Business Strategy: Impact of Macro and Micro Environment on Tesco

This report examines the impact of macro and micro environment on Tesco and suggests appropriate strategies to improve competitive edge and market position using the Porter Five Forces Model.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Using different frameworks examine the impact of macro environment..........................3
TASK 2............................................................................................................................................5
P2 Evaluate internal environment and capabilities of enterprises..........................................5
TASK 3............................................................................................................................................7
P3 Explain appropriate strategies to improve competitive edge and market position based
on evaluation of competitive market using the Porter Five Forces Model.............................7
TASK 4............................................................................................................................................9
P4 Using a range of theories, concepts and models deliver strategic management plan and
objectives of chosen enterprise...............................................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
BOOKS & JOURNAL.........................................................................................................13

INTRODUCTION
Business strategy is considered as a process in which firm makes effective strategy for
accomplishing mission and vision in targeted period of time. Due to increase in level of
competition, it is necessary to make strategy related to bring innovative ideas at marketplace.
This report is undertaken upon company named as TESCO. It is the multinational chain of
supermarket which is located in UK. This organisation was funded by Jack Cohen in the year
of 1919. The main purpose of this company is to provide superior quality products and
services to its customer in order to satisfy them. In this assignment, PESTLE and SWOT is
used for assessing internal as well as external environment which is important to consider
while making effective strategy within organisation. Apart from this, the porter five force
models is used for gaining competitive benefits as well as Ansoff matrix is adopted for
providing strategic direction for future growth (Linder and Williander, 2017).
TASK 1
P1 Using different frameworks examine the impact of macro environment
Business strategy plays an important role for increasing productivity as well as
profitability of organisation. In this dynamic environment, it is necessary to change strategy
to cope up with it in an effective manner. It aid assistance to business to bring innovative
ideas, beliefs as well as thoughts to enhance activities and functions of organisation. There
are different external environment which imposes direct impact on performance level of
business which is given below:
PESTEL Analysis
PESTEL Analysis is the framework which is adopted for assessing different functions
and activities of market in an effective manner. In context of TESCO, they adopt this
framework for identifying different factors which influences success and growth of business.
It aid assistance to business to understand changing trends and fashions at marketplace.
Therefore, the business focuses on saving time, resources, time and manpower (Lai, Melloni
and Stacchezzini, 2016).
Political factors: Political factor includes taxation structure, environmental law as
well as government regulation and many more which imposes direct influence on growth of
business organisation. Due to political stability of UK, the company need not be changed in
their policies which impose positive impact on organisation. Due to Brexit, it influences
favourable influences on productivity as well as profitability of organisation. On the other
hand, due to increase in tax rate in order to control the issue related to obesity thus it
adversely affect the sales and level of profitability of business organisation.
Economic factor: It involves exchange rate, interest rate and inflation as well as
deflation rate and so on which enforce direct influences on productivity as well as
profitability of business organisation. Due to increase in unemployment rate, the income of

an individual person is lower down, thus results in decreasing the spending of money by
consumer and shifts their brand towards products which is sold at relatively less price.
Therefore, it downward sales as well as erode level of profit at marketplace. On the other
hand, the TESCO focuses on offering superior quality products and services to its customer
as per their changing need and wants in order to boost sales in future period of time.
Social Factor: It includes age, population, taste as well as preferences of customer
and so on which imposes direct influence on productivity as well as profitability of
organisation. Due to increase in online shopping by TESCO for product related to groceries.
Therefore, the issues related to elder person who do not use mobile app for this purpose. But
the people who earn more income accepts it positively, Thus, the change in customer opinion
as well as they attracted towards online shopping increases sales and profit of TESCO in
future period of time. On the other hand, due to scandal occurred in 2013 that they do not
provide superior quality burger to its customer who ruined the brand value and reputation of
company in front of customer at marketplace (Langabeer and Champagne, 2016).
Technological factor: Technology plays an important role for success and growth of
business organisation. Therefore, it is necessary for TESCO to implement advanced
technology for providing innovative products and services to its customer in order to satisfy
them. Due to strong supply chain management which is very cost effective for individual
person, thus they prefer to deal with product provided by TESCO. It helps company in
gaining competitive advantage over rival firm at marketplace. And also they focus on
technological advancement in order to provide innovative products and services to its
customer in order to satisfy changing need of them at marketplace. Whereas, the cost of
implementing advanced technology is very high that adds extra cost for the organisation
which decreases sales and profit in future period of time (Madhushree, Kumar, A. and Aithal,
2018).
Environmental factor: It includes weather, temperature as well as climatic condition
and many more which imposes direct impact on performance of company. In context of
TESCO, they provide eco-friendly products and services to its customer in order to increase
their standard of living of individual person in society. It increases experience level of
customer at marketplace. And also they emphasised on protecting environment which will be
effective in taking decision related to future success and growth of company. Whereas, due to
change in climatic condition very frequently, it is not easy for firm to implement new
strategies and policies within organisation. Therefore, it adversely affects productivity as well
as profitability of organisation.
Legal factor: Legal factor involves laws, legislations, antitrust laws and many more
which is important to consider by company for increasing success and growth in future period
of time. In context of TESCO, they emphasised on follow all laws and legislations which
increases brand image and reputation of company in front of customer at marketplace. On the
other hand, the change in these laws rapidly that adversely affect operations and activities of
business organisation in an effective manner.

