Unit 32: Business Strategy for TESCO plc - PESTEL, SWOT, VRIO, McKinsey and Stakeholder Analysis

This report analyses the impact of macro environment on the different business strategies of TESCO plc using PESTEL and SWOT analysis. It also evaluates the internal environment of the company with the use of appropriate frameworks like VRIO, McKinsey and Stakeholder Analysis.

Business Strategy

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
PART A.......................................................................................................................................3
For evaluation of resource and capability of the organisation PESTEL and SWOT analysis has
been discussed:- .........................................................................................................................3
Competitive environment analysis with using porter's five forces model .................................8
Identification and justification of the organisation’s existing and/or potential competitive
advantage:.................................................................................................................................10
Valid strategies and tactical objectives for attainment of overall strategic objectives :...........10
PART B..........................................................................................................................................11
Critical evaluation of the different types of strategic directions available to the organisation:11
Justification and recommendation of growth platform and strategies :....................................12
Evaluation of different ways and means for purpose of monitoring strategies to get success .12
CONCLUSION .............................................................................................................................13

INTRODUCTION
Business strategy may be defined as clear set of plan and actions which outline that how
an organisation will compete in a specific market with number of goods and services. These
business strategies not only help in developing the vision but also help in creating direction for
the whole organisation(Acuña-Carvajal and et. al., 2019). It is very important that all the
employees within the organisation have clear set of goals and the following directions in order to
achieve them. These business strategies basically act as a master plan for the organisation which
are implement by the employees of the company to achieve high competitive position in the
marketplace. The following report is base on the TESCO plc which is a well known
multinational retail brand of UK who deals in groceries and general merchandise. The company
was founded by Jack Cohen in 1919 and the headquarters of the company is situated in Welwyn
Garden City, England. The following report is going to cover the impact of macro environment
on the different business strategies of the company and for this different types of frameworks has
been discussed. This report also analyse the internal environment of the company with the use of
appropriate frameworks. Porters five forces model has been discussed in order to evaluate the
competition in the present market. In addition to this, different types of theories and models has
been applied in order to interpret and device the various types of strategic plans.
TASK
PART A
For evaluation of resource and capability of the organisation PESTEL and SWOT analysis
has been discussed:-
PESTLE analysis:- this analysis is also known as the macro environment analysis which assist
the organisation in identifying all the factors which are present outside the business environment.
The impact of these macro factors over the business of TESCO plc has been discussed below:-
 Political factor:- this factor comprises of all the rules and regulation which are
developed by the government of nation(Ali and Anwar, 2021). As the TESCO plc
provide their services all across the globe that is the reason that the business is affect by
the political factors of the different nation. The business of the respective company is
highly affect by the Brexit and COVID 19 situation. Different types of rules and
regulation had been developed and changed by the government of the various countries

which make a huge negative impact over the business of TESCO plc. But, support has
also been provided by the government to the business organisation by ensuring free trade
within the nation.
 Economic factor:- this factor comprise of employment and unemployment rate, interest
rate, inflation rate and many more which has a huge over the cost of organisation. After
the arisen of COVID 19, recession has been faced by the economy of the various
countries which directly impact over the cost of the TESCO plc. People have to loss their
job due to which their purchasing power has been affected which don't allow them to
purchase the product of the respective company(Brown and Brown, 2019). Retail sector
is being considered as most competitive market segment, due to which company have to
sale their product at a very lower price which affect their profits.
 Social factors:- this factor comprises of social norms, values, behaviour of consumer
belief and many more. Since 1900 the TESCO plc operate their different business
activities, due to this the stores of company is being considered as less trendy in UK. In
the recent time people paid more focus on the trendy and fashionable cloths. But due to
the COVID they have to close their stores because of lock down and this result in
decreasing the demand of the TESCO product in the market.
 Technology factors:- this is being considered as one of the most important factor of this
model which develop different types of opportunities for the business. In context to the
TESCO plc RFID Technology has been introduced by the company in order to increase
the in store experience for customers. This automatically manage the stock of the
company. In addition to this an app name as PayQwid has been developed by the
organisation, so that can pay as they want. These components helps in enhancing the
customers experience.
 Environmental factor:- this factor comprise of all those elements which is related to
weather, climate condition, pollution, environmental protection act and many more.
Immense amount of pressure has been faced by the TESCO company form the
government agencies to address the environmental issues. The management of the
respective company encourage their customers to shop at tesco.com. This result in saving
of the fuel(Fraser, 2019) . Along with this the delivery boys of the company collect the
unwanted plastic bags and recycle them.

