Tesco's Business Strategy: Environmental Analysis & Planning

This report provides a comprehensive analysis of Tesco's business strategy, beginning with an examination of the macro environment using PESTLE analysis, covering political, economic, social, technological, legal, and environmental factors impacting Tesco's operations. It further explores the internal environment and capabilities of Tesco through SWOT and VRIO frameworks, identifying strengths, weaknesses, opportunities, threats, valuable, rare, inimitable, and organized resources. The report then evaluates the competitive forces in the retail industry using Porter's Five Forces model, assessing the rivalry among existing firms, the threat of substitute products, the threat of new entrants, the bargaining power of buyers, and the bargaining power of suppliers. Finally, it applies Porter's generic model to devise strategic planning for Tesco, considering cost leadership and differentiation strategies to achieve a competitive edge in the market.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
P1 Analysing the impact and influence of the macro environment........................................3
P2 The internal environment and capabilities........................................................................4
P3 Porter’s Five Forces model to evaluate the competitive forces........................................6
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning
for organisation.......................................................................................................................8
CONCLUSION .............................................................................................................................11
REFERENCE.................................................................................................................................13

INTRODUCTION
Business strategy is termed as the collaboration of the decisions that are taken as per to
the activities that are presented by the management to execute their managerial targets and to
secure a competitive position in the field of market. It is also termed as the backbone of the
management as it is the path that lead to the desired outcomes. The organisation consider in this
report is Tesco. It is a groceries and retail management that was created by Jack Cohen in the
year of 1919 in the United Kingdom. The management are dealing with varied term of certain
commodities from well defined area like clothing, financial services, software and many more.
The following report covers the discussion of impact and influence that the macro environment
has on the business and its business tactics. It also involves internal environment and abilities of
the business. And at last it involves porter's five forces model and theories and concept to
support the understanding and interpretation of strategic direction that are accessible to the
business that are get followed.
P1 Analysing the impact and influence of the macro environment
PESTLE analysis
PESTLE analysis is a tool that are utilised by management to maintain all external factors
that will have an impact on their function. In relation to the Tesco, PESTLE analysis are as
follows -
Political factors: In context to the selected organisation, they are operating across the
globe. As it is a multinational organisation, they should follow all the laws and regulations which
make sure that about the compliance and safety of its commodities. In order to operate in a
certain nation, they have to make sure that there is political stability (Franceschelli, Santoro and
Candelo, 2018). Due to Brexit, the new regulations could become a cause for decrease in their
sales. Along with this, another issue which create impact is due to the US China trade war where
they are battling to have a proper ground of sale as their regulations are interlinked to retail with
China of the commodities of US. The change in tax policies between their supply would affect
the income of the organisation.

Economic factors: The selected organisation has to make sure about the economy
changes which could affect their sales, revenue, profit and distribution. The organisation should
be aware about the changing policies of UK which could lead a major change in the design of the
firm. Also, they had to make sure that pricing of their commodities could affect the sales (Kadir,
2018). Due to COVID 19, the earning of individuals decreases and many loses its jobs. This
results in less spending by the consumers as well as switching towards cheap brands and its leads
to affect the operation of the organisation.
Social factors: Tesco has implemented various initiatives in regards to the social change.
Such change is the selling of Halal meat to their Muslim customers. They make sure that they are
able to provide Halal meat according to the beliefs to Muslim consumers. Along with this, they
are also selling their own label Halal meat in Thailand and Malaysia.
Technological factors: It is vital for the selected organisation to keep up with the
emerging technologies. The e-commerce site of the organisation has created a huge impact. As
people were not allowed to step out of their houses due to COVID 19 pandemic, the individual
has shifted towards online shopping and getting their product delivered at their homes.
Legal factors: In context to the selected organisation, any changes occur in government
policies could directly affect the operation and function of the firm. They need to follow local
and international laws so that they are able to continue its operations such as the Food marketing
commission that has arranged behind some rules and regulations which is required that are
followed by each and every management in the retail division (Betz, 2018). The organisation
faces an allegation regarding the age and gender biasing which creates impact on the work
culture where a legal settlement of $12 million was the result.
Environmental factors: The selected organisation has taken various initiatives for
removing and reducing all the non recycle plastic to a minimal level. This would lead to
developing a closed loop system and also reduces the amount of waste which may get collected
in the landfills. The organisation was able to change around 800 product and helps in reducing
the waste of 400 tons of plastic waste.
P2 The internal environment and capabilities
SWOT analysis
SWOT analysis is a tool which is utilised by an organisation for evaluating their
competitive position and to create strategic planning. This tool assess the internal and external

