Positive and Negative Impacts of Micro Environment on Business Operations

This report discusses the different types and purposes of organizations, the size and scope of different types of organizations, the relationship between different organizational functions, and the positive and negative impacts of the micro environment on business operations. The case study used is Tesco, a British multinational retailer. The report also includes a PESTEL analysis of Tesco's micro environment.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
TASK 2............................................................................................................................................6
TASK 3 ...........................................................................................................................................8
TASK 4............................................................................................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Business environment refers to internal as well as external forces that have influence on
the business activities. These factors mid range from policies of government to legal application.
These are very dynamic and ever changing with the time and fluctuations in the business world.
Organisations make plans and strategies in order to overcome the challenges possessed by such
forces. It is important to to increase the overall performance and sustain in the competition for a
long time. Business environment presence threats as well as opportunities for any business which
should be identified and evaluated (Argyris, 2017). There should be effective management and
strategies to use the resources in changing environment so as to maintain the performance,
increase profitability and growth. In this report, TESCO has been chosen which is a British
multinational groceries and general merchandise retailer having its headquarters in Hertfordshire,
UK. Furthermore, this report covers different types and purposes of organisation such as public,
private and voluntary along with their size, scope and legal structures. In addition to this the
relationship between different organisational functions and their connection with objectives,
identification of positive and negative impacts of micro environment. These have been followed
by an internal and external analysis of a particular organisation together with SWOT analysis.
TASK 1
P1. Different types and purposes of organisations
Organisations can be established in public, private or voluntary sectors by considering the
nature, legal structures and other benefits. These sectors have their characteristics along with the
benefits and demerits which should be considered before establishing an organisation. Some
entities in the respective sectors have been provided below:
Public sector- This sector is associated with the government and provides a range of
governmental services example infrastructure, public transportation, public education etc. British
Broadcasting Corporation (BBC) is a public service broadcaster located in Westminster, London.
it is one of the oldest and largest organisation in the field having more than 22000 employees
(Deshpande, 2018). Its purposes are to provide impartial news and information with a view to
engage the world and help them understand. To support learning for people of all ages, to show
most creative, quality content and to reflect United kingdom by reflecting culture and values. It

has been established on the royal charter where an agreement is made between Secretary of State
for Culture, Media and Sports. It is a large organisation which has its presence throughout the
world by providing services. It is a public limited organisation.
Private sector- This sector comprises of individuals and companies who run the
organisation with the motive to make profit. The government of the country does not hold or on
any shares or activities. In simple terms, there is no involvement of the government. In this
category, TESCO has been chosen which is a retailer in groceries and general merchandise. Is
operating at international level by making its present in many countries. Also, it is one of the
leading and successful companies in this industry. The main purpose of Tesco is to make profit
by creating value for customers to earn their lifetime loyalty. Also, to offer a wide range of
products and services from groceries, household products, clothing to insurance with a view to
meet the requirements of customers. It has been incorporated by forming MOA signed by its
directors and shares were subscribed by the shareholders. The directors hold the power to make
decisions and strategies which are applied within the organisation (Golovnev and et. al. 2013). It
is also a large entity conducting the business at international level. It is a public limited company
which holds stock of general public.
Voluntary sector- The entities in this sector half no profit making motive. It is entirely
different from private sector. It is directed towards the betterment of society and organisations
are non governmental nonprofit. Sometimes, it is known as the third sector, community centre
nonprofit sector. Oxfam as an organisation in which industry which is focused on eradication of
global poverty. It was founded in 1942 and comprises of 19 independent charitable organisations
having the same objective. It was registered in accordance with UK law. The headquarters are at
Nairobi, Kenya. The purpose is to help people earn a living and provide them basic necessities in
the situations of vulnerabilities. It supplies food and send children to school and stand against
injustice. The legal structure a not-for-profit limited liability company which forms council of
trustees. It is again a large nonprofit organisation.
P2. Size and scope of range of different types of organisation
The size and scope difference in all the three sectors which have been mentioned above.
Every organisation has their purposes which are based on the size and scope. These two factors
have been explain with reference to the entities presented above. These are as follows:

