Business and the Business Environment: An Analysis of Tesco Plc

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Business and the Business Environment
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Table of Contents
Introduction................................................................................................................. 3
LO1............................................................................................................................. 4
LO2............................................................................................................................. 6
LO3........................................................................................................................... 10
LO4........................................................................................................................... 13
Conclusion................................................................................................................ 15
Reference List...........................................................................................................16
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Introduction
In the present scenario, the business environment plays a significant role in
determining the operations of every organisation. This is for the reason that, the
business environment is extremely uncertain and multi-concealed. The growth and
development of the organisations significantly depends upon the business
environment it operates in. In this study, the different business sectors and its
purpose of operation will be discussed. The project will further shed light upon the
different types of organisational sectors, that is to say, the private, voluntary and
public sector. Furthermore, the interrelation of the different departments in an
organisation will be evaluated. In addition to this, the impact of the macro as well as
microenvironment on the business operations of a company will be assessed.
Application of different analytical tools such as PESTEL and SWOT will be
considered in order to analyse the external and internal environment of the company.
Here, the case study of Tesco plc will be considered.
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LO1
P1 Explain different types and purposes of organisations; public, private and
voluntary sectors and legal structures
There are mainly three types of organisational sector, namely, voluntary, public and
private. The purpose of operation and legal structures of the different organisational
sectors are discussed below:
Private Sector Organisation
A significant part of the economy of a country, the private sector is generally run by
individually owned companies. The key purpose of the private sector companies is
to earn maximum profit from its business. Such type of organisations is generally
free of the control of the state; hence, it comprises of all the business organisations
that are neither owned nor managed by the governmental bodies (Ituc-csi.org.,
2019). The private organisations mainly generate their revenue by providing its
customers with high quality products and services. In context to the United Kingdom,
the majority of the organisations operating are private organisations. Entrepreneurs
own the majority of the private companies in the country. One of the most significant
examples of a private sector organisation is Tesco Plc. It is one of the largest retail
companies in the country and contributes majorly towards its economy. The key
purpose of this company is to earn maximum revenue by catering to the needs and
demand of the customers (Tesco plc., 2019). The company adheres to the legal
structure of Public Limited Company. Owing to this, the company is liable to adhere
to certain commonwealth jurisdictions, UK company law and is free to sell or trade its
shares to the public.
Public Sector Organisation
The public sector comprises of the business organisations that are possessed as
well as run by different governmental bodies or the government itself. The main
purpose of such organisations is to provide its citizens with necessary services. The
public sector organisations do not operate with the intension of earning profits from
the business. These organisations mainly generate funds and resources from
various sources such as, fees, taxes, financial transfer from the different
governmental levels, and so forth. In context to United Kingdom, the existence of the
public organisations is witnessed to be quite minimum in comparison to that of the
private sector organisations (Na.theiia.org., 2019). National Health Service (NHS)
can be considered as one of the most significant examples of the public sector
organisation. The key purpose of operation of this organisation is to provide
healthcare services such as, primary care, to the citizens of the company (nhs.uk.,
2018). The legal structure of the company is partnership, as it functions in
partnership with different governmental bodies.
Voluntary Sector Organisation
The organisations that operate with the main purpose of benefiting and enriching
the society with its services fall under the voluntary sector. Similar to the public
sector, these organisations functions without any profit motive. In addition to this,
these organisations have little to no involvement of the government in its operations
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and runs independently. The profit or revenue that is earned by the voluntary
organisations is mostly invested back towards the welfare of the community it
operates in. The employees or members working for such organisations function with
minimum or no pay (Schwabenland, 2016). In context to UK, the voluntary sector is
also known as the third sector, whose key aim is to generate social more willingly
than materialistic wealth. Oxfam can be considered as a significant example for an
organisation operating in the voluntary sector. It is an independently operating
charitable institution in UK, whose key aim is to eradicate global poverty. It is one of
the major voluntary organisations in UK, with a widespread set of operations. The
legal structure of the organisation is international non-governmental organisation
(INGO) (Oxfam.org., 2019). The INGOs operate with the same mission as the non-
governmental organisations; however, possesses international scope and consists of
outposts throughout the world.
P2 Explain the size and scope of a range of different types of organisations.
The different types of organisations operating in different sectors consist of different
scope and size in terms of operations. The different sizes and scope of the different
organisational types are explained in the section below:
Tesco plc is a large business organisation with more than 460,000 employees
working across the different openings of the company. The company operates in
more than 11 nations; thereby, possesses huge scope of growth and development in
the future. Owing to the fact that, the company is a public limited organisation, it has
the opportunity of selling as well as trading its shares with the public; thereby,
earning better profits (Tesco plc., 2019).
National Health Services is a larger public organisation and consists of nearly 14,
00,000 workers. Owing to the fact that, the organisations works for public welfare,
the threat of monopoly is reduced. In addition to this, the level of competition is low in
the public sector; thereby, allowing the organisation to provide maximum services to
the citizens of the country. The company further has huge scope of earning profits,
which can be in return utilised towards providing better healthcare services to the
community (nhs.uk., 2018).
