Analyzing the Impact of Macro Environment on Company Strategies

This report analyzes the impact of macro environment on the company and its strategies. It includes a critical evaluation of the macro environment to inform and determine strategic decisions. The report also analyzes the internal capabilities and environment of the company by applying appropriate strategies. It further discusses the relevance of Porter's Five Force model in relation to the organization.

Business Strategy
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Contents
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
P1. Analyse the impact of macro environment on the company and its strategies................4
M1. Critical evaluation of macro environment in order to inform and determine strategic
decision...................................................................................................................................7
TASK 2............................................................................................................................................7
P2. Analysis of internal capabilities & environment of company by applying appropriate
strategies.................................................................................................................................7
M2. Critical evaluation of internal environment & capabilities..........................................9
TASK 3..........................................................................................................................................10
P3. Porter Five force model in relevance with organisation................................................10
M3 Analysis of appropriate strategies to improve competitive edge & market position.....11
TASK 4..........................................................................................................................................11
P4. Apply range of theories and concepts to devise and interpret strategic planning..........11
M4. Strategic management plan...........................................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
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INTRODUCTION
Business strategy is a plan which help an entity to attain their long-term vision & mission by
developing a business model to implement particular strategy. In addition to this, it involve a set
of actions as well strategies in order to achieve desired goals in a timely manner. It is important
for higher authorities to consider mission, objectives, values, vision of company in order to
develop an effective business strategy (Ansoff, 2019). In the present report, TESCO is chosen as
a base company. It is one of large supermarket retail chain in UK that offer high quality grocery
and home essentials as well. TESCO was established in year 19191 & it’s headquarter is located
at Shire park, England. It offer products and services in around 12 countries globally.
Mission: “To provides quality goods in market and strengthen its market position
effectively” is the mission statement of TESCO.
Vision: “To attain leading position in industry by offering different and innovative
products in market” is vision of company.
The present report show environmental analysis that take place by using different factors in order
to know about factors that impact on business performance and activities as well. Along with
this, internal capabilities and environment is analysed by applying different frameworks.
Moreover, there is discussion about porter’s five force model that help in identifying level of
competition prevailing at marketplace. At last, a strategic plan is develop that involve all
strategies, mission, objectives and many more of company in an appropriate manner.
TASK 1
P1. Analyse the impact of macro environment on the company and its strategies
It is significant for companies to identify the influence of environmental factors on
activities as well as performance of oragnisation. It is determined that analysis of environment
help an entity to reduce risk level and develop effective strategy that decline threats in a proper
manner. The higher authorities adopt PESTLE analysis to analyse factors that is given below:
PESTLE analysis:
Pestle analysis is a tool that involve external factors and assist company to determine the
imp[act of uncontrollable factors on business performance as well as activities. Most of the time,
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PESTLE analysis is sued when a company offer new product or enter into new market. The
elements involve in this framework is given below in context to respective company:
Political factor: This factors has direct impact on business performance and include
factors such as tax rates, political stability, trade barriers and so on. with reference to TESCO, it
main working is in UK and it is analysed that government of United Kingdom support or assist
companies to enhance their operations globally that has a positive influence on profitability of
TESCO. If the exchange rate is raise by government then it is identify that revenue of TESCO is
declined as it import most of the raw materials from outside the country.
Economical factor: The economic conditions, inflation rate, purchasing power, income
level and so on are factors that impact on the organisational performance in both positive and
negative manner. In context to TESCO, it is determine that labour cost in United Kingdom is
high which impact on the revenue of company in a negative manner (Burgelman, 2020). In
addition to this, people in UK has high buying power due to which and sales profitability of
TESCO increases.
Social factor: Social factors has direct influence on business performance that consist of
factors such as values, beliefs, norms, opinions, perception of people living in society. In context
to TESCO, its managers offer product and service in market by gaining knowledge about
preferences and behaviour of people. It help company to sustain in market for longer time and
strengthen its market position in an effective manner.
Technological factor: Technology is changing rapidly and direct impact on the behaviour
and attitude of customers towards buying of particular goods and services. In relation to TESCO,
it offer products online and give home delivery that has positive impact on sales of company. In
addition to this, using of new technology occur cost to company that impact on overall revenue
of TESCO in a negative manner.
Legal factor: In order to execute activities without any delays and interruptions, it is
essential for company to follow all laws and legislation in an appropriate manner. In context to
TESCO, its higher authorities follow all the policies, which help in creative positive image in
market. Along with this, it is analysed the government of UK has strict laws and if nit followed it
impose high penalties on company, which may impact negatively on overall performance of
TESCO.
