Business and Business Environment: Tesco's Macro Analysis Report

This report provides a comprehensive analysis of Tesco's business environment, organizational structure, and the impact of various internal and external factors. It begins by defining different types of organizations, including public, private, and voluntary sectors, and their respective legal structures. The report then delves into the size and scope of different organizations, differentiating between micro, small, medium, and large enterprises. It explores the relationship between various organizational functions, such as marketing, finance, HR, and production, and how they contribute to achieving organizational objectives. Furthermore, the report conducts an internal and external analysis of Tesco, utilizing both SWOT and PESTLE frameworks to identify strengths, weaknesses, opportunities, threats, and the impact of political, economic, social, technological, legal, and environmental factors. The analysis includes the impact of Brexit and changing consumer behaviors. The report concludes by summarizing the interrelation between various factors and their impact on Tesco's operations and decision-making processes.

BUSINESS AND
BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
PART-1 ...........................................................................................................................................3
P1: Explain different types and purpose of organisations; public, private and voluntary sectors
and legal structures.................................................................................................................3
P2: Explain the size and scope of range of different type of organisations...........................4
P3:Explain the relationship between different organisational functions and how they link to
organisational objectives and structures.................................................................................5
PART-2............................................................................................................................................7
P4: Identify the positive and negative impacts the macro environment on the company......7
P5: Conduct internal and external analysis of Tesco..............................................................8
P6: Explain how strength and weaknesses interrelate with external macro factors...............9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business are one of the integral part of economy. It can be defined as an activity of
making money by conducting various activities such as production, buying and selling of
products and different types of services that are offered by the organization for profit earning
and various other motives. There are many kinds of companies such as private organisation,
public organisations and voluntary organisations (Hilton and Platt, 2013). This file will discuss
about the operations and structure of various types of organisations and their objectives.
Additionally, the report will focus on various micro and macro environmental factors that
influence the decision making and operations of Tesco. The micro environmental factors can be
analysed using SWOT analysis which helps identifying strength, weaknesses, opportunities and
strength of the respective organisation. However, the impact of macro environmental factors of
Tesco can be measured using PESTLE analysis which is consist of political, economical, social,
technological, legal and environmental factors that can influence the decision making of the
company.
PART-1
P1: Explain different types and purpose of organisations; public, private and voluntary sectors
and legal structures.
There are various types of organisations which have different objectives to run the
company. Along with this, every sector have different legal structures which makes them
authentic and helps the organisations to operate its functions effeciently. These are discussed
below:
Public sector organisations are the type of companies that are owned and managed by
the governing bodies of the country. However, these organisations are responsible for providing
many employment opportunities for the employees. Funding of these public organisations are
raised through taxes, fees and funds transfer from other level of government (Ebert, 2011). These
organisations operate in various field such as health care, defence, gas and oil, and many more.
Purpose- The aim of these organisations is to provide quality services to the citizens of
the country. For example, National health service also known as NHS which is the healthcare
system provides medical services for the citizens of UK free of cost.

Private Sector organisations are the type of companies that are operated by an
individual or group of people. Private companies are usually run by board of directors and
chairman of the company. The funding is raised by shareholders, bank loans and personal means.
There are various legal documents that are required to start the company such as Memorandum
of association and Articles of Association. Furthermore, the company is issued a certificate of
Incorporation from Registrar of companies which enables the respective firms to trade as Private
Limited Company. These companies deals in various types of goods and services such as food
items, hospitals, etc.
Purpose- These companies are engaged in providing products and services in order to
earn profit for themselves. One of the examples of of private companies is Tesco plc which is a
multi-national retail and groceries company.
Voluntary associations are the type of companies which provides services and products
for the benefit of the society. These organisation does not focus on earning profits and usually
have little or no involvement of the government. The volunteer associations are operated by
group of individuals who sign accord to form a firm in order to attain the common objective of
welfare of the society. Some of these associations have volunteers and paid staff such as
charities. However, other organisations work completely through volunteers. The volunteer
sector of UK contributes £11.7 billion to UK GVA which is almost equal to 0.8% of the UK
GVA (Deasy and Meyer, 2016). One of the examples of these volunteering associations is
Oxfam. It is one of the non governmental aid organisation which operates throughout the globe
in various sectors such as human rights, natural disaster, gender quality, etc.
Purpose- These associations are formed to serve the people in difficult needs or simply
fulfil their basic needs to survive.
P2: Explain the size and scope of range of different type of organisations.
Micro enterprises are the small companies which have less than nine employees having
less than approx £2 million turnover. Nomtek Limited is one of the examples of micro
companies. The respective firm is an IT company which deals in automation, database design
and many other engineering products. The profit share of the respective company is less than £ 2
million. The director of the company is Colin Thomas Cleobury. The company helps building
products which consumes less energy in order to attain less wastage of the resources.

