Business Environment Analysis of Tesco: Macro & Micro Factors

This report provides a comprehensive analysis of Tesco's business environment, examining the impact of various macro and micro environmental factors. The report begins with an introduction to the business environment and its influence on organizations, followed by an analysis of Tesco using PE...Read More

Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Positive and negative impact of macro Environmental factor on TESCO......................1
1.2 PESTLE analysis..............................................................................................................2
TASK 2 ...........................................................................................................................................3
2.1 Internal and external analysis of Tesco............................................................................3
2.2 The Way internal strength and weaknesses are interrelated with external macro
environment............................................................................................................................5
2.3 Tows analysis...................................................................................................................6
2.4 Evaluating the impact that both macro and micro factors have on business objective and
decision making......................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business environment is considered as marketing term and it refers to the factors and
forces that have positive or negative impact on organisations. The business environment consist
of various internal and external that have great influence on business operations. Internal factors
includes employees, employer employee relationship, workers behaviour, activities, etc. all these
factors are controllable in nature. External environment consists of various political,
environmental, legal, political, technological factors and all these elements are uncontrollable in
nature. Internal constituents have effect only on small part of business while the external
environment have great effect on business as a whole.
The Tesco company is being selected for conducting research on business environment.
Tesco organisation is dealing in retail industry. The enterprise is being selected for conducting
this study as it is operating in global environment and has much experience about international
environment.
The focus of the report is on developing understanding about the concept of bushiness
environment. It emphasises on analysing the way various environmental factor influence
business decisions.. The aim of the report is to explore the relationship that company have with
their stakeholders.
TASK 1
1.1 Positive and negative impact of macro Environmental factor on TESCO
The various macro environmental factor include social, environmental, technological,
legal,political elements. These factors have great effect on the organisation as a whole.
Political factors:Vat tax system has been introduced by UK government this has great impact on
TESCO.(Harrison,2011.) Due increase in tax the company was unable to generate surplus
revenue and profits. The company has to bear the burden of tax that has affected the financial
performance of organisation. The positive impact of this element is that positive changes in
political system has allowed firm to adopt various marketing strategies. This has provided a firm
opportunity to promote its product in international market (Carroll and Shabana, 2010.)
Economic factors:The decrease in exchange rate has created transactional benefit for
organisation. On the other hand A growth in economy has positive impact on financial
Performance of business unit. Fair distribution of income among individual has allowed business
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enterprise to generate revenue and increase profit margins. On the other hand increase in
exchange rate has great impact on buying and selling power of TESCO.(Cantwell., Dunning,
and Lundan, 2010.)
Social factors-Increase in population in the country has enabled organisations to increase its sale
and market share. On the other hand change in preferences and trend of society has great impact
on demand for organisation product. For instance increase in demand for online shopping has
lead to decrease in demand for TESCo products and services.
Technology factor- These elements has provided business entity an opportunity to improve their
quality of product and develop new product. This has helped Tesco in attracting more number of
customer. It has allowed business unit to retain long term relationship with their client and
retaining old customers (Chen, Chiang and Storey, 2012.)
Environmental: Th internal and the external both environment affect the company performance.
The main purpose of organization is to maintain the product quality and give the efficient and
effective services. Tesco is wrapped up for the intake of energy and utilizing of green house
gases. This is positive impact for the firm by apply the new and efficient environment. If firm is
not following the updated environment that is good for the firm that will be and disadvantage for
the organization.
Legal: There are number of lows that is affect the company because this firm has a lot of
products and the services. For example as for agricultural items the UK government is re
producing the common policy of agricultural for the particular item. The firm is also engaged in
financial services or items like credit cards, loans etc. for each of the financial services there is a
lot of financial policies and rules for the items. Entity needs to be follow the laws and acts for
the growth of the company. The positive sign is followed the policies and rules that is invented
by the committee for each organization. By following the legal updated policies for the firm that
will help us to improved the performance of the organization (Boons and Lüdeke-Freund,
2013).
1.2 PESTLE analysis
Political factors: The various political factors include government code of conducts, policies
etc. These factors have great impact on the sustainability and growth of enterprise. The Retail
industry in UK is being supported by policies framed by legal industries. It has helped TESCO
in enhancing its growth.
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Economic Factors:The various economic factors include economic condition of the country,
exchange rate, income distribution,etc. These factors have great impact on the financial
performance of firm. The economic crisis in UK has great effect on TESCo purchasing power.
Legal factors: The legal factors have great impact on the various activities that are being
conducted by business. It has direct effect on various strategy framed by organisation for
increasing its revenue and profits. The legal policies In UK has allowed Tesco to use various
advertisement method for promoting their product.
