Business Strategy Report: Macro and Internal Analysis of Tesco

This report offers a comprehensive analysis of Tesco's business strategy, examining the influence of the macro environment on the company's operations and strategic decisions. It delves into political, economic, social, technological, legal, and environmental factors, highlighting both positive and negative impacts. The report then assesses Tesco's internal environment, including resources and capabilities, utilizing the McKinsey 7S model and Porter's Value Chain Analysis to evaluate the firm's strengths and areas for improvement. Furthermore, the report evaluates the competitive forces within the retail industry using Porter's Five Forces model. Finally, the report concludes by devising a strategic plan for Tesco, aiming to enhance its competitive advantage and achieve its organizational goals. This report provides valuable insights into Tesco's business operations and strategic planning.

BUSINESS STRATEGY

Contents
INTRODUCTION...........................................................................................................................3
P1. Analysis of impact and influence of macro environment on organisation and its strategies.
......................................................................................................................................................3
P2. Internal environment and capabilities of a firm.....................................................................6
P3. Evaluation of competitive forces of retail industry...............................................................8
P4. Devising a strategic plan for company..................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business Strategy is said to be as the course of actions and decisions which are to be taken by a
firm to earn the profit of competitive advantage in the marketplace. The main purpose of
adopting this strategy is to attain the goals and objective of the organisation in effective
timeframe and in an effective manner. This strategy also has the aim of gaining the attention of
large number of customer so that the organisation can able to enhance the growth of their
business. The present report is based on TESCO, which is a British multinational retailer
company and deals in clothing, merchandise, electronics and grocery products. This was founded
in the year 1919 by Jack Cohen in England, UK (Bell, Bryman and Harley, 2018). This report
will emphasize on the impact of macro environment of the company and its strategies. Along
with this, the internal environment of the firm and its capabilities are also been discussed in the
current report. In addition with this, various theories or model has been discussed and porter’s
five forces have also been outlined. At last, the report is end up by devising a strategic plan for
the organisation.
P1. Analysis of impact and influence of macro environment on organisation and its strategies.
Tesco manager has conducted the pestle analysis to gain the knowledge about the
external business environment factors which influence and had impact on the firm and its
strategies of business.
POLITICAL FACTOR – These types of political factors are taken into consideration to remain
and sustain for long period in the market. The political factors are related to the government and
affect the business operations of the company (Brewster, 2017). Some of these factors are
policies and taxes, fiscal regulations and trade tariffs, etc. The positive and negative impact of
this factor has been outlined below –
POSITIVE IMPACT NEGATIVE IMPACT
The positive impact of this factor is that the
government of UK is remaining stable and
reflecting that the rules and regulations
made by the political system of UK remain
consistent every year. This leads TESCO to
gain knowledge about the legal formalities
TESCO is trying to expand their business
in global market where the political system
is not legal and which can affect on the
sustainability of the company, therefore
they are devising a strategy and seeking for
such market where the government is stable

and remain and leads in that market. and the political system is legally
permitted.
ECONOMIC FACTORS – The factors which are related to the economy are said to be as
economic factors such as interest rate, inflation, economic growth, etc (Cavusgil and et. al,
2014). These factors are to be considered by TESCO so that they can maintain their leading
position in the market.
POSITIVE IMPACT NEGATIVE IMPACT
The positive impact of this factor is that the
company is considering the policies which
are made by the UK government and which
are affecting the demand, price, expenses,
and revenue of the firm so that they can run
and operate their business operations in an
effective way.
TESCO is dealing with 30% of market
share in UK, and if any change occur in
economic policies then the sale and profits
of TESCO will be affected. Therefore to
overcome by this issue, they have to keep
continue their research on revenue.
SOCIAL FACTORS – The factors which are related to the population and which affects the
business operations of a firm. The social factors are related to the cultural trends, population and
latest customer lifestyles, etc.
POSITIVE IMPACT NEGATIVE IMPACT
The positive impact of this factor is that the
UK customers are having their interest on
one stop shopping. Also the company has
increased their productivity y offering
more organic and healthy products to their
customers.
TESCO is having the innovative products
which are not available anywhere.
Therefore they have to continuously make
such products which are innovative
otherwise the customers will go to their
competitors.
TECHNOLOGICAL FACTORS – In this, the factors are related to the constant change in time
and environment which has the major effect on the business operations and strategies of the
company (Chang, 2016).
POSITIVE IMPACT NEGATIVE IMPACT

