Unit 32 Business Strategy, BTEC-HND, UK
Introduction:
Every business organisation is running their business to earn profit for
the organisation. So that most of the organisations are using a strategy for
analysing market, customers and risk (Cole, 2013). The author of this report
has analysed Tesco Plc to evaluate current market strategy, the impact of the macro-environment on an organisation. The author has also used PESTEL for analysing the macro environment and SWOT for the microenvironment (Ambrosini and Bowman, 2009). The author will discuss
here the advantage and disadvantage of different theories. Finally, it will be
ended with a recommendation.
Task 1
P1 Applying
appropriate framework analyses the impact and influence of the macro the environment on a given organisation and its strategies.
Tesco Plc is one
of the market leaders in groceries and general merchandising in the UK that started
functioning in 1919. The Headquarter of Tesco Plc is in London, UK. It is
regarded as one of the largest retailers in the world, and it is a public
limited company (Cole, 2013). The company
has succeeded to keep the revenue growth by meeting the expectation of the
shareholders. Tesco Plc is working in 13 countries across Asia and Europe.
Tesco Plc offers products for supermarket, hypermarket and so on. More than
6800 shops are available across the areas the company serves.
Mission of Tesco
Plc: Tesco Plc has
already captured the market deeply. However, the company’s mission is to entire
into more area to serve the community entirely (Cole,
2013).
Vision of Tesco
Plc: Attaining the goal
to be the best retailers in the world is the vision of Tesco Plc.
The goal of Tesco Plc:
To maximise the
shareholders', as well as an organisation’s profit, is the goal of Tesco Plc (Cole, 2013).
Stakeholders of
Tesco Plc: Tesco Plc has
several bodies and persons for whom the functions are acquired. So, several
stakeholders are available for the company (Ambrosini
and Bowman, 2009).
Owners and
shareholders: Being a
public limited company, the company is able to raise huge capital by issuing
shares. The shareholders are the owners.
Suppliers: There are a lot of suppliers from whom the company
gathers products and supplies into other industries. Common suppliers of Tesco
are Yeo Valley Farms, Muller Milk & Ingredients and so on (Cole, 2013).
Buyers: Tesco Plc serves in 13 countries right now. So, the
buyers are from these 13 countries. Individuals and separate organisations are
the buyers of the company.
Government: Government has to collect tax and another fact of
revenue from the company as Tesco Plc is a public limited company.
Stakeholders
Matrix: Different stakeholders play different roles in the organisation. All stakeholders
are not equally important. Stakeholders Matrix helps to find out the important
stakeholders.
Figure 01: Stakeholders Matrix
Source: (Cole, 2013)
Stakeholders
Mapping:
Meet their needs: The needs of the stakeholders must be met. Important stakeholders are regarded as buyers.
So, the needs of the buyers have to be met (Cole,
2013).
|
Key players: Among the several
stakeholders, the manager and the employees are regarded as the key players
as both parties are engaged to acquire the goal of the organisation.
|
Least important: Among the
stakeholders, supplies are regarded as the least important.
|
Show consideration: Some stakeholders are not treated as important, as the auditor of the organisation. However, an auditor must be considered as an important stakeholder (Rika,
2009).
|
PESTEL factors: PESTEL factors are the macro environment elements of
an organisation such as political, economic, social, technological,
environmental and legal factors. Such factors influence business functions
a lot.
Figure 02: PESTEL
Source: (Rika, 2009)
PESTEL analysis of
Tesco Plc:
Political factor: At present, Tesco Plc is thinking to enter into more
aggressive markets to spread the business. The rules and regulations have to be
analysed as the potential threat of BREXIT must be maintained. However, the operations
of Tesco Plc have no that much affected by the decision.
Economic factor: Tesco Plc gets much influence from the economic factor.
Line other organisations; Tesco Plc has to get influenced by the GDP, GNP, and
inflation and so on (Cole, 2013). In the UK, the
GDP refers that the country has to increase the production of domestic products
due to BREXIT issue. Thus potential result from economic factor has to be analysed
earlier.
Social factor: Tesco Plc has diversified products according to the
various groups of people. The diversification has been made by the age, buying
habit, choice, social belief and so on.