Oxfam is an organisation, which comprises of 20 independently operating charitable
institutions. The organisation consists of nearly 5000 employees and mainly
operates with the support of its volunteers. The organisation presently has huge
scope of expanding its operations in numerous developing countries in order to
eradicate poverty; thereby, serving more number of individuals as well as solving
more number of social issues (Oxfam.org., 2019).
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LO2
P3 Explain the relationship between different organisational functions and how
they link to organisational objectives and structure
Every business organisations adheres to a particular organisational structure in order
to carry out its business operations. The different organisational structures are
discussed below:
Functional Organisational Structure
The functional organisational structure allows the business organisations to organise
their workers as per knowledge and skills. It vertically arranges the different
departments of the company as per the job role and type of work. In this type of
organisational structure, each department or functional unit caters to the
requirements of one particular feature of the services or products. Every department
in the functional structure is managed, controlled and monitored by a manager and
all the employees working under each department are liable to report to their
respective managers (Awa, 2016). The pictorial representation of the functional
organisational structure is presented below:
Figure 1: Functional Organisational Structure
(Source: Ape., 2018)
Divisional Organisational Structure
The divisional organisational structure facilitates the business organisations in
managing the different activities of the business across different geographical
locations. Here, the business comprises of different divisions that comprises of a
complete assortment of functions. In this type of organisational structure, every
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division consists of its own marketing, sales, accounting, finance and other
departments. Such type of structures is effective for the business organisations,
which runs different types of businesses under one umbrella. One of the key benefits
of this organisational structure is that it allows the company to shift its decision-
making downwards in the company, which further allows the companies to improve
its ability to respond actively to the conditions of the local market (Su et al., 2015).
The graphical presentation of the divisional organisational structure is illustrated
below:
Figure 2: Divisional Organisational Structure
(Source: Kfknowledgebank.kaplan.co.uk., 2019)
Matrix Organisational Structure
The matrix organisational structure is an amalgamation of different organisational
structure. In most of the cases, it has been witnessed to be a combination of
functional and divisional organisational structures. This type of organisational
structures allows the business organisations to gain higher effectiveness, rapid
market adaptation and readiness. The business organisations that adhere to the
matrix organisational structure tend to respond rapidly to the customer or market
demand. It also reduces the lead duration of producing a new product (Pmi.org.,
2019). The pictorial presentation of this organisational structure is given below:
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Figure 3: Matrix Organisational Structure
(Source: Pmi.org., 2019)
Tesco Plc follows the functional organisational structure and therefore, has different
departments working for the different functions of the business. The business
organisation comprises of a number of departments such as, marketing, finance,
human resources, operations and so forth. Every individual department of the
business are managed and controlled by different managers and the subordinates
operating in each department are accountable to the manager of the respective
departments. The different functional departments of the company are as follows:
Marketing Department
The marketing department is responsible for selling and promoting the services and
products of the company. It further carries out market research in order to identify the
current needs and demand of the customers as well as the market trends. The
marketing department plays a significant role in determining the sales and
profitability of the company, as it facilitates in determining the target segment of the
company (Feng et al., 2015). Other than that, the marketing department is further
apprehensive of developing marketing plans as well as creating brand image of the
company.
Finance Department
The finance department is considered one of the most significant departments in
Tesco. This department is accountable for managing all the financial aspects of the
business such as, operational cost, revenue generation, and so forth. The
department is further apprehensive of preparing a proper financial report of the
business by considering all the transactions taking place for a meticulous period of
time. It is also responsible for the preparing budget for the different business
activities of the company. The department further develops strategies and plans for
the long-term financial activities of the retail company.
Operations Department
Owing to the fact that, Tesco Plc has extended its retail channels in the present
times, the operations department of the business has become highly active. This
department is mainly responsible for managing and controlling the supply of products
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and services and customer purchases. In addition to this, the operations department
is also apprehensive of a number of significant activities such as, management of
master data, functionalities of outlets, cash operations, customer management and
so forth. The department is further takes care of the inventories of the business.
Human Resource Department
The human resource department of Tesco plc plays a vital role in ensuring effective
performance of the company. It is apprehensive of selecting, recruiting, training and
development of the workforce of the company. Other than that, the department is
also responsible for the other employee related concerns such as, employee
relations, compensation and rewards, and so forth. The HR executives are further
accountable for creating a positive and workable environment for the employees as
well as ensuring less employee turnover (Armstrong and Taylor, 2014). The human
resources department is also liable for ensuring that the other functional managers to
act in accordance with the different laws and policies such as, employment
opportunities, health and safety and so on.
Interrelation between different departments
The different functional departments of the company are further witnessed to depend
upon the operations of the other departments. The relationship between the different
functional departments of the company is explained below:
The marketing department is closely interrelated to the finance department of the
company. This is for the reason that, in order to carry out the market research and
promotional activities, the concerned department necessitates a certain amount of
funds, which is allocated by the finance department of the company. In addition to
this, the marketing department is also related to the operations department. Both the
departments work in hands in order to meet the needs and demand of the
customers. The marketing department lays down deadlines for the delivery
completion of the products and services and the operations department ensure to
perform all the necessary duties within the allocated time (Chang, 2016). Other than
that, the finance department of the company develops and regulates policies and
frameworks for the marketing department in context to maintaining and improving the
building the brand image as well as the market share of the business.