Small enterprises are the enterprises which have less than 50 employees working with the
organisation. Also, these companies have less than £10 million of turnover and £5.1 million on
its balance sheet or less. One of the examples of such enterprises are AIRDRI Group. The
respective company deals in manufacturing energy efficient and designer hand dryers in UK. The
respective organisation have near by 29 employees with the total revenue less than £9 million
(Boons and Lüdeke, 2013). The energy efficient products reflects the sustainability of the
company.
Medium size enterprises are the organisations which have less than 250 employees.
Along with this, such organisations have an annual turnover under £50 million and the annual
balance sheet is less than £43 million. For example, M&S Logistics . The respective company
have total number of 74 staff members out of which, half of them are based in UK. M&S
Logistics have less than £50 million yearly turnover(Hamilton and Webster, 2015). The company
has near by 4,500 tanks that travel all over the world through, rail, roads and sea. It helps in
transporting various hazardous materials such as fuel, etc. to different places.
Large Enterprises are the companies which are consist of more than £50 million turnover
per year with the number of more than two hundred fifty employees working in the organisation.
An example of such enterprises can be NHS, which stands for National Health Service. It is
public sector organisation which is one of the biggest single payer healthcare system in the
whole world. The respective company provides free healthcare services to the citizens of the
country such as eye test, dental care, prescriptions, etc. The total number of employees working
with the respective organisation are near by 1.4 million people which reflects the opportunities of
employment provided by the public company. It is a public sector company which provides
healthcare services for the betterment of the society and in order to deliver quality services.
Hence, the amount of money is provided by the government through taxes and other means. The
Department of Health had a total budget of £110 billion in 2013-2014, most of which is invested
in National Health Service (Wetherly, 2014).
P3:Explain the relationship between different organisational functions and how they link to
organisational objectives and structures.
Global companies are the organisations which have operations and trading in many
countries across the globe. The number of countries that the company operates in is usually very
high i.e 15-20 countries. Some of the examples of these companies are Lenovo, Coca-cola,

Microsoft, etc. International companies are the type of organisations who sell their products and
services through exporting to the foreign countries. Additionally, importing activities are also
involved. Such companies does not have their establishments in foreign countries. Some of the
examples of these are Spencer, Wal-mart, etc. Transnational companies are the companies which
are considered as a mixture of global,international and multi-national companies. The structure
of these companies are complex and versatile. Such companies adopts the local culture,
consumer behaviour and marketing strategies are made accordingly. For example, Ford Motor
company, Nokia, etc.
Tesco is a multi-national merchandise retail company which is also the third largest retail
company in the world. The organisation operates in 7 different countries across Asia, UK,
Europe and so on (Wheelen and Hunger, 2011). Tesco is consist of many operational divisions
like HR, Finance, Production, Marketing, Research, etc. These divisions have different work
responsibilities. However, all the departments work together towards attaining the common goal
of the Tesco which is to maximise its profit levels. The interrelation can be studied from the
discussion below:
The marketing division of Tesco is responsible for promoting the product and services
that are provided by the respective company. Where as, the finance division of the organisation
helps the marketing department by providing adequate funds in order to operate efficiently. This
helps in maximising the efficiency of marketing department resulting in high sales and more
revenue of Tesco.
HR and Research also have an interrelation. The HR department of Tesco is responsible
for appointing right candidate who is qualified and skilled enough for the desired position. Thus,
the HR division of Tesco helps the research department in appointing an experienced candidate
which helps increase the level of expertise and productivity of research division of Tesco.
The production division of Tesco is responsible for producing goods and services which
are served by the respective organisation. The production department is also responsible to
maintain the stock to assure the availability of the products (Belás and Sipko, 2015). However,
the marketing division of Tesco helps the production department in promoting the products to
ensure the sales of the produced goods. Also, it provides adequate data about the latest trends and
demands of the customers which helps the production division in modifying its existing products
to attain more customers and earn more profit levels.