factors and also current and future potential (Sanders and Wood, 2019). In relation to the
respective management, SWOT analysis are as follows -
STRENGTH WEAKNESSES
 Tesco is an international and leading
management that have its existence in
several nations that have more than 400
outlet in the United Kingdom and
Republic of Ireland.
 They have diverse formats like Metro,
Excess and so on in order to cater
different types of consumers such as
they are converting Metro into Express
and Extra stores so that people could
buy daily essential items easily (Galpin,
2020).
 One of the fundamental weakness is
that, it failing in Japan and USA. The
management that was blocked in Japan
after dealing for 9 years in 2012.
 Tesco has also penalized with £7.5
million for merchandising expiry dates
food products in the United Kingdom.
OPPORTUNITIES THREATS
 There are some countries where Tesco
is not operating and it is a huge
opportunity for them to penetrate the
markets of nations such as Mexico,
Brazil, Turkey and so on.
 Strategic alliance with other
organisations is an opportunity for them
to attract more number of customers.
The organisation has already draw up
with style giant Next to develop
effective utilisation of extra store
attribute.
 Tesco is facing threats in its grocery
market as their competitors such as
ASDA and Sainsbury's are operating in
this market and trying to close the gaps.
 Another threat is the price war from
organisations such as Lidl and Aldi.
Such management are providing several
discounts and hence it is tough for the
business to execute with them. The
costing tactics of both the management
has developed its effects on the
profitability of the Tesco (Green,
2019).

VRIO framework
VRIO framework is a tool for analysing and protecting the resources and capabilities of
an organisation which provide them with a long term competitive edge. In context to Tesco,
VRIO framework is mentioned below:
VALUABLE RARE INMITATBLE ORGANISED
Financial
resources
YES - - -
Distribution
channel
YES YES - -
Patent
products
YES YES YES -
Management
systems
YES YES YES YES
Valuable - These are competence that helps in Tesco in achieving the chances. In context
to Tesco, their financial roots that are highly valuable as it helps the management in investing
into external chances that rise and also supports in defeat of external issues.
Rarity: It is a resource which is uncommon and does not possessed by most of the firms.
When a resource is both valuable and rare, it offers a competitive edge to the organisation. In
case of the selected organisation, the distribution channel is considered rare resource as rival
organisation would need to invest a lot to come up with a better distribution channel than that of
Tesco (Sutjipto, Sule, and Kaltum, 2019).
Inimitable: The resources which are hard to imitate if it is protected legally or it is
expensive for other firm to acquire. The resources are regarded as competitive edge if they are
valuable, rare and inimitable. The patents of the selected organisation are difficult to imitate as it
is not allowed legally to imitate a patent product. Along with this, similar resources to be created
and having patent is a costly procedure.
Organised: A resource is organised to captivate the value if it is supported by the
structure, process and culture of an organisation. The selected organisation should organise its

