Report on Tesco's Contemporary Business Environment Analysis

This report provides a comprehensive analysis of Tesco's contemporary business environment. It begins by defining the business environment and its influencing factors, including political, social, economic, and technological aspects. The report then delves into the specific environments affecting Tesco, such as cultural and natural factors, exploring how these elements shape organizational behavior. The cultural environment discussion covers beliefs, practices, and customs impacting the organization, with a focus on Tesco's market and hierarchy-oriented cultures. The natural environment analysis considers the impact of climate and geographical factors. The report also includes an examination of the economic environment, including policies and conditions, and non-economic factors like political, legal, and social aspects. Finally, the report concludes with PESTLE and SWOT analyses of Tesco, offering a strategic overview of the company's strengths, weaknesses, opportunities, and threats within its operating environment, providing a holistic view of Tesco's market position and challenges.

CONTEMPORARY BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Business, Cultural and Natural Environment Shape Behaviour..................................................3
Pestle Analysis.............................................................................................................................8
Swot Analysis..............................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Business environment basically refers to all the forces which have an influence on
business. Forces which are in this environment are political, social, economic and technological
factors and these factors are not in control of the business. There are changes which are required
in businesses and also improvement so that they can meet the demands of customers which will
be very helpful in gaining more revenue. Decisions which are taken hypothetically will not be
helpful for a long run in market therefore decisions should be taken after analysing business
environment. In UK, there are lot of opportunities for businesses to grow but right strategies and
tools have to be used so that the right decisions can be taken. United Kingdom is having a
capitalistic nature of business which is creating more employment take place in organization.
Long term growth and survival of business is easily present after understanding business
environment so that they can have a better functioning in market. Business environment is
dynamic in nature and can change according to situations which is a very strong point of using
this force to understand market better.
Tesco is a multinational grocery retailer organization and the company perform its
operations around 13 countries. Tesco is a public limited company and they are dealing in
products like clothing, electronics, toys, petrol, software, furniture, etc. As of 2019, number of
employees working in company are 450,000 and revenue which company generated was 63,911
euros (Tesco, 2020). Headquarters of Tesco is in England, United kingdom and there are more
than 100 stores across country. Tesco is listed in London Stock Exchange and is place by gross
revenues as the third largest retailer in the world.
The report will be discussing cultural, natural and environmental factors which are
shaping the behaviour of organizations. These factors help in understanding the business better
and make decisions for them accordingly which will be beneficial for a long run in the market.
This would help the organization to shaped in a better way and the report would also consist of
SWOT and PESTLE factors of Tesco so that the business environment of the organization can be
well understood.
Business, Cultural and Natural Environment Shape Behaviour
Businesses have a lot of forces which needs to consider and then make decisions for a
long run in market. There is a behaviour which is required out of an experienced organization

which is going to help them in making the standard for themselves. In shaping the behaviour of
organization, culture, nature and business environment play a very important role.
Culture Environment
Culture environment are beliefs, practices, customs and behaviours of business which
will make the functioning of the organization better. These factors have an impact on
organization which makes organization form policies or rules accordingly will make the working
environment better (The cultural environment, 2019). Culture does shape the behaviour of an
organization since there is a sense of working within the organization which impacts on the
external factors. This will make the employees have a better atmosphere in Tesco be better and
work as team which will improve the productivity. Leaders provide the employees with support
and understanding so that there is a balance on the working environment. Leaders and managers
provide time flexibility to employees and make decisions so that there is a minimum use of
resources which would make the company have profitability for a long term. Tesco is following
market oriented and hierarchy oriented cultures so that they can make a better functioning in
market for themselves. Market oriented helps Tesco to focus on competition in market and
achieve the objectives and goals they have set for the future. This helps business to have a
direction of functioning which would have employees have clarity as to what the organization is
expecting out of them. Hierarchy oriented there is no communication gap in Tesco because of the
managers and leaders who are providing clarity to the employees which impacts as efficient
functioning of Tesco. This way there is a positive work culture in organization which would be
very helpful for Tesco because the productivity will increase. Cultural environment is not just
creating a life balance amongst employees of Tesco but it is also creating a sense of interpersonal
community between employees. To create a healthy environment in organization Tesco gives the
employees incentives, rewards and extra privileges so that employees are motivated all times.
Since the employees not just do their work but fill in a lot of gaps in organization, so they are
very talented and there are events which are held in Tesco so that employees get a platform to
show their talent. Feedbacks are taken from the employees so that there are changes made by
leaders which are accepted by all and the organization can benefit from that factor (Tesco
controls, Inc., 2020).
There are employees working in Tesco who do not share their language, culture, rural
background, etc. but Tesco makes sure that they do not differentiate and treat all of them the

