Unit 32: Business Strategy Report - Analysis of Tesco

This report provides a comprehensive analysis of Tesco's business strategy, examining its macroenvironment through PESTEL analysis and its internal environment using SWOT analysis. The report identifies political, economic, social, technological, environmental, and legal factors impacting Tesco, as well as its strengths, weaknesses, opportunities, and threats. It then applies Porter's model to evaluate Tesco's competitive position in the market. The report also discusses Tesco's strategic management plan, including its vision, mission, and objectives. The analysis highlights Tesco's strengths, such as its large market share and technological advancements, while also acknowledging weaknesses like decreasing profit margins. Opportunities like online shopping and strategic alliances are also explored. The report concludes with an overview of Tesco's strategic approach and its implications for future growth and sustainability.

Unit-32 Business Strategy

Table of Contents
Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
P1 Apply appropriate framework of macroenvironment of an organisation...............................1
P2 Determine the internal environment and capabilities of an organisation...............................3
P3 Evaluate Porter’s model to a market sector............................................................................6
P4 Discuss strategic management plan with the help of various theories and models................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy is defined as the direction of action that assist the firm to take an
appropriate decision through proper planning and coordination for accomplishment of goal in a
respective time period (Ansoff and et.al., 2018). It is a set of actions and plans that help firm to
gain competitive position across the globe. This report is based on Tesco which is renowned
brand in UK that deal with range of products or services such as clothing, food, toys and many
other household essentials. This report comprises of PESTEL analysis and SWOT analysis to
determine both positive and negative aspect of business by combatting the threats and grab
opportunities. This report also covers Porter’s model to achieve a significant and competitive
position. It also includes strategic management plan to determine both vision, mission and
objectives of a business enterprise.
P1 Apply appropriate framework of macroenvironment of an organisation
Macroenvironment is a broader term in an economy that comprises of several factors
such as level of employment, GDP, innovation, aggregate demand and supply, national income
and may more (Anwar and Hasnu, 2016). This aspect aid determines the level of resources and
consist of external aspects that have impact on business and also provide future growth
opportunities to a business. PESTEL analysis is a major determinant of macroenvironment that
help to scan both internal and external factors of a business and help firm to take an appropriate
decision to deal with such factors. Tesco is one of the renowned brands in UK that deal with
wide range of good or services such as groceries, clothing, electronics, and various home
accessories. The focus of firm is to expand its operation in different parts of country by
providing quality products at a reasonable cost. The strategic management plan of Tesco is given
below:
Vision: The vision of Tesco is to be the most valued business in the world by serving
their clients and customers in an efficient manner. Also, it has best and committed employees
who work hard to achieve a desired level of output. The employees are highly trained and
competent in nature that would help in accomplishment of task within a limited period of time
and also help to gain competitive advantage at a global level.
Mission: The mission is to provide excellent quality of merchandise and create product
differentiation to gain maximum customer satisfaction. The respective firm aims to provide
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greater value to customers by ensuring quality specification and thus achieve a competitive
position across the globe.
Objectives: The goal of respective firm is to deliver and efficient services to their clients
to gain maximum customer satisfaction at a global level.
Macro environments play an important role in an economy as help to assess the
availability of resources and funds to achieve sustainability and significant position and also
provide future opportunities for business to grow. With reference to Tesco, the six elements of
PESTEL analysis are presented below:
Political Factor: This aspect constituent of several factors such as taxation policies,
labour law, trade restrictions, government policies and so on. UK is considered as the powerful
political stability in the world and it has multi-party system that comprises of two parties namely,
labour, and conservative party (Çitilci and Akbalık, 2020). The exit of Britain from European
Union, namely Brexit has affected the political conditions of the country in a negative manner.
This result an increase in VAT from 17.5% to 20%. Doe to this, the manager of Tesco has
increased the prices of goods and services and thus decline the overall profit margin of a firm.