Technological
factor: At present, with
the assistance of having modern technology, Tesco Plc has eased the control
over the valuation of inventory. The customers are served through online process.
Thus technology is helping to serve the activities faster than before for Tesco
Plc (Ambrosini and Bowman, 2009).
Environmental factor: Tesco Plc has
achieved international recognition. For gaining much appreciation, Tesco Plc is
now working on reducing the use of chemicals to protect the environment (Cole, 2013).
Legal factor: In 13 countries, Tesco Plc operates a business. Each
country has separate legal procedures. Tesco Plc maintains all the regulations
properly. All kinds of laws are also maintained to avoid any issue (Rika, 2009).
The above factors
affected the business in various ways. But it has both positive and negative
influence on business.
M1 Critically
analyse the macro environment to determine and inform strategic management
decisions.
The functions of
business are influenced by some macro environment elements. Such influence is
measured by PESTEL analysis. PESTEL analysis has some advantages and
disadvantages.
Advantage of
PESTEL: PESTEL analysis is
very useful for the company to know about the impacts of the macro environment
elements on various functions of the business. The manager has to take the
right decisions for the company and PESTEL analysis is very helpful for the
manager, in this case (Cole, 2013).
Advantage of PESTEL analysis is here:
Having cost
effectiveness: To analyse
the influence of the PESTEL factors, the company does not need to expend any
money. Thus the company can gain cost-effectiveness (Rika,
2009).
Understanding
properly: PESTEL analysis
helps to understand the impact of the macro elements properly. Thus the company
finds it very useful.
Exploit
opportunities: Such a factor
helps the organisation to accept the opportunities from external factors (Rika, 2009).
Disadvantages of
PESTEL analysis: Though
having several advantages, there are some disadvantages also of PESTEL
analysis. The disadvantages are:
Ø
The
information provided by PESTEL analysis is not always perfect.
Ø
The
information may be biased in some cases.
Ø
Sometime
the manager finds it not so helpful to determine the right decision.
In addition to
determine the PESTEL analysis, organisations usually have some tools to
determine the impact of the external elements of the organisation. One of the
most recognised techniques is Porter’s five forces model (Ambrosini
and Bowman, 2009). By analysing the model of Porter’s, the
organisation can understand the significant buyers and sellers and bring
necessary adjustments. However, such technique has also mix impacts. Thus the
advantages and disadvantages of Porter’s five forces are here:
Advantages: There are some specific advantages of Porter’s five
forces model. Such advantages are:
Understanding
competition: Day by day,
the competition among the industries is enlarging. Porter’s five forces model
helps to understand the competition for the organisation.
Helpful to make
plans: The manager needs
to make a lot of plans for future activities. Porter’s five forces model is
very helpful to make several plans (Rika, 2009).
Helpful to deal
with buyers and suppliers: To
deal with the potential buyers and regular sellers, the organisation can seek
assistance from this model. Thus the company can determine the useful buyers
and sellers (Rika, 2009).
Disadvantages: Porter’s five forces model has some disadvantages
also. These disadvantages are:
Avoidance of other
factors: Porter’s five
forces model avoids some factors of the organisation. Thus it cannot provide the perfect influence of the external factors.
Unfit to get
benefitted: Porter’s five
forces model cannot be used perfectly in all the organisations.
P2 Analyse the
internal environment and capabilities of a given organisation using appropriate
frameworks.
It is also
important for the organisation to examine the impact of internal environment
elements equally with the external elements. VRIO analysis is a widely used tool
to have knowledge of the internal environment.
The VRIO analysis
of Tesco Plc is here:
Resources
|
Valuable
|
Rare
|
Imitable
|
Organisation
|
Advantage
|
IT integration
|
Yes
|
No
|
No
|
Yes
|
Permanent
|
SCM
|
Yes
|
No
|
Yes
|
Yes
|
Not permeant
|
Workforce
|
Yes
|
Yes
|
No
|
Yes
|
Permanent
|
Club Card
|
Yes
|
No
|
No
|
Yes
|
Permanent
|
Cost efficiency
|
Yes
|
Yes
|
No
|
Yes
|
Permanent
|
Information
technology: Tesco
Plc is an operating business worldwide. So, it is certain that the company has to
monitor and control the functions by having assistance from information
technology.
