Strategic Planning And Environmental Analysis For Tesco

Benefits of strategic planning

Strategic planning plays an important role in gaining the competitiveness for the contemporary business organizations. This is due to the reason that in the current business state of affairs, effectiveness of the strategic planning of the business organizations will determine the effectiveness of them in dealing with high level of competition in the market. However, it is also important to consider different external and internal business factors in determining the strategic intent due to the fact that approach of the strategic planning will be influenced by the change in the internal and external factors (Abdallah and Langley 2014).

Retail sector of the United Kingdom is one of the most relevant business sectors where the effectiveness and influence of the strategic planning is more. In this report, the strategic planning approach of Tesco will be discussed, which is one of the forerunners in the United Kingdom’s retail sector. It is reported that Tesco is the market leader in the grocery sector of the United Kingdom with the market share of over 28 percent (Tesco.com 2018). This shows the brand value and penetration they enjoy in the United Kingdom. However, in this case also, they are having the need for effective strategic planning to maintain their market leadership status.

This report will discuss about the major internal and external factors that are having influence on the business operation of Tesco. Furthermore, this report will also discuss about major identified challenges for them and will state some recommended steps accordingly. An effective change management plan will also be discussed that can further help Tesco in managing the employees in transition through the change in the organization.

One of the major benefits that can be gained with the help of effective strategic planning is visionary organizational planning (Wolf and Floyd 2017). This is due to the reason that effective process of strategic planning will help the business organizations in having their intent according to the current market trend and scenario. Thus, the business policies and practices will be more market oriented and market opportunities will also be increased.

In the current approach of the strategic management, environmental analysis is having importance for the business organizations. This is due to the reason that strategic planning for the organizations cannot be effective enough if the relevant business factors are not being determined and evaluated effectively. According to De Castro, Khavul and Bruton (2014), macro environmental analysis is one of the important factors in the business environmental analysis. This refers to the determination of the external business factors, which will have influence on the operation of the business organizations. As per the authors, effectiveness of the macro environmental factors will help the business organizations to have the proper understanding about the external factors and can design their strategies accordingly. On the other hand, it is stated by Eberlein et al. (2014) that micro environmental analysis is also as important as the macro analysis. This is due to the reason that micro environmental factors are the factors, which emerges from the internal management of the business and which can be controlled. This analysis is also important due to the reason that it will enable the organizations to have the understanding about internal strengths and weaknesses. Thus, they can initiate their strategies accordingly.

Role of the environmental analysis

PESTLE analysis

Political	· Political factors for Tesco are favorable due to the stable political environment of the United Kingdom. · Majority of the political and government decisions are having pro-business approach, which will have further positive impact on the business of Tesco (Howarth and Quaglia 213). · However, on the other hand, Brexit will have negative impact on the business operation of Tesco due to the reason that Brexit will reduce the foreign market potentiality for Tesco and increase the foreign market barriers (Oehler, Horn and Wendt 2017).
Economical	· In the recent few months, economy growth of the United Kingdom is becoming stagnant. This is affecting the business potentiality of Tesco due to the reason stagnant economic growth will also reduce the business in the market (Crafts 2015). · United Kingdom is also having highly competitive retail market scenario with having the presence of large number of players. Thus, Tesco is having the challenge of maintaining their profitability (Wood and Reynolds 2013). · Tesco is having the risk of emergence of economic recession, which can further reduce the business viability in the United Kingdom.
Social	· United Kingdom is having diverse population and thus it is important for Tesco to have diverse product assortments in order to gain competitive advantages (Besbes and Saure 2016). · Bargaining power of the customers is also high due to the reason that Tesco and its competitors are offering similar sets of products at similar price points (Caprice and Rey 2015). This will affect the pricing decisions of Tesco in the long term. · It is a major challenge for Tesco to change their existing product offerings in accordance to the rapid change in the taste and preference pattern of the customers.
Technological	· Technology is one of the most important factors in determining the competitiveness of the retailers in the current scenario. This is due to the reason that technological development will ensure enhancements of the service efficiency and customer satisfaction (Blazquez 2014). · Tesco is already offering a slew of latest technologies. However, it is important for them to continue the process of offering new technologies to maintain the market relevancy. · They will incur an added cost in developing the new technologies, which may have impact on the profitability in the long term.
Environmental	· Environmental factors such as reducing the carbon footprint are important for Tesco to determine their business sustainability. · Authorities of the United Kingdom are introducing stricter regulations in terms environmental protection. This will pose further challenge for Tesco in their business operation (Elliott and Zhou 2013). · Environmental factors such as natural disasters will further cause damage and loss to the business as well as reducing the potential customer base.
Legal	· Business laws and regulations in the United Kingdom are favorable for the organizations and it is helping Tesco in expanding their business (Dedman, Kausar and Lennox 2014). · However, Tesco is facing challenges in regards to the employee management legislations in adhering to them. · Tesco is having their presence in different countries and thus the diversity of legal formalities is more for them, which may pose challenge in the long term.

