Impact of Environment on Tesco: A Contemporary Business Analysis

This report provides a detailed analysis of Tesco's contemporary business environment. It begins with an introduction to the concept of the contemporary business environment, highlighting its dynamic and competitive nature. The main body delves into the impact of cultural and natural environments on organizational behavior, focusing on economic, non-economic, and natural factors. The economic environment section examines the influence of economic conditions, policies, and systems on Tesco's operations, particularly in light of Brexit. The non-economic environment explores political and legal, socio-cultural, technological, and demographic factors. The natural environment discusses the ecological and environmental considerations relevant to Tesco. The report then presents a SWOT analysis and a PESTLE analysis of Tesco, offering insights into its strengths, weaknesses, opportunities, threats, political, economic, social, technological, legal, and environmental factors. The conclusion summarizes the key findings and emphasizes the importance of understanding the business environment for organizational success. References are also included.

Contemporary Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................4
Impact of cultural and natural environment of behaviour of Organisation.....................................4
ECONOMIC ENVIRONMENT..................................................................................................4
NON-ECONOMIC ENVIRONMENT........................................................................................6
NATURAL ENVIRONMENT....................................................................................................8
SWOT ANALYSIS OF TESCO.................................................................................................8
PESTLE ANALYSIS OF TESCO...............................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Contemporary Business Environment implies such environment of business that is highly
competitive and dynamic in nature. It is dynamic because it changes so frequently according to
change prevails outside organisation (Contemporary Business Environment, 2020). It is
competitive because of free trade liberalization where many business enterprises compete for
same market share and earning for higher profits. In such business environment, business
marketers needed to have full knowledge and understanding of these surrounding in order to
cope up with its affect effectively and efficiently. These are those external factors which have
ability to influence operational decisions and functioning of business enterprises. These
surroundings bring various challenges as well as opportunity for company that might affect its
long term survival positively or negatively. Adequate knowledge of this type of environment will
enables firms to be pioneer within industry and sustain their competitive edge efficiently. In
order to compete within dynamic and competitive conditions, company required to formulate and
implement logical business strategies and optimum utilization of managerial accounting tools.
This is important for effective planning, controlling as well as decision making process. It is
necessary for organisations to gather relevant information associated with modern business
environment that is fierce and ever changing. Business owners must have an ability to examine
and determine requirements and developments which are required to be done in order to respond
towards change (Barr and et. al., 2018). Business environment is combination of two sub
surroundings which are internal and external surroundings. Internal surroundings are those which
exists inside of an organisation such as finance and physical resources, corporate culture, values
and objectives and so on. Whereas, external surroundings are those which pertains outside of an
organisation such as political, economical, social, technological factors etc.
Tesco Plc is one of the leading and well establish trading as well as retailing British
Multinational organisation. Company deals in serving wide variety of consumable goods which
includes groceries, merchandise and many more. It has its headquarters located in England, UK.
Tesco holds ninth position of largest retailer in world and has its physical outlets in more than
seven countries around Asia and Europe. Company owns and regulates more than 6800+ stores
in different locations and employed approx 450000+ employees. Tesco has its own subsidiaries
such as Tesco Bank, Tesco stores ltd, Tesco mobile, booker groups, Spenhill and others.

This research report consists valuable information associated with impact of cultural and
natural environment on behaviour of given organisation. It includes economic, non-economic,
natural environment which have a dynamic influence over business decisions, operations and
procedures. It exhibits different analysis methods through which company can examine their
actual position in target market and enables it to assess opportunities and threats.
MAIN BODY
Impact of cultural and natural environment of behaviour of Organisation.
Business environment have an enormous impact over operational working and functions
of business enterprises. Such business environment is classified into two sub categories namely
cultural and natural surroundings. Cultural surroundings comprises of those factors which are
chiefly associated with economic and non-economic conditions of country. On contrary, Natural
surroundings are related to ecological, geographical, climatic and weather conditions and so on.
These forces plays a significant role in shaping out corporate behaviour of an organisation either
in a positive way or negative way (Hamilton and Webster, 2018).
ECONOMIC ENVIRONMENT
Economic environment is a mixture of those forces which are associated with economy
of country and has immense impact of business decisions and operations. These are factors
which influence commercial activities and consumer behaviour. This environment contains such
factors which are present in marketplace and in entire economy. These factors have a capacity to
influence demand and supply of products/services, disposable of consumer income, consumption
level, exchange rates, inflation rates, imports and exports, foreign direct investment, employment
and unemployment rates and other economic related issues. Tesco is one of the largest retail
corporation across world and has employed more than 450000+ employees as well as serve
millions of customer every week. Company is regulating its business and various supermarkets
in such dynamic and competitive atmosphere of UK (Temelkova, 2018). Although, UK has
extremely developed and market-oriented economy. It is sixth largest national economy across
world. But in present scenario, economic growth of Britain is slowed down due to Brexit
referendum. Brexit implies an agreement in which UK has voted to get separated from European
Union. This political decision has enormously hampered economic conditions, policies and