BBC- When this company was established, the services were limited to the regions of
United kingdom. After gaining success, it started broadcasting the news through television, radio
and online in 28 languages. Therefore, the scope is quite wide as it services are provided
throughout the world. It employees over 20000 staff in total in which more than 16000 hour in
public sector broadcasting. In addition to this, 35,402 are the individuals who are in part time,
flexible and fixed contracts. BBC follows Hierarchical structure of organisation.
TESCO- This organisation is one of the leading entities in the industry deals. Retaining
services of selling tea products and services is not just limited to the national boundaries of UK.
There are many markets in Europe and Asia along with USA where it sells the products and
services. This is to capture wide markets and make the position more stronger. It is planning to
expand its business in other countries as well for gaining a competitive advantage at international
level. According to the data provided by Tesco, approx 500,000 people are working in the
company at worldwide level. Also, it has around 7000 stores in different parts of the world
(Huang and et. al. 2013). Functional organisational structure is adopted in Tesco. This makes it
easy for managers to spread information to all organisational level.
OXFAM- This entity has wide scope which extends to all those people who are fighting
inequality to beat poverty together in different locations of the world. There are many countries
who have participated in the activities of Oxfam. It helps in providing dignity and opportunity
for underprivileged people. The working of Oxfam extends to who almost over 90 countries and
they all share six goals and vision working towards removing poverty. It has spent around 1.27
million dollar and read more than 22.2 million people as a part of long term development and
humanitarian assistance programs. Along with this, 5,300 people around the world are associated
with this organisation and there are 22,000 volunteers in volt who help in achieving the
objectives. The organizational structure followed by Oxfam is matrix organizational structure.
TASK 2
P3. Explain the relationship between different organisational functions
Organisational function refers to main process or set of activities which are undertaken
by a department or areas of a company. These may range from operations, human resources,
information, finance and many more. The relationship between these functions has been
provided as follows:

Marketing- The activities undertaken by marketing department about researching the
current requirements and demands of the customers. This unit provides valuable information
which helps organisation produced new products with enhanced quality in order to increase
customer satisfaction. Tesco has been improving in providing better services on the basis of data
provided by marketing department (Teng, Thekdi and Lambert, 2012). This hurts the
organisation to connect in a better way with the outside world. It helps in achieving competitive
advantage. Production department provides all the specification of the products that are being
manufactured so that marketing function such as raising awareness of the newly developed
product can be raised among the customers. This helps in gaining success. As the objective of
Tesco is to provide customer satisfaction. The finance department of Tesco has to provide budget
for organising marketing campaigns and programs.
Finance- This function is connected with expenditure or utilisation of financial resources
for different operations and processes. On the basis of reports provided by finance team, The
entity makes business plans and strategies for enhancing the performance and retain the position
in the marketplace. In order to manage the cash flows, why should be adequate funds which
should be monitored regularly and a comparison should always be made against the standard to
determine the associated risks (Bocken, Rana and Short, 2015). In the context of Tesco, it helps
in achieving the long as well as short term financial goals by paying off all the related
obligations. Human resource, marketing, production, operations etc. Communicate their
individual need for farmers which can be allocated to carry the activities. Allocation of financial
resources is done by finance department.
Accounting- The functions accounting includes tracking the transactions occurring on
daily basis regarding different account such as purchases, sales etc. With the function of
accounting, cash flow maintained in an efficient manner. The requirement of additional funds is
determined by accounting department. This helps in in achieving the objectives within the
available resources leading to higher growth and productivity. Organisational structure can be
maintained only if there is adequate funds together with close monitoring. All other units give
the information of their respective transactions to accounting department in order to assist in
making entries in me journals and books keeping a record of all the transactions (Wetherly,
2014).

