Tesco's Business Environment and Profit Maximization

This assignment analyzes Tesco's business environment, considering internal and external factors through PESTLE and SWOT analyses. It explores how these factors influence the company's operations, growth strategies, and profitability. The analysis draws upon relevant academic sources and aims to provide insights into the challenges and opportunities facing Tesco in maximizing profits.

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
P1 & P2: Various types and purpose of organization and their size and scope..........................1
P3: Interrelationship between different organizational functions...............................................2
P4: Impact of macro environment on business functions...........................................................3
P5 & P6 SWOT analysis of Tesco and relation of strength and weakness with external macro
factors..........................................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business environment refers to the internal and external factors that are considered by the
organisation for the successful strategic planning and management.. Internal factors includes
employees, business regulations demand, management and others whereas external factors are
customers, supply, environment, government policies etc. Tesco is a UK private sector
organisation which is a multinational grocery and general merchandise retailer offering large
product range to its customer. It The report discusses about NHS which is a public sector
organisation and Oxfam, which is a voluntary organisation working for the welfare of the
society. The report also discusses about private sector and public sector organizations. The report
focuses on interrelationship between different organisational functions performed by Tesco,
NHS and Oxfam. It also ponders on impact of macro environment on business operations of
Tesco. Moreover, PESTLE analysis is conducted for Tesco considering all the external
environment factors. Furthermore, SWOT analysis has also been carried out to assess the
strength, weakness, opportunities and threats of the company.
P1 & P2: Various types and purpose of organization and their size and scope
An organization is a group of people who join their hands to meet a specific goal. The
organization possesses a specific structure, based on which the activities and functionality is
defined (Adeoye and Elegunde, 2012). Various roles and responsibilities are distributed among
the members to pursue the organizational goals.
There are various types of organization such as:
 Public sector: Public sector organizations are owned and operated by government. These
are not formed to generate profit but to provide facilities to the citizens at minimum
possible rates. Various methods such as issue of shares are used to raise funds for these
types of organizations such as, taxes, fees, financial transfers from other level of
government (Bastian and Muchlish, 2012). Sometimes, public sector organizations join
hands with private organizations and create public-private partnership in order to deliver
services or business venture to the society. Public sector organizations are basically
related to education, electricity, emergency services, infrastructure, hospitals, public
transit etc. NHS is a public organization in UK which is involved in provided healthcare
services to promote healthy living.
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 Private sector: They are owned by private individuals or groups. The sole reason is to
generate and maximize profits. Business units are established to fulfil the demand of
products and services in the market. These types of establishments are not controlled by
the state or any government authority. They also join hands with public sector
organisation and deliver services jointly for a specific period or forever. Private sector
companies can be sole propitiatory, partnership, SMEs, large multinational corporations,
trade association etc. In most of the developed countries, private sector companies
contribute the most towards GDP of the country. Tesco has been a large multinational
private sector organisation, functioning in UK which is a grocery and general
merchandise retailer.
 Voluntary sector: Voluntary sector consists of the organisations whose motive is to
benefit the society. These organisations come into existence not with the motive to
generate profits but to do well for the country. The return of profits earned by the
organization is usually invested back by the organization or to the community. The
examples of voluntary sector include Charities, foundations, social welfare organizations,
faith based organizations, recreational groups. This sector contributes very less towards
GDP of the country due to its non profit motive. Oxfam is a renowned charitable
voluntary organization who focuses on to remove poverty from the world.
P3: Interrelationship between different organizational functions
An organisation has to perform various functions for the smooth functioning of the
organization. Tesco, NHS and Oxfam has been involved in different business activities and
therefore have to conduct different functions. Some of them are mentioned below:
Tesco: Being a private sector organisation, the company has to perform various functions
 Tesco: Being a private sector organization, the company has to perform various functions
such as marketing, human resource, accounting and finance, research and development.
Every function contributes to business objective in its own manner. Marketing
department helps to ascertain the demand of customer and make sure that what is
required is produced by the company. It also assures to promote Tesco in an appropriate
manner so that company can maximize its profits. Finance department make sure that the
company possess adequate finance to conduct activities of the business. Also, it takes
care of profits and losses of the company. Human resource helps to recruit right kind of
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talent in the company in order to achieve organizational goals. Research and development
department keep a track on new technologies that can be opted in the company. All the
functions of private organizations are equally important to stay competitive in the
environment. These functions are interrelated as the best kind of recruited talent and
promoting techniques will help to grow finances of the company.
