Tesco's Business Operation and Regulation

The provided document appears to be a solution to an assignment related to Tesco's business operations in Australia. The student is required to analyze the company's situation, including the impact of supermarket chain downtime on profits. They must also discuss opportunities for improvement, such as foreign direct investment, and provide references from various sources. The assignment is likely from a business or economics course.

BUSINESS ORGANISATIONS
AND ENVIRONMENTS IN A
GLOBAL CONTEXT

Contents
INTRODUCTION.......................................................................................................................................4
1) Background information of the TESCO..................................................................................................4
2) Discussion of the business environment..................................................................................................6
3) Analysis of the business scenario............................................................................................................8
CONCLUSION.........................................................................................................................................11
REFERENCES..........................................................................................................................................12

INTRODUCTION
Business organisation in this era are empowering to enhance their operation or business
activities at a greater level. Over this, retail industries are linked as source between production
and consumption function of an economy. It was realised that either business entities are raising
their business operation in other countries or enhancing feasibility of current activities in same
location to rise base for profit growth (Anıl and Ficici, 2017). In a current zone, business entities
are also working towards developing all these aspects with their clear and optimised efforts to
enhance business sustainability. For this report, chosen organisation is TESCO and selected
country is Australia. TESCO in Australia a lot effective and has been expanded from UK.
TESCO is one of a leading multinational company who is well known for choice of business
operation over supermarket or hyper-market. The major reason behind taking Australia is that, as
this firm is already operating in same country and become leader in matter of earning.
The focal objective of this report is to check whether there is any scope for Foreign
direct investment (FDI) TESCO in Australia to rise their revenue basis from bigger decline
which was reported last year. In simple language, major purpose of this report is to led TESCO
to increase its operational functioning in an entire Australia. This leading retail was already
expanded in an Australia, but continuously finding causes and solution to decline in their
supermarket functioning to restore in to reach dominant position in an Australian market part.
In order to ascertain this, major strategic and analytical framework such as Porter's five
force model and Pestle analysis with be undertaken to led outcomes to be rise at an optimised
level of its reach. Along with this, current valuable tabulation, graphic and data will also be led
discussion to arrive at its optimised results or outcomes.
1) Background information of the TESCO
TESCO is a leading public sector company which was founded in early stage of 20th
century. It is a British multinational supermarket chain, which deals in day to day groceries and
general merchandise retail. They are recognised as major chain of supermarket along with
support of its business expansion in different location such as Ireland, Thailand, Hungary, USA
and Australia. TESCO was founded in a year 1919 by Jack Cohen as a small market stalls. In
UK, headquarter of TESCO is in London city and in Australia, regional headquarter is located in

city of Sydney. Company has almost 6 different headquarter, located in different countries. The
legal structure of the TESCO is comprises of hierarchical organisational structure, which highly
reflects over its large size of their business. Even in their store level, there are four different flow
of management. Range of products or services is comprises of supermarket, hypermarket,
superstore, which majorly deals in groceries, home appliances or other accessories. There major
expansion was in Australia, which is diverse economy now a days.
Market structure of TESCO is comprises of different locations such as UK, Hungary,
USA, Australia and Thailand etc. This leading retail sector is highly operated in these location
and cities along with customer response at its weakest point. Tesco also uses supplier's of some
other nations such as Ireland, France, Germany etc., to led effective business operations.
Market share: Tesco is third largest retail chain in the world along with annual revenue
of almost 57.763 million dollar. This leading retail chain is listed in London stock exchange with
highest customer loyalty and maximum buying at single point of time. Tesco almost holds about
about customer base to market ratio of 23 percent (Anıl and Ficici, 2017). They have reached this
market share opening up 1,685 outlets in all over location, where they are operating or located.
Tesco is largest in inviting larger FDI and they also have strategic relationships with other firms
or local retailers to get access to their products.
Figure 1: Market Share of Tesco in UK
(Source: Market Share of Tesco in UK, 2019)

