Tesco's Business Strategy: Macro and Micro Analysis Report

This report provides a comprehensive analysis of Tesco's business strategy, examining both its internal and external environments. It begins with a PESTEL analysis to assess the impact of political, economic, social, technological, environmental, and legal factors on Tesco's operations. The report then delves into Tesco's internal environment using VRIO analysis to evaluate its resources and capabilities, followed by an examination of the competitive landscape using Porter's Five Forces model. Strategic options are explored, including the Ansoff matrix, to identify growth strategies. The report critically analyzes the data and information presented, leading to recommendations for improving Tesco's competitive edge and market position. Overall, the report offers valuable insights into Tesco's strategic planning and provides a framework for understanding the challenges and opportunities facing the company in the retail industry.

Business
Strategy
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Table of Contents
Introduction .....................................................................................................................................3
TASK 1............................................................................................................................................3
Impact and influence of macro environment factors on the organisation...................................3
TASK 2............................................................................................................................................7
Analysis of internal environment and capabilities of the organisation.......................................7
Critical evaluation of internal environment and the capabilities..............................................10
TASK 3..........................................................................................................................................11
Analysis of the external competitive environment for a organisation......................................11
Porter’s five forced model:........................................................................................................11
Appropriate strategies to improve competitive edge and market position................................14
TASK 4..........................................................................................................................................14
Theories, concepts, models that can help in strategic planning................................................14
Strategic business plan..............................................................................................................17
Critical analysis and interpretation of data and information.....................................................20
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................22

Introduction
Business strategy can be defined as different actions said that is used by organisation for
achievement of given objective in a saturated period of time. It is also very helpful for
Organisation in management of their level of performance and attainment of competitive
advantage in the external market. It is very necessary for all organisations to develop some
business strategies in order to survive in the market and deal with all the challenges and negative
factors that are present in overall macro environment. Present report is based on Tesco that is a
retail organisation of UK and was founded by jack Cohen(Lewis, 2017). It is present in different
parts of the world and is affected by many different factors for this there is a requirement to form
strategy based on all the external factors. Such as present report covers,Pestel analysis and
SWOT analysis. Apart from this there are use of certain porters and other different types of
models such as bowman's strategic clock and porter's generic strategy that can help in analysing
the scenario in detail and formation of effective business strategic plan and adopted by
organisation for their long run survival.
TASK 1
Impact and influence of macro environment factors on the organisation
PESTEL Analysis of Tesco
Political factor: Political factor refers to the amount of tax, legislation, rules and
regulation that need to be maintained according to the stability while carrying out operations of
country. To overcome the chances of instability government or local residence makes immense
practice in order to create significant jobs for the domestic population. Existence of Brexit has
immensely affected the whole economy of UK resulting in the fluctuations in the prices of
commodity and affected the food prices.
Positive impact: As Tesco company has large size which operates in the global market.
Large employment opportunity for the local residents often encourages the government of
various countries to make the flexible laws and successfully attract MNCs (Whitelock,
2012).
Negative impact: Existence of Brexit has caused negative implications for the large
retailer like Tesco due to the emergence of various taxes that need to be pay in different
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geographical region of European Union. Along with that devaluation in the currency of pound
sterling also leads to the rise in prices of food items causing low portability for Tesco.
Economic factors: It represent change in the policies of government, change in tax slabs,
purchasing power of people, trade regulations and so on. As Tesco company is growing
internationally but still major part of the market share is gained from its home country that is
United Kingdom. Although existence of Brexit during initial years has affected the market but
recognition of brand has helped them to maintain the interest of wide target market.
Positive impact: Although the profitable margin of Tesco was squeezed due to the
existence of Brexit but implication of appropriate discount strategy cater the requirement of all
income group that assist firm to cater wide demand of customer(Ryu, Lee and Choi, 2014).
Negative impact: Economic consequences associated with Brexit has decline in the
expenditure of company due to emergence of inflation which too affected the wages growth.
This situation leads to the pressure amongst manager of Tesco company in order to encourage
the customer demand as well as satisfy their internal employees.
Social factor: It refers to the people and society who are around the business. The taste
and preference of those affect the business directly so business needs to see all social factors
before taking any decision. The macro environment refers to the change in the lifestyle of the
people and even the trend and fashion.
Positive impact: TESCO is well aware of it and they know that customer is looking for
weekly top up shopping; a new trend which is in line and Tesco is looking to exploit it by
providing people with that top up facility. TESCO is doing complete analyses of people wants
and they are trying to structure there services accordingly which will help them to get heavier
returns.
Negative impact: The company has faced lot of negative impact due to social change.
With the customer turning health conscious, the trend is very alarming for Tesco as the company
keep on their stock lot of processed food and drinks. With the increase in obesity rate the plus
size fashion and demand for such cloth has increased. TESCO need to change their size
composition of cloths which is not favouring plus size right now.
Technology factor: With rapid innovation different supermarket store like Tesco are
making significant practice in order to use the latest technology and enhance service facility. For
instance, automatic delivery and transportation is an emerging driverless technology that