same so that the functioning of business is not affected. Diversity in Tesco is very much visible
which is why the organization is having a lot of loyal employees since they feel comfortable
working for the company. While recruitment also the human resource is very careful hiring the
productive and efficient employees in organization and not just anyone which are not going to be
helpful for the further growth of Tesco. Technological changes is one of that factor which is
changing in Tesco very frequently and that would help in making the organization have a better
functioning (Ivančić and et.al., 2017). Tesco is using democratic style of management so that
they can get more ideas and innovations in organization which would help in making working
environment stronger and get a competitive advantage. Attitude of employees towards changes
and functioning of organization is positive since the management style that is being followed is
very adequate.
Business Environment
Business environment is defined as total sum of all external and internal factors that have
an influence on business. This includes the customers, employees, management, suppliers,
demand and business regulations.
Economic Environment
Economic environment is defined as the external factors in business market which are
influencing a business. Understanding the economic conditions of country and company is very
important for Tesco only then they will be able to make decisions accordingly for the future and
the present strategies which the company should use for the competitive advantage. Economic
environment can be divided into three divisions which are policies, system and conditions of
economy (Phillips and Moutinho, 2018). Tesco has to be very careful while making decisions for
the development of company. That is one of the reasons why Tesco will have to make decisions
accordingly if they need to invest their revenue in other strategies. Investing and launching is
what Tesco keeps on doing so that they can have a competitive advantage in market. Due to
which there are a lot of changes in strategies of the organization. Leaders and the managers of
Tesco make sure that employees are being able to accept and follow them well so that the
company can function better. Technological factors are improving which is providing
advancement and that can provide development of Tesco as a competitive company (Cori, 2017).
Tesco can use GDP as an advantage by increasing the price of products so that they can
make profits. Tesco is expanding itself in a lot of countries and it already has in a lot of countries

in the past. The company wants to expand themselves over all so that they can have a profit in
market. Managers make sure that they have the best methods to use the resources in useful
manner so that they can have a better functioning for themselves. There is a lot of scope for
Tesco to improve themselves and have a better standards for themselves. There is a lot of
drawbacks which the company is having because they are not being able to have a stable
employment in company, but they have improved a lot. Income level of people are increasing
which is why the company should increase their prices which will make Tesco gain a lot of
revenue.
Non- economic Environment
Non- economic environment are the surroundings in which the business operated or in
other words those factors which have an influence in the functioning of organization. Factors
which are involved in this environment are political, legal, technical, social, cultural, physical,
etc. It is very important for Tesco to understand the functioning of society of countries which
Tesco is expanding into (Kuzmanova, 2016). Culture of society will make an impact on the
company and the products which the company is dealing in. Socio cultural environment is
including the language issues which the companies have therefore it is very important for the
company to have a better functioning strategy for themselves. Human resource of Tesco is very
careful and do no discrimination while taking the productive and efficient workers for
themselves. Minimum wages, healthy environment and safe as well, is provided to the
employees of the organization so that they can have a good functioning of Tesco. Tesco has
already made transportation for suppliers and customers very cheaper strategy so that the
company can save on a lot of cost-cutting for themselves.
Ecological environment of Tesco is very good and they have reduced the foot print of
carbon of company so that they can contribute for improving the environment. Management is
present from different social backgrounds so that they can understand the importance of each
social factor before they can make any decisions for Tesco (Sharma and Gupta, 2017).
Productivity of the products and company has to improve so that they can reach the customers
from time to time. Designs and products have to match the standards of the customers only then
the company will be able to make their products reach the customers. The products should be
made for the middle class customers as well so that they can have a huge customer base for
themselves. Weather, climate, geographical environment of countries which Tesco is spread in

