Analysis of Internal and External Environment of Tesco using Porter's Generic Model

This report analyses the internal and external environment of Tesco using Porter's Generic Model. It identifies the strengths, weaknesses, opportunities, and threats of the company and discusses the political, economic, social, technological, legal, and environmental factors that affect its operations. The report also identifies the competitive forces that influence the competitive environment of Tesco.

Strategy, Enterprise and
Innovation

TABLE OF CONTENTS
TABLE OF CONTENTS..............................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Analysis of internal environment:...............................................................................................3
Discussing the external environment for the firm:......................................................................5
Identifying competitive forces that influence the competitive environment:.............................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
.

INTRODUCTION
Innovation is very important for an organisation to discover and practice new things within
it working so that better accomplishment can be achieved in the future. On the other hand
strategies are devised by organisations based on the goals that are set by the firm against its
competitors. Moreover, these strategies are modified according the situations of the firm. The
present report is based on TESCO that is general multinational grocery company that is situated
in United Kingdom and sells variety of goods such as clothing, books, furniture, electronics,
petrol etc.
Furthermore, the report will identify certain internal and external factors that affect the
working and operations of business. These factors need to be closely analysed by the firm so that
better business policies can be made in the future. Lastly, the study will identify the competitive
advantage the firm can get using the Porter generic model that will help to identify the areas of
improvement.
MAIN BODY
Analysis of internal environment:
Internal environment relates to set of elements that defines atmosphere within any
organisation. It helps to identify how the activities within the organisation are being carried out
on daily basis to achieve the desired goals and objectives (Luceri, Sabbadin and Zerbini,
2017).The internal environment can be conducted through SWOT analysis that helps to identify
the strengths and weakness that exist with the firm like TESCO. It is briefly descried as follows:
STRENGHTS
Biggest retailer: Tesco is one of the leading grocery retailers in UK. It has highest sales in terms
of revenues and in comparison to other competitors that are currently present in the market.
Leading market share: It has the largest share in the market as it has large customer base that
helps to generate profits. Moreover it is most popular both in online and offline medium (Zaim,
Ramdani and Haddi, 2020).

Diversified: Tesco is also geographically diversified to various regions of the world that most of
the people know about its existence of the brand and those who don’t know get to know through
various information channels.
Superior technology: Also, the quoted firm uses best technology in conducting its daily
operations so that time and costs can be saved and best shopping experience can be given to its
customers (Qazi, Miralam and Bhalla, 2017).
WEAKNESS:
Low cost strategy: Although, Tesco conduct effective operations through applying low cost
strategy but such strategies may create problems for the firm when manufacturing or production
costs rises due to any uncertain events.
Poor operational performance: Also, it is seen that Tesco operational functioning of the firm
is very weak in certain regions or country due to improper research done by the quoted frim
before entering into such markets and hence they are not revenue generating units (Sinha, Sinha
and Sarangi, 2018).
Fraud trail and accounting scandal: In 2017 Tesco was charged with certain fines due to false
declaration of accounting statements and misinterpretation of profits.
THREATS:
Rising costs: Due to recent changes in prices of goods and cost of doing business Tesco may be
affected as it had to forcefully increase the prices of various goods so that it can meet the costs
and stay ahead in competition. Hence it may find it difficult to maintain its low cost strategy in
long run.
Competition: With the growing number of supermarket chain stores in United kingdom the
quoted firm may find difficult to sell its variety of goods to existing and potential customers.
Hence, it needs to continuously modify its certain policies so that they can compete with its
rivalries.
Brexit and supply chain: The new Brexit reforms can be major threat for the operations of
quoted firm as it may impose certain restrictions on import and export of certain goods from one
region to another (Khanduja, 2018).Thus this way its supply chain may also get affected and
production process may be delayed.
OPPORTUNITIES:

