Global Business Environment Report

This report analyzes the global business environment and its impact on Tesco, a leading multinational retailer. It examines key factors driving global commerce and trade, including cost, competition, and market dynamics. The report also explores the complexities of strategic challenges faced by Tesco in a globalized market, including cultural barriers and trade regulations. Additionally, it discusses the influences of ethical and sustainable globalization on organizational functions and decision-making processes. Finally, the report examines various routes to internationalization, such as franchising, joint ventures, and licensing, and their implications for Tesco's global expansion.

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
key factors which drive global commerce and trade...................................................................3
Complexity of strategic challenges.............................................................................................7
TASK 2............................................................................................................................................9
Influences of globalisation on organisation................................................................................9
Influences of ethical and sustainable globalisation...................................................................13
Different ways through which decision making can work effectively.....................................14
Various routes to internationalisation.......................................................................................15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Business environment refers to the factors and forces which can impact the business
operations of a firm in building and maintaining customer relationships successfully. Whereas
Global business environment refers to the term for the factors which can impact the ability of
firm at a global level. Business environment includes various factors such as cost, environment,
competition, market etc. These factors heavily impact the business operations of any firm while
globalising the business at international or global level. The taken firm in this assessment report
is the Tesco which is a UK based retail supermarket chain running 6,569 stores in more than 11
countries. The firm is employing more than 460,000 employees throughout their stores in the
world. This report will discuss the various factors such as cost, market, environment and
competition which drives global commerce and trade along with the complexity of strategic
challenges faced by organisation in operating at global level. Further evaluation of influence of
globalisation on the organisational governance and leadership, structure, culture and functions
along with the ethical and sustainable globalisation on organisational functions will be covered
in this report. In the end, evaluation of different ways through which decision making can work
effectively in a global environment along with the various routes to internationalisation which
can be adopted by organisations in globalising their business.
TASK 1
key factors which drive global commerce and trade
Globalisation is the process through which a company expand its business operations to
other country in order to improve the customer base, sales and profit. Tesco is a global firm
having operations in more than 11 countries. Also the firm belongs to retail sector so there are
various factors which can impact the firm in terms of global commerce and trade. These factors
are associated with global business environment which must be considered by the management
of Tesco while operating in a global environment which is full of competition. These factors
which can impact the business operations of Tesco are discussed below:
Cost: It refers to the monetary value of the various elements of an organisation such as
materials, efforts, resources, risks, time, etc. while manufacturing and delivering the products
and services to customers (Armstrong and et. al., 2015). This cost or factor should be considered
by the management of the organisations while launching the business operations in a new

country or market. This factor also needs to be considered by the management of the Tesco while
entering in a new market for enhancing the sales, profit and customer base. Tesco should analyse
the prices of their products which will be provided to the customers of new country in producing
and delivering the products and services so that the products can be provided based on the
economic conditions of the people. When the economic condition of the people is in favour of
the Tesco, then opportunities lies for the company in that market which can be grasped by
providing the products accordingly to customers. These economically stabled people will
purchase the products of firm according to their needs which will enhance the profit and sales of
the company. These prices and favourable economic condition drives the global commerce and
trade as people has enough money for purchasing the products of the companies which is a
positive impact for Tesco. This positive impact is because the company can provide its products
to customers without thinking about the low prices.
Competition: It is the peak point at where a large number of companies compete with other
firms of the same sector in order to grab more customer and market share. Competition is a
major factor which can impact the global commerce or trade for an organisation which is going
to enter in a new country (Cavusgil and Knight, 2015). This is because, companies will focus on
providing innovative products and services to the customers in order to stay ahead of the
competition. This factors also must be considered by the Tesco as the company can effectively
provide its innovative and unique products and services to the customers for cutting out the
competition. This can be achieved by Tesco through the use of their R&D division which can
provide the innovative ideas to company which will assist the firm in enhancing its customer
base and profit. Due to presence in retail market, this factor drive the global commerce and trade
of Tesco which will provide positive impact on business operations of company.
Environment: Environment includes external and internal elements such as demand and
supply, social trends, economic changes etc. Determination of these elements will help the Tesco
in analysing the opportunities, resources, future planning etc. These elements covers factors such
as technological, political, economical etc. which plays a major role in successful globalisation
of business operations of Tesco. The success and growth of taken firm depends upon the
business environment which must be considered by the management of company. These factors
which can impact Tesco in terms of global commerce and trade are discussed below:

