LSC London: Business Environment Analysis Report on Tesco (2020)

This report provides a comprehensive analysis of Tesco's business environment. It begins with an introduction to the company and a literature review exploring economic and non-economic factors. The economic environment section examines economic systems (free, mixed), conditions, and policies, with a focus on the UK context and the impact of Brexit. The non-economic environment delves into natural, demographic, and cultural factors affecting Tesco. The discussion and analysis sections include SWOT and PESTLE analyses, evaluating Tesco's strengths, weaknesses, opportunities, threats, and the impact of political, economic, social, technological, legal, and environmental factors. The report concludes with a summary of the findings and references relevant sources, providing a detailed understanding of the external forces shaping Tesco's operations and performance. The report follows the CBE assignment template, adhering to the word count and referencing requirements.

BUSINESS
ENVIRONMENT

ABSTACT
Business environment is the sum total of both the macro and micro environment which include
various elements with it such as distributors, customers, employees, shareholders and so on. The
environment of business impacts the behaviour of company and employees as well which
influences their overall performance and productivity of company. In terms of this, to carry this
report, both economic and non economic conditions are determine which include economic
system, policies and conditions and other one include natural environment, demographic and
cultural conditions of company. In addition to this, internal and external analysis is conducted to
determine the environmental conditions of company.

Table of Contents
ABSTACT.......................................................................................................................................2
INTRODUCTION...........................................................................................................................1
Company Background.................................................................................................................1
LITERATURE REVIEW................................................................................................................1
Economic Environment...............................................................................................................1
Non-Economic Environment.......................................................................................................3
DISCUSSION AND ANALYSIS...................................................................................................4
SWOT Analysis...........................................................................................................................4
PESTLE Analysis........................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Business environment is the combination of all the external and internal forces which
influence business as direct and indirect manner. Within the business organisation everything
which surrounds the business is considered as its environment. For this there are various tools
including ratio analysis cash flow Business Ethics fund flow and so on which affect the business
conditions and its proper determination and examination is useful in achieving the objectives
efficiently (Hamilton and Webster, 2018).
Company Background
Tesco is the British multinational retail company which deals in groceries and general
Merchandise products and it’s headquartering in England United Kingdom. Company relies at
the third largest retailer position in the world in terms of gross revenues. Tesco was founded by
Jack Cohen in 1919 as a market stalls group. In addition to this Tesco have its stores in around
seven countries across Asia and Europe and also market leader in retail sector within UK in
which it has around 28.4 percent market share. Moreover Tesco had a market capitalisation of
around 18.1 billion till April 2015 as it is considered as the 28th largest of any company with
primary listing on the London Stock Exchange. Currently the sales of Tesco are jumped up to
30% in the first few weeks of the outbreak of coronavirus. Moreover Tescoapplause for its
turnaround that took over in 2014 following an accountingscandal. After that it is considered as
the largest supermarket in UK with approximately 27% of market that is way ahead of
Sainsbury’s 15% and Morrison’s 10%. As the impact of brexit major problem arise in front of
company is company does not understand how to deal with their customers and gain their
confidence and because of this the pound has dropped around 14% against Euro in 2016. After
the implementation of brexit Tesco is expected to post flat sales for the first half of the Year as
they need to develop proper trade after brexit.
LITERATURE REVIEW
Economic Environment Economic systems
According to Agarwal P. 2017, economic system is a way by which government and
Society conduct and provide available resources services and commodities across the
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Geographic region and countries. This system includes many factors such as labour capital
physical resources and entrepreneurs. For this few economic system are discussed as under:
Free economy: in this companies Act and regulate for their own self interest in order to
analyse how the resources are allocated and what type of goods are developed. In addition to this
there is no intervention of government as it is a pure market economy (Prajogo, 2016). This
separation among the government and market as it prevents the government from becoming
powerful.
 Pros: in this consumers are willing to pay any price for the product which they want and
according to this business produce commodities according to the demand of their
customers as it is profitable for them (Alotaibi, 2016). In relation with this companies
invest huge amount in research and development to examine the preferences of
customers.
