Business and Business Environment: An Analysis of Tesco Plc

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BUSINESS AND BUSINESS
ENVIRONMENT
2019

Table of Contents
Introduction............................................................................................................................. 2
LO1........................................................................................................................................... 3
P1: Different Types and Purposes of Organisations.............................................................3
P2: Size and Scope of Different Organisation Types.............................................................5
M1: The Relationship of Structure, Scope, and Size of an Organisation to Aims, Objectives,
and the Products and Services.............................................................................................6
LO2........................................................................................................................................... 7
P3: Relationship between Organisational Functions............................................................7
M2: The interrelationship between functions of an organisation- advantages,
disadvantages and its impact on organisational structure...................................................9
LO3......................................................................................................................................... 11
P3 and M3: PESTLE Analysis of Tesco Plc to Identify Positive and Negative Impact of Macro
Environment.......................................................................................................................11
LO4......................................................................................................................................... 14
P5 and M4.......................................................................................................................... 14
The external analysis of Tesco............................................................................................14
Internal Analysis of Tesco Using SWOT Analysis.................................................................16
P6: Interrelationship of Strength and Weaknesses with the External Macro Factors........18
Conclusion.............................................................................................................................. 19
Reference List.........................................................................................................................20

Introduction
Business environment can be defined as the conditions or factors and elements surrounding
a business operation. It can be either internal or external in nature (Craig and Campbell,
2012). The internal environment or the microenvironment includes factors that can be
controlled by an organisation while the external environment factors or macro environment
factors are out of the control of an organisation. The report considers the business
environment factors and their effect on different types of organisations on the basis of their
sectors. The sectors being considered are the private, voluntary, and government sectors
(Craig and Campbell, 2012). Tesco Plc is taken as an example to consider the effects of the
macro environment on an organisation and the interrelationship of internal and external
factors.

LO1
P1: Different Types and Purposes of Organisations
The organisation can be divided or categorised on the basis of their belongingness to a
sector of the economy. The economy of a country irrespective of its demography can be
categorised into three different sectors that are Private, Public, and Voluntary Sectors. The
organisations belonging to their respective sectors are categorised as Private, Public, and
Voluntary sector organisations (Brinkman et al., 2014).
Private sector Organisations - These are the businesses that are controlled and owned
privately either by a group of people or by the people themselves. These constitute the
largest section of businesses in every country. Tesco Plc can be a good example of a large-
scale private organisation.
Public Sector Organisations–These organisations are controlled by the government and are
totally accountable to them. These organisations usually operate in the segments like
Defence, health and education, law and order, etc. NHS or National Health Services is a good
example of a public sector organisation (Brinkman et al., 2014).
Voluntary Sector Organisations – These organisations are created and run by people with a
focus on making humanitarian and positive changes in the local, national, or global
communities. These include charities, local level volunteers working to help animals, the
homeless, or children. Oxfam is an example of a voluntary organisation and its one of the
top five voluntary organisations in the UK in terms of expenditure (Brinkman et al., 2014).
Legal Structure of Private Sector Organisations
The private sector organisations in the UK can be of basic four types. They can be a Sole
trader, Partnership, Limited Companies, or Cooperatives. The Limited companies are further
categorised into two parts Private Limited and Public PLC. The legal structure is the
regulatory framework of doing business and specifies the size and scope suitable for
different business activities (Brinkman et al., 2014).
Sole Trader (Barrow, 2014)  Single person business
 Full control and Unlimited liability to the owner
 The commonest form of doing business
Partnership (Barrow, 2014)  Two or more people form a legal agreement or deed of
partnership to work together
 Deed of partnership contains rights of the signatories,
voting rights, individual management function, profit
sharing ratio, etc.
 Profit and Liability shared by partners as per their share.
Limited Companies (Barrow,
2014)
 The company becomes a separate legal entity
 Limited Liability

 Run by Directors and capital is converted into shares
Public Limited Companies
(PLC) (Barrow, 2014)
 A PLC is formulated after completing certain regulatory
requirements like receipt of 25% value of shares
 Their shares are bought and sold at the stock exchange
where the shares of all the PLC’s are bought and sold
Private Limited Companies
(LTD) (Barrow, 2014)
 Smaller in size
 Business name denoted by an Ltd at the end
 Shares are privately transferred with shareholder consent
 Usually family businesses with shareholders as directors
Cooperatives (Barrow, 2014)  Common form in retail and agriculture sector
 Member constituting the cooperative share its running,
responsibilities, work, decision making, and profits
 Every member have a single vote
Public Sector (Barrow, 2014)  Accountable and controlled by the government
 Funded by government
 Focus on supplying public services
 The public pays for their service through taxes to the local
and central government