SWOT analysis

Strengths	· One of the major strengths for Tesco is the availability of diverse product bases. This is due to the reason that Tesco is having high extent of product assortments, which is helping in targeting different customer segments. · Customer service of Tesco is considered as the benchmark in the industry and they have achieved a number of awards for it. This is acting as their competitive force in the industry (Setia, Venkatesh and Joglekar 2013). · Tesco is available in different store format ranging from hypermarket to departmental stores. Thus, the customers are having personalized shopping experiences.
Weaknesses	· Tesco is highly depended on their business in the United Kingdom. Thus, reduction in the profit in the United Kingdom will affect the entire business of Tesco. · Tesco is more focused in cost leadership in the market, which is further reducing their profitability (Banker, Mashruwala and Tripathy 2014). · Operation cost for Tesco is high compared to some their competitors, which is restricting their profitability. For instance, Aldi is offering same products in more competitive price due to their lean operational technique.
Opportunities	· One of the major opportunities for Tesco stays with strategic alliances. This will enable them to initiate co-creation process and cater to larger customer segments (Albers, Wohlgezogen and Zajac 2016). For instance, Sainsbury’s and Asda are initiating dual brand strategy. · Some of the developing countries are having more market growth compared to the United Kingdom. Thus, the entering in these countries will enhance the business for Tesco. Walmart is having their operations in China and India. · Market for eco-friendly products is increasing and thus offering more green products will increase business for Tesco.
Threats	· Emergence of economic recession will be the major threat for Tesco. This will reduce the business potentiality for them. · Emergence of new competitors will also reduce the profitability for Tesco (Schwenger, Straub and Borzillo 2014). · Sudden increase in the cost of the products will reduce the viability for Tesco along with reducing the number of potential customers.

The above analysis of the micro environmental factors identified a number of positive and negative factors of Tesco. One of the major positive factors being identified is the diverse product offerings of them. This is beneficial for them due to the reason that Tesco is having their operations in different countries apart from the United Kingdom. Each of these markets is having different taste and preference patterns, which is being effectively fulfilled by the deep product assortment of Tesco. Thus, Tesco is being able to target the larger customer segments across their operations. However, on the other hand it is also being identified that Tesco is focusing on cost leadership strategy, which is reducing their level of profitability (Cross, Belich and Rudelius 2015). This is due to the reason that Tesco is indulging in price war with the competitors and offering their products in minimal price. This strategy will not increase their long term business viability. It is also identified that a good portion of the customers are looking out for the organic products and they can be tapped by initiating sustainable product strategy by Tesco. This will also increase the diversity of the target customers. However, it is also being identified that Tesco is having the risk of increase in the competition in the market and emergence of new competitors. Both these factors will reduce the business potentiality for Tesco.

• It is recommended that Tesco should more focus on product and service differentiation over their existing cost leadership strategy. This is due to the reason that initiation of the differentiation strategy will help in having distinctive image in the market. Thus, the approach of the value proposition for the customers will also be different. This will ensure Tesco to have larger sales volume without compromising on the profitability.
• It is also suggested to Tesco that they should initiate market development strategy in the forms of targeting the tier II and III cities. This will segregate the dependability of Tesco over their existing facilities. This will also increase the target customer segments for them.
• Tesco can also opt for dual brand strategy to cater to both premium and mass market customers. This will involve different sub brands for both the customer segments. Thus, Tesco will be able to cater to different sets of customers simultaneously. It is identified that currently Tesco is operating in the mass market and they will gain more sales if a premium sub brand can be introduced in the market.

Kotter eight step model of change

As discussed in the above section, Tesco should implement change management process in their organization in order to initiate the recommended steps discussed. However, in the case of implementation of the change management process, there are number of steps should be followed in order to have proper engagement of the employees and lower probability of resistances from the side of them. In this case, Kotter 8 steps model of change will be effective in having ideal change management process in place (Al-Haddad and Kotnour 2015).

According to this model, the first step is creating urgency among the stakeholders. This is important due to the reason that employees should have the knowledge of objective of the change management. This will ensure that they are sure about the entire process from the very first stage and will not resist in the following time. In addition, it is also stated that in this step that all the involved stakeholders should be engaged and motivated for their feedbacks. The next step is to build coordination and cooperation among the team members. This is important due to the reason that the more will be the coordination among the team members, the more will be the probability of consensus among the stakeholders. It is the responsibility of the managers to build the team in most effective way along with identification of the leadership roles.

The next step is creation of vision, which denotes the goal by which the change process will be implemented. In the case of Tesco, their vision will be to stay ahead in their existing market and expand in new markets. In addition, the strategies to be initiated should also be aligned with this vision. Involvement of stakeholders should also be in line of this vision. This will ensure that right employees are available for the right job objectives are being achieved. It is also important to communicate the vision due to the reason that feedback from the stakeholders is important (Kazmi and Naarananoja 2013). On the basis of the feedback of the stakeholders, the vision and the strategy should be modified. Thus, it will ensure the consideration of the opinions of all the stakeholders in the change management process. There is high probability of emergence of resistance and it is important to have the effective mechanism of overcoming these resistances. It is recommended that the managers of Tesco should monitor the change process periodically and identify the issues with the employees. This will enable them to overcome the barriers in the initial stage only.

Identification of the macro factors

As per the Kotter change model, it is also important for Tesco to ensure that the improvement process is continuous even after the completion of the implementation process. This is due to the reason that there are number of issues can get emerged after the completion of the change process, which should be overcome and managed in the primary stage. Thus, it is important for the managers of Tesco to evaluate the effectiveness of the change process and modifying accordingly. This will ensure that the culture of change will be relevant in the organization and will not pose challenge in the future. The last step of the Kotter change model also states about the importance of incorporating the change process in the organizational culture. Thus, it is important for the managers of Tesco to ensure that the organizational culture of them is flexible and mobile enough to initiate the change in accordance to the market and business scenario.

Conclusion

This report concludes that Tesco is facing a number of challenges in terms of their micro and macro factors. In this report, PESTLE analysis is being done to review the macro environmental factors being faced by them. In addition, SWOT analysis is being done in this report to discuss about the internal competencies of Tesco. It is identified that Tesco is having well diversified products and market presence across different countries. This is helping them in serving the larger customer segments. On the other hand, it is also identified that Tesco is facing the issue of increase in competition and reduction in profitability. In accordance to the identified issues, a few recommended steps are discussed along with an ideal change management plan.

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