Business strategy can be referred to as the course of actions as well as decisions that are undertaken by an enterprise in order to gain a competitive advantage in market. The main objective of adopting and implementing a business strategy is to ensure achievement of organisational goals and objectives within the stipulated time in a desirable manner. The major focus here is to gain the attention of the largest quantum of population to enhance the sales and profitability of company. The following report is based upon the strategic analysis of Tesco PLC which is a British multinational retailer dealing in general merchandise and grocery items as well as renders financial services. This assignment consists of 4Ps. P1 gains an insight into the influence and impact of macro environment upon company and its strategies. P2 analyses the internal environment of organisation as well as the capabilities of firm using Porter Value Chain and McKinsey 7S model. P3 explores the practical application of Porter Five Force Model to evaluate the competition within retail industry. Lastly, a strategic plan will be devised for the company in P4.
Introduction To Company
Tesco Plc is a multinational company headquartered in England, United Kingdom. This organisation provides products associated with daily needs such as grocery, general merchandise, electronics, clothing, books etc. This entity also offers financial, telecom and internet services to its clients spread across the globe.
Background: This company was found by Jack Cohen in 1919. Tesco originally operated as a grocer in UK. Since 1960, this organisation carried out massive diversification and entered product segments such as clothing, toys, books, petroleum, financial services, internet, telecom etc. They started carrying out expansion in 11 countries since 1990s and repositioned themselves as a multinational corporation which was capable of attracting a large segment of population with “Tesco Value” items as well as “Tesco Finest” product range. This company is listed on LSE (London Stock Exchange) and is a part of FTSE 100 Index.
Mission: The mission statement given by Tesco is “To make what matters the most to people, together” (From vision, mission and values to KPIs at Tesco, 2018).
Vision: The vision statement given by Tesco is “To become the most valued company in the eyes of customers, community and stakeholders”.
Objectives: The objectives of Tesco to ensure long term sustainability in market are given below:-
- To become a leading retailer within the global market.
- To enhance the core business within UK to facilitate growth of operations in domestic country.
- To engage in social initiatives so as to act in the interest of community and environment.
Sales and Profitability: This organisation is continuously growing over years owing to its high quality products and its diversification strategy to gain a high stake in global marketplace. The social, economic and marketing initiatives that are undertaken by this organisation at regular intervals is the major reason behind this company being the third largest retailer across the globe.
As can be seen in the graph below, the profit earned by this entity in last year (2018) was £1208m. This clearly indicates the edge of Tesco over rivals within retail industry such as Marks & Spencer, ALDI, Sainsbury's, ASDA, LIDL etc. and the capabilities that this organisation possess to continue to operate in the same manner in future course of time.
P1. Analysis of impact and influence of macro environment on organisation and its strategies
This section of report will take into account the definitions of strategy. Also, it will PESTLE and Stakeholder analysis of company together with advantages and disadvantages of conducting PESTLE analysis for company.
Strategy refers to the course of action that is undertaken to achieve the long term goals and objectives.
In other words, strategy can also be defined as the direction of people as well as their behavioural characteristics towards achievement of a desirable state in future context.
Similarity between the definitions: Both the definitions propose that strategy is future oriented and assists in the attainment of long term goals.
Difference between the definitions: While the first definition proposes strategy to be a course of action, the latter indicates that it is the alignment of behavioural characteristics of individuals towards the long term goal.
The manager of Tesco has conducted PESTLE analysis so as to gain knowledge of the external business environment factors which influence and impact upon the company and its business strategies.
Political Factors: The elements belonging to this factors determine the extent of government intervention in the operations of company. These include factors such as trade tariffs, tax policies, fiscal regulations etc. The management of Tesco has to take into account these factors to successfully sustain in market for a long time.
- Positive: The government of United Kingdom is stable which reflects that the laws and legislations made by the political system of country remains consistent from year to year. This fosters Tesco to gain knowledge about the legal rules and regulations and survive in UK market at a leading position.
- Negative: As company tries to expand into newer countries where the political system is not legal, it may issues in relation to ensuring its sustainability in marketplace. To prevent this, organisation is capable of devising a strategy wherein only such markets are selected where the government is stable.
Economic Factors: These comprise of those factors which are associated with the economy of a country such as inflation, economic growth, interest rate, foreign exchange rates etc. Tesco considers these aspects to maintain its top position in UK.
