Business Environment Analysis of Tesco: A Detailed Report

This report provides a comprehensive analysis of Tesco's business environment, examining various organizational types such as private, public, and voluntary sectors. It delves into the size and scope of these organizations, highlighting their distinct characteristics, objectives, and structures. The report explores the relationship between different organizational functions, including finance, marketing, and human resources, and how they contribute to achieving organizational objectives. Furthermore, it discusses the positive and negative impacts of the macro environment on Tesco's business operations, offering insights into the company's internal and external analysis to identify its strengths and weaknesses. The report also covers Tesco's vision, mission, products, and organizational structure, including the adoption of a lean organizational structure. The analysis includes comparisons with other organizations such as the BBC and Wellcome Trust, illustrating the diverse approaches to organizational design and function within the business landscape.

BUSINESS
ENVIRONMENT
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INTRODUCTION
Business environment is a marketing term used for analysing internal as well as external
factors that influence a business (Andersson, Forsgren, and Holm, 2015). A business
environment is defined as the sum of all external and internal factors that affects the functioning
and decision making of a business. When a successful business has to be sustained then there is a
need of effective utilisation of resources. Business environment is defined as the sum of total of
different internal and external factors that affects the business of an organisation. A business
environment is an essential aspect of any business and it helps the managers and leaders to
estimate the success of company in new markets. There are different forces which constitute the
business environment such as media, government, economic conditions, investigators etc. The
different forms of business organisation depends upon nature of business and size of operations.
There are different kind of organisations including public sector organisation, private sector
organisation and voluntary organisation. All these organisations have different scope, size and
mission and vision. All these kinds of organisations uses different type of organisational
structure like matrix, lean and hierarchical organisational structure. A business environment will
present opportunities as well as threats of a business. The business environment should be easily
understood. The company which is considered in this report is Tesco. This is a multinational
company that deals in groceries and it is a merchandise retailer. The headquarters of Tesco are
located in England, UK. Tesco is a multinational retail company that is their largest retail
industry of the world. Tesco was founded by Jack Cohen in the year 1924. Tesco has a
successful expansion at global level since the day it started business. This company is listed on
the London stock exchange it has a market capitalization of around £18.1 billion. This report
consists of explanation of different types and purposes of organisations. It also describes the size
and scope of different types of organisations. In this report, relationship between different
organisational functions and organisational structure has been discussed. This report includes the
positive and negative impacts of macro environment on the business environment. In addition to
this, the report consists of internal and external analysis of the organisation for determining its
strengths and weaknesses.
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TASK 1
P1 Explain the different types and purposes of organisations
There are different types of organisation that are present in business environment. These
include private, public and voluntary. There are some goals and objectives of each and every
organisation which helps it to work effectively and perform all functions of the company. The
different kind of organisations are described below-
Private limited – This is a kind of organisation that is a small enterprise which has some
liabilities for shareholders of the organisation (Bah, and Fang, 2015). The private limited
companies are restricted for selling shares to public. Tesco is a private sector company that deals
in retail sector in UK. Sole traders – These are people who are responsible for managing different activities of
business by their own and having separate identity from their organisation in legal term.
The owner of organisation is liable for losses, debt as well as for profit generated. Partnership – This is known as the best way for introduction to private organisation if
there are less funds present. The partnership companies are basically of two people or
partners who invest money in starting same business. The amount invested by both of
them in business is known as capital and every partner is responsible for profit and losses
according to contribution made by them
PLC (public limited company) – PLC is the company which is ruled by government of
any country. The main objective of these companies is to provide quality products to customers
for increasing economy of the country (Belás, and et. al., 2015). Some example of these are
health care companies, fertilizer companies, oil and gas companies, etc. The main objective of
these companies is to enhance the profitability of whole economy of the country. Central government department – Organisations of particular state run by the central
government bodies.
 Local authorities – In particular nation, local authorities are those who control and
manage working of specific city organisations.
