Business Environment Analysis: A Case Study of Tesco UK

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MODULE NAME :BUSINESS ENVIRONMENT ANALYSIS:
CASE STUDY ON TESCO UK
Student name: Mohammed djebbari
Student ID: f1902059
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Executive Summary
This report is based on the business environment analysis of different organisation.
In this aspect, the purpose of private, public and voluntary sectors are discussed.
McLaren and Oxfam are chosen for private and voluntary sectors respectively. It can
be said that each of the sectors has a different purpose for business development.
Each of the sectors adopts different kinds of business strategic plans and idea for
business innovation. The importance of stakeholders regarding Tesco is examined
in this report. Using various management tools such as SWOT analysis, Porter’s five
forces, PESTEL analysis internal and external business environment are analysed ,
which can be further used for detailed analysis of sustainable business
establishment in Public, Private and Voluntary organisations.
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Table of Contents
Introduction................................................................................................................. 4
Business and purposes...............................................................................................4
Business Environment analysis of Public sector......................................................4
Business Environment analysis of Private Sector....................................................5
Business Environment analysis of Voluntary sectors...............................................5
Stakeholder Analysis...................................................................................................6
Stakeholder mapping...............................................................................................6
Macro and Micro Industry Analysis.............................................................................7
• PESTEL Analysis..............................................................................................7
• Porter’s Five Factor.........................................................................................10
• SWOT Analysis...............................................................................................11
Conclusion................................................................................................................ 12
Reference list............................................................................................................ 14
Appendices:.............................................................................................................. 16
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Introduction
Business environment analysis can be considered as the primary step for enabling
strategic management. Use of BEA is inevitable for business sustainability among
the emergence of competitors and adverse conditions. Environment analysis
provides a overview of company activity from inside and outside for understanding
the need for improvement and proper corporate governance. Business profitability
and stakeholder management need detailed analysis for increased productivity and
profitability of the organisation. Conduction of this study will help to understand the
internal and external factors for enhanced organisational performance and alignment
of the strategy as per the organisation’s environment. Decision making in business
operations, business expansion needs analysis of the business environment.
Business and purposes
Business Environment analysis of Public sector
The main purpose of this report is to analyze the business environment of the
private, public, and voluntary sector. Each of the sectors has its own business
strategies, business environment, as well as business purpose. In this context, the
public sector not only collects the profit from the global market but also provides
services, enforce laws, and regulate activities. In the words of Henttonen et al.
(2016), a public sector organization always focuses on strategic economic
transformation. For instance, Tesco is a leading public sector company in the UK.
Tesco uses profitable economic strategies to attract customers to their product by
reducing the cost of products. Besides, cost formation is one of the main goals of the
public sector. As mentioned by Wanke et al. (2015), a vast amount of undistributed
profit is allocated by public sector organization for expansion. On the other hand, this
sector focuses on the development of socio-economic infrastructure. As per Tesco,
this organization focuses on production, which is low price but has good quality.
Public Sector Company emphasizes on the regional development. It is vital for such
sector as they are deals with the public. Such sectors focus on the availability of
social entities such as electricity, water and so on. One of the important factors that
are controlled by the public sector is resource allocation. Public sector organization
focuses on strategic resource allocation. For instance, Tesco adopts strategic
resource allocation plan in an innovative way so that they become more productive
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in the UK market. Moreover, the main aim of a public sector organization is to reduce
the concentration of economic power. This approach helps to reduce the disparities
of income structure.
Business Environment analysis of Private Sector
In other words, the private sector is emphasized on making money and involving
more workers for their business innovation. In this context, McLaren is a popular
private-sector automotive industry. The main motive of this company is to introduce
high-quality resources to global market. The concerned firm emphasizes on the
profitability and productivity of the company. As mentioned by Liu et al. (2016), the
free economic approach helps private company to make more money from their
business. For instance, the UK government introduces free economic policies that
help McLaren to become more profitable in the market of UK. Private sectors always
seek to expand their business. In this context, McLaren expands its automotive
industry different part of UK. It uses modern technologies to increase the quality of
the products and adopting new business strategies and innovative ideas for business
development. It can be said that private sectors are well concern about technologies
as such sectors seek for efficient productivity and profitability. For this reason,
private sector organisation adopts new technologies to become more productive.