are having a limitation on Tesco from reach to their customers from time to time.
Nature Environment
The environment which includes the interference of living species, climate, weather and
natural sources that affect human survival and economic activity of world. Natural factors plays
vital role in the country because they change quality of human life. The natural factors are
geographical and ecological factors which can influence the organizational behaviour in the
country (Cori, 2017). Natural factor encompasses availability of natural resources, weather and
climatic condition, location aspect and topographical factors. These factors directly gives impact
on the business environment. For example climate change is natural factor which plays vital role
in the organization. Tesco is multinational company in UK which retails groceries in the business
market. In winter season, organization gets positive aspect because they store large productivity
of groceries in their warehouse, as result organization fulfils customers demand by providing
required quantity groceries. Winter season improves economical scale and retains large number
of customers in company (Farooq, 2016). As result climate is not stable in country which directly
gives impact on organization performance. i.e. in summer season, organization can't keep high
productivity of groceries at grocery store which gives impact on customer purchasing behaviour.
Due to lack of productivity unable to fulfil customer demand that directly gives impact on sale
scale. Both example of Tesco shows that climate condition leads change in business
environment.
Location aspect also includes into natural factor which also give impact on organization
environment. For example Tesco company is the third largest company on the basis of revenue.
Organization has lots of stores which operates in various countries. It is the strength of the Tesco
which helps them to reach each customer and offers their services well-formed. Organization
trades their groceries into various market i.e. hypermarket, supermarket, conventional stores etc.
the big firm of the Tesco is established in UK which is more famous for groceries in the country.
UK has high requirement of the groceries which is golden opportunity for the Tesco because it
offers green groceries to customers. Location aspect gives negative impact because organization
have to pay high taxes during trading with other countries. Even organization have to face
political issues i.e. government instability, taxes etc. because they have to change their policies
by and by which leads economic loss in the company. Therefore, location aspect also give
impact on business environment. Ecological factors are rainfall, humidity etc. which also give

impact on Tesco environment. Raining climate of UK, give impact on organization environment.
For example supplier of Tesco gets problem in transportation during rainy season because they
unable to supply groceries various places (Yang and et.al., 2018). Rainy season reduces
performance of supplier which is negative aspect for the company. In humidity, weather
organization have to face loss because groceries are rotten in warehouse, that leads wastage of
money. Thus, ecological factors give negative impact on organization performance as well and
change environment of the company.
Pestle Analysis
Pestle Analysis is an analytical tool that helps to identify various macro environment that
impact on the functioning of company. Company use pestle analysis to analysis market situation
in order to gain competitive advantages in the industry. It is especially done by company when it
is planning to enter into new market in order to understand market situation of new market.
Tesco company has done pestle analysis in order to understand external factors that impact on
the functioning of Tesco.
Political Factor: Political factor impact adversely on the functioning of company as it
includes policies of government rule and regulation in the country. Due to Brexit, import and
export of company have been reduced as UK was main trading partner of European Union
(Schyns, 2016). Thus, political situation of UK has impact on the sales and profitability of the
Tesco in the market. Whereas political instability has result in increase cost of product and
reduce profit margin of the company.
Economical Factor: Economic condition in which Tesco operates its business is
suffering situation of recession due to Brexit. High debt of government, high employment rate
and low disposable income of customers has lead to decrease in demand of products and services
of Tesco. Company is able to cope with such situation by introducing promotion offers or
expanding its business across various nation. Thus, economic condition of UK has impact on
cost of production and sales of the company.
Social Factor: It includes belief, attitude and value of people living in the society as
people preferences changes continuously so the company in order to gain competitive advantages
has to identify such factors. Nowadays, people are more concerned about their health in UK due
to rising issue of obesity so it forces company to introduce organic products in its product range

(Malackanicova, 2016). Change in customers preferences has impact on company product range
as it has to introduce organic products to satisfy needs of customers.
Technological Factors: It had impact positively as it provide opportunity to company to
expand its share, increase its sales and customers satisfaction by advancement in technology.
Company in order to provide customer satisfaction has introduced online shopping that provides
ease to customers to shop from home. Thus, it results in increase of sales by satisfying needs of
customers beyond their expectancy. It also helps in enhancing productivity and profitability due
to low cost of production.
Legal Factor: There are certain law and rules that company need to abided from smooth
operation of its business. It has adversely impact on company image and profit margin of Tesco
as company was found fraud for misrepresenting its profit to investors (Baker and et.al., 2018).
Company has to follow Food Retailing Commission rules in operation of its business thus it
cannot change prices without prior notice.
Environmental Factor: There is immense pressure from government and consumer to
protect environment for health and safety of people. It has impact on company functioning as
Tesco has planned to reduce carbon footprint by 50% by 2020 and at the same time planned to
reduce waste produce in their stores. Thus, company by considering such factors is able to satisfy
needs of customers.
Swot Analysis
Swot analysis is done by company to identify strength and weakness of company and
various opportunities and threat available in the industry for smooth functioning of business.
Strength: Tesco strength lies in its brand image as it is third largest leading retailer in the
world in terms of gross revenue and dominate retail market of UK (Rahman, 2019). It also
provides wide varieties of product and maintain its quality in order to satisfy needs of customers.
Weaknesses: Company has failed in certain countries and had to close its operation in
US and Japan due to ineffective marketing strategies. Misrepresentation of profit adversely
impact on its brand image and profitability.
Opportunities: Company has opportunities to expands its business by joint venture with
other company in the countries where the store are underperforming (Ahuja and Khan, 2016 ).