Human resources- This is related to the management of human capital within the
organisation for achieving good performance. Another aspect is legal provisions which are
applicable on a company. These are also included in policies to be implemented within the
organisation. Training, development sessions etc. Can help the employees of Tesco to show their
creativity and innovation in achieving goals and objectives. This further fulfils the needs and
expectations of customers. This function fulfils the vacant positions before it is too late.
Attractiveness of an organisational structure helps in getting best candidates for available job
positions in the company. This is possible when HR department and marketing department have
good collaboration. This enhances efficiency and skills of employees.
TASK 3
P4. Identify the positive and negative impacts the micro environment has upon business
operations together with specific examples
Macro business environment our forces present outside the organisation which are
beyond its control. A business can be affected majorly from the pressure put by such factors.
Therefore, it is essential to conduct an evaluation and analysis of all the macro environmental
factors for determining the risks so that appropriate strategies can be made in order to mitigate
them. Pestel analysis is a framework used for assessing the impact of such forces. It has been
conducted in the reference of Tesco which is as follows:
Political factors- These are related to the activities of the government which affect the
businesses. Text policy, foreign trade policy, trade restrictions, environmental law, labour law
etc. Are some of its examples. There is increased intervention of the government. Tesco is an
international company operating in many countries at global level (Charter, 2017). It has to
comply with all the requirements of various nations advisor business can be affected in a
negative manner. For example, import duty on goods can affect us go because it import some
inventory from outside UK like China and East Asia. Apart from this, the withdrawal from EU
membership has greatly increase the risk factor in in carrying the business activities from
different countries in Europe.
Economic factors- These are connected with the forces that prevails in an economy and
affects it. Some examples are interest rates, tax rates, wages, inflation, reception and many more.
investors judge the attractiveness of an industry on the basis of economic factors. With regards to
Tesco, labour cost in UK can affect the supermarkets. For instance, the minimum wage rate is is

increased in last few years which has caused upward shift in the cost involved in UK. Also, it
should make strategies to balance the cost, prices and profits. One of the major reasons is the
brand reputation. For this purpose, it can opt for diversification in international market for
achieving the the increased shares.
Social factors- These are the outcomes deriving from culture, environment, community,
family etc. Every society holds some norms which are followed by the people living in there.
These are the factors which greatly impacts a business as it operates within the society by using
their resources. Tesco always conduct researchers and evaluate the trends and patterns followed
by customers when it comes to shopping (Evans and et. al., 2017). It is useful in in providing the
quality and products expected by the customers. This has made Tesco realise that customers are
looking for super fast delivery with flexible goods return policy. also there should be one stop
shopping for them to increase their satisfaction and convenience. For example, Tesco always try
to sell the goods at best possible prices so that people can enjoy good quality products at cheaper
price.
Technological factors- These are connected with the technological capabilities and
evaluating the alternative which are available within the industry. It includes advancement and
development of new technologies which can help bring innovation. In the context of Tesco, it
embrace advancement in technology as an opportunity by adopting retrial technologies. Also, it
makes huge investment in research and development to find the the appropriate technology
which can help it sustain in the market. For example, it has introduced RFID technology which
increase in store experience for customers, the stock is automatically counted and remove after
sales etc. This has made the working more easier increasing high efficiency (Georgescu and
Popescul, 2015).
Environmental issues- The factors of connected with ecological that influence the living
people in a society. It covers the laws which have been enacted for protecting the environment
after considering the damages. Companies are facing immense pressure from government
agencies to address environmental issues. This is to increase the accountability for their actions
to the society. Tesco has a team which look after the ways of collecting unwanted plastic bags
from customers and recycle them. As the company is committed to use the renewable sources
and generate electricity out of it. This is going to reduce the admission of harmful gases and
carbon footprint.

Legal factors- There are some laws present in legal system which are applicable on
companies operating in UK and other countries. Tesco has faced many controversies and legal
actions in the past on different factors. So, it has become more consistent towards fulfilling the
legal requirements in order to avoid breaching or contravention of law. The can leads to to
financial burden for settling the legal matters.
TASK 4
P5. Conduct internal and external analysis of specific organisations in order to identify strengths
and weaknesses
Weaknesses and strengths are two aspects of every business which are affected by
various factors whether internal and external. These have impact on business operations in
negative as well as positive. These should be evaluated and analysed for determining the actual
scenario to make strategies accordingly. SWOT analysis has been conducted for Tesco which is
as follows:
Strengths
 It is one of the leading groceries retailers in UK which has huge sales and revenue as
compared to other supermarket chains in the country. Also the annual operating profit
increased in past few years.
 It has market dominance in the context of market share and it has been gaining popularity
in other nations as well.
 It has around 6800 stores in 14 countries making it a company having global presence.
 The number of stores are being increased every year as the operational plan is to to
introduce new stores in different locations.
 It offers diversified product range by products by following diversification strategy which
has made it successful (Hillary ed., 2017).
 It uses advanced technology for enhancing shopping experience of its customers this lead
to higher satisfaction.
Weaknesses
 Tesco has filled in conducting business in America and Japan in 2012. the field export
operations force the company to close doors in Japan after 9 years and then US after 5
years.

