Analyzing the Macro Environment in Tesco

This report analyzes the macro environment in Tesco, including political, economic, social, technological, environmental, and legal factors, and their impact on decision making. It also discusses the internal environment and capabilities of Tesco using appropriate frameworks such as SWOT analysis and VRIO analysis.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 Analysing the macro environment with application of appropriate framework in Tesco. 1
M1 Critically analyse the macro environment and its impact on decision making of a business
................................................................................................................................................3
P2 Discuss the internal environment and capabilities using appropriate framework within an
organisation context................................................................................................................3
M2 Critically evaluate the internal environment to assess the strength and weakness..........6
P3 Apply five forces model of a given market sector within organisational context.............6
M3 Evaluate the strategies to achieve competitive advantage within the market..................8
P4 Concepts theories and model range to device the strategic planning of Tesco. ...............8
M4 Strategic management plan with gaols and strategic priorities......................................10
D1 Critique and interpretation of data .................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The certain plan of actions and tasks which are devised by the management of the
organisation are formed by analysing various relent factors. These factors can be external or
internal but they have negative and positive impacts on the business as well as on its procedures.
Thus with a view to moderate the effects of such elements into the favourable outcomes for
company (Al Falasi and et. al., 2019). The superior managers within the organisations plans and
design the overall system to achieve efficiency and effectiveness in its workings. These plans
are combined with respective strategy to each and every operation and thus this whole process is
considered as the business strategy.
This report paper here is prepared on the overall aspects of Tesco Plc. It is the well
renowned multinational retail company that serves mostly in the confines of United Kingdom
and in other states. The company majorly deals in the retail segment of home appliances, daily
essentials, food, furniture, toys and other equipments. With such a wide range of products and
services the corporation has a distinctive brand image in the higher class retail markets of United
Kingdom. The below discussed report encompasses of the various macro-environmental factors
segregating them internally and externally with being respective of their impacts on the
organisation.
P1 Analysing the macro environment with application of appropriate framework in Tesco.
The effective process of operations within the respective organisation is necessary and
that can be achieved by analysing the external environment of business on a regular basis. The
reason behind performing the PESTLE analyses is the significant approaches of all the six factors
are quite impact full on the functioning of the organisation (Amran, A. and et. al., 2016). In
relation to the Tesco Plc. the analyses of PESTLE is practised as follows:
Political Factors: This factor consists of all the political elements within the nation, such as
stability of ruling party, degree of corruption, international trade standards, governmental
culture, trade barriers, labour and taxation laws. The political system since 1920, is stable by the
two major parties in United Kingdom i.e. Labour Party and Conservative Party. This provides
certain benefits to the retail companies like Tesco to gain the essential informations and carry out
its workings on the basis of consistent political powers within the country. .
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Economic Factors: These factors are combined with all the major aspects of economics
and finances, inflation rate, interest rates, exchange rates, return on investments etc. The study
and of these economical elements is crucial to Tesco for the effective operations and market
expansions of the company. Determination of costs and price certainly gets effected form the
external environments of enterprise. The economical environment of UK is flourished with
extensive flow of inflation in interest rates and decreased rate of labour and transportation costs
these can effect the Tesco to employ the new operations and rising its capital by attracting the
foreign direct investors. Thus how the retail company can expand its business and gain the
profitability by incurring less costs.
Social Factors: Those factors which includes the elements of society are called as the
social. environments of external environment. Some of these factors are the age, population,
literacy rate , lifestyle of consumer and the attitude of the market segment etc. The current
working generation of United Kingdom is shifted towards the quality and standards, which
means that most of the potential consumers of the Tesco demands for the quality and has a
product behaviour. This can efficiently act as the opportunity to Tesco, in terms of increasing the
sales and capturing an effective share of market. By offering the quality goods to the market and
enhancing the cost and price accordingly.
Technological Factors: The trends which emerges in the technical background of a
nation is all considered as the technological factor. The United Kingdom being most developed
country constitutes of major innovations and technological advancements which helps the
organisations as well as the markets to grow and increase their potential by reducing the time
excess time consumption. Tesco can face a certain amount of threats as the company still
operates on the outdated and traditions systems of operations, that occurs to extensive time and
resource wastages. The organisation should adapt new technologies and styles of working to
increase the efficiency of the whole processes inside and outside the firm. This change will bring
a different level of success to the organisation.
Environmental Factors: The environmental elements of the operational boundaries of
the organisation which consists of the climate change, whether conditions and other natural
policies are recognised as the environmental factors of the organisation. The environment of
United Kingdom is currently unstable and has serious issues which are going on with the
whether and surrounding conditions. This kind of environment is not beneficial to any
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organisation or any individual The retail company Tesco has recently taken certain giant
measures in order to maintain the balance the climate effects on the planet. The organisation has
reduced its carbon emission by 50%, Tesco also initiated to avoid the plastic bags within the
grocery stores.
