External Analysis of Tesco and Marks & Spencer

This report provides an external analysis of Tesco and Marks & Spencer, including a PESTEL analysis and an evaluation of their organizational structures. It also examines their financial and non-financial performance and compares the two companies.

INDIVIDUAL
REPORT

Table of Contents
INTRODUCTION ..........................................................................................................................3
Task – 2........................................................................................................................................4
External analysis of Tesco and Marks & Spencer.......................................................................4
Task 3...........................................................................................................................................5
Organizational Structure..............................................................................................................5
Task 4...........................................................................................................................................7
Financial and Non-Financial Performance of Companies ..........................................................7
Task 5...........................................................................................................................................8
Comparison between Tesco and Marks & Spencer –..................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Tesco Plc commonly traded as Tesco, is Great Britain Multinational Company founded in
1919, by Jack Cohen in Hackney, England. UK. Company is headquartered in Heartfordshire,
UK and offers groceries and general merchandize in retail. Tesco have its operations in various
countries across Europe and Asia. Tesco is the largest supermarket leader in UK and offering
products and services for social groups and premium groups of the country. Company to stay
market leader update its technology and come up with the products which can diversify it for
other companies.
Marks & Spencer Group Plc commonly traded as M&S, was founded in 1884, by Michael Marks
and Thomas Spencer, and is a paramount British global retailer specializes in offering clothing,
home furnishing and food products specifically of its own brand. Company has many stores
across UK and also deals internationally in various countries. Company's biggest strength is that
it focuses on creating brand value through wide range products and different outlets which help
in growing business.
The following report briefly discusses two companies Tesco and Marks & Spencer, about their
environment and the influence that external factors have on these companies. It presents the
companies organizational structure. Further, it evaluates companies performance related to
financial and non financial aspects and compares them.
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Task – 2.
External analysis of Tesco and Marks & Spencer
Following detailed analysis PESTEL of Tesco and Marks & Spencer that aims to explore some
factor that affect both the company:-
Political factor- Tesco is British retail company which operates in various number of country. In
UK where political environment is stabilized through with Brexit it has created lot of quality
(Adamyk, 2019). The changes in tax policy among several demand in different counties will
impact the profitability of company.
Marks and Spencer has branded which leads in many countries, that have welfare from trade
agreements that advance helps in decreasing sourcing costs. Company believes that it is
essential to work intimately with government and decision with them to defend their
organization authorized power. M&S is being affected by political stability and taxes, if Govt.
flexure their taxes then company increase the prices of product which could have neutral impact
on sales of product.
Economic factor- As the global economic have been seriously with COVID-19, it has been
expected that many people income have go down or many of them lost their jobs. This may
affect the profit and operation of company, that can be result that spending more wealth on
cheaper brand or preferring other brand.
Due to ascent in inflation rate of economy that affects M&S in operating their economy price of
goods and services (Perera,2017). This can lead in give up the demand of goods because of low
disposable financial gain in hands of consumer while further trim their ability in spending on
luxury things.
Social factor- Tesco has taken various number of incentive in responding social changes and
supply. Company consider in benefiting the society, by national hiring and also create
employment from different countries. Society and customer has become more health conscious,
so company must believe in dynamic action and more supply for organic food.
M&S has charm to various market in position of social class and demographics, this may have
major implication on how they handle current market trends. Consumer influenced in social,
taste and psychological occurrence in market.
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Technology factor- Tesco has greatly benefited from technology as they have introduced Club
card for their loyal customer (Stoyanova,2019). It has also developed new online mobile app
payment system so that they can pay for shopping and earn points. Recently, Tesco has brace up
with Amazon for creating newer technology and that help customer in saving time and avoid
long queues.
M&S has proclaimed technology transformation programme which modify the company to get
over first digital in concern and deliver varied customer experience. The function of technology
in successful procedure with its importance in negotiable and product on which customer have
more focussed.
Environmental factor- Many countries Tesco is cladding numerous force from government in
regarding environmental issues (Enssle, 2020). For reducing this pressure company will
withdraw many billions of plastic package and also reduce all non recyclable plastic at the end of
year.
The company M&S have worked upon mixture of areas which are considered in reaction trans
fat nutrient, decreasing the use of energy and encourage fair worth of trade.
Legal factor- Tesco has directly impact on government regulations and laws. It follows mainly
international market laws, in order to run their business operation easily. Company cannot easily
merger or purchase other supermarket and also do not pay less than minimum wages to their
employee which is already set by government.
M&S guilty with two complaint one of whom was based on Health and Safety act for worker in
command to proceeds measures for developing norms towards the safety of individual.
Task 3.
Organizational Structure
Organizational Structures defines the specific activities that are directed to achieve the objectives
and goals of the company.
Tesco Plc follows the hierarchical organizational system as following this provides the company
clear path, leads to proper and clear reporting and also provide specialization to employees to
become niche in their fields. Hierarchical system of Tesco, contains a direct chain of command
from top-level of the company to bottom. Senior Management takes all the critical decisions
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which are then passed on to the subsidiary level of management. Its hierarchical structure reflects
its large size business (Gaspary, Moura and Wegner, 2020).
The top-level of management is the executive board headed by the President (CEO) of the Tesco
who is the head of all the administrative staff and have major decision-making authority. The
board of Directors consists of 10 people - the Chairman, Chief Financial Officer, CEO, and other
Non-Executive director. There are 5 executive committees heading different department
(Organisational Structures, 2017). The top-level management performs the supervisory
functions, make major decisions and represent company in domestic and international market.
There is middle level management who works between the top-level and the Board of directors
by coordinating the function. These consist of the various vice presidents and other manger and
assistants under them.
The bottom level management the top most position is held by the Regional manager who have
authority to make major decisions regarding the store situated under his area he directly reports
to the middle and top-level management at Tesco. Further, he has store managers under him who
is responsible for their own stores(Dudovskly, J., 2016). Each store is divided into 3 departments
such as food trading section, non-food trading section and personal section with the assistants
working under different leads and assistant managers who are in direct contact of the common
people on regular basis.
Source: Tesco Organisational Structure,2016
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Illustration 1: Top-level Management

