Analyzing the Impact of Macro Environment on Business Strategy: A Case Study of TESCO

This report analyzes the impact of macro environment factors on the business strategy of TESCO, a multinational company. It explores frameworks such as PESTLE analysis, stakeholder analysis, and Porter's five forces model. The report also examines TESCO's internal environment and capabilities using VRIO analysis and value chain analysis.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
P1 Appropriate frameworks analyse impact & influence of macro environment on
organisation & strategies.............................................................................................................4
Stakeholder analysis ...................................................................................................................5
TASK 2............................................................................................................................................6
P2 Internal environment & capabilities.......................................................................................6
TASK 3............................................................................................................................................8
P3 Porter's five forces model .....................................................................................................8
TASK 4..........................................................................................................................................10
P4 Theories and concept to develop strategic plan ..................................................................10
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business strategy is defined as competitive moves or actions which an organisation uses
in order to attract more people and strengthen their position in market. Along with this, business
strategy outlines how activities is implemented and achieve on time frame. It assist organisation
to develop techniques as well as effective measures that leads to attainment of competitive
advantage at marketplace (Aldea, Iacob and Quartel, 2018) . By the assistance of business
strategy, an organisation can align activities in proper manner and met their targets within the
time frame. This directly leads to achievement of higher growth and retention for longer time
period in market. TESCO is taken into consideration for the present report. It is an multinational
company which was established in the year 1919 by Jack Cohen. It is one of the biggest retailer
in terms of gross revenue and ninth largest in terms of revenue. It provide grocery though
supermarket, superstore, Hyper market and convenience shops. It has more than 4,50.000
employees who perform activities in around 7000 shops which show that TESCO has high
market share. The report covers various framework such as stakeholder analysis, PESTLE
analysis, Porter's five forces and many more in order to analyse affect of macro environment
factors on productivity and performance of an organisation. Moreover, internal environment &
capabilities of company is analysed by using fame work like SWOT analysis, VRIO analysis and
so on. Later, strategic plan is develop by using various strategies and framework.
P1 Appropriate frameworks analyse impact & influence of macro environment on organisation &
strategies
It is important for an organisation to identify affect of uncontrollable factors and macro
environment in order to properly implement and activities of a company. The managers of
TESCO uses PESTLE analysis to identify affect of macro environment factors on its
performance and productivity (Baumgartner and Mangematin, 2019). PESTLE analysis includes
six factors which is mentioned below:
Political factors: This factor defines the extent to which government interfere in
activities of an organisation. Political factors includes tax rate, exchange rate, political stability
and so on. In relation to TESCO, it is associated with various political factors such as
unemployment rate, tax rates, economic condition of country, current legislation of countries

where it operates. For instance, import duty on products can impact Tesco as it import inventory
outside from UK that is East Asia & China.
Economic factors: Economic factors have high impact on activities of organisation as it
includes factors such as inflation rate, tax rate, exchange rate and many more. With reference to
TESCO, it is determined that Labour cost is one of the important element that affect on
supermarket of United Kingdom. In addition to this, there are also other factors that impact on
TESCO is price, cost & profits as well. The company can emphasise on raising cost in UK as it
is still depend on market of United Kingdom with around 28% share.
Social factor: The factors which is included are norms, belief, culture, trends, value of
people living in a country. Social factors have affect on buying behaviour of person towards
goods as well as service offer to them in market (Bentley-Goode, Omer and Twedt, 2019). In
context to TESCO, it is rely on UK customer and ensure that their needs is fulfilled and service
provided to them is met with their expectations. In order to maintain loyal customers, TESCO
develop on to one and effective connection with their customers.
Technological factors: Technology is changing rapidly and highly influence on buying
behaviour of customers. Nowadays, customers prefer to buy those goods as well as service that is
innovative and unique in market. With reference to TESCO, it established RFID technology in
order to give high in-store experience to their customers. This assist company to count inventory
& remove it after sales takes place, it also help suppliers to maintain demand and supply of
products within the store. In addition to this, it has online payment system named as “PayQwid”
by which customer can pay amount & earn loyalty points. By using new technologies, the overall
productivity and performance of company is increased that affect positively on its market
position and image.
Legal factors: This factor plays an important role in every organisation as it is important
for managers to follow all the laws which is associated with their businesses so that activities is
implemented in a smooth and proper manner (Chelliah and Swamy, 2018). If it is talked about
TESCO, it implement operations considering all the laws related to Food Retailing Commission
that assist in executing activities in proper manner. This factor has a high affect if company did
not follow legislations as per the rules made by government.
Environmental factors: This involve factor such as change in climate, targeted
population, pollution control, eco friendly products and so on. Considering all environmental

