Unit 1: Business and the Business Environment - Tesco Case Study

This report examines the business environment of Tesco, a multinational grocery and merchandise retailer, using a case study approach. It explores different types of organizations, the interrelationship of organizational functions, and the impact of macro and micro factors on business operations. The report utilizes PESTLE and SWOT analysis to identify key factors influencing Tesco's success and provides a critical evaluation of the complexities of business structures and decision-making.

Unit 1: Business and the Business
Environment
1

Table of Contents
Introduction......................................................................................................................................4
LO1 Explain the different types, size, and scope of organisations..................................................5
P1 Explain different types and purposes of organisations; public, private and voluntary sectors
and legal structures......................................................................................................................5
P2 Explain the size and scope of a range of different types of organisations.............................7
M1 Analyse how the structure, size, and scope of different organisations link to the business
objectives and product and services offered by the organisation................................................9
LO2 Demonstrate the interrelationship of the various functions within an organisation and how
they link to organisational structure..............................................................................................10
P3 Explain the relationship between different organisational functions and how they link to
organisational objectives and structure......................................................................................10
M2 Analyse the advantages and disadvantages of interrelationships between organisational
functions and the impact that can have on organisational structure..........................................12
D1 Provide a critical analysis of the complexities of different types of business structures and
the interrelationships of the different organisational functions.................................................13
LO3 Use contemporary examples to demonstrate both the positive and negative influence/impact
the macro environment has on business operations.......................................................................14
P4 Identify the positive and negative impacts the macro environment has on business
operations, supported by specific examples..............................................................................14
M3 Apply appropriately the PESTLE model to support a detailed analysis of the macro
environment within an organisation..........................................................................................18
2

