Analyzing Tesco's Business Model: A Case Study in the UK Retail Sector

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Business and business environment
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Table of Contents
Introduction...................................................................................................................... 3
LO1.................................................................................................................................. 4
LO2.................................................................................................................................. 7
LO3................................................................................................................................ 11
LO4................................................................................................................................ 14
Conclusion..................................................................................................................... 17
Reference List................................................................................................................ 18
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Introduction
The term business organisation means a company or a firm, which carries out various
commercial activities. The term business simply means buying and selling of goods.
Every business organisation has a defined legal structure, which forms the company’s
structure, liability risk and profit structure. There are two types of business organisation,
the profit and the non-profit business-making organisation. Every profit making business
organisation has one common target and that is to achieve the target on time for profit
maximisation. The report will discuss about various public, private and voluntary
business organisation in UK. The study will also elaborate on the purpose of those
business organisations. Further, it will also explain the scope and size of various types
of business organisations.
Tesco is an UK based retail industry founded by Jack Cohen in the year 1919. This
business organisation is a British company, which has a varied collection of general
merchandise and groceries. The headquarters are in Welwyn Garden City,
Hertfordshire, United Kingdom. According to the gross revenues, it stands third among
the entire retail business organisations in the world. It has its outlets in seven countries
(bbc.com, 2019).
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LO1
P1 Explain different types and purposes of organisations; public, private and
voluntary sectors and legal structures.
Public sector organisations
The public sector is an organisation is also known as state sector. This sector includes
both public enterprises and services. The public sector organisations are government-
authorised bodies and are owned and controlled by the government, which provides
service to the citizen of that country for economy’s growth and development. BBC is a
public sector UK based company (bbc.com, 2019). Its main purpose is to conduct in-
depth research activities to fulfil the mission. This is done to maintain the brand image
as a leading role in development and research, in broadcasting and in other means for
the consumption and distribution of audio, audiovisual and visual material and various
other content related to technological advancement. BBC’s legal structure is
corporation and it comes under statutory corporation with a royal charter. The
government controls the company so it is not necessary that the company will have
shareholders.
Private sector organisation
Private sector organisations are small or large business bodies, whichare owned by
individuals. The individuals aim at profit maximization for self-benefit. TESCO is one of
the leading brands in the retail sector, which aims at satisfying customers in order to
expand its business for profit. Tesco is a retail sector so therefore is the tertiary sector
(tesco.com, 2019). A variety of products and services are offered by TESCO.
Household products, groceries, clothing and travel insurance are the products and
services disposed by the company. It follows a private limited legal structure. As it is
a limited liability the shares can be easily sold and traded to the public
Voluntary organisations
The non-profit organisations are called the voluntary organisations. They deal with work
related to youth club, special medical research others. The organisation aims at creating
social impact. The voluntary organisations are independent bodies, which creates
awareness among people for their growth and development. Cancer research UK is
one of the well-known voluntary organisations in UK (cancerresearchuk.org, 2019). The
organisation works for the welfare of people suffering from cancer. It is a charitable
organisation. The organisational test and serving the public interest are two
philanthropies of charitable organisation without any profit motive.
Micro organisation
The small enterprise with few employees makes a micro organisation. It has balance
sheet turnovers less than the desired numbers. Issoria is a micro organisation, which is
a consultancy firm other than financial management (issoriachange.com, 2019).The
company provides a complete package of change office service management and its
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methodology and support. This will help the CMOS to gear up the impact and improve
their value. It is a private limited company. The public can sell and trade shares but
the company has limited shares, as it is a micro enterprise.
SME’s
The small business organisations have hundred employees and medium sized business
have below thousand employees. This kind of business will not have more than five
hundred employees working. Brightstarfinancial is a UK based company
(brightstarhub.co.uk, 2019). It is a private limited company, which supports the brokers
and helps them to make their life easier. The shares are sold and traded by the public.
Large organisation
Large business organization is an enterprise, which makes a lot of profit. The
organization has a huge number of workforces, which helps the company to achieve the
target on time. ASDA is an UK based retail company (asda.com 2019). It provides the
customers a huge variety of products in the supermarket. It also provides financial
service. This retail industry is a subsidiary. It can be a corporation, company or private
limited. This company is controlled by parent company. The shares are owned and
controlled by the parent company.
