Strategic Analysis of Tesco: Business Strategy, PESTLE Analysis, SWOT Analysis, VRIO Framework, McKinsey 7-S Framework

This paper provides a strategic analysis of Tesco, including its business strategy, PESTLE analysis, SWOT analysis, VRIO framework, and McKinsey 7-S framework. It examines the company's strategic position in the market and its internal and external factors for competitiveness.

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BUSINESS STRATEGY
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Table of Contents
Introduction.................................................................................................................................................3
Activity 1......................................................................................................................................................3
1.1 An Environmental Analysis conducted on your chosen organization using PESTLE (P1)....................3
1.2 An Organization audit conducted on your organization using SWOT (P1).........................................5
Activity 2 (this activity provide evidence for P2 and M2)............................................................................6
2.1 An Analysis of strategic capabilities of your chosen organization using VRIO framework.................6
Strategic capabilities of Tesco using VRIO framework.............................................................................6
2.2 M2 A critical evaluation of the internal environment (internal capabilities structure and skills set)
to assess the strength and weaknesses of your chosen organization using McKinsey 7-S framework....7

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Introduction
Business strategy is important for both competition and profitability within the
contemporary market. Tesco is a multinational company that operates a variety of products and
braches ranging from grocery to the financial market. The company has both strategic and
structural factors that enable the business to survive completions and at the same time remain
profitable. Analysis of various internal and external factors shows the strategic position of the
company in the United Kingdom market and internationally. The following paper provides a
strategic analysis of Tesco within the country’s market and internationally.
Activity 1
1.1 An Environmental Analysis conducted on your chosen
organization using PESTLE (P1)
Pestle analysis is the analysis of the environment where the firm operates that takes into
account political, economic, sociological, technological, legal and environmental factors
affecting the organization. Tesco is a multinational that is affected by macro-environmental
factors within a global perspective. Firstly, political factors affect the operation of the company
within the country and internationally (Walden 2011). The UK is a politically stable country that
remains a good environment for business enabling firms such as Tesco to intensify its investment
into the country. The global financial instability is a factor that has impacted many countries
where Tesco operates leading to government focus on employment creation. The main political

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influence that currently affects the operation of Tesco has been the need to employ residents the
move that has increased the demand for the company's products (Aghazadeh 2016).
Secondly, economic factors have a high influence on the operation of the company as it
affects the cost, profit, demand, and prices of products. The company has responded to the
changing inflation rate that is 1.7% as of September 2019. The company has, therefore, increased
its focus on building its brands as opposed to initial luxurious brands. This implies that the
company has intensified its advertisement to reach customers by brands rather than high-end
products. Moreover, the company has a larger market share within the country that enables it to
set prices according to the prevailing economic conditions within the UK (Haleblian, Mcnamara,
Kolev & Dykes 2012).
Thirdly, sociological factors affect the company pricing and marketing strategies to target
certain social behaviors of customers. The composition of the country is mainly the aged
population with over 18% of the total population. This has an impact on products that Tesco sells
has more products used by older people to become its main focus (Potter 2011). The consumer
behavior of many customers in the UK is characterized by bulk buying that requires more non-
food items that are durable. The population is also fairly large with more than 66.4 million
people and the population is increasing creating more demand for household products that Tesco
sells. This has also influenced by consumers over-relying on organic products making the
company focus on organic products. The company though was initial food-oriented the company
has responded to the changing consumer behavior in the country to include many non-food
products (Osita, Onyebuchi & Justina 2014).
Fourthly, technological factors is another macro-environmental factors that affect the
operation of Tesco within the UK market and internationally. The country is technologically

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advance and this has been used by Tesco to fashion both marketing and focuses on online
businesses that take advantage of technology. This has lead to a successful online business
version of the company that could be accessed from any place (Schmieder-Ramirez & Mallette
2015).
Fifthly, the environmental factor has a high influence on Tesco as the majority of people
within the country focus on ways to reduce the impact on the environment. The country through
its environmental regard is reducing the impact of the chemical on the environment hence focus
on organic food (MacInnis, Pieters & Hoyer 2014).
Sixthly, legal factors such as employment legislation, maternity and paternity legal
provisions, and consumer right are some of the laws that affect the operation of Tesco. This
enables the company to strategically manage its human resource to avoid legal actions (Mishra
2015).
M1
The PESTLE analysis of Tesco and the macro environment enable adjustment of
managemnt decision to cope environment. This is important effective decision making process
for the company. In addition, technology enable the company to compete effectively.
1.2 An Organization audit conducted on your organization using
SWOT (P1)
SWOT analysis is the analysis of the organizational factors that are majorly internal
strengths that contributes to its competitiveness and these include strength, weaknesses,
opportunity, and threat. This affected internal factor has a direct impact on the operation and the

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ability of the Tesco to successfully compete in the market (Winterman 2013). Firstly, the
strength of the company include large market share, increase global focus that helps the company
to diversify its revenue areas and improve technologies that enable the company to sail online.
Secondly, weaknesses of the company have decreased operation profit that has increases its
financial challenges and errors, accounting scandals and poor operation performance (Ahmed
2014). Thirdly, the company has some opportunities in the market that include joint ventures,
large online markets, emerging markets and strategic alliances that may increase the business
customer base within the country and internationally. Lastly, strong competition from other firms
such as Wal-Mart and Aldi, past advert backlash that affected its operation and fake farm
misleading products. More of the SWOT analysis of Tesco is shown in the figure below (Mason
& Evans 2015).

