Business Environment Analysis of Tesco for HND Business Students

This report provides a comprehensive analysis of Tesco's business environment, examining its organizational structure, the impact of macro-environmental factors, and its strategic positioning. The report begins with an introduction to organizational types, including public, private, and voluntary sectors, and then provides an overview of Tesco, including its products, services, vision, mission, and objectives. It delves into Tesco's organizational structure, outlining the roles of top, middle, and lower management levels. The core of the report focuses on demonstrating the positive and negative influences of the macro environment on Tesco's operations, using a PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors. Furthermore, a SWOT analysis is conducted to evaluate Tesco's strengths, weaknesses, opportunities, and threats, considering their interrelationship with external factors. The report concludes with a summary of the key findings and insights regarding Tesco's business environment.

BUSINESS ENVIRONMENT
1

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1: VARIOUS TYPES AND ORGANIZATION PURPOSE. DIVISION OF
ORGANIZATIONS IN PUBLIC, PRIVATE AND VOLUNTARY SECTORS AND THEIR
LEGAL FRAMEWORK.................................................................................................................3
LO1: SIZE AND SCOPE OF ORGANIZATION BASED ON THEIR TYPES….4
INTRODUCTION TO TESCO...................................................................................................5
PRODUCT ANS SERVICES OF TESCO..................................................................................5
VISION AND MISSION OF TESCO.........................................................................................6
OBJECTIVES OF TESCO..........................................................................................................6
LO2 DIFFERENT ORGANIZATIONAL FUNCTION AND THEIR RELATIONSHIP WITH
THE ORGANIZATIONAL STRUCTURE AND THE OBEJECTIVES OF THE
ORGANIZATION...........................................................................................................................7
ORGANIZATION STRUCTURE OF TESCO...........................................................................8
LO3: DEMONSTRATE BOTH THE POSITIVE AND NEGATIVE INFLUENCE/IMPACT
THE MACRO ENVIRONMENT HAS ON BUSINESS OPERATIONS......................................9
PESTLE ANALYSIS OF TESCO...............................................................................................9
LO 4: THE STRENGTHS AND WEAKNESSES OF TESCO AND THEIR
INTERRELATIONSHIP WITH MACRO EXTERNAL FACTORS...........................................11
SWOT ANLYSIS OF TESCO..................................................................................................11
CONCLUSION..............................................................................................................................13
REFRENCES.................................................................................................................................14
2

INTRODUCTION
Organization is group of people who have gathered together to attain a common objective
which cannot be obtained single handedly. In an organization there is a hierarchy of employees
who are at different levels working together so that the organizational goals and the objectives
can be achieved. The top level management is there to set the objectives of the organizations,
targets to be achieved and building the strategies to achieve the set targets of the department.
They are concerned with supervisory work of the organization. The organization has to work
under the macro and the micro environment. The macro environment includes the political,
social, economic and cultural environment of the economy.
LO1: VARIOUS TYPES AND ORGANIZATION PURPOSE. DIVISION OF
ORGANIZATIONS IN PUBLIC, PRIVATE AND VOLUNTARY SECTORS
AND THEIR LEGAL FRAMEWORK.
The organization is of different types which are working in the economy to achieve their
goals and objectives. There are basically Public organization, private organization, charitable
organization and the Non-Government organization which are also called nonprofit organization.
The private organization is owned by the common individuals who work on the principle of
profit making. They have to follow the rules and regulation of the land on which they are
operating their business. They can be further divided into three types which include
proprietorship organization, partnership organization and the cooperative societies. A
proprietorship private organization is that organization which is owned by the single person.
They are responsible for the liabilities and the success of the organization. They do not have
limited liabilities. The HM revenue department is responsible for the registration of
3

