Impact of Economic and Non-Economic Environment on Tesco's Behavior

This report analyzes the impact of economic and non-economic factors on the behavior of Tesco, a multinational retailer. It discusses the economic policies, conditions, and systems affecting Tesco, as well as the non-economic factors like natural and demographic factors. The report also includes a SWOT analysis of Tesco.

Project

Table of Contents
INTRODUCTION...........................................................................................................................1
LITERATURE REVIEW................................................................................................................2
Economic Environment Shapes the Behaviour of Tesco ...........................................................2
Non-Economic Environment and Its Impact on Behaviour........................................................4
DISCUSSION AND ANALYSIS...................................................................................................5
SWOT Analysis..........................................................................................................................5
Pestle Analysis............................................................................................................................6
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Organisation and business environment is interdependent on each other and both will
influenced the performance of each other. It has been affected by both the factors as like internal
and external and includes employees, customers, clients, suppliers, management, social trends,
market trends, political aspect of the government, technological advancement, economic factors
and many others as well. This factor has direct impact on the performance of the company and
affects the operations of the business as well (Amankwah-Amoah and Wang, 2019). It is
mandatory for the business to to gain the profit and sustainability that helps to remain in the
market for the longer period of time. This factor has been analysed by the business to gain the
high competitive advantage and it helps the business to make those strategies that modifies the
profitability of the business. It is necessary to monitors the change of market and it provide
accurate platform to the business to measure the business environment and that helps to stay in
the corporate world for a longer period of time.
` Business environment provides the support and balance to the company as it describes
about the internal and external factors. In internal environment defines the strength, weaknesses,
opportunities and threat that helps the business to develop and implements those strategies to
maintain balance and more easiness within the business. While in external environment it defines
about the different factors as like political, economical, social, technological, legal and
environmental. These factors individually affects the performance of the company and
influenced the working-culture of the company (Amankwah-Amoah, Osabutey and Egbetokun,
2018).
This report is based on Tesco which is a retailer of British multinational groceries and
merchandiser and having headquarter in Welwyn Garden City, Hertfordshire, England, UK. It is
the third largest retailer in the world as per the gross revenue and on ninth position while
measured with revenue. Tesco was founded in 1919 by Jack Cohen in Hackney, London UK and
it deals with the different products and services as like clothes, books, furniture, software, toys,
telecom services, electronics and many other as well. In context of this report, it includes the
detailed analyses of different business environment that influenced the behaviour and work-
culture of the company. This report includes the economic and non-economic policies that
includes the demographics and cultural factors. Furthermore, this report includes the brief
analysis of internal environment of Tesco with the help of SWOT analysis and external
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environment as well with the help of PESTLE analysis that provides the brief about the macro-
environmental factors that has direct impact on the execution of the company.
LITERATURE REVIEW
Economic Environment Shapes the Behaviour of Tesco
Economic environment defines the economic factors that affects the behaviour of the
customers as well as commercial too (Botha, Kourie and Snyman, 2014). It is the inclusion of
different factors of the economy that act as the external factors for the business. These factors
has direct effect on the performance of the business as how it works and operates their business
to how successful it become for the company in terms of generation of profit and sales. It
considers the regulations and policies of the government that has been changes an up-gradation
of the environmental factors. It affects the work-culture of the company and it might insert the
different changes within the business as per the changes in the economy of the country.
In context with Tesco, it is one of the most largest retailers that works with all across the
world and UK faces the different ups and downs due to the effect of Brexit. As in the year 2016,
the referendum has been signed by the Britain and UK withdrawal with to European Union and
UK announced to do it in the beginning of 2017. This has been acted due to the maximum of
votes are in the favour of this act and after that it has the big attack on the economic stability of
UK. There are different factors that affects the economic environment of the country and also has
an effect on the working behaviour of Tesco that is as explained below as: Economic Policies:
There are different rule and regulations of the UK government that has direct impact on
the retailing sector of the company. Whereas, the performance of Tesco has directly affected by
the rules and regulations that has been changed after the Brexit (Groff, Di Pietra and Sitar, 2016).
As Tesco works on wider scale thus the regions that comes under the European Union has been
affected by the working process of Tesco. Whereas, the policies that has been made by the UK
government is in the favour of retailing industry as the economic factors increases the
opportunities for the industries to measure the success in effective manner. UK government
spends around £92.8 Billion to develops the market in the favour of retailing industry by
introducing different advancement within the country on continuous basis ( Retail sector of UK,
2018). Moreover, retail industry generates the economy of £381 billion in the year 2018. On the
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other hand it has negative impact on the performance of the Tesco because due to this price and
cost of different product and services has been reduced. Unemployment is the another factor that
has been generated due to economic policies and it affects the profit of the company.
