Following questions are need to be answered:
- Explain the impact and impact on an organization related to the macro environment.
- Evaluate the internal environment and capabilities of an organisation.
- Assess the given market sector by using Porter's Five Forces Model and by applying its outcomes.
- Describe the understanding and interpretation of strategic directions available to the chosen organization by applying various, models, theories and concepts.
Business strategies plays a very important role in building a business and effectively managing it. The role of strategies in business cannot be undermined they played a very important role in giving shape to business. The main responsibility of framing business strategy is on the top management of the company and the responsibility To implement those policies and procedures lies with managers and subordinates of the company. Thus, it can be said that without a proper strategy a company cannot stand in a competitive market (Ireland, Hoskisson and Hitt, 2012). Tesco is a big retail company which is operating in UK and worldwide, the company is having various stores around okay in which almost all the brands and their product airport so that consumers can choose the brand of their choice. It is having diverse operations in various countries and is committed to grow beyond Europe by investing heavily in some of the emerging markets as well. For this purpose the company is making sure that right kind of business strategies is framed for the company.
P1 Capabilities of Tesco and impact of various environments on company
Tesco is the big company in the retail sector and having diverse operation within the sector. It is having various suppliers of goods and they would want to have their products being showcased in the big store of Tesco. The company is having distinct capabilities in terms of its operations and management. There are various factors that affect business directly or indirectly. These factors can be internal or external. For the P purpose of analysing these factors Pestle and Swot analysis of Tesco will be done (Sia, Soh and Weill , 2016).
It is the analysis of various external factors that could affect the proper management of business as well as organisation. It is this quite important that Tesco being a large company conduct a proper PESTLE analysis of its environment so that effective strategies can be framed for taking business forward and increasing the efficiency level of the business going forward.
It refers to the political environment that exist within our country and in which the company has to operate. The most important element of political factors of political parties and the parliaments of the nation in which the businesses operating. They are the one who are responsible for framing laws as well as regulations which will impact overall functioning of the business in general. Tesco is facing various political turmoil due to the fact that United Kingdom has decided to exit from European Union. This has resulted in various issues for the company because the different free trade agreements that were sign the United Kingdom with European Union has came to an end and has impacted the business of the company in some of the countries of Europe. Being a established company of UK it has to make various changes in its policies and procedures in order to grow its business and sustain its competitiveness. Because of various other free trade agreements that can take place, the company has decided to invest in various countries of Europe like hungry, Germany and some of the parts of France (Champoux, Durgee and McGlynn, 2012).
It refers to various economic factors that would have a direct impact on the industry and the business of the company. The various economic factors could be inflation , deflation, interest rates, monetary policy, and some of the political decisions that would impact the overall health of the economy. Economically speaking, the retail sector of UK has shown growth in the past years and have consistently outperformed various other sectors within the economy. Thus it can be said that Tesco operates in the sector which is quite important from the point of view of consumers. The company and its management are framing necessary strategies for the purpose Of effective management of the business. They make sure that any changes within the economic environment of the country would not be adversely affect affecting the overall business structure of the company. Retail sector is the sector which is impacted heavily by the kind of inflation that prevails within the economy. The level of inflation is high the consumption of customers will go down and therefore ultimately impact the business of Tesco adversely. The company is framing necessary strategies to overcome these issues (Grant, 2016).
There has been a shift in the generation of UK. The number of elderly people is increasing in UK because of the fact that the birth rate is going down the life expectancy of people is rising. The management of Tesco should incorporate this factor while making strategies for its consumers. The recently plan launched by Tesco for online portals where shopping can be made easily Amit keeping in mind the mobility issues of elderly people. This has created a positive image of the company in the eyes of consumers and has given various benefits to the company. The plan to launch online portal of Tesco has came after the research that has shown that elderly people are more interested in purchasing through online mediums rather than going to stores by themselves and making such purchases (Favaro, Rangan and Hirsh, 2012).
One of the most important factor which drives business is the technological up gradation that it had in its operations. Tesco needs technology for the purpose of its supply change management. A company can achieve cost efficiency. if it is having a right kind of supply chain management which is upgraded through proper technological implementation. Such cost efficiency would give the company an edge over the other competitor and will increase the goodwill of the company because they will be able to serve customers well.
It refer to the legal laws that exist in our country and which might affect the business of Tesco. Tesco deals in various products as well less markets; therefore it gets affected by various policies of the government that would have a direct impact on companies profitability. Some of the law is framed by the government regarding agriculture produce has created strain on company’s profitability.
It refers to the environment in which the company operates and how the business of company has impacted the same. Tesco is committed to reduce its energy consumption by making necessary investment and strategies for the purpose of saving environment and its degradation (Jensen and Berg, 2012).
