Unit 32:

Business Strategy

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Table of Contents

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Introduction
Business strategy plays a crucial role in any business because it helps a company to achieve the
vision, mission and objectives. To implement business strategies, a company must analyze the
external as well as the internal environment. The external environment is affected by so many
macro elements. To complete this report, Tesco company has been selected which has been
recognized as the multinational retail brand in UK as well as other countries (Tesco Plc, 2020).
For analyzing the macro factors, a PESTEL analysis and Porters Five Forces Model have been
conducted on the industry. Besides, to understand the internal facts, SWOT analysis and VRIO
analysis have also been conducted. Moreover, stakeholder analysis, Ansoff matrix and different
types of strategies are briefly discussed so that Tesco can adopt a proper strategy and make
decisions accordingly. It is very significant part for any business as it helps it to get a competitive
advantage over the rivalries and maintain market share appropriately.

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P1: Analysing the macro environment for Tesco using appropriate
frameworks
Definition of strategy: Strategy is something which is taken by the management of any business
for the betterment of the organization. From business perspective, a strategy can be considered as
a series of actions that an organization takes to accomplish its targets and objectives (Jofre,
2011). For instance, the strategy of Tesco is to furnish the client with more prominent value
through excellent items and administrations to expand its productivity and benefit development
in the upcoming years.

The mission of Tesco: The mission is the prime goal that has to be accomplished by an
organization. The strategic mission taken by Tesco is to make open doors so that the clients can
able to buy products from the stores of Tesco. They provide reliability cards for this so that the
clients can smoothly buy products even in the financial crisis.

The vision of Tesco: Vision is such a state in where every company cherishes to reach. The
trademark of Tesco is “Every Little Helps a lot” that means the organization needs to be as close
as conceivable to the clients by giving them each and everything conceivable.

The objective of Tesco: The main objective of the Tesco is to serve the client with amazing
buying experiences and strengthen its turnover and become the most famous retailer in UK
(Tesco Plc, 2020).

Different strategic direction of Tesco: Basically, strategic direction refers to the activities that
an organization attempts to accomplish the objectives of its strategies and arrive at its crucial
vision. To accomplish the big ambitions such as creating new opportunities for the young stars,
playing key role in reducing food waste etc. Some of the strategies taken by Tesco are given
below:

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 Strategies Tactics and focus
To develop the UK center This incorporates growing staff numbers by
20000 over two years, redoing existing stores
and introducing more technologies.
Be a creator of especially regarded brands This incorporates developing its own-name
brands, for instance, F&F dress and Tesco
Finest to give customers quality things at
competitive prices.
To be a remarkable worldwide retailer This procedure consolidates opening up to
fifty new F&F establishment stores
worldwide.
To fabricate group with the goal that they As the main component of Tesco is the
make more worth human resource so that it ensure to make the
proper use of these human resources so that
they can produce more value towards the
organization.
To be strong in all businesses like food To accomplish this strategy, it has been trying
to engage in other types of businesses by
ensuring the quality.

Strategic planning techniques: Generally, an organization can consider various sorts of vital
strategic methods and structure to make systems that can assist with arriving at its crucial vision
and mission. Tesco plc can adopt the following techniques for its strategic planning:

Stakeholder matrix: It can be defined as one of the least difficult and best instruments for
dissecting the stakeholders in the organization (Van Niekerk, 2016). It can help Tesco plc to

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manage its stakeholders in an authentic way which is essential to reach to its objectives.

Figure 1: Stakeholder Matrix (Van Niekerk, 2016)

As the above figure appears, an organization can separate its stakeholders into four groups
dependent on their interest and power. From the perspective of this matrix, Tesco plc should
make necessary steps to keep the stakeholders high force and low intrigue satisfied. To be
progressively explicit, the tax specialists, government organizations, and controllers are needed
to be kept fulfilled. The stakeholders having high force and high interests, for example, loan
bosses, investors, worker's organizations, providers, and competitors ought to be firmly
observed. Then again, the stakeholders having low interest and low force, for example, social
organizations should be observed with least endeavors. Ultimately, the stakeholders with high
interest and low force, for example, clients, representatives, and media should be kept aware
about the activity of the organization. Here is a list of stakeholders of Tesco plc:

Internal stakeholders External stakeholders

Employees and workers Consumers

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 Management body Loan providers
Executive Committee Government agency
Shareholders Competitors

PESTEL analysis: There are so many macro factors which can influence the activity of an
organization. So as to decide the situation of the Tesco recognizing the impacts of these
components, a PESTEL analysis has been directed underneath:

