Impact and Influence of Macro Environment Factors on Business Strategy

This report discusses the impact and influence of macro environment factors on business strategy, using TESCO as a case study. It explores the political, economic, social, technological, environmental, and legal factors that affect the performance of the organization. The report also evaluates the internal factors and capabilities of TESCO using appropriate frameworks such as VRIO and SWOT analysis. Additionally, it applies Porter's five forces model to assess the competitive force in the market.

Business Strategy
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TABLE OF CONTENT
INTRODUCTION...........................................................................................................................5
TASK 1............................................................................................................................................5
P1: Impact and influence of macro environment factors on the organisation........................5
P2 Evaluate the internal factors as well as capabilities of given business organisation adopting
appropriate frameworks..........................................................................................................7
TASK 3..........................................................................................................................................10
P3 By applying Porter five forces model, evaluate the competitive force in the market.....10
TASK 4..........................................................................................................................................10
P4 Use concepts & theories and prepare strategic management plan..................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
Books and Journals...............................................................................................................11
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INTRODUCTION
Business strategy signifies as a tactic approach which assists business firm to achieve vision
and mission in stipulated period of time. Therefore, it is necessary for company to maintain
effectual plan of action for gaining positive results. In addition to this, it helps in enhancing the
performance level of business organisation at marketplace. This report is carried upon TESCO. It
is well known chain of supermarket which deals in huge variety of products and services in order
to satisfy the customer. This company is situated in UK as well as founded by Jack Cohen in the
year of 1919. Apart from this, PESTLE analysis is used to assess external environmental factor
which enforces direct influence on growth as well as productivity of business organisation. In
assistance of this, SWOT and VRIO analysis is used to identify inner competencies of business
firm. And also, Porter five force models are adopted for achieving competitive benefits at
marketplace. It also involves Porter’s Generic Strategy is undertaken to assess premeditated
choice for the company (Agrawal, 2016).
TASK 1
P1: Impact and influence of macro environment factors on the organisation.
PESTLE Analysis is a structure which is used to identify the internal environmental factor
which enforces direct influence on sales as well as growth in upcoming period of time. In
reference of TESCO, the supervisor emphasised on grip opportunities and eradicates the risk for
improving efficiency of business organisation. There are different macro environmental factor in
context of TESCO which is given beneath:
Political Factor: Political factor involves different factors like tax policy, government
structure, rules as well as regulations and so on (Pearson, 2016). It imposes both positive and
negative impact on activities and functions of organisation which is discussed below:
Positive impact: Due to stability in political situation of UK, the government does not take
part in any functions and operations of business firm thus it favourably affect the performance of
company.
Negative Impact: On the other hand, the tax rate goes to be high, then it increases cost to the
goods of business firm thus it adversely affect operations and activities of business firm.
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Economic Factor: It involves interest rate, trade, tariff rate, exchange rate and many more.
Due to higher economic growth thus, it imposes positive impact on business organisation. It
enhances the growth and development of TESCO in future time period (Dodgson, 2018).
Positive impact: Due to minimize rate of inflation, it decreases the price of product which
helps the firm in increasing productivity as well as profitability level at marketplace.
Negative Impact: Herein, the unemployment rate is increases, and then income of individual
person gets minimized. Therefore, the person spends less money on buying the product. It
decreases sales and profit of company (Pitelis and Teece, 2016).
Social Factor: Social factor involves age, population, lifestyle ad trends and many more.
There are different factor which imposes favourable and adverse impact on productivity of
business firm which is given beneath:
Positive impact: Herein, the manager makes effective strategy and tactics in order to assess
the taste and preferences of customer. It helps them in providing innovative and unique goods
according to the changing need of customer. It increases their loyalty and trust level at
marketplace.
Negative impact: Due to claim made in their advertising campaign in 2013, TESCO does not
offer superior quality products as well as services to its customer thus it decreases the sales of
business firm. It negatively affects the brand image and reputation of company at marketplace.
Technological Factor: TESCO advance their supply chain management in such a manner
that increases cost effectiveness and efficiency level at marketplace. It also helps in gaining
competitive benefits over rival firm. In context of TESCO, it enforces both positive and negative
which is given below:
Positive impact: TESCO implement advanced technology, it helps the business firm in grab
opportunities in the market. For instance, mobile technology assists the business firm in
enhancing distribution services through which buyer can choose their desired wine with the help
of mobile (Tomlinson& Evans).
