Resource Based View Theory

An increasingly influential sector of this research has focused on the resources held by an organization
and how these are managed and used. Thus RBV theory seeks to analyze the relationship between
organizations and innovation by focusing on the resources and capabilities organizations possess and
that leads to differences in firm performance.

It is important to distinguish between the resources and the capabilities of a firm. The resources are the
firm's productive assets whereas capabilities are what a firm can do.

An organizations resources can be considered as two broad categories: tangible and intangible. Tangible
resources are the easiest to identify and evaluate since they are the physical and financial assets of the
organization. Tesco's tangible resources are, for instance, 3700 stores, 440,000 employees, 60 billion
turnover, and 3 billion operating income.

The intangible resources are invisible assets or skills such as a particular technology, accumulated
consumer information, brand name, reputation and corporate culture. Tesco's intangible resources are,
for instance, a wide knowledge of the retailing industry, a wide customer information, a good brand
awareness, a reputation for promoting big brand and service innovations such as 24 hour opening.
According to a report presented by Hall (1992), the three most valuable intangible resources are the
company reputation, the product reputation and the employee know-how. In order to sustain
competitive advantage a firm must have valuable and unique resources, that is, rare, non-imitable and
non-substitutable.

Capabilities represent what a company need to do in order to survive in its industry; they are directly
linked to the critical success factors. They aim to follow a particular strategy and respond to customer
needs by using some resources. For instance, grocery retailers such as Tesco and Sainsbury's have to
present a customer-friendly environment in order to attract a maximum of potential consumers, thus
Tesco requires its staff to be helpful toward the customers. These threshold capabilities help an
organization to survive in its industry.

On the other hand, core competences are the ability to create a chain in an organization's activities by
combining resources and capabilities that will be strong enough to lock out imitators

One of Tesco's key strategic capabilities is its cost efficiency. Tesco's 31 per cent of market share has a
strategic influence on costs through economies of scale and the experience effect. Thanks to a large
volume of sales Tesco has a strong bargaining power, the ability of spreading its overheads as well as
specializing and dividing its labor. Having a larger volume of sales than its competitors, Tesco benefits
from the Experience Curve, that is, labor efficiency improvement, standardization, specialization, a
better use of equipment and a technology-driven learning.

Branding and Reputation

Tesco is a brand and also serves as the core strategic advantage. The product and service development
processes of the company have been significantly re-engineered, to facilitate better management of
product lifecycles and more efficient delivery of wide ranges of products to customers. Product activity
has focused on enhancing core ranges and introducing quality products. Tescos innovative ways of
improving the customer shopping experience, as well as its efforts to branch out into finance and
insurance have also capitalized on strong brand reputation.

The company is also very successful in terms of customer loyalty due to its loyalty cards system and its
general approach to customizing services to the needs of every customer. After considering the fact the
nowadays majority of people have less time for shopping, Tesco employed this on-line systems and now
became the biggest online supermarket.
IT Integration
Today companies act in an increasingly dynamic and complex environment and adapting themselves to
the continuous changes.

Tesco launched its 'Clubcard' in 1995, this functioned more than just a pure marketing offer, it allowed
Tesco to collect a wide information about its customers' interest and to strike to their need using card
data. Sainsbury's refusing at first to adopt this method; Tesco's success could be attributed to this
invention.

Tesco places emphasis on knowledge integration. Knowledge integration plays an important role in
strategic capabilities. According to Grant (2005), knowledge integration is one of the greatest challenges
of any organisation since it aims to organise the essential task of almost all organisational processes.
This is why Tesco has developed an efficient IT integration system. Besides using systems that keep all
the stock and deliveries records and analyse business transactions, Tesco has also employed an extranet
system. This helps Tesco to create proprietary and customised information flows between the company
and its business partners. Furthermore the key information can be easily extended and shared with
business partners. Indeed there are also wireless devices, intelligent scale, electronic shelf labelling, This
technology will enable Tesco to maintain its ability to handle an increase in product and service volume
while controlling costs; it also enables to be innovative and market oriented.

Supplier Management
Tesco, like many other grocery chains companies, sources its goods from overseas manufacturers who
are more competitive on price and volumes. Tesco's relationship with its suppliers has evolved from an
old deal-based procurement to an Integrated Supply Chain Management. The balance of power has
changed; retailers became stronger. The production lines are driven directly by Tesco's EPOS systems
and the suppliers have to carry the stocks. Furthermore, from the supplier side, this is often a unique
relationship. Tesco believed in having close relationship with the local suppliers and gain more
experience in order to develop and succeed in the emerging markets.

Concerning the product range, Tesco has a control over its supplier's New Product Development (NPD),
thanks to its Integrated Supply Chain Management, that helps to direct innovations toward new or
untapped market segments. Furthermore, its wide supplying network enables the firm to be more
flexible to market changes.

Core Competence

Core competencies are activities or processes that critically underpin the companys competitive
advantage. The goal for Tesco management is to focus the attention on competencies that really affect
competitive advantage.

Tesco believed that a competitive advantage rests more on the outcome of learning to improve local
merchandising methods, systems and processes than simply on a cost advantage in the distribution of
standardized goods.

Provide potential access to a wide variety of markets:

Concerning the product value, as stated earlier Tesco focuses on selling large volume of merchandise in
order to benefit of purchasing buying power and experience learning. This will help in a first time to
reduce its unit costs and in a second time to reduce its price without damaging its unit margin.

Indeed Tesco is combining low price with perceived value added products. Tesco managed its resources
and capabilities through a profound understanding of customer need and value with a low cost base
that permits high sales volume with profits for reinvestment to further develop source of differentiation.
Customer benefits: delivers a fundamental customer benefit. In order to identify core competences in a
particular market, the customer needs have to be addressed. The customer-friendly environment focus,
Tesco trained its employees well, teaching them how to behave in front of customers and to be always
helpful. The checkout is a plus for Tesco, something that other grocery retailers do not usually have.

Difficult for competitors to imitate highlights the need for a core competence to be competitively
unique. This indicated the importance of product differentiation. For example, for many years Tesco had
a very strong position within the retailing industry. It had a different approach to the service concept,
providing good corporate reputation and introducing new premium quality products.

Price

Tesco's capability for achieving cost leadership and differentiation simultaneously gives it great rewards.
Indeed the benefits are additive. According to Porter (1985), achieving differentiation and cost
leadership at the same time leads to premium prices combined with lower costs. Hence Tesco generates
great profits, so it will be able to invest more financial resources into other strategic capabilities. This'
ideal' position provides a competitive advantage for Tesco.

Tesco's capability to innovate, to be flexible and to adapt rapidly and continuously to this changing
environment has been one of its key sustainable comparative advantages. The firm's ability to achieve
new form of competitive advantages as 'dynamic capabilities'.

http://www.ivoryresearch.com/samples/economics-essay-example-strategic-management-of-tesco-supermarket-pestle-analysis-porter-5-
forces-analysis-critical-success-factors-swot-analysis-value-chain-analysis-tesco-strategic-options-core-comp/

https://www.ukessays.com/essays/management/identifying-and-analysing-resources-and-capabilities-management-essay.php