Legal Factors: This factor is commonly encompassed with the constitutional laws and
legislations which are formed in a way to maintain the peace and harmony in the country. Just
like any other republic nation there are certain laws which regulates the trade and business of the
corporations inside and outside of the peripheral boundaries of nation (Tian, Chen, and Zhu
2017). The legal factors within the UK are much more considered on the growth of the business
along with its citizens. The laws are enforced to legally perform employment process, comply
with taxation policies and practising operations at the determined standards of the organisations.
Being a respected retail company all the operations within the Tesco are performed under the
prescribed legal framework of the country. Thus such effects enable the organisation to boost the
moral of its current work force and enhance its goodwill in the market and creates an effective
image of established brand within the respective customer segment.
M1 Critically analyse the macro environment and its impact on decision making of a business
The PESTLE analysis elaborates that provide the framework of macro environment
factors that have a major impact on decision making of a company (Thomas and et. al., 2016).
The vote for Brexit in UK has adversely affected the company in various ways especially to
political and economical factors. The increase of VAT from 17.5% to 20% increases the prices
of products that create a negative impact of a company. This results in reduction in employment
opportunities (economic) change in lifestyle of people(social) and obsolescence of technology
(technological), not abiding rules and regulations (legal) and not making proper utilisation of
resources (environmental). This creates a negative impact on Tesco which combat the growth
and it become difficult to take fast decision.
P2 Discuss the internal environment and capabilities using appropriate framework within an
organisation context
The internal factors help the company to determine its strength and weakness in order to
grab the opportunities and combatting the threats (Soltanizadeh and et. al., 2017). These factors
have impact on decision making of a company that provide growth prospect to a business. In the
context of Tesco, these are presented as follows:
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SWOT Analysis: It is a analysis that provide the internal and external aspects of business and
also to determine the positioning of market across the globe. The manager of Tesco identify the
internal and external factors of a company to achieve a greater position within the market as it
has cover large operations across the globe. The SWOT analysis of Tesco is given below:
Strength Weakness
 Tesco is one of the renowned brand in
UK that provide wide range of products
within the market (Rogers, 2016).
 It provide an ease of convenience to
their customers and thereby achieve
greater economy of scale.
 Teso is top 100 company in the world
that provide large variety of goods such
as grocery, home appliance and
financial services.
 The concerned firm has formed joint
venture in countries such as China to
cover wide area across the globe.
 One of the greater weakness of Tesco is
that the respective firm face has suffer
loss due to credit cards and greater
level of household claims.
 Tesco lag behind in certain areas like
mobile phones of its own brand name
and so on (Rothaermel, 2016).
 The respective firm provide products at
very high prices that affect the sales
and profitability of a business.
Opportunities Threats
 There are various opportunities that are
provided by Tesco such as introduction
of online shopping to create a large
customer base.
 Also, Tesco could provide tablets and
mobile phones in their own brand
name.
 The respective firm could expand their
operation in the overseas of UK such as
Australia to generate large network
 There are large number of player within
this retailing industry such as ASDA,
ALDI, Morrison which poses a big
threat to a company like Tesco.
 Its major competitor is Walmart that
provide necessary skills, resources that
causes the problem to Tesco.
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across the globe.
VRIO analysis: It is a framework that provide the business strategic process to achieve the
vision, mission and goals and objectives of a business (Nurmi and Niemelä, 2018. It consist of
four components that provide the overall functioning of an entity by allocating various resources
like employees, patent, local food and financial resources. The manager of company focuses on
optimum utilisation of resources by assessing the capabilities of a firm. The same is presented as
follows with reference to Tesco:
resources V
Valuable
R
Rare
I
Inmitable
O
Organized
Food Yes No No No
Employees Yes Yes No No
Patent Yes Yes Yes No
Financial
resources
Yes Yes Yes Yes
Valuable: With reference to Tesco, the financial resources are highly valuable because it
provide vast opportunities to a business to expand their operations within the market. Its local
food provide high value due to the product differentiation and employees are asset to a firm as
they are highly trained that increases the output (Moreno-Izquierdo and et. al., 2016). The patent
provide a valuable resources that allow the firm to sell products in order to gain competitive
position within the market. This help the concerned firm to gain opportunities by combatting
external threats and to retain employees for period of time and provide large access of customers.
Rare: The financial sources of Tesco are found to be rare because its competitors does
not provide these resources which is a major strength of a firm and accelerates the growth aspect.
The employees of Tesco are considered to be rare because the manager of Tesco provide
effective training to their employees and also provide monetary benefits so that they work
beyond their potential. There is good atmosphere in a firm that provide sustainability and long
term growth of a company. One of the greatest advantage is that Tesco provide patent that is
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considered to be rare because a lot of formalities are required to obtain a patent and is easily not
possessed by its competitors like ASDA, Kroger, LIDL and so on.
