Understanding the Business Environment - TESCO and HSBC Analysis

This report analyses the business environment of TESCO and HSBC, including types of business organizations, stakeholder analysis, market structure, PESTEL analysis, and more. It covers the main objectives and operations of TESCO, stakeholder analysis of TESCO, and business environment analysis of HSBC. Suitable for business students.

Understanding the
Business Environment

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Introduction to the business organization....................................................................................3
Types of business organizations (Legal Structure)..................................................................3
Main objectives and operations of the organization................................................................4
Market Structure......................................................................................................................5
TASK 2............................................................................................................................................5
Stakeholder Analysis of TESCO.................................................................................................5
Meaning of Stakeholder...........................................................................................................5
Meaning of Shareholder..........................................................................................................6
Stakeholder Analysis...............................................................................................................6
TASK 3............................................................................................................................................8
Business Environment Analysis of HSBC..................................................................................8
Importance of analysing the Business environment for HSBC...............................................8
PESTEL Analysis....................................................................................................................8
Porter's 5 forces competitive analysis......................................................................................9
Evaluation of the development of HSBC business with reference to short-term and long-term
performance...............................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business organization is an entity formed for the commercial purpose so as to earn profit
by engaging in commercial activities. An organization can be any company, public or private, a
partnership firm, an LLP (Limited Liability Partnership), or any sole proprietorship dealing in
the purchase or sale of goods or services (Bryson, 2022). It is imperative for every business
organization to analyse the external environment to measure its positive or negative impact on
the business and take corrective measures to improve the performance of business. It will
facilitate the company in getting competitive advantage in the respective industry it operates in.
This report is based on two business organizations i.e. TESCO and HSBC. TESCO is a UK
based multinational public limited company headquartered in England and dealing in the
products like clothing, grocery, home and food products. The report will describe the
organizational types , market structure and stakeholder analysis of TESCO. Further, it will also
cover the PESTEL analysis and Porter's competitive analysis of HSBC. It is a UK based
multinational universal bank and a public limited company headquartered in London, England
engaging in providing financial services i.e. banking commodities , insurance and investment
banking etc. The report will also describe the development of HSBC according to its KPIs.
TASK 1
Introduction to the business organization
Types of business organizations (Legal Structure)
Business organizations can be classified on the basis of their different legal structures.
The main types of business organizations on this basis are sole proprietorship, partnership,
company, LLP (limited liability partnership). Sole proprietorship is the simplest form of
organization that entirely depends on owners' decisions in which all the profits are of owner and
he is liable for 100 % debts of business (Geetha and et. al.,2022). For example, a local clothes
store, an IT consultant etc. Partnership consists of two or more individuals who invest in the
business and integrate the resources and execute the agreement to share the profits, losses and
risks in the agreed ratio. In this, each partner shares the total profits of business and partnership
gets end when any of the partners decide to end it. Example of partnership can be Red Bull & Go
Pro, Louis Vuitton & BMW etc.

Corporation or company is a separate entity and considered as a legal person that is
formed by a group of individuals to engage in the commercial activities of business. It can be of
two types public or private company. Public company is traded publicly on the stock exchange
and can invite general public to subscribe to its shares. Private company cannot invite general
public to subscribe to its shares and is owned privately (Rani and Narang, 2022). Examples of
public company are Amazon, Walmart, Marks and Spencer , Unilever etc. and that of private
company include Virgin Atlantic, Dyson, JCB etc. LLP is a partnership in which some or all
partners have limited liabilities, it has the elements of partnership as well as company. In this ,
each partner is not liable for other partner's misconduct. Example of LLP include auditing firms,
law firms, financial advising services etc.
The chosen organization is TESCO plc. which is a Public limited company and is
traded on London Stock Exchange. It is a multinational company operating in the retail industry
and dealing in grocery, clothing, home and food products. It is the third-largest retailer in the
world in terms of its gross revenues. The company has five shops in the Europe and is considered
as the market leader of groceries in the entire UK. TESCO has a market share of around 28.4%.
The company has a expanded business since 1990 on a global basis. It has operations in 11 other
countries worldwide. Since the year 1960, TESCO has diversified its operations in retailing of
clothing, books, electronics, petrol, financial services, telecoms, and internet services etc.
Main objectives and operations of the organization
TESCO is operating in the retail industry with major operations in UK in hypermarkets,
supermarkets, having TESCO express, Fuel operations and online operations as well. TESCO
extra shops are larger that can store all the wide variety of products of the company. Its largest
shop is in England i.e. TESCO extra in Walikden that has a floor space of 17230 square metres.
The company's supermarkets are standard large supermarkets that stock groceries and some non-
food products as well. The company also operates in various in-shop cafes and had also
introduces new restaurants in its shops from the year 2013. TESCO express are the convenience
shops that stock mainly the eatables such as chocolate, biscuits, sweets, processed food etc.
The main objectives of TESCO plc. include maximising the sales by ensuring increment
in the profits. Another objective is to ensure reduction in products prices to make shopping
cheaper for the average households. The main purposes of TESCO include to serve the