P2: Size and Scope of Different Organisation Types
The three different types of organisations are Private, Government, and Voluntary sector
organisations (Brinkman et al., 2014). The respective examples of private, government, and
voluntary sector are Tesco PLC, NHS, and Oxfam (Barrow, 2014)
Parameters Tesco PLC NHS Oxfam
Type Private Organisation
Large Scale
Government
Organisation
Voluntary Organisation
Legal Structure Public Limited
Company
Health and Social care
Service Provider under
the Department of
Health
A non-government
organisation, an
international charity
Stakeholders Customers
Employees
Investors
Shareholders
Suppliers
Non-government
organisations
Doctors
Patients
Government
Pharmaceutical
companies
Insurance companies
Non-government
organisations
Trustees
Donors
Partners
Trade unions
Government and
institutions
Purpose Profit Earning Health and Social Care
services
Charity services
Founded on 1919 1948 1995
Revenue/ expenditure £57.5 billion £116.4 billion £887.91 million
Micro Business Small Business Medium Business Large Business
Operates at very small
scale
Less than 10 employee
Geographically
restricted (Storey,
2016)
Operates at a small
scale
Employees between 10
to 50 (Storey, 2016)
Number of employees
between 50 to 250
(Storey, 2016)
Above 250 employees
Annual Turnover
under €2million
Annual turnover
between € 2 million to
under €10 million
(Storey, 2016)
An annual turnover of
over €10 million but
under €50 million
(Storey, 2016)
The annual turnover of
over €50 million
(Storey, 2016)

M1: The Relationship of Structure, Scope, and Size of an Organisation to
Aims, Objectives, and the Products and Services
The organisational structure, scope and size of an organisation defines the extent of the
goals and objective it can pursue as we as its limitations. The organisational structure,
scope, and size decide the resources available to the organisation such as raw material,
capital, and manpower. It also decides the level of effectiveness of an organisation in
pursuing its aims and objectives. Usually, an organisation keeps these factors in perspective
while deciding their objectives and aims (Vaccaro et al., 2012).
An example could be an organisation with a limited number of employees without any
clarity or skills to efficiently execute their roles. Such an organisation will be unable to
acquire the goals and the objectives whatever they may be since the employees will be
unable to efficiently perform and attain their individual goals. A small organisation such as a
small enterprise will have a limitation in terms of resources and with manpower and
financial resources it has, it cannot pursue the goals of a large enterprise that has over 250
employees and a large number of financial resources with a turnover of over 50 million
Euros. On the other hand, if a large organisation pursues a smaller objective it will be a
waste of its resources. The revenue generation and profits earned also vary with the size
and scope of an organisation (Vaccaro et al., 2012).
The products and services being offered also depend on the scope, size, and organisational
structure of a company. The production of products and availing the services to customers
require different levels of resource commitments, expertise and manpower support. Tesco
Plc with its organisational structure, size, and scope cannot start manufacturing
Smartphone’s since the company will first need to establish the production unit, trained
manpower, and resources capable of handling Smartphone production. In other words,
Smartphone production is out of the scope of Tesco with expertise in retailing and financial
products (Vaccaro et al., 2012)
.

LO2
P3: Relationship between Organisational Functions
For the purpose of comparing the organisational functions and their interrelationship, the
organisations being considered are Tesco PLC, a private business organisation and Oxfam a
charity based voluntary organisation. Tesco is a global retailer while Oxfam is a
confederation formed by several organisations working across the globe. A large
organisation like Tesco operates through different departments that look after different key
functions necessary for the operations of the organisations. The departments are dedicated
to overlook specific key functional areas to ensure that the activities necessary for the
achievement of the organisational goals are carried out effectively. These key functional
areas necessary for the organisational goal achievement are known as organisational
functions (Cosh et al., 2012).
Organisational
functions
Tesco
Finance Bookkeeping
Evaluation of financial performance
Managing the inflow and outflow of cash
Comparing past financial performances to predict future financial
performance and taking steps to ensure good financial performance
Human Resource Recruitment, selection, training, and development of new employees
Training and development of existing employee
Keeping employee records
Managing the organisational human resource
Managing employee welfare activities
Marketing Conducting market research
Collecting data to prepare marketing activities
Managing advertising and sales promotion activities
Managing the sales team
Production/
operations
Production of products and services offered by the company
Ensuring timely delivery as per the sales schedule
Managing production related functions like machinery
Production planning
Quality monitoring
Customer service Customer support to ensure customer satisfaction
Providing the customer's information
Providing after sales support to the customers
Table P3 a) organisational functions of Tesco

The different functions work together to fulfil different objectives. For example, marketing,
production, Human resource, and finance functions coordinate to recruit, train, promote,
and pay the employees. They also coordinate for budgetary and financial management,
cost-effective production, etc. The functions are interdependent to work efficiently and
effectively. They cannot work independently or else the organisation will suffer. Product
promotion activity requires the coordination of marketing, operations, HR, and finance
department (Cosh et al., 2012).
Oxfam being a charity organisation has few organisational functions that are different from
the organisational functions of Tesco. Similar organisational functions include functions like
human resource, finance, operations, etc. Oxfam has a functional area dedicated to
managing global ambassadors like Annie Lenox. Policy research is another functional area
dedicated to researching and providing insights regarding the policy matters of different
governments in the context of the Oxfam's areas of interests such as poverty. The
humanitarian function looks after the humanitarian activities, emergency response service
development etc. Programme implementation function is responsible for implementation of
the organisational program across the globe. This function coordinates with the functional
area policy advice, and local partners to effectively implement the programs. In Oxfam, the
coordination between different functional areas to achieve organisational goals is quite
evident (Cosh et al., 2012).

