Environmental Factors and Strategic Management

This assignment delves into the world of business and organizational strategy, focusing on Tesco as a case study. It examines how macro environmental factors influence the company's strengths, weaknesses, and working strategies. The report provides a comprehensive analysis of relevant books, journals, and online resources related to strategic management and organizational structure.

Business and Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
SECTION 1......................................................................................................................................1
1 and 2 Different types and purpose of the organisation............................................................1
3 and 4 Legal Structure, size and scope or different types of organisation................................2
SECTION 2......................................................................................................................................4
1.Relationship with different organisational functions. .............................................................4
SECTION 3......................................................................................................................................5
1.Positive and negative impact of Macro environment upon business operations.....................5
SECTION 4......................................................................................................................................8
1.Internal and external Analysis of specific organisations in order to identify strengths and
weaknesses..................................................................................................................................8
2. Interrelation of strength and weaknesses with macro factors...............................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is a collection of internal and external factors such as competitors,
suppliers, employees, customers, government activities, etc. that influence organisation's
decision-making and operating situation.
This report is based on the Tesco plc which is a British multinational groceries and
general retailer company and diversified into different areas such as books, clothing, electronics,
furniture, toys, software, petrol, financial service and telecom and internet services.
This report will include the different types of organisation. It will also explain the size,
scope and legal structure of every organisation. Further more it will include the PESTEL and
SWOT analysis to monitor the impact of external environment and strength and weakness of the
company. This will also interrelate the company's strengths and weakness with the macro
environmental factors.
SECTION 1
1 and 2 Different types and purpose of the organisation
An organisation is a social unit of people that is structured and managed to meet a need
or to pursue collective goals.
Types of Organisation
1. Private-sector Organisation: The private sector is the part of a country;s economic system
that is run by individual and companies, rather the government. Most private sector organisations
are run with intension of making profit. A private organisation can be anon-federal body that is
self-sustained and established on federal property by people that are not acting in a federal
government capacity. Tesco is also a private limited company. It is a British multinational
groceries and general merchandise retailer company and diversified into different areas such as
books, clothing, electronics, furniture, toys, software, petrol, financial service and telecom and
internet services. Purpose of Tesco plc is to be the champion for the customers, helping them to
enjoy better quality life and easier way of living (Bolman and Deal, 2017).

2. Public sector Organisation: A public sector organisation is the part of the national economy
providing basic goods or services that are either not, or can not be, provided by the private
sector. It consists of national and local governments, their agencies, and their chartered bodies. It
provides three types of goods: A public good, A merit good, Essential Services (Cabral, et.al.,
2019).
For example: BBC (British Broadcasting corporation) is working as public company in UK. It is
the British public service broadcaster that circulate news to people. The main purpose of
organisation is to broadcast all detail on time. It provides radio, web portals services as well to
mass audience. It comes under tertiary sector, as it works in service industry.
3. Voluntary Organisation: The voluntary is different from the other two sectors because it is
not-for-profit and it is not government controlled. It is a collection of individuals who work
together to undertake certain activities for the benefit of the community- whatever or whoever
that community might be. Traditionally it has occupied third space and sits between the public
and private sectors. Its purpose is to benefit and enrich society, often without profit as a motive
and a little or no government intervention. Some UK based Voluntary organisation is Wellcome
Trust. Its main agenda is to help every one. It is global charitable foundation that comes under
tertiary sector (Argenti, 2018).
3 and 4 Legal Structure, size and scope or different types of organisation
a.)Private organization - This is the type of joint stock company where the business has a
separate legal identity from the owners. Often private limited companies are small. Family run
businesses which is owned by shareholders. Each shareholder in a private company must be a
part of the public. Each share entitles the owner to 1 vote at the company's Annual General
Meeting and also to a share of the company's profit at the end of the financial year ( Legal
Structure, 2018).
Each shareholder has limited liability for the company's debts. A company is run by the
Board of director, who are elected by the shareholders and this is headed by a chairman.
Before company can be formed a number of legal documents must be completed- most important
are the Memorandum of association and the Article of association. These cover the objectives
of the business, headquarter, amount of capital, etc. When these are completed, sent to the

