Business Environment: Structure, Governance, and PESTEL Analysis of TESCO

This assignment explores the structure and governance of TESCO, a leading British multinational retailer. It discusses the hierarchical structure of TESCO and how it is governed. It also highlights the importance of performing PESTEL analysis in understanding the external factors that impact TESCO's business. The assignment further explains the impact of political, economic, social, technological, environmental, and legal factors on TESCO's operations.

Business Environment
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INTRODUCTION
Business atmosphere is defines the external and internal factors which impact how firm
functions including staff clients, administration, regulations and others. It is important for
organisation to consider the environment of its business at priority basis as it brings opportunities
which assists them to improve their business performance (Botha, Kourie and Snyman, 2014)
. Moreover, this helps management in future planning as well as decision taking. In respective
assignment the undertaken firm TESCO, it is known to be the leading British multinational
retailer. In Welwyn Garden City, UK is their main headquarters. This report covers some topics
that are how firm’s structured and governed as well as importance of performing PESTEL
analysis. Moreover, application of PESTLE framework and its impact on organisation is
explained into this assignment.
TASK 1
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TESCO PLC is considered a leading British general merchandise as well as grocery which
perform globally and having headquarters is in Welwyn Garden City, UK. It was established in
year 1919 by Jack Cohen. Not only TESCO is valuable brand in UK but it is also known to be
the 7th most valuable brand across the world. It have about 400, 000 staff that serves millions of
consumers every week into our offline as well as online stores. Moreover, in England, Scotland
and Wales, it operates about 588 super markets out of which 257 are super stores which sells
food items along with various other products such as clothing’s, alcoholic beverages, gasoline
and many more. At present, it runs their business in around 13 countries such as Malaysia,
Hungary, Thailand and others. Respective organisation brand value in all over the world is 9.2
billion USD and only in UK is 11.3 billion USD by the year 2019. It is also listed on the London
stock exchange (TESCO PLC , 2020).
Its history
TESCO PLC was founded by Jack Cohen in year 1919. The respective brand at first
appeared in year 1924 when founder bought a tea shipment from Thomas Edward Stockwell. He
developed his new label, the initial three letters was supplier’s name (TES) and another 2 letter is
his surname (CO) which formed a word named as TESCO. The first stores were open in year
1929 in Burnt Oak, Edgware. Between 1950s and 1960s, it grew organically. It buys 70 stores,
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200 Harrow stores outlets and others. Moreover, in year 1987, it takeover Hillards chain of 40
super markets into North of England for £220 million. During year 2001, it involved into online
grocery retailing within USA and year 2002 it purchased about 13 hypermarkets in Poland.
Along with this, in year 2011, TESCO introduced a range of Tesco venture brands. By the year
of 2012, it reintroduced Tesco Every day value with new recipes and packaging (Tesco
Plc history, profile and history video, 2020).
Organisational structure
A structure of firm is considered as a classification which demonstrate how certain practices
are directed for attaining the objectives of firm. These practices involve roles, accountabilities,
and rules. Moreover, it also determines that how information get flows among the levels into
organisation (Hillary, 2017). TESCO PLC comply hierarchical structure in which the function
are specifically categorised into a long chain of command. This kind of structure assists in
developing defined roles for all there by forming no chaos and confusion. So, its hierarchy is
divided in three levels that are top, middle and base. All 3 levels are discussed below:
 Top level: In the higher stage, power is in the hand of board of management whose head
is CEO of TESCO who is known to be the head of whole management employees as
well as makes all important decisions. Another person is Chairman, (CFO), CEO as well
as non managerial directors..
 Middle level: this level is carrying out among employees and board of director. It
comprise of several vice presidents and another assistant and managers.
 Base level: Within this, the topmost managerial post is held through local executive and
under him there are store manager. Every store manager is subsequently categorised into
three departments such as personal section, food trading and non food trading (Tesco
Management Hierarchy, 2018).
So, TESCO is structure in hierarchical way which helps them to perform their business in
smoother manner.
How it is governed
TESCO is having a diverse Board with various conceptions, viewpoints and thoughts that
benefits stakeholder for effective business. Its board comprises the Chairman named as John
Murray Allan who born in year 1948. Group of Chief executives, CFO, higher independent
management as well as various independent non managerial members. Moreover, in their Board
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committees, audit, corporate, nominations and governance as well as remuneration committee
are included. Along with this, its Board delegate’s accountability to formulate plans and after
approval the strategic plans are implemented. Also, daily activities are provided to management
group by Chief executives. The Chief Executive Groups of TESCO supports chief executives in
performing its role as well as manages regular operation of business. Therefore, this is how the
company TESCO PLC is governed (TESCO plc board, board committee and executive
committee, 2020).
TASK 2
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PESTEL analysis is considered as framework which is applied through marketers for
determining as well as monitoring peripheral surroundings that have affect on company. It has
an effectual role within the development of enterprises (Niemann-Struweg, 2014). Either, it is
line of product expansion otherwise launching a innovative firm in fresh place. Moreover, it is a
input of formulating plan of action. Some importances of performing PESTEL analysis are
discussed below:
 It is important for all organisations to carry out PESTEL as it assists them to identify
significant modification into macro environmental aspects.
