Business Strategy: Analyzing Tesco's Macro and Internal Environment

This report analyzes Tesco's macro and internal environment using frameworks such as PESTLE, SWOT, Porter's Five Forces, and SOSTAC model. It discusses the impact of political, economic, social, technological, legal, and environmental factors on Tesco's business strategy. It also evaluates Tesco's internal capabilities and environment, competitive forces, and applies a range of theories and models. The report includes the subject of Business Strategy, course code, course name, and college/university if mentioned.

Business Strategy

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK ..............................................................................................................................................3
P1. Analyse the impact and influence of the macro environment..........................................3
P2. Analyse the internal capabilities and environment of the chosen firm............................4
P3. Evaluate the competitive forces.......................................................................................7
P4. Apply range of theories or models...................................................................................8
CONCLUSION .............................................................................................................................10
REFERNCES:................................................................................................................................11
Books and Journals:..............................................................................................................11

INTRODUCTION
The term business strategy refers to a long term plan which is created by an organization
to compete in the target market. The strategy is created to achieve the desired goals and
objectives of company which includes products and services, target customers or the markets
where profits can be generated (Adel, Mahrous and Hammad, 2020). The report is going to
prepare on the Tesco which is a British multi-national company. It is UK based company which
is specified in retailing of clothing, furniture, toys and many more. It was introduced by Jack
Cohen in 1919. The aim of report is discuss various frameworks such as PESTLE, SWOT,
Porter's Five Forces model and range of theories on the respective company.
MAIN BODY
TASK
P1. Analyse the impact and influence of the macro environment.
PESTLE analysis is a framework that is used to examine the different factors of external
environment such as political, economic, social, technological, legal or environmental. This
framework on the Tesco used to analyse the brand on its business strategy where it facilitates to
understand the market dynamics and to improve business day by day.
 Political: Since it is a multi-national company where it done its business operations on a
global platform, there are many political factors such as tax rates, stability of the nation,
acts of legislations are the factors which influence the performance of the company.
BREXIT is one the major example which comes with new regulations, systems in order
to supply their goods to other country, along with this it also affects the profitability of
the company.
 Economic: These factor concerns with demand, supply, costs, prices or profits of the
company. In context to Tesco, it should be aware about the various taxation policies
which impacts the benefits of company. In case of inflation, the company must put their
prices accordingly on the products of daily essentials.
 Social: Generally, customers are like to buy things in bulk and one stop-shopping. These
factors includes the buying patterns of customers such as beliefs and attitudes, taste and
preferences and so on. In context to mentioned firm, it increases the number of non-food
items to sale. Social influences are changing the demand of customer.

 Technological: As the world is at very fast pace, it is very vital to keep up with the
changing technologies (Akman and Yilmaz, 2019). Tesco has been come up with the
adoption of various technologies and get some amount of success. In order to influences
customers they are promoting on social media platforms, online shopping and many
more.
 Legal: The changes in government policies highly influences the business operations.
For better smoothing of operations, it is essential for the Tesco to follow the national and
international laws.
 Environment: Tesco has taken various steps to reduce the negative affects to the
environment and more focus on the sustainability. It also focused on to reduce the carbon
footprints and introducing its phase 2 of remove, reduce, recycle and reuse plan.
As Tesco is one of the leading business in the UK, it provides a tough competition to
other businesses. After analysing the macro environment factors, the strengths and weaknesses of
the company also has been identified. When it comes with political, social, legal and economic
condition of the company, it is all supporting by external strength and various opportunities at
the same time (Beynon-Davies, 2019). The company will accomplish its benefits from the
external value. Economic condition of the company is stable in comparison with other stores. It
might be affected by political factors but by implementing strategies it can be cope with it.
P2. Analyse the internal capabilities and environment of the chosen firm.
SWOT analysis is a framework which is used to examine the internal capabilities i.e.
strengths and weaknesses of the company. It also aims to grab the opportunities and threats
which is facing by company.
Strengths:
 Biggest groceries retailer in UK: It is known as leading retailer in the country. It has
increased number of revenue and sales in comparison with other retailers or
supermarkets.
 Diversified stores: It has multiple launches such as Tesco Extra, Tesco Homeplus, Tesco
Metro, Tesco Superstores and so on.
 It is the largest private employer of UK: The company likes to create more than 743k
job opportunities throughout the world.

