Risk Review: Analysis of Risk Factors for Business Innovation

This report provides an analysis of risk factors for business innovation, including microeconomic and macroeconomic factors such as political risk, security, environmental and social factors. It also includes a summary of the strongest risk factors and proposals to mitigate them.

Business Environment

Table of Contents
INTRODUCTION ..........................................................................................................................4
MAIN BODY...................................................................................................................................4
Microeconomic factors-industry level evaluation.......................................................................4
Macroeconomic factors ..............................................................................................................5
Summary of strongest risk factors ..............................................................................................7
Proposal to mitigate the risk .......................................................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business environment basically refers to the collection of external and internal factors
such as employees, customers, management, demand and supply, innovation in technology,
market trends, social trends and economic changes etc. These are the factors which affects the
performance of company into direct or into indirect manner. In the present report, TESCO is
taken into consideration(Ananthakrishnan.,2015).The review of risk is very important at the
organisational level in order to meet out the organisational goals and objectives as well. It is a
multinational company which is British retailer that is headuartered in Welwyn Garden City,
England. The present report will cover discussion about micro economic and macro economic
factors which basically include political risk, security, environmental and social factors. The
report also consist of the strongest factors of risk and also about proposals in order to mitigate
those risks.
MAIN BODY
Microeconomic factors-industry level evaluation
The industry level evaluation can be done with the help of microeconomic factor which
basically include Porter's five forces analysis which is defined into the following manner:
Porter's five forces analysis of TESCO
Bargaining power of customers: The main factor which is concerned with customers
bargaining power which is due to large number of retailers into competitive manner into the
market. The products which have been given through the store are majorly have relationship with
basic needs of customers. These stores also have the capability to choose the storeswhich gives
maximum level of economic scale. Here the customers power of bargaining assumed to be low
and the product are of that kind that has lowest level of of hope of creating loyalty with them.
The cost of switching which includes shifting the store from one to another is also less for the
customers when products consideration is from the TESCO company.
Bargaining power of suppliers: In context to TESCO company, suppliers have less
power of bargaining and there are large number of suppliers who have provided the retail stores
with their products. (Aven.,2016). The negotiation power is only into the hands of owners of
retail and they have upper hand into the context of closing the deal through deciding the price.

It gives an opportunity to retailers to select products of those vendors which provides
them at the lowest price which assumes that they have the same quality. This makes the power of
suppliers bargaining power weaker when its about TESCO operations.
Competitive Rivalry: The sector in which TESCO company has been dealing has higher
level of competition and these competitors are Wal mart, Carrefour, ASDA etc. These are
basically established firms with logistic networks and strong supply chains which are barely
different from each other(Elshandidy and et.al.,2018). Companies have basically tried to
position themselves in a different manner as compared to their competitors by their diverse
marketing campaigns. The products which have been sold out by the organisation is for the
purpose of basic needs of people and the wars of price have the significance in the realm of
competitive world.
Threat of substitutes: There are variety of products that can substitute the products
which are real and the products sold by the company of TESCO has to fulfil the basic needs.
Here the substitutes threat is very low where price is the main factor for those customers who are
regular for their products. It has been observed that when somebody offers that product which
are on lower range then people generally buy from them which fulfil their needs which are
related to the daily basis. It basically lowers down the substitute threats to further levels which
are into lower terms and the company is basically famous for their products lines which are into
the finest terms that provides the major importance into the market. In this case, the substitute
threat will be external force which are into moderate terms that affects the whole operation od
company of TESCO.
Threat of new entrants: The main factor which affect the TESCO company operations
which is the threat due to the new entrants into the market. For a new entrant, starting a store into
positive manner requires a lump sum amount of capital requirements(Foster and et.al., 2015). A
new player into the market finds it very difficult in order to provide a high level of discount or
offers to their products which act as disadvantageous factor. In context to TESCO company, the
threat of new entrants act as the weak force in order to perform properly into the market.
Risks: There are major risks related to substitute products and competitors of TESCO company
which creates challenges for the organisation.

