Impact of Business Environment on Tesco: An In-depth Analysis

This report provides a comprehensive analysis of the business environment, exploring various organizational types such as public, private, and voluntary sectors, along with their legal structures. It delves into the size and scope of different organizations and examines the relationship between organizational functions, objectives, and structure. The report identifies the positive and negative impacts of the macro environment on business operations, using specific examples. Furthermore, it conducts internal and external analyses of Tesco, a leading multinational retailer, to identify its strengths and weaknesses and how these factors interrelate with external macro factors. The report concludes with an evaluation of the changing business environment and its implications for Tesco, providing valuable insights into the company's operations and strategies.

Running head: BUSINESS AND THE BUSINESS ENVIRONMENT
BUSINESS AND THE BUSINESS ENVIRONMENT
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1BUSINESS AND THE BUSINESS ENVIRONMENT
Table of Contents
UNIT 1.................................................................................................................................2
Introduction..........................................................................................................................2
LO 1.................................................................................................................................2
1. Explain different types and purposes of organizations; public, private and voluntary
sectors and legal structures..........................................................................................................2
2. Explain the size and scope of a range of different types of organizations..................6
LO 2.....................................................................................................................................8
3. Explain the relationship between different organizational functions and how they
link to organizational objectives and structure............................................................................8
LO 3...................................................................................................................................10
4. Identify the positive and negative impacts the macro environment has upon business
operations, supported by specific examples..............................................................................10
LO 4...................................................................................................................................14
5. Conduct internal and external analysis of specific organisations in order to identify
strengths and weaknesses..........................................................................................................15
6. Explain how strengths and weaknesses interrelate with external macro factors of the
business Tesco operates.............................................................................................................18
Conclusion.........................................................................................................................19

2BUSINESS AND THE BUSINESS ENVIRONMENT
UNIT 1
Introduction
An organization is generally organized by group of individuals with distinctive aims and
purposes such as business or public service. There can be witnessed a certain surrounding or
situational contexts whereby business enterprises execute their operations which is further
regarded as business environment which essentially comprises an amalgamation of certain
external as well as internal factors. However, these factors have the propensity to impact each
other and further function in accordance in order to influence the business strategy1. Tesco, on
eof the leading multinational grocery and merchandise retailer organization has evaluated the
change in the business environment in the globalized era. The paper will aim to evaluate the
positive and negative impact on macro environmental forces by further shedding light on the
internal and external analysis of the company. In addition to this, the paper will analyze the way
strengths and weaknesses of Tesco correlate with its external macro forces.
LO 1
1. Explain different types and purposes of organizations; public, private and
voluntary sectors and legal structures
Private sectors are generally owned by private individuals or groups whereby the
primary purpose of the organizations is to generate revenues and further create profits.
1 Carroll, Archie, and Ann Buchholtz. Business and society: Ethics, sustainability, and stakeholder
management. Nelson Education, 2014.

3BUSINESS AND THE BUSINESS ENVIRONMENT
Furthermore other private sector business purposes intend to include further development with
the elevating market share and maximising sales2. However by contrast, establishment which is
part of the state serve as element associated with the public sector whereby non-profit
associations are referred as a vital part of the voluntary sector.
The primary types of businesses engaged in private sector are:
 Sole trader- Sole traders is recognized as one of the most universal type of trade
ownership and thus is initiated in a broad variety of activities such as electronic work,
accountants. In the UK it has been noted that around 20% of sole dealers execute their
operations in the construction sector, further 20% in the retailing sector and the rest in
financial domain and catering3. As the rate of significance of complicated documentation
process is considerably low the process of decision making executes in an effective
manner with the strong association of customer and employees.
 Business Partnership- Individuals in business partnership share their competences and
ideas in order to facilitate the process of capitalization. Furthermore, partnerships are
established by legal documentation witnessed by an official solicitor and seek vital
information such as the distribution of revenues4. However, forms of partnership are
common in professional services such as accountant, solicitors and law. Partnerships
draw similarity with sole trading in terms of partnerships being unrestricted liability.
Private Sector Limited Companies
2 Trebbin, Anika. "Linking small farmers to modern retail through producer organizations–Experiences
with producer companies in India." Food policy 45 (2014): 35-44.
3 TESCO PLC (Tescoplc.com, 2016) <https://www.tescoplc.com/media/1542/q1_ims_2014.pdf> accessed
2 July 2018
4 Christopher, Martin. Logistics & supply chain management. Pearson UK, 2016.

