Tesco PLC Business Strategies: A Strategic Management Plan

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BUSINESS STRATEGY
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Table of Contents
LIST OF FIGURES..............................................................................................3
INTRODUCTION................................................................................................4
LO1...................................................................................................................5
P1 Analyze the influence on the impact of the macro environment on an organization5
M1 Analyzing the macro environment for determining and informing strategic
management decisions.....................................................................................7
LO2...................................................................................................................9
P2 Analyzing internal environment and the capabilities of the organization...............9
M2 Interpretation of the internal environment and capabilities of Tesco..................14
LO3.................................................................................................................15
P3 Evaluating the competitive forces and apply porter five forces model................15
M3 Devising appropriate strategies to improve the market position in a competitive
edge.............................................................................................................18
LO4.................................................................................................................20
P4 & M4 Applying a range of theories, models, concepts, interpret and devise
strategic planning and produce a strategic management plan...............................20
CONCLUSION.................................................................................................23
REFERENCES.................................................................................................24
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LIST OF FIGURES
Figure 1 Pestel Analysis.......................................................................................6
Figure 2 Phases of strategic management..............................................................7
Figure 3 SWOT analysis of Tesco.........................................................................9
Figure 4 MCKINSEY’S 7S MODEL......................................................................10
Figure 5 Organizational structure of Tesco............................................................11
Figure 6 VRIO framework...................................................................................12
Figure 8 Porter's five forces model.......................................................................15
Figure 7 Ansoff Matrix........................................................................................16
Figure 9 Porter's generic strategies.....................................................................18
Figure 10 Bowman Extended Model....................................................................19
Figure 11 BCG Matrix........................................................................................22
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INTRODUCTION
This report carries the business strategies tools in context to the Tesco Company with
the impacts of the internal and external environment. Tesco plc is a British multination
company which deals in groceries and general merchandise retailer. It was founded by
Jack Cohen in 1919 and its headquarters is in Welwyn garden city, Hertfordshire
England UK. It is the public limited company which serves products in supermarket,
superstore, hypermarket and convenience shops (Thompson and McLarney, 2017).
This will include the devise strategic plan for Tesco plc based on the environmental
analysis.
This report carries the influence and impact of the macro environment on the Tesco by
access towards the internal environment and the capabilities of the company. This
report will analyze the internal environment strengths and weakness along with the
Pestel analysis for examines the impact of external factors including the strategic
management decisions, objectives and tactical actions. The report will also carry the
porter five forces model for evaluating the competitive forces for the company Tesco plc
and will devise the appropriate strategies to improve its market position and competitive
edge. At last the report will emphasis on the theories, concepts and models for
understand and interpret the strategic directions to the Tesco Plc.
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LO1
P1 Analyze the influence on the impact of the macro environment on an
organization
Macro environment
The macro environment is the external environment which survives in the economy as a
whole instead of a particular region or sector (Chang, 2016). It contains trends in
inflation, gross domestic product, spending, employment and fiscal and monetary policy
(Van Wormer and Besthorn, 2017).
Mission
Tesco mission is to create value for the customers to earn their loyalty for a long time.
The mission statement is very important for Tesco as it provides the goal of the
company to strive towards it for reach and make sure the customers to give best
available services from the company and its staff (Jenkins and Williamson, 2015).
Vision
The vision of Tesco is an ambitious views that where the company wants to be
positioned. It offers a standard that what business expects to achieve. Tesco has built
around colleagues and customers and its vision guides the direction of the tactical
decisions it creates for the organization (Jenkins and Williamson, 2015).