Voluntary Sector: These are those organisations which are known as non profit
companies and these do not get any profit for doing business. The main objective of these
companies is to do work for welfare of society (Botha, Kourie, and Snyman, 2014). For example
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Wellcome Trust is the voluntary sector organisation of UK that was founded in year 1936 by Sir
Henry Wellcome which has main objective of Biomedical Research. Trust- There are few trustees who provide funds to voluntary sector organisation day to
day operations. Unincorporated association- they are the management committees of an organisation or
may be also named as council. Although, unincorporated association don't have their
identity distinct from trustees.
 Others- Royal charter bodies, community and several others.
P2 Explain size and scope of a range of different types of organisations
There are different organisation present in business environment and all of them have
different scope, size, offerings, vision, mission, stakeholders and structure. The scope and size of
different organisations is described below-
Private limited
Those Organisation which have an objective for earning money and profit by providing
products and services to customers according to their needs and requirements are known as
private limited companies. Tesco is a private firm which is dealing in retail sector. The private
limited company is a kind of business enterprise which is owned privately and this ownership is
used in many jurisdictions. There are basically following advantages of private limited
companies -
Limited liability - The main advantage of owing a private limited company is that the
financial liability of shareholders is limited to the shares. Thus if the company is in financial
trouble, then stakeholders will nor get affected.
Restricted trade of shares – There are restrictions placed on the sale of transfer of shares
is considered as a limitation or advantage depending upon outlook of the entrepreneur. Some
shareholders want to sell the shares but cannot share them outside so this becomes an advantage.
On the other hand, in case where shareholders agree to the sale or transfer of share, the risk of
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hostile is low. This restriction on the sales of share is a disadvantage as shareholders have limited
option for liquidation of shares.
Continued Existence – This is an advantage of private limited company for continuing
existence after the owner dies or leaves business. When a business is incorporates, it becomes an
independent legal entity which is able to sue assets which are separated from the owner of
company. A private limited company is different from sole proprietorship as it is owned by
single person. Background: Tesco is a British retail sector industry that is one of the largest food
retailer around the world which was established by jack Cohen in the year 1919. Vision and Mission: To be an organisation which is wanted and needed around the
world. Objectives: Objectives is to contribute in sustainable development of society by their
business model. Products : This company is dealing with groceries and food chain, clothing and bank. Size: Tesco has around 6,569 stores at worldwide level and having revenue
approximately £57,491 million per annum.
 Structure: Lean organisational structure is adopted by Tesco for attracting more number
of Tesco. A lean organisational structure is designed for creating more customer value
by utilising the available resources. The main objective of all members of a lean
organisational structure is to find different ways for improving processes of the
organisational and for making the companies efficient and productive.
PLC (public limited company)
A public limited company is one which is a type of public company under the United
Kingdom law, common jurisdictions and the Republic of Ireland. A public limited company is
legal designation of a limited liability company (LLC). These kind of organisations are offered to
the general public and it has limited liability. These companies are generally used in UK and
some commonwealth countries which follow norms of UK. The main advantage of public
limited company is the ability of increasing capital by issue of public shares. The selling of
share to public means that anyone can invest in the organisation. Companies which are listed on
London Stock Exchange(LSE) are known as public limited companies. The example of public
limited company is BBC i.e. British Broadcasting corporation.
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 Background: The British Broadcasting corporation is a British public service broadcaster
which has headquarters in London. This was started on 18th October, 1922 by John Reith.
The BBC is established under a royal charter and it operates under its agreement with the
secretary of state for Digital, Culture, Media and Sport. Products and services: The BBC corporation provides various services like providing
information through digital media such as television, radio, news , internet, etc. The
vision, mission and values provides information about the work of BBC and the way in
which promotions are done. Vision: The vision of this company is to be the most creative organisation in the world. Mission: The vision of this company is to enrich lives of people by providing
programmes and services that enhances knowledge of individuals and give them
education and entertainment. Size: The number of employees working in British Broadcasting company are
approximately 20,916. Objectives: The objective of British Broadcasting Company is to provide entertainment
and knowledgable programs to people and this company has purpose for Royal Charter
and Agreement, the constitutional basis for BBC.
 Structure: The organisational structure followed by British Broadcasting company is
Hierarchical structure of organisation. In this kind of organisational structure, employees
of the company are ranked at different levels within the organisation. Every
organisational level has a single leader under which several employees are working.
