Global Business Environment Analysis: TESCO's Strategic Challenges

This report provides a comprehensive analysis of the global business environment, using TESCO as a case study. It begins by examining key factors such as cost, market, environment, and competition that drive global commerce and trade, emphasizing the impact of digital technology. The report then delves into the strategic challenges organizations face when operating globally, utilizing PESTEL analysis to assess political, economic, social, technological, environmental, and legal factors. It further evaluates the influences of globalization on organizational governance, leadership, structure, culture, and functions, as well as the role of ethical and sustainable globalization. The report also explores different approaches to effective decision-making in a global context and outlines various routes to internationalization, including potential barriers. The conclusion summarizes the key findings, highlighting the importance of adapting to the complexities of the global business landscape.

Global
Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Analyse key factors of cost, market, environment and competition that drive global
commerce and trade................................................................................................................3
TASK 2............................................................................................................................................5
P2 Explain the complexity of strategic challenges faced by organisations when operating in a
global environment supported by specific examples..............................................................5
TASK 3............................................................................................................................................8
P3 Evaluate the influences of globalisation on organisational governance and leadership,
structure, culture and functions..............................................................................................8
P4 Evaluate the influences of ethical and sustainable globalisation on organisational functions
..............................................................................................................................................11
TASK 4..........................................................................................................................................13
P5 Evaluate the different ways decision making can work effectively in a global context 13
P6 Determine and articulate the various routes to internationalisation an organisation may
adopt, including key barriers................................................................................................13
CONCLUSION..............................................................................................................................15
REFRENCES.................................................................................................................................16

INTRODUCTION
Global business environment refers to environment of different countries where an
organisation is operating its business operations and functions in effective manner. When a
company expand its business in international market they conduct analysis of business
environment at global so that they able to develop strategies as well as plans according to
requirements and need. Analysis of global business environment include macro and micro
factors. These factors include various other elements such as geographical location, politics,
technology, economic and culture (Alkhafaji and Nelson, 2013). Analysis of these factor helps a
firm in developing strategies as well as plans appropriately in order to expand business at
international level. Organization taken for this assignment is TESCO which is public limited
company operating its business in retail sector. It is founded by Jack Cohen in year 1919 and its
headquarter is in Welwyn Garden City, Hertfordshire, England. Respective company serve their
products and services in various location such as United Kingdom, Ireland, India, Malaysia,
Hungary, Thailand and so on. Products offer by TESCO are based on supermarket, Hypermarket,
Superstore and convenience. Topics include in this report are key factors which drive
globalisation and issues occur while operating business in global market. Along with this it
include various factors which influence operations of an organisation as well as decision making
procedure.
TASK 1
P1 Analyse key factors of cost, market, environment and competition that drive global commerce
and trade
Globalisation refers to exchange of goods, services, technologies and information from
one country to another. It affects the overall functionality of any business environment. It can
raise the living standard of less developed country but on the other hand reduces job
opportunities as production of goods transfer from one country to another. It is a process where
integration and interaction is done between various companies, individuals at global level
(Amran, Lee and Devi, 2014). Globalisation is a common process in capital market, commodity,
gold and oil market. Globalisation involves transferring of services, technology, resources of
capital and data. By globalising business activities TESCO increases its market share,
profitability as well as competition. There are various factors which drives overall working

