INTRODUCTION One of the most successful grocery retailers food in the world, the company is operating 2,672 stores,

employing 273,000 people and making profit up to 39 billion. It provides online services through its subsidiary, Tesco.com. It is the UK biggest market where it operates under banners of Superstore, Extra, Metro and Express. The company sells food products, electronic, clothing and other. Tescos own-label products are of good qualities and competitive values. Other services also expanded, such as Tesco Energy, Tesco Mobile, and Tesco Personal Finance (Tesco Annual Report, 2006). 2.1 Porter Three Generic Strategies The Porter Three Generic Strategies has Strategic Target on its vertical axis which can be divided into two different segments: Industry wide multi segment and particular segment. The horizontal axis is Strategic Advantage which is divided into two positions - Uniqueness perceived by Customer and Low-Cost Position (Baroto, et. al., 2012). The description of the Porters Generic Strategies, which consists of: Leadership Strategy, and Differentiation, and Focus, is shown in Figure 1.

Source: B.V.P.M. (2005)

The differentiation Strategy is located in the Industry Wide multisegment (Within the Strategic Target) and The Uniqueness Perceived by Customer (Within the Strategic Advantage). Thus, the Differentiation Strategy is implemented in large industry where products or services are perceived unique by the customer. The Overall Cost Leadership Strategy is located in the Industry Wide multi-segment (Within the Strategic Target) and The Low-Cost Position (In the Strategic Advantage). Thus the Overall Cost Leadership Strategy is implemented in large industry and perceived low-cost provider by the customer. COST LEADERSHIP STRATEGY The cost leadership strategy is an integrated set of action taken to produce goods or services with features that are acceptable to customers at the lowest cost, relative to that of competitors (Ireland, et. Al, 2011). A company that decides to follow a cost leadership strategy has the objective of being able to realise its offer at lowest possible cost. The competitive advantage of cost leadership is achieved by performing important value chain activities at lower cost than competitors (Porter,1985). Cost-leadership strategy strives to supply a standard, no-frills, highvolume product at the most competitive price to customers (Li & Li, 2008). Cost leadership strategies are preferred in developing countries such as Indonesia, Malaysia, India and China where they have lower labour cost, and hence, a lower production cost (Aulakh et al. 2000). Cost Leadership tends to be more competitors oriented rather than customer oriented (Frambach, et. al, 2003). Cost leadership requires a strong focus on the supply side as opposed to the demand side of the

market, as thisrequires a high level of competitor orientation (Day & Wendley, 1988). Therefore, firms pursuing a cost leadership strategy must continuously benchmark themselves against other competing firms in order to assess their relative cost (and therefore profitability) position in market place.

DIFFERENTIATION STRATEGY A differentiation strategy is to create value to customers by providing quality, innovative products, brand image, and good services. This will differentiate the product which means the product will be more competitive than others (Hutchinson et al. 2007; Frambach et al. 2003; Porter, 1980). Differentiation in retail business can be seen as a strategy with the objective of adapting certain store attributes more closely to the specific needs of chosen customers segments (Morshett, et al., 2006). In retail business, two main arguments against Porters framework have emerged : Strategies that combine several competitive advantages are not considered by Porter, and the reduction of possible competitive advantages to two basic types is simplistic, and especially differentiation advantages can be reached in many different ways.

THE COMBINATION (HYBRID) STRATEGY The Porter Generic Competitive Strategies (1980, 1985) of overall costleadership, differentiation and focus on strategic management research

cannot be overemphasized. Low cost and differentiation strategy may be compatible approaches in dealing with competitive forces (Allen & Helms, 2006; Miller, 1992; Spanos, et al., 2004), and postulated the pursuit of what has been termed hybrid , mixed , integrated , or combination strategies (Kim et al., 2004; Spanos et al., 2004). These hybrid strategies are the ones which combine low cost and differentiation elements (Gopalakrishna & Subramanian, 2001; Proff, 2000). A combination competitive strategy involving high level of emphasis on both cost-leadership and differentiation strategies simultaneously should be distinguished from stuck-in-the-middle strategy where a firm fails to successfully pursue both cost-leadership and differentiation strategies (Acquaah & Ardekani, 2006). A combination strategy has been shown to be viable and profitable (Kim et al., 2004; Miller & Dess, 1993; Wright et al., 1991). Since cost-based and differentiation-based advantages are difficult to sustain, firms that pursue a combination strategy may achieve higher performance than those firms that pursue a singular strategy. A hybrid strategy seeks simultaneously to achieve differentiation and low price relative to competitors. This success strategy depends on the ability to deliver enhanced benefits to the customers with low price while achieving sufficient margins for reinvestment to maintain and develop bases of differentiation. This is, in fact, the strategy Tesco is trying to follow (Explorer, 2010).