customers, communities and planet while ensuring compliance with corporate social
responsibility as well.
Market Structure
Market structure describes how different companies are differentiated and categorised on
the basis of the types of products they engage in and how their operations are influenced by the
external environment factors. Market structure helps in understanding the characteristics of
diverse markets. It is based on the characteristics that impact the behaviour of companies in a
specific market. Market structure can be grouped in 4 categories i.e. Perfect competition,
Monopolistic competition, oligopoly and Monopoly. There is more number of competitors in the
perfect and monopolistic competition, few are there in oligopoly market structure and in
monopoly structure, there exists only one competitor. In context with TESCO, its market
structure is Oligopoly. It is market structure which have small number of firms and in which no
form or company can prevent the other from having significant influence in the respective
industry (Kenis, Höschle and Bruninx, 2022). With other leading supermarkets like Asda,
Sainsbury's. Morrisons, TESCO is also categorised as having Oligopoly market structure.
TASK 2
Stakeholder Analysis of TESCO
Meaning of Stakeholder
A stakeholder refers to a party i.e. an individual or group of individuals who have interest
in the company and either they affect or are affected by the business of company. They have
significant impact on the decisions in terms of operations and finances of the business
organization. Some stakeholders possess more power on the operations of company such as
government while others possess less such as employees (Mitchell and et. al.,2022). Some
stakeholders have major interest in the operations of company such as shareholders and some
have less such as suppliers. The key stakeholders of the company include shareholders, investors,
employees, customers, government, local communities etc. In context with TESCO, the key
stakeholders of the company include Shareholders, competitors, Government, employees,
customers, suppliers, creditors, local communities, etc.

Meaning of Shareholder
A shareholder is any individual , company or institution that owns or holds in a
company's stock. A single shareholder can hold minimum one share in the company's stock. The
shareholders are required to pay tax on capital gains or need to incur capital losses in the sale of
share being held by them. They are considered as the owners of company as the company is run
by their invested funds. They possess high power in the proceedings of company and have high
interest in its operations as well. In context with TESCO, its major shareholders include Black
Rock Inc. , Fidelity International Ltd. and Norges Bank having 6.64%, 3.04% and 3.06%
holdings respectively in the company.
Stakeholder Analysis
The stakeholder analysis is a business framework that facilitates the businesses in
identifying, assessing and prioritising the stakeholders of the company who affect or get affected
by the operations of business. The company needs to prioritise its stakeholders on the basis of
their interest and power in the company's proceedings and operations (Jiménez Sánchez, 2022).
This system has four steps i.e. identifying the potential stakeholders of company, analyses them
and contact them followed by their prioritisation. It helps the company in evaluating which
stakeholder the company is facing most impact of . The stakeholder analysis if TESCO plc. is
explained hereunder -
Keep Satisfied
(Government,
Regulatory Bodies)
Manage Closely
(Shareholders, Investors,
Owners)
Monitor
(Suppliers, Competitors)
Keep Informed
(Customers, Employees)
 Manage Closely – These stakeholders possess high power and have high interest in the
proceedings and operations of company as the company is running because of the funds
invested by them in company. They are needed to be managed closely by the company.
In case of TESCO, they are its shareholders, investors and owners. The major
shareholders of TESCO include Blackrock Inc. ; Norges Bank, Fidelity international etc.

