Analyzing the UK Business Environment: A Case Study of Tesco PLC

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BUSINESS AND BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION............................................................................................................................. 2
SECTION 1...................................................................................................................................... 3
DIFFERENT TYPES OF BUSINESSES THAT EXIST IN THE UK.........................................................3
THE PURPOSES OF PUBLIC, PRIVATE AND VOLUNTARY SECTORS ORGANISATIONS IN THE UK. 4
LEGAL STRUCTURES OF DIFFERENT TYPES OF BUSINESSES THAT EXIST IN THE UK...................6
THE SIZE AND SCOPE OF A RANGE OF DIFFERENT TYPES OF ORGANISATIONS THAT EXIST IN
THE UK....................................................................................................................................... 8
SECTION 2.................................................................................................................................... 10
THE RELATIONSHIP BETWEEN DIFFERENT ORGANISATIONAL FUNCTIONS AND HOW THEY
LINK TO ORGANISATIONAL OBJECTIVES AND STRUCTURE......................................................10
SECTION 3.................................................................................................................................... 12
THE POSITIVE AND NEGATIVE IMPACTS THE MACRO ENVIRONMENT HAD UPON TESCO’S
BUSINESS OPERATIONS............................................................................................................12
SECTION 4.................................................................................................................................... 15
AN INTERNAL AND AN EXTERNAL ANALYSIS OF TESCO IN ORDER TO IDENTIFY STRENGTHS
AND WEAKNESSES................................................................................................................... 15
HOW STRENGTHS AND WEAKNESSES INTERRELATE WITH EXTERNAL MACRO FACTORS........17
CONCLUSION............................................................................................................................... 18
REFERENCES.................................................................................................................................19
1

INTRODUCTION
The purpose of this study is to determine the factors and state outside of the business which
directly and indirectly impacts. The factors which business depends upon aren’t standstill and
the most important factor is the environment that plays a crucial role in influencing a business.
A suitable organization helps in coordination, making proper use of human resource and clear
communication. This report also helps in understanding how the strengths, weakness,
opportunity and threats are concerned with decision making. Analysing the organization helps
in understanding the size, scope and structure. In addition to it, the element of a different
environment has been analysed with the help of SWOT and PESTLE analysis tools (Cadle et al.,
2014).
2

SECTION 1
DIFFERENT TYPES OF BUSINESSES THAT EXIST IN THE UK
The variation between the different types of an organization has powerful consequences for
the legal status of the company, specifically with regards to ownership. The three major types
of organizations are private (profit) organization, public organization and voluntary (non-profit)
organization.
Private Organization: The point of convergence of this organization is maximizing profits for
own self. Virgin Atlantic Airways Limited was formerly known as Ritter Public Limited Company
is a private organization in the UK, which provides commercial airline services and other
hospitality services (Gompers et al., 2015). Furthermore, since this organization makes a profit
for their own, the government impose massive taxes on them.
Public Organization: It is a form of organisation which is possessed and traded publically with a
minimum of 7 members. It restricts the transferability of shares but the company can invite the
public for the subscription of shares and debentures (Administrator, 2016). Tesco public limited
company is a great example for the public organization as it is owned by thousands of people. It
is the biggest retailer in Britain by global sales and domestic market share (Tesco, 2019)
Voluntary Organization: Voluntary organizations seek to supply society’s needs. It intends to
serve a community or public and is dedicated to being present for a social cause. This form of
organization is trusts, public hospitals, club etc. The source of income is through donations
mainly. Voluntary organizations are exempted from paying sales tax and property taxes but
they pay employee taxes just like any other private organization (Webb, 2019). The National
Trust for Places of Historic Interest or Natural Beauty is an independent charity organization in
the UK. An organization that works to preserve and protect historic places and spaces—for
everyone is known as National Trust.
3

THE PURPOSES OF PUBLIC, PRIVATE AND VOLUNTARY SECTORS
ORGANISATIONS IN THE UK.
The business includes of those economic activities directed mostly towards earning profits and
acquiring wealth through production and sale of goods and services on a regular basis.
However, the purpose of every organization is different as they operate on different aspects
such as personal profit, public profit, charity, etc.
PUBLIC LIMITED ORGANIZATION:
The main objective of a Public Limited Organization is to be able to maximise shareholder value
by generating as much profit as possible (London, 2019). Tesco is a public limited company and
it is one of the largest retailers in the UK which sells shares to the common people. Tesco's
main motive is to generate value for customers to gain their lifelong loyalty. Its other purposes
comprise of providing goods and services to the populace at a cheap and affordable rate and
upstage challenger to remain the market leader (Clark, 2019).
PRIVATE LIMITED ORGANIZATION:
The private company is owned and controlled by individuals and companies. The basic purpose
of a privately owned company is to earn a maximum amount of profit (Borden and Yunis, 2018).
Virgin Atlantic is a private company and its chief purpose is to attain a large amount of profit
and achieve high revenues. Apart from earning the profit, it has a long term goal which aims to
provide a smooth journey and enjoyable experience from the time of booking tickets to landing
on the destination (Pantazi, 2014).
VOLUNTARY ORGANIZATION:
The basic and chief purpose of this organization is to enrich and benefit society, often without
profit as a motive. They contribute to elevating the lives of citizens and the progress of the
nation (Mohita, 2019). A National Trust is an organization who works as a voluntary
organization and is dedicated to preserving the cultural heritage. It looks after forests,
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coastline, islands, fens, beaches, natural reserves, etc.to shelter and rehabilitates. It owns over
350 heritage properties where they conserve natural beauty.
5