The positive impact arises in this factor is
that Tesco is undertaking various initiatives
to stay forward from its competitors in UK.
The main rivals of Tesco are ALDI,
ASDA, M&S, etc. The firm has started
doing online delivery and self services to
gain the attention of more customers.
The huge number of companies within UK
who deals in the same sector of TESCO,
they mainly focus to produce innovative
and creative products to gain the attention
of large number of customers, which can
affects the sale of and performance of
TESCO.
LEGAL FACTORS - These factors are related to the legal aspects which are to be considered
by the firm to remain constant in the market for long period (Chen and Jermias, 2014). The
factors include the legal aspects such as consumer laws, employment laws, safety standards etc.
POSITIVE IMPACT NEGATIVE IMPACT
The positive impact arises in this factor is
that Tesco is a MNC retailer company
which follows all the laws and legislations
made by the UK government so that the
reputation and goodwill of the firm will not
get affected by the revenue generated in the
market.
The code of practice has been introduced
by the food retailing commission which the
company must follow but in case of Tesco,
no standards is followed by them which can
harm their goodwill and reputation of the
firm.
ENVIRONMENTAL FACTORS - The firm who is running their business in the economy
they must operate their business as per the interest of the society and environment (Davies,
2016). These factors include sustainable development, CSR activities, recycling etc., all these
contributes towards protection of environment.
POSITIVE IMPACT NEGATIVE IMPACT
The positive impact Tesco has decided to
undertake an initiative of decreasing the
carbon footprints by 50 % till 2020, and
minimising all the waste in their stores
which is the most important step taken by
them to protect the environment.
The population of UK is having very huge
expectations from Tesco, and if they fail to
fulfil that then it may harm their reputation
and goodwill of the company.

From the above discussion, this has been analysed that macro environmental factors have
opportunities and threats related with them for the business enterprise which should be
considered by the firm to ensure and to remain or sustain for long term in the market.
P2. Internal environment and capabilities of a firm
The arrangement of a wide variety of elements like employees, management, culture,
beliefs, values and practices existing in the organisation is said as the internal environment of a
firm. On the other hand, Resources are the economic factors which are necessary to perform a
task or for the implementation of a activity which are the key for attaining the goals and
objectives of the firm. The main resources which are to be required by the firm to run a business
are land, labour, energy, management, time, cost, etc.
Apart from all this, Capabilities of a firm is said as the show of expertise, capacity and
competence of an individual or business in order to perform a task or activity (Goffee and Scase,
2015). The manager of Tesco has mainly uses two types of Models to gain the insight into the
internal capabilities of the firm.
McKinsey 7S Model – This theory is related with the seven elements which helps the firm to
increase the entire effectiveness of the firm. In respect of Tesco firm, seven separate elements are
outlined as below -
1. Shared Value: This is a element which is used to states the beliefs and core values which
is to be shared by the firm. Tesco believes in enhancing its difficult management
techniques from simple creation organisations to the value of greater standards.
2. Strategy: This is the type of element which describes the methods which are used by the
firm as a part of strategic planning to accomplish its goals. Tesco has applied the number
of strategies by using balanced scoreboard method (BSC).
3. Structure: This is the structure element which is unique of all the firms and depends on
the hierarchy which is followed by the organisation (Jeston, 2014). Tesco believes that
the firm must have the huge number of employees who can able to run and operate the
business by following the flat organisational structure, in which the information is passes
from top management to subordinates.
4. System: This element is referred as the process by which the firm is performing their
daily operations of the business. Tesco uses the reform steering wheel performance

