Unit 32 Business Strategy: Internal and External Analysis of Tesco

This report analyzes Tesco's internal and external environment using PESTLE and SWOT analysis, Porter's Five Forces model, and VRIO tool. It identifies the competitive advantage of Tesco's financial resources, food sources, and employees. The report also evaluates the potential growth platforms and strategies for Tesco.

Learner Name ID
Programme Name Pearson BTEC
Higher National
Unit Number and Title Unit 32 – Business
Strategy
Credit Value Unit Level
Academic Year Cohort
Assessor
Project Title Strategic
Management Plan
Issue Date
Submission Deadline
IV Name
IV Date
Statement of
Authenticity:
Learner Name:
Date:
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Table of Content
Introduction p
Part A: An internal and external analysis that provides a platform
for strategic decision making: p-
p
1. PESTLE and SWOT of the organisation and an evaluation of the
organisation’s resources and capabilities p
2. Competitive environment analysis using Porter’s Five Forces model
p
3. Identification and justification of the organisation’s existing and/or potential
competitive advantage p
4. Valid strategies and tactical objectives to achieve overall strategic
objectives p
Part B: On the basis of this analysis critically evaluate and justify
strategic options for the organisation: p-p
1. Critical evaluation of the different types of strategic directions available to
the organisation p
2. Justification and recommendation of the most appropriate growth platform/s
and strategies p
3. Evaluate ways and means by which the chosen strategy/ies can be
monitored in order to ensure success p
5.0 Conclusions p
References p
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Introduction
Strategical management planning is all about the activities related to the
management of an organisation that is in the use to set all the priority, focusing on
the energy and sources, strengthening of all the operations, making sure about all
the workers in the firm and other shareholders who are working to achieve all the
objectives. Tesco has been taken as a base firm which is a British international firm
established in 1919 by Jack Cohen as a retail industry which has expanded at a
global level. This firm is serving to all the consumers as their motive of serving them
on a daily basis which is affordable, healthy and sustainable food items and other
products. This file covers the impact in which the macro environment has on the
business and its strategies and internal environment of the chosen firm (Ritter and
Lettl, 2018). This will also cover evaluation of the result with the use of Porter's five
forces and models or theories to help with the understanding of all the strategical
directions present in a chosen firm.
Part A: An internal and external analysis that provides a platform
for strategic decision making:
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1. PESTLE and SWOT of the organisation and an evaluation of the
organisation’s resources and capabilities.
PESTLE Analysis
This analysis helps the firm for the establishment of the exterior factors that could
affect the decisions which are made in the firm. It is a strategical planning tool used
for the Tesco to analyse many of the factors that could impact the environment of the
market for a business or an organisation (Rosyad, Syarief and Syuaib, 2022). This
investigation is assistive in the determining of the credit related to the products and
services and description of a new growth in the products.
Political:
These are the factors which are determining the level to which a government
may affect an industry or a firm. It is also impacting all the decisions related to the
social and cultural surrounding of the nation which has a great influence on the
emergence of new technologies. In case of Tesco, government policies like power of
marketing which is promoting the competence and preventing the amount of cost so
the chosen firm will not be able to mistreat the power of market. As marketing power
in Tesco is more as they are the largest grocery super market in the UK.
Economic:
These are the factors which has a great impact on the business and the level
of customer impacting the cost, investment in the making of decisions and the
number of people that a business use. In context of Tesco, it also requires for
keeping in knowledge that cost of a commodity will affect the sale. In case if an
economic condition is under pressure, or rising prices present, commodities of every
day requirement, must be costing in accordance to that (Williamsson, Sandoff and
Schaad, 2019). Only modification in the cost, with lessen the growth in the
expendable financial gain will cause a decerement in the marketing of the
commodities.
Social:
This is a factor which is very assistive for all the firms to plan all the marketing
analytics and strategies in a better manner. Factors such as family, status etc. is
impacting all the decisions related to the busines which makes the understanding of
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the way sellers are understanding to all the consumers. In relation to Tesco, this firm
has taken various number of initiatives recently to all the modifications and demands
in a social manner. Tesco is managing to acquire its user basal by changing the
behaviour for supporting organic, to fulfil its consumers. Tesco accept in
performance of the society, by localized recruiting, and so has created employment
in various countries.
Technological:
This is a factor in which all the trends are changing at a great speed and for staying
applicable in the present duration, it is essential for a firm to keeping up with a
changes in the technology (Chen, Jing and Tan, 2019). In context to Tesco, it has
been researching with a variety of aspects for retailing and has accomplished a good
success in a few enterprises. Also, online shopping, digital promotions with social
media and many more are the part of influencing all the consumers, by giving
various technological advantages.