4BUSINESS AND THE BUSINESS ENVIRONMENT
These forms of business enterprises are regulated by shareholders thus necessitates a
Memorandum of Association and Articles of Association which includes the authorities of
stakeholders, procedures for recruiting directors and other arrangements in terms of auditing
company accounts.
 Private Limited Company or LTD-limited liability, with private shares- In these
organizations owned by stakeholders, the owners can create regulations on the percentage
of shares being purchased5.
 Public Sector Public Limited Companies- There are over 500,000 companies in the UK
whereby around 4% of them are engaged in public limited sector. However, the name of
these organizations ends with PLC and the shares of the companies can only be
purchased and sold with the authorization of the Board of Directors6. Furthermore, the
shares of public limited companies with restricted liability can elevate considerable rate
of capital, economies of scale and enhance the dominance of the market.
` The public sector is often recognized as the state sector that is owned and regulated by
the government for their citizens. The primary purpose of this sector is to deliver services
required by the general public regardless of the income or wealth for instance health and
education7. Furthermore, these business enterprises are aided through taxation process. The
organizations engaged in the public sector includes
5 Anheier, Helmut K., Nonprofit organizations: Theory, management, policy. Routledge, 2014.
6 Tugby L, Waller-Davies, B and Tugby, L, 'Profile: Tesco - The UK’S Largest Retailer' (Retail Week,
2013) <https://www.retail-week.com/home/profile-tesco-the-uks-largest-retailer/5046179.article> accessed 2 July
2018
7 Doherty B, H HaughF Lyon, 'Social Enterprises as Hybrid Organizations: A Review and Research
Agenda' (2014) 16 International Journal of Management Reviews

5BUSINESS AND THE BUSINESS ENVIRONMENT
 Central Government- Defence, national health services, social security, police and
universities constitute a major portion of the public sector.
 Local Government- Local government fundamentally comprises primary and secondary
education system, refuse collection, social services as well as sport facilities.
Voluntary Sector
The organizations constituting the non-profit or voluntary sector vary from both public
and private sector whose fundamental aims and objectives were reliant on profit generation.
While voluntary organizations such as charitable organizations, trade unions along with public
art enterprises do not share its profits and revenues to its stakeholders or owners but further
utilize the profits to accomplish its targets8. Furthermore, non-profit enterprises possess the
capacity to transform their share of revenues as surplus to attain its self-preservation,
advancement and other prospective strategies. Thus are devoid of any acts of liability in most
nations specifically in terms of income and property taxation.
The legal structure of a business enterprise aims to be vital to the way the business
executes its operations. A limited company exists as a legal entity in itself in seclusion from its
ownership. Furthermore, the development of limited company necessitates the documentation of
several permits with the Registrar of Companies which must involve a Memorandum of
Association and Articles of Association. If necessary documentation is satisfactory, legal
incorporation is issued further establishing the company into significance as a legal entity. Tesco,
being a public limited company (PLC) aims to pursue a strategic business unit (SBU) pertaining
all of its operational areas to enhance the rate of competitiveness within the domain of individual
8 Young, Dennis R., and Jesse D. Lecy, "Defining the universe of social enterprise: Competing
metaphors." Voluntas: international journal of voluntary and nonprofit organizations25.5 2014: pp.1307-1332.

6BUSINESS AND THE BUSINESS ENVIRONMENT
market areas9. It has been noted that the SBU aims to serve TESCO with high degree of
flexibility in order to expand its operational area in several directions and further facilitates the
company to be successful globally rather than implementing strategies from home nation.
2. Explain the size and scope of a range of different types of organizations.
There are generally five forms of organization, public, government enterprise,
cooperatives and NGOs. It has been noted that limited business are generally corporate
associations whereby they have legal identification in its own authorization. Studies have
revealed that limited business organizations have been established by two or more individuals
which led the business associates have to comply with various process of documentation such as
memorandum and articles of association. Furthermore, several private limited business
enterprises must comprise minimum one share while an organization can serve a significant
portion of its revenues and share to the public. In addition to this, business enterprises can offer
considerable amount of share to the segment of the population who want to form association
with any specific company. It has been recognized that Tesco established by Jack Cohen as a
solo traders’ organization, therefore the organization can easily develop without any legal
formalities. Modern theorists have revealed the growth of Tesco over the past three decades
which has involved a significant transition of its strategy and brand image. The company in 2005
surpassed all its unconstructive image and evolved as one of the largest and leading retailer in the
UK comprising a portion of over 30% of the grocery market in comparison to the 16.50% share
9 Butler, Richard. and C. Wilson. David, Managing voluntary and non-profit organizations: Strategy and
structure. Routledge, 2015.

