TESCO's Business Environment: Unit 1 Report Analysis

This report provides a comprehensive analysis of TESCO's business environment, focusing on Unit 1 of a business course. It begins by defining different types of organizations (public, private, and voluntary) and their legal structures, followed by an examination of the size and scope of various business types. The report then explores the relationship between organizational functions (marketing and financial control) and organizational objectives, highlighting how these functions contribute to TESCO's goals. A significant portion of the report is dedicated to identifying the macro-environmental factors (political, economic, and social) that impact TESCO, using PESTEL analysis to assess both positive and negative influences. Furthermore, the report conducts an internal analysis using SWOT (Strengths, Weaknesses, Opportunities, and Threats) to evaluate TESCO's internal capabilities and vulnerabilities. Finally, the report interrelates the identified strengths and weaknesses with the external macro factors, offering a holistic view of TESCO's position within its business environment.

Unit 1 - Business and the
Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
P 1 Various types and purpose of organization and their legal structure - ................................3
P 2 Size and scope of the different types of business - ..............................................................4
P3 Relationship between organizational functions and organizational objectives and structure
- ..................................................................................................................................................5
P4 Identification of macro environment within the organization which have negative and
positive and negative impact - ....................................................................................................6
P5 Conduction of internal analysis with the help of SWOT to identify strengths and weakness
of organization - .........................................................................................................................8
P6 Interrelation of strengths and weaknesses with external macro factors - .............................9
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business and its business environment plays a major role in the formulation of business
operations. The business environment is the term of marketing and factors to refer and forces
which affects the ability of the firm for building and maintaining successful relationship among
customers.
TESCO is the leading grocery retailer in the UK. The company had its headquarter in
London, UK. The company is the third largest retailer in world. The above study includes the
different types and purpose of the organization and their legal structure. Size and scope of the
types of organization. Interrelationship between function of organization and structure
& objective of organization. The study further carried forward with PESTEL analysis and SWOT
analysis of the chosen organization and the study ends with the evaluation of strengths and
weakness.
P 1 Various types and purpose of organization and their legal structure -
There are variety of different types of organization each organization have their specific
purpose, function, structure. Organization can be divided into three parts which are classified
below -
Public Organization -
The public companies are owned and governed by government in UK. This organization
consist of limited ACNB liability for its managers and owners. In the public organization share
of government is 51% and the rest of the share is hold-ed by shareholders. The example of public
organization are National banks that is Royal Bank of Scotland Group (RBS), hospitals, schools
etc., These type of organization has responsibility for providing dividend on time to their
shareholder. Their main purpose is to render services which can include governmental and goods
services as military, public, police, education. Financial services along with services of health
care. These type of organization are accountable to local and central government. They are
directly funded by government and thus they are pleased to supply services and products to the
public rather than producing products for profit. Taxation is paid by central government and
along with this tax is paid by local government through Council Tax (Holotiuk and Beimborn,
2017).
Private Organization –
It is type of government where organization works in the hand of private partners. This
type of organization are managed and owned by two or more than two directors. Organization

must have to follow rules and regulation which are formed by the government of UK. The
partners have limited liability in the private organization. The main aim of this organization is to
gain profit by developing knowledge of the needs and demands of the consumers. There main
purpose is optimum utilization of resources and efficient use of such resource. Example of
private organization are Sainsbury, TESCO etc., The legal structure of private organization- as
this organization includes joint-stock company which have a separate legal entity. Each
shareholder in this type of organization must be the part of organization(Malikov and et.al.,
2015). And the share can not be sold to public. The shareholders are entitled to place their 1 vote
in Annual General Meeting (AGM) and the company profit must be shared in the form of
dividend at the end of financial year. The number of legal documents are required before the
formation of company which are moot necessary are Articles of Association and Memorandum
of Association in which the company details are provided which are the objective and aim of the
company, headquarter and registered office of the company, capital which is raised by
shareholder etc. This all are ent to Registrar of companies and then further certification of
Incorporation is given to this organization for conducting business activities. Share capital can
not be raised more than £50,000(Prajogo and Oke, 2016).
Voluntary Organization –
Voluntary organization are those which works for the welfare of society. These type of
organization depend on the donation and funds by public and government. The main purpose of
these companies is to work for the welfare of society. Voluntary organization have two sub-types
that are Voluntary associations and voluntary agencies. These are non- profit organization. The
example of these type of organization is NHS. Legal structure of these companies includes the
partnership done with NGOs, government firms, social care and work for the betterment of the
society. Where partnership deed is to be signed by the partners which creates the liability for
both of the business partner(Otache and Mahmood, 2015).
P 2 Size and scope of the different types of business -
 Public Sector organization – The Royal Bank of Scotland group provide the financial
services worldwide. The Bank employees more than 67,000 employees. It is the world's
largest with assets of £1.9 trillion and liabilities of £1.8 trillion. The company operates in
wide variety banking brand which offers business and personal banking, private banking
and insurance and corporate finance.