management system, policies, culture and many more to have full potential of its resources. This
would assists the organisation in achieving a sustainable competitive advantage.
P3 Porter’s Five Forces model to evaluate the competitive forces
Porter's five forces model
Porter's five forces is a model which helps in identifying and analysing the five competitive
forces which shapes the organisation as well as assists in determining the strength and
weaknesses (Parnell, Parnell and Jones-Sepulveda, 2019). This model might be practical to any
section of the efficiency for knowing the competition section and increase the profitability of the
management. As in relation to the Tesco, Porter's five forces are as follows -
Rivalry among existing firms (high): The rivalry in the retail industry is high as the there
increase economic process for and supply of the products to satisfy the fundamental
requirements and as a result, there are number of entities which have captivate the markets to
offers various platforms to customers to purchase from. The major rivals of Tesco are Asda,
Morrisons and Sainsbury's.
Threat of substitute product or services (low): The threat of substitute product or
services is low in the retail industry as in effort to satisfy the economic process and supply of
food items and groceries, wholesale in terms to the regarded term as key players. The limited
choice of substitute goods that makes it tough for customer to switch from branded trade good.
Along with this, the substitute products are expensive than the products which is selling by Tesco
which makes the risk of substitute products low (Singer, 2018).
Threats of new entrant (high): The threat of new entrant is high in the retail industry as
emerging store organisations could easily penetrate into the markets. Small firms could
participate in speciality, locality, accessibility and some other reasons. The floor plan space
requirement could become a barrier for start-ups. This increases the competition between the
organisations owing to the nature of the retail industry, thus making the threat of new entrant
high.
Bargaining power of buyers (high): The bargaining power of buyers is high in the retail
industry due to several suppliers in the market and individual could easily buy products which
they like. Also, the offered commodities and price of groceries are comparable which results in
significant power of buyer. Owing to internet channels, there is increased awareness about the

prices of the products and various offers which create impact on the buying pattern of the
customer.
Bargaining power of suppliers (low): The bargaining power of suppliers is low to
moderate as there are higher amount of suppliers that are exist in the section, hence it will
develop low effects on the business. Individuals suppliers might have decreased impact on larger
retailers. As with it, a large amount of suppliers might execute for a limited retail management.
Hence, the bargaining power of suppliers in the retail industry is low to moderate (Chege and
Wang, 2020).
P4 Applying a range of theories, concepts and models, interpret and devise strategic planning for
organisation
Porter's generic model
Porter's generic model is an effective methods that are utilised by the management for
determining the potential niche in which they might have a competitive edge in the management.
As in relation to the respective management, Porter's generic model that are as follows -
Cost leadership: In cost leadership, the management manage itself to become low value
manufacturer in the market. The source of cost benefits is varied as well as rely on the form of
the management. This could comprises of proprietary technology, economies of scale and some
other factors. The selected organisation could achieve cost leadership by offering low costs
products and also maintain things such as utilisation of own transportation and warehousing
systems in order to deliver and keeping the products, purchasing materials with low prices and
using short distribution network (Astuti and Rahayu, 2018). These things are needed to maintain
by the selected organisation so that they will be able to offer quality products to the customers
are lower prices. Tesco has adopted this strategy which helped them gaining much popularity
and market share.
Differentiation: A differentiation tactics appeal for the growth of a goods or facilities that
are offers diverse aspects that are unique and are valued by the consumers and also perceives to
be better or distinct from the rival's products. The valued added to the commodities would
enables the organisation to charge with premium price. High differentiation strategy is adopted
by various organisations such as Microsoft, Apple and Google. The condition for sustaining an
organisation in the market for a longer period of time is delivering differentiation in the

commodities. But on the other hand, Tesco is not following differentiation strategy (Valenti and
Horner, 2020).
Source: Tesco, IGD Research
From the above chart, it can be said that brand differentiation is increasing at Tesco as
they sees differentiation as a fundamental to attract buyers and retaining its loyalty. The main
initiatives comprises of entire launch of their private label offer which is assists in lifting quality
perception and enhancing Tesco's position on value (Tesco, IGD Research, 2019).
Cost focus: The organisation that seeks to create low cost advantage in particularly in
small market segmentation is the cost focus strategy. The products that are provided might be
fundamental and same to the normal market directing products and it might be accepted to
enough amount of customers in order to make revenue. This strategy could be adopted by
catering requirements of a niche market segments at low prices.
Differentiation focus: The firm would be looking to product differentiation to small
market segmentation. The organisation will be trying to appeal to the desires of these groups. It
is a strategy which would focus on taste, design and size of the products and that could match
with the requirements of consumers.
Bowman's strategy clock

