Analysis of Tesco: Business Environment and Organizational Structure

This report provides a comprehensive analysis of Tesco's business environment. It begins by outlining the types, size, and scope of organizations, differentiating between public, private, and voluntary sectors, with Tesco used as a prime example of a private sector organization. The report delves into Tesco's internal analysis, utilizing the VRIO model to assess its resources and capabilities, and then moves on to an external analysis, including macro-environmental factors. The report explores the interrelation of internal and external elements. It examines Tesco's organizational structure, legal framework, and the company's approach to maximizing profits and maintaining its market position. The report concludes by summarizing the key findings related to Tesco's business operations and its strategic positioning within the retail industry. The report utilizes SWOT and VRIO analyses to evaluate Tesco's strengths, weaknesses, opportunities, and threats, as well as the value, rarity, imitability, and organization of its resources.

BUSINESS AND BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
TYPES, SIZE AND SCOPE OF ORGANISATIONS................................................................3
Purpose of organisations:.............................................................................................................4
Public, private and voluntary sector organisations:.....................................................................5
PART 2............................................................................................................................................6
Internal Analysis of Tesco...........................................................................................................6
External Analysis.........................................................................................................................8
Interrelation of the external as well as internal factors..............................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Macro environmental features in the organisation deals with the issues of business which
include economy, socio-cultural, environment, laws and regulations technology and politics.
Macro environmental factors cannot be excluded because they contain factor that are equally
important in contributing towards the growth of the company. Macro environmental features are
such that the business will not have any control over the factors that dominate the organisation
(Shafie and et.al, 2018). Macro environmental features affect the functionality and decision-
making process in the organisation. The entire report deals with the macro and all the factors that
include in the business environment of the company. The chosen company in this regard is
Tesco. This is one of the largest retailers in the United Kingdom which operates has number one
grocery store all over. It produces and sells goods that are of very important to all the customers
and the consumer. Tesco provides groceries that are easily usable to all the domestic purposes
and also the cosmetics that are essential for the consumers. The report is in regards to the
company Tesco which determines types, size and scope of organisations along with the legal
laws.
PART 1
TYPES, SIZE AND SCOPE OF ORGANISATIONS
There are different categories in which the organisational structures operate. There might be
multiple tiers between the entry level workers and top managers of the company. Sometimes
there can be few levels between employees and Management. No two companies can operate
upon the same theme. In the same manner there are no companies that are running identically in
the marketing world. There might be few coincidences where the companies come across having
similar organisational structures within the same industry performing different activities and
have different management that are adopted. To get adapted to a particular structure is to
maintain a hierarchy and the positions of the company based on the atmosphere of the
organisation in which the company is operating (Moullin, 2017). The different types of
organisations are as follows:
Flat organisation:
In a flat organisation there are no electric measures that are pressurized upon the employees
senior manager and executive. In this type of companies there is an equal level of treatment that
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is given to all the hierarchy of the organisation. Organisations that manage flat organisation
structure are described as self-managed. They have an idea behind this organisational structure to
reduce Bureaucracy and empower employees to make decisions. This can create solution to the
problems that arise within the company. This type of structure typically works best for small to
medium sized companies this structure cannot be applied to the multinational companies and that
is working with the decentralized decision-making.
Functional organisation:
Functional organisation structure is adopted by the companies that will operate the firms
operation based on specialist. There is a particular in charge that is allotted for a function in the
organisation. It is more like an organisation that is composed of sales, department human
relations and marketing department. Here every employee is treated to be accountable to a
particular superior that is allotted to take part in the functions of the company.
Divisional organisation:
Divisional organisation structure is everything about the market product or specific group of
consumers. They might operate under different entities but every form of this particular
organisation will come under a same brand. The divisional organisational structure applies to the
company Tesco since there are many small stores that are being operated under the single
management. Every store of the company is said to be allotted with different managers that will
look after the customer criteria.
Matrix organisation:
Companies that are adopting this particular organisation type are said to be having more than one
line of reporting manager. In this type of organisation, the employees must report to more than
one single Boss (Kornilakis, 2020). The two chains of command in this organisational structure
are functional and project managers (Parrado and et.al, 2020). For companies that are dealing
with large scale projects this type of organisation will be best suitable.
Purpose of organisations:
Every organisation is set to follow a basic structure in order to not to end the particle operation
that it is carrying on in the industry. There are many targets that are being achieved by the
organisations based on its structure and organisational management facilitates this. The purpose
of every structure in an organisation is to work towards achieving the goals that are stipulated.
