This report analyzes the internal and external factors that impact the operations of Tesco PLC along with its capabilities and competitive factors. It includes VRIO Framework, SWOT Analysis, PESTLE Analysis, and Porter's Five Forces Analysis.
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Strategy, Enterprise and Innovation
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Table of Contents INTRODUCTION...........................................................................................................................3 MAIN BODY...................................................................................................................................3 A. Internal resources and capabilities that gives Tesco PLC a competitive advantage in the industry.......................................................................................................................................3 B. Analysis of external environment of Tesco PLC...................................................................5 C. Porters five forces analysis of Tesco PLC.............................................................................8 CONCLUSION................................................................................................................................9 REFERENCES..............................................................................................................................10
INTRODUCTION An enterprise refers to an entity that is legally approved to conduct the operations of business. Most of the enterprise are created in order to generate revenues and profits in the business except for the non-profit institutions(Aldea, Iacob and Quartel, 2018). To run these enterprise, the managers and the entrepreneur needs to develop business strategies. Strategies refers to ideas and plans developed by the top authority in order to achieve goals or specific objective. These strategies are essential in the business as it helps in overcoming several challenges such as competition and globalisation. Innovation in the field of businesses is very important as it assists the business in developing productivity and profitability(Trunina, Kushal and Zagirniak, 2019). In this report Tesco PLC is considered which is a multinational grocery store based in United Kingdom. This report outlines the internal and external factors that impact the operations of Tesco PLC along with this the capabilities and competitive factor is also discussed. MAIN BODY A. Internal resources and capabilities that gives Tesco PLC a competitive advantage in the industry Internal factors or the micro factors are the most essential aspect of any business as these give the company scope and potential to deal with the competition in the industry(Bradul and et. al.,2021). Tesco PLC need to analyse these resources in order to gain a competitive advantage. To understand the internal resources and capabilities SWOT Analysis and VRIO Framework is being applied on the company. VRIO Framework This is considered as a most essential tool in the industry to evaluate the resources and capabilities of the business which will help them in sustaining for a longer period of time in this competitive market. This analysis is conducted on an internal basis in which the usefulness and quality of the resources in the organisation are studied(Daska, 2018). VRIO determines the four internal factors of the organisation, these four factors are acronym for the word VRIO. These are discussed below in context with Tesco PLC:
(Source: What is Vrio Analysis? 4 Question Vrio Framework Explained) Valuable-The value of the resources that are available in the firm is most essential aspect of this framework. Resources in the firm must be valuable enough to help in achievement of objectives(Doroshenko and et. al., 2019). The resources present in Tesco PLC is capable enough to provide productivity in the organisation which further helps them in gaining competitive advantage. Rare-The resources used by the organisation should be rare as this will ensure that only few firms have this advantage on their side(Martynov, Filosova and Zaytseva, 2020). In context of Tesco PLC, they have few production unit which provide them with high efficiency and effectiveness. Other firms dealing in this industry lack in these resources as these are high priced and rare to acquire. Inimitable-The resources and strategies used by the organisation must be inimitable. If the other firm can easily imitate the company's resources then there won't be any competitive advantage to the business. In context of Tesco PLC, they acquire costly and innovative resources which is very difficult to get imitated. This helps them in gaining competitive advantage over the long term.Organized-The company should be able to effectively organise these resources, this will help the firm in minimizing the cost and increasing the productivity in the operations. In Illustration1: What is Vrio Analysis? 4 Question Vrio Framework Explained