environment of the country. These driving forces influence company's expansion at global level
which includes market factor, cost, technological advancement and many more. These major
factors are as follows-
Market factor- From past few years domestic market has a saturation, which provide the
opportunities of global expansion. In the present context, By expanding business activities at
global level, TESCO can capture huge market share. Consumers of every country having almost
similar basic needs and by analysing customer needs company can easily expand its business
share.
Cost factor- There are some cost variations in every country. Cost factor determines the
sales volume, production, labour and materials. TESCO consider these factors while expanding
its business operations at international level. As a result these cost drivers aid the company while
building their economies of scale. Cost of shipping is continuously decreasing due to bulk
shipping as a result, company gain more profits.
Competition- Before expanding business activity at international market, competition is
the most essential factor to analyse. TESCO diversified its functioning in various sectors like
grocery, clothing, petrol and so on (Bititci, Cocca and Ates, 2016). In order to gain competitive
advantages while expanding business at global level, company has to adopt latest technology.
Along with this, employees of the organisation should be well trained to reduce the scrap
activities. Training and development sessions are given to the staff members on regular basis.
Environmental factor- Environment refers to the surroundings where business activities
has been operated. Various environmental factors influence globalisation such as social, legal ,
technological and political factors. TESCO formulates strategies according to the changes occur
in the environment, which will aid them while operating at international level. As a result, it will
help in developing the overall business.
Significant impact of digital technology upon globalising business operations
Digital technology is a procedure where company use digital platform for creating,
communicating and transferring information to the end users. It involves using different
programming tools, software's and websites by a company in order to attract more and more
customers (Cheng, Green and Ko, 2014). Digital technology has positive impact on companies
due to globalisation, because of technological advancement company gain more profits in the
global market. Use of digital technology reduces cost of transportation and communication, as a

result company use the fund in its other operations. In order to gain competitive advantage
company adopt digital technology, by which they attract more and more customers and gain
more revenue as compare to their competitors. With the help of digital technology, buyers as
well as seller can do business functions anywhere, at any time. In earlier days, it is the
technology which was used by very limited business owners but with the rise in globalisation, it
is used by every size of business organisation. As it is essential for every business entity,
managers innovate new idea in order to attract and influence more customers across the world.
As per the above analysis, it has been said that there are various factors which affects the
overall business organisation. Also it has been recommended that before expanding business at
global level TESCO have to evaluate overall environment of the country (Coltman and et.al.,
2015). Along with this, by using digital technology in an effective way respective company can
gain more profit as well as gain competitive advantages across the world such as they able to
attract or enhance their ratio of potential customers which leads to sales and profitability ratio.
Globalisation influence overall structure, cost and leadership of the company as decisions can be
taken in the company according to theses factors. In order to make decision each and every
external as well as internal factor should be considered by the managers so that employees can
perform in an effective manner.
TASK 2
P2 Explain the complexity of strategic challenges faced by organisations when operating in a
global environment supported by specific examples
Strategic challenges refers to issues and problems faced by a company while operating its
business in international market. These challenges can be internal and external factors which
affect process as well as decision making of a firm. Here internal challenges include factors like
unskilled employees, lack of resources, failure in production process and many more (Daley,
2012). Whereas external challenges are related to financial, social, economical, technological
and many others. Along with this while expanding business in international level an organization
face various complexities such as supply chain management of various countries, impact of
international trade legislation and economics of various countries which influence decision
making process and strategies making of a manger. For conducting analysis of these factors
TESCO adopt PESTEL analysis whose explanation is given below:-

