Understanding Business Environment: Tesco Overview, Legal Structure, Market Structure, Stakeholder Analysis, PESTEL Analysis, Porter Five Forces Model

This document provides an understanding of the business environment with a focus on Tesco. It includes an overview of Tesco, its legal structure, market structure, stakeholder analysis, PESTEL analysis, and Porter five forces model.

UNDERSTANDING
BUSIENSS ENVIRONMENT

Table of Contents
INTRODUCTION.....................................................................................................................................3
TASK 1.......................................................................................................................................................3
Overview of Tesco..................................................................................................................................3
Determine the legal structure...................................................................................................................3
The market structure................................................................................................................................4
Its impact on organization.......................................................................................................................4
TASK 2.......................................................................................................................................................4
Explain the terms: stakeholders, shareholders and stakeholder analysis and application of stakeholder
analysis....................................................................................................................................................4
TASK 3.......................................................................................................................................................6
PESTEL Analysis....................................................................................................................................6
Porter five forces model and its importance............................................................................................8
TASK 4.......................................................................................................................................................9
Develop business in relation to short-term and long-term performance on the basis of KPI and provide
recommendations for improvements........................................................................................................9
CONCLUSION........................................................................................................................................11
REFERENCES........................................................................................................................................12
Books and journals................................................................................................................................12

INTRODUCTION
Business environment or market environment refers to factors which can influence the
operations of business. There are three levels of business environment which involves: internal
environment, external micro environment and external macro environment. The factors of
business environment affect the functions of an organization. Such factors help in identifying
business opportunities, tapping useful resources, making strategic plans and enhancing the
organization overall productivity, profitability, performance and growth (Barac and et.al, 2016).
Tesco PLC is a public limited company which was founded by Jack Cohan in 1919 in England,
UK. The company is operating as a retail industry which offers multinational groceries and
general merchandise. There are several brands which are introduced by the company, such as
One stop, Booker, Makro and others. Tesco is operating in various countries which involves UK,
Ireland, Slovakia, Hungary and Czech Republic. It can be seen that Tesco is a big multinational
company which has offered numerous employment opportunities to more than 4,23,000 people
and the operations of the company are divided into different divisions which involves Booker
group, Tesco store limited, Tesco Bank, Tesco mobile, Tesco Ireland and many more. This
project report aims to define the legal structure, purpose and market structure of the company.
The project with throw a light on the stakeholders, shareholders and stakeholder analysis of
Tesco. With the help of different external environment analysis techniques, the external
environment of HSBC will be analyzed.
TASK 1
Overview of Tesco
Tesco is a multinational corporation based in the United Kingdom. Customers will buy
groceries and other things from it. Its headquarters are in the English town of Welwyn Garden
City in the county of Hertfordshire. Every week, it is said to serve millions of customers all over
the world. Tesco stores have everything a customer could possibly need.
Determine the legal structure
Tesco's Board of Directors is made up of ten people. It has a hierarchical structure that is
well suited to the demands of the company's enormous scale. Multiple management systems
work in this structure to ensure that everything is completed to completion (Bocken, Boons and

Baldassarre, 2019). Tesco's company was founded on a single mission: to be an advocate for
consumers, assisting them in achieving a higher quality of life and a more convenient way of life.
This is still the case. Customers want high-quality goods at a reasonable price that they can
obtain quickly, and it is our responsibility to do this in the most efficient manner possible.
The market structure
Tesco has made a name for itself in areas other than supplying groceries and general
merchandise to its consumers over the years. Tesco has offered employment opportunities to
thousands of people through its various subsidiaries. Tesco calls itself an oligopoly because it is
not the only supermarket in the UK; Tesco is the largest shareholder but not a monopoly because
many other companies compete with Tesco, such as Sainsbury, which owns 16.3% of UK
supermarket shares, and Morrisons, which owns 11.5 percent; this means the entry barriers to
entry are extremely high.
Its impact on organization
Oligopoly is a business environment in which a few companies compete fiercely with one
another. The retail industry in the United Kingdom is one of the best examples of an oligopolistic
market, with Tesco, Sainburys, Asda, and Morrisons as the key competitors. Tesco has been the
industry leader for a number of years, battling to grow its market share by opening new stores
and expanding its product range (Dierkes and Coppock, 2017). Tesco had 30.6 percent of the UK
market in 2009, but the market started to stagnate after that, making it more difficult for Tesco to
sustain and grow its market share in difficult economic times. Sainsbury’s increased its market
share from 16.1 percent to 16.4 percent at the same time. Furthermore, as a result of the
recession, customers of all income levels began to shop at major discounters such as Aldi and
Lidl, and Tesco's profits suffered as a result.
TASK 2
Explain the terms: stakeholders, shareholders and stakeholder analysis and application of
stakeholder analysis
Stakeholders: Stakeholder is a party which has interest in company and can affect the
company or get affected by the business. Stakeholders of an organisation majorly involves its
investors, customers, suppliers and their employees. Stakeholders of a business can be internal as
well as external and such members of the business can be affected or can affect the performance

