Business Strategy: Tesco's Macro Environment Analysis Report

This report provides a comprehensive analysis of Tesco's business strategy. It begins with an introduction to business strategy and its importance, followed by an in-depth examination of the macro environment using PESTEL analysis to identify its impacts on Tesco's strategic management decisions. The report then delves into an internal analysis of Tesco, including a SWOT analysis to assess its strengths, weaknesses, opportunities, and threats. Porter's Five Forces analysis is also employed to evaluate the competitive forces within the retail industry. The report culminates in the development of a strategic management plan for Tesco, incorporating the findings from the preceding analyses and offering insights into how Tesco can achieve its objectives and maintain a competitive advantage in the market. The report also includes a review of the company's awards and market share.

BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY..........................................................................................................................................3
Analysis of macro environment to inform and determine strategic management decisions and the
impacts of macro environment on the strategies employed by the Tesco organization........................3
Tesco SWOT analysis.............................................................................................................................5
Porters five force analysis of tesco..........................................................................................................6
Strategic management plan......................................................................................................................8
REFERENCES..............................................................................................................................................10

INTRODUCTION
Business strategy is an essential procedure in any organization. It assists to strengthen the company’s
performance, achieve goals and objectives, attracts the huge customer base and also encourages
competing effectively. Business strategy is made by the company to give a high competition in the
national and international market. It is created for several objectives such as mobilizing resources,
improving effectiveness, developing a better results from challenges and threats, create a high position in
the entire market, grab and utilize best opportunities, directing efficient efforts and behavior of employees
etc. it helps to identifying the needed activities and efforts for business to reach up to high level success.
It is a combination of best actions and procedure to enhance the organization’s performances and
operations. Business strategy shows a desired path, directions and destination to company for
gaining great success. Tesco is a British multinational groceries company and also a general
merchandise retailer. It is one of the best retail companies in United Kingdom. Tesco is also a
third biggest retailer in the whole world according to their gross revenues. Its headquarters in
England, United Kingdom, Hertfordshire, Welwyn Garden city. This report highlights the critical
analysis of the macro environment to inform and determine strategic management decisions and
the effective framework to define how macro environment affects the strategies employed by the
Tesco. This report also includes the analysis and evaluation of the internal environment that will
identify the internal structure, skills and capabilities of Tesco organization such as SWOT
analysis. This report also states about the appropriate strategies to increase competitive
advantages and also concepts, theories and models for developing strategic management plan for
Tesco.
MAIN BODY
Analysis of macro environment to inform and determine strategic management decisions
and the impacts of macro environment on the strategies employed by the Tesco
organization.
Macro environment plays a crucial role in the strategic management decisions of the
Tesco. Macro environment creates huge impacts on the company. For the great analysis and
identifying the impacts of macro Environment Company will use PESTEL analysis. It helps to
recognize the impacts of external environment on the strategies of company. PESTEL analysis
includes Political, economic, social, technological, and environmental and legal factors (Johnson.
2016). Any changes and differences in the macro environment can highly influences the whole
activities and operations of Tesco organization. Macro environment create a huge impact on the
company’s performances by influencing the whole strategic management decisions. PESTEL is a
best strategic management practices that defines the effects of the factors of external
environment on the company and its strategies. The PESTEL analysis highlights the various
extrinsic scenarios which create a high impact on the business and its brand. This analysis is a
tool which is imperative for organizations such as Tesco, as it assist to effectively understand
market dynamics and increase its whole business operations continuously.

Political Factor
The political factor includes the various government impacts on the Tesco Company and
operates multiple business company as one of the largest retailer in the world. The company
must follow various regulations that ensure safety and compliance of its product. Global political
factor better influence the performance of Tesco. As Tesco plays it’s creating employment
opportunity and increase the demand for it diversifies its workforce and products (Thompson,
Strickland and Gamble). By the government incentives Tesco organization will gain the
opportunity to efficiency their financial performance in the whole market. More the influential
the political government the best is opportunity to carry out trade.
Economic Factor
Tesco have a vast range of products and economic factor plays a crucial role in the
consumption of wide area of products. There are several economic factors that create huge
impact on the Tesco Company such as issue of economic stability. Tesco are playing major
attention to an economic factor and their impact on buying behavior of their customer and also
downgrade the UK Economy. The Tesco Company needs to have for any economy changes
occurred in the company and it operates many factors that will affect its sales and its distribution.
It should be aware of the various taxation policies in order to own benefit and in order to
leverage (Akter and et.al., 2016). These market around the globe is spreading its major share of
revenue is generated from the United Kingdom. Tesco also needs to keep in mind that product
raising with influence the sale. Economy factor plays a major role in the consumption of
products.
Social Factor
Social factor includes the variable of customer trends and employee. The analyze of
social factor helps the Tesco company to create various development program by identifying
multiple social trends in the specific target market. Social factor plays an important role in the
business of Tesco. Tesco has plan out its tore to facilities to meets customer needs and the
company has change from major food product to a food cum non food model (Higgins, Omer
and Phillips. 2015). The choice of product may also depend on the various cultural factors. The
society influence the future generation which needs to be assessed by Tesco and the customer
needs to provide efficient product to choose from. Tesco has managed to acquire its business for
marketing organic products to satisfy its customer. This company believes in advantaging the
society by local hiring and generating employment in whole country.