 Private Sector organization - The company is headquartered in Hertfordshire, United
Kingdom and employs over 500,000 people worldwide. Tesco operates almost 7,000
stores around the world. It is one of the leading super market chain. Tesco's scope relates
to the extent of the market into which it sells its products and services. It is already the
largest retailer in UK and is planning to expand to US .It has already wide markets in
Europe and Asia. The company has the scope of expanding more their market. This will
also help them in increasing their profitability.
 Voluntary Sector organization - Size- The national health service has above 10,00000
nurses and also they have 19,772 ambulances. They also have above 5 lakh doctors and
health care professionals. The scope of National health service is that they are trying to
improve the quality of service provided by them. They are engaged in making it
better(Cumming and Zahra, 2016).
Difference between micro, small and medium-sized enterprise (SMEs)-
Micro Enterprise Small Enterprise Medium-sized
Enterprise
Number of
employees
Employees nine people
or fewer than that
Employee fifty
employees according
to the European
Union.
Employee can range
from 50 to 249
individuals.
Turnover These enterprises have
a balance sheet or
turnover less than
certain amount
The annual turnover is
more than 5 Crore but
it can't exceed Rs. 75
Crore.
The turnover of these
enterprises is fall
between Rs 75 Crore
and Rs 250 Crores.
P3 Relationship between organizational functions and organizational objectives and
structure -
The main organizational functions of TESCO are
Marketing
This is the basic function of the company and thus involves adverting the products as
well as services. This function of the company mainly relates to selling the products at the large
platform and thus establish the position within the market place. This function helps TESCO in

achieving their goals and objectives where they help in attracting the large customers. Besides
this, it also helps in achieving their basic objective which is having the global presence and thus
expanding in various geographies of the world. The major advantage of this relationship is that
TESCO is able to capture the great market share and hence take their brand message to the
audience. On the other hand, its disadvantage is that it requires great and time to do the extensive
research due to which the focus of organization shifts and thus hinders their
operations(Westrenius and Barnes, 2015). If TESCO had effective marketing strategies and
policies that there goals could be effectively achieved. The company had effective marketing
policies which is further helpful for them in attracting consumers to their products and services.
There is proper interaction among each department which allows them to implement market
strategies and gain huge competitive advantage by this.
Financial control
Another major function of TESCO is maintaining the right cash flow within the company
and thus monitor the various activities through budgeting. This organizational function basically
addresses the allocation of various resources for different kinds of activities like launching the
new product. This major function of TESCO eventually helps them in achieving their goals and
objectives and thus relates to them. The major objective of TESCO is to increase the profitability
ratio hence generate more and more revenue. In this context, this function helps TESCO to
allocate the huge and other resources in the right amount which eventually bring greater
productivity for the organization. The major advantage of this interrelationship is that the
company remain aware of the nature of work and resources which they have to use for expansion
or launching the new product. On the other hand the major disadvantage is that sometimes the
vision of the company regarding the change goes beyond their budget due to which the company
faces huge financial loss and thus incur useless operational cost and expenses(Scheer and
Hoffmann, 2015). As company follows flat structure in their operations there is more
communication among the all department and thus they could interact with each other
effectively. And if there is smooth flow of operation in all department then company could easily
fulfill needs and demand of their customer and produce final product accordingly.
P4 Identification of macro environment within the organization which have negative and
positive and negative impact -
UK's grocery industry is formed by both macro and micro environment. The macro
environment is the general layer of environment of the business which consist of environmental