M2: The interrelationship between functions of an organisation-
advantages, disadvantages and its impact on organisational structure
Most of the large organisations opt for the functional structure due to its ease of use and
effectiveness in large organisations. It allows the organisation to have a clearly defined
organisational structure with different specialised departments looking after specific
functions (Higgins and Toms, 2013). These specific work areas can be indicated as
marketing, manufacturing or production, operations, human resource management,
research and development etc.
The functional structure involves the coordination of different functions to achieve
organisational aims and objectives. The advantages of such an interrelation are as follows
Expert Managers - The managers leading a function are experienced and experts in their
field and steer their department to maximum efficiency. The people within a department
become experts in their work due to the expert guidance given to them (Higgins and Toms,
2013).
New Skill Development And Improvement Of Existing Skill Set - The function interact to
complete various tasks necessary for achieving the organisational goals. The interactions
between the employees of different vertical expose the employees to new things and allow
them to learn new skills. This leads to the acquisition of new skill sets and an improvement
in existing ones that make the employees more effective and versatile (Higgins and Toms,
2013).
Reduces Employee Turnover - The employees get ample opportunities for career
progression since their work is compatible with their skill set that increases efficiency and
effectiveness. This is true except at top levels where the progression opportunities are few
due to fewer available positions.
Beneficial for the Organisation- The high skill levels of employees leads to higher levels of
efficiency and effectiveness in completing their tasks. This leads to an improvement in
organisational efficiency and effectiveness in achieving the aims and objectives (Higgins and
Toms, 2013).
Effective Work Execution- The high skill levels of employee ensure low mistakes and delays
during work execution.
The above points clearly indicate the beneficial nature of functional interrelation but there
are certain disadvantages of this interaction. The following are the disadvantages associated
with the interrelation of organisational functions
Unhealthy Competition - The interrelation of organisational functions increases the
potential for unhealthy competition between the employees of different functions that may
harm the organisation (Higgins and Toms, 2013).
Slow To Change - The implementation of changes in the organisational strategy becomes
slow due to a delayed response from the functions

Affects Flexibility And Innovation - The interrelationship and interaction of different
verticals result in a reduction of intra-department communication. This results in lowering of
aspects like flexibility and innovation.
Low Employee Motivation Levels - the need for high skill levels for career advancement
may cause a drop in motivation levels of the employees due to the time it takes to gain the
expertise of a particular skill.
Bureaucratic Approach - The functional structure promotes a bureaucratic approach that
causes a delay in the decision-making process and the rigidness of the structure (Higgins and
Toms, 2013).

LO3
P3 and M3: PESTLE Analysis of Tesco Plc to Identify Positive and Negative
Impact of Macro Environment
Tesco - Company Profile
Tesco Plc is a multinational retailer based at Welwyn Garden City, Hertfordshire. It’s a
leading retailer with over 440000 employees in over 6800 stores across the world. The giant
retailer has operations in countries like UK, India, Czech Republic, Hungary, Ireland, etc.
Tesco is nearly a century old organisation with statutory revenue of £57.5 billion and
operating profit of £1837 million. Tesco deals in food and non-food products along with
sectors like Mobile, Insurance, and Finance (Gupta, 2013).
The Macro Environment
The macro environment can be defined as a collection of different factors that affect the
business operations of an organisation at both national and international level and can lead
to its success and failure. The macro environment factors include economic, environmental,
political, legal, technological, and socio-cultural. These factors are the component of a
country's economy or the global economy. These factors are also known as the external
environment and the analysis of their impact on a business organisation can be done by
using the PESTLE analysis method. The name PESTLE is basically an acronym and represents
Political, Economic, Social, Technological, Legal, and Environmental factors (Gupta, 2013).
PESTLE Analysis of Tesco
The PESTLE analysis of Tesco will be used to analyse the impact of the macro environment
on the company operations (Ho, 2014).
Political
The global operations of Tesco make it vulnerable to the political environment of its host
countries as well as the global political environment. The factors that impact the company
include legislation, regulatory framework, tax rates, political stability, etc. Many of the
companies are promoting retail operations as a way to create job opportunities allowing
Tesco favourable terms and reception in most of the countries it operates in. Tesco’s
employee base has a large number of elderly, disabled, and young individuals through such
employment strategy Tesco nullifies the negativity arising out of opening a retail store that
usually affects the local retailers and the local employment rate. Low wages payment of
such employees allows Tesco to gain economically while ensuring employee loyalty (Gupta,
2013).
Tesco has benefited from China's WTO accession and expanded its operations in China to
access a large and lucrative market. Tesco has opened a number of supermarkets in China
post-WTO accession. Tesco was adversely affected by the increased VAT rates of countries
like the UK. Other factors that greatly affect the company are the food and employee