proprietorship firms in United Kingdom. The individual operators are responsible to pay the tax
to the government. A partnership organization is formed by the combination of two or more
individuals for a common purpose. In a partnership organization the benefits and the liabilities
are shared by all the partners of the organization and they are also held responsible for the tax
payment to the government. If the ownership is in the hand of the government then it is a public
organization. They work to serve the society and do not work on the principle of earning profit.
The government is made responsible for the liability and the tax payment of the organization.
The working of the public organization is transparent and the information is made available to
all. It works with the help of the employees who are selected by the rules and regulation of the
government. Charitable organizations are working for the benefit of the society. They serve the
society and have a specific agenda of working. They have to get themselves registered by the
authority for example an organization working for the deaf and dumb people. They provide them
shelter and living.
LO1: SIZE AND SCOPE OF ORGANIZATION BASED ON THEIR TYPES.
The organizations are made for the specific purpose and they are working to achieve the
goals and objectives. Scale of the private organization is less comparison to others. Same is the
case of the partnership organization w.r.t their scale. But the public organizations are bigger in
size in comparison to the partnership and private organizations.
The organization has its vision, mission, goals and objectives for which the employee of
the organization is working. This report study in detail about the working of the Tesco
organization. It is working as a retail chain in United Kingdom. They have now expanded
globally and started their operations in Hungry, Malaysia, China and India. The employees are
4

made aware about the organization vision, mission, goals and objectives. It is retail chain which
is customer focused and providing services in stores and online shopping. They believe in the
innovation so they continuously take feedback from the customer and make changes according to
the requirement of the customer.
INTRODUCTION TO TESCO
Tesco is located in the Welwyn Garden City which is at Hertfordshire, United Kingdom.
It is a public sector company which started its operation in the year 1919. They have a long chain
of 100 retail stores all around the world. The company has to follow the rules of the government
and work accordingly (Coe and Lee, 2013). The company is customer centric and is able to
deliver according to the demand of the customer. They are also performing their social
responsibility and trying to produce the products which are environment friendly. Seeing the
need of the current scenario, they have started a zero carbon store which is free from any
pollution and is environment friendly.
PRODUCT ANS SERVICES OF TESCO
Tesco is dealing in w wide range of products that are available in store as well as online.
Their super market and the mega store are filled with the products such as electronics; apparels
for men, women and kids of all ages, groceries and electronic product. They have a brand loyalty
and provide the customer with high quality product at low prices. They have also started with the
home delivery of the products. They have also started with financial service to the customer.
There financial service includes insurance of automobile, health, life and travel. They also
provide loans to the customer against some mortgage. They have also started their banking
5

service which include saving account. They have also started tourism and the tour package
system.
VISION AND MISSION OF TESCO
Tesco has a vision and mission set, which it has to achieve within in given time frame.
The organization work for the customer and has set the objectives based on providing better
product to the customers. They want have a competitive advantage in the market and become a
brand which is preferred by the customers in comparison to the competitors. They have a wide
diversity of the employee working in their organization. The company has a large share in the
retail segment in comparison to the competitors working in the retail industry. They want to
provide customers with the best quality product and at a low cost.
The mission statement has an objective to build a strong customer client who is loyal to
the company by providing them with good quality product at a low price.
OBJECTIVES OF TESCO
The organizations have specific goals and objectives as discussed below:
1. They want to cover a large share of the market. They want to increase the overall demand
of the product by increasing the number of stores in different parts of the world. For
achieving this objective they are opening different stores in different part of the country.
They are producing the product in bulk and thereby decreasing the cost of the product.
2. They want to provide the best quality of product to the customer at the low price. By
lower the cost of the product the overall demand of the product will increase and the sales
6

of the organization will increase. This will help to increase the profitability of the
organization.
3. Seeing the current demand of the product they want to produce the product which is
healthy for the customer. They have started producing the products which do not have
any environmental hazards and is better for the economy. They want to work for the
betterment of the society.
4. The current demand of the customer is to provide the goods at their home. For this
purpose they have set a home delivery system in their store. They have also started with
online platform for placing order for those customers who cannot visit stores.
5. They want to do their best towards the social responsibility and economic development of
the country.
LO2 DIFFERENT ORGANIZATIONAL FUNCTION AND THEIR
RELATIONSHIP WITH THE ORGANIZATIONAL STRUCTURE AND
THE OBEJECTIVES OF THE ORGANIZATION.
Tesco has a hierarchy in the organization. According to this hierarchy system the top
level management is involved in the decision making role of the organization (Son, Baek, Park
and Kim, 2018). The organization has a better coordinated system in the organization that helps
in the smooth working of the organization without any disputes between the employees. The
organization work on the globalized platform therefore it follows the rules and regulation of the
host company in which they work.
7

