Strategic Management Plan for Tesco: Impact of Macro and Internal Environment, Ansoff Matrix, SWOT Analysis, and Porter's Five Forces Model

This report analyses the impact of macro and internal environment on Tesco, the largest supermarket chain in the UK. It includes Pestle analysis, Ansoff matrix, SWOT analysis, and Porter's Five Forces model to devise strategic planning.

Business strategy

Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
P1 Applying appropriate frameworks analyse the impact and influence of the macro
environment of organisation........................................................................................................3
TASK 2............................................................................................................................................6
P2 Analyse the internal environment and capabilities.................................................................6
TASK3.............................................................................................................................................8
P3 Applying Porter’s Five Forces model evaluate the competitive forces..................................8
TASK 4..........................................................................................................................................10
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning
...................................................................................................................................................10
CONCLUSION..............................................................................................................................12

INTRODUCTION
Business strategy is defined as the set of direction and course of action that direct organisation to
attain defined goals and objectives. It is the master plan that is implemented by the organisation
to secure competitive positioning in market place, carry business operations efficiently. basically,
business strategy is the combination of different competitive moves that is under take by the
organisation to attract large number of customers, strengthen performance to reach desirable
outcome. It is the tool of top management with having efficient and integrated framework in
order to analyse and exploit business opportunities (Anwar, 2018). Corporate, business as well as
functional level strategies are formulated that lead business in right direction. In this report
chosen organisation is Tesco s which is largest supermarket chain in United Kingdom,
established in 1919 by Jack Cohen. Headquarter of respective organisation situated in
Hertfordshire, London, England, UK. 4,23,092 employees are engaged with organisation and
enable it to serve in different market area of UK, Ireland, Hungry, Czech Republic and Slovakia.
In this report Pestel analysis and swot analysis is mentioned that described internal and external
factors of organisation. furthermore, Ansoff matrix, porter’s five forces and porter’s generic
model are discussed that help business to maintain competitive positioning in market place.
TASK
P1 Applying appropriate frameworks analyse the impact and influence of the macro environment
of organisation
Business environment is defined as the combination is internal and external factories that
have power to influence business decision-making process and organisational strategies in
positive and negative manner. Tesco s conducts deep research to analyse business environment
factors and their impacts on business operations and performance. Some factors of Pestle
analysis are mentioned below:
Pestle analysis:
PESTLE analysis is considered as the framework that is undertake by business to assess
external factors. Tesco analyses these factors properly and take decisions to gain competitive
advantages. Each and every factor of external environment impact business operation in positive
and negative manner. Some factors of Pestle analysis are mentioned below:

Political factors: Political factor plays important role in assessing the factors that impacts
Tesco s performance and functioning in longer period of time. As Tesco s is the multinational
retailing supermarket chain that operate its functions in various countries and explore itself in
different political environment. In order to attain success in dynamic retailing industry in
different political environment across various countries, Tesco should diversify the systematic
risk of political environment (Bereznoy, 2019). Respective organisation analyses these factors
before entering in certain market. In political environment various factors such as political
stability or instability, government interventions, foreign trade policies, as well as trade
restrictions that impacts business performance. As Tesco organisation operates, its operations
world wide so, global political factors greatly impacts and influence the performance and
functionality of organisation. Due to financial instability in the world, government encourages
retailers to develop job opportunities for domestic population. Brexit is the factor that impacts
organisational sales and decreases profitability ratio. Along with that, changes in tax policies
affect business in negative manner. Tesco analyse these factors and develop policies accordingly
to reduce negative impacts and run business operations efficiently.
Economic factor: Tesco provides range of products to its customers. Economic factors
play important role in the consumption of products. Respective organisation evaluates economic
changes that occur in country. These factors impact business revenue, sales, profits as well as
distribution. Tesco consider various taxation policies to run business efficiently. Economic
factors include labour supply, purchasing power of customers as well as cosy of credit impacts
on functioning of business in competitive environment. As per decline in consumer disposable
income and household income, Tesco shift its concentration on advertisement activities rather
than producing more luxurious items.
Social factor: There are various changes are happened in social trends and factors that
indicates that UK have moved towards bulk shopping as well as one-stop shopping. Respected
organisation increases the number of non-food items that enhances organisational sales.
Customers buying behaviour is influenced by the various factors such as their attitude, beliefs
and their social conditioning. Now these days, consumers are becoming more health conscious
and aware about health issues that changes their approach towards food products (Guo, 2017).
Tesco regularly observe these changes and implement them in organisation through providing
organic products.

