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“Strategy is the direction and scope of an organisation over the long term: which achieves advantage for the organisation through its configuration of resources within a challenging business environment to meet the needs of markets and to fulfil stakeholder expectation”.
In the business industry, it is very difficult to seem companies are reach to the success. One day they have to be faced, other face of business, which is called ‘losses or ‘decline'. Today's business environment going very critical because of recession, makes business down, That's reason we can see that established companies are going down and out of business environment, they can't started on against environment.
This challenging business environment pushing Supermarket to back of form market but some Supermarket and company still they are fighting and achieved succeed. Tesco, which is one of the successful supermarket because of they are applying strategy is entirely proved in business environment. Tesco is successful in environment because of applying analytical tools e.g. PESTEL, Porters 5 Forces, SWOT Analysis, on the basis of these analysis and they have proven to be success is this challenging business environment.
Johnson and Scholes have described that statement, which is said strategy is goal like path of business success. Where mention successful way and goal of long term of maturity level in business environment. Where's through of using organisation resources achieved benefits and advantages of success in business. Perhaps full fill stakeholder needs and expectation of business and constantly make successful place in challenging Environment.
It is argued that UK supermarkets are delivering a quite different offering to the marketplace from a simple ‘basket of goods' with a specific price and quality. The issues of product range, innovation potential, and associated convenience factor are all part of the package. This leads to a consideration of the questions of what is competing with what? And who is competing with whom? The issue of comparing like with like. From there we arrive at the question of how competitions policy in this field needs to consider long-term innovation potential as well as short-term price issues. (Supply chain management: An International potential 2000)
Why it is importance to understand business environment
Today's very important to learn business environment, which proved to be become successful in the markets, they promote and help you to increase business profitability and protect you, form competitors. Because they are successful in the market, they understood the Business environment trends. Who's invested in business and make profits and constantly is a successful in the markets.
What do we understand by business environment
In a business organisation, peoples are investing input which's consider e.g. Labour, material, Capital and place etc. These inputs are converting in output like Goods and services that is customer willing to buy.
Difficult Evaluation strategy changes of business environment
Tesco is using different strategy to become successful in the critical environment and proved that they achieved success in the challenging environment. Supermarket competitors; are always trying to be a best but couldn't succeed. Tesco is always understood business strategies and be a leader in Markets. Tesco is using one strategies called as PESTEL Analysis.
Microenvironment would include competitors, suppliers, customers, intermediaries, financial community, local community, pressure groups and government.
Customers: are important person for any business, for instance in a completive environment, no business grows without customers. Organisations should use an information gathering systems in order to update with changing needs and requirements of the customers and able to predict even the future on what the customers want next.
Suppliers: are providers to an organisation of goods and services that the organisation transforms into value added product to customers, also when demand of a product increases suppliers are crucial to the success of an organisation to make available to them due to increase in demand, thus better relationship with suppliers increases the growth of businesses.
Competitor's: survival of organisation in today's recession in dealing with competition is extremely important, hence an organisation must keep a close look on its competitors on how they are changing towards the need of the customers, and example of competition would be mobile phones and soft drinks.
Intermediaries: are people who provide a link between the organisation and its customers, large companies use intermediaries as they find it difficult to deal direct to their customers.
Financial communities: are institutions they may currently support or support the organisation in the future. Share holders both private and institutional are important to the business as they reassure that the business will achieve it objectives. Expansions of many markets have failed because the companies did not consider the needs and expectations of potential investors.
Local community: it is for organisation to enhance their image towards the society, through charitable contribution, sponsorship of local events and also been seen as a support to the local environment.
(Fifth edition by Adrian Palmer and Bob Harley)
PESTEL Analysis Tool uses on Tesco supermarkets
1.1) Political factors:
Tesco makes strong infrastructure in globe, now they are operating six countries in Europe in additions in the UK. Tesco have high demand by UK, including the European Union (EU). Tesco follow employee govt. Legislation to provide variety in job, flexibility of jobs, lower paid higher paid, variety of demand, requirement of position like for student, under 18 ages, senior citizen. Tesco are implemented position for different requirement for full fill their needs and makes them constantly growth, that's why on the basis of needs. They recruiting people as part time, full time, contract, temporary, seasonable, get job done in limited period of time.