system of UK. All these factors are bringing adverse as well as positive affect over TESCO
business. Economic environment is widely classified in three categories which are explained
below.
 Economic conditions: this category is comprises of different set of surroundings which
creates immense challenges and threats for large organisation. This represents actual
economic position that a country is having across world. It comprises of various
components such as GDP, per capita income, import and export, optimum demand and
supply, exchange rate, inflation rates, consumption level and so on. Currently, UK is
facing adverse economic conditions due to Brexit. UK is facing enormous fall down in
its GDP as it increased only by 1.2% in 2019 as compare to 2018 that is 1.4% (UK
Economic Forecast, 2020.). Moreover, it increase unemployment rate which is 4%,
inflation rate 2%, decrease in foreign direct investment, fall down consumption level,
decline in import and exports. All these condition have negative impact over behaviour
of Tesco and its operations. It bring negative influence over its import and exports, on its
sales, investment in other projects. Overall it brings adverse impact over its growth
expansion aspects and profitability.
 Economic policies: this category comprises of various policies, legal laws, rules and
regulation which are framed or formulated by nation’s government in order to monitor
and control business as well as commercial activities. It contains different number of
policies such as fiscal, industrial, monetary, foreign investment so on. Government make
time to time changes on basis of emerging external changes pertains due to new
guidelines of IMF, WTO, world bank etc. Presently, UK has unstable economic policies
as government has implement various changes in its policies namely economic policy,
labor market, tax policy, budgetary policies and others. It bring negative impact over
behaviour of Tesco plc as company is unclear about current policies. On basis of Brexit
agreement, company might has to follow WTO rules which may affect its working style
and operation (Akhtar and et. al., 2018).
 Economic system: UK has cultivated mixed and open economy where it offers free
trade globally along with collective restrictions, barriers and policies framed through
nation’s government. Currently UK is facing unstable economic conditions and policies
which formulate weak economic system. This brings adverse impact over behaviour of

Tesco as company might face stiff competition from small retail organisation. Moreover,
company has to follow rules of WTO which might bring economic losses in UK.
Although, it overall bring enormous effect on its productivity and profitability.
NON-ECONOMIC ENVIRONMENT
Non-Economic environment is another field of business environment which have an
immense impact over organisational functions, strategies, decisions, operations and its growth.
These are not related to economy of nation but it is chiefly associated with people, political
environment, and technology. It include socio cultural, political and legal, demographical and
technological environments. Each environment has its own strength and weakness which are
require to be consider by every organisation. In case of Tesco, company has to look after such
surroundings in order to sustain long term survival and retain its competitive edge. This
environment brings enormous growth opportunities unless they are address by firm (Schaltegger
and Burritt, 2017).
 Political and legal environment: this kind of environment is highly associated with
political and legal factors that are present in economy. These factors have an ability to
influence growth and success of business enterprises. This environment is highly
connected with various political departments such as legislature, executive and judicial
which are controlled and monitor by nation’s government. If there is stable political
environment exists in a country then is highly favourable for organisations operating its
business (Belyaeva, 2018). In case of UK, as it discussed earlier that its economic
conditions, policies are not great due to which increase instability in political and legal
laws due to Brexit. This factor shape out behaviour of Tesco negatively as unstable laws
will influence its products demand and supply that in turn will bring down its sales. Also,
it might not able to attract more investors and leads to variations in labour laws,
marketing conditions.
 Socio-cultural environment: this environment encompasses different values, culture,
ethics, norms, belief interlinked with nation around which company operates its business.
Moreover, it contains taste and preferences of customers. Every organisation is required
to assess various factors of this environment so that it can be easy for them to offer
products and services according to cultural requirements. UK has cultivates flourish and

