Unit 32 Business Strategy: Macro Environment Factors Impact on Tesco

This report provides a comprehensive analysis of Tesco's business strategy, focusing on the impact of macro environment factors. It begins with an introduction to business strategy and its application to Tesco, a major UK-based retail company. The report then delves into the analysis of the macro environment using PESTLE analysis, examining the political, economic, social, technological, legal, and environmental factors affecting Tesco's operations. It also includes an organizational audit using SWOT analysis. Furthermore, the report assesses Tesco's internal environment and strategic capabilities, utilizing the McKinsey 7S and VRIO frameworks. It evaluates Tesco's competitive market share through Porter's Five Forces model and concludes by interpreting different strategic planning models, theories, and concepts. The report aims to provide a detailed understanding of Tesco's strategic approach to achieve its business objectives in a dynamic market.

Unit 32 - Business Strategy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P 1 Analyse the impact and influence of the various macro environment factors on the
organisation and its strategies.....................................................................................................1
LO 2 ................................................................................................................................................4
P 2 Assessment of organisational internal environment and capabilities...................................4
LO 3.................................................................................................................................................6
P 3 Evaluation of competitive market share...............................................................................6
LO 4.................................................................................................................................................8
P 4 Interpretation of different models, theories and concepts for the strategic planning............8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategy refers to the set of plan and activities that company used to attract the
customers and suppliers for the successfully completing the target, performance and achieve the
organisational goal. Business strategy provides a framework to direct the business to achieve the
target. Tesco is the large retail company of UK which operates their business across the world
and provides the various goods and services such as clothes, foods, Grocery, household items
etc. The aim of the study is to provide the detail information about the macro environment factor
which influences and affect the organisation and its strategies. It explains the organisational
capabilities and the porter five force model to evaluate the competitive forces which affect the
bushiness of tesco in global market. The study highlights the different strategies, model and
theories to interpret and evaluate the strategic planning of the organisation to achieve its goal and
objective.
LO 1
P 1 Analyse the impact and influence of the various macro environment factors on the
organisation and its strategies
Tesco is one of the largest retail company in UK which provides the various goods and services
to their customer via different media such as online websites, retail store etc. The mission of
Tesco is to provide the better and better products and services to their customer and improve
their performance to get the higher customer (Scholes, 2015). The vision is made of 5 elements
which explains the Tesco performance. The vision includes the factors : deal across the world,
provide different opportunities with growing business, innovation, creativity and ideas, use the
best strategies and skills in global market and earn the loyalty, trust and belief of the customer,
communities and colleagues.
Strategy refers to preparation of plan by using the various methods, models and theories to
achieve the goal and objective of the organisation (Sia, Soh and Weill, 2016). To prepare the
strategy for the organisation and achieve target within the proper resources' organisation use
various models and techniques such as SWOT, PESTLE, porter five force model, maturity
model, root cause analyse technique etc.
Analysis of macro environment
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The macro environment factor affect the performance of Tesco in the market. It influences the
strategic planning process of the company.
Stakeholder mapping refers to the business tool used by the Tesco to ascertain the list of the
stakeholders which are interested in the performance and project of the company. It also known
as stakeholder matrix. It helps to evaluate the interest of the stakeholders in the particular project
and prepare the plan and strategy to achieve the company target.
Environmental analysis
PESTLE analysis
Political factor : Tesco operates its business in worldwide. It expands its company to the Asia,
Hungary, Poland, Turkey, Ireland, Czech republic etc. The different political and legal
environment of various country affect the business of the company like each country has
different interest rate, political policy and strategies (Hammad, 2015). For employment
legislation government forces the retail industry to provide the employment with the range of
facilities like the lower paid salary to the higher paid salary. It influences the strategies of the
company to get the higher level of output.
Economic factor : It affects the demand, supply, cost, price and profit of the company. The high
unemployment level affect the demand of the goods and services. UK increases the borrowing
cost for the industries which increases the price and cost and reduces the profit of the Tesco. It
makes huge impact on t eh performance of the organisation and its strategy. It forces the
company to evaluate the different ways to collect the resources and finds to reduce the cost of
production.
