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The Iood and drink retail sector represents the largest industry in the UK, providing employment Ior over three million people in primary
production, manuIacturing and retailing. In 2003 retail accounted Ior 9° oI gross domestic product (Datamonitor, 2003). In recent years
UK supermarkets have come under increased scrutiny over their treatment oI suppliers, particularly oI own-label products, yet the
development oI strategic supply networks has been an integral part oI most supermarket strategies Ior the past decade.

The report below provides an insight into the supermarket company, Tesco, with emphasis on its external environment analysis and
company's analysis oI resources, competence and culture. Two Iuture strategic options are suggested in regards to the resources based

Tesco is one oI the largest Iood retailers in the world, operating around 2,318 stores and employing over 326,000 people. It provides
online services through its subsidiary, Tesco.com. The UK is the company's largest market, where it operates under Iour banners oI Extra,
Superstore, Metro and Express. The company sells almost 40,000 Iood products, including clothing and other non-Iood lines. The
company's own-label products (50 percent oI sales) are at three levels, value, normal and Iinest. As well as convenience produce, many
stores have gas stations, becoming one oI Britain's largest independent petrol retailers. Other retailing services oIIered include Tesco
Personal Finance.

2.1 Political Factors
Operating in a globalized environment with stores around the globe (Tesco now operates in six countries in Europe in addition to the UK;
the Republic oI Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland. It also operates in Asia: in South Korea, Thailand,
Malaysia, Japan and Taiwan), Tesco's perIormance is highly inIluenced by the political and legislative conditions oI these countries,
including the European Union (EU).

For employment legislations, the government encourages retailers to provide a mix oI iob opportunities Irom Ilexible, lower-paid and
locally-based iobs to highly-skilled, higher-paid and centrally-located iobs (Balchin, 1994). Also to meet the demand Irom population
categories such as students, working parents and senior citizens. Tesco understands that retailing has a great impact on iobs and people
Iactors (new store developments are oIten seen as destroying other iobs in the retail sector as traditional stores go out oI business or are
Iorced to cut costs to compete), being an inherently local and labour-intensive sector. Tesco employs large numbers oI; student, disabled
and elderly workers, oIten paying them lower rates. In an industry with a typically high staII turnover, these workers oIIer a higher level
oI loyalty and thereIore represent desirable employees.

2.2 Economical Factors
Economic Iactors are oI concern to Tesco, because they are likely to inIluence demand, costs, prices and proIits. One oI the most
inIluential Iactors on the economy is high unemployment levels, which decreases the eIIective demand Ior many goods, adversely
aIIecting the demand required to produce such goods.

These economic Iactors are largely outside the control oI the company, but their eIIects on perIormance and the marketing mix can be
proIound. Although international business is still growing (Appendix A), and is expected to contribute greater amounts to Tesco's proIits
over the next Iew years, the company is still highly dependent on the UK market. Hence, Tesco would be badly aIIected by any
slowdown in the UK Iood market and are exposed to market concentration risks.

2.3 Social/Cultural Factors
Current trends indicate that British customers have moved towards one-stop' and bulk' shopping, which is due to a variety oI social
changes. Tesco have, thereIore, increased the amount oI non-Iood items available Ior sale.

Demographic changes such as the aging population, an increase in Iemale workers and a decline in home meal preparation mean that UK
retailers are also Iocusing on added-value products and services. In addition, the Iocus is now towards; the own-label share oI the
business mix, the supply chain and other operational improvements, which can drive costs out oI the business. National retailers are
increasingly reticent to take on new suppliers (Clarke, Bennison and Guy,1994; Datamonitor Report, 2003).

The type oI goods and services demanded by consumers is a Iunction oI their social conditioning and their consequent attitudes and
belieIs. Consumers are becoming more and more aware oI health issues, and their attitudes towards Iood are constantly changing. One
example oI Tesco adapting its product mix is to accommodate an increased demand Ior organic products. The company was also the Iirst
to allow customers to pay in cheques and cash at the checkout.

2.4 Technological Factors
Technology is a maior macro-environmental variable which has inIluenced the development oI many oI the Tesco products. The new
technologies beneIit both customers and the company: customer satisIaction rises because goods are readily available, services can
become more personalised and shopping more convenient.The launch oI the EIIicient Consumer Response (ECR) initiative provided the
shiIt that is now apparent in the management oI Iood supply chains (Datamonitor Report, 2003). Tesco stores utilise the Iollowing

* Wireless devices
* Intelligent scale
* Electronic shelI labelling
* SelI check-out machine
* Radio Frequency IdentiIication (RFID).