Legal:
This means to the way laws or rules are impacting the firms in the operations
and a consumer is behaving. So, the modification in the policies is directly impacting
the working of the firm. In case of Tesco, it is not paying to all the workers which is
very low than the minimum salary set by the government.
Environment:
In this, it is an essential tool to understand and making of all the decisions in all the
conditions of the firm. This factor enable the company to examine and choose a
good alternative for the development and success of the company. In relation to
Tesco, it has taken various initiative to take away and lessen all the non recyclable
plastic items to minimise the level and exploring new chances to utilise that plastic
which is still being used (Rahayu and Fatima, 2019). This will result in the
development and production in the firm and lessen the quantity of waste.
SWOT Analysis
This analysis is all about the recognising of strength, weakness, opportunity and
threat which will aid in understanding all the fundamental problems which are
impacting the firm. SWOT is crucial for all the strategical planning of Tesco in the
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identification of inner and outer influences which are accountable for the position of a
firm.
Strength:
In this, it is a very important factor which is important for identifying the
capabilities of the firm for its success and protecting against the weak point and
threatening part of the firm (Van Zeebroeck, Kretschmer and Bughin, 2021). This
will lead to the firm that is performing in a good manner and differentiate it from the
other firms. In context of Tesco, it is a largest multinational firm which has a unique
profitability structure in which it is collecting sales tax from its purchasers and then
paying them to the authorities of government directly.
Weaknesses:
This is a very important factor as this will help the firm for the identification of
regions for the improvement. This will prevent the firm to accomplish their objectives
of the firm by defining those features of business which are giving disadvantage
related to others. In case of Tesco, it is facing problems like a decrement in the
quality of its commodities and services in the market and the failure of understanding
the trend, societal difference in other nations.
Opportunities:
This is a factor which gives a very good benefit for the competition to an
organisation which will help in the assessment of all the possibilities for the growth,
development and surviving of the firm (Hakim, Susanti and Kholidah, 2020). In
relation to Tesco, it has spent a good amount on the online and new distributing
platform which is capitalising on this by a very good understanding of all the
consumers and meeting all the requirements. With the opening of a new market,
Tesco has a capability for reaching to a new developing firm.
Threat:
This factor involves all the negative things which are impacting the business
from outside like issues related to the supply chain. It is critical to evaluate threats
and to taking any activity against them before they are becoming a sufferer of them
and their development. In relation to Tesco, nowadays due to the covid 19, fast
change to online services are saving the firm at a time when there are various other
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firms are failing. Also a threat of increment in the cost of raw material is a biggest
threat in the profit of Tesco, and cause it to increase the network of supply to get a
good cost of raw materials.
2. Competitive environment analysis using Porter’s Five Forces model
Porter's five forces assist in the determining of where the strength present in a
condition of an organisation (Ahmad, 2019). This is helpful for both in knowing the
capabilities of a firm actual competence place, and the strengthening of a place that
a firm may face to take decision into. These are the forces find out a firms
competence surroundings, which are affecting the profit. Industry competition is likely
to be high when various firms are competing for the similar consumers, and
consuming competence resulting to less cost, production and profitability.
Threat of new entrants:
It is all about the risk a new challenger builds for the actual firms in an
enterprise. This will happen when a new firm is starting to sell same commodities or
services as an existent firm. In case of Tesco, nowadays there are very competitions
in the market as they can put pressure on the chosen firm be lowering the price
strategy, lessening the price and giving new suggestion to the consumers.
Bargaining power of buyers:
It is an essential part in this analysis of a firm, as it gives an understanding of
the potentiality of net income in a firm. Increment in the buyer power decrease the
profit of the firm and lessening the attraction of an enterprise. In context of Tesco, it
is serving to the millions of consumers each and every week so this is very low for
the people of UK. This needs Tesco to support its cost which are less that affects on
the net income margins.
Bargaining power of suppliers:
This will refer to the intensity of competence in a firm where the strong
suppliers can dictating the commodities and presence in the market places. A good
supplier can create their own commodities critical to their firm. In context of Tesco, it
is negotiating very hard with the suppliers for the improvement its net income
margins (Chege and Wang, 2020). These suppliers also cannot use any significant
power on the chosen firm as there are variety of them out there.
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Threat of substitutes:
This is high when competition, or firms outside the firm, offer more in the
attraction or less cost commodities. Buyers are having more opportunity to make a
performance or cost. The price to switch is also a component as If it is high, the
threat of substitution is less. In relation to Tesco, it is offering a broad variety of
commodities and also sells it substitute for most of the commodities. Like, it is selling
both butter and margarine and also it is selling fresh milk, powdered and condensed
milk.