Registrar of the companies, who will then issue the Certificate of incorporation, which allows
the business to trade as a Private Limited Company (Haigh, Kennedy and Walker, 2015).
Size and Scope : Tesco objective is to maintain its leading retail supermarket and provide good
quality services and products to their customer at a low cost. Tesco has 6,569 stores across the
world. Its revenue is £57,491 million in 2018, operating income is £1,644 million and net income
is 1,208 million. It has 460,000 employees who are contributing in the organisation. There is a
high Scope of Private-sector organisations such as Tesco. As It has huge scope to enter into
international market and provide services to foreign consumers as well (Boon and Wynen, 2017).
b.)Public Organisation - In Tesco company, Board of director run the business and
shareholders have right to vote in company. It is essential to sell shares on stock exchange.
Public corporation is term used to describe a nationalised industry. Central government
pays for the public goods and merit goods through taxation, whereas local government pays for
the services they provide through council Tax (Boon and Wynen, 2017).
Size and Scope : Scope of BBC is wide. As this organisation are operated with government and
they serve for best to people of UK. Enterprise has generated revenue of £4.954 billion, in the
year 2016/2017. It has 20916 employees. Net income of the firm is 129.1 million.
c.)Voluntary Organisation - There are a number of different legal structures available to
communities and voluntary groups.
Unincorporated Association - This structure is ideal for small groups with a membership, short
term goals, low incomes and which do not intend to employ staff or acquire property. An
unincorporated association has no separate legal existence and remains for most purposes a
collection of individuals (Legal Structures for Voluntary and Community Groups, 2018).
Trustees - Trust are generally set up to manage money or property for clear defined purpose.
Wellcome Trust is also follows this legal structure. They establish a formal relationship between
three parties: the donors of money or property, the Trustees (normally 3) who become the
nominal owners of the trust property and the beneficiaries – the people who will benefit from the
trust (Haigh, Kennedy and Walker, 2015).
Limited Companies - A company structure is an increasingly popular choice for voluntary
organisations. It is often appropriate if a group is going to be managing staff, land, contracts

and / or large amounts of funding. A company limited by guarantee is an incorporated
organisation. This means that it has a separate legal identity distinct from that of its members.
Size and Scope: Objective of the Wellcom, Trust is adopting right long term strategy and
priorities. Objective of Voluntary organisation is to provide social services to poor, needy
neglected, old- aged, the sick and the down trodden. Wellcome trust become an irresistible
global force today. It has a definite place on modern state but also perform vital functions and
providing social services to poor, needy neglected, old- aged, the sick and the down trodden. In
the year 2017 company has done £125.9 billion investment. Recently there are around 2,057
employees those who are contributing well in accomplishing goal of the company.
SECTION 2
1.Relationship with different organisational functions.
In Tesco organisation has performs variety of tasks in their organisation. It has different
stores like books, clothing, and provide different services like telecom and internet service. For
smooth operation of this department there are various functions in the Tesco has to do like
finance, marketing, production, research and development, human resource etc. these all
interconnected with each other and helps in their operation. Like (Serizay and Ahringer, 2018)-
In Tesco Market Research and development with production function. In Tesco research
and development, team research about market conditions, competition in the new market and in
existing market as well and costumers, their demands, search about the new policies by the
government, geographical region and many more, according to the research development report
production is done. They make the report about the competitions, about their pricing strategies,
packaging styles and substitute products in the market. On the basis on this report production
take decision that what products has to be product in large quantity according to the region what
changes they have to do. This helps the organisation to make productions according to the
research and can fulfil the demand of the different customers and also helps in making strategies
opposed to the competitors and make profit and achieving goals (Bonev and Cavalli, 2016).
vise versa this Production is also connected with the marketing functions, large amount of
the production helps marketing manager to make their strategies according to the products, that
in which market it has to be sell, what should be the price of the products, they set the MRP and

CRP according to production and set the profit margin. This helps the organisation to stop access
flow of money and wastage of products.
SECTION 3
1.Positive and negative impact of Macro environment upon business operations.
Macro Environment - It is the major external and uncontrollable factors that influence
an organisation's decision making, and affect its performance and strategies. These factor include
the economic factors, demographics, legal, political, and social conditions, technological changes
and natural forces.
PESTEL Analysis
PESTEL analysis is the tool or framework used by the marketers to analyse and monitor
the macro environment. PESTEL stands for:
P – Political
E – Economic
S – Social
T – Technological
E – Environmental
L – Legal
Tesco Plc organisation also apply this PESTEL analysis in the organisation to monitor
the macro environmental factors that affects their business operations and performance.
Political Factors - This factor relates to the pressures and opportunities brought by political
institutions and to what degree the government policies impact the business (Phillips and
Moutinho, 2017).
Positive impact: Tesco is a retailer company and deals with the numbers of countries and
also performs different operations in different political situation. Tesco entered in Turkey in
2003 through the acquisition of Kipa, a retail store chain. The Political environment of the turkey
helped Tesco to grow in the country. Political stability, fix taxation, interest rate and other

