Comprehensive Business Strategy Analysis of Tesco: A Detailed Report

This report provides a comprehensive analysis of Tesco's business strategy. It begins with an introduction defining business strategy and its importance. The report then delves into the macro environment, examining stakeholder analysis using stakeholder matrices and mapping, followed by a detailed PESTLE analysis, assessing political, economic, social, technological, legal, and environmental factors. The report further explores Tesco's internal environment and capabilities using SWOT and VRIO analyses, and the McKinsey 7S model to evaluate organizational design. Finally, it applies Porter's Five Forces model to analyze the competitive landscape within the retail industry. The conclusion summarizes the key findings and the report includes references to support the analysis.

Business Strategy

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
Impact of macro environment over strategy formation...............................................................3
LO2 .................................................................................................................................................6
Internal environment and capabilities of organisation.................................................................6
LO3..................................................................................................................................................8
TESCO - PORTER'S 5 FORCES ANALYSIS...............................................................................8
LO4................................................................................................................................................10
Covered in PPT..........................................................................................................................10
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Business strategy means the combination of the decision taken and the actions which are
performed by the business to achieve its goals and establish its strong position in the competitive
world. In this report TESCO considered as the organisation. This company was founded in 1919
by Jack Cohen and is the biggest grocery retailer in UK dealing with diversified range of
products and market. This report is about the business strategy where in various types of
strategies can be used in operational, tactical or strategic role in the organisation and gain
knowledge about the theories, models and concepts which supports the working of the
organisation. This report covers the analysis of macro as well as internal environment of the
organisation and its capabilities. It further includes various types of models, theories, and
concepts and also the analysis of Porter's five forces model and apply the outcomes of it.
LO1
Impact of macro environment over strategy formation
Macro environment is defined as external business environment factors that put an impact
over company's performance and presence in target market. To analyse about the macro
environment management of Tesco frame a strategies based on the following analysis.
Stakeholder Analysis
Stakeholders are considered as all such associated entitied of the company that carry an
specific interest in company's operations (Peng, 2017). Management of Tesco use Stakeholder
Matrix and Stakeholder Mapping in order to conduct the stakeholder analysis of the company.
Stakeholder Matrix: Based on the power and influence in company's operations stakeholder
matrix is framed. Based on the power and interest stakeholders are considered in four categories
keep context setters, players, crowd and subjects.
 Context Player: This category involves such stakeholders who carry the high power and
high interest in operations. Shareholders of Tesco will be covered in this category.
 Subjects: All such company's stakeholders who carry the low power but high interest in
company's operations. Stakeholders like company's employees, team members are a part
of this stakeholder group.
 Context setters: All such stakeholders of who carry the high power and low interest in
operations (Akter and et.al., 2016). Company's shareholders and owners are covered in
this stakeholder category.

 Crowd: All the low power and low interest stakeholders are covered in this category.
Stakeholder Mapping: Stakeholder mapping is a process that involve position the stakeholders
of the company based on the priorities. It involve developing a list of stakeholders that involve in
company's operations. Based on the role priorities are decided of each stakeholder involved in
company's operations of Tesco (Rothaermel, 2016). For example shareholders of company are
covered among top priority stakeholders. Investors are also a part of top priority stakeholders.
Based on the influnce in company's operations all stakeholders are segregated under stakeholder
mapping.
PESTLE Analysis
Political Factor: Political factors involve government policies associated with all such countries
in which Tesco operates its business operations. Political stability is also a major aspect involve
in political factors. Tesco operates its business operations across the globe that enable the
company management to make a suitable business strategies that can cope up with the political
atmosphere of all the countries involved in business operations of the Tesco (Johnson, 2016).
Government across the globe apply a supportive approach to promote corporate culture in the
country as corporate organisations carry the major contributions in the economic development of
the country. All governmental policies like taxation policy are assessed under political factor in
order to make suitable business strategies.
Economical Factor: Economical factor also play a major role in strategy formation of the
company. Economical factor comprises with GDP of country, inflation rate, corporate growth in
the country and other associated aspects of economy. UK economy is among the stale economy
across the globe that supported the company management in Tesco to sustain the business
strategies for the longer period. GDP Growth rate of country also drives the company
management to expand business operations by launching more relative products. Retail sector is
witnessing an immense transformation specifically in developing nations like India that are going
through major infrastructure development. Due to economic factor company management of
Tesco has utilized growth improvement and business development by expanding the services and
retail outlets across the globe.
Social Factor: Social factors involve culture, values of society, trends, fashion and other
associated aspects of the society (Leonidou and et.al., 2017). Retail products are among the
routine used products of the society as it comprises with food products, clothing line and other

