Business Strategy: Internal and External Analysis and Strategic Options for Tesco

This report provides an analysis of Tesco's internal and external environment, including PESTLE and SWOT analysis, competitive environment analysis using Porter’s Five Forces model, and identification of existing and potential competitive advantages. It also evaluates different strategic directions available to the organization and recommends the most appropriate growth platform/s and strategies.

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Unit Number and Title Unit 32 – Business Strategy
Title Strategic Management Plan
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Table of Content
Introduction 03
Part A: An internal and external analysis that provides a platform for
strategic decision making: 03
1. PESTLE and SWOT of the organisation and an evaluation of the organisation’s resources
and capabilities 03
2. Competitive environment analysis using Porter’s Five Forces model 06
3. Identification and justification of the organisation’s existing and/or potential competitive
advantage
4. Valid strategies and tactical objectives to achieve overall strategic objectives p
Part B: On the basis of this analysis critically evaluate and justify strategic
options for the organisation: p-p
1. Critical evaluation of the different types of strategic directions available to the organisation p
2. Justification and recommendation of the most appropriate growth platform/s and strategies
p
3. Evaluate ways and means by which the chosen strategy/ies can be monitored in order to
ensure success p
5.0 Conclusions p
References p
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Introduction
Business strategy is defined as to set out the transparency on the plans, goals and such actions. It
helps to highlight the outlines of the business to compete with their rivals and gain a competitive
advantage in the particular market place with the number of products and services. The London
based organization which will mention in this study is Tesco. It is basically known for the best
retailer in the country. It has its stores in more than five countries which is across Europe. The
main purpose of this report is to analyse such impacts of the macro environmental factors on the
Tesco. Further, analyse of the internal environment and capabilities as well. By applying the
porter's five forces model evaluate the competitive forces of a given market sector. Moreover,
applying a range of theories, concept and models with the given organization. With the porter's
generic strategy and bowman's strategy clock with the devise strategic management plan.
Part A: An internal and external analysis that provides a platform for
strategic decision making:
1. PESTLE and SWOT of the organisation and an evaluation of the organisation’s resources
and capabilities
The PESTLE analysis is a tool to analyse such external environmental situation which Tesco plc
operating by discussion such factors who are creating the impact on the Tesco's performance.
Political factor- the factor helps to determine the stages in which the government are
influencing the certain economy and organization as well (Awan and et.al., 2022). It may create
a negative impact on the Tesco because the company is basically operating with the many
countries and the government sometime refuses to avoidance of the prices and that may affect in
the future.
Economic factor- this factor examines the economy performances which directly impact
on the company and give the reason for the long term effects. It may create a positive impact on
the Tesco because increasing the wages rate and GBP is regularly increasing in the UK which
creating the benefit for the company.
Social factor- this factor basically highlights the social environment of the country which
are changing day by day with the new trends. It may have a positive impact on the Tesco,
because changing in such trends like customers preferring the fast delivery and get to more
flexible with the return policy as well.
Technological factors- this factor is with such innovations in the technology which
affects the organizational operations of the organization (Felipe and et.al., 2020). Few years ago
Tesco were facing the technological issue with the decreasing customer experience as well. Now
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with the innovative ideas the company is expanding their business as well as increasing in the
customer experience as well. It may have a positive impact from the technological factor to the
organization.
Legal factor- this factor involves basically both internal and external ways with the
changing in the certain laws which affect the whole business environment. It may create negative
impact on the Tesco because changing in certain laws or regularly changing the company needs
to make an extra effort to reduces such risks. Such kind of breaches can easily put the
organization in the legal trouble which is very problematic for them.
Environmental factor- this factor basically determine by the surrounding environment
which are all crucial in the particular industries (Hong and et.al., 2019). This may create a
negative impact on the Tesco because changing such environmental laws affect the company
with using the renewable energies and changing plastic bags with the paper bag.
There are many internal factors as well which have an impact on the organization positively and
negatively as well. The factors will analyse with the help of the SWOT.