 Cons: because of the huge competition within the free market companies does not care
about the society as the only put emphasis on their benefits profitability and increasing
their income (Deasy and et. al., 2016).
Mixed economy: it is the combination of various kinds of economic system including
market and command economy. In this the market is more or less free from the ownership of
government except in few areas including transportation and sensitive Industries like defence and
rail (Barac and et. al., 2016). Therefore government is only involved in the regulation of the
private companies.
 Pros: in this the government intervention is less which results in the businesses can easily
operate more efficiently and also cut down cost than a government entity.
 Cons: the biggest problem with it is that the state operated industries are subsidised by
the government and relies under large debts because of an uncompetitive environment
(Virglerova, Dobes and Vojtovic, 2016).
By considering the above discussion it is analysed that mixed economy is best for UK
and Tesco as well as in this the intervention of government is more or less both which allows
private organisation to run their business in smooth manner. Economic conditions
By analysing the Global development and financial conditions of UK it is determined that
Global output growth has slowed market since 2017. It is particularly visible within the
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manufacturing sector as their annual growth in industrial production was around 0.3% in
November and after that it gets town proximity 4% in 2017. It likely impact on increased trade
protectionism which describes the ongoing slowdown in China that also drag the growth of other
countries which relies on the Chinese demand (Gavurova and et. al., 2017). In addition to this
inflation has been quite weak in euro area and despite of this arise in unit labour cost increases
since 2017 that is average around 1% over 2019. Economic policies
The economic policies describe the impact of brexit regulations laws and other concerning
European Union policies as these are the factors which affects the organisational behaviour and
its culture. Meanwhile it is analysed that the UK Government and their organisations has some
fundamental aspects of their organisational behaviour asset include the people structure
technology and environment (Erasmus, Strydom and Rudansky-Kloppers, 2016). The
organisations of UK believe that behaviour and culture is important as it develops better relations
by attending individual organisational and societal objectives as well and also bring coordination
among the management.
Non-Economic Environment Natural Environment
Natural conditions of UK is not so well and has been considered as highly populated
Nation and the current environmental issues are quite culminating because of the interaction
among British and their natural surroundings. These interactions are quit intensified since World
War II as the increased population demand more production and infrastructure which require
more natural resources and also harm of available resources as well (Gaganis, Pasiouras and
Voulgari, 2019). In addition to this The Marine and coastal habitats are declining over the last 60
years and not only the quality of ecosystem the disappearance of coastal marshes has increased
which can become the risk for the further erosion and flooding. Moreover rising sea water
temperatures and exploitation of natural resources leads to a serious loss of quality in the UK
Marine ecosystem. Demographics
The population of UK gets doubled over the last 140 years and reaching a new high of 66
million people 2017. Reason behind the growth is the more births than deaths and more people
are migrated or moving to the UK. In addition to this the population is also ageing as the UK
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population is projected to continue growing reaching around 73 million by 2041. Although
improvement in life expectancy have currently installed the UK population is basically living
longer then before as the babies who born in between 2015 to 2017 are expected to live around
75 to 80 years. By considering the size and characteristics of the population of United Kingdom
is quite crucial when it comes on planning and delivering services such as education Healthcare
and transport (Civelek and et. al., 2016). Along with this the environment is concerned about the
natural resources which cannot be tackled on the national scale and for this solution is required
by the political solutions that go beyond the national policies. Cultural
The culture of Britain and the social norms are very unique as the people of the four
countries including England, Wales, Scotland and Northern Ireland make their own unique
traditions and Customs. As the British food is blind of for various rich culture of countries as the
people of Britain usually relies on the fast food including fish and chips Sunday roast black
pudding and full English breakfast which include sausages bacon toast mushroom tea and coffee
(Saleh and Watson, 2017). In terms of English language the Britain languages are less widely
spoken as some of them are even at risk of Shipping towards complete extinction. Moreover the
British artist have impact the European and global history of music as the music concerts and
rock music is a common thing in UK and the most biggest music events are conducted in UK.
