Essay on Business Organizations and Case Study of Tesco

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Business and Business Environment
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Table of Contents
LIST OF FIGURES.......................................................................................................................3
INTRODUCTION........................................................................................................................4
SECTION 1 – ESSAY (LO1 & LO2)...............................................................................................5
TYPES OF ORGANIZATION....................................................................................................6
BUSINESS PURPOSE AND SUPPLY OF GOODS IN THESE SECTORS........................................7
SIZE AND SCOPE OF THE ORGANIZATION.............................................................................8
ORGANIZATION STRUCTURE AND FUNCTION......................................................................9
DIFFICULTIES IN TRANSITIONAL, INTERNATIONAL, GLOBAL ENTERPRISE..........................11
PART 2 – CASE STUDY: ‘THE UK SUPERMARKET SECTOR’ (LO3 & LO4)...................................12
A) PESTEL ANALYSIS..................................................................................................... 12
B) SWOT ANALYSIS AND PORTER FIVE FORCES OF TESCO...........................................15
CONCLUSION.......................................................................................................................... 21
REFERENCES........................................................................................................................... 22
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LIST OF FIGURES
Figure 1: Types of organisation................................................................................................ 5
Figure 2: Functional Structure..................................................................................................9
Figure 3: Divisional Structure................................................................................................. 10
Figure 4: Matrix Structure......................................................................................................10
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INTRODUCTION
Business Environment includes all the related internal and external factors that directly or
indirectly affect the organization. Internal factors include employees, management,
proprietors, etc. Whereas, external factors include government regulations, demand,
supply, recent market trends, etc. (Hamilton and Webster, 2018). New business
opportunities can be tapped if business environment is scanned in a proper manner. This
report will include an essay and a case study on different types of organization, size and
scope of the organization and organizational structure and function.
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SECTION 1 – ESSAY (LO1 & LO2)
Introduction
This essay will be discussing different types of organization based on their size, scope and
purpose and how these organizations are structured, functions and interlinked.
Body
There are different types of business organisations which are discussed as under:
Figure 1: Types of organisation
Source: (Ahmady et al., 2016)
SOLE TRADER
When an individual owns and runs all the business-related activities solely is known as a sole
trader. There is a legal difference between a sole trader business and its owner. The sole
trader has full control over its business activities. In any case, of debt, the sole trader has to
pay off its debt on its own.
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PARTNERSHIP
When two or more people come together desirably who agree to share business
responsibilities, profits and losses of the business under the influence of a legal agreement
that may be in oral or written form (Diksha, 2017). Partnership also comes into existence as
a part of expanding the business.
LIMITED LIABILITY
In this, the owner of the business is not held responsible for the debts or the liabilities that
arise in the business organization more than the amount that he has invested. It can be said
that the investors and the partners have limited liability in any case.
FRANCHISE
In this concept, the company i.e. the Franchisor gives the right to the party i.e. the
Franchisee to sell its products and service offerings by using its business name and identity.
In this, the franchisor acquires money from the franchisee as an initial start-up fee.
TYPES OF ORGANIZATION
PROFIT ORGANIZATION
An organization whose prime objective is to earn and maximise profits is known as profit
organization. The money earned out of profit is then used as a means for the expansion and
growth of the business. (Subramanian et al., 2016) These types of organization mainly focus
on increasing the revenue of the business and if a company’s revenue that is generated is
more than the cost then it is said to a profit organization.
For example,
The example of a profit organization is Tesco PLC is a UK based retailer that offers regular
merchandise and groceries. It is a multinational retailer.
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NON PROFIT ORGANIZATION
An organization that has been permitted an exemption from paying taxes because the
money that is received is further dedicated to the welfare and development of the society.
Their ultimate aim is not to earn profit rather help society for its development and growth.
The key features on which it works are honest, reliability, trust.
For example,
The example of non-profit organization Macmillan Cancer Support is a specialist health care
issue and provides financial and information aid to cancer-prone patients. Its aim is to
support people with cancer in the UK.
GOVERNMENT ORGANIZATIONS
Organizations that are government-owned and the operations that are carried out are also
by the government bodies only are said to be government organizations. These
organizations came into being to serve and support the citizens of the country. The
government establishes, owns and operates these kinds of organizations (Chenhall et al.,
2017). They do not focus on attaining profits for themselves instead; they mainly focus on
meeting the needs of the public.
For example,
The example of government organization Department for Work and Pensions is a UK based
government department that mainly looks upon the welfare.
BUSINESS PURPOSE AND SUPPLY OF GOODS IN THESE SECTORS
Profit Sector
The example for Profit Sector is Tesco PLC, headquartered in England, the UK offering
regular merchandise and grocery through its retail outlet. It has seven outlets across the
countries (Chenhall et al., 2017). Its main purpose is to attract customers by offering them
products that range from low cost to high cost that is Tesco Value items to Tesco Finest
range of products.
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Tesco PLC has its own Supermarkets, Hypermarkets, Superstores and convenience stores for
offering a wide range of products to its target customers.
Non-profit Sector
The example for the Non-profit sector is Macmillan Cancer Support, headquartered in
Somerset, the UK offering its specialised services in health care. Its main purpose is to
provide specialised health care treatment and financial aid to cancer-prone people
(Quraishi, 208). It also provides awareness through information to the people who need it. It
provides treatment to the people and also makes them aware so as to make cancer relieved
society.
Government Sector
The example for the Government sector is the Department for Work and Pensions,
headquartered in London, UK. The government department that mainly looks upon the
welfare and the pension policies. It provides information regarding pension services,
disability and carer services, to help the people who are not aware of their rights.
