Report on the Business Environment and its Impact on Tesco

This report delves into the business environment and its impact on Tesco, a multinational supermarket. It begins by defining the business environment and its significance, followed by an analysis of different industry types—public, private, and voluntary—and their purposes, using the National Health...Read More

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1...............................................................................................................................................1
P1 Types of industry and its purposes.........................................................................................1
P2 Size and scope of different types of industry.........................................................................3
Task 2...............................................................................................................................................4
P3 Relationship among different organisational functions and their link to objectives and
structure.......................................................................................................................................4
Task 3...............................................................................................................................................5
P4 Positive and negative impacts of macro environment on business operations......................5
Task 4 ..............................................................................................................................................7
P5 Internal and external analysis of specific industry for defining the strength and weakness..7
P6 Strength and weakness interrelation with external macro factors.........................................8
CONCLUSION................................................................................................................................8
REFERENCE.................................................................................................................................10

INTRODUCTION
Business environment is the total of internal and external factors which affect an entity.
The main aim of this report is to understand how business environment impacts on business.
Organisation runs business and expand it for earning profits (Trad, 2015). To understand this
Tesco has been selected that is private company deals in multinational products and services.
The current report will discuss about different types of industry and their purpose, legal structure,
size and scope of entire enterprises. Additionally, report will have covered positive and negative
impact of macro environment that help to operate business successfully. Apart from this report
will state the strength and weakness interrelate with external macro factors.
Task 1
P1 Types of industry and its purposes
Organisation is the combination of internal and external elements that help to achieve
business goals. It may be in the form of human association and institution who make efforts in
order to run a business effectively. The main aim of business organisation is to increase the
productivity and become world's best organisation that help to achieve objectives. There are
there types of organisation public, private and voluntary company whose description is given
below-
Public company: This means a company whose shares are freely traded on stock
exchange and it arranges capital from public sources is known as public company. This type of
organisation is able to raise funds and capital through selling of securities at marketplace. Any
company that has more than $10 million in capital and 500 shareholders is required to get
permission from securities and exchange commission authority. Such as National Health services
is public company that was established in 1948. it provides health care services to customers and
make them feel good. It collects funds by issuing shares publicly.
Purpose: The main purpose of NHS is to improve the quality of services and provide
maximum satisfaction to customers. Additionally, to deliver the health and care services at
global market by expanding the business (Rossano and et.al., 2016).
Legal structure: This means a legal corporation that has capacity to enter in to
agreement or contract in order to run a business successfully. The public organisation follows the
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different types of legal structure such as central government, general government, state
government and local government that give a permission to run a business.
NHS is following general government legal structure that help to run a business easily by
giving the permission. Additionally, it helps to expand the services which is provided by NHS.
Advantages: It help to provide good health to people by focusing their needs and wants.
The public sector works for non profits who help to provide maximum benefits to its customers.
Such as NHS is public sector organisation that provides better quality of health services to
people.
Disadvantages: It has drawback also such as it works for non profit so it need to arrange
the capital which is difficult for organisation because shareholders does not get ready easily to
invest for less profit.
Private company: It states that a business organisation who arranges capital from
internal sources such as friends, relatives and by own self in order to run a business is known as
private company. The shares of private company are not freely traded at stock exchange or over
a counter. Tesco is British multinational super market private organisation that deals in groceries
and other retailing product in order to attract the customers. It was established in 1919 by Jack
Cohen. It provides number of product and services at larger market and raising profits
continuously.
Purpose: Tesco's main purpose is to create the value for customers and earn more profits
by selling number of products and services at global market.
Legal structure: Private company involves sole trader, partnership, cooperatives, private
limited and public limited as legal structure. Tesco is following public limited legal structure that
increasing profits by selling the number of product and services (Linder and Williander, 2017).
Advantages: The main advantage of Public sector is to maximize the profits by making
efforts within organisation. It help to complete goals by concerning with shareholders that help
to increase the profits. Such as Tesco is public limited company who introduce from new
products and services in order to increase the number of customers.
Disadvantages: The main disadvantages of public sector is government has to bear
losses and can charge high taxation rate from private enterprises. The choice of customer can be
restricted to the states in case of monopoly. So it may be disadvantages for Tesco that it has to
pay high tax amount and political pressure.
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Voluntary company: This means an organisation which is run for non-profit
organisation and it provides aid or services to individual, group of person and countries. The
main aim of this type of organisation is to provide the maximum satisfaction to customers and
develop the country. Oxfam is the charitable industry which was established in 1942 to remove
the poverty. This organisation focuses on alleviation of global poverty.