diversified cultural environment which make it different from other countries. This
environment has positive impact over Tesco behaviour as it bring immense opportunities
for firm to explore and expand its business. Presently, UK citizens are highly motivated
regarding their fitness and health as well as inclined to organic and diet products. This is
an opportunity for Tesco to produce healthy and organic food products to satisfy healthy
requirements of youth (Khan and Quaddus, 2015)(Erl, Khattak and Buhler, 2016).
 Technological environment: this environment is associated with new and updated
techniques of productions, distribution and research. It exhibits application of scientific
methods in order to perform and complete out organisational tasks. It includes innovative
products, inventions associated with equipments, tools, machines and so on. At present,
everyday something new has emerged in market in terms of advance technology and
organisation has to adopt these new techniques for smooth functioning of its business
(Rosenbach, 2018)
 . UK has strong and advanced hub of technical and research centres which is highly
beneficial for large organisation like Tesco. Tesco has always take advantage of retrial
technologies in order to provide better customer services to enhance customer experience
and satisfaction. Company has launched RFID technology with purpose of increasing in-
store customer’s experience. As it automatically count level of stock inventory and
remove its after sales.
 Demographic environment: this environment id highly relatable to size of population
that exists in particular nation. This environment is classified into various sub categories
such as gender, age, income, growth rate, language, religion etc. Surroundings of such
environment has direct impact on demand and supply of product/services that
organisation offers in order to gain profits. UK has favourable demographic conditions
which indicates that it have large as well as diversified population. This environment has
positive impact in shaping out behaviour of Tesco at large extent. It provide opportunities
to serve its products to large customer base. Also, it is one of well-establish brand in UK
and enjoys high market share. Company can enhance its brand extension by entering new
market (Liu and Stening, 2016).

NATURAL ENVIRONMENT
Natural environment comprises of various factors which are related to environmental
conditions within which an organisation operates its business functions. These surrounding are
associated with natural scarce resources, climatic and weather conditions, biological and
ecological factors, forestation and so on. Every profit or non-profit organisation has social
responsibility to provide such product and services which create no harm to earth and its climate.
Due to various toxic chemicals and economic activities it brings adverse impact over climatic
conditions as it produce air, noise, water pollutions which needs to be stop. UK government and
local bodies, citizens are highly inclined towards taking corrective measures to reduce negative
impact of business and economic activities over environment. Tesco is leading retail organisation
and it is highly inclined towards protecting environment. Company has taken various initiatives
to reduce carbon emissions, launched recycle scheme by providing bottle banks where
consumers can bring waste bottles and jars to recycle same (Lee, 2015).
SWOT ANALYSIS OF TESCO
 Strength: Tesco has several strength which enables it produce and retail high quality
products and services to its potential customers. Some of its strengths are: Tesco holds
highest position in retail industry in UK. It has well established brand image due to which
it enjoys huge and diversified customer base. In addition to this, it has power product
portfolio.
 Weakness: Tesco is weak in some areas which creates an obstacle in its long term growth
and competitive edge. Some of its weakness are: Tesco has involved in various
controversies which hamper its goodwill and brand image as company has to pay fine
because of fraud trial and accounting scandal. Tesco has to face poor operational
performance in certain market of US and JAPAN.
 Opportunities: some opportunities through which Tesco can enhance and sustain its
competitive edge. Tesco can expand its Business through adopting international market
expansion strategy and serve its product worldwide. It has strong presence in financial
sectors. Moreover, company can move to non-food retail range of customers (Moncrief,
Marshall and Rudd, 2015).

