Business Strategy for Tesco: Impact of Macro Environment, Internal Capabilities, and Competitive Forces

This report discusses the impact of macro environment on Tesco, analysis of internal environment and capabilities, evaluation of competitive forces using Porter's Five Forces model, and strategic planning using Porter's generic strategies. It includes a PESTLE analysis, stakeholder matrix, SWOT analysis, and VRIO/VRIN framework.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
P1 Impact and influence of the macro environment and its strategies........................................3
P2 Internal environment and capabilities....................................................................................5
P3 Porter’s Five Forces model evaluate the competitive forces.................................................7
P4 Range of theories, concepts and models, interpret and devise strategic planning................8
CONCLUSION..............................................................................................................................10
REFERENCE.................................................................................................................................12

INTRODUCTION
Business strategy is referred to as the combination of the actions taken on the basis of
decisions by the organisation in order to achieve the business goal as well as for making a secure
position in the industry. It is considered as a backbone of the business as this is the roadmap that
leads to reaching to the desired goal. If there is any fault discovered in this path, it would be have
some consequences which could create impact in getting lost of the track. Tesco is taken as base
management. Tesco is a British multinational grocery store and retail merchant that specialised
in selling of goods of varied areas such as clothing, financial facilities, software and many more.
This management was established in 1919 by Jack Cohen in the United Kingdom. In this report,
it covers the impact of macro environment in organisation with the analysis of internal
environment and capabilities. Along with this, a model for evaluating the competitive forces and
a strategic planning is mentioned.
P1 Impact and influence of the macro environment and its strategies
Vision: The sight statement of Tesco is to be effective and highly efficient organisation
through the consumer that they serve, the gathering in which they are functioning as well as their
committed and loyal stakeholders and colleagues.
Mission: The mission statement of Tesco is 'We make what matters better, together'
which means that every has their contribution towards the success of the organisation and it has
the ability to create that environment where every member of the organisation could reach to its
potential for contributing for a constant growth and development (Borges and et. al., 2020).
Objectives: The objective of Tesco is to serve shoppers a little on every day. As they are
serving 66 individuals every second in UK and that is their objective to make sure that that every
customer gain experience of getting things from their organisation at their each visit.
Core values: Tesco core vale encompasses of customer focused, taking caring for all and
a small support could make a difference.
PESTLE analysis
PESTLE analysis is a structure for measuring the macro environmental component that
could create its effects on the managerial performance (St-Hilaire and Boisselier, 2019). In
context to the selected organisation, PESTLE analysis is mentioned below:

Political factors: Tesco is operating in various nations as it is considered as the largest
retailer across the globe. In order to operate in several countries, they need to keep an eye on the
changing political circumstances. With Brexit, there is dilemma which is related to the new
legislations which could arise and it can be the reason for increase or decrease in the sales.
Economic factors: The COVID-19 outbreak has created a huge impact on various organisation.
As people were not allowed to step out of their houses due to the lack down as imposed by the
government across the globe. With the e-commerce platform of Tesco, they have saved
themselves from being the victim of the pandemic (Zámborský, 2020). Along with this, through
their e-commerce platform, they have increased their revenue even in the pandemic.
Social factors: Tesco follows the local social and cultural trends of distinct nations and
serves as per them. For illustration, Tesco is serving Halal meat for Muslim customers in UK.
Along with this, they are also serving their own label of Halat meat and brand in Malaysia and
Thailand. Moreover, people are more inclined towards plant based vegetarian food in which the
organisation's revenue has been increases recently.
Technological factors: The trend of online shopping has been increased due to COVID
19 pandemic. Individuals have order groceries online to avoid getting infection of COVID 19. As
Tesco has its e-commerce site, they are able to survive in the pandemic an deliver products on
time to the customers (Ahn, 2020).
Legal factors: Tesco should follow all the local and international laws as legal structure
and government rules and legislations are different in distinct nations. The European Union in
2018 has implement a law which restrict the organisations for functioning any anti-competitive
actions. It means that the respective management will not hold and merge with high term of
enterprises of their scope in Europe. As Britain is not present in Europe, the law would not be
applicable in UK.
Environmental factors: The selected organisation has launched their phase 2 of the
recycling plan and this includes removing, reducing, reusing and recycling of the plastic. This
would assists firm in reducing the plastic.
Stakeholder matrix
Stakeholder analysis is a procedure for determining the individuals prior to the beginning
of the project, grouping them as per their level of participation, influence and interest in the
project and identifying how to include and interact each stakeholder entities (Hvass and