having major holdings in the company. The shareholders impact the decision making of
the company regarding its business strategies, expansion strategies etc.
 Keep satisfied – These stakeholders have high power but low interest in the business of
company. The company neds to keep them satisfied by adopting lawful activities while
conducting the business. In context with TESCO, the stakeholders that needs to be
satisfied by the company are Government and regulatory bodies. As the company deals
in food products, it needs to ensure offering of healthy food products to ensure safety and
health of customers and to comply with the health and safety norms of country. It needs
to publish true and fair financial statements and keep informed the government about
these.
 Keep Informed – These stakeholders possess low power but have high interest in the
business of company. The company is required to inform them on frequent basis about its
operational performance and strategies (Ojiako and et. al.,2022). In context with TESCO,
the stakeholders that need to be informed constantly are its employees and customers.
TESCO has a global customer base that it serves each day. The company has employee
base of almost 367300 that are spread worldwide on its stores in UK and in other
countries. The employees affect the operations of company in terms of increasing
productivity and customers impact the business in terms of providing competitive
advantage and increased sales revenues by switching to its products.
 Monitor – The company is required only to monitor these stakeholders as they possess
low power and have low interest in the company. In context with TESCO, the
stakeholders that have low power and interest in the company are its competitors and
suppliers. The major competitors of TESCO in the retail industry include Marks &
Spencer, Sainsbury's ASDA, Morrisons, Walmart, Amazon etc. that impact the company
in terms of market share and shared customer base. So the company needs to monitor its
competitors to analyse the degree of competition in the retail industry. The suppliers of
TESCO does not only provide the company with required quality products but also
facilitate the company in minimising food waste.

TASK 3
Business Environment Analysis of HSBC
Importance of analysing the Business environment for HSBC
It is imperative for the business organizations to analyse their external environment to
measure its positive or negative impact on the performance of company and to identify the
opportunities and threats in the current market (Marcos-Pablos, Juanes-Méndez and García-
Peñalvo, 2022). Analysing the business environment also helps the company in identifying the
degree of competition in the market so as to make them prepared to face the competition with
existing as well as new competitors (Fritz, 2022). It also helps in facing competitive pressures
from the bargaining power of buyers as well as suppliers. It helps in increasing productivity as
well as profitability of the business that facilitates increased market share in the respective
industry due to identification of opportunities. In context with HSBC, analysing the business
environment will help the company in identifying and analyse its major competitors in the
banking industry such as Bank of America, Standard Chartered bank, BNP Paribas etc. so as to
take suitable steps to face competition and develop business strategies.
PESTEL Analysis
This is a framework that facilitates the business in analysing the external environment to
measure the positive or negative impact of environmental factors on the business that will help
the company in improving its performance by taking suitable measures (Flegr and Schmidt,
2022). The PESTEL analysis of HSBC is explained hereunder -
 Political Factors – These factors have impact on business due to changes in government
policies such as trade restrictions, foreign trade, political instability etc. In context with
HSBC, it is operating in many countries and has to face different political environments
and political system risks such as regulations and tariffs related to financials, interference
in banking industry by the government etc.
 Economic Factors – These factors include change in interest rates, inflation rates, foreign
exchange rates and other economic factors that impact the business. In context with
HSBC, it has negative impact of inflation rate change as it had increased the prices of
services that led to lower levels brand loyalty.

 Social factors – The social culture and shared beliefs and attitudes of the population also
affect the culture of organization. In context with HSBC bank, these factors have positive
impact on the company as the culture of savings in US and china is prevailed that
impact the fund requirements of bank in a positive manner.
 Technological factors – The technological trends such as developments in artificial
intelligence, use of machine learning and big data analytics are the factors that impact the
business in estimating the consumer behaviour (Gupta and Kumar, 2022). Technology
helps HSBC bank in managing the data of its worldwide customers, associated
organization and subsidiaries through the use of big data analytics.
 Environmental factors – These factors constitute changes in climate and ecosystem and
are considered by the customers, regulators and policy makers as well. In context with
HSBC, it has taken initiatives for climate plan and also contributing to the society
through its CSR efforts.
 Legal Factors – The business needs to adhere to the various applicable laws in order to
comply with the legal factors such as banking regulations act in context with HSBC to
ensure safety of the funds of customers and transparency in the financial statements so as
to avoid any penalty in case of non-compliance.
Porter's 5 forces competitive analysis
This framework is a Competitive analysis introduced by Michael E. porter to facilitate the
businesses in analysing the competitive landscape and degree of competition in the respective
industry. The competitive analysis of HSBC using porters' five forces framework is explained
hereunder -
 Existing Competition – When the company has similar competitors in the same industry
that it competes with, it is said to have existing competitors. For this it needs to analyse
the number of existing competitors , their switching costs to the customers etc. (Vilkov
and et. al.,2022). In context with HSBC, the competitive pressure from rivals in the
banking industry is High that is consisting of the competitors like BNP Paribas,
Citigroups, bank of America, Standard Chartered bank etc.
 Competitive Pressures from new entrants – In context of HSBC, the threats from the new
entrants is quite low as the existing companies in the banking industry are able to develop

