Business Environment Report: Tesco's Organizational Analysis

This report provides a comprehensive analysis of Tesco's business and its environment. It begins by defining different organizational types and their purposes, along with their size and scope, using Tesco as a key example. The report then explores the interrelation between organizational functions and their impact on organizational structure, including the advantages and disadvantages of such interrelation. A significant portion of the report is dedicated to examining the positive and negative impacts of the macro environment on Tesco's operations, employing the PESTLE model for a detailed assessment. Finally, the report concludes with an internal and external evaluation of organizations, utilizing SWOT analysis to identify strengths, weaknesses, opportunities, and threats, and their interplay in decision-making processes within the context of Tesco's business environment. The report covers areas like HR, finance, and marketing, and provides a look at Tesco's corporate governance and store-level organizational structure.

BUSINESS AND BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1 Types and purpose of Organizations......................................................................................3
P2 Size and Scope of Different Organizations............................................................................4
LO2..................................................................................................................................................6
P3 Interrelation between Organizational Function and its impact on organisational structure...6
Advantages and Disadvantages of interrelation between organisational functions and structure
.....................................................................................................................................................7
LO3..................................................................................................................................................8
P4 Positive and Negative impacts of macro environment on Tesco...........................................8
LO4................................................................................................................................................11
P 5: Internal and external analysis of organizations.................................................................11
P6: Strength and weakness interrelate with external macro factors in Decision-making: -......12
CONCLUSION..............................................................................................................................13
REFERENCES................................................................................................................................1

INTRODUCTION
Business and its environment mainly describes the relationship between the business and
its stakeholders and their contribution to make any decision for business (Aydiner and
et.al. ,2019). Tesco is a multinational food retailing company which has its headquarter in UK
being the third largest retailer in the world. This report will mainly focus on the different types
and purpose of organizations along with their size and scope. Its emphasis is also laid on the
relationship between different functions of organizations along with its objectives, structure,
advantages and disadvantages. The research will be followed by discussing the positive and
negative impacts of the macro environment on operations of business with the help of Pestle
Model. Finally, the report will explain the internal and external evaluation of certain
organizations to recognize their strengths and weaknesses with the help of Swot Analysis.
LO1
P1 Types and purpose of Organizations
Every business has its own goals, strategies and different people to implement those
strategies to achieve their respective goals (Aithal, 2016). Tesco is the biggest private sector
employer in the UK and possess a high competition to all the other sectors in all aspects. Based
on their services and purposes, the organizations are divided into 3 categories that are as follows:
Public Sector
 Purpose: This sector is run by the state government and works for the welfare of the people
(Xing, Liu and Cooper, 2018). Their focus is to make benefit for the society by providing
significant public services and making the best use of the resources available.
 Advantages: Job Security, low turnover rates, attractive retirement and healthcare benefits.
 Legal Structure: It has not only helped them to provide a positive contribution to the society but
also build a positive relationship with their partners thereby developing sustainable profits to
their shareholders in UK.
 Example: In UK, ESPO is a public sector organization whose main aim is to provide variety of
good and services to the public sectors. If any surplus is made in the organization, it is provided
to the public only and it also offers one-stop-shop solution.
Private Sector

