Business Strategy Report: Tesco's Internal and External Analysis

This report provides a comprehensive analysis of Tesco's business strategy. It begins with an introduction to business strategies and the chosen organization, Tesco, a public limited company and market leader in the UK grocery sector. The report then explores the impact of the macro environment (political, economic, social, technological, environmental, and legal factors) on Tesco's operations, discussing both positive and negative influences. Next, it delves into Tesco's internal environment, utilizing a SWOT analysis to evaluate strengths, weaknesses, opportunities, and threats. The report further applies Porter's Five Forces model to assess the competitive landscape of the market sector and its impact on Tesco. Finally, it examines various models and concepts to aid in understanding and interpreting the strategic direction of Tesco, providing a holistic view of the company's strategic positioning and future prospects.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
Impact and influence which macro environment has on Tesco organisation.............................1
LO 2.................................................................................................................................................4
TESCO'S internal environment and capabilities.........................................................................4
LO 3.................................................................................................................................................6
Evaluate and apply Porter's five force model .............................................................................6
LO 4.................................................................................................................................................8
Models that interpret and device strategic planning for TESCO organisation...........................8
Conclusion.....................................................................................................................................13
References......................................................................................................................................15

INTRODUCTION
Business strategies is the set of action which carried out by every organisation to secure
competitive position in business market, and to carry out business operations, to please
customers and to achieve targeted business objectives of the organisation.(Maniora, 2018. ) In
this present report chosen organisation is Tesco which is public limited company. This present
report will cover the impact and influence of macro environment on Tesco organisation.
Organisation's internal environment and capabilities is also going to discuss in this report. Ater
this in this report Porter's Five Forces model of market sector and their outcomes is also going to
discuss in this report. This present report will also going to cover theories, models and concepts
to assist understanding and interpretation of strategic directions available in Tesco organisation.
LO 1
Impact and influence which macro environment has on Tesco organisation
Tesco is a public limited company which deals in business of groceries and it is the
market leaders of groceries in UK which has third position in business of retailers across the
world which is measured on the basis of gross revenue of the company. It was founded in 1919
by Jack Cohen. Diversifies areas into which this company trade are retailing of books, clothing,
electronics, furniture, toys, petrol, software, internet service and financial services. Because of
this diversified business gross revenue of this company is very large and company also listed on
London Stock Exchange and are providing the best quality of groceries and other food items.
The aim or objective of Tesco company is to provide products and services at cheaper
rate for average households. They have many objectives and aims which helps in enhance
growth of the company such aim of the company is to increase supply and demand of groceries
and to introduce more healthy products in it.(Peng, 2017.) Vision of the company is to grow
business which is full of opportunities, to make strategies which is innovative and full of ideas.
To make products which satisfy customers and helps in earn customer loyalty and trust in
company.
Mission of the company is to expand business in such a way that it satisfy customer needs
and to ensures goals of the company are fully achieved. Other mission of the company is to
develop loyalty in applying their skills globally. Here are the external macro factors that is
political, economical, social, environmental and legal which has impact on the company.
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Political factors- since this company is doing their business globally therefore they have to face
some political influence in their operation of business which also influence their performance.
Such types of factors are tax rates, legislation acts, economic stability of country in which they
operate and also if there is inflation in country. Government influence is also there because
ongoing financial instability in world therefore there is a continuous pressure by government to
create employment for domestic peoples of the country. Company's this employment factor
makes their demand and supply increase which helps them to diversify their products. Example
of macro factors which affect company's performance is that it imports it products outside UK
therefore, import duty affect their performance. Different countries have their different tax rates
because of this Tesco company's import duty affected as they also trade their products in China,
East Asia.
Economic factors- this factor has a greater impact on Tesco company such factor may be
leverage costs, demand, profits and prices.(Scholes, 2015.) Therefore, company have to be aware
is they change any policies of the company which provides negative impact on their financial
stability. Another factor which affect company's performance is that company is still dependent
on UK market share which is around 30% therefore, company's food market affected more in
UK and are also exposed market concentration risks. Company's success policy is that they have
created huge internationalization and diversification of business across the world. Tesco has
started doing more advertising on their valuable brands rather than on luxurious items. Main
factor which influence company's products and services are unemployment in the country which
affect adversely their overall demand in producing goods and services.
