Business and Business Environment: Tesco Case Study

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BUSINESS AND BUSINESS ENVIRONMENT
TESCO

Table of Contents
INTRODUCTION.....................................................................................................................................2
TASK 1....................................................................................................................................................3
LO1 DIFFERENT TYPES, SIZES AND SCOPE OF ORGANIZATIONS........................................................3
DIFFERENCE BETWEEN DIFFERENT TYPES OF ORGANIZATION......................................................3
THE SIZE AND SCOPE OF THE RANGE OF DIFFERENT TYPES OF BUSINESS ORGANIZATIONS........5
LO2 INTERRELATIONSHIP OF VARIOUS FUNCTIONS WITHIN AN ORGANIZATION AND THEIR LINK
WITH ORGANIZATIONAL STRUCTURE................................................................................................8
DIFFERENT TYPES OF FUNCTIONS WITHIN AN ORGANIZATION....................................................8
HOW THESE FUNCTIONS RELATED TO OVERALL ORGANIZATION MISSION AND OBJECTIVES......8
DIFFERENT TYPES OF ORGANIZATION STRUCTURE.......................................................................9
TASK 2..................................................................................................................................................14
LO3 POSITIVE AND NEGATIVE INFLUENCE OF MICROENVIRONMENT ON BUSINESS OPERATIONS 14
PESTLE ANALYSIS.........................................................................................................................14
POSITIVE IMPACT OF MACRO ENVIRONMENT ON TESCO..........................................................16
NEGATIVE IMPACT OF MACRO ENVIRONMENT ON TESCO.........................................................16
LO4 THE INTERNAL STRENGTHS AND WEAKNESSES OF THE SPECIFIC BUSINESSES AND THEIR
INTERRELATIONSHIP WITH THE EXTERNAL MACRO FACTORS........................................................17
INTERNAL AND EXTERNAL ANALYSIS OF TESCO..........................................................................17
PORTER’S FIVE FORCES...............................................................................................................17
SWOT ANALYSIS..........................................................................................................................18
INTERRELATIONSHIP OF INTERNAL STRENGTHS AND WEAKNESSES WITH THE EXTERNAL
MACRO ENVIRONMENT FACTORS..............................................................................................18
CONCLUSION.......................................................................................................................................20
REFERENCES........................................................................................................................................21
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INTRODUCTION
Increasing Globalisation and changing customer needs have developed a vigorous business
environment that involves the varieties of factors that could affect the business routine
functioning and decisions of the businesses (Pulver, 2012). This report contains a brief
overview of the different aspects and factors in a business environment that could affect the
operations and decisions of the new and existing business organizations. It would support in
extending knowledge on the different types and sizes of the businesses and how the types
and size could affect the business structure, functioning and scope in the wider business
environment. After discussing the basic information on different types, sizes, legal structure,
and functions of the business, the key factors in the internal and external business
environment and their influence on the businesses will be discussed.
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TASK 1
LO1 DIFFERENT TYPES, SIZES AND SCOPE OF ORGANIZATIONS
The term business environment could define as the collection of all the internal and external
factors that could affect or get affected by the operations of the business. A business
environment facilitates in identifying the key business opportunities, supports in business
planning, tapping the beneficial resources and improving the overall performance of the
business (Pulver, 2012). There are various types of business organizations operate in the
business environment. Business organizations can term as entities that are founded with the
aim of carrying on commercial activities by providing goods and services to customers.
DIFFERENCE BETWEEN DIFFERENT TYPES OF ORGANIZATION
The business organizations are mainly differentiated in three types; for-profit organizations,
not for profit organizations and non-government organizations (Craig and Campbell, 2012).
The basic differences between these three organizations are discussed in the below table;
Basis For-Profit (Private) Non – profit (Public) Non – Government
(Voluntary)
Meaning The legal entity that
operates with the aim
of earning money is
known as a for-profit
organization.
The legal entity
operates with the aim
of serving society as a
whole are non – profit
organization. (Craig
and Campbell, 2012)
The legal entities that
are formed by ordinary
civilians and operated
autonomously of
government are known
as non-government
organizations.
Goals and
Objectives
It works for earning
higher profit and
growth through
commercializing
products and services.
For example, ASDA
It works for promoting
commerce, art,
scientific research and
another useful
purpose that lead to
the betterment of the
economy and society.
For example, police.
It works for the
betterment of society
and the economy. For
example, women
empowerment,
creating awareness
about human rights.
Legal status These are considered
as a separate legal
entity established
under companies act.
(Craig and Campbell,
2012)
These are set by the
act of law. With at
least 51% of
government shares.
These are registered
under public trust act
or societies registration
act. This could also
register under the
companies act as a non-
profit company.
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Form of
organization
Sole proprietorship,
company or
partnership etc.
Hospitals, police,
municipality etc.
Trust, charities etc.
Sources of
revenue
Sales of goods and
services
Income tax, exports
and imports tax,
service tax and
income from
government-owned
corporations.
Donations,
subscriptions and
government grants.
