There is an explanation in order to analyse environment impact so as to draw growth and expansion plan.
- Analysis of factors of macro environment influencing the business.
- Assessment of internal capabilities.
- Application of Porter’s Five Forces model.
- Application of various theories in order to examine strategic decision.
Business strategy is crucial for every organisation in order to mange and control different resources and production as well as profitability. The report will cover appropriate frameworks to analyse the macro environment and the internal environment and capabilities of Tesco. In addition to this, competitive forces applying porter's five force analysis and range of theories, concepts and models, which are required to interpret and devise a strategic plan and decision will be discussed in this report.
P1 Appropriate frameworks to analyse the macro environment
Tesco is one of the leading groceries and retail sector firm located in United Kingdom, provides online, and store services to customers in the market effectively. There are so many strengths, weaknesses, competitors, and micro environment factors that affect the business operational activities.
PESTLE Analysis of Tesco
Political: It can be said that political factors affect the business operations. Changes made by UK government such as tax and fiscal policies, trade tariffs etc. affect operational activities and strategies. The UK government recently adopted a tax measure which has a significant impact upon Tesco. VAT is increased by government from 17.5% to 20% in order to enhance revenues by 13 billion per year effectively (Ahenkora, Banahene and Quartey, 2016). Tesco is responding to the changes that help to manage and control business activities.
Economical: The economic performance of country has a direct impact on business which has long-term effects. Economical factors such as change in demand and supply, changes in inflation, interest and foreign exchange rates. These factors affect business strategies and policies. It can be said that the UK government is showing positive signs of recovering from financial crises. Economical growth will help business and country to reduce unemployment and increase revenues and sales.
Social: Social factors are related to the social environment of that particular country which helps to determine market environment, cultural trends, demographics, buying trends and population analysis (Searcy, 2016). There are number of elderly people increasing in UK due to the baby boom generation. The internet facilities are used by much of the people living in UK that online sales will increase for Tesco if the social changes are managed and controlled well and accordingly.
Technological: Technological changes such as innovation, research and development, automation, technological awareness such as latest techniques and equipments. These factors affect business operations and profitability. Technology has been critical for Tesco for the supply chain management. Tesco should improve and develop supply chain management to gain competitive advantage and profits. For example, mobile technology will help to improve Tesco's distribution service because customers can select their preferred wine through their mobile effectively.
Environmental: Environmental factors help to determine surrounding elements and environment. Factors such as business environmental analysis, tourism, agriculture, farming, geographical location, weather, climate and global changes affect business operations and profits. Tesco is adopting a number of measures that are aimed to protect the environment (Kudlats, Money and Hair 2014). For example, company is committed to diminish the consumption of energy and utilisation of greenhouse gases effectively. This will help to improve environmental status of business which leads towards success.
Legal: It can be said that legal factors have both external and internal side. Certain laws, legislations and policies formulated by UK government affect business activities such as consumer law, health and safety law and labour law which should be followed by firm in order to run business smoothly and effectively. It will also help to enhance production and profitability which leads towards achieving objectives and goals.
SWOT Analysis of Tesco
Strengths: Tesco is one of the leading groceries and retail sector firm located in United Kingdom, provides online, and store services to customers. The firm is in top 100 valuable brands and slightly below to Ikea and well above to E-bay. A wide range of products and services will help to manage customer requirements demands. The firm has 6784 stores and increasing 433 stores from 2012 worldwide (Smit, 2016). Innovative business methods are also possessed by firm to expand operational activities and profitability.
Weaknesses: The main weakness is model and structure of business. The profits and production is influenced by bad debts and high level of insurance claims effectively. Another issue is Tesco's lack of experience in some markets that it intends to enter, such as its own brand smart phone and tablet. The company needs to invest a lot of money in new and emerging technologies as well as refurbishment of stores. This has an adverse effect on business sales and profitability.
Opportunities: There are a lot of opportunities available for business such as expansion, digital entertainment etc. The effective move by Tesco to offering own-brand tablet and smart phone can intersect with this investments, particularly in foreign market such as Malaysia, South Korea, Thailand, and China effectively. Australian market is one of the best options for Tesco management in order to expand their business operational activities.
Threats: One of the biggest threats for business is takeover of Asda by Wal-mart. Wal-Mart and Asda stores and branding is increasing in UK which is affecting Tesco profitability and production. Wal-Mart is the ninth most valuable brand in the world and also a key competitor for business in the grocery and retail market (Sievänen, Rita and Scholtens, 2017). The expansion plans and strategies managed by Tesco are also influenced by concern of the livelihood of small shops and town planning.
Competitors: There are a lot of key competitors for Tesco such as Asda, Wal-Mart, Sainsbury, Morrison, Aldi, Lidl and Waitrose Ltd. These are affecting business revenues and sales which are not good for company in terms of raising profitability and production.
P2 Appropriate frameworks to analyse the internal environment and capabilities
Internal environment: Internal environment of any organisation is the main key for business success. It is composed of the elements within Tesco including management, current employees, corporate culture etc. Such factors and elements affect whole business operational activities and some affect only the managers. Internal factors and elements should be managed and controlled by management in order to improve efficiency of production activities which lead towards prof