Business Environment Analysis of Tesco: A Comprehensive Report

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Business and the
Business Environment

Table of Contents
Introduction............................................................................................................................. 3
LO1........................................................................................................................................... 4
P1......................................................................................................................................... 4
P2& M1................................................................................................................................ 7
LO2........................................................................................................................................... 8
P3: Explain The Relationship Between Different Organisational Functions And How They
Link To Organisational Objectives And Structure.................................................................8
M2...................................................................................................................................... 10
LO3......................................................................................................................................... 11
P4....................................................................................................................................... 11
M3...................................................................................................................................... 12
LO4......................................................................................................................................... 15
P5....................................................................................................................................... 15
M4...................................................................................................................................... 17
P6....................................................................................................................................... 19
CONCLUSION.......................................................................................................................... 21
REFERENCES........................................................................................................................... 22

Introduction
Business environment can be defined as the collection of both internal and external factors
that affect a business (Hamilton and Webster, 2018). The internal and external factors are
prone to influence each other and that affects the business. Its knowledge is helpful in
safeguarding the organisation from the adverse effects of external or internal factors. The
assignment covers the study of business environment and its influence on the effectiveness
and working of the environment. It covers the types of organisations and their legal
structure. It also analyses the organisations on the basis of their size and scope. The second
part of the assignment deals with macro factors and their influence on the business
operations and the decision making of the organisation. The organisation taken as a
reference point is Tesco and determination of its strength and weakness through internal
and external analysis is proposed (Hamilton and Webster, 2018).

LO1
P1
There are following five different types of organisations in the UK and they all have different
ways of operation and objectives (Craig and Campbell, 2012)
 Private Organization – Organisations owned and controlled by individuals or group.
A good example for such an organisation is Tesco, A company working in the retail
sector.
 Public or Government Organisations – Organisations controlled by the government
such as the NHC or National Health Services.
 Non-Government Organizationsand Not-For-Profit Organisations– These are
organisation that are out of government control and work towards the betterment
of society, environment etc. An offshoot of this type of organisation is the non-profit
organisation. These are dedicated to further any particular charity cause. The
Woodland Trust is a good example of such an organisation.
 Cooperative Organisations – These organisations are formed by individuals joining
together for common objective. Examples of such an organisation are trade unions,
clubs (Craig and Campbell, 2012).
The Public, Private and Voluntary Sector Organisations and Their Purposes
On the basis of their purposes and ownership, the different organisations in the United
Kingdom can be categorised into the following three categories
The Public Sector Organisations
The public sector organisations are those that are controlled and managed by the
government. These organisations focus on providing public service and profit is not their
primary focus. The government funds the public sector organisations through funds
received from fees and taxes paid by the citizen’s (Craig and Campbell, 2012). A few
examples of public sector include the NHS, police services etc.
The Private Sector Organisations
The private sector includes the business organisations that are controlled, managed, and
owned by individuals and enterprises with minimal governmental interference. The worker

strength in this sector is higher than that of the public sector. The purposeof a Private sector
organisation is to survive in the business world by generating profit. The private sector
organisations focus on profit maximisation (Craig and Campbell, 2012). A few examples of
Private sector organisation include Virgin Atlantic, Tesco, and Apple.
The Voluntary Sector Organisations
The voluntary or community sector organisations differ from the other two sectors since this
sector is not government controlled. These organisations focus on providing help and
benefit to the public and their no focus on making profit. This sector usually doesn’t
produce or raise revenue and majority of people working there, work voluntarily. Some
examples of such organisations are Woodland Trust, MayTree, and NSPCC. The NSPCC works
in the field of prevention of child abuse and supporting recovery of abused children (Craig
and Campbell, 2012).
The Legal Structures of Different Types of Businesses That Exist In the UK
A business entity can be defined as a vehicle that’s used to work an activity or trade by an
individual or a group of individual. A business or work organisation is an organisation that
employs an arrangement favouring the organisational goals. A business organisation is
required to be formed as per a legal structure that indicates its responsibilities and
limitations (Weaver, 2012). There are three basic legal structures of businesses in the UK.
Sole Trader
This is the simplest type of business entity and it’s considered to be most popular across the
UK. Sole Trader or Sole Proprietorship is a business entity that’s managed and owned by a
single individual and its control remains with the owner. Establishing and disbanding a Sole
Proprietorship is easy and it needs adherence to only a few regulations facilitating a low
operational cost. The UK law doesn’t distinguish between the owner and the sole trader so
the owner is entitled to all the debts and post-tax profits. This is known as unlimited liability
(Weaver, 2012).
A sole proprietorship is considered a good starting point and many of the businesses change
their structure as they grow. A major part of sole traders are the specialist service providers
like electricians, plumbers etc. Achilleos Energy Assessors (Owner- George Achilleos) and
Adnil Creations are shining examples of Sole traders.