PART-2
P4: Identify the positive and negative impacts the macro environment on the company.
Political factor determine to which extent government can influence the economy or a
certain industry. These includes tax rates,acts of legislation,fiscal policy trade tariffs etc. The
European union allows free movement of products ,services individuals and funds; which helps
Tesco to expand its business as it provides a platform to start trading on internationals markets
(Halbert and Ingulli, 2011). Government levies import duty on goods imported into the
country ;this effects Tesco because the raw material is imported from China due to cheap labour
rates.
Economic factors have significant impact on the working of the organisation and to see
how profitable they are,examples of economic factors affecting the business include interest
rate,exchange rates,inflation rates , recession rates .Increase in the employment opportunities has
increase the level of production which is beneficial for the Tesco. After the Brexit law has been
passed it has disturbed the economy in uk which have make the conditions critical out there .
Hence take a lot of time to become stable hence it impacts the business of Tesco.
Social factor scrutinize the social environment of the market .These factors include -
population growth,age group,health awareness , career cognition and so on. These factors help
the marketers to understand the needs of the customer what they want and what drives them. The
people in UK new prefer one stop shopping and bulk shopping which gives a great opportunity
to Tesco for maximising its sales (Storey, 2016). As due to changing demands of the citizens, the
company needs to launch new products in order to restrain customers.
Technological factors relate to the existence and development of technology. These are
the factors that have an impact on how an organisation operates that are related to equipment
used within the organisation. Technological advancement in the Tesco has helped by the way of
improved scanners ,better self service tills and checkout cameras were being used to reduce
queues ;with the use of technological advancements they opened dotcom store which is only for
online shopping deliveries. Advancement in the technology has become an expensive thing for
the tesco. As with the technological up-gradation Tesco has to modify its machines process
accordingly which becomes too expensive for the business.
Legal factor are the external environmental elements which refers to how the law and
regulations influence business operations and customers behaviours ; laws such as consumer law

,discrimination law health and safety law employment law. Tesco has made several laws for the
smooth functioning of the business eg. sales of goods act maintained by them says that item that
are sold online should be as per the mentioned description without any damage or other defaults.
In dismissal laws and contracts Tesco needs to carefully construct their contracts to make sure
they abide by the rules ,it also affects the everyday working of the business as every accident is
recorded for legal purpose.
Environmental factor refers to the impact of the company on the surrounding
environment. Tesco has taken certain measures to limit the wastage and carbon emission
produced by the company (Shenkar, Luo and Chi, 2014). However, it has limited the company
in operating freely and has increased to cost of production in order to use more expensive and
eco-friendly materials.
P5: Conduct internal and external analysis of Tesco.
Swot analysis is a strategic planning technique used by the organisation to evaluate its
competitive position by identifying its strengths, weaknesses, opportunities and threats. Swot
analysis helps the retailers of the Tesco group to face numerous external competition which helps
them in rethinking strategies.
There are many strengths of Tesco. It has considerable brand equity and global
recognition which helps them to retain customer and earn a profitable business. Tesco has a
strong portfolio mainly in top segment areas which helps them to sell products and provide
services around the globe and helps to maintain significant cash reserves.
However, there are many weaknesses such as, Tesco majorly concentrates its sales in
UK &Europe , these concentrated operations will impact the business in case of any economic
slowdown (Wolfinbarger and Page, 2015). Tesco if would not concentrate on other countries will
not be able to retain customers and earn huge profit.
Tesco serves customers around the globe should continuously invest in R&D as it can
enhance its existing technologies and offer new innovative products to existing and attract new
clients ; to attract new clients tesco can go for strategic alliances with other companies to attract
more customers in certain target market.
Competitive pressure around the globe has forced tesco to offer lower prices and greater
variety ,hence food prices around the globe is increasing , has threaten tesco to maintain balance
between demand and supply in order to share a good market.