Tesco is a multinational company which is having operations around the world. The company is having a very good brand which is just lesser then IKEA and it is well above then eBay. it is having 6784 stores around the world and has grown 400 stores since 2012 and this has contributed in company’s strength. It uses various innovative technology for the purpose of making a life of its consumers easy. Tesco has launched Tesco Metro and Tesco express for its consumers who live in a small neighbourhood so that they can get there and make purchase conveniently.
It refers to the Weakness that a company possess and might stop it to reach to its full potential. The biggest weakness of Tesco is it’s a scale of operations. The company is having various stores and is diversified into different sectors because it keeps products of various companies in its hypermarket. Some of the weakness also include the Tesco’s decision to enter into markets of smart phones and tablets, which does not turn out to be good and has impacted the profitability of the company (Leonidou and et.al., 2015).
The company do have very supportive and eighties to expand its business in different markets like China, India, Indonesia, Brazil and some of the other emerging markets which is growing rapidly and offers return on investment more than any other developed countries. The company shall make necessary business strategy to expand its business in these market effectively.
The biggest threat to Tesco is it competitors which are Asda, Sainsbury, Aldi etc. in UK which are growing the business substantially. The company is also facing pressure on global level because of a giant competitor like Wal-Mart. It is growing into UK as well and is eating up the market share of Tesco which is not a good sign for the company. It shall make necessary strategies to overcome these competitive pressures and at the same time maintain its brand and goodwill (San Martin-Reyna, and Duran-Encalada, 2012).
P2 Analysis of Internal environment and capabilities of Tesco
Tesco's qualities are, Tesco is positioned third biggest basic need retail organisation on the planet. The organisation held 30.7% offer of the UK basic supply retail showcase in 2010. Money related execution of the organisation has not heavily influenced by the retreat, it has indicate development at all levels of business, this underlines organisation’s Strategic capacities. Information indicates £ 54billion turnover recorded , which is 14.9% more than 2008. This would be the consequence of key decision of customisation of item as market requests. In a decade ago organisation’s proficiency in execution developing. Tesco's technique points convey items and administrations at moderate value, suits to clients' needs and keep up quality guidelines. A year ago's online deals was up by half.
There is no flawless market, thus every organisation has a few shortcomings. Tesco has it as well. Tesco have being attempting to perform in 2009-2010 contrast with its past execution and that of it matches as well. Tesco's esteem lines has booked misfortunes because of organisation’s system of conveying less expensive items. It's rivals like Sainsbury's and ASDA increased upper hands by giving quality item at sensible cost. Company still rely upon UK retail showcase for producing real income nearly up to 75%, as UK is still not announce out of retreat. This would be significant difficulty for geographic broadening technique (Muduli, 2012).
The company has various potential is like lean supply chain management and generation of values through efficiently managing its operations. The company is having an accident goodwill in the market and is leading the retail industry with margin. The company is focusing More on making their customers their priority and therefore Framing strategies which will be beneficial for both company as well as consumers going forward. Tesco has also been able to implement various technological gradation within company which has Benefited both individuals working within employs and outside customers of the company. Tesco follows both cost leadership and differentiation strategy, under cost leadership it tries to maintain its cost by implementing various decisions regarding supply chain and distribution. Under differentiation, the company tries to make it stores a bit more unique and competitive then other companies in the same business.
P3 Evaluation of Competitive forces for Tesco
For the purpose of analysing the competitive forces that act this within industry, it is necessary that a proper analysis of the structure of that particular industry is conducted. Only after knowing this forces proper strategy can be framed regarding competition. Porters five forces model is the best theory theory for analysis and evaluation of these competitive forces. A Proper analysis of porters five forces model for Tesco has been described as follows:
- Threat of Substitute: It refers to the threat that a competitor may bring certain products or services which might substitute the current product or service of the company and therefore may result in the loss of customers market share as well as profitability of the company in general. A company like Tesco Shall make sure that its competitors does not able to copy its products as well less services which it provides to its customers and consumers if the company fails to do so it may end up losing its market share and this will affect overall productivity of the company.
In the sustenance retail showcase, the substitutes of significant nourishment retailers are little chains of accommodation stores, off licenses and natural shops which are not seen as a danger to general stores like Tesco that offer brilliant items at impressively bring down costs. In addition, Tesco is further getting hold of these shops by opening Express stores in nearby towns and downtown areas making an obstacle for these substitutes to enter the market. In any case, the danger of substitutes for non-sustenance things, for example apparel, is genuinely high. It ought to be noticed that as the financial retreat wins, clients will be slanted towards marked down costs henceforth Tesco is a risk to the claim to fame shops.
- Threat of new entrant: It is the threat that any new competitor may come within the market and acquire the market share of the company as Well as destroy the customer base of the organisation. Tesco deals in retail sector there the level of competition is quite high, therefore various competitors like Asda, Walmart, is already present within the market of UK. But any new entry for competitor will further increase the market and the company may end up losing it share, if it will not focus on its quality and service delivery to its consumers (Ritchie., 2013). A new entrants within the retail industry of UK is highly unlikely because the amount of investment that is required is quite huge and the quantum of resources also makes it difficult for any company to compete on a sustainable basis. For a new entrant, the company will have to Bring something extraordinary on table like, sufficient quality with minimum prices are excellent service delivery to consumers. Otherwise, it would be very difficult for any company to enter into the industry and sustain for a longer period of time.