Technological factor
It is relevant in today time and is essential for a company to keep up with many changing
technology. Tesco have been experiencing with many aspects of retailing and achieve some
amount of success. Technological factor provides many benefits to the customers and promoting
its products on the social media platform. This will help removing the long queues for the
consumers and save time with hassle free invoice. Tesco company had recently tied up with
Amazon go to invent a new technology for cashless billing. This company invested in several
energy efficiency projects to decrease its carbon footprints. This factor plays a crucial role in the
organization.
Legal Factor
In the operations of the Tesco Company it needs to follow both the international market
law and local law in order to continue with ease. Law and many legal systems direct the
company business managing decisions and development. There are many legal factors that can
impact Tesco Company’s strategy. These legalities should be follow religiously and consider in
order maintaining its company reputation. In 2016 there were many allegations enforced on
Tesco regarding the gender base and age in the work culture.
Environmental factor
Tesco has undertaken many initiatives in order to better improvement and create a more
sustainable society. Tesco has launched its phase of reduce, remove, recycle and reuse plan. The
many ecological conditions are a part of pestal analyzes and several factors can largely influence
the Tesco Company such as increasing awareness, climate change and rising environmental
program. It is also minimizing the waste produce in their stores by increasing social conscience
in customers.
Tesco SWOT analysis
This SWOT analysis is the Tesco group global portfolio in retail brand that offer food
and non food item in country and all over the world in different format including a large online
retail store.
Strength
Tesco has won various awards for its customer service overall shopping experience and
retail experience and it is considered one of the most profitable super market in the world. It has
higher revenue and sales as compare to other super market chain. Tesco covers the highest
landing market share and it is recently become the most powerful supermarket in the world.
Tesco has launched different form of store such as Tesco metro, Tesco express, Tesco home plus
and Tesco super store (Amran and et.al., 2016). Tesco diversifies much strategy to gain better
achievement for the company and it has home ware items, clothing range, school uniform,

financial and telecom service across the globe. Tesco has created more Job opportunities for
employees worldwide. Tesco has achieved several awards for the successful commercial
performance this includes the Grocer’s own label food and during award, British favorite
supermarket etc, Tesco use lean management system to encourage their employees to work
together. It will directly increase the productivity and performances. This also creates a simplify
process of decision making, eliminate writing proposal, its submission and give direction by the
chain of command. Tesco has numerous stores and distribution channels that provide good
distribution of their products. The Tesco has strong financial structure to tackle any critical and
complex issues of external factors.
Weakness
Tesco subsidiaries are not vulnerable to certain external factors and some of the retails
formats in several countries have not performed. Tesco was charged with fine due to miss
representation of the profit and false accounting declaration. And the share price of Tesco fails
more than 9% due to decrease in operating profit and it is the worst performance for the
company (Lieder and et.al., 2017). It is also the price leader in the UK market, its low-cost
strategy due to reduced profits margin. It is including also due to its credit card liability and high
debts stucco’s company in financial profit is affected in the business. This company has poor
operational performance in market and not performing well in many countries. Tesco not carry
out better market research before entering into these super markets so this is main weakness of
organization. Many important weaknesses of Tesco can affect its profitability and performance
such as failure in the Japanese and US market and sudden club card switching. The operational
performance if Tesco company in many countries has very low and market department not going
sufficient ground research in market before the opening up stores in super market. This company
should follow the business model of law cost strategy, its offer services and product at a law rate
to its customers.
Opportunities
TESCO has the major opportunities can improve the best performance in the future
market. This company launched a new discount store by the name of Jacks and its performance
well and the Tesco company should invest more because the potential to grow and with law cost
for product. They are opportunities fro strategies alliance with admired companies to offer many
product and many customer attract in certain market. Many significant opportunities to grow
online shopping for TESCO and home delivery services to all areas. This company also
expanded its businees operations in many countries but they are emerging market like South
Korea, turkey. Tesco has a mobile app for online shoppers and it would attract many customers
towards TESCO (Strategy. 2017). It should opportunity and associate up with many local

