Business Environment Analysis at Tesco PLC

This assignment delves into the organisational structure and macroeconomic factors affecting Tesco PLC, covering internal analysis, PESTLE analysis, SWOT analysis, and impacts of macroeconomic factors on business operations.

BUSINESS ENVIRONMENT

Table of Contents
Introduction................................................................................................................................3
Task 1.........................................................................................................................................3
Introduction................................................................................................................................3
Positive impacts.........................................................................................................................5
Negative impacts........................................................................................................................6
Task 2.........................................................................................................................................6
Conduct a comprehensive internal analysis of your employing organisation. The internal
analysis must include consideration of the organisation’s resources, capabilities and core
competencies..............................................................................................................................6
Task 3.........................................................................................................................................9
Pestle analysis of Tesco.............................................................................................................9
Task 4.......................................................................................................................................10
Apply either a SWOT or TOWS analysis to your employing organisation. Write-up your
findings and analysis in a formal business report....................................................................10
Conclusion................................................................................................................................11
Reference List..........................................................................................................................13
Appendix..................................................................................................................................14

Introduction
The assignment serves the function of explaining and understanding the concept of
organisational structure in the backdrop of a selected organisation. The assignment dissects
the need and purpose of organisational structure with its corresponding functions. The
organisation chosen here for the detailed analysis of the same is Tesco Plc. Tesco Plc is a
leading retail chain rooted in UK at about 99 years ago. Founded by Jack Cohen, Tesco has
its headquarters based at Hertfordshire. At present Tesco owns approximately 6553 outlets all
over UK. Tesco’s success can be recognised by observing the net income which is 54 million
pounds as recorded in 2017 (Tesco plc, 2018). The assignment contains organisational chart
that helps the reader to analyse the inter-departmental functions. Centralization and
decentralization has been compared and contrasted that helps the reader to understand the
aims and objectives of the company. It also helps the management with an ideal organisation
structure that becomes a blueprint for the future transactions. Organisational structure
particularly aims at developing workforce, budgeting, enhancing communication etc. The
advantages and the disadvantages of the hierarchical structure existing in the organisational
structure have also been elucidated. However, the inter-relation between the organisational
structures at Tesco has both its pros and cons, which has been addressed in detail.
Task 1
Introduction
There are various macroeconomic factors which affect the business environment and provide
organisations with different opportunities to grow and improve business operations of the
company (Harrison, 2013). The company that has been selected for this assignment is Tesco.
A macroeconomic factor can be referred to as a variable which applies to the broader
economy and includes economic factors such as economic output, unemployment rates,
inflation etc (Popescu, 2013).These factors usually impact organisations in the large scale
market and are studied through the use of frameworks such as PESTEL (Political, Economic,
Social, Technological, Environmental and Legal) or Porter’s five forces analysis. The
external macroeconomic environment is very closely considered when any investment
decisions are taken by businesses and organisations as these are affected by risks, financial
output etc.

Some of the theoretical models that are used for this topic are the IS-LM model, Keynesian
macroeconomics model etc.
BREXIT is a very good example of how macro economic conditions affect the business
environment. This landmark referendum cast in the summer of 2016, declared the United
Kingdom’s intent to leave the Euro zone. The fallout from this was massive as stock markets
reeled from derivative dropping in value, companies shedding trillions of their market
capitalisation value (Kierzenkowski
et al., 2016)
Soon banks declared their interest to shift from the United Kingdom as they expected
unemployment levels to increase and interest rates to be affected accordingly.
Companies such as TESCO were also affected by this as they import a lot of their produce
from foreign markets. The falling value of the pound meant that the company were paying
more than previously, while market uncertainty and shocks affected their stock values as
well.
Another way in which this external macroeconomic environment will affect the company is
terms of ease of doing business in other countries as they lose their pass porting rights.
Another macroeconomic factor is unemployment levels in the country which could lead to
Tesco facing employee acquisition issues. This could be due to the lack of work and
decreasing disposable incomes.

Positive impacts
A positive macroeconomic factor includes those events that would improve business
prosperity as demands for goods and services would increase and national and international
business opportunities for TESCO would be affected positively. Some of these positive
impacts are found below:
 Increasing employment levels would be one of those positive macroeconomic factors
which would benefit TESCO. Increasing employment levels would mean that house hold
incomes and disposable incomes would increase, thus leading to higher consumer
confidence and an increase in the net spend in Tesco stores.
 Decreased interest rates would mean that organisations and consumers would be able to
borrow at lower cost from the banks. This means that TESCO could effectively increase
the amount they invest into their own operations; while consumers will also increase their
net spend. Unfortunately, this may lead to inflationary rates rising in the country.
 Better economic outlook for the United Kingdom in the form of increased GDP levels
would entail better economic performance for organisations such as TESCO as cash flow
in the economy would increase.
 Falling lease rates would also benefit TESCO. A TESCO superstore is usually 11,000
square feet in size, which means that in terms of contemporary land rates, the company
are significantly increasing their operational costs. Falling rent and lease would mean that
the company could open several more branches of the super store, while opening stores
such as Tesco express and Tesco Metro as well.
 If the government were to decrease tariffs, then TESCO would be able to import their
food products at a lower price which would significantly bring down their operational
costs.