policies of the country helps the company to sustain in the market that company don't need to
change its strategy.
Negative impact: Inter-country relationship affects the business of the organisation in
the Global market. For example Tesco run there business across the world, so the political region
of that country affects the business of the Tesco as well. They have to make strategies according
to that country's government. Elections and political trends influence the business as the every
changing political party make different policies and trends for the organisation that affects the
operation of the Tesco Because every time they have to plan strategies according to them.
Economic Factors - Economic factors relates to economic policies, economic structure and the
degree of economy impact the business (Haleem and Jehangir, 2017).
Positive Impact: If there is good employment rate and value of the currency is high then
people will have the adequate source of income. This helps the firm in attracting more employees
and customer. This will help the organisation to buy more products of Tesco and helps to expand
business.
Negative Impact: If there is a low employment rate and value of the currency is low it
will affect the Tesco to operate business smoothly. Fluctuation in import export ratio, intrest rate,
taxation will affect the company and its production. Company will not able to buy products and
raw materials and if production will get low it can not fulfil their customer demand. This will
create negative image of the Tesco company (What is pestle analysis?, 2019).
Social Factor: This relates to the cultural aspects, attitudes, beliefs that will affects the demand
of the Tesco company's product and the business operation.
Positive Impact: Tesco is the large retail company across the world and has a well
known brand image. Tesco has a large diversity in different sectors like books, clothing,
furniture and many more. Tesco full fill the demand of their customer according to their choice.
It also produces their product according to social and cultural environment. This helps Tesco to
sustainability in the market and to maintain its brand image.
Negative Impact: Fluctuation in customer behaviour affects the organisation as the
customer cut off the utilisation of the particular products it will reduce the demand and it will

affect the production of the Tesco. Changing life style trends, customer buying patterns can
reduce the demand of the Tesco company.
Technological Factor: This factor relates to the technological aspects, innovations, barriers and
Its impact on Tesco plc.
Positive Impact: As Tesco provide the internet services and telecom services to the
customer across the world. It also follows the online trend as it give a greater access of
information to the clients, partners and customers. Tesco has upgraded their sites, telecom
systems, and provide high internet services which attract more customers and changing
production techniques and promotions helps Tesco to icrease customer and fulfiling high demand
of the customer within short period.
Negative Impact: If Tesco will not go with the emerging technologies and innovation
they will lose their customer and investors. It can not fulfil the customer's demand within time,
with new technologies quality of products is also improving, then it will not able to provide high
quality products in the market. If Tesco will not deliver the high speed internet, their customer
will shift to other company.
Legal Impact: Legal factor relates to the laws, regulations and legislation that impact the
business of the Tesco.
Positive Impact: Tesco always follows legal reguslation carefully, before entering into
new location it looks upon the government policies and apply these policies into its business
practices. That supports Tesco in running operations smoothly. This improves brand image of
company and enhance its sustainability as well.
Negative Impact: If the government of UK make changes in trade laws, import policies
and employment legislation, all these laws will affect profitability of Tesco negatively. For
example if government reduces wages rate of employees then it will enhance staff turnover issue
that would affect productivity of company to great extent.
Environment Impact: It relates to the ecological and environmental aspects that will affects the
demand for a company's product (Haleem and Jehangir, 2017).

Positive Impact: Tesco company is taking care of their social responsibility by
delivering proper services and products to their stakeholders and clients and also deals in
pollution control activities to save environment and also made scheme to save seasonal products
which is affected by the changes in weather.
Negative Impact: Company face huge losses due to change in weather in terms of
providing internet services, telecom services and other services to customers. Sometimes they
fail to maintain relationship from their stakeholders or with any business partners and the reason
may be related to profits or the terms and condition which the Tesco company is offering.
SECTION 4
1.Internal and external Analysis of specific organisations in order to identify strengths and
weaknesses.
To Identify the strength and weakness of the firm, Tesco apply the SWOT analysis in
their decision making process to make a better decision to achieve goal. It aims to examine the
strengths and weaknesses of company and explore opportunities and threats facing the company
(Sarsby, 2016).
Strengths -
 Tesco is a leading and the third largest retailer in the world. It is no.1 In UK and has
27.8% of the UK market share in the grocery market. It operates in number of countries.
This high brand image put pressure in company's decision making process that they have
to make plans and take decision to achieve goal as well as maintain this image.
 Tesco follows new advance packaging techniques which gives unique differentiated
position in customer mind. Tesco brand is established due to its innovative marketing and
advertising strategies. And it also influences its decision they always have to think in
innovative way to attract more customers maintain bond with existing ones (SWOT
analysis of Tesco, 2017).
 The revenue of the Tesco company is £62.54 billion which is increasing every year along
with adding of new supermarket chain. It has strong distribution network, reliable
suppliers, strong brand portfolio, highly skilled workforce through successful training and
learning programmes. Before, entering into new market Company's management have to