Strengths
The biggest grocery store over the Brian- Tesco is liable to capture the proper growth in
the market in the term of revenue.
Effective network of suppliers- it simply increases its business effectiveness, with
reducing the costs by the waste management.
Weakness
It has a failure in the Japanese and US market- the company expanded its business to
these countries but fail to survive, the major reason is it could not export their operations.
Financial Errors- Tesco's profitability affected because of their high debt on the credit
card.
Opportunities
New emerging markets- Tesco is expanding their business in many countries as some
emerging market like Indonesia and Turkey.
Online shopping store- Tesco is already having the mobile app for the online shoppers it
can upgrade that for more feature.
Threats
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National economic crisis- the factors like the credit and government rules and regulation
creating a major threat on the Tesco.
Market competition- the biggest supermarkets like Sainsbury's and Aldi are growing very
fast and creating the highest competition on Tesco.
Ansoff's growth vector matrix
Market penetration strategies of Tesco- with the using this strategy Tesco can easily
sell its existing products in its existing market where it is able to expand their business with the
well strategy as well (Irfan and et.al., 2019). The strategy will help to increasing the market share
and proper usage of the products by the existing customers as well.
Market development strategy- Tesco already implemented various market strategies
which help to sell out the existing products to the new market and country as well. From UK as
well it easily expanded its business to many countries around the world. In some market
organization failed to implement their strategy as well.
Product development strategies- Tesco has developed good marketing as well the well
verified label to products for selling it into the existing market as well. It has its own brand name
as well as different market segments. If the company does not have its own brand name or label
it increases the negotiation level of the suppliers.
Diversification of strategies- it considers as a difficult strategy to implement in the
market,, selling the new products to the new customers is not such easy thing but Tesco has
opened its business and diversified in many areas as well. Some time Tesco also fails to
implement the diversification to the market strategy.
Tesco McKinsey 7S model are illustration which create the link between the 7 elements
in the business that increases the effectiveness. There are 3 hard elements and 4 are soft elements
which are discussed below.
Strategy- Tesco always promotes is cost leadership for their business strategy to pursue
in their market communication. In today's time Tesco is facing many challenges like, restoring
the customer's trust, the financial scandal, delays in the payments from the suppliers and declined
the sales to remove this incident.
Structure- Tesco's business structure is highly stratified and grabbed with several layers
of the management from their store of the sales and assistant of the director. The director directly
divided the roles for the duties to gain the organizational structures.
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Systems- the supermarket chain is captured into the wide range on the regular basis for
the proper management process which are simplified in the certain range. It gets to track business
on the daily basis which are basically known for the proper management.
Shared values- the shared value includes such values which include the Core value,
corporate culture and task alignment with values. Tesco ensures about the activities and
operations which are conducted by the ethic manner. It encourages for more innovation and such
creativities which the company is following.
Style- it included many factors such as management leadership style, effective leadership
style and cooperation vs competition and team vs group(Juliana and Nyoman, 2019). Tesco
already have these style but it mainly focuses on the participative leadership which help to grow
the business.
Staff- Tesco already has a qualified employee, and they are very sufficient for the
company. Employee has different job roles and hiring positions which are internally and
externally hired process. It mainly has a qualified employee which are best for them.
Skills- skills mainly describes the employees abilities and capabilities which are focusses
on the partition for the businesses. It includes employees skills, employee skills vs task
requirements, skill management and company's competitive advantages. Its workforce has a
better environment and very qualified employees with the best skills.
2. Competitive environment analysis using Porter’s Five Forces model
Threat of new entrants- it is one of the main factors which are critically affecting the operations
of the Tesco with increasing such new entrants. It has a high impact on the Tesco which create a
threat by the new entrants company can mainly extracting the start-up of the new shops and store
on the demand of the capital requirements (Mehjabeen, 2018). The new entrants need to face
many challenges from the bigger stores that they need to know about what abilities do it carrying
forward.
