Impact of Culture, Environment and Business Environment on Tesco

This report assesses the impact of culture, environment and business environment on Tesco, a British multinational retail store specializing in groceries and general merchandise.

CONTEMPORARY
BUSINESS
ENVIRONMENT
TABLE OF CONTENTS

INTRODUCTION...........................................................................................................................3
Impact of culture, environment and business environment on Tesco.........................................4
PESTLE and SWOT Analysis.....................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
The internal and external business environment in which an organisation operates in is
made up of multiple individual factors all of which have an effect on the business organisation’s
operational performance productivity and profitability in the consumer markets. Some of these
factors tend to affect the organisation’s operations directly while other influence the operation in
an indirect manner (Cepel and et.al., 2018). Hence, the business environment in which a business
organisation operates in is a highly complex, convoluted and multi-dimensional landscape which
comprises of various individual factors which determine a business organisation’s productivity,
performance and profitability in the markets. The business environment in which a business
organisation operates in can be divided into two categories economic and non-economic. The
productivity, profitability and performance of a business organisation is highly dependent upon
the economic environment in which it has to operate in. Economic environment consists of the
various economic policies, conditions and systems of the country in which the business
organisation operates in. Economic systems have an effect on a business’s operations are the
inflation rates, taxation rates, consumer bargaining power etc present in the economy of the
country. Economic conditions include the political stability of the country, outbreak of diseases,
and its impact on the economy of the country (Hamilton and Webster, 2018). While economic
policies that influence a business’s productivity and profitability comprise of the legal rules and
regulations of the country, which business organisation has to adhere to in order to legally
operate in the country. The non-economic environment in which a country operates in also has
immense influence on its productivity, profitability and performance in the markets. These
comprise of various individual factors which include demographic, social, technological,
political, legal and natural factors all of which have an effect on the business’s operations and
functions.
This report assesses the impact of business environment on the British multinational retail
store Tesco which specialises in groceries and general merchandise, from its headquarters in
Welwyn Garden City, Hertfordshire, UK. Tesco was founded in 1919, an astonishing 101 years
ago and having operated in retail markets for such a long time has presented Tesco with many
opportunities to grow and expand their operations to international markets. In this process Tesco

has risen to become world’s third largest retail business on the basis of its gross revenues
generated. In the UK alone, Tesco operates around 3433 distinct establishments.
Impact of culture, environment and business environment on Tesco
Business Environment
Organization culture is crucial part of the organization because it supports to integrate all
the staff to enhance their efforts towards common goal of the business for accomplishing its
objectives effectively. It also influences the performance of the workforce by inspiring them and
improves their personal development for performing effective in decision-making process and
achieves high profitability within company (Abramishvili, 2016). It maintains healthy working
environment for employees which inspires them to work hard and coordinate with their team
member effectively. A good working environment improves working quality of staff along with
high coordination and great ethics and morals supports manager and leader to become role model
for their employees. Tesco also understand significance of cultural theory within company and
determines different factors which can enhance the organizational behaviour that can give impact
on overall organization performance. organization can implement effective strategies which can
help to analyse different organizational culture, politics and power. It is very crucial for business
organization to understand overall factors either internal factors and external factors to become
more efficient in decision-making process and increases the quality of their working efficiency.
The main goal of the Tesco to raise profit opportunities and improve customer satisfaction along
with better quality of goods and services. Basically, behaviour of the organization is properly
dependent on financial performance and financial resources. For example, when organization has
good financial performance then can easy conducts wide number of operations within company
for getting higher profitability. While financial resources empower company by offering funds
which helps company to expand their business in other countries as well. It also supports to gain
higher perceived values in the business market. In UK has wide scale of retail industries so
organization gets difficulties to attain leadership in the business market and generates higher
profit margins on products.
Economic Environment