Partnership
The Partnerships can be considered an extension of sole traders due to their similarity in
being subject to unlimited liability. In the partnership business type, the liability of a partner
is shared by other and it’s known as ‘joint or several’ liability. This business entity requires at
least two owners known as partners. These owners share profits, business responsibility,
and liabilities based upon their shares in the partnership. The partners represent the
partnership business and act on its behalf (Weaver, 2012). These are also an easy way of
doing business that’s easy to establish and comparatively inexpensive.
NotONTheHighStreet.com, ‘Pret A Manger’, and WhatsApp are examples of some fairly
successful partnerships.
An extension of traditional Partnership business type is the Limited Liability Partnerships.
These are similar to traditional partnerships except in terms of liability. In case of limited
liability partnerships the liability of the partners or designated partners is limited to their
share and investment (Weaver, 2012).
Limited Company
A Limited Company is considered to be a separate legal entity. This business type offers
limited liability with its shareowners not being responsible for the profit and loss of the
company (Weaver, 2012). The two types of Limited companies are Private Limited and
Public Limited Companies. The shares of the Public Limited Companies can be traded at the
public market and this type of business is usually used by large enterprises. A private limited
company needs to issue fifty shares worth fifty thousand pounds to register as a public
limited company. The Virgin Atlantic and JCB are two popular examples of Limited Company.
In addition these, another type of Limited company are the Guarantee Companies. These
are usually non-profit companies and focuses on Charity based activities (Weaver, 2012).

P2& M1
The National Health Services was established in 1948 and was considered to be a big social
reform in the post-World War-2 era. It works towards providing health services to the
United Kingdom residents and is controlled by the UK government. Tesco or Tesco Plc is a
retail giant and was established in 1919. It became the United Kingdom’s largest retailer in
2006. As of 2017, Tesco had over 6500 shops and revenue of £55.9 billion with over 476
thousand employees. It deals in convenience shops, superstore, supermarkets, and
hypermarkets. The Woodland Trust is a charitable trust and it was established in 1972. It’s
focused on preserving and restoring the native woodland heritage. It has over 500 thousand
supporters and is known for planting over 41 million trees.
The organisations can be either focused on generating profit or public works and charity
(Weaver, 2012). The organisations that focus on generating profit or the business
organisations vary in terms of size, number of employees and shareholders, legal status, and
market share. On these factors the business organisations can be categorised as micro,
small, medium, or large. In addition to these another category is SME’s or small to medium
sized enterprises. Nowadays, a majority of businesses comes under this category. This
category has employee strength of fewer than 250 people and maximum annual turnover of
Euro 50 million or an annual balance sheet of maximum EUR 43 million(Turner et al., 2012).
In case of micro businesses, the employee strength is under 10 and the turnover within EUR
2 million. The small businesses can have employee strength of maximum 50 employees with
a turnover of less than EUR 10 million. In case of medium sized businesses the employee
limit is 250 and turnover limit is EUR 50 million. The SME’s have the benefit of applying for
benefits and supports that’s unavailable to large businesses. Every business organisation is
required to finalise their legal structure and it has a major implication on business
operations (Turner et al., 2012).

LO2
P3: Explain The Relationship Between Different Organisational Functions And
How They Link To Organisational Objectives And Structure.
The relationship between different organisational functions
An organisation is divided into many functions or departments that work together in
coordination to effectively achieve the organisational goals (Bustinza et al., 2018). The
following are the typical function of an organisation
Production - This function is responsible for designing and producing the products and
services that are offered to the customers by the organisation. It overlooks the various
aspects of production such as planning, scheduling, supervision and control of workforce,
quality management, maintenance of production unit etc.
The coordination of production with other functions is necessary for smoother operations.
For example, R&D coordinates with production to design products with practical production
costs and methods. Coordination with finance is necessary for availing new equipment or
raw material. The collaboration with marketing allows for the product to be functional,
sellable, and durable. HRM looks after the availability of sufficiently trained production
staff(Bustinza et al., 2018).
Research and Development (R&D) - This function focuses on developing new products and
processes. It also works towards improving the existing ones. R& D collaborates with
marketing to design products that match customer needs and demands in an economic and
effective manner.
Purchasing - It’s involved in acquiring goods and services for organisational needs. The
purchasing function is responsible for fulfilling all the other function's material
requirements.
Marketing & Sales- This function is responsible for analysing customer needs and the
manner in which it can benefit the organisation. It helps in identifying potential markets,
managing product promotions and its eventual sale to the customer.