Major competitors: Tesco is not under any kind of safe zone or possibilities is not that,
it will be market leader for period of time. This is why, Tesco has different competitors such as
Sainsbury (16. 1 percent of market share) with 2nd position in the UK market, ASDA with market
share 13,6 percent and Morrison with market share of 10.7 percent. This competition is a threat
for Tesco number one position and for now, Sainsbury is a major threat, as they are hooked up t
different location such as Netherlands, Denmark and different nation of the Asia.
International operations: Tesco is currently located in nations such as Australia, USA,
Hungary, Czech Republic, India, Thailand, Malaysia etc. This leading retail is working under
various culture or level of ethics, different from UK. In Australia, Tesco is looking for FDI to
access funds for expanding their business operation into this location. The major psychology
behind inviting FDI is getting easy availability of resources, manpower or valuable competencies
for Tesco to led their profit grow at an optimised stage.
Financial performance: Tesco is leader in earning higher revenue or sales, beating
major Sainsbury and Morrison at a point. The financial position of the Tesco will be discussed
with support of tabulation as given under:
Particular 2015 2016 2017
Sales or revenue $49, 853 millions $47, 859 millions $49, 867 millions
Profits $1,076 millions $1,072 millions $1, 034 millions
Share value 5.9/share 7.3/share 6.7/share
This set of information is valuable for Tesco to attract for attracting FDI, which shows
that their health and condition is good in Australia, but they needs a acceleration to operates at a
higher end.
2) Discussion of the business environment
As, this was previously discussed that Tesco is already an establishment firm in region of
the Australia and acquired market share in that location. This leading retailer in Australia has led
an issues and problems with non performance of its supermarket chain. This may be of reason
related to lack of funds, less allocation of the valuable resources and of-course due to lack of the
support strategic planning. After the brief research, it was realised that currently some of macro-

environment are not stable and controlled, which is a major reason why, Tesco is suffering with
such issues or problems. In order to realise business environment of an Australia, it is responsive
to go for Pestle analysis are as follows:
Political: This is a stage of Pestle analysis, in which political influence or measures are
used to be measure or ascertained such as instability in political formation or control, influence
of one common party, less support of government over defined matter of conflict along with
alteration in current political efficiency (Burayidi, M. A., 2013). In Australia, where political
scenario is stable and also controlled, but government is their, because of which after every 3
years, government is used to be changed. Hence, this macro-factor needs to have proper
regulation and policies to have major control over its impact.
Economic: This is one necessary elements for Pestle analysis, as it involves major source
of discussion over inflation rate, regulation of the FDI, unemployment rate, per capita income,
interest rate, exchange in relation to the GDP and FDI in an Australia. This will be better analyse
with support of past 3 years data of given constituent such as:
Particular 2016 2017 2018
GDP $1.5139 trillion $1.5250 trillion $1.530 trillion
Interest rate 2.98 percent 3.01 percent 3.05 percent
Inflation rate 1.7 percent 1.4 percent 1.26 percent
Exchange rate( In
comparison to UK
pounds)
0.55 pounds 0.56 pounds 0.59 pounds
Give table shows that economic condition of Australia is suitable for attracting FDI to be
placed in Tesco to upgrade business activities are at high context along with enhancing business
operation at a productive level.
Social: This is the third element of macro-environment analysis, which shows that social
culture of Australia is very familiar and supportable business to sell anything. Australia people
less believes in online shopping culture, but they highly flow towards traditional shopping such

as going to supermarket, hypermarket etc. This socio-cultural influences is positive and also
directly linked towards development of Tesco Australia business operations.
Technological: In Tesco, still business entity believes that online shopping is not suitable
in Australia, because still, people of their believes in traditional shopping and buying, which is a
major opportunity for Tesco to raise upon its business operation at a greater context (Hacioglu,
Dincer and Celik, 2012). Using of E-payment gateway by Tesco is an another option to regulate
into the business option to establish productive for Tesco Australia business operations.
Legal: This is five element of this macro-environment analysis, which in reality says that
Australia economy is consists of diverse and structural culture with rule of some strict legal
reforms such as fines, penalties, imprisonment in case of any kind of informal activities. Hence,
while calling for FDI in Tesco Australia business operation, it is necessary to have legal info and
sub-judiciary in case of controlling business at a greater and optimised stage.
Environmental: In, Tesco business entity has support of sustainable working such as
removal of pollution, enhancing scope of fair working along with enhancing scope of welfare
and social working (Vasilcovschi and Georgescu, 2012). Tesco Australia has decided to go for
less plastic poly-bag usage to bring business sustainability at a greater level. This is a good way
to attract Foreign direct investment in their business operations. Hence, this factor needs to have
proper and optimised solution.
3) Analysis of the business scenario
As, this section is divided into two different parts such as impact of opportunities and
threats and understanding of the market attractiveness for Tesco to know whether it is active to
generate or attractive FDI for enhancing business operation of Tesco Australia to overcome issue
related to supermarket chain. Major discussion over those two parts are as follows:
3.1) Impact of opportunities & threats
After complete analysis of the Pestle analysis in context of Tesco Australia, it has been
realised that, there is huge opportunity for this leading retail firm to led feasibility into its unit or
business operation at a greater or utilised stage (Warkentin, Sugumaran and Sainsbury, 2012).
Along with opportunities, there are also certain threats associated with given opportunities after
its implementation. Also, it will be discussed in response to enhance feasibility of Tesco business

