Impact of Internal and External Factors on Tesco

BUSINESS ORGANISATIONINTRODUCTION
Business Organisation is basically an entity which is formed for the
major purpose in order to carry on the commercial enterprise. Such an
organisation tends to predicate on the law systems which helps in
governing the contract and the exchange, incorporation and property
rights. Business enterprises can be in the form of individual
proprietorships, limited-liability companies or partnerships (Williams,
2017). Tesco is a multinational company of groceries and retailer of
general merchandise. Its headquarters are in England. It became the third-
largest retailer in the world in terms of gross revenues and is the ninth
largest in the world in terms of revenues. It performs its operations in
various countries including Asia, Europe which is making it a market
leader in retailing industry of UK (Tesco, 2020). The report will focus on
the internal and external factors which affects the company along with
describing the factors of the company which affects the external
environment including the stakeholders.
Impact of the internal factors on Tesco
SWOT analysis
This is basically a framework which helps in examining strengths,
weaknesses, opportunities and threats of the companies.
Strengths: It is the biggest and leading grocery retailer and supermarket
in UK which is giving higher sales and revenue which also can be
evidenced through increase in 28% operating profits. Tesco is
geographically diversified having 6800 stores in 14 countries.
Weaknesses: The exit from American and Japanese markets forced the
company to close many of its stores and also it was fined due to the fraud
trial and scandal of accounting in 2017. Due to Brexit, the operating
profits declined which led to decrease in share prices by 9%.
Opportunities: Tesco has a great opportunity for the joint ventures in
some of the underperforming regions as a great knowledge can be
provided by the local companies which can enhance the Tesco’s
performance.
Threats: The main threat for Tesco is its competitors such as Walmart,
Aldi who are responsible for threatening the market position of the
company.
Impact of the external factors on Tesco
PESTLE analysis
This is basically a framework which is imperative for the companies like Tesco
which helps them in understanding the market dynamics and also helps in analysing the
impact of the PESTLE factors such as Political, Economic, Social, Technological,
Environmental and Legal.
Political: The regulations and the rules must be followed by the company and must
ensure that these regulations ensure comply with the safety of the products. It must keep
a watch on the fluctuating political circumstances in the country it operates. As the
political stability increases, the opportunities also increase regarding the trade.
Economic: The company must be aware of all the economic changes in the country as it
impacts the sales, revenue, profit, distribution etc. The taxation policies must be focussed
and must be leveraged to gain benefits. The change in any policies in the country also
affect the company a sit requires additional cost need for redesigning the company
according to the change.
Social: These factors affect the operations of the company greatly as these include the
demands of the customers and the social or societal influence. The customers due to the
fast pace of life, prefer to get everything in one go which force the company to plan its
stores accordingly to facilitate the needs of the customers.
Technological: The technological trends are changing rapidly which created a need for
the companies like Tesco to keep up itself with the same. These basically can be done by
online shopping and the social media promotions which is influencing the customers
through providing the technical benefits.
Environmental: These factors play a major role in the processes and practices of the
company as this is the responsibility of the company to contribute in making a
sustainable society. All the operations of the company must be performed by keeping in
mind its impact on the environment and for that Tesco has taken many initiatives which
helps in improving the environment.
Legal: These factors basically include the change in the government policies which
affects the operations of the company. These include all the local as well as international
market laws for smooth functioning of the operations. The company need to follow the
regulations laid down by the Food Retailing Commission (FRC).
Impact of Tesco’s business on the external
environment
Tesco plc. was initially formed as a sole
proprietorship firm and later identified as a leading
public limited organisation in UK. Earlier the aim of
the company was to make profits but now as a
public limited company, its main objective is
enhancing the fund by issuing more shares in the
capital market to the stockholders (Planning, 2017).
In the external environment, the stakeholders play a
major role in the growth and development of the
organisation. Tesco considers the need to fulfil the
requirements and needs of the stakeholders. It also
focusses on paying the proper dividend to the
shareholders who are basically considered as the
important stakeholders of the company. the
customers are considered as the most important
stakeholders of Tesco therefore the company
focusses on providing quality products at normal
price along with giving the excellent customer
service by the employees of the company (Tesco
SWOT & PESTLE Analysis, 2020). Tesco also lays
emphasis on employing the internal marketing
system for the employees’ betterment who are the
internal stakeholders. The company also follows all
the rules and regulations of the government and
adhere to all the laws for carrying out business in
ethical way. It also pays dues to the creditors and
suppliers a proper time. Tesco has also launched the
phase 2 plan of Remove, Reduce, Reuse and
Recycle plan under which it took many initiatives to
reduce and remove the use of non-recyclable
materials and also performs all the sustainable
practices in order to create sustainable environment
(Wu, 2020).
CONCLUSION
The report focussed on the impact of the internal and
external factors on the Tesco plc. which is the leading player
in the retailing industry of UK and is the most famous retail
company in the world. SWOT analysis was done to analyse
the effects of internal factors of the company and PESTLE
analysis was done to evaluate the impact of the macro-
environment factors on the business activities of Tesco. The
report shed light on the impact of the business activities and
operations of Tesco on the external environment.
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