Economic environment encompasses various economical factors i.e. tax rate,
unemployment rate, changes in disposable income, inflation rate, policies and exchange rates etc.
are directly and indirectly gives impact on organization’s financial performance. it gives impact
on business activities and also important for organization to determine overall factors for
enhancing it’s selling infrastructure in the business market (de Andrade and et.al., 2016). These
factors give impact on Tesco which causes reduces power of company in the retail market
adversely. In addition, it supports organization to understand market attractiveness for
developing effective market strategies which enhances selling infrastructure of company over the
period. Generally macro environmental factors directly gives impact on economical growth and
indirectly affects organization’s operation which conducts by manager to generate high sales
revenue. UK gets major impact on their economy due to Brexit because they lead several
changes in policies, trading policies, inflation rate, exchange rate and unemployment as well
which directly declines due to inefficiency of liquidity in the business market. it has also
enhanced cost of employment which causes organization unable to improve high turnover of
employees within workplace. shortage of potential employees in the UK’s market reduces
effectiveness of recruitment strategies within company. Such kind changes directly give impact
on customers buying decision because they avoid to spends more. It creates situation like 2008
when recession has taken place in UK which has declined growth of global economy (Wangand
et.al., 2019). In addition, most of SME companies has got difficulties to survive in business
market due to heavy losses and needed higher investment for operating in business market
effectively. So it is very crucial for the Tesco to analyse these macro environmental factors and
designs products as per the situation so that generate profit margin and leads change in user’s
purchasing behaviours for improving economic growth effectively.
Tesco needs to change their organization behaviour is organization wants to improve survival
rate in retail sector as result easy to gain high market share positively. It is very important for the
retail industry to identify the economic environment of company internally and externally and
inspires employees to high quality working services along with higher quality goods for
enhancing their knowledge and raises brand value effectively in global market. Due to low
disposable income and reduction in cash flow in UK’s market directly gives impact on
organization’s revenue (Epure and Bondrea, 2016). It also gives impact on country to attract
potential customer for investing high funds in business expansion and innovation it’s [products

and services effectively. Government banks also raises rate of interest in loans which declines
the profit margin on products for operating in a giant market and upgrade high brand values
effectively. The cost of raw material is properly dependent demands of customer. For example,
when customer requires large quantity of products that automatically improves suppliers working
efficiency and easy to generate high revenue by the company. In other case, when demand of
products is fewer by users that increase cost of suppliers instead of the working performance. due
to high decline in supply of products, suppliers can be enhanced cost of products for sustaining
in market that can give negatively impact on profit margin of Tesco.
Non-Economical Environment
It encompasses natural, cultural, demographical, technological and political which
directly or indirectly gives impact on organization performance. it is very essential for Tesco top
understand critically impact of non-economical factors so that can determine growth
opportunities of organization in retail market (Končar and Leković, 2016). It is not only giving
impact on customer purchasing behaviour but also helps to identify opportunities and threats for
business in UK’s market. Tesco is famous as general merchandise retailer in retail market so it is
very important to analyse non-economic factors for enhancing product efficiency and generate
higher revenue effectively.
Cultural Environment
Tesco is well-organized company due to effective policies and effective management
within business. Manager and leader work together while creating decision and implements
effectively to keep hope for achieving expected outcomes. due to good organizational culture can
make better decision and strategies for business which supports to give better functioning for
staff within workplace. Leader of the Tesco is very flexible with time which keeps employees’
pressure free while workload. Due to flexibility, employees gives their best performance within
workplace which supports organization to enhance the productivity of business in global market.
to improve organizational culture creates strategic plan so that motivates workforce for staff like
they can lead better productivity for them assists company to gain competitive advantage by
achieving short-term goals over the period (Kondo, 2017). Organization offers incentives,
rewards and extra privileges on the basis of their efforts which they put in company to deal with

work pressure. 360 feedbacks strategies also adopted by manager to gather feedbacks from users
about goods and services and employees as well. It is very important for organization because it
can help to lead change in operations and policies which can lead better functioning in the
market.
Open communication also execute by manager so that individual or staff can directly
communicate with manager about their issues related to salary, workload. Open communication
keeps environment healthy which directs company to provide needed facilities to employees so
that they can give quality in their services that provides to customer and company. Changes are
needed in business because users requirement and preferences keeps changes time to time that
organization has to comply with trends which can generate higher profit within workplace.
Organization has great loyalty of employees which is major strength of Tesco and it improve
brand image in global market. Good organization cultures supports company to put pressure on
rivalry companies because they have less productivity of employees within workplace.
Tesco has great market stability in the retail market because it has strong global presence which
helps to understand customer psychology for products and services and easy to fulfil the needs
and demands of the users on time. Most of the organization have to face language barrier while
operating in different countries but Tesco doesn’t have to face such kind issues due to culture
diversity at workplace (Kuikel and Intralawan, 2018). They help company to understand
different countries demands and expectation for products so, company easy to comply with
different trends and gains competitive advantages. Manger doesn’t keep any type of unfair
treatment which motivates employee to give honest performance and upgrade their current
poisoning at workplace. so it can be interpreted by above discussion that organization has good
organization culture which causes has brand positioning in global market.
Natural Environment
On the basis of environmental list analyses that 70% business gets negative impact on its
financial performance by weather of UK. There are fewer resources which is available in the
world and it is used by Tesco wisely so that can survive in business market for long time. It is
very crucial for employees and customer that environment is well maintained. Tesco has found
other alternatives which can restore and reuse them as per requirement (Oudah, Jabeen and