7BUSINESS AND THE BUSINESS ENVIRONMENT
of ASDA and around 16% revenues of Sainsbury which had been recognized as a prominent
market leader of UK until surpassed by Tesco in the late 1990s10.
Furthermore, it has been recognized that Tesco has maintained various rules and
legislation in order to enhance their business sustainability as a public limited company. The
company has registered them with the London Stock Exchange in order to sell their share to the
populace. Furthermore, it has been noted that the London Stock Exchange maintains strict
regulations in the process of share trading. The business enterprise effectively organizes annual
meeting with their stakeholders once in a year11. As the volume of the organizations is
immensely reliant on their distinctive product types, the scope for one of the leading beverage
brand Coca-cola enterprise is to produce and deliver non-alcoholic beverages such as carbonated
drinks, concentrates, energy beverages and packaged drinking water. Furthermore it has been
identified that OXFAM, one of the renowned charitable organizations comprise a wide range of
target which aids more resources in order to safeguard themselves from new entries to the market
whereby it has been recognized that a large business enterprise with enhanced rate of resources
comprise a higher rate of risks in order to sustain its level of protection. With the dependency of
several business operations on the stakeholder base, the level of influence thus becomes
immensely higher by any business operations. As the recent business environment has been
immensely been targeted by several global organizations, the business environment of Tesco has
been gradually transforming on the basis of the trend of latest consumer base and society12.
10 Tesco plc, 'Our Businesses' (Tesco plc, 2018) <https://www.tescoplc.com/about-us/our-businesses/>
accessed 2 July 2018
11 Doherty B, H HaughF Lyon, 'Social Enterprises as Hybrid Organizations: A Review and Research
Agenda' (2014) 16 International Journal of Management Reviews
12 Khan, Arifur, Mohammad Badrul Muttakin, and Javed Siddiqui. "Corporate governance and corporate
social responsibility disclosures: Evidence from an emerging economy." Journal of business ethics 114.2 (2013):
207-223.

8BUSINESS AND THE BUSINESS ENVIRONMENT
Though, the business can undergo certain degree of expansion globally by supportive industries,
the business might experience irrepressible situation because of the whole business operation
which is based on factors related to macro environment and forces.
LO 2
3. Explain the relationship between different organizational functions and how they
link to organizational objectives and structure
The business operation of any organization is immensely reliant on various functions
such as human resource, sales as well as marketing, along with research and development,
customer service, administration, finance and accounts. As the process of marketing is regarded
as a significant association with the market to enhance the level of contentment of the consumer
base, it is considered to be highly effective for both the consumer and the distributor base. This
process aids TESCO to deliver adequate customer details for emerging new products which
subsequently aids the quality life of the customers13. Furthermore, it has been noted that the
emergence of Tesco has a prominent brand has effectively formulated a competitive base
through the comprehensive pricing strategy. Furthermore, the business enterprise has expanded
its production system which permits the customer base to have expedient rate of accessibility to
products and services14. The elevating rates of demand of Tesco products facilitate the expansion
of its business and generate more revenues from the UK market. The unique communication
techniques of the organization facilitate the company to enhance its social behaviour in a well
13 McKeever, Brice S., and Sarah L. Pettijohn. "The nonprofit sector in brief 2014." Washington, DC:
Urban Institute (2014).
14 Barrientos, Stephanie. "Corporate purchasing practices in global production networks: A socially
contested terrain." Geoforum 44 (2013): 44-51.

