Impact of Macro and Internal Environment on Business Strategy: A Case Study of Tesco

This report analyzes the impact of macro and internal environment on business strategy using Tesco as a case study. It covers PESTEL analysis, stakeholder analysis, McKinsey's 7's model, SWOT analysis, Ansoff growth vector matrix, and Porter's five forces model.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1 Using appropriate analysis identify that in which way macro environment makes an impact
on the business and on its strategies............................................................................................1
P2 Analysis of an internal environment and capabilities of a business......................................5
P3 Use Porter's five forces for making an evaluation on the competitive environment.............7
P4 Using different theories devise strategic planning for the company......................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy is the planning of actions which is taken by the business in order to
achieve business objectives. It is the decision which is taken by business for performing the
actions and to provide a competitive position to the company in market(Ellinger and et. al.,
2020). Taking proper decisions helps in giving the roadmap as in which directions company have
to take their next step. Increasing competition makes it very important to prepare a business
strategy because they have to operate their business at risk. Business have to operate their
activities in a dynamic environment which keeps on changing and if one method does not works
they have to use some other so that results can arrive perfectly. Adopting second method requires
proper planning of business strategy which helps the business in achieving their objectives.
Tesco is a grocery and merchandise company which is headquartered in Welwyn Garden,
England and started their business in 1919. This report will cover impact of macro environment,
internal environment, Porter's five forces model and understanding of strategic directions
available to organisation.
MAIN BODY
P1 Using appropriate analysis identify that in which way macro environment makes an impact on
the business and on its strategies
Strategic context-
Mission- The mission of Tesco is to be customer focused and to provide them all the products
which they will need. To develop the business so they can become successful retailer in the
International market.
Vision- The company aims to become highly valuable business and to provide good services to
customers. They want to be valuable in communities, with the shareholders and to make new
innovation for the people (St-Hilaire and Boisselier, 2019).

Objectives- Their main is to make new innovation in the products and services which they
provide to consumers in order to attain competitive advantage. To become leading supermarket
and to provide quality services at low cost.
Meaning of strategy- Strategy is the plans and actions which the management of a company
will be taking in order to gain competitive position in the market. They set the goals and outlines
with the objectives of a company will be established.
Role of strategy- Strategy helps the business in setting their future goals and provide the
direction as in which way they have to move forward. Strategy helps in reducing any
inconsistency as for all the dynamics business is prepared in advance.
PESTEL analysis-
 Political factors- There are some regulatory norms which needs to be followed by
companies as it is compulsory(Raharja and et. al., 2019). Tesco is related with consumer
based company in which they provide products which are needed by them so it becomes
very important to adhere to the food act and quality of product.
 Economic factors- Economy is dynamic and it keeps on changing which is related with
inflation, employment, recession and many others which the business have to make the
analysis. Different countries have different taxation policies in which Tesco always
makes the analysis on how they can take the benefits. Other than this, they also work for
providing employment opportunities to unemployed people.
 Social factors- Social factor is related with society which include latest trends and
preferences of consumers which needs to be taken care of by the company. Tesco always
provides the consumers with those products that will be used by them in their daily life
and that too at reasonable cost.
 Technological factors- Technological factors are the most important in which business
have to take care of the updated technology(Mancha, Gordon and Stoddard, 2019).
Tesco has provided consumers with the facility of online delivery of food which has
made it easier for the company as well as for consumers.
 Environmental factors- Environment factors have become the most important one in
which business have to focus on reducing carbon footprint which not in direct but in
indirect way is caused by them.