Online shopping: Tesco has also to expand it online business through various modes so that
home delivery services can be provided so that customers can get various goods at their
conveniences.
Joint venture: Tesco also has large opportunities in those markets where one of its units is not
performing well due to any of the reasons (Reddy, 2019).Hence it can go for joint ventures and
mergers so that productivity can be enhanced and problem of shutdown of certain unit can also
be overcome easily.
Cashless stores: Moreover, vast opportunities are available for the firm to open cashless
transaction in almost all its stores so that in times like pandemic most of the people prefer using
debit , credit and online methods for easy payment and thus this mode will also provide ease to
customers to not remember to carry cash all the times.
Discussing the external environment for the firm:
External environment consists of factors that are outside the business environment and
affects the operations of business to great extent. Also, these factors cannot be removed by the
firm completely but can be taken into control from time to ensure that there are no problems in
work operations. It consists of various factors that are briefly discussed as below:
Political factors:
Various factors such as tariffs policy, tax policies, fiscal policy etc. may affect the
operation of nay business. In regards of Tesco such political factors may create negative impact
as if there is political instability in any country than it will not be able to sell goods easily as
there would be certain restriction by the government (Atulkar and Kesari, 2018). Moreover if tax
rate are higher than prices of good will be become higher that may also not allow consumers to
buy goods easily in local market and thus they may shift to other options available in the market.
Economic factors:
Factors such as inflation rate, unemployment rate, trade restrictions etc. are major cause
of problems for quoted firm. Moreover with the upcoming of new Brexit reforms, inflation rate
is higher that means that demand of the products is lower as purchasing power decreased.
Moreover, salary expectations of Tesco workers increased and thus there was higher production
cost that may also create a negative impact as demand of its shareholders has to be met to work
in long run.

Social factor:
Factors such as change in attitudes and trends may also affect the operations of the
business In the current era UK population is shifting to consume more healthy diet and is more
health conscious (Al-Hadi and Al-Shaibany, 2017). This factor may create positive impact on the
brand image of Tesco as it can change its variety and include more healthy options such as
organic food products. Also, consumer’s behavior demands in fair trade movement where the
right prices must be given to farmers and other suppliers for various products that are kept in the
supermarket.
Technological factors:
Technology need to be upgraded in timely manner as use of old technologies and
production methods may increase the costs of products and also cause more delivery time. In
context of Tesco this factor is turned out be positive as it has come up with an idea of selling its
goods online and also given various interesting promotions, discounts and rewards etc. to build
brand loyalty (Hänninen and Paavola, 2021).Moreover, the recent announcement of Tesco with
Amazon Go to create new technology for cashless transactions is also very popular.
Legal factors:
Employment rate, wage rate and various government rules and regulations etc. affects the
working of the firm on large scale. These factors need to be fully followed so that there are no
future hindrances in the operations of business. Moreover, minimum wage decided by the UK
government need to be given to the all the workers to ensure employee retention and maintaining
the brand image of the firm .Also, this factor proved negative for Tesco as there was case of age
and basis done by the quoted firm to its employees and thus firm may find difficulty in handling
such factors.
Environmental factors:
Pollution in any form such as air, land or water can harm the natural resources and impact
living beings. Hence, Tesco ensures that all the manufacturing process is done in environment
friendly manner and for this it has launched phase called Remove, Reduce, Reuse and Recycle
Moreover in this context Tesco it is working hard to reduce carbon emissions in its daily
operations (PESTLE analysis of TESCO, 2021). Therefore, company has changed its 800
products and reduced 4000 tons of plastic waste that is difficult to recycle. Also, it is aiming to

reduce plastic waste in production process and become more socially responsible firm in the
future.
PESTLE ANALYSIS
Political factors:
Various factors such as tariffs policy, tax policies,
fiscal policy etc. may affect the operation of any
business.
Economic factors:
Factors such as inflation rate, unemployment rate,
trade restrictions etc. are major cause of problems for
quoted firm.
Social factor:
Factors such as change in attitudes and trends
may also affect the operations of the business In
the current era UK population is shifting to
consume more healthy diet and is more health
conscious.
Technological factors:
Technology need to be upgraded in timely manner as
use of old technologies and production methods may
increase the costs of products and also cause more
delivery time.
Legal factors:
Employment rate, wage rate and various
government rules and regulations etc. affects the
working of the firm on large scale.
Environmental factors:
Pollution in any form such as air, land or water
can harm the natural resources and impact living
beings friendly manner and for this it has
launched phase called Remove, Reduce, Reuse
and Recycle.