 Multiple Award holders: Tesco is not only winning hearts of their fan and statistics but
its has won many awards too. British favourite supermarket is one of the award which is
won by Tesco. It is found that the company is created various employment opportunities
in the Europe.
 Strong performance during the pandemic: Due to the Covid-19 situation, the
company has been grown by 10.5% which significantly impacts its online sales as well.
The growth has been shown clearly as it hires employees with increasing demand.
Weaknesses:
 Fraud Trial and Accounting Scandal: Tesco was charged with fine in 2017 due to
misrepresentation of profits and false accounting declaration.
 Poor operational performance in specific markets: It has been found that due to
insufficient research before entering into new markets, the company was not able to
perform well.
 Failure in Japan and US's markets: Tesco has expanded their business in Japanese
market and US market in the year of 2012, but lately the company has to shut down their
stores because it has failed to export operations.
 Low-cost technique: As the company likes to follow lost cost strategy in which it is
offer their products and services at low cost to their customers. But unfortunately this
strategy did not work and it is shown in terms of low profits.
Opportunities:
 Expansion of Jack's business: Recently, it has been found that Tesco introduced Jacks
which is a new discount store of company (Baù and Et.al., 2020). It has created more
growth opportunities and competitive benefits with Aldi and Lidl which are a low cost
rival.
 Online shopping: It is a opportunity for the company to grow and upgrade its online
purchasing system as well as to be more focused on home delivery services.
 Joint venture: It is found that in some of the countries the company did not go well. If
the company tie-up with some of local businesses and gain the knowledge about the local
market then their performance rate will increase and it can be clearly shown on the
graphs.
Threats:

 Competition with supermarket giants: Tesco's market position is in threat due to the
rise in growth and performance of Walmart after acquiring ASDA, Aldi and Carrefour
are the biggest competitors of the Tesco.
 Economic Crises and Credit Crunches: Credit crunches, government regulations, legal
and taxation matters or economic crises majorly affects the business operations and its
efficiency.
 Brexit Deal: Due to Brexit, if the trade deal happens, then it significantly impact on the
Tesco's business as it is running their operations in many countries.
It has been evaluated from the above SWOT analysis is that it helps to explore Tesco's
competencies, competitive viability and cost position in the marketplace. This analysis facilitates
the company's strengths, weaknesses, opportunities and threats. It is identified that the company
has created a lot of employment opportunities which resulted in talented workforce who helps to
increase the financial base of the company (Maula, Wardana and Wibowo, 2019). One of the
strength is that it is always ready to adopt the new and latest technologies which impacts
positively on its online and offline stores both. Gaining knowledge of local market where it
wants to expand its operations must be helpful which simultaneously increases the opportunity to
grow. Threats must not ignored by the company and always consider so that it cannot affects on
the productivities.
VRIO Analysis of Tesco: It is framework which is used to assess and evaluate the resources of
a firm and determining its competitiveness and strategic benefits (Lombardi and Et.al., 2019). It
evaluates the resources and competencies on the basis of following features:
1. Valuable
2. Rare
3. Imitation
4. Organization
Resources Valuable Rare Imitation Organisation Competitive
Advantage
Position
among
retailers and
whole-sellers
Yes, it has
healthy
relationships
with retailers
Yes, it has
dedicated
partners of
Difficult to
imitate though
not impossible.
Yes, it is used
successfully
by the firm.
Sustainable
competitive
benefits.

and whole-
sellers.
channels.
Marketing
Expertise
Yes, it is
based on
differentiation.
No, many
competitors
has its own
and unique
marketing
(Riahi, 2017).
Pricing
Strategies are
often matched
by rivalries.
Yes, Tesco
has its in-
house
expertise.
Temporary
competitive
benefits.
Opportunities
in the E-
commerce
space using IT
skills
Yes,
opportunities
can be
leveraged by
the Tesco as
the e-
commerce is
rapidly
increasing.
No, many
firms likes
spend in the E-
commerce.
The in-house
analytics and
AI are difficult
to imitate.
It is just a start
for the
company.
Sustainable
long run
advantage.
It has been analysed that VRIO analysis helps to uncover and protect the resources and
capabilities of the respective firm which also provides the long term competitive benefits of the
company.
P3. Evaluate the competitive forces.
Porter's Five Forces model aims to study the impact of five forces that is buyer power,
supplier power, threat of substitute, competitive rivalries and threats of new entrants on Tesco
which operates its business in the supermarket or relating industry.
 Competitive Rivalry in the market: In the retail industry, the competition is very high
due to the increasing number of companies which is offering similar goods and services
to the consumer (Meirelles, 2019). Tesco is considering the leading group in the
industry but still they are facing many rivalries such as Aldi, Asda, Sainsbury's,