- Positive: Tesco takes into account the policies of UK that may significantly affect the price, expenses, demand and revenues of company so as to smoothly run its operations within the nation.
- Negative: The market share of Tesco in UK is 30% which indicates that an adverse change within any of the economic policies of country will hamper the sales and profitability of company (PESTLE Analysis for Tesco discusses its Business Environment, 2019). To deal with this, organisation should constantly keep on conducting research on its dominant revenue generating markets such as UK.
Social Factors: These are the demographical factors of the population which influence the operations of company. These include aspects such as latest customer trends and lifestyles, population analytics, cultural trends etc.
- Positive: The customers of UK have now shifted their focus towards bulk and one-stop shopping. Owing to this, Tesco has significantly raised the quantum of non-food articles. Within the food segment, they have introduced organic products taking into account the health conscious nature of people.
- Negative: The customers within UK have an innovative mindset and desire products which are unique and not available anywhere else. Thus, Tesco need to continuously make use of innovative techniques or launch innovative products otherwise the competitors will out-power the brand.
Technological Factors: With efflux of time, constant changes take place in the environment which have a significant influence upon the operations of business as well as their strategies.
- Positive: Tesco is an innovative company which undertakes various initiatives so as to stay ahead of competitors within UK such as M&S, LIDL, ALDI, ASDA etc. They have started online delivery and self service check out points to facilitate convenience for consumers.
- Negative: There are large number of competitors within UK retail industry which indulge in innovation and creativity to gain the attention of people towards their products, thus, a little variance of Tesco with innovative initiatives may significantly hamper the performance of company in marketplace.
Legal Factors: These consists of legal aspects prevailing within United Kingdom that need to be considered by companies to sustain in marketplace. Such laws include employment laws, consumer laws, safety standards etc.
- Positive: Tesco is a multinational corporation that ensures the compliance with all the necessary laws and legislations to ensure that the name and stake of organisation is not hampered within its dominant revenue generating market.
- Negative: Food Retailing Commission have introduced a Code of Practice which has to be complied with, by companies. In case Tesco does not comply with any of the standards, this will cause harm to the reputation and stake of company.
Environmental Factors: Any organisation that is functioning as a part of economy should operate in the interest of society and environment. This include practices such as CSR, sustainable development, recycling etc. that contributes towards preservation of environment.
- Positive: Tesco has undertaken an initiative to reduce carbon footprints by approximately 50% till 2020 and minimising waste in its outlets which is a significant step towards preservation of environment (PESTLE Analysis for Tesco discusses its Business Environment, 2019). This helps the organisation to gain goodwill and top position in market.
- Negative: Being a multinational corporation, consumers within marketplace have a lot of expectations from Tesco and a little deviation from operating in community interest may damage the goodwill of entity in UK.
Stakeholders are the most crucial and significant part of an organisation who possess the power to take part in decision making process and influence the operations of company consequently. Stakeholder analysis matrix is a strategic tool which segregate the stakeholders on the basis of their interest and power in company context. In this regard, the external stakeholders and their influence upon Tesco are mentioned below:-
Influence on Tesco
Customers are the key to success of a business and thus Tesco has to operate in a manner that they derive maximum satisfaction from customers. If Tesco does not offer products which are liked by customers, it will be out-powered by rivals.
They are the ones who supply the resources that a business needs. Suppliers of Tesco wants that firm makes payments to them within timely manner in case of credit sales.
The main concern as well as interest of trade unions in Tesco is to generate higher wages and to provide a healthy working environment to employees.
Actions undertaken by Tesco have a significant impact upon the community and thus they desire that Tesco operates in the interest of environment and society.
The UK Government makes policies and procedures which have to be taken into account by Tesco so as to ensure their sustainability within marketplace.
Advantages and disadvantages of PESTLE Analysis
- This framework assists an organisation to make use of the opportunities available in macro environment so as to gain a strategic edge in market over rivals.
- Also, this analysis helps to tackle with the macro environment issues that act as threats for a company.
PESTLE analysis is an excellent strategic tool to gain knowledge of the macro environmental factors that impact on the organisation yet it possess certain disadvantages also.
- The biggest disadvantage of using this analysis to analyse the influence and impact of macro environmental factors on conduct of business is that these factors change at a rapid pace and conducting PESTLE analysis at regular intervals is not feasible for an organisation.
- Conducting this analysis requires efforts, time and money which indicates that if the results of carrying out this analysis are not favourable then this may lead to waste of manpower performance and initiatives.