 It has been charged with the acquisition of false accounting declaration and miss
representation of profits.
 The profit is affected it is of high debts and credit card liability.
 The low cost strategy has chances to reduce the profit margins.
 Sum of its stores perform very poorly.
Opportunities
 It has introduced a new store called Jack’s which is discount store and has shown
significant growth. This unlocks the opportunity to grow the business and successfully
complete as a low-cost rifle with other competitors.
 It can get collaborated or strategic alliance with other reputed companies. Does can help
it provide even wider range of products to attract the customers (TESCO SWOT Analysis,
2019).
 There is an opportunity for joint ventures in the regions where Tesco stores are
underperforming. the local companies can provide profound market knowledge which
can help in improving performance in such regions.
 Online shopping trend is something which has emerged as a powerful opportunity for
Tesco. Along with this, it can provide home delivery services.
 Tesco can make plans of expanding the business in developing or emerging countries
such as Turkey or Indonesia. This can help it gaining competitive advantage.
Threats
 The exit from EU referendum has declined the trade deals and cost have increased which
is a threat for Tesco.
 Government regulations, legal and tax matters along with other economic crisis have
hamper the performance of Tesco. The impact of these factors can affect the operational
efficiency and performance for a long time.
 It has been involved in some of the controversies which has taken down the brand image.
In future, if such charges are likely to be imposed on the company then and it is going to
lose customers.
 There are many companies who are giving tough competition to Tesco such as Walmart,
Aldi etc. it is getting tougher for TESCO to survive in the market.
P6. Explain how strengths and weaknesses interrelate with external micro factors

Below is mentioned interrelationship between macro and micro environment factors in
context with TESCO:
Political factors: These factors are related with stability of government along with their
rules and procedures associated with business organisations.
 Strength: UK is politically stable due to which company is able to give appropriate
services to their customers. This is helpful in maintaining the quality of the products and
carry the operations without any intervention of government or related parties.
 Weakness: Due to advantage of operating in UK, company is not trying to achieve high
business advantage in other countries. It should focus on the business expansion for
exploring the business opportunities which are beyond the national boundaries.
Economic factors: These aspects are linked with GDP, purchasing power, inflation and
interest rates, currency fluctuations etc.
 Strengths: Due to high purchasing power of people, brand equity of TESCO is high in
UK. Also, there is a dominance which is shown by TESCO that has helped it gaining
market shares. Furthermore, the UK market is stable as of now which is a good time for it
to expand the business.
 Weaknesses: Because of increased cost in delivery, distribution of products and salary of
worker, marketing strategy of firm remains weak (Argyris, 2017). It should analyse the
position of economy before making any plans.
Social factors: It is related with the culture, value, preference, opinion and choice of
people which are living in a region
 Strengths: People in UK prefers online shipping and presence of company on social and
other media is its biggest advantage. Online shopping has increased in the last few
decades. This is a digital transformation.
 Weakness: people are preferring the products of rival firms due to more attractive offers
and discounts. This is because of its getting occupied in some controversies that have cost
it its image.
Technological factors: These aspects are linked with technological updating of the
region where company is operating.

 Strengths: Technology is going to help TESCO in reaching their range in Asian market
and other markets for high profits and revenues. This is the way in which other ventures
or entities can be attracted to TESCO to make collaboration.
 Weaknesses: Due to lack in technology and automation, market strategy of company is
weak. This can make the company suffer from huge loss.
CONCLUSION
As per above specified report, it can be comprehended that all business firms have
different purpose, objectives, size and mission. Appropriate coordination in each departments of
businesses benefits in achieving long term goals and objectives. Macro factors influencing a
business had both positive & negative effect on their functioning. Tesco PLC follows divisional
organization structure that assures a smooth business activities and operation so that probability
and larger market share can be acquired. There should be effective strategies made by the
management which can help the business to grow and make more profit.

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