Business and Business Environment: An Analysis of Tesco

This assignment explores the complexities of the business environment, focusing on the case study of Tesco, a leading multinational retailer. It delves into different types and purposes of organizations, examining the public, private, and voluntary sectors, as well as legal structures. The assignment further analyzes the relationship between organizational functions and their link to objectives and structure, using Tesco as a prime example. Furthermore, it utilizes PESTEL analysis to identify the positive and negative impacts of the macro environment on Tesco's operations. Finally, the assignment employs SWOT analysis to conduct an internal and external analysis of Tesco, identifying its strengths, weaknesses, opportunities, and threats, and exploring how these factors interrelate with external macro factors.

BUSINESS AND BUSINESS ENVIRONMENT
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Table of Contents
Introduction...............................................................................................................................3
LO1............................................................................................................................................4
Explain different types and purposes of organisations; public, private and voluntary
sectors and legal structures and explain the size and scope of a range of different
types of organisations [P1, P2, M1]......................................................................................4
LO2............................................................................................................................................7
Explain the relationship between different organisational functions and how they link
to organisational objectives and structure [P3, M2, D2]....................................................7
LO3..........................................................................................................................................10
Using PESTEL identify the positive and negative impact the macro environment has
upon the business operations of your chosen organisation. You should support your
answer by specific examples from your chosen organisation [P4, M3]........................10
LO4..........................................................................................................................................14
Using SWOT or TOWS conduct an internal and external analysis of your chosen
organization in order to identify its strengths and weaknesses and explain how
strengths and weaknesses interrelate with external macro factors [P5, P6, D2]........14
Conclusion..............................................................................................................................18
Reference...............................................................................................................................19
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Introduction
Business environment can be defined as the sum total of the internal factors and the
external factors. Both the internal and the external affect each other. As the internal
and the external factors are interdependent so if a balance is maintained between
the two, then this could lead to a positive effect on company’s growth. It is essential
to study the factors to make the decision making process. Business is the analysis of
all the aspects of business including the vision and objectives of the business, legal
information, scope of the business, etc (Tukker and Tischner, 2017). The following
parameters make the evaluation of the business management easy and effective. All
the sectors like public, private and voluntary sectors, profit and non-profit
organisations, are covered according to their importance. The different
developmental factors are consumer development factors, political factors,
microeconomic factors, macroeconomic factors, social factors, technological factors,
etc.
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LO1
Explain different types and purposes of organisations; public, private and
voluntary sectors and legal structures and explain the size and scope of a
range of different types of organisations [P1, P2, M1].
Organisations or companies are defined as a group of people working for a particular
motive or function for some development or growth of a particular sector.
Organisations are classified into profitable organisations and non profitable
organisation based on their purposes.
Profit and non-profit making organisation.
A profit making organisation has a primary goal of making profit or money as well as
increasing its earning and growing the business. Where as a non-profitable
organisations focuses on development and for the welfare of the people or society. It
is a myth that non-profitable organisations do not earn profit. They usually earn profit
but their main objective is different. A non-profitable organisation usually earns the
minimum profit required to make the organisation work (Butler and Wilson, 2015).
The work of this organisation only includes development of the society in any means.
Profit making organisations includes one individual company, firms, joint stock
companies, partnerships, or sole proprietorship. Non-profitable organisations on the
other hand include trusts, Government schools, Government hospitals, clubs, social
gatherings of a group of people. The source of revenues for profitable organisations
is sale of products and services where as the non-profitable organisation includes
membership fees, subscriptions, donations. One is commenced through the capital
contributed by the owner of the companies where as the other gets funds from
government, subscriptions. The profit is shared among the owners of the company or
only to the owner of the company for profitable organisations. In the other hand the
profit of the non-profitable organisations are used for donations or welfare of the
society. The success of a non-profitable organisation depends on the reputation of
the community. It depends on the customer’s feedback that they can enhance as
well as damage the reputation of the company depending upon the customer’s
satisfaction.
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Profit making organisations are classified into public and private sector organisations
and the non profitable organisations refers to voluntary sectors.
Public, Private and Voluntary Sectors
Public- The organisations which are owned by the government are known as private
sector companies (Cellini and Darolia, 2016). This is the portion of the economy that
is controlled by the state. The officials of these sector companies are also recruited
by the government. For example Network Rail is a government owned public sector
Company of United Kingdom. The company is a subsidiary company of Network Rail
Infrastructure Limited. The company delivers goods all over the nation. The service
of the company is good enough to gain the confidence of the people.