operations or functioning in location of Australia. These both will occur after getting of the FDI
from other business entities. In context with Tesco Australia, several impacts and threats for
being opportunistic for FDI are as follows:
Opportunities Threats
With support of FDI, Tesco Australia has
major opportunity to existence of Tesco
supermarket and retail chain in different cities
of Australia. With support of this, retail firm
have surety over enrichment for product and
brand image at a optimised stage or platform to
generate higher growth and profit to continue
productivity based growth for longer period of
time.
In this, major threat is related to loss of brand
image or threat of customer loss. Here, Tesco
is looking to bringing some major changes into
their buying or purchasing system, because of
people of Australia are highly believes in
socio-cultural buying, hence it will be difficult
for Tesco Australia to enhance their business
operation at a higher and durable stages. Loss
of profit along with closure of business process
are some major threats for Tesco.
Impact of opportunities & threats:
Opportunities: Through this, it is clear that, attracting FDI will led Tesco Australia to
enhance their business operations at a greater and optimised stage (Du and et. al., 2013). If
foreign direct investment would be put to Tesco business operation, chances are in positive side
that, Tesco business units in Australia will be rise up along with increase in their performance
structure and feasibility in current business process.
Threats: If foreign direct investment is against of defined norms & regulation of
Australia legislation of economy, it would be danger for Tesco to close down their business
operation. There is FDI approval forum in Australia, through which FDI's are majorly pass out.
Without its approval, court of their call for business shutdown.
3.2 Attractiveness of the market:
This will be measured with support of porter five force model, which is useful to judge
market or business competitiveness for longer period of time (Herrmann and Felfe, 2014). In
context with Tesco Australia, explanation of this five factor force model is as follows:

Bargaining Power of Buyers: In Australia supermarket purchasing, buyers are higher
demanding lot. They are majorly looking to get purchase best offerings available to them after
paying minimum or less price as possible. This will put pressure on Tesco Australia Plc to
enhance their major profitability in the long run. In this condition, level of threat is bit high, as
Tesco can loose their customer's.
Bargaining Power of Suppliers: Most of the companies in Australia's retail industry use
to buy raw material from different suppliers. Suppliers with greater influence might be decrease
margins Tesco Australia Plc can to earn major market in the supermarket chain. In this context,
level of threat is majorly high and therefore, it may led to decrease in profit generation for Tesco
to grow their market (Lam and O'Higgins, 2012).
Threats of New Entrants: New entrants such as Morrison, Sainsbury can effects
supermarket and retail which may leads to brings innovation, creative ways of doings or selling
and also this can put pressure on Tesco Plc to sell groceries at a lower pricing strategy, reducing
costs, and providing new value and brand value to the customer's.
Threats of Substitute Products or Services: In context with Tesco Australia Plc, when
any new product or selling process looking for similar customer needs in innovative ways,
industry profitability would get effect, such as online ordering or delivery of groceries can
replace traditional shopping (Marsh, 2013). Here, level of threat is high, because, online platform
is enriching, which are threat for supermarket.
Rivalry among the Existing Competitors: If the rivalry out of an existing players such
as Sainsbury, Morrisons etc., in an industry is wide or intense, in that case it would led to drive
down of major prices along with decrease in an overall profitability for this leading supermarket
(McCahery, Sautner and Starks, 2016). Tesco Plc operating in very different competitive retail
industry, where traditional buying is used to be given major priority. So, here level of threat is
highly moderate.

CONCLUSION
From the above report, it is to noted that Tesco Plc is leading supermarket chain with
support of their customer, but in Australia, they are highly suffered with an issue of down of
supermarket chain and this has caused profit loss for Tesco is region of the Australia. Pestle
analysis has been resulted into identifying scope for Tesco to enhance their business operation
and porter model assisted Tesco to know various threatening forces which can simply impact
business operation of Tesco. Through, there is major opportunistic way for Tesco to enhance its
business functioning and operation, by calling for FDI into the similar to enhance business
operation at a greater and optimised stage of regulation.

REFERENCES
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