Political: These factors consists political terms and conditions, foreign policy, philosophy,
government ideology etc. which must be determined by Tesco in globalisation process. The
management of Tesco needs to consider the change in these factors for ensuring that the business
operations can be performed effectively. For example: When Tesco was entering in India, the
political conditions of India or government was stable due to which company get the permission
from government to operate its business in the country (Tesco signs deal to enter India's
supermarket sector, 2014).
Economic: These factors consist of economic policies, inflation rate, tax etc. Tesco needs to
analyse these factors during the expansion for reducing the cost and for improving the profit.
For example: When Tesco was entering in India, company decided to enter using the joint
venture as it will reduce the cost of operations and also the tax and economic policies are low in
India. Tesco grabbed the opportunity and joint ventured with Tata for increasing the customer,
sales and profit (Tesco confirms joint venture with Tata in India, 2014).
Technology: These factors consist of the advancements in technology applications,
technology investments, technology in markets etc. which must be considered by Tesco while
implementing and developing the required technology through which the cost can be reduced
and profit can be increased. For example: After entering in India, company started their new
facility for R&D activities in Bangalore in order to provide ease to customers. This facility is still
working on the technology such as AI, VR And 3D Modelling in order to assist the customer in
shopping for their convenience (How Tesco Bengaluru Is Working On Using AI, VR And
3D Modelling In Retail Industry, 2017).
Market: It is the place where product are provided to the customers by the companies in
exchange of products or money. The sellers of the market provides their products based on the
needs and demand of the buyers. This factor drives the global commerce and trade as untapped
and huge market has opportunities which attracts foreign companies to enter in that market
(Cumming and Zahra, 2016). For example: Asian countries such as India, China has huge and
untapped market due to having a large population and few companies who provides the products
to the customers. These countries also has high amount of raw materials at low cost which can
positively impact the Tesco in entering into these market for better profitability and sales.
Impact of key factors global business environment
Cost

Positive Negative
 High cost leads to the higher profit for
the Tesco which results in tough
competition to the competitors.
 High prices also leads to increased
revenue which can be utilised by the
firm for the growth and future
sustainability of the firm in global
market.
 Fluctuation in the prices can leads to
the closing of the product in the global
market.
 Also the reduced prices can raise the
question on the quality of the products
due to which customers can opt for
better quality products of the
competitors.
Market
Positive Negative
 A product can perform better in the
market if the segmentation is done
properly on the basis of taste,
preference, size, colour, quality etc. A
existing products in the existing market
can be proved beneficial for the firm is
segmented properly.
 When a new is introduced in the market,
then it can bring both positive and
negative responses from the
competitors. There are chances that the
products can be closed by the company
if the products is not favourable for the
customers.
Environment
Positive Negative
 Tesco can use the green energy and
recycling process in their business
process for supporting the environment.
 Tesco is operating in retail industry due
to which the firm needs to focus on the
pollution and emission level in the
environment done by their stores which
can negatively impact the business.
Competition

Positive Negative
 Tesco can use the competition for
expanding their business and for
creating huge number of business
opportunities for the firm.
 The competition from the competitors
can leads to exploitation of the
customers which can ruin the market of
the Tesco.
Complexity of strategic challenges
There are a large number of challenges which can be faced by the Tesco in performing
the business activities at global level. These challenges can rise in implementing the strategies
due to which these are also called as strategic challenges (Ferraro and Briody, 2017). These
strategic challenges can restrict the Tesco in properly executing the business activities which will
impact the operations and performance of company while operating at international level. Some
of the strategic challenges which can be faced by company during the globalisation process are
discussed below:
Strategic challenges
Tesco can face several strategic challenges while globalising the business operations due
to government policies, trends of customer and market etc. These can negatively impact the
business activities of Tesco as discussed below:
 Tesco can face the challenge in promotion of their products in the new market as
company have to analyse the trends and preferences of their targetted customer in order
to provide the products accordingly.
 Tesco also needs to analyse the pricing strategies for providing their products in new
country as people purchase the affordable products which can fulfil their needs and
demands. Tesco can also face the challenge in importing the products for the operations of host
country as the trade laws of the governments varies with country. Due to this, company
needs to analyse these trade laws as company is dealing in the retail market.
Recommendations for overcoming the challenges