eliminates the use of delivery person and carry out fast home delivery for the convenience of
consumer (Malerba and et. al., 2015).
Positive impact: Tesco company is the major food retailer that has remain competitive in
terms of technology. Like, it offers fastest delivery facility where the goods are delivered at the
footsteps of consumer within minimum time duration. Along with that company has built the
desirable responses from online platform where all the goods and services are displayed with the
help of catalogue based on which customer can make better choice.
Negative impact: Adoption of innovative technology or technique is a time, energy and
cost consuming process. After certain period of time the existing technology gets obsolete so it is
the continuous expenditure which Tesco needs to bear in order to remain ahead of their rivalries.
Environment factor: Consumer is becoming environmental friendly nowadays and
government is also promoting the same as well. With switch of the customer to environment
friendly approach, company need to change with the time. They need to understand how
important it has become to do sustainable development and do activity in favour of environment
welfare so that lot of eyes catches them. Tesco is focusing on the same line to get more and more
customers.
Positive impact: Tesco is focusing on environmental changes and is operating and are
using recycle items in operation, they are using paper bags. These all things are less costly
resulting in increase in the margin of profit which is good for the company. Company is trying
their best to promote sustainable environment
Negative impact: It is not that easy to implement change in the working environment.
Tesco is facing an issue in changing their old habit to new eco friendly habits. As the scale is big
it is not that easy to change in a night. Some of the factors are taking time to get implemented.
Legal factor: Legal factor are the rules and regulations set by the government of the
country. A company have no choice but to follow the legal policies. If they not, it can result in
high penalty and even ban in some cases(Anwar Shah and Hasnu, 2016). Tesco is well aware of
that and try to do business keeping rules and regulations into their mind.
Positive impact: It may be in Favour of the company sometimes. If following the law
company can get lot of benefits and can stay out of the trouble at the same time. Legal factors
will give the company the guidelines and policy they need to follow and they can form plans
keeping the policy into consideration.
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Negative impact: Tesco has incurred heavy losses in 2014 because of an audit which
shows over stated of profits which severely damaged their reputation. Some of the rules and
regulations introduced by US government on banning high fat drinks advertisement to teenagers
and children may impact promotion and advertisement of company.
Ans off vector matrix of Tesco:
Ansoff matrix is used for the purpose of developing a detailed understanding of different types of
aspects that are part of the matrix:
1) Market penetration:
It is a strategy that is related with the use of low prices for the purpose of entering a market and
getting a leadership position. This strategy can be used by Tesco if they are dealing into existing
products and the market share also exists.
2) Product development:
It is a strategy that is related with developing a product in the existing market but the product is
new. Tesco can make use of the strategy for approaching the existing market share that is having
already high amount of sales.
3) Market development:
It is a strategy in which there is development of existing product but the market is completely
new. It can be used by Tesco in patience when they are willing to approach a new target segment
of market.
4) Diversification:
Strategy in which new products are sold and the market is also new. Best strategy can be used by
Tesco when they are willing to diversify their present share of markets with the help of making
new launches.
From above Discussion it can be said that according to the present scenario of Tesco, there is
requirement of a appropriate marketing plan and some strategies like Diversification by

