Business Environment Analysis and Risk Assessment of Tesco

This article provides an analysis of the internal and external environment of Tesco using SWOT and PESTLE analysis. It also includes a risk assessment of the company and an action plan to manage the identified risks.

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4009

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Internal environment analysis......................................................................................................1
External envirornment analysis....................................................................................................4
Risk assessment for the company................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment analysis could be termed as systematic process through which
factors of business environment are determined, impacts are assessed and strategy is devised for
mitigation or take benefit of them (Hamilton and Webster, 2018). Key purpose of the analysis is
to identify potential effects or influences of specific aspect of general abd operating environment.
At same time, risk management is termed to identification, evaluation along with prioritising
risks that are followed by coordinated together with economical applications of resources for
minimising, monitoring as well as controlling probability of unfortunate events or maximising
realisation of opportunities. For the assessment, Tesco is considered venture popular to sell
groceries and merchandise with more than 4673 stores across the globe. It carry out practices for
providing groceries, clothing along with electronics goods and range of services online.
The assessment covers internal environment analysis and external environment analysis
through various models. It also includes risk assessment of the company and action plan to
manage the identified risks.
MAIN BODY
Internal environment analysis
The term internal environment analysis arm management with knowledge to grab
benefits of strengths, expertise along with opportunities (Abdullah and Mansor, 2018). In
association to Tesco, internal environmnt analysis is carried through through mentioned below
models:
SWOT ANALYSIS
It is the strategic planning and management technique which uses by organizations, It is
an assessment tool and helps in identify its strengths, weaknesses, opportunities along with
threats. It provide an organization a clear view and build the business objective. In Tesco,
managers uses SWOT analysis for understanding health of the firm and carrying out internal
organisational evaluation. In aspect to Tesco, SWOT Analysis is mentioned below:
Strengths:
 Efficient supply network: Tesco
follows simple business model as well
as to reduce costs, it have efficint waste
Weaknesses:
 Weak operating performance: In
certain stores, the compan has weak
operational performance which is due
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management system.
 Multiple award holder: Performance of
the company is not restricted to fans
and statistics, it has won huge number
of awards that makes it more popular
nationwide.
 Intense diversification: Since its
establishment, the retailer has
diversified in 12 countries with approx
4673 stores.
to lack of marketing professionals.
 Low cost technique: Tesco works with
low cost strategy that cost the enterprise
in terms of restricted or low profits.
 Financial errors: Profits of the retailer
are impacted due to high credit card
debt (Gogokhia and Berulava, 2021).
Opportunities:
 New emerging markets: Although the
enterprise has expanded opertaions in
huge nations, it has opportunity for
tapping emerging markets including
South Korea, Turkey, etc.
 Alliance with other brands: Tesco can
partner up with small brands that are
popular to come up with better
offerings and facilitating customers
better.
Threats:
 Retail market competition: Tesco faces
threat of retail market competition from
giant players including Aldi, Carrefour
and hence forth.
 Global pandemic: The pandemic of
Covid-19 is threat for the company as it
has to invest in huge equipment and
maintain operations with limited people
at stores to adhere guidelines.
VRIO Analysis
VRIO framework can be defined as strategical internal analysis to access varied resources
and capabilities that a company have to attain competitive advantage for a prolonged period in
market (Khajeheian, Friedrichsen and Mödinger, 2018). It is beneficial for the mangers of Tesco
to identify unique value they offer to customers and which is difficult to copy for competitors.
Evaluation of varied elements of VRIO framework with accordance to Tesco are discussed
below:
Resources Valuable Rare Inimitable and Organised Competitive
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and
Capabilities
non-
substitutable
Implications
Product
Design
Yes Yes Yes Yes Sustained competitive
advantage
Supply and
distribution
chain
Yes Yes No No Temporary competitive
advantage
Quality of
service
Yes Yes No No Temporary competitive
advantage
Research and
development
department
Yes No No No Competitive parity
Valuable- These comprises of varied specific resources and capabilities that an
organisation has to sell their products and services in market (Assaad and El-Adaway, 2020).
These are the resources which company uses to mitigate threats and grab opportunities. In
relation to Tesco, all resources and capabilities such as product design, management of human
resources, supply and distribution chain etc are valuable to them.
 Product design is valuable for Tesco as it aids them to get fewer customer complaints that
enhances brand loyalty.
 Supply and distribution chain management is valuable for Tesco as it aids company in
meeting varied demands of consumers and also reduces their overhead costs.
