Analyzing Tesco's Business Environment: Key Issues and Sustainability

This report delves into the business environment of Tesco, a prominent multinational supermarket chain in the UK. It identifies and analyzes two major issues impacting the company: a decline in product and service quality and the challenges posed by cultural differences and local work pay, using PESTLE analysis to categorize political, economic, social, technological, legal, and environmental factors. The report demonstrates how these issues affect Tesco's sustainability, particularly highlighting the negative impacts of reduced quality on profit margins and the challenges of adapting to diverse cultural contexts and varying wage rates. The analysis concludes with a reflection on the research process, emphasizing the challenges encountered and the skills developed during the project, such as research and communication, and underscores the importance of understanding the external environment for long-term business sustainability.

BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
Explain two key issues that affected the Tesco supermarket subsector....................................................3
Using PESTLE model, categories two issues you discussed and reasons for doing so............................4
Demonstrate how key issues can impact sustainability of businesses......................................................6
Reflection................................................................................................................................................7
CONCLUSION...........................................................................................................................................7
REFERENCES............................................................................................................................................9

INTRODUCTION
Business environment refers to an integration of internal and external factors which
impacts the company operations and sustainability in positive and negative manner. This report
is based on the Food retailers and wholesalers subsector in which Tesco is taking. Tesco is the
leading multinational supermarket store in UK. This report includes the major key issues that the
Tesco face and by using PESTLE analysis these key issues can be discussed prominently.
Further this project reflects the impact of key issues on business sustainability so that best
solutions can be taken out. At last reflections are to be done that depicts the challenges that are
faced at the time of completing this project study(Prajogo, 2016).
MAIN BODY
Explain two key issues that affected the Tesco supermarket subsector
Tesco supermarket is one of the largest organizations within UK in which number of
employees are working. This company deals globally and attracts the customers from
international and national market. Tesco can face the major issue in their profits earning and
sustainability. In today’s world there are many food supermarkets are available within market
who offers the quality goods to their customers at reasonable cost. That will affect the subsector
in major ways. The supermarket subsector can face the many issues such as downward shift in
the quality of goods and services, accounting scandal, horsemeat controversy, cultural
differences in other nations and many more(Eling and Schaper, 2017). In context of Tesco
superstore subsector this report includes the two major issues that can be shown below:
 The first major issue that a subsector can face is related to the downfall in quality of
products and services: In Tesco plc consumers are visiting the stores for wet products as
these are relatively cheaper than other food retailers and wholesalers. Currently, Tesco
cannot maintain the quality of their offerings due to this low price of the goods and
services are not attracted the customers anymore. In recent times people are highly focus
on quality products rather than their price. In this Tesco can totally based on their
suppliers for their products and services for restocking the shelves to maintains the
quality and freshness of the foods and drinks. This is the leading challenge in front of

company to sustain in market and attracts the large number of customers. The subsector
based on food retailing and wholesalers can majorly impact by this issue. reducing the
quality of goods will affects the profit margin. Quality is majorly accepted by the
customers as lack of quality is wasting the cost of the company in developing and
manufacturing the products(Khan and Quaddus, 2015).
 Another major issue that the Tesco subsector can face is the cultural difference and local
work pay: Cultural difference within the different countries can results the variations in
the choices of the consumer buying decisions and handling the employees within the
company in all the outlets that are present globally. For success of business employees
play an important role because they can attracts the customers and retain them for a
longer period of time. In case of food Superstore Company Tesco can pull out their
operations in Japan after the 9 years of working because there culture is based on family
owned and long sustainability supermarket. This means customers can enjoy shopping
which had a community hub and personal touch. in this employees are also working as a
team that is totally different from the UK culture where people are working individually
and achieves the task on their own. Buyers in Japan prefer quality and excellent products
and services. This will highly impact the Tesco sustainability within market. And due to
increment in the wage rate by government within UK Tesco face the issue of pay high
salary that will enhance their overall expenses. Due to this Tesco can fire most of their
employees and this will impact the negative on their brand image.
Using PESTLE model, categories two issues you discussed and reasons for doing so
PESTLE analysis refers to an analytical framework that helps in analyzing the external factors
so that high profits can be gained by the company. In context of subsector Tesco supermarket
PESTLE model can be shown below:
 Political factor- This factor includes political instability, tax rates etc. The Tax on
supermarket is charged by the government is low for avoiding the price hike but this
similar initiatives affect Tesco negatively. It is to be categories that the issue related to
Tesco that is lower the quality of products and services is related because due of price of
their raw materials are high due to their quality of the offerings is affected(Prajogo and
Oke, 2016).

 Economical factor- It involves inflation rate, purchasing power of customers etc. In UK
the minimum wage rate is enhanced by 4.4 % that will majorly affected the operating cost
of the Tesco. Due to this company can fire most if their employees that will reflects the
unemployment within country. this issues will affect the purchasing power of customers
and it will majorly impact profits of Tesco.
 Social factor- This factor influences the individual perception, values, beliefs, culture in
a particular society. In case of Tesco supermarket this factor impact majorly in their issue
raising. At the time of operating business in Japan company cannot focus effectively on
their followed culture and beliefs as they can adopts the culture like UK due to this it
highly impact the company sustainability within that market and due to this market share
also affect negatively(Saleh and Watson, 2017).
 Technological factor- This factor is one of the most trendy factor that is adopted by the
organisations in their day to day business operations. to overcome their major issues
related to customer services Tesco can introduced the radio-frequency identification
technology that helps customers in experiencing the in-stores so that they can attracts
towards it. Further it also involves the PayQwiq so that customers can pay effectively
without waiting. this helps the business enterprise in saving the cost related to employees
wages.
 Legal factor- This aspect related to the laws, guidelines, regulations that was imposed by
government for the welfare of the employees and customers. In terms of Tesco
supermarket that is based on subsector food retailing and wholesalers. The issue of the
company that is employment pay is majorly related to this factor and affected the
company profits and performance. In this employers can took legal actions on their
manager basis of unequal pay and discrimination in age and gender. Because in this
workers are very frustrated after knowing the low pay rates for nights, bank holidays and
weakened shifts. In this Tesco also take legal actions for fraud in accounting and
misleading with the investors. To overcome this issue company mainly focuses on all
legal laws(Sodeyfi, 2016).
 Environmental factor- This determinants can involves the environmental standards that
is regulated by government of UK. this factor mainly affect the subsector of food
retaliating and wholesaling sector because they feel the pressure from the government

