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Tesco's Business Environment Analysis

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Added on  2020/01/23

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This assignment requires a thorough analysis of Tesco's business environment using the PESTLE framework. It examines political, economic, social, technological, legal, and environmental factors impacting Tesco's operations. The analysis should identify key challenges and opportunities facing Tesco within these dynamic environments.

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Business and Business
Environment
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Table of Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
a) Case studies of private and public sector organizations..........................................................3
b) Interrelationship of various organizational functions and structures.......................................5
c) Tesco vs. Iceland......................................................................................................................9
Part 2..............................................................................................................................................10
a)................................................................................................................................................10
P4 Identifying the positive and negative impacts of micro environment on the business
operation....................................................................................................................................10
P5 Conducting internal and external analysis to identify its core strength and weaknesses.....11
P6 Link of strengths and weaknesses of external macro factors...............................................12
M3 & M4 Applying PESTLE and SWOT.................................................................................13
b) Impact of micro and macro factors on decision-making process..........................................16
CONCLUSION..............................................................................................................................17
REFERENCE.................................................................................................................................18
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INTRODUCTION
Business environment is composition of internal and external environmental factors
which effects on entity's operations. These factors are able to present market position of
company and its products value. The present report is based on case studies of Iceland and Tesco
retail industries in private and public sectors respectively of UK. Therefore, methods to solve out
issues are to be expressed to run organization effectively. Moreover, the study is able to present
organizational functions and different structures systematically. It is to provide understanding
positive and negative aspects of environmental factors and presents firm's reputation in market.
However, analyses of internal and external tools can be determined through this report to predict
strength and weaknesses of business entity in transaction of resources. In addition to this, impact
on organization's effectiveness is to be recognized to present competitive strategies of retail
industries.
PART 1
a) Case studies of private and public sector organizations
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Tesco:- It is public limited company provides grocery and food products to customers at
large scale. In this regard, government interferes in business operations including transaction of
resources, effectiveness of entity and in various functions. In addition to this, it plays effective
role in country's efficiency.
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Iceland:- It is wide spread private limited retail company of UK aims to gain maximum
profit with customer satisfaction. Further, owner and top level managers of entity makes
decisions to run business. Therefore, less government interference presents. In addition to this, it
provides goods and services to million customers and has several branches in other countries of
the world.
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b) Interrelationship of various organizational functions and structures
Iceland is one the most popular retail company of UK in providing grocery and food
items to consumers at high level. It has several branches in other cities of country also
establishes good relationship with other business entities for long term sustainability of
organization in market. At present, it is considered that organization is facing issue of unstable
economy to run business smoothly (Ahmed, 2012). Therefore, different departments of entity
effects and create imbalanced environment at workplace. According to this case study, several
departments and their functions including interlinks can determined as:-
Different departments:- There are various departments in organization are as follows:-
Finance department:- It includes activities of fund allocation, money transaction,
making decisions for economic development (Camacho, 2012). Thus, finance manager
of company sets target to implement monetary profile and increasing productivity as
well profitability of firm.
As per the given case, Iceland is suffering from monetary crises, highly impacts finance
department of the organization. It interrelates with other departments of company as marketing,
production and operation as similar research and development department. Therefore, entire
business activities effects due to lack of money in transaction of resources.
Marketing department:- Manager of marketing department prepares plans for accurate
market research and production and distribution of resources effectively. It includes
decisions related to product quality, price and promotional techniques to advertise goods
and services in market (Dickinson, 2013). However, it interrelates with other
departments for effective transaction of resources and efficiency of entity to manage
demand and supply of goods.
According to financial crises case of Iceland, it is determined that issue is interconnected
to marketing department. In this regard, production and operations of transaction get impacted
also effects on other departments of entity to run industry effectively.
Human resource (HR) department:- It is department related to entire business activities
of organization. It involves functions like analyzing employees performance and
encouraging them for effective coordination to reach out the target (Gabriel, 2014). In
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addition to this, HR department analyses business activities including evaluation of
market research, recognizing production and distribution of resources, relationship
management among workers and other departments of the firm effectively.
