Business Strategy for Tesco: Analysis of Macro Environment, VRIO Model, and Porter's Five Forces

This report analyzes the business strategy of Tesco, including the effect of macro environment, VRIO model, and Porter's Five Forces. It examines the political, economic, social, technological, legal, and environmental factors affecting Tesco's strategies. It also evaluates Tesco's competitive edge and market position based on the VRIO model and Porter's Five Forces.

Business strategy

Table of Contents
INTRODUCTION...............................................................................................................................3
TASK 1.................................................................................................................................................3
P1 Application of proper framework to analyse the effect of macro environment on strategies of
organisation.......................................................................................................................................3
TASK 2....................................................................................................................................................6
VRIO of Tesco....................................................................................................................................6
TASK 3....................................................................................................................................................7
You will produce appropriate strategies to improve competitive edge and market position based on
your evaluation of the competitive market using the Porter’s Five Forces model..............................7
TASK 4..................................................................................................................................................11
Strategic planning............................................................................................................................11
CONCLUSION..................................................................................................................................12
REFERENCES....................................................................................................................................13

INTRODUCTION
Business strategies refers to the strategic management which in walls formulation as a
implementation of various goes and initiatives taken by any organisations top management in
order to make sure that all the goals and objectives of an organisation are fulfilled in the
given time period. This involves objective is, developing of policies plants as well as
procedures including various frameworks which will help organisation in decision making
process. Tesco is the biggest supermarket group in United Kingdom with a number of
competitors such as Sainsbury, Morrisons and so on. They started their business as a
vegetable stall in 1924 in London. Tesco is mostly engaged in selling of clothing, groceries,
retail banking, electronics and a number of household products. The following report consist
of the business strategy used by Tesco in order to run their business effectively. It includes
analysis of internal as well as external environment of business with the help of a number of
strategies and frameworks. Apart from this in order to devise the competitor strategy used by
Tesco to stand in competition at the market place is also mentioned in this report. Various
theories and concepts as well as models are also used which will help to produce a proper
strategic management plan for Tesco including its tangible and tactical strategies for the
objectives it needs to achieve.
TASK 1
P1 Application of proper framework to analyse the effect of macro environment on strategies
of organisation
Macro environment usually includes all the conditions which are existing in the economy as a
whole. This includes wider extent rather than just the region or a sector. There are various
concepts included in macro environment such as trends, domestic product, inflation,
employment, governmental interference is, so on (Sulich and Grudziński, 2019). It is
important for businesses to study their macro environment correctly in order to formulate a
proper strategy which will help them in attaining all the opportunity present in external
environment. PESTLE analysis is a framework through which macro environment of Tesco
can be analysed.
PESTLE ANALYSIS
Pestle analysis is it tool which is used by business in order to analyse the macro
environment and the factors include it in macro environment which have an impact on
performance of any organisation. It is necessary for businesses to analyse and use this tool in

order to formulate a proper strategy. This stands for political, economic, social, technological,
legal and environmental factors present in macro environment in a business which have a
great impact on functioning of a business. Pestle analysis of Tesco and effects of Brexit in
various external factors is mentioned below:
Political factor: Political factors are regarded to all those factors which are affecting
the business due to the governmental implications. Briggs it has brought a number of changes
for supermarkets in United Kingdom including Tesco. The prices of food have arrived
steadily. Also, the devaluation in pounds sterling have affected supermarket growth due to
which the food which is imported by these retailers such as Tesco are more costly now. Tesco
is now forced to buy the imported food products at a higher prices. Also the European Union
suppliers specially the ones who provided core grocery items to Tesco are now increasing
their prices due to Brexit. This implication of Brexit have heavily affected Tesco as the profit
margin of company is decreasing due to increase in various products imported by company.