Political

Legal Economic

PESTEL

Environme
Social
ntal

Technologi
cal

Figure 2: PESTEL model (Academy, 2018)

Political factors: The main political elements remember political soundness of the country,
government approaches, strategies of tax, foreign exchange arrangements etc. These elements
can altogether affect the general tasks of an organization. Since the Tesco is a global
organization the general political strength of the outside business sectors assumes an essential
job in the general execution of the organization. Tesco is largely dependent on European nations
where the political elements are stable. (Tesco Plc, 2020)

Economic factors: These variables are the most applicable components which can affect the
general business activity of an organization by impacting the cost, demand, income and price

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levels. The monetary variables refer to the loan and interest rate, exchange scale, GDP
development rate etc. Though the Tesco is an enormous global organization, it is vigorously
reliant on the UK where it has practically 30% of its share of the overall industry. In this way,
the organization is vigorously presented to the adjustments in the financial elements which
implies a downturn monetary development may put the organization at stake.

Social factors: The predominant social components which can impact an organization is
population development, age conveyance, health cognizance. All of these elements have both
positive and negative sides. Tesco is cautious about distinguishing the effects of these variables
which drove the organization to present increasingly organic items in its stores.

Technological factors: These factors often give different new chances to a business organization
to improve its items, procedures and client relations. Tesco consistently attempt to adopt the
benefits of these advances with the goal that it can keep up its competitive position contrasted
with its rivals. For example, the advancement of new innovations has permitted the organization
to receive web-based shopping administrations which has helped the organization increment
consumer loyalty and yearly turnover (Tesco Plc, 2020).

Environmental factors: The ecological factors, for example, shortage of materials, carbon
impressions can likewise impact an organization. Tesco is constantly dedicated to securing the
earth for which it has embraced a guarantee to decrease its carbon impressions up to 50% by
2020. Other than the organization, the organization is consistently cautious about wastage
reducing programs and this has given it a competitive edge.

Legal factors: The legitimate elements incorporate different kinds of legislation and guidelines
forced on the various sorts of organization inside a nation. An organization must comprehend
these legitimate factors so as to maintain a strategic distance from potential lawful results which
may dissolve the reputation of the organization. Different acts regarding law might impact
adversely on the operation of Tesco.

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P2: Application of VRIO to analyse Tesco’s internal environment
and capabilities
To survey the qualities and shortcomings of the Tesco's inside capacities and range of abilities,
the internal condition of the organization has been examined below with the assistance of the
VRIO examination:

Figure 3: VRIO analysis (Pesic, et al, 2013)

Value: Value is the first component of the internal condition as a company can make some
benefits by the existing assets. A similar asset may create diverse degree of values for various
organizations which relies upon the limit of use of the asset appropriately (Baron, 2018). The
human asset of the Tesco Plc. gives the organization an extraordinary wellspring of value
contrasted with different organizations. The reason behind this is Tesco group is continuously
trained up their employees to increase the effectiveness.

Rarity: Tesco is one of the best business organizations in the UK as well as the European
nations in view of its retail greatness which is an uncommon capability. So far, the organization
has the ability to give the best shopping experiences to the clients. however, the greatness may
get affected if the contenders discover increasingly creative approaches to serve the clients.

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Imitability: The contenders cannot mirror some kinds of assets and that’s why they can provide
some competitive edge to the organization. Tesco has built up a solid supply chain almost
everywhere in the world to get the flexibly of items helpfully and cost-successfully. Those assets
can't be effectively imitated by the contenders.

Organization: Despite the fact that an organization has significant, uncommon, and supreme
assets, it might not compete with the other organizations if the resources are not properly sort
out. So, the organization of various resources play a major role to the success of Tesco and that’s
why it is one of the top retailers in UK.

P3: Evaluating competitive forces using Porter’s Five Forces model

The model is perhaps the best tool to analyse the engaging quality of industry and to discover the
various sources of gaining competitive advantage. It is very important for any company to
continuously analyse the changes of the attractiveness of industry. As Tesco has created a
position in the retail market so the attractiveness of industry can be analysed through the Porters

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five model:

Threat of
entrants

Bargainin Bargainin
g power Industry g power
of Rivalry of
suppliers customers

Threat of
Substitues

Figure 4: Porters five forces (Dobbs, 2014)

The threat of new entrants (High): The entry threat by expected competitors in the
supermarket industry is similarly low on the grounds that there are entry obstructions, for
example, high fixed cost and brand reliability which keep others from entering the business.
Tesco is in the retail business for around 100 years which truly has made the organization
commendable and strong to the people the world over. In another word, the organization has
developed a brand commitment which made it functional for the company to get around 30%
market share of the UK. In addition, coordinating the cost structure is exceptionally hard for any
new organization.

