Business and the Business Environment Analysis: Tesco Case Study

This report examines the business environment, exploring different types and purposes of organizations, including public, private, and voluntary sectors, with a focus on their size and scope. It analyzes the relationships between organizational functions, such as human resources, marketing, and finance, and how they contribute to organizational objectives, using Tesco as a case study. The report also identifies the positive and negative effects of macro-environmental factors, like political and economic variables, on business operations. Furthermore, it conducts an internal and external analysis of Tesco, pinpointing strengths and weaknesses and how they interact with external macro-environmental variables. The report provides a comprehensive overview of business operations and external factors that impact a business.

Business and the Business
Environment

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
LO 1................................................................................................................................................3
P1. Different types and purposes of organisations.....................................................................3
P2. The size and scope of different types of organisations. .......................................................5
LO 2.................................................................................................................................................6
P 3. Analysing the relationship between different organisational functions and the way they
link to organisational objectives and structure ...........................................................................6
LO 3 ................................................................................................................................................7
P4. Identifying the positive and negative effect of macro environmental factors on business
operations....................................................................................................................................7
LO 4 ..............................................................................................................................................10
P5. Internal and external analysis of Tesco forb identifying strength and weakness. .............10
P6. Analysing the way strength and weakness interrelate with external macro environmental
variables....................................................................................................................................12
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Business environment can be defined as the sum of internal as well as external forces
which effects business. The few internal factors which can effect the business operations as well
as decisions are employees performance, working conditions, availability of resources etc.
External factors which might adversely affect the performance of organisation are changes in
social, political, economic factors. It is very much important for companies to address both
internal and external variables as these elements can great effect on its competitive strength.
The study will emphasize on analysing the legal structure and objective of different types
of organisation. It will also have focus on identifying the relationship between different
organisational functions. The positive and effect on changes in internal as well as external
factors on business operations in context of Tesco will be highlighted in the report. In
assignment, the focus will on analysing the way strength and weakness interrelate with external
macro variables.
LO 1
P1. Different types and purposes of organisations
Organisation can be defined as social unit of people which is structured as well as
managed in systematic manner for meeting the needs as well as pursuing specific goals. It is also
recognised to be as entity which performs the commercial practices in order to achieve specific
objective. An organisation consists of group of people those who work together for
accomplishing common objectives. It is entity which sells goods or services in order to achieve
set target. An organisation also consists of structural framework which defines the roles as well
as liabilities of an individual working in a company. Each and every organisation is set up for
accomplishing specific purpose. The different types of organisations and their purposes
Public organisation : Such type of organisation are owned, controlled and management the
government in the nation. The main purpose of public organisation is to provide the different
services to people in the nation. Transportation, electricity, education etc. are some services
which are offered by such types of enterprises. Revenue earned by government is generally used
for the purpose of fulfilling the business need of public sector firm. Some public sector
organisations are Tesco, child support agency etc.
Private organisation : These type of organisations are privately owned and managed. The
investment in such type of firm are solely done by business owner. An entrepreneur is a person

who is mainly liable for profit and losses. New Look, Nexus, Deloitte are example of few private
sector organisation. Main purpose of private enterprise is to earn higher revenue and profit. In
addition to this, private firms also intends to increase sales and expand business. According to
the company Law in UK, private companies can not sell its shares to public. The private firms
can be further categorise into different categories These are :
Sole proprietorship: It is the type of organisation of which an individual is owner. Business
owner of sole proprietor companies have unlimited liabilities. Objective of sole proprietor
companies is to earn high profit. Example of sole proprietor enterprise is Kurt Gieger, it is
basically a popular brand. Kurt Gieger company has simple organisational structure important
business decisions especially related to the investment are made by business owner.
Partnership: Such types of organisations are owned, controlled and managed by two or more
people. These type of companies are generally established with the objective of earning higher
revenue as well as profit. The partnership organisation can also be classified as general, limited
and limited liability partnership. For instance, John lewis is a partnership enterprise In United
Kingdom.
General partnership :Such types of firms are generally owned by two or more people in order to
achieve common goal. Both partner in such type of enterprise are equally liable for profit and
losses. The purpose of such type of firm is to earn high profit and to lower the business risk.
Limited partnership : In such types of partnership enterprise, liability of each partner is restricted
to some amount of investment in business.
Limited liability Partnership : In such type of organisation individual partners are not responsible
for the unethical activities of other partners. The main objective of establishing such type of
enterprises is to gain tax advantage
Corporations:The main purpose of such enterprise is to earn profit. Such types of organization
have separate legal identity from its members, it is the type of company which is owned by one
or more people. The example of corporations are Vodafone, Lloyds etc.
Voluntary organisation : Such type of companies are generally consists of volunteers . These
are those people who form group especially for accomplishing common goals. Social welfare is
the main purpose of voluntary organisation. National trust is basically a British foundation
which has been established for Welfare of society.