Competitive Rivalry:
In an enterprise, where competence is big, firms are attracted by the consumers by
sharply cutting the cost and launch of high-affecting market battle. So, this form it in
an ease manner for suppliers and purchasers to go at the place if they have
awareness that they are not acquiring a better deal from the person
(Subramaniam,2020). In case of Tesco, it is having a lot of strong competition in the
UK. These people are spending a great time on the advertisements and other
techniques related to the marketing. So the pressure from the other industries are
more on this firm.
3. Identification and justification of the organisation’s existing and/or potential
competitive advantage.
VRIO is a tool which is in use to assess the sources of the firm and assists it to
continue in the industry for long duration (Westerman, 2018). This will help an
industry to develop and increase the decision making abilities for its whole
improvement.
Value: Value shows the worth of commodities or services which the chosen firm is
offering in the marketplace. Financial resource: Tesco is extremely valuable as these sources assist in
financial support in the chance that are arising in the market place for the
organization. Food sources: Tesco is valuable for the firm as these are providing very
distinguished commodities and that is the reason this is a largest multinational
retailing firm.
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 Employees: These are extremely valuable sources for the firm as workers
are honest and working to increase the development of the firm.
Rare: It is all about whether the commodities or services offering by any firm which
are rarefied or not. Distribution network: This is the rare source for the firm as the competition
would needs an amount of financial support in creating a distribution network
such as Tesco. Employees: These are also rare source for the firm as they are highly expert
and have the training by the firm in a proper manner. Financial resources: Powerful fiscal sources are also rare sources for the
firm as these are only controlled by fewer firms.
Imitable: Imitable refers to that the commodities or services offering by the firm
which are specific and are challenging to copy. Patents: These are very difficult to copy for any of the firm as this is not legal
and are not permitted to copy a patent commodity. Distribution network: This is an imitable resource for Tesco as it needs a lot
of investing funds and duration to make same kind of distribution system. Food products: The localized food commodities are taken to be an
impermanent competitory benefit in case of Tesco as these products are not
very expensive to copy by the competition.
Organisation: The support, culture and structure provided by the company that
makes the products or services rare, valuable and hard to imitate. Financial resources: The financial resources are used to build the
organisation and also helps in identifying the right place for investment
(Korachi and Bounabat, 2020). These resources also helps in making
utilization of opportunities and threats the company faces. Patents: The organisation is not using its patent to its full potential. If the
company starts selling patents before the expiring date of patents than it can
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convert unused competitive advantage into sustainable competitive
advantage.
 Distribution network: The distribution network of the company is organised
as it helps in reaching out the potential customers and ensures that all
products are easily available for them.
4. Valid strategies and tactical objectives to achieve overall strategic
objectives.
Porter's strategy is in use to search the direction of the firm and is able to give a
competence benefit for an enterprise of a given marketplace.
Cost leadership: Cost leadership is a kind of strategy in which targets broad market
and price offering is low (Hermelingmeier and von Wirth, 2021). If this strategy is
applied on Tesco, it has a very big market place which is dependable, display
development and offering its commodity with normal cost, results to the growth in an
industry.
Differentiation: In this strategy there is a wide market but the commodity or a
service has its various and specific features which makes it totally different from
other commodities. In case of Tesco, it has a unique design of the commodity that is
to sell them with its own label.
Cost Focus:This is concentrating on a narrowing consumer section and gives less
pricing service and commodities. In context of Tesco, its labelled commodities will
come in this industry and offering their commodities in less price.
Differentiation focus: In this, an administration is concentrating on those
commodities or services which has different properties that other firms are finding
trouble to perform (Nonaka and Takeuchi, 2021). In context of Tesco, it is trying to
offer unique commodities which are serving values to the consumers in the market.
At the end, differentiation strategy can be suggested as they can create more
commodities to hold its better place in the market such as in clothes for old aged
people by offer of less cost to them and many more.
Part B: On the basis of this analysis critically evaluate and justify
strategic options for the organisation:
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1. Critical evaluation of the different types of strategic directions available
to the organisation.