and functions of the business (Domingo and et.al, 2015). Internal stakeholders are those
members who have interest and company engage with the business through a direct relationship
which involves employment, investment or ownership. Whereas, external stakeholders are those
who are not working within the organisation but can be affected by the actions and outcomes of
the business. External stakeholders involve suppliers, public groups and creditors.
The internal stakeholders of the company hold vital role in the company, the internal
stakeholders of Tesco involve employees, managers, board and executive committee and
shareholders. The external stakeholders of the company involve: suppliers, competitors, local
communities, pressure groups and the government.
Shareholders: Shareholder is also known as stockholder; these are the people, company
or institution which owns at least one share of a company stock which is known as equity.
Shareholders can face profits by purchasing the shares of the company, if the price of the share
increases. Whereas, if the price of the share decreases, this will lead to loss on the share which is
purchased by the shareholder (Gerbl and et.al, 2015). There are certain rights which share holder
holds such as voting in a meeting, dividend, distribution on workers can be decided by them.
Shareholders who control more than 50% of outstanding share of the company are known as
majority shareholders which have more power than minority shareholders, as minority
shareholders have less than 50% stock of the company.
The major shareholders of Tesco involve BlackRock, Inc., Norges Bank and Schroders
plc who have 6.64, 3.9995 and 4.99 % in the company respectively.
Stakeholder Analysis: Stakeholder analysis is a technique of identifying stakeholders
which will be involved in the project. Such stakeholders are identified before beginning of a
project. This approach helps in identifying potential changes which are related to interested
parties and all the information which is gathered is used to assess how interest of stakeholders
can be addressed by policy or other actions (Täuscher and Laudien, 2018).
The application of stakeholder analysis on Tesco has been discussed below:
Stakeholders Power Interest
Internal stakeholders The power of internal
stakeholders of Tesco, such
The interest of owners in all
managerial activities is high

Owners- as Owners holds high power
in all activities of the business
as they can decide all
functions and managerial
activities of the company.
as effective implementation
of all activities and operations
will be more profitable or
such internal stakeholders
(Halbert and Ingulli, 2020).
Employees- The power of such internal
stakeholders is low as
employees are not liable to
form decisions and are
assigned job roles which
needs to be completed by
them in the assigned time
period.
The interest of customers can
be fluctuating which can be
low as well as high. As the
interest of such stakeholders
can depend upon the work
which and working scenario.
External stakeholders
Customers-
Such external stakeholders
hold high power as they can
affect the sale and profit
margin of the company
(Ihtiyar and Aras, 2020).
These external stakeholders
can have high interest in the
activities of business which
will majorly affect the
profitability and productivity
of overall organisation.
TASK 3
HSBC is market leaders in today's banking world and identification of market regularly
plays a major role in continuous operations and managerial activity of business. Identification of
internal and external business environment helps HSBC in using technology which can speed up
their process of operating in the industry. Identification of factors is helpful for maintaining
competitive position by effective work life balance. It also helps in managing international
finance and get opportunities for business growth in emerging economies.
PESTEL Analysis
Pestel analysis is marketing technique which helps in identifying different macro
environment factors which can create an impact on the industry. PESTEL Analysis of company