All the members of the organisation are clubbed together in order to evaluate functions and find
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means to achieve them. The purpose of organisations is to ensure smooth and efficient
functioning. The organisation activities will help to reduce time and the efforts that are being
applied on the tasks that are to be performed by the company. Every person might be aware of
the responsibilities that are being given to them.
Tesco's purpose is based on achieving aims and objectives that the company adopted. The aims
and objectives of Tesco revolve around maximizing the profits. Tesco being one of the largest
retailers with regards to groceries aims at providing goods and services that are cost effective and
are affordable to the general public. In order to maximize the sales, the company adopted grow
and maintain measure that the number of retailers in the UK fail to adopt. In order to win across
many competitors in the particular field that Tesco is operating, the retailer maintained its terms
and policies of maximizing profits which made it remained as a market leader.
Public, private and voluntary sector organisations:
Private sector organisations:
The private sector organisations are those that are established upon the funds that are invested by
the individuals or groups. These individuals or groups invest upon the form to receive greater
capital as a return in future. It is to be noted that organisations that come under private sector are
said to be profit driven organisations.
Public sector organisations:
The public sector organisations are generally run by the government of that particular state where
the funds are drawn from the public money. The services that are offered by the public sector
organisations are primarily driven by the requirement of the service which benefit the whole
society.
Voluntary sector organisations:
The voluntary sector organisations are established by an individual or a group of people but are
not funded by the state money. These organisations are considered to be non-profit organisations
and non-governmental. There might be gaps in these particular organisations, with respect to the
market and that the private and public sectors have failed to fill.
Tesco is one of the best examples for a private sector organisation. Earlier the company was
established as a small business only to sell goods and was not in an idea of expanding all over.
Based on the services that are being offered by the company there came an expansion of the store
all over United Kingdom. At present Tesco has 3751 branches all over the United Kingdom and
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a 70 million customer base. The major tool to develop the organisation as a number one private
sector organisation is this SWOT analysis. Tesco maintained its SWOT analysis in order to
determine the strengths weaknesses opportunities and threats that are related to the retailers in
the field that Tesco is operating. With this SWOT analysis the company maintains the sales by
modifying the drawbacks every now and that which made it one of the best private sectors. This
four-dimensional decision-making process enabled Tesco to conquer the myths that are
associated with being the best retailer by providing the products that are cost effective. The
purpose of SWOT analysis is to maintain the consistency in the prospects of growth.
Legal structure:
The legal framework in any organization is defined as the entity that will provide a safety to all
management decision making processes and employees safety. In order to determine the
competitive advantage of a particular company and more of a retailers the legal procedures are to
be followed and to be incorporated.
The legal structures of the organisations that with regards to the private sector organisations are
not in the eye of the loss yet there are entities that determine and preside over the private sectors.
The different legal forms that are associated with the organisations are including unincorporated
corporations and limited liability companies. The other legal entities that are associated with the
organisations include non-profit franchises, government owned corporations and cooperative.
Tesco being one of the largest retailers, a proper legal structure will make the business
flourishing. The major legal structural component of Tesco is corporate governance. In this type
of governance, the people that are present in the organisation deal with the shareholders. This
dealing is to ensure that Tesco is receiving and achieving the strategies that the shareholders
want them to achieve. The licensing team of the organisation will make sure to ensure that every
store has a licence and the legal entities that are required.
PART 2
Internal Analysis of Tesco
Internal analysis is basically examining the internal components whether tangible or
intangible which includes the assets, resources and processes. It helps the company in making
decisions accurately by identifying the areas of growth which helps in developing and
implementing the business strategies and plans. There are various models which are used to
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perform the internal analysis of the companies (Fatricia, 2017). Tesco being a multinational
retailer in UK needs to analyse the internal factors in order to examine the external factors
further.
VRIO model can be used for looking at the internal resources in order to analyse whether they
help in gaining competitive advantage or not. VRIO stands for valuable, rare, imitable and
Organisation. This also helps in uncovering the sustained competitive advantage.