 It aids firm to develop strategic planning for expanding its business effectively and
efficiently.
 Also, any functional units in organisation such as marketing, sales and finance can be
controllable internally for this they may recruit more individuals into sales for producing
revenue. So, the outcomes depend upon the people who are doing work in it. However,
macro environmental factors such as socio cultural, political as well as many more are
existed as well as will continue to stay without its input. Thus, here it plays an important
role and important for organisation to perform.
Therefore, it is crucial for TESCO to perform the PESTEL analysis as this is helpful for them in
various aspects. Some of them are discussed below:
Exploit opportunities: This is helpful for organisation to take advantage of the prospect
which takes place within changing period because of macro environmental aspects (Cairncross,
2014). For example: TESCO encompasses a range of products and economic plays main role
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into consumption of this wide product array. Moreover, technology advancement develops
several opportunities for TESCO likes online shopping with home delivery, self services check
out points and many more. This creates an opportunities for them to expand its business in
effective and efficient way.
Alertness development: PESTEL analysis assist firms be ready for chances intimidation
that raise within changing period due to macro environmental factors. For example: As the
society demand and needs are changing rapidly so TESCO has to take decision for its business
accordingly. If they do not do so then there will be competitive threats for respective
organisation.
Deeper Understanding: The most effective thing about PESTEL analysis is that it is
helpful to understand the factors which impact business environment (Sodeyfi, 2016). For
example: if TESCO want to develop new product, PESTEL helps to enhance strategically
thinking as well as in depth knowledge about several aspects like advance technology
development, regulation and many more. That impact product launch into competitive
marketplace (PESTEL Analysis: Definition, Examples, Importance & Advantages, 2020).
Thus, it is important for organisation like TESCO to carry out PESTEL analysis as it assist
them in understanding external factor deeply, exploit opportunities and alter them towards some
threats like changing society demand, technology etc. Moreover, all these help them to improve
their business in effective and efficient manner and gain more profitability (Sodeyfi, 2016)
TASK 3
3.
PESTEL framework is utilised to ascertain the external aspects that impact the company.
Mainly, it stands for Political, Economical, Social, Technological, Environmental and Legal;
whole this considered as external aspects that affects performance and operations of enterprises
(Ketata, Sofka and Grimpe, 2015). Moreover, it is applied through marketers for determining as
well as monitoring the external environment that has impact upon company. It has an essential
role within the development of firm. Therefore, TESCO utilises PESTEL framework for
analysing the external environment and also it impacts their business which were described
underneath:
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Political factors: These factors are whole about how as well as to what degree a government
intervenes into economy. It includes political stability, foreign trade policy and others. It often
has an impact upon business. So businesses required have to respond towards present and
anticipated future regulation and develop its marketing policy as per that only. For example:
TESCO is performing their business in around above 12 countries so its uncovered various
political factors which may impact their operational as well as functional practices directly and
indirectly.
 Positive impact: The government of UK has to pay its more attention for developing
direct relation with global countries. Hence, this procedure may assist TESCO to perform
its business in all over the world.
 Negative impact: UK local council proposed tax upon big supermarket that is called
Tesco Tax but government of UK refused this kind of initiative for obviating the hike of
price. These types of government interference may develop disputes for respective
organisation.
Economical Factors: It has a considerable impact upon how firm perform its business and
profitable they are. This involves interest rates, inflation rate and many more (Ketata, Sofka and
Grimpe, 2015). For example: As TESCO PLC is the largest UK super market which has various
stores across countries. So, this may impact its business in both manners affirmative and
pessimistic.
 Positive impact: It provides above 745 thousand jobs opportunity for people into its
stores. Based on this, they can able to facilitate their own contribution into the
development of United Kingdom economy and enhance its sales. Therefore, respective
country government supports their business operations which will outcome into
maximisation of brand image.
 Negative impact: Within United Kingdom, the cost of labour is considered to be the
essential aspects related to the business of supermarket. In year 2018-2019, rate of least
remuneration is enhanced by 4.4% into United Kingdom so it is a kind of change have
incurred cost to company in millions of pounds.
Social factor: This factor is also called socio-culture aspects. These were the points which
contain collective behaviour and conviction of population. It consists, age distribution,
population growth and so on (Sinay, 2014). For example: Tesco is dealing in various product and
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services which will be beneficial for the society. As various changes occurs time to time so this
impact respective firm negatively and positively as well.
 Positive impact: As per changing trends, it shift towards bulk and one stop shopping.
Moreover, they execute some modification into its operations of business as well as
provide desired sale upon very much likely goods.
 Negative impact: TESCO requires performing changes in its products through moving
towards organic goods as within community people are more focused about its health.
Therefore, this may impact the buying behaviour of customers indirectly as well as
directly.
Technological factors: It is considered to be the most essential factor. Now a days firm
delegate considerable resource towards research and development for moving ahead into
competitive marketplace. It is not only important for product production but also in its
distribution. It assists business to flourish new ways of interacting, communicating and
participating with its targeted customers (Fernández-Olmos and Ramírez-Alesón, 2017). For
example: If TESCO adopt some advanced technology into their business operation so it may
impact their activities in positive and negative manner.
