Business Strategy: Macro and Micro Environmental Factors

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This report discusses the macro and micro environmental factors that impact business strategy, using Tesco as a case study. It analyzes the political, economic, socio-cultural, technological, environmental, and legal factors, as well as the strengths, weaknesses, opportunities, and threats of Tesco. The report also includes a VRIO analysis of Tesco's internal resources and capabilities.

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Business Strategy

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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P 1. Macro environmental factors................................................................................................3
M1 Critically analyses macro environment.................................................................................5
P 2. Micro environment ..............................................................................................................6
M2 Critically analyses internal factors........................................................................................8
P 3. Porter's Five Forces..............................................................................................................9
M3 Critically analyse.................................................................................................................10
P 4. strategic management plan.................................................................................................11
M4 strategic plan........................................................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
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INTRODUCTION
Business strategy refers to the effective actions and practices which are used by business
to attract large number of customers which increases the sales and profits of business. This cans
help to increase the performance level and attain the goals and objectives of company. Business
strategy can explain that how business can reach company's specific goals and objectives. This
report explains different business strategies of Tesco which is the third largest retail company of
world. Its headquarter is located in the England, UK. This report describes macro environment
factors and their impact on the business operation of Tesco. There is analysis and evaluation of
internal environment which determine how these factors affect the strategies of business.
Company conducts porters five forces which helps to gain the advantages of competition in
different markets of world. In this report, there is a determination of strategic management plan
which helps to gain success and growth of company. Strategic management plan will help the
business to expand the business and increases the profits and sales of company.
TASK 1
Macro environmental factors
Macro environmental factors are defined as the factor which does not have any control over them
by organisation. Macro environmental factor can be defined as external factor which gives
impact on organisation performance and their operations. It includes GDP, inflation rate, and
employment, monetary and fiscal policy. There is a specific framework to understand external
factors i.e. Pestle analysis. Pestle analysis is a tool which analyses and monitors external factors
i.e. political, economic, socio-cultural, environmental, legal and technological factors. Tesco
applies pestle analysis for understanding impact of external factor on the company.
Political factors: Tesco is a British multinational company of the UK which is famous as
general merchandize retailer. The political factors include tax policy, labour law, trade
restrictions, tariffs, political stability, trade restriction etc. Tesco gets positive impact by political
stability because Tesco doesn't have to change their policies during trading products. It improves
working efficiency of the employees in the company. Second organization doesn't have to pay
high taxes during trading of products that leads economic benefits in the company (Cubas‐Díaz
and Martinez Sedano, 2018).
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Economic factors: it includes foreign exchange rates, interest rates, unemployment law,
market conditions etc. are major economic factors. Economical factor of UK also gives impact
on organization. For example, when inflation rate becomes higher in UK market, then it gives
golden opportunity for Tesco to sell retails groceries on affordable price. Due to high inflation
rate, organization improves customers purchasing behaviours by offering required groceries. It
will help organisation to achieve high profits and competitive advantage. However, it can also
have negative impact on performance of the organisation.
Socio-cultural factors: Demographical changes, population density and lifestyle,
feelings, quality of living and trends are social factor. It gives positive and negative impact on
organization. For example, people in UK are health conscious therefore they require organic
groceries that leads positive impact on their health. Thus by focusing on this factor Tesco can
improve the range of products and can build new customer segments. Second organization
improves their purchasing power by offering varieties of the products like food-item, non-food
item. Thus, Tesco enhances demand of the products by the customers. On the other hand, it the
life style trends and feelings of people towards.
Technological factors: New emerging technologies like RFID, E-commerce, online
delivery etc. are current technologies which is famous in the UK. Tesco gets positive impact of
the new technologies. For example, RFID is the new technology which is adopted by Tesco. It is
effective technology because organisation can measure quantity of products which has sold and
other resting products which are remained (Anwar and Hasnu, 2016). It saves the time of
employees and improves their working efficiency during selling of the products to customer. At
the same time online shopping also helps organisation to sell their high quantity products to
customer. For example, organisation offers home online delivery services to customers. Even
customers also get opportunity to buy products low price rather than wasting time to go on store
and buy products. Tesco offers online payments services like Tesco payment app, mobile app
etc. to customer, so that large number of customers purchase large quantity products.
Environmental factors: Pollution, governmental law etc. are environmental factors of
the UK. Organisation gets impact by the environmental factors. For example, due to these
regulations Tesco offers sustainable products and follow effective waste management practices
which are promoted by the government. It alleviates public health and helps organisation to
build trust of the customers on organisation. It is also helpful in enhancing brand awareness and