Negative impact: The small business firm adopted disrupted technology to enhance the
criteria of performance through bulk of market. Thus, it will become popular and customer
provides more value to disruptive technology. Therefore, the customer is not attract towards
advanced technology used by TESCO enforces adverse impact on performance level of business
firm.
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Environmental Factor: It includes weather and climatic condition and many more. It
imposes both favourable and adverse impact on productivity of firm which is deliberated below:
Positive impact: Herein, the business firm offer that product that is eco-friendly in nature
thus it enhances the standard of living of people in the society. Thus, it also helps in protecting
environment from pollution at marketplace.
Negative impact: The climatic condition is changing in frequent manner; therefore, it
imposes adverse influences on sales and profit of TESCO in upcoming period of time.
Legal Factor: Legal factor involves that employment law, consumer protection law and
many more (Fraser, 2019). Therefore, it enforces favourable and adverse influences on the
performance of business firm which is given below:
Positive impact: Herein, TESCO follow the laws and legislation which enforces favourable
influences on productivity as well as profitability of business firm.
Negative impact: The business organisation is involved in financial services products work in
obedience to significant regulation in 2013; it imposes adverse effects rising from distraction to
the endurance of financial services (Priem and Alfano, 2016).
P2 Evaluate the internal factors as well as capabilities of given business organisation adopting
appropriate frameworks.
In order to assess internal environmental factor in an effective manner, TESCO use the
VRIO and SWOT analysis for enhancing knowledge related to internal competencies of business
organisation which is given beneath:
STRENGTH WEAKNESS
 TESCO has achieved a leading position
within marketplace. They offer
innovative products and services to its
customer. It increases sales and profit
of business firm (Reilly and Jones,
2017).
 Herein, TESCO offer products and
services according to the need of
customer that helps in boosting
 Due to increase in conflicts and
grievance arises among employees thus
imposes adverse influences on
productivity of business firm.
 TESCO does not make effective
strategy and tactics in order to assess
the plan of action which is adopted by
business firm thus it adversely affect
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profitability level in the market. the company at marketplace.
OPPOTUNITIES THREATS
 TESCO advance their supply chain
management that enhances cost
effectiveness level at marketplace.
 The main advantage of TESCO is to
implement advanced technology that
helps in attracting large number of
audience at marketplace (Kono, 2016).
 Due to claim of publicity campaign in
2013, TESCO does not provide high
quality products and services to its
buyer thus it declines the sales of
company.
 There are different competitor of
TESCO such as Sainsbury’s, Aldi and
many more; it decreases sales and profit
of company.
VRIO Analysis
Resources Valuable Rarity Inimitable Organised What is the
result?
Global
presence
Yes Yes Yes Yes Competitive
advantage
Positive
market
reputation
Yes Yes No Yes Long term
competitive
advantage
Distribution
system
Yes Yes No Yes Strong
competitive
advantage
Competent
employees
Yes Yes Yes Yes Realised
Sustainable
Competitive
There are four resources such as leadership team, high rating of customer, positive marketing
position as well as Global presence that are used by TESCO to assess internal environmental
factor in an effective manner (Macarthy, 2018).
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Valuable: Valuable resources are those which provide value to its customer. Herein, the
business firm focuses on offering differentiate products and services to its buyer at affordable
cost. It helps in gaining competitive advantage over rival firm in the market. In context of
TESCO, there is different kind of valuable resources which is discussed below:
Global presence: Herein, TESCO achieve a leading position across the globe that assists
business organisation in accomplishing competitive benefits at marketplace.
Positive market reputation: Due to favourable market reputation, it increases sales as well
as profitability level of business firm.
Distribution system: The distribution system of TESCO is too good, it helps firm in offering
products and services on timely manner.
Competent employees: The manager of TESCO hires a highly skilled and talented
employee that helps in increasing the level of performance within business organisation.
Rare: It includes those resources which are rare that helps in accomplishing competitive
benefits over rival firm at marketplace. It has been assessed that global presence is not unique for
TESCO because there are large number of business firm which have a global presence at
marketplace. The unique resources of TESCO are given beneath:
Positive market reputation: The positive reputation of business firm in the market, it is not
copied by any other competitive firm considered as a rare resource of firm.
Distribution system: The manager of TESCO offer timely delivery of goods and services to
its buyer is determined as a unique for business firm (Machoka, 2019).