As per the given case, it is determined that ineffective fund allocation impacts HR
department. In accordance to this, HR manager of Iceland requires to analyse problem and
coordinate to implement strategic plans. Hence, HR department plays great role to achieve
coordination and create environment of the organization.
Production and operation department:- This department's manager plans to proper use
of resources including production and supplement of goods. It prepares plan according to
market research analyses on behalf of which other factors and departments get effected.
In this regard, research and development, quality and quantity of goods and services are
recognized (Galende, 2016). It is interconnected with departments as economy, create
balance between demand and supply of goods. In addition to this, it is related to
management of risks occurs in the organization etc.
Regarding case study, financial problem of Iceland impacts on transaction of resources as
production and distribution. In this process, department's manager has to contribute its working
performance for economic growth. Therefore, effective production and supplement of grocery
items and food products can be achieved.
Interrelationship of different departments:- Several departments who work for organization's
effectiveness are interconnected to each other (Ghosh, 2014). For example, market research
analyses and implementing strategic plans are possible to be effective only through great
coordination of all departments. Hence, fund allocation decision requires to make decisions for
arranging appropriate money to run business effectively. Similarly, HR department plans to
create supportive environment of organization's departments' through encouraging employees for
better service qualities. It influences entity's market position and also presents competitive
strategies to long term sustainability.
According to given case study, it is recognized that monetary issue occurs in organization
reflects other departments of Iceland to activate entire business activities. It impacts on other
departments' planning procedure. Therefore, environment of the retail company get disturbed due
to issue occurs at workplace.
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In this process, coordination and great understanding among all departments' managers is
required. For implementing strategic planning procedure, HR manager prepares plan to create
effective atmospheres of firm. It motivates employees for better work performance and get
adjusted according to problem (Iqbal and Strong, 2016). Thus, departments of entity interrelates
with each other. It is useful to face competition and sustain product value in market for long time
period. Hence, all departments' role in marketing and working efficiency is valuable to get
effectiveness of groceries and food products. In addition to this, effective support of all
departments to reach out the goal is helpful for managing overall business activities at
workplace.
Advantages:- Interrelationships of all departments is beneficial for effectiveness and to create
positive environment of firm. Including this, it is able to increase productivity and profitability of
industry which influences balance between production and distribution of resources (Johnston,
Bringall and Fitzgerald, 2012). Moreover, presents unique ideas to increase working efficiency
of employees as well effective performance of organization is determined. It impacts on great
understanding relationship among workers to gain effectiveness high level reputation in market.
Disadvantages:- Although interrelation among departments is beneficial for organization but
sometimes conflicts and disputes occurs at workplace. It is because of lack of understanding
among employees, unsupported behavior in contributing work for achieving target etc. Including
this, problems emerges due to uncertain changes occurs therefore all employees do not support
effectively for adjustments according to dynamics (Lusardi and Mitchelli, 2015). In this regard,
technological changes and implementing strategic plans remains fail to meet set goals.
Organizational structure:- Management of business activities including optimum utilization of
resources, increasing working efficiency and high level productivity as well profitability presents
shape and entity's structure. It is framework to present reputation and workers' performance
efficiency systematically. Along with different kinds of organizational structures are recognized
at workplace can understand as:- Functional structure:- It is framework to present functions of entity also includes
behavior and attitude of workers towards organization's performance. It is sum up of all
departments' functions like marketing, HR, IT and finance etc. Under this structure,
performance and roles of all departments are determined (Manas and Graham, 2013). It
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considers as a departmentalization process which influences functional areas of all
departments to present working efficiency. Strategic Business Unit (SBU):- It considers as composition of marketing plans,
recognition of competitive tools etc. Regarding SBU, it presents revenue, marketing
costs and HR profit shares to present factors which influence environment of the
industry. Including this, it represents market segment and strategic ideas for satisfied
service qualities to gain customer satisfaction (Kárpáti, 2012). However, concept is able
to present product value in market. On behalf of this structure, new ideas are generated
for further transaction of resources and applying techniques for effectiveness of company
to sustain its position in market.