Recommendations: It has been recommended that they have to work on their quality of their
pproducts and they can attract the attention of people through introducing new classification in
their product ranges which cannot be provided by their competitors.
Macroeconomic factors
Macroeconomic factors basically refers to the influential natural, fiscal or geo political
event which broadly affects the regional or national economy. These are the factors which
basically include PEST analysis and there are other parameters which are included in it and these
are political risk, security, environmental and social factors as well.
 Political factors: TESCO is the company who is the largest retailer on the global basis
where organisation has to follow various rules an regulations that ensures about
compliance and safety of products. The company has their operations into different
countries and they have to keep an eye on the circumstances which are changing at
political level which is a major point in the political stability(Heckmann and et.al., 2015).
When there is proper stable political environment and there is best opportunity in order to
carry out trade. With the impact of BREXIT, there is a kind of dilemma regarding the
new regulations which might have come up and can have lower levels of sales as well.
Another factor that affects performance of TESCO company is due to trade war between
US-China. The changes in policies of tax among different suppliers of country will affect
the company’s profitability.
 Environmental Factors: The company has taken different kinds of initiatives for
improving the environment and creating a society which is more sustainable as well. It
has been observed that TESCO has launched their phase two of reduce, reuse, recycle
plan and remove as well(Ho and et.al., 2015). The company has taken various steps in
order to reduce and remove all the plastic which is non-recyclable to a very lower level
and they also explore more opportunities to use the residual plastic which is still being
used. It will lead towards creation of a closed loop system and reduce the waste which
gets accumulated in the landfills as well. It has been observed that organisation has
changed around 800 products and support in terms of reducing the waste of 4000 tons of
plastic waste which is very hard to recycle (Kot and Dragon., 2015). The company has
also taken initiative towards creating a system which identifies the boat where fishes

were caught for establishing a policy of zero tolerance towards sourcing into illegal
manner. When these changes has been taken into consideration then organisation is trying
to do their parts towards the environment which is more sustainable.
Social Factors: In this competitive world, people have preference towards buying things into
one spectrum that is based on latest trends which is related to bulk buying and company has
also planned out its stores in order to facilitate these needs. The organisation has changed
themselves from products which are food on the major basis to a food cum non-food
model(PESTLE Analysis for Tesco discusses its Business Environment,2022).Social
influence or societal influence plays a major role into the context of products which are
demanded by their customers. The choice of products of customers depends on this factor
which is related to cultural factor where individual has lived into different environment and
from which background people are coming from.
 Technological Factors: In this changing period of time, technology are changing on a
very fast pace manner. In context to TESCO company they have opened the frictionless
store in central London using computer vision technology which is supplied by Israeli
artificial intelligence start up Trigo.
In context to TESCO organisation, the effect of these external factor is that as the UK is a
politically stable country then they can easily establish and expand their business from long term
perspective. The company has properly take care about the environment factor where they have
used the packaging that can be recycled very easily. The choices of customers preferences has
been changed with the changing culture and accordingly decision has been taken for buying it.
The new technology has attracted the customers on a large scale which contributes in increasing
the revenue of the company. TESCO has to assess these changes in societal influence and culture
among generations which are upcoming and customers should be provided with proper products
to choose from. According to the attitude of customer, their shifting preferences, organic
products where TESCO has captured to manage their customer base through shifting their
attitude towards promoting organic in order to satisfy their customers. The company also have
faith in this parameter of providing benefits to the society through hiring at local level and also
has employment generation into different countries.
Risks: There can be political risks due to which the trade relations gets disturbed and the
political stability of the country gets disturbed into negative terms. There can be dangerous