 Legal factor:- this factor comprises all those rules which are imposed by the legal
structure of the nation. Employment law, equality law, food safety laws, health and safety
has been adopted by the TESCO plc within their workplace. By following all these laws
support has been provided by the government and along with this a positive image has
been created by the company in the mind of consumer.
SWOT analysis
This framework is basically used by the organisation in order to evaluate its competitive
position in the market. This framework assist the company in developing different strategic
plans which helps them in enhancing their sustainability in the market. In context to the TESCO
plc SWOT analysis has been discussed below:-
 Strengths:- this factor comprises of all those elements that makes the company more
competitive and strong. This assist them in surviving in the competitive market for a long
period of time(Indrawati and et. al., 2021). In relation to TESCO, the years of experience
and goodwill of the company is act as a strength for them which make them more
stronger from their rivals. Along with this, their trained employees and different rage
product also make them more competitive in the market.
 Weaknesses:- this factor comprises of all those elements which develops various
problems and complexities for the company. This directly affect the survival of the
company in the market. In context to the TESCO plc, high cost of the product is the main
weakness of the company. Due to the immense use of the manual processes the cost of
the product has been increased which result in declining in the sales. Along with this
different types of legal issues & lawsuits has been faced by the company which affect
their brand image.
 Opportunities:- opportunities is being considered as those factor of this model which
develop different benefits for the company by which they can become more competitive
in future (Kitsios and Kamariotou, 2021). In context to the TESCO plc, the management
of the company can plan to enter into the new and emerging market in order to expand
their areas of operations. New and effective digital media method can be used by the
company in order to reach to an international audience.
 Threat:- threat is being considered as those factor which not only harm the sustainability
of the company but also harm their profits. In accordance to the TESCO, immense

amount of competition has been faced by the company not only in the market but also
form the supply side. Maintaining relationship with supplier is their biggest concerned
and the biggest rival of the company are Marks and Spencer, Amazon, ASDA, Sainsbury,
GAP and Next.
VRIO analysis
This is basically an internal analysis tools which are used by the organisation in order to
evaluate all their resources which help them in enjoying the competitive advantage over their
rivals. With the help of this tool company find out its competitive advantage, in context to the
TESCO plc this model has been discussed below:-
Resources and
Capability
Valuable Rare Imitable Organised
workers Yes No No No
Financial
Resource
Yes Yes No No
Patents Yes Yes Yes No
Distribution
Channels
Yes Yes Yes Yes
 Valuable resources: this comprises of all those resources which develops values for the
company and allow them to grab all the opportunities which are present in the
competitive market(Kumar and et. al., 2021). The valuable resources which are
possessed by the TESCO plc are patents, distribution channel as well as financial
resources.
 Rare resources: these are basically those resources which are rare in nature and not
posses by the rivals of the company. With the help of these resources company not only
able to enjoy the competitive advantage over their competitors but also help them to
acquire huge market share. The rare resources which are posses by the TESCO are
financial resources, distribution channel and patents.

 Inimitable resources: this comprises all those resources which are not imitable in nature.
In simple terms it means that cannot be copied by other. These resources are not be easily
acquire or imitate by the competitor which provide different advantage to the company.
Distribution network and patent resources is being considered as the imitable resources
for the company.
 Organisation:- in this factor, organisation have to organised their all resources in a very
well effective manner(Lestari and et. al., 2020). This provide them competitive
advantage over their rivals. All the resources which are posses by the TESCO company
are well organised and this developed various opportunities for them.
McKinsey Strategy Framework
This is a tool which are used by the a company to analyse its organisational design. The
main goal of this model is despite how effectiveness can be achieve within the company.
 Strategy:- this comprises of plan which are developed by the organisation in order to
enjoy the competitive advantage in the market. TESCO will have to face different issues
like decline in customer base and sales if they don't have a sound strategies.
 Structure:-this comprises that, in which manner business units and divisions are
organised and communicate information with each other. If inappropriate structure has
been possess by TESCO then this reduce their effectiveness due to which their rivals get
the advantage.
 Systems:-this is basically the process of an organisation which comprises of daily basis
and decision making process (Liu and Kong, 2021). If appropriate system has been
maintained by the managers of TESCO then this assist the company in organisational
change properly.
 Skill:- this comprises of skill, competences and capability which are possess by the
employees of the TESCO. These skills allow the employees of company to deal with all
the complex situation in a very effective manner.
 Style:- this comprises of styles which are used by the top level managers of the company
in order to manage their employees and interact with them . Participative style is used by
the managers of the TESCO in which though and opinions of the employees taken into
consideration.