LEGAL STRUCTURES OF DIFFERENT TYPES OF BUSINESSES THAT EXIST IN THE UK
It is observed that every organization adapts certain legal structure in order to make the work
effortless and less complex. The structure is directly linked with the organization and exhibits
the legal status of an organization or a company. Legal Organizational Structures differ from
country to country and business to business.
TESCO PLC:
Tesco is a British multinational grocery store which has shops in seven countries across Asia and
Europe. It is a public limited company which is an incorporated business, run by the Board of
Directors on the account of shareholders. In order to ensure efficient and effective work, an
organizational structure has been followed by them. The structure contains a chain of
command which works from the top of the organization to the bottom of the organization. All
the critical decisions are passed down through subsidiary levels of management (Dudovskiy,
2016). The position and obligation are divided into many parts to certify if the work is done
effortlessly. In addition to this, the layers of management have been reduced so that the
management must be done in a flexible manner.
VIRGIN ATLANTIC:
The Virgin Atlantic is one of the largest organizations in the world. The founder of the Virgin
group, Richard Branson, has helped this organization to attain huge success. The employees of
the Virgin group are highly valued and respected. The virgin group follows a hierarchical
organizational legal structure and encourage the employees to get involved in the business,
make an effort to connect with others, collaborate and behave respectfully. It is a form of
organization where people or employees are grouped based on their area of specialization
(Miles, 2015). The organization is a blend of people from different cultures thus making
innovation is their key to the positive result. Their perfect choice of organizational structure
helps the Virgin Atlantic Airways to enhance their performance.
6

NATIONAL TRUST:
National Trust is an organization which is formed for a social cause rather than a profit purpose.
It is devoted to protecting the cultural heritage of a specific region. They strive hard to manage
their events efficiently and make clarity between the employees about the allotted jobs to
them. The personal staffs of the national trust look after the properties and wider events. The
governance volunteers provide service to a range of groups intended to support our staff and
the Trust’s activities. Moreover, the organization is a foundation which does not depend on the
government for the funding but on membership fees and donations from members.
7

