Report: External Environment, Organisational Performance Analysis

This report provides a comparative analysis of two major players in the UK retail sector, Tesco and ASDA. It begins with an introduction to business organizations and their objectives, followed by an examination of the external environment using PESTLE analysis, focusing on political, econo...Read More

Introduction to
business and
management I

Table of Contents
INTRODUCTION .........................................................................................................................3
The external environment ..........................................................................................................3
The organisational structure ......................................................................................................5
Organisational performance ( financial and non financial) ........................................................6
Comparison of two firms and Conclusion.................................................................................7
REFERENCES ...............................................................................................................................9

INTRODUCTION
Business organisation is defined as the structure in which business is done and how this
structure is helpful in achieving the goals and objectives of the company. Business is designed
for focusing on two purpose either generating revenue or improving society. Before starting any
business, it is necessary for companies to do various analysis for evaluating the rate of success
within market. Some of the analysis are PESTLE analysis, market analysis, etc. In this way, it is
easier for companies to do successful and profitable business.
This report is based on two organisations naming Tesco and ASDA. Tesco plc is a British
multinational groceries and general merchandise retailer. The headquarters of this company are
located in England. This is the third largest retailer of the world. The other organisation i.e.
ASDA is a British supermarket retailer which has headquarters in Leeds. This company was
founded in the year 1949. The following report includes discussion about external environment
factors that affects business, financial and non financial performance of business is discussed.
Also there is discussion on organisational performance of the company. At last there is
conclusion on the comparison of two big organisations dealing in retail sector.
The external environment
PESTLE analysis is an important framework for strategic planning which is used for
analysing macro environment factors which impacts business (Huang-Horowitz, 2015). PESTEL
analysis stands for Political, Economical, Social, Technological, Environmental and Legal
factors. The PESTLE analysis of ASDA and Tesco in UK is described below -
Political factors

Political factors are those which include rules and regulations given by government of the
country. Several rules are made for companies which are operating in retail sector. Political
factors affected business operations of both ASDA and Tesco. In context of ASDA,
international, national and European Union regulations and directives that affects legislation,
employment, taxes, consumer rights, etc. affects business operations. ASDA is having relatively
stable political environment in UK (Pestel analysis of ASDA, 2017). On the other hand, Tesco is
a retailing sector company that operates worldwide and it is affected by global political factors.
Tesco increases employment rate in many countries where it is operating. This also increases the
product diversification.
Economical factors
Economic factors are main concern of Tesco as they are related to leverage cost, profits,
demands and prices. Diversification and internationalism are two factors that help Tesco to be
successful in market. Due to reduction in disposable income levels and household incomes,
Tesco is focusing on advertising on value brands and not on luxurious items. In context of
ASDA, it considers economic factors like cost of credit, pay level, labour demand and supply
and energy prices. These affects pricing strategy of ASDA.
Social factors
The social factors on which ASDA focus are celebrity following, ageing population and
healthy lifestyle. The understanding of such factors helps ASDA in introducing new services and
products in market. This also provides help in developing segmentation strategies (Jenkins, and
Williamson, 2015). Tesco faces issue of customer's social behaviour. People are more concerned
about obesity and made Tesco to focus upon organic food. Tesco analyses consumer shopping
trends as these change within time.
Technological factors
Tesco was facing some issues related to poor customer experience and horse meat
scandal (PESTLE Analysis of Tesco, 2019). But by using technological advancement, this
company is able to overcome these problems and developing good brand value among
customers. Technology is growing at a faster rate and thus ASDA has started to sell it's products
using mobile applications with click and collect delivery services.
Environmental factors

