Tesco's Business Environment: Macro Factors, SWOT, and Decisions

This report provides a comprehensive analysis of Tesco's business environment, focusing on the impact of macro-environmental factors and a detailed SWOT analysis. The study utilizes PESTLE analysis to evaluate the political, economic, social, technological, legal, and environmental factors influencing Tesco's operations. It examines the company's strengths, such as its skilled workforce and strong brand portfolio, alongside its weaknesses, including profitability ratios and technological investment needs. The report identifies opportunities like online sales channels and government free trade agreements, as well as threats such as competition and environmental regulations. Furthermore, the analysis explores how the SWOT framework informs Tesco's decision-making processes, particularly in areas such as technology adoption and financial planning. The report also considers the influence of the competitive environment and government intervention on Tesco's strategic goals, offering a well-rounded perspective on the challenges and opportunities facing the company.

Business and business
environment

Table of Contents
INTRODUCTION...........................................................................................................................1
P4. Evaluation of macro environment factor which affect the business operations in terms of
positive and negative...................................................................................................................1
P5. Swot analysis of Tesco and how they form the decision-making of the firm.......................3
P6. Evaluates how strength and weakness are interrelated with external macro factors............6
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business environment refers to the factors such as internal as well as external
environmental factors which influence the organization. Internal factors involves competitor,
supplier, customers and stakeholders and external factor includes political, economical. Legal,
social and technological factors(Beatty, Samuelson and Abril, 2018). This report presents various
macro factors which affect the business operations of Tesco company. Tesco is multinational
grocery and merchandise retailer and established in the Welwyn garden city, England. This study
also defines the external and internal factors of Tesco in order to identify their strength and
weakness of the company and also evaluates how weakness and strength interrelate with external
macro factors.
P4. Evaluation of macro environment factor which affect the business operations in terms of
positive and negative.
The macro environment consist of various factors such as political, economical,
technological, social and legal factors, all of these factors has great impact on the business
operations of Tesco company. Macro environment can be effectively analyzed through pestle
analysis framework. Tesco is multinational food retailer company established in United kingdom
and located in 12 countries across the world.
Political factor
Tesco is the multinational retailer company and operates across the world, political factor
affect performance of the tesco in terms of decreasing because of the instability of government
and their tax rates, acts of legislation and also different countries have different policies and
regulation and company has to make their policies accordingly which has great impact on the
organization. Government also encourage retailer to create employment opportunities which has
positive impact on Tesco in terms increasing the demand of its products as well as diversifying
its work force. Political factor also affect the marketing decision of the business because
government provides low rate of the taxation on the retailer companies which impact the
marketing decision of the Tesco(Bennett, James and Klinkers, 2017).
Social factor
This factor is related with the marketing environment of the Tesco which is defined by
the relationship between customers and organization. This factor has great impact on the
business decisions such as which type product stock has to carry by the company. It also impact
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on the brand image of the company which is provided by the consumers on the market place, if
company provides the products according to the requirement of the consumers which encourage
the interest of the customers towards the company which results in high brand image of the
Tesco at the market place. Changes in the social factors takes place continuously and the best
example is changes in tastes and fashions. Social factor is represented by the society or
communities which affect the way of demand and supply of goods and services means increasing
the population results in increasing in demand of various goods and services. For maintaining the
impacts of social factor organization need to evaluate the various needs of the consumers in
terms of products price, quality as well as quantity or packaging(Charter, 2017).
Environmental factor
This factor is related with various aspects of environment which affect the business in
terms of climate, culture and pollution. This factor affects the operational procedures of the
Tesco because it includes the various environmental policies which are committed to the rules
and regulation of the company which are related to the environmental issues. This factor also has
great impact on the organizational climate because it is very difficult for company to operate
equally in every type of climate or weather condition. Pollution also have an impact on the
business strategies of Tesco because as a food retailer company can not survive in the polluted
environment and also increase the cost of raw material. Tesco need to make the contingency plan
for dealing with them. Tesco faced the increased pressure from the government agencies to solve
the environment issues. At present company encouraged their customers to shop at tesco.com.