development of certain new product category for new market segment that can help in
development of products which would lead to higher sales latest by the year ending 2020.
Critical analysis of macro factors to determine the management decisions
Macro environment consists of different factors that possess impact on overall process of
decision making for management in understanding all the ant associated threats that are part of
these environment strategies can be formed in order to deal with such negative aspects(Dodgson,
2018).There are some strategies that can be used such as PESTLE analysis used for developing a
detailed understanding of macro environment factors. Also, there is use of Ans off growth vector
matrix that leads to understand that most suitable strategy is Diversification as there will be new
product and new market segment. It is also related with how effective Strategies and the process
of decision making can be improved by making detailed aspects of all the opportunities and
positive factors that can help in smooth adoption of such Strategies and functioning of business.
TASK 2
Analysis of internal environment and capabilities of the organisation
VRIO Analysis
Capability Valuable Rare Imitable Organising
Global reach ✔ ✔ ❌ ✔
Financial
capability
✔ ❌ ❌ ❌
Online
shopping
✔ ❌ ✔ ✔
Skilled staff ✔ ✔ ❌ ✔
Valuable: TESCO is spread all over the world which help the company to increase the
market share. It is a valuable aspect for the company as more the reach more is the chances of
increase in profits. The company is also financial stable which help them to do large investment
and bring new innovation into picture. Online shopping is also a valuable part for TESCO as it
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helps in advertising, promotion and sales of the product. The company most crucial aspect is
having a skilled staff which help in doing work with efficiency.
Rare: Global reach is the rare element for the company as not lot of company has global
risk. Tesco get huge business from Asian countries also and these rare element help the company
to get a competitive edge over other companies in the industries. Skilled and developed staff due
to continuous training is another rare factor for company.
Imitable: online shopping is one thing which other competitors can imitate as everybody
is using online media to sell their product.
Organisation: Everything is organised properly by Tesco be it global reach or online
shopping. The company focus on their employees also so that they can be more productive.
SWOT Analysis
Strength
 Tesco company has effectively adopted
the advantage of economies of scale due
to which it comprises of large number of
retail outlets. These outlets have built an
effective relationship with customer due
to the support of strong distribution
network that helps to timely deliver all the
goods and services into the retail store and
from the retail store to the foot step of
customer.
 Extensive training and development
session is provided to the existing as well
as new employee of Tesco company. This
leads to the growth and development of
employees and enhances the chances of
employee satisfaction by working on the
advanced technology effectively.
Opportunity
 Digital media serves a desirable
opportunity for the Tesco as the
percentage of internet user has increased
all over the world. Thus, the company
needs to make potential use of technology
and make strategy in terms to reach out to
potential market successfully(Tesco
SWOT Analysis, 2018).
 Focus needs to be given in the technology
development that offers numerous
advantages to the various departments.
Automation in the operation department
can help to reduce the cost along with that
it helps to better gain the data in form of
responses from customer which
simultaneously improves the marketing
effort of company.

Weakness
 Although the company has desirable
market share but still spending into
research and development department is
less in comparison to its competitor. The
external situation of the company is
dynamic due to which manager needs to
invest in the market research and get
desirable data.
 The company experience advantage of
low profitability margin as it delivery
services at minimum prices which restrict
the inflow of cash.
Threat
 With the increase in competition the
bargaining power of suppliers can
increase leading to increase in the cost of
input. This is the complicated situation in
order to retain the interest of existing
buyer.
 Changing preferences of customer is a
threat to company as they need to
promote constant change in order to
accommodate the interest of target
market.
TWOS analysis
Strength and opportunity
 As Tesco company is already well established so it needs to focus more on the digital tools in
order to establish brand name amongst global market and gain market dominance over other
competitors.
 Desirable networks with supplier have helped the entity to gain better material at nominal
prices. Better negotiation needs to be done in order to gain the advantage within the
competitive grocery market.
Weaknesses and opportunity
 As customer are shifting towards organic food so low availability of fresh and organic food
can decline the sales, efforts needs to be made to keep up the fresh stock of food items.
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 Adequate investment in research and development can help the company to come up with
better solution and distinguish its services from the other competitors available in
market(Sung and Ashton, 2014).
Strength and threat
 Since Tesco company is a market leader in terms of selling out discounted products. Thus,
the company needs to gain competitive advantage by accommodating the behaviour of
customer.
 The company can maintain effective relationship with customer if it timely delivers the
services by making effective supplier supply relationship.
Weakness and threats
 The other competitors of Tesco like Sainsbury are experiencing rapid rise which generate
more options for its supplier. This can probably increases the prices of the raw material so in
that case Tesco can incorporate desirable negotiation to create win-win situation for diverse
party.
Critical evaluation of internal environment and the capabilities
It is very necessary for management to gain overall insights about internal factors that
affecting a performance of organization. SWOT analysis and tows analysis are two most
important tools that can help in understanding the overall strength weakness opportunities and
threats that are part of the business environment both internally and externally help in
understanding of such factors. VRIO analysis for the purpose of understanding the resources that
can be used for understanding what factors are leading towards long term competitive advantage
for Tesco and also achievement of sustainable growth. There are certain capabilities of internal
and different core factors that can help in formation of certain profitable Strategies for
enhancement of the overall position in market and sustaining in long run.
It can be evaluated that SWOT analysis is a tool that helps in making a detailed analysis
of after making SWOT analysis the use of TOWS helps in formation of strategies to use the
strength as a opportunity. Further there can be conversion of weakness into a profitable
opportunity such as in Present case Tesco is using the unavailability of organic food segment to
enhance their market share. Threats can also be used as a opportunity for expansion by a