Threat of substitute- there are lot of products which such in the comparison from the
actual products and the products which the Tesco is selling to meeting with the basic need. The
threat of substitute on the Tesco is minimum, because it believes in sale the products on the
constant basis which likely to be offered in the regular price as well.
Bargaining power of customers- it is a main factor for the concerning to the bargaining
power for a large number to compete with the other retailers in the market (Obeidat, Al Bakri
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and Elbanna, 2020). The product quality also counted as the same with the many shops which the
company is going to be change its basic goods quality to focus on the main objectives.
Bargaining power of suppliers- it has a less bargaining power in the comparison with
the products which are offered to the Tesco to completing its project on time to have a proper
product which are switching for the supplier to usually in the retail stores which are basically
connected with the store like Tesco.
Competitive rivalry- the sector in which the Tesco is surviving with operating their
business in the field where it has an intense competition which affect the overall market of Tesco
and has a very bigger marketing campaigns which help them to survive in the market.
3. Identification and justification of the organisation’s existing and/or potential competitive
advantage
Tesco is one of the best retailer in the UK market where it has a groceries market across
many countries. It has the biggest competitive advantage which is their pricing strategy. Usually
many retailer sell their products on the highest expensive quality of products which can usually
reflects the different strategies. The competitive advantage can easily gain by giving the
customer what they needed and the quality value which have a better than their competitors. It
can only maintain when it has a better quality or product which justify the higher rates in the
business. It can gain the competitive advantage by creating a corporate culture which usually
attracts the skilled people and have the best talent. The business need to have a transparency in
their work with the innovative as well as in the creative way which are help to gain more
competitive advantage. It can help the business to its establishment for the unique value of the
proposition which follows the better workplace.
4. Valid strategies and tactical objectives to achieve overall strategic objectives
There are various routes available to Tesco which can lead the firm towards higher success.
One of the strategies from Porter’s generic strategies can be used by the firm to gain higher profits.
These strategies are thoroughly demonstrated below:
Cost leadership strategy
This strategy focuses on capturing the existing market with penetrating prices or cost of the
product. Organizations can gain a competitive edge in the market by reducing the prices of goods and
services. Company can also focus of n reducing the cost for increasing the profit margins. Tesco can
use this strategy by working on its supply chain or production process with a aim of reducing the
costs of goods produced. The company can also focus on the profits from bulk sales instead of higher
profits from individual profits. this can lead to attract higher customers as the prices of the goods and
services will be comparatively low from its competitors.
Differentiation strategy
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This strategy focuses on catering the customers with unique and innovative products and
services which can attract higher customer base (Petrova, L.A. and et.al., 2022). Following this
strategy, the company can make a different image of its offering in the markets and it will sideline its
competitive products. for making proper strategies to develop the product the company needs to do
invest in research and development of the product which will determine the changes needed in the
products. These changes can make the product unique in the segment. Following this strategy, the
organization has to keep the relevance of product with consumer needs in consideration.
Focus strategy
This strategy focuses on the niche market segment by targeting the customers of a specific
demographic which is too rigid. There are two types of focus strategies cost focus and another one is
differentiation focus. Following the cost focus strategy, company can focus on the niche markets
which comprise of customers with higher earning capacity. In this strategy the company increases the
prices of goods and services which is affordable by some people. This strategy has a basic focus on
higher profit margins and not on higher sales. On the other hand, differentiation focus strategy aims
to differentiate the product to cater the customers with specific needs. following this strategy, the
company can aim to capture the specified market which may have lower or no competition.
Part B: On the basis of this analysis critically evaluate and justify strategic
options for the organisation:
1. Critical evaluation of the different types of strategic directions available to the organisation
Bunch of fundamentals that depicts the way of strategy is considered are considered as the
strategic direction. These foundational ideas support the aim of the strategy. Various strategic
directions are:
Mission
Long term purpose of an organization is termed as mission which depicts the destination of
the business (Plan, 2019). This mission of the firm is considered while preparing any strategies
whether it is to solve a problem or to increase the sales.
Vision
This is the imagination of the organization that is aimed to achieve ultimately by performing
business activities. Vision of the firm remains constant while formulating plans and strategies.