business and emerging market still many opportunities for certain retail formats. It is providing
good access to the goods is demanded.
Threats
In the SWOT analysis of Tesco is the issue many threats facing the organization. Credit
crunches and economic recessions will continue the thereat in the market profitability and share
so size of purchases made by customer is reducing. In the organization, national economic factor
like regulations, taxations and government rules are a serious threat to the company performance
and growth of Tesco. Rising raw material price are also main threatening of Tesco profitability
and labor threat is related to benefit and wages are also affected in the organization. Supermarket
competitors are main threat like aldi, walmart and Carrefour are some of the main competitors of
company(Hart, Sharma and Halme., 2016). In this organization, food price are rise whole the
world, which can reduce what customer can buy in market. In the market many stakeholder
pressures related to the social and environment responsibility also adverse impact Tesco’s cost
basis. Tesco biggest competitors in the whole market so Tesco market position can be threatened.
In this company was accused of many misleading customers with fake firm and marketing its
food produce under the using fake name of company.
Porters five force analysis of Tesco
This is a detailed porter’s five forces analysis of Tesco and it examine the impact of the
five forces such bargaining power of buyers, threat of new entrants, bargaining power of
suppliers, threats of substitute product or services and rivalry among existing firms on Tesco
which can operate in the super market of whole country.
Bargaining power of suppliers
Tesco Company under the supplier has a law bargaining power due to existences of
numerous suppliers in the supermarket retail industry. In the market power to get product from
whole suppliers at the lowest prices to improve their profits margins in the market (Pisano.,
2015). Tesco has many suppliers and there is minimum switching cost for the supermarket chain.
This organization has using its bargaining power to delay payment to many suppliers in order
effective its operational profit margins in the supermarket. Tesco work with 2500 suppliers in the
UK and many more thousand in the whole world. Company largely dependent on the suppliers
that can enhance the power of suppliers. For the various materials, Tesco highly depends on the
suppliers. It will encourage the suppliers to increase their cost or prices, that diversely reflect on
company’s reputation or image. Supplier is a dominant position in the company as it decrease the
margins and powerful supply in customer service centre use their negotiating power to high
prices from the firm in retail field. The overall impact higher supplier bargaining power is that
low the overall profitability of retail super market.

Bargaining power of buyer
Tesco customers have relatively high bargaining power in super market like ASDA, sains
bury etc,. Tesco serves millions of customers in its online as well as retail stores. It analyzes the
bargaining power of grocery customer is high in the UK As now many competitive. It is require
that Tesco business keep its price very low that impact on profitability. And many product price
is low which gives the customer power to choose between a various product in the same price
bench. The smaller and more powerful the customer of Tesco in higher the bargaining power and
ability to seek increasing offer and discount. Tesco can also tackle the bargaining power of buyer
like building a large base of customer(Theoharakis, Bicakcioglu and Tanyeri., 2019). It will be
helpful in two ways such as it removes the bargaining power of buyer and also it will give an
opportunity to the firm to streamline production process and sales. The high bargaining power of
the customers can generate diverse impact on the company’s performances. The various
government policies like government incentives gives tax credit deduction to customers, that can
reduce the bargaining power.
The threat from new entrants
In the Tesco major threat is regarding entrance of new competitors. Tesco faced various
challenges as a new entrant in the market. They faced various financial troubles such as lower
capital investments, limited distribution channels and unable to build company’s brand because
of huge competitors in the supermarket (González-Rodríguez and et.al., 2018). Competitors may
not have enough money access to expertise to explore the super market industry and distribution
network in the UK.
Threat of Substitution
In Tesco the threat of substitutes in grocery markets is very high for both non grocery
items and grocery items because Tesco potential food substitutes can come from many retailers
in other super market that can offer not just drinks and foods directly to consumers but also non
food items such as electronic furniture and clothing etc (Razak and et.al., 2016)., Tesco offers
the customer the wide range of product and it is also sales substitutes of majority of the product
in the Supermarket.
The intensity of Rivalry in the industry
Tesco have a powerful company in the UK and it has been exploring appropriate solution
to tackle many business problem of competition. Tesco supermarket faces many competitions
from big supermarket like ASDA and morrisons Sainsbury they provide similar product such as
food item, electronic etc,. if the rivalry amount the existing player in the market it will downsize
and it will affect the overall profitability of the industry. Tesco provides more discount in the
super market chain to increase sales and attract more customer (Buckley, Burton and Mirza.,
2016). Tesco can tackle rivalry among the existing competitors in the retail industry such as by
building scale so that it can compete better and collaborating with competitors to increase the
market size rather than just competing for small super market.