 NHS: NHS has been involved in providing healthcare services to the people who cannot
afford medical treatment. This organisation provides medical treatment to the minimum
possible prices. The organisation has been involved in various functions such as, funds
and government grants, technology, research and development, competent staff. Since, it
is a hospital the technology used by them should be modern enough to conduct all the
medical tests and should give appropriate results so that the treatment of patients can be
conducted in right way. NHS also has to take care of funds which it gets from the
government. It has to distribute the funds among various departments for the smooth
functioning of the hospital. NHS also take care that only competent doctors and nurses
are appointed in the hospital so that the treatment can be conducted in right way. The
doctors appointed are required to be well qualified and sufficient staff is appointed to
attend the patients. NHS also functions in research and development, where new
medicine and way of treatment is researched for several untreatable diseases. It also
researches which medicine is a noble drug and least reactive to the patients. These
functions help to attain the organizational objective which is to make sure that every
patient coming to NHS is treated in minimum possible fees. These functions help to
promote the best healthcare facilities in the hospital and thus helps in growth
maximization.
 Oxfam: Oxfam is a charitable organization involved in poverty eradication from the
world. Being a not for profit organization, it does not function for generation of profits
but for the welfare of the society. Oxfam is involved in understanding the reason of
poverty, its statistics in different countries and where it is required to concentrate more to
generate livelihood. It provides essentials to the poor people in order to support them in
learning and earning. Finances is a big problem for charitable as they need to promote
their trust in such a manner that people and companies get motivates to give funds to the
organization. It also organises awareness programme in various countries to make people
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understand about the poverty concept and risks related to it. Various campaigns are
designed to promote jobs and learning facilities for people dwelling in poverty. These
functions helps to achieve objectives that has been set by Oxfam.
P4: Impact of macro environment on business functions
External environment plays an important role in performing business function. These
factors are required to be considered in depth while taking decisions in strategic management
(Granger and Schroeder, 2013). Considering all the factors will help in successfully achieving
the organizational goals. The main macro environment factors are Political, Economical, Social,
Technological, Legal and Environmental. The factors are discussed below:
 Political factor: Changing in governmental policies affect the operation of organization.
Political factors of UK as well as different geographical region affect the stability of
Tesco. Bureaucracy and extent of corruption prevailing in the market reduces its profits.
Tax rates, legislations, stability of the country affect its operations too. It helps to develop
new job opportunities and increase in the demand of product sold by Tesco has helped
the market of retailers to grow. Government has also been company up with various laws
that can help the market of retailers to grow leaps and bounds. However, price floors
decided by the government affect the market and profit generation of Tesco.
 Economic factors: There are various economic factors affecting the business
environment of Tesco. Uncertain financial crisis that arise in the environment causing
instability in the business operations as well. However, when there is higher economic
growth it is a positive sign for Tesco. The company can grow leaps and bounds in this
period. The prevailing cost of labour increases or decreases the labour expenses of Tesco.
Economic factors beyond the geographical boundaries also has greater amount of impact
on Tesco, such as, currency exchange rates, import, export rates prevailing in different
countries reduces or increases business profits. UK's interest rates, fuel rates also have an
impact on Tesco. Overall macro economic situation of UK such as, fiscal policy, rate of
inflation, monetary policies, availability of credit affect Tesco to a great extent.
 Social factors: Variety of changes in social environment, change in trends, taste and
preferences on the customers, demographic changes prevailing in the country, change in
beliefs and attitudes of the customer has a great impact on functioning of Tesco. Changes
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in age distribution where number of elderly people start increasing and there is a decrease
in young generation will reduce the demand of Tesco as online grocery will not be a
preferable choice of elderly people. Changing habits of the customers have a great impact
to an extent. For instance, the market of ready to eat food products is in increasing phase
which has reduces the demand of Tesco. It is advised that the company should also come
up with its own ready to eat products in the market. Consumer attract towards tech savvy
companies therefore there is an increasing demand of Tesco in the market. It has also
helped to increase the market share in the prevailing market.
 Technological Factors:Continuous change in the technology forces the company to
invest in updated technology available in the market (Kubasek, Brennan and Browne,
2016). However, it increases the expenses on the company but it also results in higher
revenue. It reduces the dependence of labour and become convenient for Tesco. Apart
from investment, it also increases the convenience level of customers and attracts them
towards the company. Modernised scanners, updated bar codes safeguard the store from
theft and store lifting. Installing CCTV cameras records the incidents and help to trace
the customer in case of theft for later evidences.
 Legal Factors: The company involved in the business is required to legal and fulfil all
the legal requirement before offering product or services (Popescu, 2013). Being engages
in supermarket, it has to fulfil certain agricultural policy where it is required to maintain
certain standards of agricultural products in order to promote quality farming. It will help
the company to provide quality products to its customers and increase loyalty of
customers towards the company, Tesco has also been involved in rendering services
related to credit cards, savings, loans and mortgages. Therefore, Tesco has to follow legal
framework of regulating financial services and is required to get himself register. Tesco
also follow labour law where, all the laws are being followed by the company based on
the legal framework issued by UK government.