Objectives
 Its main objective is to increase the sales which results in increasing the profits
 It aims to make the shopping cheaper for the average household
 Its aims to introduce more healthy eating products (Chang, 2016)
 It also aims to develop a large online shopping site to provide their services
online (Jenkins and Williamson, 2015)
 It aims to provide jobs in their local community
Impact of the macro environment
The organization gets impacted by the economy, cultural forces, suppliers, competitors,
social factors, customers, technology, legal structures, political structures, distributors
and dealers etc. (Jenkins and Williamson, 2015)
The company Tesco plc gets impacted by the macro external factors and will be
analysed by Pestel analysis:
Political factors
The company claims that it has no political affiliations and they do not support any party
which is connected with political. Tesco has supposed to impact the government for
expansion permission and reduction in taxation (Van Wormer and Besthorn, 2017). The
government gets supported by the Tesco financially and in other political activities to get
in return.
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Figure 1 Pestel Analysis
(Source Van Wormer and Besthorn, 2017)
Economic factors
Tesco reported 10% undergrowth because of the financial crisis. It gets affected by
economic factors of unemployment, fall in income and overall shrinking economy in
spending less on food, books, clothing and other things (Van Wormer and Besthorn,
2017).
Social factors
The company gets affected by social changes in public habits and culture. For better
achievement of lifestyle, people are changing themselves according to the trend (Van
Wormer and Besthorn, 2017). Tesco products should have to be developed by keeping
the social changes in mind to take over society.
Technological factors
Tesco has developed its online site which has increased its revenue by 10%. The
technology factors affect the company due to change in technology and trend the
company advanced and modernized scanners and bar codes to guard the store.
Environmental factors
The company is in collaboration with the global action plan trained which provides
employment to young candidates in order to support environmentally friendly behaviour.
The company gets affected by environmental factors like changes in climate, weather
etc. affect the products (Zinovieva, 2016).
Legal factors
The company gets permission by law to provide legal services to their customers and
the business (Zinovieva, 2016). Tesco uses the rights given by the law to prevent
competition from entering the market area. Legal factors affect the company like laws
related to discrimination, consumer protection, health and safety etc.
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M1 Analyzing the macro environment for determining and informing strategic
management decisions
Strategic management:
It is a set of management actions and decisions which defines the continue
performance of the company. It has included both of the internal and external
environmental scanning, strategic formulation, evaluation and strategic implementation
(David and David, 2016). The strategic management laid emphasis on monitoring and
evaluating the external opportunities and threats also enlightening the strengths and
weaknesses (Arshed, 2016).
Figure 2 Phases of strategic management
(Source David and David, 2016)
Macro-environmental factors which affect the strategic management decisions:
Political factors
The political factors affect Tesco in the establishment of the strategic plan and
management decisions. The government taxes, policies and regulations affect the
formulation of the strategy. The company has to keep the regulations and policies in
mind before implementing the strategy (David and David, 2016).
Economic factors
The economic factors like unemployment, growth rate, inflation etc. affect the Tesco in
the establishment of the management plan. The macro factors impact the controlling of
the strategies of the company. These factors have to be observed before the
implementation and evaluation of the strategic management plan.
Social factors
The social factors affect the establishment of the plan as they get affected by the
change in public habits and culture. The management plans are set to be decided after
evaluating the needs and wants of society and the customers. Before implementing
strategic management plan Tesco has to observe the social and the trends.
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Technological factors
The technological factors that impact the strategic management plan are the change in
technology and the trends that are prevailing in the market. Due to that change, the
company has to establish any marketing plan after analyzing the market trends and
technological changes (David and David, 2016).
Environmental factors
The environmental factors affect the establishment of the strategic management plan
and the management decision. The factor includes the change in the behaviour of the
customers, change in climate and weather which affect the strategic management plan
because these factors affect naturally.
Legal factors
The legal factor includes consumer protection, health and safety and related to
discrimination etc. can affect the strategic management decision (David and David,
2016). The factors need to be the focus before implementing the strategic plans as well
as before establishing the strategic intent.