Private- The private sector companies are not controlled by the Government. It is
controlled by individuals and companies (Warner and Sullivan, 2017). They generally
work for the intention of increasing the profit of the organisation. TESCO is an
example of Private Sector Company. The objective of this company is to increase its
turnover and also its shareholder to get maximum revenues. The company
manufacture various goods and promotes through online platforms to reach the
consumers.
Private sector companies are divided into sole traders, partnerships, limited
companies and co-operatives. Among the limited companies there are private limited
companies as well as public limited companies. The advantages of a sole trader are
that profit is not divided but only the owner gets it. The set up is easy to build for a
sole trader because he/she generally has the complete control over the company.
Partnerships on the other hand include distribution of profits, voting rights, the
management function of each partner. Business losses are also shared among the
partners so a huge loss can be managed. On the other hand everyone is bound to
follow some decisions.
Voluntary Sectors- Voluntary Sectors include organisations with the sole motive of
social activity related to the welfare of the society and development of the people
(Vrentas et al., 2018). This generally includes NGO’s or non- profitable
organisations. Welcome Trust is such example. It is a UK based organisation that
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helps people and provides fund for research analysis. The students who are
financially weak but want to research are provided help by this company.
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LO2
Explain the relationship between different organisational functions and how
they link to organisational objectives and structure [P3, M2, D2].
TESCO is a multinational British Company of groceries and general merchandise.
The company is the third largest retailer in the world in terms of profit. It is
headquartered in England. The company was founded in the year 1919. The
company supports hundreds of charities and local communities for the welfare and
development purposes. It supports British Red Cross as well. It also includes
TESCO bank which is completely owned by the company. The objective of the
company is to serve the British better every day. The company meets the customers
need, then becomes the first company to offer unique goods and services to the
consumers and then maintaining their reputation. The company believes that a small
change in the business for good of the consumers makes a major difference.
Relationship between different organizational functions in TESCO
The different organisational functions are interrelated with each other, the factors
supports each other and functions accordingly to perform a suitable method.
Organisational structure is defined as the activities like supervision, co-ordination
and task allocation involved for the success of the organisation. This is a major factor
as it initialises the work of an individual in an organisation and the standards of the
organisation which should be maintained for the growth of the organisation. The
types of organisational structures are functional, geographical area, product groups,
and customer types.
Tesco follows hierarchical structures with tall structure as it has various departments
on various products. These structures are generally tall in structures and have a
narrow span of control. This initiates good quality of work as the person or the group
of people is working for a small part of the business or company. But this on the
other hand reduces the communication among the different layers of management.
Any information needs time to travel the different layers of the management which
causes a lag in the processes which are emergency factor for the growth of the
organisation. It also initiates employment of many staffs which finally leads to higher
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costs. The functional areas of the company are human resource, finance
department, marketing department, operations department, production department,
research department, and many others.
Finance department
This department keeps the records and manages the funds of the company. The
statements of the company and the financial sheets are made in this department
(Hudson, A., 2017)t. The company does not face failure because this department
ensures continuous flow of the capital and handling the funds as well. The strategic
planning and financial analysis are done in this department. It also manages the
treasury of the company and the capital management as well. Capital budgeting of
the company which includes utilisation of the capital or capital projects managed in
this sector. This also includes the risk management operations as well.
Human Resource
The recruitment and selection of the employees are done by this department. The
department ensures effective staffs for the various sectors are selected so that the
growth of the company increases eventually (Cascio, W., 2018). As the quality of the
workers or staffs of a company is a major factor to increase the growth of the
company and to maintain the standard of the company. The department provides
orientation of new employees so that the employees could work effectively by
knowing their job role, job description, relationship of the position as well. It also
maintains the good employee relations followed by good working conditions.
Marketing department
This includes strategies taken by the managers to increase shares of a particular
market. It includes marketing research of the company to know the customers need,
products used by them, competitors in the market, type of customers available
(Sowter, 2018). The department plans and develop communication products to
increase the promotion of the products to a larger extent to reach a huge number of
consumers. So it provides every form of sales support required for the company. The
marketing department organises different events such as seminars, customer
hospitality events, sales conferences, exhibitions to promote the company as well as
the products and services of the company.
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Operations department
This department deals with the profitability of the company, increasing the sales of
the company, management of the people as well as the products and the services of
the company (Srivastava, 2017). The company usually splits its vital operations like
production to make the work more effective.
Research department
This department deals with the new projects to make new products as well as up
gradation of the old ones. The quality checks of the products are done in this
department. The company finalizes the products for delivery after it is checked by the
quality control department (Devine and Williams, 2016). Innovative ideas are
implemented in this department.