factors which impacts all the supermarkets in UK. Whereas macro level factors impact the
TESCO along with its rivals. For such analyzing it is very important for TESCO to avail through
PESTEL analysis which is as follows -
Political factor –
TESCO is operating its business in across 12 countries including Europe and Asia. It is
exposed with many political factors which can directly affects the operation of company. The
political factors include political instability, tax rates, unemployment rate, economic condition
and impending & current legislation of countries where business is going to be operated. Import
duty on products can also affects the TESCO business, as some of its inventories are brought
outside from United Kingdom like East Asia and China. The negative impact because of Brexit
has affected the food prices adversely as the purchasing power of the consumer has decreased
due to fall in the value of pound. FDI restriction in the UK also bounds the business of the
TESCO(Ricciardi, Zardini and Rossignoli, 2016).
Economic factor –
The cost of labor is the major economic factor which affects the UK supermarkets.
Increase in Minimum Wage rate of UK in 2018 by 4.4% for the employees of 25 years old and
more. This is helpful in the upward shift for company by millions of pounds in UK. A economic
inflation in the market due to Brexit which leads to have an adverse effect on all the business
which are operated across the united Kingdom. The purchasing power of the consumer is
decreased thus the sales of TESCO has directly increased as the number of consumer has been
reduced adversely. Due to Brexit there is an economic crisis occurs in the UK which severely
affects each and every business which are operated in UK. Fluctuation in the global exchange
rates may also affect the business of the UK. High wages and pension which to be mandatory
given by the company to their employees(Zaharia and Zaharia, 2015).
Social factor –
The shopping trends of consumer changes over time. Thus, nowadays people have busy
schedule thus they want fast delivery at the same day with flexible return policy of products. One
stop shopping is preferred by them. For meeting this issues TESCO understand and provide
services which meets the needs and demands of consumers. The another issue which is faced by
company in the society are that the consumers are majorly concern about their health. So the
TESCO must consider changing trend among the UK. The consumer now moving towards
organic food and beverages the adults of the UK now moving towards adopting less sugar and

non-alcoholic drink products in their diet and actively adopted by them. It is an serious threat for
TESCO as it has stocked a wide range of processed drinks and foods which contains high sugar
and a lot of artificial sweetener. Thus, they can't be able to offer healthy and organic food
products to their consumer's.
Technological factor –
TESCO was suffering from poor experience from its consumers and horse-meat scandal.
By bringing technological advancement new opportunities are developed by TESCO which is
helpful in gaining the trust of customers again. The RFID technology is introduced for raising in-
store experience for their customers. The stock are automatically counted and thus removed after
the sales. It is also helpful for their suppliers of stores and again replenish when required. The
own mobile payment system is developed by TESCO which is known as PayQwid. The 524
stores of the TESCO are using this app by downloading this app and link that with NFC
technology and Clubcard. Thus, by shopping through this app customer can pay for the shopping
and loyalty points are offered to consumer on each purchase and shopping. For the shopping
lover customers they had also introduced a new thing which “scan as you shop” through check
points. Products are purchased and tagged by consumer's. It is less time-consuming so saves time
and reduces the labor cost as well(Goedertier, Vanthienen and Caron, 2015).
Environmental factor –
Nowadays companies are facing extreme pressure from government agencies for
addressing environmental issues. Companies are liable for responding to these issues. For that
TESCO encourages their customers to shop at tesco.com. Tesco Van Drivers in which the fuel
saving routes will be followed by them along with that they are also focusing on collecting the
plastic bags from their consumers and recycle back them. TESCO is now also focusing and
committing for using renewable sources and thus 100% of their electricity will be generated by
such till 2030. Company also promises to reduce the 50% of carbon foot print by 2020. So more
and more consumer will be attracted towards company.
Legal factor –
The new “sugar tax” which is levied by UK government main aim is to decrease the
content of sugar in the drinks by 20% till 2020 which impact the brand products of the
supermarket of TESCO itself. New rules is given by UK government which is banning the
advertising of salt, high-fat and sugar (HFSS) drink and food products for the children who are
below 16 thus the promotional and marketing efforts of the TESCO has been affected by these.

TESCO had to commence its business practices according to the Food Retailing Commission
(FRS) which is the strict code for practice commenced by UK government(Abdullahi and Zainol,
2016).
Porter's five forces -
It is the tool which is helpful for understanding the competitiveness of the business
environment and for identifying the strategy for profitability.
Competitive rivalry–TESCO should have to know who are there rivals in the market. The
positive impact of this that they could form strategies and product according to that. The negative
impact is that if company doesn't have differentiated product then there is tough competition
with rivals. They must have monitored and implement strategies so that they could compete with
rivals effectively. High quality goods and services must be given to the customer so that they can
gain consumer loyalty base.
Supplier power-The company should select the cheap alternative supplier so that they can raise
their profit. The negative impact of that is if there are fewer suppliers than TESCO couldn't have
other alternative they had to work on the supplier high prices. The supply chain will play a major
role for company in rendering quality services and product to their customer on time.
Buyer power- If the company have a few customers than the power of buyers is high so
company had to work according to the customer preference. Where positively if there is any
customer than the power of supplier will be low and thus they company can work accordingly. If
demand of consumer in market is high then they could render product and service accordingly
but if there is low demand then they could work as per so that they could easily maintain balance
among that.
Threats of substitution- The company can have threat from the similar products available in the
market. Positive aspect is that the company can develop the unique product to remove this threat.
Thus unique product will be helpful for company to compete with other rivals in market and
rendering quality service to their customers.
Threat of New entry- If TESCO will enter the new market it will be threat for the other super
market available in the market. Whereas, it can be threat for the company also as this will be the
new business environment for the company which is the negative aspect of the new entry. But if
TESCO has unique product and services as per the needs and demands of their consumer then
they could not have threat from any of the new entrants in marketplace.

