Business Strategy: Analyzing the Macro and Internal Environment of Tesco

This report analyzes the macro and internal environment of Tesco, including the impact of different frameworks, strengths, weaknesses, and growth opportunities.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1 ...........................................................................................................................................4
P1 Apply different framework which impact the macro environment for Tesco.......................4
M1 Critically analyse the macro environment to determine strategic management...................6
TASK 2............................................................................................................................................7
P2.Analyse the internal environment and capabilities of a company.........................................7
M2.Evaluate the internal environment to assess strengths and weaknesses of an organisation. 9
TASK 3..........................................................................................................................................10
P3. Porter's five forces model evaluate the competitive force of a specific market sector.......10
M3. Devise appropriate strategies to improve competitive edge and market position.............12
TASK 4..........................................................................................................................................12
P4. Applying a range of concepts, theories and models to interpret and devise strategic
planning.....................................................................................................................................12
M4. produce a strategic management plan that has tangible and tactical strategic priorities and
objectives...................................................................................................................................13
D1. Critique and interpret information and data applying environmental and competitive
analysis......................................................................................................................................14
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy is define as the combination of all the decision which are taken and
action are performed by the business to accomplish business goal and secure the position in the
market. The present report is based upon Tesco which is an British multinational groceries store
and general merchandise retail store all across the world (Shuen, 2018). The company head
office is located in Hertfordshire England. It was founded by Jack Cohen in 1919 as have 450000
employees currently working in the organisation. It is essential to focus on macro environment to
provide better service to consumer. The internal environment must be maintain by the
organisation for a smooth functioning. The report further describe about porters five forces in the
given outcomes.
TASK 1
P1 Apply different framework which impact the macro environment for Tesco
Macro environment refers to those elements which are not manageable by the company.
Such factor are social. Legal, environmental etc. Tesco management have to focus on managing
all such factor and male sure to achieve all the desire outcomes effectively. There are some
factor which are explain below which comes under Pestle analysis:
Political factor: These are the factor which are controlled and governed by the ruling
party. This consist of Tax rate, laws and regulations in which company have to operates. As UK
have stable government and laws are made in favour of organisation which help them to run
business effectively. Tesco management should focus on all the political aspect and follow all
the rules and regulation for smooth functioning. The tax on supermarket chain like Tesco was
proposes by the local bar council of UK as government refused to take initiative mainly to avoid
any kind of price hike. This can effect the image of company and also reduces the sales for the
company. Along with this, government also support the organisation and it also permit the
respective company to import foreign commodities for selling there outlets effectively. BREXIT
have impacted the entire nation and the business which reduces the sales and productivity of the
company.
Economical factor: These are the factor which consist of GDP, inflation and recession
rate. Therefore Tesco must be aware about the change in policies such as exchange in taxation
and other norms for smooth functioning. UK people have high spending power which makes

company to earn more profit in lesser time period. All these components create direct as well as
indirect impact on the organisation so company have to make effective strategies to create long
term impact on the business as to achieve desire aims and objective effectively. As people of
UK have more spending power due to high growth rate help firm to earn more profit in a well
define manner (Navissi, F and et. al., 2017). Diversification have been the main key strategies
which is pursued by the organisation over the year which have the main reason for its success.
Due to economical change company have shifted towards promotional activities which aid in
creating awareness regarding new product. As identifying the market of UK enterprise is now
focusing on luxurious as to capture niche target consumer. This has been figure out by increasing
disposable and household income have increased which lead company to explore and expand
business effectively.
Social factor: Due to drastic change in social norms and trends indicates that UK have
move towards bulk shopping. As per the changing needs and demands of the customer
organisation have to change there product and service as meet the expectation of the consumer.
Tesco is adapting to these changes by accommodating the demand for organic products. The
shopping trend is constantly changing over the period of time and people nowadays require fast
and easy product to consumer. Now customer need home delivery which help in increasing and
which rise in the obesity in the society of UK. Tesco must consider changing behaviour as well
as demand for the organic product. Hence the firm is focusing on improving the hygienes level
of product and provide healthy goods to make a world better place. As per the survey report of
UK that most of the shopper are loyal and they are brand specific which leads towards common
goal. Tesco have duty to avail this opportunity by creating close ties and one to one connection
with the customer.
Technological factor: In modern world technology have changed the way of doing
business. So in this case Tesco management have to focus on implementing new technology such
as online shopping, home deliveries and self service checkout points as provide customer ease of
doing shopping and company attract larger customer base. To embrace advancement in the
technology as opportunity by adopting different technology as improve the market share. The
rival company like ASDA is using technology where stock and inventory are managed by
software. Hence it become crucial for Tesco to have better better inventory management system
as this provide competitive edge and also maintain demand and supply present in the market.

