Tesco: Analysis of Business Environment and Organizational Factors

This report provides a comprehensive analysis of Tesco's business environment, encompassing its organizational structure, types of organizations, and the interplay between various functions. It delves into the different types of organizations, including public, private, and voluntary sectors, and explores the size, scope, and range of each. The report examines Tesco's legal structure as a public limited company and analyzes the interrelationship between its organizational functions, objectives, and structure. Furthermore, it assesses the positive and negative impacts of macro-environmental factors on Tesco using PESTLE analysis and conducts internal and external analyses to identify the company's strengths and weaknesses. The study also explores the relationship between Tesco's strengths and weaknesses and external macro-environmental factors, providing a holistic understanding of the company's position within its business environment.

BUSINESS AND BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
P1. Different type and purpose of organisation..........................................................................1
P2. Size, scope and range of different type of organisations......................................................2
P3. Functions of Tesco and Its Interrelationship With Organisational Objectives And Its
Structure......................................................................................................................................4
P4. Analysis of positive and negative impact of macro-environmental factors on Tesco..........6
P5. Internal and external analysis to identify strength and weakness for Tesco. .......................7
P6. Analysis of strength and weaknesses inter-relation with external macro-environment
factors in Tesco ..........................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment consists of factors, components and forces that strengthen
enterprise ability to develop consumer relationship. The three levels of environment consist of
macro, micro and internal (Deasy and et.al., 2016). Understanding of these environmental
factors assists organisation to adapt to changing conditions and also establish their identity as
unique firm. Present study will lay emphasis on environmental factors affecting Tesco. It is a
British multi-national store and are also merchandised retailer. Company has been headquartered
at England, United Kingdom. They have opened more than 200 outlets across the region. Report
lays emphasis on different type, size and scope of organisation. It also highlights legal structure
for Tesco. Assignment discusses about inter-relationship between different organisational
functions and there inter-linking with companies objectives and structures. Study also discusses
about internal and external factors in order to identify strength and weakness of Tesco.
MAIN BODY
1. Different type and purpose of organisation
There are different type of organisation in a business environment. Each industry has
different purposes, size and scope. The organisation structure is varied in working and also have
unique legal structure. The various sectors are-
Public sector- These type of sectors are mainly owned and run by government. All the
task and activities in these organisations are done by central authorities. The main purpose of
establishment of the sector is to not generate the profit but to serve general public. Major source
of income for these type of organisations are taxes, penalties. They can expand their business by
inter-linking with private sector. These sectors are been managed and organised at local, national
and regional level. Businesses perform by the public sector are owned and controlled by
government. All the rules and regulations in these sectors are made by central authorities.
Example of public sector- Tesco is a public limited company as it is owned and managed
by many partners. They can sale their share to public freely and independently.
Private Sector- These type of sectors are usually managed and controlled by private
owners. Main purpose for establishing these type of organisations are creating profit. Mainly
private sector industries are engaged in building unique image and offering creative product and
goods to customers. The shareholders of these companies have limited liabilities. To establish a
private limited company individual requires various legal papers and permission of authorities to
1

start it. These organisations are involved in introducing new and creative good in market
according to the need and requirement if customer's. They increase their worth by issuing share
and debentures(Deasy and et.al., 2016). Also no decision is made by government in this sector.
Private sector is involved in providing high benefits and incentives to employees working under
them. The sector mainly works for generating profit and revenue for their businesses. They are
engaged in expanding their market across the region by delivering high quality of goods.
Example of private sector- Mac Donald is a private organisation that is working for
creating their own benefits and profit.
Voluntary sector- Voluntary sectors are the community sector which undertakes social
duties. These type of organisation only work for providing social benefits for the people. Profit is
not their main aim or motive. Main purpose these industries are to provide welfare, enrich the
society and work for development of nation. The organisations are involved in developing
schemes and policies that benefits the society. For example they can develop campaign related to
saving ad protecting environment. They can ask customers or their clients to avoid using poly
bags and instead use paper bags.
Example of Voluntary Sector- Red Cross is a voluntary organisation that is been working
to provide social benefits to public.
Legal structure for Tesco
Tesco is a public limited company. They are the joint stock company which is been
operated by board of directors on behalf of stakeholder. Tesco is involved in conducting annual
general meeting in which shareholder are involved in making certain key decisions. They can
sell their shares on the stock exchange to general public and expand their business. Main owners
of the public limited company are their shareholders (Clarke, Li and Xu, 2016). They are
involved in decision-making process of the company. The price of the shares given to
stakeholder can fluctuate on the basis of market demand and need. Shareholders can force
company to make more profit so that they can get more amount of share.
Legal structure for private sector
Mac Donald is a private sector that has been following a legal structure where all the
decisions are made by board of directors of company itself. They can also ask for advice to their
franchisees.
Legal structure for voluntary sector
2