Furthermore, this has different impact on the economic conditions of European Union as
stills there are some negotiations that works in between Britain and EU. It is not good for Tesco
who has works and operate their functions all over the world as it includes the supply in EU as
well. That is not in the favour of Tesco as it cost very high to Tesco as it enhances the rate of
suppliers and reduces the power of buyer (Hamilton and Webster, 2018)(Ilie, 2014)(Ivolga,
2014). Tesco will face a lot of difficulties and struggle while managing their business in an
effective manner that might affects the loss of profit and sales to the company.
 Economic Conditions:
The political and economic conditions of the country affects and influences the behaviour of
the company that shows the different operations and functions of the Tesco. Brexit has negative
impact on the country and also affects the trade networks with European Union. It will develops
and lead the removal of tariff rates and country was enjoying that with the other countries as
well. This conditions enhances the rate of export and Tesco might faces different consequences
related to the export of their product and services that reduces the ratio of profit as the sale and
cost of the business gets affected. It is even more challenging for the industry who works on a
wider frame work as it create more difficulties to manager the exchange rate as from outside UK.
In addition to this, Tesco is well known company as they deals with diversified products and
services that attracts the concentration of a larger number of people. Tesco always try to supply
their products and goods on affordable prices and induce all the technological advancement
within the business (Khan and Quaddus, 2015). By applying these strategies Tesco could reduces
the production cost. But after the Brexit difficulties has been raised up that reduces the profit
generation of the company because Tesco imports lot of raw material from EU with cheaper rate.
On the other hand, unemployment rate is the another major factor that affects the
behaviour of Tesco as after the Brexit the workforce also get affects a lot as it divides the
availability of the skilled labour. Thus economic policies has negative impact on the execution of
Tesco whereas it also create more complexness in the future as well. While the UK government
also doesn't have any though to perform the negotiable deal with EU.
 Economic Systems:
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It includes different factors as like taxes, inflation rate, foreign exchange rate that affects
the behaviour of Tesco. The commercial market has different trends that has been changing and
thus Tesco also induces different changes within the company to overcome from the effect of
Brexit. For example, the supermarkets or those retailing industry that works with diversified
products and services has direct impact on the sales. To enhance the profit of the company they
induces more changes and provides the products with less prices by maintaining the quality of
the goods. While the innovation and advancement bring positive impact on the performance of
the company as it reduces the overall cost of production (Khan and Khalique, 2014).
Whereas, the other factors as like taxes and economic slowdown is not in the favour of the
company specially to the retailing industry as like Tesco. To manage the different functions of
the company it is mandatory that human resources would be more effective and talented by
which work has been performed in efficient manner. This would help to reduce the overall cost
of the company by using scarcity of resources. Due to economic system it create more toughness
for the business to afford the talented and skilled staff with reasonable prices. It improvise the
cost of supply of goods and services that is offered by Tesco to their customers.
Non-Economic Environment and Its Impact on Behaviour
Non economic environment involves the factors that are not in relation with the economy
of the country these are those factors that affects the social and environmental factors of the
country (Lorenz, 2015)(Malik, 2015). There are some of the factors that affects the behaviour of
Tesco that are as defined below as:
 Natural
It is the aspect that includes the factors related with the changes in nature and in
environment as like weather and climate change, geographical factors as well. All the world is
going with the different consequences and problems that is generated with global warming. It has
more negative impact of the ongoing lifestyle and different trends of the market. As like the
availability of the raw material and fossils fuels that has organic element that create more purity
and perfectness. But it doesn't remains the same because the global extortion reduces the time
period of generation of fossils fuels. The standard of pollution has been raised and due to this
more heat will be generated in the environment and it causes global warming. Thus Tesco uses
short path while delivering the product and services to the customers and collects the wastage of
plastic and other reused products. And this is how Tesco contribute to procure the safety and
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security of the environment by controlling the pollution. It has positive impact on the
performance of the company because it has create more opportunity and value of the company in
the market (Raziq and Maulabakhsh, 2015). Tesco works with the positive approach to reduce
the carbon footprints from the environment and with the scarcity of the resources.
 Demographics:
It is the factor that describes about the lifestyle, age, income, living-standard of the people.
As UK is more developed country thus has more good standard and wider acceptability of
change. While the unemployment level has been raised that decreases the net profit of the
company as company has to provide the high wage to the employees and also provides training
and development. UK has quite high inflation rate thus people all of sudden changes their
preferences as per their requirement and satisfaction. There are different products that has been
offered by the market and every company wants to grab the attention of the customers thus they
provide the products with cheaper rate as well. Thus it has both positive and negative impact on
the performance of Tesco as they have more opportunity to reduces the cost and gain more
competitive advantage and with this Tesco attracts large number of customers. Whereas,
negative impact is that there are more rivals as like Wakmart that also wants profit and sale the
products with cheaper rate that divides the profit ratio of the company.
