Retail Development under Globalization

The assignment is based on a case study of Tesco PLC, a leading grocery retailer in the UK. It explores the role of social networking in global business environments, strategic analysis, and changing roles of maintenance in business organizations. The assignment also discusses the influence of discount retailers on Tesco's financial performance and the company's strategy to adapt to changing market conditions.

BUSINESS ORGANIZATIONS
AND ENVIRONMENTS

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
1. Type and Nature of Organization............................................................................................1
2. Factors and Issues affecting the Business Environment.........................................................2
3. Discussing appropriate analytical framework.........................................................................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

Illustration Index
Illustration 1: Number of retail stores in UK...................................................................................3
Illustration 2: Profitability Ratio......................................................................................................4
Illustration 3: Shares of Different Company....................................................................................5
Illustration 4: TESCO's number of Stores.......................................................................................6

INTRODUCTION
Business is an activity which is performed by an individual or in a group in order to
make good revenue from market. Business organization and its environment is very crucial for
any company to manage it properly and effectively. This will help them in maintaining their
workflow smooth. It is a type of process, in which a person or group of people works together
for the improvement of the organization. It is also used to understand the nature and importance
of business. This can be very helpful in overall growth and enhancing their performance.
Having an effective business environment will aid in identifying business opportunities, coping
with sudden changes in market, it will also help in improving their overall performance as well.
Present report will talk about TESCO operating in Norway. It will explain about the business
organization and factors and issues which is affecting its business environment in that country.
It is also discussing about the analytical framework such as, PESTLE analysis in Norway .
Apart from this, porter's five forces has been included which affects ability of serving
customers.
MAIN BODY
1. Type and Nature of Organization
TESCO is a public limited company and have a number of different stakeholders
working with them. It is a British multinational grocery and retail shop. It was discovered by
Jack Cohen in 1919. Its headquarters is in Welwyn Garden City, Hertfordshire, England and
United Kingdom. According to gross revenue generated per year, it is the third largest retailer in
the world. It has its shop in different countries across Asia and Europe. Area in which TESCO
supplies its service includes, UK, Ireland, India, Thailand, etc. TESCO mainly used strategies to
build customer loyalty (vom Brocke, Zelt and Schmiedel, 2016).
Presently, TESCO has various subsidiaries, for example, Tesco retail stores ltd., Tesco
bank, Tesco mobile, etc. It also has supermarket, hypermarket, superstore, etc. In United
Kingdom, it offers financial services to the people through their Tesco Bank which is a joint
venture with The Royal Bank of Scotland. Services includes, loans, credit cards, insurance, etc.
They also operate a mobile phone business across United Kingdom, Ireland, Slovakia, the
Czech Republic, etc. as a partnership with O2 (Kasemsap, 2016). They have expanded their
business outside United Kingdom as well in approx. 11 different countries. The main purpose of
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TESCO's different types of organization is to make their customers satisfied from their service.
They always try to be innovative in giving their services in order to enhance their business.
As a leading company in supermarket industry operating in United Kingdom, TESCO
has improved their business environment to attract more customers which can help them in
earning a good revenue from their business. It also has a good brand image in the industry
which helps in fulfilling their customer needs and wants and provide them good quality
products at reasonable prices as compared to their competitors (Simões, Gomes and Yasin,
2016).
2. Factors and Issues affecting the Business Environment
Business environment is external and internal factors which can affect the functions of
any company. These factors can include, their staff members, customers, management, supply,
industry trends, technological development, etc. Business environment is most important aspect
for any company in order to work efficiently as it will help them adapt all the latest trends that
are important for them to implement in their organization. There are various factors which can
affect TESCO to operate their business in Norway successfully. Norway is a sovereign state in
North-western Europe (Salaman, 2017). To set their business in this country, it is very important
for the organization to study all those factors and issues that can affect their functionality, such
as,
Governmental Policies: There are various environmental policies which can affect the business
activity of Tesco. These are the laws and regulations which plays an important role for any
organization. These can include political and economic prospect of the country in which it is
operating. Norway’s economic condition is very good. They have improved labor freedom,
government integrity, etc. which can be very useful for TESCO. GDP or gross domestic
production is a type which is used to measure value of their goods and services produced by
them in the whole year. Norway has a good account of GDP which will be very beneficial for
them. Corporate taxes are also being cut to attract foreign investors as well. Unemployment rate
of Norway is low which can affect TESCO for employing staff for their organization (Babajana
and Hughes, 2015).
Climate Change: This can also affect the company in various ways. Increasing issues related to
environment, such as, global warming and adverse weather condition can also impact their
business activity.
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Availability of natural resources: Norway is very rich in terms of availability of natural
resources. This can be very useful for TESCO to start their business in Norway.
Availability of Employees: This is another factor which is very important for TESCO to work
on. Insufficient amount of staff members can impact a negative effect on their business. The
labor market lacks flexibility.
This statistic shows the number of stores for eight of the leading grocery retailers in
United Kingdom (UK). In this figure, it is clearly shown that Tesco is the second largest retail
company operating in UK with 2455 stores in worldwide.
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Illustration 1: Number of retail stores in UK
(Source: Number of stores of leading grocery retailers in the United Kingdom, 2014)