products. Company management frame all strategies based on the social value and culture of the
people in society. Social factors create huge influence over the presence of company's products
as it drives to product acceptance by the society. Social factors also enable the company
management to take competitive advantages in retail market by improving brand presence of
company's products.
Technological Factor: Technological factor involve in PESTLE analysis emphasis over utilising
the latest technological advancement for conducting business operations. Information technology
has transformed the business sector by making company's products and service more accessible
for the target customers. Company management in Tesco has also framed suitable strategies in
order to involve technology fr conducting business operations such as marketing, sales and other
business functions. Company management also utilise technology for conducting public
interaction that has also provided company's presence in target market.
Legal Factor: Legal factors comprises with various legislations of country and laws of UK Like
labour law, minimum wage payment act, equality act and other associated laws. Company
management needs to frame all business strategies and policies based on the guidelines of
legislations framed by UK government (Gattorna, 2017). Legal factors also involve effective
dealing with government laws associated with export and import of products and services. Tesco
has a global business outlet which also drives the company management to involve legislations
and laws of other countries as well in its business strategy formation.
Environmental Factor: Environmental factors also play a crucial role in strategy formation of
Tesco company. Environmental factors involve eco-friendly products of the company. Corporate
social responsibilities of the company is also a crucial part of the environmental factor
(Bıçakcıoğlu, Theoharakis and Tanyeri, 2019). Application of this factor in framing business
strategies has recently implicated after the emergence of people awareness towards environment
protection. Inclusion of these factors in strategies and policies of company provided the Tesco
management to take competitive advantages in the market by improving brand loyalty.
Advantages of PESTLE Analysis:
 Enable the company management to assess impact of external business environment
factors over company's operations.
 It guides the company management to make a suitable business strategies in order to take
competitive advantages in the target market (Sia, Soh and Weill, 2016).

 Cost effective technique.
Disadvantages of PESTLE Analysis:
 It only assess about external business environment factors which also restricted with
certain factors of macro environment.
 Company management can't be relies on over this tool completely.
Porter Five Forces
Advantages:
 Guides business planning.
 Enable effective dealing with buyers and suppliers.
 It enable the impacts of various forces associated with business operations.
Disadvantage:
 Ignore many business environment factors.
 Not any industry will be suitable for this model.
LO2
Internal environment and capabilities of organisation
Internal capabilities of company helps in identifying strength and weakness of company
thus helps in gaining opportunity and protect company from various threats.
SWOT Analysis:
Strength: Tesco is a leading company in retail industry that deals in wide varieties of products
and services such clothing, electronic, toys and provide financial and internet services to
customers (Pramanik, Maiti and Maiti, 2018). Thus, strong brand image and wide product
portfolio of company helps in gaining competitive advantage in the market.
Weakness: Tesco is mainly depended on UK market that is suffering from political unstability
and situation of recession thus impact on company sales and profitability.
Opportunity: It has opportunity to expand its business across different nation and increasing its
presence in online sites to attract large number of customers.
Threats: ASDA and ALDI are two discount providers for Tesco as they offer qualitative
products at reasonable rates to customers thus increasing competition is threat for Tesco
(Chelliah and Swamy, 2018).
VRIO Analysis:

It is complement to Pestle Analysis that is used to asses situation inside the organisation
such as resource, competitive implication and potential for improvement in particular area.
BASIS Value Rareness Imitability Organisation
Employees ✓ ✓
Technology ✓ ✓
Management ✓ ✓ ✓
Global presence ✓ ✓
Value: Resource of company should have high value to satisfy needs of customers in effective
manner for achievement of organisational goals. Tesco have highly skilled and knowledgable
employees that promote growth and success of business in the industry.
Rareness: Company use rare technology to gain competitive advantages in the market in order
to produce qualitative products and services. Its global presence is also rare as it has concentrated
operations in UK (Goode and Negoro, 2018).
Imitate: Management of company can be imitated by other competitor easily for achievement of
organisational goals.
Organisation: Company is able to effectively manage its resource and capital requirement for
growth and success of business.
Mckinsey 7s Model of management
It evaluates company organisation design by analysing 7 important internal elements such as
strategy, structure, system, shared value, style, staff and skill for achievement of organisational
goals.
Strategy: Tesco strategy is to provide continuous innovative and qualitative products and
services to satisfy needs of customers beyond their expectancy (Zakaria, Hashim and Ahmad,
2016). Thus, it helps in long term growth and survival of company and gaining competitive
advantages in the industry.
Structure: Tesco has functional organisational structure within organisation thus each
department performed specific function that are coordinate for achievement of organisational
goals. Thus, company is able to provide qualitative, specialized and unique products to its
customers and enhance its profitability.