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Bargaining power of buyers (Low): Bargaining power of the purchaser in the retail business is
extremely high as all the business individuals give nearly give a similar standard item (David,
2016). Other than the exchanging cost of the purchaser is low which implies they can without
much of a stretch move starting with one brand then onto the next brand which gives more value
nearly. Moreover, the scope of online shopping strengthens the power of buyers. So, Tesco
should differentiate their products so that the customers become loyal to their products.

Bargaining power of suppliers (Low): Bargaining power of the providers in the superstore is
relatively low on the grounds that the providers are constantly disposed to flexibly their items to
big retailers such as they purchase items in a huge amount from the providers which help them
to discard their items rapidly and on schedule so they fear to lose the relationship with these
enormous purchasers.

Rivalry power (High): Basically, the rivalry among existing organizations in the food and retail
industry is high in light of the fact that there are various solid contenders such as Sainsbury,
ASDA, M&S etc. In spite of the fact that the contention is high, the Tesco has had the option to
accomplish the first mover advantage and become the industry leader. In any case, the
organization should find a way to ensure its situation in the market as changes in competitive
forces would make the organization's current position adverse.

The threat of substitutes (Moderate): The threat of substitute is moderate because Tesco
produced both the original and substitute products. For example, it makes both bread and butter.
Here bread is the prime product and butter is the substitute product. But making substitute
products is easy for many other companies and customers might attracted by those if they can
provide better quality. In this case, Tesco has to ensure the quality of the substitute products like
the original products.

Tesco plc can take help from the stakeholder analysis and balance scorecard in the following
way to adjust the organizational strategies:

Stakeholder analysis: As previously mentioned, Tesco Plc has already adopted so many
strategies to fulfil their ambitions. It has uncovered that stakeholders, for example, the
purchasers, workers, media, investors, creditors, providers, contenders, and worker's
organization are the most significant stakeholders of the organization (Chopra, 2020). That is the

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reason to embrace suitable strategies to create a competitive edge in the market and to arrive at
the vision, the organization must satisfy the requirements of these stakeholders well. To satisfy
their need properly, the organization keeps informed the customers, representatives, and media
by furnishing them with the pertinent data timely.

Balance Scorecard: In order to modify the authoritative vision and systems, Tesco Plc can
attain the vital data from the balance scorecard. It can give both the monetary and non-budgetary
data required to make proper strategies and find a way to arrive at the authoritative vision. It
measures the exhibition of an organization from four points of view to produce the necessary
data. Tesco can use these following KPI’s:

Perspective Focus KPI

Financial Monetary improvement Profit margin, ROI, operating
cost
Customer Preference of customers Rate of service, online
feedback
Internal process Efficiency of business Cost of per unit, new product
operation cost
Organizational capacity Innovative ideas Employee satisfaction,
feedback of new product

P4: Applying a range of concepts, theories, and models to interpret

and devise strategic plans for Tesco
There are many concepts, models and theories which are used by the companies to achieve the
strategic advantage. Here some of the models and theories will be discussed which are relevant
to Tesco company:

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Cost and price leadership strategy: This strategy says that an organization tries to take some
attempts to become the low-cost producer (Saloner, 2018). If there should be an occurrence of
cost initiative, an organization tries to take the opportunities of scale of economics, restrictive
advances etc. This technique, whenever actualized appropriately, can give a firm better than
expected benefit by expansion. Tesco follows the cost leadership system which permits the
organization to give the clients products at the most reduced potential costs.

Differentiation strategy: An organization attempts to detach its things from opponent's reliant
on a qualities and highlights which are regarded by the clients in this strategy. Since the results
of the differentiators are not the same as the standard results of the existing firms, the clients will
address a greater expense which can prompt better than expected productivity. So, Tesco should
adopt the differentiation strategy to gain some competitive advantages.

Focus strategy: An organization seeking after focus strategy concentrate on creating

items/benefits that serve the necessities of a specific market. For this situation, an organization
may seek after either focus strategy or differentiation focus strategy. As Tesco serves an
expansive market comprising of low to middle pay group, it doesn't seek after focus procedure.
So, it can be said that focus strategy isn't a suitable for a large organization like the Tesco.

The extended model of Bowman’s strategy clock: It fundamentally shows the alternative for
the key situating of a specific item or administration in the market. This demonstrates the
Bowman's strategy clock can help Tesco decipher and devise suitable item situating plans which
is the reason the strategic clock is clarified below:

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 Figure 5: Bowman’s strategic clock (Motohashi, 2016)

Low price and low added value: This strategy says that the things are arranged in the market at
a lower cost in spite of not being isolated from other products of rivalries. This doesn't reflect a
competitive situation as the apparent worth is low.