Social factors : It refers to the changing need and perception of the customer regarding the
goods and services of Tesco. Now they shift to focus on the one store purchasing item rather than
to purchase the goods to the different shops (Barrett, 2017.). Tesco provides the best product to
their customer with safety norms and faster delivery services. It helps to prepare the strategies
regarding improving the delivery services and add the more items in the store to fulfil the
customer needs and demands.
Technological factor : Technology advancement help the Tesco to regain the customer trust by
using the RFID technology which help customer to provide the better services and store
experience. Technology also help the customer to choose the various payment method according
to their methods. The technological factor influence the organisation to change the strategy of
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collecting the payments of the customer and adapt the new payment method and provide them to
the customer such as scan and pay, mobile payment with the rewards point (Oh and et.al., 2018).
Legal factors : It refers to the change in law and regulation regarding the business. The different
law such as employment law, safety and security law, company law etc. The different regulation
bind Tesco to perform under the government framework and protect the right of the employees
and customer (PESTLE Analysis of Tesco, 2019).
Environment factor : Company has to follow the different norm regarding the environment
such as use the paper begs, work toward reducing the carbon emission etc. Government
pressurize the company to manage their activities and acknowledge their responsibilities towards
the society. It influences Tesco to prepare the strategies and plan which protect the environment
and work toward the society. It also helps them to regain the customer trust and increases the
profit of the company and achieve the target.
Organisational Audit : It helps the company to know the area of improvement and the various
strength and weaknesses of t eh company and the way to improve company performance. It can
be done by SWOT and benchmarking indicators.
SWOT analysis
Strength
 Tesco provides the numerous rewards
and benefits to the customer such as
club card, loyalty card etc.
 The strong research and development
department provide the innovative
product to the customer (Sroka, 2017).
 The leading company in grocery items
reduces the threat of new entrants.
Weakness
 The increasing competition in the retail
supermarket affect the business of the
company.
 Competition in the market force the
company to reduce the prices and
provide discount on the product and
services.
Opportunities
 The strategic alliance with the other
growing brand may help to gain the
market share and competitive
advantage.
Threat
 The increasing inflation rate become
the treat of Tesco because it reduces the
purchasing power of the customer
which affect the overall profitability.
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 Advance technology provide the
opportunity to improve the delivery
system and provide online shopping
facility.
 Government regulation force the
company to change the operational
structure which increases the additional
expenses of the company (Ravanfar,
2015).
LO 2
P 2 Assessment of organisational internal environment and capabilities
Strategic capabilities refers to the combination of all the sills, techniques and methods to gain
the competitive advantage to increase the sustainability and profit in the market with higher
market share. The strategic capabilities include the various component to gain the competitive
advantage and maintain the growth in the market. It includes the :
1. Tools for analysis
2. Strategic purpose
3. Values
4. Vision
5. Key goals
6. Action plan
McKinsey 7s framework
It helps to provide the better understanding of the company performance in the market and to get
the effective and efficient result. 7S are made up of some hard and soft elements to improve the
performance of the company. It helps the manager and owners of the company to aligned there
organisation and provide the different way to improve the performance. The 7s framework are :
Hard element
Strategy : It helps Tesco to prepare the different plans to take the competitive advantage over
the competitors. The strategies of the company help the organisation to achieve the target and
goal within the resources.
Structure : The structure of the company defines the direction of flow of information. It helps
the employees to provide a structure that who inform to whom (Channon and Caldart, 2015). The
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structure element helps to monitor and control the performance of the company and provide the
measure to improve the performance.
System : It refers to the criteria or way to perform the task and activities in the company. The
proper system of Tesco help them to get the required changes in the organisation and suggest the
company to improve the strategies and plan to get the higher result.
Soft skills
Shared values : The soft element of the 7s model are also important to improve the performance
by the proper planning and execution of strategy. Tesco shares the values and objectives to the
employees and customer to get the higher result. It helps the employees to feel valued in the
company and also align their work toward the common goal.