Furthermore the company have RFID technology to increase in store experience for consumer.
This facilitate management to count items in the stock and remove it after sales. This system is
useful for supplier for the store and replenish when required. Apart from this, customer have to
pay by online payment system in store such as PayQwid. This help to gain loyalty points to
customer as through which they can avail more product and service.
Legal factor: These factor involve all the laws and legislation made by government and
they are consider as the most important factor for organisation as this prevent loss and theft
present in the market. UK have different set of laws from other nation and company must follow
all the laws to make sure for a smooth functioning (Nagy, J and et. al., 2018). To facilitate these
policies Tesco provide its customer price reduction on various items as per the rules. In a
business legal environment, company administration have to focus on fulfilling the needs and
requirement of the company which help to gain effective decision for the company. In recent
years Tesco employees have tool legal action against the employer on the basis of age gender
discrimination. It was identified that workers were extremely frustrated as they were getting low
rates for nights and weekends.
Environmental factor: Many organisation are facing high pressure from the
government authority in order to address environmental issues. In the case Tesco management is
focusing on reducing the waste and implementing different policies such as collecting unwanted
plastic bags from the area. Furthermore the company is committed to the renewable sources and
generate 100% of electricity in coming years. Firm promise to reduce carbon footprints as to
provide healthy environment. Recent trends that are influencing UK clothing retail industry
include the rise of ethically and environmentally conscious consumers who continually demand
firms to adopt practices such as paper packaging and use of recycled materials. A new
environmental trend is facing the food retail industry is the consumer demand for zero waste by
supermarket. In response Tesco have already started taking initiative to fulfil the need and
requirement of the users. Apart from this, spending more resources on solar power as create a
sustainable business environment which provide a better future for coming years.
M1 Critically analyse the macro environment to determine strategic management
Macro environment plays an vital role in expanding and making effective strategies
which help firm to capture large market share. The analysis is crucial for the company to make
effective decision to explore the market and productivity effectively. Along with this, Tesco

management have to focus on all the rules and regulation which are government and other factor
such social, technological and other factor as to fulfil the requirement of the company. With the
assistance of such analyses, management can offer high end service to consumer. Primarily the
company closely focus on the larger extent as every business get effected by the different
external forces present in the market. The macro environment is quite dynamic and Tesco
management have constantly focus on the trends which are changing as to compete in the
business world. Along with this, company have to regularly track the market and make quick
decision which leads to success and growth. Furthermore entity have to look forward all the
factor such as demographic, technological, and other factor which help in increasing the sales
and productivity of the company.
TASK 2
P2.Analyse the internal environment and capabilities of a company
VRIO Analysis
This is tool which is used to figure out the different sources along with the capabilities as
to build a sustainable business model. This consist of four different elements such as Value , rare
, Imitate and organised. Tesco manager can use such model to expand and explore the business
and can easily target the market audience effectively.
Valuable: The image of Tesco is valuable which help in company to attract larger
number of audience effectively. Entity have creates positive brand image and consumer are
aware about the product and service. Product portfolio is highly essentials because it differentiate
the product from another rivals present in the market. Technology is essential as this improvise
the plan and make proper decision which help in expanding and exploring the business
effectively.
Rare: The goods and commodity which are offered by Tesco is not rare as it help in firm
to have unique image in the minds of customer. The method and techniques used by firm is also
differentiate from other product present in the market. There are different factor such as financial
resources which are very rare as it has strong financial implementation for long term.
Imitate: Technology which is used by Tesco is very costly and it is very difficult for the
company to eliminate such factor because it is very tough task to copy such product which are

offered by different organisation. Apart from this technological capabilities cannot be intimated
as it comes with different features.
Organised: Financial resources of the company is organised to capture the value because
firm can use different resources effectively as to create proper structure and method to invest the
right resources at right place. Apart from this, Tesco management can focus to make use of
strategies effectively to expand the business effectively.
Valuable Rare Imitate Organised
Brand image Brand image - - - Competitive
disadvantage
Product
Portfolio
Product
portfolio
Product
portfolio
- - Temporary
parity
Technology
capability
Techno-
capability
Techno-
capability
Techno-
capability
- Unused parity
Financial
resource
Financial
resource
Financial
resource
Financial
resource
Financial
resource
Competitive
Sustainability