The adoption oI Electronic Point oI Sale (EPoS), Electronic Funds TransIer Systems (EFTPoS) and electronic scanners have greatly
improved the eIIiciency oI distribution and stocking activities, with needs being communicated almost in real time to the supplier (Finch,

2.5 Environmental Factors
In 2003, there has been increased pressure on many companies and managers to acknowledge their responsibility to society, and act in a
way which beneIits society overall (Lindgreen and Hingley, 2003). The maior societal issue threatening Iood retailers has been
environmental issues, a key area Ior companies to act in a socially responsible way. Hence, by recognizing this trend within the broad
ethical stance, Tesco's corporate social responsibility is concerned with the ways in which an organization exceeds the minimum
obligations to stakeholders speciIied through regulation and corporate governance. (Johnson and Scholes, 2003)

Graiser and Scott (2004) state that in 2003 the government has intended to launch a new strategy Ior sustainable consumption and
production to cut waste, reduce consumption oI resources and minimise environmental damage. The latest legislation created a new tax
on advertising highly processed and Iatty Ioods. The so-called Iat tax' directly aIIected the Tesco product ranges that have subsequently
been adapted, aIIecting relationships with both suppliers and customers

2.6 Legislative Factors
'arious government legislations and policies have a direct impact on the perIormance oI Tesco. For instance, the Food Retailing
Commission (FRC) suggested an enIorceable Code oI Practice should be set up banning many oI the current practices, such as
demanding payments Irom suppliers and changing agreed prices retrospectively or without notice (Mintel Report, 2004). The presence oI
powerIul competitors with established brands creates a threat oI intense price wars and strong requirements Ior product diIIerentiation.
The government's policies Ior monopoly controls and reduction oI buyers' power can limit entry to this sector with such controls as
license requirements and limits on access to raw materials (Mintel Report, 2004; Myers, 2004). In order to implement politically correct
pricing policies, Tesco oIIers consumers a price reduction on Iuel purchases based on the amount spent on groceries at its stores. While
prices are lowered on promoted goods, prices elsewhere in the store are raised to compensate.

3.1 Threat oI New Entrants
The UK grocery market is primary dominated by Iew competitors, including Iour maior brands oI Tesco, Asda, Sainsbury's and SaIeway
that possess a market share oI 70° and small chains oI SomerIield, Waitrose and Budgens with a Iurther 10°. Over the last 30 years,
according to Ritz (2005), the grocery market has been transIormed into the supermarket-dominated business. Maiority oI large chains
have built their power due to operating eIIiciency, one-stop shopping and maior marketing-mix expenditure. This powerIul Iorce had a
great impact on the small traditional shops, such as butchers, bakers and etc. Hence, nowadays it possesses a strong barrier Ior new
companies who desire to enter the grocery market. For instance, it becomes rather diIIicult Ior new entrants to raise suIIicient capital
because oI large Iixed costs and highly developed supply chains. This is also evident in huge investments done by large chains, such as
Tesco, in advanced technology Ior checkouts and stock control systems that impact new entrants and the existing ones. Other barriers
include economies oI scale and diIIerentiation (in the provision oI products or services with a higher perceived value than the
competition) achieved by Tesco and Asda seen in their aggressive operational tactics in product development, promotional activity and
better distribution.

3.2 Bargaining Power oI Suppliers
This Iorce represents the power oI suppliers that can be inIluenced by maior grocery chains and that Iear oI losing their business to the
large supermarkets. ThereIore, this consolidates Iurther leading positions oI stores like Tesco and Asda in negotiating better promotional
prices Irom suppliers that small individual chains are unable to match Ritz (2005). In return, UK based suppliers are also threatened by
the growing ability oI large retailers to source their products Irom abroad at cheaper deals. The relationship with sellers can have similar
eIIects in constraining the strategic Ireedom oI the company and in inIluencing its margins. The Iorces oI competitive rivalry have
reduced the proIit margins Ior supermarket chains and suppliers.