LO4 Determine the internal strengths and weaknesses of specific businesses and explain their
interrelationship with external macro factors................................................................................20
P5 Conduct internal and external analysis of specific organisations in order to identify
strengths and weaknesses..........................................................................................................20
P6 Explain how strengths and weaknesses interrelate with external macro factors..................22
M4 Apply appropriately SWOT/TOWS analysis and justify how they influence decision-
making.......................................................................................................................................24
D2 Critically evaluates the impacts that both macro and micro factors have upon business
objectives and decision-making.................................................................................................25
Conclusion.....................................................................................................................................26
References......................................................................................................................................27
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Introduction
For every business organisations, it is highly important to consider both internal as well as
external environment before taking any decision related to business activities. Operational
activity and profitability get affected by external and internal factors so it is essential for the
company to give focus on employees, suppliers, management, demand, supply, business
regulation, competitors etc. This project report is based on Tesco which is a multinational
company in the United Kingdom. It is largest merchandise retailer and grocery organisation that
offer high-quality products to customers. This organisation faces tough competition from its
competitors such as Morrison’s, ASDA, Sainsbury’s etc. This report is categories into four
sections in which the first section examined various different types of an organisation like the
public, private and voluntary. The second part has been analysed the different purpose of public,
private and voluntary sectors with their legal structures. Pestle analysis has been examined in this
report that helps the company to identify all factors that affect its operations. In the fourth
section, external and internal factors have been discussed to analysis the strengths as well as
weaknesses of the company.
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LO1 Explain the different types, size, and scope of organisations.
P1 Explain different types and purposes of organisations; public, private and voluntary
sectors and legal structures
There are various different types of organisation which are a sole trader, partnership, and limited
organisation. These are discussed as under:
Sole trading organisation: This type of organisation is owned by the only single person who is
liable for all profit as well as loss. In this, all responsibilities and liability of the company depend
on the single person. It is also known as a sole proprietorship because it is operated and owned
by one person who does not need to follow any kind of legal structure. The biggest advantages of
a sole proprietorship are that he will bear high profitability individually and the biggest
disadvantages are that if the company get loss then he will be a single person who is liable for it
(Yüksel, 2012).
Partnership organisation: When two or more person ready to share their profit and loss equally
and ready to make contract then it is known as partnership organisation. There are so many
advantages of partnership firms such as they do not require paying income tax separately, high
profitability and productivity, capture more market share, great ideas, and thoughts. Partnership
business assists to increase the revenue and sales in the large competitive marketplace. Apart
from this, there are various disadvantages of a partnership like the chance of conflicts arises
between partners, not the clear transparency of shares, limited capital and many more.
Purposes of the organization are as follows:
Types of organization Purposes of the organization
Public SECTOR It is healthcare organisation which offers high-quality healthcare
facilities and services in the United Kingdom. The major aim of
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(National Health Service) National Health service is to fulfil needs of people and deliver
free services to those people who unable to afford treatment.
There are huge numbers of employees who are employed in the
organisation for achieving set goals and objectives in the certain
time period.
Private SECTOR
(TESCO Company)
It is largest grocery and merchandise retailer organisation in the
United Kingdom which offers high-quality goods and services to
customers. The main objective of Tesco is to provide products
according to the market as well as customer’s requirement for
enhancing their level of satisfaction (Writing, 2017). It is a
private organisation which has the main motto to earn high-profit
margin and sale.
Voluntary SECTOR
(Red Cross)
The British red cross is a non-profit organisation which works
for the welfare and benefit of the society. It is a voluntary
organisation which does not have main aim to earn high
profitability. This organisation provides so many services to
fulfil the requirement of people and society.
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P2 Explain the size and scope of a range of different types of organisations
There are different size and scope of every business organisation that plays a very important role
in the marketplace for achieving high growth and success effectively. Size of the organisation
influence the stakeholder’s which enhance the profit margin. Generally, the size of the enterprise
totally depends upon the number of employees who employees there. There are different types of
organisation which are small, large, medium and micro organisation.
(Figure: Factors deciding the size of the organisations)
(Source: Laporte, et. al., 2017)
There is less employee requirement in the micro company for fulfilling the requirement of the
customers. In a micro organisation like Plaza shops, there are less than nine people employed to
earn revenue. In the medium size enterprise, there can be less than 1000 employees and
maximum 100 employees. In a small organisation, there are 50 or less than 100 employees who
employees for generating income. Tesco is a large business organisation which generates high
profit and sales margin every year. It has over 476000 employees who work for the betterment of
the organisation (Wetherly and Otter, 2014).
In the below table various scope and scope of different types of the organisation has been
examined.
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Types of organization Purposes of the organization
Private organization
(TESCO Company)
It is multinational merchandise and grocery
retailer in the United Kingdom. There are huge
employees more than 476000 who work for the
betterment of the organisation. Tesco offers
high-quality products and services to its
domestic as well as foreign customers. There
are over 6553 stores of Tesco in all around the
world through which company earns high
revenue and sales every year.
Voluntary organization
(Red Cross)
Basically Red Cross is a non-profit
organisation which works for the welfare of the
society. The annual revenue organisation is
US$2, 974, 133, 83. Red Cross assist people in
the recession time. The main aim of the
company is to fulfil the requirement of people
effectively (Shehu and Mahmood, 2014).
Public organization
(National Health Service)
The National Health Service is largest
healthcare system in the United Kingdom. The
main motto of the organisation is to fulfil the
needs and demands of people and deliver free
healthcare services to poor people who are not
able to afford high treatment. In NHS there are
over 1.4 million employees who provide high-
quality healthcare services.
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M1 Analyse how the structure, size, and scope of different organisations link to the
business objectives and product and services offered by the organisation.
As there are some different kinds of business organisation and every organisation has their own
goals and objectives. Size and scope of the organizations are important factors which help in
making business goals and predetermined objectives. There are several kinds of the organisation
– small, medium size and large organization. Organisations need to set their work and do their
work so to achieve their desired goals. If managers and employees of the organization do not
know about the size and the services of the organisation then how can they work? So for this, it
is required to properly aware of the size and work of the organization (Glor, 2014). In this task
here is the example of a private company –Tesco. Tesco was established by a single person. As
the owner of Tesco clearly know about the size of the organization so that he worked after kept
all the factors related to the scope and objectives of the organization. Meanwhile, in the current
period, Tesco is one of the multinational grocery and general merchandise in the UK. The
different organization has their own objectives but some objectives are similar in all the
organizations like – customer satisfaction, profit-making. Objectives of the organisation are
based on the scope of that organization.
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LO2 Demonstrate the interrelationship of the various functions within an organisation and
how they link to organisational structure.
P3 Explain the relationship between different organisational functions and how they link to
organisational objectives and structure.
Tesco has an organisational structure that assists to manage business activities in a proper way
and to control management process. Tesco is largest retailer organisation in all around the world
which have huge structure organisation and manage proper hierarchy to manage and control
organisational structure. There are various different level and department within the organisation
which manage control entire organisational structure in a proper manner. Tesco uses very simple
organisational structure to achieve high growth and development in the large competitive
marketplace. Marketing, finance, operational, human resource, IT and production are some
departments of the organisation to assist in achieving high profitability as well as productivity
effectively (Scott and Davis, 2015).
(Figure: Department of the organisation)
(Source: Bluemner, 2013)
Marketing: With the help of marketing department Tesco analysis the relationship between
customer and organisation. This department provides appropriate information about customer’s
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needs and current demands so that organisation produces goods and services accordingly. The
marketing department is linked to other departments such as operation, production, and finance.
If marketing department provides wrong information then entire organisational structure get
affected.
Production team: This department play most important role in the profitability as well as
productivity of the organisation. According to the information which is given by marketing
section it produces goods and services for customers. To enhance sales and profit margin it is
essential for production department to produce good quality products that fulfil customer’s
current requirement effectively (Peppard and Ward, 2016).
Human resource department: It plays a most important role within the organisation to control
and manage other departments. Human resource hires highly skilled and qualifies employees
who perform a business activity in most appropriate and proper manner and easily tackle a
difficult situation. This department provides salary, rewards, and punishment to employees on
the basis of their performance in the workplace.
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M2 Analyse the advantages and disadvantages of interrelationships between organisational
functions and the impact that can have on organisational structure.
The business organization is the combination of different levels of employees. The relationship
between employees and managers explains the work, task, and communication, formalities and
practices which are done to avoid the duplication of work. Different organisations have a
different level of operational working. So, it is necessary for every organisation to maintain the
relationship between all the employees and make a peaceful environment for their working
(Eruemegbe, 2015). Tesco is the organization which deals with many things so for this it is
required for them to maintain the relationship between employees healthy and biasedness. Here
are some advantages and disadvantages of interrelationship -
Advantages Disadvantages
If the proper relationship is maintained by
the employees then they clearly know the
different aspect related to organisation and
work.
In organizational functions as everyone
knows each other’s work so they can hide
some information which is beneficial for
others.
Helps in maintaining cooperation. It increases the competition in the
organisation.
Helps in remove duplication work Employees do one particular work all the
time it creates demotivation.
The interrelationship between organisational functions is very important in every organisation. It
increases the profit of the organisation because employees share all the information with others
employees too.
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D1 Provide a critical analysis of the complexities of different types of business structures
and the interrelationships of the different organisational functions.
As each organization has different organizational structure and performs different functions.
These functions are being performed by the lower level managers and top-level managers. There
are various types of complexities being faced by the organizations. Below are the critical
analyses of these complexities:
The decisions which are taken by the top level managers are being considered to be right. As
they consider all the point before taking any decision. This also provides the benefit to the
employees and other staff members. On the other hand, the top level managers look at their
benefit at first. The decisions are taken are not fruitful for the` employees and the organization
(Glor, 2014).
The divisional structure is helpful in dividing the activities and work according to the different
areas (Teixeira, et. al., 2012). The production is being done by the production departments. All
the activities related to the production are being taken care production department. Same as the
marketing activities are handled by the marketing department. The adverse effect will be that all
the departments take care of their work and activities to be performed.
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LO3 Use contemporary examples to demonstrate both the positive and negative
influence/impact the macro environment has on business operations.
P4 Identify the positive and negative impacts the macro environment has on business
operations, supported by specific examples.
Every business organisation is surrounded by business environment so it is essential to consider
all the factors while taking important business decisions or making business planning to attain
the result. Tesco is multinational retailer organization that is highly influenced by external
factors this is why management of company consider macro factors business in the environment.
Tesco is largest Merchandise and grocery retailer in all over the world that considers external
elements for achieving high probability and growth in the large competitive market (Kew and
Stredwick, 2017). There are several Impacts of macro factors on Tesco which is explained as
below:
Positive Negative
Political factor This factor includes text
policy trade agreements
political stability as well as
Government support that can
impact positively and
negatively on the probability
and growth of Tesco. for
example, if the government
of UK develops positive text
policy through which
business organisation can
gain high growth
opportunities and enhance
their profit margin
The business organisation
gets influenced by
continuous changes in
political policies that impact
negatively on the operation
and functional activities. For
example, if the government
of you came will develop
high tax policies that will
affect negatively on the
profit margin and sales of
Tesco (Humer, et. al., 2013).
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effectively this will make a
positive impact on Tesco.
Economical factor These factors include the
interest rate population
rate inflation rate income
level economic growth of the
country. For example income
level of UK is great which
entrance them which
influence them to purchase
such an expensive product
and services of Tesco.
Sometimes the high-income
level of people can impact
negatively on the business
organisation to do mess
manufacture of products
because of the high level did
you want more due to which
company faces pressure. For
example, high demand for
grocery good can put high
pressure on employees of
Tesco.
Environmental factor It includes where are
environmental factors like
weather climate changes and
many more that influence
business activity of Tesco.
Environmental factor assists
the organisation to use our
available resources and most
appropriate manner to
enhance sales and probability
(Grimsley, 2014).
Environmental factor
inference negatively and
business operations of Tesco
so it is necessary to use
available resources in a
proper manner. If
temperature increases rapidly
then it impacts negatively on
product and services of
Tesco.
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Legal factor The government of UK
develops so many laws and
regulations such as
employment law equality law
equal pay etc that reduce
unfairness. Legal factor
makes aware of employees
for their rights and duties
which impact positively and
business activities of Tesco.
Any business organisation
does not follow legal factor
then it will impact negatively
on their probability and
business activities. So it is
highly important for every
company to implement all
legislation in a proper
manner.
Social actor Social factors include health
perception age distribution
growth rate education level
etc people will be more
aware of product and
services of Tesco if they are
highly educated and
qualified.
Continuous changes in
demand perception need
demographic attitude wants
of people business
organisation face so many
problems in production and
manufacturing process.
Technology factor Technology factor decreases
the money as well as efforts
of the employee and
organisation through which
Tesco gain high profitability
and productivity. It also
Expenditure of Tesco will
rise due to expensive
machinery and equipment.
Tesco needs to spend high
capital to purchase advance
technological devices and
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helps in achieving set goals. equipment for the production
process.
.
17