From the above graph, it is clear that, Tesco is leading company in terms of profitability
ratio as compared to their competitors, Sainsbury and Morrison. Growth of company has
increased eventually as year passes. This shows that they have implemented various strategies
into their management system which helped them in increasing their sales and customer rate.
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Illustration 2: Profitability Ratio
(Source: Ratio Analysis of Tesco Plc, 2014)

Above image shows the number of shares of different companies till April 2016. This
graph show that Tesco has the maximum number of share as compared to its rivalry. This depicts
that Tesco has some uniqueness in their products and services which make them distinct from
others.
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Illustration 3: Shares of Different Company
(Source: Ratio Analysis of Tesco Plc, 2016)

Above graph shows Tesco's number of stores that are operating worldwide from 2008 to
2016. For example, in 2008, Tesco has operated 3,751 stores worldwide which eventually
increased to 6,809 store by the end of year 2016. Most of the Tesco’s annual revenue is
generated from its key market, i.e., in United Kingdom. Apart from this, they also sell their
products in stores located in other European and Asian countries as well to increase their sale and
customer rate. Based on market share, Tesco’s top rivals in the grocery store business include
Asda and Sainsbury’s (Haddock-Millar and Rigby, 2015).
3. Discussing appropriate analytical framework
There are various factors which can affect the business activities in many ways, such as
externally and internally. Some analytical frameworks are available which is used to identify and
evaluate these factors, such as, PESTLE analysis, Porter's Five Force Model. These are used to
study the external macro environmental factors of TESCO, which is explained below,
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Illustration 4: TESCO's number of Stores
(Source: Tesco's number of stores worldwide, 2017)