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Figure 1: Tesco SWOT Analysis
Activity 2 (this activity provide evidence for
P2 and M2)
2.1 An Analysis of the strategic capabilities of your chosen
organization using the VRIO framework
Strategic capabilities encompass the ability of a company to use its capabilities,
resources, and skills to have a competitive advantage over other firms hence perform a level of

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success. There are some components of the strategic capability of a company. These include
resources, competences, and the balance of resources. Firtsly, resources that are available within
the organization determines the strategic capability of the organization. Secondly, competence of
performing activities within an organization is another important aspect of strategic capability.
Lastly, balancing of resources refers to the ability of the organization to balance between
activities and various business units within the organization.
Strategic capabilities of Tesco using the VRIO framework
The strategic capability of Tesco can be analyzed based on the VRIO framework. Firstly,
Tesco over time has built its business strategies that ensure that it offers customers value. This
has enabled its effective competitiveness in the market and hence expansion to other countries.
Secondly, Tesco is one of the companies that have some unique features and a product portfolio
that enable it to compete in the market (Mesly 2017). The company over the past years has
diversified its brand to build on new areas such as online branding that is rare for its competitors.
Thirdly, the global strategy that is used by Tesco has proved competitive in the market as
competitors are not able to imitate some product line that is only offered by Tesco (Butler 2018).
Besides, Tesco has shown some imitable especially within its product line where it sells products
that are also sold by other competitors except brands that are unique to the company. Lastly, the
organization of its management can be termed as its strength since this has been an area of
competitiveness (Wann-Yih & Anridho 2016). The company has proved high management
capability through its unifying of both grocery portfolio and other product lines such as finances
that show its excellent management. However, the management aspect of the organization has

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also shown some weakness especially in terms of accounting and finances reducing the
profitability of the business (Barney & Hesterly 2010).
M1
The strategic capabilities of the company are also comparable to the macro environment
of the company. The company strategic capbilities depend on the level of competion within the
market.
2.2 M2 A critical evaluation of the internal environment (internal
capabilities structure and skills set) to assess the strength and
weaknesses of your chosen organization using the McKinsey 7-S
framework
McKinsey 7-S framework refers to the framework of analyzing the organization’s
effectiveness in the market based on various internal factors. The framework takes into
consideration various internal capabilities to evaluate the strength and weaknesses of the
organization. To evaluate the internal environment of Tesco various factors called 7-S are used.
These include strategy, system, staff, structure, shared value, style and skills (McDonald 2014).

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Figure 2: VRIO Analysis for Tesco
Strategy
The main strategy that Tesco uses understands consumer needs and this is important for
investing in a highly competitive environment. Tesco has a business strategy that acts as its
strength and competitive advantage that enables it to compete in the market. Another unique
business strategy of the company that includes venturing in a unique portfolio has enabled the
firm to compete favorably in the market (Dess 2018).
Structure
The organization structure of the company has been marked with a functional
organization that enables various departments to function well at the organizational level. The

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organization is large and has many layers that require structure based on the functionality of
these layers (Leahy 2012).
System
Tesco has a variety of system activities that ensure its meet needs of customers daily. The
company source products and brand them to bring uniqueness required for market competition.
The company also has an operational system that integrates online, in-house and international
portfolios of the company. This makes all layers of the organization function normally and
realizes its objectives (Fill 2013).
Shared value
The share value of Tesco is customer focus that makes the business to consider the
customer need above all other business objectives. This has enabled the company to create
customer-oriented products with low prices hence competitive in the market (Hayes 2014).
Style
The style of leadership is democratic that enables the involvement of employees in the
decision-making process of the company. The democratic leadership style used by the company
enables the company to remain innovative in the market as ideas from the employee are used to
improve the management of the organization (Ryle 2013).
Staff
Tesco has a wide variety of employees with diversified capabilities ranging from local
staff to international staff operating within its international subsidiaries. The staff diversification
enables the company to meet customer demand and remain within the competitive advantage

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over its competitors as it has a large staff pool that majority of those companies (Andreou,
Ehrlich, Karasamani & Louca 2015).
Skills
The skill and competencies of the organization are based on its innovativeness, resources,
and achievements. The company has remained innovative in terms of customer need satisfaction
and this has also enabled the company to acquire a huge number of resources. Moreover, the
activeness of the company enables it to boast of multinational status (Straker, Wrigley &
Rosemann 2015).
M1
The macro environment factors determine various aspects of 7-S environment of Tesco.
Macro environment such as human resource policies enable deciison making in skills needed
within the company. This also determines the staff aspect of the 7-S of the company.
In conclusion, various organizational factors have the competitiveness of the company
and its ability or capabilities to compete in the market. Tesco is a multinational company that has
designed strategies that enable it to compete with other companies in the same industry. The
company has both internal and external factors that enable a company to have a competitive
advantage. The company's resources, structure, and management are key strategic factors that
enable the competitiveness of Tesco in the UK market and internationally.

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