Resource
Capabilities
Valuable Rare Imitable Organisation Competitive
advantage
Positive
market
reputation
Yes Yes Yes Yes Long term
competitive
advantage
Leadership
team
Yes Yes No Yes Strong
competitive
advantage
Awareness of
brand
Yes Yes No Yes Sustainable
competitive
advantage
High
customer
rating
Yes Yes Yes Yes Realized
sustainable
competitive
Valuable: This describes that whether the company is offering any resource which adds value for
the customers. The financial resources of Tesco are highly valuable as it helps to invest in the
raised external opportunities along with its differentiated local food products. The trained
employees of the company and the patents are also much valuable as these help in increasing the
productivity as well as selling its products without competitive interference.
Rare: This deals in the resources or capabilities which are scare and are hard to find. The
financial resources of the company are also rare. The employees of Tesco are also rare resource
as these are highly skilled and trained. The patents of the company are also rare resource as they
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are not easily available and also they are not possessed by the competitors (Peng, 2018). Tesco’s
distribution network is also rare as a higher capital is required by the competitors to get a better
distribution network as compared to Tesco.
Imitable: This describes the ability to duplicate the resources of the organisation. The financial
resources of Tesco are gained by much prolonged profits which will take time for its competitors
to achieve which makes this imitable. The employees and the local food products are not costly
to imitate. On the other hand, the patents of the company are difficult to imitate and there are no
laws made for imitating the patented product. The distribution system is also very difficult as
well as costly to imitate.
Organisation: These deals in the systematic management systems, structures, processes and the
culture for capitalisation on resources. The financial resources of Tesco are organised for
capturing the value and are strategically used at the right placed which helps in making use of the
opportunities and minimizing the threats (Thuku, 2019). The distribution network of Tesco is
also organised as it helps the company to reach the customers by providing the products to all the
outlets.
This is how, this can be evaluated that the distribution network and the financial resources helped
in providing the sustained competitive advantage to the company. Competitive parity exists for
the local food products. Patents are considered to be source of unused competitive advantage.
Besides all these, Tesco’s structure of cost and R&D provides competitive disadvantage.
External Analysis
This is also known as environmental analysis as it helps in analysing the impact of the
macro-environmental factors on the business operations. Most of the companies perform this to
ensure that they can easily adapt to the changes and continues to get success in the emerging
industry. Tesco being a market leader in the retailer industry of UK performs its operations in
many countries across the world. So, it is necessary for the company to perform the external
analysis. PESTLE analysis is considered as the best and the most effective model to analyse the
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external environment in which the country operates (Zhao and et.al., 2018). The positive and the
negative impacts of these PESTEL factors on the Tesco operations are as follows:
Political: These factors include the current and impeding legislation, tax rates, political
instability, economic condition of the country etc.
Positive: When the country is politically stable, then it gives various benefits to the company as
the company gets various opportunities for carrying out trade. There are various taxes imposed
on the company which gives the opportunity to the company to be in the safe and stable zone by
depositing all the taxes. This also helps in ensuring the safety of products and compliance
(Mahadevan, 2019).
Negative: Brexit is the biggest change which impacted the trade and supply operations of the
company. There were various restrictions on the trade and supply due to Brexit which decreased
the sales of the company. The tax policies also changed which impacts the company’s overall
profitability.
Economic: These factors are decided by the financial stability of the company which changes
frequently. These factors majorly affect the sales, revenue, profit and distribution in the
company.
Positive: The economic stability in the country affects the company positively as the pricing
strategy of the company is premium. Tesco needs to adapt to the economic changes and needs to
change its pricing strategy accordingly.
Negative: When the country faces financial crisis, then the people cannot afford the products and
services of Tesco. This decreases the profitability of the company. If the economic policies of the
company changes then there are additional costs incurred to the company which are massive.
Social: These factors include the demands of the customers, societal trends, cultural factors etc.
These affect all the departments of the company especially the production.
Positive: The Company gets various opportunities to bring innovation and advancement by
considering the demands of the customers. They also get various new ideas like the people of
UK started preferring organic food as they became health conscious.
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Negative: The Company need to shift its attitude towards the organic products for satisfying the
customers. This also led to decrease in the overall profitability (Tama, 2017).
Technological: These include especially the technological advancement which the company
needs to adapt.
Positive: The online shopping helped the company to increase the customer base as it helped in
reaching the customers which was impossible to reach in person and this also made the processes
very easy for the employees which saved a lot of time.
Negative: This also leads to large investment in making use of advanced technologies.
Environmental: These factors lay emphasis on the initiatives which are taken by the companies
to protect and preserve the environment and to ensure that they impact the environment
positively.
Positive: These factors create awareness in the company and the customers for protecting the
environment and to take steps such a remove and reducing the use of plastics, reducing the
overall waste from the company.
