Analyzing Business Structures and Functions: A Tesco Case Study

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BUSINESS AND BUSINESS
ENVIRONMENT

Contents
INTRODUCTION...........................................................................................................................................3
SECTION 1....................................................................................................................................................4
P1: DIFFERENT TYPES OF BUSINESS ORGANIZATION...............................................................................4
P2: SIZE AND SCOPE OF ORGANIZATIONS...............................................................................................6
P3: ORGANIZATION STRUCTURE AND FUNCTIONS..................................................................................8
REFERENCE LIST.........................................................................................................................................10

INTRODUCTION
Business is an organization where the goods and services are exchanged with the aim of
earning the profit and on the other hand, to satisfy the needs and wants of customers. It is an
economic activity in which the owner does a special task or duty and has the responsibility
towards the society to deliver the goods and services for satisfying their needs. All the needs of
the final consumer are met by the shopkeeper such as food, clothing, shelter and all related
household products (Scholes, 2015).
According to Stephenson, "business is an activity of regular production, purchase or sale of
goods or services with the main objective of earning the profit and to satisfy the human needs."
The business environment is the environment that consists of internal and external factors that
affect the business operating situation. It includes all individuals, other business entities,
customers, suppliers and all other factors. The factors of every business are different from
other business because every business operates in a different environment that affects its
performance, profitability, survival and even growth (Erasmus et al., 2016). The main
characteristic of the business environment is that it continuously changes and the reason
behind is that there are many factors that are present in the environment, changes its structure
and shape of business.
Tesco
Tesco is a British multinational company selling groceries and merchandise. Tesco was
established in 1919 by Jack Cohen and dealing in the retail sector. The company is also engaged
in other business i.e. retail banking and retail services. Tesco as a leading retailer serves millions
of customers every week with the help of 440,000 colleagues.

SECTION 1
P1: DIFFERENT TYPES OF BUSINESS ORGANIZATION
The business organizations are classified into three categories. These are:
 Profit organization- If the business or organization is set up with the primary purpose of
earning a maximum profit is known as a profit organization. These organizations are
generally present in the private sector. But are regulated by local or state government.
For instance, Tesco's primary objective is to earn a minimum amount of profits for its
employees and shareholders.
 Not for profit organization- The main purpose of these organizations is not to gain
financial benefit but they work for some public benefit. These include charities or any
other social enterprises (Lee et al., 2017). For example, TLG, The Brilliant Club and so
forth.
 Non-governmental organization- These organizations operate independently from the
local or the state government. But they receive the funds from the government and do
not have to represent the government. For example, Transparent Hands, Kickstarter etc.
Difference between profit, not for profit and non-governmental organizations (NGOs)
Basis Profit organization Not for profit
organization
Non-governmental
organization
Purpose To generate profit Provide services to
the community
Work for public
benefit
Size Minimum one
member
Minimum one
member or family
members can be a
member of society
At least 2 trustees
and maximum no
limit
Scope Profit organization
can be operated in
any part of the
world.
Society has a
limited scope of its
operation. As it can
have the
NGO has a limited
scope of operation
in a particular area.

operations where
it is registered.
Business purpose and supply of goods and services
The business purpose of profit organization is to generate maximum profit for its
founder/owner and its employees. The goods and services are supplied by purchasing from
either manufacturer or wholesalers and then to sell it to final customers.
In contrast, not for profit organization's activities are to benefit the society rather than
earning the profit and earn minimum profit to bear its expenses. These organizations supply
their goods and services by letting the people know about their expenses in manufacturing
or purchasing the goods or services and invite the people to donate the amount according
to their wishes (Young and Karme, 2015).
The purpose of non-governmental organizations is providing maximum benefit to the
society and they get funds from the private sources. They supply their goods and services by
giving them the goods as a gift rather than charging fees.

P2: SIZE AND SCOPE OF ORGANIZATIONS
Difference between micro, small, medium-sized and large enterprises
Microenterprises are the very small enterprises which are generally family-owned and
employing very few employees.
Small enterprises are generally privately owned that operate independently and also it is
limited in size, employees and turnover (Hillary, 2017).
Medium-sized enterprises are the same as small enterprises but are different in terms of the
number of employees and the annual turnover.
Large enterprises are enterprises that require large investments for earning high profits for a
long period of time.
The main difference that distinguishes these organizations is on the basis of employees and
revenue generated by them (Company Warehouse, 2012).
Basis Micro
organization
Small
organizations
Medium
organization
Large
enterprises
Employees Less than 10 Less than 50 Less than 250 More than 250
Turnover Under 2
million
Under 10
million
Under 50
million
More than 50
million
Market share, profit share, growth and sustainability
According to Economic help (2014), the market share of Tesco and other top competitors in the
retail industry are given below.