Morrisons, Cooperatives. These rivalries spend lavishly on marketing and other
advertising techniques.
 Threats of substitution: Tesco offers a broad range of products and services to its
customers. In context to Tesco, it sells majority of the substitutes of its products such as
fresh milk, powder milk or condensed milk. Threat of substitutes are irrelevant for the
company.
 Threats of new entrants: Due to the capital requirements, the threats of new entrants in
UK is very low. Tesco has its own core competencies and enjoys economies of scale.
Therefore, it does not have to worry about the new entrants in the industry as the
competitors may not have enough access to distribution networks, enough money to
invest and explore the industry either.
 Bargaining power of buyers: Bargaining power of customers in UK is very high as
they can switch to the other competition very easily (Carsonand and Et.al., 2018). It is
essential for the company to keep their prices at very low but somehow it also affects
their profits margin as well. Hence, customers has influencing power in the retail
industry.
 Bargaining power of suppliers: Bargaining power of suppliers in the industry is very
low to moderate as there are many companies which affects low due this force. In
context to Tesco, it negotiates with its suppliers very hard in order to increase the profit
margins.
P4. Apply range of theories or models.
In order to devise the strategic planning of the Tesco, SOSTAC model has been used
which helps to marketing and business planning. It is general strategy of marketing that can be
applied to different commercial situation (Nishino, Takenaka and Takahashi, 2017). It contains
various stages which are discussed below:-
 Situation analysis: In this analysis, an overview of the company has been reviewed
about what mission, vision and objectives of company.
Vision: To be the most high valued organisation by its customers and communities where
they operate the business, the loyal and committed employees as well as their
shareholders.

Mission: It says that everyone is a part of the success of the company which means every
member has a potential to achieve the goals and contribute the success of the business.
Objectives: The objective of the company is to be the champion of the consumers through
serving a better standards of living and make every possible way to provide ease of
convenience.
 Objectives: The SMART objectives of the Tesco:
S for Specific: Tesco wants to make huge profits.
M for Measurable: The main goal is to increase the sales by 1.36% .
A is for Achievable: Is to increase the number of customers day be day and increase the
market share as well.
R is for Realistic: The objective of company is realistic which is based facts and historic
figures.
T is for Time: It is specified with proper deadlines which must be achieved.
 Strategy: Ansoff Matrix is the strategy that the Tesco is using to improve the strategic
advantages and the market position of the business. In context to Tesco, the following are
the explanation of the four divisions of the matrix:
Market penetration: This strategy concentrate on the sale in the current market of the
established goods. The company is focusing on the current price market share, restructure
the mature markets and increasing the use of developed markets by utilizing the market
penetration strategy.
Market development: It is the development of new market with similar commodities. It
is the riskier situation of the company to expand business in new market but proper
research and knowing the buyers expectation it can be effective.
Product Development: In this strategy, the company will focus the same market with
new and innovative products (Baù and Et.al., 2020). Tesco is conducting proper research
to identify the needs and wants of buyers and try to deliver the commodities for the
same.
Diversification: This is tactful as the company targets the new market with new products.
For such, the product and the demand both should become apparent to the Tesco.
 Tactics: Product development is the suitable strategy for the company as it has already
cover the current market and has basic information of the target market. The idea of

innovative products can be a appropriate strategy to gain more customers in the same
market and increases the profits of the company.
 Actions: It is essential for the company to implement a plan for which they are required
with the allocation of the funds. Tesco can allocate their funds with the help of marketing
budget:
 Control: This is the final stage to monitor the performance which is based on objectives.
KPI is tool that helps to monitor the performance at each stage of customer journey.
CONCLUSION
It has been concluded from the above report is that business strategy in the organization
offers as an actionable way the achieve the goals of the company. It helps to produce a single and
forward focused vision that can line up an organization and its shareholders. It also supports to
expand the capabilities without exerting the resources of company and generating too much
risks.
PARTICULARS First Year Second Year Third Year FourthYear Fifth Year
Opening capital 23453000 50588000 18910700 15881700
START-UP CAPITAL 6000000
INVESTMENT 19000000 28000000 19000000 16000000 8000000
TOTAL 25000000 51453000 19000000 16000000 8000000
MARKETING OUTLAY:
MARKETING 850000 155000 36500 23200 82800
PUBLICITY 697000 710000 52800 95100 114800
TOTAL 1547000 865000 89300 118300 197600
Closing capital 23453000 50588000 18910700 15881700 7802400

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