Impact of Macro Environment on TESCO's Strategies

This study analyzes the impact of macro environment on TESCO's strategies, including PESTLE analysis and Porter's five forces. It examines the political, economic, social, technological, legal, and environmental factors affecting TESCO's operations. The study also discusses TESCO's internal analysis using SWOT analysis and suggests strategies to improve the company's performance.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
P1 Impact as well as influence of macro environment over the organization and its strategies.1
P2 Internal analysis for given organization.................................................................................3
P3 Porter's five forces..................................................................................................................5
P4 Theories for the strategic direction and planning for the organization..................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business strategy is a strategy by which the company can achieve the goals as well as
take competitive advantages over the competition. Business strategy helps the business achieve
satisfaction among the customers (Cadez, Czerny. and Letmathe., 2019). TESCO is a British
MNC which deals in grocery store which is spread all across the world. The company is having
headquarter in Welwyn Garden City. The firm is the third largest retailer in the entire world. The
firm was founded in the year 1919 and founder of the organization is Jack Cohen. The topics
covered in the study are the Pestle analysis for the macro impact. For the micro impact Swot
analysis is taken. Various theories along with Porter's five factors are taken. In the study a detail
analysis and study will be done.
MAIN BODY
P1 Impact as well as influence of macro environment over the organization and its strategies.
For the chosen organization which is TESCO, PESTLE analysis is used in order to find
the influence over the organization. Positive as well as negative factors are considered in the
macro environmental analysis. They are the factors which can influence organization as a whole
in large manner over the economy of scale.
PESTLE Analysis
PESTLE analysis is the analysis which influence the organization from the factors which
are external. Performance as well as position of the company is known by doing Pestle analysis
by finding out what are the reasons that the company is lagging behind and how the company can
overcome it, pestle analysis is explained below:
Political factor
Political factors are the factors on which the influence of the government over TESCO is
analysed in which the policies related to government which include changes in the government,
taxation policies, labour policies and trade restriction policies are taken (Cadez, Czerny. and
Letmathe, 2019). The positive impact over TESCO is the government is stable which will lead to
same taxation policy for the company. UK's government is having taxation concession policy for
the grocery store which will help the organization to save taxes and this will lead to increase in
the profitability of the TESCO (Kaliappen. and et.al., 2019.). The negative impact over TESCO
will be change in laws of labour in which the UK government is increasing the minimum wage
rate for the labour this will adversely effect the company by increasing the cost of the company.
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Economical factor
Economic factor includes change in interest rates, inflation, deflation etc. Positive impact
over TESCO will be deflation and this will lead to fall in the price of the grocery products, due to
which the sale of the TESCO will increase and this will lead to rise in the revenue of the
company and the profitability of the TESCO will increase automatically. The negative impact
over TESCO will be change in interest rate and due to which loan will be available to TESCO at
higher rate and this will increase the cost of borrowing and similarly the profit of the company
will fall.
Social factors
Social factors include wealth, occupation, education, lifestyle etc. The positive impact of
the social factor over the TESCO will be wealth of the UK population as the company is
targeting high wealth people in order to increase its revenue by providing them home delivery
services (Dunne. and McBrayer, 2019). The negative impact over TESCO will be impacting the
lower income group as they will think that the company is only profit oriented and focuses only
on targeted audiences this will shift the audience to other grocery store.
Technological factors
Technological factor include advancement of technology which can ease the conduct of
the operation and make fast the process in the work. It will impact and influence TESCO by
using advance technology in which 3D technology will be used by TESCO in order to present
information available online in much better and attractive way. This will increase the visibility of
the product and which will lead to increase in the sale of the product or products. The negative
impact over TESCO will be using outdated technology in the grocery cart in which still company
is used traditional cart, this will lead to making shifting of the customers as the customers will be
more interested towards the grocery store having advanced technology in the grocery store, in
which the company can automatically put items in the cart.
Legal factors
Legal factors are law factors which effect the operation of the business. Positive impact of
the legal factor change in law for the safety and health management of the employees in which
the companies which were not maintaining the safety of the employees have to suffer. TESCO is
already maintaining proper safety law which will lead to imposing no penalty against them. The
companies which were not maintaining the safety will have to pay for the penalty and this will
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increase there cost and direct impact will be seen over the price of the product, the price will
increase. The negative effect due to legal factor will be change in law for the tax in which higher
taxes will be imposed towards the companies not following regular guidelines for the e co
friendly tools and machinery and this will increase the cost of the company and which will
directly impact the profitability of the company.
