Tesco: Analysis of Business Environment and Company Functions

This report provides a comprehensive analysis of Tesco's business environment. It begins by explaining different types of companies, including public, private, and voluntary organizations, and then details the size and scope of companies like Tesco, NHS, ASDA, and the Red Cross. The report then explores the inter-relationships between functional departments within a company, such as marketing, production, finance, research & development, and human resources. A PESTLE analysis is conducted to identify the positive and negative effects of macro-environmental factors on Tesco. Finally, the report assesses the internal and external factors of Tesco to determine its strengths and weaknesses, concluding with an explanation of the relationship between macro and internal factors.

Business and Business
Environment

Table of Contents
INTRODUCTION ..........................................................................................................................3
LO1..................................................................................................................................................3
P1. Explaining different kinds and the purposes of the companies ...........................................3
P2. Explaining size and the scope of different organizations ....................................................3
LO2..................................................................................................................................................6
P3. Explaining inter-relationships between different functional departments within the
company .....................................................................................................................................6
LO3..................................................................................................................................................8
Identifying positive and the negative effect of macro environmental factors ............................8
LO4................................................................................................................................................10
P5. Conducting an internal and the external assessment of particular company for the purpose
of determining the strengths & weaknesses .............................................................................10
P6. Explaining the relationship between macro and internal factors of an entity ....................11
CONCLUSION .............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business environment referred as the internal or external factor which affects function of
the company that involves employees, management, customers, demand and the business
regulations. The present report is based on Tesco, a leading grocery retailer of UK operating with
its outlets in different countries across the world. Furthermore, the report presents size and the
scope of different kinds of companies. Moreover, it also highlights the macro and micro factors
that directly impacts working of an enterprise.
LO1.
P1. Explaining different kinds and the purposes of the companies
Different company operate its business under different sector that is public, private and
the voluntary organization.
Public Limited company- It means the company that has legal right to offer its holdings
to the public for sale. It is the firm whose shares might be sold freely and traded to public with
minimum capital of amount $ 50000 and is suffixed with PLC at end of company name. Such
organization can either be listed or unlisted on stock exchange (Rezaee, 2020). The purpose of
public sector companies is to provide best or quality services to the customers at a reasonable or
affordable price and utilizing scarce resources in optimum way for maximizing productivity of
the company. For instance- National Health service (NHS).
Private Company- It is the type of privately held small enterprise that is considered as the
profitable company under which the liability of owner limits to their shares. The firm is allowed
to have 50 or fewer shareholders and its shares seems as prohibited from being traded in the
public. An enterprise becomes as an independent legal form of structure when it is been
incorporated. The aim of such company is to earn profits and in creating the value of an
enterprise. For example- Tesco
Voluntary firm- It refers to the group or the union of individuals who enters into
agreement as volunteers for forming the body in order to fulfil the objectives (Surin and et.al.,
2016). It is counted as non-profit organization with primary objective to work for the well-being
of the society and focuses on creating social effects instead of profit. For instance- Red Cross.
P2. Explaining size and the scope of different organizations
Basis National Health ASDA Red Cross

Service
Overview The company was
established in the year
1948. It provides with
comprehensive range
of the healthcare
services except
optimal and the dental
care. It works for
welfare of the people
and profit is the
secondary motive of
this company.
It is one of the leading
or largest retailer that
dedicates towards
serving the customers
through their network
of grocery services
and the stores with an
inclusion of
supermarkets,
supercentre,
superstores, living
stores and the depots
around UK.
It is born of desire for
bringing assistance
without any
discrimination to
wound on battlefield
within its national &
internation capacity
(Kuula and Haapasalo,
2017). It has been
developed for
preventing &
alleviating suffering
with human. The main
purpose of this
voluntary firm is to
protect the life of
human and ensuring
respect for human
being.
Vision To help the people in
living healthier and
independent life by
way of providing them
with high quality care
services.
To be as highly valued
enterprise through
customers served,
communities within
which it operates, our
committed & loyal
colleagues.
To inspire, facilitate,
promote and
encouraging all types
of humanitarian
activities by the
national societies for
preventing human life
and contributing to
promotion &
maintenance of the