M3 Apply appropriately the PESTLE model to support a detailed analysis of the macro
environment within an organisation.
The business environment is affected by both internal and external environment. The internal
environment is that which control in the hands of the managers is. Whereas external environment
is a combination of all the external factor which influence the business environment. The
external environment is of two kind – micro and macro environment. Here is the Pestle analysis
of Tesco (Ho, 2014)-
(Figure1- PESTLE Model)
(Source- Adams, 2015)
Factors
Political Tesco is the organization which is the grocery market leader in the UK.
Tesco is a retailing company, it affected by the political factors.
Political factors like tax rates, acts of legislation.
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economic The economic factor is related to the wealth of the organisation. Main
concern point of Tesco is leverage cost, demand, profit, and prices.
Social As trend, taste, and preference of the society change continuously.
Tesco understands the social changes and adapting these changes in
their product and services.
Technological Development of new technology increases the new opportunities for
Tesco. Here are some technological changes which help in increasing
the business of the organisation.
Legal Government rule and regulation impacts the performance of Tesco.
Tesco reduces its prices of various products.
Environmental The environment is an important factor. Considering the environment
Tesco is minimising the waste product and reduce its carbon footprints
(Eruemegbe, 2015).
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LO4 Determine the internal strengths and weaknesses of specific businesses and explain
their interrelationship with external macro factors
P5 Conduct internal and external analysis of specific organisations in order to identify
strengths and weaknesses
With the help of SWOT, analysis Company can easily identify its strength, weaknesses,
opportunities, and threats which assist in attaining high growth and development in the large
competitive marketplace. It is highly important for the Tesco to determine its internal
environment that includes management, employees, culture, structure etc which can be
controlled by the organisation. Tesco is unable to control external environment which exists
outside the organisation. By taking help of SWOT analysis Tesco can identify both internal and
external factors.
SWOT analysis
Strengths Weakness
 Fast increase in brand value as well
as image.
 Enhance market share in the large
competitive marketplace
 Great commitments
 Adopt strong strategies and good
plans to enhance productivity.
 Qualified and skilled employees.
 Inflexible organisational structure
 Low reputation global market
because of high competitors
 Face huge competition pressure from
competitors.
 Less effective strategies for adopting
modification and new changes (Dunning,
2012).
20

