Business and Business Environment Analysis: Tesco Report - Module 1

This report examines the business and business environment, focusing on Tesco as a case study. It begins by explaining different organizational types (private, public, and voluntary sectors) and their purposes, followed by an analysis of their size and scope. The report then explores the relationship between organizational functions (finance, marketing, HR, and production) and objectives, highlighting their interdependencies within Tesco. The second part delves into the impact of macro-environmental factors (PESTLE analysis) on Tesco's operations, followed by an internal and external analysis of the company's strengths and weaknesses. Finally, it discusses the connection between these strengths and weaknesses and external factors, providing a comprehensive overview of Tesco's business environment.

Business and Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
Part 1................................................................................................................................................1
P1.Explain the different types of organisation and their purposes..............................................1
P2 Explain the size and scope of range of different type of organisation...................................2
P3.Relationship between organisational functions and objectives.............................................4
Part 2 ..............................................................................................................................................6
P4 Impact of macro environmental factor on business operation...............................................6
P5 Internal and external analysis of strength and weaknesses ...................................................8
P6 Relation of strength and weakness with external factors.......................................................9
Conclusion ..................................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
External and internal factors has capacity to influence decision making are
considered as the part of business environment. They play significant role in running an
enterprise successfully. Tesco is a public limited company, they are table leader of
United kingdom in retail industry. This report will discuss about various kinds of
organisation and their reason of existence. Their size and scope will also become part
of this file. This assignment will also include functions that are performed in an
enterprise and their relationship with company's objectives (Arasti and et.al., 2014). It
will study about impact of environmental factor on business operations. At the end, this
report will analyse strength and weakness of a firm.
Part 1
P1.Explain the different types of organisation and their purposes
Structure of an organisation depend upon the targets which they are trying
achieve. It mainly has three types, first is private sector, second is public and last is
voluntary. Following is their deep explanation:
Private Sector – The purpose of their existence is to earn profit and increase their
sales in regular interval of time. They provide goods and service to the society and
charge money for facilities which they are providing to their customers. Their area of
operation differs according to size. This sector can be further divided into three parts,
first is sole proprietor. In this types, one man manages complete business so he/she
can earn money for his/her livelihood. They mainly focus on continuous earning instead
of obtaining more money. They do not have any legal existence so they are free from
various kind of formalities which bring complexity in trading.
Partnership is second types where 2-20 people start a business try to achieve
organisational objectives. They have more area of operation compare to sole proprietor
but they can expand their enterprise up-to a limit. Registration of partnership is not
compulsory but according to recent amendment limited liability firm has to register
themselves under appropriate government authorities (Boons and Lüdeke-Freund .,
2013). Their main target to sell goods or provide service to their customers and
maximise their profits. Company is most popular form of in private sector. It can operate
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at various levels like regional, national and international. They have a legal existence
and they have to follow all the formalities which make their structure very complex.
Expansion of business and enhancement in profit is their prime objective. They provide
employment to large number of people and invest huge money in fixed assets. They
have to make various accounting documents. They can raise money from pubic but if
they opt this option than they have to release their financial report in market.
Public sector – Their main aim is to provide goods and services to the people of
their nation at decent rate or sometime without charging a single penny. These
organisation are controlled by government, they hold key positions in top level
management (Cantwell, Dunning and Lundan., 2010). They do not care much about
profit but at the same time they can expand their business other countries in order to
increase their area of operation and revenue. Due to presence of government they have
sound legal existence. They mainly operates in an area where private companies do not
want to enter because they may not earn desired profits. Sometimes an industry need
huge investment, in that case public sector organisations has to take a lead because
other do not have capacity to risk immense amount of funds.
Voluntary organisation – Some people with similar goals make a group and than
plan various activities in order to achieve desired objectives. They do not care about
profit or sale of goods. They area of operation is politics, culture, society, etc.
Registration of these organisations is depending on the tasks which they are performing
in continuous basis.