 Cultural:
It shows the belief, culture, values, nature and social value that helps to build the strong
relationship with the customers. There are various people who belongs from different society,
culture, religion and have different values (Warwick, 2014). It is good for Tesco to build the
relationship with the customers by satisfying the needs and demand of the customers in order to
gain more market share. It has positive impact as due to the values and belief of the company and
customers it imparts more opportunities for Tesco to build more loyal customer base.
DISCUSSION AND ANALYSIS
SWOT Analysis
It is an analysis that shows the strength, weaknesses, opportunities and threat of the business
that affects the internal factors of Tesco. These factors are as explained below as:
Strengths:
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The biggest strengths of Tesco is wider acceptability that has been generated with the help
of diversified products and services that is offered by the company to improvise the sale and
profit. Tesco is associated with those products that has better quality with reasonable prices that
attracts the large number of customer base (Wetherly, 2014). Another strength of Tesco is that
they offered the products with continuous development and always try to impart new innovation
with in the company that attracts the customer to keep remain with the company for the longer
period of time.
Weaknesses:
The biggest weakness of Tesco is that they work with larger scale and to satisfy the need and
demand of each individual customers is not possible for Tesco. Low cost strategies is also be one
of the weaknesses with this Tesco attracts the lower and middle level income group. while higher
income group people wants those product those are sale with the name of a particular brand.
Opportunities:
Tesco provides the product and services with affordable prices that attracts the large
customers base and they works for the climate protection and for this follow some rules that
takes the attention of a lot of people. Diversified products also be the most important
opportunities because with this people get a lot of products in single store.
Threats:
The biggest threat of Tesco is to overcome from the effect of Brexit. But government also
works for that and develop some laws by which companies gains the lot of advantage. While
giving tough competition to Walmart and other retailing industry is the biggest threat for Tesco.
Pestle Analysis
Political:
It is the factor that depends on the rules and regulation of the government and the different
factors that affect after the Brexit. As it is the biggest Threat for Tesco to overcome from the
effects of Brexit.
Economical:
It is the factor that includes different factors related to the economical changes and inflations
rate is the recent challenge that has been faced by the company. While the maintenance of supply
chain is also be the biggest threat for Tesco.
Social:
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The current generations is very much acceptable and accept all the changes of the market
in effective manner thus it is beneficial for Tesco to improvise their share and profitability.
Technological:
With the help of technological advancement Tesco innovate the goods and services on
continuous basis and that helps to gain the more profit (Boone, L.E and et. al., 2019). Tesco
reduces the overall cost by using advanced machinery and equipment that is more time saving
and less wastage is produced.
Legal:
Tesco works on larger scale as in 11 countries and follow the rules and regulation of each
country and having an experience of 101 year. It helps the company to gain more advantage from
the different policies of the government. Thus it is in the favour of Tesco as they get help from
their experience and try to overcome from the different consequences in an effective manner.
Environmental:
The different changes in environment helps the Tesco to measure the concern from the
global warming by applying different tools and techniques. Tesco also works to reduce the
carbon footprints from the market by using and utilising the resources in effective manner.
Thus both the factors as internal and external has direct impact on the performance of the
company as its interrelationship helps the company to achieve their target and maintains the
sustainability and balanced environment within the company for the longer period of time. The
business must maintain the supply chain on the basis of contract with EU and relates themselves
with the different uncertainties.
CONCLUSION
It has been concluded from the above report that business environment has various
important aspects for the organisation. It is also mandatory for the business to know about the
different consequences of the market and after the complete analysis company might develop
some strategies to gain the success and development to overcome from the different negative
situations. Furthermore, it is also essential for the business to fight with the internal abilities that
helps the company to achieve growth by developing opportunities for the business and take that
advantage in efficacious manner.
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Economic factors are most necessary for the company as it helps to improvise the
economic stability of the business. It provides the brief about the internal and external factors
that has direct impact and also influenced the performance and profitability of the business. After
that, it also helps the company to overcome from their threat and develop that into the
opportunities and then gain the market advantage. Furthermore, economical conditions defines
the external factors that affects the sale and profit of the company and allows to enhance the
market share of the business.
As per the non-economic environment it defines the social and cultural aspect of the
society that also considers the marketplace. It is necessary for the company to analyse all the
different functions that helps to enhance the competitive position of the company in the market.
The impact of these environment indicates both benefits and challenges that is faced by the
company and defines the brief about the differ conditions of the external market.
Company analyse internal environment by using SWOT analyses and it helps the
company to know about the strength and weaknesses of the business. It also identifies the major
operations of the company and ensures that it is competed in an effective manner. And analyse
the external environment by using PESTLE analysis that defines all the macro-environmental
factors that has direct impact on the performance of the company. At the end it is analysed that
the relationship between the internal and the external factors has huge impact on the performance
and profitability of the business to maintain sustainability within the company.
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REFERENCES
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ONLINE
Retail sector of UK. 2018. [Online] Available through:
<file:///home/user/Downloads/SN06186.pdf>.
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