Matrix structure:- It is integrated management of marketing tools and efficient
organization's activities. Under this structure, product qualities, brand marketing,
adequate management of resources including product management is presented.
Therefore, effective portfolio analyses is obtained for market growth in economic and
non economic fields. Hence, matrix structure creates effective framework of product as
brand in also determines its value and demand in market which impacts on organization's
business activities (Dickinson, 2013).
c) Tesco vs. Iceland
Tesco and Iceland both are retail industries to provide grocery and food items in public
and private sector in UK (Lusardi and Mitchelli, 2016). In accordance to this, both companies
have different organizational structure in size, shape and planning bases. It can be comprised as
follows:-
Bases Tesco (Public sector
organization)
Iceland (Private sector
company)
Scope Large scope Largest scope (It has various
branches in other countries of
world)
Objective To provide healthy and
safe products.
To gain social welfare
To aware society
related to product
To gain profit at
maximum level.
To increase qualities of
goods and services.
To pull customers at
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services.
To play great role in
nation's development.
high level.
To implement action
plans to sustain
effective value in
market.
Government interfere In public limited company,
government interferes at large
scale in business activities.
Organization has to follow
government policy's rules and
regulations.
Transaction of resources are
implemented
There is less government
intervention in operations of
business activity.
Owner and top level managers
plans and makes decisions to
run entity effectively.
Public and private sector organizations perform business activities in different ways. In
this regard, both companies have different power to run business and monitoring tools in
implementing action plans are varies to each other. However, there are limitations in Tesco for
business plans due to following rules and regulations of government but favorable part is that it
focuses on public welfare and seeks to gain society's awareness. While in comparison to private
sector organization, it is determined that Iceland is free from government intervention therefore it
can take its decisions regarding business activities. Moreover, it has wide scope to activate
transaction of groceries and food items through export and import. Therefore, it can increases
efficiency at high level through operating new branches in other countries. Similarly, it is able to
face competition and sustain its good reputation in market.
Complexities according to case:- As per the given case study, Tesco is facing issue
related to quality services of grocery and food products. While, Iceland faces issue regarding
economic condition of organization. It is analyzed that both cases disturbs retail company's
effectiveness as well impacts on transaction of goods and services (Iqbal and Strong, 2016).
Therefore, facing competition and make place in market considers difficult for long term
sustainability. Apart from this, customer satisfaction towards services and market demand for
products effects.
Interrelation between different organizational functions:- Different organizational
functions are interconnected to each other for production and supplement of resources. In this
case, market position of Tesco and Iceland get effected influences various environmental factors
whether they are controllable or uncontrollable. Therefore, activities of all departments
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performance reflects atmosphere and competitive strategy of organization in great way (Cornuel,
2016). It is related to segmentation of work among all departments' employees including
understanding behavior and supportive role for product value in market.
PART 2
a)
P4 Identifying the positive and negative impacts of micro environment on the business operation
An organization has direct impact of varied factors like environment, technological,
political and economical situation through which overall business operation is affected. This
assists management to bring necessary change in its internal environment and accordingly apply
appropriate strategy. For example, Tesco's micro environment consists of competitors,
customers, suppliers and public. It would be effective for corporation to adopt appropriate
strategy through which business can easily improve the business performance in an effectual
manner. It facilitates to utilize resources in an optimum manner (Joseph and et.al. 2013). At this
juncture, management of Tesco ensures to conduct micro environment analysis for assess all
important for through which all business activities can be integrate for generating higher rate of
return. Not only this but corporation put efforts to build good relation with all stakeholders such
as shareholders ans customers.