Low price: For this circumstance, the things are arranged in the market at a lower cost at this
point they have a higher seen an incentive to the customers. Some cost minimization frameworks
and economies of scale are needed here.

Hybrid: The strategy incorporates situating an item with some joined components of minimal
effort and separation. Apparent worth is higher in this case because the clients are getting
uncommon items at an affordable cost.

Differentiation: The things are separated from the opponents to the extent quality and
significance to attain a competitive advantage in the business. Though there might be occur some
heavy cost but if the organization can provide products with excellence quality then it can charge
more from the customers.

Focused differentiation: This option includes situating an organization in a specific portion of

the market with separated items and administrations. The organizations situating themselves

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dependent on focused differentiation system get the chance to charge premium costs for their
item.

Risky high margins: It is a kind of position strategy which includes situating an item with more
significant expenses that doesn't offer anything extra which has a perceived value to the
consumers. Most of the cases this strategy does not work well because there is a chance to switch
from one brand to another.

Monopoly pricing: The firm can arrange its things at a higher regardless of the way that the
thing doesn't offer higher customer perceived value when there is only a solitary firm.

Loss of market share: The last option in the model shows a positioning technique that includes
estimating standard for a specific item despite the fact that the apparent client value is similarly
low. Therefore, an organization following this situating choice loses its share of the overall
industry at last.

Hybrid Strategy: The hybrid strategy refers to the strategy of an organization to at the same
time accomplish both low cost and separation. There are numerous organizations in the market
seeking after hybrid strategies, for example, Toyota, Sony, Dell, IKEA, Canon, etc. Today the
progressed and adaptable assembling innovations permit an organization to seek after a hybrid
strategy which permits an organization to keep the cost of the items low as opposed to keeping
up separated intrigue.

Diversification strategy: The organizations that seek after diversification strategy will in
general extend its business over the long run by adding new items to the current product
offerings or by entering new ventures or market. This demonstrates the diversification strategy is
concerned about broadening the business activity of an organization over time into various items,
markets, or ventures. The diversification strategy can play a crucial in lessening the business
hazards and expanding market share of the overall industry and productivity of an organization
by extending the market.

Vertical/Horizontal integration: The vertical integration can be considered as a key plan where
an organization broadens its activity by possessing its supply chain (Williams, 2013).
Fundamentally, every individual from the flexibly chain gives an organization the important raw
materials so it can deliver the completed items. On the contrary, horizontal integration refers to

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the obtaining of a related business by an organization with the goal of extending the size of tasks,
or broadening the contributions of items and benefits, or accomplishing the economies of scale,
or decreasing rivalry. Tesco can use both integrations to build up a strong position.

M1: Critically analysing of Tesco’s macro environment to inform

and determine strategic management decisions
PESTEL analysis and the Porter’s Five Forces Model is very important in assessing the macro
environment of any industry (Lynch, 2018). As they have both advantage and disadvantage, so
these should be considered while making decisions. These are briefly described below:

PESTEL analysis model

Advantages Disadvantages

It is exceptionally straightforward and apply The results of the analysis may end up being
to break down the large-scale components of superfluous soon as the macro factors
an economy which is significant for an regularly changes which demonstrates that
organization to upgrade its comprehension taking choices dependent on PESTEL
about the current macro factors while creating analysis results may not be productive for an
techniques or settling on plans and choices. organization.
The PESTEL analysis can help the The PESTEL analysis includes a great deal of
administrators of a business organization abstract decisions and since the abstract
effectively recognize the chances and dangers decisions fluctuate from individual to
passed on by the macro variables of an individual the results of the PESTEL analysis
economy which is important to retain the may not be satisfactory to all in the same way.
chances and take out dangers to ensure the
accomplishment of the business
Eventually it can assist the administrators The expense of assets and time spent to
with bettering position their organization in examine the macro factors utilizing the
the market by making the most of the PESTEL system is more than the advantages
opportunities emerging because of fluctuating that can be arrived from the analysis.
the macro-environmental elements.