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context of Tesco PLC, they have proper management framework which helps them in effectively maintaining the resources of the organisation. The managers of the business ensures that the resources are well organised as it positively impacts the operations and give the business competitive advantage. SWOT Analysis of Tesco PLC This refers to a strategic planning to analyse the organisation's four important aspects that helps in competing well in the industry(Zhiqiang, Xi and Danbin, 2019). SWOT Analysis covers the major strengths that is depicted by the business, weakness that the business faces , opportunities that the business has for growth prospects and the threats the business faces in the regular terms. SWOT Analysis of Tesco PLC is performed below(Tesco SWOT Analysis 2020: A Detailed report, 2020): Strengths-Tesco's major strength is the market share and the innovative technology. Tesco has acquired a majority of market share in the field of household groceries which give them competitive advantage over the firm who are still trying to make their presence in the market. Weaknesses-Tesco's major weakness is constant change in the leaders and leadership styles, this affect the level of operations. This puts a negative impact on the competition factor as the goodwill of the company is majorly impacted by such decisions of management. Opportunities-Company has a good growth prospect as the innovation in the technology is impacted helps in the growth of online grocery sales. Tesco PLC can further apply strategies to effectively implement their operations in this field to gain competitive advantage over the businesses dealing only in offline sales.Threats-Tesco's major threat is Brexit as it has impacts more than 80% of the total food supplies of the company. Tesco is majorly dependent on the imported food and they need to deal with this situation in order to gain competitive advantage in the industry. B. Analysis of external environment of Tesco PLC External environment of the business is as important as the internal one, the macro factors of the organisation needs to be taken in account of consideration. To evaluate the external
environment of the organisation, PESTLE Analysis of Tesco is done below (PESTLE Analysis for Tesco discusses its Business Environment, 2014): Political factors-Tesco PLC has expanded their operations throughout the world, due to this political interference of different countries are there. Tax and duties are major concern for the company, A high tax rate and duties in the operating countrynegatively impactsthe operations of business. A low taxation and rate ispositivefor the company as it increases the profitability of the business. PESTLE Analysis Political factors Economical factors Social factors Technological factors Legal factors Environmental factors
Economic factors-This factors directly impact the cost, revenue and profit aspects of the business. Tesco PLC needs to analyse the economic state of different countries in which they are operating. The GDP , economic rate directly impacts the operations of company. If the operational country of the business is going through a recession period then it will negatively impactthe sales of Tesco PLC. Vice versa: If the economy of the country is booming then the business will see a high growth in the sales and operations which is positivefor business. Social factors-This refers to the factors which society drives to the business, factors such as social behaviour and change in the taste of the customers comes under this category. Major change in the demand of the consumers result in dead stock and inventory whichnegatively impactsthe business. The social trend of a consuming a particular grocery product such as health conservative items, increase the sales of Tesco PLC whichpositively impactsthe organisation. Technological factors-Technology in the new era has become the most important factor, this helps the businesses in effectively achieving the objectives. If Tesco PLC is able to adapt to the latest technology in their operations then this willpositively impactthe business as the productivity in the business will increase. If the workforce of Tesco PLC is unable to adapt to the new technology then the company will lose the competitive edge over the industry and this willnegatively impactthe business. Legal factors-Laws and policies directly impacts the operations of Tesco PLC. There are certain laws set by the government regarding the food and grocery store. The company is expected to follow all these laws in their course of business. Laws such as FRC if implemented in the organisation would help in avoiding the legal interference of the government which will put apositive impacton the business. Violation of these laws would lead to legal obligations against the company which willnegatively impactthe operations of business. Environmental factors-Environment plays a major role in driving sales to the business, the products offered are according to the different seasons. The company is obliged to take care of the environment, they are requested to follow green gas operations in their production cycle. Tesco Plc will benegatively impactedin case they are unable to manage the changing aspects of the business. It will put apositive impactif the business