For example, customers are provided suitable products and service sin accordance with
their views and suggestion. This aspect make it possible for company to bring certainty and
determine successful operation with higher rate of return. Furthermore, competitors analysis is
done to assess that what potential strategies are applied by company and how it can be improved
for assessing growth and development of Tesco (Bertillo and et. al., 2013). At the same time, it is
also important for business to understand that micro analysis must be done on time to time for
selecting the most appropriate strategy for its long run survival in the marketplace. Apart from
this, assessment is also done for workers and union of corporation which make it possible for
management to assess their motivation level. It can be critically evaluated that micro
environment generally takes time and it must be conducted on right time otherwise, management
will not get to know about sudden changes occur at workplace. Owing to this, Tesco tend to
focus upon conducting micro analysis effective in order to maintain its higher performance and
meeting expectations of all related parties (Wang, 2011).
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P5 Conducting internal and external analysis to identify its core strength and weaknesses
The internal and external analysis of corporation can be conducted by considering the
availability of resources and other related aspect of continuity of different product activities. This
facilitates business to cater need of all related buyers and provide them chance to create
competitive edge in the marketplace. In this regard, strengths and weaknesses of Tesco are
explained as follows. However, management of Tesco is operating effectively in UK because of
good relationship with its stakeholders such as suppliers, customers and shareholders etc. It can
be critically evaluated that ethical issues such as horse meat scandal affect operation of business
to a great extent (Fu and Oum, 2014). For example, customers get dissatisfaction and they no
more willing the purpose the products and services which are being offered by Tesco. At this
juncture, appropriate promotion strategies are used along with communication with customers
through which they come to know about favorable aspect of products and services. For example,
YouTube is used for sharing the video clipping that company lays emphasis on quality of
products and services. Furthermore, management can effectively integrate all business activities
so as to accomplish long as well as short term objectives. In this regard, management of business
ensure to use competent workforce and highly updated technologies and tools for better
production of the different business activities (Camacho, 2012).
Strength
Tesco is capable enough to expand the business because of good financial position in the
marketplace.
The focus of business on both food and non-food line facilitates to diversify overall risk
and ensure long run survival of the firm within increased rate of return. Company is using multi format strategy to manage its hypermarkets, supermarkets as
well as convenience store.
Weaknesses
Inappropriate credit collection period of business might have direct impact on overall rate
of return to a great extent
Household insurance claims of Tesco are greater because of credit card related issues and
bad debts etc
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Some of the countries are not generating profit for Tesco due to its weak presence in the
marketplace
P6 Link of strengths and weaknesses of external macro factors
The strengths and weaknesses of a business is linked to external environment. It is
because performance of business is highly influenced by different factors such employment,
inflation and technological changes and social aspects. For example, currently UK faced
contemporary issue related to Brexit under which UK was separated from EU. Owing to this,
currently value get affected to a great extent (Lange and et. al., 2015). This reflects both
favorable and less favorable aspect for business because corporation can now work on the basis
of own countries rule. Before, Brexit, the scenario was different and corporation were unable to
work on the basis of own regulation. Owing to this, Brexit can be beneficial and less favorable
both. However, positive impact of Brexit proves as strength for business because financial
position will be strong and corporation can easily create its goodwill it the marketplace. It can be
critically evaluated that profitability might go down as for expansion EU regulations will not
supported and accordingly it might be possible that entry barriers are faced (Dickinson, 2013).
Furthermore, weaknesses can be derived from entry barriers of corporation and poor
value of currency of UK. Such kind of situation can create barriers at the time of expansion of
the firm. This reflects that macro environment consists of strength and weaknesses both for
company. In this manner, it can be said that in case technological innovation are coming then
being successful company Tesco will initiate first which in turn facilitate to secure its long run
growth in the marketplace with higher rate of return (Jennings, 2010). In addition to this,
weaknesses can be seen in term of higher competition in the marketplace which can be
understood with the help of macro environment. For example, in case inflation rate of moderate
then all companies will take advantages to grab the attention of buyers by offering them products
and services at relatively lower prices. It can be critically evaluated that competition will be
increased as more companies get right to enter into market. In this manner, strengths and
weaknesses are related to macro environment,
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M3 & M4 Applying PESTLE and SWOT
An organization is surrounded by internal and external environment which can be
conducted with the help of application of suitable model such as Pestle and SWOT analysis.