Also, the manager follows the same policies and procedures that simplify the working procedure
of a company due to the reason that UK has constant ruling party since a long time. The political
aspect would influence the company like Tesco as there is great political stability and less
interference of government which assist the company to facilitate smooth operation and does not
make changes quickly in its policies and procedure within the confines of retailing industry. As
there is less restriction that assist the firm in facilitating business at international level and ensure
greater productivity.
Economical factor: This aspect related to market demand and supply, employment,
GDP, per capita income and so on. UK is considered as the fifth largest economy in the world in
terms of GDP and Foreign Direct Investment (FDI) is a major source of attraction towards
investment from different countries and thus provide enormous growth opportunities in future
(Hill, 2017). The vote for Brexit has created lot of uncertainties and unimaginable chaos in an
adverse manner that affect the economic conditions of the country. The manager of Tesco has
risen the prices of merchandise or services which in turn affects the purchasing power of
consumers and minimise the profit margin. In addition to this, it hampers the growth
opportunities and minimise the productivity and efficiency of a company. Due to Covid, this
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impact the overall operations of business as there is less supply of products due to the reason that
its manufacturing activities stop which in turn decline the performance and reduce the sales of a
company.
Social factor: This element includes such factors in which society is interlinking to a
business such as moral values, emerging lifestyle, safety emphasises and change in taste and
preferences of customers. The population in UK are diverse in culture and their lifestyle is highly
standardised constituted with world class education. Due to globalisation, the senior manager of
Tesco adapts changes quickly as it recruits most potential candidates who come up with new and
innovative ideas that help in promoting the growth of an organisation in an efficient manner.
Moreover, the concerned firm provide innovation in its good or services so as to gain maximum
customer satisfaction by emphasising on quality specifications.
Technological Factor: This element consists of factors such as innovation, level of
awareness, research and development and so on. UK is regarded as the most advanced
technological country in the world. In a modern era of digitalisation, the manager of Tesco
provides goods and services through introduction of online facilities and online payments that
provide greater ease of convenience among the large group of individuals across the globe
(Johnson, 2016). This focus on delivering fast and efficient services to their clients and thus gain
competitive position. This boost the sale of a firm and improve the profitability and productivity.
In an era of digital economy, the respective firm is creating more awareness on online shopping
as it has strong presence of brand across the globe and also it saves time of customers which
boost the efficiency in a marketplace. Also, it is one of the renowned brand that provide excellent
offerings that built trust over the customers.
Environmental factor: This aspect includes such elements such as environmental policies,
climate and weather conditions and pressure from NGO’s and so on. By looking awareness
towards an environment, government has implemented various policies towards this aspect so as
to save environment. In relation to this, the manager of Tesco emphasises on use of paper bags
and also committed to use renewable source of energy such as solar energy, wind panel and so
on to generate electricity. Furthermore, the respective firm also focus on minimising the carbon
footprint by 50% so as to achieve sustainable development in a long run. Also, it has adopted the
strategy of 3R’s that is reduce, reuse, and recycle in order to provide protection towards
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environment. All such measures aid the firm to gain positive reputation across the globe and thus
generate more revenue and thus improve the overall performance of a company.
Legal Factor: This aspect constitutes various elements such as antitrust laws,
discrimination laws, copyright, and patent laws and many more. It is mandatory for firms in UK
to abide all rules and regulations of legislations to facilitate smooth operation of a business
(Kharub, M. and Sharma, R., 2017). The manager of Tesco is strictly ensuring quality and
standardised products in accordance with Food Retailing and Commission (FRC) to gain
maximum customer satisfaction from different parts of the country. Also, it follows the proper
code of conduct and abide all policies and procedure of country that simplify the working
procedure and conduct business in a fair and efficient manner that facilitate the future growth of
a business.
P2 Determine the internal environment and capabilities of an organisation
The internal capabilities aid in assessing the availability of resources and also determine
positive and negative aspects of a business so that an effective decision can be taken by the
manger (Lai, Melloni and Stacchezzini, 2016). Also, the company make appropriate use of funds
in an efficient manner that help in accomplishment of task in a short span of time. The senior
manager of Tesco hires the best employees and assign them work that matches their skills and
talent so that they could work with greater zeal and thus achieve an effective result.