Red Cross is a voluntary sector that is involved in following legal structure where
government is also given authority to make decisions. Shareholders are imparted with to rights to
involve in judgements.
2. Size, scope and range of different type of organisations
In this part size scope and range of public, private and voluntary sector have been
discussed. These are as follows.
Basis Public sector ( Tesco) Private sector (Mac
Donald)
Voluntary sector (Red
cross)
Background details It is a British multi-
national store and are
also merchandised
retailer(Moroni,
Arruda and Araujo,
2015) . It has been
established in
England, United
Kingdom
It was introduced by
brother Maurice and
Richard in 1940 in
united states.
This community sector
was been established
by Henry Dunant in
Geneva, Switzerland.
Products and services
offered
They are involved in
selling grocery
products to the wide
range of consumers.
Mac Donalds is
engaged in selling
products such as
burgers, French fries,
Mac flurry,
sandwiches and many
more.
This sector provides
services like giving
blood or social care to
those who are in need.
Size and Scope The company has
opened more than 200
outlets across the
region. They earn an
annual revenue of 345
million dollars
Mac Donald has
opened more than
1000 stores across the
region. They earn
revenue of dollar 400
million
Red cross has more tha
100 outlets around the
globe. They earn
revenue of 100 million
dollar.
3

Vision/ Objectives The main aim and
vision of Tesco is to
expand their market
share and satisfy
consumers with high
quality products.
Mac Donald have aim
and objective of
earning more profit
and revenue by
targeting more
customers.
Red cross also have a
vision to provide
social benefits to large
number of people
across the globe.
Organizational
mission
Mission of Tesco is to
have competitive
advantage by giving
unique and innovative
products to customers.
Mac Donald mission is
to overcome their
competitors like
burger King, subway
and many more.
Red cross has a
mission to make
people healthy and fit
through their services.
Organizational
structure
Tesco is a public
limited company, it
adopts an
organisational
structure which is flat
in nature. Role and
responsibilities of each
employee has been
defined by them.
Mac Donald is a
private firm, they
follow a tall
organisational
structure so that they
can easily manage the
work and operations.
Red cross is a
voluntary organisation
which follows matrix
structure. It helps them
in effectively
managing the work.
Stakeholders Public Limited
company involved
shareholders in
decision-making
process.
Shareholders have no
role in decision-
making process.
Red cross slightly
involve shareholders
in decision-making
process.
4

3. Functions of Tesco and Its Interrelationship With Organisational Objectives And Its Structure
Different organisational functions are inter-linked with each other. They also help in
achieving the objectives and goals of Tesco. Company is also engaged in designing its
organisational structure in a way which helps them in making decision.
Organisational chart- Tesco is involved in making an appropriate organisation structure
for its firm in order to gain competitive advantage. It explains the relationship which one
employee shares with another. It defines the level of responsibilities. Authority and roles of each
individual is been defined by this organisation chart. It has many levels of hierarchy and also
communication is been followed from lower to higher level.
Functions of Tesco-
Every organisation is been engaged in performing varied function in order to gain
competitive advantage. It also based on chart of industry which has been prepared by Tesco.
Different strategies and functions performed by company helps them in achieving organisational
goal. The functions performed by them are as follows:
Research and Development: Company is also engaged in doing research and analysis about the
need and demand of consumers. This helps them in gaining competitive advantage. Also it
support in acquiring and retaining efficient employees. Research and development helps them in
establishing firm across the region. It is the most important function of organisation as it supports
them in increasing efficiency.
Product department: Tesco also consists of product department that assists them in designing
product and goods according to the needs and wants of their client. This department is
5
Illustration 1: Organisation chart
Source: (Organisation chart, 2018)