PESTLE Analysis
Political Factor: These are the most important factors which has to be managed properly
by TESCO in order to operate their business successfully. These can affect company's efficiency
and effectiveness. Norway is considered as most stable country and best suitable for starting any
business. Norway is a member of European Free Trade Association (EFTA) and take part in
European Union (EU) with the help of European Economic Area (EEA). Norway is politically
stable. Since Tesco is a global retailing company, it must follow rules and regulations of the
markets in host countries to work smoothly. Political factors can include taxes, rate of inflation,
regulations, etc. It is a challenge for them to deal with all these factors and expand its business
network in that country (Coe and Wrigley, 2017).
Economic Factor: These can affect the business activity of TESCO in Norway. These
factors can include global economy and gross domestic product or GDP rate as well. Global
consumption for goods and services has increased tremendously in the past several years in
Norway. Financial crisis also has a huge impact on overall economic growth of the country. It
has stable economic condition with a political stability and fiscal responsibility. Inflation and
interest rates are another factors which may also affect them. Changes in policies, such as,
taxation can affect the company’s ability to access finance, which is very crucial for them to deal
with. This has to be evaluated clearly for TESCO as it can impact a huge effect on their business.
It is very important for Tesco to perform international trading as it is one of the largest retail
stores in world (Wood, Coe and Wrigley, 2016).
Social Culture Factor: This is the factor which keeps on changing and has direct impact
on their business. These are those factors which is directly linked with the purchasing behavior
of customers. They have study nature of people living in Norway to deliver the best services
according to their taste and preferences. This will help them in increasing their customer rate in
industry and they can earn a good profit as well. These factors can affect them a lot as every
person has its own preferences while purchasing any product from the market. TESCO has to
perform an effective marketing analysis to study its customers and their behavior as well
(Chkalova and Efremova, 2015).
Technological Factor: In today's world using internet has become a daily routine. For
TESCO, it is very important to have all the latest tools and technology which is required to run
their business successfully in Norway. Technology consists of type of machines and processes
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available for use by a firm and the way of doing things. Technological availability is very good
in Norway which will be very beneficial for them in operating their business. This will help in
providing better service to their customers and make them feel satisfied. As Tesco is using
internet facility to operate their online market, so it becomes mandatory for them to check the
availability of internet in Norway to deliver their service to their customers. The use of
technology by Tesco does not only shape culture but also it brings changes to certain aspects in
an organization (Vu, 2016).
Legal Factor: These are those factors which has to be followed properly by any business
organization to work effectively. In this factor, it includes various laws and regulations of that
country which they have to implement in their business, such as, labor law, tax law, etc. Other
than this, they also have corporate and value added tax which is in stable condition. They also
have to maintain the health and safety regulations of their employees who are working with them
(Fernie and Sparks, 2014).
Environmental Factor: In this factor, company has to take care of that they are not
harming their external environment while conducting their business in that country. All
governments have raised their concern on environmental matters. They have to maintain the
dignity so that they operate smoothly. Norway has strict rules and regulations related to
conservation of their environment. These laws have imposed additional responsibilities and costs
for the companies who are planning to start their business in Norway. Factors like, weather,
climate and natural disasters of the host company, i.e., Norway can impact the operations of
TESCO, which can influence their business (Rahman, 2015).
Porter's Five Force Model
This model is very useful to analyze their business position in industry which can be very
helpful in improving their business activity. This method attempts to analyze five different forces
which can help in determining the extent of overall competition in a grocery retail industry. Five
forces of Porter is explained below:
 Threat of Substitute Product: These factors can affect the business activity of TESCO
in Norway as there are so many small and big departmental or retail store which is
operating their business for many years and has a good number of loyal customers. If
TESCO creates their distinctive brand identity than this can be reduced (Moutinho and
Phillips, 2018). This will help them in gaining confidence of their customers by providing
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them products and services according to their preferences and choices. TESCO sells
variety of products, such as, grocery, health and beauty, home appliances, etc. which is
easily available in the market, So to cope up with this situation they have to come up with
new and innovative strategy. They have to bring some change in their services which can
attract customers to buy their products (Business and industry in Norway - The structure
of the Norwegian economy, 2014).
 Threat of New Entrant: In this factor, it includes new company which sells the same
service as TESCO. It has to be taken into consideration as it can affect their sale. If the
new entrant is selling its products and services at low price, than it can be very difficult
for them to retain their customers. To deal with this, they have to apply some strategies
which can increase their sales. For this they can imply various strategies, such as, by
giving those offers, discounts, etc. on their products.
 Competitive Rivalry: These includes competitors that are already present in an industry
which gives the same service like TESCO in market. To establish their business in
Norway it is very important for them to analyze their competitors as it can have a huge
impact on them. To deal with them it becomes crucial to upgrade their business by
bringing some change which is new in the market and totally different from their
competition so that it will help in attracting consumers (Norway, 2018).
 Bargain Power of Supplier: This force is basically very low as compared to the
bargaining power of buyers. This can impact a huge effect as Tesco has hundreds of
suppliers and there is a minimum or no supplier switching cost for the supermarket chain.
This has to be maintained properly by them in order to work smoothly in industry to
increase their overall revenue from the business. The retail industry has to build healthy
relationship with their suppliers to get products on reasonable price.
 Bargain Power of Buyer: This force is generally high as buyer have a strong impact on
these companies to bargain on the actual amount of product which can give them loss in
their business. To deal with this situation, TESCO can set the prices of their products in
such a manner which can be easily affordable by their customers in Norway. To make it
effective, TESCO can compare their prices with their competitor's products which is
available in market to increase their customer’s rate (Moutinho and Phillips, 2018).
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CONCLUSION
From the above report, it can be summed up that it is very important for any firm to have
effective business organization and its environment which can help them in increasing their
commercial effectively and efficiently. Present report has discussed about TESCO and its
business organization in Norway. It explained about type and nature of the organization and its
factors and issues which has a huge impact on their business which includes both, internal and
external environmental factors. Apart from this, it also explains about the analytical framework,
such as, PESTLE analysis and Porter's five force model which is useful for them in
understanding these external environmental factors which can affect them while operating their
business in Norway.
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REFERENCES
Books and Journals
Babajana, Z. and Hughes, A., 2015. Business Environment.
Chkalova, O. and Efremova, M., 2015. Retail Development under the Conditions of
Globalization. International Journal of Trade, Economics and Finance. 6(4). p.205.
Coe, N.M. and Wrigley, N., 2017. Towards new economic geographies of retail globalization.
Oxford: Oxford University Press.
Fernie, J. and Sparks, L., 2014. Logistics and retail management: emerging issues and new
challenges in the retail supply chain. Kogan page publishers.
Haddock-Millar, J. and Rigby, C., 2015. Business Strategy and the Environment: Tesco PLC’s
Declining Financial Performance and Underlying Issues.
Kasemsap, K., 2016. The role of social networking in global business environments. In Social
media and networking: Concepts, methodologies, tools, and applications (pp. 1635-1653).
IGI Global.
Moutinho, L. and Phillips, P., 2018. Strategic analysis. In Contemporary Issues in Strategic
Management (pp. 46-79). Routledge.
Rahman, M.M., 2015. Critical analysis of the influence of discount retailers on Tesco plc in the
UK.
Salaman, G. ed., 2017. Co-ed Understanding Business Organisations. Taylor & Francis Limited.
Simões, J.M., Gomes, C.F. and Yasin, M.M., 2016. Changing role of maintenance in business
organisations: measurement versus strategic orientation. International journal of
production research. 54(11). pp.3329-3346.
vom Brocke, J., Zelt, S. and Schmiedel, T., 2016. On the role of context in business process
management. International Journal of Information Management. 36(3). pp.486-495.
Vu, M., 2016. IS THE BALANCED SCORECARD USEFUL IN A COMPETITIVE
INDUSTRY?: Using Tesco PLC as a case study in the UK grocery retail industry.
Wood, S., Coe, N.M. and Wrigley, N., 2016. Multi-scalar localization and capability
transference: exploring embeddedness in the Asian retail expansion of Tesco. Regional
Studies. 50(3). pp.475-495.
Online
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Business and industry in Norway - The structure of the Norwegian economy. 2014. [Online].
Available through: <https://wwAw.regjeringen.no/en/dokumenter/Business-and-industry-
in-Norway---The-structure-of-the-Norwegian-economy/id419326/>
Norway. 2018. [Online]. Available through: <https://www.heritage.org/index/country/norway>
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