business organization. VRIO analysis is a very significant tool that can help in understanding of
the resources that can help in generation of a long run competitive advantage. But VRIO analysis
has a limitation that it cannot be used for purpose of making a detailed evaluation and it does not
gives importance to each and every resources that are providing the Competitive advantage to a
organization.
TASK 3
Analysis of the external competitive environment for a organisation
Porter’s five forces model:
Porter's five forces is a tool that is used for understanding the basic five forces that are part of
overall external environment and can impact the functioning of a business organization. This
model is very helpful in developing insight of the positive and negative impacts of major five
forces that are part of external environment for a business organization in context with Tesco this
model is discussed below:
1) Threat of substitutes:
The factors related with new entry of competitors or existing competitive who can easily
be substituted for products provided by the organization (Karami, 2016). In case of Tesco it
belongs to Retail Industry and there is requirement of High investment to attain competitiveness
and produce quality products to survive for longer time in the market. There is Economics of
scale that has benefited Tesco in order to gain benefit from the high production which this brand
is making. So if any new willing to enter or existing are willing to provide competition to Tesco
then they have to produce high quality products and it can lead to substitution opportunities for
their customers. It depends on Tesco how they are maintaining the overall quality and a balance
between prices so that high value is offered to their customers and they are not able to easily
substitute any other brand for such product. For Tesco this threat of substitution is not a risk for
this brand in long run.
2) Competitive rivalry:
Competitive rivalry refers to the intensity of number of competitive that are present in the
industry and affecting the sales of Organization in a negative manner. Tesco belongs to Retail
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Industry that has many large players If in case of UK, said that there are many retail brands such
as Morrison’s, Waitrose ASDA and Sainsbury’s all the major retail brands that are providing
very high competition to Tesco. These are the brands that are providing similar products and of
similar quality to same segment of customers which Tesco is targeting(SirénandKohtamäki, .,
2016). Hence, it can be said that there is very height threat of high competition being faced by
Tesco because of presence of very high competitive rivalry and there has been a slow growth of
market in recent years because of such high competition that is affecting the leadership position
of Tesco. Apart from this different brands like a aldi so taken position of market in case of
recession by opening their discount store that has led to shift of many existing customers of
Tesco specially in case of certain rural areas where retail brands are not having reach.
3) Bargaining power of suppliers:
This is a factor that is related with the overall power of suppliers to switch to other brands
according to the prices being offered by a particular brand for their products. Tesco is a
organization that is having presence in UK and various other locations of the world since a long
time this brand has a belief in having long term associations with Limited suppliers that can
provide them high quality products (Pham, Pham, and Pham, 2018). So Tesco has able to
negotiate many suppliers that has helped them to get products at competitive also maintain the
cost leadership position by not compromising with the overall quality of products and providing
such products with high quality to their customers so that their overall Expectations can be met.
So there is no power of suppliers that is raised as a huge threat for them in a longer period of
time.
4) Bargaining power of buyers:
This is the power of buyers according to number of options available for them in the
market and how easily are the able to switch between different brands to satisfy their needs. In
case of Tesco are offering large variety of products so it leads to many different options that are
available to them that can impact their long term demand (Ansoff and et. al., 2019). Many
brands like Sainsbury’s and Morrison’s are providing similar variants of product just like Tesco