Business and the Business Environment

This document provides an analysis of the impact of macro environment on business operations, with examples from Tesco. It also includes an internal and external analysis of Tesco to identify its strengths and weaknesses. The interrelation of strengths and weaknesses with external macro factors is discussed as well.

Business and the
Business Environment

TABLE OF CONTENTS

INTRODUCTION
Business Environment is the surroundings in which business exists. It is the sum total of
all the internal and external factors which affects the business. To establish a business in not a
difficult task but to successfully sustain it in the competitive market it is necessary to analyze all
the internal and external factors present in the business(Akter, and et.al.,2016
Under this study Tesco, a multinational food retailing company has been taken. This
public limited company deals in food and non-food products and now has extended its services
by providing hardware services, mobile, insurance and finance services.
This study has been conducted in order to have a detailed study of business environment.
With the help of this study, it will be easy to analyze the factors present in the business
environment. The study will cover the impact of macro environment has on business and will
help in identifying the strength and weakness of business organization (Alles and et.al., 2018)
.
TASK3
P3 Impact of macro environment on business operations, with examples.
In the modern world it is very important to identify the factors present in the business
which changes according to the changing needs of customers or dynamic environment. Every
organization runs business to attain profits but it is not easy to survive in the competitive market;
it is required to adapt changes as soon as possible (Ayios, 2018).
Business environment helps the organization to adapt rapid changes, it refers to
combination of all internal and external factors that impact the business. Internal factors are
those which are present in the business, they are employees. External factors are those present
outside the business, they are political, technological changes, etc.
Tesco is a multinational food retailing company headquartered Welwyn Garden City,
UK. The company was founded in 1919 by Jack Cohen. The company is well known for
providing food and non-food products and its extended services. It is ranked as the second
biggest retailer in terms of revenue and profits earned. Tesco has added its slogan ‘every little
helps’ to its goals that includes customers satisfaction and better relationships. Business
environment of every organization consists of macro environment and micro environment (Crane
and Matten, 2016).

Macro environment refers to those factors or outside forces that cannot be controlled by business
but have a powerful impact on the functioning of the organization. The study of this environment
is known as PESTLE Analysis. It stands for Political, Economic, Social, Technological,
Legislative and Environmental factors. Macro environment factors assist Tesco to identify the
pricing policy of different organizations so they are able to set the price of the products
according to the competitor’s price(Demil and et.al., 2015). The positive outcome of this factor is
that it will clearly define the market position of Tesco and can clearly read the customers
perception regarding the organization. The negative impact is that without proper analysis the
company might have to bear losses and may not be able to identify the competitors in the market.
TASK 4
P5 Internal and External Analysis of an organization to identify strengths and weaknesses.
Internal and External analysis helps an organization to identify its strengths and weakness, in
order to analyze it SWOT analysis has been used by Tesco. It is a strategic management tool and
a framework which is used by managers of Tesco to evaluate the competitive position in the
market (Goss, 2015).This analysis helps indentifying the strengths, weakness, opportunities and
threats related to business. Conducting a SWOT Analysis helps an organization in growth and
leads to success. It starts with:
Strengths: As one of the leading organization in its industry, Tesco has numerous
strengths that not only help to protect the market share but it also helps in penetrating new
markets. The company has leading market share which will help in gaining a competitive
position in the market(Hallward-Driemeier and Pritchett, 2015). As, the company offers a wide
variety of products it will help the company in raising the level of profit and will offer varied
range of choices. Since the company has a good return so now it is preceding its expansion in the
international market by offering product at low prices.
Weaknesses: These are the areas where the company needs to improve upon. In Tesco
the inventory is high compared to the competitors, so the company will have to raise more
capital to invest which will impact the long-term growth of the business. Tesco needs to invest
more in the new technologies which will help the company to expand (Schaltegger and Wagner,
2017).
Opportunities: It refers to the chances which a company has to grow. Tesco has the
opportunity to grow its business by increasing the range of products. Because of the largest
retailing grocer status, Tesco provides reimbursement for its customers to grow online with
internet.

Threats: In Tesco, there is no regular supply of innovative products due to which the
market share will ultimately decline (Jenkin and Williamson, 2015) .If the company will not new
technologies present in the dynamic environment, it may act as a big threat in the long term
future.
P4 Interrelation of strengths and weakness with external macro factors.
Different organizations have different objectives to maintain some position in the market
but the main objective of every business is to satisfy the needs of its customers. Strengths and
weakness of a business organization are related with macro and micro environment factors
(Schaltegger and et.al., 2016). Management compares strengths of the company with macro
environment factors. A sudden change in environment can affect the decisions taken by the
business. Interrelationship between macro environment factors with organizations strengths and
weakness are as follows:
Political Factors: It refers to when government of the country intervenes in the
functioning of an organization. These are the activities related to government which might have
impact on the performance of the company (Zur Muehlen and Shapiro, 2015). These factors are
critical for the operations of Tesco because political platform varies of every country and since
Tesco is a global company, it must follow the rules and regulations of the market in the host
country.
Economic Factors: It refers to the factors that impact the economy and includes wages,
interest rate, tax rate , policies, etc. These factors influences future investment value and are not
in direct relation with the business (Sekaran and Bougie, 2016). Tesco is directly concerned with
the economic factors since they impact the buying behavior of customers.
Social Factors: It focuses on the forces within the society which includes friends,
family, neighbors, colleagues, etc. To understand the customer it is necessary for Tesco to
develop a demographic profile of the customer so it can motivate them. As the company operates
well in different countries as the company focuses in offering the product which satisfies the
needs of customers despite of their religion, race and income level .For example: The number of
retired population is more than that of children which has reflected Tesco, since old people do
not frequently visit supermarket than that of people of young age.
Technological Factors: It refers to those innovations in the equipments and machinery
that are being used in an organization to promote business. Development and Advancement in

the technology helps the company to stay competitive. Constant improvement in technology has
played important role in the success of Tesco as the company was able to develop its official
website which helped customers in online shopping. For example: The company uses official
application to direct the customers to buy the products, from where they can purchase their
selected product by easily sitting at home (Stacey, 2016).
Environmental Factors: It refers to the known characteristics of the environments that
impact the growth, survival and operations of the business (Tregear, 2015). In context of Tesco,
The company is trying to provide some hydrophobic materials to the packaging of the products
which will help the reusing the bags and optimum utilization of resources.
Legal Factors: It refers to all those restrictions or rules and regulations which a company
should follow in order to trade successfully. It includes- Health and safety, equal opportunities,
consumer rights and laws, product labeling and product safety(Trevino and Nelson, 2016).These
factors directly impact the operations of Tesco as there was the law to ban certain practices
exercised by the company which include changing the prices of goods and services without
giving any notice.
CONCLUSION
From the above study, it has been analyzed that a proper evaluation of business
environment must be done in order to gain the depth knowledge of micro and macro
environmental factors in which business organization operates. The study also identifies various
objectives which business organizations have and also tries to fulfill the demand of customers
and evaluate the overall performance of Tesco with the help of PESTEL and SWOT Analysis.
The report has explained various strategies to sustain in the competitive market and has
explained tools which were used to identify the factors that affected the business both internally
and externally.

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