TESCO PLC: Analyzing Business Environment for New Zealand Expansion

This report provides a comprehensive analysis of TESCO PLC's planned expansion into New Zealand. It begins with an introduction to business organizations and the business environment, specifically focusing on TESCO PLC's operations and its potential in the New Zealand market. The report then delves into a PESTLE analysis to evaluate the political, economic, social, technological, legal, and environmental factors affecting TESCO's business in New Zealand. Furthermore, it applies Porter's Five Forces framework to assess the competitive landscape, including competitive rivalry, the bargaining power of customers and suppliers, and the threat of new entrants. The report concludes with a summary of key findings and insights into the challenges and opportunities for TESCO PLC in the New Zealand market, supported by data charts and references to relevant literature. This report is a student contribution available on Desklib, offering valuable insights for business students.

Business organisational
Environment in a global
context

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
Background to Business organisation....................................................................................1
Background to the business environment...............................................................................3
Porter’s five forces:................................................................................................................5
Data chart/ tables:...................................................................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business organisation is a group or entity that is formed for the purpose of regulating
operation on commercial enterprises. It is an activity through which wealth is created by
producing quality products as per the requirement of the customers. It aims at conducting
business by manufacturing goods and services in order to meet various demand of clients. This
project aims to provide specific information about TESCO PLC which is considered as British
multinational groceries and common merchandise retailer. They are planning to expand their
business operation in other country in order to earn more profit as well as for growth purpose.
New Zealand is the one they have opted for stability as well as expansions. During the expansion
different issues will be faced like competition and other will be identified by conducting
PESTLE of that particular nation. Apart from this, nature and types of specific aspects in context
to Tesco plc is taken into account (Briscoe, Tarique and Schuler, 2012).
Background to Business organisation
Tesco is the type of private limited company which is listed over LSE. It is third largest
retailer in global in terms of total revenue with €55,917 million. This company was founded in
1919 by Jack Cohen. The total employees working within this particular organisation is about
476,000. It has market capitalization of approximately £18.1 billion. This company is also
operating in banking and insurance sectors. Their major operations are conducted from UK,
Ireland, Poland, Malaysia and some other parts of the world. Tesco serves their customers with
6809 stores offline as well as online (Crystal, 2013). As a leading supermarket retailer they are
serving plenty of customer in every week in terms of providing various supports and facilities to
them. Knowing all the facts of earning they have decided to make expansion for their business in
New Zealand. This country is considered as sovereign island nations in south-western Pacific
Ocean with around 600 smaller islands with the total population of 4.1million. Their capital city
is Wellington and it is the most populated city in New Zealand with residents exceeding 1.8
million. The population growth rate is 2.1 % annual changes in 2016. The Gross domestic
product (GDP) of New Zealand is going increase from 0.5% in the initial quarter of 2018 in
comparison to last year. It is 2.7% as quarterly value of 34.809m$. It is a constitutional monarchy
that is having parliamentary democracy.
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New Zealand is open for business because of wide land mass. It is not only perfect place
to taken long break and enjoyment but also provides great opportunity for people who are
looking for any kind of change or expansion. It offers a more flexible working life with plenty of
residents –preferring to lead their business operations in effective manner. likewise, sometime
this happens to be considered as hard working and giving maximum time in offices. It is
crucially, self-sufficient nation with a modern era which is having free market economy. It is held
effective for ample amount of strong opportunity for faster growing businesses. The nations are
having tradition of developing their own innovation and products through having innovative
method in order to get maximum growth for the economy (Ferraro and Briody, 2013). Wellington
has already been established themselves as a location for various multinational company. It is
vital for the supermarket industries to come up with wide range of attractive and reliable
products and services that can satisfy different needs of customers.
Additionally, New Zealand is having more corporation tax of 28% which is less effective
for the TESCO plc. It means that they need to make maximum payment as corporate tax to that
particular nations. But at the same time as the incomes level is only 10.5% which is positive sign
for the company. This will help them to draw maximum customer toward their products. Low
corporation tax is more effective as it would be profitable for the company in terms of earnings.