Pedersen, 2019). This analysis evaluate both internal and external stakeholder of the Tesco.
Internal stakeholder are considered as the main stakeholder which includes employees,
managers, executive committee, shareholders and board. Tesco board includes chief executives,
chief financial officers, chairman and some non- executive directors. They are considered to be
powerful as well as vital for the organisation (de Oliveira, Carneiro and Esteves, 2019). The
external stakeholder of Tesco includes creditors, suppliers, local communities, rivals and
government.
INTEREST
POWER
Meet their needs
Directors
Service sales
Key players
Colleagues
Lead generation
Least important
IT support
Consulting admin
Show consideration
Sales support
Partner sales
P2 Internal environment and capabilities
SWOT analysis
SWOT analysis is a tool that are utilised for evaluating the competitive orientation and
developing strategic planning for the organisation. In context to Tesco, SWOT analysis are as
follows -
Strength: Tesco is termed as one of the largest and most profitable markets as well as
retailers across the globe. They has several formats for appealing to the local an cultural needs,
assisting in providing more personalised experiences. They are using latest technologies
throughout their functions and operation, developing a greater cost efficiencies and increased the
service experiences.
Weaknesses: The selected organisation has a number of competitors which led price wars
which erode profit margin of some of the retailers and Tesco must have concentrated on some
other manners for gaining competitive edge. Also, Tesco is highly independent on UK an Europe

of its sales and has not invest resources on creating markets where they operate (Lüdeke‐Freund,
Gold and Bocken, 2019).
Opportunities: There are various opportunities for Tesco such as to penetrate into those
countries where they are not present. Along with this, they could also make joint ventures with a
local firm of that market or nation where they are not able to operate properly. This would assists
the organisation in improving their performance in those areas.
Threats: One of the major threat to Tesco is the economic recessions and credit crunch
which threaten the revenue as well as market share that reduce the number of size of transaction
done by the consumers. Along with this, rivalry threats are coming from global retailer firm
which would be capable to provide low term of prices and greater sort and also more accepted
international supply distributor to maintain the commodities faster than Tesco as they are
creative and also have the knowledge of using technology more efficiently (Hirsch, 2020).
VRIO/VRIN framework
VRIO framework is a strategical section of tool that are created to help the business for
uncovering and securing the assets and capabilities which provide them a long term competitive
edge. VRIO framework for Tesco is mentioned below:
Valuable Rareness Imitable Organised
Brand image YES - - -
Problem solving skills YES YES - -
Quality product YES YES YES -
Finance YES YES YES YES
Valuable: Tesco has a unique brand image and this includes brand integrity. The brand
image has been developed from over a long period of time with its constant effort and product
provided by the organisation.
Rarity: Tesco fosters the organisational culture of solving problems between their staff
members and management. This provides higher creativity, team work and innovation in the
organisation. The innovation converts a higher rivalry that leads to competitive edge and
beneficial for the firm in the industry on terms of long run as well as short run (Mihardjo and et.
al., 2021).

Imitable: Tesco provides high quality commodities to the customers which is a source of
the brand appeal. Their is increase in consumption of product of Tesco as they are providing high
and constant quality.
Organised: The financial strength helps the organisation in searching opportunities for
new product development and introduction. This is vital in allowing the firm to analyse the
merger and acquisition for gaining the competitive edge. Along with this, it is valuable as this
support in provided by the organisation's vast and well managed distribution systems.
P3 Porter’s Five Forces model evaluate the competitive forces
Porter's five forces model
Porter's five forces model is developed for determining and evaluating the five
competitive force that helps in shaping of the organisation and also enables to identify the
strengths and weaknesses. This framework might be applied to various sections of the economy
for comprehending the business relation sections (Jayakumar, Das and Srivastava, 2019). In
relation to the respective management, Porter's five forces are as follows -
Rivalry: The competitive rivalry in retail market is high as there is increased demand for
the commodities to fulfil the basis need and wants. This results in number of entities that have
capture the market to offer several platforms for the consumer to purchase which results in more
competition between the player. The main rival of Tesco includes Aldi, Lidl, Morrisons and
Sainsbury’s which operate in this segment.
Bargaining Power of Customers: The bargaining power of consumers is higher as the
shifting of costs in the retail section is low. Thus, customers could effectively shift to other retail
merchant if they are not satisfied with the goods scope, pricing policy or consumer facilities of
Tesco. Tesco cater their services to more than 80 million consumers on a weekly base and this
fact could slightly decrease the bargaining power of consumers.
Bargaining Power of Suppliers: The bargaining power of suppliers is low to moderate as
there present a large number of suppliers which has a low influence on the organisations. Also,
individual vendor has a low impact on the large retail enterprises. Along with this, the limited
supply capacity makes it challenging fir the vendors to create influence on the successful
development of the organisation and this allows for taking a certain power over them (Kano and
Verbeke, 2019). As Tesco offers food and non-food items from more than 1,000 providers as

