Analyzing Tesco's Business Model and Macro-Environment

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BUSINESS AND BUSINESS ENVIRONMENT

Contents
INTRODUCTION.....................................................................................................................................3
LO1....................................................................................................................................................4
SIZE, STRUCTURE AND SCOPE OF ORGANISATION AND THEIR LINKS TO PRODUCT AND SERVICES AND
BUSINESS OBJECTIVE.........................................................................................................................9
LO2..................................................................................................................................................10
VARIOUS FUNCTIONS..................................................................................................................10
ADVANTAGES AND DISADVANTAGES OF INTERRELATIONSHIP BETWEEN FUNCTIONS OF ORGANISATION
AND ITS IMPACT ON ORGANISATIONAL STRUCTURE......................................................................11
LO3..................................................................................................................................................13
LO4..................................................................................................................................................16
STRENGTHS..................................................................................................................................16
WEAKNESSES...............................................................................................................................16
OPPORTUNITIES...........................................................................................................................16
THREATS......................................................................................................................................17
CONCLUSION.......................................................................................................................................18

INTRODUCTION
A successful business can only be established in a suitable business environment. Business
environment consists of various dynamic factors which affect the business. All the factors which
cannot be controlled internally and still affect the business form a business environment (Prajogo,
2018). In this report different companies’ size, scope, legal structure, their key stakeholders will
be discussed and analysed. Different functions of an organisation will also be discussed and how it
will affect the organisational structure. It will also be discussed how PESTEL affects the working of
an organisation and how the strength and weakness of an organization are affected by
macroeconomic factors.
This assignment focuses on the working of TESCO, one of the best retail giant in the UK and how it
works to maintain its position in the market. The macro environment of TESCO and its effects on
the strength and weakness of the company will also be discussed.
Figure 1: TESCO LOGO
[Source: TESCO PLC, 2019]

LO1
There are three types of business organisation:-
Figure 2: SECTORS OF ECONOMY
[Source: Andrade, 2015)
 Private sector
As the name suggests, the private sector is the businesses run privately by the individuals
and company and are not controlled by the government. The main aim of a private sector
organisation is to earn a profit. These organisations employ various techniques to attract
customers and increase sales ( Andrade et al,.2015).
For example - TESCO is a private sector organisation.
Figure 3: TESCO LOGO
[Source: TESCO PLC, 2019]
 Public sector

Public Sector Companies are the companies which are controlled by the government. In
these companies at least 51% of shares are owned by the government. The board of
directors of the company are also appointed by the government. Unlike private
companies, these companies are not established with the sole aim of profit making. These
are established to help the public.
For example - the British Council is a public sector company
Figure 4: BRITISH COUNCIL LOGO
[Source: Milligan, 2017]
 Voluntary Sector
The voluntary sector is also called civil sector or non-profit organisations. This organisation
works with the purpose of solving social issues instead of profit making. The voluntary
organisation deals with a wide range of issues such as domestic violence against women,
providing shelter to needy, helping drug-addicted victims, establishing hospitals in villages
etc. The voluntary organisation usually have a low budget and work in small local areas
but some organisation work at larger levels (Milligan,2017)
For example - Wellcome Trust is a non- profit charity organisation.
Figure 5: WELLCOME LOGO
[Source: Milligan, 2017]

Details of Organisations
Tesco
Background: - Tesco was founded in 1919 by Jack Cohen. The name Tesco came from the initials
of the name of Mr T.E. Stockwell from whom Mr Cohen bought his first shipment of tea, this-co. It
started as a small retail shop and later became the largest retail giant in the world (TESCO
PLC,2019).
Size and scope: - It is a multinational grocery store and is the third biggest retailer in the world for
its profit-making capacity. It has 6553 stores in 12 countries of Asia and Europe. Approximately 5
lakh employees are currently working in its stores throughout the world. Tesco's business
strategies are to expand its business overseas and to maintain a strong foothold in the UK. The
main purpose of TESCO is to provide customer satisfaction to earn their unwavering loyalty.
Tesco's CEO Terry Leahy said "we have got only 5% of the non-food market in Britain, we have got
only 6% of the convenience market and we have got only 2-3% of the banking market …In all
these examples we could be much bigger” ( TESCO PLC,2019).
Key stakeholders:- Tesco include both internal and external stakeholders which are employees,
customers, government, pressure groups, the board of directors, owners etc. These people affect
the organization in some way or the other. Some stakeholders take part in maintaining the
company's policy and rules.
The legal structure: - The legal structure of Tesco can be multiple. As it is a multinational retail
giant, it follows several legal structures to check that organisation is running effectively. Tesco is a
public limited company and can sell its shares to the public. One of the legal structures which
Tesco follows is ‘Corporate governance’ which deals with the shareholders (TESCO PLC,2019).
Figure 6: TESCO LEGAL STRUCTURE

Source:
British Council
Background: - British Council is a public sector company which provides educational and cultural
knowledge and establishes a fine relationship with other countries and promotes British values. It
was founded in 1934 and first office abroad was opened in 1938 making it the cultural
organisation of the world. It was called British relation with other countries at that time (BRITISH
COUNCIL,2019).
Size and scope: - British Council works in over 100 countries providing British education and
knowledge of English knowledge throughout the world. The policies and plans of such
organisation are derived from the motive of promoting public growth and thus funding for these
organisations is provided by the government. The size of the organisation is obviously very large.
It's the oldest cultural relation organisation in the world. It reached a total of 758 million people
all around the world online and offline (BRITISH COUNCIL,2019).
The key stakeholders: - The key stakeholders of British Council are Department of Trade and
Industry, Design Centre of Philippines etc., which makes policies and plans together to promote
education and maintain a good relationship of UK with other countries.
Legal structure: - British Council is led by the Board of Trustees. These trustees hold Senior
Leadership Teams to maintain rules and make policies and strategies. To maintain a fair viewpoint
advisory team is also maintained.