PESTEL Analysis of TESCO-
PESTEL analysis is a tool and process which help a company in evaluating its macro
environmental factors which can impact on business operations and functions. By analysing this
company manager able to develop strategies, plans and procedures in effective manner according
to situation such as they able to develop strategies according to change in factors such as
political, economical, social and so on. In this respect for conducting respective analysis TESCO
conduct evaluation of PESTEL analysis (political, social, economical, environmental,
technological and legal factors), which is given below:-
Political: Respective company is operating its business operations and functions in 12
countries that includes Asia as well as Europe. Their are variety of political factor which affect
decision making operations process of TESCO such as tax rate, legislation, political instability,
economic condition, unemployment rate and many more. Due to which manager of respective
company has to develop strategies and plans in effective and appropriate manner so that they
able to conduct business proper operations and functions.
Economical: Economic factors are those which are related to economic condition of
country as well as company. In this labour cost is an essential aspects which affect supermarket
activities and decision making. Form 2018 minimum wage rate of United Kingdom get increased
by 4.4 percent for employees aged 25 years and above. Due to which budget regarding salary
shift upward of TESCO, that is approx millions of pound in United Kingdom (PESTLE Analysis
of Tesco, 2019). This show that when there is change occurred in economic condition it will also
affect an organisation in same manner.
Social: Behaviour of consumers get changed according to trends and time, according to
that they want delivery of products and services on same day as well as they want flexible return
policy. Along with this they also prefer one stop shopping. In respect of TESCO they understand
need and requirement of customers and develop strategies and plans accordingly. By this they
attract and retain customers for long run in appropriate way and leads to expand business in
properly. According to research conducted by PWC, there are 65 percent of loyal shoppers in
United Kingdom. This is possible for respective company because they develop close and
effective relation to their customers.
Technological: Due to technological advancement TESCO creates various opportunities.
By adopting upgraded technologies company create new and innovative products which will

increase the growth and profitability of the company (Dubihlela and Sandada, 2014). TESCO
invested some amount of energy efficiency projects, for reducing carbon footprints, in order to
fulfil their long term goals. Respective company adopt new payment option which is known as
PayQwid by which customers able to pay bill amount in easy and simple way.
Environmental: Company should consider environmental standards before expanding its
business activities at international market. Various factors have been evaluated like climate,
weather and many more. TESCO is reducing 50% of its carbon footprints by the year 2020 in
order to clean and safe the environment. Along with this respective company committed that
they are planning to use renewable resources and want to generate 100 percent electricity from it
by year 2030.
Legal:Policies of government directly influence the working culture of TESCO. Before
operating at international level company should analyse different laws, legislations and
regulations of operating countries. Food Retailing Commission (FRC) act was passed in the year
2004, which says that no company can change its prices without prior noticing to the public. As a
result, competitors formulate its strategic accordingly. Respective company face problem
because in 2016 their 17 workers take legal action due to their employer are doing discrimination
on basis of age and gender (PESTLE Analysis of Tesco, 2019). For which manager of respective
company develop strategies and policies accordingly.
As per the above analysis, it has been said that there are various factors which affects the
overall business organisation. Also it has been recommended that before expanding business at
global level TESCO have to evaluate overall environment of the country.
Challenges of Globalisation and strategic challenges of organisation
Globalisation help an organization in conducting work in effective and appropriate
manner. By this a company also able to conduct whole process and develop strategies in properly
but it also leads to challenges which affect working of a company. Some of the major issue or
challenges drive from globalisation are given below:-
Mobility of jobs:Due to occurrence of globalisation many companies shift their
manufacturing unit in developed and developing countries due to which there is many peoples
lose their jobs.
Loss of cultural diversity: Through globalisation culture are exchanging which is
consider as good but in some point individuals of country are losing their distinctive features.

Cost of expanding:When an organization expand its business at international level they
have to spend more money on the process (Eden and Ackermann, 2013). Along with this they
also have to develop products and services according to situation and location due to which they
have to conduct analysis.
TESCO need to conduct evaluation and analysis of market so that they able to minimise
effect of challenges or issues which are mentioned above. This will help them in developing
strategies and plans which help in avoiding issues.
Recommendations on overcoming challenges
By analysis all the above situation some recommendation are given to TESCO to
overcome issues and develop grow business in proper manner. They must understand culture and
beliefs of diverse countries in which they are going to expand business (Elbanna, Andrews and
Pollanen, 2016). This is so because by it they able to develop strategies and policies in
effectively. Along with this they also able to avoid issues which they can face while expanding
business as well as it help respective company in sustaining in market in effective and
appropriate manner such as by adopting these strategies respective company able to deal with
issues and problems properly. More over they must also hire employees form respective country
in which they are expanding this will help them in conducting business according to respective
country demand and requirement. By adopting these TESCO able to operate and conduct their
business activities appropriate which help them in fulfilling their objetcive.
TASK 3
P3 Evaluate the influences of globalisation on organisational governance and leadership,
structure, culture and functions
Influence of globalisation on governance, leadership, functions, culture and structure are
mentioned below:
Globalisation on governance:
This is considered as a practices of rules, system, methods that guide company to manage
as well as control. It assists in balancing the structure of stakeholders interests such as workers,
consumers, suppliers, management and so on. With the rise in globalisation, it effects business in
respects of rules, structure and system (Khan and Khalique, 2014). TESCO have influence by
internationalisation on corporate governance as this assists in promoting resources utilisation in