By analyzing all the five forces the Tesco strategy can gain a complete picture of the
profitability in organization. Porter’s five forces effectively help the company in their future
growth and development. It is favorable for enhancing company’s performances and productivity
for a long term period. The market of TESCO industry is very competitive and very attractive for
competitors or big players in the market. The porter’s five forces used in the Tesco Company to
recognize various impacts of competitors on the business of organization. It can help the
company to develop their stability in the whole retail supermarket. The porter’s five forces
model used by the Tesco to identify the impacts and influences of developed competitors of
supermarket chain. It makes the company’s structure more strong so that their business can stand
against several competitors in the market and create their unique image in market. It also attracts
the huge customer base and encourages them towards the company and its products.
Strategic management plan
Porters generic strategies
It is one of the most useful theory that can help an organization in analyzing competitive
positioning. There are three main types of generic strategies: cost leadership, differentiation and
focus strategies (Frantz and et. al., 2017). Cost leadership strategy is one in which broad market
is focused and products or services are offered at lower price to the target customers. It helps an
organization to gain competitive advantage, increase their overall sales. Due to increasing
competition in retail sector, Tesco uses this strategy in order to compete with the competitors and
gain competitive advantage. Usage of this strategy also helps Tesco to maintain their market
share. Differentiation is another strategy can be used by organizations, in this broad market is
focused on but products with unique features are introduced. This helps in making products and
services more attractive so that a greater number of customers can be attracted. Tesco can use
this strategy for their new product development process. Third strategy is focus strategy in which
a particular niche market is focused upon and in order to build strong loyalty they concentrate
either on reducing cost or creating differentiation within products and provide those products to
the chosen niche market. Tesco can use this strategy to enter into a new market.
Strategic management plan
Strategic objectives:
 To increase sales by at least 10 percent by the end of the year.
 To enhance overall customer base by at least 5 percent within a year.
Business strategies:
 Prices of the products and services of Tesco can be lowered by reducing overall
manufacturing cost of the products. This strategy will not only help Tesco to increase their
customer base but will also help them to increase their overall sales.

 Tesco can focus on enhancing their overall business and increase their overall customer base,
they can focus upon online shopping platform where all kinds of products offered by Tesco
will be available for their customers.
Marketing Mix
Marketing mix will help in explaining marketing strategies for Tesco.
Product: Tesco provides large variety of products and services to their target customers in order
to fulfill their needs and requirements (Coffie, 2017). They can focus upon introducing new
features within their products as per the need and desire of their customers.
Place: Tesco has more than 6800 stores in more than 11 countries. Tesco can focus upon selling
their products within the help of online platforms as well upon their websites or with other
applications or websites.
Price: Tesco follows cost leadership strategy i.e. they provide products at lower price and also
focuses upon maintaining overall quality of their products in order to attract their customers and
increase overall sales. They can use differentiation strategy by introducing new products or new
features within current products and services in order to attract a greater number of customers.
Promotion: Majorly promotions by Tesco for their products and services are done with the help
of traditional methods like television advertisements, charitable events as promotional events and
many more. They can focus upon online advertising or social media promotion. Other than this
they can also focus upon providing various kinds of discounts or offers to their customers for
promotion of their products and services.
Conclusion
Business strategy is a great process to attract huge customers, achieve company’s objectives and
compete effectively. It is a group of process to advance the company’s performance and produce
company’s objectives. The business strategy is formed by company to stand at local and global
market. The business strategy is created by the business for diverse purposes such as: achieving
efficiency, mobilizing funds, eliminate threats and challenges, protected a superior position in
the market, using and perceiving opportunities, creating control over unsure situation. The
PESTEL analysis is a big and strategic tool to recognize the effects of macro environment of the
business. PESTEL analysis engaged Political factor, economical factor, social factor,
technological factor, environment factor and legal factor. This is very helpful for the Tesco
company to identify the huge impacts of external environment of organization. Variations in the
macro environment elements will basically influence the Tesco Company and the others
companies in the market. SWOT analysis will recognize the strategic capabilities of a business
and main troubles from external environment of the business. All these factors will mostly effect
on strategic development of company. The SWOT analysis help the business to successful
development in future Courses of actions and strategic options. Porter’s five competitive forces
model is very useful for the Tesco in their strategic analysis. It is used for creating attractiveness
towards the business that can boost the company’s profitability and develop their performances.

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