It is a marketing framework that are concerned with the strategic orientation. This model
was created by Cliff Bowman and David Faulkner that will concentrates on developing the
management aware of its position in the field of market. In relation to the respective
management, Bowman's strategy clock that are as follows -
Low price and low added value: It is a tactics that are not common between management
that are most of the business do not contend under low worth and terms. In relation to the
respective business, the low cost and low cost is a partial tactics. It is due to their management
that only applies low cost of the trade good but upholds the worth of its goods. The cost are low
to ensure that the management is competitive between their rivals. The low price of the products
means that the product has low margin and owing to this, it offer high volume of returns to the
firm. It depicts that organisation's strategy are focused on the interest of their consumers and in
return, the organisation is able to attract more customers to buy their products. Tesco has adopted
this strategy in which they are able to win the consumer shopping preferences. They make sure
that it elevates their marketability by minimizing the prices of its commodities (Barron and
Boutary,2020).
Low price: The low cost tactics means that goods are the lowest cost derivative in the
field of marketplace. Tesco might adapt this tactics as they are producing large amount of goods
and cost ineffective.
Hybrid: Hybrid make sure that organisation is able to perform its activities in a moderate
operation strategy. Tesco has a low pricing strategy and they could harmonize their costs by
using reinvestment efforts. The company has diversified its operations whereby they had attained
a high market share from the diversification. Tesco has also made effort in maintaining the cycle
of reinvestment whereby it has expanded their operations in other nations,
Differentiation: Differentiation helps in assessing the uniqueness of the selected
organisation functions as a strategy for improving the marketability level of the organisation. The
management has created its functions that involves functioning on diverse retail program and
these retailing program are autonomous of one other whereas the presentation of one does will
not have an impact on the performance of others. It will help the management in diversifying the
functions of arrangement and enhance the marketability level of the business.
Focused differentiation: This strategy is only adopted by those organisation which is selling
branded and luxury products (Wielsma and Brunninge, 2019).

Risky high margins: It is risky high margin tactic that are utilised by various
management that sets high cost without providing much value in return.
Monopoly pricing: An organisation would be controlling the price and products so that
these elements such as rivals, values, price points could play a less of factor.
Loss of market share: It is a worst position and and it suggested organisation to exit from
the industry.
Business plan
Executive summary: Tesco was established in year 1919 by Jack Cohen in UK. They are
serving with the help of more than 7000 stores across the globe and generates a revenue of
£64.760 billion.
Mission: The mission statement of Tesco is to create value for customers to earn their
lifetime loyalty.
Vision: The vision statement of Tesco is to be the must be an effective valued business by
the consumer that they serve, the people that they functions, their loyal and wrapped up
colleagues and its stockholder.
Strategic objective:
 To enhance the increased sale by launching new product in the market. To diversify its new product line.
Tactics: The organisation could utilise social media as a marketing tool for promoting
their new launch. As social media is a powerful tool, it would allow organisation to directly
interact with the customers. Also, they could invest in research and development in order to
diversify new product line.
Monitoring and controlling: It is important for a firm to monitor their progress towards
their business plan. The selected organisation could use routine progress reports for monitoring a
specific element in implementing the business. This report will be responsible for the
implementation of the strategy (Diderich, 2020).
Controlling the execution is the distribution a concise duty and also have a direct sight-
line to answer. This would supports in determining that indicators are at risk so that they could
directly sort it.

CONCLUSION
From the above discussion, it can be concluded that business strategy referred to a
blueprint which starts from hiring of individual to organisational structure. In this report, it
involves PESTLE analysis for analysing the macro environment effects. Also, SWOT analysis is
followed for considering internal environment and skills of the business. Porter's five forces
model for evaluating the competitive forces that are mentioned. Hence, range of theories like
Porter's generic strategies and Bowman's strategy clock as with business plan is get followed.

REFERENCE
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Online
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