 Legal factors- Legal factors are related with rules and regulations which are formulated
by the government in order to make it healthy and safe for consumers. Legal factors
includes employment law, food quality and hygiene which Tesco tries to fulfil such
things.
Stakeholder analysis- Stakeholder analysis is a method in which the first step is to make the
identification of stakeholders who will be involved in the project with their interest.
Identification of key stakeholders of Tesco- Customers, investors , government, employees,
suppliers
Mapping of stakeholders-
Interest Level
Influence (power)
Level
HIGH LOW
HIGH Investors, Government Employees
LOW Customers Suppliers
Investors- Investors are the one who have made the investment in project and who are the most
interested stakeholders for the projects(Chou and et. al., 2020). They have made an investment in
the project so they have full right in identifying that how much profit will the project provide and
the chances of loss. Their interest and influence both are high because they can make changes in
the project if they think that project will not bring any success.
Employees- Employees are the part of company who works hard for the achievement of business
goals. Employees cant make any influence in the project or changes but the interest level of
employees are always high. Employees are interested because they also want to take high
incentives and salary other than that they does not focus on everything.

Customers- Customers are the one who makes purchases from the company and are the most
important assets for the company also. Customers interest level is high because they will be
making purchases from the company products but their influence power will be less.
Suppliers- Suppliers are the one who have less interest on the activities of a company because
their work is just or provide the products on time. They cannot even make any influence on the
company goals and activities.
Structure conduct performance model
This model helps to make an analysis on the connection which is established between economic
or market structure as well as the performance of market and the conduct of market. There are
different elements in structure conduct performance model which are explained below-
 Structure- Structure refers to formation of a company in which the company operates
their business(Butner and Ho, 2019). This structure mainly affects the attitudes of buyers
and sellers and the structure of company is determined on the basis of products they are
selling.
 Conduct- The behaviour of buyers and sellers on the structure of a company in which it
is operating. It also includes the behaviour which buyers are sellers are having towards
each others. Performance- This is the measurement of performance which is compared on the basis
of existing firms and industry. The performance is measured on the basis of product
quality and quantity.
Ansoff growth vector matrix-
Ansoff growth vector matrix is the strategy which is used by companies to prepare the growth
strategy. This helps the company to make an analysis as to which direction and method they can
use for establishing their objectives.
 Market penetration- This strategy explains that company launch their existing products
in the existing market in which Tesco will be having the option to cut the prices of
products and to make improvement in the distribution(Ilić, Šević and Ranković, 2020).
Tesco can use this strategy to make the dominance in the market which will require
promotional techniques.

 Product development- Product development is the strategy in which company launches
new products in the existing market. This strategy is done by companies to make their
unique identification in the market which Tesco always tries to do. This is done so that
company can be able to attain competitive position in the market. Tesco always tries to
make complete research on the market so that they can identify as to which product will
be liked by customers a lot.
 Market development- When the company wants to make expansion of their business in
new markets then they conduct such thing in which existing products are launched but in
the new market(Zuhdi, Rainanto and Apriyani, 2020). The main focus is to reach new
customers and to make the identification of sustainability of company which Tesco
always does.
 Diversification- Diversification is the strategy in which companies tries to make
expansion in new market but with new products. The most important growth strategy in
which Tesco can use by conducting proper research on the products liked by the
consumers.
P2 Analysis of an internal environment and capabilities of a business
McKinsey's 7's model- This model is helpful for making the analysis of organisational design so
that if any changes needs to be taken company can make the plan for it.
 Structure- Structure refers to the business structure in which the company is divided in
which Tesco is having various departments. Each ly less because temployee knows to
whom they have to report and to whom they have to ask things.
 Strategy- Strategy is a business plan which is prepared by every company including
Tesco so that can work effectively in a competitive environment. The main aim or
preparing business plans is to achieve growth so that they can take all the risks
effectively.
 Systems- Systems are the daily processes and activities which the tasks are undertaken
and in which way decisions are made in the business(Lemma and et. al., 2020). Tesco
main aim is to work with great activities and procedures so that they can plan their
activities accordingly.