P2 Explain the size and scope of a range of different types of organisations
Public sector organisation
BBC is a public sector organisation (bbc.com, 2019).The headquarters is located at
broadcasting house in Westminster, London. The organisation is one of the oldest and
has largest number of employees in the world. There are 35,402 total numbers of
employees, which includes flexible, Part-time and fixed-contract staff. Royal charter
established BBC. It operates under the agreement with cultural, media, sport and digital
secretary of the state. BBC studios ltd brings a quarter of BBC’s revenue. It sells BBC
services and programmes internationally. In the year 2009, BBC received the Queen's
Award for Enterprise in recognition of its international achievements. John Reith
founded it in the year 1922. According to 2016 and 2017 statistics, the revenue was
around 4.954 billion. The products and services by the BBC are broadcasting, Radio
and web portal (Medawar, 2019).
Private sector organisation
Tesco a private sector is a UK based organisation (tesco.com, 2019). It is a
multinational retail company. The company produces various groceries and apparel
products. According to the gross revenues it stands the third largest company in the
retail sector in United Kingdom and ninth largest in the world. Jack Cohen founded the
company in 1919 the market capitalisation according to 2015 was £18.1 billion. Tesco
has expanded its business and the company now produces various clothes, toys,
books, financial services and others. Tesco has around 6800 shops all over the world.
According to the 2019 statistics, its revenue is around £63,911 million. The
headquarters are in Welwyn Garden City, Hertfordshire, United Kingdom. The
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companies name is also listed in London stock exchange. The net income according to
2019 is £1,320 million.
Voluntary organisations
Cancer research UK is a charity firm (cancerresearchuk.org, 2019), which works
towards social change in a particular area. It is a non-profit organisation. The company
aims at reducing the death rates from cancer. The motto of the company is “together we
will make a change”. It is the world largest voluntary organisation in cancer research
charity. The public funds the company. It raises money through legacies, donations,
community fundraising, retail, events and corporate partnerships. The company
receives the largest fund in the world. According to the 2015, statistics around 3,964
employees work in this organisation. There are around 40,000 volunteers in this
organisation. It was founded in the year 2002 and organisation is located in London.
According to the 2015 calculation the organisations revenue is around £634.81 million.
Micro organisation
Issoria a small organisation is a micro organisation. It provides CMO services. It also
provides supports and tools for change management office. It was founded in the year
2016. They analyze the needs of the customers and help the business organisation to
grow and develop. We believe that adaptive organizations of the future are enabled by
high impact change management offices now. The adaptive firms in future are believed
to enable high impact changes in the management offices. The company begun with
2000 employees and now it has around 5000 employees working in the company. The
stakeholders are the members the customers and people in the community.
SME’s
Brightstar financial is a small or medium enterprise, which operates in the United
Kingdom. It helps the brokers with their work. The company has won 73 national
awards. According to 2011, the company had already made over £3 bn in lending
across eight key disciplines. It is authorised by financial conduct authority.
Large organisation
ASDA is a British supermarket. The headquarters are in Leeds, Yorkshire. This
organisation was founded in the year 1949. Peter and Fred Asquith founded this
organisation. According to 2014 it was the second largest supermarket chain in the in
the retail sector. The products produced by this organisation are groceries and financial
services. It operates in around 633 countries. The revenue according to 2016 is £1,666
million. The number of employees working presently is around 165,000.
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LO2
P3 Explain the relationship between different organizational functions and how
they link to organizational objectives and structure. Functional organisational structure
The functional structure is responsible for organising the workers according to their
skills and knowledge. They are divided into various departments according to their
qualification. The specialized unit reports the top management from the functional
organisation. The functional department handles one aspect of service or product.
Information technology, marketing research and others are some of the units under the
functional department. The department has their independent functional structure, thus
it is also known as the silos. The worker under this department needs to interact with
each other for smooth functioning of the organisation. This organisational structure
helps the company or the firm to achieve the target on time with maximum profit. If
people with same experience and background are clubbed together then the efficient
results are received. The time utilised is less and there are less conflicts.
Figure 1: Functional organisational structure
(Source: Harper, 2015) Divisional organisational structure
The organisation plans the activities of business around market, geographical, or
service and group’s product. Europe or United States, commercial customers, the
obsolete green product line are organised by a company on the basis on divisional line.
There are three subdivisions under divisional organisational structure are the
Commercial division, Retail division and International division. This structure is effective
while making important decision at fractional level to react quickly to local status.
Divisional organisational structure works when an organisation has to look after various
regions, markets and products.
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Figure 2: Divisional organisational structure
(Source: Behmer et al., 2016) Matrix organisational structure
The combination of two or more organisation forms a matrix organisation structure. This
can help the other organisation to improve its market adaptations, readiness and
efficiency. This kind of structure works effectively for start-ups or SME’s. There are two
or more reporting line upwards to the bosses representing customer, product, region,
function and others. Often it can be a reply to the corporate silos (Wright et al,. 2017).
Figure 3: Matrix Organisational structure
(Source: Pakarinen and Virtanen, 2016)
Tesco being a large organisation operates using functional organisational structure.
