Impact of Macroenvironment and Internal Capabilities on Business Strategy

This report discusses the impact of macroenvironment and internal capabilities on business strategy, using Tesco as a case study. It covers the influence of macroenvironment factors such as political, economic, social, technological, legal, and environmental aspects on Tesco's operations. It also analyzes Tesco's internal capabilities and applies Porter's five force model to evaluate competition in the marketplace. Additionally, various models and theories are applied to devise a strategic management plan for Tesco.

Business Strategy

Table of Contents
Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
P1 Impact of macroenvironment in an organisation....................................................................1
P2 Analyse the internal environment and capabilities of a firm..................................................3
P3 Apply Porter’s five force model to evaluate competition in a marketplace...........................4
P4 Apply various models and theories in an organisation and devise a strategic management
plan..............................................................................................................................................5
M1 Critically analyse the macro environment and inform strategic management decisions......7
M2 Critically evaluate the internal environment and capabilities...............................................7
M3 Demonstrate an effective strategy to gain market share and competitive position...............8
M4 Devise a strategic management plan.....................................................................................9
D1 Interpret information and data applying to produce a strategic direction............................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy refers to set of actions that provide assistance to a firm in preparing an
appropriate strategy in order to compete with rivalry firms that help in accomplishment of task
within respective time period (Amran and et.al., 2016). This report is based on Tesco which is
most popular retailing company, headquarter in UK. It provides wide range of products such as
groceries, food products and other household essentials and emphasise on delivering fast services
and great offerings so as to obtain large customer base. This report comprises of influence of
macroenvironment and its impact on an economy and also it includes internal capabilities is
discussed. In addition to this, this report also covers Porter’s model and a strategic management
plan is devised in this report so as to achieve the business objectives.
P1 Impact of macroenvironment in an organisation
Macroenvironment is a broader term in an economy that includes GDP, national income,
per capita income, aggregate demand and supply and many more which assist the firm in making
an appropriate decision by analysing the several external factors of a firm (Ansoff, and et.al.,
2018). Tesco is a well-known brand in UK that deal with wide range of items such as groceries,
food and other household essentials. Its vision and mission are prescribed below:
Vision: the vision of Tesco is to be the highly valuable business in the world which
ensure future success and gain competitive advantage across the globe.
Mission: The mission of respective firm is to create a product differentiation and to
provides better shopping experience to their customers.
Objectives: The senior authority of Tesco is to provide excellent offerings and use high
quality products so as to generate maximum satisfaction.
PESTLE analysis: This assist the environmentalist to scan various external factors
which assist the firm in accomplishment of a goal in a respective time period (Anwar and Hasnu,
2016). It consists of six elements such as political, legal, social, economic, environmental and
technological aspects. In the context of Tesco, the same is presented as follows:
Political factor: This includes various political aspects that affect the operation of a
business as UK is considered as the political stable country in the world (Van Wormer and
Besthorn, 2017). It has same ruling party since a long time which assist the manager of Tesco to
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make a long term plan as it bring proper coordination and facilitate smooth operations of a
business in an effective and efficient manner.
Economic factor: This comprises of various factors such as inflation, monetary and fiscal
policy, economic growth and many more. The vote for Brexit has created an unimaginable chaos
and adversely affect the economy (Hill, 2017). This largely affect the overall operations of Tesco
as it reduces the sales and profitability within the confines of retailing industry. Foreign Direct
Investment provide an enormous opportunity to Tesco to generate multiple streams of revenue
that accelerates the sales and productivity in a marketplace.
Social factor: Due to globalisation, changes are taken at fast pace as there are changes in
technology and taste and preferences of customers and many more. By looking this
consideration, the manager of Tesco emphasises on providing new and innovative merchandise
and fast delivery of products so as to gain large access of customers across the globe.
Technological factor: UK is most technological advanced country in the world. In an era
of digitalisation, the manager of Tesco uses creative and advanced technology which help in
conducting fast operations of a business and also it uses online platforms in order to promote
their products among them. They also emphasise on proving fast delivery of products among
their clients which provide ease of convenience and thus saves both time and cost.
Legal factor: these includes various laws such as antitrust laws, patent, copyright and
trademarks and many more. The manager of Tesco abides all rules and regulations and follow
proper code of conduct which facilitate smooth flow of activities. Also, the senior authority uses
health and safety laws and employment laws so as to protect the interest of employees as it
increases job satisfaction and thus boost the morale and trust in a workplace (Johnson and et.al.,
2017).