factors assist companies to build an image in market and sustain for longer time period at
marketplace. Nowadays, people are more aware and concerned of their health and prefer to use
products which is environmental friendly. In context to TESCO, its van drivers use fuel saving
routes and gathered unwanted plastic bags from its users and then recycle it. In addition to this,
the organisation promises to decline around 50% carbon footprints by December, 2020.
Stakeholder analysis
Stakeholder Effect on TESCO
Customers
The company offer quality as well as on time
service to customers in order to build positive
brand image in mind of customers towards
company. Moreover, it adopt low pricing
strategy in order to increase customer base
level which has a positive affect on sales and
profit of company.
Governments
TESCO follow all policies and legislations in
order to smoothly carry out activities as well as
operations. By the assistance of this, the
company build its reputation in market which
strengthen its position.
Shareholders
By the help of this stakeholders, companies
implement activities such as marketing,
operations in effective manner that leads to
achievement of higher growth as well as
success.
Employees The another essential stakeholders for company
is its employees who provide quality service
and deal with customer queries in effective
manner. In addition to this, its mangers
motivate and fulfil all the needs of their
employees due to which their productivity and

efficiency increases that directly have affect on
performance of company in a positive manner.
TASK 2
P2 Internal environment & capabilities
In order to analyse the internal environment and capabilities, the higher authorities of
TESCO uses various frameworks that is VRIO analysis and value chain analysis. These
frameworks is defined below in relation to company:
Value chain analysis: This analysis helps companies to attain competitive advantage and
execute activities in an effective manner. Along with this, value chain analysis assist an entity to
gain knowledge regarding how to decline overall cost and develop value in market (Cosenz and
Noto, 2018). This strategy consider all the activities from initial level to the completion of
project. The managers of TESCO uses value chain analysis with an aim to maximize value and
decline overall cost which has a positive impact on internal environment of company. This
strategy includes primary as well as support activities which are as follows:
Primary activities: This activity is mainly related with delivering and adding a product
and services. The activities which is involved are marketing and sales, outbound logistics,
inbound logistics, services and so on. By the assistance of primary activities, companies can
easily raise their efficiency as well a productivity level.
Support activities: It is important for an organisation to have support activities as it assist
in implementing primary functions that leads to attainment of competitive advantage at
marketplace. The support activities includes procurement, technology, infrastructure and human
resource management as well. By the assistance of support activities, Tesco can attain
competitive advantage at marketplace and achieve higher success within short period of time.
VRIO analysis: This analysis assist in identifying resources & capabilities of an
organisation. It include four elements which are value, rarity, imitable & organisation as well
(Foss and Saebi, 2018). The main resources of TESCO is human resource, cost strategy, global
presence & differentiation strategy. The VRIO analysis of TESCO is mentioned below:
Valuable: In every organisation, there is valuable factors which assist in achieving their
desired goals within stipulated time frame. With reference to TESCO, it have presence in more
than 11 countries including UK that shows its high global presence which assist company to earn

higher profits. In addition to this, it also assist TESCO to reach more number of customers and
increase customer base of company. By following differentiation strategy, company is able to
develop its reputation in market high and fight with their rivals in proper that leads to attainment
of competitive advantage at marketplace. Furthermore, the company have talented employees
who perform activities in effective manner which is the main reason of its success at
marketplace.
Rarity: TESCO offer product to customers at lower prices which is a rare concept. The
global presence of company is also considered as rare concept. It provide training to their staff
members in order to enhance their productivity and performance level that leads to attainment of
organisational objectives within stipulated time frame (Ghauri, Grønhaug and Strange, 2020).
Providing goods at lower prices help company to attract more number of customers and enhance
their sales as well as profitability level.
Imitable: The company have its online payment application which assist in giving high
experience to customers. The global presence & its employees is also considered as strongest
factor of TESCO. In addition to this, its staff members that provide adequate service and on time
service to their customer that imitate as one major factor of TESCO.
Organised: It is important for managers of TESCO to organise as well as maintain proper
resources of an organisation that helps in attaining desired goals within stipulated time frame. It
also help company to expand their operations and gain higher success within the market. In
addition to this, it is also essential for TESCO to emphasise on differentiation strategy which will
assist in building reputation and earn higher profits as well.
Resource Valuable Rare inimitable Organized
HR Yes Yes
Global Existence Yes
Differentiation
Strategy
Yes Yes yes Yes
Cost strategy Yes Yes yes