From the above mentioned external environmental factor, it has been analysed that
PESTEL is used for assessing macro environment which impose direct influence on
productivity as well as profitability of business organisation. This framework helps
organisation in overcome from the activities related to external environment in an appropriate
manner.
TASK 2
P2 Evaluate internal environment and capabilities of enterprises
Micro environment is described as the factor which is controlled by business
organisation in an effective manner. Therefore, it is necessary to adopt SWOT Analysis for
identifying internal environment which imposes direct impact on productivity as well as
profitability of business organisation that is mentioned below:
SWOT Analysis
STRENGTHS WEAKNESSES
 TESCO has won several rewards for
providing effective service to its
customer, retail excellence as well as
entire shopping experience.
 TESCO has achieved leading position
across the world that increases brand
image and reputation of company in
front of customer at marketplace
(Sanden, 2016).
 Due to implantation of advanced
technology for providing cost
effective products to its customer as
well as enhanced level of services
during the period of time.
 There are various competitor of
TESCO such as Sainsbury’s, ALDI
and many more that decreases sales
and level of profit of company in
future period of time can be
considered as a major threat for
company.
 There is some subsidiary of TESCO
which does not operate their business
that decreases sales of company.
 TESCO does not make effective
strategies, policies in order to assess
competitive strategy which adversely
affect performance level of firm.
OPPORTUNITIES THREATS
 The main advantage is related to
strategic alliance of TESCO with
some other brand in order to provide
innovative products to large number
 Economic recession as well as credit
crunches can be considered as a major
threat for TESCO.
 Due to increase in cost of food, it

of customer at marketplace.
 TESCO can grab opportunities
related to online marketing as well as
home delivery services to its
customer in order to retain them for
longer period of time.
 TESCO also focuses on western
products which are highly demanded
that can be considered as big
opportunities for organisation.
reduces purchasing power of
customer which reduces sales in
future period of time.
 Furthermore, due to enhance wage
rate, which adds additional cost for
the company which consumer is not
able to pay. It negatively affects brand
image and reputation of company in
front of customer at marketplace.
Therefore, SWOT Analysis helps marketer in assessing information related to
changes and trends occurs at marketplace. It helps in identifying and assessing performance
at wider level (HunTer, 2016).
Another tool is VRIO analysis which is used for assessing internal capabilities and
resources of TESCO which helps in exploring their business across world. There are four
resources which are adopted are valuable, rare, inimitable as well as organised which is going
to be mentioned below:
 Valuable: Valuable resources are those which provide value to the consumer for
increasing success as well as growth of organisation. In context of TESCO, they have
global presence, competent workforce, strong distribution network as well as their
brand which is valuable for firm. They achieved global presence across the work. And
also they hire talented employees in order to provide better services to its customer as
well as timely delivery to its customer. And also they provide branded products and
services to its customer for satisfying them. All these resources are considered as a
valuable for organisation. It helps them gaining competitive advantage over rival firm
at marketplace Tsai and Lin, 2016).
 Rare: The rare resources are those which are unique and specific for its customer.
These kinds of resources are not copied by its rival firm easily. There are various
resources which is unique for TESCO such as competent workforce, strong
distribution network as well as their brand value which is not duplicated by rival firm.
They provide effective training to its employees in order to increase brand value of
products and services of firm in front of customer at marketplace which is considered