Environmental factor: The manager of Tesco focus on several environmental protection
measures such as banning plastic and adopt the strategy of reduce, reuse and recycle which help
in achieving sustainable development in a long run. Additionally, it uses renewable source of
energy which generates positive reputation across the globe.
Stakeholder analysis
LEVEL OF POWER Level of Interest
HIGH LOW
High Shareholders Government
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Low Consumers Suppliers
On the basis of above stakeholders’ matrix, the requirements could be satisfied by forming an
appropriate strategy so ensure that task is achieved within limited time period. In the context of
Tesco, the stakeholder analysis is given beneath:
Shareholders: The power and interest are high in case of shareholder of Tesco as they
provide greater return on investment which increase the profitability which develop a strong
brand image in a worldwide.
Government: With reference to Tesco, the government has low level of interest but have
high power due to the reason that it contains strict rules and regulations that affect the operations
of a business (Kawde, Baig and Sajid, 2016).
Suppliers: the suppliers of Tesco have both low power and less interest as there are lot of
suppliers present in the market which provide same offerings so the manager could purchase raw
material at low cost so as to reduce the cost of production and increase the profit margins.
Consumers: Customer have high level of interest but low power so the manager of Tesco
creates product differentiation in order to grab their attention which in turn boost the sales in a
marketplace.
P2 Analyse the internal environment and capabilities of a firm
The internal capabilities assist the firm in determining the availability of resources which
assist the firm in taking best decision and provide competitive advantage at a global level.
Strategic capabilities are understood as the process of forming numerous strategies which
provide greatest benefit to an organisation and help in attainment of business goals and
objectives.
VRIO analysis: This provides the framework to assess the internal factors and resources
so as to gain competitive edge in a marketplace (Kharub and Sharma, 2017). It consists of four
components such as valuable, rare, imitable and organisation which assist a firm to achieve a
significant position and thus ensure future success. In the context of Tesco, the same is presented
below:
Valuable: This is one of the crucial aspects of this framework as it the financial resources
in case of Tesco are valuable as it provides easy access of capital. Also, the patent are highly
valued as it does not allow its competitors to copy its products in a marketplace and also its
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employees are asset of the firm as they are specialised trained so as to make them capable of
handling sophisticated machines and thus produces desired level of output.
Rare: This represent the uniqueness in a workplace as the senior manager of Tesco
determine that its financial resource is rare which help in diversification and modernisation as
well as expansion which generates greater source of revenue within the confines of retailing
industry. The employees are considered to be rare as they work with greater efficiency in order
to accomplish task in a short span of time. Also, the local food is rare as the manager of Tesco
creates product differentiation which promotes new and advanced products so as to generate
maximum customers.
Imitable: The patent of Tesco is costly to imitate due to the reason that it incurs huge
investment so it would not allow competitors to get such product and financial resources are also
imitable as it is earned through profits that are earned in previous years (Lee and Abdel-Aty,
2018). The employees of respective firm are specialised trained and also the manager provide
them with several compensation benefits and incentives so as to boost the morale and motivation
of them. This improves the overall productivity and ensure vast growth in future within retailing
industry.
Organisation: The financial resources of Tesco are highly organized as the finance
manager makes an appropriate planning regarding the investments so as to generates greater
return on investment and also emphasise on making optimum utilisation of resources in an
effective and efficient manner which promotes proper coordination and thus facilitate smooth
operations of a business.
P3 Apply Porter’s five force model to evaluate competition in a marketplace
This model provide assistance to the firm to gain competitive advantage across the globe
as it determines the profitability and attractiveness in a market. This aid in gaining significant
position at a global level as this model consist of various components. In the context of Tesco,
the five components are presented as follows:
Bargaining power of customers: The power of this force is considered to be high. There
are various competitors of Tesco such as ALDI, ASDA, Sainsbury and many more that provides
similar products but of high cost (Li and et.al., 2016). But the customers have more preference
towards quality and are less sensitive to prices. So, the manager of Tesco provides great quality
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of products at a reasonable price so as to generate maximum customer satisfaction around the
globe.