Economic factor: Economic factors refers to all the factors which are taking place in an
economy which usually affects the profit of a company directly. This includes foreign
exchange, interest, gross domestic product, income level, and so on. Do you to implication of
Brexit the spending level of consumer have declined and also inflation have raised do you to
slow wage growth of various sectors in economy. This discretionary spending of customers in
various products have hit companies including Tesco. Tesco is no forced to deal at lower
prices. Due to these changes taking place in the economy company have faced a negative
effect of Brexit (Panda, 2019). There have been price war in economy due to the merger of
Sainsburys and Tesco. It is another reason why Tesco needs to lower its profit margin and
stand out for price war in economy with the supermarkets.
Technological factor: Technological factors are all the factors related to innovations
in an organisation. As there are a number of advancements made in technology in
environment so the business requires to keep up with it in order to satisfy their customers.
When taking Tesco into consideration the automobile and transport companies have
effectively helps the company in order to increase its business. Tesco is now using automated
home delivery which have eliminated a number of human resources for better of the company
and the consumers. Along with this self-checkout and various billing benefits provided to the
customers of Tesco have improved the revenues of company. A number of supermarkets are
now included in a war of fastest delivery. In order to continue this Tesco uses technology and
make sure that its customer is provided with the products as soon as possible. In this way
Tesco is taking benefit from the technological factors to improve its revenues.
Social factor: Social factors refers to the believes and values of society. The changing
customer trends and preferences of customers are also included in social factor. The lifestyle,
fashion, labour composition and various demographic trends can prove to be great for even a
porch unity for various businesses. It is challenge for Tesco to understand the changing
lifestyle of people in United Kingdom in order to take advantage of social factor from its
macro environment. The changing habit of shopping for consumers have led to bring a
number of changes for Tesco. It is now convenient for customers to buy food online. In order
to do so Tesco have also developed their own app which consist of various features and
fastest delivery for customers. In this way Tesco is taking advantage of the changing
preferences and buying habit of customer. Another change in customers can be seen that the
rise of plus size fashion in United Kingdom is at height. It has been seen that a number of
people in United Kingdom are been classified as obese or fat.. There is a major graph for
Tesco to serve clothes for these people and cater the service for oversized apparels. Doing so

will help Tesco to bring in the maximum customers and also fulfil the need of society by
critically analysing the demographic of the macro environment.
Legal factor: Legal factors are regarding all the rules and policies which are implied
by government and required to be followed by every company. Any company failing to
follow these legislations may face lawsuits against them. Some of the new laws included in
United Kingdom are sugar tax which is levied on various products or sugary drinks in order
to decrease the use of sugar in such drinks. Also, various laws are developed in order to ban
the use of fat, salt and sugar in products for children below the age of 16. All these laws are
to be followed by Tesco in order to avoid any lawsuits against them.
Environmental factor: It is necessary for every organisation to include rising ethical
and environmental consciousness in their consumers. In order to do so Tesco is favouring
paper packaging and also using a lot of recycled material. They are developing a zero-waste
supermarket as the food waste is increasing which is leading to land pollution in the
environment. Doing this Tesco is fulfilling its environmental responsibility and taking
advantage from the environmental factor as it will increase goodwill and brand image of the
company
TASK 2
VRIO of Tesco
VRIO model is used by various companies for analysing the strength and weakness while
performing the business activities. It is important for the companies to have talented
employees who can achieve the organisational goals in less time frame.
Valuable - these are the type of resources required by Tesco for sustaining within market for
longer period. In context of Tesco, financial resources of the company are useful for
managing the the achievement of strategic plans of company. Tesco is a supermarket retailer
and in this there is requirement of local food market providing opportunities for the
customers.as per the VRIO analysis, it is concluded that employees and staff who are trained
are very essential for the company in order to have good management within the company.
Rare - these are defined as the resources which are rarely found within VRIO analysis of
company. In context of Tesco, financial resources are there within the company and it is the
reason for not expanding in unexplored foreign markets. Local food product are also rare

among the Tesco (SE, 2019). Talented and skilled employees is also a resource with this
company. The distribution network channel used in this company is also rare.
Imitable – these are defined as the resources which can be easily by another firm by adopting
the strategies followed by the company. Financial resources of Tesco cannot be imitable.
Moreover, trained staff of Tesco is not imitable by any other company.
Organised - it is essential for the companies to manage the smooth running of business
operations. In context of Tesco, it is important that different resources like financial
resources, skilled employees and local food product as well as distribution channel of the
company e must be organised in proper manner. It is seen that they are not be affected by
different aspects of of other companies.
Resources Valuable Rare Imitable Organized results
Financial
resources
Yes Yes Yes No Unused
competitive
advantage
Local food
market
Yes No Competitive
equality
Trained staff Yes Yes No Temporary
competitive
advantage
Distribution
network
Yes Yes Yes Yes Long term
competitive
advantage
TASK 3
You will produce appropriate strategies to improve competitive edge and market position
based on your evaluation of the competitive market using the Porter’s Five Forces model.
It is important for every organisation to clearly examine and identify the different
competition within the industry where it is reading or going to launch his business. This will
directly help the organisation in identification of different factors and managing its
profitability according to the level of competition within the market for this organisation can