Competent employees: The supervisor of TESCO conducts effective training session for
its employees in order to increase their skill and knowledge in performing the work. Therefore,
this is not copied by any other rival firm.
Inimitable: It includes those resources which are not copied by rival firm. In context of
TESCO, the manager implement advanced technology that is not imitable by its competitive
firm.
Distribution system: Herein, the top management of TESCO focuses on transferring the
product as per the convenience of customer which is not duplicated by any other firm.
Competent employees: Due to highly proficient and knowledgeable employees, it is not
possible for rival firm to copy their staffs. It helps them business firm in increasing sales as well
as profitability level in upcoming period of time.
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Organised: It includes only those resources which are required to be organised in proper way that
helps in achieving vision as well as mission of the company.
Competent employees: The presence of highly competent and skilled subordinates,
TESCO operates its business activities and function at global level. It helps company in
sustaining buyer for a longer duration of period. It also assists in boosting sales and profit that
helps them in achieving competitive benefits from rival firm at marketplace.
From the basis of above given topic, it has been examined that it is important for business firm to
hire competent and skilled employees for gaining competitive benefits at rival firm (Montenegro
and Barragán, 2018).
TASK 3
P3 By applying Porter five forces model, evaluate the competitive force in the market.
Competition in the market has been increasing dramatically as new entrants are trending and
taking place in the market. This has largely affected the profitability as rapid increase in
competition has led to increase in substitute and alternatives options to the buyers. In context
with TESCO, they adopted Porter five forces model to cope with circumstances and remain
ahead in the market. This has been described as-
Porter Five Forces Model
This is a tool for analysis and determining the level of competition. Commonly used by
organisation to determine the competition, execution, and progress in the market. It helps firms
in decision making and shape management structure (Sousa-Zomer and Miguel, 2018). In
reference to TESCO, marketing team of the company works towards identification of the five
forces that shape industry competition which are-
Entry of new threats- In market, one company is doing its business and new entrants enter
within the same line established business's market share starts being depleted. It affects more
when a rising firm is in the market from nowhere new entrants disrupt the market. In reference to
TESCO, they keep an eye on the dynamic market scenario which helps them in studying new
entrants. Also, for new entrants they cannot easily setup their entities, gain customers trust and
capture the market as it require time and huge capital.
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Competition Rivalry- This force evaluates how intense is the competition in the
marketplace. It is good to have competition as it encourages the firm to achieve the higher
standards and improve themselves. In context with TESCO, their competitors like ASDA,
Sainsbury’s etc. has affected their business at broader level. But this encourages them to enhance
their quality standards and services to retain customer and expand.
Bargaining power of buyers- This force helps evaluate the power of the buyers, and their
effect on pricing. Bargaining power of buyers is more when they are fewer in number but there
are plentiful sellers (Timms, 2017). The products are only consumed by buyers. So, they act as
source of profit and bargaining is accepted by the vendors. TESCO has large customer
acquisition areas across the globe which makes them strong competitor. In this bargain power of
buyer is low because of trust on the brand, product quality and relationships with the users.
Organisation is able to fulfil the demand of customers for quality at affordable prices .This helps
in getting more profitability and to explore more opportunities at greater levels.
Bargaining power of Suppliers- the Suppliers act as distribution channel. Resources and
rareness of raw materials used by the organisation affects the Bargaining power of suppliers.it
also depends on the number of suppliers available fewer the suppliers more will be the
bargaining power to them. TESCO is a multinational grocery and merchandise retailer it has
huge supplier network from around the world and its product team ensures resources are used
efficiently. So, this leads to lower bargaining power of vendors.
Threats of substitutes- Threats of substitutes depend on the availability of the same
product with different suppliers. This force is threatening when buyers can easily access
substitute products with lesser prices or better quality. In reference with TESCO, they have large
number of competitors like ASDA; SAINSBURY’S etc. and ample of local retailers are
available who provide similar products at competitive pricing. This broadly affects the entity
profits and revenues at wider level. So, to encounter from such scenario firm should provide
more lucrative deals on the products and services so that users are attracted. It is essential for
company to evaluate customer’s behaviour so that new plans are executed accordingly to gain
market share
The brief analysis of porter’s five forces model we can say that market has opportunities,
challenges as well as threats. Porter’s framework is used to analyse competitive forces and shape
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organization’s strategy accordingly. Plans and procedures have to be executed after proper
analysis so that functions and operations of the business are carried out smoothly. Porter five
forces model has been used to evaluate factors affecting the flow of the business. This analysis
helps in identifying the competition factors affecting the business and helps in adjusting the
strategies to suit competitive environment and improve potential profits (Wonglimpiyarat, 2016).