3.3 Bargaining Power oI Customers
Porter theorized that the more products that become standardized or undiIIerentiated, the lower the switching cost, and hence, more
power is yielded to buyers Porter M. (1980). Tesco's Iamous loyalty card - Clubcard remains the most successIul customer retention
strategy that signiIicantly increases the proIitability oI Tesco's business. In meeting customer needs, customizing service, ensure low
prices, better choices, constant Ilow oI in-store promotions enables brands like Tesco to control and retain their customer base. In recent
years a crucial change in Iood retailing has occurred due to a large demand oI consumers doing the maiority oI their shopping in
supermarkets that shows a greater need Ior supermarkets to sell non-Iood items. It has also provided supermarkets with a new strategic
expansion into new markets oI banking, pharmacies, etc. Consumers also have become more aware oI the issues surrounding Iairer trade
and the inIluence oI western consumers on the expectations and aspirations oI Third World producers. Ecologically benign and ethically
sound production oI consumer produce such as tea, coIIee and cocoa is viable, and such products are now widely available at the
maiority oI large chains.

3.4 Threat oI Substitutes
General substitution is able to reduce demand Ior a particular product, as there is a threat oI consumers switching to the alternatives
Porter M. (1980). In the grocery industry this can be seen in the Iorm oI product-Ior-product or the substitute oI need and is Iurther
weakened by new trends, such as the way small chains oI convenience stores are emerging in the industry. In this case Tesco, Asda and
Sainsbury's are trying to acquire existing small-scale operations and opening Metro and Express stores in local towns and city centres
Ritz (2005).

3.5 Bargaining Power oI Competitors
The grocery environment has seen a very signiIicant growth in the size and market dominance oI the larger players, with greater store
size, increased retailer concentration, and the utilisation oI a range oI Iormats, which are now prominent characteristics oI the sector. As
it was mentioned above, the purchasing power oI the Iood-retailing industry is concentrated in the hands oI a relatively small number oI
retail buyers. Operating in a mature, Ilat market where growth is diIIicult (a driver oI the diversiIication into non-Iood areas), and
consumers are increasingly demanding and sophisticated, large chains as Tesco are accruing large amounts oI consumer inIormation that
can be used to communicate with the consumer Ritz (2005). This highly competitive market has Iostered an accelerated level oI
development, resulting in a situation in which UK grocery retailers have had to be innovative to maintain and build market share. Such
innovation can be seen in the development oI a range oI trading Iormats, in response to changes in consumer behaviour. The dominant
market leaders have responded by reIocusing on price and value, whilst reinIorcing the added value elements oI their service.

AIter a close evaluation oI the external analysis oI the grocery industry and SWOT analysis presented in Appendix B, it is crucial to
consider internal operational eIIectiveness oI Tesco in the Iorm oI identiIying critical success Iactors oI the company within the Iood
retailing sector.

4.1 Branding and Reputation
There are companies that have always understood that they were selling brands beIore the product. Tesco is a brand and also serves as the
core strategic advantage. The company was spreading like wildIire transIorming the generic into the brand-speciIic, largely through
careIully branded packaging and the promotion oI an 'every penny counts¨ environment. The company has a strong brand image, and is
associated with good quality, trustworthy goods that represent excellent value.

The product and service development processes oI the company have been substantially re-engineered, to Iacilitate better management oI
product liIecycles and more eIIicient delivery oI wide ranges oI products to customers. Product activity has Iocused on enhancing core
ranges and introducing quality products. Tesco's innovative ways oI improving the customer shopping experience, as well as its eIIorts to
branch out into Iinance and insurance have also capitalized on strong brand reputation.

The company is also very successIul in terms oI customer loyalty due to its loyalty cards system and its general approach to customizing
services to the needs oI every customer. This is truly evident in terms oI tremendous growth oI on-line sales where the company has a
strong platIorm to Iurther develop this revenue stream. AIter considering the Iact the nowadays maiority oI people have less time Ior
shopping, Tesco employed this on-line systems and now became the biggest online supermarket.

4.2 IT Integration
Today companies act in an increasingly dynamic and complex environment, giving more diIIiculties making Iorecasts and adapting
themselves to the continuous changes. In order to be able to compete in this kind oI world, it is necessary to innovate at an extraordinary
speed, continuously improving the products, services and processes. For Tesco operations have become necessities rather than luxuries.
Systems that control stock, keep all the stock and deliveries records and analyse business transactions are the liIelines oI the company. It
can also be said that IT has risen beyond its traditional support role and taken up a central role in business strategy Iormulation.

