Understanding the Business Environment

Understanding the Business
Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Market structure of Tesco............................................................................................................3
Stake holders and Share holders..................................................................................................4
Stakeholder analysis process.......................................................................................................4
Tesco- Business Environment Analysis......................................................................................6
Analysis of Current behaviour of Tesco through Porter’s Five Forces model............................8
Evaluation of business through key performance indicator of Tesco........................................10
Recommendations on the business practises of Tesco..............................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is a mixture of individuals, various complex bodies, several dynamic
and uncontrollable external and internal factors which decide the growth and productivity of a
company. An environment decides the growth, long term profitability and even business life of
that organisation (Teece and et.al. 2018).
Tesco is the biggest and most profitable supermarket chain in UK. Tesco is a public limited
company and also a big name in the private sector of UK. The company is the world’s third
largest grocery retailer. It has expanded in Europe, USA and Asia too. The founder of the
company is Jack Cohen. He started Tesco in 1919. Tesco has stretched its roots since then by a
mixture of acquirement of new stores and retail services. Main motto of the company is ‘to serve
the customer’ that’s why company believe in adaption of the needs of consumers. Tesco also
focus on keeping active customers satisfied as they are more likely to return (Tesco, 2021). The
management find it more profitable and in favour of company (Simangunsong and et.al., 2018 ).
Tesco has over 2,200 stores including the huge supermarket style shops to small Tesco
Express high street outlets in UK. Tesco is not only in retail but also in banking, insurance
services, electrical goods and telephone equipments. The company wants one stop shopping for
the customers. It means customers can get all their purchasing needs from one place in the stores.
The company has also stretched its clientele base through its website.
Market structure of Tesco
Market structure denominates how different industries are classified and differentiated.
Organisation must focus on its market structure as it has an impact on the degree of the
competition in the industry and control the business products or service pricing strategies. The
four popular types of market structures are perfect competition market, oligopoly market,
monopoly market, and monopolistic market.
Tesco's market structure is believed to be a monopoly. Tesco’s main competitors are
Sainsbury’s, ASDA, and Morrison’s. The company has over 4,000 stores across the globe. It has
50% of those stores in UK only. Despite this Tesco also have Tesco metro and express stores.
This shows its monopoly in the market but realistically Tesco is an oligopoly. As there are many
super markets in UK which are in competition with the company. For example Sainsbury owns
16.3% of the UK supermarket shares and Morrison’s owns 11.5% of the supermarket share
where as ASDA owns 15.5% of market share. Tesco is on the top of it with 27.9% market share.
3

This means the Tesco is the dominant supermarket in UK but also have fairly large competitors
who also partly control the market. Thus it can be said that as there are few big competitors in
UK retail market that has control on supply Tesco faces oligopolistic market.
All the major players in UK supermarket are interdependent. As they collaborate to charge
the same price. This oligopoly is also an obstacle for a new entry in the industry. For Tesco price
is not most essential factors in this situation. The management focus on its market mix (4Ps) that
means their attention is towards the quality of products. The company also believes in giving the
best experience to the customer in their super market. To deal with oligopolistic market Tesco
has diversified into clothing, financial services, telecoms and insurance to maintain its guarantee
customers. As Tesco has a good brand value customer feels so satisfied to purchase with it.
Stake holders and Share holders
Share Holders-
A shareholder is an individual or institution that owns the shares of a company. Share holders
have some rights which generally include voting for the Board of Directors, receiving dividends
from the company, and receiving its annual financial statements. Share holders can be few
people or they can be in thousands of in numbers according to the type of the company.
Shareholders buy shares in a business to earn profit. Profit can be in form of dividend payments
or in form of an appreciation in the market price of the shares (Wamslez and et.al.,2017).
Stake holders-
Stakeholder is any person or entity that has a curiosity in a business. Stakeholder can be a party
that can either influence or be influenced by the business. The main stakeholders in a company
are its creditors, investors, employees, customers, suppliers and can be a local person.
In a company stakeholders can be internal or external. Internal stakeholders are owners,
employees or investors. Suppliers, creditors, and public groups are external stakeholders.
Stakeholder analysis process
A stakeholder analysis is a method of recognising the internal people before the project,
begins, assembling them according to their levels of contribution, concern, and influence in the
project. Stakeholder analysis turns the folds and eliminates multiple obstacles in understanding
the company's progression. There are 4 methods to analysis stakeholders (Shin and et.al., 2018).
The nature of company, available assets, and timeframe state which model is most suitable
1. Power-Interest matrix
4