It can be evaluated by using Bowman's strategy:
It is a utilized to assess the place of the firm in the marketplace. The Bowman's
Strategic was used which is representing the characteristics on the way an
enterprise can place its commodities or services in the industry. The eight positions
of the Bowman's Strategic are given underneath as: Less cost and less added value: In this, for the competition in the
marketplace a firm can utilise this strategy to keep the less cost. To keep the
cost of commodities or services offering by the Tesco is very less to the
consumers often has more modifications to competence in the marketplace. Less cost: This is including the productivity of commodities in big amount and
attract the consumers by reducing the cost of commodities. The major
concentration of marketplace leadership is on lessening the cost in Tesco with
the means of inexpensive and fast creation of commodities with the use of
features of economic system of criterion. Hybrid: This will involve the concentration of the firm on the firms on the
features of differentiation for a commodities that creates all its value of the
commodities in the marketplace (Chokheli, 2018). The focus of the Tesco is
on the less cost creating it a hybrid framework. Differentiation: The organization selecting this will be offering the quality
commodities at a normal cost and attempting to give their consumers of
Tesco the valuable commodities that can assist them in making identifiable
individuality in the firm. Focused differentiation: This is used by the uppermost brands that mostly
focusing on the unique commodities of Tesco that are most valuable and
could be sold-out on full cost. Risky High Margins: Firms which are using adopting this will improve the
cost of the commodities or services offering by them but by not offering
amount in return. When the high cost is recognized by the consumers of
Tesco, it will enjoy the high profit and when the enhanced cost is not
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recognized by the consumers the market sharing of the firm get lessen til they
create further improvement in the cost. Monopoly costing: Firms are selecting this strategy are the monopoly
individuals in the marketplace as they are offering the particular commodities
in the industry. As they are only the people who are offering the service, they
do not have a frightening of rivalry and the cost of commodities in Tesco can
only be finding out by them.
 Loss of Market Sharing: The failure of market sharing plan of action of the
Bowman's Strategy refers to the firms which are not capable to give
commodities or services that the consumers worth (Hatta, Riskarini and
Ichwani, 2018). The Tesco is trying to support the regulation cost of the
commodities to stay applicable and competitory in the marketplace.
The main concentration of the Bowman's Strategy is to study and finding out the way
commodities should be placed to enhance the competence benefit in the marketplace. By
taking in the consideration of Tesco, it is suggested that the organization could utilise the
Hybrid strategy to aid its targetting and for becoming different from its competition in thr
Tesco. The organisation can also use the Differentiation position strategy to give good
commodities at a normal cost.
2. Justification and recommendation of the most appropriate growth platform/s
and strategies.
It can be evaluated by using Ansoff Matrix:
Ansoff Matrix is a tool utilised to examine the plan of actions to increase the development of
any firm. This matrix has four strategies that could aid a firm in development and also in
studying the risk related with each strategy.
Market Penetration: A firm is trying for penetration of the marketplace with the
existent commodities to improve the market sharing. In case of Tesco, this is broadly
utilised by different firm as it is low in risky.
Market Development: This is where the firms are entering new marketplace with its
existent commodities. For entering in the new marketplace, a firm should keep these
things in a brain like consumers of market of Tesco are profitable or not (Borowski,
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2021). Consumer's attitude of Tesco are offering inventive technologies that are not
presented in the marketplace.
Diversification: It is all about the launch of new commodities in the existent
marketplace and it is a very risky as both marketplaces and growth in the
commodities are needed in Tesco.
The main concentration of this is to increase the development of a firm and to
improve the scale of commodities. By taking the consideration of Tesco is suggested
that the firm can utilise the Product development plan of actions. The firm may give
new commodities for the commodities for the consumers in accordance to the trends
in the marketplace.
3. Evaluate ways and means by which the chosen strategy/ies can be
monitored in order to ensure success .
Key performance indicators were used here for measuring the performance for a
particular goal to give a target for the team of Tesco for its progress that aid people
across the firm to make a good decision.
Strategic: These key performance indicators will see the structure objectives.
Administrators of Tesco will be looking to one or two strategical KPIs to search the
way a firm is performing at any given time. like returning on investment, tax income
and market sharing.
Operational: These are mostly measuring the working in a short period, and are
concentrated on organizational procedure of Tesco and its skillfulness (Peterson,
2018). It involves sales by areas, monthly transportation system price and many
more.
Leading vs Lagging: The kind of key performance indicator defined, a person or a
firm should be knowing the variation among leading and lagging indicators. In
leading, KPIs can aid predicting result in Tesco, and in lagging, KPIs tracking what
has already occurred. Tesco is using a mixture of both to make sure they are
following what is very essential.
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5.0 Conclusions
It is concluded from the above report is that business strategy is one of the most
effectual factor to be adoptive by an administration in context to increase the
competitory place of itself and its offer in its place and possible marketplace. It is
extremely necessary for an firm to examine the cause of macro surroundings of the
firm which would permit the firm to invent proper strategies in context to raise its
development. It gives a competitory benefit to the firm and secure their upcoming
days. From the above analysis of the chosen firm, it can be seen the way all macro
environment components has influencing its activities. From a proper model, internal
surroundings and abilities of Tesco could be interpreted. In judgment, Business
strategies have assisted in the secure of its place in the market place.
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