S/N Details of each
organisation
Private organisation Public organisation
1 Name of
organisation
Tesco National health
service
2 Headquarter of
organisation
Hertfordshire,
England
London, England
3 Legal status Public limited
company
Government
organisation
4 Year established 1919 1948
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5 Product/service
offered
Super market, hyper
market
Health services
6 Purpose of
organisation
Create value for
customers and earn
their lifetime loyalty.
Improve health and
social acre in
England
7 Industry/sector Retail Health and social
care
P2 Explain the size and scope of range of different type of organisation
Size and structure of an organisation dependences upon their vision and
mission. In private sector their are three forms of business, first is sole proprietor. One
person perform all the task which limits their scope of expansion. They can achieve
growth up to a limit because they do not have necessary resources like money,
manpower (Carroll and Shabana., 2010). Process of decision making is very simple in
this form of business because chances of conflict is not possible. Some examples of
sole proprietor are electrician, plumber, owner of grocery store etc. In partnership, 2-20
people perform all the task. Their size is limited which restricts them to expand their
business up to a limit. They can not provide employment to a large number of people.
Their organisational structure is simple so they can take decision in short period of time
but chances of conflict is high because two partners may have different thoughts in their
mind. If they register their business than they have to fulfil various types of formalities
relating to rules and regulations made by government. This can bring some complexity
in firm but it also have some advantages (Cavalcante, Kesting and Ulhøi., 2011).
People trust these kind of partnerships because they have to provide different detail to
state and government authorities.
Private companies can vary in size but it has more complex structure if it is
compared from other two form of business. Some run their organisation in a small town
while other may operate in more than one country. They main motive is to expand their
business and earn more profit by maintain a proper balance between their mission and
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vision. They give employment to a larger number of people in various region. They also
have to fulfil all the formalities which is mandatory in order to do business in a nation.
Public sector is bit different from private organisations. These companies are run
by government which is the main reason of their gigantic size. They operates across the
nation and provide employment to thousands of people. Decision making process is
very complex in these enterprises because of involvement of states as well as central
government. Member in top level management comes from various position so it is
difficult for them to make a common understanding in short period of time (Chen,
Chiang and Storey., 2012). Normally they restrict their presence up to a country but
their is no hard and fast rule. They can also enter in foreign market in order to sell
goods or provide services.
Size of voluntary organisation depend on their objectives. Sometime they operate
in many countries, sometime their presence is limited up to a village. They main motive
isn't profit, they want to bring changes in society by they execute their plans accordingly.
They scope has no limits because they deals in area like politics, culture, etc.
S/N Detail of each
organisation
Private organisation Public organisation
1 Name of
organisation
Tesco NHS
2 Number of
employees
476000 1.6 million
3 Market share of
industry/sector
28.20%
4 Scope
(Regional/internation
al)
Expansion in
developing countries
Expansion in
regional areas
5 Scope (Product
portfolio)
Non-food segment Use of technology
and collection of
data
4

6 Scope
(Branches/subsidiari
es)
8 4
7 Major competitor ASDA Private hospitals and
care home
8 Brand
position/recognition
Table leader in UK Publicly funded
organisation
9 Financial position Strong Struggling
P3.Relationship between organisational functions and objectives
In order to achieve set objectives top level management of company divide
organisational function. They make various department like finance, marketing etc. who
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have specialisation in the tasks which they are performing. Following are some division
of Tesco:
Finance department – They are responsible for managing all the money that is
coming in the firm or going out of the enterprise. They play crucial role in decision
making process relating to fixed investment or up-gradation of stores. They manage
various kind of loan that company take from banks and other sources.
Marketing department – They are responsible for brining business in the
organisation. This wing has to determine need of customers so they can develop new
products according (Christopher and Holweg., 2011). They play role in increasing the
brand value of company by making and executing effective strategies relating to
advertising and promotion.
Human resources department – This division selected appropriate candidates for
various post in organisation. They also do negotiation from employees for salary and
incentives.