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Environmental factor: In order to protect environment and to safeguard people,
companies offer environmental friendly products in market. It help an entity to develop their
positive image and increase their level of sales. In case of TESCO, it make use of carbon
footprints in order to decline pollution. Moreover, it is determine that Van drivers of TESCO
make use of fuel saving routes and collect plastic bags in order to recycle them. This aid
company to gain eyes of more number of people and strengthen market position in an effective
manner.
SWOT analysis
It is consider as a tool which help companies to gain knowledge towards strength and
weakness along with opportunities and threats as well. The SWOT analysis of TESCO is
discussed below:
Strength Weaknesses
 One of the major strength of company
is its market presence that help in
gaining higher profits and revenue as
well. TESCO offer product in more
than 12 countries due to which it is
come under the list of large
supermarkets globally.
 Another strength of company is its
highly talented and skilled employees
that offer quality service to customers
and help in retain them for longer time
with TESCO.
 TESCO is still not able to reach on
developing countries as it is highly
depend on market of United Kingdom.
 It is determine that subsidiaries of
TESCO is bot performing well that has
high influence on its overall
performance in market.
Opportunities Threats
 TESCO has the possibility to enter into
new segment that is offering organic
food. It is determine that demand of
organic food is increase in market and
offer such prof=duct help company to
earn profit in an effective manner.
 One of the biggest threats of TESCO is
its competitors such as Aldi, Walmart
and so on that has negative influence on
its sales and profit margins as well.
 Increase in the price of raw materials
decline the profit margin and revenue
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 TESCO can enter in new market, which
does not occur high cost to company as
it is renowned organisation that does
not require any kind of promotions.
of TESCO negatively.
M1. Critical evaluation of macro environment in order to inform and determine strategic decision
For remaining competitive at marketplace, it is essential for companies to analyse influence
of external factors on business performance and activities as well. By the assistance of PESTLE
analysis, it is easy for an entity to gain knowledge about factors that has direct influence or high
influence on their performance level. Moreover, it is significant for higher authorities to consider
all external factors in order to take better decision and improve their performance level in an
effective manner.
TASK 2
P2. Analysis of internal capabilities & environment of company by applying appropriate
strategies
It is essential for a company to analyse its internal capabilities & environment in order to
take better decision and enhance performance in an effective manner (Cao, 2019). In order to
analyse internal environment, higher authorities of TESCO make use of VRO analysis and
MCkinsey 7s model. The model is defined below in context to respective organisation.
VRIO analysis
This framework is used by company in order to understand various resources, which are
available in order to achieve competitive advantage at marketplace. The VRIO analysis of
TESCO is given below:
1) Valuable: It is defined as resource which are valuable for an entity. In relation to TESCO, its
resources are market presence, leadership position, brad image and many more. It is important
for company to fully utilize its resources in order to achieve competitive edge and strengthen its
market position in an effective manner.
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2) Rare: It is determine that there are various forms of resources hat is rare and possessed an
entity to achieve unique or differentiate image in market. With reference to TESCO, it has three
rare resources that enable company to fight with their rivals such as brand image, quality service
and leadership position as well.
3) Imitation: It is analyzed that along with the rare resources that is not easily imitate by its
rivals. In relation to TESCO, leadership position & high market position is not easily imitate by
others and help company to achieve objectives and competitive advantage in a proper manner.
4) Organization: In order to sustain in market for longer time and implement activities in a
proper manner, it is important for an entity to organize all resources in an appropriate manner. In
relation to TESCO, it is stated that its market reputation is significant to maintain by company in
order to enhance its position and raise revenue level.
Resources Valuable Rare Imitable Organisation Competitive
advantage
High brand
reputation
Yes Yes Yes Yes Long term
Competitive
advantage
Brand
awareness
Yes No No No Realized
Competitive
advantage
Leadership
position
Yes Yes Yes No Strong
Competitive
advantage
Higher
customer
rating
Yes Yes No No Sustained
Competitive
advantage
Mckinsey 7s Framework
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It is identify that an entity involve both hard and soft values that has direct influence on
performance and productivity of employees. In order to gain insight about internal capabilities,
higher authorities of TESCO make use of Mckinsey’s 7s model that involve 7 element that is
defined below:
Strategy: It is important for companies to develop an effective strategy so that they can
attract large number of people and enhance their sales level. In context to TESCO, it make use
cost leadership strategy as it offer products at affordable price without compromising quality. It
help company to raise its sales and earn higher profits as well.
Structure: It is determine that TESCO uses hierarchical structure at workplace that involve
layers of management such as chief executive officer, board of directors, managers of every
department and so on.
System: TESCO is a supermarket and it is analysed that it is based on daily basis system,
which help in maintaining balance between demand and supply at marketplace (Danso, 2019).