It has various workers working under various departments. The employees maybe
differently skilled and works under various departments but for one organisation and it’s
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achieves its goal together. In the company all, the employees are divided according to
their qualification for efficient work and fruitful results.
Different types of organisation
The company has various departments, which helps the company to work smoothly and
effectively.
Human resource department- The human resource department is mainly responsible
for recruitment, training and development. There are various requirements of the
company especially efficient workers to achieve the target on time. The HRM
department advertises the requirements and recruits through various procedures.
Training and development is not necessarily for new employees. The employees are
trained according to the company’s requirement.
Finance department- This department is responsible to keep a record of all the
expenditure made by the company. The finance department is also responsible of
planning, organising, auditing and controlling companies finance.
Marketing department – This department is responsible for planning a proper strategy
for the proper buying and selling of goods. The marketing department is responsible to
study the market in-depth to make a proper strategy. The marketers also interact with
the customers to understand their needs. Understanding the customers helps the
marketing department to serve their customers effectively.
Logistic department
The logistic department is responsible for assimilation and distribution of products. The
department is responsible for supplying goods when needed and storing it safely. The
department is a link between effective production and consumption. The logistic
department looks after the proper packaging and delivery of the products (McDonaldand
Wilson, 2016.)
Interrelationship
All the departments in Tesco are interrelated. The marketing department has to carry
out various functions like advertisement and promotion. The department needs money
to carry out its function. The finance department helps the marketing department to plan
the expenditure so that the department can carry out its function effectively. The human
resource department helps the marketing department with better employees by
recruitment, training and development. The marketing department needs efficient
candidates for marketing the human resource department analyses the needs and fulfils
it on time. The logistic department helps the marketing department by delivering the
products on time (Fernie et al., 2018). The department also helps in keeping the track of
the products in the store. The logistic department helps the marketing departments by
delivering the products needed in the store. This department helps the finance
department with the product details. The logistic department helps the marketing
department with packaging and distribution. As Tesco is in the retail sector it needs to
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make it products and packaging attractive, thus the customer service department helps
the marketing department with creative ideas for effective marketing (Imrie, 2016)
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LO3
P4 Identify the positive and negative impacts the macro environment has upon
business operations, supported by specific examples
Elements Influences
Political Political factors that can affect the
organisation are tax rates, political
instability and others. The duty on import
can create problem for Tesco because
there are few inventory imports from other
countries like east Asia and china. Tesco
tax was the name proposed by the local
council to the tax on large-scale
supermarkets. The UK government
declined the proposal, as it would have
affected the organisation negatively. The
Brexit is another political issues and
challenges faced by the faced by the
supermarkets. This will raise the product
prices and affect the business drastically.
The customers would not be willing to buy
products in such higher prices thus affect
the supermarkets negatively.
Economical An important economical factor is cost of
labour. According to Chan et al. (2017),
2008 reports employees more than 25
years must get an increment of 4.4 on their
salary. Tesco had to pay millions for this
shift upwards. Tesco being the large
supermarkets provides huge opportunity
for employments. This affects the
economy positively. The annual wage bill
of the company is around GBP 4.5 billion.
If the cost of labour increases up to 1
percent, the wage bill would rise up to
GBP 45 million. The external factors also
affect the revenue of the company. Tesco
being the largest supermarket in the retail
sector it is still depended on UK market.
The market share is around 30 percent.
Social According to the recent study of markets,
the customers demand changes with the
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trend. Tesco has to keep a regular market
survey scheme where the marketing
department can interact with the
customers to understand their needs so
that the company can keep their loyal
customers happy (Lancaster and
Massingham, 2017). The company will
benefit a lot if it keeps their customers
satisfied. There are some other social
factors like the population growth, age
distribution, career and so on. Tesco being
the largest supermarket has created
various employment for the local people
and worldwide.
Technological Tesco had faced problems due to less
technological advancement in the
company. RFID technology was
introduced for better experience for the
customers. The customers will not face
problems related to the products. Tesco
has also improved on payment options by
introducing PayQuid where customers can
pay online and earn loyalty points (Taylor,
2016). The technological advancement
has helped the company to understand the
consumers need and has accelerated the
growth of the company (Bonetti et al.,
2017). The technological advancement
helped the company to maintain its brand
image.
Environmental Tesco has paid great attention towards
creating fewer wastes that would affect the
environment. This would keep the
environment clean thus creating fewer
problems from the government regarding
business. The UK government is very strict
with the environment. The company
encourages the customers to shop online
from their website This will keep the
environment clean and would not affect
the company’s sales. Tesco is working
towards using renewable resources.
Legal The company has strict legal laws against
any fraud or illegal activity in the
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