Icon College: Business Strategy Analysis of Tesco's Strategic Planning

This report provides a detailed analysis of Tesco's business strategy, focusing on its macro and internal environments. The report begins with an introduction to business strategy and then delves into the impact of macro-environmental factors on Tesco using a PESTLE analysis, examining political, economic, social, technological, environmental, and legal factors. The report then analyzes Tesco's internal environment and capabilities using SWOT and VRIO frameworks to identify strengths, weaknesses, opportunities, and threats, as well as valuable, rare, inimitable, and organizationally exploitable resources. Further, the report explores the competitive environment of Tesco, and discusses relevant strategic planning models and concepts. The report includes an analysis of Porter's Five Forces. Finally, the report concludes with a summary of the key findings and recommendations for Tesco's strategic planning.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Impact & influence of macro environment factors on the organisation......................................3
TASK 2............................................................................................................................................6
Analysis of internal environment & capabilities of organisation................................................6
TASK 3..........................................................................................................................................10
Analysis of competitive environment of the organisation........................................................10
TASK 4..........................................................................................................................................13
Theories, models, concepts that can help in strategic planning................................................13
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21
Tesco Porter’s Five Forces Analysis, 2016. [Online]. Available through: <.................................22

INTRODUCTION
Strategies can be regarded as the various plans that are used by organisations in
achievement of long run goals. It is also very helpful in improvement of overall
performance of various business organisations (Marx, 2015). In present report there has
been different frameworks been applied to a retail organisation of UK for developing an
understanding of how can they form strategies to achieve their overall objectives. There is
application of models such as PESTLE, SWOT, VRIO, Porters five force, porter’s generic
strategy, bowman’s strategic clock all these are said for development of a business plan to
be used in course of achievement of their laid down objectives
TASK 1
Impact & influence of macro environment factors on the organisation
PESTLE Analyses is a framework which is adopted to assess the micro environment factor
that imposes direct impact on the productivity and profitability of business organisation. In
context of TESCO, the manager focuses on grab the opportunities as well as eliminate the risk
in order to boost the success and growth of the company (Murthy, 2012). There are various
external factors in relation to TESCO which is going to be mentioned below:
Political Factor: It includes various factor such as government policy, taxation structure and
many more which directly affect the performance of business. The positive and negative
impact in relation to TESCO which is going to be given below:
 Positive impact: The political condition of UK is stable thus it imposes positive impact on
the productivity of the company. Due to political stability, government does not make any
inference in the activities and functions of business organisation.
 Negative Impact: Due to increase in tax rate it adds cost to the product of the company
thus it affect the company in negative manner.
Economic Factor: Economic factor includes unemployment rate, interest rate, exchange rate,
inflation and deflation rate and so on which imposes positive and negative impact on the
operations of the TESCO which is discussed below:

Figure 1: Interest rates in UK
 Positive impact: Due to decrease in inflation rate, it reduces the cost of product which
imposes the positive impact on the productivity of the company. It helps in increasing the
future sales and growth of TESCO.
 Negative Impact: Due to stable economy, it imposes negative impact on the financial
performance of TESCO because it increases the rate of interest for the business
organisation.
Social Factor: Social factor includes population, lifestyle, preferences as well as trend and so
on thus it imposes both positive and negative impact on the future sales and growth of the
TESCO which is going to be mentioned below:
 Positive impact: In context of TESCO, the manager focuses on providing superior quality
products and services to its customer in order to satisfy them. It helps the company in
retaining the customer for a longer period of time. Tesco organic sales rise by 15 percent
in the year 2017 (Tesco “Organic food sales strongest for over a decade,
2017).
 Negative impact: Due to frequently changes in taste and preferences of customer; it is not
possible for TESCO to cope up with dynamic situation in appropriate manner.
Technological Factor: Technology plays an essential role for the success and growth of
business organisation. It is important for the manager of TESCO to execute the latest
technology in order to offer innovative products and services to its customer (Nurlansa, and
Jati, 2016.). There is some positive and negative impact in context of TESCO which is given
below:

 Positive impact: Due to implementation of latest technology, the manager of TESCO
offers innovative and unique products and services to its buyer in order to satisfy them.
 Negative impact: The cost of implementation of advanced technology increases the cost
for the TESCO can affect the productivity of the business firm in negative manner.
Environmental Factor: Environmental factor involves climate as well as weather condition
and so on (Oldmanand Tomkins, 2018). The favourable and adverse impact of this factor in
reference of TESCO which is going to be discussed below:
 Positive impact: The manager of TESCO provides the eco-friendly products and services
to its customer in order to increase their living standard. And also they offer goods and
services which do not harm the environment.
 Negative impact: Due to frequently change in the weather condition it imposes negative
impact on the future sales and growth of TESCO.
Legal Factor: Legal factor includes rules, laws, regulations as well as regulations and many
more thus it imposes both positive and negative impact on the productivity of TESCO which
is given below:
 Positive impact: The manager of TESCO comply the laws which imposes positive impact
on the performance of the company. TESCO has reduced its carbon emissions by
26% (Our Tesco “How We Communicate Together”, 2018)
 Negative impact: Due to change in rules, laws and regulation results in change in the
policies of the business organisation.
Critical analysis of various macro factors to determination of some of the management
decisions.
The manager of the company makes effective strategy, policies and procedures in order
to grab the opportunities and reduces threat which is prevailing in the environment of the
business. From the above mentioned topics, it has been analysed that political condition of
UK is stable thus it imposes the positive impact on the productivity and profitability of
TESCO. In addition to this, they provide eco-friendly products and services to its customer in
order to satisfy them. It helps in increasing sales and growth of business organisation.
From the above analysis there are some opportunities and threats that have been identified in
respect of Tesco:

Opportunities:
Tesco has opportunity to form strategic alliances with other organisations and existing plants
by diversifying their product range. They can launch for the discount change in different parts
of the world where they are presently not having any present surcharge in countries like India.
Threats:
There is a very high threats from various German discount brands and high growth of
competitors. Whether there is any validity to adjust the supply chain because of the brexit
environment and after effects of this referendum.
TASK 2
Analysis of internal environment & capabilities of organisation
Internal environment of every organisation is related to the culture, management and can
impact the overall decision making in the organisation. There is a requirement to study all
such factors in detail that are having an impact on the internal functioning of a organisational
and are also a part of internal business environment. Tesco has to integrate the strength &
opportunities that they have identified and then convert them into strategies for achievement
of their laid d own business objectives. Below discussed is the swot analysis and VRIO
analysis. These two models are basically used for purpose of achievement of certain business
objectives in Tesco. For achievement of certain objectives SWOT analysis.
Strengths Weaknesses
 Tesco has a established brand image as
no other retail store is having a high
trust worthy image that is possessed by
TESCO.
 The capacities only compatible with
their present business model that is
leading to limitation for expansion of
their more product segments.
 Tesco is having a low profitability ratio
& their overall contribution is also low
in their industry average
 The overall investment made in the

 They have a track record of skilled
workforce that they built up by
continuous training & different learning
programmes that have been developed
with time. It is helping Tesco in getting
competetive advantage as compared to
other competitors.
 Tesco has their own supply can
management and at same time they
possess a very strong network of
research and development is low as
compared to other fast growing players
in the retail industry to which Tesco
belongs.

distribution that is helping them in
reaching to their potential customers and
target markets.
Opportunities Threats
 Tesco has a very attractive opportunity
as they are willing to enter some new
emerging markets that can help them in
enhancement of their sales
 There has been lot of cost advantage for
Tesco such as their low transportation
cost is providing them with to increase
their profitability. It is a tool that can
help them in offering products at
reasonable prices so that it is helpful for
their customers in getting attracted
towards such products.
 There has been a huge investment being
made in online platforms by Tesco, as
they will be able to expand in Tesco
locations where they are not having any
physical presence.
 Threat that has been very crucial for
Tesco has been that there is no proper
innovation or timely innovation that is
done by Teso recently all this is leading
to other similar brands getting a
competitive advantage and more variety
products for their customers.
 There is a limitation of coounterfelt &
product quality. The prices of their
goods are many times not in accordance
with the quality of products. It may lead
to dissatisfaction by their customers and
they might switch to other products.
 There have been many law suits that
may have resulted into a threat to tecso
brand image and also there have been
continuous fluctuations in standards of
product in the target market.
For a organisation it is very essential that they have to make a detailed analysis of their
competencies & overall capabilities so that various opportunities can be availed an and
used for the purpose of achievement of laid objectives (PhadermrodCrowder. and Wills,
2019). VRIO framework is a analysis that can be used for purpose of making a detailed
analysis of different factors for attainment of a competitive advantage.
The VRIO analysis consists of four factors such as value, imitability, rareness & the
organisation. The framework can be used for Tesco as given below:
 Value This consists of various factors that can be sued for identification of