Source: Tesco Organizational Structure,2016
Marks & Spencer plc pursues the flat organizational structure; in which there is limited or less
manpower between the administrative and front line employees. This structure consists of the
organization head and the heads of different department who directly report the CEO. Marks and
Spencer uses this structure in order to encourage its employees more in decision-making practice
(Ziyadin, Palazzo and Sidhu, 2020). The company believes additional layer would add
unnecessary complexity and friction. Using this method helps Company in minimizing the level
of bureaucracy and make employees of M&S skilled by authorizing them to make decisions.
And because of the less manpower communication between the upper and lower level becomes
easy which helps to solve issues fast and allows rapid growth. Company opted for this method
because in the traditional structure has many levels of management between the top line and the
base line management, decision-making has to go through the these long process, leaving front
line staff to answer regarding the delays that happened with customers which decreases the
productivity. While opting flat management structure, allows whole company to work with ease
and less resistance which is more cost conscious approach, as it cost of middle men and decrease
the communication barriers which would have arisen.
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Illustration 2: Baseline Mangement

Source: Flat Organizational Structure, 2017
Task 4.
Financial and Non-Financial Performance of Companies
Performance of the company can be evaluated on two bases i.e. on financial and non-financial.
Financial performance of the company is the subjective measure of how well the company is
using its assets from its primary mode of business and generating revenues. It can also be
referred as a common measure of company’s overall financial well-being over a given period.
Tesco conducts the audit of its company per the International Standards on Auditing UK and the
applicable law. It can be observed that in its financial year 2019-2020, Tesco revenue amounted
to almost 53 billion British Pound in UK. It is increase of approximately 1.3 billion pound as
compared to the previous financial year. Company stays ahead of many companies and is the
largest grocer in UK with the share price of 226.38 Pound (Annual Report, 2020).
Marks & Spencer trading profitability can be considered consistent over the years, the sales have
been increased for the Food business, while the clothing and the home segment has not been able
to represent the top line growth. The revenue for the 19-20 is 10,377.3 GBP and the performance
of upcoming year will be bit low due to Corona virus pandemic, because of which company has
less sales in clothing but the sales of food products is growing with the time and the growth of
home-ware is stagnant (Marks & Spencer plc Financial Statements, 2019).
Companies’ performance could not be always based on the financial figures as they alone cannot
determine the success of the company. Company’s non financial performance is judged on the
base of company’s effort that goes beyond what may be required by the public and government.
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Illustration 3: Marks & Spencer Organizational