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value of organisation among its various stakeholders. The consideration of environment
sustainability helps organisation to take competitive advantage from competition market.
Legal factors: Employment and health and protection law etc. are legal factors which
can influence the organisational policies. In addition to these due to health and safety regulations
and employment legislations Tesco management always follow a standard framework for
recruitment and work culture. It improves the work productivity and allow organisation to
deliver quality services with the help of efficient work force and productive and safe work
culture.
M1 Critically analyses macro environment
Trade restriction gives negative impact on the organisation growth because they can trade
their products in various countries, as result organisation unable to promote their business
in markets.
Recession period can lead to adverse impact on scales of the company. During recession
period, customers may avoid making excessive purchasing. Due to low purchasing
power, overall profits of the company may lower and thus Tesco comes in loss during
recession period.
Tesco can also have negative impact on success of organisation. It is possible that pricing
or product specifications of the products and services offered by organisation are not
accepted by specific communities on religious or life style grounds. Thus it can have
negative impact upon brand value and profits.
Emerging of new technology continuously enhances cost of the products. Even new
technologies require experts for operating, therefore organisation unable to generate high
income in company. However, the adaption of these technology improvements also
demands for new and skilled workforce along with regular maintenance of equipment and
systems. It increases burden on recruitment costs and creates a constant threat of cyber
threats which is common concern for the organisation.
However, such regulation also imposes certain difficulties for operations of organisation.
When government bans polythene, or use of certain packaging material on grounds of
pollution then Tesco is unable to use polythene for the packaging of groceries. Thus it
demands for additional packaging or changes in supply needs increasing operational cost
of company.
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One of the negative impact of these laws is that it enhances the additional expenses on
organisation. For instance, due to employment law, organisation can't keep employees on
low wage and thus it increases operational expenses and lowers the profit margin of
Tesco.
Micro environment
Micro environment can be defined as those factors or elements in a business which
affects organisation's performance and decision-making. Micro environment refers as internal
environmental factors of firm which includes suppliers, competitors, marketing negotiator,
customers etc. There is a framework which explains internal environment of company. It is
described below-
SWOT analysis of Tesco
In the business of Tesco, SWOT analysis helps to evaluate strength, weakness,
opportunity and threat of business. Company will identify different elements which are required
at the time of market development and corporate strategy by applying this analysis in business
operation. SWOT analysis help company to achieve goals and objectives in different market
conditions of business. This is used to evaluate the effectiveness and efficiency of corporate
planning. Various elements of SWOT analysis are described below:
Strength: Tesco have the large share of market as compared to retail companies of
world. Tesco operate its business in more than 14 countries of world and have more than 6800
stores in the world (TESCO SWOT Analysis, 2019). Success and growth of company depends
on its diversified products and services in the market. Different products with different variety
such as mobile phones, clothing, and home ware items, financial and telecom services and many
more products which sales by Tesco across the world. Technology of online business operation
which is used by Tesco is new and advanced that gives the best and effective experience of
shopping to the customer with Tesco. Organisation has various agreements of patents for
development of technology which provides advantages to the company. Company has strong
brand image in the minds of customer which is biggest strength to attain future growth. Tesco
develop the large online shopping sites so that they sales variety of products and services online
(Chen, Eshleman and Soileau, 2017). Company make the business successful by selling the
products and services online.
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Opportunity: To achieve the advantages and benefits of competition there is need to
innovate and invest in the new technology on the continuous bases. This will increase the
customer base by improving the existing technology and better experience. Organisation will get
the opportunity by increasing the business of online shopping and services of home delivery.
Currently people are more concerned to shop online rather to shop from the stores so Tesco will
enhance the business of online shopping which increases their profits and sales. Best opportunity
for Tesco is to expand their business in the market of Turkey, Indonesia and South Korea
(Grayson and Hodges, 2017). Development of effective partnership with reputed companies can
give the opportunity to attract more people and provide large variety of products to them.
Threat: Demands of customer changes as per the changes in season so it is the biggest
threats for the business of Tesco. Variations in seasons will affects the execution and planning of
various projects of business. Increase in the cost of raw material will affects the profitability and
sales of business. With the increase in growth and performance of other companies like Walmart,
Aldi and Carrefour which creates difficulty in the business of Tesco. These companies are the
biggest competitors of Tesco. Effective performance of these companies may affect the market
position of Tesco (Yuliansyah, Gurd and Mohamed, 2017). Government laws, legal and tax
issues and economic changes may have impact on performance and efficiency of Tesco in
different market.
It can be evaluated from the above SWOT analysis that Tesco have various strength
which makes them profitable in different market conditions. Because of large market share,
Tesco will gain the competitive advantages. The customers are attracted towards the business
because organisation sales large variety of products and services in the market.
VRIO Analysis Model
VRIO analysis is a framework which is organized to support business uncover and
protect their resources and maintain their capabilities that provides sustainable competitive
advantage. VRIO model is one of the most important framework which examine internal
environment of the firm. Tesco applies this model to analyse internal resources and capabilities
of company.
Valuable: It includes valuable resources which supports Tesco to achieve profitability in
competition market. Valuable resources of Tesco are local food products, employees, patents,
distribution network etc. helps organisation to achieve long term competitive advantage. R&D