1.2) Economical Factors:
Economically we are in recession time but all supermarkets as well as same in problem. Tesco is faced difficult time this year but they made strategies that's result recession will not critical y overcome on Tesco. So simply we can say that competition like Sainsbury, Asda economically they are strong, but Tesco are selling product for different categories customer some time using offer like free parking and Tesco reward cards, offers etc. That's reason Tesco always one step ahead of competitors.
1.3) Social / cultural factors:
Tesco are always applying PESTEL strategies in business. That why they always consider on different factor like social life, which belong to the people. Economic changes are changing people living trends, now people like to live single family, which is differences in single person, aged citizen, competition of job, people like gives preference time consuming, it is means peoples don't want spend time to make food. Tesco is understood people demand and introduce micro able food in the market. This is gives to the Tesco customer more time saving, easy to full fill their daily needs. On the chaining environment, supermarkets must be alert and do research on changes of cultural and social.
1.4) Technological Factors:
Technological factor are makes great effort on environment, which gives great impact of Tesco business environment. Tesco recently started new technology like ‘Online Shopping' which is makes people life easier and peace, they are also saying don't need to come to us just order from home by online and you will get your delivery on your door step ahead.
Tesco has also made investment in Pollution control, that is support to the carbon reduction and also encourage customer to use and buy low carbon product. It gives clean natural atmosphere to the human beings. Tesco is promoting to use carrier bags again and again and they also giving Tesco points on it. Which is clearly says to the customer make city clean and also urge for environment friendliness. This all activity makes good reputation in between people minds.
Ø How existing products can be made cheaper and better quality by introducing new technology
Ø How distribution of goods to consumers have changed e.g. how new books can be purchased via the internet
Ø How consumers are offered more innovative products and services e.g. new anti cancer drugs, internet banking.
Ø How new technology has enhanced organisation to communicate to their consumers e.g. customer relationship management, mobile internet services
1.5) Environment Factor:
When Tesco's using strategies in business, they also considerate about wrong impact on Business Environment and that's why they are always trying to avoid those impact. Tesco says ‘Make your staffs happy and they will make your customer happy'. Tesco's always trying to keep their staff Happier and which is good result on customer relation and build strong relation between customer and Staff.
1.6) Legislation Factor:
Tesco's always facing bargaining problem between them and competitors because of legislation create difficult environment like recession. It is means Price and Quality ‘War' between supermarkets competitors; which means loss in business. Legislation understanding is very important in business, that's makes easy way to achieve their target in the market. In order to implement political correct pricing policies, Tesco offered to customer price reduction on food purchase based on the how many times customer spent money on groceries at their stores. It is gives competent stability in the Business environment.
In the Business Environment How Tesco apply SWOT analysis to state internal and external Factors.
A) Strength (Internal factor):
1) Tesco have had achieve 30.08% highest share of the UK market; Tesco is growing faster and faster in their future carrier and to allow to drive a high share in Non-Food industry.
1) Tesco Online services spreading all over the world and operating 270 stores around the globe. In which Tesco cover 96% market in the UK and other millions of store having online services. Then we can simply say that Currently Tesco got strong platform to develop their profitability in the market.
2) Recently advertised in UK's newspaper, Tesco have 71% Sales larger than Sainsbury; and they are leading UK's Supermarket business.
B) WEAK (Internal Factor):
1) Tesco still need more effort to reach world market and makes stability in the world.
2) Tesco have already invested in different industry like Tesco Bank, New stores, Investment companies; if recession is continue like that, business environment will go bust and Tesco will have to face big loss in the business...
3) Traditional small business like local butcher, local deli shop, local bakery etc. they are situated in resident areas which is very near for customer and traditionally customer got used to with their services. In this situation it's very difficult to attract customer and make relation.
C) Opportunity (External Factor):
1) Now Tesco is giving ‘Online Shopping' facility to the customer. Its give opportunity to the customer, they can buy their product from their home and will get delivery on their door step. This is save customers Time, money and energy etc.
2) Tesco is going to open some new shop, Tesco Bank, and Tesco Investment company etc. In current status Tesco got highest share in market; its show Tesco great service and loyalty about customer, they already capture customer trust. On behalf of Tesco got opportunities to expand their business in world wide level and achieve success.
3) Tesco's almost shops are providing 24Hrs service to the customer, its really great opportunities to get customer trust.