P2. The size and scope of different types of organisations.
Size as well as scope of different types of organisations are:
Private limited Enterprise :Such types of companies generally have small business. Private
limited firms consist of 50 shareholders. According to the legislations in UK, private limited
organisation can employees minimum two or maximum two hundred workers. These enterprises
are managed by an individual. Private limited firms have separate identity from that of an
entrepreneur.
Example of private company is John Lewis. The different products which an
organisations sells are clothes, furniture, cosmetics, food etc.
Size and Scope : There are approx. 88900 employees working with John Lewis
organisation. In addition to this, the average operating revenue of John Lewis is 11 billion.
Legal structure of organisation : John lewis company is owned by two partners.
Public limited firms : Size such type of organisation is completely depended on the services
offered by companies as well as on the vision of the state.. According to the norm in UK, it is
very much essential for public limited companies to employees at least seven workers. Such
firms has right to employ maximum number of employees. The legislation in UK, states that it is
mandatory for public limited enterprise to hire minimum two directors. In addition to this
business entity can issues its share to public (Kopnina and Blewitt, 2018). NHS is a public
limited company. Primary services are generally offered by such types of enterprises.
Size and scope of company : There are approx. 1.4 billion of workers are working
worldwide for NHS.
Legal structure: It is the executive as well as non-executive director in NHS those who
manages business. In addition to this, non-executive directors are appointed by cabinet sectary.
Voluntary organisations: Such types of organisations generally have turnover in multi-million
pounds. Such types of companies have large business operations. Cancer research in UK is
basically a Voluntary organisation in United Kingdom. The core business of Cancer research is
to identify the new medicines as well as therapies for cure of deadly disease such as Cancer.

Legal structure of an enterprise: There approx. 3964 employees are working in the
Cancer research. In addition to this, cancer research voluntary organisation consists of approx.
40,000 volunteers those are working for firm.
Size and scope of companies: Voluntary organisation such as cancer research are
managed by trustees. The trustees are the stakeholders those who are mainly liable for making
sure that all the norms are being followed. In addition to this, trustees only have right to make an
important business decision.
LO 2
P 3. Analysing the relationship between different organisational functions and the way they link
to organisational objectives and structure
Tesco is basically an American multinational organisation which operate business in
retail sector. Business entity has achieved leadership position in retail industry. It is among the
ninth largest retailed in the world in terms of revenue. An organisation has recently changed the
format of its store. Tesco has functional organisational structure. There are number of
department which performs different functions in order to support an organisation in
accomplishing desired business goals. In addition to this, every department in Tesco consists of
manager those who are mainly liable for performing different activities within set budget. Clear
line of authority is considered to be as one of the important benefit of functional organisational
structure. The different functional units are finance, market, sales, human resource, purchase,
accounts department, operational functional unit etc. It is the organisational chart of Tesco,
which indicates its organisational structure (Begg, Van der Woerd and Levy, 2018.).
In context of Tesco, Each and every department is interlinked with other functional division
within an enterprise.
Human resource department:It is the functional unit in Tesco which works closely with
the accounts as well as finance department. The human resource department coordinate with the
finance department in order to analyse the financial performance and to determine the funds
which can be used for providing the incentive to employees. In addition to this, human resource
department in Tesco also works closely with accounts department in order to make sure that the
salaries of employees are processed and rights amount of money are being transferred to their
bank accounts. Finance department in Tesco support human resource manager in formulating the

