TESCO Plc Business Strategy: Environmental Factors and Capabilities

This report provides a comprehensive analysis of TESCO Plc's business strategy, focusing on the impact of the macro environment, internal capabilities, and competitive forces. It employs PESTLE and SWOT analyses to evaluate external factors and internal strengths and weaknesses. Porter's Five Forces model is used to assess the competitive landscape of the retail sector. The report also utilizes theories and concepts, including the VRIO model, to devise strategic planning recommendations for TESCO. It examines political, economic, social, technological, environmental, and legal factors influencing the company's performance. The analysis aims to provide insights into how TESCO can enhance its market position and achieve sustainable competitive advantages. Desklib offers a variety of similar solved assignments and resources for students.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Impact and Influence of Macro Environment on TESCO Plc..........................................1
TASK 2............................................................................................................................................4
P2 The internal environment and organisation capabilities...................................................4
TASK 3............................................................................................................................................6
P3 Porter's five forces model to evaluate the competitive factors of retail sector..................6
TASK 4............................................................................................................................................8
P4 Range of theories, concept and model, interpret and devise strategic planning...............8
CONCLUSION....................................................................................................................11
REFERENCES .............................................................................................................................12

INTRODUCTION
Business strategies play a vital role in modern era to gain much more profitable
advantages at marketplace. On the other hand, management of a firm formulates scheme or
strategies that help in decision making process. With the help of effective business strategy,
company enhances their overall performance level to capture larger market share than its rivals.
Mainly, it includes clear mission, vision, goals and objectives of the company which may lead in
attaining positive outcomes (Business Strategy, 2015). In this assignment, a British multinational
retailer which has been taken is TESCO Plc. They are providing services to their consumers all
over world. Along with this, 476,000 employees are working in stores all around the globe. In
the year of 2017, they made £55,917 million as revenue. Report will also put light on impact of
macro environment on business. Away from this, internal environment and capabilities has also
been included in assignment in order to understand rivals properly. Porter's five forces model has
enclosed. Lastly, ample number of theories and concepts are going to be used in order to
formulate a strategic plan.
TASK 1
P1 Impact and Influence of Macro Environment on TESCO Plc
TESCO Plc is a private limited firm that is offering grocery products to its consumers all
over world. Profit which was made by TESCO Plc in the year of 2017 was in the amount of £54
million. Its headquarters are in Welwyn Garden City, Hertfordshire, England (United Kingdom).
They are also looking forward to expand its business by evaluating trends and taste of customers.
While enlarging the business and at the time of making strategies there is ample number of
elements which needs to be considered in much more effective way.
PESTLE Analysis of TESCO Plc:
Political Factors: This is one of the main elements that play vital role when it comes to
expanding the business. Along with this, it also influences the company performance and its
brand image. In this, various political factors and aspects are there in which company and its
operations are totally dependent (Ackermann and Audretsch, 2013). Thus, it is important for
manager to effectively measure its factors in order to manage their business activities effectively.
If country has political stability, then company can easily maintain their structure and prospectus
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in market case. On the other side, it directly impacts on overall progress of the firm at market
place. For example, recent as well as current conflicts directly impact on company activities
Economic Factors: These types of factors are also an important element for Tesco. In
this, company has chance to expand their business because UK economy has positive signs in
which customers are able to purchase company products and services. Along with this, GDP of
the nation plays a vital role which defines people’s income level (Annabi and McGann, 2013).
With the help of this, company increases their profitability level and have chances to expand
their business in other areas. Basically, this factor is related with the customer’s income level.
Due to this, company enhances their profitability level and sales as well. Along with this, for
accomplishing positive image, company modify their strategies in an effective way to attain
positive outcomes.
Social Factors: As a famous and the biggest company, Tesco serves their quality services
to its customers with high qualities. Along with this, it directly impacts on company because this
factor includes local beliefs and culture of customers. Basically, this factor is dynamic in nature
thus, firm has to provide their products and services as per customers demand. Because it is
continuously changed according to marketing trends. For attaining better results, it is important
for Tesco to deliver quality services to its customers which may lead in creating strong customer
base. For example, if Tesco uses online shopping to sell their grocery products and services, then
they easily increase their profitability level by increasing customer’s demand and base towards
the products. Along with this, customer’s opinion and taste can quickly change so that it is
important duty of company to deliver their products accordingly so that they positively respond
to social change and improve their performance level.
Technology factors: It is also important for Tesco to use new and innovative
technologies within their operational activities. Basically, technologies play an important role in
overall Supply Chain Management of the company. By this way, they easily attain competitive
advantage and also enhance their effectiveness at market place. Thus, it is highly important for
company to use innovative and advance technologies to improve their distribution services. For
example, mobile technology also helps in interacting with their customers and understanding
their needs effectively (Auzair, 2011). With the help of this, company offers its services
accordingly and attain their higher satisfaction.