Voluntary sector
These are those organisations who work for welfare of society and their motive is not to
earn money or profits. A voluntary organisation is one which includes a group of individuals
who enter into an agreement and these people are known as volunteers. Some of the examples of
voluntary organisation includes trade associations, learned societies, professional associations
and environmental groups. The voluntary associations can be incorporated and unincorporated.
Voluntary groups are a broad and original form of non-profit organisations. An example of
voluntary sector organisation is Welcome Trust is offering services related to biomedical
research in UK and it has approx. 2,057 personnel according to the data of 2017. Principles of
Wellcome trust is to improve health of their clients.
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 Vision- “To gain extra improvement in health of human beings and animal for whom
they are conducting biomedical research.” Mission- “To do work in such a way that no other can bring their brightest mind in the
field of biomedical research.” Size: The number of employees working in British Broadcasting company are
approximately 20,916. Objectives: The objective of Wellcome trust is to achieve extraordinary improvements in
health by supporting the brightest minds and funding many biomedical research which
help in understanding of science.
 Structure: The organizational structure followed by Wellcome Trust is matrix
organizational structure. This kind of organizational structure is one in which the
reporting relationships are set up as a grid, or matrix and not on the traditional hierarchy.
Employees have dual reporting relationships for both functional and product manager.
TASK 2
P3 Explain the relationship between different organisational functions and how they link to
organisational objectives and structure
An organisation consists of various departments and functions so that all operations of
the company are operated effectively. All the functions are interrelated for smooth running of all
business operations and functions (Chang, 2016). The different departments present in Tesco for
running successful business are human resource, marketing, finance, operations and management
etc. Some of the functions and their interdependence in Tesco are described below- Finance department – Finance is the department of organisation that is required for
doing each and every activity of business. It is termed as the backbone of company. The
main objective of this department is to provide money for doing all activities of the
business. In Tesco, finance department is connected with all other departments as it
provides money to them for performing activities of their function. The daily activities of
operational department that includes distribution of products to customers and retail
shops in time. The finance department allocates all activities and time at which this will
take place. Tesco’s finance department provides money for human resource department
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to provide training and development to people of the company. Also the company
provides money for recruitment process and hiring of new employees. Human resource department – It is the most important function of any organisation. The
human resource department of Tesco provides effective trainings and development
sessions for growth and increasing knowledge of employees. In Tesco, there are several
roles and responsibilities of the human resource department. This department has the
main aim for making employees of the company competitive and strong. The human
resource department of Tesco manages employees by motivating them and enhancing
their knowledge and abilities. In Tesco, the human resource department is interlinked
with all other operations of every division as they manage all employees.
 Marketing department – It is another important department of the company which takes
care of the functions like advertising, promoting, and organising campaigns for products
and services of the company (Charter, 2017). The marketing department of the company
is interrelated with all other departments as this department analyses the needs and
demands of customers and guide all other departments to make products according to
demand of customers. This helps in developing brand image and reputation of the
company.
There are some advantages as well as disadvantages of link of all functions of the company
and these are discussed in the table given below-
Advantages Disadvantages
 The interrelation of departments helps
to easily collaborate and cooperate with
all departments of company and
achieve goals and objectives of the
company in an effective manner.
 This helps in managing all activities of
the company in an effective manner.
 If in a company there is no proper flow
of communication then the interrelation
will not give effective results.
 There are chances of fights and
conflicts if many people have to
collaborate and work with each other.
In context of Tesco, there are different departments which have to perform functions and
operations in an effective manner. Tesco is a retail sector company which is a privately owned
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organisation and it follows lean organisation. There are different departments in Tesco like
marketing, finance, human resource management, operation and management department and
sales and distribution department. In Tesco, the marketing department is responsible for
conducting research and evaluating the needs and demands of a customer. Marketing department
takes money for conducting research from finance department of the company. The human
resource management of Tesco helps in increasing employee engagement and motivation. When
employees of the company are motivated it is easy for accomplish the goals and objectives of the
company. The operations and management activities of business can be developed by
establishing good interrelations between all departments of the company.