THE SIZE AND SCOPE OF A RANGE OF DIFFERENT TYPES OF ORGANISATIONS
THAT EXIST IN THE UK
The performance of an organization begins with an understanding of its structure. Size and
scope of the organization connect with the goal of business. Without having a good
organizational structure it is not possible to reach the target which has been set.
The goal or objective of any organization is set on the basis of its size. If the size of the
organization is huge and can put a great amount of capital, then they set a big target as their
objective. In addition to it, the organization set its objectives by keeping the scope of the
organization (Tokta, 2019). The scope of any organisation is attained by the help of its
employees and effective operations. According to the product and service, an organization
analyse their size and structure and then eventually the objective.
An organization can be micro, small, medium or large. The distinguishing factors between these
types of businesses are the number of employees, the number of owners and/or shareholders,
their market share.
MICRO ORGANIZATION:
The Willoughby book club is a micro organisation and is the UK's leading book subscription
provider, selling books to thousands of people covering 30 countries all over the world. It was
launched in 2012 with a growing team which has 10 permanent members. In order to spread,
the organization has partnered up with 20 stockists all over the world and major high street
retailers (yip, 2016). The founder of the organization has gained 180% revenue in the last three
years.
SMALL ORGANIZATION:
Wiser is a creative and recruitment company and was established in the year 2014. It is a small
organisation which provides an ambition to the youthful people and also surroundings where
creative meets recruitment to build and modify employer brands. The full service of talent
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acquisition is provided, from employer branding and website builds to recruitment. The
organization encompasses some partners such as Just Eat, Worldpay, Sky Betting and Gaming,
and Expedia (Goss, 2015). The organisation involves staff of 50 employees, in which 52% is the
male employee and 48% are the female employee, with an average earning of more than
€35000.
MEDIUM ORGANIZATION:
Captify is a medium sized organisation, launched in 2011. It is a data exhibiting company,
specialised in search intelligence and media decisions. The organisation has successfully
achieved over €1 million as profit in its first year of operation and currently has raised $15
million as an investment. The gross revenue of Captify has been increased by 300%, which has a
market share of 0.5%. It has approximately 2.2 billion users, tie up with 8 global markets which
include approximately 200 employees to work for.
LARGE ORGANIZATION:
Tesco is a British multinational grocery and merchandise retailer, found in 1919. It is a large
scale organization which serves in 11 countries. Currently, they have around 6,553 shops with
4,76,000 employees working for (Winterman, 2015). The revenue of Tesco is €55.9 billion along
with a market share of Tesco is 28.3%.
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SECTION 2
THE RELATIONSHIP BETWEEN DIFFERENT ORGANISATIONAL FUNCTIONS AND
HOW THEY LINK TO ORGANISATIONAL OBJECTIVES AND STRUCTURE
Every organization has a variety of departments which includes Production, Finance, Marketing,
and Human resource. When these departments of the organization start acting as a group, it
makes easier for the organization to achieve its objectives effectively. Tesco is a large scale
organization which includes all of these departments. Every department has a different function
and it has been observed that every department has a certain relationship with another
department.
Finance department’s function manages the part of the money received and paid out by an
organisation. It helps in producing the financial statements of the company. It has the capacity
to influence other departments which results in managing cash flow to the capital structure and
control risks and costs (Hong, 2015).
The marketing strategy helps in introducing product or services to potential customers. Strong
and attractive strategies are needed to increase sales, which cannot be done without Human
resource and production department (Adams, 2017).
Human resource plays a vital role in understanding, controlling and governing people and
supplement the environment of the workplace. This includes managing, recruiting and hiring
employees, coordinating employee benefits and suggesting employee development strategies
(Scott, 2018).
It has been assessed that all the departments of Tesco work collectively in an effective manner
which helped Tesco to be one of the leading competitors in supermarkets today. Due to
working in a combined form, the operations are handled in a proper manner. The collective
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functioning of various departments provides the availability of different types of employees
which helps in ease of operations.
In addition to it, Tesco follows a hierarchical Legal Organizational Structure in which positions
and responsibilities are clearly divided into different parts to make sure work will be done
effortlessly and easily. The departments of Tesco connect and works parallel to the
organizational structure which reduces the hindrance in achieving the decided objectives and
goals. Furthermore, the communication between all the departments is simple and
straightforward. The transparency between all the departments helped Tesco in attaining the
position of a leading company.
11