Additionally, the human resource department is interrelated with almost all the
functional departments of the company. The HR department is apprehensive of
identifying vacancies in the different departments of the company and accordingly
hiring suitable personnel for them. In addition to this, the human resource
department of the company is concerned about the welfare of the workforce of every
department. The HR department also manages the payroll and salary of the
employees working in the different departments (Chang, 2016). Hence, it can be
stated that, the human resource department is strongly related to almost all the
significant functional departments of the company.
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LO3
P4 Identify the positive and negative impacts the macro environment has upon
business operations, supported by specific examples
With the intention of identifying the influence of the external or micro environment on
the business operations of Tesco Plc., the following PESTEL analysis has been
carried out. The PESTEL analysis is a tool or framework, which allows the business
organisation to analyse as well as monitor the external marketing situation of the
country wherein the company is operating and its impact upon its business
operations.
Factors Analysis
Political The political factors of a country comprises of factors such
as, industry regulations, trade and governmental policies
and so forth. In context to the United Kingdom, the country
is considered one of the most stable nations in relation to
politics. The country is known for its effective application of
law as well control in corruption. Owing to this, Tesco Plc
has the opportunity of lessening its cost of source, as the
country encompasses liberal trade policies. Furthermore,
the cost of commerce has decreased owing to this.
In the view of the fact that, the country offers free trade
policy, Tesco Plc is able to expand its business in different
regions. As a result, the company has gained better profits
and revenue.
However, the advent of Brexit has resulted in being a key
factor, which may influence the business operations of the
company (Fuller, 2017). It may create uncertainties for the
retail company in context to its business operations.
Economic The economic factors comprises of factors such as, interest
rate, inflation, exchange rate, labour cost and so forth.
The United Kingdom is considered one of the largest
growing economies in the world. The decrease in the rate of
exchange has resulted in controlling the unemployment rate
of the country (Dhingra et al., 2016). In addition to this, the
capability of customer spending has been witnessed
expanding; thereby, allowing the company to improve its
revenue. However, with the advent of Brexit, the price of
products has grown considerably; thereby, resulting in
conflicts with the home retailers of the country. A
considerable alteration in the rate of interest has increased
the business expense; thereby, affecting the operations of
the company. On the other hand, the vigorous growth in the
economy of the country has facilitated Tesco Plc in gaining
extensive financial sustain whilst expanding its business.
Social The social factors include the purchasing behaviour of the
consumers, fashion interest, demographics, lifestyle and so
forth.
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It has been witnessed that, the power of customer spending
in the United Kingdom is high in comparison to the other
nations. The population of the country tend to spend more
into new services and products. As a result, the retail
company has gained the opportunity of coming up with new
products and services; thus, being able to earn better
profits. In addition to this, the population of the country is
extremely apprehensive of their health conditions and
therefore prefer opting for products that are safe in terms of
health (Djekic et al., 2014). Owing to this, the business
organisation has come up with food products that are
organic in nature.
On contrary, it has been further viewed that, the people of
the country are more prone towards using online shopping
sites for purchasing products, which may affect the
traditional outlets of the company.
Technological The technological factors include issues such as, social
media, innovation, and so on.
The United Kingdom is considered one of the most
advanced nations in terms of technological advancement
(Assets.publishing.service.gov.uk., 2019). This has further
allowed Tesco Plc to incorporate the latest technologies in
its business functions; thereby, being able to improve its
performance and productivity. The company can effectively
make use of the latest software and hardware systems;
thereby, improving its business operations. The improved
security systems of the country have further allowed the
business organisation to enhance the security level of its
services.
However, the highly developed technology has also
resulted in increasing the threat of data and security, which
can turn out to be a major concern for the company.
Environmental The environmental factor comprises of aspects such as,
CSR (Corporate Social Responsibility), sustainable
approach, and so forth.
The government of UK has currently become highly
concerned of the environment and therefore, has imposed a
number of policies for the business sector that they must
adhere in order to carry out smooth operations in the
country (Benn et al., 2018). This has further provided Tesco
Plc with the opportunity to carry out several CSR activities
and adopt sustainable approaches. This has in return
facilitated the business organisation in gaining better
goodwill and brand image. Owing to the fact that, the
population of the country prefer opting for the companies
that are more active in CSR activities, Tesco Plc has the
opportunity to attract more number of consumers; thereby,
improving its customer base.
Legal The UK government has inflicted a number of laws and
legislations that the business organisations need to adhere
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to in order to function smoothly in the UK market (Von
Glahn and Taulbee, 2017). The company is liable to adhere
to a number of legislations and policies such as, the
employability act, equality rights, health and safety and so
forth.
Tesco Plc ensures to consider all the above-mentioned
laws and policies and therefore, provides its employees
with all the employment rights. It further ensures that the
employees of the company receives equal wages as well as
health and safety benefits when working in the company.
Table 1: PESTEL Analysis
(Source: Created by the learner)
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