Understanding the Business Environment of Tesco: Implications of External Factors, Stakeholder Analysis, and Performance Evaluation

This report analyzes the business environment of Tesco, including the implications of external factors, stakeholder analysis, and performance evaluation. It covers PESTEL analysis, Porter's framework, and KPIs to indicate its performance.

Understanding the
Business Environment

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK ..............................................................................................................................................1
Introduction of Company............................................................................................................1
TASK TWO................................................................................................................................3
Implications of the external factors over the business organisation ..........................................4
Evaluate the development of the business with reference to short-term and long-term
performance.................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business environment may be defined as sum collection of various internal as well as
external factors such as customer needs and expectation and employees. All these factors impact
on company’s operations and defines how it operates either in direct or indirect manner.
Business function are affected by these forces either in positive or in negative way. It aids in the
identification of business prospectus. This project report is based on Tesco, a multichannel
grocery retailer merchandise super market chain, headquartered in Welwyn Garden City, UK.
This project report will cover introduction of company with its legal structure along with its
objectives. Further, it will include market structure in which it operates and effect of amelrt
structure in achieving competitive advantage. In addition to that, it will also cover differentiation
in stakeholder, shareholder and stakeholder analysis along with its applications in chosen
organisation. (Anwar and et. al., 2021)..At last, it will cover PESTEL analysis and and porter’s
framework and KPI to indicate its performance.
TASK
Introduction of Company
Tesco is a private multinational grocery and merchandise retailer store, headquartered in
Welwyn Garden city, England. In terms of gross revenues, it is the third largest retailer and
places ninth in world. It was founded by jack Cohen in 1919. It offers various brands to
customers such as Booker and Makro. It had expanded its business operation in 1990. In 1960, it
had diverse its business in clothing, books and electronics. It had launched Tesco value brand in
which it offers better quality products at a reasonable price. And for high class customers it had
launched Tesco Finest. Its main aim is to provide better quality of products to customers at cheap
price. In 1980s, it reinvests its profits and savings in business in order to make it cheap for
customers. The management of Tesco is strong as it optimally utilises its resources in such a
manner that yield higher profit. The company is operating its operations in privates basis and
have all control over it. This makes company more profitable as no other external stakeholder is
allowed to take part in decision making process. It analyses demand and based on that it
formulates effective strategies that will lead company towards the attainment of goals.
Purpose of Tesco
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The main purpose of Tesco is to serve customers, planet and communities better every day.
Companies keeps customers in their heart and it reflects in their responsibilities.
 Customers – They treat every customer in unique way and everything it do starts with
their customers and ends at customer. Company regularly tries to makes their customer
satisfied by products. Company focus on understanding customer needs and wants along
with rendering better quality of products.
 Communities – The role that company is playing in communities is vital in terms of
creating new jobs, helping local cause and supporting its suppliers.
 Planet – Company focus on maintain sustainability by undertaking various procedures in
order to become sustainable.
Objectives
The main objective of Tesco is to become champion of its customers. It always focus on making
innovation to its products to cope up with dynamic business environment and provide better
quality products. Its aim is to provide electronics, clothing and groceries on their online platform.
They wants to make their service more convenient in order to attract large customer base. It
wants to enhance the customer experience by opting online service. By this, it can attract many
customer and may reduce customer efforts in purchasing products.
Market structure
It refers to how industries are classified and differentiated based on their nature and size of firm.
It helps in understanding relations between sellers and buyers. In case of Tesco, it have
oligopoly.
Oligopoly market structure – In this market structure, there are small number of firms and have
large number of customer and they affects each other’s performance. This type of marketing
structure is having kinked demand curve. The prices of UK supermarket have high entry barriers
to entry, exploitative relation between supplier and supermarket, non price competition and price
rigidity. In oligopoly if one company lower down its products value then it will impact on other
company and it alsos have to reduce its prices. This creates a pressure in lowering down prices of
products as customer can switch company which is offering similar product at lower price.
Customer is having tendency to buy better quality of product but by paying minimum price.