These above discussed strategic challenges which are faced by the Tesco can be
overcome by the company through the use of following recommendations which are discussed
below:
 It has been recommended to Tesco to implement and use the updated technology in their
business operations of the Host country so that the productivity and performance of the
company can improve rapidly in the new market. This is also essential for overcoming
the technological challenges.
 Also Tesco should use the market penetration and price skimming strategies for setting
the prices of their different types of products. Through these strategies, Tesco can provide
its product at low prices in initial period which then can be increased after getting a good
market share.
 Tesco needs to analyse the culture of host nation so that promotions can be done in
proper manner for overcoming the promotional issues.
 Tesco should analyse the cost of products after importing these to host nations based on
the occurred production cost, trading cost, importing cost etc. so that proper funds can be
gathered.
Impacts of international trade law
International trade refers to the procedure of transporting products and services from one
country to the another country in return of the money. Government of a country has their own
trade laws which can impact the business of the Tesco in globalising the business operations.
These includes Custom, tariff etc. which can impact the process of importing and exporting the
products. These laws developed by the government can influence the performance and
productivity of the Tesco at any level (Groşanu and et. al., 2015). Tesco is a retail firm which
needs to follow the rules of the particular in which they are expanding their business operations.
The Tesco needs to consider the trade laws for transporting their products to another countries
otherwise these can impact the operations of the company. This factor impact the global trade
negatively when the policies regarding the trade is not favourable for the company such as High
trade charges, high import or export duty etc. which can reduce the profit and margin of the
company.
Economics of globalisation

Economics of globalisation deals in the mobility of the money, individuals, products,
technology etc. at an international level. It is also known as the enhanced integration and
interdependence of national economies. Economic globalisation is useful for the Tesco in
assisting the growth and stabilising the firm's position in global market. By using this, Tesco can
integrate with the local or national economies for enhancing the amount of trade in that particular
country. Whereas this integration can cause the problem or negatively impact the firm in terms of
risk and diversification strategies. This is because the management of the Tesco needs to develop
and implement new strategies for the country in which their operations are expanding.
TASK 2
Influences of globalisation on organisation
There are various factors which can influence the business operations of Tesco during the
globalisation as discussed below: Structure: Tesco is following the hierarchical structure in their business operations in
order to ensure the smooth flow of operations. This structure can impact the firm in the
globalisation of business. This impact can be minimised by providing the proper
information to the employees as well as by recruiting more knowledgeable employees
which can perform their assigned work properly.
 Culture: Tesco is following the soft culture model in their business through which
company is paying attention to both tangible and intangible objectives. Hiring of new
employees can impact culture of Tesco as new employees may belongs to different
culture (Hamilton and Webster, 2018). For this, company needs to recruit the talented and
skilled employees which can increase efficiency and profit of company.
 Leadership: Participative leadership style is used by Tesco through which managers took
the ideas from employees in taking the decisions. Company needs to change the style to
Transformational style due to change in the cultural differences. Through this style,
managers and leaders can determine the required change which occurs due to the
globalisation.
 Functions: Tesco is providing products of different brands which are used by the
customers based on their needs and demands. During the globalisation, Tesco needs to

determine the market and economic condition of people in order to make changes in their
products accordingly.
 Governance: Tesco is following hierarchical structure and participative leadership style
due to which the higher authorities can take proper and better decisions and strategies.
The firm needs to determine the laws and regulations along with the changes in them so
that company can comply to them.
McKinsey's 7s Model: It is a tool which is used by the managers for analysing the
business operations and activities in order to determine the change. This model includes 7s
which are divided into hard and soft elements (Miller and Jentz, 2017). Tesco can use this model
for improving the performance. These 7s are discussed below:
Illustration 1: McKinsey 7s model
Source: McKinsey 7s model. 2013 Hard Elements: These elements directly impact the business of Tesco which includes
structure, strategy, system etc. These are discussed below:
Structure: Tesco is following hierarchical structure in their business operations for
ensuring that the activities of each employee can be monitored. In this structure, hierarchy is