 Skills- Skills are the abilities of a company by which the employees performs in an
effective role. It is very important for the company itself to employ those people who are
having good skills and are capable of achieving the business objectives.
 Style- Style means the way by which top managers makes an interaction with other
people which depicts the style of leadership. Tesco is a well renowned company and the
leaders of the company works in a very interactive manner and tries to solve the issues so
that company objectives are established.
 Staff- Staff is the type of employees which are recruited in the company by identifying
their talents and skills. Shared values- This is the norms of a company which has been framed and which
depicts the behaviour of employees and the actions which will be undertaken by the
company.
SWOT analysis-
Strengths Weakness
 Tesco have become the best retailer in
terms of their turnover which has
helped them in attaining competitive
position.
 They have made innovation in their
products range which is the main
reason for their success.
 Customers usually have to face the
issue of shortage of products and this is
the main reason why they always try to
switch their brands.
 The company is also facing the problem
of food safety in which they are not
adhering with the food safety
guidelines.
Opportunities Threats
 They can provide online grocery in
which it would be great for the
customer and also for the company.
 They can make the expansion of their
company in other countries also which
will help them to access to new
 Higher competition is the main threat
which the company is facing.
 Policies of government is the another
factor which can create an impact on
the business(Van Rijmenam and et. al.,
2019).

markets.
Benchmarking strategic capabilities- Benchmarking is the tool in which companies makes the
analysis of there company with the other existing company of the same industry. This helps the
managers to make the analysis on how the company is performing and if they are not performing
according to the defined standards then what actions needs to be taken.
Cost benefit analysis- Cost benefit is related with the tool of making the comparisons that if the
cost which has been invested is making any sense or not. That sense will be evaluated on the
basis of results which the project will be providing.
P3 Use Porter's five forces for making an evaluation on the competitive environment
Porter five forces model-
Porter five forces model is a tool in which companies makes the analysis of their competitive
environment so that can plan the activities. This tool is usually used by the companies so that can
make the identification as what factors have the real consequences of their business and in which
way they can effect their company(Knight, Moen and Madsen, 2020). Tesco is an established
business but competition still prevails in the market and this is the only reason of conducting
research so that effective measures can be undertaken.
 Threat of new entrants- The threat of new entrants and that too in the retail business is
always high because the procedures is not that difficult and any person can start their
business even with the small investment. For the Tesco, threat for new entrants is high
and there is high competition in the market also. There are small and local business which
exists in the market and which will be providing the product at low cost. This makes it
really difficult for the company as well but for standing in the competition they also
provides the product at low cots and with high quality. Tesco is working hard in order to
establish their own business in new and emerging markets also.
 Bargaining power of buyers- The bargaining power of customer in the market is high
and they have certain influence on the activities of a business also. Tesco is a established
company and have built the company with great decisions but there small change can
make their customers away from the consumption of their products. For the retail
business there are many business which exist including the small and large business in

which consumers are having many options which can be taken by them if they charge
high prices for them(Iyer and et. al., 2019). The products which are offered by the
company and which is offered by the other existing companies makes many changes and
this is the reason why Tesco is making new and unique changes in its products.
 Threat of substitutes- The threat for substitutes in this type of industry is high because
there are many companies which exist in the market and offers the similar products which
are being offered by Tesco. This is the only reason why Tesco have tried to make new
innovations in the company so that the other competitors in the market cannot copy the
similar things(Sajjad, Eweje and Tappin, 2020). Products offered in Tesco are of high
quality and the price at which they provide is also reasonable which can be afforded by
any individual for purchasing their daily needs products.
 Bargaining power of suppliers- Bargaining power of suppliers is less because the
availability of suppliers in this industry is high. They are not the one who can make
higher influence in this industry because if anything gets changed with the suppliers
which can be in terms of charging higher prices then the retailers will change their
suppliers. Rivalry among current players- In the retail sector, Tesco is facing huge competition
and because of which they are making an analysis of what innovation they can make in
terms of sustaining in the market for longer term.
Balance scorecard-
Balance scorecard is a performance tool which is helpful for the managers of a company as this
tool provides them the facility to the mangers in which they keep the track of all the things which
is conducted by their employees. Tracking activities helps the company to make the
identification that whether the operations are conducted in a planned and defined manner or not.
If any of the mistakes are identified by the manager then they can control such activities by
providing good solutions(Eweje, 2020). Tesco has to provide the products according to the likes
and preferences of a consumers and this is the main work of keeping the stock on time, with the