you spot the five forces model for clearly examining the different strategies related to market
where it is going to trade or trading currently. In context of Tesco, it operating at global level
it is important for the organisation to properly examine the competition within the
environment where it can eliminate the wastage of resources as well as increase its
profitability by the use of various resources used in the environment
Porter's five force model: it is that analytical tool which is used by different organisations
who are working with in a competitive environment. It includes 5 industrial forces which are
helpful to the organisation in determining the intensity of the competition within the industry
and the profitability level. This Framework was created by importer in 1979 for identify
different competitive forces within the industry.18245 major factors which are threat of entry
industrial rivalry bargaining power of fire threat of substitutes and bargaining power of
suppliers (Kulkarni, Verma and Mukundan, 2019). These all are the five pillar of porter's five
force model which help in identification of the different organisation. Tesco can also use this
factor to determine competition within the environment where it is going to launch its
business is currently operating. These all factors in relation to Tesco are discussed below:
Threat of new entrants: It includes those forces which determine how easy it is for
an organisation within the particular industry to launch their business. if industry is profitable
for the organisation then there is few barriers to enter but if it is not so profitable as well as it
require large number of investment then it became low level of new entry within the
particular industry. Tesco is dealing in retail industry where it has its operation in global level
threat of new entry for the level of test score is low because it requires a huge investment as
well as market research for a new entrant to start their business. Tesco is operating at high
level within retail industry where it has more than 7000 outlets in UK and more than 8000
outlets outside the UK. It make it difficult for a new entrant to compete with organisation like
Tesco.so this factor is favourable to the test score as it can obtain new strategy because there
is high level of customers who are loyal to the organisation there is no fixed government
regulation within the industry of retail and the existing companies are too little to compete
with Tesco. It act as competitive advantages for Tesco where it can use a high profit margin
within the market because company provide good quality of products as well as it have loyal
customers within the market.
Bargaining power of suppliers: according to this factor in porter's five forces model
the bargaining power of suppliers is a matter for concern for every organisation. This is
because there are various organisations have to buy different products and services from
different suppliers. And each supplier provide a different quality of product to the

organisation which cell by the organisation within the in context of Tesco is dealing in retail
industry where there a large number of suppliers in that in context of Tesco is dealing in retail
industry where there are large number of suppliers in that industry of different products
because of easy availability of substitute and large scale demand because of FMCG products.
This provide competitive edge to Tesco as the bargaining power of suppliers is low because
of high availability of the supplied within the market where the Tesco trading. it also provide
an advantage to the organisation as it can now begin from its supplier on the raw materials as
well as it can also use credit facility because of large number of suppliers within the market
where the organisation is trading
Bargaining power buyer: destructor is associated with the bargaining power of the
buyers within the market where the organisation is trading. In context of Tesco it is trading in
retail industry of the UK as well as some global countries. Tesco is providing a good quality
service to its product which also help organisation in maintaining a loyal customer to the
organisation. But there is large amount of customers who can give up on the company
product because of cheap prices offered by different competitive in the market. This this
factor activation thread for the organisation as there are large number of sellers within the
market where Tesco is trading and customer can easily shift to this because of cheap products
and services offered by the competitors so bargaining power of consumer is high in context
of Tesco and its impact negatively on the performance of the organisation.
Threat of substitute: Tesco is operating in highly competitive market with their
number of substitute of the firm's products as there are large number of competitors within
the market who sell same product with in same quantity and quality which is directly related
to organisation. But Tesco always use the benefit of large scale production which help
organisation in maintaining the cheaper prices within the market and attract large number of
customer towards its product which also eliminate the threat of substitute within the market
so this factor act as a low key factor for Tesco because of its different operations.
Rivalry with the market: Tesco is operating at global level where there are various
competitors who are come across with the organisation and have a proper competitive rivalry
with the firm. Sainsbury and as TESCO are the main competitors and a perfect competitive
rivalry of Tesco. These both of the company operating at high level where they provide equal
services to the organisation and have same customer loyalty which makes it at moderate
factor to Tesco
It can be concluded from the above porter's five forces analysis that there are various
factors which can impact on the performance of the organisation in and specific market but