Extranet system employed by the company, enables Tesco to use the Internet to create proprietary and customised inIormation Ilows
between the company and its business partners. The system connects business partners online behind virtual Iirewalls, bringing more
Ilexibility, scalability, extensibility and integration across the distribution channels. Extranet also helps to extend the key inIormation on
business partners throughout the supply chain and Iacilitate collaborative relationships with partners. Market exchanges hold the promise
oI extending Tesco's reach, delivering buyers to their virtual doorstep Irom around the world. Other examples oI the most eIIicient
technological advances that support daily business operations oI Tesco are wireless devices, intelligent scale, electronic shelI labelling,
selI check-out machine and radio Irequency identiIication (RFID) systems. This technology is an eIIort to maintain Tesco's ability to
handle an increase in product/service volume while controlling costs; it also enables to be innovative and market oriented.

4.3 Supplier Management
Tesco, like many other grocery chains companies, sources its goods Irom overseas manuIacturers who are more competitive on price and
volumes. For many years Tesco has been supporting British iobs and expertise by encouraging large branded suppliers to develop
exclusive production Iacilities. But in recent years the company has realised the need to look abroad Ior products no longer available in
UK, bud tried to do it through long-established UK partners. The Ioods continued to be heavily UK-based due to the very successIul
range oI prepared Ioods.

As a maior retailer selling diverse product range, they work with many diIIerent suppliers around the world, with employees Irom many
diIIerent cultures and ethnic groups. ThereIore, it is the company policy and company's main approach to have unique relationships with
suppliers. Applying advanced technology in its communications and cooperation with the suppliers, the company aims to control the
work oI its suppliers and heavily relies on their eIIiciency. The direct suppliers use a number oI sub-contracted suppliers, selected to be
best in class in their country. Tesco has established close relationships with the contractors believing that regular and long term orders
promote the investment necessary to improve conditions in the supply chain.

Being an international company, Tesco develops various supplier management programmes to survey key suppliers and Iranchisee
satisIaction. The company also takes part in the Ethnical Trading Initiative.

The table presented below gives a strategic comparative analysis, comparing Tesco's successIul Iactors discussed above with the same
Iactors oI the main competitors' in the UK grocery industry. The scores have been give with the scale Irom 0 to 5
CSF Sainsbury's Asda SaIeway


IT Integration


Supplier Management






The results highlight that the main threat is potentially coming Irom Sainsbury's that possesses a strong brand name and is careIully
selects and controls its suppliers.

5.1 SWOT Analysis
Tesco is the top grocer and leading retailer in its home market oI the UK. Pitched at the broad middle mass-market, it has maintained its
position through a clear Iocus, well targeted product oIIer and excellent record both in product and Iormat innovation. Tesco also leads
the world in online grocery retailing. In the UK the company concentrates on running grocery superstores, c-stores and an online service.
Elsewhere the Iocus is usually on hypermarkets. In 2003, the group's trading record around Europe and UK has been outstanding.

The Iull SWOT analysis oI Tesco is presented in Appendix B, summarizing the key issues Irom the business environment and the
strategic capability, including resources and competence, oI the company that are most likely to impact on strategy development

5.2 Core Competence
Superior perIormance, according to Johnson and Scholes (2003), has to be determined by the way in which company's resources are
deployed to create competence in the organisational activities. Core competencies are activities or processes that critically underpin the
company's competitive advantage. The primary target Ior the company is to recognize that competition between businesses is as much a
race Ior competence as it is Ior market position and market power. ThereIore, the goal Ior Tesco management is to Iocus the attention on
competencies that really aIIect competitive advantage.

The competence leads to levels oI perIormance Irom an activity or process that is signiIicantly better than competitors. Benchmarking
may help in understanding perIormance standards and what constitutes good or bad perIormance. However, it will be crucial Ior Tesco to
look at the generic level. Core competences may be embedded deep in Tesco at an operational level in the work routines. The Iramework
developed by Prahalad and Hamel in the 1990s suggests that over time companies may develop key areas oI expertise which are
distinctive to that company and critical to the company's long term growth (Dreier, 2000; De Toni, and Tonchia, 2003). In the case oI
Tesco the areas oI expertise are most likely to develop in the critical, central areas oI the organisation where the most value is added to its
service and its delivery. For example, trust in the Tesco brand lies at the heart oI these services and in 2003 the number oI retail service
accounts rose by 36°. Some 50,000 new service accounts per week are being opened and Tesco sees these areas as long term businesses
with the potential to build real scale. Financial services have also been launched internationally in Ior example Hungary and Korea
(Datamonitor Report, 2003; MarketWatch, 2004).