These are explained as follows-
PESTLE analysis
PESTLE analysis is used for conducting external analysis of business which consists of
different factors such as political, economic, social and technological as well as legal. Along
with that economic factors are also included which affect operation of corporation in a both
positive and negative manner- Political factors-Tecsco company is operating its business across the globe because of
offering good quality of products and services in the marketplace (Joseph and et.al.
2013). It assists corporation to manage all operational activities and deliver good quality
of services to large number of buyers. However, legislation related to food authority, tax
rates etc has direct impact on the performance of Tesco. It can be critically evaluated that
financial instability in the country tend to affect operation of entire retail sector.
However, Tesco support economy of UK by creating employment which in turn demand
of products and services is increased in the marketplace which in turn proves to be
beneficial for the same (Samy, Odemilin and Bampton, 2010). Economical factor-It is another important factor affecting performance of corporation
like Tesco in the marketplace. Here, changes in policies such as taxation and other related
aspect has direct impact on profitability. For example, in case there is change in fiscal or
monetary policy then tax rate or bank rate will be changes. Owing to this, Tesco might
face issue in accessing cost effective source of finance. Owing to this, it becomes
important to bring necessary changes in the current performance of company so as to
cope up with chancing scenario (Wensveen, 2015). This facilitates to support all
operational activities in the marketplace. This reflects that positive economic changes
create competitive edge of the business and support all its stakeholders effectively. Social factor-Social factor is also important affecting performance of corporation as it
consists of preferences and expectations of consumers who are direct associated with
business. For example, now a days people are shifting towards hygienic products so
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company also ensure to produce the same effectively for meeting their specific need
effectively (Lange and et. al., 2015). Furthermore, Tesco is applying to strategy to
product organic products in order to meet the expectation of all related customers in an
effectual manner. Hence, new strategy of business facilitates to retain buyers for longer
time span and enhance their satisfaction level to a great extent (Joseph and et.al. 2013). Technological factor-There are several kind of technqaiues which assists corporation to
create competititve edge. However, being successful firm, company is putting efforts to
provide online services to buyers for their ease and retaining them for longer time span.
At this juncture, self-service checkout points are also added. At the same time, club card
system is also used by corporation so that customers get attraction towards the same and
accordingly rate of return of corporation can be increased. Furthermore, implementation
of self-checkout system tends to be effective in reducing cost of production. This enables
company to ensure upward direction in the marketplace so that corporation can be work
with higher level of integration (PESTLE Analysis for Tesco, 2017). Legal factor-The legal requirement are generally imposed by government of nation
which must be followed by management of Tesco. At this juncture, is important to shed
light upon Food Retailing Commission stated that Code of practice which must be
complied by management. This ensures that ethical conduct of business is maintained and
accordingly overall rate of return can be increased in the marketplace (Jennings, 2010). In
this manner, is important for corporation to follow the fair price policy and accomplish
set of rules and regulations imposed by government of UK. Environment factor-Every organization is obliged towards environment and related
issues so as to ensure accomplishment of all related activities. Here, Tesco, has target to
reduce the carbon footprint by 50% by 2020 along with generation of employment. This
kind of practices of business facilitates to support Tesco to a great extent.