Shared values: The values that is shared by TESCO is empathy, innovation, culture,
employee safety and many more. It is important for higher authorities of TESCO to consider all
such values that help in maintain positive working environment and enhance productivity of staff
members.
Staff: The company ensure that the requirements of its employees is fulfilled so that they
can work without any mental pressure. In addition to this, it provide extra benefits to employees
such as safety, compensation, insurance and so on.
Skills: It is determine that TESCO provide training session to employees in order to increase
competencies and skills in an appropriate manner. It help company to serve better to customers
and create a good reputation in market.
Style: The leadership style that is adopt by managers of TESCO is participative style.
Herein, employees have the right to showcase their ideas and give suggestion at the time of
decision making. It develop confidence in employees and make them feel value to be part that
directly leads to increase in productivity as well as profitability of company.
M2. Critical evaluation of internal environment & capabilities
It is essential for an entity to gain knowledge about its internal capabilities and environment
as well as it help in developing effective strategy and increase productivity and profitability of
company. There are various frameworks such as MckKinsey and VRIO analysis that assist an
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organisation to evaluate their level of performance and capabilities in order to make
improvements and attain higher growth as well as success in market.
TASK 3
P3. Porter Five force model in relevance with organisation
Porter’s five force model is adopt by an entity to determine the competition level prevailing at
marketplace. It is significant for companies to analyse level of competition in order to develop
effective strategy and sustain in market for longer time. This model mainly involves five factors
on the basis of which competition is analyzed:
Threat of substitute product: It is determine that there are lot of competitors selling similar
goods and services in market so the threat of substitute for TESCO is high. It is significant for
company to ensure that they maintain good relationship with their customers in order to retain
them for longer time. In addition to this, it is essential for TESCO to offer unique commodities in
market as it help in attracting large number of people. Moreover, it is require to offer products at
affordable price without compromising the quality, it will help company to enhance their
customer base level and remain in competition in an effective manner.
Threat of new entrants: In order to start a business on such level as TESCO, it require lot of
investment, time following of laws and so on. Therefore, threat of new entrant is low for the
company. The objective of company is to enhance sales and profitability level of company and
for this, it is essential to offer quality in market (Kingsnorth, 2019). Moreover, company also has
the opportunity to enter inti new market segment and strengthen its market position in an
effective manner. By maintain customer for longer time period, TESCO can gain competitive
advantage and achieve leading position in industry.
Competitive rivalry: The major competitors of TESCO are ASDA, Sainsbury’s, ALDI and
so on that offer same products as well as service to customer at a reasonable price. This threat is
high for company so it is important for company to focus on fulfilling requirements of customer
and offer them unique products in an effective. It help company to attract large number of people
that has positive impact on sales and profitability level of TESCO. Moreover, it is determine that
company take feedback from customers after providing them service, it aid in making
improvements and also help in make customer feel important to be part of organisation.
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Bargaining power of buyers: Herein, it is determine that bargaining power of buyer is high in
the industry in which TESCO deals as they have the option to shift on another brand, In relation
to TESCO, it offer large variety of products at one place, which is convenient for customers to
purchase. In order to decline this, it is important for managers of TESCO to emphasis on
fulfilling customer requirement and provide them quality service. It spread positive word of
mouth in market about organisation and increase its sales as well as profit in an appropriate
manner.
Bargaining power of suppliers: There are lot of suppliers prevailing in this industry that offer
raw materials at low price due to competition. The companies have the opportunity to shift to
other suppliers, if the price charge by them is high. TESCO is a multinational company that has
presence in more than 12 countries. It is analyzed that TESCO purchase raw material in bulk and
thus it has the advantage negotiate with suppliers in an effective manner. in addition to this, it
help organization to increase their profit margins and enhance their revenue level in a proper
manner.
By analyzing the above strategies, it is stated that TESCO can make use of competitive
strategy by providing innovative and quality products as well as service in market. It help
TESCO to fight with its rivals and attain competitive advantage at marketplace.
M3 Analysis of appropriate strategies to improve competitive edge & market position
In order to strengthen market position and to attain competitive advantage, one of the
suitable strategy that can be used by companies is differentiation strategy as it an entity to offer
unique products and attract large number of people towards brand that leads to attainment of
competitive advantage. Along with this, company can use digital tools such as social media in
order to reach large number of people and increase its sales and market position in an effective
manner.