Porter’s Five Forces model

Advantages Disadvantages

The first advantage of this model is that it The prime weakness of these model is that it
enables an organization to comprehend the overlooks numerous significant variables
competitive weight in an industry which is that can decide the engaging quality of an
important to settle on the vital decisions to industry, for example, the threat of
improve the position of the business. correlative item and government enactment

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 and guideline.
Porters Five Forces model can enable an The abstract decisions utilized in the
organization to choose whether it is analysis of the five forces may not be
beneficial to enter a specific industry by precise and suitable all the time which can
making the necessary ventures. hampers its points of interest.
It can assist a company with understanding The model can't be applied to investigate all
the bargaining intensity of purchasers and kind of enterprises including the innovation
providers which is important for an and style businesses as there are numerous
organization to successfully and proficiently different variables molding the competitive
manage them. weight in that industry, for example,
innovation and customer taste.

M2: Applying SWOT to critically evaluate the internal environment

of Tesco
The internal condition and capacity of an organization can play an indispensable job in its
prosperity or disappointment. Fundamentally, the internal condition and ability of an
organization help it to construct particular capabilities which can give competitive advantage
over its competitors (Jack, 2014). So as to break down the internal condition and abilities, a
SWOT analysis has been analysed underneath based on Tesco:

Strength of Tesco:

The organization has conceivable brand value and acknowledgment for its items and
administrations as far as class and dependability.
It has developed a strong system of suppliers to guarantee both food and non-food items
at a competitive cost.
It has enhanced its activity among various created nations worldwide so that it has
become one of the top retailers.

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 The organization has won many prizes for giving superior shopping services to the
clients.

Weakness of Tesco:

It has been previously mentioned that Tesco is largely dependent on UK and Europe
countries that means it has not invested much in Asian countries which is a weakness for
it.
Because of insufficient market research while entering into some new markets, some
stores of Tesco are not performing not so well.
Despite of being the price leader in UK, the profit margin can be reduced because of low-
cost strategy of Tesco.

Opportunity of Tesco:

To increment the performance of the organization's store, where they are failing to meet
expectations, it can make a joint project to get a help from the subsidiary organization in
statistical survey and marketing activities.
Tesco has a scope to develop its business further by giving web-based services around the
world (Tesco Plc, 2020).

Threat of Tesco:

As there are so many rivals of Tesco so if the rival firms can make some innovative
strategies so that there might be a chance for Tesco to loss its market share.
Due to the ongoing price of food items, the customer demand is decreasing. So, it can
affect to the profitability of Tesco.
The pressure of the stakeholders and regulation of the Government can adversely affect
to the operation of Tesco.

M3: Applying Ansoff matrix for devising appropriate strategies for

Tesco
A company can use the Ansoff matrix to develop the market position and competitive gain. The
Ansoff grid is given underneath to show proper procedures to develop the market position and
the competitive advantage of Tesco:

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 Figure 6: Ansoff matrix ((Kotler, Armstrong, Harris and He, 2019)

Market Penetration: The market penetration strategy refers to the strategy of building up the
market segment of an organization by selling the current things in the current market. To look for
after the market penetration strategy, Tesco can diminish the expense of its things or broaden
their marketing and special exercises to extend the market share in the current market.

Product development: It is the strategy of building up the market part of an association by

introducing new things in the current market. Tesco can utilize this strategy by presenting
another product in the current market so the prevalence of the current brand can expand the offer
of the new product.

Market development: Market development refers to the strategy of building up the market
portion of an organization by familiarizing its present things with new markets. Tesco can use his
strategy by create a new market for the higher income group.

Diversification: The diversification strategy refers to the strategy of developing the portion of
market by entering new market with latest items. Generally, it is the costliest strategy. In this
case, Tesco has to invest a huge amount in any new sector.

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M4: Setting a strategic management plan for Tesco
The strategic management plan is very important to meet with the objectives of any business
(Grieve Smith, 2012). For this reason, some strategies and tactics which can be implemented by
Tesco:

Objectives Strategies Tactics

Make the products more The strategy for this is to Providing low cost products
attractive to gain differentiate the products so that the low- and middle-
competitive edge. from the competitors with income group can also get
supreme quality and attracted.
affordable price.
Reduce the operating cost Manage the operating To create good relationship
system by cost-leadership with the suppliers.
strategy.
To make the product more Giving some online offers Ensuring that every segment
innovative. which do not introduced by has been served by
the rivalries. innovative ways.

Conclusion
As the macro environment of any industry is continuously changing so Tesco should
appropriately adopt the strategies while making decisions. For the internal analysis, it can utilize
the VRIO and SWOT analysis and for the external analysis it can take help from the PESTEL
model and Porters five forces model. As strategy plays a critical role in the success of any
organization so in that case the Ansoff matrix can help. Both the external and internal
environment is very important as the success or failure mostly depend on these. So all these
elements should be monitored carefully by Tesco.

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