Opportunities Threats
 By using advanced methods and latest
equipment Tesco can grab new growth and
development opportunities.
 Great strategies and plan assist the
organisation to expand its business operation
in large market segments.
 Marketing strategies help Tesco to
gain huge competitive advantages.
 High fluctuations in currency impact
negatively on the demand of customers due
to which company face the problem. It is the
biggest threat to the organisation.
 There is very tough competition in
the marketplace as lots of substitutes
available in the market.
 Tesco has lots of competitors such as
Sainsbury’s, ASDA etc which is a threat to
the organisation.
Hence, SWOT analysis help Tesco can identify its strengths, weakness, opportunities, and threats
through which company can achieve its set goals and objectives effectively. Tesco uses Swot
analysis to identify both internal and external factors that impact positively and negatively on
business operations (Dillon, 2014).
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P6 Explain how strengths and weaknesses interrelate with external macro factors
Tesco is one of most popular grocery and merchandise retailer in all over the world which has
interlinked with the legal, political, social, economic and environmental factors. To achieve set
objectives and goals company have to evaluate interrelation between strengths and weakness
with macro factors. This can be explained as under:
Factor Interrelation
Political This factor influences the organisational
operation and function so it is essential for
Tesco to evaluate the current political position.
Economic Tesco can attain high profit as well as sales
margin by effective economic conditions. This
factor influences both negatively and positively
on business activities.
Social It is necessary for the company to identify
social factor for achieving set goals and
objectives because preferences, needs, and
demand of customers changes quickly that
impact negatively on the production process.
Technological To accomplish high profitability and
productivity it is necessary for an organisation
to use high technology and advanced
equipment. Employees of the company should
have proper knowledge about technology so
that they can use them effectively introduction
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process (Bock, et. al., 2012).
Legal Continues changes in the tax rate, international
trading rate, business policies etc can impact
business activities. Tesco operates its functions
by following all law and legislation in a proper
manner if the government make fast changes in
tax policies and trade rate.
Environment This factor includes climate, weather and
environmental changes that influence business
operations. The production process of Tesco
gets influence negatively and positively by
environmental factors.
23