In this relation, the SWOT analysis is done to determine both positive and negative aspects
of a business by identifying several threats and grabbing opportunities. In addition to this, it is a
technique that help firm to look towards its weaknesses and threats to gain competitive position
across the globe and also it ensures greater success and thus gain productivity and efficiency.
With reference to Tesco, the same is given beneath:
Strength
 Large market share: Tesco is one of the renowned brands in UK and it has captured
large market share of approximately 27% in Britain.
 Diversification: The concerned firm has expanded its operations in different parts of
the country in almost 14 countries such as Germany, France, Denmark, Australia and
so on and it has more than 6800 stores at a global level.
 Advancement of Technology: Tesco use new and innovative technology in their
workplace such as RFID barcode system that automatically count the number of
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products as well as it provide the facility of M-commerce to provide a greater ease of
convenience to their clients.
 Leading grocery store: Tesco is one leading retiling company in Britain that provide
varieties of goods or services of excellent quality at a reasonable cost.
Weakness
 Decrease in profit margin: This is due to the reason that the concerned firm
emphasises on low cost strategy that reduce the overall profit margin of a firm.
 Fraud in accounting: The manager of Tesco declares wrong and misleading
information of accounting that lead to high fines and penalties.
 Poor performance in specific markets: Another weakness that is being faced by the
company is that the performance of some Tesco outlets in specific market is very
low that affect the overall performance of company.
 Inability to meet excessive order: Due to online shopping there is greater chances of
excessive demand of several product which posses a greatest weakness for the firm
as it is not being able to cater the demand.
Opportunities
 Collaboration: This is one of the greatest opportunities as joint venture with local
companies could improve the overall operation of firm like Tesco. This boost sales
and increase the profit margin of company.
 Online shopping: In a digital economy, there is introduction of online platforms that
provide vast opportunities for growth in future and also it focuses to deliver fast and
efficient services in order to generate more customers.
 Strategic alliances: This is the greatest opportunity to firm like Tesco as combining
with reputed brands help to develop more products and generate more ideas that
provide future growth of a firm.
 Emerging modes of market: Tesco has expanded its operations in different parts of
countries such as turkey and South Korea that provide a profitable opportunity for
the business enterprise.
Threats
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 Impact of Brexit: The vote for Brexit has affected the business in a negative manner and
lead to vulnerable consequences that possess a big threat for a renowned brand like
Tesco.
 Increasing competition: There are giant number of players of Tesco like Sainsbury,
ALDI, Amazon which possess the threat of occupying the established market position for
a company.
 Fall in growth of economy: This provide disadvantage to the company as due to
excessive government rules and regulation which affect the internal operations and thus
lead to delay in decision making.
McKinsey 7S model
This model comprises of several factors such as structure, skills, shared values, strategy
and many more that aids the firm to monitor and control the activities of operations of business
and meet with unexpected changes of a company (Li and et.al., 2016). Each element is related to
each other and changes made in any one area would make the changes in other areas of business.
In the context of Tesco, the following elements of this model is presented below:
Strategy: The manger of Tesco through proper planning and coordination prepare an
appropriate strategy so as to achieve most competitive position across the globe. Also, it
organises the work through proper assignment of work so as to avoid duplication of activities.
The strategy adopted by the respective firm is market penetration which increase the large base
of customers and generates maximum satisfaction.
Structure: The senior manager follows proper hierarchy in an organisation as it divides
the work among their subordinates in according to their specialised skills so that they could work
with efficiency.
System: In a concerned firm, the manager follows proper authentication of work and
systematic procedure that improve the overall efficiency of business and facilitate smooth flow
of activities. The manager of Tesco follow a proper hierarchy system which facilitate proper
coordination and cooperation in a workplace.
