Business Environment Analysis of Tesco: Value Chain Model Application

This report offers a comprehensive analysis of Tesco's business environment, employing the value chain model to dissect the company's operations. The introduction establishes the significance of internal and external factors influencing business activities. The report then delves into the value chain model, outlining its primary and supportive activities, including inbound logistics, operations, outbound logistics, marketing and sales, and services. A detailed overview of Tesco's organizational structure, history, and market position follows, highlighting its retail dominance and global presence. The core of the report focuses on Tesco's internal environment, analyzing how the value chain model is applied across various functions such as procurement, technology innovation, and human resource management. The study includes reflections on the value chain model's impact, emphasizing its utility in understanding business operations and strategic decision-making, and the importance of communication and research skills. The report concludes by underscoring the value chain model's effectiveness in fostering business growth and competitiveness, particularly for Tesco.

BUSINESSS
ENVIRONMENT

TABLE OF CONTENTS
1. INTRODUCTION.......................................................................................................................3
2. Value Chain Model......................................................................................................................3
3. Tesco Organisation......................................................................................................................4
4. Internal environment of the company..........................................................................................5
5. Reflection on Value chain model................................................................................................7
6. CONCLUSION............................................................................................................................8
REFERENCES................................................................................................................................9

1. INTRODUCTION
Business environment is about the internal and external factors which affect the business
activities, both factors simultaneously influence the business in their own ways. The aim of this
report is to analyse the business environment of Tesco using value chain model. Report has
discussion on the value chain model, how it affects the business. Tesco is chosen for studying the
macro and micro environmental factors which directly or indirectly influences the business
activities along with discussing the internal environment of the company. Further it has reflection
on the value chain model for better understanding.
2. Value Chain Model.
According to previously suggested models of profits, it is very necessary for the business
that it regulates the business activities in terms to earn profit. So Michael Porter suggested Value
Chain Model in 1985, it links the primary and other supportive activities of business (Ghawana
and et.al., 2016). Porter developed this value chain framework to analyse the activities for the
acquisition of raw material to handover it to consumer. This makes a chain.
Illustration 1: Value Chain Model
This model supports the activities which are referred as primary: inbound logistics,
operations, outbound activities, marketing and sales, services (Horng, Chang and Chen, 2016). In
this model inbound logistic are explained as it is the starting activity which is about receiving

and inventory control of raw materials in the company. So it is about the storing and receiving
the products from suppliers which they want to market. It also covers the relationship of the
manufacturer and company. Operations are performed in the businesses which are denoted as
procedures included in the conversion of raw materials into useful products. They are also
understood by as the products are packaged and labelled in the production. It adds the value to
the products and company. Outbound logistics are explained as the distribution of the final
product in the market or it distributes among the retailer chain. It covers the activities of shipping
or storing the product in terms of the e-commerce. Marketing and Sales are the strategies
followed by the companies to enhance the deals of the products in terms of their sales. As these
products are distributed in the market, businesses also need to do the advertisements, promotions
for the knowledge of the customers so that they can buy it. All such activities are covered under
the sales and marketing (Kehoe and Mateer, 2015). Services are the activities which are
provided by the companies after selling their products to the consumers like repairmen, customer
services, refunding or exchanging the goods for better customer experiences.
Supportive activities are procurement, technology innovation, infrastructure of company,
human resources. These activities are used improvement in primary activities. Procurement is
explained as the acquisition of resources for the company, like the raw materials are procured by
the firm at negotiable prices. Human resource management is for the company’s sake like they
can hire good and efficient employees in the company. So, they can manage all the primary
activities because business activities need interaction for these processes. Technology innovation
is very necessary for the development of the business like they have to install advance
technology machinery, hardware, software in their units, so this makes the procedure of company
easy. Infrastructure allows all the operations to be done the site (Yanzheng, Zengxiang and
Changhong, 2015). It includes the legal, accounting and administrative operations to be
performed.
3. Tesco Organisation.
Tesco was founded in 1919 by Jack Cohen who started to sell groceries in the well street
market, later it made the Tesco brand in 1924 (Alam and Raut-Roy, 2019). The first supermarket
was opened in 1956 in Maldon. Tesco has become second largest retail company after WalMart.
It has covered the areas like retailing of clothes, electronics, books, households, decor, furniture,