across the globe, thus, Tesco could easily negotiate goods cost, while selecting only those
supplies which provides goods of the higher terms of the choice.
Threat of Substitution: The threat of substitution in the retail industry is low as in effort
to fulfil the demand and supply, retailers are considered to be the main players. There are some
options to retail store commodities which could be accessible easily. However, the differentiating
factor of a limited selection of substitutes made in challenging to consumer for switching away
from branded products. Moreover, some of the alternatives are more expensive than product
which are at the stores. The utilisation of emerging technologies and also the impact of online
buying and e-commerce have exchanged the manner of doing the management. On the other
side, the key secondary of large retail bonds are small stores and organic shops that will not
poses any sincere threat to financial sustainability of Tesco. Furthermore, due to the economic
system of scale outcome, Tesco could provide the similar commodities at a inexpensive cost,
creating them more captivating to customers
Threat of New Entrant: The threat of new entrants is high as in the presence of large
retailer , and emerging store businesses could easily penetrate into the markets. Small
management might come into the business and take part in locality favourable accessibility,
strong suit and varied other causes. Hence, the superior is not taken the concern as wholesale
commodities could be maintain as per to the needs of new entrants which would be either on a
level of small or medium. Although the floor space need can be an obstacle to entry for new
firms. This elevates a sense of healthy rivalry between the organisations owing to the nature of
the retail industry. The new entrant would likely to be high (D’Souza and John, 2019). A higher
term of market impregnation is other element which restrict the firms from entrance this market
section.
P4 Range of theories, concepts and models, interpret and devise strategic planning
Porter's generic strategies
Porter's generic strategies is utilized to identify the behavior of the organization and
drives its behavior. The organization position itself by leveraging its strength. The organization's
strengths fall into divisions such as cost advantages and differentiation. In context to Tesco,
Porter's generic strategies are mentioned below:
Cost leadership strategy: Cost leadership strategy call for the lost cost producer for
providing a quality level. The main aim of this tactic is to maintain the leadership point by

effective value chain organisation. This tactic will enable the Tesco to extend their market share
by making target to the middle class teams that made a largest dimension of the global customer
field of market mix in almost of all the nations. The middle class groups commonly have a high
importance in the pricing factor and cost leadership is considered to be the best and efficient
strategy to serve the wants and needs of this segment of consumers (Ghouri and et. al., 2020).
The selected organization concentrates on the affordability and availability of their goods in the
world that leads to high term of awareness and gross sales development and growth and also
offers a bold competitive boundaries. Tesco also provides discounts and coupons to reach their
sales target as well as manage the rival pressure by their close competitors. The intended
outcome of offering discounts and coupons is to elevate the popularity of the brand as well as
motivate the consumption.
The cost leadership strategy has benefits to Tesco such as gaining of rapid recognition of
the brand, increasing the customer base, reaching their sales targets as well as motivating
consumption of the customers with emphasizing on the affordability and accessibility of the
commodities.
As Tesco competitive advantage strategies has been represented cost leadership as its key
strategy, the organization also utilized the differentiation strategy for setting the basis of a
sustainable competitive edge in the competitive global industry is mentioned below:
Differentiation strategy: In the differentiation strategy, the organization seeks to be
unique in the market with certain dimensions which are broadly valued by the purchasers. It
chooses one of more traits which many purchasers sees as vital and also uniquely positions
themselves for fulfilling those wants and needs. The selected organization utilize differentiation
making combination with cost leadership strategy for achieving the growth objectives. This
strategy acts as secondary generic strategy which allows Tesco for extending their customer
base through emphasizing on the their unique features of the commodities (Untari, 2020). The
objective of utilizing this strategy is to make difference by creating innovations as well as
addresses the growth health concern of the customers. With the helps of this strategy, Tesco has
positioned their commodities in such a manner so that they could stand out of the crowd
(Hassanien and Dale, 2019). The organization uses differentiation as a tool for reducing the
pressure of their brands with investment in marketing as well as celebrity endorsement for just