Although tesco van drivers collect the plastic bags from customers for recycle them.
Environmental factor also affect the efficiency level of work force, if organization maintained
healthy working environment it will result in the high productivity of the firm(Georgescu and
Popescul, 2015).
Technological factor
This factor also influence the business environment of the Tesco. Technology
advancement brought various new opportunities as well as threats for the company because
technological changes in the production procedures causes the conflicts among the management
and workers due to resistance of changes by worker. Technological advancement provides the
online shopping with home delivery facilities which attract the consumers towards the company
products. Technological changes also affect the cost structure of the company due to adopting
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new technologies in the company and also results in decreasing the productivity of the firm
because every advancement in the technology takes times to implement successfully. This factor
also results in the high productivity and profitability due to the fast speed of technological
disruption which results in timely completion of organizational goals. Tesco introduced the
RFID technology which automatically counts stock and also remove it after sales, this
information is helps the suppliers of the stock in terms of supplying the goods and
services(Hamilton and Webster, 2018).
Legal factor
This factor has great impact on the various marketing operations and decisions of firm in
terms of labeling, distributing, advertising and promoting the goods and services of the tesco.
The company realized that major regulations has already impacted on their marketing strategies.
This factors also includes various laws which are affected the decision making of the Tesco,
health and safety acts protects the health issues of the workers and it is the responsibility of the
employer to take the decision about the health and safety issues of the workers and also provides
the various information and instruction about the causes of accidents for preventing the workers
from accidents. It also includes the consumer protection law which is essential for protecting the
consumers from bad products and makes sure that product is provided by the company is healthy
and good for the consumers. Tesco involves and follow the employment law which encourage
the employees interest towards increasing the productivity of the organization because it
provides the minimum wages to employees and protects employees from unfair discrimination at
work(Hillary, 2017).
P5. Swot analysis of Tesco and how they form the decision-making of the firm
Strength
 Tesco is one of the leading company in the market place and has number of strength
which are as follows-
 Tesco has highly skilled workforce due to investing huge investment in the training and
development programs which motivates workers to achieve organizational goals.
 With help of customer relationship management department it is able to gain high level of
customer satisfaction.
 Strong brand portfolio, tesco has invested in building a strong brand portfolio.
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 Tesco also has the strong base of the reliable supplier which are plays an important role
in reducing the any breaker on the supply chain.
 It built a strong distribution network which helps in gaining its potential market(Tesco
swot analysis, 2018).
Weaknesses
 Some retail formats of the tesco have not performed as well as expected in cetain
countries
 Profitability ratio of the tesco has below the industry average.
 Need more investment in the advancement of technology.
 With different culture not highly successfully firm and failure to merge with different
work culture firms.
 Company can use cash more efficiently than what it is doing at present due to improper
financial planning.
 Huge investment on training and development of its employees as compared to other
organization in the market place which results in high attrition rate of work force(Kim
and Zhang, 2016).
Opportunities
 The company has invested money on the online platform which helps in opening new
sales channel which attracts new consumers.
 Adoption of technology advancement and government free trade agreement which
provides an opportunity for Tesco to enter in new emerging market.
 Due to lower shipping charges it decreases the cost of transportation which brings sowns
the product cost of the Tesco thus providing an opportunity for boosting its profitability
or provides the benefits to consumers for gaining market share.
 With the help of the new taxation policies, Tesco has opportunities to doing new way to
business in new way for maximizing profitability(Lee, 2017).
 The lower inflation rate bring more stability in the market which enable credit at lower
interest rate yo their consumers.
Threats
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 Lead the high and low swing in the sales number over the period due to the non regular
supply of innovative products.
 Threats in terms of Tesco's profitability can pose because of raising raw material
 Low quality products also threats for the tesco's products in the emerging markets.
 New technology adopted by the competitor could be serious threats for the industry in
medium to long term future.
 New environment regulations could be a threat to the certain existing products
categories.
 Government rules and regulation also putting pressure on company to make new
regulations that require them to make significant changes in their operating structure for
additional expenses.