Technical Forces: Technological forces have great impact on quality and development of
product. Advancement in technology has enabled Teco to develop new and improve its quality
of product.
Social factors:The company has greater threat from these factors. As the choice, value and
trends keeps on changing with passage of time. Same threat is Faced by Tesco enterprise As
well. But its market segmentation strategies as aid business unit in overcoming such risk factor
(Holcombe and Ipate, 2012)
TASK 2
2.1 Internal and external analysis of Tesco
Swot analysis can be used for conducting internal analysis for Tesco. These techniques
will assist firm in identifying their strength, weakness, opportunities and threat. It will enable
organisation to convert its weakness into strength, minimising weakness and threats, and also
provides an opportunity to explore opportunities (Bøllingtoft, 2012.)
Strength:The company has powerful retail
brand in international market.
It offers quality of product at reasonable price.
The organisation offers wide range of product.
It has number of stores that are operating
global that provide easy access to customer.
The enterprise has effective cost reduction
Weaknesses:
Lack of focus on quality of product.
Ineffective marketing strategy.
Great impact of economic and legal factors.
Ineffective investment strategies
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strategy.
TESco has great strengths but this analysis
focuses on the brand value of the organisation
and huge range of the products and various
outlets which help to increase the brand value
of the business.
It has able to gained high market and
competitive advantage in global market due to
selection of right partnership. Locally sensitive
management.
Lack of online presence,
Lack of experience in some markets.
Opportunity
The organisation has an opportunity to expand
its core business activities in other countries.
It has potential to mark online presence.
The company has the opportunity to develop
and introduce innovative product.
It can develop its own labels for its products.
The business unit has the chance to make
investment in marketing activities.
Tesco can develop their own website by
through they can do their business at online
basis. They also propound new market
segment that offer more profit.
Threat
Threat of new entry
bargaining power of supplier and buyer
Increases in product prices.
Economic crisis in the country.
Rigid government policies related to retail
sector.
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External analysis
The Porters five forces model can be used for conducting external analysis.
Bargaining power of buyers-As Tesco is dealing in variety of product the power of negotiation
of buyer is quite high. On the other hand cost of changing market is low. So customer can easily
migrate from one market to another. It has been analysed that customer get more attracted by
low price. In retail industry it is easy for consumer to compare cost of product.(Holcombe and
Ipate, 2012)
Bargaining power of supplier- Tesco is well known and has impressive brand image it has
number of suppliers that the reason negotiation power of supplier is low. In case of Tesco
supplier has threat of loosing contract with company. The Supplier generally want to develop
contractual relationship with such big companies as it allows them to earn more profit and
provide supplier an ease in delivering product and services to consumers.
Threat of substitute product and services-The new organisation is required to make huge
investment of capital to enter into competitive environment and to capture wide market area. In
order to achieve this objective the new enterprise will be required to produce innovative product
at low price in order to conduct this activity business entity would be required lot of time. There
are fewer chances of substitute product as it requires expertise and innovation skills. It is
difficult for other organisation to develop same product.
Intensity of competitive rivalry:The intensity in food and retail industry will remain high. The
Tesco has to face competition with firm such As ASDA, SAINSBURy, Morrison and Waitrose.
Morrison and Watson has competition with TESCO in terms of price, product and promotion
(Kirchmer, 2012.)The pricing strategy adopted by the Tesco competitors has forced enterprise to
reduce the price of the goods and services. This factor has great effect on the profitability of the
firm.
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2.2 The Way internal strength and weaknesses are interrelated with external macro
environment
Macro environmental elements are the major part of business environment. These
variables have great effect on the strategies, Policies, practices and decision of manager in Cited
venture. Macro environmental factors are uncontrollable in nature. It has great effect on business
performance and also impact on organisational structure.
In following ways' strength and weakness interrelates with external macro environment :
Macro environment include various variables that are concerned with economic and non-
economic factors. These elements have direct effect on financial performance of Tesco. It has
great effect on Its purchasing power.
Various external factors create barriers for firm in ways of achieving its goals and objectives.
This external constituents have great influence on various business decisions and strategies.
It has enabled Tesco to take effective steps and to form appropriate strategies in order to gain
competitive advantage.
These factors have provided Tesco an opportunity to expand its core business activities.
The technological factors have provided TESco way to maximise its profits and enable them to
produce innovative product (Klapper and Parker, 2011.)
External forces has created barriers for cited firm by developing various hurdles it has diverted
the focus of the manager.