The threat of substitute product and services are, Tesco sells wide range of food and non
food items ;risk for non food items is high as compared to food items eg. Clothing in such items
customers will be inclined towards discounted prices ;hence tesco is a threat to the speciality
shops.
The Threat of new competitors Threat of competition is low , in order to be competitive
and establish a brand name it requires huge investment and a lot of time to establish new markets
therefore it is a barrier to new entrants.
Intensity of competitive rivalry can be understand by following example. Asda is one of
the key competitor in this segment, Tesco faces intense competition from its direct competitors,
in areas where supermarket can be some distance away consumers are attracted by retailers like
somerfield and co-op,therefore the intensity of competitive rivalry is high (Crane and Matten,
2016) .
When the customers are getting standardised products and switching cost is low ,buyers
easily switch from one brand to another, thus bargaining power of buyers is high and creates a
problem for tesco as customers are attracted towards the low prices and now-days with the
facility of online retail shopping customers compares the prices of the products and thus selects
them.
Tesco has hundred of suppliers and there is no supplier switching cost for the
supermarket as the suppliers are inclined towards grocery retailers position of tesco is
strengthened as they can get lowest price from the suppliers.
P6: Explain how strength and weaknesses interrelate with external macro factors.
There are many external or macro environment factors that affects the decisions of the
company. There factors can be understood by analysing PEST analysis which is an acronym of
political, economical, social and technology.
Political factor of PEST analysis is consist of various regulations that are framed by the
government of the country and how it can influence Tesco. Some of the regulations are interest
rate, tax, etc. Due to the allowance of free movement of products and services, the respective
organisation can plan its future strategies and expansion to the respective areas (Sekaran and
Bougie, 2016). However, the import duty and other regulations affects the budget planing of
Tesco and makes the process of importing raw material lengthy and complex.

Economical factor involved the impact of the respective company on the economy of the
country. The rise in employment opportunities through Tesco has helped the respective company
to earn a good reputation in the market along with various subsidiaries from the government.
However, the recent changes in the economy of UK has caused a sudden decline in the sales of
Tesco.
Social element of PEST includes various factors like culture, lifestyle, demographics and
others which have the power of influencing the sales and demand of the products of Tesco. Due
to diverse backgrounds of the employees, there has been a communication gaps between the
customers and employees which has resulted in affecting the work flow of Tesco.
Technological element is consist of various technological factors which can enhance or
have a bad impact on the company such as internet, latest tools and technologies, etc. (Kew and
Stredwick, 2017). The technological modifications has helped in attracting more customers.
However, it is one of the costly methods which has impacted the costs of operations of Tesco.
CONCLUSION
From the above discussion, it can be analysed that there are many types of companies
which operates for distinguished motives such as public sector companies. These operates for the
welfare of the society. However, the private sector organisations operate to earn revenue by
selling products. Additionally, the companies are also categorised according to the size which
can be analysed from the number of employees and revenue per year. The respective company is
consist of many operational divisions which are important for smooth running if the business and
maximise the profit levels of the company. Thus, the interrelation of these divisions can clearly
be understood from the discussion above. Furthermore, there are many macro environmental
factors which influences the decision making of the company such as legal regulations, social ,
technological and many more.

REFERENCES
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