maintained through which every entity is subordinate to a single other entity in the organisation
(Lewis, 2019).
Strategy: Tesco is following various strategies in order to perform the business
operations effectively. Main strategies includes the accountability and CSR activities which are
providing quick growth to business in this competitive global market.
Systems: This element includes the operational activities of business in which employees
performs their work for achieving the organisational goals. The employees of Tesco execute the
work first which must be executed on priority bases. Soft Elements: These element are complex in nature due to which they impact the
organisational culture more. Some of these Soft elements are discussed below -
Skills: Tesco is hiring the employees based on their skills and knowledge for performing
the business operations effectively for the globalisation.
Staff: Tesco has estimated to hire 2000 employees through the online recruitment and
interview methods for determining their competencies.
Style: Tesco's managers are following participative style for providing the opportunity to
employees to share their ideas and suggestions which can be included in the decision making
process. The managers are also allotting the task to employees based on skills and knowledge so
that they can execute the work efficiently.
Shared valued: Tesco is based on the concept of shared belief and values through which
the employees can perform their assigned activities in an ethical and proper manner.
Hofstede's model of culture: This model was developed by Geert Hofstede. This model
states that the organisational culture is the mix of beliefs, practices, ideologies etc. through
which an organisation is differentiated from other firms. This model also states that the
behaviour of employees depends upon the culture of organisation. This model has several
elements as discussed below:

Illustration 2: Hofstede cultural dimensions
Source: Hofstede cultural dimensions. 2012 Masculinity vs. Femininity: This element states that the male employees becomes
aggressive and heroic while taking the decisions (Popescu, 2013). So, Tesco is using the
females employees for taking the decisions in order to avoid conflicts among employees. Power Distance: This element states that Tesco needs to treat equal every employees and
provides equal power and rights to all the employees so that better results can be
generated from them. Individualism vs. collectivism: This element states that when employees work
individually, then their performance gets affected. So, Tesco needs to follow collective
approach for ensuring that employees are working in groups. Uncertainty Avoidance: This element states that behaviour of employees must be
analysed for determining the situation of conflicts. Tesco is preparing their employees in
such a manner through which they can adapt to changes without any issues. Long and short term orientation: This element states that in long term orientation,
employees of an organisation needs to be modest, thrifty and pragmatic whereas in short
term orientation, employees are more focused on principles and truth. Tesco is
globalising their business due to which company needs to adopt long term orientation.

 Indulgence vs Restraint: This factor states that countries having high IVR score are
encourages their people to stay happy, whereas countries having low IVR score control
the satisfaction and happiness of their people (Rowell, 2017). Tesco needs to provide
freedom to employees so that they can stay happy in their working.
Influences of ethical and sustainable globalisation
There are a large number of ethical and sustainable factors which can impact the
globalisation process of an organisation in the competitive business environment. Such factors
must be also considered by the management of Tesco while operating in a global environment.
Some of these ethical and sustainable factors are discussed below:
Sustainable factors
Brand loyalty among the customers: This is an essential factor which can assist an
organisation to sustain in the competitive global market. This can be achieved by the Tesco
through providing effective service and products which has the potential to fulfil the needs and
demands of their customers (Slack and Brandon-Jones, 2018) . When products of Tesco will
satisfy the needs of customers then customer satisfaction can be achieved by the firm which will
help the company in getting the loyalty of their customers. Loyal customers purchase the
products from the company only which will enhance the sales and profit of the firm. Through
these, improved profit and sales, Tesco can sustain in the global market which is full of
competition.
Offering good quality based products: It is the major focus of the companies in order to
achieve the satisfaction and loyalty of the customers. Tesco also needs to focus on this factor so
that company can survive in the global competitive environment. The company needs to provide
the products based on the needs and demand of their targetted customers along with the major
focus on quality of these provided products. Quality based products are necessary for ensuring
the satisfaction of customers through which company can achieve the sustainability while
operating at global market.
Ethical factors
Equal treatment and compensation to employees: This factor must be considered by
every organisation in order to perform the business functions ethically. Tesco also needs to focus
on this so that employees satisfaction can be ensured which will also assist the firm in achieving
the sustainability (Stacey, 2016). Tesco is providing the compensation to employees based on