 Environmental factors: Environmental factors affect the functioning of the company
both in positive and negative way. Adopting environmental friendly products and
investing a part of profit in corporate social responsibility activities is a necessary step
required to be maintained by every company. Optimum utilisation of natural resources
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helps to maintain the environment rules issued to conserve the resources. Tesco is
required to follow all the steps which add to the cost of the company. Also, it increases
the functioning of one more department in the company, known as CSR department (Yu
and Ramanathan, 2012). It helps the company to reduce wastage and promote optimum
utilisation of available resources in the company. It also attracts the customers towards
the company and increases the loyalty of customers towards its products. It also increases
social conscience in customers towards the nature and the society.
P5 & P6 SWOT analysis of Tesco and relation of strength and weakness with external macro
factors
SWOT analysis is the useful techniques that support entity in identifying its strength and
weakness. It is beneficial technique through which organizations can address loop fall in the
system and can make effective strategy for improving their business performances. Furthermore,
with the help of this method company gets to know its strength so that it can utilize them
effectively (Solomon, 2014). It is internal auditing tool that supports in analysing internal
business environment of the corporation. For identifying the current business performance it is
essential for the entity that to conduct SWOT analyze that supports the firms in getting overview
of its performance. Tesco is the multinational brand that operates across the world. It has strong
command over market but still company is having some issues which are necessary to resolve for
improving its business performance.
Illustration 1: SWOT analysis
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Strength: Leading position: Tesco has leading position in UK. It is the market leader that provides
quality services and products to its customers. Positive brand image of organization is its
strength that supports in attracting more people towards the brand. Effective online operations: Cited firm has strong command over the online platform. It
serves better to customers those who purchase goods online. Effective online operations
has made the firm popular and helped in gaining competitive advantage.
 Strong financial condition: Strong economic position is another strength of the Tesco that
supports the entity in expanding its business across the world. Due to sufficient reserve
funds it invests the funds in right direction that assist in increasing the profitability of the
entity.
Weakness:
 Its brand image has been damaged due to commercial income scandal in 2015. That has
influenced the mind of consumers. Apart from this, due to this issue overall sales volume
of Tesco has go down to great extent.
 Weak presence in other countries is another weakness of the cited firm. Due to this profit
of the corporation is less than to its competitors.
 Recent controversies have spoiled the image of Tesco to great extent. That has created
negative image in the mind of consumers and due to this its image has been affected
badly.
Illustration 2: Profit before tax of Tesco
Opportunities:
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 Expansion in the international countries is one of the great opportunity for Tesco. It can
move to developed nations and can established their business in other nations well.
 Effective marketing strategy and digital marketing can support the Tesco in
accomplishing its goal easily.
 It is sure that in coming year demand of online shopping will get raised hat will support
the Tesco in increasing its profitability to great Ethernet.
Threats:
 Fluctuation in economic condition can harm the sales of the Tesco because due to high
inflation purchasing power of customers will be decreased and they will not buy its
products frequently.
 Raising raw material cost is another threat to the entity because that will impact on its
profit.
 High competition is another threat to Tesco, due to this, consumers can move to other
band any time. That may affect overall working performance of the organization to great
extent.
The strengths of the company help in remaining competitive in the environment. It also
helps to assess whether that the functions the company is performing are enough to grow and
maximise profits (Wild, and Han, 2014). Based on the weakness, the company can try to
improve the functioning by adopting effective methods within the organization. The company
can develop promotional activities to improve its brand image which is degraded due to 2015
scandal.
CONCLUSION
Based on the above report, it can be articulated that business environment plays vital role
in smooth functioning of the company (Welford, 2013). It is important to consider all the factors
while taking business decision so that the company can grow and works towards profit
maximization. Various types of organization are there such as public, private and voluntary
organizations. Every type of organization have different size and scope to pursue. Based on the
type of organization, its functions get changed and every function is related to the growth of
organization and achieving company's objective. Based on PESTLE analysis of Tesco, all the
factors all required to be considered for profit maximization. Based on SWOT analysis the
company can evaluate its strengths, weaknesses, opportunities and growth.
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REFERENCES
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enterprises in selected regions of the Czech Republic and Slovakia. E+ M Ekonomie a
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Granger, M. J. and Schroeder, D. L., 2013. Integrating the Internet into the business
environment. Internet Research.
Kubasek, N. K., Brennan, B. A. and Browne, M. N., 2016. The legal environment of business: A
critical thinking approach. Pearson.
Popescu, G. H., 2013. Macroeconomics, Effective Leadership, and the Global Business
Environment. Contemporary Readings in Law and Social Justice. (2). pp.170-176.
Solomon, M. R., 2014. Consumer behavior: Buying, having, and being (Vol. 10). Engelwood
Cliffs, NJ: Prentice Hall.
Welford, R., 2013. Hijacking environmentalism: Corporate responses to sustainable
development. Routledge.
Wild, J., Wild, K. L. and Han, J. C., 2014. International business. Pearson Education Limited.
Yu, W. and Ramanathan, R., 2012. Effects of business environment on international retail
operations: case study evidence from China. International Journal of Retail & Distribution
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