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Tesco PLC was formed in the year 1919 and its base location is Welwyn Garden City,
UK. Being its home location as UK, Tesco later expanded its branches across various
locations in the world from the early periods of 1990s and also entered areas such as
clothing materials, toys, software, petrol, book retailing, electronics, financial
services, furniture, internet service providers and telecom sectors (Wood Fuel
Resource, 2017). There are around 640000 workers working in Tesco and there are
around 6809 stores for Tesco all around the world and also involved in online
shopping (Tesco, 2018).

The major objective of Tesco is to provide good services and products to the
customers of Britain with daily improvement and good shopping experience. The
mission and the goal of the firm is very simple, that is to serve the customers in an
excellent manner and make them enjoy a better life and good shopping experience
making their life easier.

The basic core values of Tesco are given below which will help in having a better
understanding of the firm. The values and missions are given below.
 Understanding the nature and the needs of the people who are customers,
communities and other colleagues and making them shop better with good
shopping experience is the prime motto of Tesco. This can be achieved by
understanding and hearing the needs and the requirements of the people and
explaining them about the services of Tesco starting from Clubcard to other

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 media. They also involved in innovation for the satisfaction and the comfort of the
customers.
 Treating the people in the way they wish to be treated to satisfy them. Looking
after the employees of the firm is the basic way for the success of any firm and
this was well understood by Tesco and they are doing it with excellence.
 Even a small good service to the customers will be a big change maker in the
future. This was the value followed by Tesco for serving their customers, share
holders and workers.

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Challenges which were faced by Tesco are given below:

Network Outage:
In the year 2017, there were many issues for Tesco including issues in network
outage and software issues. While other firms are dealing with the issues and
working out on how to get out of it, Tesco too suffered a lot by facing the
consequences. This made an impact on the business with the retailers resulting in
revenue loss, poor brand name and loss in productivity.

Financial statement Fraud:

Normally, the financial statement fraud is done to give good results. This has many
major impacts than what is expected by the managers (Zack, 2012). As mentioned by
Rezaee and Riley in the year 2010, there were many fatal effects of the financial
statement fraud. They are listed below.
 it makes the quality and the uniqueness of the process of financial reporting go
down drastically.
 it targets the integral nature and the goals of the accounting process in a negative
manner.
 it reduces the confidence level of the capital firms and make the customers lose
reliability in the firm and the financial details given by the firms.

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 the capital market is made with lesser efficiency than expected.
 it affects the development of the nation.
 it resulted in loss of litigation.
 it spoiled the career of the professionals who are involved in the fraudulent
activities.
 it resulted in the bankruptcy of the firms who are involved in fraudulent activities.
 and it motivated good level of intervention and interrogation by the regulating
firms
 It resulted in affecting the performance and the operations of the involved firms.

Lack of Investor’s Confidence:

While dealing with investments and confidence are two edges of sword which can
affect any side (Telegraph, 2016). If there is any issue in the investor’s confidence,
this will result in the doubtful nature of the customers and firm. Many corporate
firms like Tesco are largely relying on the investors to give funds to the firm by
purchasing their stocks.

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Identified risks were justified as follows:

Network Outage:
Tesco is one of the largest supermarkets functioning in UK. Hence, being a big
supermarket, the IT infrastructure of the firm being perfect is a vital necessity to
provide comfortable online shopping to the customers. Tesco is a financial firm;
hence its credibility is very important for the success and popularity of the firm. If
the IT services are not good, the firm might lose the credibility which might pave the
way for the failure and poor performance of the firm.
New technologies have to be used and new infrastructures for IT must be formulated
for the success of the firm and comfort of the customers. In highly competitive
markets like mobile industry and technological firms, outage is not a good sign for
the firm and is definitely a drawback for the firm. The connectivity of the firm has to
be improved a lot. If not, it might lead to the failure of the firm (Zetta, 2017).