TASK 3
P3 Porter's five forces model
This model was proposed by Michael Porter with an aim to determine factors which
affect on the operations and efficiency of an entity (Liao and Tsai, 2019). By using this model,
the higher authorities gain insight about factors that has affect on activities & strategies of an
organisation. This model includes five forces that help companies to identify attractiveness of
industries & its strength as well. The five forces of Porter is defined below in relation to
company:
Threat of new entrants: This threat is mainly faced by companies when same segment
of new organisation is enter into market and impact on productivity and performance of an
entity. In relation to TESCO, this threat is determined as moderate as it is not easy to open a big
retail store that required higher capital or investment. Along with this, achieving economies of
scale is difficulty in which sector Tesco operates. Distribution network access for new entrants is
easy which assist new companies to set up their channels of distribution. TESCO can tackle this
situation by taking benefits of economies of scale (Priem, Wenzel and Koch, 2018). Moreover,
the company can invest on marketing in order to develop strong identification, it will help
company to retain customers instead of loosing them by new entrants.
Threat of substitutes: Nowadays, customer are more aware of substitute products and
what price they are charging from customers. If there are higher number of substitutes available
in market it affect negatively on profitability and performance of a company and vice versa. It is
important for an organisation to develop effective strategies in order to retain and gain trust of
customers. If it is talked about TESCO, it has been analysed that threat of substitute is high as
there are many competitors who offer product at lower price in order to attract more customers.
Thus, it is essential for TESCO to maintain effective relationship with their customers and retain
them for longer time frame.
Bargaining power of Buyers: The buyers have high power if they have knowledge
about the price of products which is charged by competitors in market. Customers are the key
asset as efficiency and profitability is totally depend on them. In relation to TESCO, it deals in
retail sector where large number of companies producing goods so this threat is high for the
company. In order to retain customers, it is important for company to charge amount of goods
according the affordability level of customers (Ransbotham, 2018). It is analysed that switching

cost is low in these market and this threat can be tackle by company if they develop effective
strategies and provide high quality as well as on time service to customers.
Bargaining power of suppliers: The number of suppliers, brand power, reliability of
customers all these factor affect in the bargaining power of suppliers. In relation to TESCO,
there are lot of suppliers in sector Tesco operates which directly mean it has less control on
prices which is charged from customers. If the suppliers find any other company beneficial then
they shift to other organisation as switching is low. In order to maintain supply of products, it is
important to maintain good relationship with suppliers in order to ensure availability of resources
which has a positive impact on performance and productivity of the organisation.
Competitive Rivalry: The factors on which the competition is based are price, number of
distributors, service quality, customer base level an so on. If it is talked about TESCO, there are
very few competitors who have a large market in which industry Tesco operates. It means
organisation did not take moves without being noticed. All these competitors affect negatively on
market share as well as market position of company. In addition to this, it is essential for
company to provide unique offerings in market which assist in gaining competitive advantage at
marketplace.
From the above discussion, it is analysed that it is essential for TESCO to maintain good
relation with customers and suppliers as availability of resources and raising of sales is wholly
depend on them. Furthermore, it is significant to offer quality and on time service to customers in
order to retain them for longer time period which increases productivity and profitability of
company.
TASK 4
P4 Theories and concept to develop strategic plan
In order to develop effective strategic plan, it is essential for higher authorities to adopt
varios frameworks that assist in proper planning and raise effectiveness of a company. For this,
managers of TESCO adopts Porter's generic strategies (Sousa-Zomer and Miguel, 2018). It
involve three strategies which helps in targeting right people and gain knowledge about market
conditions. The strategies is defined below:
Cost Leadership: It is considered as first strategy of Porter's that focuses on developing
high position in market and to gain higher growth as well as development opportunities for