Supply
chain management: Tesco Plc is usually a general retailer and merchandiser. Thus the
supply chain management has to be maintained property to collect the right
products from useful sources.
Workforce:
There
are approximate 450000 employees of Tesco Plc. However, the company needs to
employ more skilled employees to get faster services.
Club
card: Tesco
Plc gives club card to the customers who make regular transactions for the
company. By having the club cards, customers seek it useful to get better
service (Rika, 2009).
Cost
efficiency: As
Tesco Plc sells products at a discounted rate; the company has also gathered
such products from the supplies against the effective cost.
M2 Evaluate the
internal environment to assess the strengths and weaknesses of an organisation's
internal capabilities structure and skill set.
The
internal strengths, weaknesses, opportunities and threats are measures by SWOT
analysis. Tesco Plc regularly measures such analysis to direct the capabilities
of the organisation. The SWOT analysis of Tesco Plc is here:
Figure 03: SWOT analysis
Source: (Rika, 2009)
Figure 04: SWOT of Tesco Plc
Source: (Rika, 2009)
Strengths:
The
strengths refer to the areas and services from which the company can gain
better advantages than the competitors in the market. Tesco Plc has the following
strengths:
Largest organisation: In the UK, Tesco Plc is the largest retail
organisation.
Market
growth: The
market share of Tesco Plc is increasing.
Attractive
price: Tesco
Plc sells products at a discounted price. Thus the customers also like to buy
products a lot than the competitors (Alkhafaji, 2011).
Weaknesses: Weaknesses refer to the areas and
services where the company gets some issues. Tesco Plc has the following
Weaknesses:
BREXIT issue: Some issues are getting from the
BREXIT issue.
Inflation
rate: The inflation and recession have some
negative impacts on the functions of Tesco Plc
New competitors: The entrance of new competitors is making
obligation to cut more price.
Several
laws: Different
laws have negative impacts of Tesco Plc.
Opportunities:
Opportunities
refer to the areas where the company can get benefits in future. The
opportunities of Tesco Plc are here:
New
markets: The
Company has great scopes to enter into the aggressive and larger markets in
Asia.
Subsidiaries: The number of subsidiaries can be
enlarged.
New
products: New
products can be added in a significant manner as the company has gained much
loyalty from the customers (Rika, 2009).
Threats:
Threats
refer to the enforcement of obligations that can hamper the business. Tesco Plc
has the following threats:
Threat
from rivals: The the entrance of new competitors is continuously threatening the business of Tesco Plc
(Alkhafaji,
2011).
Aggressive
pricing: Competitors are also taking low prices against the
products.
Economic
power: The economic power of the customers is
decreasing in several regions where the company serves.
7’s
model:
Figure 05: 7’s model
Source: (Rika, 2009)
Strategy
|
According
to Ambrosini and Bowman (2009), Tesco
Plc has several strategies to continue the legacy of success. Basically,
the company believes in a cost leadership strategy. The company sells products at low prices. Thus the customers can get products according to the purchasing ability, which leads the company on the right track.
|
Structure
|
There are
several organisational structures. However, the author has found that hierarchical structure is followed by Tesco Plc. Each board and executive
member follows the leadership of immediate leader (Alkhafaji,
2011).
|
System
|
The
Company has established systems to be followed in all sectors. The
performance of the employees is also measured under the established systems.
All the employees have to follow the systems set by the company.
|
Staff
|
At
present, approximate 450000 employees are working at different sectors of
Tesco Plc. At the employees have to handle the activities set by the management (Rika, 2009).
|
Skill
|
Without
having skilled employees, the organisation cannot come to the present position. However, Tesco Plc needs more skilled employees. Skill can be
enhanced by facilitating training to the employees (Ambrosini
and Bowman, 2009).
|
Style
|
Tesco
Plc follows a democratic leadership style for all employees.
|
Shared
value
|
The
management of Tesco Plc believes that values have to maintained and shared
among all the employees to have benefits for all. The employees are given
opportunity to share ideas to improve the process (Alkhafaji,
2011).
|
P3 Applying
Porter’s Five Forces model evaluate the competitive forces of a given market sector
for an organisation.