Business Environment analysis of Voluntary sectors
Voluntary sectors define those sectors, which create social impact, not the profit. The
main purpose of voluntary sectors is fighting for social issues and justice. For
instance, Oxfam involves in the fighting for human rights, poverty, and other terms of
injustice. As suggested by Alturaigi et al. (2016), voluntary sectors collect money
from donors as well as government by conducting a different campaign,
environmental events, and social awareness programmes. In this context, Oxfam
works with a different charitable organization to raise awareness about social issues
in the UK. Such charitable organisations are sometime bounded by government
rules that restrict them to work for social justice. For example, Oxfam has to follow
the charitable acts rule under UK government. This affects its business environment
as well as popularity.
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Stakeholder Analysis
Stakeholder mapping
High level of stakeholders
interest
low level of stakeholders
interest
High level of
stakeholder
power
 Need to notice all the
stakeholders of Tesco
 Engage directly with
stakeholders
 Explore new business
ideas
 Seek for business
growth
 Interest in business
development
 Tesco Need to promote
new business ideas to
keep them interested
 Need to provide new
profitable business deals
to keep them satisfied
Low level of
stakeholders
power
 Communicate
regularly with
stakeholder
 Give opportunities for
business
development
 Communicate when it is
necessary
 Low interest in business
growth
 Low interest to explore
new business ideas
The above table shows the stakeholder mapping of Tesco. In the word of Carballo ‐
Penela and Castromán‐Diz (2015), stakeholder mapping is important for business
growth. Stakeholder manage is quite difficult for every organization. This table shows
that Tesco needs to take care of all of the stakeholders to keep their interested in
their products. This concerned firm needs to engage in direct conversion to solve
queries and problem. It shows that a high level of stakeholder interest involves in
innovation of products as well as exploring new business ideas. On the other hand, it
becomes quite difficult for Tesco, when their stakeholders have low interest in their
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business. The concerned firm needs to promote new business dealing and ides to
make their stakeholders satisfied. Proper regular communication must be conducted
for low-interest stakeholders.
Macro and Micro Industry Analysis
• PESTEL Analysis
Factors Impact
Political ● Availability of oil Impact of the automobile industry is
prominent in UK’s financial situation;
prices have increased due to the rise in
inflation in UK market. UK is dependent
on external countries for oil supply,
which causes a major drawback in
economic surge. Rise in petrol price is
not always dependent on demand for a
car due to modern fuel-efficient
technology, which causes customers
with money saving option (Bocken,
Rana and Short, 2015).
Economic ● Conflict with
Ukraine
● Rise of corruption
● Rising cost in
foreign business
policy
Russia-Ukraine conflict has insisted US
to implement sanctions, which can
contribute to the destabilization of the
trading rules. Eradication of corruption
was the motive this sanction imposes
and extinction of the imposition can
generate corruption within the country,
which results in doing business within
and outside the country.
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Social ● Accusation of
overspending
● Demographic
variability
Construction of sports car needs high-
value input due to maintaining security
and quality management of used spares
(Jones, Wicks and Freeman, 2017).
Overall cost of the product can reach a
certain level of a high budget allocation
and remain available to only specific
sections of people. Activists argue that
producing and buying over-priced cars
can be considered as wastage of
money thus creating a social
propaganda of avoiding luxury cars and
spending money for greater good such
as feeding the starved. Brand reputation
is a prominent indicator of buyer’s
behaviour. As stated by Ferro et al.
(2017), demographic condition of
buyers can affect in buying behaviour
such as customers with large families
often opt out for bigger cars instead of
style unlike youths, who depend on
stylized and customized cars.
Technology ● Technological
dependency
In order to produce high budget racing
and sports car, McLaren needs to use
advanced technology in cars, which can
generate high revenue among tech
lover and avoid competitive
disadvantage. As stated by Tyl et al.
(2015), technology dependency in
inevitable for a modern edge racing car
and implication of innovative ideas can
enhance racing performance and quality
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of life
Environment
al
● Challenges from
carbon emission
Apart from challenges presented by
social activists, environmental
sustainability holds importance
regarding company management and
brand reputation. McLaren has already
started producing Hybrid cars, which is
hugely appreciated by environment
activist. Establishment of eco-friendly
hubs and forefronts has presented with
the idea of establishment of an
environment-friendly ambience with a
spotless, odourless, and interactive
environment.