Through a long period oI operations, core competencies oI Tesco have to be rather Iixed. Prahald's and Hamel's approach states that core
competencies should change in response to changes in the company's environment and be Ilexible and evolve over time. ThereIore,
Tesco needs to adapt to new rapidly changing circumstances and opportunities, so its core competencies will have to adapt and change.
The example oI this was when the company has launched its loyalty card and went into banking.

Core competences Iramework suggests three Iactors, which can help to identiIy core competences:

Provide potential access to a wide variety oI markets: enables the creation oI new products and services. Fro instance, Tesco has
established a strong leadership in Iood retailing industry. The core competence that enabled Tesco to enter retailing oI Iood and non-Iood
products was a clear distinctive brand proposition that had a Iocus on a properly deIine market segment. Tesco is recognized as the
company, providing the most customized and eIIicient service, based on a good customer relationship management.

Makes a signiIicant contribution to the perceived customer beneIits oI the outcome: delivers a Iundamental customer beneIit. In order to
identiIy core competences in a particular market, the question oI - why is the customer willing to pay more or less Ior one product or
service than another- needs to be addressed. For example, Tesco have been very successIul in capturing the leadership oI the retailing
market. This shows that Tesco designs and implements eIIective supply systems and deliver an eIIicient "customer interIace". Tesco was
the Iirst UK grocer to launch a loyalty card and has been the most eIIective. Palmer (2004) claims that until recently, it was the only
grocer to use the inIormation to mail customers every month.

DiIIicult Ior competitors to imitate highlights the need Ior a core competence to be competitively unique. This indicated the importance
oI product diIIerentiation. For example, Ior many years up to 2003 (In 2003 Tesco has been recognised a leading UK Iood retailer) Tesco
had a very strong position within the retailing industry. It had a diIIerent approach to the service concept, providing good corporate
reputation and introducing new premium quality products (MarketWatch, 2004).

Applying this Iramework to Tesco shows that the company in order to be successIul has to base its business strategy on these capabilities.
Capabilities result Irom Tesco's ability to combine and exploit these resources in uniquely diIIerent ways. In the external environment,
the intensity oI competition is not completely under the retailer's control, however, to compete eIIectively Tesco have to identiIy its core
competences and use them Ior company's advantage.

5.3 Cultural Web
Cultural web theory application (The cultural web theory is also an eIIective analysis Ior management in order to represent the
underlying assumptions linked to political, symbolic and structural aspect oI the company) is a useIul tool in considering the cultural
context Ior Tesco's business. Culture generally tends to consist oI layers oI values, belieIs and taken Ior-granted actions and ways oI
doing business within and outside the company. ThereIore, the concept oI cultural web is the representation oI these actions taken Ior
granted Ior understanding how they connect and inIluence the strategy ('eliyath and Fitzgerald, 2000; Johnson and Scholes, 2003). It is
also useIul to understand and characterise both the company's culture and the subcultures in adaptation oI Iuture strategies.

Culture can be analysed through the observations oI how the company behaves, including routines, rituals, stories, structures and systems.
This presents the 'clues¨ about the taken-Ior-granted assumptions. Tesco has a very Iriendly and supporting approach in the routine ways
that staII at Tesco behave towards each other, and towards those outside the company that can make up the ways people do things. The
control systems and measurements are constantly under the management review to monitor the eIIiciency oI the staII and managers'
decisions. The rituals oI the company's liIe are the special events, corporate gatherings, which Tesco emphasises what is particularly
important and reinIorce the way things are done. On-going meetings and communication at every level oI the company's hierarchy
represent a strong internal environment.

Generic Strategies are characterised by an individual retailer's response to the industry structure. For a giant retailer, such as Tesco, to
obtain a sustainable competitive advantage they should Iollow either one oI three generic strategies, developed by Porter.

The Iirst strategy oI cost leadership is one in which Tesco can strive to have the lowest costs in the industry and oIIer its products and
services to a broad market at the lowest prices. This strategy will be based on the Tesco's ability to control their operating costs so well
that they are able to price their products competitively and be able to generate high proIit margins, thus having a signiIicant competitive
advantage. II Tesco uses another strategy oI diIIerentiation, than it has to try to oIIer services and products with unique Ieatures that
customers value. Tesco will be able to create brand loyalty Ior their oIIerings, and thus, price inelasticity on the part oI buyers. Breadth oI
product oIIerings, technology, special Ieatures, or customer service are popular approaches to diIIerentiation.