SWOT analysis
The SWOT analysis is done on internal level for assessing the strength and weaknesses of
business. It covers varied aspects through which management of firm can easily adopt suitable
strategies on right time. SWOT analysis of Tesco has been conducted as follows-
Strengths Weaknesses
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Strong brand image with presence of
firm across north Africa, Asia and
Europe etc
Locally sources products to bring
operational efficiency
Large stores of non food lines such as
telecoms, financial services, internet
sercvices as well as apparels etc (Tesco
Stores SWOT Analysis, USP &
Competitors, 2017)
Application of multi format strategy
Negative media image of the firm due
to recent controversies
Poor brand image in other countries
Higher bad debts, credit card arrears
Greater household insurance claims
Opportunities
Using innovative digital media for
promotion of products and services
Focusing on private label growth
Using acquisition strategies
Threats
Higher price of raw material cost from
non food and food segment
Higher competition from Wallmart,
Debenhams
b) Impact of micro and macro factors on decision-making process
Environmental factors impact on organization's effectiveness. These factors includes
political, socio-cultural, technological and legal factors. Moreover, these are uncontrollable tools
to run entity smoothly. It is due to changes in people interests, technological changes as
implementation in machinery equipment for qualitative services. Therefore, atmosphere of Tesco
remains effected in positive and negative manner. Along with micro and macro factors are key
elements to make plans for further business activities. In order to this, organizational functions
impacts also generates idea to implement action plans (Ahmed, 2012).
Management of business activities at workplace involves various functions such as use
of materials for preparation of finished goods including its production and supplement. In
addition to this, analyses of past years performance generates idea for future trend and future
activity plans. In this form, organizational framework of Tesco is determined by which monetary
and earning capacity tools recognized to create effective environment of retail sector. In addition
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to this, various external environment factors impacts in different ways. For example, political
factors which includes tax policy, interest rates and other aspects. There are highly government
intervention impact on organization's effectiveness (Camacho, 2012). Further, changes in tax and
interest rates effects financial profile of company. In this regard, increasing in rates reflects
entity's market position.
Time to time, there are changes occurs in interests and customer attitude towards goods
and services impacts social and cultural factors of public limited company. Therefore, varieties
of environmental changes occurs to present organization's effectiveness. In addition to this, other
countries' people lifestyles, choices effects production and distribution system of retail industry.
In this case, changes in views and opinions reflects Tesco market position for grocery and food
items.
Technological factors are those environmental factors which presents products' quality
services effectively. According to this atmospheric tool, it is obtained that qualitative resources
are identified by analyzing machinery equipment and techniques used for marketing of grocery
and food items. In this process, tools and techniques get effected to present organization's
effectiveness. Adoption of technological changes are able to gain better quality of services as
well impacts on personal and professional development of workers (Bernard and Jensen, 2014).
In addition to this, market position of Tesco impacts by recognizing legal factors includes
data protection, rights of public and employees towards retail company's services. It includes
government interference and following rules and regulations of government policies. Thus, it is
necessary for public limited company to concentrate on legislation provided by government. It
influences organization's effectiveness and market position to face competition and make place
in global market effectively.
Hence, micro and macro environmental factors impact on Tesco business entity's
effectiveness. It influences market position and sustainability tools to maintain goodwill at
workplace. However, proper analyses of these factors leads to make decisions for further
business activities as transaction of resources, economic development, performance and
contribution of employees to maintain good reputation in market (Cheng and et .al., 2016).
Including this, it involves accurate market research and implementing plans for future
businesses. It includes relationship of Tesco with customers and other business entities.
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Environmental factors influences different aspects of business and effective production as
supplement of resources. Hence, it is determined that organizational factors impacts market
position and product value for competitive strategies. It is able to analyze effective tools and
techniques to implement service qualities and effectiveness of organizational functions and
structure. It obtains valuable tools to attract public and society's awareness towards product
services. Including this, proper management of utilization of resources and influences
atmosphere of entity. It is valuable to increase working efficiency and performance of
organization in competitive market.
CONCLUSION
The aforementioned report concludes that business environment is surrounded by varied factors
which must be considered by corporation. At the same time,. Appropriate strategy is applied to
assess the performance of corporation and suitable action are taken to improve its performance.
Here, PESTLE analysis support company to focus upon external environment such as changing
political situation, economics and technological environment so that accordingly company can
effectively bring changes on right time. Furthermore, application of SWOT analysis model
facilitates to assess internal environment of firm. Apart from this, research and development
activities of business should be supported by management in order to manage all business
activities in an effectual manner.
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