responsible to perform function that goods prepare should be on basis of taste and preference of
customers.
Finance department: This department performs the financial functions of company. They are
engaged in making budgets. Finance department decides budget for marketing, production,
research and development. The tall structure followed by Tesco makes it easier for functional
departments to interrelate with other departments and work towards achievement of goals
(Moroni, Arruda and Araujo, 2015).
Human resource department: This department is provided with function to organise and
manage human resource of Tesco. They motivate and encourage employees to perform better. It
helps organisation in achieving their vision, objectives and goals. Also, they try to strengthen the
decision-making process of employees so that they can choose appropriate things that fixes their
growth.
Sales and marketing department: Tesco has also appointed sales and marketing department.
This department focuses on promoting and marketing of products in order to attract and acquire
new customers. It also helps company in making other people aware about the goods and
services offered by organisation.
4. Analysis of positive and negative impact of macro-environmental factors on Tesco
Tesco can get impacted by various environmental factors. It can lay great effect on their
working. For overcoming this PESTLE analysis will be done by organisation. This includes:
Political factor: Tesco can get effected by the political factors. Government rules and
regulations can negatively or positively impact the business of company. For example increase in
tax rate to export grocery product can hamper the working of the organisation. Also if
government reduces the tax rate on such goods than it can increase the output which can be
derived from business(Clarke, Li and Xu, 2016). This can increase efficiency of organisation.
Government brings changes in its foreign trade policy and allows easy entry in global market.
The free entry in global market facilities Tesco to enter in new markets and increase its market
share
Economic factor: Company can also get impacted of the economic factor. If the inflation
rate and cost of labour is low than it can influence the growth of business in a positive way. Firm
can engage in hiring employees at low cost. This increases the efficiency and productivity of
business to grow. If the economic growth of any country is low than Tesco may have to think
6

about expanding their market share in the new area and regimes. They might have to redesign
their structure.
Social factor- These factors are related to culture, values and beliefs of people of the
region where firm wants to expand their share. Market analysis must be done about the customer
taste and preference so that Tesco will be able to gain competitive advantage. If firm realises the
importance of values and beliefs of consumers than they will be able to gain brand loyalty. This
will help in creating positive image in front of market. Also it can lay negative impact if
customers values, beliefs and thoughts are not been respected by company.
Technological factor- Tesco must make use of advancing technology to expand their
business. This can lay a positive impact on their growth. Making use of techniques like social
media channels and online services can help them in retaining and acquring customers. Also if
organisation is engaged in using traditional method for promoting than they can lose the
consumer base. Also it creates negative image in the market.
Legal factor- Laws, rules and regulations made by government must be adhered by
Tesco. This will help them in creating positive brand image in the market. Different law like
health and safety, consumer law can impact the decision-making process of customer. If products
are not designed according to these rules than it might hamper companies growth.
Environmental factor- These factors include taking care of environment, providing
schemes that protect and care for ecological conditions of any region. Tesco can engaged in
activities like promoting use of paper bags instead of poly bags. This can lay positive impact on
their growth(Hamilton and Webster, 2015). Tesco focuses on maintaining environmental
balance by adopting practices of corporate social responsibility which creates brand image of
company and it also builds trust of customers
5. Internal and external analysis to identify strength and weakness for Tesco.
Tesco can engaged in doing internal and external analysis to identify their weaknesses
and it will help them in decision-making.
Internal analysis: In order to identify the strength and weakness internal analysis can be
done by using SWOT. It includes the following:
Strength-
7