incentive system for positively influencing employees to make their significant contribution in
accomplishment of desired goals.
Marketing department: This functional division in Tesco closely work with operational
unit in an organisation The marketing team in Tesco through research gathered all important
information about customer to operational functional unit in order to help them in identifying the
needs as well as demands of clients. Marketing team in Tesco is also interrelated with the sales
department (Hamilton and Webster, 2018. ). As sales functional unit prepares the report of sales
of products or services which are made by business entity during the particular financial year
which is used by marketing department for analysing the business performance. Sales and
marketing department in Tesco works closely with each other in order to assist an organisation in
earning higher revenue and profit which is main business goal of Tesco.
Finance department: It is the functional unit ion Tesco which prepares the budget for
different deportment within an organisation. Both accounts and finance department are inter-
related. Finance department provides the information about the funds which are allotted by them
to different functional division in firm. Accounts department records all the business
transactions including the expenditures done by different units (Makkonen, Aminoff and
Valkokari, 2018. ). Finance and account department in Tesco works together in order to help
Tesco in improving financial performance. These functions units also supports business entity in
minimising the operational expenses.
LO 3
P4. Identifying the positive and negative effect of macro environmental factors on business
operations.
Pestle analysis is considered to be as one of the best technique for identifying the external
factors which can influence business plans and operations. In context of Tesco, The different
external variables which can have great effect on business operations of an organisation are:
Political factors : These factors are changes in the political conditions , introduction of new
regulation by political parties related to retail sector or specific business activity have direct
influence on business operations of TESCO. In context of UK, due to brexit there was political
unrest in the country which has adversely effected the retail industry. In addition to this, political
instability in the nation has created the hindrance in the routine business operations of Tesco.

As Tesco imports raw material from other nation, Import duty imposed by political parties in the
nation has adversely effected organisation.
If in case UK agrees to leave the EU then in such case the Tesco does not have to pay tax
to European Unions which might lead to increase in saving.
Economic factors : Increase in Tax, inflation, customer income, economic condition of the
country etc. Changes in the economic variables has directly as well as significant effect on the
profitability as well as financial performance of income. It also has great influence on the
financial plan of an organisation. In context of Tesco, inflation in prices of products lead to the
decrease in sales and profitability of Tesco. In addition to this, increase in lobar cost has lead to
the additional expenses for business entity.
Decrease in the exchange rate has provided Tesco with transactional benefit. In addition
to this, the positive effect of recession on the Tesco is that during the time of the financial crises,
people prefer to eat food prepared at home which has provided groceries retailer such as Tesco
an advantage to increase its output (Beatty, Samuelson and Abril, 2018. ).
Social factors: These variables includes population, changes in needs as well as preferences of
customers, trends, lifestyle etc. Changes in the social variables which has direct as well as
significant effect on the demand for the goods or services offered by firm. Increase in ageing
population is the major disadvantage for Tesco, as older people prefer mainly the food prepared
at home. In addition to this, increase in health consciousness among customer has lead to the
decrease in the demand of food item offered by Tesco. Increase in spending by customer has
assisted Tesco in increasing sales and profitability.
Technological factors: It is basically a advancement in Technology. Changes in the
technological factors have direct as well as significant effect on the quality of business
procedures and products or services. It is the advancement in Technology which has supported
Tesco in improving the quality of its products as well as business operations. Advancement in
Technology has assisted Tesco in increasing operational efficiency as well as helped business
entity in increasing productivity. It has supported firm in providing more services as well as
facilities to customers. At the same time Advancement in Technology has given rise to intense
competition in retail sector due to which Tesco is facing difficulty in maintaining its
concentration on core business functions.

Legal factors: It includes amendment in Laws which has significant effect on the business
plans , operations and procedures of firms. In context of Tesco, due to changes in Employment
legislation, an organisation has to face legal issues which has adverse effect on its business
performance. Few monetary policies implemented by government in UK has provided Tesco an
ease in getting the funds for fulfilling the needs of business (Yu, Ramanathan, Wang and Yang,
2018. ).
Environmental factors: It includes changes weather conditions, level of competition in
industry, amendments in environmental legislation etc. In context of Tesco, changes in the
environmental factors have less effect on the business operation of Tesco, as business entity is
already using the Eco- friendly material for packaging goods.
Due to the continuous changes in environmental factors, Tesco has to change it business
policies . In addition to this, intense competition has lead to the distraction of Tesco from the
core business activities which has adversely effected the business performance of organisation.

Illustration 1: PESTLE ANALYSIS
Source: (Scanning the Environment: PESTLE Analysis, 2016)
LO 4
P5. Internal and external analysis of Tesco forb identifying strength and weakness.
Swot analysis is one of the effective technique which is generally used by companies for
assessing the internal, weakness, opportunities and threats. It is the strategic technique which has
helped TESCO manager in developing strategic plan.
 Strength :
 An organisation has won many awards
Weakness :
 Changes in the economic factors have