 Purpose: This sector is run and owned by private individuals. Their main aim is not for the
welfare of the people but to earn maximum profit for the organization (Marginson, 2018).
Government has no role to play with this.
 Advantages: Higher earning potential, focus on innovation, faster decisions and many more.
 Legal Structure: The company has diversified their geographical and retail hold in
manufacturing equipment’s and therefore maximum sales. This has enabled them to expand their
business by serving large number of places nearby.
 Example: Besides Tesco, JCB is also a British multinational corporation whose headquarter is in
UK (Choudhary and et.al., 2019). The function of this company is to manufacture the
equipment’s for agriculture, construction and many more purposes.
Voluntary Sector
 Purpose: The main aim of this sector is to create social influence instead of profit making.
 Advantages: making positive difference, gain greater cultural awareness and many more.
 Legal Structure: By holding an effective entrepreneurship, they have further been able to
support their internal structure and include 9 clinical trial units, 17 Experimental cancer
Medicine Centres, 7 Graduate training programs and many more.
 Example: Macmillan cancer support charity works in London, UK secured first position in the
British charity organizations that help the cancer patients financially, medically and socially.
P2 Size and Scope of Different Organizations
To describe the types of organizational structures and type, the main focus is laid upon
each of their size and scope (Eze and et.al., 2018). On the basis of number of employees, the
number of owners, market share and their legal status, organizations are classified into 3
categories — Macro, Small and Medium-Sized.
The micro sectors are not only large in their number but also seek to work for enhancing the
income and growth opportunities for the developing countries (Pan, Chen and Zhan, 2019).
In the above example of treating cancer patients, Cancer research being a voluntary based
organization requires low investment costs but seeks to work with a wider organizational goal of
eradicating cancer globally thereby working in all areas for social cause.
Advantages: Freedom and fulfilment of employee and customer needs which helps them to
grow.

Disadvantages: Financial risks and presence of competition which poses as a big problem in
their way of development.
The small enterprises include companies such as TESCO which are retail sectors that seek to
enhance their business and increase their sales volume thereby holding partnerships with other
companies or individuals to meet their purpose.
Advantages: Getting a stronghold over management and control by the owners thereby adapting
quickly to meet customer needs.
Disadvantages: The limited sources of finance.
The medium and large enterprises include examples such as Virgin money which Page 6 of 12
is a government bank based in UK and has been solely working as a not-for-profit company
thereby working their channels to help customers by providing loans and advances thereby
working for the benefit of all.
Advantages: Flexibility and close relationship with customers.
Disadvantages: To maintain loyalty of the customers and difficulties in terms of funding.
Basis of classification Macro Small Medium-Sized
Investment Upto £1 million More than £1 million
but less than £10
million
More than £10 million
but less than £50
million
Turnover Upto £5 million More than £1 million
but less than £10
million
More than £50 million
but less than £250
million
Employees 6 to 20 21 to 50 Upto 250
Example Issoria Imaginera Verdant Leisure
So, the research above concluded that there are different types of organizations on the basis of
their services, size and scope. Every organization has its own purpose to improve their overall
performance.

LO2
P3 Interrelation between Organizational Function and its impact on organisational structure
Organization structure can be characterized in three ways classic, functional, divisional.
The first Classic Structure in an organization work centralized and relate itself to small
businesses. On other hand the functional structure define itself on the basis of the employees job
functional and it is related to the larger organization. The last is Divisional structure, in this it
takes units and divide those units into more divisions.
Organisation structure are linked with all the function of the company. It is linked with
the Human resource department of the organization, With marketing department, With finance
department.
Human Resource: - Human resource is linked with both marketing and finance as it include the
employee recruitment which required finance and to promote the advertisement human resource
required marketing. Every structure in the organization is linked to each other and work
accordingly.
Finance function: - Finance works as a mix of debt and equity in an organization to use as
operation. Marketing promotes the business which can be beneficial for company's profit and
increase in capital. Finance includes Human Resource as it need employees which are provided
by human resource management in the organization.
Marketing Function: - Marketing is linked with both human resources and finance in the
organization as they all work according to the organizational structure. Marketing required
money and for that they need to contact with finance department and for the employees they
need to link to HRM.
Tesco the no.1 retailer in the UK in Retail supermarket with having 27% market share
use their organizational structure in a way so that they get the best result of it. Tesco provide all
the services and product of Retail Supermarket with the varieties and choices. They utilize the
resources and plan the best of the structure in the organization to work better. Tesco Corporate
governance structure is as follows:

Figure 1 Tesco Corporate Governance Structure
The Governance structure of Tesco shows how the Boards directors works. Who needs to
report to whom.
Figure 2 Tesco organizational structure at store level
The Organizational structure of Tesco at store level Shows how the hierarchy of functions works
in the stores of Tesco. The Store manager need to report to Regional manager, trading food &
non-food manager need to report store manager and hierarchy goes on.
Advantages and Disadvantages of interrelation between organisational functions and structure
Advantages of interrelation: -

 Interrelation helps in improving team performance and allow sharing of knowledge and it
helps in learning new skills to the employees. Employees in Tesco make good
relationship with the Collegial and that improve in the performance of the employees.
 The retention will improve as working in the teams helps company to achieve goals and it
helps the employees to improve the relation which make them retention in the
organization for longer period.
 Working in team is beneficial for employees as team is managed by experience person
and the high ability of leadership helps the team member a benefit of improving through
others and learn through others. It helps in reviewing the team member.
 Organizational structure helps the manager to freely think on the strategies and can
concentrate the work flow in a better way as communication helps them to know things
easily and better.
Disadvantages of interrelation: -
 Segregations: Many employees from different teams doesn't get opportunities and this
cause in the permanent business development.
 Lack of coordination: groups might disappoint and might fail cause of not having proper
institution standards of communication.
 Common Connection: Weakening in the common connection highlight principal purpose
weaker and industry diverse the workflow when working together.
 Territorial argument: when planning objectives and budgets the argument may vary from
person to person in an organization causes conflicts.
Organization like Tesco include sales department and if the interrelation is happening
between marketing sales and marketing department. Then in this Situations the problem is sales
need to communicate the marketing department the communication become a barrier. But it
shows positive responds if the communication is good and can increase in work performance.
Communication helps in innovation and ideas (Gürel and Tat, 2017).
LO3
P4 Positive and Negative impacts of macro environment on Tesco
Pestle Analysis

The influence of Macro environment on the organizations play a very important role in
their overall progress (Ortega and et.al., 2019). In this report, the positive and negative impacts
of these macro factors in Tesco will be evaluated by doing Pestle analysis and therefore
considering all its factors.
The above figure mentions the different factors of Pestle analysis.
Political : Many political factors affected the rapid progress of Tesco in a numerous ways. These
include tax rates, acts of legislation and stability of the country. One of the major factor was the
Brexit as new tariffs affected exports and imports of raw materials and intermediate products.
 Positive impact: Tesco became more strong as post-Brexit, it developed new domestic supplier
actions. They could choose lower corporate tax rates.
 Negative impact: Increased in food prices, Profit was rapidly declined, hiring workers became
more difficult and costly, bottleneck at UK ports.
Economical: These factors decide the financial stability of the company in the country. There
are many economic factors that affected the Tesco but the most important one was labour cost.
 Positive Impact: Tesco got a chance to increase its goodwill and image in the market by
providing more job opportunities which attracted many of the customers.
Figure: Factors of Pestle analysis
Source: Scanning the Environment PESTEL Analysis,2016

 Negative Impact: Loss in terms of revenue, need for production of new products, strategies and
advertising the value brands.
Social: It influences the types of products demanded by the consumers. Tesco was processing
food having high sugar content by adding artificial sweeteners.
 Positive Impact: It started providing organic food products and got a chance to attract customers
by introducing new methods of shopping and delivery.
 Negative Impact: People in Tesco started consuming the food with less sugar content. Threat
was to adapt the regular changes in the demand of UK people.
Technological: As technology advances, there are many challenges for the company regarding
the way it sells its products.
 Positive Impact: It could enhance its online shopping method along with facilities of home
delivery.
 Negative Impact: The areas which are not so developed in UK, people living their cannot use
this advanced technology to buy the products.
Environmental: Tesco equally focuses on how to effect the country positively which can
improve its environment conditions because it effects both the consumers and the company.
 Positive Impact: It got a chance to prove itself by using the biodegradable materials for
deliveries.
 Negative Impact: it was forced to reduce its carbon footprints by 2020 and to minimize the total
waste produced in stores.
Legislative: Legislative factors are much important to be kept in mind because performance of
Tesco is directly impacted by policies of UK's government.
 Positive Impact: Tesco got the opportunity to facilitate the policy of FRC i.e., code of practice
which states that illegal practices like changing price without information must be banned.
 Negative Impact: Sugar tax was imposed on Tesco as it was selling food having high sugar
content.
So, it can be concluded that the above factors of Pestle Analysis impacted Tesco both positively
and negatively. But besides this. It proved to be the largest retailing company in UK.
Organizations like Tesco are greatly affected by the macro environment and its factors which
affects the overall performance of the employees and finally the progress of the company.