Threat of substitutes: The threat of substitutes in a market is high due to the reason that
there are several alternatives present in the market which provides same offerings but they are
expensive so the manager of Tesco creates product differentiation and thus fulfil the expectations
of buyers.
Bargaining power of suppliers: The magnitude of this factor is usually low due to the
reason that there are giant suppliers so it provides advantage to Tesco to have greater switching
cost (Soltanizadeh and et.al., 2016). They would acquire raw material of best quality at a
reasonable cost so as to minimise the cost of production and increase the profitability within the
confines of retailing industry.
Competitive rivalries: The extent of this force is acknowledged to be high. There are
several competitors present in the marketplace such as Morrisons, Sainsbury and many more
which provide similar attributes and also result in cut throat price wars. The manager of Tesco
could conduct extensive market research and provide new and advanced merchandise so as to
generate maximum sales and increase the profit.
Threat of new entrants: the power of this force is considered to be low due to the reason
that it requires huge capital investment which possess a big threat for new entrants as they do not
greater economy of scale in a marketplace. Tesco has strong brand image in retailing industry
and also it built large base of customer that assist the firm to gain competitive advantage across
the globe.
P4 Apply various models and theories in an organisation and devise a strategic management plan
Porter’s Generic strategies
This strategy provide assistance to the firm to gain competitive advantage by
accomplishing task within respective time period so as to gain competitive edge over a
marketplace. The manager of Tesco applied these strategies which are presented as follows:
Cost leadership: In this strategy, the manager of Tesco provides wide varieties of
products at a low cost and also provide discount and other offers in order to grab the attention of
individuals across the globe (Morden, 2016). This boost the sales and profitability and thus
achieve a rivalry edge over a marketplace.
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Differentiation: This strategy emphasises on provide unique product or services so as to
create a distinct image. The manager of Tesco provides creative and innovative merchandise and
also it creates differentiation with their products so as to gain maximum satisfaction of customers
across the globe.
Focus: It is a sum of cost leadership and differentiation which assist the firm to target the
customers in an easiest manner. The manager of Tesco would understand the needs and wants of
customers and make necessary changes in a product so as to fulfil their requirements. They focus
on providing best product at an adequate price so as to gain the market share and thus generates
strong image at a global level.
Bowman’s strategy
This model is applied in an organisation in order to give a tough competition to their
competitors in a marketplace (Patnaik, 2017). In the context of Tesco, these strategies are
presented as follows:
Low price: the manager of Tesco would provide offerings at low price so as to contribute
a significant position across the globe.
Hybrid: It is one of the effective strategies as the manager of concerned firm uses both
product differentiation and low cost so as to become leader in the market.
Differentiation: The senior authority of Tesco would provide creative and innovative
products or services so as to generate more sales.
Monopoly pricing: In this strategy, the manager of a concerned firm would create its own
pricing in accordance to demand of merchandise in the market.
Risky high margins: In this regard, the firm could suffer loss so in order to control it, the
firm could take maximum risk so as to manage the profits.
Loss of market shares: In this, the company suffer huge losses as a result it decreases the
market share and thus declines the productivity.
The Tesco would make an effective planning and innovate a best product and also
provide technological advancement so as to gain maximum exposure and competitive
advancement across the globe. This accelerates the productivity and increases the market share at
a global level.
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M1 Critically analyse the macro environment and inform strategic management decisions
Macroenvironment play an important role in an economy which assess the several
external factors of a firm and determine the availability of resources (Prasad and Warrier, 2016).
The PESTLE analysis provide an advantage to the firm as it provide greater opportunities to
expand the business at a global level through Foreign Direct Investment that attract invests from
different countries and also it facilitate the respective firm to adopt advanced technologies in
their working operations but at the same time the impact of Brexit has created an unevenly effect
on business operations which declines the sales and profit margins within a country. The Porter’s
model assists Tesco to gain a strong rivalry position over a marketplace but at the same time it
possesses a big threat to Tesco due to emerging competitors and new entrants.
M2 Critically evaluate the internal environment and capabilities
In the context of Tesco, the internal aspects are prescribed below:
SWOT analysis:
Strength Weakness
 Tesco has strong brand image in the
market and also it has increased the
market share within retailing sector.
 Tesco provide excellent offerings at a
reasonable price which boost the sales
and improves the productivity.
 The concerned firm has huge debts
which affect the overall profitability in
a market.
 Tesco is providing offerings at a low
cost which minimise the profit margins
within the confines of retailing
industry.