Technological factor: Advancement and development of technology bring various
opportunities for Tesco. Adoption of technology, facilitates business to gain competitive
advantages. Respective organisation starts development and introduction of online shopping
along with the facility of home delivery of products. Furthermore, Tesco also implements self-
service check-out points that provides facilities and convenience to customers that reduces labour
cost of organisation as well. There are various investment in energy efficient projects are done by
the organisation that fulfil organisational long-term objectives as well as reduces carbon
footprints.
Legal factor: Rules and regulations that are introduced by the government directly
impacts on performance level of Tesco. For instance, the food retailing commission (FRC)
introduces various code of practices and ban many current practices like changes in prices of
products without notice or demanding payment of suppliers. On the other hand, organisation also
consider various legislations regarding employment laws, working hours regulations, safety and
security regulations and various others. Tesco provides products to its customers on fair value
that enhances customer base and profitability ratio.
Environment factors: In current environment, there are various factors that plays
important role in success and development of business. Tesco takes various decisions and actions
towards reducing carbon footprints by 50%. Organisation adopts waste management technique to
minimize waste in their stores and enhance social conscience in customers. Respective
organisation executed remove, reduce, reuse and recycle plan as well as reduce the use of plastic
in its stores. Now these days, organisations are facing immense pressure from different
government agencies to resolve environmental issues.
Ansoff Matrix:
Ansoff matrix is defined as the strategic planning tool or framework that is used by
organisation to develops strategies and planning for future growth and development. In matrix
four strategies are includes that facilitates business to grow as well as analyse the risk factors that
are associated with each strategy. Strategies of Ansoff matrix are mentioned below:
Market penetration: Market penetration is defined as the strategy that includes
enhancing business selling through offering existing products in existing market place. Main
objective of adopting this strategy is to increase market share and sales ratio (Hansen and et, al.,

2018). If organisation adopts this strategy than it increases promotional and distribution efforts
and offering products low prices to attract new customers.
Product development: Product development strategy is related to introducing new
products in existing market place. Before developing new product depth research is conducted to
analyse customers needs, demands and preferences. It enables business to attract customers and
enhance sales volume.
Market development: Market development is the growth and development strategy that
concentrates on providing existing products in new market place. Before entering in new market,
organisation analysis market trend, customer requirement that help to sustain for longer period of
time.
Diversification: Diversification is the riskiest strategy that concentrates on entering in
new market place through introducing new products. It enhances organisational reach in different
market areas and revenue.
Tesco adopts market penetration and market development strategy that facilitates
business to expand it operations and ensure wider reach. These strategies help business to
increase market share and usage of its products by its existing as well as new customers
(Hikmawati, and Alamsyah, 2018). Online promotions and research are used by the organisation
to spread awareness of its products to customers that enhances organisational sales as well.
TASK 2
P2 Analyse the internal environment and capabilities
SWOT analysis:
Swot analysis is defined as the strategic framework or tool that is implemented by the
organisation to analyse internal sufficiency and insufficiency of business in order to gain
sustainability objectives. understanding of these factors help business to develop policies and
strategies that provides competitive advantages then other competitors. SWOT analysis of Tesco
is mentioned below:
Strengths: Strengths are defined as the internal sufficiency of organisation that provides
competitive advantages than other competitors. Tesco is the biggest grocery retailing
supermarket in UK with having leading market share that strengthen organisation from others.
Respective organisation has geographical presence in almost 14 countries with 6800 stores. As
Tesco provides range of products such as home ware items, clothing, grocery products and