Dixon, 2018). Even organization use resource effectively and don’t misuse them and saves them
for users so that users can get high standard quality products on time. UK is highly developed in
technology which supports organization to reach their users faster that is very crucial thing for
company is they expect high revenue within company. UK’s government has implemented
several policies which the industries which operates in the retail market have to comply so that
countries environment can improve that is very important for the UK and beneficial for everyone
as well.
While Tesco follows environmental policies strictly which creates loyal set of the
customers in the business so it can generate high sale revenue within company. Tesco adapts
sustainable product strategy to develop customer base which can be beneficial for organization to
long run in business market (Popescu, 2018).
PESTLE and SWOT Analysis
PESTLE Analysis
Political Factors: The current political instability in the UK, due to Brexit, can have
major influence on Tesco’s operations, profitability and productivity. Though the nature of
changes post Brexit still isn’t clear to the public, it will involve scrapping of complex and
convoluted international trading laws, which shall be replaced with transparent ones aiding
Tesco’s operations.
Economic Factors: The UK’s government has recently announced a decrease in the
corporate tax levied on the profits generated by businesses organisations from 19% to 18% from
2020 onwards. This will definitely result in higher profitability for Tesco in consumer markets as
they would have to pay less taxes.
Social Factors: The growing social trend of online shopping can be a great opportunity
for Tesco to increase its current market share, productivity and profitability in the markets. To
take advantage of this trend, Tesco should start improve its own online store’s capacities, selling
their products digitally to consumers in order to capture a whole new market and keep their
competitors from attracting consumers towards their operations.

Technological Factors: The recent growth and innovation in technology also provides
Tesco with various opportunities to increase their operational performance and efficiency
(Perera, 2017). Tesco can install self-checkout counters in their physical stores, which though
possess I high installation cost, will reduce Tesco’s staffing costs significantly and be highly
profitable for Tesco in the long run.
Legal Factors: In order to operate legally within the UK, Tesco has to adhere to many
legally mandated rules and regulations relating to health and safety of employees, labour laws,
wages etc. Though these laws help keep Tesco’s workforce motivated and satisfied, adhering to
these regulations is also costly to Tesco and any changes in these will decrease Tesco’s
operational profitability in the market.
Environmental Factors: With the rising public and governmental concern over
environmental issues in the UK, adoption of environmentally sustainable operational processes
by Tesco can prove quite costly for the business organisation if they are legally mandated by the
authorities.
SWOT Analysis
Strengths
 Brand: Tesco enjoys high brand value and reputation in the retail markets amongst its
competitors.
 Global Operations: Tesco has been able to expand its operations to global markets in
order to increase their total market share, productivity and profitability.
Weaknesses
 Price Wars: Tesco has been forced into price wars by its competitors in the past which
have resulted in decreased profits for the organisation (Gürel and Tat, 2017).
 Acquisition: Tesco has been unsuccessful in its past attempts to merge and acquire other
businesses to grow its operations.
Opportunities