their skills and performance. Apart from this, company is also providing equal treatment to the
employees without any discrimination based on gender, caste or age. These ethical practices are
useful for the firm in improving the brand image through which company will sustain in the
global market.
Reduced environmental impact through the operations: This is an essential factor which
must be considered by the management of organisations. Protecting the environment is a major
challenge for any organisation due to the amount of pollution and carbon emission which is
released by the businesses. Tesco is implementing the energy efficient devices and equipments in
their business operations and stores which is positively impacting the environment. Through this,
the brand image as well as sales of the company is improving as customers are aware that
company is using energy efficient equipments in business in order to protect the environment.
These above discussed factors should be determined by the Tesco so that company can
survive in the global market which is full of competition due to the availability of various
international organisations (Taneja, Sewell and Odom, 2015). When these factors are
considered by the management, then brand image and sales along with the revenue of the firm
will improve through which company can sustain in the market.
Different ways through which decision making can work effectively
For making effective decisions in a global context, to be successful at an international
level decisions have to be made quickly and each opportunity should be considered as a chance
for success, as there is high degree of correlation between decision making and success of the
company. Organisations which follows effective decision making technique will be more
successful financially and may lead to success at the marketplace (Taylor, Doherty and McGraw,
2015). Companies following effective decision making will help in engaging their employees,
due to which they will be happier at the work place where it is easy to make decision and getting
things done, as they are considered as whole and sole of the organisation.
Various ways decision making can work effectively in a global context
By collaborating in teams, leaders can request their employees to give some
recommendations, so that new ideas could be developed in a global context. While following this
style, a leader should try to avoid the surrounding which always agrees him and try to get people
who strongly argues with him, which will help in clarification of decision. Managers may
welcome the ideas of employees but he might not follow them which can also be called as toxic

leader. Managers may command their employees and can make decision without consulting their
teams. It is followed when things are moving quickly and the team looks for immediate guidance
(Tregear, 2015). An effective decision-making in a global organisation will help to attain huge
amount of profits and capture high market share, which will reflect in increasing the productivity
and efficiency of organisation and will help in cost reduction of the products and services. By
making effective decision, no loss could ever generate in an organisation, it will just lead in
maximisation of profits . Where in case there is no effective decision-making, there will be huge
amount of losses in the company, which will reflect in failure of organisational structure and
even employees would not like to work there since no effective management is there .
Various routes to internationalisation
Internationalisation in an organisation refers to the tendency of an organisation to operate
across national boundaries and designing and development of a product according to the
acceptable culture, region or language. Internationalisation in an organisation has helped in
improving a company's image, enhance productive capacity and diminishes costs by virtue of
enhancing productive efficiency (Waddell, 2017). There are some routes to internationalisation
adopted by organisations. They are:
Franchising: Franchising is a form of business, wherein the owner authorises other party
to use their brand, product as well as business system and process, in return of consideration for
a defined period of time. It consist of a franchisor and a franchisee. A franchisor is a person who
grants the permission to various franchisee. A franchisee is an extension of already established
brand. It is a business strategy used for getting and keeping customers. Usually, franchises have
higher rate of success than that of start-up business and provides wider outlets for products and
services.
Joint Venture: A joint venture is a business arrangement in which two or more parties
agree to share their ownership, profits and combine their resources for the purpose of achieving
some task (Welford,2016). When an organisation enters into joint venture it gives ample
opportunities to develop and grow. Joint venture helps in attaining mutual competitive advantage
over other players in the market. When two or more companies join hands, it aims to provide
best products and services to its customers with most efficient price.
Licensing: Licensing is a sophisticated arrangement where a firm transfers the rights to
use its product or service to another firm for a fixed term in a specific market. In it, the

relationship between licensor and licensee is limited to the licensed trademark. It is highly
attractive for companies which are new in international business, since not much risk is involved
in it. Licensing allows easy and quick entry to foreign market, create new business opportunities
and reduces the risk involved in business.
While going international an organisation may face some barriers. They are:
Cultural barriers: Cultural barriers are the rules or expectation in any culture. It is
typically more difficult to do business in a foreign country than that of home county. An
individual must mind his words before speaking because different individuals have different
perception of same thing due to which misunderstanding may take place, which should be
avoided.
Trade Barriers: Trade barriers are the government induced barriers imposed on
international exchange of goods and services which includes tariffs, subsidies, import/export
license, quotas, etc. These are used for protecting customer and domestic employment.
Technical Barriers: Technical barriers is any regulation that could make exporting of
goods more difficult. It includes testing and certification (Wood and et. al., 2015).
The technological barriers can be eliminated by Tesco through implementing the updated
technology in the business operations and stores. Cultural barriers can be eliminated by
determining the culture of different people and motivate them to coordinate with other
employees properly. Trade barriers can be eliminated by using the expertise of an experienced
person having adequate knowledge regarding the laws and regulation of the host country.
CONCLUSION
It has been analysed from the above report that there are various factors such as cost,
environment and market etc. which can impact the global commerce and trade. There are also
strategic challenges which can be faced by companies while operating at global level. There are
various factors which can impact the companies in global market which must be considered by
the company in globalisation process. Various routes of globalisation can be used by companies
such as joint ventures, franchising etc. in order to enter in a new market.

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