Purpose: Its main purpose is to reduce the poverty and provide a better life to poor
people. Moreover, to treat people equally whether poor or rich.
Legal structure: It includes an unincorporated association, a trust and a company limited
by guarantee which is used by voluntary groups in order to provide social services.
Oxfam is a voluntary organisation that follows Trust as legal structure. In this structure
many people give contribution to remove the poverty and increase the living standard of poor
people.
Advantages: It provide the benefits such as protection from personal liability without
making profits. It mainly focused on customer satisfaction by providing services. Oxfam is non
profit making organisation that get benefit of tax as it is exempt from tax and stays relevant in
business industry.
Disadvantages: There is need to invest time and money in voluntary sector and also need
to extra maintenance. So Oxfam is facing the problem such as no profits and prohibition from
political campaigning.
P2 Size and scope of different types of industry
Every organisation has different types of size and scope that help to decide business
nature. The size and scope of business depends on internal and external structure of business that
includes number of staff, capital, size of business, market share and organisational culture. The
size and scope of different organisation are described as-
NHS
National health services is public organisation that provides heath care services to
patients and others at reasonable cost. It charges very less prices from patients and provide them
best heath care services.
Size and scope: NHS is big in size that focuses on health and care of people and provide
them best treatment in order to remove diseases. It has wider scope which operates services
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across UK and planning to expand its services by providing services at large area (Lee, Lee and
Seo, 2015).
Vision and mission: Its vision is to provide best treatment patients who comes at there
and make feel them good that will help to increase the market share of business organisation.
And mission is to improve the health and care services and become more successful company by
providing health services.
Objective: Its main object is to focus on health of people and provide them best facility
in order to increase market share and expand business at large area.
Tesco
Tesco is the multinational supermarket that deals in variety of products and satisfy the
customer. Its main target is to expand the business at global market that help to earn more
profits.
Size and scope: Tesco is big in size as it operates business in 11 countries and it largest
company that deals in retailing products. Its scope is to capture untapped area that help to
increase the market share and more profitability.
Vision and mission: Tesco's vision is to be most highly valued business all over the
world by selling the products. And mission is to become world's largest company in retail
industry by making profits.
Objectives: Its main object is to increase profit margin by selling number of products and
raise the capital that help to maintain productivity and profitability.
Oxfam
Oxfam is voluntary organisation who focuses on social welfare by removing the poverty.
Its main goal is remove poverty by making strategy and planning.
Size and scope: It is larger in size as it is a federation of 20 independent charitable
organisation who focus on global poverty. The scope of Oxfam is stated as it serves services
around the globe that help to works for poor people.
Vision and mission: Oxfam's vision is to provide the maximum satisfaction to poor
people and create equality among rich and poor people.
Objectives: Its main object is to all the people should be treated as same and increase
the living standard of poor people (Korshikova and et.al., 2016).
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Task 2
P3 Relationship among different organisational functions and their link to objectives and
structure
Business enterprises are running their business by performing different functions at
market place. The main aim of business organisation is increase the productivity and profitability
that help to make further business decision. Organisation structure means a structure in which
employees or managers communicates with others in order to solve problems. There are different
types of organisation structure are defined as:
Tall structure: This structure is used by mostly large size of organisation that involves
taller hierarchy. Tesco can use this structure that can help to grow, increases the management
level and growth of business.
Flat structure: In this structure have few management level with controlling each level
of broad area and group. Tesco can use this structure by focusing on empowering employees
instead of adhering to the chain of command. It need to self direction for solving the problems.
Matrix structure: This is a structure in which reporting relationship can be set as a grid
and matrix rather tan traditional hierarchy. The manager of Tesco can use matrix structure help
employees to have dual relationship like grid and matrix in order to share information and get
solution of problems (Matrix structure of Tesco, 2016).
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Illustration 1: Matrix structure of Tesco, 2016
(Source: Matrix structure of Tesco, 2016)
From the above mentioned structure Tesco is using Matrix organisational structure that
help to achieve goals and objects. As shown in structure store manager of Tesco communicates
with food trading, non food trading and personal managers that consider in matrix structure. And
personal manager communicates with personal assistant, food trading manager coordinates with
fresh food section, ambient food section manager by following the grid structure. Moreover, they
coordinates with electrical and clothing section manager that help to address the problems and
with organisation in order to achieve goals or objectives. Tesco is super market that performs
different functions that is sated below:
Marketing function: It play an important role in all organisation such as it identify the
needs and wants of customer and produce products according. Tesco is using this function in
order to promote products and services that help to attract the customer and sell them products.