Imitable: With reference to Tesco, the financial resources are costly to imitate due to the
reason that these resources are purchased by the company through the profits that are earned in
previous years (Lopes and et. al., 2018). It would be difficult for new entrants to accumulate
huge profits for future growth and expansion. This provide wide opportunities to the manager of
Tesco to modernize and diversification of a business. The patent of Tesco is difficult to copy
because there are severe legal regulations regarding the imitation of a product. This is biggest
advantage to a company due to its costly process which possess a big threat to its competitors.
Organisation: This the last component of VRIO analysis which comprises of the
resources that are presented in an efficient manner for attainment of goals. The financial
resources of Tesco are highly organised to make sure that they are invested in right place at right
time by making use of opportunities that provide a source of competitive advantage within the
market. Other resources are not utilises properly in case of this intenal analysis in the context of
Tesco.
M2 Critically evaluate the internal environment to assess the strength and weakness
It can be ascertained that internal environment of Tesco consist of both benefits and
drawbacks within the market. The respective firm has the most valuable resources that is
employees because this is the most important asset of a company that is considered valuable,
rare, imitable and organised (Linder and Williander, 2017). Also, it has huge financial resources
that provide competitive position within the market but at the same time the respective firm is
lagging behind the marketing strategies and initiatives to cover large market area. This retailing
industry has large number of competitors such as Walmart, Asda, ALDI and so on which possess
a greatest threat to a company. Every aspect of business has two sides that is positive and
negative which provide strength and opportunities to a company by overcoming weakness and
threats to achieve sustainable growth.
P3 Apply five forces model of a given market sector within organisational context
Porter's model is a business management tool that determine the level of competition and
profitability within industry. In other words, it help in ascertaining the positive and negative of a
firm in order to gain position within the market. Tesco is one of the leading firm in UK that has
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cover wide expansion across the globe and provide good quality products to meet customer
requirements. Through strategic planning, the manager use this approach to find the competitors
and ways to increase the sale within the market. With reference to Tesco, the five forces of
Porter is presented as follows:
Threat of New Entrants: This factor is acknowledged to be low due to the reason of
maximum capital requirements which become difficult for new entrants to capture the market
share. Also, it is difficult to obtain license because of strict government rules and regulations
which posses a big threat for new entrants. The manager of Tesco could focus on providing new
and innovative products to create strong brand image across the globe. It can achieve large
economy of scale and thus gain large access of customers.
Bargaining Power of Suppliers: This model if Porter's is regarded to be low as there are
various suppliers that provide standardised products that results in less switching costs. The
higher authority of Tesco could purchase raw materials at a low cost so that it could minimise the
cost of production and maximise the profit to get benefit within the market. This help the
company to save money and invest it in expansion and diversification.
Bargaining Power of Buyers: The magnitude of this force is usually low. As there are
large number of competitors within the market such as Walmart, ASDA and so on that provide
products at high prices. Buyer are more concerned towards the quality rather than prices so by
looking this concern the manager of Tesco provide superior quality products in order to satisfy
the needs of customers. The concerned firm sell products at low prices to build brand loyalty and
to attract large number of customers.
Threats of Substitutes: The extent of this force is regarded to be low because there are
various alternatives available within the market which incur huge cost. Thus it become difficult
to achieve economy of scale across the globe. The manager of Tesco provide high quality
products as compared to its competitors and could also provide unique offerings to gain strong
base of customers. There are large number of competitors within the market which provide
products at high cost thus allow the company to gain competitive advantage so as to achieve
large market operations.
Rivalry among competitors: The extent of this force is considered as weak within the
confine of retailing industry. This is due to the reason that there are large number of competitors
operating across the globe such as Amazon, J Sainsbury, Carrefour, Morrisons and many more
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but they provide products at high cost. The manager of Tesco produced differentiated products
that poses a big threat for rivalries. The concerned firm could capture large market share by
focussing on winning the new customers rather than just existing clients.
M3 Evaluate the strategies to achieve competitive advantage within the market
There are various strategies through which firm can gain competitive position within the
market as they perform various functions like planning, organising, controlling and monitoring
the activities of an organisation to achieve goal effectively and efficiently (Lai, Melloni and
Stacchezzini, 2016). The firm can build effective marketing strategies like market research,
pricing policies and so on to attain a significant position within the market. Also, it can use
promotional methods like social media marketing, various websites to create awareness among
the customers. This improve the overall functioning and provide growth opportunities to a
business and thereby provide cost advantage to a company. This help to boost the sale and
profitability of a business enterprise and capture large market share and achieve the economy of
scale across the globe.
P4 Concepts theories and model range to device the strategic planning of Tesco.
