Another strategy during the 90s was new business development. They formed an alliance with the Esso group and operated under the Express Store format through their petrol stations while they sold their fuel through Tesco stores. This was an unrelated diversification strategy where they added to their service portfolio. 1.6 Related and unrelated diversification During the 2000s they entered the convenience stores market by acquisition of T& S stores which added value to their existing profile. They extended their core food retailing into different areas of operation. They diversified into areas as diverse as clothing, electronic goods, financial services, and the housing market.
This was done strategically as the food market had matured and price war had reduced the profit margins. 1.7 Hybrid strategy In 2007 Tesco’ s growth in overseas expansion was strong. The food retail market in developed countries had matured and hence Tesco applied the hybrid strategy (Annexure I) which, ‘ seeks simultaneously to achieve differentiation and a price lower than that of competitors’ (Business Strategy, 2002). Tesco gained leadership in all markets it entered – both in market share and market capitalization.
They focused on low prices with high-quality service. This strategy allowed them to identify their core competencies and achieve greater volumes. 1.8.1 Market penetration In the initial stages of the product life cycle, Tesco followed the simple market penetration strategy as it could leverage its own resources and capabilities. It achieved organic growth through its own internal investment in resources. This is the internal method of development. Tesco used this strategy up to the 1960s. This was important in the beginning as retaining the customers was important. 1.8.2 Product DevelopmentTesco focused on product development after the initial market penetration.
The purpose of product development was to utilize the existing infrastructure and resources to leverage economies of scale. Through the use of technology and innovation, they could protect the market share.
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