M2.Evaluate the internal environment to assess strengths and weaknesses of an organisation
SWOT Analysis :
This is the method through which the company tend to figure out strength and weakness
present within the organisation (Evans, and et., al., 2017). For Tesco management have to
implement such model as to improve the efficiency as well as productivity in a well define
manner. It is a tool and technique that is used and implemented by the management of a
company to monitor the strengths, weaknesses, opportunities and threats of the firm. It is a
strategic planning tool that utilised to assist an individual and company to find out its strengths
and weakness. The SWOT analysis of Tesco is mentioned as below:
Strengths
Wide and diversified customer base- Tesco offers a wide and diversified base of
consumer that consist equipment brokers, drilling contractors, oil and gas organisations. The
company also provide products and services in different segments, it is not over-dependent on a
single segment for its profit margins and revenues. The company is one of the biggest grocery
store in UK and have highest sales revenue among the competitor.
Strong product portfolio- Respective company has a strong product portfolio specially in
top drive segment that sells equipments and offers services across segment cross wise the world.
The company also have strong product line and segments like groceries, home appliances and
others. Furthermore firm use high end technology to provide better to services to consumer.
Weaknesses
Weak financial performance- It is the major weakness of this company because the firm
operate its business globally so it raise fund from financial institutes. But the profit of the
respective company is impacted by bad debt from credit cards and high extents of household
insurance claims. The prime weakness of Tesco is there sales services which is very slow which
create a negative impact on the customer. Along with this company do not sell there product
online.
Lack of experience- It is other weakness of the firm because Tesco have lack of
experience in some markets that it specify to enter like its started it own business or brand in
smartphones and tablets. The organization requires to invest more finance in new networking
technologies and information technologies. It also invest in store renovation, amusing cash from
diminution plan of action and it is probable to have an harmful effect ons sales of the firm.

Opportunities
Continue investing in research and development- Tesco, it a technology supported
company that requires to perpetually innovate to sustain in a very rival marketplace. By investing
in research and development activity, the firm can accomplish growth option because with the
help of it, the management aware with the customers needs and changes or innovation that are
arising in technology.
Pursuing international market expansion strategy- It is an another growth option that
can be adopt by the management of the company in term of making business expansion at global
level. With the help of it, the firm can expand its business in that nations where it is not operating
its business. While expanding and exploring the business company can earn more profit and
revenue.
Threats
Change in laws and regulations- It is the major threat that affect the business of Tesco
because the firm operate its business globally. Due to running at international level, the company
consider laws and legislations of different countries so that it can operate in that nations legally.
But when the national authorities make changes in their legislations then it influence the business
of the respective firm.
Competition- It is another risk and threat that is suffered by the administration of Tesco.
There are number of competitor in retail industry like ASDA, ALDI, Sainsbury and others that
offer similar products and services as Tesco. It create high level of competition to Tesco and
create barrier in term of gaining rivalry benefits form market. The major threat to the company
are the rivals present in the market. So company have to focus on quality and services to avoid
threat.
TASK 3
P3. Porter's five forces model evaluate the competitive force of a specific market sector
Porter's Five forces model
This model is used for various organisation as to figure out the different competitors and
identify different factors to eliminate such factor to expand the company effectively. This
concept is developed by Michael Porter in 1979 to understand the five competitive forces that
create their impact on an industry. Tesco management should focus on different forces which

help in capturing larger market share. The detail description of this model for Tesco is describe
below:
Threats of new entrants: Tesco have large distribution channel and operates its business
in different part of the globe. As in present world there are various organisation which have
entered in the market. The threat will lead Tesco to bring out down the price and reduce cost to
capture and avoid large threat from other companies. Enterprise have to manage all these
challenges and build effective barriers to safeguard competitive edge. There are other companies
such as ASDA are the threat to new entrants which allow company to improve the quality of
service effectively.
Bargaining power of supplier: All the organisation in the retail sector purchase there
raw material from the different suppliers. They dominant the market which can decrease the
margin of the Tesco. In order to avoid such kind of situation company have to tie up contracts
with different suppliers as this will help entity to maintain demand and supply present in the
market. The organisation have history of using its bargaining power to delay payments in order
to improve the sales and its operational profit margin in a limited time frame.
Bargaining power of buyer: Buyers often demand more from the company and firm
have the responsibility to meet the end requirement so that that Tesco can attract large customer
base. Apart from this, it put pressure on Tesco to gain profitability for longer time period. So
firm must indulge in research and figure current and future trends to meet the requirement of end
user effectively. The product differentiation is high which means that buyer are unable to find
out alternations for the product which are used by the company. The difficulty in switching
makes bargaining power a weaker force within the industry.
Threats of substitutes: When the new product in launch in the market it become threat
for the company to manage the sales and revenue for the longer time period. Hence Tesco top
management have to become more service oriented rather than just focusing on product hence
this will help enterprise to handle larger audience. There are very few substitutes present for the
company which compares to Tesco as it operates at the lower price than the other substitute
present in the firm.
Competitive rivalry: If the rivalry among the companies are intense than it will drive to
lower pricing and strategies to gain overall profitability for the industry. Tesco is operating in a
very competitive environment as to avoid such rivalry firm have to develop a sustainable