groceries, also they started their subsidiaries like telecom and financial services. It attracts large
amount of consumers group for purchase at their supermarkets and local stores. They have more
the 3000 stores including supermarkets across the UK, USA and Asia. Its headquarter is situated
at England UK. So they operated a wide range of local stores and supermarkets, so they have
employed 450000 employees in their organisation. It helps to build the economy of thee UK
when the time of recession they have sold the products at very low cost so that they are
affordable for all the people in the country. Also, they give the employment to a large segment of
the UK public. They also need suppliers for the raw material which are needed by the
manufacture and product units. It promotes the local and global vendors for business purpose as
they purchase the raw materials from them, it build the good relation of the Tesco in global
market. Tesco is generating revenue £63,911 million, and operating income is £2,206 million till
2019. Tesco is leading now in terms of manufacturing and marketing the products with net
income £1,320 million (Nguyen and et.al., 2017). It is a huge ratio in the market form the income
perspective. They have operating self service store by providing the facilities like club card, or
discounts at their supermarkets, as the customers can earn points on their purchases. They launch
new products every year to engage the public, and they are succeed to catch the audience focus.
4. Internal environment of the company.
Tesco has the second largest supermarket range in UK. Value chain model is used to analyse
the internal environment of Tesco, according to the model this creates a bridge between the
primary and supportive activities involved in business. Tesco performs the same according to the
value chain model discussed as, inbound logistics of the Tesco are uses the cost leadership
strategy for buying the raw materials from the suppliers and it makes the good market position.
As they have good bargaining capability. They perform effective inbound logistics operations
like thy constantly update suppliers list and system of order (Camerinelli, 2016). Operations,
they perform various operations in terms of supply chain management, and do it in low cost.
They adopt leadership strategy, they operate on digital platform, ERP of third generation is used
by them. It leads them to achieve profitability. Outbound logistics, they have maximum
consumer exposure as they have large range of stores. They holds effective outbound logistic in
terms of covering online and offline market. Services they provide like self service stores,
financial services, and they focus on providing better customer service so that they may have

increment in the consumers. They use the dual strategy like they make availability of the services
along with the marketing and sales. Marketing and sales they do at good level. They promote
their brand using low cost strategy as they provide the offers and discounts on their products. So
their customers are attracted to purchase the needed items from their stores (Guo and et.al.,
2016). It provides reliable services along with their purchasing.
Supportive activities are also used by Tesco to improve their primary activities like they
have changed their infrastructure in their stores. It gives the soothing and attracting look in their
stores as well as in their offices and manufacturing and production units. They change their
infrastructure regularly to achieving the good will in market. As they have big business meetings
with their investors and suppliers and clients they have to install the good looking furniture,
machinery and they have to present themselves very appealing. Procurement in terms of good
bargaining skills, Tesco possess the brilliant low cost leadership strategy for purchasing the raw
materials from their supplier. As they negotiate with them with use of BATNA which is very
effective tool for the negotiation. They apply it for lowering the prices form their vendors. They
proposed the deals which give them maximum profitability (Thomas-Francois, von Massow and
Joppe, 2017). As they make the fear in the supplier that they can give the bulk order to other
supplier company for their raw materials which provide them good deal. So the vendor is agreed
on their points. That’s how they use the procurement. Technology innovation of the Tesco is at
peak point, they use the latest technology for providing better customer experiences. It makes
their consumers to visit again. For example they are plan to adopt self checkout in their
supermarkets, technology they sue in their stores like upgraded software which makes easy for
paying bill. Also they have installed latest machinery at their manufacturing and production unit.
They change their packaging of the products by making it easier and simple and less time
consuming. Human resources management, Tesco has 450000 employees in their organisation
all over the world. So they utilise the human resources from manufacturing to marketing and
sales and lastly they provide good customer interaction (Savino, Manzini and Mazza, 2015).
They invest huge in developing and training their employees to upgrade their skills in terms of
technical, communication and interpersonal. It affects their business in positive ways.
Value chain model helps the Tesco to become leading company in the world and earn
profits. It made their image in public very positive and generous (Johnson and et.al., 2018).