Social factor- according to this factor, Tesco company mainly relies on UK customers therefore,
they have to made policies which satisfy customer's needs. Nowadays, customers do not have
much time in doing shopping therefore, they want activities which provide them fast delivery
and easy return policy in same day. Customers now preferring one day shopping. Another factor
which affect their performance is obesity because of these customers are now more concern
about what to eat therefore company has to make organic food products to increase their demand.
Technological factor- this factor has affected Tesco company previously in which they had to
faced poor customer experience. They bring new technological advancement in company to
regain customer trust. For gaining customer trust they introduce RFID technology which helps in
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counting stock and remove that after sales. It is also helpful for suppliers about when to store
products and when to replenish it. They also bring online payment technology which helps
customers for doing easy payment. In this technology they created an application which
customer has to download in which they make orders and pay for that easily and in return
company provides pay-back points to customer which helps them to redeem in next shopping.
Environmental factor- now in every country across the world government makes pressure on
companies to create their social responsibility towards environment. Therefore, Tesco company
is also have to provide their contribution towards environment.(Leonidou and et.al., 2015.) They
make policy to encourage customers to shop from their online application for that Tesco Van
Drivers will only use route which save fuel and they also collect plastic bags from customers by
which they recycle them again. Company created policy to use renewable resources which helps
them to generate 100% electricity by 2030.
Legal factor- every business environment has to develop legal environment which satisfy their
employees to do work. According to survey 17 workers of Tesco company has filed legal action
against them for age and gender discrimination. There is also legal action against them related to
accounting frauds and to mislead investors. Company has to conduct its operation in accordance
with strict code of practise regarding food products.
According to the view of López López, (2017) macro environmental factor plays an
important role in company's performance. Positive impact of political factor in Tesco company is
that they generate high employment for the domestic peoples of country where they have
established their business. Negative impact of political factor on company is that they have
created huge globalisation of their business because of this company have to face problem in
doing import because of different import duty levied by government.
As per the view of ZHAO and et.al., (2018) environmental factor affect Tesco company in both
positive and in negative way. Positive impact is that they have provided huge role to provide
contribution in maintaining environment which increases their goodwill. Negative impact is that
for performing their contribution huge amount of investment is had to be done by company and
their profitability reduced.
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LO 2
TESCO'S internal environment and capabilities
SWOT analysis
Strength-
 Tesco company has provided best
services in customer service and retail
excellence which provide them
numerous of awards.
 This company has the largest
profitability in supermarkets and in
retail stores across the world.
 In all types of economic cycles this
company has strong financial position
which increase their cash reserves and
property which is undeveloped.
 They have developed new technologies
throughout their operation which helps
them to generate growth of the
company.
 They have effective online operations
in providing better delivering food
services among peoples.
Weakness-
 They have weak financial performance
in some of their subsidiaries which are
not operating well which reduce their
profit level.
 Increased competition in market has
provided continuous pressure and also
have reduced retailer's profit margin.
 They majorly rely on UK market
because of that their demand and
supply reduced on other markets.
 Less investment in new technologies
because this is not as effective as the
vision provided by company.
Opportunities-
 They have lot opportunity in increasing
their market internationally.
 By developing new strategies they have
opportunity to attract new customers
which helps them in increasing market
share.
 By developing their online services
Threats-
 Customer changing demand create
hurdle in implementing strategies.
 Has to face sometimes different law
suits regarding their product standards.
 Large competition in market reduce
profitability level by which number of
player increased in market which
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they got success in capturing new
customers of the market.
 By developing long term relationship in
market they have opportunity of
lowering cost and to build strong brand
image.
providing tough competition to
company.
Strength- by providing best services to customers and by increase retail excellence Tesco
company is able to maintain their position in the market which helps them to achieve many
rewards in market. This company has the largest profitability in supermarkets and in retail store
by which they are providing tough competition in market to other companies.(Belton, 2017. )
Companies financial position is so strong which helps in increase company's cash reserves and
profitability. They are providing good quality of services by which managers are able to develop
strong brand image of the company. Company have developed new technologies throughout
their operation which helps them to generate growth of the company.