Environmental factor
Environmental factors are the factors which affect the climate or the surroundings of the
company where it operates. Environmental factors include the geographical location, climate as
well as weather, disposal of waste etc. The positive impact over the environment, TESCO is
using proper waste management system in which the disposal of the waste is done at area which
is for the waste (Dayan, Ng. and Ndubisi, 2019). This will protect the environment as well as
health of the people, which will make the society fit and free from diseases. The negative impact
over the environment will be climatic change in the environment due to pollution. The pollution
will lead to killing of water bodies and affecting the health of the population adversely and which
will badly or negatively impact the image of TESCO. This will lead to loosing of faith among the
customers and the goodwill of the company will be affected due to this. If the goodwill of the
firm will fall then this will affect the business of the TESCO.
M1 Strategic management decision.
Due to macro environment factors the strategic management decision for TESCO will be
cutting the cost of the cost of production such as cost of running machinery and increasing the
minimum wages for the employees (Dunne. and McBrayer, 2019). This will lead to compliance
of the law and which will help in preventing from penalty. The company should take loan in
advance so the cost of the borrowing increment will not affect the operation of the company and
the company will maintain profitability. TESCO must focus on audience from different groups
and should not reply on audiences which are of a particular group, this will lead to winning the
confidence of all audience and all audiences will be ready to invest in the company. The strategic
management decision for the company will be using the advanced technology for the cart and the
same will lead to ease for the customer to choose and carry products and this will give boost to
the audience from the old community. The TESCO must also use the machinery which are e co
friendly because the same will save taxes and due to which the profit of the company will
increase and productivity in the work will also increase.
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P2 Internal analysis for given organization.
For doing internal analysis the method used is the SWOT analysis (Garcia-Swartz. and
Campbell-Kelly, 2019.). It is the method which is used to find out the strength as well as
weaknesses of the company which are the internal factors and external opportunities as well as
threats.
Strength
Strength are the factors at which the company is better than the competition. Strength of
the TESCO is the sound employees who are having the required skills to deal with the customers
and make the company profitable. The employees are provided best in class training to deal with
the critical situations and which will lead to quick resolving of the issues of the customers. If the
customer's issues are resolved then this will lead to growth in the business of the TESCO.
Weaknesses
Weakness is also the internal factor at which the competition is better than the TESCO.
The weakness of the company is its outdated technology for serving the customers (Dayan, Ng.
and Ndubisi, 2019). TESCO must improve the technology in order to get better results otherwise
this will impact TESCO adversely. Out dated technology will lead to increase in the cost of
production and due to which the price of the product will increase and this will result in shifting
of the customers to the place where they are getting better deal for the same product.
Opportunities
Opportunity is the external factor which takes into account timely action, if timely action
taken then this will lead to better result achievement or taking first mover advantage by which the
company can be profitable (Kaliappen. and et.al., 2019). If opportunity is not grabbed then this
skill lead to loss of the TESCO. For TESCO the opportunity is UK government is providing
subsidy for the usage of e co friendly machineries. If the latest technologies are used then this
will save a lot of cost of TESCO and due to which profitability of the company will increase.
Threat
Threat is an external factor over which the company do not have any direct control but if
timely actions are taken then the company can directly control the threat (Kingsnorth, 2019). If
threats are not controlled then they can have critical impact over the operation of the business and
business can suffer loss due to this. Threats are the factors which requires prompt action because
if the action is not taken timely then this will lead to giving competition advantage to grow in the
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future. The biggest threat for TESCO is the threat of entrance of new competition in which the
cost for the entrance of the new competition is higher and the competition can easily enter and
capture the grocery market at competitive rate.
M2 Internal strength and weaknesses with skill set.
The internal strengths of TESCO is the employees and the weakness of TESCO is using
the outdating technology (Koh, Singer. and Edmondson, 2019). The skill which is necessary for
the firm is giving the employees training of how to use advanced technologies in order to achieve
better results.
P3 Porter's five forces.
Porter five forces are the forces which helps the industry in analysing the strength as well
as weaknesses of the industry. For the challenges in the industry the corporate strategies can be
formed which helps the company to achieve better results (Madsen, 2019). In order to determine
the level of competition in the industry porter five forces can be applied to any segment of the
industry in order to find out the level of competition prevailing in the market. This model is
helpful in achieving long term profitability and long term revenue for the business. For TESCO it
is very important to determine the industry challenges so that steps can be taken in order to
overcome them timely. The structure of the industry is determined and then analysis of the
industry is done accordingly. The five forces of Porter are explained below:
Competition within industry
The higher the competition in the industry the lower the control the company have in the
market and if there is lower competition in the industry then there is higher control (Madsen,
2019). The competition plays a major role in determining the level of competition in the industry
which helps the firm to charge price accordingly of the product (Martínez. and et.al., 2019). In
the present industry for TESCO the competition is higher, so if the prices are increased then it
will result in shifting of customers to other companies. TESCO should not charge higher prices
and must do industry analysis and then charge the price of the product.