Negative impacts
Negative macroeconomic factors include those events which would put the national and
international economy at the risk of jeopardy as instability in politic-economics situations
would lead to depressed business and economic environments. Some of these factors are
found below.
 BREXIT was a prime example of negative macroeconomic situations as economic
uncertainty decreased the value of the pound, which would make imports more expensive
and increase the cost of operations for TESCO (Dhingra
et al, 2016)
 Increased unemployment levels mean that household incomes would fall, so would
consumer confidence which would lead to TESCO suffering from a dip in sales.
 Though unlikely, a debt crisis (2008) would lead to an increase in the inertest rates
significantly and mean that costs of borrowing would also increase, thus affecting the
spending patterns of firms and consumers alike.
 Political instability in the form of frequently changing governments would affect the
economy from a policy point of view as different governments may approach this in their
own ways. This would again cause unstable economic situations.
 Terrorism would also be a negative macroeconomic situation which would affect any
economy and companies such as TESCO in turn. This would be because having a pulse of
the public feeling is very important. Negative public mood has shown a decrease in
consumer spending and this would have an impact amount of sales that TESCO are able
to generate.
Task 2
Conduct a comprehensive internal analysis of your employing organisation. The internal
analysis must include consideration of the organisation’s resources, capabilities and core
competencies.
Internal analysis of the organization is the critical process by which the organization directly
leads to attain target in the most appropriate manner. As stated by () on analysis of internal
factors enables the organization to identify the areas that need to be improved in order to gain
competitive advantage. With the help of SWOT analysis, the organization Tesco PLC would
easily be able to identify and recognize the statistics that can raise the performance standards

of the organization accurately. In the following manner, the overall comprehensive internal
analysis of Tesco PLC is carried out:
Identification of strengths of organization Tesco PLC
 The organization Tesco
holds more than 30% of the overall retail sector of United
Kingdom (Tesco plc, 2018). This is one of the most important factors behind success
of this organization. The reason behind having largest market share is its huge number
of stores within the country United Kingdom that enables the organization to serve
maximum number of customers and thereby lead to increase its overall sale record.
This also leads the organization
Tesco PLC to increase its overall market share on
comparison to its competitors. This also enables the organization to maintain its
strategy in the most appropriate manner.
 The organization
Tesco PLC is also present online, which is also one of the factors
behind appropriate sustainability of the organization in the market. By being online,
the organization is able to provide an effective service to its customers and reach out
even to those customers who reside far away from its store. Therefore, it can be
analysed that change in technological strategy enabled the organization to continuous
increase its overall number of sales within provided duration of time.
 Another strongest factor of this organization is its
quality of products and services
within approachable price rates. This directly enables the organization to increase its
overall rate of customer satisfaction. The market research strategy implemented by the
management department of this organization leads the organization to attain the
demands and choices of customers effectively and thereby lead the organization to
stabilize its economic rate.

Brand value of the organization Tesco PLC is very high on comparison to its
competitors. This enables the organization to easily attract huge number of individuals
and lead in increase its overall revenue. This organization has high brand value as it
organizes various events and shows, and pay special attention to CSR activities
(Tesco plc, 2018). This leads the organization to improve its overall social stability in
customer’s perspective.


Patents and patent License Agreement is strength of the organization Tesco PLC. This
organization holds various patents and patent license agreements in order to develop
the technologies that the organization believes for beneficial of the organization.
Composing the exhaustive list of weaknesses of Tesco PLC
 Due to various
infringement controversies, the organization Tesco PLC has faced
number of problems and issues. Many legal claims is been registered against this
organization that directly impacts in decrement in number of customers purchasing its
products and services.
 Weak control over overseas market is one of its most considerable weaknesses that
directly enable the organization to depend mainly over market of United Kingdom
(Tesco plc, 2018). Weak monitoring and managing of businesses in overseas market
is the main reason behind low productivity on comparison to the market of United
Kingdom.

Weak political support for overseas business is one of its weaknesses. This leads the
organization to decrease its political standards for supporting overseas business. This
also directs the organization to face various policies that reduces its overall
profitability.

Supply chain management is one of the most effective weakness factors of Tesco PLC
as it directly affects the quality of products and services. The strategies implemented
by the organization Tesco PLC is not appropriate that results in decrement of its
overall distribution of its products and services.

Employee relations within the organization Tesco PLC is very poor that weakens the
bonding and relationship between employees and management department. This is
mainly due to improper communication among the employees.