Figure 1: Market share of Tesco in the year 2014
[Source: Pettinger, 2014]
There is a decline in the profit sharing of the company from 2013-2014 by 3.6%.
Figure 2: Retail Grocery Market Share Fluctuations 2013-2014
[Source: Haddock-Millar, 2014]
For growth and expansion of its operation, the company starts to diversify the product portfolio
by including several bio-products and different organic products for a healthy lifestyle. At the
beginning of the year 2014, there is a rise in internal sales by 29% and a rise in profits by 44% to
£306m (Corporate watch, 2019).

P3: ORGANIZATION STRUCTURE AND FUNCTIONS
Different kinds of structures relating to the size and scope of operations
The organizational setup is in such a way to accomplish the predefined goals and objectives and
this can be done by following a specific structure which is known as organization structure.
There are mainly four types of structure which are as follows:
 Functional structure
The functional structure of the enterprise is segmentation of a group of the organization
according to their purpose (Radford, 2017). For example, marketing, sales, production, logistics,
HR department and so on.
 Divisional structure
Divisional structure is suitable for large companies that have its operation in more than one
geographical area or having a different small organization for different products or different
markets.
 Matrix structure
The employees in this organization are divided into teams or according to the products. It is
suitable when the enterprise operates in the cross-functional group. This structure helps in
better communication and flexible work environment.
 Flat structure
A flat structure is one in which there is no level of management and all are at equal positions.
This structure helps the employees in self-development and self-decision making the ability for
employees. This type of structure is mainly found in small enterprises (Kato et al., 2018).
Complexities of transnational, international and global organizational structure
The complexities in the transnational structure are that Tesco has to manage its operation
effectively so that it can raise the value of products and is able to gain sustainable competitive

advantage. The problem arises because the company operates in several geographical areas,
products or having different functional levels.
The complexity in the international structure is that the companies cannot make direct
investments in the countries in which they operate. They have to customize their products or
services according to local markets and for this, the companies have to spend a lot on the R&D
and customization of the product or service (Picciotto, 2015).
The complexity in the global business structure is that the companies treat the entire globe as
a huge global market and uniform products and services in every country. The complexity arises
in the global business is to have the economies of scale and at the same time satisfying the local
customers.
Functions related to overall organizational mission and objectives
The aims and objectives of Tesco are increasing the sales of organic manufacture up to 1 billion
pounds and in the time period of 5 years. The objective of the company can be achieved by
integrating the different functional structure of the company.
For instance, the production department should arrange the raw material, labor, equipment to
manufacture organic goods. The logistics department should prepare the strategies regarding
the transportation of goods from one place to another. The marketing department makes the
use of marketing mix for segmenting, targeting and positioning the products for the potential
customers. The HR department arranges the required human resource so that the operations of
the company does not affect due to lack of manpower. The finance department prepares the
budget and allocates the resources to the various department so that financial resources should
utilize them effectively and efficiently. These departments are interdependent on each other to
achieve the objectives on time.

REFERENCE LIST
 Company Warehouse, 2012. What is an SME? Online available at
https://www.thecompanywarehouse.co.uk/blog/what-is-an-sme (last accessed on 29th
March 2019).
 Corporate watch, 2019. TESCO COMPANY PROFILE online available at
https://corporatewatch.org/tesco-company-profile/ (last accessed on 29th March 2019).
 Erasmus, B., Strydom, J.W. and Rudansky-Kloppers, S. eds., 2016. Introduction to
business management. Oxford University Press Southern Africa.
 Haddock-Millar, J.,2014. Business strategy and the environment: tesco plc’s declining
financial performance and underlying issues online available at
ftp://ftp.repec.org/opt/ReDIF/RePEc/ibf/rbfstu/rbfs-v6n3.../RBFS-V6N3-2015-9.pdf (last
accessed on 29th March 2019).
 Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
 Kato, M., Mano, T. and Sekiguchi, J., 2018. Flat structure and potential vector fields
related with algebraic solutions to Painlevé VI equation. Opuscula Mathematica, 38(2),
pp.201-252.
 Lee, C.C., Strohl, K., Fortenberry, M. and Cho, C.Y.S., 2017. Impacts of human resources
management innovations on productivity and effectiveness in a medium-size non-profit
organization. Global Journal of Management and Marketing, 1(1), p.51.
 Pettinger, T., 2014. The battle for market share in UK supermarkets online available at
https://www.economicshelp.org/blog/11947/economics/market-share-in-uk-
supermarkets/ (last accessed on 29th March, 2019).
 Picciotto, S., 2015. Indeterminacy, complexity, technocracy and the reform of
international corporate taxation. Social & Legal Studies, 24(2), pp.165-184.
 Radford, A., 2017. Phrase structure and functional categories. The handbook of child
language, pp.483-507.
 Scholes, M.S., 2015. Taxes and business strategy. Prentice Hall.

 Young, S. and Karme, T., 2015. Service learning in an Indigenous not-for-profit
organization. Education+ Training, 57(7), pp.774-790.