The potential of new entrance in the industry.
Analysing the present industry the cost and time to enter into the market is low and slow.
So this is a benefit for the TESCO and the same can charge higher prices for the product and
have control over the industry and the competition due to this. But if the price and time to enter
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in to the market is higher than the company can not charge higher prices and this can result in
shifting of customers to the new business.
Supplier power
If there are fewer suppliers in the industry then more dependency will be there on the
supplier and if there are suppliers in the industry then the company will not be dependent upon
suppliers in the industry phenomenally (O'brien, 2019). If there are fewer suppliers then the
supplier can drive cost and input to the company at the desired rate which is so in the present
industry.
Buyer power
It depends upon company to company how much the customers are there if there are few
customers then there is high negotiable rate. If there are higher customers than the buying power
will be higher. In the industry the buying power is higher as TESCO is having higher customer
base.
Substitute product threat
If there are higher substitutes for the product then there will be higher chances that
customers will shift to another product and if there are lower substitute available then this will
lead to gaining control (Pucheta‐Martínez. and Bel‐Oms, 2019.). In the present industry there are
higher substitutes available so it is must for the TESCO to do proper analysis before framing
strategy of pricing.
M3 Using appropriate strategies in order to improve.
TESCO must focus on pricing strategy and should not charge higher prices for the
products which are available in the market at lower price because the same will lead to shifting of
the customers from TESCO to other companies. As the industry is having high competition it is
necessary for the TESCO to keep updated and should have sound marketing plan in order to
address sales and marketing issues.
P4 Theories for the strategic direction and planning for the organization.
Profit maximisation and competence theory
As per this theory company must focus on maximizing the sale sin order to increase the
probability of the firm (Quinlan. and et.al., 2019). In order to maintain dignity in the market the
company must cover its marginal cost and its marginal revenue must be higher than marginal
cost. TESCO must apply this theory in making strategy as this will help the company in
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increasing the productivity as well as profitability, which is very necessary in order to give
competition to the other companies. If timely application of this theory is not made then TESCO
can suffer losses and due to which the growth of the firm will be affected.
While using the cheap sources, TESCO should also maintain the quality of the product as
without which the company will lose competition in the market (Rao. and Polepeddi, 2019.). If
the customers are not provided quality products, and they will walk away and this will impact the
goodwill of the company. Quality and pricing of the product plays equal role and must be
balanced in order to make company competitive and more result oriented with the happy
customers.
Contingency theory
As per this theory a company must have a plan which is known as contingency plan. The
plan includes situation which may or may not arise in the future, but the company must be
prepared for the situation in order to face the challenge effectively and efficiently (Umar. and
Chunwe, 2019). TESCO must make contingency plan in order to prevent the future big loss for
the company as when the negative situation is there the company can easily face the situation.
There are various contingency situations for TESCO which may arise in the future such as
earthquake, petition in the court, losing the case in the court which if occurred frequently then
can result in decrease in the financial performance of the company. As per this theory the
contingency must match situation, effective management is not stagnant all the time and must be
balanced in order to get prominent result. TESCO will face positive as well as negative trends or
will face profit as well as losses, so the firm must not waste the profits by distributing them to the
employees rather retain the profit in order to meet the future misshapenness which may arise.
Planning for the organization
Under the strategic plan budgeted result must be compared with the actual result and then what
are the deviations must be addressed by increasing the productivity of the company. TESCO
must include in the plan the factors such as cheap labour, cheap technology, attractive seasonal
discount rates in order to increase the customers and various other factors which reduces the cost
and increases the profitability. Planning for the situation which may arise will lead effecting
management to deal with that particular situation.
M4 Strategic management plan having tangible as well as tactical priorities for the strategy.
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For TESCO strategic management plan having tangible benefit will be prioritizing the
client and then addressing the issues by meeting the expectations of the client (Uyar, 2019). This
will boost the confidence of the client and the client will be more interested in investing in the
products. Prompt addressing of management problems are also necessary as this will lead to
maintaining proper management which will result in increase in the productivity of TESCO.
Framework for fuller utilization of the resources will lead to achieving optimum result and due to
which the reduction in the loss of the company will take place. As per the strategy ethics as well
as policies of the company must be followed in order to maintain the dignity.
CONCLUSION
As per the study it is foun that business strategy plays a dominant role in taking decisions
which are related to business. The internal as well as external environment plays equal role in
making decision. Porter five forces are very much necessary for doing industrial analysis without
which the company cannot make appropriate decisions. In order to achieve profits and stability
the company must do analysis regularly and implement the required changes in order to achieve
better results which will help the company in increasing the productivity. The other theories such
as contingency theory and profitability theory also plays a major role in doing analysis of the
business. TESCO should also follow the same for the better and effect results.
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