appraisal system which assists the firm in achieving its prearranged strategies to give
support to their employees.
5. Staff: This element is referred as the number of employees, a firm to run their business.
Currently Tesco is having around 4,20,000 employees in all over the world.
6. Style: This element states the way of running a business in order to attain the goals and
objectives. Tesco is using the steering wheel system to accomplish its goals and
objectives.
7. Skill: This is a element which states the skills and abilities of the firm in order to perform
a task or activity. Tesco is enhancing the knowledge of their employees and making them
highly skilled employees by providing them training sessions so that they can be able to
do work and perform their task according to the standards and norms of Tesco
Porter Value Chain Analysis - This model of porter’s defines and identifying those activities
which adds some value to the organisation and provides competitive advantage to the firm
(Jocovic and et. al, 2014). In context with Tesco, the manager of the firm has conducted Porters
Value Chain analysis which consists of two activities and that are mentioned as below -
Primary Activities
1. Inbound logistics: The operations of inbound logistics of Tesco are very complex and
comprise the supply of a large number of product categories in around 7820 outlets in all
over the world.
2. Outbound logistics: The main source of value creation of outbound Logistics of Tesco is
Flexibility and cost-effectiveness of. The firm has also started doing home delivery of
their products to some selected places.
Secondary Activities.
1. Technology development: Tesco is the multinational company who always try to produce
more and more innovative products for their customers, they also invest more of their
earning in Research and development so that they can able to gain the knowledge about
the new technology and the changes taken place in the market and also introduces them
for the convenient of the employees and customers (Klettner, Clarke and Boers, 2014).
2. Human resource management: Tesco is always remain up-to-date and always provide
training sessions to the employees in every six months so that they can be able to gain

and learn some knowledge about the design and technology used to build the innovative
product
From the above discussion, it has been analysed that the firm should incessantly keep on
evaluating its internal environment so that the organisation can able to gain the knowledge
about the capabilities of firm and investing more money to enhance their productivity and
profitability.
P3. Evaluation of competitive forces of retail industry
The competitive forces of the any organisation is analysing the Porters five forces model which
is outlined as below -
Porter Five Force Model – This model is used to identify and analyse the competitive position
of the company in the market (Laudon and Traver, 2016). This also helps the firm to identify
those strategies by which they can earn and maximise their profitability. In context of Tesco, this
deals in retail, banking and manufacturing sector, among which their more revenue is generated
from retail sector. Therefore, considering this sector as the main sector, it states that this is a
dense firm, thus Porter’s five force model will be beneficial for the company to understand its
competitive position. The following model is stated as below -
1. Threat of new entrants: The industry which deals in retail sector is very vast in nature
and needs huge amount of cost to enter in a new market and establish their business in an
effective way. Therefore threat of new entrants is low for the firm Tesco, as this and other
rivals of Tesco has already grabbed around 80% of market share within the UK. So, it
will be difficult for the competitors to enter and compete with other leaders of UK market
(Lawtons, 2017). Along with this, it is required by the new entrants to take permission
from the government about the time and resources. Therefore this will become obstacle
for new entrants
2. Threat from substitute products: In context with Tesco, the threat of substitutes is very
low, as it is very difficult for the other retail industries to compete with tesco as it is
already providing the best quality food products to its customers and at low cost, as it is
known by everyone that there are many substitutes of food products but in respect of
Tesco it is difficult to defeat them, that’s the main reason behind the low threat of
substitutes in retail industry.