P5 Conduction of internal analysis with the help of SWOT to identify strengths and
weakness of organization -
The detail SWOT analysis of Tesco has been done below. The main aim of this analysis
is to strengths and weaknesses of the company along with exploring its opportunities and threats
which are faced by TESCO.
Strengths –
 TESCO is the leading grocery retailer in the world.
 The company has 27.75 of market share in grocery market of the UK. TESCO operates
its business across wide number of companies which includes China, Poland, Hungary,
Ireland and other.
 Till December 2018, it has around 6,809 shops and 3400 stores across world.
 Millions of customers are served by the company every week at their stores and
online(Gauthier and Gilomen, 2016).
Weaknesses –
 Along with the immense strengths with global success TESCO is also facing some
failures. TESCO was failed to trade with Japan and USA. The company has closed all of
its trade operations in Japan in 2012 after the trade relation of 9 years with the country.
 The company has been fined by Serious Fraud Office in United Kingdom. Company had
to pay £129 million for overrating their profits in the year 2014.
 The whole scandal had a negative impact on image of the company.
Opportunities –
TESCO can explore its business by emerging through various countries like Turkey,
Indonesia, South Africa, Mexico and Brazil. Thus, company can in future grow itself in UK also
by making cautions steps because of changing behavior of consumers and the uneven situation of
Brexit in UK. Recently introduced by TESCO new discount store which is named as Jack which
has significantly grown in the market and so the company has an opportunity for growing their
business and successfully compete with other rivals Lidl and Aldi. Company can also develop
the strategic partnership with reputed companies so that they can offer an excellent opportunity
for the company. This will helpful for the company to offer more products to their customers and
attract the wide range of consumers to the purchase their products.
Threat –

The major threat for the company is that Britain no longer with European Union by
which the trade cost and deals matters had created threat for company. The regulations by
government, economic upheavals due to economic crisis and credit crunches in the UK, which
can affect the performance and efficiency of stores of the TESCO in UK. Company is also facing
major competition with Carrefour, Walmart and Aldi so the market position of the company can
be threatened. The another major threat for the company is also the rapidly changing behaviors
of the consumers in the market(Banica and Hagiu, 2015).
P6 Interrelation of strengths and weaknesses with external macro factors -
The strengths and weakness can be interrelated as the company can improve their threats
and develop that and make it as a strength for TESCO. This ca be effectively done by forming
the various strategies, policies and plans which can be further used by company for
improvement. Weakness can be further developed into opportunities by compelling through
improvement in the operations and related function so that the things can be improved
effectively. This all is interlinked thus they can be further improved their growth and revenue by
effective use of strategies and policies further and implement it in such a way that it can be
turned into strength and opportunities for the company. And so company can easily compete
with their rivals and gain huge business revenues within the financial year(Aithal, 2016). TESCO
could work for creating a positive image among its customer and working on that they could
develop it as a loyal customer base so that they could easily rely on company. This weakness
allow company to develop more and more in marketplace so that they could build a good brand
reputation of their company in marketplace. So that they could gain huge competitive advantage
from its rivals and sustain in market for long term. Hence, decision-making of TESCO could be
impacted as they must have policies and strategies accordingly so that they could enhance their
brand reputation among marketplace among its customer. And they must render high quality
product and services to their customer so that their needs and demands could be fulfilled.
CONCLUSION
From the above study it is concluded that the business environment plays a major role in
the success of the organization with the effective use of policies and strategies which are formed
by the help of analysation of organization effectively. The company can overcome its weakness
and form strategies and plans to reduce its threats and compete with rivals and gains huge
revenue and expand its business globally across emerging countries. The company can optimize

its organizational functions and structure and size according to its business environment so that
the business activities can be performed steadily and well thus it can fruitful for the company in
raising their business.