In context of British Broadcasting Company, it is a public service broadcaster which uses
hierarchical organisational structure. In this company the main function is of the marketing and
technical department. Both these departments cooperate and collaborate to aware people about
information of programs that are used for enhancing knowledge of individuals. BBC is involved
in broadcasting media on radios, televisions, web portals, etc. Finance department of this
company is responsible for providing money for promoting and advertising programs and
increasing the awareness of programs.
In context of Wellcome Trust, there are different teams available for performing activities
that will help in achieving the objective of the company. These teams includes education
team,grants team, humanities and social science team, innovations team, policy team and public
engagement teams. The wellcome Trust is an organisation that is involved in welfare activities.
This organisation has different interdependent teams which work together for attaining the goals
of company.
TASK 3
P4 Identify the positive and negative impacts the macro environment has upon business
operations
There are several factors that affect business environment and they affects decision
making of the company directly as well as indirectly (Cohen, and Kietzmann, 2014). Tesco can
undergo a PESTEL analysis for identifying the different external factors that affect businesses.
The PESTEL analysis of Tesco while running it's business successfully is described below-
Political factors
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These are related to all policies and governmental rules and regulations that an
organisation has to follow for effective and smooth functioning of the company. If there are any
changes in rules and regulations abide by law and government of the country then it has a great
impact on company's operations. There are both negative as well as positive implications of
political factors on BBC. These are mentioned below- Positive impact - The political factors of countries change rarely and business expansion
of BBChas always been appreciated in all countries as it operated by following all rules
and regulations abide by government of the country.
 Negative impact - Sometimes it is not easy for the companies to obey all rules and
regulations of the company. BBC has experienced negative impact on the company's
operations while it was operating when there is lower economic growth. Thus, it is
advisable for this organisation to have proper knowledge about the expansion.
Economical factors
These are the factors which affects business and operations directly. All
economic factors are essential for increasing profits and revenue of the company
(Erasmus, Strydom, and Rudansky-Kloppers, S. eds., 2016). The different kind of
economic factors are rate of exchange, growth of economy, rate of interest, etc. Negative impact – If the company operates in a country which is having low economy
rate and it is not developed, then there are chances that it can face several negative issues
that impact efficiency of operations of the company.
 Positive impact - The British Broadcasting company should expand it's business where
economy growth is high and exchange rates are fixed. This helps in smooth functioning
of the organisation.
Social factors
The social factor is one which means the changes that occur within the society and these
have a major impact on the functioning of business. Social factors include trends, fashion styles
and lifestyle trends of an individual. Negative impact – The changes in social trends of an individual have negative impact on
BBC as it deals with lifestyle, news, trends and social life of a person.
 Positive impact – The change in social factors also have positive impact on operations of
BBC. This company ensures that quality and authentic information is provided to them.
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Technological factors
The technological factor is important to be considered while doing business (Hillary, R. ed.,
2017). Technological changes like new techniques and equipments helps company in attracting
more customers and increasing it’s customer base. Negative impact – The use of latest technology, equipments and trends cause high price
to the company. It is not very easy for BBC to adapt new technical changes and provide
services to customers.
 Positive impact – The use of new technology is important and it helps a company to
provide good and quality products and services to people. This creates positive image in
front of customers.
Environmental factors
The environmental factors are associated with several elements that affects the
operations of a company. The environmental factors that affects operations of BBC in different
countries include global warming, greenhouse effect, natural calamities, etc. Negative impact – There are some natural calamities or climate that limits an
organisation to do successful business. Thus, it is important for BBC to analyse the
climatic condition of the country before starting business there.
 Positive impact – Sometimes climate is the only reason for the companies to make more
profits and money by establishing business in that country.
Legal factors
The legal factors include several rules and regulations that are given by government for
operating business. It is important for BBC to follow all rules and regulations and do business
without any hurdles and problems. Negative impact – There are different rules and regulations followed in different
countries and it is important for companies to follow them and do business appropriately.
There are some rules and policies which causes decrease in sales of the company.
 Positive impact - It is important for BBC to earn more profit and expand it’s business for
enhancing the global market share. BBC analyses all policies and rules of the company
and then operates business.
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