ASDA focuses on different issues related to green economy, organic food, carbon
footprint, etc. This company is aware about the impact of organisation on environment and this
company is aware about various factors that affects business environment. This is a environment
friendly company. Tesco is using renewable sources and generates 100% of electricity by the
year 2030.
Legal factors
Tesco has faced various legal action for accounting fraud and misleading the investors of
the company. The operations of this company are done in he accordance of Food retailing
Commission (FRC). ASDA should abide by the regulations and rules of the country in which it
is operating. For instance, ASDA cannot pay less than minimum wage to it's employees.
Dismissal of employees is done within the workplace without investigations.
The organisational structure
Organisational structure is defined as system which outlines how business activities are
directed for achieving organisational objectives and goals. This include regulations, rules and
responsibilities. This organisational structure determines the flow of information between levels
of the company. Business of all sizes and shapes use organisation structures heavily. They define
a specific hierarchy within the company. A successful organisational structure defines job of
employees and how this fits within the overall system. In simple words, organisational
structure decides who is going to perform specific operations for meeting desired goals aof the
company. The organisational structure and culture are integrated in management systems. The
structure of each and every organisation is foundation of it's culture. A strong and organised
culture is very essential in development of workforce of the company. Behaviour of employees
depends upon regulations, rules and working environment of the company (Khan, and Quaddus,
2015). The performance of the company depends upon depends upon performance of
employees. Organisational culture determines performance of employees. ASDA adopts
functional and hierarchical type of organisational structure and communal culture (.Organisation
structure of ASDA, 2016). This type of organisational structure followed in ASDA creates lack of
communication between different groups as every group or department works separately. The
lower group of employees feel dissatisfaction as they do not have any active role in decision
making of the company. For reducing these loopholes, communal culture is essential for ASDA
so that this company can perform in a better manner. Thus, culture is helpful in providing

positive environment at workplace. The common aim is helpful in increasing level of
commitment that is provided by employees. The relationship between structure and culture
develops rules and regulations of ASDA which are not followed by the employees. Culture and
organisational structure forms regulations and rules of this company and this provide common
motive that helps company to perform more effectively.
Tesco is following hierarchical structure of and it employees a lot of employees as this
company is operating in different parts of the world. While handling and managing business
operations across the world, it is not possible for a single leader to manage all business
operations (TESCO COMPANY ORGANISATIONAL STRUCTURE, 2016). This is why Tesco is
using hierarchy structure of organisation. The Board of directors of Tesco consists of 10
members and there are changes in Board in the financial year 2014-2015. At that time, John
Allan was the Chairman of the Board. New CEO was appointed by the company naming dace
Lewis. The governance structure of the company consists of five committees which report to the
PLC board. There are eleven members in Tesco executive committee which is led by Group
Chief Executive. The organisational structure followed by Tesco is highly hierarchical as this is a
large size organisation (Sodeyfi, 2016). The organisational structure at store level is different. If
there are four levels of management within a store that this creates bureaucracy with a bad effect
on collaboration and coordination among leaders and managers. So it is concluded that reduction
of management layers must be done quickly for creating flexibility and faster flow of
information.
Organisational performance ( financial and non financial)
Tesco has become a phenomenon in retail market. This has nearly a third of Uk's market
with profit of more than £2bn a year. This company has adopted strategy of diversification,
employee benefit and customer orientation. The main core of Tesco's strategy is it's continuous
advancement of technology. This is the only organisation which has build the self service until
and cameras. This company follows a strategy of customer orientation to convert as consumer
preference change. The new business of Tesco is based upon profitability and scale (Kolk, 2016).
The new business are based upon profitability and scale. Tesco is having a well established
strategy for growth. This strengthens core business and venturing into new markets. The business
of Tesco has adopted to the local market with help of local management teams that finds ways
for lowering the costs. Tesco uses various strategies like international sourcing, F&F clothing