 Tesco is engaged in using advancing technology that helps them in attracting and
acquiring new consumers. They try to make use of innovative and creative techniques so
that a unique image of their firm is been established.
 Company lays keen emphasis on their customers that helps them in gaining competitive
advantage. Also, this support them in increasing their profit or revenue.
 Organisation is also involved in expanding their company across the region or globally.
This acts a strength of company(Savrul, Incekara and Sener,2014).
 They also lay focus on building consumer relationship by offering high quality products.
This also help in building healthy relationship with customers. Company is also engaged in developing brand image and brand loyalty by designing
products according to the needs and demands of consumers.
Weakness
 Tesco is surrounded by keen competitors and other large firms that can hamper their
growth.
 Company is not engaged in making use of advancing technology like promoting their
goods and services on social media channels like Facebook, Twitter or Instagram.
 New entry can create risk in the market for Tesco.
 Also, they do not involve their employees on decision-making process.
 Organisation is engaged in making use of advanced technology that increases cost related
to training and development. It increases the expensed of the firm.
External analysis: Tesco is involved in using Porter's five force model that helps in
determining the external forces that can affect the companies decision-making process. It also
helps in finding out the strength and weakness.
Tesco has been involved in developing the brand image by offering quality products that has
reduced the bargaining power of supplier.
Company is engaged in expanding their business across the globe that has helped them in
gaining trust of lot of suppliers. They have provided firm with benefit of making low bargaining
power.
Free and independent entry in new market support Tesco in expanding their market share across
the region and globe.
8

Tesco is also engaged in designing products according to the varied type of customers that help
them in gaining trust. It also creates brand loyalty for the product and service they are been
offering.
Company is also surrounded with threat of new entry or substitute product. For this firm is
engaged in doing market analysis. This also help them in gaining competitive advantage.
By using SWOT and porters five forces model Tesco can analyse their strength and
weakness. This help them in better understanding the customers and also offering them wide and
varied range of quality products (Hamilton and Webster, 2015). This supports company in
overcoming the barriers faced by them. Firm can also make keen decision by analysing their
strength and weaknesses. They can make strategies to overcome the external environmental
factors coming in their way of success. This can help them in gaining competitive advantage.
6. Analysis of strength and weaknesses inter-relation with external macro-environment factors in
Tesco
Tesco can be engaged in analysing strength and weaknesses by doing SWOT analysis.
The strength and weakness are also inter-linked with external macro-environment environment
factors. SWOT analysis basically refers to identifying strength, weaknesses, opportunities,
threats for the company in order to allow them to make various strategies related to it to
overcome it. The interrelationship between external macro factors and strength and weaknesses
of Tesco includes the following:
Political factor: These are basically rules and regulations which are implemented by
government of any country or region. It can lay positive or negative impact on the growth of
firm(Clarke, Li and Xu, 2016).
Strength- Relaxation in taxation policies, laws, rules and regulations can act as strength
for company. Tesco can get benefit of it and this can also help them in entering new market
easily.
Weaknesses- Increase in taxes laid by government can act as weakness for company as it
can allow them to lose consumer base and ground.
Economical factor: These factors include inflation rate, fiscal policy and economic
condition of any region where firm is going to expand.
9

Strength- Stable gross domestic income of any region can support Tesco in expanding
their business across the globe. They can increase their outlet by this and also raise their revenue
and profit share.
Weaknesses- Rise in cost of labour rate can act as a weakness for the company Tesco to
spend more on personnel which increases overall cost of products and services and lower down
the demand of product.
Social factor: These factors include values, beliefs, thoughts of customers. Tesco needs
to analyse these components in order to gain competitive advantage.
Strength- Company is engaged in designing products according to the taste and
preference of consumers that act as strength of firm.
Weaknesses- Tesco if involved in giving goods and services that are not according to the
values and beliefs of customers, then its growth might get hamper. It can act as weakness for the
firm. Also this can hamper the image of company and they can lose their customer base.
Technological factor: These factors involve making use of advancing and updating
techniques or methods in order to attract and acquire customers. Tesco is involved in making use
of digitalisation and high technology.
Strength: Tesco is making use of customer relationship management to tainting and
organise data related to customers and their clients. This has helped them in gaining competitive
advantage. Also, it has reduced their cost and helped them in saving time.
Weaknesses: Company is not engaged in using technology like promoting their product
on social media channels. It can hamper the growth of firm and also their competitors can take
their place instead of them.
Legal factor: These are the factors that includes laws, rules and regulations. Various
policies have been implemented by government which has to be followed by companies (Savrul,
Incekara and Sener,2014).
Strength: Tesco has been engaged in following the laws like consumer safety and
employee safety and health law. This has helped them in gaining trust of various customers.
Also, with this they are able to retain more efficient workers in the organisation.
Weaknesses: The weaknesses related to this if firm is not involved in making use of legal
laws and rules implemented by government than customer can lose trust. It can hamper their
productivity and working efficiency.
10