The last strategy oI Iocus can be either a cost leadership or diIIerentiation strategy aimed toward a narrow, Iocused market. In pursuing a
cost leadership strategy Tesco Iocuses on the creation oI internal eIIiciencies that will help them withstand external pressures. ThereIore,
it appears reasonable to think that Tesco will have Irequent interactions with the governmental/regulatory and supplier sectors oI the
environment. In accordance to this Iramework, while both overall cost leadership and diIIerentiation strategies are aimed at the broad
market, Tesco may also choose to conIine their product to speciIic market areas or may choose to oIIer a smaller line oI products to the
broad market, thus pursuing a strategy oI Iocus or niche (Porter, 1980). In other words, Tesco pursues a strategy oI cost leadership or
diIIerentiation either in a speciIic market or with speciIic products.

The danger some organisation Iace is that they try to do all three and become what is known as stuck in the middle. In case oI Tesco it is
not appropriate, as they do have a clear business strategy with a clearly deIined market segment.

Strategy Irameworks and structuring tools are key to assessing the business situation. Risk and value trade-oIIs are made explicit, leading
to concrete proposals to add value and reduce risk. Explicit plans Ior action, including eIIective 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
obiectives oI Iocus on market development though partnerships and diversiIication 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 oI the company's revenues and expansion strategy.
Tesco's 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 oI Tesco, one oI the suggested strategic options is in international alliances with the local retailers in Asian markets. It will be
considered as a method oI development and may be Iormed to exploit current resources and competence. By entering into ioint ventures
or partnerships, in order to gain a larger economy oI scale and larger market presence, Tesco will draw on the extensive local knowledge
and operating expertise oI 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 oI these markets, Tesco may Ieel that
being the Iirst mover is not necessarily an advantage. The success oI the partnership will be related to three main success criteria:
sustainability, acceptability and Ieasibility. Sustainability will be concerned with whether a strategy addresses the circumstances in which
the company is operating. It is about the rationale oI this expansion-market development strategy. The acceptability relates to the
expected return Irom the strategy, the level oI risk and the likely reaction oI stakeholders. Feasibility will be regarded to whether Tesco
has the resources and competence to deliver the strategy.

Product Development: DiversiIication
Johnson and Scholes (2003) believe that changes in the business environment may create demand Ior new products and services at the
expense oI established provision. AnsoII's matrix also suggests that iI new products are developed Ior existing markets, then a product
development strategy has to be considered by the management level oI a company. In expanding and diversiIying Tesco's product mix, it
is also crucial to implement internal development when new products are developed. The nature and the extent oI diversiIication should
also be considered in relation to the rationale oI the corporate strategy and the diversity oI the portIolio. By Iollowing the changing needs
oI 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 maior competitive advantage.
ThereIore, innovation has to be a maior driver Ior Tesco's product development. For example, Tesco can develop a portIolio oI diIIerent
store Iormats in the UK, each designed to provide a diIIerent shopping experience. While the maiority oI Eastern European and Far
Eastern outlets are hypermarkets, Tesco can also develop diIIerent store types in these markets as well. This value added by the
uniqueness will eventually lead Tesco to command a premium price. The management oI 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
platIorm(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 oI others in order to create a business platIorm).

The success oI the Tesco shows how Iar the branding and eIIective service delivery can come in moving beyond splashing one's logo on
a billboard. It had Iostered powerIul identities by making their retiling concept into a virus and spending it out into the culture via a
variety oI channels: cultural sponsorship, political controversy, consumer experience and brand extensions.

In a rapidly changing business environment with a high competitors' pressure Tesco have to adopt new expansion strategies or diversiIied
the existing in order to sustain its leading market position in an already established retailing market. The company must constantly adapt
to the Iast changing circumstances. Strategy Iormulation should thereIore be regarded as a process oI continuous learning, which includes
learning about the goals, the eIIect oI possible actions towards these goals and how to implement and execute these actions. The quality
oI a Iormulated strategy and the speed oI its implementation will thereIore directly depend on the quality oI Tesco's cognitive and
behavioural learning processes.

In large organizations as Tesco strategy should be analysed and implemented at various levels within the hierarchy. These diIIerent levels
oI strategy should be related and mutually supporting. Tesco's strategy at a corporate level deIines the businesses in which Tesco will
compete, in a way that Iocuses resources to convert distinctive competence into competitive advantage.

Figure 1

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