System: Well established system and definite roles and responsibilities helps in effective
coordination of effort of different individual, reduces conflict and quick decision-making that
helps company in gaining competitive advantages.
Skills: Employee of Tesco are highly knowledgable and have specialized skill as each function is
performed by specialised department to work effectively for achievement of company objectives.
Company has provided good working environment and build strong relationship among
employee to reduce conflict and coordinate works of individual towards predetermine objectives.
Staff: Tesco has approx 450000 employees that are highly motivated and inspire to work
effective to provide qualitative services to customer in order to build strong brand image in the
industry.
Style: Tesco is a large organization with number of employees so manager in order to motivate
and enhance interest of employees use participative or democratic leadership style of
management. Therefore, it leads to increase in employees satisfaction and bring new ideas as
there views are taken in decision-making of organization that helps in gaining competitive
advantages.
Shared Value: Company has strict and well-defined rules and regulation for maintaining quality
of product and service that helps in building strong brand image and differentiate it from other
competitors.
LO3
TESCO - PORTER'S 5 FORCES ANALYSIS
Porter 5 forces is a strategy which is used in making decisions while analysing the present
competition (Hengky, 2016) . In Tesco porter 5 forces model can help in competitive advantage
for retail industry and can also give opportunities to gain profit.
BARGAINING POWER OF BUYERS:-
 In Tesco customer negotiation power is high due to the availability of similar products at
minimum price in the market.
 The customers can choose between the varieties of products of same range of prices.
 Customer wants quality products with low prices, so they are choosing stores (aldi, lidl)
which are providing discounts or offers which has decreased in 0.3% in Tesco market
share.

 Tesco has large customers, so they can not increase their product prices rapidly it will
affect the purchasing power of the customers.
 After introducing a new product the bargaining power of customers will reduce.
BARGAINING POWER OF SUPPLIERS:-
 Tesco has many suppliers in the market, so they have low bargaining power.
 The supplier which is offering products to the Tesco supermarket at lower price which
can give high profit margin to the Tesco supermarket but this can lead to loss to the
suppliers.
 By making a supply chain with multiple suppliers the Tesco can improve the bargaining
power of the supplier.
 Suppliers use bargaining power to remove the higher prices from the firm in retail field.
 Higher bargaining power of supplier impacts to lower the profitability of the retailer.
THREATS OF NEW ENTRANCE:-
 New entrants products offer high quality products similar to the price of the competitor's
price to attract customers.
 Aldi and Lidl are the supermarket which provide 40% price discount on their products as
compared to Tesco.
 By introducing a new product gives a reason to customers to buy products from Tesco.
 New entrance with innovation forces Tesco to reduce the cost and to lower the pricing
strategy which is beneficial for the customers.
 Tesco has to face many challenges and also have to safe themselves from the
competitors.
THREATS OF SUBSTITUTES:-
 In Tesco threat of substitute is high because food and non-food substitutes are available
in the other market that comes from other retailer that gives food and non-food directly to
the customers.
 Tesco can overcome the threat of substitute by product as well as service oriented.
 Company must understand the need of the customer with product buying of customers.
COMPETITIVE RIVARLY:-

 Tesco face big competition in similar products with relative price in other supermarkets
like- Sainsbury, Asda and Morrisons, which make customer switch to other supermarkets
which affects the sales of Tesco.
 Tesco can overcome the competition from rivalry by amalgamating with competitive
companies to increase the market share.
Ansoff's Matrix
TESCO uses various strategies to sustain its position in the market and gain competitive
advantage. For this Ansoff’s Matrix can be used as follows-
Market Penetration – This means the company increases sales and gain more access into the
existing market and give more benefits to the existing customers. If the competitors sell similar
products and one of them decreases the price can harm the entire organisation.
Product Development – This refers that the company produces new products for the customers
in the existing market so that the customers get wide range of different products at one place. On
the other side new products can fail also due to the testing of product.
Market Development – Through market development the company explore new markets,
reaches new customers and sells its existing products in this market to increase sales of the
company. Here extra cost is incurred by the company on evolving new markets and it can be
time-consuming as well.
Diversification – In this strategy the company produce new products and sell them into new
markets. There is no role of existing products in this. It is risky as well as difficult to achieve the
existing position.
From the above mentioned strategies, The Product Development is the most suitable
strategy for the TESCO to use as this strategy helps in producing good quality products and
services, expanding the product range, facing the competition easily and successfully, earning
maximise profits, goodwill of the organisation also increases. The company can achieve its goals
in effective and efficient manner and can maintain its position secured in the market. It will help
in building customer's loyalty, trust and can make them satisfactory with its products, price and
quality. Also it reduces the chances of products getting obsolete in the market.

LO4
Covered in PPT
CONCLUSION
From the above report it can be concluded that internal and external factors of
environment impact on functioning of company. Company by using its internal capabilities and
strength can gain competitive advantages in the market. It is also concluded that Tesco by
offering differentiate products and service is able to build strong brand image and enhance its
profitability. At last, it is explained that continuous innovation and qualitative products and
services helps company in gaining competitive position in the industry.

REFERENCES
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