3. Bargaining power of buyers: The bargaining power of buyers of Tesco is high, as this
has always focused on providing the best quality at low prices to its customers. If Tesco
do any type of comprises by increasing the rate of products and by not providing the best
quality then it may be possible that their customers will move to buy the retail products
from other retail company (McCahery, Sautner and Starks, 2016). Therefore, it is
necessary for Tesco to concentrate on producing the best quality products at low prices.
4. Bargaining power of suppliers: The bargaining power of supplier in retail sector is low,
as Tesco is a multinational company and running its business at a large scale which
provides support to this company for negotiating with suppliers. Along with this, the
position of Tesco also impacts the suppliers to provide the raw material at cheap cost.
5. Rivalry among existing competitors: The rivalry among the competitors is found to be
high for the firms like Tesco, ASDA, and Sainsbury’s which are competing with each
other on promotion, process and products. Also, these competitors are sharing the equal
market share which is directly or indirectly affecting profits of each other.
Advantages and Disadvantages of Porter’s Five Force Model
Advantage Disadvantage
 This helps the company in planning and
determining the rivals in the similar
industry.
 This provides the huge number of ways
by which the firm can easily deal with
suppliers and customers and can gain
huge number of profits.
 This is a model which is not used for
every industry, as this is the major
drawback of this model.
 This model ignores the environmental
factors like government obligation, tax
issues etc., because this was not result
in effective and positive outcomes.
From the above discussion, it has been analysed that industry analysis is essential for the
firm to gain knowledge about the competitive forces existing in industry (Mittal and Dhar, 2015).
Along with this, it has been examined that the threat of new entrants is low in context with Tesco
as this acts as an opportunity for the active industries. While, the bargaining power of buyers is
high which serves as a possible threat for the firm to keep the price and quality in a balance.

P4. Devising a strategic plan for company
This part of report will help in explaining the dissimilarities between function level, business
level and corporate level strategies which are as follow :-
BASIS CORPORATE BUSINESS FUNCTIONAL
Definition This help in explain
over all strategies of
an organisation,
which can provide
detail about the
points related to
market in which they
are performing their
functions (Describe
the Three Levels of
Strategy for a Single-
Business Company,
2019).
This explains the
steps which an
organisation use to
adopt when they are
entering in a new
market. Also help in
detailing that how
these steps and
strategies will get
applied.
These are the
strategies which an
organisation use to
complete their day to
day activities.
Focus The main focus of
this is on financial
and structural
elements along with
resources.
The main focus of
this strategy is on
products and service
development so that
need of customers get
fulfilled along with
market competition
(Describe the Three
Levels of Strategy for
a Single-Business
Company, 2019)
Focus of this strategy
is on quality system,
planning associated
and inventory
management in
production of
products as services.
Corporate Level strategies

Beneath are the suggestions make for TESCO according to macro environment and internal
environment analysis that they can adopt in their functions :-
Diversification: This is one the best strategy which TESCO can adopt in their operation,
as this will help them in gaining some additional competitive advantages and also help them in
making long term sustainability in market place (Ocasio and Radoynovska, 2016). This also will
help them in making new products which will lead to increase in their variety of products and
services offered by them. Therefore, this can become as one of the biggest strategy which they
can adopt to enter in new market and gain some profits along with competitive advantages. This
is a strategy which will help them in increasing their market share along with the variety of
offered by them
Business Level strategies
Cost Leadership: This is the strategy which TESCO can use for reducing the cost of the
products and services offered by them. For this, it is important for them to hire well skilled
employees which can develop new technologies, so that cost of production can get reduced. The
cost of the products offered by TESCO is very much low than to their competitors, therefore, this
strategy will become very effective for them.
Differentiation: In this strategy, it is very important for TESCO to make themselves
different from their competitors in terms of delivery, channels, sales, products and other. Along
with this, it is important for them to take care that the customer base of them dot not get
disturbed. Also they can use steering wheel technique, so that they can make it sure that
performance of their employees is according to aims and objectives of them.
CONCLUSION
From the above mentioned report, this is to conclude that business strategy is the course
of decision which helps the firm to attain the success and remain in the market for long term.
Along with this, it is necessary for the firm to analyse the macro environment to recognize the
connected opportunities and threats. Also, it is recognized that McKinsey 7S model and Porter
Value Chain model helps the firm to gain knowledge about the firm internal capabilities. Apart
from this, the industry analysis has also been done effectively to earn the knowledge about the
competitive forces which exists in the company. At last, this is concluded that corporate level
and business level strategies help the firm to gain the strategic frame in the market.

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