market. Herein, the main emphasise is on offering quality goods & services at lower price to
their customers as it assist company to attract more number of people and raise customer base
level of company. In addition to this, it assist companies to attain competitive advantage and
fight with their rivals in effective manner.
Differentiation: The another strategy is differentiation that is adopted by companies in
order to offer unique and innovative products as well as service to customers. It assist companies
to attract or gain eyes of maximum people that affect positively on sales and profitability level of
an organisation. With the help of this strategy, companies gain higher growth and attain success
within short span of time at marketplace.
Focus: It include cost strategy and differentiation strategy that assist companies to
strengthen their position at marketplace (Yucel, 2018). The main focus is on to provide unique
products at affordable price so that more number of customer purchase product that leads to
earning of higher profits to company.
From the above strategies, it has been analysed that one of the most beneficial and
feasible strategy for TESCO is cost strategy which helps in raising profitability as well as
productivity level of the company.
Bowman's strategic clock: This strategy is adopted by companies in order to develop
position of brand in market. It involves eight elements that is mentioned below:
Low price & low added value: This strategy is also known as bargaining strategy which
help in gaining success and sustain in market for longer time period. In order to compete with
rivals and build position, it is determined as not beneficial and feasible strategy to adopt.
Low price: Hereby, the emphasise is on offering products and services at lower prices so
that brand reputation is develop in market. Adoption of low price strategy enhance sales of an
organisation bit decline profit margins.
Hybrid: This strategy is defined as combination of low price and differentiation product
as well as services. With the help of this, it is easy for companies to gain higher position &
develop value within the market.
Differentiation: Herein, the main objective is to offer different as well as unique goods in
market that assist in building higher reputation and develop positive mind set of customer's.
Along with this, it helps in performance as well as market share of company.

Focused Differentiation: At this stage, the main focus is on to position products &
services at high level so that people achieve higher perceived value. By the assistance of this
strategy, organisation earn high profit margin that leads to increase in market share of company.
Risky higher margins: Herein, organisation set standard price of products as well as
service and dis not offer any discount to customers. The customer may shift to other brand if
same products is available to them at lower prices.
Monopoly pricing: This strategy is adopted when no other alternative of product is
available in market. Herein, an organisation have an opportunity to take advantage and charge
higher price from them.
Loss of market strategy: It is the last position of strategic clock which is such a disaster
for an organisation. The customer perceived low price of goods due to which companies did not
gain success within the market.
By analysing the above strategies, it is determined that TESCO can adopt Hybrid strategy
which assist them to offer unique products at lower price in market which have a positive impact
on sales and profit of company.
Strategic management plan:
It is mainly defined as an overall view of mission, vision, plans, objectives as well as
strategies of an organisation. This plan assist companies to achieve objectives within stipulated
time frame. The plan of TESCO is defined below:
Vision: The vision statement of TESCO is “To gain leading position in these industry by
offering quality product to their customers”.
Mission: The mission is “ To improve lining standard of people and to give high
customer experience”.
SMART objectives: The objective of TESCO are as follows:
 To gain profit by 10% in coming 8 months by using effective marketing strategy and and
promote their products and services.
 To increase 5% market share in coming 6 months by processing its existence in other
countries.
 To gain competitive edge at marketplace by offering quality & on time service to
customers.

Extensive Marketing: The higher authorities and marketing team of TESCO develop
effective plans which help them to attract more number of people that leads to raise in sales &
profitability level of company.
Market research: TESCO conducted market research in order to identify customer
needs and market trends which assist in customer satisfaction and retention as well.
Tactics: TESCOP adopts cost strategy in order to attract more number of customer and
rise their profit as well as market share level.
CONCLUSION
From the above report, it has been analysed that business strategy plays an important role
in every organisation as it helps in gaining success at market and to achieve objectives within the
time frame. In addition to this, PESTLE framework is adopted in order to know the impact of
uncontrollable factors on organisation. Furthermore, Ansoff matrix assist in gaining growth and
development opportunities that directly affect positively on performance and productivity of
organisation. Bowman's strategic clocks is used by companies to strengthen position in market
and to develop positive image in mind of customer due to which customer base and profit of an
organisation increases in an effective manner.

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