Production department – They covert raw material into final product so company
can sell them to their customers. They take important decisions like designing of item,
material used in manufacturing etc.
Relation between finance and marketing division
Marketing wing has complete knowledgeable about the market so they can give
valuable advice to finance department so they can take important decision like where to
invest, right source of debt etc. This will help cited enterprise in reducing their debt and
find correct economy where they should expand in upcoming time. Finance team should
also allocate them proper funds so they can do market research and make strong
connections with their customers. Permanent buyers provide stability to organisation in
difficult situation (Haidar, 2012). Tesco is aiming to get 6.5% market share before 2020,
strong relation between these two department will assist firm in achieve this target
without any hindrances.
Relation between human resource department and production department
Cited enterprise is trying to improve quality of their current products, specially
organic items. They are targeting to increase it's sale by 20% in new two years. If HR
division of company will hire skilled and talented worker than they can speed up the
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production process. They will be able to maintain the standards which are set by top
level management.
Relationship between production and marketing department
If cited company do not make good products than they can not earn high
revenue. Marketing wing provide important detail to manufacturing division so they can
produce goods according to the needs of customers. Tesco is trying to expand their
business in developing economies like India, China etc (Harrison, 2011). If marketing
team will provide essential detail to production department than can smoothly enter in
new market.
Part 2
P4 Impact of macro environmental factor on business operation
An organisation can get influence by external environment where they are doing
their business. Following in the PESTLE analyse of Tesco:
Political factor – Political condition of a country can change various strategies
made by cited organisation. If case of favourable situation, a company who is facing
loss can earn huge profit but if condition is unfavourable than an enterprise who is
earning high revenue can face huge loss. Brexit is the perfect example of this case. In
upcoming time, cited company has to take various kind of permission if they want to do
business in European countries. This will enhance cost of operation which will make
negative impact on profit (Kian Chong, Shafaghi and Leing Tan., 2011). On the other
hand, government in developing nations like Brazil, China, India etc. are inviting firm like
Tesco. They want them to invest money in their country so they can provide jobs to a
large number of people. They are ready to give different kind of deductions in taxes,
they are providing land a cheap rate so firms can do fixed investment. This will make
positive impact on their business in long run.
Economical factor – In a growing economy, it is very easy for cited organisation
to grow a high speed but if growth is low like European countries, than they can not
expand their enterprise. Nation in this area is facing various kind of challenges which is
making a negative impact on company's like Tesco because they are highly dependent
on their domestic country. Asian continent has seen remarkable growth in last 2
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decades, if cited enterprise investment money in this region than they will earn lot of
money in upcoming time because according to experts these states will deliver highest
revenue in forthcoming time (Klapper and Parker., 2011).
Social factor – Demand of customers changes with time. Tesco was the first
company who started selling organic products because they understood that customers
are getting very serious about their health. This move play crucial role in improving
goodwill of cited organisation. Workers of this firm went to on strike in last year, this
incident did lot of negative promotion of cited enterprise which brings down valuation of
company.
Technological factor – Tesco knows the importance of technology, they are
investing huge amount in this area because according to top level management this
factor will provide them some extra edge over their competitors. The are going sell their
products online which will increase their markets as well as profit. But according to
some expects, spending money on technology is a bad strategy because new tech
become old in swiftly. They bought some soft-wares couple of years ago which are of
no use in current scenario (Lee, Olson and Trimi., 2012).
Legal factor – Government in UK is changing some rules relating to farmers.
They are going to cut down the financial assistance which they were giving to peasants.
If they will not get appropriate money than they will reduce the quality of raw which they
are farming. This will bring down the quality of finished goods which cited organisation is
selling in their stores. This move will make a negative impact on business of Tesco.
Developing nation in Asia and Africa are removing various types of legal restriction.
They are focusing on ease of doing business, this move will make a positive impact on
business of cited company because in upcoming time it will be easy for them to expand
their organisation in different part of these nations.