these can be clearly identified and analysed. Tesco is operating at global level and there are
some factors like existing rivalry and bargaining power of wire which can affect negatively
on the organisation and they must be kept in focus by organisation.
Ans-off's growth vector matrix:-
It is defined as the strategic management tool used by different companies to manage
the business activities and tasks. This is very important for the companies to manage the
functioning effectively for developing plans and strategies. Tesco is having proper planning
and strategies are developed within this organisation for achieving orgasnisational goals. The
four strategies of Ansoff in reference to Tesco are mentioned below -
Market Penetration:- It is defined as the planning and strategy used for managing the
organisational goals properly and managing the attainment of goals. It is very important for
the company to provide quality products at affordable price. This helps in attracting a lot of
customers. When any product offered by TESCO becomes popular among customers, it can
be innovated and provided at higher price in existing marketplace.
Market Development: - According to this strategy, there is selling of existing
products in a new market region or area. Tesco is benefited by enhancing profits and sales by
managing the work in effective manner. This company is working within the market and aim
of this is to become successful in global market.

Product development: - Another strategy of this model is product development
strategy. According to this strategy, company is launching a new product in market. The main
aim of this approach is to work upon increasing customer base of new product launched in
market (Hamzane and Belangour, 2019). With the passage of time, TESCO is seen to expand
it's functions as well as operations in a successful manner. There is a lot of development
within retail sector and thus there is lot of opportunities with TESCO to launch a new product
in market.
Diversification: - This strategy is developed for providing the products by
diversification. It is concluded that it is important for Tesco to manage the functions and
activities of business in managing the achievement of goals.
TASK 4
Strategic planning
The porter’s generic model is helpful for evaluating the position of company within the
market. It is important for the companies to manage the efficiency and profitability so that it
can run longer in market. In context of Tesco, it is saying that competitive advantage of this
firm is because of the differentiation and low cost. There are different approaches of strategic
planning within Tesco. Some of these are explained below
Differentiation - this is known as the development of unique strategy which day company is
having for running business operations. Tesco is having unique strategy of managerial
economics of scale and adopting latest technology in the business processes. There are
various ways by which this company is managing the leadership and it is the best retail sector
company across UK.
Cost leadership - this is defined as the management of low cost producer. Tesco is a company
e that provides effective services and products to customers by managing the attributes as
well as factors of different consumers.
Focus – the porter’s strategy define that organisation must know how to manage the business
activities in market for maintaining competitive advantage. It is seen with business
environment of Tesco that there managing competitiveness within the retail sector since
many years. This company is having two factors for focus strategy which are explained
below –
Strategic management plan
This is defined as a business plan developed by the management in order to define strategies
as well as planning for achieving organisational goals and objectives. It is very important for

the company to manage these strategies of the company so that organisational goals can be
achieved in specified time frame. The strategic management plan of Tesco is given below –
Mission statement – Tesco has the mission for becoming one of the best retailer across the
world.
Vision statement - to provide quality and standard products to clients and customers and
increase customer value.
Objectives of the company – Tesco wants to become one of the best retailer across the world
by providing quality and standard products to customers which are according to their needs
and demands. The organisational objective is to enhance the market share and increase profits
of the company.
Extensive marketing - this is defined as the management of marketing in order to who
organised various marketing campaigns for managing the targets of company.
Tactics – Tesco is a company which managers different planning and strategies used for
organising various advertising and promotional activities.
Market research – Tesco has planned to manage the demands of clients and customers by
conducting various market researches. These will help in in knowing more about demands of
customers and managing the work properly.
CONCLUSION
The above report specifically highlights various points at which Tesco needs to change its
strategic plan and develop a new plan in order to cope up with the changes taking place in the
environment. There are a number of challenges, opportunities as well as threats present for
Tesco which I needed to be included in the strategic plan. Along with it is important for
Tesco to make sure that all the external opportunities which are present in macro environment
should be effectively used by Tesco in order to grow their business. There are a number of
competitors like Sainsbury, Morrison’s who are providing cheap products and gaining the
shares of Tesco. Tesco needs to develop a perfect strategic plan which will help the company
in dealing with its competitors and provide it with a competitive edge in the wholesale and
retail market of groceries. There are a number of emerging opportunities which can benefit
Tesco such as focus on healthy food and beverages and also growth in its fashion line. Tesco
also has the revenues and financial resources present which will help it to extend the reach of
its food and drinks retailing which is another beneficial investment for Tesco. In this way

company can easily survive in the dynamically changing environment and increase its
revenues and profitability.
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