Task 3
Pestle analysis of Tesco
Sainsbury uses the strategic tool to determine the external factors and the challenges that need
to face by the organization in the present years. The external factors are stated as follows:
Political- UK is a democratic country and so there is consistent level of government policies.
There is also a risk of terrorism in the near future which may damage the structure of the
government body. In the year 2010, there was a threat for UK’s security and Intelligence
which hampers the business of Tesco to a great extent. UK is also facing challenges due to
the difference in opinions of liberal democrats and conservatives which affects the democracy
of UK. Therefore, UK took the oath to double its trade at the end of 2015 by getting tied up
with India (mitropoulou, 2018).
Economic- In the past years, the government was suffering from debt which challenges UK
in boosting its per capita GDP. But today, UK is the strongest country on the grounds of
economy and earning huge GDP which enhance the business of Tesco, according to the
World’s bank’s Doing Business at the end of 2013. UK is facing about debt of £1.38 trillion
and taking it as a challenge, UK government decides to reduce the corporate taxes.
Technological- UK can be referred as a country which possesses best education system by
establishing 170 universities which helps the people to get the knowledge about the negative
aspects of the country. Tesco train its employees to its level best so that it will help the
organization in meeting its target. Tesco is also concerned about the health of the people by
providing the healthy food to its customers. The challenges that need to be faced by UK are
the child poverty and increasing the dependency ratio from 16.5% in the year 2010 to 24.6%
by 2060 (Metzger, 2014).
Technological Factor-
Being a financially developed country, UK has a better access to advanced technology and
innovations that ultimately helps in the development of the business sector. Tesco Plc has
gained popularity not only due to its planning process but also for adopting different
advanced technology with the passage of time. Especially in the retail sector, there was a
huge crisis before the introduction of digital promotion tools and technique into the UK

market. But retail organization like Tesco Plc has implemented online shopping facility as
well as mobile shopping technology along with its rivals such as Sainsbury’s, Morrison’s, etc
has finally resulted in effective growth of the organization.
Legal Factor-
The UK government has strongly implemented few policies in order to maintain a favourable
working environment across the country. Tax avoidance costs the country an estimated worth
of £14 billion annually. The introduction of Acts such as Equality Act 2010 ensures that all
workers must be given equal importance and no discrimination is prohibited (Davies
et al.,
2016). Employment Law Act suggests that every employee must be provided with casual as
well as earned leaves. In addition, Tesco Plc must put forward legal issues of the sector in
order to increase the customer base and maintain a positive image in the market that will help
in gaining the trust of the customers.
Environmental Factors-
With rapid globalization, people have become more ethical and that has allowed customers to
select their own products from retail industries like Tesco Plc. It has to be taken into
consideration that working environment of an organization play a major role in attracting
consumers to become a part of Tesco Plc family. Tesco Plc has been highly dynamic in
nature as it has helped in expanding the network throughout the European Circle.
Task 4
Apply either a SWOT or TOWS analysis to your employing organisation. Write-up your
findings and analysis in a formal business report.
Strengths
The organization Tesco holds more than 30% of the overall retail sector of United Kingdom
(Tesco plc, 2018). This also enables the organization to serve maximum number of customers
and thereby lead to increase its overall sale record. This also leads the organization
Tesco
PLC to increase its overall market share on comparison to its competitors. By being online,
the organization is able to provide an effective service to its customers and reach out even to
those customers who reside far away from its store. High quality of products and services
enables the organization to increase its overall rate of customer satisfaction. Market research

leads in attaining the demands and choices of customers effectively and thereby lead the
organization to stabilize its economic rate. This organization has high brand value as it
organizes various events and shows, and pay special attention to CSR activities. This leads
the organization to improve its overall social stability in customer’s perspective.
Weakness
Number of infringement controversies is very high and so many legal claims is been
registered against the organization Tesco PLC that directly affects in decrement in number of
customers purchasing its products and services (Tesco plc, 2018). Weak political support for
overseas business leads the organization to decrease its political standards for supporting
overseas business. The strategies implemented for supply chain by the organization Tesco
PLC is not appropriate that results in decrement of its overall distribution of its products and
services.
Opportunities
Continuous investment in research and development of technologies and strategies used is its
opportunity for future, as it would enable the organization to obtain maximum outcome
within a short interval of time. The organization Tesco has made substantial investment
within strategic acquisitions.
Threats
Global economic environment is one of the main threats of this organization. This is due to
definite uncertainty in the global politics and economic status. This directly impacts the
demand of Top drive units of Tesco.
Conclusion
On a concluding note it can be stated that the assignment has successfully covered almost all
the aspects which are relevant to the organisational structure of the chosen organisation
Tesco. It successfully covers the details of organisational structure in the context of its need,
purpose and functions at Tesco. Organisational structure in turn ensures the successful
operability of any organisation. In other words it helps an organisation to establish and
maintain a link between the various departments within an organisation. The evaluation of the
overall organisational structure of Tesco revealed the fact that the organisation has

successfully implemented a hierarchical organisational structure with an effective top down
communication process. The communication process ensures that all the employees within
the organisation are well informed about the decision making activities undertaken by the
management of the organisation. Furthermore, the relationship between the different
organisational functions has also been explained in the light of the relevant literature. It has
provided the researcher with a clear understanding regarding the fact that without effective
connection between different departments it would not be possible for an organisation to
sustain within the competitive market place.