The main object of this function is to increase the number of customer through marketing the
product. It is related with HR and finance function such as marketing department get the needs
and wants of customer discuss with HR that help to hire the talented employee who can accept
the challenges. On the other side, marketing department collects the budget from finance
department that help to achieve organisation's objectives. It is link with matrix structure that help
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to achieve objectives such as HR manager communicates with food and non food manager in
order to provide facilities.
Finance function: Finance is the major function of all organisation which is used to
provide the finance with in organisation and run a business speedily. Tesco is using this function
in order to make money and keep records of all transaction which provides true and fair view.
This function is related with both HR and marketing such as finance function provides finance to
HR department to conduct the interview programme and hire best employees where as finance
function help in marketing to promote the products and services. It is link with matrix structure
such as the store manager coordinates with finance department that help to provide finance to
keep to raw material safe.
Human resource functions: This function helps Tesco to select the best candidates in
order to get work done at fixed period of time. The HR manager of Tesco conducts interview
programme and hire best candidates who uses their skills and experience in order to increase the
production and selling the products (Jo and Henry, 2015). It also links with matrix structure that
such as Human resource manger coordinates with all manager in order to accomplish goals and
objectives.
Therefore, it has been stated that HR, marketing and finance function are related with
each other and they are linked with organisational objectives or structure such as the main object
of Tesco is to increase the number of sale and profit margin. So achieving this object marketing
department HR department will hire the best candidate who can accept the challenges and
marketing department will help to increase the sale of multiple products and services. The
finance department will help to keep records of profits and will provide finance to both
department in order to hire and promoting the products.
Task 3
P4 Positive and negative impacts of macro environment on business operations
Macro environment contains external factors which affects the business organisation
whether positive or negative. It help to define that how an business organisation can expand
business by concentrating on macro environment. The impact of macro factors on Tesco is stated
as:
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Political: Tesco is dealing with retailing products at global market that pays import and
exports duty. It can impact on business because it imports goods from out side UK such as
China, and East Asia. If import duty rate increase than it has to pay more amount as result its
profitability will be decrease within organisation (Fleisher and Bensoussan, 2015).
Positive: Tesco can increase the profitability if import duty and tax rate will be stable as
it has to pay less amount and can think about more products.
Negative: If tax rate, import duty and government is not stable there is changes to get
loss in business because it has to large amount as tax and other duty.
Economical: This factor impacts on Tesco such as annual labour cost of Tesco is GPB
4.5 billion. In 2018 this rate was increased by 4 % that impacts its business. As result it has bear
high labour cost that reduces productivity.
Positive: Tesco can use labour optimally and can hire more candidates if labour are is
low that will help to sale more products through marketing and selling the products.
Negative: If labour cost increased then organisation will not hire more employees or has
to pay more amount that processed to low profits in order to sustain in global market.
Social: In modern time, people are much aware about shopping, new trend, changes in
fashion and customer health. Tesco's manager focuses on fashion and customer health that help
to attract the customer and sell number of products and services.
Positive: Tesco can increase the number of customer and customer base by focusing on
changes and people's culture and sale that kind of products that help to attract customer in order
to purchase products (Falkner, 2017).
Negative: It has to spent high amount on research and development of product that will
reduce the profit of organisation.
Technological: Now a days, every business concerns is focusing that how to attract he
customer by providing new product and services. New technology is the challenges for Tesco
that need to accept in order to sustain in competitive marketplace. So Tesco has introduced from
RFID technology that help customer as well as suppliers to get information about new product
and ordered in advance (Buno, Nadanyiova and Hraskova, 2015).
Positive: By using new technology Tesco can attract the customers in order to provide
new product and services such as net banking, online payment, advance booking and order as
customer wants ( Dyllick and Muff, 2016).
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Negative: It may be drawback for Tesco such as employees are not ready to get new
technology easily. Hence it need to provide training in order to introduced new technology
Legal: Tesco is following laws such as workmen compensation act and minimum wages
act that help to motivate employees and get work done on time. It impacts on business such as it
can prevent from fraud, misleading investors and inspire the staff in order to achieve
organisation goals.