Figure 06: Porter’s Five Forces
Source: (Ambrosini and Bowman, 2009)
Porter’s
Five Forces model is very helpful for the manager to understand the internal capability of the organisation and to understand the influence of several
internal factors. Here the five forces that Porter has depicted are:
Threats
of new entry: Threats
of new entry always lie in the market, and the organisations have to be ready
for facing the competition. However, Tesco Plc has already faced new challenges
given by the competitors and there are fewer scopes for having threats from new
entrance.
Power
of buyers: There
are a lot of similar organisations like Tesco Plc in the market. Thus the
purchasing power of buyers.
Purchasing
power of suppliers: The availability of more organisations in the market paves the suppliers
to enjoy more purchasing power as the scope for moving into another
organisation (Alkhafaji,
2011).
Substitute
products: The
substitute products are also available in the market. So, the customers have
the scope for switching into the substitute products if the price gets higher (Cole, 2013).
Threats
of rivalry: The
existing rivals are very competitive, and the threats are regularly obtained to
set price and bring new products to the market.
M3 Devise
appropriate strategies to improve competitive edge and market position based on
the outcomes.
High
competition has already emerged in the current market. Thus the plans and
strat6have to be changed regularly to cope with the situation. The failure of
having effective strategies can lead the company in the decline position. Thus
the competitive advantage must be gained.
Ansoff
matrix is used here to denote the competitive gains of Tesco Plc.
Market
penetration: It
indicates the entrance of an organisation into a specific market of the product
line.
Product
development: This
process signified the process for improving the quality of the products. The
quality of the products must be high so that the customers can be satisfied by
having more facilities from the products (Alkhafaji, 2011).
Market
development: Market
development refers to the entrance of new markets with the same products.
Diversification
strategy: It
means to enter into new markets with new products.
According to the Ansoff matrix of Tesco Plc is:
Market
penetration: Tesco
Plc has several markets where the company sells products. Thus the markets of
the company are certain and specified. The company follows the market penetration
strategy. So, the markets are divided according to the specific needs of the
market. Thus the company has been able to get more customers (Alkhafaji, 2011).
Diversification
strategy: Tesco
Plc is regularly enlarging the span of the business. Thus diversification strategy
is followed by the company.
Figure 07: Ansoff Matrix
Source: (Alkhafaji, 2011)
Conclusion:
Tesco
plc is the market leader at the grocery industry of UK. But they also run their
business in the international market. But the business has been affected by the macro-environment such as BREXIT issue (Alkhafaji, 2011). The author has analysed the market and
Tesco Plc that they have found out that Tesco Plc is using Market penetration
and diversification strategy also. The author has also used 7's strategy to
find out Tesco's internal capabilities. Finally, this report will help both the
author and learners to fulfil their objectives.
TASK 2
References:
Cole,
A. G. (2013). Strategic Management.Cengage Learning EMEA
publications
Alkhafaji,
A. F. (2011). Strategic management: formulation, implementation, and control in
a dynamic environment. Development and Learning in Organizations: An
International Journal. 25(2).
Ambrosini,
V. & Bowman, C. (2009). What are dynamic capabilities, and are they a
useful construct in strategic management?. International Journal of
Management Reviews.11(1). Pp. 29-49.
Hill,
C., Jones, G. & Schilling, M. (2014). Strategic management:
theory: an integrated approach. Cengage Learning.
Ma,
Y., Ding, J. & Hong, W. (2010). Delivering customer value based on service
process: The example of Tesco. Com. International Business Research.
3(2).Pp.131.
Rika,
N. 2009. What motivates environmental auditing? A public sector
perspective. Pacific Accounting Review.21(3). Pp. 304-318.
Taylor,
W. C., Franzini, L., Olvera, N., Poston, W. S. C. & Lin, G. (2012).
Environmental audits of friendliness toward physical activity in three income
levels. Journal of Urban Health.89(2). Pp. 296-307.
Trott,
P. (2010). Innovation management and new product development.
Harlow, England: Financial Times/Prentice Hall.
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