Style : It refers to the way of leading the team in the company. Tesco use the different leadership
style like autocratic leadership, democratic leadership etc. which help them to motivate the
employees and getting work from them. It also helps to improve the performance buy adapting
the different style in different strategy.
Staff : Evaluating the strength and weakness help Tesco to prepare the strategies according to
their plus and minus area. But is also important to get the staff performance and their abilities to
take the work according to their strengths and abilities (Grundy, 2017).
Skills : Skills are also refers to the staff abilities. It can be enhance by the training and
development program. The skills of the employees help to perform the task in better way and
increase the productivity of the company.
VRIO framework for strategic capabilities
Value : It refers to add the value or additional features in the product and services to get the
competitive advantage. Tesco hire the highly skilled employees in the company to improve the
products and services and add value to differentiate it from its competitors.
Rarity : It refers to use the resources or technique which was not available to all organisation or
difficult to reach the resources. It helps the company to differentiate its product from the
competitors and gain the competitive advantage in the market (Explaining The VRIO
Framework, 2019).
Imitability : It refers to provide the unique features to the product and services with the value
and rarity which can not be easily copy by the other company. The uniqueness of the product and
services help Tesco to create a new market.
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Organisation : The organised management system, structure and process help the company to
use the capabilities and resources to get the better product and services and earn the sustained
competitive advantage.
Cost benefit analysis
Cost-benefit analysis is the process of analysing the all intangible actions like decisions, projects
and systems and determine the values. It helps the company to identify the benefit of the
company with the cost and take the useful measures to minimize the cost and earn the higher
profit. It helps to develop the proper plan, strategies and decisions for the company to improve
the overall result.
LO 3
P 3 Evaluation of competitive market share
Porter five forces model
Basis Analysis
Threat of new entrants : Low Tesco is the largest retail company in grocery item in
UK. The business of the company is established to the
different countries. The threat of the new entrants is
low because Tesco is already a large company with the
high capital and market share. The new companies
have to require the large capital investment to enter
into the market.
Bargaining power of the customer :
moderate
The bargaining power the customer is moderate
because Tesco provided the variety of goods and
services under the single roof. It also provides some
loyalty and club card to their customer to retain the
employees in the organisation (Hengky, 2016). It helps
the company to gain the customer trust and
competitive advantages.
Bargaining power of the suppliers :
High
The bargaining power of the suppliers is high because
of the few suppliers in the market. It affects the
business of the company and increases the cost of
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production and reduces their profit. It also affects the
performance of the company in the global market.
Threat of substitute : High The threat of the substitute is high because of t eh
emerging business and innovation. The various
competitors of Tesco start to innovate the new product
and services to gain the customer and provide various
substitute with lower prices (Dawes, 2018).
Bargaining power of the competitors
High
It is high because of the increasing competition in the
market. The growth of ASDA, Sainsbury and
Morrison affect the business of the company by
providing the new and innovative product in the
market. It affects the business of Tesco and reduces
their profit margin.
The porter five forces model helps Tesco to get the impact of changes in external forces and how
they affect the functions of the company. It helps the company to find the area of improvement
and analyse the strategies and plan of the competitors in the market.
Balance scorecard
It is used in the organisation as management and strategic planning system. It helps to plan the
activity according to the defined structure on the basis of its mission and vision. Balance
scorecard is used by Tesco to communicate the plan and strategies to the employees that what the
company require from the employees. Align the daily work to employees to accomplish the work
within the strategy. It also helps to prioritize the projects and task which are more beneficial to
the company and measure and monitor their performance to get the strategic target.
Balance scorecard is used by the different department to accomplish their within the proper time
and resources. It helps to monitor and control the projects to minimize the wastage and time in
completion of important project.
Ansoff's Matrix
Market penetration strategy
 It refers to trade in the existing market
Product development strategy
 It refers to introduction of new product
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with the existing products and services.
Market penetration strategy is mainly
used when the market is already
growing and the company use the
promotional and discount strategy to
sale the product and services (Chiang,
Chen and Ho, 2016).