as rare and they offer timely supply to its customer as per their convenience in order
to satisfy them.
 Inimitable: It signifies those resources which are not easily duplicated by its rival
firm. Tesco has various resources which is not imitable such as brand value as well as
strong distribution network. TESCO offer brand products as per the need of customer
which helps them in increasing loyalty and trust of customer at marketplace. In
addition to this, they provide products as per the convenience of user help them in
retaining customer for longer period of time which is considered as inimitable for
TESCO.
 Organised: It includes those resources which is organised in an effective manner.
The brand of TESCO is organised resources that increase sales as well as level
profitability level in future period of time. It also boosts brand image and reputation
of company in front of customer at marketplace. And, it helps in retaining customer
for longer period of time.
From the above mentioned topics, it has been analysed that SWOT and VRIO is used for
assessing market trends as well as fashion in an effective manner. Therefore, it is important
for organisation to emphasise on micro environment which imposes direct influences on
growth and success of organisation. It increases brand image and reputation of company in
front of customer at marketplace. This is the only reason of growth and success of TESCO in
future period of time (Park and Mithas, 2020).
TASK 3
P3 Explain appropriate strategies to improve competitive edge and market position based on
evaluation of competitive market using the Porter Five Forces Model
In business sector, competition is increasing at rapid level and it is becoming difficult
for them to survive in market. Many firms implement new strategies or they copy the strategy
and tactics of rivals or competitors. Organisation keeps tracking and has proper information
regarding rivals new approaches or tactics which are going to be used in business. Tesco,
which is multinational company also use several strategies so that functions, operations and
activities of business are carried out in proper way without facing any problem or issues. To
implement such tactics accurate information and market knowledge is required so that
decision making in process of strategy implementation is done in appropriate manner.
It is time consuming process and is to be used properly so that conflicts or errors do
not arise in near future. In relevance with Tesco, they also use the strategy after deep market
research so that maximum profit is obtained from such tactics. With help of business strategy,
it becomes easy for organisations to develop their business and expand activities at wider
scale. Many frameworks and models have been used by organisations so that strategies are

implemented in appropriate way. Without adopting business strategy, it is not possible for
entities to achieve goals and objectives as well as to face the rivals in market. Also, correct
measures are being taken by them so that if problems arise during the process than it is faced
properly. So, chosen firm is using Porter Five Force model which is used by them in effective
way. Manager of firm assures that correct frameworks are being adopted by enterprise.
Porter Five Forces Model- In marketing, business strategies are essential and to
implement them successfully this model is used by Tesco. To conduct this model in proper
manner, reliable information regarding the market and competition as well as external factors
is required so that competitive advantage is taken in proper manner. Porter Five forces model
is defined as framework through which competitive advantage, strength and position of
business is examined and evaluated. In relation with Tesco, they also use this model to
evaluate their position in market properly. Decision making is done in proper manner so that
conflicts or errors do not arise in near future. In this, it has several forces which are discussed
below-
Threat of new entry- There are many new businesses which enter into market with
same product, same purpose but with different strategies & tactics. In this, power of new
entry is relatively high when there are no rules and regulations of government, sellers are less
in market etc. In relation with Tesco, threat of new entry is moderate as because it is not easy
to start new business of retailing. So, basically local retailers affect the sales & business of
firm as they copy the products and sell at low prices.
Competition rivalry- Market is wider and broader and degree of competition is rising
at wider scale. In relevance with chosen brand, they do also have ample numbers of
competitors and rivals in market such as Amazon, Asda, and Sainsbury etc. So, competition
rivalry is high when same products are being distributed around the market. It also helps them
to produce and deliver new products as well as innovate to be different from others.
Bargaining power of suppliers- These are those who provide and help enterprise to
get the appropriate resources and materials for business production and activities. Mostly,
suppliers wish for high bargaining power with motive of earning more profit by giving low
quality products to buyers. Vendors are crucial part of business as they help in completion of
product and also deliver it in the market. Thus, Tesco manager make ensures that suitable
vendors are selected for business. Decision is made on the basis of suppliers goodwill,
behaviour etc. Therefore, evaluation can also be done by comparing with other vendors. This
helps in making effective decisions.
Bargaining power of buyers- In this, buyers wish to keep their power at higher level.
They keep their bargaining power to get the products or resources at affordable rate. In this,
power depends upon the basis of product value, resource rareness or intimacy etc. These are
the elements which decide the power of buyer will be high low. In context to selected firm,
they are having moderate power because of availability of many buyers. If they keep their
bargaining power than they might lose the opportunity in market. So, proper analysis is to be
done before demanding the high bargaining power.

Threat of substitutes- A substitute refers to replacement of existing product by
another one. There are various substitutes which are available in market and satisfy the
customer demand and requirements. So, firm should be aware about end users demands so
that switching portion of consumers is low. In relation with selected enterprise, they due to
large availability of substitutes, it is becoming difficult for Tesco maintain their position in
competitive market.
After a brief analysis of above matter, it is seen that implementation of strategy is not
an easy task and which requires high level of skills and knowledge. Also, it is duty of
manager to assure that framework which has been used is suitable and helps business in
achieving goals as well as objectives. So, Porter Five Forces model has been used so that it
assists entity in obtaining the desired common goal. Through this model, it is easy for them to
prepare tactics for running the business smoothly as well as effectively.
TASK 4
P4 Using a range of theories, concepts and models deliver strategic management plan and
objectives of chosen enterprise
Strategic planning is essential for every enterprise to carry out functions and
operations in most appropriate manner. With help of planning, firm are able to allocate and
use their resources in most efficient way (Narayanan, 20017). Strategic planning is defined as
setting up the goals and objectives of firm in proper way. In relation with Tesco, they also use
strategic planning to achieve goals of business within a period of time. It is wider and
broader concept which is to be understood with focus so that aim is achieved. In this several
elements are included which are given below-
Vision- Main vision of Tesco is to be the global leader in retail chain.
Mission- Mission of Tesco is to deliver quality of products and goods to customers.
Objectives –
 To generate profit and increase the market share
 To provide total satisfaction to both new and old consumers (Alrawashdeh,2016).
Executive Summary- Tesco is a global chain of supermarket which deals in variety of
products and goods such as apparel, cosmetics, groceries etc. It is widely located all around
the world and planning to expand their business in more other countries.
So, the above mentioned is achieved through implementation of appropriate strategic
planning. To use it in effective manner, many enterprises use various tools to implement
strategy such Ansoff matrix is used by Tesco. It depends upon the entity to decide to select
which type of framework.