Skills: This is very essential as proper training and learning are provided to their staff in
Tesco as it inculcates confidence in them and make them capable of handling sophisticated
machines. By providing proper training, they would accept challenges and additional
responsibilities that bring desired level of output.
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Staff: Tesco is popular multinational grocery store with an around 4,50,000 employees
that emphasises on rendering specialised training to them so as to accomplish task in a respective
time period. The manager of Tesco follow the proper recruitment and selection procedure so that
they hire potential candidates for their firm.
Style: The style adopted by concerned firm is democratic style in which it considers the
ideas and suggestions of employees so that they feel motivated and inspired and work with
greater efficiency to produce desired results. The adoption of democratic style would assist the
firm like Tesco to generate maximum job satisfaction and employee retention for a long period
of time.
Shared values: In this aspect, the senior manager provide proper guidance and norms
about the culture of company among its personnel which is considered as the foundation of every
business entity. Also, this simplify the working procedure of internal affairs of company and lead
to proper functioning of overall operations in an efficient manner. The manager of Tesco conduct
induction programs so that they could make new employees familiar with policies and
procedures, rules and regulation so as to avoid any sort of confusion among them.
Therefore, this model would assist the firm in gaining large exposure as their staff
is more competent and superior who provide growth of a firm with innovative ideas and also the
proper and systematic working would help in accomplishment of business objectives.
P3 Evaluate Porter’s model to a market sector
In today’s era, retailing industry is considered as the most competitive sector which
provide a remarkable edge over the other. Tesco is renowned brand in UK that deal with variety
of goods or services of best quality to gain maximum customer satisfaction. Porter five force is
management tool that provide the framework to gain competitive position across the globe. In
other words, it also aids the firm to determine the level of attractiveness and profitability by
assessing the positive and negative aspects of a firm (Lin and et.al., 2019). With reference to
Tesco, the five models of Porter are presented as follows:
Bargaining power of customers: The magnitude of this factor within the confine of
retailing industry is regarded as low. In an era of globalisation, buyer put more emphasises on
quality and they are less sensitive to the prices in the market. Although, the competitors of Tesco
are several but in this regard the manager of concerned firm create innovative products and thus
create product differentiation across the globe. Also, it provides merchandise at a reasonable cost
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which help the firm to gain competitive position at a global level. Moreover, introduction of
online shopping and fast delivery of services could aid in serving the millions of customers
especially their target audience in an effective and efficient manner.
Threat of new entrants: The magnitude of this factor is regarded to be low due to the
reason that it has enormous amount of capital that possess difficult for new entrants to gain
access of market (Moreno-Izquierdo and et.al., 2016). In addition to this, Tesco enjoy great
economy of scale that focus on product differentiation and also it has capture large market share
at an international level. In this regard, the concerned firm could emphasise more on innovation
and should develop marketing campaigns in order to built strong brand image across the globe.
This help to retain existing customers and discover new clients from different regions that boost
the sale of firm.
Bargaining power of Suppliers: The power of this force is acknowledged to be low in
the market. With regard to Tesco, there are giant number of vendors present in the market, so
they have less control on the prices of goods or services as they provide similar standardised
products so switching cost is less for suppliers (Zhao and et.al., 2016). This provide a greatest
opportunity to the manager of Tesco to acquire raw materials in bulk quantity at a reasonable
cost that decease the overall cost of production and thus increase the profit margin of business
enterprise. This gave cost advantage and also provide vast future opportunities.
Threat of substitutes: The extent of this force in retailing industry is considered to be
low. In regard to Tesco, there are several alternatives present in the market, but they provide
products at high cost. The manager of Tesco provides standardised and high-quality products at a
reasonable cost, so the switching cost tends to be low. Through market research and
development, the respective firm render products of best quality that help the firm to achieve
competitive position at a global level. This increase the sale of products within the retailing
industry and also it improves the overall efficiency and productivity of corporations.