Negative: The Company has to make many initiatives which include changing of products and
reducing the waste which requires proper time and capital (Walls and Barnard, 2020).
Legal: These include the laws, legislations and the government policies along with the local as
well as international laws.
Positive: The company if follow the laws and policies of the government can easily increase its
goodwill as it helps in creating trust of the customers in the company and its products. This helps
in smooth going of the functions.
Negative: The allegations imposed on Tesco destroy the reputation of the company. Once the
credibility of the company is gone then it becomes quite expensive to get back to the normal
position.
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Interrelation of the external as well as internal factors
In order to analyse the interrelation between the internal and external factors which
affects the operations of Tesco, TOWS matrix can be made which helps in getting deeper
insights about the strategic choices faced by the company (Richardson, 2019).
Strengths Weaknesses
Opportunities  Increase marketing.
 Increase social media
presence
 Develop environment
friendly products.
 Property’s finance
ownership at low
interest rate in order to
own more properties.
 Increase the payrolls
and incentives to the
employees which helps
in decreasing the
turnover of employees
and increasing the
morale of work.
Threats  Use the strong
distribution network to
compete with the
competitors.
 Using strong financial
position for investing
in the intellectual
property rights
(Tonelli, M. and
Cristoni, 2018).
 Making use of
innovative teams so
 Making more
investments in R&D to
gain competitive
advantage.
 Providing the
incentives for
increasing the
engagement of
employees.
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that cheaper
alternatives can help in
recuing costs.
This is how; the internal strengths and weaknesses can be interrelated with the external
opportunities and threats. This will help the companies like Tesco to make strategic decisions.
These must be coordinated by all the departments of the organisation such as marketing, finance,
operations, logistics, human resource etc.
CONCLUSION
The above report concluded the various types, sizes and scope of the organisations which
included the private, public and voluntary sectors along with the legal structures. This was
followed by describing the interrelationship of the different functions in the organisation and the
ways in which they link with the organisational structure. The report also focussed on one of the
largest retailer company in UK, Tesco. The internal analysis of the company was done using
VRIO model and through this the external analysis was done by using PESTEL analysis. Then,
the interrelationship between the internal and external factors was done by using TOWS matrix.
This is how; the impact of these factors on decision making was highlighted by giving strategic
decisions.
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REFERENCES
Books and Journals
Fatricia, R.S., 2017. STRATEGIC ANALYSIS OF TESCO SUPERMARKET. Jurnal
Manajemen Terapan dan Keuangan. 6(2). pp.69-86.
Kornilakis, 2020. On the Legal Structure of Digital Commons. European Company Law. 17(4).
Mahadevan, K., 2019. TLP for Strategic Management 2019-2020.
Moullin, 2017. Improving and evaluating performance with the Public Sector Scorecard.
International Journal of Productivity and Performance Management.
Palmer, 2005. Retail multinational learning: a case study of Tesco. International journal of retail
& distribution management.
Parrado and et.al, 2020. The impact of publicness on the performance of professional services:
Do private sector organizations perform better?. Public Policy and Administration,
p.0952076720977616.
Peng, S., 2018, November. The Status and Countermeasures of Rural E-commerce in Shandong
Province Based on SWOT Analysis. In 2018 International Conference on Economy,
Management and Entrepreneurship (ICOEME 2018) (pp. 197-199). Atlantis Press.
Richardson, N., 2019. Sustainable marketing planning. Routledge.
Shafie and et.al, 2018. Effects of organisational structure on social value: Mediating role of
financial performance. Management & Accounting Review. 18(3). pp.1-30.
Tama, S.K., 2017. Export opportunities and obstacles of Bangladesh’s RMG sector: a case study
on Aman Textile Ltd.
Thuku, N.W., 2019. Effect of value chain management practices on peformance of medium and
large scale retail outlets in Nakuru County, Kenya (Doctoral dissertation, Egerton
University).
Tonelli, M. and Cristoni, N., 2018. Strategic management and the circular economy. Routledge.
Walls, C. and Barnard, B., 2020. Success Factors of Big Data to Achieve Organisational
Performance: Theoretical Perspectives. Expert Journal of Business and Management.
8(1).
Zhao, J.K. and et.al., 2018. Research on the Development of Little Red Book—By Adopting
SWOT Analysis. DEStech Transactions on Social Science, Education and Human
Science, (amse).
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