M4 Apply appropriately SWOT/TOWS analysis and justify how they influence decision-
making.
SWOT analysis is the analysis of both internal and external factor of the organisation. Strength,
weakness, opportunities, and threats are the basic factors of SWOT analysis (Abdi and Ashouri,
2013). Strength and weakness are the internal factors of the organization whereas opportunities
and threats are external factors of the organization.
Factors
Strength Strength is the internal factor of the company. Tesco has won lots
of awards for various product and services of the company. The
company has good cash reserves, good financial position in the
market. It serves as per the customer needs and provides the better
quality product.
Weakness As Tesco open their outlet at various places but proper care and
maintenance are not done. Some stores have not performed
properly. Proper research is not done by the Tesco due to it they
face some and another kind of problems.
Opportunities There are too many opportunities available for Tesco – provide
more products and services. In current time people go for online
shopping so they can increase their online services and provide
home delivery.
Threats There are various kinds of threats available for the organizations
like- governmental threat, competitor threat, and labour threat.
Rising raw material cost is one of threat also.
24

D2 Critically evaluates the impacts that both macro and micro factors have upon business
objectives and decision-making.
Both macros, as well as micro factors, influence the decision-making of the business
organization so it is essential to consider them in planning and decision process.
If competitors of Tesco such as ASDA, Sainsbury’s etc sell same goods and product at less price
then this organisation face so many problems. Thus, it is necessary for Tesco to consider them
while taking any important decision for the price policy. For satisfying customer’s current needs
and demands, it is important for an organisation to offer high-quality product and services at less
price.
It is highly important for the organisation to analysis the working culture and relationship
between employees and managers for reducing issues within the workplace. Employees will
make more efforts to achieve the best result if they are satisfied with the work. Tesco maintains a
good relationship with suppliers for achieving high growth and development in the large
marketplace (Bluemner, 2013).
Tesco will get high-quality raw material from suppliers through which they can produce goods
and services according to the requirement of the customers. If the organisation does not give
attention to suppliers demand then they will not ready to give the raw material in frequent cost.
There are so many micros as well as macro factors that influence both ways positively and
negatively on the decision of the organisation. Hence, it can be said that organisation should
consider them while making any strategies and decision related to business practices for
accomplishing set goal and objectives effectively in the certain time period (Adams, 2015).
25

Conclusion
By analysing this report it has been analysed that there are several factors which affect
operations and business activities that which should be identified by the company. Internal
factors such as employees, suppliers, customers etc can affect business which can be controlled
by the company by taking right decision and planning. The company has no control over external
factors like social, economic, political, legal and environment which must be considered while
developing strategies and plan for the business activities. With the help of Pestle and Swot,
analysis Company can easily evaluate those factors that can impact on its business activities in
both ways negative and positive. This report gives focus on three types of organisation which are
public, private Tesco considers both internal as well as external factors in order to achieve high
growth and success in the large competitive marketplace. The small and large organisation can
attain high profit and sales margin by matching the requirement and demands with the structure
that they adopted. To achieve high profitability and success in the large competitive business
environment it is necessary for Tesco to include micro and macro factors in decision making and
planning process.
26

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