Legal ● Economic
sanction on
Russia by the US
Law and regulation is an important
factor while analysing business
development factors (Aithal 2017). Laws
and regulation can affect the business
environment as positive and negative
ways depending on the level of
precaution and care prescribed while
producing. Problems relating from
sanctions levied on Russia is reshaping
company activities around the globe.
Trading around the world needs
reconsideration of the policy for ongoing
Russia-Ukraine conflict event
Determination of fate of the participating
companies is still now known. Various
rules imposed by the European
Government on Automobile industry can
direct towards the production of fuel-
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efficient cards for rapid growth in the
sale, which in case of McLaren works
adversely.
• Porter’s Five Factor
Barriers to enter
Possibility of the company with a new brand of car line can aggregate to this factor
and opening of a low-cost economic car model and high-cost luxury cars (Pan,
Chen, and Zhan 2018). Both options represent possible opportunities and risks.
Opening of a luxury car production line can lead to market risk due to the eminent
presence of established luxury brands. On, the other hand opening of a budget-
friendly production line can lead to loss of brand reputation. Thus entering a new
market can provide McLaren with various opportunities along with sustainable
market risks. McLaren is a sports car manufacturer, experiences limited competitors
in this segment due to less production unit, and entering mass car market can effect
in its signature production disruption and loss of financial resources.
Suppliers bargaining power
Ability to reshape a product’s cost is dependent on the supplier of various parts in
case of the automobile industry. High-performance racecar producer deals with a
limited kind of supplier that complies with a high-cost margin and tech components.
This indicates towards increasing bargaining power of the suppliers. McLaren has
avoided the situation of providing high bargaining power to the supplier by
contracting with Mercedes regarding supply of engines for racing and sports car.
Buyers bargaining power
Most of the consumers of McLaren mainly belong to high economic niche and
fragmented customer base, thus the bargaining power of consumers is very low.
Products of McLaren Automotives are mainly bought for symbolic significance, which
provides with authentic customer base and low bargaining power.
Threats of substitutes
Competition of the company is less compared to the mass car market for
propagation of sports car industry is less producing less scope for substitutes
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(Tsangas et al. 2019). Luxury and sports car makers are dependent on a particular
buyer niche, which results into least market competition.
Threats from rivalry
Opening of a new production line for introducing into commercial car market can
provide McLaren with potential Rivals, other than that company competition is limited
due to the presence of low sport car manufacturing company.
• SWOT Analysis
Strength ● The company has gained a reputation for innovative
automotive designing.
● Parts manufactured by the company are sustainable and
included in high-quality cars for better performance.
● McLaren has established itself as an ultimate standard for
producing racing cars, which shows product durability and
sturdiness.
● Unified facility service, starting from research and
development, production, testing and distinctive designing.
● Exclusive and distinguishable appearance creates a buzz
among sports car lover.
Weakness ● Price is considerably high, for focusing on the quality of
parts.
● Availability of the products is uncertain due to low retailer
and lack of distribution management.
● Lack of repair shop due to unavailability of parts amidst
general market
● Most of the cars are customisable thus reflects upon
personal choice, which makes it hard to resale.
Opportuni
ties
● Creating a separate market line for a different type of luxury
cars
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● Using advanced technology in device making, assembling,
and designing will remain exclusive and gives rise to
customer preference.
● Participation in races has opened a pathway for promotional
measures to involvement in the sports sector.
● A new class of car directing towards the middle-class
economy
Threats Creation of a new production line can cost huge money outflow and
uncertain of a return due to competition in the other market sectors.
Creating a low budget line production will decrease brand value and
exclusive tag of the company, which can cause harm to present
products.
As stated by Takata et al. (2016), dependency on Advanced
technological innovation can lead to rise of market competitors.
Risk of losing an important supplier if US sanction on Russia
happens accordingly.
Conclusion
Establishment of a sustainable business environment needs proper analysis of the
company’s internal and external factors and relates to demographic, geographic and
economic positioning. Various factors contributing to possible growth and expansion
of the company has been analysed through business tools, which provides an
overview of authentic execution and understanding of the business environment in
various companies. It can be concluded that in order to maintain sustainability in the
market Tesco, Oxfam, and McLaren have undergone several changes and
implementation. Impact of the changes according to the internal and external factor
has reshaped business policy of the organisation as well as the country.
Implementation of BEA as a strategic tool is used for solving issues regarding
environmental factors reshaping business success. Internal factors are used for
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