It is done so because, they believe that New Zealand major focus is given on business and
investment and they are open to various MNC all around the globe in order to increase the
standard of living of various customers.
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Figure 1: Global corporation Tax levels
Sources: (Luke Patterson, 2018)
Background to the business environment
The best ways to make proper analysis among Tesco plc and republic of New Zealand by
using PESTLE. It is considered as one of the external factors those are affecting overall business
operation within that particular nation. Some basic component of these factors are mentioned
underneath:
Political factor: The Country New Zealand is extremely relying on trade with other
nations. The favourable business climate and political stability which used to promote
accountable FDI inflows to this country (Kirton and Trebilcock, 2017). They have planned to
keep the corporate tax 17.8% as it taken into account as one of the primary areas of New Zealand
policy. The political situation is much more stable but affect economic and business environment
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of various company. TESCO plc can provide major benefit and FDI scene is that particular
nation.
Economic factor: As discussed earlier, New Zealand’s high corporation tax is major
factors that can lead to TESCO company to think once before making expansion planning. They
are not being able to earn that much profit as they have planned. Any change in external demand
can lead to affect the country economy situation (Voegtlin, Patzer and Scherer, 2012). Their
economy enjoys a very low rate of inflation that used to contributes to lower interest rate and
enhance purchasing power uniformity. The employment rate down to 4.4% in first quarter from
2018 to that 4.5% in comparison to last year. Tesco Plc is going to invest in New Zealand that
will also open great chance to jobless people, unemployed persons.
Social factor: For TESCO PLC, New Zealand is a best economic place for capturing
more customers. As per the market research, overall spending made by New Zealand with total
of 7812.15 NZD million from 1987 to 2018. Its population is also growing at decent rate and
birth rate is also at higher rate with 1.99 %. Maximum population means that maximum number
of customers is likely to available in target for Tesco. The total disposal income is lower than the
OECD average of USD 30,563. There is already termed as overall demand for Tesco plc in New
Zealand, there have been petitions made in relation to welcome Tesco to come and start their
business operations more effectively.
Technological factor: It has been found that technology is continuously changing and for
all MNCs company such as Tesco Plc those are reliant on retail business to make its goods
required to keep consistent in the market. It has been observed that Tesco company is more
depend of serving customer by providing maximum facilities over online or offering superior
customer services case to them. The TESCO customer have been promised that they can able to
get more hi-tech offering as the per coming budget. The company is having product development
roadmap facilities to the customers and to explore more in store technology such as,
Touchscreen, making payment on COD as well as online (Lindberg, Voss and Blackmon, 2013).
Legal factors: These are basically concluded various regulatory and law determinants
those are having negative and positive effects on overall outcomes of the market actions and
future decision making. It has been found that because of lasted election and civil uncertainty has
created maximum burden on country as well as customer as the same point of time. Some crucial
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security and risks that are faced by UK businesses while operating in New Zealand. Such as New
Zealand’s FDI flow had break all the record in 2017 by exceeding USD 3.5 billion as per the
official data agency. They are mostly depending on foreign investments. TESCO cannot be able
to get any difficulty to deal with policies that are affecting the overall business. It can help them
to improve the economic condition of that particular nation and FDI sustainability. Henceforth,
these policies will not be having any kind of negative implication of TESCO financial as well as
ethical sustainability of the country.
Environment factors: It is considered as one of the effective factors that is having
appropriate impacts on the last fifteen years. Basically, this has become more crucial Tesco
company to make maximum influence on all the aspects those are affecting the overall nature
and economy (Bansal and Hoffman, 2012). This will be providing insight into the New Zealand
agencies that can tailors their assistance to enhanced more effectively by welcoming Tesco to
commence business in their locations. The maximum awareness regarding environment led to the
particular body of develop western nation more drastically. Conservation act 1987 and
environmental protection act 1986 is needed to be followed to every company that wants to set-
up their business.