 Staff:-this element state that which types and number of employees work within the
TESCO. This comprises that in which manner employees hired, trained, rewarded and
motivated.
 Shared values:- this is being considered as the most important element of this model as
it comprises of standard, norms, and rules which guide the different actions of TESCO
and behaviour of employees in effective manner (Maniora, 2018).
Stakeholder Analysis:
Stakeholder analysis may be defines as the process of analysing and gathering the information in
a very systematic manner in order to determined whose interest should be taken into
consideration, when developing or implementing a programme. . In context to the TESCO their
stakeholder analysis is mentioned below:
 High power-High Interest:- this refer to those stakeholders of the company who posses
high authority in the decision making and have the major effect on the growth of the
company (Martínez, HernándezSánchez‐Medina and Díaz‐Pichardo, 2021). In relation to
TESCO, the CEO and other high level management comprises in this category.
 High power–Low Interest:- these stakeholder possess high authority even they are not
interested in the different activities of the business. These stakeholders required to be
satisfied. In context to the TESCO, the employees of the company belongs to this
category. The authority has been given by the high level management to them but they
are not interested in outcome.
 Low Power-High Interest:-this category comprises of those people that required proper
information regarding to the different operations of the company. In relation to the
TESCO, consumers of the company belong to this category as they possess low power in
the company but have a major interest in the different operational activities.
 Low Power-Low Interest:- this category comprises of those individual who posses low
power in the decision making process of the company as well as have low interest in the
activities of the business. In relation to the TESCO, government as well as media belongs
comprises in this category as they don't posses any power in the decision making of the
company(Miao, Saide and Muwardi, 2021).

Competitive environment analysis with using porter's five forces model
Porters' five forces model:
This model was introduced by the Michael E Porter in 1979 that which help the firm in
evaluating its competitive strength. This model is totally based on the intensity and attractiveness
of the market. This tool help the TESCO company which help them in analysing the business
situation. In context to the TESCO plc this model has been discussed below:-
 Supplier Power :- this is related to the power of supplier for increasing the prises of the
raw material. This power is totally depend upon the number of supplier which are present
in the market and quality of raw material and services which are provided by them. In
relation to the TESCO plc, less amount of threat has been faced by the company from
this factor(Pucheta‐Martínez and Bel‐Oms, 2019). This is because of number of supplier
available in the market. Due to this organisation may not have to depend on a single
supplier for the requirement of raw material.
 Buyer Power:- this factor is related to that power which is possessed by the buyer of the
company. If high bargaining power is posses by the buyer then company have to decrease
their product prices which affect their profit margins. In relation to the TESCO, the
management of the company target large base of customers due to which low bargaining
power of buyer has been faced by the company. Company thinks that one consumer
cannot impact on the profit as well as sales of the company.
 Competition rivalry:- this is being considered as one of the most important factor which
make a huge impact on the attractiveness and effectiveness. Enhancing number of the
rivals does not permits the firm to enhance their revenue and share in the marketing.
There is enhancing number of rivalry in the market of England that makes effect over the
firm of M&S. It act as the major threat to the respective firm(Queiroz and et. al., 2020) .
 Threat of substitute – Substitute are the merchandise with can be conveniently replace
with goods provide by the organisation. Enhancement substitute in the market decline
uniqueness of the goods in the market. There are low number of substitute in market that
makes moderate threat for the firm.
 Threat of new entry: In accordance to position sector in the retail industry and
functioning business at the broad level, major investment is needed. It consist major

threat as there are enhancing rivals in the market, so it is not convenient for the new
marketing organisations to tap into the new industry.
Identification and justification of the organisation’s existing and/or potential competitive
advantage:
This is being considered as the key element for any type of sound strategy or marketing.
By maintaining the data related to their rivals like what they are doing and many more, this will
assist the organisation in identifying their weakness and strength. This also help the organisation
developing appropriate thoughts of what they can avoid in order to enjoy the competitive
advantage over their rivals(Rehman and et. al., 2021). In addition to this, with the support of
Porters Five Forces model, the organisation can effectively evaluate that what is going to happen
in the sector in which they are working. Along with this, this help the organisation in becoming
more dynamic by fulfilling the needs and wants of the consumer.
Valid strategies and tactical objectives for attainment of overall strategic objectives :
Different types of tools and techniques are required by the leaders of the company in
order to achieve all their set goals in a very effective manner. With the help of these techniques
they can easily eliminate all the issues which came in the way of performing the different
business activities. Strategies which are adopted by the TESCO plc has been discussed below:-
 Consumer relation management:- this is technique which are used by the managers of
the TESCO which assist them in making good and healthy relationship with their
customers (Salehi and Arianpoor, 2021). According to the current business condition,
competition has been increases. So it is very important for the organisation to develop
effective consumer relationship. This help in retaining and increasing customer base for
the company.
 Motivation strategies:- different types of motivational strategies has been used by the
leaders of the TESCO in order to motivate their employees. With the help of these
strategies they can effectively achieve objectives of the company which result in
achieving growth and success in the competitive market.