DISCUSSION AND ANALYSIS
SWOT Analysis
 Strengths: Tesco get various awards regarding the excellence in retail industry, customer
service and whole shopping experience. For this, it is determined that the largest and
most significant profitable supermarket retail company in world in comparison to other
rivals. Moreover, company has various formats of stores according to the cultural and
local requirements of customers and also offer more customised experience to their
customers (Benmamoun and et. al., 2016).
 Weaknesses: Competitive pressure leads to develop price war that was eroded by major
retailers in order to maintain their profit margin as in this; Tesco put emphasis on the
other methods of gaining competitive advantage (Aithal and Aithal, 2016).
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 Opportunities: Tesco has prominent opportunities to maintain strategic alliances with
various brands and admired organisations in order to offer various goods to attract more
customers to target more areas. Meanwhile, private label market also has the prominent
opportunity for company (Šoltés and Štofková, 2016).
 Threats: Economic recession threaten the market area and share in terms of profitability
in much area around the world in order to reduce the number and size of purchasing to
develop by customers. In addition to this, its stakeholders put emphasis on the concerning
environment and social responsibility as it adversely influence the cost of company.
PESTLE Analysis
 Political: These factors include tax rates, current legislations and political instability and
so on. The chairman of Tesco describe that political factors impacts the business
conditions and also add the European Union referendum that is greatly create a risk factor
for the investors and the British Economy that passes through the hard times (Hansen and
et. al., 2018). In addition to this, because of financial instability of world, government
encourages the retailers in order to create jobs regarding the domestic population as it
create employment opportunities by increasing the demand for its products and
diversifies the workforce. Tesco employs ample of people that are disabled and elderly
workers often paying the lower rates. For this, the workers provide great level of loyalty
for their respective customers and organization as well.
 Economical: In economic factor labor cost is important which influences the
supermarket conditions of UK. Like the annual wage bill is amount GBP is around 4.5
billion as the minimum wage rate is increased by 4.4 per cent for 25 years old and
onwards people. For this, there are many factors that influence the Tesco including cost,
profits and prices. In relation with this, company put emphasis on the increased
borrowings cost of United Kingdom. It leads to increase the costs and prices and also
decreases the profitability. As a result it impacts the brand image, reputation and cost
leadership strategy (Alaloul, Liew and Zawawi, 2017). Away with this, diversification
and presence of international market are considered as the important strategies in past
years regarding the success of company. So, it is significant to mention that Tesco
depends on the market of UK with around 27.7 percent share in the UK grocery market.
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 Social: By considering this factor consumers shopping becomes the major trend and
continuously changes over time. In relation with this, Tesco relies on the consumers of
UK and need to understand and offer prominent services in order to meet the suitable
issues (Liu and et. al., 2017). As per the PWC report, 65% shoppers of UK are loyal in
nature and for this, Tesco has opportunity by developing close relation and building
healthy relations with customers.
 Technological: Tesco embrace advanced and updated technologies as an opportunity that
is available for the retail technologies. In relation with this, they introduce RFID
technology in order to enhance their in-store experience for respective customers. It
ultimately leads to count the stock and remover its after sales. In relation with this,
prominent information is useful for the providers regarding the stores and refill if
required (Rialp-Criado and Komochkova, 2017).
 Legal: In this, business legal environment, in which law changes impacts the overall
business performance to attain prominent goals and objectives. For this, Tesco 17
workers tool legal action against the managers on the grounds of age and gender
partiality. In relation with this, workers got frustrated by noticing on the low pay rates for
overnights, weekends and bank holidays shifts (Hillary, 2017). Moreover, company also
faces legal action against the accounting scam and misguiding the capitalist that are
agreed to pay GBP of 12 million to settle down the legal action.
