Strategic Management Plan for Tesco: A PESTLE and VRIO Analysis

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Strategic Management Plan
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Contents
Introduction......................................................................................................................................3
LO1..................................................................................................................................................4
P1Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies...............................................................4
M1 Critically analyze the macro environment to determine and inform strategic management
decisions.......................................................................................................................................7
LO2..................................................................................................................................................8
P2.Analyze the internal environment and capabilities of a given organization using appropriate
frameworks...................................................................................................................................8
M2. Critically evaluate the internal environment to assess strengths weaknesses of an
organization’s internal capabilities, structure and skill set........................................................10
LO3................................................................................................................................................12
P3. Applying Porter’s Five Forces Model evaluate the competitive forces of a given market
sector for an organization...........................................................................................................12
M3. Devise appropriate strategies to improve competitive edge and market position based on
the outcomes..............................................................................................................................14
LO4................................................................................................................................................15
P4 Applying a range of theories, concepts, and models, interpret and devise strategic planning
for a given organization.............................................................................................................15
M4 Produce a strategic management plan that has tangible and tactical strategic priorities and
objectives...................................................................................................................................17
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D1. Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions..............18
Conclusion.....................................................................................................................................19
References......................................................................................................................................20
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Introduction
For the successful operations of the business, it is imperative that the business formulate the
effective working plan by giving priority to the objectives that are important for achieving the
goals of the business. By formulating effective and efficient strategies it assists the business to
achieve the desired goals. For the successfully implement the strategies of the business it is
important that the business must include each and every point while successfully implement the
strategies for successfully compete with the competitors and achieve good performance level. In
this report, Tesco is taken for assessing the business strategies for the whole assignment. Tesco
is the British Multinational groceries and general retailer which globally expand its business. In
this assignment, it includes the impacts of the macro environment on the Business by critically
evaluate the strengths and weaknesses and the internal capabilities of the organization. With the
help of the Porters five forces model and also evaluate the ways for improving the competitive
edge. This assignment also includes the different range of theories and concepts for interpreting
the strategic planning for the businesses.
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LO1
P1Applying appropriate frameworks analyze the impact and influence of the macro
environment on a given organization and its strategies.
As a Corporate Strategy Manager of the Tesco, it is important to formulate the imperative
strategies for the successful, running of the business operations. As Tesco is dealing in operating
the groceries store at international level. For business expansion and progress, it is important that
the business must assess the impact of the macro environment.
The framework used by the Tesco for accomplishing the targeted goals is PESTLE. It is an
analyzing tool which helps in analyzing the macro environmental factors. PESTLE stands for
Political, Environmental, Social, Technological, Legal, and Economic.
Political
The political factors can play an important role in identifying the factors which can make major
impacts and can affect the long-term profitability of Tesco. The political factors are:
 Risk of invasion of the military.
 Protection of property which is intellectual.
 Corruption level of the country.
 Retail related laws of anti-trust.
Environmental
The environmental factors which may make an impact in the Tesco are as follows.
 Environmental pollution related to law regulations.
 Change in the climate.
 Pollution of Water and Air in the retail industry’s regulations.
 Renewable energy consumption.
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Social
The culture of the society and different ways of doing the work impact the culture at Tesco
enormously. The social factors are as follows:
 Population’s level of demographics and skills.
 The society’s structural power and structural class.
 Level of education.
 The attitude of people towards the environment and health.
Technological
Technological facilities are growing day-by-day in countries and it is important to understand the
impacts it can make on the company. The technological factors are as follows:
 Growing competition in the development of technology by competitors.
 Impact of technology on the offering of products.
 The diffusion rate of technology.
Legal
Different countries have a different legal framework in the country for industries and it can make
an impact on Tesco in many ways. The Legal factors are:
 Employment law.
 Law for safety and health.
 E-commerce and protection of the consumer.
Economic
The economic factor is the most important factor in which Tesco should make a strategy. The
economic factors are:
 Economy system is different in different countries.
 Financial market’s efficiency.
 Level of education in the economy.
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 The growth rate of the economy.
 Currency stability in the country.
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M1 Critically analyze the macro environment to determine and inform strategic
management decisions.
It is very important for any organization to determine the macro environment and take strategic
management decisions on the basis of the macro environment. Strategic decisions are the
decisions taken for the long-term in which planning of future is concerned. It is taken by
focusing on the vision and mission of the organization. The macro environment analysis of
Tesco is done through a tool known as PESTLE. According to PESTLE, Tesco there are factors
which may affect the growth of the company. The factors analyzed by the PESTLE tool are
Political, economic, environmental, social, technological, and legal. These factors help in
organizing the strategies for the company’s development and take strategic decisions for the
management of the company. For countering the political factors which may affect the Tesco, the
company should work according to the legislation of the country the company working in. The
economic factor of the company which may arise can be overcome by taking pre analyzing that
which country is suitable for the works of the company as different countries have different
economic systems. The effects of technological factors can be overcome by putting more focus
on the company in the development of technologies in the company as it will make Tesco stay a
step ahead in the competition. Social factors can be avoided by organizing public events which
will help in identifying the culture and education level of the area. The company should work
and follow all the laws of the country and should also promote it in the workplace of the
company to avoid legal problems. The products or services provided by the company to the
customers should be manufactured by keeping in mind the environmental status of the country.