D) Threats (External):
1) Now days Business environment giving tough challenge to the Supermarkets, economics value is going down, which means no jobs and no money. This is reason other supermarkets have already reduced their product price by 6%. Tesco and Sainsbury got leadership in the business market; simply they have to be decreasing their price rate, hence other wise they are out of market. Tesco got threats about loss of business because they have to reduce their cost lowest than their competitors.
2) Some time it's very complicated to decide what to do? Or not? Because of some other supermarkets are buying their product from abroad; where economy is very low and that's they are selling their good very low cost. Some supermarket are taking advantage about it and buying standard product in cheap price from abroad and selling them on low price. For Tesco there is threat about stealing customer from them.
3) In UK's supermarket competition Tesco got success and they achieved leadership. Now Tesco going expand their business all over the world but still some countries like E.g. India, Pakistan, Bangladesh etc. They are traditionally buying their goods from their traditional shops and they got used to with their services. So When Tesco start their business in these countries might be there is threat about loss and decline of business.
Porter 5 Forces Analysis: How Tesco state their strategies and success on their competitors by using Porter 5 forces Analysis.
1) Bargaining power of Suppliers:
This statement is practically proved by supermarkets competitors, where large supermarkets like Tesco, Sainsbury, and Asda etc are suffering by business environment crises called ‘Recession'. Its result people they don't have enough money to buy their groceries form supermarket and that why they are always bargaining with supermarket price. For that reason large supermarkets are also forcing their suppliers to make very low cost on their selling product; which is result its very difficult for suppliers in low profit margin they can manage, their expenses. UK's based supermarkets are facing these problems but in hence other abroad based supermarkets are buying their goods in cheaper deal from abroad. These competitors are competing with large supermarkets and encouraging price war between supermarkets.
2) Bargaining power of Customers:
In our business environment area we can see that great changes in markets like now peoples are demanding more supermarkets, who can gives them different facility, that could makes their life easier. Tesco has also started some schemes like loyalty customer card, club card and they also going to give some different facility E.g. Bank, Pharmacies etc. these all business environment changes are only happening by customer demand. It is increased supermarkets counts in the markets and their competition.
3) Bargaining power of competitors:
In challenging business environment customer demands and expectation are high from supermarket; to full fill their needs we can see that every day entering new competitors in the market and challenging Supermarkets. So now these condition UK's supermarkets have had to keep maintain their leadership in the market and innovative to build market share. Tesco is always updating their Price and value scan between competitors success and on behalf of have given excellent service to the customer.
4) Threat of New Entrants:
In the UK's large supermarkets like Tesco, Sainsbury, ASDA etc. they are capturing large space of business, there is no space for other because of they are rapidly spreading all local areas and draining out business from market. Mostly some small tradition shops are affected and they are start disappearing from market like Butcher, bakery, dairy shop etc. So it very difficult for those new entrants companies to stand in grocery market and also they are facing some problem like not enough capital and resources for product compare to other Supermarkets.
5) Threat of Substitutes:
In this changing business environment is able to reduce demand for a specific product, as threat is of consumers switching to the other supermarkets. Tesco have started new business trend in the markets like opening shop Tesco express, metro in local towns and city. Whilst help to protect Tesco, about stealing customer by small supermarkets.
In business environment Tesco always tries to understand changes of business environment and on the basis of situation applying their unique strategies E.g. PESEL, Porter 5 forces, SWOT analysis etc and got succeed in the market. It gave leadership in between competitors. This strategies are practically proved that's why these are very effective source to full fill Tesco's stakeholder expectation and providing excellent service to the customer.
Changing business environment, Tesco innovate some different Technology changes, which gives to the customer easy and simple approach for the life. One of the technology changes is effective in the business like' online shopping'. On the basis of ‘Online shopping' Tesco says to the customer, you don't need to come to us, instant we will come to you.
In hence Tesco have to understand changes in business environment which relate with competitors. It is necessary to scan competitor's success activity and makes good decision on it and implements Tesco key success. Tesco have to also consider on their behaviour of business which is help to them to understand, how they are reacting on implement of trends and strategy changes. These strategies changes are makes final decision to Tesco can use their analytical strategies in the competitive business environment, which gives Tesco successful stage in the market.
In the Challenging business environment Tesco's success strategy is proved and applied on the practical life that why there is no change of error; that's reason Tesco's giving excellent service to the customer and understanding their need and full fill their need on their demand. For better technology can save cost, money and energy and it is important for that organisation should regularly have scans on their competitors to achieve success within the challenging business environment.