economies of scale. HSBC provides different services such as asset management, credit
cards, insurance and investment banking, risk management, wealth management etc.
worldwide on a differentiated basis, so the company has low competitive pressure from
the new entrants in the banking industry.
 Competitive pressures from the bargaining power of suppliers – Bargaining power of
suppliers tends to increase when there are low number of suppliers in the market
(Adéchian and et. al.,2022). The suppliers in case of banks are depositors. The suppliers
of HSBC has low negotiating power as it is a well-established company having
operations in many countries and connections with many suppliers worldwide.
 Competitive pressures from the bargaining power of buyers – As HSBC is a large
multinational banking company having a large customer base worldwide, the bargaining
power of customers is low and they demand lower discounts and offers with the
company.
 Competitive pressures from the substitute products of other company – The threat of
substitute services of other banks that the customers of HSBC can switch to, is high for
the company as in the same banking industry, there are many other banks offering same
services like Standard chartered bank, Bank of America etc. that the customers can
switch to.
Evaluation of the development of HSBC business with reference to short-term and long-term
performance
A key performance indicator is a kind of performance measurement. They assess the
success of an organization or of a particular activity that the business engages in (Pageler and
Palma, 2022). In context with HSBC, it can measure the business performance by considering
the following financial performance indicators -
 Profitability – HSBC had reported its highest ever profit from its India operations in
2021. The pre-tax profits of the company from Indian operations were 8 % high than
1024 million dollars in the year 2020. It has helped the company in improving its short-
term performance.
 Leverage – As compared to December 2020, the leverage ratio of HSBC had fallen in
June 2021 from 5.5% to 5.3% which was a good indicator of improved performance by
reducing the debts. As of recent details of December 2021, it has fallen more by 0.1 %

and reached to 5.2% that is an indicator for growth for HSBC as it is ensuring low risks
due to more debts.
 Liquidity – HSBC monitor its position using Liquidity Coverage ratio and net stable
funding ratio. In June 2021, the LCR of the company was 134% and it held the high-
quality liquid assets of 659 billion dollars. It shows that the liquidity of company is also
improving and heading the company towards growth.
 Efficiency – The cost efficiency ratio of the company has seen reduction for the year
ended on 31 March 2021 as compared to the year ended on 31 March 2020 in which it
was 59.2%. It means that the bank is operating better.
From the above measurement of company’s performance by using various KPIs, it has
been analysed that the banking company HSBC has seen growth for the year ended 31 March
2022 as compared to the pervious years. Because the company has high liquidity and low
cost to efficiency ratio, it can be said that the company is operating in a better manner and
ensuring long-term performance growth for the future as well.
The current growth reporting practice of HSBC is absolutely balanced in terms of
financial as well as non-financial measures as the company has seen operational as well as
profitability growth.
Further, it is recommended to the company to analyse the external environment as it is
operating in many countries and having many competitors that also share the market share of
respective industry. It can analyse the degree of competition by using various business
frameworks explained in TASK 3 and can improve its internal performance to get
competitive advantage.
CONCLUSION
From the above discussion, it has been concluded that the business organization can be of
different types on the basis of legal structure. The report has been discussed on two business
organizations. The market structure and operations of TESCO has been discussed with the
company’s stakeholder analysis. Further, the evaluation of development of HSBC bank with its
business environment analysis has been discussed by using the analysis frameworks such as
PESTEL analysis and Porters’ competitive analysis.

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