situation as the environment is facing the high level of pollution. The changing taste and
preferences of their customers can create challenge for the TESCO company to understand them
into deeper manner. As the technology is changing on the fast pace manner so its not necessary
that TESCO company can easily adopt the new technology into implementation form at the
organisational level.
Recommendations: It has been recommended that they have to made some strategies which
help in protecting the TESCO company from the political influence and their trade relations can’t
be disturbed with other countries. They have to keep changing in their way of working so that
they can positively contribute towards the environment. TESCO company has to understand the
main reason of changing taste and preferences of their customers so that accordingly they can
work towards it. It has been recommended for TESCO organisation that there is no requirement
of introducing new technology at the organisational level which can’t positively contribute to the
growth and development of the organisation. They have to implement those technologies which
are beneficial for them and result oriented as well.
Summary of strongest risk factors
According to micro economic factor, the porter's five forces analysis has been taken into
consideration for analysing the market into deeper manner. The strongest factor is related to the
competitive rivalry into the market and this is possible due to this reason that there are lots of
competitors into market(Lee and et.al., 2020). In this fast changing world, it has been observed
that there are may companies or businesses who are coming up with new ideas and concepts as
well so its possible that its difficult for TESCO company to stand strongly consistent into the
market.
The changing level of technology also gives advantage to other competitors to come
forward with their new concept into the market due to which they can give tough competition to
TESCO company. There are various intense competitors of TESCO organisation who can give
challenge to the company in terms of sharing of market and generation of revenue as well (Luo
and et.al., 2015). According to macro economic factor, the most strongest risk factor is related to
security risk factor. This is due to reason that if organisation does not have proper strategies to
secure their system and their organisational related as aspects. In this fast changing technological
world, it is very important to have tight security system so that no one can steal the personal data
of the company and can't think about the illegal activities such as hacking etc.

Proposal to mitigate the risk
For mitigating the risk of competitive rivalry, TESCO company has to always be ready
with any kind of change and also should have back up plan so that they can stand strongly and
consistently into the market. They have to always come up with new ideas so that they can
always stand on the top position into the market. In this manner, the company has mitigate this
risk into positive manner.
For mitigating the risk of security, it is very important for TESCO organisation to
continuously access the market from the perspective of technological factor(Sadgrove., 2016). A
tight security system can be installed from different codes so that no one can manipulate the
codes for accessing the information. A strong technical team can also be appointed at the
organisational level so that any kind of problem or challenge can be resolved into positive
manner. In this manner, the risk of security can be mitigated into positive manner.
CONCLUSION
It has been concluded that risk factors is very important at level of organisation in order
to achieve objectives and goals of the company. It has been concluded that to analyse any
organisation, there are two main factors which are very important which includes
macroeconomic and microeconomic as well. These factors also includes certain frameworks and
analysis as well. It has been determined that there are certain factors which are very important
from the perspective of analysis which includes, political, social, environmental and security as
well. It has been observed that to determine the environment of an organisation, it is very
important to do the analysis into deeper manner and take actions accordingly for it for their
future decisions. So its very important to consider the risk factors into serious manner so that
proper planning can be done accordingly for it.

REFERENCES
Books and Journals
Ananthakrishnan, A. N., 2015. Epidemiology and risk factors for IBD. Nature reviews
Gastroenterology & hepatology, 12(4), pp.205-217.
Aven, T., 2016. Risk assessment and risk management: Review of recent advances on their
foundation. European Journal of Operational Research, 253(1), pp.1-13.
Elshandidy and et.al., 2018. Risk reporting: A review of the literature and implications for future
research. Journal of Accounting Literature, 40, pp.54-82.
Foster and et.al., 2015. Tradition and innovation in scientists’ research strategies. American
Sociological Review, 80(5), pp.875-908.
Heckmann and et.al., 2015. A critical review on supply chain risk–Definition, measure and
modeling. Omega, 52, pp.119-132.
Ho and et.al., 2015. Supply chain risk management: a literature review. International Journal of
Production Research, 53(16), pp.5031-5069.
Kot, S. and Dragon, P., 2015. Business risk management in international corporations. Procedia
Economics and Finance, 27, pp.102-108.
Lee and et.al., 2020. Risk factors for post–intensive care syndrome: A systematic review and
meta-analysis. Australian Critical Care, 33(3), pp.287-294.
Luo and et.al., 2015. Risk factors affecting practitioners’ attitudes toward the implementation of
an industrialized building system: A case study from China. Engineering, Construction
and Architectural Management.
Sadgrove, K., 2016. The complete guide to business risk management. Routledge.
Online
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