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Environmental factors: As per current scenario, it is important for business organisation
to use ethical factors due to increase in globalisation. By this firm improve their performance
level by providing quality services to its customers (Azar, 2011). Along with this, image of the
company play important role in improving the living standard of the society. As per effective
nature, company easily attracts larger number of customers towards its products and services
which aids in increasing profitability level at market place.
Legal factors: Number of laws and legislation are there which affect the Tesco
performance level. So that it is important for company to effectively follow all the government
rules and laws. With the help of this they improve their productivity level by services their
products at wide market. As a famous company, number of competitors is there against Tesco so
that company have to be alert towards all kind of legal issues like coying and so on. With the
help of this, company easily improves their performance level and increase customers’ base in
the most effective manner (Bharadwaj and et.al., 2013). Furthermore, various act and legislation
such as equality act, health and safety act and many more. All these are important for company
to follow at workplace in order to maintain ethical environment. By this, Tesco enhances their
market share and compete with its customers by delivering quality products and services.
SWOT analysis of TESCO plc: It is another method to analyse the actual performance of the
company at market place. With the help of this type of evaluation, firm determines the ways to
improve their productivity level. This can be understood by following points:
Strengths Weaknesses
 Tesco has strong product portfolio in
which they sell their quality services to
its customers as per their demands.
 Tesco holds various patent license to
technologies development which is
beneficial for enhancing the overall
performance level at market place.
With the help of this company attract
customers and companies for different
projects.
 Weak presence in other countries is
also the biggest weakness of Tesco. In
this, they fail in attracting customers.
 High competition in market reduces the
company performance. By which
company reduce their customer’s base.
 Share of disputation is also negatively
impact on the overall performance of
the company.
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 Tesco provide diversifies base to their
customers due to this they does not
depend on single segment.
Opportunities Threats
 Various opportunities are there in
which company expand their business
activities in another areas. It helps in
improving the performance level of the
company.
 Tesco use effective marketing
strategies to enhance customer’s base
by delivering them quality services.
 Tesco also focus on increasing non-
food sales in which they easily enhance
their market share as compared to its
rivals.
 Increased in raw material cost also a
threat for Tesco because it reduces the
profitability level of the company at
market place.
 Continuously increase in retail stores
also negatively impact company
performance.
 Low prices in economic recession are
also a big threat (Bucolo and Matthews,
2011).
All these element helps in determining the impact on business organisation which may
lead in attaining various ways to improve their performance level. With the help of this, manager
of the company can easily take better decision.
TASK 2
P2 The internal environment and organisation capabilities
The company is more popular in market place and compete with another business. Thus,
it is important for business organisation to set workers as per its strategies to improve their
productivity level (Grover and Kohli, 2013). Along with this, it is important duty of leader to set
as well as implement entire strategies effectively in order to attain competitive advantages.
Strategic capability defines business capacity to use innovative technologies which may
leads in attaining better results and also cater number of benefits. Along with this, it also defines
utilization of business resources and technologies aid in accomplishing benefits in appropriate
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time frame. By using this, manager of the Tesco reduce the chances of arising any issues and
complexity. Basically, the main advantage of strategic capability is to employ competitive
strategies which help in increasing the values in upcoming period of time. In context of Tesco,
they are rapidly obtaining resources that are helping them in performing by effectively making
strategies (Jocovic and et.al., 2014). Furthermore, there are various factors which directly
contribute in business activities. This will aid in attaining better results and enhancing the
performance level. It includes various assets such as property, cash and many more which
directly contribute in enhancing the business activities at the time of implementing strategies.
Along with this, various factors of ability of strategic define as well as consider structure of firm,
its HR, workers skills and knowledge and so on. All these will directly contribute in enhancing
the performance level and competitiveness.
“VRIO Model: One of the most effective tool which is used to analyse and determine
variety of human resources. Along with this, it helps in identifying potential which can be further
used to attain competitive advantage in market place.
Valuable: This structure allows Tesco to explore opportunities that will add value to
resources that are being processed. It generates query to identify if resources are valuable or not.
This method also allows in giving differentiating factor to existing product and in reduction of its
prices. There is limitation that exists, which is that sometimes resources did not fulfil specific
requirements thus leading competitive disadvantage (Kalyani and Sahoo, 2011). Therefore, to
maintain value of resources, it is crucial to evaluate it on regular basis as they are changed as per
internal and external environment.