 Stake holder pressures related to the environment and social responsibilities which also
affect the cost basis of tesco(Tesco swot analysis, 2018).
 Increasing the cost material also threat for the profitability of company.
Swot analysis helps the organization in terms of decision-making because it identifies
various strength of the Tesco and provides the way for attaining organizational goal effectively
for example it has strength in terms of high work force and through arranging training and
development program Tesco can increase their productivity as well as profitability. Through
weakness such as requirement of technology advancement, this weakness helps the Tesco to take
better decision about investing more in the advancement of technology and provides the effective
way for gaining competitive advantages(Prajogo, 2016). With the evaluation of swot analysis
Tesco identifies their weakness in terms of improper financial planning which helps the Tesco to
take the decision towards making effective financial planning and use their funds more
efficiently to accomplish organizational goals and also do the optimum utilization of all the
available resources of the organization which results in high profitability of the company.
Swot analysis also identifies opportunities for tesco and help the organization to take
good decision towards the accomplishment of organizational goal. For example new taxation
policies of government in terms of decreasing the rate of tax is the opportunities for Tesco and in
this situation tesco take the decisions about doing business in different way to achieve the
business objective efficiently. It also identified the threats for the company which affect the
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future potential growth of the firm such as threat in terms of adopting new technology by
competitor which helps the tesco to taken the decision about their technology advancement and
company invest huge amount in technology adoption for achieving competitive advantage from
market place(Saleem, 2015).
Key external factors such as competitive environment and government intervention affect
the process of achieving organizational goals. Competitive environment affect the firm at very
large extent. Competitive environment includes various competitors a company faces such as
relative size of competitors and the degree of interdependence in the industry. Tesco has many
competitors for example ASDA and Sainsbury's companies which affect the organization's
productivity as well as profitability because every company provides their goods and services at
competitive price in the market place for increasing the healthy competitive environment at
market place. In a healthy marketing environment which filled with direct competitors. In this all
the business which offer the same product and services are the competitors of the Tesco
company which provides huge competition at market place and affect the productivity as well as
profitability of the enterprise(Teece, 2018).
Government intervention also influence the business organization because government
has great involvement in the policies and regulation of tesco. Tesco operates their business in
more than 12 countries and each of these countries have their different policies, rules and
regulation which are compulsory for the tesco to follow and also makes their policies according
to their state government policies to achieve the success. Government intervention also affect the
production procedures of Tesco because it provides various laws related to employees such as
employment law and health and safety laws and employer is responsible for this law to protect
the health and safety issues of the company(Wheelen and et.al., 2017). Organization also
affected by the government intervention because of their changing business policies and
regulation for the industry due to instability of government.
P6. Evaluates how strength and weakness are interrelated with external macro factors
Strength and weakness are interrelated with the external macro factors because every
company has great impact of various factors such as political, legal, social, environmental and
technological factors on their working environment. Strength of the company are interrelated
with external macro factors for example tesco is the one of the leading company in the market
place and this strength of the company are interrelated with the political environment because
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with the help of political environment company can survive successfully and it can be possible
by the stable political environment and their policies(Bennett, James and Klinkers, 2017). Tesco
also has the strength in terms of strong brand portfolio and this strength are interrelated with
social factor of the firm because it involves consumer satisfaction towards the company and
strong brand portfolio can be recognized through consumer's satisfaction which can be gain by
the company by providing better goods and services at reasonable price to customers at the
market place.
Strength of tesco such as adoption of new technology advancement are interrelated with
the technological factor of the external macro environment because technology advancement
introduced by this factor and also provides the various information about the using of
technology. Technological factor also increase the productivity of the company through
providing various new techniques of the production procedures. Tesco also has the strength such
as strong distribution network for gaining its potential market which are interrelated with
technological factors because company can build a strong distribution network through new
technological innovations(Charter, 2017).