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and cost structure doesn't classify into valuable resources because it requires high funds that
leads loss in company.
Rare: Those sources which are fewer for the organisation and possess limited application
of the resources. Such kind resources are rare and useful when the competition is high and each
organisation applies these resources for managing sustainable growth within company. The rare
resources of the Tesco are Financial resources, patents, distribution network, employees etc.
Imitability: Some resources which can be imitated or copied by the other competitors.
Financial resources, local food products, employees etc. are imitable resources of the Tesco
which can be copied by other competitors, because these are not costly for imitation.
Organisation: To create and application of the resources are essential for the company
because it helps company to maintain sustainability in the company. To list resources is not big
deal for the Tesco but arrange them effectively is big deal for the organisation. Resources which
are properly organized for effectively use are distribution network, financial resources etc.
Resources Valuable Rare Imitable Organisation
Financial
resources

Local food
products

Distribution
network

Employees
Patent
Based on the above analysis of VRIO analysis model can be evaluated that financial
resources and distribution network offers sustained competitive advantage. While patents are
important resource for the organisation but doesn't use for competitive advantage. Employee also
a valuable resource for the organisation but leads low competitive advantage within company.
M2 Critically analyses internal factors
Tesco faces difficulty and problems in their business operation due to their weakness in
the business. They have to make various business strategy that they will reduces their
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weakness and improve their performance. Different opportunities will give advantages to
attain growth and success of business (Amran and et.al., 2016). Proper planning is needed
to deal with the threats of company that will create the effective and efficient image of
company in front of the customer.
VRIO analysis also analyses research and development and cost structure leads
competitive disadvantage because it requires high funds for investment. Local food
products create competition for the organisation.
Porter's Five Forces
It is a framework which is designed to analyse a business's competitive environment.
This model focuses on four factors such as threats of new entrants, bargaining power of buyer
and suppliers, threat of substitute products and rivalry among existing companies. These
elements can identify the actual position of business in different market so that the company can
improve their products and gain benefits of competition. In business operations of Tesco, level of
competition can be determined with the help of porters five forces model. The main competitor
of the Tesco is Asda. Elements of porters five forces are described below:
Threats of new entrants (low): In Tesco there is the low threats of new entrant in
market because they cover large share of market and it is difficult to achieve success for new
entrants. New companies have to invest large amount of money to build the effective presence in
the market of retail. New entrant will have to provide high quality of products and services in
low prices to the customer so that they will easily gain the attention of customer towards the
business (Tesco Porter Five Forces Analysis, 2018). Tesco has the strong product differentiation
which creates difficulty to attain success for new entrants. As per the policies of government,
there is need of proper licence and legal requirement for the company to start the business so it is
difficult for new entrant to join the business.
Substitute products (Low): The threats of substitutes products are low because very few
substitutes of products are available in the market. Companies which earn low profits in the
market are the one which produces the substitute products so it does affects the business of Tesco
(Bentley-Goode, Newton and Thompson, 2017). Tesco sells substitute products in low prices to
the customer with effective quality which attracts the people of country.
Rivalry among existing firm (Asda): In business operations of Tesco, it faces high
competition from large companies like ASDA which sells similar products and services to the
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customer (Holotiuk and Beimborn, 2017). These similar products are clothing, food items,
electronics etc, so that the buyer will easily switch from the products of Tesco and purchase from
another company which will affect the sales and productivity of business.
Bargaining power of suppliers (Low): Suppliers of Tesco has low bargaining power
because there are many suppliers in the retail market. Company can easily change their suppliers
from the other so it gives the power to Tesco to get the products and services in low prices from
suppliers (Soltanizadeh and et.al., 2016). This can increase the profits of business and loss to the
suppliers. Tesco will change their supplier if their supplier does not provide high and good
quality of products and services.
Bargaining power of buyers (High): In Tesco, customers have high power of
bargaining because there is a supermarket available in the market I.e. ASDA which offers similar
products and services. The customers have the power to choose the products from variety of
products and services in similar prices. Customer purchases the products from other company
like Asda which offers high discounts on the similar products.
Porters five force factors Tesco Asda
Threats of new entrants Low High
Substitute products Low High
Rivalry among existing
firm
Asda None
Bargaining power of
suppliers
Low High
Bargaining power of
buyers
High Low
M3 Critically analyse
The above analysis can evaluate that Tesco faces high competition in retail market,
because they don't have effective market research and less differentiation in product line which is
the main reason to face competition from the Asda. On the other hand, Asda is performing well
currently because they have high market research which supports organisation to take
competitive advantage. Organisation focuses on product differentiation which attracts customer