Advantages and Disadvantages of inter-relationships between the
organizational functions
The interrelationships between the organisational functions include both advantages
as well as disadvantages for the company. The advantages include co-ordination
among the departments and this causes the production as well as the sales of the
products at a faster rate. The proper management among the departments increases
the company’s profit margin and helps to reach the objectives of the company. On
the other hand if one department makes any disputes, the whole channel of events
gets misplaced and causes major problems. Since the departments are interrelated
so this leads to a large problem. Also time is spent to work together as process
works one after the other in a chain process.
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LO3
Using PESTEL identify the positive and negative impact the macro
environment has upon the business operations of your chosen organisation.
You should support your answer by specific examples from your chosen
organisation [P4, M3].
Elements Impact Positive Impact Negative
Impact
Political Global political factors
always influence TESCO.
This generally includes
legislation acts, tax rates. As
the financial stability is not
stable around the world so
the governments are
stimulating retailers to
provide jobs. A large number
of individuals are offered
with jobs and the company’s
business grows rapidly.
Product demand is
increased and
workforce is
diversified
The formation
of BREXIT has
reduced the
company’s
expansion in
the European
Countries. It
has become
difficult for
TESCO to
carry out its
business
through
Europe.
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Economic This factor has a major
impact on TESCO. This
includes prices, profits,
demands, and costs. The
company keeps tracking the
changes caused in taxes
made by the government or
any other changes that
could directly influence the
company.
Since TESCO is a
large organisation
working for many
years, its
diversification and
internationalization
has contributed to
its major success.
Implementatio
n of high taxes
by the
government
leads to
changes in the
company’s
price structure
as well as
profit structure.
Social The customers of UK are
focussing mainly on one-
stop shopping or rather bulk
shopping. This has become
a trend and it is
consequently followed by
the company. TESCO has
increased the sale of non-
food items. The demand of
goods and services
completely depends on the
consumer’s beliefs and
attitudes. Being mostly
health conscious customers,
their demand of food
changes rapidly.
TESCO has
changed its way of
manufacturing
food products.
This caused a
large number of
customers to buy
goods from
TESCO which
eventually
increases the
growth of the
company.
TESCO has to
invest more
money to
change the
manufacturing
process to
meet the
customer’s
demand. New
machines, new
technologies
as well as
experienced
workers
require high
capital
investment.
Technological With the advancement of
technology, new methods of
sales, new technologies,
new strategies are
introduced in the market.
These include online
TESCO has
introduced online
services of its
products and
developed
provisions for
To include
home
deliveries for
the products
and services,
TESCO needs
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shopping, advertisements on
social media, and other.
home deliveries as
well. Along with
this, the company
has introduced
self service
counters. This
decreases the
workforce and
meets the
customer’s
satisfaction as
well.
to invest on the
transportation.
Along with this
to install self
service
counters for
the customers
expensive
machines are
bought. This
requires a high
capital for the
initial cost and
servicing of the
company as
well.
Environmenta
l
This includes the company’s
impact on environment. The
process of manufacturing of
products often causes
pollution to the environment.
This counts the amount of
carbon content released by
the companies, amount of
waste materials depending
upon the harmful effect on
the environment.
TESCO has
committed that the
company will
reduce its carbon
footprints by 50%
within 2020. Tesco
has already
reduced the
production of
waste material.
To make the
wastes eco
friendly,
TESCO
requires to
implement
processing of
the waste so
that causes
investment of
capital.
Legal Government policies and
rules generally influence
TESCO. The government
generally changes terms
and condition and so the
company needs to plan
TESCO has
minimised the
customer’s
expense on fuel at
the cost of the
groceries. This
To cope up
with the new
policies of the
government, it
requires
planning and
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strategies accordingly.
According to the Equality Act
2010, every employee must
be provided equality.
Following the Act of National
Minimum Wage 2018/19, the
minimum wage of the
workers must be maintained.
According to the Health and
Safety at Work etc Act 1974,
the safety as well as the
health of the employees
must be handled by the
authorities of the company.
increases the
sales of the
company.
strategies to
create the
changes.
From the above PESTEL analysis it is clear that TESCO have much positive as well
as negative impact. The negative impact of BREXIT on the political impact is a
serious threat for TESCO. The company needs to expand its business in other
countries as well to overcome the limitations from the European countries. The
company’s delivery services must be stretched to a greater geographic location to
reach a large number of consumers demand. This includes construction of stores
and warehouses to other countries as well. The taxes implied by the government
become difficult for the company to overcome, so strategies must be implemented
accordingly. The cost for installing new machines must be managed well to increase
the profit margin.
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LO4
Using SWOT or TOWS conduct an internal and external analysis of your
chosen organization in order to identify its strengths and weaknesses and
explain how strengths and weaknesses interrelate with external macro factors
[P5, P6, D2].