Opportunities Threats
 The manager of Tesco ensures quality
specification which builds customer
loyalty in the market.
 Tesco make use of digital platforms
such as Facebook, Instagram and other
respective sites to promote its products
to gain large base of customers.
 There are giant competitors of Tesco
such as ALDI, ASDA, Sainsbury etc.
which possess a big threat for the
company.
 This lead to price wars which affect the
profitability of a firm within confines
of retailing industry.
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McKinsey 7S model: It consist of seven elements that are interrelated towards each other
like changes in any one element would lead to changes in another elements (Prasad and Warrier,
2016). In the context of Tesco, the seven elements are prescribed below:
Strategy: the strategy used by the manager of Tesco is low priced strategy so as to gain
maximum exposure around the globe.
Structure: The manager of Tesco maintains a proper hierarchy in an organisation as roles
and responsibilities are clearly defined in a workplace which help in attainment of a goal in a
respective time period.
System: the firm follow proper sequence of activities that provide a proper systematic
working in an organisation. This assist the manager to take best decision which provide best
possible outcomes.
Style: The manager of Tesco uses democratic style as it invites the ideas and opinions of
subordinates so that they could work with greater zeal and thus facilitate smooth operations of
business.
Staff: The staff of concerned firm are highly trained and inculcates confidence and
determination among them. This increase the efficiency and productivity within the confines of
retailing industry.
Shared values: The manager of a firm renders proper advice and has high standards and ethics
that promote sustainability and achievement of long term goal within limited time period.
M3 Demonstrate an effective strategy to gain market share and competitive position
Ansoff matrix: The senior authority of Tesco uses various strategies which are presented as
follows:
Market penetration: Tesco keep the prices of product or services low so as to capture
large market share as this would attract many customers from different parts of the country
(Sarsby, 2016).
Product development: The concerned firm would launch new and innovative products in a well-
established market which boost the sales and profitability in a marketplace.
Market development: The manager of Tesco would expand its operation in different countries
and sell its products so as to generate maximum number of customers as it is regarded as one of
the popular companies in UK.
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Diversification: This is considered as a risky strategy as the manager of concerned firm would
develop new products in new market segments as there is chances of loss because this strategy
would incur huge investment.
It has been determined that market penetration is an appropriate strategy for
Tesco as it help in improving the market share and boost the competitive advantage across the
globe. This creates a strong brand image and thus provide an immense level of growth of
business at a global level.
M4 Devise a strategic management plan
The strategic management plan of Tesco is presented as follows:
Vision: The vision of Tesco is to provide most convenience to their
customers by providing excellent offerings at an affordable price.
Mission: The mission is to be the best in every aspect of a business by
providing a drastic experience to their customers.
SMART objectives:
 To increase the sales by 10% within twelve months so as to gain large market share
across the globe.
 To provide an effective training among their subordinates for three months so that they
could accept challenging task and does not hesitate.
Tactics: they use the elements of marketing mix which are given below:
Product The manager of Tesco deal with different
products like groceries, food and other
household appliances.
Price The prices of Tesco are low and uses market-
oriented strategy so as to grab more and more
customers.
Place The firm would sell its products through
several intermediaries such as wholesalers,
manufacturers and consumers and had
expanded its operations at a global level to
develop more sales.
Promotion They use digital marketing and social media
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websites in order to persuade customers to buy
the product.
D1 Interpret information and data applying to produce a strategic direction
The manager of Tesco uses various indicators in order to improve the overall
performance like Key Performance Indicators that make further sales in a marketplace.
Evaluation: In the first year, the manager of Tesco incur heavy investment on promotional
and marketing campaigns and then in final year these are minimised as it become the most
reputed brand in UK and also it emphasise on using new and innovative technology so as to gain
maximum exposure across the globe.
CONCLUSION
From the above information, it can be comprehended that company can
formulate an effective strategy and proper planning for the attainment of a goal. The company
perform both internal and external factors through frameworks such as PESTLE analysis,
stakeholder analysis and VRIO analysis that help in taking decision which in turn increases the
effectiveness of an organisation. The Porter’s model is conducted to determine the competitive
advantage and help in achieving significant position across the globe. At last, a strategic
management plan as well as Porter Generic and Bowman is conducted which help in
accomplishment of goals.
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REFERENCES
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