SECTION 3
THE POSITIVE AND NEGATIVE IMPACTS THE MACRO ENVIRONMENT HAD UPON
TESCO’S BUSINESS OPERATIONS.
The uncontrollable factor of an environment which influences business strategies, decision
making and performance is known as Macro Environment. These factors help an organization to
shape opportunities, but also pose threats to the company. Factors both positively and
negatively impact an organization (Burton, 2015). In order to understand the Macro
Environment, PESTLE analysis has been performed (Administrator, 2019). PESTLE analysis
stands for Political, Economic, Social, Technological, Legal and Environmental.
Figure 1- PESTLE Analysis
Source- Administrator, 2016
Political factor
Since Tesco operates worldwide and is the largest
retail market, the performance of it is highly
influenced by the politics and legislation of those
countries. These factors include Tax rates, current
and impending legislation, political instability,
unemployment rate, the economic situation of the
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countries where it is been operated (Dudovskiy, 2016).
To provide jobs to the population, government uplift
the organizations to hire employees with average
wages. Tesco plays a vital role in creating employment.
For example, Import duty is imposed on the goods
imported in the country. Tesco is negatively affected
by this act as some of their stock is imported from
different countries.
Economical factor
Factors like cost, prices and profits impact the
revenues of the supermarket chain. The annual wage
of Tesco bill accounts to GBP 4.5 billion. Tesco revenue
also gets affected by monetary and fiscal policies
introduced by the government, the rate of inflation,
etc. Furthermore, the Laws affect the pricing of
product and services of organization which increases
the risk of paying high priced and can affect its
dominance in the market.
Tesco was negatively affected as it had to sell the
Tesco Kipa Business to Migros Ticaret A.Sin June 2016
for £ 30 million because Kipa failed to yield the desired
growth against his competitors.
Social factors
The trend has changed and the demand of the
customers has also changed, as they have tough
routines and inclined towards more healthy food.
Tesco has positively accepted the challenge and made
alterations along with accommodation of the demand
for organic food.
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Technological factors
Customers give more value to the present technology,
so it is important for Tesco to maintain its digital
market. Tesco has been using an online shopping
feature in order to increase the production all over the
world since 1994. Productivity has been increased with
the help of the modern IT system. It is crucial for Tesco
to continue with the online market in order to capture
a large market base (Dudovskiy, 2016).
Advanced technology effectively helped Tesco to
obtain opportunities and earn customer trust.
Legal factors
Government policies and legislation directly impact
the performance of Tesco. The Food Retailing
Commission (FRC) has strictly suggested a code of
practice which Tesco has to follow. The code of
practice that bans the different activities in food
retailing Therefore, this law directly harms the
organization. To facilitate these changes Tesco reduces
the price of fuel to its customers in accordance with
the amount they spend on their grocery store.
Environmental factors
Many organizations are facing great pressure from the
government to address the environment. Tesco
encourages its customers to shop from tesco.com.
Tesco delivers the product via fuel saving roads and
also collects plastic bags from the customer in order to
recycle them. Tesco is dedicated to recycle, reuse, and
minimize carbon footprints up to 50% by 2020.
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SECTION 4
AN INTERNAL AND AN EXTERNAL ANALYSIS OF TESCO IN ORDER TO IDENTIFY
STRENGTHS AND WEAKNESSES
Figure 2– SWOT Analysis
Source- Halepoto, 2019
An environment should have the ability to analyse its internal and external factors that affect its
performance. The marketing strategy of the organization is directly influenced by
environmental factors. For analysing the aspects effectively, SWOT analysis has been used
which is the acronym of Strength, Weakness, Opportunities and Threats. This analysis helps in
analysing the strengths and weaknesses of an organization so they can try reducing their
weakness and develop proper strategies (Parsons, 2018).
Tesco is one of the powerful organizations which have numerous strengths. It ensures to
maintain its position as a leading organization through analysing its strengths and weaknesses.
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The main purpose of Tesco is to exploit external opportunities, counter threats and increase its
strengths.
STRENGTHS WEAKNESSES
1. Maintains a high level of customer
satisfaction.
2. Product innovation
3. It has improved the use of
technology throughout its
operations.
4. A strong base of reliable suppliers of
raw materials.
5. It has a strong financial position.
1. Not highly successful in accommodating
new firms with different work culture.
2. It observed a low performance in
financials.
3. Tesco is dependent on the UK and
Europe for its sales and does not spend
time developing different markets.
4. The average investment in research and
development is still unable to compete
with leading players in terms of
innovation.
5. The structure of Tesco is compatible
only with the present business.
OPPORTUNITIES THREATS
1. Strategic association with other
brands to offer more diverse
products.
2. Has opportunity in Private label
market
3. Enhancing their different segments
regularly.
4. Obtain new Environmental policies.
1. Various competitors in the market of
the food segment of the UK.
2. The growing strength of local
distributors.
3. The other global retailers are putting up
threats that may be able to offer lower
prices and various varieties as well.
4. Pressure on pricing strategy as the
labours threaten Tesco in order to
increase wages and benefits.
16

HOW STRENGTHS AND WEAKNESSES INTERRELATE WITH EXTERNAL MACRO
FACTORS
Strengths and weakness are connected with the external macro factors which help in
determining the position of an organisation. Tesco is a customer-centric organization whose
first priority is to provide services to its customers. Tesco attempts to effortlessly fulfil the
demands of customers and give them the best service (Bhasin, 2018).
The technological factor provides the best facility for the organization. Customers from
different parts of the country can easily reach to the market of Tesco. Tesco provides them with
the facility to choose and order through its online market. In return, Tesco gets to know the
reviews of common people. The technological environment helps Tesco to get true information
from its customers and develop the strategies to improve accordingly.
Economic factors and political factors are the major reason for the weakness in Tesco. The
strategy of business contraction has proved as a hindrance to the rise of Tesco. Tesco cannot
dominate the political factors or the economic environment because different countries have
different types of political and economic factors. Bus Tesco gets opportunities from the free
global market in the political and economic environment.
We as a people are shaped by the social factors in the environment. People are more likely to
get influenced by these factors (Bush, 2016). People have changed their perception of diet and
health. Due to this shift in attitude, Tesco is more focussed on investing in providing Organic
food.
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CONCLUSION
This has been evaluated from the above-mentioned data that every organization has different
types of goals and objectives and different kinds of actions are attempted to achieve those
objectives. This report helps in understanding how business environments influence
operational activities. In addition to it, Different types of size and scope of an organization have
been discussed. Furthermore, it has been observed how analysing interpersonal relationships
help an organization to ease their operations. The use of PESTLE and SWOT analysis tools has
been made to analyse environmental factors. Therefore, a brief interpretation has been
followed about the Business and Business Environment.
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