In order to operate effectively, it is important for the organization to conduct internal
and external environment analysis. With the help of internal analysis, the
management will be able to explore the competencies, market position and
competitive viability of the organization. On the other hand, external analysis helps in
identifying the external factors that are affecting the business operation of Tesco. For
internal analysis, the management has decided to conduct SWOT analysis and
PESTLE analysis for external environment analysis. SWOT analysis of Tesco is
given below:
 Strengths: The main strengths of Tesco are its high brand value and
reputation in the market. Tesco has also won many awards for its customer
service, retail excellence and better shopping experiences. Tesco is
considered as one of the largest and most profitable retail organization in the
world. Moreover, Tesco has different kind of stores such as hard discount
stores, supermarkets, multi format strategy hypermarkets and convenient
stores to provide better shopping experience to customers (Keller, 2016). It
has also enhanced the use of modern technology throughout its operation,
which has helped the organization to create more cost efficiencies and
improved customers’ services. The organization has many retail stores across
the globe for meeting the cultural and local needs of the customers.
Additionally, Tesco has higher private label brands, which has helped in
gaining competitive advantage over its competitors. Since, the company is
operating for many years, its internationalization and diversification has
helped it in gaining more success.
 Weaknesses: Pressures from the competitors has led to the price wars,
which has decreased the profitability of Tesco when the organization focused
on other methods to gain competitive advantage. In some countries, the retail
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stores are not able to generate effective revenue. Therefore, Tesco is highly
dependent on the stores in Europe and United Kingdom. The company has
also been involved in many controversies, which has affected its public image
(Jack, 2018). Implementation of higher taxes has affected the price structure
of Tesco, which will also affect the business of the company. This will also
increase the cost of company’s products.
 Opportunities: There is an opportunity for Tesco for strategic alliance with
other brands or companies in those countries where the company is not
operating well. Additionally, there is also an opportunity for Tesco to grow its
online services, which will help in increasing its sales and profitability.
Moreover, Tesco can focus on boosting its sales of non-foods products
(Lasserre, 2017). By conducting effective market research, the company can
enter into emerging markets, which will help the company to increase its
global presence (Grant, 2016). The company can enter through tie-ups and
acquisition of small chains.
 Threats: One of the threats for Tesco is from its competitors such as
Sainsbury, Aldi, Walmart, Marks and Spencer and others. Increase in the rate
of inflation is causing a threat to the company, as it decreases the purchasing
power of the customers and revenue of the company. Rise in the cost of raw
material is also affecting the profitability of the company (Grundy, 2017). On
the other hand, regulation of the government and political landscape is also
adding pressure to the company to comply with new rules and regulation
imposed by the UK government. Due to this, the company has make
significant changes in the operating structure, which is adding the additional
cost to Tesco. Pressure from the stakeholder regarding the environment and
social responsibility has also added pressure to the company regarding the
cost basis.
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Figure 1: SWOT analysis
(Source: Grundy, 2017)
From the analysis of the external factors, the organization was able to identify the
strengths and weakness. With respect to Tesco, the change in the external factors
and the manner in which the company is dealing with these factors reflects its
capabilities and weakness. From the PESTLE analysis, it has been indentified that
the demand of the company is increasing, which can create opportunity for Tesco to
generate more revenue. In addition to this, the company can also face issues in
generating higher profit due to implementation of high taxes from UK government. In
the context of social factor, the customers are more dependent on one-stop
shopping, which can help Tesco to attract more numbers of customers and for this,
Tesco has to invest more in the modern technology to provide overall shopping
experience. From the PESTLE analysis, it has been identified that Tesco has
committed to reduce carbon footprints, which increases its brand value. The
company can also face problem to deal due to the new policies of the government,
which can affect the operation of the organization.
The micro and macro factors can affect the decision making of the company, as it
can help the management to develop effective strategies. In most of the countries,
some of the stores of the company are not performing well, so the management
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needs to take effective decision to improve the business operation. From the
PESTLE analysis, it has been identified that the company needs to make effective
decision to set appropriate prices to meet the impact of higher taxes imposed by the
UK government. From the external factor, it has been identified that the management
needs to make effective decision to cope with the new policies of the UK
government.
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Conclusion
This assignment has been conducted with reference to Tesco, the United Kingdom.
This assignment has displayed different types and purposes of the organization and
at the same time, it has also provided the structure and scope of different
organizations. This assignment will also help in identifying the interrelation of the
different function within an organization. It will so display the advantage and
disadvantage of interrelationship between the different organizational functions. This
assignment has also displayed PESTLE analysis of the United Kingdom and its
positive and negative impact on Tesco.
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