appropriate management and economic system. As this constrained TESCO to comply
regulation, legislation for accomplishing the society expectation so that they can meet
preferences, requirements and demand of the clients. So changing globalisation let business to
utilise assets in effectual manner.
Globalisation on leadership:
This aids in influencing leadership style of TESCO that states through situational theory.
Various situations which can develop in company and in this case leaders required to select
strategic course of action that should be according to the situational variable. Because of
internationalisation, modification took place often (Kirchoff, Tate and Mollenkopf, 2016). For
example: if leaders are knowledgeable as well as experienced in that case authoritarian style is
appropriate and when team members are proficient then democratic style is suitable. As situation
changes, this is very essential fro TESCO to use style and accomplish work which is influenced
through globalisation.
Globalisation on functions:
This assists in facilitating negative and positive effects to business organisation. Positive
impact of internationalisation helps in enhancing competition because of global investment. The
often modification in preferences, demands and requirements of consumers want proper quality
of products or services. As TESCO can carry out economies of scale with assistance of huge
production due to selling goods in different nations. Globalisation aids in enhancing joint
ventures as well as merger for expanding market. Also, the negative effects of globalisation on
functions that facilitated to TESCO are variation of price arise into enterprise due to competition.
With emergence in internationalisation, job insecurity in firm occurs because company outsource
jobs to developing nations.
Globalisation on culture:
This is the knowledge as well as characteristics of particular team of individuals,
religious, languages, habits etc. It can influence TESCO that is described with Hofstede's
theory. It is the concepts which was introduced by Greet Hofstede which can be shown with the
help of six dimensions (Liu and Wang, 2014). Also, this is the tool for cross cultural
communication that explain impact of culture upon individuals as well as society. All the
dimension are mentioned below:

 Power distance index: It shows the measures of inequality that is accepted and rejected
through people with or without power. TESCO manager should has power to allot task to
its workers according to their job role. Individualism Vs Collectivism: if work are done by whole team members together then
objectives can be accomplished. Likewise, when TESCO individual member perform
work then problems may rise as a results their goals can be attained in specified time
periods. Uncertainty Avoidance: This is the condition when team members feel anxiety for
inappropriate situation that raise within company. Because of globalisation, TESCO
managers decision making abilities get influenced. Masculinity Vs Femininity: This considered that there should not be any difference
between male as well as female workers working into company. Both should be
facilitated with same opportunities (Noble and Nwanekezie, 2017). As TESCO can
accomplish their objectives in successfully way. Long Term Vs Short term orientation: This is considered as union interrelationship of
recent and upcoming challenges as well as actions. TESCO should follow short term and
long term orientation for fully accomplishment of goals.
 Indulgence Vs Restraint: It is considered as a level of freedom that is facilitated ti people
for accomplishing it expectations. Whole workers, manager of TESCO should work
according to their comfort level in firm for better results.
Globalisation on structure:
TESCO which is the leading retailer company. Globalisation on structure can be differ
from one to other that are described with the assistance of McKinsey's model. All elements of
this model are mentioned below: Strategy: This is used to maintain the game plan as to obtain business root. It also
develop a competitive advantage that assists in removing whole barriers to attain success
into life. Strategies are well-defined of each new business that maintain a market level in
improving environment (Okeke, Onuorah and Jakpa, 2016). TESCO adapt strategies that
can mould as per the market dynamic condition.