production activity or with any of the promotional activities. Such type of tools helps the
company in making proper evaluation of the activity to check that if the work is done with the
profound solutions or not.
P4 Using different theories devise strategic planning for the company
Porter' s generic model
 Cost leadership- This strategy is used by companies in which they reduce the prices of
products for gaining the market share. This is a competitive strategy in which companies
makes the large scale production so that they can be more effectively. Tesco if uses this
strategy will be helpful for them in gaining huge market share.
 Differentiation- To provide products different from that of other companies is the main
strategy which will help them to look different in the market. Tesco uses this strategy and
because of this only company is gaining huge success (Tayeh and et. al., 2019).
 Cost focus- This strategy explains to be cost focus but only in a small market segment.
The products are to be very basic which will be used by many people in the market but
Tesco have also used this strategy whenever they enter in new market. Differentiation focus- This strategy is used for making the products differentiated but
only in a small market. Companies provide the products after conducting research which
means they have identified their target people also with their needs and preferences.
Bowman strategic clock-
 Low price and low added value- Low price means that the products will be provided to
consumers at low cost but with this the value which is provided by companies is also of
low quality. This strategy is not used by any company because this will hamper their
market position if they will be providing the products of low quality and Tesco have not
used such type of strategy.
 Low price- Low price is the other good strategy which can be helpful for the companies
for increasing their sales. Low price provide the company with good turnover which will
make the company to produce more with less cost (Mihardjo and et. al., 2021). Tesco is

providing products at low prices which are reasonable and can be easily afforded by
every individual.
 Hybrid- Hybrid is the strategy in which companies provides the differentiated and
unique products and that too at very reasonable prices. Tesco is providing the unique
products at low and affordable prices which is the best strategy for them to gain large
share of market. Customers also gets convinced with the products if provided to them in
variety of options.
 Differentiation- This is the best strategy and the most common one in which companies
try to provide the products different to what is provided to them by their competitors.
Tesco is having multiple of products which will be required by the consumers in their
daily life but those products are having uniqueness which is the main reason why
company has gained their market share.
 Focused differentiation- This strategy is used by those companies which are providing
luxurious and exclusive range of products at higher prices. This is done by the companies
with the help of using some promotional strategies and other segmentation tactics which
helps the company to target right market(Lemma and et. al., 2019).
 Risky high margins- This strategy is quite riskier because companies ask for high prices
from the customers of their products. The most riskier one if they have to opt for such
type of strategy because consumers will try to focus on that companies which are
providing the similar one but in less prices. Tesco cannot use such strategy if they have to
attain competitive position.
 Monopoly pricing- This strategy is used by those companies which have created their
monopoly in the market. They can charge their prices according to the required products
and customers will not be having any substitutes. But for Tesco this option is not
available because there are other companies also who are providing the similar products
like them. If they charged higher prices from consumers then consumers will switch the
company and will try some other brands products. Loss of market share- This is that strategy in which companies are not able to provide
the products which are liked by the consumers. They also charge prices which are very
higher in cost and this is the only reason why Tesco does not want to charge higher prices
because they can lose the shares in the market.

Vertical and horizontal integration-
Vertical integration- The integration takes place when the companies are merging because of
same production and products level.
Horizontal integration- Horizontal integration means that in which merging takes place
between different companies where production level is workable with two and more process.
CONCLUSION
From the above report it can be concluded that making strategy for a business is an
important factor because this helps in proper planning of a business and will be able to make the
identification of the strengths and weaknesses. Company will be working with full efficiency and
their objectives will be achieved if the business plan is made in a correct way. Business strategy
also helps the business to provide the information that in which way allocation of resources will
be conducted. When the business will do their activities according to the existing competition
then this will help them in gaining competitive advantage.

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