Weakness- during last four years company's profit before tax has been constantly declining
which reduce their overall profitability of the company. They have to face continuous pressure
from competitors in market by which their retail profit margin got reduced. Increased
competition in market has provided continuous pressure and also have reduced retailer's profit
margin. Company does less investment in new technologies because this is not as effective as the
vision provided by company which leads to reduce their overall performance.
Opportunities- new technological strategies and company's overall development strategies are
so powerful that it helps company to expand their business internationally and to achieve overall
growth of the company. TESCO have lot opportunity in increasing their market internationally.
They have strong long term relationship in market from customers by which opportunities like
lowering of cost help company to build strong brand image. By developing long term
relationship in market they have opportunity of lowering cost and to build strong brand image.
Threats- continuous changing demand of the customers in market create hurdles for company
regarding implementation of strategies for the growth process of the company. Another threat for
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company is different law suits which government has provided regarding food safety and about
nutritious food will have to strictly maintain in company.
According to the view of O'Hare, Stewart and McColl., (2018). company's strength that
is brand positioning and largest profitability from retail stores will only provide positive impact
on company. Another positive impact on company is there online services which nowadays will
rapidly increase and helps company in generating higher revenue in company. Company's
constantly changing technologies for their products and services makes them strong competitor
in business market by which they are they become third largest revenue generating company
across the world.
According to the view of Lewis, (2017).company's weakness will only provide negative
impact on company's profitability for which company has to develop effective strategies which
resolves these outcomes like weak financial position of company, their dependency majorly in
UK customers, less investment in new technology etc. company majorly relies on UK customers
by which they will not able to concentrate on other market which need attention to increase
revenue and profitability of the company. Tesco's innovation policy is not so strong in doing
research and developments of products and services they offered by which other competitors in
the market get that position in doing innovation activities. These all factors leads to a negative
impact which reduces overall profitability of the company.
Both internal and external factors of the Tesco company are affecting company's
performance. But company's strength and their positive impact also helps company in achieving
their objective goals and to get growth of the company internationally. Company's political,
economical, social, environmental and legal factors are also helps company to stay strong in
business market. Company's policies are need to be so strong that both internal and external
factors only provide benefits to company and which does not affect company's performance.
Large competition in market reduce profitability level by which number of player increased in
market which providing tough competition to company.
LO 3
Evaluate and apply Porter's five force model
Tesco is the British multinational groceries and general merchandise retailers in UK. It
has varied fields as retailing like clothing, electronic, furniture financial services and internet
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services. Company porter's five force model for analysis and improve competitive edge and
market positions of business (Dobbs, 2014).This model is also helping for investigating threats to
company and determining them. It helps in determine multiple aspects of company's competitive
structure and economic environment that raising competition in industry. There are five forces
involves in model such as:
Competitive rivalry among existing competitors: Company adopt this model to
identify competitors in the market. Tesco is retailing company and selling differentiate products
and services. There are many challengers such as ASDA, Sainsbury, Aldi etc. in retail industry.
There are no shifting cost for customers and this impact also rising grade of competition in the
sector. With the help of maintains clear leadership, they are facing challenges with positions
disregard(Asiedu, 2015). Tesco handle aggravate rivalry among existing challengers in retail
sector by increasing sustainable distinction and building scale for better competing for
competitors. They are managing this force by competing for small market instead of
collaborating with challengers to rise market size.
Bargaining power of suppliers(low): There is no sifting costs of suppliers for
supermarket chain and marginal cost. Firm utilizes its bargaining power to wait payment to
suppliers in terms of rising its functional profits margin. After this, poor suppliers handling
pulled large media coverage damaging brand image. After that, relationship with suppliers have
been capable to big review by new leadership. As result, now Tesco has many of suppliers that
they are feeling satisfied with their relation with company. Firm handle bargaining power of
suppliers by building efficient supply chain with aggregate suppliers. Tesco utilize different
material by experimenting with product design. Firm switch to another, if pricing is rising of one
raw material.
Threats of new entrants(Low): Tesco has low threats of new entrants, because they are
bringing invention, lower pricing approaches, decrease price and giving new value suggestion to
consumers. Company has to bring off all challenges and build effective barriers to safe-conduct
competing edge(Porter’s Five Forces of Competitive Position Analysis, 2013). Through creating
new goods and services and building economies scale, so that it can lower fixed cost per unit.