various others that enhances organisational customer base (Ilhan, 2021). Organisation prefer uses
of technology aspects in order to enhance shopping experience of its customers with
organisation. it also uses e-commerce and m-commerce facilities that attract large customer base.
Tesco has efficient supply chain networks that reduces organisational operating cost and enhance
business profitability.
Weaknesses: Weaknesses are some internal insufficiencies that limits business
effectiveness then others. Tesco has failed to operate its business in the market of US and Japan.
As per the high debts as well as credit card liability, financial stability and profits are getting
affected. Inefficient performance in specific market areas are the weakness of business that
impacts overall proficiency and effectiveness of business in international market. Tesco adopts
low-cost strategy that reduces its profitability margin. Retaining experienced and skilled
employees is the greatest concern of organisation in current business environment. Apart from
that brand switching is the factor that impacts organisational performance.
Opportunities: Opportunities are defined as the external factor that facilitates business to
sustain in business environment for longer period of time. Tesco avail the opportunities through
growing as well as upgrading the process of online shopping along with home delivery of
products that attract higher customer base and provides competitive advantages than others
(Khan, Daddi and Iraldo, 2020). During the pandemic of Covid-19, online shopping provides
various opportunities and enhance market share. Knowledge and understanding of Artificial
Intelligence and machine learning improves business productivity and operations. high-
unemployment rate is the factor that factor that provides opportunity to retailing sector because it
is the only place that provides jobs to members and become the centre of employment. Tesco
gain all these opportunities through performing accordingly.
Threats: In present environment, businesses face various threats due to political crisis,
economic crisis and health crisis that impacts business performance and sustainability. Brexit
impacts 80% imported food sold in supermarkets. Due to Brexit various trade restrictions are
imposed on business negatively impacts to Tesco. There are various competitors of Tesco such
as Asda, Sainsbury that posse’s threat on organisation and affect market share as well (Macchi,
Savino and Roda, 2020). Economic recession impacts on purchasing power of customers that
reduces sales and profitability of organisation. on the other hand, raising unemployment creates

financial uncertainty of business. Raising material cost and government regulations are the
major threat of business that impacts business performance and functioning.
BCG matrix: This model is defined as the framework that is used by the organisation to design
strategic planning, for attaining growth opportunities through reviewing portfolio to take
decision where to invest, discontinue or develop products. Some factors of model are mentioned
below:
Dogs: These products come in the category which have low market share and low growth
in market. Mobile sector has uncertainty and tesco is doubt to continue the operations in this
industry because there is high competition in this industry.
Question mark: These products are defined as the category of product that consist high
growth market and low market share. Tesco has which are nor operating with their full potential
like Tesco lard.
Stars: Star products are hero of organisation that enable business to attain higher
profitability and competitive advantages in market because they contains high market growth and
high market share. Bank is the star section of Tesco organisation that provides various loan and
insurance services to its customers.
Cash cow: Cash cow are the category of products that have low market growth and high
market share. Tesco have fresh meat section that included in cash cow category due to having
high demand across different tesco stores.
TASK3
P3 Applying Porter’s Five Forces model evaluate the competitive forces
Porter’s five forces model: It is defined as the strategic framework or tool that enables
organisation to identify different competitive forces that plays important role in shaping industry
in efficient manner. There are five forces are included in this model that facilitates Tesco to
develop strategic planning and take effective decisions that help to make competitive positioning
in market place. Forces of this model are discussed below:
Bargaining power of suppliers: Power of suppliers are defined as the influence suppliers
on material quality, prices and quality that impacts organisational overall effectiveness and
efficiency in competitive environment. Tesco is the leading organisation that has wide range of
suppliers from UK as well as other countries. Bargaining power of suppliers are high for Tesco