TASK 4
P4. Apply range of theories and concepts to devise and interpret strategic planning
Porter’s generic strategies
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This strategies was proposed in year 1980 by Michael porters, which states that how an
organisation can attain competitive advantage by choosing appropriate strategy. It involve
mainly three strategies that is given below in context to respective company:
Cost leadership: This strategy sates that companies offer products as well as services at
low price without compromising quality. It help an entity to attract large number of people
towards brand and enhance their level of sales and profitability level in an appropriate manner.
Differentiation: In order to attract more number of people in market, it is important for
organisation to offer unique and innovative goods and service at marketplace (Liao and Tsai,
2019). It help TESCO to develop its unique image in market and retain customer for longer time
which in turn help to achieve competitive edge within the market.
Focus: It is consider as the last strategy and is highly influence business to focus on their
resources in order to target market. In addition to this, it is determine that adoption of such
strategy help company to focus on niche market and to attain competitive advantage.
From the above discussion of porter’s strategy, the most suitable strategy that cab adopt by
TESCO is differentiation strategy. It hep company to gain eyes of more number of people that
leads to raise in sales and profit level of company.
BOWMAN’S strategy clock
This model is adopt by an entity to determine and examine strategies by comparing
competitors strategy in an effective manner. This framework consist of 8 main segments that is
discussed below in context to TESCO:
Low price- low value
This strategy states that how value of goods is low and is commonly used by companies
that is small in size. This strategy is not suitable for TESCO as it offer quality products in
market.
Low price- Herein, the product price is low in order to attract more number of people
and enhancing sales. The higher authorities of TESCO can make use of this strategy in order to
increase sales only.
Hybrid- It is a mix of both quality and differentiation strategy. It is determine that
acquisition of such strategy by TESCO increase goodwill of organisation that help in attaining
competitive advantage.
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Differentiation- Herein, the focus is on to provide unique as well as differentiate products as
well as service in market as compare to its rivals (Sanders and Wood, 2019). It help TESCO to
attract more number of people that has positive impact sales and profit margin of company.
Focused differentiation- Herein, all those brands is exist that is luxurious and help
company to remain competitive in market. By the assistance of this strategy, TESCO can raise its
market share and attain leading position at marketplace.
Increased price- Standard product- This strategy states that price of a product is
getting high neglecting quality. This will develop negative mind set of people towards TESCO
that directly leads to decline in sales and profit margin of company.
High price—low value- As per this strategy, the price of goods is high, when company
has monopoly in market. with reference to TESCO, it cannot adopt such strategy as there are lot
of competitors of company such as ALDI, Sainsbury’s and so on.
Low value- Standard price- This strategy states that an entity offer low quality goods by
setting standard price. Acquisition of such strategy by TESCO might have negative influence on
brad image and market reputation of company.
M4. Strategic management plan
Strategic management plan is defined as document or blueprint, which consist of mission,
vision, objectives, strategies and so on of an organisation. It help company to achieve their
desired goals in a timely and proper manner. The strategic plan is discussed below in relation to
TESCO:
Mission: “To provides quality goods in market and strengthen its market position
effectively” is the mission statement of TESCO.
Vision: “To attain leading position in industry by offering different and innovative
products in market” is vision of company.
Strategies: The managers of TESCO can make use of cost leadership and differentiation
strategy as it aid in attracting more number of people that directly leads to raise in sales and
profitability of organisation.
Objectives: The objective are as follows:
 To enhance level of sales by 10% in upcoming 6 months by using different promotional
tools in order to aware more number of people towards brand.
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 To attain competitive advantage and leading position in market by offering unique and
quality goods as well as service in market.
Implementation: It is essential for higher authorities of TESCO to execute all the
planned actions in an appropriate manner. For this, it is significant to encourage staff members
so that activities and operations of company is implemented in an effective manner.
Monitoring and Evaluation: It is important for top level management of TESCO to
monitor all activities implement by employees and to evaluate them by their expected
performance. It will help organisation to make improvements & increase its profitability in an
effective manner.
Analyse and interpret information applying environmental and competitive analysis to
develop a set of valid strategic directions, tactical actions and objectives
Strategic decision are mainly as set of action, which aid companies to execute activities
and operations in an appropriate manner that leads to attainment of desired goals on time period.
It is determine that managers undertaken all environmental factors for better decision making &
to reduce level of threats. By the assistance of VRIO analysis, an organisation can easily get to
know about its internal capabilities and environment as well.
CONCLUSION
From the above strategy, it has been concluded that it is significant for companies to
develop strategy in order to attain competitive advantage at marketplace. In addition to this,
environmental analysis of using frameworks such as PESTLE and SWOT aid an organisation to
know about factors that has influence on business activities and performance as well. Porter’s
five force model is applied by companies in order to determine level of competition prevailing at
marketplace. Development of strategic plan aid company to achieve its desired goals within
stipulated time period.
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