 Effectual Leadership:-for the leaders of TESCO leadership is being considered as the
most important element. On the bases of these, the attitude of the employees while
working the company can be directed and along with this, this also provide shape to their
work which help in achieving all the goals of the firm.
PART B
Critical evaluation of the different types of strategic directions available to the
organisation:
In order to overcome from the different types of issues and complexities which are occur
in the organisation, it is very important for them managers of the company to adopt different
types of strategies(Suoniemi and et. al., 2020). Bowman's strategy clock and Porter's generic
model has been adopt by the managers of the TESCO which have been discussed below:-
Bowman's strategy clock
 Low prices and low added values:- this strategy will allow the TESCO to maintain its
products price at low which help them in attaining competitive edge over their rivals.
 Low Price:- this assist the TESCO company to manufacture the goods in quantity which
reduces the cost of production and allow them to offer the product at lower price.
 Hybrid:- with the help of this strategy the leaders of the TESCO can effectively involve
the values in their product on regular basis.
 Differentiation:- by executing this strategy by the TESCO manager, this assist them in
putting more efforts in providing goods and services to their customers.
 Focused differentiation:- this strategy assist the TESCO in providing excellent product
with premium quality which can be offer at a very high price. Managers of the company
can concentrate on different techniques in order to gain more revenue.
 Risk high margins:- this strategy allow them to charge high rates of their products and
permits them to increase their goods values. It is hard to adopt this technique.
 Monopoly pricing:- monopoly has been created in the market by providing high quality
product to the consumer. Immense amount of competition has been faced by the company
in their product segmentation, so according to this they have to determined their prices.

 Loss of Market Share:- in this strategy company is not able to provide goods which
make value on front of the customers.
PORTER'S GENERIC:
 Cost leadership:- this element state that organisation provide their goods and services at
a very lower rate in order to enjoy the competitive advantage over their rivals. This can
be done by the purchasing the raw material at a very lower cost and by other cost
effective method (Liu and Kong, 2021).
 Differentiation :- this comprises of modification in the product in a very innovative
manner so that consumer can differentiate the company products. Appropriate research
as well as better quality product has to be conduct by the company in order to established
this.
 Cost Focus:- this help in focusing in the niche market by understanding the need of the
consumer in the specific market.
 Differentiation focus:- this technique help in differentiate the niche number of target
sector and provide product to a particular section of consumer.
Justification and recommendation of growth platform and strategies :
From the above discussion it has been recommended to the TESCO that the managers of
the company have to focus on the differentiation strategy from the porters generic model and on
differentiation from the Bowman Strategies. Both of them help in attaining competitive
advantage over their rivals. These methods also allow the firm to to be creative in the market in
order to remove the competition. In order to improve their customers services and quality of the
product they must have to adopt these strategies.
Evaluation of different ways and means for purpose of monitoring strategies to get success
Strategic management plan:

 Background:- TESCO is a well known British brand of UK who deals in home, food and
clothing products. Issues like decline in sales and profitability has been faced by the
company.
 Organisation Structure: divisional organisational structure has been used by the
TESCO company which assist them in enjoying the competitive advantage and benefit of
specialisation.
 Vision:-the vision of the TESCO is to create quality product in order to increase the
customer satisfaction(Miao, Saide and Muwardi, 2021). By doing this they can
effectively focus on the innovation which make their product different.
 Mission:- mission of the TESCO is to become global leader.
Marketing Mix:
◦ Product:-TESCO deals in retail product which comprises of food, clothing and home
merchandise.
◦ Price:- premium pricing strategy has been followed by the respective company in the
market for their high quality product.
◦ Place:-TESCO sold their products in their stores and through online portals.
◦ Promotion:-different types of digital marketing techniques has been used by the
company in order to sell their product.
 Strategy formulation:
Differentiation strategy has been adopted by the management of the company in order to
overcome form the different issues. Digital techniques has also been used by the company for
their growth.
Implementation:
From the leaders point of view the making as well as the implementation of the strategy
is important. This result in long term growth as well as success of the company(Salehi and
Arianpoor, 2021).
Evaluation:
Focus has been paid by the managers of the company on the implementation of
developed strategies. Their main aim is to focus on the issues and develop strategies to overcome
form them for the smooth functioning of the business.

CONCLUSION
From the above report it has been concluded that it is very important for the organisation
to develop the strategies in order to overcome form the issues which are faced by them. For this
they have analyse the internal and external environment with the help of different frameworks. In
order to evaluate the effective competitiveness leaders of the company utilize utilising several
frameworks and for the evaluating the aim VRIO model is used.

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