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towards company for buying different products. So, currently Asda perform well in business
market. To redeem organisation situation, Tesco makes effective plans and strategies in the
business so that they will gain the benefits of competition. To attract the more customer, Tesco
focuses on the innovation and differentiation of products because they have high bargaining
power of customer (Theoharakis, Bicakcioglu and Tanyeri, 2019). With the help of marketing
strategies this will maintain brand loyalty and increase the customer base. To overcome issues, if
Tesco conduct the market research that helps them to understand the situation of demand and
supply in industry and protect the business from over production. Thus, organisation can beat
Asda and improve brand popularity in business market.
Strategic management plan
Ansoff's matrix
it is also known as product or market expansion tools which is applied by the
organisation to analyse and organize their strategies for expansion. It consists four strategies i.e.
Market penetration: It is effective strategy which focuses on enhancing sales of current
products to a target market.
Product development: It is product development strategy which has goal to introduce
new products in target market.
Market development: It is another effective strategy which has focus on entering
emerging market by using existing products or goods.
Diversification: It is another strategy for influencing growth of business in new market
and promotes new products or goods. Tesco applies diversification strategy because organisation
wants to promote their business in new market. Second organisation wants to improve brand
power by introducing new products in new market. Therefore, Tesco chooses diversification
strategy.
Executive summary:
This plan describes the aims and objectives of the company which they want to achieve
the success and growth in business. Tesco is the multinational retail company and focuses to
increase the customer base by providing the effective experience of shopping to the customer.
Tesco launch the new products in new market which increase the profits of business. This plan
covers the 7 Ps of marketing which explains the products, price, process, promotion which is
used to gain success.
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Aim:
Main Aim of Tesco is to launch the new food products in the market of Indonesia s so
that they will expand their bushiness along with the increase in profits. Their aim is to attract the
large number of customer in the market of Indonesia by selling large variety of food products to
them.
Objectives:
To maximize the profits by 20% within 1 year.
To provide better quality products in low prices.
To expand the business in different countries of world.
Marketing mix:
This strategy is effective tactic for the Tesco because they want to promote new product
in new market, so that enables to maximize high profit within one year. It helps organisation to
influence brand popularity in new market by lunching new food products.
Product: Tesco sales variety of food products in the market which gain the customer
satisfaction and increase the brand image and reputation. They provide healthy food products
because nowadays people are more conscious about their health. As per the needs and wants of
customer they produce the products and sell them in the market. Product strategy is implemented
by the organisation for accomplishing second objective of the company. i.e. organisation offers
better quality products to customB06273ers in low price which improves purchasing behaviour
of the employees and maximizes profit 20% within predetermined period.
Price: They use the competitive strategy of pricing when they sale the products to the
people. Tesco strategy of pricing will give the information and data about the competitors which
exist in the market. They sell health and diet food products in low cost so that people get
attracted and company will easily reach to their goals and objectives. This price strategy helps
organisation to maximize profit over predetermined time.
Place: As per this plan aim of Tesco is to sales the products in the market of Indonesia
which is the biggest opportunity to achieve greater profits. By launching the food brand in the
market of Indonesia this will expand the business of Tesco and increases the chances to achieve
more profits. Tesco make the plan that in every market of Indonesia the products are available
which helps to achieve the success and growth in new market. Place strategy is implemented by
the Tesco for influencing brand awareness in different countries. This strategy supports
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organisation to expand business in various countries of the world. Thus, organisation can easily
achieve third objective of the company.
Promotion: To increase the sales Tesco advertise their food products with the help of
TV, newspaper and social media which gain the attention of people living in Indonesia. Tesco
appoint the local people in their business which increases the sells because these people have
perfect knowledge of market and works effectively to increase the sales of company.
People: In business operations of Tesco they have large number of employees which
works to increase the sales of food products in market. Employees are the key to achieve success
so Tesco will invest large amount of money to train and develFeedback1582092700086op the
skills and talent. They motivate their workforce so that they will worked effective to increase the
sales of food products and maintain effective image of brand in the mind of customer.
Process: Tesco makes the plans and policies so that they done their business operations
as per the plan and reached to the goals. They provide home delivery services to the people so
that they will purchases more aB06273nd more food products from the company. This process
will improve the brand image in the market of Indonesia.
Physical evidence: It refers to the effective logos, colour and labels on the packaging of
the food products so that the food can be remained fresh before use. Tesco make the effective
packaging, so they cannot be destroy ut you need to suggest changes that Tesco can implement
in order to improve performance. Aim for 10 strategies (minimum of 5) and explain each one.
ed and better in taste. It is implemented by the organisation for executing objectives of the
company.
Budgeting:
The requirement of budget in this planning process is 5000 €.
Strategies
To improve technology performance, Tesco should take help of artificial intelligence
which helps company to update new technology and improve working performance of
labours well-formed.
To save from economic crisis organization should adapt flexible policies which helps
organization to operate business in various countries without interruption government
regulation, legal and credit crunches. This strategy leads economic benefits, so
organisation should implement this strategy.