human dignity across
the globe.
Mission To facilitate service
and care for
improving the wealth
of all the persons in
society (Kasemsap,
2018).
 To provide
high quality
products at
reasonable
price so that
average class
customers
could also buy
it.
 Creating value
for the
stakeholders
for earning
their loyalty in
long term.
To prevent human
sufferings in times of
emergencies through
mobilizing power of
donors and volunteers.
Objective  To improve the
mental state
and well-being
of an
individual.
 Delivering
efficient and
high quality
services with
available of
resources.
 Managing &
preventing the
 To maximise
sales and
growing
number of the
retailers in UK
 To outshine the
competitors
and remaining
as market
leader
 To help
demolished
sick &
wounded
members of
Armed union
forces.
 Establishing
and
maintaining
peace among
all the nations.
 Improvement

long run
conditions for
extending
quality &
length of life
with reducing
health
inequalities.
of the health,
preventing
diseases and
mitigating
sufferings of
people.
Size The size of this
company is also seen
as large with around
1.7 million employees
across the UK.
It is the large sized
company gained
revenue of Pound
63.911 billion in the
year 2019 with an
operating income of
pound 2.206 billion
(Aydiner and et.al.,
2019). The number of
staff is also high with
approx 450000
employees around UK.
It deemed as large
scale organization
having approx 17
million volunteers who
work for protecting
human life and
preventing them from
sufferings any disease.
Scope The scope of NHS is
very wide as it
provides services in
entire UK from
England to Northern
Ireland.
It has wide scope to
grow in future as its
outlets or store are
increasing and current
having 6800 shops in
an entire UK.
There is seen as wide
scope for the company
in future as it aims to
protect dignity and the
life of victims of
internal &
international armed
conflicts.

LO2.
P3. Explaining inter-relationships between different functional departments within the company
Marketing department with Production function – The operational department relates to
managing several activities that includes distribution, packaging and warehousing. Marketing
department includes promoting the goods the services by making use of different medium in
order to increase the sales and revenue of an enterprise. Prior to producing the product, it is
important for production function to coordinate with marketing function as it facilitates relevant
information relating to the current and the future requirements of the customer (Prajogo, 2016).
It helps the operation department in manufacturing the product as per the desire and
specifications of customers. On the other side, marketing department also needs appropriate
information from production function in relation to the availability of product so that it could be
delivered to the customers on time and increasing demand for the product so that the firm
resulted increased revenue.
Finance department with research & development function- Finance function has
overall brief of an entity for ensuring that an entire business operates within the financial
capabilities. They require that all the departments work in accordance to the funds allocated or
the budget specified (Gorla, Chiravuri and Chinta, 2017). Research department gathers detailed
information regarding the new opportunities and the innovation that the company should come
up with in order to attain success in the future. Without research and development function,
finance department cannot allocate the funds in the new project as it gives full detail relating to
viability and feasibility of proposed project. Similarly, without finance function, R & D cannot
make deep research as it requires huge funds to make analysis of proposed project to find out
that it is desirable or not.
Human resource department with production or operation function- HR overlooks the
recruitment, selection, training and development related aspect of enterprise. The other
functional responsibilities of this department involves well-being, health & safety, motivation
and performance management. On other side, production function manages the operational
activities of business. Both the departments are inter-related in the sense that if the human
resource managers will not recruit talented and skilful employees then operations department
could not function effectively as it directly hampers productivity and performance of the
company (Yang and Gabrielsson, 2017). In same terms, if the production department does not