(Craig and Campbell,
2012)
Management
and control
Managed and
controlled by
individuals or group of
individuals. (Craig and
Campbell, 2012)
Managed and
controlled by the
local, regional or
central government.
Managed and
controlled by trustees.
Area of
operation
Depends on size and
type of organization
limited large
Examples Tesco, ASDA and
Vodafone
The Met Police,
Museums associations
and BBC
Oxfam, Human rights
watch, and anti-slavery
international
The above-discussed types of businesses organizations may have a different legal structure.
The range of legal structure related to the different types and sizes of the business
organizations are:
SOLE TRADERS: sole traders are the exclusive owners of the business that are entitled to
keep all the profits after tax and liable for all the losses. The sole traders are free to handle
their business operations as they want and can be established with limited investments.
These are free from any legal formalities (Baden-Fuller and Morgan, 2010). They do not
mandate for maintaining accounts and auditing.
PARTNERSHIPS: partnership is when two or more person establishes and operates a
business and shares the profit and losses. The involved parties in a partnership can share the
profit, losses and risks on mutual agreement or equally. Partnerships can be a general or
limited liability (Burns, 2016). It is governed either by partnership deed or under regulations
of partnership act.
PRIVATE LIMITED COMPANY: in such companies the liability of the business owner is
limited to their shares and shares of a private limited company cannot be publically traded.
The number of investors or shareholders is limited to 50 or less.
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JOINT VENTURES: it is when two or more businesses agree to share resources, risks, returns
and ownership of businesses with a common purpose (Burns, 2016). The joint ventures are
the separate legal entity that may be temporary or permanent based on the purpose of the
businesses.
FRANCHISING: it is a form of businesses that allows the franchisor to distribute their
products, model or methods to the customers through affiliated dealers i.e. franchisee. The
franchise has to pay a certain amount of royalty to the franchisor for using their products
and services (Sherman, 2011). A standard legal agreement is required for franchising.
LICENSING: it is an agreement through which a business (Licensee) gets the rights or
permission to use the property of another entity (Licensor) for a particular time in exchange
for a royalty. The property may be patent, trademarks or copyrights and designs produced
by the licensor (Sherman, 2011).
THE SIZE AND SCOPE OF THE RANGE OF DIFFERENT TYPES OF BUSINESS
ORGANIZATIONS
Not just the types, the business organizations are also differentiated in terms of size and
scope in the market that are the great drivers of the growth and sustainability of the
business in the market.
On the basis of size the business organizations are classified into four types;
BASIS MICRO SMALL MEDIUM LARGE
Meaning Organizations
with maximum
10 or fewer
employees and
an annual
turnover under
€2million.
(Hillary, 2017)
Organizations
having the
number of
employees
between 10-50
and an annual
turnover of
more than
€2million but
less than
€10million.
Organizations
with the
number of
employees in a
range of 50-250
and an annual
turnover above
€10million and
below
€50million.
Organizations
with more than
250 employees
and an annual
turnover of
more than
€50million.
Purpose and
objectives
To earn enough
profit for
meeting daily
needs
To earn a higher
profit
To earn higher
growth and
sustainability
To gain and
maintain brand
value and
capture greater
customer base
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in the market
Supply of goods
and services
Local market Local or national
market
National or
international
market
International or
global market
Resources It does not
require higher
capital and
resources to
carry out
business.
It requires
moderate
capital and
resources
(Hillary, 2017).
It requires
higher capital
and resources to
run and manage
the business.
It requires
extensive
capital,
investment and
continuous
product
development.
Market share Limited to the
local area
limited limited wider
Profit share owner Owners and
partners
Owners and
partners
Among
investors and
shareholders
Growth Limited growth
opportunity
Moderate
growth
opportunity to
the local or
regional market.
Higher growth
opportunity in
the national and
international
market.
Higher growth
opportunity in
the global
market (Hillary,
2017).
Sustainability Low Low Moderate Higher
SCOPE OF DIFFERENT BUSINESS ORGANIZATIONS
The different types and sizes of business organizations have different scopes that are
discussed as follows;
 Local: the local organizations are those whose operations are spread at the local
level in a city or region (Casson, 2013). Such businesses have limited capital,
resources and profit as well as limited scope for growth.
 National: at the national level, the business operations are expanded across the
national territory. These organizations have a wider scope, resource, profitability and
capital as compared to local level companies.
 International: at the international level, the organizations have great scope to
expand the business beyond the national boundaries through import and export of
its products and services in different countries (Casson, 2013).
 Multinational: the multinational organizations are the ones that have their offices
and management in more than one country. The key difference between the
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multinational and international businesses is that production and operations of the
multinational organizations are expanded to more than one country while
international businesses have production and operations in just one country but
offers its products in the international market.
 Global organizations: such organizations have the highest scope of growth and
profitability as they have plentiful resources and investments. The supply chains of
global organizations are widespread across the different continents of the world
(Casson, 2013).
The management, operations and growth of the business organizations are largely
depending on the industry structures, competitiveness and different forces in the market
such as supply and demand, scarcity and choice and income elasticity.