is essential, as this marketing technique helps in identifying the change in business environment
and macro external business factors. Such factors can create an impact on the managerial
operations of the company and profit margins. The pestle analysis of HSBC is discussed below:
Political factors- Due to political stability which was an outcome of Brexit such factors
as created and huge impact on HSBC and brought uncertainty as to the functions of the business.
The company has ensured that all the rules, regulation, polices and legislations formed by the
government are and will be followed by the company. Since the tampering of markets by trade
wars between two countries has been so serious, regulations related to retail with China of
American products are frowned upon, businesses have been battling to secure a proper ground of
sale (Lee, 2017). The company's profitability would be affected by changes in tax policies in
different supply countries.
Economic factors- Due to huge impact of Covid-19 on the economy, this has affected
the sale and profitability of the visitors. By facing such adverse situation in the global pandemic
this resulted into customer switch as the customer demands during the pendency due to financial
instability. HSBC raises demand for its goods and diversifies its workforce by contributing to the
development of new job opportunities. With that in mind, internationalization and diversification
have been two main strategies adopted by the organization over the years, and they have been a
major factor in its success. Furthermore, as disposable income and household incomes have
decreased, HSBC has changed its promotional emphasis to value customers.
Social factors- There are several initiatives which are followed by HSBC as such
initiatives will help them in bringing social change and meet the demand of their customers.
Consumer demand for goods and services is largely determined by their values and behaviors,
which are influenced by social conditioning. HSBC is responding to these shifts by meeting the
demand for customer centric policies and programs become more mindful of helping customers,
resulting in a constant shift in their lifestyle.
Technological factors- Due to technological advancement, HSBC has faced many
benefits. The creation and implementation of online and digital transactions and transformation
capabilities is one of the most notable examples. Second, mobile applications and digital
transactions have provided consumers with convenience and ease, lowering labor costs. HSBC

has also spent a considerable amount of money on energy conservation programs in order to
meet its long-term goal of lowering its carbon footprint (Martins and Nienaber, 2018).
Environmental factors- Due to enormous pressure from government which focuses on
environmental issues. Such environmental pressure is created by the government and by
consumers which can affect the profit margin and revenues of the company. To minimize the
work pressure HSBC, the company has launched various initiatives such as removing use of
plastic and other initiatives. HSBC has stated that it would reduce its carbon footprint by 50% by
2020, in response to increased pressure on businesses to solve environmental concerns and
implement business practices that favor society. HSBC is also reducing the amount of waste
generated in their stores by encouraging consumers to be more socially conscious.
Porter five forces model and its importance
Bargaining power of customers- This factor of five forces model helps to identify the
bargaining power of buyers. HSBC serves millions of customers by offering them quality
customer services. Whereas, the bargaining power of buyers in UK as they are not organized and
it can easily switch to other competitor companies and banks. The market for HSBC is highly
competitive as there are numerous competitive companies which offer products and services at
lower price and interests, as this can create an impact on profit margins of the company.
Bargaining power of suppliers- HSBC operates with the help of 2500 suppliers in UK
and a greater number of suppliers around the globe. Suppliers hold less power in relation to
HSBC, as working with numerous suppliers is an advantage for HSBC to negotiate with them.
With the help of negotiations with suppliers, it helps HSBC to increase their profit margin
(Planita, 2015).
Threat of new entrants- The threat of new supermarket industry in UK is low, as it
requires huge use number of capital investment. As the company is operating on national and
multinational level, this helps them in facing benefits on economic scale and advantages from
their core competencies. As their will be less competition of new supermarket which can create
impact on the business, this leads to less threat for HSBC.
Threat of substitution- The threat of substitution of products is high as the products
which are offered by company can be substituted by other companies as well. HSBC offers wide