operate properly then HR managers could not be able to decide incentive and performance
appraisal. Without knowing the gap, HR cannot use proper training techniques to educate the
employees regarding a manner in which the tasks need to be performed.
Thus, all the departments or function in an organization are linked with one another in
terms of various aspect which helps the company in achieving the goals in effective & efficient
manner. In case of omitting one function, all the other functions could not be able to perform
their task and the company leads to failure.
LO3.
Identifying positive and the negative effect of macro environmental factors
Pestle analysis
Political- This factor reflects the political stability and the government legislations which
has a direct impact on the functioning of the business concern. The firm that operates in different
countries across the globe so it must have to follow several regulations which ensures safety and
compliance of the products. As the company operates across several countries so it requires
keeping track on changing political conditions, in each and every country within which it
operates (Langston and et.al., 2017). This poses a negative influence as it is very difficult for an
entity to follow different rules framed by different government due to political instability.
However, the more stable is the government or political environment, there is better opportunity
for the company in carrying out the trade. For example- With Brexit, Tesco faced imposing of
new regulations which may come up and causes increase or the decrease in revenue. The
company was affected by US-China trade war where it tends to battle for gaining proper ground
of the sale, as tampering of the market by trade wars in between two countries has seen as so
intense, that rules relating to retail with China of an American product has been frowned upon.
Changes in taxation policy, among various supplies also impacted profitability of an entity.
Economic- It relates to disposable income, currency exchange rate and economic
condition of the market which impacts the company to great extent. High disposable income of
people imply high purchasing power which in turn increases demand of consumers towards
buying product & services of the firm. This shows a positive effect on sales and profits of an
entity as more products will be sold. However, if the disposable income of people fall or decline
then their purchasing power also decreases with fall in demand of the goods and services. For
example- Tesco encompasses wide range of the products that plays major role in consumption of

wide array of its product. The firm need to have an eye for any kind of economic changes which
occur within countries in which it operates, since these are factors that would affect its sales,
distribution, profit and revenue.
Social- It indicates the belief, attitude and cultures of the people within the market that
poses a high influence on the working or operations of the firm. Different country follows
different culture which seen as the negative influence as it is not possible for the company to
operate its business by following all types of culture (Pestle analysis of Tesco, 2020). On other
state, with evolving lifestyle, people prefer to buy new products which reflects as positive sign
for the company to gain an advantage over the use of new products by customers and this also
helps in attracting large customers. For instance- Tesco planned for switching from major food
items to the food-cum non-food model in order to provide the customers with bulk buying
facility. It provides variety of the products to the customers so that they can choose the product
as per their culture and societal group .
Technological- Trends had been changing at high pace, and in staying relevant in current
times, it is crucial for an entity in keeping up with the changing technology. Automating the
business comes up with a negative impact as it results to high cost of training that needs to be
provided to the staff as they are not aware about the way in which the technology can be used.
On other note, automation helps the company in delivering the goods quickly and within the
time frame. For example- Tesco seems as experimenting with several aspects of the retailing
and had achieved some amount of the success in few endeavours. Online shopping and the
digital promotions are all counted as part of inducing customers through facilitating them with
several technical benefits (Sangwa and Sangwan, 2018). Recent announcement made by an
organization, relating to its partnership with Amazon Go created a new technique for the cashier
less type of billing which is an update that would revolutionize the manner in which retail
shopping is been undertaken.
Legal- It means as the changes in legal laws and legislations of the country in relation to
the international market highly impacts the performance of an enterprise. Constant changes in
legislations poses a negative effect on the working of company as it becomes complex for an
entity to work in compliance the legal laws of all the countries. However, operating the business
by complying with proper legal rules helps the firm in enhancing its reputation in the market
around the world Which is reflected as the positive effect on company's market position and