ORGANIZATION STRUCTURE IN TESCO
Tesco has a well defined organizational structure that helps in better flow of information
and coordination at different level of the organization. The different level of management is top
level, middle level and bottom level management.
The top level is basically composed of the directors of the organization. The number of
the director in the organization is nine. They have the role of decision making based on the
objectives of the organization. There are nine directors which are Chairman or the Managing
director, the Chief Financial Officer, the Chief Executive officer, Non executive directors and
some other executive directors. They work together to formulate the strategies of the
organization.
The decisions that are formulated by the top level management are converted into plans
by the help of the middle level management. They are an intermediator between the bottom level
management and top level management. The middle level management basically includes the
Vice Presidents of the organization, General Managers of the departments and Team leaders of
the departments. They communicate to the lower level management the demands of the top level
management and supervise the work of the lower level management.
The lower management implements the plans made by the middle level management
based on the strategies of the top level management. They are responsible for the smooth
functioning of the organization. They include the store managers who take the command of the
general managers and control the staff members. The store outlet of the retail Tesco is divided
into three parts, which includes the food products, non food products and the personal items.
This level comes in interaction of the customer directly. They know the strength and weakness of
8

the strategy at the grass root level. Based on their feedback the changes are made in the product
by the top level management strategies.
LO3: DEMONSTRATE BOTH THE POSITIVE AND NEGATIVE
INFLUENCE/IMPACT THE MACRO ENVIRONMENT HAS ON
BUSINESS OPERATIONS
PESTLE ANALYSIS WITH REGARDS TO TESCO
Tesco works on the globalized platform in 12 countries worldwide. They have the largest
retail outlets in the United Kingdom. They are affected by the various micro and macro factors of
the economy. They work in other countries therefore they have to work on the rules and the
regulations of the host countries. This report discusses in detail the PESTLE analysis of Tesco.
In PESTLE analysis the various factors like political, economic, social, technological, legal and
environment factors which affect the working of the organization are discussed.
Political Factors: The political situation of the country is not good. To boost up the
political condition of the country employment has to be provided. This can be done if
government focuses on the domestic market in comparison to the international market. Tesco is a
big organization which has set up different stores in the different part of the country. These have
provided employment to the native of the United Kingdom. The company hires employee from
different part of the world therefore a diversified employee structure is present in Tesco. The
company has to face the negative impact of the government taxation system like VAT. Because
of the tax system the disposable income with the buyers has decreased and the demand of the
product has decreased. Because of the low demand the profitability of the organization has
9

decreased. Therefore the company is trying its level best to reduce the price of the product so that
the sales of the company do not come down. The government wants to make the citizen to have a
healthy diet. So they are increasing the tax rate on the consumable products (Burt, Johansson and
Dawson, 2015). The company has come up with a strategy by which they will be producing
healthy product and get exempted from the taxation system. This is also in accordance with the
social responsibility of the organization.
Economic Factors: The gross domestic product of the United Kingdom is in a better
situation. This indicates a good economic indication. It will also help Tesco to take the advantage
of the current scenario. Increase in the GDP of the country means the purchasing power of the
people is increasing (Wood, Coe, and Wrigley, 2016). Therefore the company is coming up with
strategies like buy one get one free do that the demand of the product increases.
Social Factors: The sales of the company are impacted because the death rate is
increasing and the birth rate is decreasing. This will impact the products which are made for the
elder and the youth generation of United Kingdom. Seeing the current scenario Tesco has
brought certain changes in its organization. It has started an online portal which is helpful for the
elders who have movement restriction. Therefore, Tesco is entering to the world of digitalization
for the betterment of the customers.
Technology Factor: The technology provides the organization an opportunity to increase
the business. Use of better technology helps in reduction of the cost of the organization. It helps
to improve the distribution channel of the organization. Tesco have also started using digital
medium to increase its customer base. They have started online shopping portal so that the
customers can place their orders sitting at home.
10