business model to compete better. Apart from this collaborating with the different companies
may lead to increase the market size to earn more profit. The industry in which Tesco is growing
every year and is expected to continue to do this for a few years ahead. A positive Industry
growth means that rival are less likely to engage in completive activity because they do not need
to capture market share from each other. Tesco have fixed cost which is high in which company
operational activities tale place.
M3. Devise appropriate strategies to improve competitive edge and market position
Ansoff Matrix
This matrix was created by Igor Ansoff and used by companies as strategy stage of
marketing planning process. Here are some step which Tesco must take under consideration are
explained below:
Market penetration: This is the first strategy in which company offers is existing
product in existing market by making changes to there promotional activities as to capture large
market share. Tesco management have to focus on needs and requirement of user as to develop
penetration in market.
Product development: Tesco firm should improvise the product and offer services as
per there needs and wants. The management have to focus on product quality as this aid to
increase the value of product effectively.
Market development: This is growth strategy which is risky as compare to other factor
present in the market. Tesco require large amount of resources to identify the needs and wants of
consumer. Apart from this it reduces any kind of risk present in the market where organisation
tend to provide existing product in the market.
Diversification: The administration of Tesco have more there product line from one
place to another in order to capture large market share effectively. There are many rivals present
in the market hence to capture large market share company have to diversify there product range.
TASK 4
P4. Applying a range of concepts, theories and models to interpret and devise strategic planning
Vertical and Horizontal integration
Both the vertical and horizontal plan of action is used for business to expand the sales as
well as revenue for the company. Establishing an effective business organisation it is essential to

have make effective decision by the top level management. Understanding the difference
between the two can help in making choice which best match the goal of business. Here is the
detail explanation of both integration in detail manner:
Vertical Organization
In vertical organisation the decision and communication flows from top to down
structure (Leonidou, L.C and et. al., 2017). The top level management take all the effective
decision and make sure that every employees follows the decision as per the management as to
fulfil the need and requirement of the company. In the context of Tesco company have to follow
vertical structure as this aid organisation to maintain proper hierarchy to achieve the target set by
firm. Apart from this, manager is responsible for telling employees to work under the guidelines
of the company to meet out the maximum output.
Horizontal organisation:
In horizontal organisation firm have flat structure which means very few managers have
more authority to make decision as per the needs and wants. This system allows employees to
feel motivated and encouraged and this help in completion of work on time. Tesco manager have
responsibility to improve the working environment by improvising policies and productivity of
the company. The leader and manager are in horizontal structure are motivated and driven by the
company goal which tend to increase efficiency and morale.
M4. produce a strategic management plan that has tangible and tactical strategic priorities and
objectives
Strategic management plan
This is an action and process of making different strategies as to bring out useful result
for the firm to expand and grow the business effectively. This plan consist of mission, vision,
objective and strategies etc. for the development of firm.
Overview: Tesco is an grocery supermarket chain which was founded by Jack Cohen and
its operates its business in different part of the world. Along with this, it has around 6800 shops
and its headquarter is Hertfordshire UK.
Mission: The prime mission of the Tesco is to create a better image as well as improve
the market share in a limited time frame.
Vision: The vision statement of firm is to become the most valuable firm by providing
better product and service to consumer.

Objectives: The main objective of the Tesco is generate profit by 10% in coming 5 years.
The another objective is to create larger customer base by promoting there product and services
to the larger scale. Apart from this company have objective to sell product online which help in
boosting sales for longer time duration.
D1. Critique and interpret information and data applying environmental and competitive analysis
This has been interpreted from the above report that by using different model company
and concept like stakeholders analysis, SWOT and VIRO will aid firm to explore and expand the
business effectively. All the essentials factors must be carried out by the top level management
as to achieve the desire aims and objectives effectively. The competitive analysis determine the
business in the distinct advantage from the traditional as well as non traditional competition.
While analysing the competition, the firm can exploit the business and tend to identify the
various flaws and improvise changes as to create sustainable business model for the company. In
order to understand the competition firm have to do intensive market research which help in
expanding business and earn more more profit in coming years.
CONCLUSION
As per the above decision it has been identified that business strategies are those factor
which help in organisation to make effective plan through which firm can increase the sales for
the company. Apart from this, Porters five forces have been used in report to identify the present
and future trend in the market. Beside this, SWOT has been taken into account to figure out the
strength and weakness and make changes to improve the market policies of the company
effectively. PESTEL analysis helps in providing information about the outside factor of the
environment in which organisation running. At last different models and theory have been used
to make, framework to make strategic planning for the success and growth in an effective
manner.

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