Reference List
Davies, C., Ferreira, N., Morris, A. and Morris, D., 2016. The Equality Act 2010: Five years
on.
Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. The impact of Brexit on
foreign investment in the UK.
BREXIT 2016,
24.
Harrison, A., 2013.
Business environment in a global context. Oxford University Press.
Kierzenkowski, R., Pain, N., Rusticelli, E. and Zwart, S., 2016. The economic consequences
of Brexit.
Metzger, K., 2014. Business analysis of UK supermarket industry.
mitropoulou, a. (2018). UK PESTLE Analysis. [online] Academia.edu. Available at:
http://www.academia.edu/8993883/UK_PESTLE_Analysis [Accessed 31 Jan. 2018].
Popescu, G.H., 2013. Macroeconomics, effective leadership, and the global business
environment.
Contemporary Readings in Law and Social Justice,
5(2), p.170.
Tesco plc, 2018.
Tesco PLC. [online] Tesco plc. Available at: <https://www.tescoplc.com>
[Accessed 31 Jan. 2018].

The impact of the Macro-Environment upon Business Operations
Introduction
There are various macroeconomic factors
which affect the business environment and
provide organisations with different
opportunities to grow and improve business
operations of the company (Harrison, 2013).
The company that has been selected for this
assignment is Tesco.
A macroeconomic factor can be referred to as
a variable which applies to the broader
economy and includes economic factors such
as economic output, unemployment rates,
inflation etc (Popescu, 2013).These factors
usually impact organisations in the large scale
market and are studied through the use of
frameworks such as PESTEL (Political,
Economic, Social, Technological,
Environmental and Legal) or Porter’s five
forces analysis. The external macroeconomic
environment is very closely considered when
any investment decisions are taken by
businesses and organisations as these are
affected by risks, financial output etc.
Some of the theoretical models that are used
for this topic are the IS-LM model, Keynesian
macroeconomics model etc.BREXIT is a very
good example of how macro economic
conditions affect the business environment.
This landmark referendum cast in the summer
of 2016, declared the United Kingdom’s intent
to leave the Euro zone. The fallout from this
was massive as stock markets reeled from
derivative dropping in value, companies
shedding trillions of their market capitalisation
value (Kierzenkowski et al., 2016)
Positive impacts
Increasing employment levels would be one of those
positive macroeconomic factors which would benefit
TESCO. Decreased interest rates would mean that
organisations and consumers would be able to borrow at
lower cost from the banks Better economic outlook for the
United Kingdom in the form of increased GDP levels
would entail better economic performance for organisations
such as TESCO as cash flow in the economy would
increase. Falling lease rates would also benefit TESCO. A
TESCO superstore is usually 11,000 square feet in size,
which means that in terms of contemporary land rates, the
company are significantly increasing their operational costs
If the government were to decrease tariffs, then TESCO
would be able to import their food products at a lower price
which would significantly bring down their operational
costs.
Negative impacts
BREXIT was a prime example of negative
macroeconomic situations as economic uncertainty
decreased the value of the pound, which would make
imports more expensive and increase the cost of
operations for TESCO (Dhingra et al, 2016) Increased
unemployment levels mean that household incomes
would fall, so would consumer confidence which
would lead to TESCO suffering from a dip in sales.
Though unlikely, a debt crisis (2008) would lead to an
increase in the inertest rates significantly and mean
that costs of borrowing would also increase, thus
affecting the spending patterns of firms and
consumers alike. Political instability in the form of
frequently changing governments would affect the
economy from a policy point of view as different
governments may approach this in their own ways.
Terrorism would also be a negative macroeconomic
situation which would affect any economy and
companies such as TESCO in turn.
Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. The impact
of Brexit on foreign investment in the UK. BREXIT 2016, 24.
Harrison, A., 2013. Business environment in a global context. Oxford
University Press.
Kierzenkowski, R., Pain, N., Rusticelli, E. and Zwart, S., 2016. The economic
consequences of Brexit.
Popescu, G.H., 2013. Macroeconomics, effective leadership, and the global
business environment. Contemporary Readings in Law and Social Justice, 5(2),
p.170.
Student Name:
Student ID:
Appendix: Poster

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