 Positive impact: By this TESCO gets opportunities to opt retrial technologies into its
stores. It launched RFID technology for enhancing the experiences of in-store for its
clients. This type of activities helps them to obtain effective knowledge for its enterprises
purposes.
 Negative impact: Only some times ago, respective firm was gone through few most
important problems such as poor consumer experiences as well as scandal of horse meat
which may increase problems for them and also their online presence across the world.
Environmental factors: These are crucial to determine PESTEL as it can able to gain some
rising concern about environment within masses. Currently, clients prefer to purchase goods
from business whose product are environmental friendly as well as who are accountable toward
society (Shi and Wu, 2017).
 Positive impact: TESCO focuses upon utilising paper bags instead of plastics. In respect
of safety of surroundings and ecological, they opt plan of action to reduce, reprocess as
well as recycle its commodities as well as binding too. Moreover, within respective
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context, administration facilitates their possess involvement towards respective firm to
begin such types of environmental safety.
 Negative impact: Through considering action related to reprocess, salvage as well as
condense enhances the business cost of TESCO.
Legal factors: These factors have focused upon problems such as customer rights, products
safety, equal opportunities and many more. For firm to perform effectively they must not only
understand it but also abide through legislation and regulation of country where they are
operating or planning to perform (Li and et. al., 2019).
 Positive impact: Respective organisation executes appropriate code of conduct and
mentions that all in its policy in clear manner in front of its potential staff members as
well as consumers. This develops transparency and formed a legal ethics within
workplace.
 Negative impact: the fluctuation into the policy as well as practices of government affects
the decision making of TESCO in pessimistic way. Moreover, it also forms some kind of
barriers for their functional as well as operational practices of business.
Therefore, from the above it has been determined that political, economical, socio- cultural,
technical, ecological as well as lawful are some external aspects which affects business of
organisation negatively and affirmatively.
CONCLUSION
Based upon the above mentioned assignment, this can be summerised that it is important to
understand business environment as it helps them to identify various opportunities that improve
firm’s performance. Moreover, it is essential for firm to be structured effectively as per their
business as it also determines that how information get flows among the levels into organisation.
Also, it has to be governed in appropriate and proper manner so that all operations are managed
in proficient way without any kind of difficulties or confusion. Along with this, it is vital for
organisation to perform PESTEL analysis as it assist them in understanding external factor
deeply, exploit opportunities and alter them towards some threats like changing society demand,
technology etc. this analysis impact the business affirmatively and pessimisticly.
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REFERENCES
Books and Journals
Botha, A., Kourie, D. and Snyman, R., 2014. Coping with continuous change in the business
environment: Knowledge management and knowledge management technology. Elsevier.
Hillary, R., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Niemann-Struweg, I., 2014. An integrated communication implementation model for the post-
2000 business environment. Public Relations Review.40(2). pp.184-192.
Cairncross, F., 2014. Green Inc.: guide to business and the environment. Routledge.
Sodeyfi, S., 2016. Review of literature on the nexus of financial leverage, product quality, &
business conditions. Journal of Economic & Management Perspectives.10(2). pp.146-
150.
Ketata, I., Sofka, W. and Grimpe, C., 2015. The role of internal capabilities and firms'
environment for sustainable innovation: evidence for G ermany. R&d
Management. 45(1). pp.60-75.
Sinay, J., 2014. Safety management in a competitive Business Environment. CRC Press.
Fernández-Olmos, M. and Ramírez-Alesón, M., 2017. How internal and external factors
influence the dynamics of SME technology collaboration networks over
time. Technovation. 64. pp.16-27.
Shi, X. and Wu, Y., 2017. The effect of internal and external factors on innovative behaviour of
Chinese manufacturing firms. China Economic Review. 46. pp.S50-S64.
Li, G and et. al., 2019. Combined effect of internal and external factors on sintering kinetics of
plasma-sprayed thermal barrier coatings. Journal of the European Ceramic
Society. 39(5). pp.1860-1868.
de Loë, R. C. and Patterson, J. J., 2018. Boundary judgments in water governance: diagnosing
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Online
TESCO PLC . 2020. [Online]. Available Through: < https://www.tescoplc.com/about/>
Tesco Plc history, profile and history video. 2020. [Online]. Available Through:<
https://www.companieshistory.com/tesco/>
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Tesco Management Hierarchy. 2018. [Online]. Available Through:<
https://www.hierarchystructure.com/tesco-management-hierarchy/>
TESCO plc board, board committee and executive committee. 2020. [Online]. Available
Through: [Online]. Available Through:< https://www.tescoplc.com/about/board-board-
committees-and-executive-committee/board/>
PESTEL Analysis: Definition, Examples, Importance & Advantages. 2020. [Online]. Available
Through:<https://studiousguy.com/pestel-analysis-definition-examples-importance-advantages/
#:~:text=Whether%20it%20is%20a%20startup,planning%20to%20expand%20their
%20businesses. >
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