It has becoming challenge for manager in organisation to develop
The changes in Economic factors has provided firm a chance to gain transactional benefit and
provided them a path to increase their profit margins
Increase in competition level has encouraged business entity to facilitate innovation and develop
new product in order to gain competitive advantage in the marker. It ha also allowed business
Entity to attract more number of customers by developing unique characteristics.
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2.3 Tows analysis
Weakness and threats:Lack of understanding market can create threat for firm in order to lose
market share. Ineffective marketing strategies can have negative impact on revenue and
profitability of TESCO. The other weakness is that the company does not emphasize on
fulfilling the needs of its employees this may lead to the legal obligation on Firm. Improper
strategies and management system due to which the organisation may have to face major issues.
Weakness and opportunities:Tesco has potential to develop understanding about market and has
opportunity to increase its market share and growth. Tesco can enter into new venture which
will help organisation in expansion of business.
Strength and Threats:Its is offering product at reasonable price that can lead to increase in
competition as same strategy is being followed by its competitors. It may have risk on its profit
ability and growth as well.
Strength and opportunities:TESCO has large customer base it can enter into new market and has
form strategic alliance that can assist enterprise in enhancing competitiveness (Klapper and
Parker, 2011)
2.4 Evaluating the impact that both macro and micro factors have on business objective and
decision making
Micro environmental factors include
Suppliers-The supplier has direct impact on success of TESCO. It has great effect on production
and quality of product.
Customers: Customer have great impact on various strategy formulated by such as marketing,
product development, diversification strategy etc.
Employees-Employer and employees relationship has direct impact on Tesco
performance .These factors have great effect on organisational culture and environment as well.
Competition-The competition has great impact on competitive strategy and other plan made by
Tesco in order to gain competitive advantage.
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Macro environmental factors
Social factors-These constituents has great impact on TESco objective of increasing market
share and increasing sale. These elements have direct impact on Firm profitability and growth.
Technological factors-This element has supported Tesco in fulfilling its objective of reduction in
cost of production and developing innovative product. It has allowed business unit analyse way
for increasing its production efficiency.
Economic factors- The economic Policies has allowed TESCo to gain transactional benefit. It
has allowed firm to make various investment decisions (Moutinho, ed., 2011.)
Political factors-Political factors are those which are formulated, managed and amended by the
government. Tesco in global markets has disadvantage through the higher cost structure.
Legal factors-Marks and Spencer has also faces some legal legislations, they are always
changing day by day. Tesco always plan tactics or strategies in order to keep up to date its
knowledge related to new laws or legislations such as health and safety regarding issues. Tesco
invites the new objects and methods that need to be changed and new training and also ongoing
development.
Environmental: Tesco is considered as the one of the most popular brands out there in market.
With the changing environmental climate, the company has to face some major issues which are
being promoted on the television, in magazines and newspapers and also on the radio. All the
companies, industries and the organisation are being affected to change their way of production.
CONCLUSION
It has been concluded from the study that various macro and micro environmental factors
have great impact on growth and profitability of Firm. The study has concluded that The internal
as well as external environmental factors have great impact on the success and growth of the
firm. It has influence on the business policies, plan, procedures and practices. It has been
identified that Tesco is performing well in the market, still there are various areas in which the
organisation can make improvement.
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It has been suggested by report that Tesco company is required to frame various effective
strategy in order to reduce the impact of various factors on its business activities. The manager
in Tesco is required to conduct internal analysis as this will assist them in making effective
strategies, decision and policies. The marketing manager in the business entity has been
recommended that they should conduct the market research. As this will help firm in analysing
the need of the customer and keeping itself with the latest market as well as business trend. The
Tesco company need to have focus on providing satisfaction to its employees as this will help
business entity in achieving success and fostering growth.
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REFERENCES
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the-art and steps towards a research agenda. Journal of Cleaner Production. 45. pp.9-19.
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international business activity: The co-evolution of MNEs and the institutional
environment. Journal of International Business Studies. 41(4). pp.567-586.
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Harrison, R., 2011. Learning and development. Development and Learning in Organizations: An
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Holcombe, M. and Ipate, F., 2012. Correct systems: building a business process solution.
Springer Science & Business Media.
Kirchmer, M., 2012. Business process oriented implementation of standard software: how to
achieve competitive advantage efficiently and effectively. Springer Science & Business
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Klapper, L.F. and Parker, S.C., 2011. Gender and the business environment for new firm
creation. The World Bank Research Observer. 26(2). pp.237-257.
Moutinho, L. ed., 2011. Strategic management in tourism. Cabi.
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