Financial statement Fraud:

Frauds definitely have a negative impact on the operations of the firm, however big
or small the firm might be. It is very clear that Tesco had paid around $235million to
set right the interrogations done by SFO and FCA in the year 2014 when a scandal
happened. Hence, Dave Lewis, the CEO of Tesco, asked pardon to the affected
people. He mentioned that the scandal has created negativity to the firm, but the

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firm is out of it now. The brand name of Tesco was well affected due to scandal (The
Guardian, 2017a).
Whatever the fraud might be, it definitely affects the firm and the associated people.
This damage is severe when the workers are well communicated and integrated in
the firm like Tesco. Though the workers resign, they carry a bad reputation to all the
places they approach for work, though they have no relation with the fraud.
.
Lack of Investor’s Confidence:
Normally, the shareholders lose their interest in the firm which is involved in firms
and switch off to other firms. The confidence of the shareholders plays a critical role
in the success of the firm. If the stocks are valuable for the firm, then the prices will
fluctuate if they shift. This is because of the fact that investment is very vital for any
firm (Reuters, 2009).

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Constraints:

Constraint #1: An outage in IT infrastructure is more dangerous than causing an

inconvenience to the firm (Reuvid, 2005). When a disaster happens, it creates a
chain reaction in a negative manner affecting the customers, workers and the
shareholders (Zetta, 2017). The success of the firm ends soon if the outage in IT
infrastructure is not cleared at the proper time and when new technological
innovations are not made in time (Vertel, 2016).
Business of Tesco went down as their networks went down. When something which
is unexpected happens like this, the firm directs the resources to the area where
high attention is needed. Most of the manpower and the revenue go to the affected
area until the crisis is resolved. If it takes more time to resolve the crisis, the repair
will be long lasting and the effects will be more and take long time to heal.

Constraint #2: All the stakeholders, customers, workers needs are integral parts of
Tesco. The supermarket industry of UK saw a huge change because of two huge
stakeholders after taking over the firm. The Booker Group, a wholesale firm made a
costly takeover.
The important question is , ‘How the lack in the confidence of the stakeholder is
having a negative impact on the firm?’ the reply is, when the shareholders lose their
confidence, they doubt the objective of the firm and switch on to other firm though
it might be a smaller one. This is the point for the failure of any firm, how big the

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firm may be.

Drivers:
Tesco has come out of the failure and is going on its successful path. But, more is
expected from them. While seeing Tesco context, there are six main drivers of
strategies for the firm and given below.
 A differentiated brand: the motto of Tesco is to give the customers a good
shopping experience which will stand in the minds of the customers.
 Reduce operating costs by £1.5bn: Tesco has taken a complete review of the
firm, to see any successful opportunities and low production costs.
 Generate £9bn cash from operations: a target for three years has been set by
Tesco to get around $9 billion retail cash from the activities of the firm.
 Maximise the mix to achieve a 3.5% – 4.0% Group margin: Hard work is being
done by Tesco to achieve sustainability and profit in the products, services and
the total business.
 Maximise value from property: the strategy of Tesco regarding property is to
increase the value of its estates and make over space to give good service to the
customers.
 Innovation: The strategy of Tesco for innovation is based on talent and
experience and is on the three main abilities namely the product, channel and the
customers.

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Strengths
Wide and Diversified Customer Base: Tesco has a huge and wide customer base
containing contractors, drillers, oil firms, gas firms and equipment brokers.
Strong Product Portfolio: The firm is having a portfolio for products which is very
strong in nature mainly in the top drive segment which sells the products and gives
services around the world.
Strong brand image: Tesco is a strong international brand having a good ranking in
the global ratings (RankingThe Brands, 2018).
Solid global operations: There are around 460000 workers and 6809 stores for Tesco
in the whole world other than online selling (Tescopoly, 2018).

Weaknesses
IT issues: Tesco highly depends on older infrastructure and Data Centres. The firm
has to work and invest a lot in new and latest technologies to be more successful.
Very Diversified business model: Tesco is a very big firm selling innumerable and
wide range of products. Also, Tesco must gain some expertise in certain markets in
which they wish to enter. Some examples are smart phones and tablets.