 Environmental: In UK many organization face immense pressure from government
agencies against addressing the environmental issues. For this, companies are liable to
respond regarding the issues for the beneficial of society. Currently, Tesco motivates
their consumers to shop from their online website tesco.com. For this, the Tesco van
drivers not only use fuel saving routes but also gather irrelevant plastic bags form the
customers in order to recycle them (Esangbedo and Che, 2016). Away with this, company
also committed to use renewable sources and generate 100% electricity by 2030.
CONCLUSION
By considering the above discussion, it is analysed that business environment carries many
forces in order to determine the various conditions of market in consideration with company. For
this, it carries prominent areas and conditions for the smooth running and functioning of
company. In terms of this, various key areas are determined which is useful in determining the
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various key elements of company that negatively and positively influences the working
conditions of an organisation. In terms of this, economic and non-economic conditions are
analysed which impacts the expansion and growth of company. Moreover, to determine the
working area and expansion, suitable frameworks are selected to analyse the internal and
external working conditions and key areas for company that are SWOT and PESTLE analyse
that examine the internal and external areas of market and describe the suitable risk factor for the
expansion of company.
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REFERENCES
Books and Journals
Aithal, P.S. and Aithal, S., 2016. Nanotechnological Innovations & Business Environment for
Indian Automobile Sector: A Futuristic Approach. International Journal of Scientific
Research and Modern Education (IJSRME). 1(1). pp.296-30.
Alaloul, W.S., Liew, M.S. and Zawawi, N.A.W., 2017, December. Communication, coordination
and cooperation in construction projects: business environment and human behaviours.
In IOP Conference Series: Materials Science and Engineering (Vol. 291, No. 1, p.
012003). IOP Publishing.
Alotaibi, Y., 2016. Business process modelling challenges and solutions: a literature
review. Journal of Intelligent Manufacturing. 27(4). pp.701-723
Barac, K and et. al., 2016. The capability and competency requirements of auditors in today's
complex global business environment.
Benmamoun, M and et. al., 2016. Gulf Arab E‐Business Environment: Localization Strategy
Insights. Thunderbird International Business Review. 58(5). pp.439-452.
Civelek, M and et. al., 2016. A model of measurement of the quality of business environment in
SME segment. Journal of International Studies.
Deasy, S and et. al., 2016. Controlling use of a business environment on a mobile device. U.S.
Patent 9,247,042.
Erasmus, B., Strydom, J.W. and Rudansky-Kloppers, S. eds., 2016. Introduction to business
management. Oxford University Press Southern Africa.
Esangbedo, M.O. and Che, A., 2016. Grey weighted sum model for evaluating business
environment in West Africa. Mathematical Problems in Engineering, 2016.
Gaganis, C., Pasiouras, F. and Voulgari, F., 2019. Culture, business environment and SMEs'
profitability: Evidence from European Countries. Economic Modelling. 78. pp.275-292.
Gavurova, B and et. al., 2017. Predictive potential and risks of selected bankruptcy prediction
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Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
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Hansen, M.W and et. al., 2018. Coping with the African business environment: Enterprise
strategy in response to institutional uncertainty in Tanzania. Journal of African
Business. 19(1). pp.1-26.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Liu, G and et. al., 2017. Business model innovation and its drivers in the Chinese construction
industry during the shift to modular prefabrication. Journal of management in
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Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in
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Rialp-Criado, A. and Komochkova, K., 2017. Innovation strategy and export intensity of Chinese
SMEs: The moderating role of the home-country business environment. Asian Business
& Management. 16(3). pp.158-186.
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Saleh, A. and Watson, R., 2017. Business excellence in a volatile, uncertain, complex and
ambiguous environment (BEVUCA). The TQM Journal.
Šoltés, V. and Štofková, K.R., 2016, September. The impact of business environment on regional
disparities. In CBU international conference proceedings (Vol. 4, pp. 187-191).
Virglerova, Z., Dobes, K. and Vojtovic, S., 2016. The perception of the state's influence on its
business environment in the SMEs from Czech Republic. Administratie si Management
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