side related to environment issues. Due to this company can the initiatives to shop at
tesco.com.
Demonstrate how key issues can impact sustainability of businesses
The sustainable practice reflects that the company develops will facilitate the better
system establishment for decision making and cost saving. by using the effective and efficient
resources organisation can able to attain the long term sustainability to gain the competitive
advantage. In context of subsector food retailing and wholesaling supermarket i.e. Tesco have
facing some major issues that will negatively and positively impact the sustainability of the
company. As their first issue that is lowering the quality of goods and services affect the
company sustainability in a negative way. Because of this old customers are switching their
brand related to food sector as customers want high quality products. Their low quality helps the
competitive firms to gain their market sharer and position in the market effectively(Denning,
2015).
Another issue that is cultural difference and work related pay issue is also affect the
sustainability of the business venture majorly in both positive and negative way. In terms of
positive way due to not increasing the employee pay the company can maintain their overall
operating cost. This will helps in their long term sustainability. but at the same time it affect
negatively as due to not enhancing the pay of workers , employees demotivated with this and do
not perform their task effectively and efficiently. this will generate the major loss for the
company and reducing the customer base. On the other hand cultural difference affects the Tesco
overall sustainability because due to this their Japan outlet is pulled out and which may affect the
company sustainability majorly in a negative way. Because of this firm will face major issue. In
this all the company within this subsector may affect their sustainability because of occurring
these issues. So it is very prominent to understand the market environment so that controlling
and quality is to be offered to customers in an effective and efficient way, which helps in
enhancing the long term sustainability of the business enterprise(Moşteanu, Faccia and
Cavaliere, 2020).
For example- Tesco is one of the leading supermarket in UK that faces the major issues within
their operating business that are cultural difference and local pay gap and the another one is
offering low quality products and services because of Brexit because due to this suppliers can

raise their price of raw materials due to this firm will reduce their overall quality. It will affect
their profit margin and customers base negatively. both these issues affected the sustainability of
the organisation and also all other businesses within in these subsector. Low quality issue will
affect sustainability in negative manner because it reduced the customer base and brand image.
on the other hand cultural differences also affected negatively in their Japan outlets because
manager cannot follow their culture and values. If they follow the cultural, values and beliefs as
per Japan than the firm will sustain for a longer life and with a good brand image.
Reflection
By involving in this project that is based on business environment is reflecting a good
experience. In completing this report I have faced major two challenges that are in their
researching part and communication part. Before indulging in the study my overall research and
communication is weak and to overcome this issue I involve in this business environment. I
found an opportunity within this project as this will enhance my presentation, communication
and research skills that will develops personal and professional career in future point of view.
That will helps in enhancing my knowledge regarding the subsector related to food. I can face
the issue in researching and communication to my seniors but because of cooperative seniors I
have completed my project effectively and efficiently. due to this I can understand the various
aspects related to research by using ICT and enhance my communication skill by integrating
with my seniors and doing presentations. These helps in developing my future skills and this will
reflect the grate experience in completing the overall project within the helps of seniors and
friends. Due to this I can get the wonderful opportunity by overcoming these challenges. To
develop the communication skills I can see the pervious presentations of my seniors so that I can
do best at the time of presenting and communicating the report ion front of much audience.
CONCLUSION
From the above analysis it is concluded that business organisation can sustain in market
by examining the external environment effectively using PESTLE analysis so that opportunities
can be captured and issues can be effectively discuses with the reasons. In this key issues can be
inculcates of the Tesco. This issues can be demonstrate effectively so that the impact this can be
reflected accurately that helps in longer sustainability of organisation. It is very essential to

reflect the study so that challenges can be identifies so in future it can done effectively without
facing any issue.

REFERENCES
Books & Journal
Denning, S., 2015. Agile: it’s time to put it to use to manage business complexity. Strategy &
Leadership.
Eling, M. and Schaper, P., 2017. Under pressure: how the business environment affects
productivity and efficiency of European life insurance companies. European Journal of
Operational Research. 258(3). pp.1082-1094.
Khan, E.A. and Quaddus, M., 2015. Examining the influence of business environment on socio-
economic performance of informal microenterprises. International Journal of Sociology
and Social Policy.
Moşteanu, N.R., Faccia, A. and Cavaliere, L.P.L., 2020, August. Digitalization and green
economy-changes of business perspectives. In Proceedings of the 2020 4th International
Conference on Cloud and Big Data Computing (pp. 108-112).
Prajogo, D.I. and Oke, A., 2016. Human capital, service innovation advantage, and business
performance. International Journal of Operations & Production Management.
Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International journal of production Economics. 171.
pp.241-249.
Saleh, A. and Watson, R., 2017. Business excellence in a volatile, uncertain, complex and
ambiguous environment (BEVUCA). The TQM Journal.
Sodeyfi, S., 2016. Review of literature on the nexus of financial leverage, product quality, &
business conditions. Journal of Economic & Management Perspectives. 10(2). pp.146-
150.