 Structure: Business structure explain the culture of work in firm. Communication
manner, authority delegation etc. TESCO maintain an effectual structure in order to set
company and represents whole operational requirements. System: In each day there is a work that firm required to accomplish as well as maintain a
regular working culture for regulating schedule. TESCO use interpretative tool that
perform as per organisational requirements. Shared value: This is analysed as superordinate goals as firm operates on similar values.
This regulates all firm that comply a suitable regulation to perform as per that. Style: Style that firm adapt to perform on it, as style of leadership regulated overall team
in accomplishing objectives. This manage whole function that provides strength to work
effectively and aids in attaining targets. Staff: Workers are the essential organisational part as this manage whole working culture
and develop each aspects in attaining expected objectives (Owolabi and Makinde, 2012).
TESCO considered all feedback to enhance their employees efficiency to accomplish a
allotted work in specified time.
 Skills: Hard working, knowledge, creative nature and skills of adapting things in proper
way is advantageous. TESCO set a competition to improve their employees skills and can
obtain progress in this.
P4 Evaluate the influences of ethical and sustainable globalisation on organisational functions
Ethical globalization refers to a process of transferring various information, products and
services in an ethical manner. In addition to this, ethical globalization motivates shareholders,
government, customers, society and suppliers to work in an ethical way which help them to
achieve competitive advantage. As a result, it will aid the company in successfully
accomplishing organizational goals, which will enhance growth, profitability as well as market
share of the company.
Sustainable globalization means expanding business operations at international level in
such a way which will increase its sustainability at competitive market. As a result, it will
enhance the profit ratio of the company and maintain sustainability for a long period of time
(Pathak, Hoskisson and Johnson, 2014). In addition to this, it is a tool which transfer the
pattern of operating business at international level according to recognized structure of
sustainability. In order to maintain long term sustainability at international level, company have

to follow all the legal formalities for their survival and growth at the competitive marketplace.
Various organizational functions will be affect by ethical and sustainable globalization. These
organizational functions are as follows:
Human resource- Human resource is one of the important or most valuable asset for
any company or organization. With the help of efficient workers company will achieve its long
term goals and objectives. With reference to this, TESCO should follow all the legal formalities
in an ethical manner. Rules and regulations of operating country should be follow by the
company in order to achieve their goals. In the present context of TESCO, it has been examined
that mangers of the company start adopting human practices in order to maintain long term
sustainability at the market place. In addition to this, TESCO give rights and freedom to their
employees for maintaining high performance, which will aid them to achieve their predetermined
goals.
Marketing- It is the most crucial but necessary factor for a business organization. It will
aid the company by identifying the requirements and needs of customers and manufacture their
products and services accordingly (Scott, 2013). Also marketing factor helps the company while
creating social awareness within the society about a particular product or service. In the present
context, TESCO promote their goods and services at very low cost in order to capture large
market share at international level. In addition to this, for increasing sale of products, mangers of
TESCO should formulate appropriate marketing strategies. Along with this, mangers of TESCO
focus on those product which will aid the company in maintaining their sustainability for a long
period of time.
Finance- Finance is very important for every business entity to run their operations
smoothly. Along with this, main motive of the company is to proper utilize their funds for
smooth ruining of their business activities. In reference to TESCO, it is the responsibility of
finance manager to collect required funds in an ethical manner. In addition to this, finance
manner of TESCO utilize funds in order to produce high quality goods and services. Along with
this, proper evaluation of market trend require a lot of fund, which will aid the company by
producing goods according to the needs, demands and requirements of customers.
As per the above analysis, it has been analysed that there are various elements which will
influence the working environment of the company. Human resource, finance and marketing are
some of the department in an organisation which will influence the organisation while expanding