Opportunities
Further overseas expansion: There are huge and flourishing opportunities for Tesco

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in retail industry in countries like Australia.
Strategic acquisitions: To be successful in the market other than having latest
technology saving time and cost, the firm must try to acquire some firms to be more
successful. Tesco must concentrate on acquisitions.
Continue investing in Research and Development: Innovation is highly needed for
sustaining success in the competitive industry in which Tesco is operating.

Threats
High intensity of rivalry: Tesco is holding the first position in the grocery and retail
market of UK and having constant competition from Sainsbury's, Asda, Morrison's,
Lidl and Aldi.
Currency fluctuations: the fall in the value of pound in UK is forcing the firm to
increase the price of its products.
Innovation: Innovation by other firms such as Asda, Waitrose, Morrison and
Sainsbury is a huge threat for Tesco. Tesco must concentrate in more innovation.

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Political factors –Tesco is affected by a lot by the political environment. This created
an impact in the risk factor and lead to loss in the business. Take for example,
changes in the policies of the government have to be followed by the firms and this
might affect the firms. The political environment, in which Tesco is functioning,
affected the firm and introduced some risk factors which challenged the success of
the firm. For example, VAT alterations made in the recent time by the government of
UK affected the bill of taxation which created a huge impact on Tesco. So, plans must
be made by the firm based on the changes in the policies of the government.

Economic factors –Economic factors are the factors which contain all the changes in
the economy which might help or affect the firm from attaining its objectives. The
main economic factors which hindered Tesco are the factors of employment, rates of
interest and inflation levels. These altered the economic indicators of the market in
which Tesco is functioning. Take for example, the economy of UK is seen to grow
around 1.4% in the year 2018 (FT, 2018) which favoured the development of Tesco.

Social factors –this society is constantly changing. Tastes and the needs of the
customers are changing constantly along with fashion. Many customers in UK are
now opting for one stop shopping because of the changes in the culture, social
behavior etc. due to this, Tesco has started increasing the range on non-food
products. In the recent years, UK has seen a huge change in the food market and
firms providing online shopping and discounts (USDA FAS, 2017).

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Technological factors - Technological changes can bring positive vibes for Tesco.
Modern technology can help in giving new products, improved service and new
markets are formed. Also, because of latest technologies, production cost is
lowered. Hence, new ideas can be put into practice. Because of this, online shopping
is improved and free delivery to the houses is also possible. But, physical stores can
opt for this option since it might be costly for them.

Environmental factors - Environmental factors such as climate, resources etc have

an impact on the operations of a firm. Some factors which affect business are
change in climate, weather, non-renewable goods and their availability, pollution etc.
Tesco has made a resolution to reduce the carbon footprint to around 50% by the
period of 2020.

Legal factors –Legal factors like government policies have an impact on the firms
which are operating. Take for instance, National Minimum Wage Act 1998 affects the
operations of the firm. The main problems of Tesco are the rules of government
which are dealing with monopolies and heavy competition in the industry.

Threats to Tesco’s Business Model –Rising raw material cost is a big threat which
affects the marginal profit of the firm.

Opportunities to Tesco’s Business Model –Tesco must concentrate on the sales of

items which are non- food based (Dudovskiy 2016). Some examples are health and
beauty products.

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With respect to Tesco, nine building blocks of Business model canvas are explained
as follows:
Key Partners
This building block delineates the network of partners and suppliers, which enable
the functioning of business model (Cowan, 2018).
 Investors - An investor is the one who allocates funds with the anticipation of
financial returns in future. Investors in Tesco are private shareholders and debt
investors.
 Subsidiaries - Tesco PLC functions as a grocery retailer, altogether with the
company’s subsidiaries. Some of Tesco’s subsidiaries are Tesco Bank, Tesco
Mobile, and Dunnhumby.
 Manufacturers and distributors – Tesco has committed to source responsibly from
farmers, suppliers and growers with the objective of reducing waste.
 Logistics companies - Logistics handles storing, stock control, facilities planning,
staff scheduling and response of products. In July 2015, Tesco renewed contract
with XPO Logistics for the next five years.
 Suppliers - Tesco committed to collaborate with its suppliers to maintain food
prices low and to avoid food waste.
 Strategic partners - Tesco assumed strategic alliances with key regional players,
which have facilitated the company expanding across the world and maximizing
revenues. Some of the strategic partners are Dunnhumby, Google and Apple.