for its retail excellence.
 It has different retail formats which
helps in making appeals to local as well
as cultural needs.
 Tesco has significant cash reserves.
 Business entity offers wide range of
products or services to customers.
 Brand equity is considered to be as
biggest strength of Tesco.
 An organisation has been successful in
gaining the brand recognition in the
market.
 Tesco utilises advance technology for
performing different functions. It has
assisted an enterprise in increasing
operational efficiencies.
 Highly talented and skilled workforce
 An organisation by launching a club
card scheme has been successfully in
retaining the profitable customers
(Bertram and Chi, 2018).
negative effect on the financial
performance of company.
 Increase in the level of competition has
lead to the price wars which has
negative effect on the profitability of
business entity.
 Lack of depth knowledge about the
market.
 Retail outlets of Tesco are not set up to
operate as specialist retailer in
particular area of goods which can be
capitalised on by other small companies
in retail industry.
Opportunity :
As Tesco has good brand image in the market,
an organisation can expand its business at
international level.
As an organisation has wide customer base, an
enterprise can enter into new market.
By utilising the advance Technology, Tesco
can develop innovative products, as this tactic
will support company in increasing sales and
Threats :
 Increase in level of competition in retail
sector.
 Rise in cost of raw material can have
negative effect on the profitability of
organisation.
 Increase in health consciousness among
people can lead to the decrease in
demand for the goods offered by

profitability. Innovation strategy will provide
firm an ease in attracting more number of
customers.
Tesco can expand business by acquiring the
other companies.
Business entity has an opportunity to form
strategic partnership with other firms, as it will
help them in reducing the adverse effect of
competition on business performance.
TESCO.
 Economic recessions in the nation can
have negative effect on the financial
performance of TESCO.
P6. Analysing the way strength and weakness interrelate with external macro environmental
variables
Changes in the external factors also have direct effect on the competitive strength of
TESCO. As Tesco has good reputation in the market, it is very much crucial for an organisation
to comply with all norms. . And if company fails to comply with the law, it can have adverse
effect on the image of the company.
External factors/ Internal
factors
Strengths:
 The biggest strength of
Tesco is that it has
capture wide market
share in UK.
 An organisation has
strong financial
performance.
 Other major strength of
Tesco is that it has
established supply
Weakness :
 Decline in cash flow
 Poor Corporate social
responsibility and
community impact.
 High reliance on UK
market.
 Reluctant to follow
market changes.
 Highly exposed to

chain network.
 An organisation has
team of highly skilled
and talented workforce.
 Club card scheme
launched by Tesco has
helped business entity
in gaining the customer
loyalty.
 Tesco has online
channel through which
it sells goods or
services to wide
number of customers.
 International
diversification.
macro economic
problem.
Opportunities Strength and opportunity :
Tesco can increase its sales and
profitability by including the
organic food item in its product
portfolio.
Tesco can either acquire small
firms or can merge with other
organisation.
Tesco can implement
diversification strategy.
Weakness and opportunities
As Tesco is highly relies on
UK market, an organisation by
expanding business in Asian
countries can increase market
share.
Business entity can
diversified its business in
other sectors, as this will
support firm in escaping from
the intense competition.

Tesco can foster business
growth b y expanding business
in n on -food sector.
An organisation can establish
its retail stores near city
centres , as by applying this
tactics business entity will get
an ease in attracting the target
customer group.
Threats Strength and Threats : As s
has achieved leadership
position in industry, there is
high level of threat that
competitors by taking the
strong actions will pull down
an organisation (Young,
2020).
As company has strong
financial position, competitors
by reducing the prices of
products can negative effect the
profitability of Tesco.
Weakness and threats : The
biggest cause of loss of sales
for Tesco is the growth of
discount and convenience
stores, an alternative area of
focus for Tesco could be to
open more convenience stores
of its own, and close some of
its supermarket outlets
Opportunities : An
organisation by participating in
the champaign for social
welfare can enhance its image
in the market.
Threats :

CONCLUSION
It has been concluded from the assignment that changes in external factors have direct
effect on the business operations of companies. The other fact which has been found from the
study is that an effective coordination as well as inter relationship between different functional
unit is very much essential in order to drive an organisation towards accomplishment of
objectives. It has been concluded from the report that there are different types of organisation
and they all established for accomplishing specific purpose. The other fact which has been
discovered is that size as well as scope of public firm is completely based on the services
provided by them and also on vision of state.
It has been recommended that manager in an enterprise is required to develop suitable
plan in order to provide an appropriate response to changes in external factors. In addition to this,
an organisation is required to provided an appropriate training to employees, so that complex
situation which has been occurred due to changes in external factors can be handled in
systematic manner.

REFERENCES
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ONLINE :
Scanning the Environment: PESTEL Analysis. 2016 . [Online]. Available through
:<https://www.business-to-you.com/scanning-the-environment-pestel-analysis/> .