Rare: When resources are acquired by one or more companies, then it is considered as
rare. There are plenty of resources available in rare quantity that grant temporary competitive
advantage to company. However, there are times when similar resources are utilised by multiple
companies and lead to decrease in competitive edge. The reason for this may be due to utilisation
of similar resources upon similar tactics thus every company exist in same level. Thus, granting
no higher performance in terms of revenue and profits.
There still exist numerous resources which any company must not neglect even if their
prime motto is not desire position in market place. To maintain process and operation, it is
essential to utilise resources as per the abilities of Tesco because their optimum utilisation will
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result in higher productivity and efficiency (Klettner, Clarke and Boersma, 2014). If not, then it
can cause hindrance in business process and loss of position in market place.
Costly to Imitate: Under this, high cost is defined at the time of imitating resources In
this company have to manage their cost at the time of using substitute sources which will leads in
attaining better results. If company fails in managing their cost then they reduce their
performance level at market place. In this context, Tesco defines use various reasons which are
hard to copy by others:
 Some historical reasons define various resources which determines for long time frame.
These type of resources are more difficult to copy from another.
 Along with this, various resources are related with organizational culture of Tesco, due to
this company enhance their benefits.
Organised to capture value: Under this, number of resources which does not define any
benefits to the Tesco. Basically, it is important for firm to manage its process, policies, structure
of company and its system. This helps in determining the company potential value and abilities
of resources. It also help Tesco in attaining better sustainability by achieving better competitive
advantages in appropriate manner.
TASK 3
P3 Porter's five forces model to evaluate the competitive factors of retail sector
Tesco is the company which deals to provide different type of products and services to its
loyal customers. In order to enhance the performance of the organisation and determine various
factor in order to improve the performance of the company. Company implement strategies of
Porter's five forces model to determine various factors in order to attain goals and objectives of
the organisation. These strategies aids to stand before the competitor present in the marketplace.
It leads to attain the goals and objectives of the organisation. In order to compete the various
competitor in marketplace. Porter gives these strategies in order to perform various types of
function in organisation (Köseoglu and et.al., 2013). It aids to accomplish different task in
effective manner. It also helps to establishes effective environment of organisation. The
management of Tesco put their effort in order to attract large number of customer in the
marketplace. It also aids to maximise the performance of organisation in stipulated time period.
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There are various factor which are describe below plays an important role in order to accomplish
different task in effective manner. These strategies help Tesco to inculcate with the challenges
which are arises in future perspective of time. Competitive Rivalry: This factor concerned with to determine the strength of different
rivals present in the marketplace in effective manner. It also determines the various
strategies and policies by which the rivals implemented in order to attain profits in the
marketplace. Tesco implements different strategies in order to manage the various
strategies in order to attain profit and stand before the different rivals present in
marketplace. This is the kind of comparison along with intense competition in order to
attract large amount of customer ineffective manner (Murano and et.al., 2011). It leads to
enhance the growth of the business. It leads to attain goals and objectives of organisation.
Tesco determines the various factors in order to attain the target which is fixed by the
organisation. Supplier power: This factor is concerned with the power of different supplier in the
marketplace. It leads to attain the effectiveness in the performance of employee working
in the organisation. Tesco cuts the price of different products in order to increase overall
sales of the products and services at market place. By reducing the price of different
products, it leads to maximise the profit of the organisation. The supplier needs to
implement new and innovative method to supply the different products in order to attain
the various types of words in effective manner. It leads to compete the different rivals
present in the marketplace. In order to increase the rate of sales of different products and
services organisation needs to implement effective pricing strategies in order to compete
the different rivals present in the marketplace. It aids to generate large amount of revenue
of the organisation it leads to attend the goals and objectives of organisation in an
effective manner. It aids to manage the different objectives. Buyer power: There are various ways by which it can be determined along with the
prices which can be reduced by the buyers. Along with that, it is highly essential for the
company to determine the buyers (Oestreicher-Singer and Zalmanson, 2012). Apart from
this, evaluation of cost will also be done in order to determine the range of customers.
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Consumers have the main power where there are less companies. Hence, TESCO has
verity of customers for increasing of power. Threat of substitution: This kind of factor defines the availability of a products that are
purchase by customers. Due to high competition in market, substitution of Tesco product
is high because its competitors serve the same products at the cheapest cost. For example,
ASDA and Sainsbury are the major competitors of Tesco at market place in which they
offer more attractive and quality products at low cost. Therefore, it is important for
business organisation to offer attractive products at affordable cost so that customers get
attracted automatically towards its products (Schaltegger and Wagner, 2011).
 Threat of new Entry: Under this, when company enter in new market then it directly
affect its image and reputation. Basically, it requires huge capital for investment which
helps in establishing brand image at market place. With the help of this, company can
enhance their performance level as compared to its rivals.