Corporate social responsibility plays a crucial role in assessing the financial position of the
company.
Tesco ensures that it contribute its CSR with the staff, suppliers, society and to environment. By
providing support and training requirements such as to A-level entry programs, apprentices,
advance leadership program etc. for the staff and ensures that its staff is happy with the
management of the company and is well motivated (Sethibe and Steyn, 2016). Its relationship
with the suppliers can be found loosening, because Tesco took time in paying the debt. Tesco
offers employment opportunity, support local schemes, make charities and provide donations
every year to contribute its part for society. Tesco is taking action towards reduction of Carbon
emitted in its distribution network and has promised to remove the plastics from the country.
Mark & Spencer have always followed its responsibility towards its customer, employees,
suppliers, local community and environment seriously. By conducting it business operations in
responsible way and underpinning the value of providing quality innovation, service and trust.
Company do charity and to organizations through its local stores. It also donates its business
surplus and clothing to charitable organization who wants to start up something as well it
recycles its left over dead stock of clothes. Company has made commitment to support people if
any major disaster takes place.
Task 5
Comparison between Tesco and Marks & Spencer –
Tesco Marks & Spencer
Created its Brand Image with low priced
product and services.
Marks & Spencer provide products in bit
higher price than Tesco but assure quality
is worth the price.
Tesco built their brand image by providing
Clubcards to its customers.
Marks & Spencer did not provide any
clubcard but provide Credit Card.
Tesco has the reputation of cheap retailer in
UK.
M&S has the reputation of obvious British
appeal and the most-reliable high street
retailer.
Tesco believes in providing wide range of
products and has flexibility in price.
M&S believes in providing easy return and
exchange policy with fewer product
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ranges.
CONCLUSION
The report above discuss about the two supermarket giants of UK i.e. Tesco plc and Marks &
Spencer plc in detail. It evaluates the company’s external environment that what factors affect
the business of the both company using the PESTLE framework. To know more about the
working style of the company, it analyses the organizational structure that these companies
follows (Gupta and Wales, 2017). Further, this report evaluates the company on the bases of their
financial and non-financial performance. Last but not the least, report compares the two
companies and determine that one follows the strategy of attracting customers through lowering
the price and offering wide range of products and other creates its brand value by offering high
quality and innovative products.
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REFERENCES
Books and Journals
Adamyk, K., 2019. PESTLE Analysis on Tesco PLC.
Enssle, N., 2020. Microgreens: Market Analysis, Growing Methods and Models.
Gaspary, E., Moura, G.L.D. and Wegner, D., 2020. How does the organisational structure
influence a work environment for innovation?. International Journal of Entrepreneurship
and Innovation Management. 24(2-3). pp.132-153.
Gupta, V.K. and Wales, W.J., 2017. Assessing organisational performance within
entrepreneurial orientation research: where have we been and where can we go from
here?. The Journal of Entrepreneurship. 26(1). pp.51-76.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Sethibe, T. and Steyn, R., 2016. Innovation and organisational performance: A critical review of
the instruments used to measure organisational performance. The Southern African
Journal of Entrepreneurship and Small Business Management. 8(1). p.12.
Stoyanova, A., 2019. Impact of external and internal circumstances on food safety management.
Trakia Journal of Sciences.17(1). pp.386-394.
Ziyadin, S., Palazzo, M. and Sidhu, M., 2020. The evaluation of the impact of innovation
management capability to organisational performance. Qualitative Market Research: An
International Journal.
Online
Annual Report , 2020 [Online]. Available through:<https://www.tescoplc.com/investors/reports-
results-and-presentations/annual-report-2020/>
Dudovskly, J., Tesco Organizational Structure, 2016[Online]. Available through:
<https://research-methodology.net/tesco-organizational-structure/>
Marks & Spencer plc Financial Statements, 2019 [Online]. Available
through:<https://corporate.marksandspencer.com/?
pointerid=5ddfed557880b20f8c90f198>
Organisational Structures, 2017 [Online]. Available
through:<https://open.lib.umn.edu/principlesmanagement/chapter/7-3-organizational-
structure/>
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