research about the availability of the resources, suppliers, workforce and different
training programmes to train their employees to sustain its strong image and generate
revenue (Grundy, 2017).
Weaknesses:
 A very strong dependency on the revenues generated by its UK chain and decline its
market there would be decline the overall scenario for the company.
 Business model followed by Tesco is similar everywhere, however its needed according
to the different geographies and accordance with the culture.
 Investment and research development is below the fastest growing players in the
industry. Not highly successful at integrating firms with different work culture.
 Lack of focus on specific market because of entering all the markets at the same time.
The retailer is highly dependent on UK and Europe for its sales and not spent the time
and resources on developing the other market where it operates (SWOT analysis of Tesco,
2017)..
Opportunities:
 There are opportunities for Tesco for strategic alliances with other brands and admired
companies to offer more products or attract more consumers in certain target market.
 In countries where Tesco may be under performing, there will could be opportunities for
joint ventures in which the local company can help with market research and market
intelligence to improve performance in those areas.
 There are significant opportunities to grow online shopping for Tesco as well as offer its
home delivery services to more areas.
 Low inflation rate brings more stability in the market, enable credit lower interest rate to
customers of Tesco. Acquisition of smaller chains and tie-ups can help boosts the
business of Tesco.
 The new technology provides opportunities to Tesco to practices differentiated pricing
strategy on the new market. It will enable the firm to maintain its loyal customers with
great service and make new customers through other value oriented prepositions (Sarsby,
2016)..

Threats: The last element to address in the SWOT analysis by Tesco is the issue of the threats
facing the company.
 High competition from supply side as maintaining relationship with them is big concern
for Tesco company.
 Government policies and taxation can affects business operations of Tesco.
 Products and services can be imitated by competitors so constant innovation required to
achieve uniqueness.
 Changing consumer buying behaviour from online channel could be a threat to the
existing physical infrastructure driven supply chain model.
 Tesco company can face lawsuits in various market given - different laws and continuous
fluctuations regarding product standards in those market.
 New technologies developed by the competitor r market distributor could be a serious
threat to the industry for long term future.
2. Interrelation of strength and weaknesses with macro factors.
Tesco is the third largest retail company in the world and stand as no 1 company in UK
and has 27.8% of the UK market share in the grocery market. Its revenue is £62.54 billion which
is continuously increasing with the opening the new market. This strength of the Tesco relates
the Economic macro environment factor of the organisation. Fluctuation in the economic
condition of the Tesco also affects the macro environmental factor. Changes in the interest rates,
import export rates, Taxation, all these economic macro factors affects the economic strength of
the Tesco. It creates the difficulty in import and export of the products of the Tesco. It will be
one reason of the downfall of the Tesco in Global market.
As Tesco apply the new techniques in packaging and in production, this technological
strength of Tesco highly relates with the Technological macro environment factors. New
techniques and skills and knowledge which Tesco apply in their production and packaging and
services all affects the technological macro environment factors. Both are interrelated with each
other. If the company apply new techniques in providing fast internet and telecom services and
their productions and packaging it will impact the smooth running of the business. Customer's
get attracted with new packaging, and high speed internet, this will increase the customer and
their demand and it will help in gaining more revenue and achieving the targets.

Weakness of the Tesco is that, it follows the same business model everywhere, however
it should be according to the different geographical areas and according to the culture. This
weakness of the Tesco relates with the Demographic Factors of the macro environment.
Different market segments and different culture, age, region, education level, lifestyle all these
demographic forces influence the Tesco in their decision-making process and affects the planing
of production. Tesco have to fulfil the demand of the customer as accordance with their choice.
Every customer is different and have different demands. As customers in UK and custo,er in
India both will have different regions and have different choice, so the changing demographic
condition influence the Tesco to make change in its Business models and plans to satisfied the
demand of the customer.
CONCLUSION
From the above study it can be concluded that Business environment is consisted of different
types of organisations and their scope in the global market to achieve the predetermined goals of
the company. Present report has concluded that the Business environment of Tesco's company
helps the organisation to achieve the success. There are many macros factors that affects the
overall operating situation and decision-making process of company to great extent. It also
concluded that macro environmental factors are related with the company's strength and
weakness that can influence the Tesco's working strategies.

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