Figure 7: BRITISH COUNCIL LEGAL STRUCTURE
Source: BRITISH COUNCIL,2019
Wellcome Trust
Background: - Wellcome Trust was established in 1936 after the death of an American pharmacist
and entrepreneur Sir Henry Wellcome. It was formed to maintain the fortune of Mr Wellcome.
Size and scope: - Wellcome Trust is one of the largest charity organisations in the world. Its main
objective is to improve health by providing funding for the research and development of
medicine. It is an independent foundation registered under charity act. Welcome Trust is planning
on funding £29.5 million in charity in order to encourage researchers in the field of medicine and
making the world healthier.
Legal structure: - Wellcome trust takes advice from the board of committees and the experts and
other members also take part in these meetings when necessary to formulate future plans and
policies.

Figure 8: WELLCOME LEGAL STRUCTURE
Source: WELLCOME TRUST
SIZE, STRUCTURE AND SCOPE OF ORGANISATION AND THEIR LINKS TO
PRODUCT AND SERVICES AND BUSINESS OBJECTIVE.
The size of all the organisations taken here is large. The size of the organisation affects the
business objective of the organisation directly. Tesco is a multinational corporation and its
main objective is to satisfy its customers and earn maximum profit. Stakeholders who play
a key role in the decision making of the company mainly focus on business objective and
make plans accordingly. The bigger the company, the larger the funding required to run it,
so the legal structure is also corporate governance providing shares of the company to the
public in return to their investment(TESCO PLC,2019).
Likewise the British Council, a public sector company is also a large organisation, it works
in the field of education and cultural development and its business objective that is to
promote UK’s education and culture to the world is only achieved because of its large size,
its better scope and key stakeholders who are making correct policies for its
growth(BRITISH COUNCIL,2019).

Umbrella organisations like Wellcome Trust which are charity driven also fulfil their
purpose through the funding and policies their stakeholders make. These organisations
work for the betterment of society so the bigger the scope, the larger objective they
cover(WELLCOME TRUST,2019).

LO2
VARIOUS FUNCTIONS
The Organisational structure defines how certain activities are performed in an organisation. The
organisational structure represents the hierarchy in an organisation and maintains a basic order in the
company. It also maintains the flow of information in order. According to Lounsbury Fish, "Organisation
Structure is more than a chart. It is a mechanism through which management directs co-ordinates and
controls the business. It is the foundation of management."
The organisational structure chart is given below: -
Figure 9: TESCO ORGANIZATIONAL STRUCTURE
Source:jypozoa.alethamacdonald.com
RELATIONSHIP BETWEEN DIFFERENT FUNCTIONS OF ORGANISATION AND THEIR LINKS TO
ORGANISATIONAL STRUCTURE AND OBJECTIVE.
TESCO follows a functional organisational structure. The organisational structure of Tesco is highly
hierarchical. Even in the larger stores, there are at least four levels of management. The organisational
structure includes finance, management, HR, sales, marketing etc. These departments have subdivision
within them and hence the hierarchy forms (Maduenyi et al,.2015)

 Finance function
The finance function of Tesco maintains the finance of the organisation. They record all the
financial transactions and maintain the budget of the company. All the salary and other expenses
of the organisation are managed by the finance team (Maduenyi et al,.2015). Sales and marketing
are linked with finance function as all the budget for promotions and production are maintained
by the finance department. HR and management are linked because all the salary and bonuses of
employees are fixed by the finance department after maintaining the profit of the company.
 Production function
The production function is necessary to maintain the production of the organisation. It is linked
with the research and development function. Production function also affects the sales function.
Production department produces goods and services as per the needs and objective of Tesco
which is to satisfy customers and increase profit (Maduenyi et al,.2015). The cost of production is
maintained by the finance department.
 HR function
HR stands for human resource. The human resource is the most valuable asset of an organisation.
HR department recruits intelligent and efficient employees for finance, sales, and marketing
department. HR also maintains that the rules and regulations are followed in the organisation. HR
department manages complains of the employees and in some way can be said as a consultant of
the company ( Ranjan,2017). In Tesco, HR plays an important role as it is a large organisation and
requires many employees.
 Marketing function
In Tesco, the marketing function is directly linked with a production function. The needs and
demands of customers are provided by marketing function to production function and the
products and services produced by production function are marketed by marketing function
( Ranjan,2017). The cost of bills and promotion is managed by finance function and ergo all the
functions are interrelated in Tesco.
ADVANTAGES AND DISADVANTAGES OF INTERRELATIONSHIP BETWEEN
FUNCTIONS OF ORGANISATION AND ITS IMPACT ON ORGANISATIONAL
STRUCTURE
The organisational structure is important to maintain the working of an organisation in an orderly fashion.
There are some advantages and disadvantages of the interrelationship between the functions of an
organisation. Tesco which follows functional organisational structure faces both merits and demerits of
such interlinks, though these demerits are solved by careful consideration and proper analysis.
ADVANTAGES
 The interrelation helps in maintaining the healthy work environment and coordination of work is
efficiently carried out.
 There are no repetitions of the task and hence time can be efficiently managed.