to made that Tesco is different from its brands. The strong presence with extensive experience in
the world are considered as differentiation element.
Ansoff matrix
Ansoff matrix is a tool which is utilize by the organization to evaluate and plan its
strategies for growth. The matrix consists of four strategies which could be used to assists an
enterprise to develop and evaluate the risk with each strategy. In context to the selected
organization, Ansoff matrix is mentioned below:
Market penetration: Market penetration implies being in the present market with existing
products by the organisation. As for the rest of the competitive in the industry, the organisation
needs to adopt certain alterations in the goods' design, packaging and prices or this could difficult
for the organisation to be in the industry for a longer period of time. Tesco promote their grocery
business concern share by providing quality of goods in the current field of market. For entering
in the marketplace, the management provide low priced quality goods to the customers that will
maximise their market share.
Market development: The selling products which are already exists to the new market is
considered as market development. Market development is costly for small organisation but big
organisation could implement it certainly and it is vital for them as well. Tesco adapts this
growth tactics by shifting itself into convenience store market and growing new shops in the
foreign markers. Market development helps the management to extend their customer base,
making the management work globally.
Product development: When an organisation creates new products by staying in the
existing market, it is known as product development. Product development is needed when a
business require to present new brands for the marketplace. Tesco has currentl launched
insurance facilities that is an the art of product growth (Boone, Kurtz and Berston, 2019). The
product is developed in the present brand name.
Diversification: When an organisation initiate to sale a new product to the new market, it
is known as diversification. Diversification is risky as it takes time to launch new product to the
consumers. If Tesco involves with a new section of operations by leaving the previous courses of
activities, it might be diversification. Tesco is known for helping consumer grocery and when
they started to make mobile, it leaves its core place and increase the the diversification tactics.

CONCLUSION
From the above discussion, it can be concluded that business strategy is vital for the
success as well as growth of an organisation. Business strategy is the plan which is made by the
organisation to achieve their aim, vision, mission and its objectives. This has an essential role in
carrying out the financial performance and resources in the best possible way. In this resport, it
includes PESTLE analysis and stakeholder matrix for analysing the influence of the macro
environment. Also, SWOT analysis and VRIO framework is mentioned for analysing the internal
environment and capabilities of firm. Porter's five force used for evaluating competitive force,
Porter's generic strategies and Ansoff matrix are stated for strategic planning for the firm.

REFERENCE
Book and journal
Ahn, J. M., 2020. The hierarchical relationships between CEO characteristics, innovation
strategy and firm performance in open innovation. International Journal of
Entrepreneurship and Innovation Management, 24(1), pp.31-52.
Boone, L. E., Kurtz, D. L. and Berston, S., 2019. Contemporary business. John Wiley & Sons.
Borges and et. al., 2020. The strategic use of artificial intelligence in the digital era: Systematic
literature review and future research directions. International Journal of Information
Management, p.102225.
D’Souza and et. al., 2019. Environmental management systems: an alternative marketing
strategy for sustainability. Journal of Strategic Marketing, 27(5), pp.417-434.
de Oliveira, C. A., Carneiro, J. and Esteves, F., 2019. Conceptualizing and measuring the
“strategy execution” construct. Journal of Business Research, 105, pp.333-344.
Ghouri and et. al., 2020. Enhancing business performance through green human resource
management practices: an empirical evidence from Malaysian manufacturing
industry. International Journal of productivity and Performance management.
Hassanien, A. and Dale, C., 2019. Hospitality business development. Routledge.
Hirsch, P. B., 2020. A breakfast of champions: brand marketing lessons from the Great
Depression. Journal of Business Strategy, 41(4).
Hvass, K. K. and Pedersen, E. R. G., 2019. Toward circular economy of fashion: Experiences
from a brand’s product take-back initiative. Journal of Fashion Marketing and
Management: An International Journal.
Jayakumar, T., Das, K. and Srivastava, N., 2019. Design thinking: a working strategy for the
third sector. Journal of Business Strategy.
Kano, L. and Verbeke, A., 2019. Theories of the multinational firm: A microfoundational
perspective. Global Strategy Journal, 9(1), pp.117-147.
Lüdeke‐Freund, F., Gold, S. and Bocken, N. M., 2019. A review and typology of circular
economy business model patterns. Journal of Industrial Ecology, 23(1), pp.36-61.
Mihardjo and et. al., 2021. Role of customer experience in developing co-creation strategy and
business model innovation: study on Indonesia telecommunication firms in facing
Industry 4.0. International Journal of Business and Globalisation, 28(1-2), pp.48-63.
St-Hilaire, W. A. and Boisselier, P., 2019. The coordinated strategy for the optimization of the
interaction level of business model. Journal of Economic and Administrative Sciences.
Untari, D. T., 2020. The role of information technology in promotion strategy. Case in taman
mini Indonesia indah and ragunan, Indonesia. Journal of Environmental Management
and Tourism (JEMT), 11(04 (44)), pp.960-964.
Zámborský, P., 2020. A blueprint for succeeding despite uncertain global markets. Journal of
Business Strategy.