9BUSINESS AND THE BUSINESS ENVIRONMENT
constructive manner. Tesco has proficiently established several awareness campaigns in order to
spread the rate of responsiveness such as anti-smoke awareness and diabetes prevention
awareness initiatives aimed for the Tesco and Diabetes UK collaboration to enhance the rate of
accountability of the organization on the society.
Tesco finance functions facilitates the daily transaction of the purchases, sales, use of
business resources internally as well as externally to the business enterprise. Tesco’s cash and
cash equivalents further ensure the proper financial transaction of the company in order to
sustain business liabilities. Thus the corporate, financial department of Tesco is accountable for
supplying additional investment for the development of the business. Furthermore, Toyota has
engaged itself in efficient human resource management department in order to supervise
employee activities in the organization. The HR strategy at Tesco involves high degree of work
simplification, introducing essential skills along with performance management associated to
achieving critical targets and objectives. Strategic HRM in Tesco has attained both credibility
and popularity over the past decade especially in regards to its influence on the company’s
performance15. Thus the induction provided to the employee base encompasses all learning
capabilities and permits certain cultural divergences. It has been identified the corporate
objectives implemented by the company which are further reinforced by a comprehensive
Corporate Strategic Action Plan which entails various functions of Tesco. As Tesco falls under
cost leadership category it coerces to the lowest cost operator in the industry. Thus in order to be
a cost leadership environment, investment is required in the domain of production technology
along with improved quality staff. Tesco’s products are considered to be lowest in comparison to
15 Hartley-Brewer J Merrick, 'Tesco Chairman John Allan Slams Tory Plan For EU Referendum' (The
Independent, 2015) <https://www.independent.co.uk/news/uk/politics/generalelection/general-election-2015-tesco-
chairman-john-allan-slams-tory-plan-for-eu-referendum-10187367.html> accessed 2 July 2018

10BUSINESS AND THE BUSINESS ENVIRONMENT
its competitors Sainsbury and Morrison16. However, Tesco cannot be identified as a true cost
leader as it has distinguished itself from other operations in regards to its product range, service
delivery, and online sales. Thus it can be stated that Tesco is proficiently aiming to adopt both
cost leadership and differentiation.
LO 3
4. Identify the positive and negative impacts the macro environment has upon
business operations, supported by specific examples.
As the business environment constitutes of several internal and external forces under
which any small or large business enterprise executes its operations, thus serves a critical role in
the business. It further shapes the competence level of the business enterprise in order to sustain
its customer associations. Modern theorist significantly categorizes the business environment
into macro and macro factors whereby the macro environmental factors tend to pose universal
impact on every small, medium or large enterprise operating in a particular market such as
economic, environmental or political environment17. While the micro environment aims to focus
on the suppliers, distributors and customer base of the organization.
The positive and negative impact on the organization has been discussed through the
analysis of PESTLE factors.
16 Butler S, 'Tesco Increases Grocery Market Share For First Time In Five Years' (the Guardian, 2016)
<https://www.theguardian.com/business/2016/oct/18/tesco-increases-grocery-market-share-sales-rise> accessed 2
July 2018
17 Barrientos, Stephanie. "Corporate purchasing practices in global production networks: A socially
contested terrain." Geoforum 44 (2013): 44-51.

11BUSINESS AND THE BUSINESS ENVIRONMENT
 Political Analysis-The UK government in recent times has adopted a taxation assessment
which posed high degree of influence on Tesco. In 2011, it has been reported that the UK
government has increased the rate of Value Added Tax (VAT) from around 17.8% to
20% with the propensity to raise government revenue by £ 13 billion per year. As a
result, a rise in the rate of VAT unconstructively impacts the growth of sales revenue
generated by Tesco18. Furthermore, the UK government has planned to adopt proposed
taxation rates with the purpose of regulating the intensifying rate of obesity and further
restrict medical issues associated with it. Therefore, such assessment can pose adverse
affect on the revenues of certain goods retailed by Tesco. As a result, Tesco acts to be
responsive to such threat and introduced a wide range of new healthy food products to
mitigate such risk factors19.
 Economic Analysis-The UK economy tends to reveals signs of resurgence during events
related to financial crisis. It has been noted that a considerable rate of financial rise has
been estimated with a gross domestic product which was approximated to undergo an
increase of over 2.5% than the pre-crises peak20. However, economic development has
been regarded as a positive indicator for Tesco as it results in the advancement of
supermarket and retail industry, the leading industry in UK where Tesco executes its
operations21.
18 Chaffey, Dave, and Paul Russell Smith. eMarketing eXcellence: Planning and optimizing your digital
marketing. Routledge, 2013.
19 Lettice, Fiona, Markus Tschida, and Ingo Forstenlechner. "Managing in an economic crisis: The role of
market orientation in an international law firm." Journal of business Research 67.1 (2014): 2693-2700.
20 Shortell, Stephen M., et al. "A taxonomy of accountable care organizations for policy and
practice." Health services research 49.6 (2014): 1883-1899.
21 Ridley-Duff, Rory. and B. Mike, Understanding social enterprise: Theory and practice. Sage, 2015.