variety of products, plans and polices that can be an advantage or customers which leads to less
effect of substitution on the sale and profit margin of the company.
Competitive rivalry- There are many competitors and these companies focus on
promoting their products and services by using advertisement and different marketing
techniques. Whereas, HSBC is the leading supermarket company but can face intense
competition from rivalry companies and such competition can create an impact on profit margin
of the business. Several factors such as cost strategy, promotion strategy, interest rate, plan,
policies, programs and other strategies of the business can make them face high competition in
the industry (Prajogo, 2016).
Importance of model for HSBC
With the help of Porter five forces model, it helps HSBC in identifying their competitive
forces which will be helpful in gaining competitive advantage and maximizing the profitability
of the business nationally and internationally. The factors of porter five forces model help in
understanding the attractiveness of the company which helps to creating competitive pressures.
These forces involve potential buyers, suppliers, threat of new entrants, threat of substitution and
competitive rivalry companies, by identifying such factors it helps HSBC in identifying their
competitive position in the market by attracting numerous customers and gain competitive
advantage from their operations (Rudnicka, 2016). This is one of the primary ways that such
bank can retain brand loyalty within their customer base, and it ideally suits the oligopolistic
characteristics. According to the theory, firms in oligopolistic markets will frequently sacrifice
short-term profitability in order to gain market share. HSBC seems to be using this strategy,
recognizing that many of the consumers drawn by special deals will remain loyal until the offers
and extra coupons are no longer available.
TASK 4
Develop business in relation to short-term and long-term performance on the basis of KPI and
provide recommendations for improvements
HSBC will focus on setting targets which will be helpful for the organisation in
development of the business which will offer effective business performance and position in the
industry. Some of the short and long term targets which are set by HSBC are discussed below:

 Productivity and profitability- This KPI is based on short term performance which is
necessary for maximum productivity and profitability of the business. HSBC will focus
on targeting maximum number of customers which will be helpful for them in enhancing
the profit margin of the company, as this will be the outcome of incline in sale of the
products.
 Employee training program- This is the long term target of HSBC in which they will
regularly monitor the performance of their employees which will help them in identifying
the training need assessments and offer quality training to their employees based on their
performance deviations and knowledge (Saura, Palos-Sánchez and Cerdá Suárez, 2017).
Such targets will be helpful for the organisation in enhancing the performance and
productivity of the employees which lead to creating and maintaining a good brand image
in the industry.
 Employee retention- another long term target which is set by HSBC is to retain and
engage maximum number of their talented employees which will be helpful in
maintaining the brand image and productivity of the organisation. For ensuing retention
of employees within the organisation, HSBC will focus on motivating their employees,
ensuring positive working scenario in the business and by appraising and rewarding
employees will be a helpful approach for HSBC in retaining maximum number of
talented employees.
Recommendations
 Identification of markets- Through identification of markets with the help of effective
research and development team, HSBC can identify the changing business environment
which can help them in identifying opportunities that can enhance the profitability of the
business sand threats which can affect the overall functions of the organisation. Such
identifications help in meeting the demands of the customers which will lead to
maximum customer satisfaction and incline in sale of the products and service that can be
profitable for the business and HSBC can gain competitive advantage from such
measures (Schmidt, Kirchner and Razmerita, 2020).
 Effective training programs- By creating and organizing an effective training program,
it will help HSBC to improve the performance of their employees and this will also help

them in meeting the desired performance standards and organisational objectives by
forming constructive and innovative decisions. Such approach will also be helpful in
retaining maximum number of employees. This strategy will be helpful for HSBC as this
will help employees to willingly participate in managerial activities and will lead to
reduction in employee turnover and absenteeism.
 Effective utilization of resources- Another strategy which will be helpful in business
development for HSBC is effective and optimum utilization of resources as this will help
in meeting the demands of their customers on time and can be helpful in reducing the cost
and wastage which can be faced due to excess and under utilization of resources (Zhang,
Warner and Homsy, 2017). Such strategy will help in ensuring timely usage of products
by managing all inventories effectively and closely.
CONCLUSION
From the above project report, it can be concluded that business environment of an
organisation is dynamic and keep on changing which majorly affects the operations, competitive
position and profitability of the business. Several marketing techniques such as Pestel analysis
and Porter five forces model are used to identify the changing internal and external business
environment and how such factors can help an organisation in gaining competitive advantage.

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