Analyzing Tesco's Business Environment: Ethical and External Factors

This report provides a comprehensive analysis of Tesco's business environment, examining both internal and external factors influencing its operations. It delves into key issues such as ethical practices, highlighting the impact of accounting scandals and the importance of stakeholder trust. The report further explores the effects of the COVID-19 pandemic, political instability (including Brexit), economic challenges, technological advancements, environmental concerns, and legal issues. It also addresses the challenges of retaining talented employees. The analysis emphasizes the need for Tesco to adapt its strategies to navigate these complexities and maintain a competitive edge in the retail industry, focusing on sustainable management and ethical considerations to achieve long-term success. The report concludes that Tesco, by adapting its strategies, can maintain a strong market share.

Business
1

TABLE OF CONTENTS
.........................................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN ANALYSIS .........................................................................................................................3
CONCLUSION...............................................................................................................................6
REFERENCES ...............................................................................................................................6
2

INTRODUCTION
Business environment is collection of both internal and external factors like supply and
demand, management, customers needs and preference, competition and government policies.
Both internal and external factors have positive and negative impact on function and operation of
business therefore companies in order to grow and sustain in market needs to effectively handle
the factors. Better understanding of business environment helps manager in identifying
opportunities, resources and threat in external environment and the way companies can gained
competitive advantages. Tesco is British multinational company which is third largest company
in retail industry that provide wide range of products and services at reasonable rates to meet
needs of each individuals. This report is essay on examining of implications of a topical current
affairs issue on business functioning so that better strategies can be formulated in order to get
particular outcome. Furthermore, it has also contained ethical theory in order to understand
internal and external factors that affects business environment.
MAIN ANALYSIS
There are numerous changes in business environment like innovation in technology,
change in taste and preference of people, introduce of new policies by government and many
more. Due to ever changing nature of business environment, company needs to change its
strategy so that it can easily retained its market positioning and growth, succeed further.
Currently there are numerous key issue in external environment like impact of Covid -19
operation, changes in technologies and taste and preference of people or government policies.
Therefore issue that are faced by Tesco in external environment can be illustrated as follows:
Ethical practices: Due to increase in awareness among people about increasing unethical
practices of companies in order to earn more profitability and market share. Many firms in order
to get maximum benefits make use of unethical practices which resulted in decrease in brand
image and market value. Like Tesco has overestimated its profit margin by £263 or conducted
accounting scandal that has affected negatively on reputation of company in external
environment. It further leads to loss of customers satisfaction and decreased overall profitability
of company as less number of people wants to be part of organisation (Seetharaman, 2020). Such
as utilitarianism, is one of the most common approach of theory of ethics which states that
manager or any individuals while taking particular decision need to considered its consequences.
3

In order to identified whether it will be beneficial for maximum number of individuals or not. So
in context of Tesco, manager has not find consequences or does not have taken decision that is
beneficial to all individuals. As the decision of overestimating of profit has adversely impacted
on interest level of all stakeholders such as customer’s, investors, employees and many more. It
have broken trust of them therefore it can be understand that company is facing challenges
related to regaining stakeholder trust so that firm can grow and sustain for longer time frame in
retail industry of United Kingdom.
Impact of covid -19: It can be stated that Covid-19 has adversely impacted on business
functions and operations of Tesco as less number of people are ready to make purchase of
products and services. Covid-19 is an pandemic situation that has negative affected on growth of
business thereby resulting in decrease in overall sales volume and profitability of company.
People due to coronavirus wants products and services that are more hygiene, organic and
healthy so that they can be stay safe and secure (Eden and Gupta, 2017). Therefore, Tesco in
order to survive in market needs to take necessary steps in order to ensure health and safety of
people.
Political issue: Tesco is an organisation that have its operations across worldwide that is nearly
in more than 13 countries including Europe and Asia. Company is facing issue related to policies
of different government due to international operations such as political instability, restricted
policies and tax rates. Tesco also have to bear import duties that resulted in increased in cost of
products thereby decreasing overall sales volume of firm. Organisation is facing challenge
related to deciding strategies as each country have different rules and regulation that resulted in
closure of operation of company in several market (Hoffman, 2017). UK government by
implementing brexit policies has reduced overall sales volume of company as maximum import
and export of UK is with EU. Thus after implementation of brexit UK is no more part of EU
thus it resulted in decreasing number of customers or market share and profitability of
organisation. Therefore, Tesco to expand and diversify its business operations in international
market needs to effectively deals with political issue.
Economic environment: There are various elements that are included in the economic
environment like interest rates, disposable income of individuals, demographical structured and
many more. Tesco is adversely impacted by economical environmental factors as due to Brexit
and covid -19 customers are forcing companies to reduce their price of products so that they can
4