SIZE AND SCOPE OF THE ORGANIZATION
MICRO ENTERPRISE
When a group of less than 10 people come together, establishes and operates an
enterprise, which is on a small, scale is known as a micro-enterprise (O'Connor et al., 2016).
A small amount of capital is invested and required to run a micro-enterprise also the capital
that is invested does not go beyond twenty-five lack rupees. One of the examples of micro-
enterprise in the United Kingdom is Castle Hill Fire Protection Ltd the company is said to
have achieved around 145% turnover in the last three years (Hillary, 2017).
SMALL ENTERPRISE
An enterprise that does not involve a large amount of capital and also there are very less
number of employees working is said to be a small enterprise (Hillary, 2017). In this type,
the amount that is invested and required is more than 2.5 million but does not exceed more
than 5 million. One of the examples of small enterprises in the United Kingdom is Cafe Pod,
Trusted Housesitters that has grown rapidly with revenues growing by 70%.
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MEDIUM ENTERPRISES
An enterprise that is growing slowly but at a steady pace having not more than 250
employees is said to be a medium enterprise. In this type, the amount that is invested and
involved exceeds five million but is not more than ten million. One of the examples of
medium enterprise in the United Kingdom is Verdant Leisure who has invested 6 million in
the past two years and its annual turnover is 31 million (O'Connor et al., 2016).
LARGE ENTERPRISE
An enterprise that is very big in size, as well as the employees, are also in a large capacity is
known as a large enterprise (O'Connor et al., 2016). These enterprises require a large
amount of capital for carrying out its operations that involve an investment of more than
ten million having varied branches and offices. One of the examples of a large enterprise in
the United Kingdom is ADM Group 400 hundred people in 27 offices in 19 countries (Hillary,
2017).
ORGANIZATION STRUCTURE AND FUNCTION
Each organization has its structure which it follows. And any organization works on that
basis only. There are mainly three types of organizational structure:
FUNCTIONAL STRUCTURE
An organization that is divided among various functional departments like Production, HR,
Marketing, and Accounting are known as a functional structure of an organization. Mainly
small enterprises are preferable for this kind of division. For example Café pod, etc.
Figure 2: Functional Structure
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Source: (Ramanadham and V.V, 2019)
DIVISIONAL STRUCTURE
An organization that has to carry out its operations in different geographical regions tends
to go for divisional structure. It creates ease for large companies to operate (Maduenyi et
al., 2015). Also, it is adopted by those companies that have their smaller branches in other
areas covering various types of products. For example Verdant Leisure, etc.
Figure 3: Divisional Structure
Source: (Ahmady et al., 2016)
MATRIX STRUCTURE
It is the most important type of structure, where divisional structure and functional
structure both are used in combination. It focuses on the dual management system that is it
is used in larger organizations that mainly wants to benefit from both structures. For
example ADM group, etc.
Figure 4: Matrix Structure
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Source: (Egelhoff et al., 2019)
DIFFICULTIES IN TRANSITIONAL, INTERNATIONAL, GLOBAL ENTERPRISE
TRANSITIONAL ORGANIZATION
Organizations that control over operations like production and service delivery in various
countries that is more than one are known as transitional organizations. These are basically
multinational organizations (Hamilton and Webster, 2018).
INTERNATIONAL ORGANIZATION
Organizations that operate in more than one country and also have its business set up in
various countries are known as an international organization. It is difficult for the
international organization to carry out its operations only when they do not have a properly
structured format of communication among the subsidiaries and then problems arise.
GLOBAL ORGANIZATION
When the organization is divided and carry out its functions based on a global format rather
than based on the products are known as a global organization. These organizations
operations are based on various geographical regions and the product line that they offer.
The example for this is the ADM Group which has its operations in 19 countries having 27
offices (Hamilton and Webster, 2018).
Conclusion
It can be concluded that difficulties occur in organizations that are solved on the basis of
their size and scope.
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PART 2 – CASE STUDY: ‘THE UK SUPERMARKET SECTOR’ (LO3 & LO4)
A) PESTEL ANALYSIS
PESTEL Analysis is a strategic tool that is used to identify the political, Economic, Social,
Technological, environmental and legal factors that affect an enterprise. would be
conducted in United Kingdom Supermarkets.
POLITICAL FACTORS
Political factors include all the factors related to the political element of a country that will
affect the performance of the supermarket industries. Various tax decisions, legislation
decisions, decisions related to economic conditions are taken by the government that will in
end affect and have a huge impact on the supermarket industry (Kaur and France, 2018).
These political decisions that are taken by the government of the country affect the
companies and leaders in various manners like pricing decision, supply chain decision, etc.
The social and economic environment can also get influenced indirectly by the political
environment in which it is prevailing. This implies that the political environment has the
ability to affect both economic as well as social factors, For example, the local council
proposed a tax on big supermarkets which was known as Tesco Tax but the government of
United Kingdom refused for this so as to avoid rise in the prices (McEachern and M.G, 2017).
ECONOMIC FACTORS
Economic Factors include factors related to the inflation rate, labour cost; the price of one
commodity has an effect on the consequently related commodity. These factors mainly
include inflation and due to inflation rate going down for supermarkets customers want to
save money rather than spending (Kaur and France, 2018). Economic factors like a hike in
the price of petrol have an adverse effect on the supermarket shoppers because people
then tend to buy things from an online store instead of going out at a supermarket and shop
for saving their money that is going to spend on the fuel. Consumer buying behaviour is
generally considered in social factors but as this affects the economic condition of the
country this is added in economic factors of the country. Economic Factors also affects
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