LO4
P 5: Internal and external analysis of organizations.
Strengths: -
1. Tesco have been rewarded numerous time in its excellence service and overall experience
they provide in shopping.
2. Tesco is world’s most profitable retail and supermarket format, there are many
competitors who tried to emulate Tesco.
3. The cash reserve of the company is so strong and wide which helps Tesco in stability and
give strong financial position.
4. Tesco focus on providing the best of the services with good quality.
5. Long lasting history of Tesco helps them in giving the assurance and credibility.
Weaknesses: -
1. Tesco subsidiaries are not working well and its financial profit is still to rebound after the
crisis.
2. Working in competitor market includes price wars which eliminate the profit margin.
3. Weak market strategies in few countries led in performance which were not as expected.
4. Adjustment in inventories and selection cost Tesco high cost in inventory due to less
disposable income (James, 2019).
5. Tesco's main weakness is that Tesco focus on UK and European market only which effect
their business in other countries and cause them damage in profit and product.
Opportunities: -
1. Strategic alliances with brands gives opportunities to Tesco and company should admire
other companies to offer products and focus on attracting customers.
2. If in any country Tesco is not performing according to their performance or
underperforming in any countries than Tesco should find a joint venture with local
company to increase the performance as local marketers help in market survey and
strategies (Rivers, W.H.R, 2019).
3. Thousands of opportunities are there for Tesco to promote their business online and
increase the efficiency of their work. They can offer home deliveries etc.

4. Opportunity in private labels as well.
5. Opportunities of western goods according to the demands as Tesco can provide their
customer western taste and choices.
Threats: -
1. Economic recessions are a continues threat and credit crunches too.
2. Other big giants in the supermarket competition throughout globe and the giants
providing low prices and varieties can damage Tesco's sales.
3. Food prices are rising around the world which causes reduction in the buying behaviour
of the customer.
4. Raw material prices are increasing and it affecting Tesco in its profit making.
5. Stakeholders pressure to work better and social responsibilities adversely impact Tesco
cost.
P6: Strength and weakness interrelate with external macro factors in Decision-making: -
Political Strength and weakness: Political factor affect a business in its pricing policies as it
include tax rates, legislation etc. Tesco gets strength in UK as it has a goodwill in the market and
stability helps them in finding the result.
Economic Strength and weakness: Economic factor determine economic performance and
include economic growth, exchange rates, etc. These factor directly or indirectly affect the
business objective and goals. Economic condition of a country effect the buying behaviour of the
consumer.
Social Strength and weakness: Social factor include the general environment and demographic
conditions and characteristics. It include the trends, population. Lifestyle etc. Social factor helps
a company to target the market, study of social factor helps in getting the market knowledge.
Technological strength and weakness: Innovation in technologies affect the operations in both
positive and negatively. Technologies helps in making work easy and solve issues a bit easier,
but it affect the unemployment to an organisation.
Environmental strength and weakness: Environmental factor need to be considered on serious
note as company needs to be aware about the market environment and should focus on providing
eco-friendly ideas. Environment includes the basic environment factor to a company like
weather, climate etc. this show how climate changes can affect the business.