afford. It has also resulted in increased in unemployment, thereby leading in decreased in overall
demand of products and services by key individuals. Company annual wages bill is amounting
GBP 4.5 billion furthermore the minimum wages rate is increased by 4.4% that resulted in
increasing cost of millions of pound of UK. Due to covid-19 cost of resources have been
increased thereby leading challenges for company such as Tesco to providing products at low
prices possible so that people can be part of organisation.
Technological factors: Another businesses issue that are faced by companies is continuous
development and growth in technology. Like Tesco is facing challenges in adapting to new and
innovative technologies due to limited resources and availability of capital. Company has
decided to make best use of technology in order to delivered services to customer’s in limited
time frame (Berman and Dalzell-Payne, 2018). Tesco has make its own mobile payment system
named as Paywid that has provided ease and comfort to customer’s to easily buy the products or
services to fulfil their needs in best possible manner.
Environment issue: Recently, due to increasing pollution and limited availability of resources,
government and key individuals have pressured companies to take steps towards sustainable
management. People have forced enterprise to undertake social corporate responsibilities while
operating its function so that maximum benefits can be given to end individuals that are living in
society (Buckley and Casson, 2019). Therefore, Tesco is facing challenges or key issue related
to formulating effective strategies related to sustainable management of resources. Thereby
Tesco in order to promote its business operations needs to put its efforts, time and energy to
make optimum utilisation of resources so that maximum value can be delivered to customer’s at
minimum price.
Legal factors: Government is responsible for framing various rules and regulation so that no
unethical practices can be used by company in order to earn maximum profitability or for its
personal gain. Employment, discrimination, equal payment to all workers are some of the legal
laws that are made by government for ensure health relationship between employees and
employers. Tesco has faced legal issue as it has been suspected for conducting accounting fraud
or misrepresentation of profit that has negatively impact on investors that have invested their
capital in the company to earn maximum return (Karpenko and et.al., 2019). At the same time it
was identified that across 17 workers has take legal actions against employers as they found that
company was discriminating between different individual. There are many workers in Tesco that
5

are frustrated after getting notice of low pay rates for weekend and bank holiday. Therefore it
can be stated that legal is also one of the issue that has resulted in barriers in effective operations
of business.
Retaining talented employees: It is also important issue that is faced by large number of
enterprise in UK as they are unable to recruit and retained high talented employees within
organisation for longer time frame. As per 2019, 88% of UK employers are experiencing
shortage of skills that resulted in challenge for organisation to retained talented employees in the
organisation (Liao nd Yang, 2020). For examples: Tesco is also facing challenges related to
retention of high talented employees which cause issue for company to delivered better services
to customer’s. Enterprise should make use of different motivation theories such as equality,
Maslow need hierarchy in order to make employees happy and satisfied.
CONCLUSION
From the above report it can be illustrated that manager needs to conduct continuous
market survey, research in order to find several changes or challenged in external environment
which could be affects company operations. There are various issue which were covered in the
report like CSR, technology, government policies and many more thereby companies are finding
different method to respond to achieve their goals. Businesses environment is every changing in
nature therefore it is responsibility of company to keep track on several factors so that company
can gained and retained its competitive advantages. At last it can be summarised from the above
essay that there are numerous issue in business environment but Tesco by modifying its strategy
is able to gain maximum market share in retail industry.
6

REFERENCES
Books and journals
Berman, S. and Dalzell-Payne, P., 2018. The interaction of strategy and technology in an era of
business re-invention. Strategy & Leadership.
Buckley, P. and Casson, M., 2019. Decision-making in international business. Journal of
International Business Studies, 50(8). pp.1424-1439.
Eden, L. and Gupta, S. F., 2017. Culture and context matter: gender in international business and
management. Cross Cultural & Strategic Management.
Hoffman, A .J., 2017. The evolving focus of business sustainability education. In EarthEd (pp.
279-288). Island Press, Washington, DC.
Karpenko, L and et.al., 2019. Formation of the system of fair business practice of the company
under conditions of corporate responsibility. Academy of Strategic Management
Journal, 18(2). pp.1-8.
Liao, S. H. and Yang, L .L., 2020. Mobile payment and online to offline retail business
models. Journal of Retailing and Consumer Services, 57. p.102230.
Seetharaman, P., 2020. Business models shifts: Impact of Covid-19. International Journal of
Information Management, 54. p.102173.
7