Culture
Culture refers to the behavior and norms that are developed among the organization while
interaction of people. Culture of the firm is a strong aspect that acts as a strategic direction. If the
culture in the organization is good, then the business activities taking place will be smoother and
fluent.
Ideology
Ideology of the firm directs the strategic planning towards social, economic and political
directions while considering the moral values as well.
Principles
Principles of the organization are depicted in the set of rules and guidelines which provides a
direction to the strategical process. It is ensured in the strategical process that these core values of the
firm are not disrupted.
2. Justification and recommendation of the most appropriate growth platform/s and strategies
There are various growth strategies available to Tesco which can help in achieving higher
profits. these strategies can lead the firm towards higher benefits and can increase its market share
(Greckhamer and Gur, 2021). For gaining higher profits, company can use expansion strategy which
focuses on diversifying the customer base. Company can enter untapped international markets which
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provides an abundant amount of opportunities to the organization. Grabbing these opportunities, the
firm can make higher profits by targeting the customers accordingly. these untapped markets have
comparatively lower competition which can be beneficial for the firm as they won’t have to tackle
the barriers occurred by the acts of competitive firms(Ali, and Anwar, 2021). Before entering these
markets Tesco has to critically analyze the markets which depicts the customer preference,
feasibility, demand etc. After studying the markets thoroughly management has to devise a strategic
plan which will direct the organization towards success. proper planning can reduce the chances of
failure as it determines every aspect that has to be faced by the firm. Culture and preference of
consumer also plays a vital role in global expansion. Strategies has to be made accordingly so that
the targeted customers can relate to the organization and accept their product and services.
3. Evaluate ways and means by which the chosen strategy/ies can be monitored in order to
ensure success
Once the strategy is implemented, its performance has to be monitored regularly in order to
know the areas which needs improvement or corrections. Monitoring the performance regularly
makes the strategies more feasible in different kind of situations. For monitoring these strategies
various ways has been mentioned below:
Analyzing the figures
Management can gather statistical data and interpret it to determine the strategical process.
this data reflects the financial aspect that has been achieved after the implementation of the strategy.
This data can be compared with data sets of previous year or it can be compared with expected
figures of the management. This can give accurate results of the performance that of the strategies
being implemented.
Communicating with stakeholders
Company can interact with the stakeholder on which the strategy has impacted. customers are
the main stakeholder which can give accurate response about the performance (Firoz Suleman,
Rashidirad and Firoz Suleman, 2019). This can be done through various methods: company can take
feedbacks through online platforms such as emails, social media platforms etc. questionnaire can be
prepared which comprises the questions related to the implemented strategies.
Use of KPI
Key performance indicators are the criteria which is being set to determine the performance of
strategies. Management can set these KPI’s to monitor the strategies and make the needed changes.
Some KPI are recommended below:
 Customer satisfaction
Customer satisfaction is one of the main aim of the business organization which gives them
higher profit margins. Feedbacks can be used in this indicator to determine whether the
performance have met the expectations or not.
 Customer retention rate
Customer retention rate shows that how many customers prefers to buy the goods nad services
the organization again and again. This can be used to measure the performance of strategy in
terms of the customer satisfaction.
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5.0 Conclusions
The above report has concluded various aspects of strategical process in context of Tesco
which is an UK based firm operating as a supermarket chain. Pestle analysis tool has been used to
thoroughly analyze the macro environment of the organization which effects the strategical process.
For analyzing the micro environment, SWOT analysis tool has been used which has shown the
strength. Weakness, opportunities and threats possessed by the firm. Ansoff growth strategies has
been mentioned in the report which can be followed by the organization to gain higher revenue.
Moreover, the porter’s generic strategies were demonstrated which has shown the options for the
organization for increasing their business. Further in the report, recommendations for strategical
process has been described which can uplift the organization by increasing the revenues through
various strategies. For monitoring the performance of strategies various key indicators and methods
has been recommended in the final part of the report.
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References
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