 Research and development department is valuable for Tesco as it assists in analysing
emerging new market trends and fluctuations in consumer preferences or taste.
 Service quality is also a valuable element which Tesco has. It helps company in creating
loyal customers which further aids in increasing revenue and profitability of business.
Rare resources are those which is unique to company and competitors do not have any
sort of hold on these resources (Bhattacharyya and Verma, 2019). In relation to Tesco, it has
some rare capabilities like designing of products, human resource management, service quality
etc which gave a differentiated position to organisation over its competitors.
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 Product design- This element is rare to Tesco from that of its competitors as customers
are wiling to pay more for unique and tempting designs.
 Supply and distribution management is rare element for Tesco. As it helps company in
creating potential for new partnerships and collaborations.
 Providing excellent service quality is rare in Tesco. It aids in attracting large customer
base through creating positive image and reputation in market.
Inimitable and non-substitutable elements comprises of those rare resources and
capabilities which are not easy to copy for competitors. In accordance with Tesco, human
resources and product design are those resources that are difficult for competitor to imitate.
 Product designs of Tesco is a costly job for competitors as company hired a team of well-
experienced designers to give a unique designs.
Organised resources can be termed as those which an organisation is able to capture and
value in its managing its varied operations (Dobrosavljević and Urošević, 2019). Organised
capabilities if identified critically, it helps company to gain sustainable competitive advantage.
 Tesco uses lot of its resources to maintain product design its organised capabilities. As by
maintaining this, it provides positive reputation and brand image to Tesco.
External envirornment analysis
In a company, external environment analysis determine aspects or factors in an industry
that drive volatility, growth as well as profitability. In Tesco, managers carry out external
environment analysis with below mentioned models:
PESTLE Analysis
Pestle analysis is a model which used by the firms to identify the external factors
impacting strategy and operations. In aspect to Tesco, business managers uses PESTLE analysis
for gaining macro image of environment of nation. The factors of the model are described for
Tesco below:
Political – This factor tells about degree of government interference certain economy or
industry. UK government has undertaken a decision of Brexit, comprising withdraw of UK from
European Unions. Due to this, all the retail store of Tesco which were in EU has to shut down
and all the employee who are working in UK had to shift to EU that caused labour shortage for
the venture.
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Economic – This factors has a huge effect on any industry and its success which includes
economic growth, inflation rates, unemployment and consumer spending power (Liu, Tong and
Sinfield, 2020). Economic environment of UK is based on highly developed social and market
economy. However, the pamdemic of Covid-19 impacted adversely on operations of Tesco as its
stores are required to adhere guidelines of government including social distancing and operations
with limited workforce resulted in reduction of sales volume.
Social – Factors including culture aspects, health consciousness, pollution and age
distributions are social facyors. Population of UK are preferering or becoming more conscious
about their health. In this approach, Tesco initiated offering of organic and low fat food items
that are purchased in large proportion by customers that resulted in organisational profitability.
Technological – Automation, research and development, etc are technological factors
impacting venture operations. In UK, ample number of advanced techniques are helping
enterprises to smoothly carry out working and streamline practices. In Tesco, adoption of digital
techniques including search engine optimisation, Chatbots and so on assit in improving ranking
of websites, improving customer services, replying queries on time and creating larger target
audiences.
Legal – In UK, political leaders has governed huge laws for ventures to comply with
while practiciung operations. Managers of UK adhere legislations including Minimum Wages
Act 1998, Data Protection Act 2018, Equality Act 2010 and so on to safeguard employment of
workforce. Along with this, legislation provides support to company to work ethically and
achieve sustainable positions.
Environmental – The factors influence the surrounding of organisational environment
and the impact on climate, recycling, waste disposable and suitability (Biloslavo, Bagnoli and
Edgar, 2018). This factor become important due to increase scarcity of raw material, pollution
and carbon footprints target set by government. In UK, government introduced the corporate
sustainabilty responsibility that centralises how the organizations need to conduct their business.
Tesco managers start committing to decrease the consumption of energy and utilisation of
greenhouse gasses through the solar system. With this, the company contribute in sustaining
ecologicakl environment of the country and building positive brand image.
Porter’s Five Force Analysis
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Porters five forces analysis is a model that identify and analyse level of attractiveness in
an industry (Dinçer, Yüksel and Martinez, 2019). Within Tesco, purpose behind using the model
is to analyse organisational competitive environment. Forces of the model in relevance to Tesco
are explained below:
Competitive rivalry – In retail industry, rivalry among existing players is intense which
decrease organsiational product prices and overall profitability. Tesco has number of powerful
competitors, for example Morrisons and Asda that creates competitive rivalry high for the
organisation.