 International Expansion: With proper market and feasibility researches conducted, Tesco
has immense opportunities to grow and expand its business to global markets in the Asian
and African markets with the intention to increase their operational productivity and
profitability and also to diversify their operations and increase total market share.
 Online Store: Tesco can improve their online store capabilities by offering consumer
choice of scheduled delivery times, refundable policies, gift vouchers and memberships
in order to increase their productivity and profitability immensely. This would also allow
Tesco to increase their current market share and increase customer retainability and
loyalty.
Threats
 Wages: Demands by Tesco’s employees and labour for increased operational wages
poses a threat to Tesco’s operations and profitability. Substitute Products: The high competition in the retail markets along with the availability
of alternate and substitute goods poses a massive threat to Tesco’s operations and
profitability. Economy: Rise in inflation and decrease in consumer’s purchasing power within the UK,
can also have massive impact on Tesco’s productivity, profitability in the retail markets.
CONCLUSION
The brief study of the report gave an understanding about business environment which
gives shapes to organizational behaviour for meeting objectives over the time. Organization
culture understood in the report and explained its significance within company. It is crucial to
recognise impact of culture for developing organizational structure of the business for generating
higher profit and raises quality for making effective decision. It gave positive understanding
about culture in organization that it improves effectiveness of internal resources for creating
appropriate strategies encompassing staff to gain better opportunities and compete with
organization’s rivals within market. Tesco has to organize affective information about various
market environmental factors which could give impact on business operations and financial
performance as well. It helped organization for improving product quality for generating higher
profit margin and raises goodwill of brand in global market. By analysing economical and non-

economic factors supports business organization to formulate beneficial marketing strategies and
make enable to improve its financial position positively. The brief study of the report has been
discussed about political, economical, socio-cultural, technological, legal and environmental
factors which affected in UK’s retail market in different ways such by declined organization’s
performance to compete with potential competitors like Asda, Sainsbury, Morrisons and Aldi
and Lidl. It was crucial for the Tesco to create strategic plan for market analysis for identifying
current change and trends of users for enhancing their satisfaction and encouraged to become
loyal for company. It supported organization to improve their knowledge about overall issues
and problem which could led conflicts between employees for their job responsibility as resulted
declined wellbeing of employees. Apart from this, it was essential for organization to understood
about overall issues and problems of customer which was related to products or services. Tesco
improved its efficiency for developing effective strategies and followed customer relationship
management activities which supported company to understood psychology of customer for
products and established customer relationship with company as well. Organization adopted
corporate responsibility activities which assisted company to improve it’s image in the business
market and raised quality of goods and services by removing environmental harm. By the
analysis of business environment supported to understood change trends of customer in food
segments which is needed to be followed by offering standard and healthy quality foods. The
report also has been highlighted impact of Brexit on UK’s economy which was not only
impacted countries economy but also led change in customer buying behaviour. So, it was very
essential for Tesco to understood impact of business environment within business.

REFERENCES
Books and Journals
Abramishvili, N., 2016. European Integration and Business Enviroment in Georgia. European
Journal of Sustainable Development. 5(1). pp.91-91.
Cepel, M. and et.al., 2018. Business environment quality index in the SME segment. Journal of
Competitiveness. 10(2). p.21.
de Andrade, P and et.al., 2016. Change management: Implementation and benefits of the change
control in the information technology enviroment. arXiv preprint arXiv:1603.03110.
Epure, M. and Bondrea, A.A., 2016. Doing Business in Emerging Market: Successful Strategies.
In International Conference on Economic Sciences and Business Administration (Vol. 3,
No. 1, pp. 31-36). Spiru Haret University.
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International
Social Research. 10(51).
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Končar, J. and Leković, S., 2016. The role of retail strategy in the development and efficiency of
business on the global electronic market. Strategic Management. 21(4). pp.22-28.
Kondo, T., 2017. Invesment law in a globalised enviroment: A proposal for a new foreign direct
invesment regime in Zimbabwe.
Kuikel, A. and Intralawan, A., 2018. Risk Assessment of Importing Machinery and Electronic
Goods from China to Nepal-Importers’ Perspectives. Journal of Management Science
Chiangrai Rajabhat University. 13(2). pp.86-102.
Oudah, M., Jabeen, F. and Dixon, C., 2018. Determinants linked to family business sustainability
in the UAE: An AHP approach. Sustainability. 10(1). p.246.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Popescu, N.E., 2018. The Situation Of The Business Enviroment In Romania. Revista
Economică. 70(6).
Wang, N and et.al., 2019, May. Supervision of Laboratory Animal in Barrier Enviroment and
Pre-warning System. In 2019 2nd International Conference on Sustainable Energy,
Environment and Information Engineering (SEEIE 2019). Atlantis Press.