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 Clubcard partners – Tesco consistently review the partners of its Clubcard Reward
to make sure they provide the best probable range of comforts to its clients.
Key Activities
This building block delineates the most crucial things an organization must perform
to better its business model.
 Procurement - Tesco has been utilising Eqos, an international procurement
platform, to handle its global sourcing activities for more than a decade.
 Pricing - Pricing strategy of Tesco can be explicated as cost leadership.
 Marketing - Marketing strategy of Tesco utilizes an expansive utilisation of media
and print advertising methodologically as an experimented channel to convey
marketing message to potential and current clients.
 Customer relationship – As per Tesco sources, CRM initiative of the organization
was not confined to the loyalty card programme; this was more of an organization
wide philosophy.
 Diversification – The Company has diversified regionally into areas including
internet services and telecoms, financial services, software, petrol, toys, furniture,
electronics, clothing, and the retailing of books.
 Supply chain management - Tesco has been assuming lean management solutions
into the company’s supply chain fruitfully. In general, lean management depends
on 3 basic ideas: continuous improvement, reduce waste, and render value from
the perspective of customers.
Key Resources
This building block delineates the most crucial things an organization must perform
to better its business model.
With more than 460,000 staffs, the company serves well its clients through roughly
6,809 physical stores across the globe, as well as online (Tesco, 2018).
 E-Business Platform - Tesco provides information about goods via electronic
brochures or buying guides.
 Warehousing and logistics - In July 2015, Tesco renewed contract with XPO
Logistics for the next five years.
 Own distribution and supply chain network – The Company has the chance to
supply international food brands by means of their efficacious capability as the
international supply organization.
 Own mobile payment wallet - In September 2017, Tesco launched a new mobile
payments app Pay+, which intends to transform shopping trips more comfortable
for shoppers seeking to pay through their phones.
Value Propositions
The Value Proposition delineates the bundle of services and products, which
generate value for a particular Customer Segment base. This building block is the key
reason why buyers switch from one organization over another.

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 One stop shop - In Tesco, customers can purchase all they want in "one stop".
 Good prices - Tesco committed to collaborate with its suppliers to maintain food
prices low and to avoid food waste.
 Wide presence - Tesco has around 6,809 stores in more than 14 countries around
the world
 24/7 shopping experience - Tesco’s e-commerce platform enables direct
associations between the customers and suppliers.
 Convenient on-line shopping - Tesco’s 24/7 online support is very effective in
accomplishing demands of customers by responding and resolving their queries
quickly.
 Business diversification - The Company has diversified regionally into areas
including internet services and telecoms, financial services, software, petrol, toys,
furniture, electronics, clothing, and the retailing of books.
Customer Relationships
This building block delineates the kinds of relationships an entity forms with
particular Customer Segments base. An entity should explain the kind of relationship
it expects to form with their target customers.
Since 1995, Clubcard has been assisting Tesco to monitor shoppers’ information
from individual details to purchasing behaviour patterns (Tesco, 2018). It assists
Tesco to ascertain clients’ loyalty and to lure new buyers towards the company. The
data accumulated via these cards established the basis for devising course of actions
that rendered clients customized services in a cost-effective manner.
Customer Segments
This building block delineates the various groups of organizations or people an entity
intends to contact and serve.
Tesco’s vision is to deliver the high quality products at affordable prices to the
shoppers. Tesco mainly target people who fall under low and middle level income
category. However, it still targets people, who are more curious in the quality, for
example, students, housewives, and older people.
Channels
This building block delineates how an entity reaches and communicates with its
customers to render a Value Proposition.
 Tesco Extra– These stores are mainly out-of-town and larger hypermarkets that
merchandise almost all product ranges of Tesco.
 Tesco Superstores – These stores are standard large in size, and stocks fewer range
of non-food products than Tesco Extra.
 Tesco Express - These stores are situated in villages and small towns, in residential
areas, and in busy city centre districts.
 Tesco Metro - These stores are sized between Tesco Express shops and Tesco
superstores.