Competition among existing firms: The level of this factor in regard to retailing industry
is usually low. There are giant number of players of Tesco such as ALDI, Lidl, Sainsbury,
Amazon and so on that provide similar products with same attributes but at the same time they
incur high cost (Nurmi and Niemelä, 2018). So, the offerings produced by the manager of Tesco
deal with new and innovative products that win the hearts of customers and gain maximum
customer satisfaction. This provide sustainability and long-term growth of a firm and thus
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generate more revenue and profitability within the confines of retailing industry. Also, the
respective firm could invest more on research and development so as to understand taste and
preferences as well as market demand of goods or services.
Tesco needs to focus on product differentiation and develop new and innovative products
and emphasise on providing merchandise or services at a low cost so as to gain competitive
position across the globe. The respective firm emphasis on providing excellent quality of goods
or services at a reasonable cost and also render fast and efficient services to their customers that
boost the sale and thus accelerate the profitability within the confines of retailing industry. In this
regard, quality is considered as most crucial aspect for every buyer, so the concerned firm meet
this expectation and create value to the large group of individuals across the globe.
P4 Discuss strategic management plan with the help of various theories and models
There are various theories and models that are adopted by top management as it takes a
most appropriate decision to achieve the efficiency of business enterprises. Porter generic
strategy is done to ascertain the competitiveness at a global level and provide future
opportunities that help in expansion, diversification, and modernisation of a firm (Linder and
Williander, 2017). In the context of Tesco, the several elements of Porter generic strategies are
given below:
Cost leadership: this strategy emphasises the firm to keep the minimum possible cost of
their merchandise or services to gain significant position across the globe. The manager of Tesco
could emphasise on selling the products at a reasonable cost by purchasing raw materials in bulk
quantity that minimise the overall cost of production in order to increase the market share. This
improve the productivity and profitability of business enterprise and thus increase the
effectiveness and efficiency of organisation through proper usage of resources.
Differentiation: This strategy could majorly emphasise on creating product
differentiation so as to gain competitive advantage within the retailing industry (Oldman and
Tomkins, 2018). The manager of Tesco innovates new products in such a manner with its
attractive packaging in terms of durability and functionality that build strong brand image at a
global level. In addition to this, the concerned firm invest huge sum of money on research and
development and focus on more advertising campaigns so as to gain large access of customers
from different parts of the country. Also, it emphasises on providing high quality products or
services that accelerates the sale and boost the profit.
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Focus strategy: This strategy is combination of both differentiation and cost leadership
that emphasise on providing best and efficient quality of goods and services among their clients
at a reasonable cost so as to gain maximum customer satisfaction (Sarsby, 2016). The firm
produce merchandise in a new and innovative manner by understanding the needs and wants of
customers in a dynamic environment.
It has been observed that focus strategy is considered as an appropriate strategy for Tesco
which emphasise on providing standardised products by adopting low cost strategy so as to gain
significant and competitive position. This enhance the profitability of business enterprise within
the confines of retailing industry.
Strategic Management Plan
It is described as the process of defining the long-term vision, mission, and objectives of
firm for fulfilment of task in a respective time period (Soltanizadeh and et.al., 2016). With
reference to Tesco, the strategic management plan is described below:
Products and services offered: Being one of renowned brand in UK, Tesco provide wide
variety of goods and services such as furniture, groceries, toys, clothing, and other household
essentials.
Vision: The Vision of respective firm is to be the most valued business and serve their
customers in an efficient manner. Also, employees are highly committed who word hard to reach
the target in a proper time period.
Mission: The mission of Tesco is to deliver best services to their clients by providing
standardised products at a low cost in order to boost the sales and profitability of corporation.
Strategy: Tesco would adopt focus strategy by creating product differentiation and
provide offerings at a low cost so as to gain large access of customers across the globe.
SMART objectives: he manager of concerned firm use SMART objectives that are prescribed
below:
 To increase the sale by 10% within six months which thus improves the profitability of
corporation.
 To provide training to their staff for two months so as to make them capable of handling
irrespective changes takes place in an organisation.
 To improve communication skills within three months in order to avoid conflicts and
misunderstandings among them.
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