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LO2
P2 Analyzing internal environment and the capabilities of the organization
Internal environment
The internal environment includes the elements in the organizations such as the
management, employees and business culture which define worker behaviour (Arshed,
2016). Tesco mission statement describes the organization’s stand and exists also
includes the differences from the other types of organization (Kourdi, 2015).
Strategic capabilities
The internal and external analysis of Tesco is considered by its competitive advantage,
the competence of resources (Jenkins and Williamson, 2015). For Tesco, the
organization should be able to get means of organizing of the stakeholders as the main
concern and considerate the stakeholders' views and adding in the stakeholders'
viewpoints to the future plans of the business.
Components of strategic capabilities
The important components of strategic capabilities for success and failure of Tesco are
organizational structure, assets, stakeholders, human resource and competitors
(Echchakoui, 2018).
SWOT Analysis for Tesco
Figure 3 SWOT analysis of Tesco
(Source)
Strengths
 The company have a leading market share of 28.1%
 The company serves varieties of products and choices to customers
 Tesco follows the successful strategy of diversification in the range of popular
clothing and mobile phones
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Weaknesses
 The company having weakness of misleading of profits and investigation
problems
 The weak share price in 2017
 Increase in market share up to 32% and the market share of Tesco was at 28.1%
Opportunity
 Tesco have the opportunity to grow in the market as the company has
announced the introduction of jacks as low price rival
 It has increased the premium range of products
 It has an opportunity to grow business online
 The company has an opportunity to expand into the growing market
Threat
 The value of the pound is falling down which results in an increase in price for
Tesco
 The threat for the company is that increase in market share from low price rivals
such as Aldi and Lidl
MCKINSEY’S 7S MODEL
The MCKINSEY'S Model will lead to knowing the overall effectiveness of Tesco by
internal analysis (Ravanfar, 2015).
Figure 4 MCKINSEY’S 7S MODEL
(Source Ravanfar, 2015)
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Strategy
In accordance to the message for marketing communication "Every Little Helps", Tesco
pursues a business plan of cost leadership. Due to wide misuse of the economies of
scale the strategy of a chain of supermarkets has been sustained (Ravanfar, 2015).
Tesco strategy is to deal with the issues related to reducing the capital expenditure and
replacement of pension benefit for the employees is the main aim for reduction.
Structure
The structure that Tesco follows is hierarchical and contains various coatings of
management from the CEO to the assistant store manager. There are 15 members in
the executive committee and 10 members within the board of directors and the CEO
eliminated the roles to simplify the structure of the organization (Ravanfar, 2015).
Figure 5 Organizational structure of Tesco
(Source Ravanfar, 2015)
Style
Tesco adopted the leadership style to guide and motivate the employees for the
attainment of the estimated objectives and represents the top management as well as
the overall operating style of the organization (Ravanfar, 2015). It also involves how
they work and interact with each other.
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System
For sustaining the operations the supermarket relies on the wide range of the systems.
In order to get back on the path, the CEO has announced plans to simplify
organizational systems (Ravanfar, 2015). The performance appraisal system only has 6
key performance actions, so that the overall procedure can easily get simplified.
Staff
Tesco has human resources and their competencies which concerns the organizational
existing employees and the entry of new employees required by the organization. It
includes recruitment, selection, training and development and motivation (Ravanfar,
2015).
Skills
Tesco believes in the distinctive competencies within the organization. It concerns with
the skills of brand awareness and strategic alliances and activities of the employees
they are doing for the organization (Ravanfar, 2015). Tesco motivates employees to
work hard and perform well and also helps in the growth and development of the
employees.
Shared values
Tesco set the norms and standards which guides the employee behaviour and the
company’s action. It always shares values and guiding principles that unite the whole
industry in one direction (Ravanfar, 2015).
VRIO FRAMEWORK
The VRIO framework is followed by Tesco for conducting an analysis of resource to
build maintainable competitive advantage above its rivals in the business (Echchakoui,
2018).
Figure 6 VRIO framework
(Source Echchakoui, 2018)
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