Companies must be flexible in making alternation as rigidity may lead to loss of customer. In
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this situation, companies mutually agree to divide their market as one will cover this market and
other will cover different market segment. For example, one company opt sportswear and other
may opt sports equipment as it will lead to diverse customer and both companies can be
benefitted.
Market structure affects company’s operations in either positive or negative aspects. Company
should makes necessary alternation in order to minimise its negative impact. It can also help in
increasing profitability of company and thus lead in generating higher revenue. This allows
companies in identifying potential segments in which they can attract customer. Company can
save its cost as it allows in analysing on accessible market. This market is very competitive as
similar products can be availed by customers from other supermarket because of low pricing.
Companies can tie up and can hike prices of products and can take advantage. Tesco is providing
better quality of products at a lower price so that it can take competitive advantage. As there are
many supermarket chain that offers similar products but customer will opt that alternative who is
offering at lower price.
TASK TWO
Stakeholder analysis:
The power interest grid is being used in order to make the analysis of the stakeholders of the
business. Tesco comprises of ,many stakeholders and they will be analysed on the basis of their
power and interest in the company.
·High power, high interest: This category of involves those stakeholders who have high
involvement in the company due to their high power and high interest. The top level
management are the one who are under this category as they seeks to have the high interest as
well as power to make the important decisions of the business.
·High power low interest- It includes those stakeholders who have high power but very low
interest in the business operations. The employees of the business Tesco are involved in this
category as they have less interest in working of Tesco but have power to make decision of
operations of company due to their stake.
· Low power high interest- the stakeholders who have interest in the business but low say are the
one included in this category. The customers of Tesco are in this category as they have interest in
the working of business but no power to make decision for the company.
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·Low power low interest- This category of stakeholder includes the one who have no interest or
power rather they are only required to be informed about basic information of the company. The
media, government, etc. are included in this as they are only to be informed of basic information
of business and they have no power to make any kind of intervention.
 Stakeholders are merely all such person or the parties which complies to have interest in
all the company shares and also are relied and are affected on the business practises. They
are mainly all such members which comprise4 to have support in the companies and
focus on all the projects and the productivity of the company. They mainly have an
important role in creditors, investors and also in maintaining the local community
through which it draws the major focus and significant impact for the operational
activities. some of the main external stakeholder in Tesco are suppliers, creditors,
customers and many more. Shareholders refers to all such institution and all the working nature with which the
company, organisation and the institution will manage to share all the stock and the
equity of the company this manage to have the effective nature and the institution of
maintaining the business success. All such individuals who own the maximum shares in
the company will be relied in it.
 Stakeholder analysis is majorly a [recess in which all the assessing systems and also the
potential changes are being undertaken. They are generally all such person who are
related to varies in retested areas and the parties with there relevant interest.
Implications of the external factors over the business organisation
It is identified that it is very important for the business organisation to identify the
various external factors which have a influence over the business organisation. It is essential that
the company identified that there is the impact of the external forces over the operational
activities of the business enterprise. There are various factors which are analysed in order to
conduct the activities of the business enterprise. A model is used which is known as Pestle
analysis in order to identify the external factors in context of Tesco which are discussed below:
 Political- This is the factor which is related to extent to which government policies may
influence the business organisation in the numerous ways. Such factors include the trade
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policy, tariffs etc. it is very important for the Tesco to analyse the various change in the
government polices in order to conduct the business operations. It is identified that the
Brexit move have impacted the organisation as the European Union have been separated
from the other Unions. This has made several changes within the polices which have
influences over the various activities of the business organisation.
 Economical- This is the factor which is related to the direct impact of the performance
within the world over the business organisation. Such factors include the inflation rate,
taxes etc. it is observed that the Tesco company was impacted because of the pandemic
where there was rise in the inflation rate which has impacted in the sales of the
organization. This has also increase the prices of the raw material which has decline in
the purchase of the products.
