, innovation has to be a major driver for
Tescos product development. For example, Tesco can develop a portfolio of different
store formats in the UK, each designed to provide a different shopping experience. While
the majority of Eastern European and Far Eastern outlets are hypermarkets, Tesco can
also develop different store types in these markets as well. This value added by the
uniqueness will eventually lead Tesco to command a premium price. The management of
technological innovation is increasingly involved in strategic decision-making. Tesco
have to exploit their internal strengths and minimise their internal weaknesses in order to
achieve sustained competitive advantage (Although a competitive advantage is the goal
innovators want to achieve, the ability to create platform(s) depends on how they could
manage the innovation. Nevertheless, it does not mean that the innovator has to possess
all requisite capabilities, the important thing is the ability to organise and use the
capabilities
of
others
in
order
to
create
a
business
platform).

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