Environmental factor – Tesco took some important decision in recent years, they
are going to reduce their carbon footprint by around 50% before ending of year 2020.
They move earned them lot of appreciation from public which is making a positive
impact on business operation of cited organisation. This enterprise missed their
environmental goals, they failed to reduce the pollution which promoted their bad image
among public.
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P5 Internal and external analysis of strength and weaknesses
Every organisation want to determine their strength and weakness so they can
make future plans according. Below is the SWOT analyse of Tesco:
Strength:
 Cited organisation holds majority of market share in their domestic market.
They do not have to spend much money on promotional events because they
get unwanted attention of media.
 Human resources is considered as the prime assets that an a company can
have in their organisation (Moutinho, 2011). Cited enterprise has a manpower
of 480000, they bring diversity in teams which help them in smooth expansion
of business. Local employees has better knowledge of their domestic market.
 Tesco understand importance of technology which can be considered as the
main reason that they are investing huge amount in this area. This factor is
giving them some extra edge over their competitors. Their online sale is
increasing, in upcoming time they do not need to invest huge sum on fixed
investments like opening of new retail store.
 Asian and African continents have highest economic growth rate. Cited
organisation is investing huge money in this region because governments of
these nations are providing special tax deductions to companies like Tesco.
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They are proving land at subsidiaries rates so organisations can do fixed
investment. According to expert this reason will get high returns in upcoming
time. Cited company has already started expansion in this region.
Weaknesses:
 Cited organisation has high dependence on their domestic business which
is not performing according to expectation of company (Palo and
Tähtinen, 2011). They have weak presence in developing market like
Asia.
 After Brexit, demand in market of UK is going down. They are facing fear
of uncertainty which is restricting them in formation of effective strategies.
If they will not make proper plan than their execution is not possible.
Opportunities:
 Cited enterprise has strong presence in food segment, they can earn more
money by investing in non food division which has seen remarkable growth in
last 5 years (PikkaIskanius and Page, 2011).
 Market in Asian and African continent is still unorganized, they can do early
investments so they can enhance their profit in upcoming time.
Threats:
 Cited company earns most of the revenue from their domestic market. After
Brexit, this market will not see any growth in upcoming five to six years.
 Competitors of this organisation is getting stronger because they are investing
huge money in developing economies like Asian and Africa.
P6 Relation of strength and weakness with external factors
Tesco is a leading company in retail industry. Government in developing nations
like China, India, Brazil etc. want multi nation corporation it invest in their country
because these organisations has capacity to invest huge amount. This will generate
employment in these states which can be considered as their major problem. They also
need money for infrastructural development. Government in this region are ready to
give special tax deductions, they are also providing land at subsidised rate so
companies can do fixed investment (Pingali and Roger, 2012). Cited organisation has
started their online store, sale through this mode is enhancing regularly and this move
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has given some extra edge to Tesco on their competitors. They took an important
decision that they will reduce their carbon footprint by 50% before 2020. They step got
lot of appreciation from public which played crucial role in increasing their revenue.
Cited organisation is facing huge burden of debt. External factors like Brexit is
adding more problems because this enterprise will face fear of uncertainty in upcoming
time. They are dependent on business of UK, economic growth of European continent is
slow. They are failing to achieve their set objectives which is putting some extra
pressure on their financial records. Tesco pledged to reduce the pollution which they
are doing while moving goods from one place to another. But according to a recent
report they missed their set target. This incident earned them bad promotion which is
going to make a negative impact on their business in upcoming time.
Conclusion
From the above report it can be concluded that reason of existence of a business
entity made a huge impact on their organisational structure and size. Main there are
three types of sector, private, public and voluntary. Their scope and area of operation
depends upon their mission and vision. Marketing, finance, human resource are some
of the most important department of an enterprise. It will work in a synchronised way
than firm can achieve their set targets in a effective manner. SWOT and PESTLE
analysis can determine correct position of a company because they analyse various
functions and policies which they have executed in past years.
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