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is able to save the environment from the harmful factors and is able to deal and manage with the fluctuating aspects of the environment. C. Porters five forces analysis of Tesco PLC Thus is a holistic framework that helps in taking strategic decision by analysing the competitive factor(Dubrovina, 2017). There are five factors of Porters five forces which helps the business in gaining sustainable competitive advantage in the industry.Threats of New Entrants-The grocery and food industry is exposed to major threat of new entrants, but Tesco has competitive edge. They have a good amount of market share to deal with the new entrants in the industry. The company can level up in their innovation techniques to deal with thisthreat and they also have good production techniques which helps them in minimizing the cost of production.Bargaining power of the supplier-There are several suppliers in the industry who are willing to expand their business with a firm like Tesco PLC. The company has good grip over the bargaining power of the supplier which helps them in minimizing the cost of raw material or the finished goods. They have effective supply chain management which ensures that the goods are being delivered effectively and efficiently with the minimal cost.Bargaining powers of the buyers-Buyers are the most essential part of any business, they decide the terms on which the business will work (Rinaldi and et. al., 2018).The buyers are always up for good offers and focuses on getting gooddiscounts from the business. Tesco PLC has a wide range of customers, their customer base is loyal which helps the company in effectively dealing with this aspect of the model.Threat of substitute products or services-Tesco PLC service and product has a lot of substitute, many organisations are offering grocery products. There are wide range of grocery products that are available in the market which can be a good substitute to the Tesco's product. To deal with this threat that need to innovate their services and product so that to find the substitute of the same would become difficult for the consumer. Rivalry among the existing competitors-Tesco PLC has competitors who are innovating their services and products. One such firm who gives competition to Tesco PLC is
ASDA. They are the biggest competitor of the company, their operations are somewhat similar which results in customer distribution. However the majority of the market is acquired by Tesco PLC but they need to deal with this otherwise this can be a major threat in long term. The company can increase their productivity by several means which will help them in giving tough competition to other companies who acquire a good amount of market share after Tesco. CONCLUSION From the above discussion it can be concluded that it is important for the company to evaluate the both micro and macro environment in order to sustain in the industry. The company need to perform good analysis as this helps the firm in gaining a good competitive edge in the market. Further the models like porter's five forces, VRIO and PESTLE helps in critically analysing the important factors which will help in taking over the industry above the major competitors. SWOT Analysis helps in analysing the internal capabilities of the business.
REFERENCES Books and Journals Aldea, A., Iacob, M.E. and Quartel, D., 2018, October. From business strategy to enterprise architecture and back. In 2018 IEEE 22nd International Enterprise Distributed Object Computing Workshop (EDOCW) (pp. 145-152). IEEE. Bradul, A., and et. al.,2021. Forecasting the Effectivenessof the Enterprise to Intensify Innovation and Investment Development, Taking into Account the Financial Component of Economic Potential. Eastern-European Journal of Enterprise Technologies, 4(13), p.112. Daska,M.D.,2018.10.1EnterpriseInnovationinDevelopingCountries:Evidencefrom Ethiopia. Doroshenko, A., and et. al., 2019. Substantiation of the Choice Diversification Strategy for Ensuring the Safety of the Enterprise Activity. Dubrovina,N.A.,2017.ESSENCEANDIMPROVEMENTOFTHESTRATEGIC MANAGEMENT OF THE ENTERPRISE. Vestnik of Samara University. Economics and Management, 8(2), pp.50-55. Martynov, V.V., Filosova, E.I. and Zaytseva, A.A., 2020, October. Methodology for modeling optimal enterprise architecture in the application to the strategy of socio-economic developmentofenergyenterprisesoftheRepublicofBashkortostan.In2020 International Conference on Electrotechnical Complexes and Systems (ICOECS) (pp. 1- 5). IEEE. Rinaldi, C., and et. al., 2018. Universities and smart specialisation strategy: From third mission to sustainable development co-creation. International journal of sustainability in higher education. Trunina, I., Kushal, I. and Zagirniak, D., 2019. An imitation model of the financial-economic mechanism of taking strategic decisions at the enterprise. In SHS Web of Conferences (Vol. 61, p. 01027). EDP Sciences. Zhiqiang, Z., Xi, Z. and Danbin, S.G., 2019. Study on Process Coupling Between Total Quality Management and Technological Innovation of Enterprise-Analysis Based on Survey Data of 210 Enterprises in Beijing. In Forum on Science and Technology in China (Vol. 9, pp. 146-152). Online: TescoSWOTAnalysis2020:ADetailedreport.2020.[Online]Availablethrough: <https://pestleanalysis.com/tesco-swot-analysis/>/. PESTLE Analysis for Tesco discusses its Business Environment. 2014.[Online] Available through: <https://pestleanalysis.com/pestle-analysis-tesco/>/.