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 One Stop - It means some of the smallest size shops (littler than a Tesco Express).
 Tesco.com Only Stores – These stores are devoted for fulfilling online grocery
orders.
 Home shopping - In UK, Tesco operates home shopping services via its website
portal.
 Tesco Clubcard - Tesco launched the Tesco Clubcard in the year 1995.
 Petrol stations - Tesco started its very first petrol station in the year 1974.
Cost Structure
This building block delineates all costs incurred to operate a business model.
 Advertising - Marketing strategy of Tesco utilizes an expansive utilisation of media
and print advertising methodologically as an experimented channel to convey
marketing message to potential and current clients. For instance, Tesco spent £78
million on advertising in 2015.
 Cost of goods – Tesco has the capability to keep prices low in a way such that it
cannot be beaten by other firms.
 Real estate - Tesco is a notable retailer who leverages on the developing demand
for commercial real estate market in UK.
 Employees – As a cost-cutting measure, Tesco planned to lay off 1,700 employees
in new, earlier this year.
 Acquisitions - Tesco acquired key regional players, which have facilitated the
company expanding across the world and maximizing revenues
 Global operations - The economies of scale helps Tesco to minimize the cost
structure and provide low prices to shoppers.
 Taxes – Throughout FY2016, Tesco paid a tax of £1.6 billion. Besides, they
gathered £2.8 billion in taxes created from its operations in 2017.
Revenue Streams
This building block denotes the cash an entity makes from each and every customer
segment (Cowan, 2018).
 Retail Sales - In 2017, Tesco’s revenue was £37.7 billion and this is a 1.4% increase
(£37.2 billion) from the revenue generated in 2016 (Tesco’s Annual report 2017).
The company generates the majority portion of profits from its grocery retail
operations.
 Online Sale - In January 2018, Chief Executive of Retail Economics Richard Lim
commented that sales of Tesco have been uplifted by the ceaseless growth in e-
shopping.
 Commissions on affiliate’s sales - Tesco generates significant revenue from the
Commissions on affiliate’s sales

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This segment intends to render recommendations for the identified issues, which
have been chosen to be investigated as crucial to Tesco’s business success, as
follows:
Network Outage:
IT networks has become such an intrinsic and important characteristic of business
landscape today. In the technology era, technology is not anymore the necessary
component in only tech companies and retailers needed it more than ever (IRIS,
2015).
Tesco depends on 'conventional' Data Centre technologies and infrastructure
network layers and (Stackoverflow, 2017). Repeated incidents at Tesco in 2017 are
the reminders of threats associated with the company’s 'conventional' technologies.
Tesco should embrace the more efficient cutting-edge cloud services to render
uninterrupted services to e-shopping clients. Notable leading cloud service providers
are Amazon, Microsoft, IBM, Salesforce, SAP etc (Forbes, 2017).
Tesco should partner with any of the service provides who can guarantee an
uninterrupted comprehensive service scope for online website’s better performance.
The organization should think about putting resources into the most recent web
technologies.

Investors' Confidence:
It can take a very long time to develop trust and will take only just seconds to wreck

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it. Tesco must brace corporate administration to reestablish certainty from its
investors and shareholders.
Due diligence is an extensive examination of a business attempted by a prospective
purchaser, particularly to set up its liabilities and assets and assess its business
potential (Howson, 2017). Tesco ought to perform appropriate due perseverance
before completing any mergers and acquisitions.

Financial Statement Fraud:

Tesco must educate its employees and management people on the indicators of
fraud. According to the Association of Certified Fraud Examiners, fiscal statement
manipulation involves the deliberate issuing of manipulative information in financial
statements and filings.
To help forestall fraudulent activities, Tesco must implement internal structure, or
controls, and comprehend what situations to contemplate.
People indulge fraudulent activities under financial or situational pressure. Hence,
there are chances to indulge fraudulent activities and when a person easily justifies
his fraudulent actions.

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