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Tesco should use low cost strategy which assist company to become price leader in UK.
It directly improves brand image and covers large number of customers with company.
Therefore, organization should implement this strategy for enhancing brand image in
global market.
Diversification strategy is good strategy to promote product in other market. Tesco
should apply this strategy to classify product or services from other products in new
market. It can prove successful for the Tesco because they get chance to promote new
product in new market. Therefore, organization should implement this strategy.
Digital marketing strategy is quite effective strategy for influenci8ng brand awareness
and it builds brand reputation in global market as well. Tesco should implement digital
marketing strategy to reach existing and prospective customers in minimum time.
Operation strategy supports company to align overall operations relevant to customers,
products and business. Additionally, it helps organization to adapt low price policy and
introduce organization from other organization. It can lead vast change in public relation
with company, so organization should implement operation strategy within company.
Cultural diversity within workplace is quite good strategy which helps to understand
every type of customers needs and their preferences. Organization easy to give value each
type of customers which influence brand image in global market. Additionally this
strategy maintains health working environment for employee which appreciate the to
perform well.
Recruitment and selection strategy also beneficial strategy for organization because it can
lead creative employee within company. It improves employees turnover which can
enhance product demand amongst the public at workplace.
Customer relationship management (CRM) also a good strategy which supports
organization to build good relation with customers and makes them permanent customers.
The main goal of the CRM to retain potential customer prolong time so that organization
easy to take sustainable profit from them prolong time.
360 feedback strategy is effective strategy which assists organization to analyse
effectiveness of implemented strategy. Apart from this, it keeps employee loyal for their
job performance. Feedback strategy not only retain talent within company also reduces
high turnover of employee that leads competitor advantage within business. Therefore,
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organization should adapt this strategy to improve organization performance well-
formed.
Monitoring and controlling:
Manager of Tesco properly monitor the activities of their employees in launching the new
food products in new market. They analysis and evaluate the business operation and provide
guidance if there is need, so they will do the business in the most effective manner. All the
information and data are collected with the help of monitoring which measures the performance
of business.
Tesco uses the controlling function in their business operation which helps them to
compare actual performance with the planned performance of the business. This comparison will
provide the results through which company will ensure that all the activities are performed as per
the plan and if there is any kind of deviation then correct and effective actions is to be taken.
Thus, organisation achieves all objectives of the company within a year.
M4 strategic plan
Organisation implements strategic management plan in well-formed as result enable to
access objectives of company. Monitoring and controlling helps organisation to maintain plan
long term.