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LO2 INTERRELATIONSHIP OF VARIOUS FUNCTIONS WITHIN AN
ORGANIZATION AND THEIR LINK WITH ORGANIZATIONAL STRUCTURE
DIFFERENT TYPES OF FUNCTIONS WITHIN AN ORGANIZATION
For managing and business operations effectively, a business organization needs to perform
several roles and functions. The key functional areas that every business has to perform
irrespective of its size and type are:
 Marketing: the marketing function is responsible for promoting the business among
the potential customers, investors for generating higher sales and increasing brand
awareness among the customers (Picincu, 2019).
 Finance: this function deals with preparation of budgets, processing tax payments,
keeping track of inflow and outflow of cash and assessing the financial performance
of the company.
 Human resource management: this function is responsible for attracting and
selecting talented workforce to perform different activities of the company (Picincu,
2019). It also deals with managing employee relations and optimum working
conditions for the employees along with compliance with labour and employment
laws.
 Production and Operations: this function is responsible for managing the production
and distribution operations at the organization to ensure that the products are
produced and reach to the customers efficiently.
HOW THESE FUNCTIONS RELATED TO OVERALL ORGANIZATION MISSION AND
OBJECTIVES
All the above-discussed functions of the business are needed to perform in coordination to
achieve the desired aims and objectives of the business. In the different functional units of
an organization, the employees perform their respective roles and duties to conduct the
overall business operations in coordination. Therefore, all the business functions are
interrelated and interdependent on each other to carry out regular operations of the
business (Henttonen and Kettunen, 2011). For example, the finance function is dependent
on the operations and marketing functions to earn revenue for the company. Similarly, the
marketing function is dependent on the finance function to plan and implement marketing
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strategies. Moreover, the human resource function supports in selecting the right talent to
perform different functional roles at the company. Therefore, all the organizational
functions are interrelated and interdependent on each other to complete daily business
activities.
ADVANTAGE
 The interrelationship between the different organizational functions facilitates in
improving the working efficiency of the company
 It supports in increasing the productivity and performance at the company through
sharing responsibilities (Henttonen and Kettunen, 2011).
 it supports the standardization of the overall operations with the involvement of
expert and specialized work.
DISADVANTAGES
 There are chances of conflict of interest among the different functional units due to
unclear roles and responsibilities
 Increased chances of mistakes and confusion due to miscommunication and unclear
responsibilities (Henttonen and Kettunen, 2011).
 The dependency of functional units among each other can also be increased.
LINK WITH ORGANIZATION STRUCTURE
Organization structure outlines the way to perform different activities of the business to
achieve the goals and objectives of the organization. The organization structure also
determines the flow of information within a business (Cavusgil, et al., 2014). Organizational
structures play a key role in determining the interaction and relationship between all the
functions of the organization.
DIFFERENT TYPES OF ORGANIZATION STRUCTURE
The organisational structure is very important for businesses to ensure efficient working and
performance in the competitive market. The different types of organisational structure are
discussed below;
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Bureaucratic: such type of structure is commanded with the high degree of formality in the
regular business operations. The bureaucratic organizations have a clear division of labour,
clear hierarchy and set of formal rules (Usmani, 2019). The decisions flow from down and
the basis of the organization is formed by rules and procedures rather than people. such
structure is suitable for large companies that require complex operations.
Post-bureaucratic: it consists of several standards and procedures with a central command.
Under this, the decisions are made through democratic procedure among the board
members (Usmani, 2019). It considers obtaining employee suggestions to encourage
employee trust, responsibility and participation.
Strategic business units: SBUs structure is a type of formal organizational structure that is
usually used for large businesses with operation spread over different fields and markets.
The SBUs are independent divisions of the large organization with its own objectives.
Matrix: this is one of the most complicated organizational structure under which the
reporting relationships are set up as a matrix rather than a hierarchy. Under this system, the
employees have to deal with a dual reporting relationship to both functional and product
manager (Usmani, 2019).
Functional levels: in a functional structure, the employees are grouped under different
functional units on the basis of their specific skills and knowledge for e.g. sales, finance, and
marketing department.
ORGANIZATIONAL STRUCTURE AND COMPLEXITIES OF TRANSNATIONAL, INTERNATIONAL
AND GLOBAL BUSINESS ORGANIZATIONS
The small and medium-sized companies are typically following the three common types of
organization structure; functional, divisional or matrix. The SME can efficiently manage its
business by following the simple hierarchy structure. But in case of the large business
organizations whose business operations are spread over the national boundaries in the
international market needs to manage the business in dynamic conditions and thus requires
more effective organization structure to manage and control the business activities (Lorette
and Seidel, 2019).
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The market dynamics and business environment beyond the national boundaries are very
complex. In the international market, businesses need to be globally integrated and
responsive to the local market. The organizational structure of the international or global
organizations needs to be multidimensional that systematically differentiates between
different business, geographic areas and functions of the business (Cavusgil, et al., 2014).
For instance, Tesco is a multinational company that faces challenges and complexities of the
international market and thus, requires multidimensional and systematic organizational
structure to manage the business activities in the different countries of the world. Here, the
organizational structure of Tesco is presented below to gain a better understanding of
business management at a global level.
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