 Social- This is the factor which is related to the changes and the impact on the behaviour
of the people because of the changing trend around the world. Such factors include the
lifestyle, attitude, behaviour. It is identified that the current trend which is observed that
the people are willing to purchase the health food items after the pandemic and the spread
of the coronavirus. It is very important for the Tesco company to analyse the current tend
in order to attract customers. The social factor plays a major role in producing the
products or services according to the customer preferences.
 Technological- this is the factor which is related to the innovations and development
which is required in the world and by the company can have a influence over the
operational activities of the business enterprise. Such factors include research and
development, digitalisation etc. it is very important for the Tesco to adopt the new
technologies such as the online system, in a quick way so that the customer are able to
adopt to the new changes and the fast process. This will help the organisation to attract
customers and increase sales and revenue.
 Legal- This is the factor which is related to the various rules and regulations which are
there within the country and this have a influence over the business organisation and its
activities. Such factor include labour laws, safety laws etc. it is very important for the
organisation to follow the safety laws in respect of the employees working in the
organisation. This factor plays a major role as the employment safety law is necessary
where the companies need to follow in order to avoid any legal actions.
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 Environmental- This is the factor which is related to the surroundings and the impact
which have a influence over the business organisation and operational activities. Such
factors include climate, weather, sustainable development etc. it is very important to the
organisation to reduce the use of the plastic within the company in order to save
environment. This is the factor which is important for the company in order to be
effective and efficient.
Porters five forces
This is the another model which plays a major role in order to have a influence over the
business organisation. There are various
 threat of the new entrants- it is identified that as per the company y and the industry
analysis it is very important for the Tesco to remeasure the entry of the new firms ion
order to be competitive. It is very important for the organisation to analyse the different
forces. There is the high threat of the new entrants which can impact the organisation and
its operational activities.
 Bargaining power of suppliers- This is the ability of the suppliers to bargain. This
means that there is the high power as the suppliers when there are number of
organisations.. it is analysed that in context of Tesco there is low power os suppliers
because Tesco has several other options.
 Bargaining powers of buyers- This is related to he ability of the customers to influence
and bargain with the organisation. In this factor it is considered the ability of customers
that how much it can lower the price of the product / services charged by the firms in an
industry. Here the bargaining power of customers is High because there are several
other supermarket such as ASDA, LIDL so customer can easily switch to the other if the
company stick to one pricing strategy. Also, nowadays customer is more aware about the
discounts , price of the product which influences buyers to other retailers.
Evaluate the development of the business with reference to short-term and long-term
performance
It is analysed that there are several key performance indicators for the company in order
to have the success and growth within the organisation. There are several tools such as
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benchmarking which can help in analysing that whether the company is able to achieve the goals
and objectives within the limited time period. It is very important for the business organisation to
be aware of the it is very important for the organisation to analyse the different factor so that the
company can analyse which is the performance indicator sin order to keep the track on the
services provided by the organisation. The various key performance indicators will help analysis
the different factors.
When we evaluate their quick ratio, it also indicates reduction which is considered as riskier
for Tesco since at this stage their repayment cycle is higher because they are not maintaining
their liquidity in above years. Further Tesco is not maintaining a positive cash and operating cash
ratio. However, such decline is on margin of 06 and .01 times respectively. These negative
margins affect their cash flows in long run period which is not sustainable for investors and
stakeholder to make an investment in Tesco. These ratios are useful for conducting fundamental
analysis. These ratios provide clarity regarding firms source of funding their business that
ensures company’s reliability and stability over the period of time. The risk that is calculated
with the help of gearing ratios is known as financial leverage. As far as Tesco Plc is concerned,
we have calculated debt equity, debt capital and equity ratio and debt - service ratio as part of
gearing ratio.
CONCLUSION
From the above report it has been concluded that the global business environment has the
different aspect for the business organisation. It is very important for the organisation to analyse
the different models in order to expand its business sin the other global countries. It is very
important to understand the business environment in order to conduct the business in the
effective and efficient way. The various model which has been discusser below suggest that the
company need to be aware of the external forces and factors which can influence the
organisation. The forces and the various aspect suggests that the company need to be careful of
the political aspect in order to conduct the business activities.
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