CONCLUSION
From the above study, it can be concluded that success and growth of market is depend
on the effective strategies of business in different conditions of market. Success and growth of
business is attained when company will make proper planning of all the business activities.
Different internal and external factors are analysed and evaluated to gain large share of market so
that the company will sales various products and services to the customer. Company determines
porters five forces analysis which helps them to gain benefits in the competitive markets.
Organisation creates the strategic management planning in their business operation which helps
them to meet the goals and objectives of business. This analysis will help the business to
improve their performance level and increase the sales and profits of business. Organisation
attracts large number of people towards the business by providing quality products and services
in low prices. VRIO analysis model has been summarized in the report. Strategic management
plan has been concluded in the report. In the strategic management plan includes marketing mix
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strategy, Ansoff's matrix, budgeting, monitoring and controlling etc. tactic can be concluded in
the report.
REFERENCES
Books and Journals:
Chen, Y., Eshleman, J.D. and Soileau, J.S., 2017. Business strategy and auditor reporting.
Auditing: A Journal of Practice & Theory. 36(2). pp.63-86.
Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make
corporate social responsibility work for your business. Routledge.
Yuliansyah, Y., Gurd, B. and Mohamed, N., 2017. The significant of business strategy in
improving organisational performance. Humanomics.
Amran, A., and et.al., 2016. Business strategy for climate c ut you need to suggest changes that
Tesco can implement in order to improve performance. Aim for 10 strategies (minimum
of 5) and explain each one.
hange: An ASEAN perspective. Corporate Social Responsibility and Environmental
Management. 23(4). pp.213-227.
Holotiuk, F. and Beimborn, D., 2017. Critical success factors of digital business strategy.
Soltanizadeh, S., and et.al., 2016. Business strategy, enterprise risk management and
organizational performance. Management Research Review.
Theoharakis, V., Bicakcioglu, N. and Tanyeri, M., 2019. Green business strategy and export
performance: an examination of boundary conditions from an emerging economy.
International Marketing Review.
Welford, R., 2016. Corporate environmental management 1: Systems and strategies. Routledge.
Bentley-Goode, K.A., Newton, N.J. and Thompson, A.M., 2017. Business strategy, internal
control over financial reporting, and audit reporting quality. Auditing: A Journal of
Practice & Theory. 36(4) pp.49-69.

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Cubas‐Díaz, M. and Martinez Sedano, M.A., 2018. Measures for sustainable investment
decisions and business strategy–a triple bottom line approach. Business strategy and the
environment. 27(1). pp.16-38.
Anwar, J. and Hasnu, S.A.F., 2016. Business strategy and firm performance: a multi-industry
analysis. Journal of Strategy and Management.
Online:
TESCO SWOT Analysis. 2019. [Online]. Available Through:<https://bstrategyhub.com/tesco-
swot-analysis-2019swot-analysis-of-tesco/>
Tesco Porter Five Forces Analysis. 2018. [Online]. Available Through:
<https://www.essay48.com/term-paper/13685-Tesco-Porter-Five-Forces>
Key:
Outcome Achieved
M1P1
Outcome NOT Achieved
Improvements or Changes Needed
UNIT 32: BUSINESS STRATEGY
Outcome Almost Achieved
DistinctionPass Merit
LO1
D1
P4 M4
LO3
P3 M3
LO4
P2 M2
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