The basic concepts and models that combined with all the internal and external factors of
the said business entity to attain the organisational success (Johnson, 2016). The following
strategies will be evaluated in respect of Tesco Plc by the help of Ansoff matrix.
Ansoff matrix was developed by business management specialist H. Igor Ansoff . It is
used as a strategic provision tool which helps the organisation to formulate its future plan of
action by considering the 4 strategies of Ansoff matrix which can classified on the basis of the
nature and goals of the organisations (Ansoff, H.I. and et. al., 2018). These are discussed in
relation to Tesco company:-
Market Penetration: By the term penetration it is referred as the promotion of the current
product of the company in to the existing segment of market to increases the sale and
profitability of the business. The development of existing consumer base can be attained by
Tesco Plc. By applying certain techniques of market penetration which can be the decrement in
price of the current product range to attract new consumers or doing the promotion of existing
product on a mass level to influence the potential market. The acquisition of other potential
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ventures is the most efficient approach to be adapted by Tesco to perform the market penetration
effectively.
Market expansion: This strategy is called as the market development. The market
expansion is defined as the process of introducing the existing product range to new and
untapped market shares (Ansoff .and et. al., 2019). Tesco retails will be benefited with the great
strength of the market expansion as it will guide the company to seek the attention of new
customer segment and capturing a handsome proportion of the potential market place by
entering into new locations of the market that could be in national as well as international. This
would give an enhanced boost to the sales and generate revenues for the growth of Tesco.
Product expansion: It is also recognised with the name of product development. This
strategy approaches the organisation to introduce new products in to existing market place of the
company. This process can only be applied by the organisation in the case of identified demands
and necessities of the customer base in existing market by the organisation. The product
expansion allows respective firm to use the innovative and essential terms to introduce a new
product which can fulfil the gap of sale in the market. In relation to Tesco plc there is a lot of
demand and need of certain product portfolios which can be offered by the company to increase
the demand in sales.
Diversification: This is the last strategy which majorly focuses on the alternatives of
introducing a very new product in the new market. This is considered as the most risky
provision among the overall registrar as the new market share can be much more
unacknowledged by the firms and launching a new product without identifying and evaluating
the new market conditions (Habib, and Hasan, 2017). This strategy will comparatively act as the
most expensive action for Tesco plc. as surveying new market areas and determining their facts
and conditions inside out, will incur excessive cost and productive time of the company.
As per the evaluation of all the strategies of Ansoff matrix it can be it has been
determined that the strategy of market penetration would be the most preferable strategy for the
Tesco Plc. To achieve its growth objective effectively and efficiently. The reason behind
adapting this strategy is clear, as the company is already having a effectively owned market share
in terms of sales. Thus, emphasising on the current product and existing would support the
market of firm and generate the additional revenue for Tesco.
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M4 Strategic management plan with gaols and strategic priorities
The strategic business plan of Tesco is formed to achieve the growth of company. It is
comprised by the view of long term and short term organisational goals and objectives and other
characteristics of the operations.
Aim: To maintain the consistency in prising as well as with increment in profits.
Mission : To provide the best quality products and give a remarkable consumer
experience every time when they visit the retail stores.
Vision: To become the top leading retail company in the national as well as international
marketplaces
Goals and Objectives: To provide the effective product and services to existing
customers is the short term goal and capturing the optimum market share for expansion is the
long term goal of the business.
Strategic priorities : The market penetration will be the strategic priority to gain the
effective growth in terms of profitably.
Tactics: Tesco will launch certain other variants in the same product range to ensure the
maximum coverage of different customer segment by providing the valuable benefits within the
suitable price standards.
D1 Critique and interpretation of data
The functions that are needed to be performed by the management of the organisation can
be evaluated and guided through all the factors of internal as well as external factors of
environment of business (Indartono and Wibowo, ., 2017). The business can use al the strategic
directions which are discussed hereby in a way to achieve the effectiveness and efficiency from
all the actions of business. The study of all external factors by performing PESTLE and the
assessment of internal environment involving VRIO and SWOT helps in preparing the strategic
plan of business and to determine the goals and objectives of organisation..
CONCLUSION
From the above furnished information, it can be inferred that the business environment in
which company carry out its operation is regarded as dynamic in a competitive era. Macro
environment is very necessary to take accurate decisions which includes various aspects like
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national income, GDP, employment, level of competition and many more to achieve
predetermined goals effectively and efficiently. It has been analysed that the PESTLE analysis
has affected the business with the given organisation. The internal analysis of company is
conducted by SWOT and VRIO analysis to determine the strength and weakness of a business
enterprise. It has been observed that the Porter's model is done to determine the level of
competition and profitability within the market. The various theories and models has been
studied and strategic management plan is created that provide the vision, mission, goals and
objectives, tactics and strategies of a particular firm. It has been analyse that company should
prepare an appropriate strategy to attain long term objectives of a enterprise.
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