All these factors determine competitiveness at market place. By this, they can enhance
their market share as compared to its rivals. Along with this, Tesco determines their competitors
thus, they introduce their products and services accordingly. With the help of this, they can
enhance their growth level at market place. All these porter aspects need to assess by the
management of a company so that they are going to compete at market world in an appropriate
and suitable manner. Such things will lead to contribute in framing out business strategies which
support in accomplish targets and goals in an appropriate and suitable manner. Moreover,
chances of making things appropriate and operation suitable become possible in nature with
respect to utilising Porter five force analysis. Although, suitable and feasible gain for business
could be determine only with strategic formulation of task in which each and every section
divide.
TASK 4
P4 Range of theories, concept and model, interpret and devise strategic planning
Planning is an essential factor for every business which needs to be determined by
management of a company so that appropriate and suitable plan lead to get done. Strategic plan
is a collection and gathering of values, mission and vision statement of a company which provide
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a defined direction in order to accomplish goals and target properly. With rapid change and
growth of time and technology, management need to determine the business environment and
then craft out their strategic plan as per that. This enables them to deal out various aspects
properly which supposed to maintain feasibility and sustainability of a company at keen market
area. TESCO is one of a largest retail section company which operates in various kinds of
products and services. Management have clear aims and objectives which facilitate to
accomplish their targets in an appropriate and suitable manner. This will be going to bring out
positive reflection which further enables in generating more and more revenue as well as profit.
All market related aspects required to be determined by the company in defined manner so that
better assessment and accomplishment of objectives get done which further aids in maintaining
healthy competitive environment.
There are different kinds of strategies that company adopts in order to gain maximum
profit. TESCO Plc is using Bowman's strategic Clock so as to get various choices in terms of
strategic positioning. This approach works primarily on the two dimensions i.e. price and
perceived value. It enables them in having variety of options by which they can enhance their
brand image. Below, the strategy clock is explained so that the concept behind this is cleared:
Low Price and Low Value Added (Position 1): It is considered as one of the cheapest
end of the market and is considered as least achievable method. Thus, they are not of high
quality and don’t add any value to the product. This method cannot be utilised by an organisation
in their initial years as it will not provide the organisation with competitive advancement. Instead
this method is used by most of the organisation so as to give tough fight to rival companies and
also to remain in the market for longer period of time because they don't have any other option
(Scholes, 2015). This kind of method is helpful in areas where the product is not getting much
profit. Reducing the cost of commodities may assist them in grabbing attention of customers.
Low Price (Position 2): This kind of method is helpful when an organisation wants to
sell their commodities at low price so that they can compete and remain in the market as well. It
is not an easy task, as it requires a large number of profits in order to gain maximum profits.
Here, in a particular market, leaders those are dealing in small scale can achieve big names as
compared to others. In this, small and medium sized business cannot sustain their position as
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they don't have a large number of products and if they want to remain in the market they cannot
set a high price for longer period of time.
Hybrid (Position 3): This includes various kinds of factors that compete with both price
and quality of products so that customers can differentiated between commodities. Hence, the
main purpose of this is to add value in the product by adding minimum or reasonable price which
are acceptable by the customers. Therefore, with the help of this, TESCO is able to sell excellent
products at low cost, through which they are gaining customers loyalty and market share at the
same time. Thus, the company is making proper strategies so as to grow in rapid speed.
Differentiation (Position 4): This helps a company in standing out differently from the
crowd and makes them unique in nature. They prefer to sell products which are not in common
and here branding plays a major role. TESCO is using various mediums so as to attract targeted
customers. It provides a wide perspective to consumers, and provides opportunities in choosing
the commodities according to their needs and wants. Customers will consider the product even if
the prices are high as usual.
Focused Differentiation (Position 5): Already existed companies with high market value
come under this as they have maintained their superior position in front of the customers. The
price of these commodities is higher as compared to other methods mentioned above (Slack,
2015). Therefore, in order to attain a superior position in market area, company needs a strong
team who can help them in enhancing the brand image.
Risky High Margins (Position 6): This is considered as one of the hazardous situation in
which company may feel disappointed for a long period of time. Under this, organisation sets a
high price without making modifications in the quality of products (Svee, Giannoulis and
Zdravkovic, 2011). If customers are willing to pay high amount of any product then this will
helps in increasing profitability level of the company in effective manner . Thus, it is determined
as uncompetitive strategy for short term period.
Monopoly Pricing (Position 7): Under this, the company doesn't need to concern about
the choices present in the market as it is the sole proprietor in market area. Hence, they are in
competitive advancement as they don't have alternatives present in the market area.
Loss of Market Shares (Position 8): This is the position of company within marketplace
where high chances are present for adverse situation. There are various kinds of customers who
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