People prefer to buy the goods from their stores as they know it provide the products at
affordable prices.
5. Reflection on Value chain model.
During the study about the value chain model which was proposed by Michael Porter, it
gives the detail analysis on the business activities which are involved in business. Value Cain
model is the best ways to study about any organisation. I get to know about the internal and
external factors which influence the business activities. On the study of the Tesco organisation it
gives me full knowledge about the working of the retail industry how it operates its business
activities and daily operations. When I was preparing the report on the business environment, I
used to communicate with my seniors and companions who help me in giving right direction
about the report preparation. So it improved my communication skills. As i gathered th
information about the model it leads me to know that how secondary research is made. I used to
read several journals and books and other ways of collecting information like internet. I analyse
thath value chain model helps in business in various sense like the inbound and outbound
logistics are very important so learn the bargaining skills and how to make profitability by
selling the products to consumers. Also, it gives the knowledge about the range of operations
performed in the companies daily to achieve their target. It gives the idea of the marketing
strategies which are included in it to sell the products in bulk. Like what know of marketing
strategy can be used, how to do promotion and advertise about your products. If I will choose to
an entrepreneur then it will guide me a lot as I will choose value chain model for my guidance.
Further supportive elements like technology, infrastructure, human resources are so important to
be considered in businesses so, that builds the company’s image in market. I get to know about
technology innovation is so much important in organisation as it improves the quality of the
products, and also it saves the time, money for the company. If I will choose career in IT sector
then it will help like there is a huge demand of IT background person in every business which are
ready to pay big amount for their IT development at their sites. It motivates e to enhance my
technical skills, as I have to be concern about developing my basic technical skills for further
requirements. As I possess low technical skills but I will surely improve it, if I get another
chance to work on the projects I will sue my experience and improved skills in it. Next I came to
know about Human Resource management is very necessary for the businesses they provide

support to primary activities in the firm. Like they have need of employees from manufacture
unit to production and sales and marketing. Then it makes the use of the human resources in
building good relations with clients and consumers. So it needs good communication skills and
knowledge. It provides me to improve my interpersonal skills as well. This report is proved the
best approach in my personal development and let me know about the career options for further
study and business.
.
6. CONCLUSION
According to the report on the business environment which includes all the business
activities which are affected by the internal and external environmental factors. Value chain
model is very important in terms to study the internal and external environment of the
businesses. It provides best assistance to get knowledge about it. Value chain model consist all
the factors which influence the company to perform the operation. It helped the businesses to
make profitability and achieve big success like Tesco. Company use this model for their
expansion and better future and help to gain the potential customers.

REFERENCES
Books and Journal
Ghawana, T., and et.al., 2016. Applying the knowledge innovation value chain model to land
administration research. In Proceedings of FIG working week 2016: recovery from
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cultural and creative industry. In Thriving in a new world economy. (pp. 198-203).
Springer, Cham.
Kehoe, K. and Mateer, J., 2015. The impact of digital technology on the distribution value chain
model of independent feature films in the UK. International journal on media
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Yanzheng, T. U. O., Zengxiang, C. H. E. N. and Changhong, B. A. I., 2015. Destination
Marketing Performance: Current State and Value Chain Model. Tourism Tribune/Lvyou
Xuekan. 30(1).
Camerinelli, E., 2016. Measuring the value of the supply chain: linking financial performance
and supply chain decisions. Routledge.
Guo, M., and et.al., 2016. Implementing land-use and ecosystem service effects into an
integrated bioenergy value chain optimisation framework. Computers & Chemical
Engineering. 91. pp.392-406.
Thomas-Francois, K., von Massow, M. and Joppe, M., 2017. Service-oriented, sustainable, local
food value chain–A case study. Annals of Tourism Research. 65. pp.83-96.
Savino, M. M., Manzini, R. and Mazza, A., 2015. Environmental and economic assessment of
fresh fruit supply chain through value chain analysis. A case study in chestnuts
industry. Production Planning & Control. 26(1). pp.1-18.
Johnson, S., and et.al., 2018. Tesco Bank Wellbeing Case Study. In WELL-BEING (pp. 179-
188). Palgrave Macmillan, Cham.
Alam, S. and Raut-Roy, U., 2019. Evaluating the Effectiveness of Reward Strategy at Tesco:
Evidence from Selected Stores in UK. Indian Journal of Industrial Relations. 55(1).
Nguyen, L. T., and et.al., 2017. The effect of click & collect service in the context of retail
atmospherics on consumer buying behaviour in terms of repurchase intention: an
empirical study of Tesco UK. In 4th International Conference on Innovation in
Economics and Business. (Vol. 87, pp. 43-51).