Tesco spending large amount of money on research and development and building capacity for
discourage new entrants in the industry. Company keep determining modular on daily basis, so
that new commodity are less likely to enter impulsive industry. It importantly decreases
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framework of exceeding income for new business hence disapprove new participants in the
sector.
Bargaining power of buyers: There are numbers of buyers in the market and their
demand is also higher. Consumers are required high quality products and services at lower price.
Therefore, Tesco has high pressures for increasing profits in long run. There are higher
bargaining power of consumers and their ability to desire rising discounts and offers. Company
increase big base of clients that assists in decrease bargaining power of purchaser and provide
possibilities to Tesco to conformation its sales and procedures of production(Wang and Zhang,
2015). Firm introduce new goods by invention, because consumers frequently want discounts
and offers on accepted commodity that can limit bargaining power of buyers. New goods
decrease defection of existing customer of company to its challengers.
Threats of substitutes(High): Company suffers profitability while new goods and
services meet customers wants in various path. If company offers value suggestion that is unique
from current offers of sector, so that it is higher threats of substitutes product and services. Tesco
handle threats of substitutes by being services oriented instead of product oriented. Firm identify
wants of customer instead of purchasing by customers. They are increased sifting costs for
consumers for managing threats of substitutes goods and services.
LO 4
Models that interpret and device strategic planning for TESCO organisation
Strategic planning is the type of process which is done by organisational leaders to find
out vision to create better future, goals and objective of the organisation. Primary objective to
create strategic planning which helps leaders to achieve company's growth in the future.(Wicker
and et.al., 2015. ) Two models which applied in doing strategic planning in Tesco organisation is
Porter's generic strategies and Bowman's extended model of strategy.
Porter's generic strategy
Basic aim of this strategy is to maintain effective long term and short term success. In
order to gain competitiveness in market Porter has given four major elements on which company
has to rely which helps in building effective success of company. Main challenges which
company face is what elements are to produce that helps in establishing strong image company
among its competitors. Company has to provide competitive advantage to its customers in order
to gain their loyalty. This only can be done by either providing offers and discounts to its
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consumers or by lowering price from its competitors which helps them to attract more customer
in the firm. Four elements provided by Porter are-
Cost leadership- according to this factor Tesco company either sell its product by offering lower
price in comparison to their competitors or by doing producing products in the lowest prices by
which will able to sell their products on average price.(Bell and et.al., 2017.) This theory helps in
establishing profit margin by which company will able to stand in front of their competitors and
may able to establish long run success.
Differentiation- by this factor Tesco company will able to maintain their product which is reach
in high quality and with style. This helps them not to lower cost and to sale their product with
charging fair amount to consumers. If company will provide good quality of product then
customer will not think on investing amount on that product. But this only happens this
marketing plan needs to be communicated to consumer so that they get attracted.
Cost focus- according to this strategy Tesco company will not use principle of cost leadership
under which there main aim is to provide only single product but with the best quality so that
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Illustration 1: porter's generic strategies
source:(Porter’s Generic Strategies, 2018)

they will be able to maintain strong customer loyalty in the company. Company may able to
charge higher price of amount of that product because no other substitute is available for them to
purchase. Main aim of this focus is not diversified company's products and services into different
production, company only have to pay attention more on single activities.
Differentiation focus- this point specify that if company makes product which is according the
expectation of consumers then they will be able to charge higher amount of price in goods and
services they provide. Under this company has to select specific area or elements which other
company is not producing by this they will able to maintain customer satisfaction which leads to
develop strong customer base in the organisation.(Shakhshir, 2014.)
These are the basic four elements which is provided in Porter's Generic Strategies by which
Tesco company able to make effective marketing strategies to enhance growth in the company.
Another model used by company in doing effective strategies in company is-
Bowman's clock strategy
Company use this model for doing effective strategic planing in relation to product
position so that company will able to develop their competitive position in business market
which helps them to attract customer in organisation. In this model eight elements are provided
that is low price and low value added, low price, hybrid, differentiation, focused differentiation,
risky high margin, monopoly pricing, loss of market share. This strategy depends on two
elements that is price value and perceived value. Diagram which shows this strategy is as
follows-
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