Company can market its product through social media or its website to attract large number of
customers.
Threats: Political instability and increase in competition in retail industry are the two
threat Tesco company is facing in the industry. Thus, expansion of business across globe protect
company from various threats.
CONCLUSION
From the above report it can be concluded that business environment adversely impact on
the functioning of business. It helps in shaping organization environment as it is consists of
internal and external factors such as customers, employees management supplier and
government. Therefore, business environment is divided into two economic and non-economical
environment. Economic environment includes economic system, policies and condition of the
country whereas non-economic includes demographic, technological, legal and political
environment. It can also be concluded that this report explains key elements of internal
environment of Tesco and the interaction with external environment. For example increase in
demand of company product leads to change in its price and increases profit margin and sales of
the company. Economic condition and political instability of UK has adversely impact on sales
and profitability of the company. It has decreases company import and export as UK was main
trading partner with European Union. High employment rate, reduction in disposable income of
customers, rise in cost of material also impact on company sales and productivity. But on the
contrary Tesco is able to survive and grow its business by expanding its operations in other
countries where economic condition are good. Company by considering business environment is
able to gain competitive advantages in the market. It can also be concluded that culture
environment also helps in shaping organization work environment as it includes belief value and
attribute of people living in the society. Company by evaluating and analysis culture of particular
society is able to satisfied needs of customers and employees. Culture environment helps Tesco
in retention and maintenance of customer loyalty by satisfying their needs beyond their
expectancy. This also helps in recruit of employees and deciding various technique to motivate
employees for achievement of organizational goals. It can also be concluded that Natural
environment such as geographical and ecological factors impact on smooth functioning of
business. Company has considered such factors in its operations as they are in limited amount

and need to be preserved in order to ensure health and safety of people. Tesco is able to expands
its business across various nation and build its brand image by analysing various internal and
external factors that impact smooth functioning of company. Pestle is an analytical tool that
helps in identifying various external factor such as up gradation in technology has enhanced sales
of company. Company is able to gain competitive advantage by identifying that customers are
more concerned about their health thus introducing organic food in its product range. Whereas
swot analysis helps in using available opportunities by identifying its strength lies in brand image
of the company. It also protects company from threat of high competition and political instability
in UK by expanding business across the globe. Thus, it can be concluded that business
environment, cultural and natural environment shape the behaviour of Tesco and helps in
achievement of company goals.

REFERENCES
Books and Journals
Ahuja, K. and Khan, M. S., 2016. Retail sector: An emerging and happening sector for the
sustainable growth of Indian economy. IJAR. 2(5). pp.802-805.
Baker, L. M. And et.al., 2018. Online opportunities: A quantitative content analysis benchmark
study of online retail plant sales. HortTechnology. 28(4). pp.516-523.
Cori, C., 2017. How work environment influence on morale ofemployees of employee
cooperative. South East Asia Journal of Contemporary Business and Law. 13(2). pp.87-
90.
Ivančić, V and et.al., 2017. Strategy implementation–external environment
alignment. Management: journal of contemporary management issues, 22(Special
Issue), pp.51-67.
Kuzmanova, M., 2016. Contemporary problems related to crisis management of
organizations. Trakia Journal of Sciences. 14(3). p.257.
Malackanicova, B., 2016. Increasing the competitiveness and profitability of a small and
medium-sized enterprise.
Phillips, P. and Moutinho, L., 2018. Contemporary issues in strategic management. Routledge.
Schyns, P. F. M., 2016. The technological future of the wealth management industry for portfolio
management investment services (Bachelor's thesis, University of Twente).
Sharma, R. R. and Gupta, N., 2017. The Contemporary Context of Management
Education. Managing for Responsibility: A Sourcebook for an Alternative Paradigm.
p.2.
Yang, D and et.al., 2018. Contemporary issues and current challenges. Maritime Business and
Economics: Asian Perspectives.
Online
Farooq U., PESTLE Analysis of Tesco. 2018. [Online]. Available through :
<https://www.marketingtutor.net/tesco-pestle-analysis/>.
Farooq, U., 2016. [Online]. Available Through: <https://www.marketingtutor.net/economic-
factors-affect-business-environment/>.
Tesco controls, Inc. 2020. [Online]. Available Through:
<https://tescocontrols.com/about-us/careers/your-career-join-in/company-culture/>.
Tesco. 2020. [Online]. Available Through: <https://en.wikipedia.org/wiki/Tesco>.
The cultural environment. 2019. [Online]. Available Through:
<https://link.springer.com/chapter/10.1057/9781137440785_5>.
1