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LO2
P2.Analyze the internal environment and capabilities of a given organization using
appropriate frameworks.
For better growth of a company, the internal environment plays an important role. Tesco uses the
VRIO framework for analyzing the internal environmental factors which may make a major
impact on the company and its growth. The VRIO framework is a framework which critically
evaluates the importance of relative resources to the firm. VRIO stands for Value of the founded
or present resources in the company, Rareness of the present or finds resources in the company,
Imitation risks, and organizational competition in the market. It is a tool which focuses on
analyzing the resources strategically. As the role of resources is very important to the company
in gaining a sustainable advantage in the competition, Tesco has designed the VRIO framework
for its company to gain a competitive advantage. This framework works as follows:
Value of the resources
A resource is considered as valuable if it adds value allowing an organization to defend against
the threats or to exploit opportunities. The valuable resources help the organization to increase
the value of the customers which are perceived. The customer value is done by decreasing the
price or by increasing differentiation or by both. A competitive disadvantage arises when the
resources could not meet the conditions required. The value of resources should be continually
reviewed to keep the resources valuable because the internal and external conditions change
regularly and with a constant rate and if not taken care of it may lead to decrease the value of the
resources or can make it useless for the company.
The rareness of the resources
The resources which can be acquired by only a few or by only one company are considered to be
rare resources. With the presence of rare and valuable resources, a company can stay a few steps
ahead in the competition in the market. These are needed to keep classified because they are
exceptionally valuable for the company. The company parity is the result of the situation when
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more companies have similar resources or identical resources. This may lead to the same
performance of the companies and will not be able to achieve superiority in the market.
Imitation risk
The buying or substituting the resources when it becomes costly to imitate for an organization, it
is called as imitation risk. It could occur in two different ways: first, by imitating directly or
duplicating and second, by substituting the resources i.e. providing the comparable or similar
service or product. A competitive advantage can be achieved by the company by overcoming the
imitation risk but it can be very hard to imitate the resources.
Organizational competition
The resources are needed to be conferred by the company and organize it to extract the value
from those resources to gain the advantage in the company. To realize the potential of the
valuable resources the company is needed to organize its policies, structure of the organization,
management system, culture, and processes. The restructuring of the company's processes and
strategies can help the company in gaining and achieving a competitive advantage in the market.
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M2. Critically evaluate the internal environment to assess strengths weaknesses of an
organization’s internal capabilities, structure and skill set.
The internal environment is very important for the development of a company. The main role of
the analysis of the internal environment of an organization is to determine if the capabilities and
resources of the company are good enough for making a competitive advantage or not and the
strategies are managed and made according to it. Capabilities of an organization are a subset of
resources that may help the organization to take advantage of other resources that are present
within the organization fully. The internal analysis of a company helps in identifying the
strengths and weaknesses of the company, in making good decisions strategically, and to provide
the information for the development of alternative strategies for the growth of the company.
Strengths
The main strengths of the internal environment of an organization are the resources that they
possess and the capabilities that have been developed by them that can be used for the
development and exploitation of the new strategies for gaining the sustainable advantage
competitively.
Weakness
The main weaknesses of the internal environment of an organization are the capabilities and the
resources which deficient or lacking in the organization which is stopping or preventing the
organization in gaining or developing the sustainable advantage in the competition. The internal
environment of an organization helps in making a good business structure which is very helpful
in gaining a competitive advantage in the market.
Making a well-shaped structure of the business of an organization should be the topmost priority
because, without proper structure, the direction and goals of the business cannot be seen clearly
and can decrease the business productivity and growth. By the analysis of the internal
environment of the company may help to identify and the strategies can be made for the
development of the skill set of the organization which they require in the organization.
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Opportunities
The opportunity that Tesco have is to get strategically alliance with the other brands that have a
good reputation in the market. Through this Tesco can offer many new products to the customers
and can achieve their targeted goals effectively. Tesco can also get help from the local
companies of the country where the performance of Tesco is not so good. The local companies
can help to do market research through which the company can improve its performance.
Threats
Threats that might affect Tesco are economic recession and crunches in the credit. These threats
can affect Tesco by decreasing the market share and may also decrease the profitability of the
company as the customers in the working area of the company may feel threatened to buy
products from Tesco. Competition is also a threat which Tesco should consider because other
companies might provide the same product with high-quality and in a low-cost which Tesco is
providing.
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