various capabilities and resources that are very valuable for a
organisation. There are four such resources that is very important
for Tesco and is very helpful for theme in attaining of their
objectives (Policy, 2016). Such as Distribution network, strong
brand image, competent workforce, cost advantage and range of
products.
 Rareness Rareness is used for identification of those resources that are very
rare and is also very difficult to be found in a organisation. In case of
tesco such resources includes their strong distribution network,
competent workforce and their wide product category (Sirén, and
Kohtamäki, 2016). These are resources that are rarely found in a
organisation and are very helpful for Tecso in attainment of a
competitive advantage over a period of time.
 Imitability It refers to a criteria whether a certain range of features and resources
that cannot be copied or imitated by other competitors. Such type of
resources for Tesco is their strong distribution network and the wide
range of products (Varelas, and Georgopoulos, 2017). These two
are such resources that cannot be easily adopted by any
organisation. In case if a organisation wants to then also there is
requirements of huge amount of investment by a organisation.
 Organisation It can be said that every organisation as one particular resource that is
valuable, rare and at same time cannot be imitated by other
organisations. Such resource for Tesco is identified that whether the
organisation can exploit the capabilities or not (Verbeke, 2013).
This resource is the strong distribution network that is helping them
in reaching to a large base of customers in given period of time.
After making a detailed analysis of internal environment it can be said that Tesco has
certain objectives such as higher profits, larger market share that can only be achieved by the
internal factors and the capabilities of the organisation (Rastogi,and Trivedi, 2016). Tesco can

form their strategies so that after considering their strength and weakness they are able to
achieve their overall objectives
Analysis from resource based view
Distribution
network
Brand
image
Competent
workforce
Range of
products
Value Yes Yes Yes Yes
Rareness Yes No Yes Yes
Imitability Yes No No Yes
Organisation Yes No No No
Resources Long term
competitive
advantage
Short run
competitive
advantage
Sustainable
competitive
advantage
Temporary
competitive
advantage
Critical evaluation of internal environment & capabilities
Internal analysis is helping every organisation in identification of their overall strength &
weakness. It is very helpful in understanding the resources and capabilities to minimise the
threats of such organisation. Organisation’s structure also plays a role in utilisation of overall
capabilities and strength of an organisation so that their overall functioning is carried out
smoothly and in a better manner.
TASK 3
Analysis of competitive environment of the organisation
Porters five force model: Porter five forces is a model that is used for the purpose of
understanding of different opportunities that are part of the external environment and can be
used for formation of attractive opportunities. Porters five force model is used for
identification and understanding of what are the opportunities that can be sued by a
organisation in order to expands their present market share and profitability ratio. This is a
model that is used for purpose of understanding of the forces that could posses an impact on

the organisation. The description of porters five force model in case of Tesco is mentioned
below:
Competition in the industry: It can be said that is a requirement to identify the potential
competitors that can posses an impact the operational functioning of a organisation. In case of
Tesco the overall industrial rivalry is very high as there are some of the big brands that are
actually leading to high competition for Tesco. Such brands are Aldi, lidl etc. All these are some
of the retail organisation’s dealing in similar products like Tesco.

Threats of the Substitutes Products: When there are more substitutes available the
threat is high but when there are lesser substitute the threat is less. With the increasing
competition the threat of substituent is increasing day by day for Tesco. Also the low switching
cost increases substitutes which affect their operations such as public transport etc (Köseoglu and
et. al., 2013). There are many substitutes like Morison’s, Sainsbury, ASDA that are leading to
presence of high substitution threat for Tesco that can be understood from graph mentioned
below:
 Figure 2• Market share of grocery retail chains in the UK from January 2015 to
April 2016
Source: Tesco Porter’s Five Forces Analysis, 2016