Positive: By using workmen and compensation act Tesco can enhance the productivity
through motivating the staff. As it follows minimum wages and workmen compensation act that
help to increase the productivity and profitability (Chi, 2015).
Negative: It has drawback such as it employees can switch the organisation if
organisation is not following the workmen and compensation act.
Environmental: Many industries are facing big pressure from government to address
environmental problems. This factors impacts positively on Tesco such as it is using Van drivers
that help to save fuel and also help to collect unwanted plastic bags from customers and recycle
them.
Positive: As Tesco is using Van drivers it can save the environment and reuse the plastics
bag through recycle process (Divanbeigi and Ramalho, 2015).
Negative: It may be more expensive for Tesco to use the van drivers and recycle process.
Task 4
P5 Internal and external analysis of specific industry for defining the strength and weakness
Internal analysis of organisation is used to state the strength and weakness of business
organisation (SWOT analysis of Tesco 2019). The strength, weakness, opportunity and threat of
Tesco is given below:
Strength Weakness
Tesco is leading market share at global market.
It provides product choice and variety of
products.
It run successful market driven strategy in
order to influence customers.
Highly competition in retail market.
Facing share of controversies.
Low concentration on operating activities.
Low investment on research and development.
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Opportunity Threat
It can increase the customer by reducing the
prices and selling the number of product.
Has an opportunity to grow online business.
Tesco can expand the business all over the
world.
Patent and trademark of products.
Market share gains from low cost of products.
Reducing the value of currency.
Buying power of customers.
SWOT analysis of NHS
Strength Weakness
Provide proper health services to customers.
Increase the customer satisfaction.
Large organisation public sector.
Not focus on profit maximisation
Highly competitive.
Need to invest more amount.
Opportunity Threat
To become world's largest company by
providing more health services.
Adopt new technology for treatment
Competitors who can grab the opportunity.
Low market share.
Change in currency.
P6 Strength and weakness interrelation with external macro factors
The PESTLE analysis of Tesco company states the strength and weakness of macro factors
which is described as:
Strength: The strength of political factors is if import duty and tax rate will be low then
organisation can increase the profitability and can expand the business at global market. The
economical factor such as stability in inflation rate and labour cost will help to get work done
more from employees. Social factor such as changes in fashion and culture will help Tesco to get
information about introducing new products and increase the customer base. Technological
factor such as van driver will help to provide new product and services in order to influence
customers. Legal factors such as workmen compensation and minimum wages act will help to
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retain employees for long period of time that will help to save the rehiring cots of Tesco
company. Additionally, renewable of sources will help Tesco to reuse energy sources and
maintain the healthy environment in Tesco (Chorafas, 2016).
Strength of NHS: Political factor can influence NHS as it may be exempt from tax rate
because it focuses on customer satisfaction. If new technology arrived in market the NHS can
provide more health services that will help to increase the number of customer. As result it can
achieve goals and objectives.
Weakness: Tesco can suffers loss situation because there are more competitors like
Unilever, Sainsbury, ASDA and Morrison that dealing in retailing products. So it may be
difficult for Tesco to sustain in competitive market. For cracking the competition it has to
reduced cost and need to make solid strategy in order to influence customers. Additionally, if
government and tax rate, people culture, fashion and inflation rate are fluctuating then Tesco has
to face a huge amount of loss. As result less profitability and high competition in market.
Weakness of NHS: If there is any changes in government policy such as Brexit then
organisation has to follow new rules and regulation which may be difficult. Moreover, if
organisation is not following the equal pay act then employees will make decision to leave the
organisation. So these factors have weakness which may impacts business.
CONCLUSION
From the above report it can be concluded that business is the combination of internal
and external factors which impacts on business. It gives an opportunity to business in order to
run a business successfully. PESTLE analysis is used to know the impact of external factors on
business and SWOT analysis help to define the strength and weakness of entire business. A
business organisation can grab the opportunity by introducing new product and by using new
technology. Organisation performs various function such as finance, HR and marketing which
are interlinks with each other and help to achieve organisation's goals colletively.
REFERENCE
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Divanbeigi, R. and Ramalho, R., 2015. Business regulations and growth. The World Bank.
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Online
SWOT analysis of Tesco. 2019. [Online]. Available through:
<https://www.marketing91.com/swot-analysis-of-tesco-corporation/>
Matrix structure of Tesco. 2016. [Online]. Available through:
<http://www.orgcharting.com/tesco-company-organisational-structure-chart-example/>
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