 Threats: some threats that might create challenge for Tesco. Uncertain global economic
environment is biggest threat for Tesco as it dynamic in nature. Tesco has to face
challenge of seasonal variation which affects its sales and Revenue. Moreover, tesco is
facing fierce competition from its top competitors that is Morrisons, ALDI, Sainsbury.
These organisation offer identical product portfolio at affordable rates.
PESTLE ANALYSIS OF TESCO
 Political: these factors brings adverse impact over operations of Tesco due to Brexit
Referendum. UK has Unstable political conditions it create negative affect over
operations and functions of Tesco. It influence its import and export decisions to other
countries. Company has to change its current policies and strategies according to new
rules of World trade organisation (Amankwah-Amoah, Osabutey and Egbetokun, 2018).
 Economical: these factors are chiefly related to economic conditions of UK which are
currently unfavourable for Tesco in terms of growth and sustainability. There is high
fluctuations in tax policies, fiscal policies, monetary policies, GPD rate and other
economy elements due to UK-EU separation and other global uncertainties. Moreover,
high labour cost also affects operations of Tesco. It affects overall productivity and
profitability of firm.
 Social: these certain factors are optimal for growth expansion of Tesco as company can
address wide and diversified opportunities. UK has diversified socio cultural environment
in which Tesco can produce organic and healthy diet eatable items to cater various needs
of health conscious customer base (Lenart-Gansiniec, 2018).
 Technological: these factors are also favourable for Tesco operations and functioning in
UK. UK is known for its advanced hub of technology by taking advantage of it Tesco has
launched RFID technology in order to provide high quality products and enhance
customer experience. Moreover, Tesco has introduced self-service checkouts to make it
more convenient for customers to shop and also it reduce unnecessary labour cost.
 Environmental: impact of these factors are optimal for brand image of Tesco as
company has taken various initiatives to reduce carbon footprints and other climatic
pollution. Company has launched energy awareness campaign. Also, Tesco has
introduced bottle recycle bank in order to make use of waste plastic bottles and jars.

 Legal: these factors have an adverse impact over policies, strategies, rules of Tesco. Due
to unstable political factors there is fluctuations in various legal laws. Tesco might have
to follow laws of WTO which may create challenges for company to survive (Fascia,
2018).
CONCLUSION
From above research analysis report, it can be summarise that contemporary business
environment has a vital role in success and long term survival of business organisation. In such,
modern business environment that is chiefly dynamic and competitive in nature every
organisation required to collect and examine such various factors. Management of business
enterprises must have a proper tools and techniques in order to assess and examine such external
forces which have enormous impact on its working operations. These forces are highly associates
with economic environment of country around which organisation is operating its business units
such as economic conditions, systems, and policies. These forces have both negative and positive
affect which shape out behaviour of an organisation. It is necessary for business organisation to
have proper knowledge regarding these factors in order to develop effective strategies
accordingly. Along with economic environment, company required to look after various other
factors which are related to demography, political and legal, environmental, technological and
many others. These factors influence various activities of business such as production, sales,
marketing, supply and demand of products so on. In order to address these factors there are
various tools which can be carried out by organisations so that they can able to analyse their
actual position and sustain their competitive edge within industry. Such analytical methods are
PESTLE analysis, SWOT analysis. All these tools are helpful in order to examine their strengths,
weakness, Opportunities, Threats so that company can achieve pioneer stage. This enables them
to provide effective services and products according to requirements and emerging trends of
market. This report explores various environmental areas of UK which shape out behaviour of
industry positively and negatively. Although which bring direct affect on operations of various
organisation. Moreover, business environment provide brief and relevant information regarding
customer’s taste and preferences, competitor’s moves and strategies, upcoming government
policies and laws. All these information enables an organisation to take certain steps according to
external information. Better knowledge of such dynamic environment helps organisation to take
corrective measures in order to create value for its potential customers and enhance its brand

image in market. Through this company can always be prepared for uncertain emergency
situations. This enables them to take proper utilisation of scarce resources and provide them
various options associated with investment and growth strategies. This make an organisation to
face out different challenges and threats. With better compatibility with such dynamic
environment company can develop effective course of action plan to provide stiff competition t
its rivals. Furthermore, it justify that how internal core competencies, competitors products
benchmarking, marketing mix strategies, corporate culture and structure influence entire
decisions and functions of an organisation. Business environment enables firms to design and
develop its products, formulate long term strategies and tactics so that it can regulate its business
smoothly and effectively. It enables firm to adjust or modify its vision and mission statement in
correspond to prevailing changes. Moreover, it can establish smart objectives to take advantage
of opportunities.

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Online
Contemporary Business Environment. 2020. [Online]Available
through<https://www.bartleby.com/essay/Contemporary-Business-Environment-
P334XCAX7KU4Z>./
UK Economic Forecast. 2020.[Online]Available
Through<https://www.focus-economics.com/countries/united-kingdom >./