Ansoff Matrix- It is a tool which is used by many enterprises to analyse as well as
examine the competitive advantage and growth in market. This framework helps in
determining the opportunity that business use in the firm with use of strategy. Moreover, it is
simple to understand and gives a clear picture of strategies that gives a sales or loss.
Furthermore, company have number of alternatives which can be adopted by them by one or
two depending upon their need or requirement. Thus, it includes several factors which are
explained below-
Market penetration- It is being considered as safest form of strategy as because in
this in existing market same product is being used by firm to attract more customers and
increase the sale of existing product. This is mostly done by many enterprises so that sale of
that product increase and expanded at rapid scale. In relation with Tesco, they can adopt this
strategy without any fear. Risk associated with this is quite low. So, product sales can easily
be enhanced while going with this strategy. Capital and less time is required in this and is
easily used all type organisations (Dobbs, 2019).
Market development- Then comes the market development in which risk associate
with firm is moderate as because new market is chosen for existing product. This is mostly
adopted when corporation wants to develop and enhance their product into new sector or
segment. In this, cost and resources are used at higher level so when going with this proper
consideration is required. In relevance with Tesco, they also use this strategy after going
through the actual need & requirement of people. This helps them to make decision
accordingly and in the same way they use the resources required for that product (Kader,
2020).
Product Development- Further arises the strategy which new product is introduced
in existing market. This is also the appropriate strategy which can used by firm and it is
mostly used when there is need for actual development of product in the market or the
switching behaviour of customer if increasing at wider level. In relation with chosen entity,
adopting this strategy will helps them to enhance their firm goodwill & maximize their sales
at higher scale. Further, this also assists in making a new change in existing market.
Diversification- Then at last one is diversification which is riskier strategy from the
above specified one. This is because in this new product is introduced in new market. Also, in
this degree of risk is also high. It is adopted by those entities which are financially stable and
wish to expand their business in another state or country. In context to chosen organisation,
they need not have to have to focus on more on this one as they have already opened up new
store in Bangkok and need to enhance their level of existing stores. This will help them in
time saving and costs as well as resources are going to be used in most efficient way.

After a brief analysis of above paragraph, it is stated that using of strategic planning is
to be done in effective way so that objectives are achieved properly. Moreover, when tool is
adopted, it is duty of manager and superiors authorities to analyse it with proper
consideration. Decision making process is to be carried out in appropriate way so that
conflicts do not occur (Khajezadeh, 2019).
Advantages
 It helps organisation and forces them to think and make changes in business or not.
 Aims & objectives are easily achieved through this tool.
 It also assists in managing and creating the risk awareness.
 With use of tool, risk are identified and solved or measures are introduced when such
situation arise.
 It delivers the possible strategies which are useful for growth & development of
entity.
Disadvantages
 It is only a theoretical model and which do not a give practical methods to business.
 This model is good for knowledge because when it is practically applied many
changes have to be done by firms.
 It does not give or provide the information related to activities of competitors.
 Through this tool. It is not possible to predict the uncertain events that have deep
impact in business.
 To us this method, accurate credentials regarding the market is required which is
again a difficult task.
 It is time consuming approach and do not give accurate results.
After analysing the above matter, it is seen that this tool is to be used after a carefully
examining the need and situation of business activities because changing a and adopting new
strategies as well as tactics a time consuming (Kukartsev, 2019).
CONCLUSION
After going through the above report, it has been concluded that business strategy
requires time and capital so that it is used in effective manner. In the present report, PESTEL

and SWOT has been explained which helps in understanding the need of implementing
strategy and tactics. Further, Ansoff matrix as well as Porter Five Forces has also been
discussed which assists firm in examining how and when to take decision regarding the
tactics in market. When going with implementation of strategy, all factors are to be carefully
analysed so that conflicts do not arise.

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