Environmental Factors: Our globe is in the biggest danger of global warming. The
temperature of the globe is increasing at a higher pace. This has led to the melting of the glaciers.
Seeing the urgency of the situation and the hazards that the product causes to the environment,
Tesco has taken a step towards the social responsibility. They have started process innovation
system in which the resources will not be wasted and the overall cost of the product will come
down (Wood, Coe, and Wrigley, 2016). Tesco has started making healthy products for the
customers and have started with Zero carbon store. These stores sell products which causes no
pollution.
Legal Factor: Tesco work on the global platform. It has to follow the rules and
regulation of the host country. Therefore they have to make the policies according to the
legislation of the host country. They cannot violate the laws on the land on which they are doing
business.
LO 4: THE STRENGTHS AND WEAKNESSES OF TESCO AND THEIR
INTERRELATIONSHIP WITH MACRO EXTERNAL FACTORS
SWOT ANLYSIS OF TESCO
Tesco is work in the influence of different factors. It needs to realize its strengths,
weakness, threats and opportunity to survive in the competitive market. The strength and the
weakness are concerned with the internal environment of the organizational and the threats and
weakness are concerned with the external environment of the organization.
Strengths: The biggest strength of Tesco is the brand image. They provide quality product
to the customers at a low price in comparison to the competitors. The bulk production that the
11

company does helps to reduce the cost of the product. The company is also providing an online
portal for shopping. The customers can sit at home and order products.
Weaknesses: Tesco has started different business some of them were not successful. The
basic reason of the failure of the business was inexperience. The smart phone business was a
failure. They should do complete study of the market before starting the business.
Opportunities: Though some of the business that it started was a failure but the retail
business is largest in United Kingdom. They can combine the resources of different resources for
the effective utilization. They can use smart phones to promote their retail business. They can
expand the online shopping venture because it is just in the introduction stage (Wood, Coe, and
Wrigley, 2016). They can expand their market and explore the market of Australia. They can
take the help of the local players and get the knowledge of the customer base present there and
explore them. This will help to know the current demand of the customer and make changes in
their product.
Threats: The completion is increasing day by day. The biggest fear that Tesco has is
losing its customer base. Wal-Mart is working on the similar principle and expanding its market.
The other problem that Tesco has to face is that the stores are not located in the market place but
are located at outskirts. Therefore they shifted to online portal system. They should increase their
presence in the market area. The threat that Tesco has to face is the government rule and
regulation for the labor (Son, Baek, Park and Kim, 2018). Coat of labor is increasing day by day
and this leads to increase in the price of the product.
12

CONCLUSION
Tesco has its brand name in the food retail industry of United Kingdom. Tesco works on
the principle of customer focus. They believe that customer is the king of the market. They
produce high quality product at low cost. They also believe in innovation. They have their retail
stores all over the country and now they have also started the online portal system. Customer can
sit at home and order their products. They work globally so they have to follow the rules and the
regulations of the host country (Coe and Lee, 2013). The PESTLE analysis shows that the
political factors are not in favor of the company. Economically and socially the company is
trying for the betterment of the society. Technology is an opportunity for the company to provide
better product to the customer. The SWOT analysis shows that the company has started different
business. To be successful in a business they should first do full research and then launch the
product. They can use their smart phone business for the promotion of the retail food business.
Increasing price of the labor is the biggest threat to the company because of which the overall
cost of the company is increasing.
13

REFRENCES
1. Coe, N.M. and Lee, Y.S., 2013. ‘We’ve learnt how to be local’: the deepening territorial
embeddedness of Samsung–Tesco in South Korea. Journal of Economic
Geography, 13(2), pp.327-356.
https://academic.oup.com/joeg/article-abstract/13/2/327/926758
2. Wood, S., Coe, N.M. and Wrigley, N., 2016. Multi-scalar localization and capability
transference: exploring embeddedness in the Asian retail expansion of Tesco. Regional
Studies, 50(3), pp.475-495.
https://rsa.tandfonline.com/doi/abs/10.1080/00343404.2014.926317#.WwvE40iFPIU
3. Burt, S., Johansson, U. and Dawson, J., 2015. International retailing as embedded
business models. Journal of Economic Geography, 16(3), pp.715-747
https://academic.oup.com/joeg/article-abstract/16/3/715/2364025
4. Loonam, J., Eaves, S., Kumar, V. and Parry, G., 2018. Towards digital transformation:
Lessons learned from traditional organizations. Strategic Change, 27(2), pp.101-109
https://onlinelibrary.wiley.com/doi/abs/10.1002/jsc.2185
5. Son, J., Baek, J., Park, H. and Kim, C., 2018. The localized merchandising for
international retailers: A study of Tesco’s failure in Japan. The Ritsumeikan Business
Review, 56(5), pp.1-20.
http://rcube.ritsumei.ac.jp/repo/repository/rcube/10653/be_56_5_son_baek_park_kim.pdf
14