- Threat of existing Competition: The level of competition within retail industry in UK is quite high and therefore it becomes extremely difficult to operate within this industry, if the company is not having a good brand image and reputation then it is highly unlikely that a business will be able to prosper or make profits on a sustainable basis. There are various competitors within this industry which has became cold good in size, some of the examples include Asda, Sainsbury, Walmart etc. these companies do have a ticket resources to compete with Tesco, and Tesco will hurt have to bring something on the table which is different then these companies, otherwise consumers will switch to these companies who are offering almost the same kind of quality as well as services for their products. Tesco faces serious rivalry from its immediate rivals, including Asda, Sainsbury's, Morrisons and Waitrose, which are contending with each other over value, items and advancements irregularly. It ought to accordingly be featured that Asda is one of the key rivals in this fragment with an expansion of piece of the pie from 16.6% to 16.8% amid the financial year 2016. while Sainsbury's has demonstrated an increment to 16.1% from 15.8% and Morrisons to 11.6% from 11.3% through a similar period. The moderate market development basically implies that these expanding pieces of the pie from contenders have heightened the market contention, which is undermining Tesco's market authority position. In provincial zones where the closest superstore can be some separation away, some essential shoppers are pulled in by retailers like Somerfield and Co-operation (McGrath., 2013).
- Bargaining Power of Buyers: Bargaining power is a very important thing in the field of business. Buyers do have a bargaining power to switch over to another brand or company, if the products offered is not satisfactory or even if it is having a minor differentiation then the other company. The level of competition in retail sector is quite high and there are various competitors like Asda, Sainsbury, Walmart having almost same kind of products and services and within the same price range, therefore, the buyers to have the power to switch over to other companies in no time and this constraint the profitability of Tesco in the future (Sanden, 2014). The company should implement various strategies For the purpose of coping up with the situation and maintaining its competitive position.
- Bargaining power of Suppliers: suppliers also to have the bargaining power with companies to get a fair price for their produce. But as far is the retail industry of UK is concerned, the bargaining power of suppliers is fairly low because of the fact that most of the suppliers are inclined towards supermarkets who offers them a good price along with purchases that are being made in bulk. Therefore companies like Tesco, Asda, Sainsbury, Walmart do have an upper edge with the suppliers in terms of getting a fair price deal (Linder and Williander, 2017).
P4 Strategic plan for Tesco
Tesco is the big multinational company, it is having diverse operations around the world and therefore, it is important that right kind of a strategic planning is done so that company is able to benefit from various positive factors that it already possess. Some of these factors include good brand image, low-cost, high-quality offering, better service delivery etc.
The most important part of framing a strategic plan would be to develop A mission statement which will not only guide individuals within the company that what the management of the company wants and how it see the company in future. The next time after wearing a mission statement would be to set goals that achievable that has to be achieved by the people are working within the company. These goals can be in terms of quantity of quality. The quantity can be that revenue that needs to be achieved,Level of profitability. As far as quality is concerned it can be the working environment provided by the company, the management quality, the quality of policies and procedures as well as the kind of culture that prevails within the company.The goals can be long-term or short-term. The long-term goals would be to make company much more productive and profitable along with taking care of all the needs of the society. The short-term goals can be to achieve a desired number of sales (Lai, Melloni and Stacchezzini, 2016).
The company should think of reducing its prices by offering high-quality services through the products“ that it offers. The company should aim at reducing its overall cost so that profitability can be increased and this will benefit all the stakeholders of company like employees, customers, suppliers, shareholders etc. It should bring new offers and discounts for its consumers so that they stick with the company and does not think about switching over to some of the other competitors. Company should also Premier strategies to overcome various barriers that are being put by its competitors in terms of level of class quality, prices, and service delivery (Werner and Xu., 2012).
It is quite clear from the above discussion that for a business organisation to grow and prosper It is highly Essential that right kind of business strategy is frame and followed accordingly. For the purpose of framing a business strategy, various factors have to be considered by the management of company, this sector is to have influence on how the company will operate and can impact the decision making of managers. Some of these factors include the internal analysis as well as external analysis of the environment in which the company operates. The external environment is consist of various factors like political, Legal, social, technological, environmental. On the other hand internal factors would include the company the strength, weakness, opportunities etc. for the purpose of assessing the current strength of company itself and other competitors there is a need to analyse the various forces as laid down by Michael Porter. Porters five forces model will give explanation about the various forces which makes the structure of an industry. hence, it can be said that for the purpose of planning and making strategies for business good and proper analysis of all the factors that surrounds the company can make it easy for Management to effectively as well as efficiently manage th