trend countries and club card and discount brands which are able to leverage business in global
manner (Makarova, and Polyanin, 2015). By the diversification and introduction of new
products and services, TESCO is sustaining growth within market. The contribution of Tesco
was around 8% in the year 2000. This increased to 53% in the year 2010. This company is
selling products out of UK and they have share of approximately 65% outside UK. The growth
of company has slowed down in 2000 and this developed lower profit margins. Tesco used
balance scorecard approach that aims for maximising business and performance of employees of
the company.
Financial performance of ASDA
Statutory accounts published for year to 31st December 2018
 Like for like sales (ex fuel and ex VAT) in the period 1 January 2018 to 31st December
2018 increased 1.6%
 Operating profit of £803.2m - a year-on-year increase of 9.2%
 Net cash flow from operating activities of £1,291.1m
ASDA accounts includes financial activities all ASDA stores, online operations and
distribution centres which consists of clothing, food, fuel, general merchandise which is in
financial year from 1st January 2018 to 31st December this supermarket liked sales excluding fuel
and VAT was increased to 1.6%. Growth of ASDA is driven by focusing on targeted price
investments. It develops own brand product for providing good quality products to customers.
This is unique strategy followed by any retail supermarket. Lowering of price across key
customer for helping mitigate the influence of food inflation secured this organisation. This
organisation has won Grocer’s G33 Price Award for the twenty-first consecutive year.
Comparison of two firms and Conclusion
Tesco is the organisation of retail sector which took fourth position among all
supermarkets as it has earned highest revenue in 2019. ASDA was the most expensive
supermarket for May and grocery basket of customers costs at an average of £143.36 – a hefty
£16.33 which is less than Tesco. It has been concluded from the results of independent shopping
website Mysupermarket that average price for each and every item of Tesco was sold at lower
price than ASDA (Otache, and Mahmood, 2015). This is a retailing company operating in UK

and it is having around 600 stores which are supported by 26 distribution centres. There are a lot
of challenges that evolved expectations and customer behaviour. ASDA requires to provide a
convenient way for tracking parcels online. On the other hand, Tesco is more profitable than
ASDA as it uses diversification of products. ASDA offers various loyalty schemes for attracting
more number of customers. It is concluded from the current reports that Tesco is the fastest
growing supermarket in retail sector (Prajogo, 2016). Tesco has sales growth of 2.7 percent this
year. Tesco is making profits from it's extra superstores.
It has been concluded from the above report that both Tesco and ASDA are operating in
retail sector and they are making huge profits by providing service in UK. These are utilising
resources effectively for capturing UK market (.Raziq, and Maulabakhsh, 2015). Also,
technological advancement of both companies helps in providing quick de;liveries and effective
services to customers.

REFERENCES
Books and Journals
Huang-Horowitz, N.C., 2015. Public relations in the small business environment: Creating
identity and building reputation. Public Relations Review. 41(3). pp.345-353.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Khan, E.A. and Quaddus, M., 2015. Examining the influence of business environment on socio-
economic performance of informal microenterprises: content analysis and partial least
square approach. International Journal of Sociology and Social Policy. 35(3/4). pp.273-
288.
Kolk, A., 2016. The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business. 51(1).
pp.23-34.
Makarova, Y.L. and Polyanin, A.V., 2015. Formation of the business environment in the
agricultural sector. Вестник аграрной науки. 53(2).
Otache, I. and Mahmood, R., 2015. Corporate entrepreneurship and business performance: the
role of external environment and organizational culture: A proposed framework.
Mediterranean Journal of Social Sciences. 6(4). p.524.
Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics. 171.
pp.241-249.
Raziq, A. and Maulabakhsh, R., 2015. Impact of working environment on job satisfaction.
Procedia Economics and Finance. 23. pp.717-725.
Sodeyfi, S., 2016. Review of literature on the nexus of financial leverage, product quality, &
business conditions. Journal of Economic & Management Perspectives. 10(2). pp.146-
150.
Online
Pestel analysis of ASDA, 2017. [Online]. Available
through:<https://www.howandwhat.net/pestel-analysis-of-asda/>
PESTLE Analysis of Tesco, 2019. [Online]. Available
through:<https://www.marketingtutor.net/tesco-pestle-analysis/>
Organisation structure of ASDA, 2016. [Online]. Available
through:<http://www.articlesfactory.com/articles/business/organisation-structure-of-asda.html>
TESCO COMPANY ORGANISATIONAL STRUCTURE, 2016. [Online]. Available
through:<http://www.orgcharting.com/tesco-company-organisational-structure-chart-example/>
Tesco and Morrisons fastest growing big supermarkets, 2018. [Online]. Available
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lidl-shopping-inflation-kantar-worldpanel-asda-sainsburys-a8241701.html>