leads to increase in value of an entity's shares. For instance- Food retailing Commission laid
down various rules which need to be followed by all retail organizations. Tesco is being sued
because of an unequal pay among women and men who are working in an entity. It has been
under purview of the media within which legal settlement is of $ 12 million.
Environmental- It relates with the practices adopted by the company for sustainability of
an environment and the community that directly influences goodwill of an entity. Developing or
involving in sustainable programs seen as increased value of the firm in an industry which seen
as a positive influence (Wong and et.al., 2016). On other side, if the company does involved in
sustainable projects then it might not be available with any kind of rebate in taxes and
government support for growing its business. For example- Tesco launched its own phase 2 of
the remove, reuse, reducing and recycling the plan. An entity had taken several initiatives for
removing and reducing all non-recyclable plastic to minimal level and in exploring the new
opportunities for using residual plastic and is still been used.
LO4.
P5. Conducting an internal and the external assessment of particular company for the purpose of
determining the strengths & weaknesses
Strengths- Tesco is seen as biggest grocery retailer in UK and operate as the number 1
supermarket within UK. It has the higher amount of revenue and sales in comparison to the other
supermarket chain in the Great Britain. It has the larger market share of around 27% and
dominates the other retailers in the market. The company is having a well-known global presence
with higher than 6800 stores in the 14 countries except from North America & Europe and
contains a huge market share within Asian markets as well. It is having growing no. of outlets
from 3751 in year 2008 to 6966 stores at present worldwide. This results to increase in the
revenue of an organization under its operational chain (Swot analysis of Tesco, 2020). It has
diversified stores that involves Tesco Homeplus, Tesco Extra, Tesco Metro etc. Its
diversification strategy proved to be successful for the firm as it is having clothing range,
telecom and the financial services at a global level. With a simplified model, reduced cost and
efficient waste management related policies, it had created reliable & effective supply chain
network.
Weaknesses- Tesco resulted a failure of operations in Japan and US which results to exit
of the firm from an American & Japanese markets in the year 2012 (Oh and et.al., 2017). The

company was charged with the fines because of false accounting related declaration and
misrepresentation of the profits. Share price of the firm fell higher than 9% because of decrease
in profits. It proved as worst performance for company since Brexit Referendum. The low cost
strategy of firm lead to reduction in the profits and showed a poor performance in particular
markets and countries.
Opportunities- Recently Tesco introduced Jacks, which is the new discount outlet that
has shown a significant growth (Rosnizam and et.al., 2020). It had an opportunity for growing
the business and could successfully compete as low cost competition as posed from Aldi.
Developing the strategic alliance with reputed firms could offer excellent opportunity for an
entity and enables in offering more items & attracting more customers. It could go for joint
venture in the regions where its stores are seen as underperforming. Local companies could
facilitate a profound market related knowledge that could help in improving the performance in
such type of regions. It could also avail an opportunity through upgrading & growing its online
business channel and services relating to home delivery.
Threats – The company faced Brexit due to which it could not trade with European
Union, the cost matters and the trade deals posed a threat on the company. With rising growth of
Walmart, Aldi etc. market position of Tesco could be threatened (ZHAO and et.al., 2018).
Economic crunches also poses a great threat towards operational efficiency of the company and
performance of its stores in the critical regions.
P6. Explaining the relationship between macro and internal factors of an entity
As the firm has faced Brexit which impacted company's operational activities, this can be
overcome by its strength of diversification strategy as it seems to be successful for an entity. As
an economic effect, the firm has faced consistent changes in economy with regard to decline in
the currency exchange rate and income of people, this could be linked with large market share of
the company which depicts that the company can gain benefit from some countries' economy of
which currency rate is increasing. The legal factors relate to the weaknesses of the company as
due to involvement in the fraud cases, company faced a decline in the revenue and an operating
profit and also resulted a failure in its Japan and US segment operations (Stümke and Ruël,
2017). The environmental factor which directly linked with strength of well-known presence as

the form has always been initiated the sustainability projects which leads to enhancing awareness
and reputation globally.
CONCLUSION
The above report summarizes that different companies has different legal structure and
works with different purpose. Macro and micro environmental factors helps in scanning the
environment in appropriate way so that an entity could meet with the future uncertainty
adequately. All the functions of an organization are inter-related as without one, other could not
function adequately.

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Online
Pestle analysis of Tesco. 2020. [Online]. Available through :<https://www.mbaskool.com/pestle-
analysis/companies/18023-tesco.html>
Swot analysis of Tesco. 2020. [Online]. Available through :<https://bstrategyhub.com/tesco-
swot-analysis-2019swot-analysis-of-tesco/>