Human Resource Management or HRM - This function is responsible for managing the
manpower of the organisation. It looks after recruitment, grievance handling, training,
development, employee relations etc. It works towards maintaining the workforce in a
productive environment (Bustinza et al., 2018).
Accounting and Finance - It looks after financial statement preparation, record keeping, and
payrolls. It also prepares the accounting information of the organisational management for
planning and decision making by the managers.
The above stated organisational function needs to be in synergy for the organisation to be
effective. A flatter organisational structure supports the inter-functional synergy and results
in improved effectiveness of the organisation. This also reduces the undue expenses and
wastage and streamlines the organisation to become efficient and effective. An organisation
with different functions is known as a functional organisation (Bustinza et al., 2018).

M2
The advantages and disadvantages of interrelationships between organisational functions
The functional structure is the commonest organisational structure type that's found in
most of the organisations (Jones, 2013). These organisations are divided into small groups or
departments known as functions that look after a specific area of work such as production,
finance, or Human resource management. The advantages and disadvantages of an
organisation that projects inter-relationship between its functions are discussed below.
Advantages
 The person leading a function is usually of high skill level and experience. Thus,
functions are ably supervised and managed.
 The employees from different function work with each other to complete
organisational tasks. This exposure helps in refining and developing new skills.
 Helps in lower employee turnover since employees get a higher chance of being
elevated in their functional expertise (Jones, 2013).
 The organisation benefits from the high skill level of employees
 Lower mistakes and efficient and effective execution of the work.
Disadvantages
 Potential of unhealthy competition between employees from different functions
 Slow response to the changes in strategy
 Lack of interdepartmental communication may cause lower innovation and
flexibility.
 It requires a specialised program for employee advancement or may result in lower
motivation levels and effectiveness.
 Lack of accountability to other functions may result in management issues (Jones,
2013).
 Slow decision making and rigid organisational structure.

LO3
P4 & M3
The positive and the negative impacts of the macro environment over the Tesco can be
easily defined by the use of the PESTLE Analysis, which clearly defines the factors:
Figure 1: Macro Environment
Source: (Ginter et al., 2018).
PESTLE ANALYSIS
This analysis provides the detailed view of the various external factors which acts as the
important tool to analyze the unpredictable environment in which the Tesco performance
depends. Tesco is the multinational organization, providing the facilities not only in the
sector of the foods and products but it also deals with the additional factors such as mobile
networks, insurance services, broadband etc. (Bocken et al., 2013).
POLITICAL ECONOMIC SOCIAL
Tesco is been operating under
the 14 countries including Asia
In terms of the economic
factors, labor cost can affect the
An analysis in the UK has
defined that there has been

and Europe, which has added
various policies such as political
instability, unemployment rate,
impending legislation, Tax
rates(Bocken et al., 2013). One
of the main taxes which were
included by the local council
was “Tesco Tax”, which was
refused by the UK government.
In China the WTO has
promoted the concept of free
trade, which leads to the
increase in the profit of the
Tesco (Bocken et al., 2013).
UK supermarkets. For example
in UK there has been the
increase in the Minimum Wage
Rate by 4.4% for the labors
above the age of 25 years. In
Tesco the two important terms
are the diversification and the
presence in the international
markets in the past few years.
At present, Tesco is sharing the
dependency of 27.7% with the
UK grocery. The financial
uncertainty can be maintained
by taking measures like spend
less premium products (Bocken
et al., 2013).
demand of the products in the
young generation as that in the
old age people. The old age
people decreases the amount
of food intake due to which
there has been decline in the
purchasing of food items by the
old age people. The main focus
should be made by the Tesco
on defining the way of
attraction towards the young
generation. According to the
PWC report 65% UK shoppers
are loyal shoppers. Tesco
should avail the opportunity by
making the strong bond with its
customers (Bocken et al.,
2013).
TECHNOLOGY ENVIRONMENTAL LEGAL
Few years ago, Tesco faced
some issues such as weak
customer experience and
horsemeat scandal. But with
the advancement of the
technology in the Tesco, it
brought up the new ways to
regain the trust and believe of
the customers. They introduced
the RFID technology to increase
the experience of the customer
within the stores. They also
developed the PayQwid
system, which made the
payment method easier. They
Tesco has been working on
these factors over the years; it
has also introduced the biofuel
system which leads to less
pollution within the
environment (Bocken et al.,
2013). Tesco van drivers follow
the short routes, which help in
fuel saving, along with this they
also collect the unwanted
plastic bags from the customers
and recycles them. Tesco has
also promised to minimize the
carbon footprint up to 50% by
2020. It has also defined to use
The VAT tax approached by the
government has directed on
the 20% increment in the
business budget and non-food
sectors development. The
Tesco should perform its
operations according to the
Retailing Commission strict
code of practice (Bocken et al.,
2013).