Bargaining power of customer – The power of customer is relatively high as the
switching cost in retail industry is low. In retail industry, consumer have power when they are
fewer in number but there are plenty of sellers in the market which makes it easy for them to
switch. For Tesco, there is high bargaining power of customesr as customers switch to other
brands when product are offered at relatively higher prices.
Bargaining power of suppliers – It explains how easy it is for suppliers to drive up the
price (Gaitán, Herrera-Echeverri and Pablo, 2018). This depends on the number of suppliers
which are available in the market or the uniqueness of their product or services. Tesco works
with so many suppliers, this does not exert any significant power because there are so many out
there in the market. So company can easily negotiate product price, while selecting only those
suppliers that offer products with good quality. So the power of this force is low.
Threat of new entrants – New entrants in retail market bring innovation, new ways of
doing things and put pressure on old marketers to lower their pricing strategy, reducing cost and
provide new value of preposition to the customer. The threat on new entrants in UK retail sector
is very low because of their capital requirements. Tesco does not need to worry about any new
entrants as it enjoys economies of scale and has it own competence. Competitors may not have
enough money, access to distribute network and expertise to explore the supermarket industry.
Threats of substitutes - This force tells about how easy it is for customers to switch
from one marketer to other. It examines the number the competitors, how their price and quality
is different from other rival and how much profit they are earning . The threat of substitutes is
low in UK retail industry because in order to meet the demand and supply of grocery and other
food products that are commonly accessible. The differentiating factor of limited selection of
substitute makes it difficult for customers to switch away from branded products. Some
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alternatives are costlier then the stores low cost items. Therefore the risk of substitutes in Tesco
is Low.
Risk assessment for the company
It is defined to a process of determining potential hazards together with analysing
consequences of what can happen when the hazard arises (Chang, Chang and Wu, 2018). It is
thorough look at place of organisational working for identifying aspects, things, processes and so
on that can harm people specifically. In Tesco, risk assessment is conducted to ensure that
organisation is safe to carry out practices effectively. Evidences comprising sufficient checks for
risks or hazards in all business areas makes risk assessment effective. For risk assessment, risk
register is prepared by managers. Mentioned below is risk assessment for Tesco:
Risk Impact Responsible for
action
Likelihood Actions to manage
Strategic risk High Administration High  Redefining stratgies of
business in more nuanced as
well as holostoc balanced
manner.
 Establishing key performance
indicators for measuring
outcomes (Lyu, Shen and
Zhou, 2021).
 Establishing key risk
indicators along with
tolerance level.
 Integrated reporting addition
to monitoring.
Compliance
risk
High Human
Resource
Manager
Medium  Thorough along with up-to-
date knolwdge and
understanding of relevant
laws in addition to regulation
policies.
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 Rebuilding culture of
enterprise with ethics and
sustainable long term
compliances.
 Continuously updating
compliance policy of the
establishment.
Reputation
risk
High Administration High  Protecting the venture against
data breaches (Gul, Guven
and Guneri, 2018).
 Being vigilant for mishaps of
customer services.
 Keeping employees
motivated and happy with
rewards and other aspects.
 Understanding and working
on all aspects that have
chances to affect public
perception.
Operational
risk
High Operations
manager
Medium  Setting standard processes
with meaningful together with
better decision making
insights.
 Collaboration across various
functional units to understand
distinct viewpoints for same
operational issue and
managing the risk jointly.
 Using Information
Technology software
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capability.
CONCLUSION
From the mentioned information, it can be conclkuded that business environment analysis
allows identification of all kinds of external and internal factors having probability of affecting
performance of corporation. It helps in assessing level of risks posed buy various environment
factors as well as business opportunities presented by them. To conduct internal business
analysis, SWOT analysis and VRIO analysis are effective. SWOT analysis is a business model
that provide visual overview and motivate to upgrade business plans. VRIO analysis assist in
identifying key resources of the organisation that help them to gain long-term success. For
conducting external business environment, PESTLE analysis and Porter’s Five Force Analysis is
conducted. With PESTLE Analysis, businesses form impression abpout factors that have
possibilities to impact working in nearer future. Risk assessment determines strategies required
foir minimisisng hazards. With good risk assessment, business managers are able to prevent ill
health together with accidents.
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