Identifying competitive forces that influence the competitive environment:
Competitive advantage helps the firm to stay at the top amongst the rivalries and thus to
gain this Tesco can use various strategies. The strategies are briefly described using the Porter
Generic model that is as follows:
Cost leadership:
It is method where competitive advantage of firm can be gained through becoming the low cost
producer among its competitors. For this purpose the firm need to identify all the sources of
access raw materials at lower costs so that production costs can be made lower. Tesco is
currently using this strategy so that it is able to cater to particular segment of group through
maximizing the supply chain efficiencies (Tesco Generic And Intensive Growth Strategies, 2021)
.Moreover, it also offers various discounts and coupons to attract its potential customers and
create brand awareness among its customers.
Differentiation:
In this strategy the firm try to develop those products that are unique, innovative and different
from rest others in the market. Also, it selects one or more attributes of the new product so that it
can position itself in the market. Tesco in this context also does heavy investment in marketing
and advertising so that information related to any new changes or product can be easily
communicated to others (Verma and Duggal,2017).Moreover its distinctive brand logo has
established strong image in the minds of its customers. Also it has extended its product line after
analysing the changing needs of the customers.
Focus:
In this the frim selects a particular group or segment existing within the business so that
needs and wants of that group can be closely identified by the company. Also, the focus strategy
of the firm can be again of two types such as cost focus and differentiation focus. In the cost
focus the firm would reduce the costs of products for that are specifically needed by that group
and in differentiation strategy the firm would make unique products for that segment (Sagin and
Ayvaz , 2018).. Tesco also emphasis on taste, design and size of the products when choosing the
differentiation strategy for a niche market segment. Moreover, focusing on product attributes and
continuously changing the design of the product has helped the quoted firm to enjoy economies
of scale and maximise value for the money.

Thus it be said that firm competitive advantage depends on the current market trends and
situations of the country. However choosing one particular strategy for overall growth can be
only effective when members of the organisation work together in coordination so that firms
objectives can be met in timely manner.
CONCLUSION
From the above report it can be concluded that enterprise can ensure smooth running only
when extensive research is carried out in that particular market so that better products can be
offered to its customers. Also, such types of research need proper time from the management so
that there are no future losses to the firm. Moreover, the report had summarized that external
factors such as technology, social, legal and much more had to be closely analysed before
launching any new business plan or product in the market. Also various strengths, weakness,
opportunities that are currently present in TESCO had been carefully investigated so that
maximum benefits can be generated from the UK markets. Lastly, the study had closely
identified the different competitive strategies such as cost leadership, differentiation, focus etc.
using the porter generic model so that best strategy can be implemented so that maximum
revenues can be generated in the future.

REFERENCES
Books and Journals
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Hänninen, M. and Paavola, L., 2021. Managing transformations in retail agglomerations: Case
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Khanduja, P. S., 2018. Correlating Work Engagement with General Well-Being in Retail Sector
Employees. IAHRW International Journal of Social Sciences Review. 6(3). pp.472-474.
Luceri, B., Sabbadin, E. and Zerbini, C., 2017. Innovation in tradition: key success factors of
new entrepreneurs in the retail trade. International Business Research. 10(12). pp.239-
245.
Qazi, S., Miralam, M. S. and Bhalla, P., 2017. Organizational culture and job satisfaction: A
study of organized retail sector. Journal of Business and Retail Management Research.
12(1).
Reddy, N. S., 2019. The profitability interlinkage model of retail store
management. International Journal of Mechanical Engineering and Technology. 10(2).
Sagin, A. N. and Ayvaz, B., 2018. Determination of association rules with market basket
analysis: application in the retail sector. Southeast Europe Journal of Soft
Computing. 7(1).
Sinha, D., Sinha, S. and Sarangi, P., 2018. Human Resource Practices in Organized Retail: A
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Verma, H. V. and Duggal, E., 2017. Relationship Quality: What It Means in Indian Retail
Context?. International Journal of Asian Business and Information Management. 8(3).
pp.14-35.
Zaim, H., Ramdani, M. and Haddi, A., 2020. E-CRM success factors as determinants of
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