TASK 4
P4 Use concepts & theories and prepare strategic management plan.
An organisation utilise theories and various concepts which is being used in a business for
increasing its activities and actions within a largest level while the competitive advancement is
arising (Sousa-Zomer and Miguel, 2018). The models and concepts which is necessary in a firm
to assess in guiding the individual manager that how the problem are being faced and act
according to the present situation which is raised within an organization. In assistance to this,
various strategies which is essential for enhancing the circumstances and observations within a
market area. The specified time that is necessary for managing the business strategies that lead to
be more effective and efficient which is based on a differentiation of time period. In reference to
Tesco, Porter generic strategies have been used by a company for evaluating various strategies
which is described as follows:
Porter generic strategies of TESCO
This strategy is used as to enhance the competitive advancement for the wider global of an
organisation towards its effectiveness and efficiency (Timms, 2017). This strategy is further
described as follows:
Cost leadership: It is refers to the competitive among the rivalry for lowering down the
cost. In assistance to this, this strategy is used to expand its market structure for increasing its
presence in overall rivalry firms. The middle class customers have highest existence on the cost
leadership for developing best strategy according to their requirements of their consumers.
Differentiation strategy: This strategy is described as the other most basically utilise
generic strategy to manage a competitive advancement. In context to Tesco, this company uses
this differentiation strategy in collaborating with the cost leadership strategy to attain high
growth objectives and goals (Wonglimpiyarat, 2016). Tesco strategy has the various innovation
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and opinions by assessing the customer’s growth. In assistance to this, this company is the
combination of differentiation and cost leadership which enhanced a loyal customer level. The
main objective and goals of this strategy is to verify the existing products to new products.
Focus strategy: This strategy is the third porter generic strategy which motivates an
organisation to avail the resources which is going to explore according to its targets. In reference
to Tesco, this Focus strategy has the low down cost and also offers the high growth for the
success in the near future. This company develops brand strategy that ongoing variations for
designing and packaging which lead to motivates and influences the customers for attraction that
product. In assistance to this, it is also responsible for completion of needs and requirements of
the existing customers.
Strategic management plan
SMP is described as the decision which is being undertaken and also ideas which could
manage and developed by a business and increase its productivity and profitability according to
their performance level in an organisation (Xie, and Cooke, 2019). By analysing the strategic
management plan, the objectives and goal are attained in a very suitable way. In reference to
Tesco, this procedure is used as the competitive advancement in overall market structure and
competitive firms. The strategic management plan involves different models that are discussed as
follows:
Aim: The main aim of Tesco Company is to explore its business structure global in a
wider level and also it provides better quality of life across the country (Zahra, 2016).
Vision: The main vision of this company is too managed and developed the business
actions and activities in a national and international level.
Mission: The mission of Tesco Company is to avail the proper nutrients food to the
community of people for enhancing its productivity and profitability.
Values: The management of a business organisation is being followed various process
and procedure for conducting a disciple among the organization of employees.
Market research: The very essential strategic plan is to maintain the research on
market structure. It is very important for a firm because it enhances to analyse and implementing
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the circumstances and occurrence that lead to effect on the overall productivity and profitability
of a firm.
Strategies: While in the competitive advancement of TESCO Company it utilise the
market rivalry for developing the entity of a business organisation and it also enhances its
profitability for surviving in a market area (Yucel, 2018).
CONCLUSION
On the basis of above mentioned report, it has been examined that it is necessary to build
effective strategies, policies as well as procedures for gaining competitive advantage over rival
firm at marketplace. In assistance of this, Porter five force models are used for achieving
competitive benefits in the market. Apart from this, SWOT and VRIO are adopted for analysing
the internal capabilities of business firm. In addition to this, Porter generic strategy is used to
differentiate their products and services in order to increase sales and profit in upcoming period
of time. The main motive of business firm is to earn more and more revenue at workplace. And
also, TESCO distribute their products and services all around the world. It helps them in
achieving leading position at marketplace.
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REFERENCES
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Kono, T., 2016. Strategy and structure of Japanese enterprises. Routledge.
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