because they are large in number. Respective organisation negotiates with suppliers for gaining
higher profit margin. Tesco maintains effective relation with suppliers to gain quality material at
reasonable prices. Organisation maintains strong relationship with suppliers to reduce the
bargaining power.
Bargaining power of buyers: Bargaining power of buyers enables them to shift prices of
product at their desirable level that impacts on organisational profitability and performance.
There are millions of customers are engaged with physical as well as online stores that enhances
business sales and profitability ratio (Puspitasari and Jie, 2020). Bargaining power of buyers are
low for Tesco because they are not organised as well as they can switch to other brand for
gaining similar products such as Asda, Sainsbury and various others. High switching cost is the
factor that limits buyers power to switch brand from another. Organisation being innovation and
creativity in products and services the differentiated organisation from others and reduce
bargaining power as well.
Threat of new entrants: If an industry gains higher profitability than it attracts new
business to enter in market that directly impacts on other existing organisation through reducing
their market share and profitability ratio. Threat of new entrants is low for Tesco because of
higher capital requirement. Tesco has no threat of new entrants because of its economy of scale
and core competencies. There are various barriers are imposed by the industry to limit new
entrants. To requires high capital, higher distribution network as well as expertise to explore their
operations in supermarket of UK. To reduce the threat organisation implements various barriers
and restrictions that demotivated new business to enter in the industry.
Threat of substitute products: Availability of substitute products and services in industry
create threat for organisation through reducing sales and profitability. Tesco provides range of
products to its customers in order satisfy needs and demands of customers. As respective
organisation deals in grocery products that are essential for live and no substitute products are
available in market place that reduces threat of substitute products from Tesco. Respective
organisation beings various innovation in products to make differentiate positioning then other
competitors. Organisation provide training to employees to being uniqueness in products that are
demanded by customers as well.
Rivalry within industry: Existing competition within industry is defined as the rivalry
inside industry that impacts on organisational market share and revenue. Tesco has high and

powerful competitors that impacts performance as well as profitability ratio of Tesco. These
competitors spend on various activities such as advertisement, promotions and marketing
techniques that attract large customer base (Rugman and Verbeke, 2017). Tesco faces intense
competition from rivals like Aldi, Asda and Sainsbury that directly impacts business market
share. Tesco finds appropriate to handle the problem on intense competition within industry.
Organisation have to concentrates of innovation, marketing and others activities to make strong
positioning in market then other competitors and maintains large customer base.
TASK 4
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning
There are various theories, concepts as well as strategic planning are used to access
strategic positioning of business in competitive market place. Bowman extended model and
balance scorecard models are used that plays important role in maintaining strong positioning in
market and attain determined goals and objectives on time with efficiency. Proper
implementation of these strategies provides competitive advantages than other competitors.
These strategies are described below:
Bowman extended model of strategy:
Bowman extended clock strategy is considered as the comprehensive as well as easy
strategy that enables business to make effective positioning in market on the bases of price and
perceived value. In Bowman extended model various strategies are included that help
organisation to gain competitive advantages. Relative strategies are mentioned below:
Low price and low value-added strategy: This strategy is related to quantity of selling.
According to this strategy, product and services value as well as prices are establishing at lower
level. Combination of these aspects make it less competitive in strategic clock.
Low price: Low price strategy is related to become lowest cost producer or option for
buyers to purchase products and services in market place (Sanders, and Wood, 2019). If
organisation is using this strategy, then it is essential to enhance efficiency of process and reduce
cost in order to attain success. Through adopting this strategy organisation provides high quantity
of products to customers in market.
Hybrid: Hybrid strategy is the combination of low price and differentiation strategy. In this
strategy, organisation ensures that prices of products are established at competitive level and

promote the value aspects to products. Success of this strategy depends on the balance between
cost and differentiation that enable business to gain higher margin in market.
Differentiation: Differentiation strategies is defined as the approach in which organisation
differentiate it from others through adding value in its products and services. Organisation
maintains diversity of products by adding new and unique features in core product.
Focused differentiation: Focused differentiation strategy is related to provide high value
products to customers at higher price. Organisation able to gain higher profitability but it is quite
difficult to maintain. Organisation provides differentiated products in specific area of market.
Risk high margin strategy: According to this strategy, organisation is involved in
providing products and services at higher prices to customers without adding any extra features
and value that make it quite risky (Yuan, Xue and He, 2021). Organisations are emotionally
associate with specific brand then others that enhances effectiveness of this strategy.
Monopoly pricing: In monopoly market, single organisation has control on products and
prices that reduces effectiveness of other factors such as value of product, competitors, price
point. Monopolist organisation analyse all external factors that decides prices of products
accordingly.
Loss of market share: Loss of market is defined as the worst positioned strategy in clock.
In this position organisation are exist in market which is declining at fast rate. Business in this
position move to new market as well as their pricing strategies also inappropriate which impacts
business in negative manner.
Tesco adopts low price and low value as well as differentiation strategy that enables
organisation to attain higher market share and attracts large customer base. Through adopting
these strategies, respective organisation maintains its unique and differentiate positioning in
market that enhances organisational sales and profitability ratio as well. Tesco adopts latest
technology and efficient methods, process in order to become low-cost producer and attain
attraction of customers.
Porter’s generic model:
Porter’s generic model is used by the organisation to understand business competitive
positioning with industry. It facilitates business to implement strategy that differentiate business
then others organisation and help to gain competitive advantages. Strategies that are the part of
Porter’s generic model are mentioned below:

Cost-leadership strategy: In cost-leadership strategy, organisation want to become low-
cost producer in industry. This strategy depends varies according to the structure of industry. In
order to become cost producer, organisation adopt proprietary technology, ensure optimum
utilisation of resources and access raw material to produce products at lower prices. It provides
cost advantages to organisation than others. If an organisation is able to gain sustainable cost
leadership than it enables business to become above average performer in industry.
Differentiation strategy: Differentiation strategy is defined as the approach in which
organisation implement uniqueness’s in product along with various dimensions that have high
value for customers. It facilitates business to maintain differentiated positioning in market that
provides competitive advantages then others (Mackay and Zundel, 2017). Organisation provides
unique products at higher prices that enhances profitability ratio as well.
Focus strategy: In focus strategy, business concentrates on narrow segment of industry
and serve them quality products that enable organisation to gain competitive advantages. There
are two strategies are included in focus strategy such as cost focus and differentiation focus
strategy. In cost focus strategy, business gain cost advantages through provide products on lower
cost on the other hand, in differentiation focus strategy business concentrates on providing
unique and differentiates products in specific segment of industry.
Tesco concentrates on cost-leadership and focus strategy that enable business to provide
products and services at lower prices which attracts higher customer base. Through adopting
focus strategy, respective organisation focuses on specific segment of market and provide them
differentiated products and lower prices (Peng, 2021). It provides competitive advantages to
organisation and enable to sustain for longer period of time.
Balance scorecard strategy:
Balance scorecard strategy is defined as the performance management and analytical tool
that is used by the organisation with the objective of measuring activities of staff members
within their control as well as monitor the consequences that are raised from their actions. It is
mainly concentrates on managing the implementation of operational activities of organisation in
efficient manner. Basically, it is the tool which objective is to translating organisational goals
and objectives into a set of organisational performance objectives that are regularly evaluated,
measured to ensure that these objectives are mate. Proper implementation of this methodology
facilitates organisation to provide more comprehensive point to organisational stakeholders

through complementing financial measures that measures performance area such as customer
satisfaction as well as innovation in products. Tesco adopt this analytical tool to implement and
manage policies in efficient manner. The methodology links organisational vision to strategic
objectives, initiatives and targets. Respective organisation uses this to create balance financial
measures with organisational performance to attain goals and objectives with effectiveness.
Tesco measures organisational performance and ensures that all efforts lead business towards
attain objectives on determined period of time.
Tesco uses cost-leadership strategy in which organisation maintains its products and
service price low without compromising quality of products. Through implementing this
strategy, organisation maintains effective relationship with suppliers to get quality material at
reasonable prices and ensures optimum utilisation of resources.
CONCLUSION
As per above report, it can be concluded that business strategy is defined as the effective
tool that is developed by the organisation to gain defined goals and objectives on time with
efficiency. Effective strategies provide guidance to business and help to gain competitive
advantages then other competitors. Strategies lead business in right direction and enhance
effectiveness of business operations. both internal as well as external factors that directly and
indirectly impacts business operations. Organisation develop policies and strategies on the bases
of these factors that lead business functions in right direction. Apart from that, various strategies
are implemented by organisation to identify competitive positioning of business then other
competitors like Porter’s five force, pestle analysis, swot analysis and Ansoff. All these strategies
facilitates business to attain determined goals and objectives in efficient manner.

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