 The risk in the penetration strategy is
low because of the well established
market and company growth.
and services in the existing market to
increase the sales of the company.
 Product development strategy is riskier
to market penetration strategy because
of the risk associates with the new
products.
Market development strategy
 It refers to introduction of existing
product into the new market. It helps
the company to get the new customer
from the new market.
 It is riskier than the product
development strategies because new
market may be beneficial for the
existing product or may not.
 It requires heavy promotion and
marketing of product and services to
enter into new market.
Diversification strategy
 It refers to introduction of new product
into the new market. It helps to expand
the business in the other market with
the new products and services.
 It is the riskier strategy of Ansoff's
matrix because of the unfamiliar market
with the unexpected behaviour of the
customer regarding the new product
and services.
It helps Tesco to evaluate that which strategy is more beneficial for the company to expand their
business. It also helps to evaluate the risk associate with the company performance and product
development. Product development strategy is the best suitable strategy for Tesco to introduce
the new product in the existing market because it is less risky than the other strategy and it also
helps the company to introduce the new product in well established market.
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LO 4
P 4 Interpretation of different models, theories and concepts for the strategic planning
Porters generic strategies
Cost leadership strategy : The aim of the strategy is to provide the product and services at the
lowest cost from its competitors. It helps the company to increase the sale by lowering their cost.
It requires the high cooperation within the different department to lower down the cost with the
efficient profit margin.
Cost focus strategy : It refers to lower the cost of the product to the specific segment or market
to gain the competitive advantage. It helps them to gain the profit by lower cost in the particular
segment and also earn the profit by increasing the price of the product which are scare (Wicker
and et.al., 2015).
Differentiation focus : it refers to differentiate the product and services from the competitors in
few segments or market to get the benefit of differentiation. It refers to provide the product
which are highly different from their customer. It helps the company to get the advantage of
differentiation with the increased price.
Differentiation leadership : It helps to get the benefit of differentiation in the whole market and
segment. They charge the premium price of the product and services because they are scare in
the nature and less available in the market. It helps to gain the higher profit and competitive
advantage.
Hybrid strategy refers to the combination of one or more strategy to get the combine benefit
and competitive advantage like combination of cost leadership, focus differentiation strategy. It
helps to gain the benefit of increasing the sales and also provide those service which are less
available in the market. It supports to reduce the competition in the market and differentiate the
product from the competitors (Gould and Desjardins, 2015).
Diversification strategy refers to diversify the business in different market with he different
product. Company adopt the diversification strategy to expand the business in different market. It
can be done by expanding the business with adding the new products or expansing business by
entering into new market. Tesco diversify the business with the grocery items to food business. It
helps them to earn more profit with the large number of customer. They can also diversify their
business by adding new product in their product category to reduce the competition and achieve
the mission and vision of the organisation.
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Cost leadership strategy is the best strategy for the Tesco because it helps the company to
increase the sales and get the higher customer by reducing the little profit margin. Increasing
sales help to earn the higher profit in the market. It also useful for the company because it
operates its business in large scale and able to reduces the price of the products or provide
discount on the product and services. Tesco can also use the diversification strategy to expand
the business and earn the grater profit. It helps the company to enter into the market with new
products. It also less risky because of the well established business and leading company in
market.
CONCLUSION
The report summarizes the various macro environment factor which affect the business of
the organisation by the different models such as SWOT analysis, PESTLE analysis etc. It helps
the company to evaluate the strength and weaknesses. It can be concluded from the study that the
different models such as 7s model help the company to evaluate the capabilities and the
competitive advantage of the company. The different models such as porters five force model,
balance scorecard used by the company to evaluate the strategies and the way to improve the
performance in the organisation. It can also be concluded from the study that the porters generic
strategy, hybrid strategy, diversification and vertical/ horizontal integration provide a framework
to prepare the plan for the company to get the higher result.
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REFERENCES
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Sia, S.K., Soh, C. and Weill, P., 2016. How DBS Bank Pursued a Digital Business Strategy. MIS
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Online
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