The weakness of the Tesco also interrelated with the external macro factors and influence
the performance of the organisation at very large extent. The weakness of Tesco as its some
retail formates are not performed as they expected in some countries due to government
interventions which are interrelated with the political factor because the political environment
takes places regularly. Social factor may also influence the business in the negative due to
corporate social responsibility of the firm and it is the duty of the every enterprise to do social
activities which form the weakness of the firm. Tesco act as a failure while merging with the
other cultural company which are interrelated with the environmental factor because each and
every country has the different work culture and Tesco is the global company and it has to
operate their business in different companies according to their working environment(Hillary,
2017). It also has the weakness in terms of law quality products which are interrelated with the
social factor because consumers plays an important role in building a brand image of the
company and also provides the information about the requirement of products and with the help
of this information company can produce the desired products of consumers which results in
high productivity as well as profitability of the Tesco.
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Government rules and regulation are also put pressure on the company to change their
rules and regulation according to their state government policies and it is the weakness of the
Tesco in terms of consuming high cost and it is the part of political factor and it is interrelated
with this situation. Economic factors are interrelated with the product price and their profitability
of the tesco. The dynamic policies of government also affect the economical factor of the
company because changes in the companies policies according to the government policies
consume high cost(Prajogo, 2016). Weakness in terms of decreasing the productivity of the
enterprise due to changes in market trend are interrelated with the social factor of the firm
because it includes the consumer perception about the production, in which changes in trend
takes place continuously and as Tesco is the food maker company and customers are more aware
about their health issues and their expectations towards food are changes regularly.
The performance of the Tesco are interrelated with the legal factor, in this food retailing
commission provides the various code for improving practices in terms of the changing prices
without notice. To facilitate this policy Tesco provides fuel to consumers at lower price(Teece,
2018).
From above discussion, we determine that strength and weakness of the Tesco are
interrelated with various external macro factors such as political, legal, social, environmental and
economical which affect the organisation at vary large extent in terms of various up and downs
in the productivity and profitability of the firm.
CONCLUSION
The above study has summarised that the business environment plays an important role in
the accomplishment of the organisational goals through the internal and external analysis of the
firm. This study also identify the various macro factors such as political, environmental, social,
economical and legal which influence the business in a positive as well as negative way for
example political environment provides the various trade agreements to the Tesco to enter in the
emerging market for expand their business globally which increase the profitability of the
company whereas it also put the pressure on the company to change their regulations and
policies according to the state government policies and regulation which consumes high cost.
This study also evaluates the strength, weakness, threats and opportunities and also defines that
this swot analysis help in the decision making process of the firm. For example the strength of
tesco is it has highly skilled work force and with the help of this tesco takes better decision about
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the optimum utilisation of all the available resources for increasing their productivity which
ultimately results in high profitability of the company.
REFERENCES
Books and journals
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Beatty, J.F., Samuelson, S.S. and Abril, P.S., 2018. Business law and the legal environment.
Cengage Learning.
Bennett, M., James, P. and Klinkers, L. eds., 2017. Sustainable measures: Evaluation and
reporting of environmental and social performance. Routledge.
Charter, M., 2017. Greener marketing: A responsible approach to business. Routledge.
Georgescu, M. and Popescul, D., 2015. Social Media–the new paradigm of collaboration and
communication for business environment. Procedia Economics and Finance. 20.
pp.277-282.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Hillary, R. ed., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Kim, C. and Zhang, L., 2016. Corporate political connections and tax
aggressiveness. Contemporary Accounting Research. 33(1). pp.78-114.
Lee, I. ed., 2017. The Internet of Things in the Modern Business Environment. IGI Global.
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.
Saleem, S., 2015. BUSINESS ENVIRONMENT, 3/e. Pearson Education India.
Teece, D.J., 2018. Business models and dynamic capabilities. Long Range Planning. 51(1).
pp.40-49.
Wheelen, T.L. And et.al., 2017. Strategic management and business policy.(p. 55). Boston:
pearson.
Online
Tesco swot analysis, 2018. [online]. Available through
<https://www.learnmarketing.net/SWOTTesco.html>
Tesco pestle analysis, 2017 [online]. Available through
<https://businessteacher.org.uk/pestel/tesco.php>
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