Porter’s five forces:
It used to explore various level of competition within an organisation and make business
strategical development. Assess the threats to gain profitability while making any kind of
strategy in order hold proper balance among market situations those are affecting the business.
This framework is being design as proper tools and techniques in order to gain competition for
increase the goodwill of the company. Some of the basic aspects those are needed to be taken
into account are mentioned underneath:
Competitive rivalry within the business: Tesco Plc is major competitor will mostly be
local Woolworths supermarket and countdown businesses. These are operating as one of the best
supplier of producer of products and services in effective manner. It seems to be shopper and
retailer landscape in various parts of New Zealand. It need to be related with grocery and
supermarket stores that are held responsible for serving maximum number of people in that
particular nation. Despite being having similar MNC, it has been believing that Tesco Plc would
be successful in New Zealand because to their high demand from the citizen and provide
sufficient amount of growth to the company.
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Bargaining power of Customer: It seems to be related with perception of customer as
how they get affected with the price and quality of product and services that are provided by
Tesco Plc to the customers. As plenty of customer would easy know about Tesco company they
are likely to attract various types of customers because of online craze. The quality of products is
also sufficient enough to proven clients that they are buying more reliable products. These are
positive sign for TESCO to create good chances to gather maximum number of customer. In case
they are getting good products at the affordable prices there bargaining power would
automatically go on high side (Black, Morrison and Gregersen, 2013)
Bargaining power of supplier: It is basically easy for the suppliers to enhance prices for
the products in case their other competitors are not able to provide quality products. The social
demand of clothing and other household material are more effectively reliable in accordance with
creating good brand value in New Zealand market. As Tesco is having lot more supplier those are
available for the providing raw material in order to manufacture various kind of products and
services to the customers. Tesco is at presently working with around 15000 suppliers and large
number of producers to offer great deal to the nation. Healthy and sustainable products to various
customer as per the desirable cost.
Threats of New Entrant: It has been found that it is more tough and difficult for various
people to deal with competition to enter into the business environment. The major competitor of
Tesco Plc is Woolworths supermarket which is having 40% share of New Zealand grocery
market. It always tried to welcome FDI and its low corporate tax is always attracting overall
businesses into their nation.
Threat of substitute goods: It is basically related with the matter of facts to determine
how customer switches from a goods and services to other competitor products. New Zealand is
also considered not that much profitable as other because of High corporate tax rates. It is likely
to draw the attention of various franchises those are trying to decline profitability to gain
competitive advantage over other products (Scullion and Collings, 2011).
Tesco Plc is investing in New Zealand which is good decision keeping all factors in the
mind. It is one of the leading supermarket retail company that needs to keep increasing their
territory but in the modern field. It means that targeting maximum on environment friendly but
economic growth will bring maximum advantage to the nation. As New Zealand welcome FDI, it
primary target on how the external factors will be beneficial implication of the economy, social
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factors and various issues they are getting from Tesco Plc. Most of the customer wants to be
make avail several services or facilities that are provided by Tesco to country in terms of quality
and economical products. They are also trying to make use of natural resources at the end of
2017 for making their products. This will help to them to control every damages that are
affecting the environment of New Zealand (Murray, Skene and Haynes, 2017)
Data chart/ tables:
In order to make expansion of business into the New Zealand market, the important
aspects needed to be taken into account is various charts that are representing tax information
from the last couple of years. while market share growth and stability. One chart is showing
various competitors those are available in New Zealand. All of them are mentioned underneath:
(Source: Company accounts, Digital Look, consensus analysts’ forecasts. Financial year to
January, 2018)
From the above chart, it has been indicating that all the pre-tax profits that are incurred by
Tesco plc from 2008 to future estimation is being shown. This is basically the upcoming
planning done by the company. It will help them to make expansion for the business projects.
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(Source: Daniel Thomas, 2018)
According to the above mentioned chart, it has been fluctuation in the share prices since
July, 2014. After the period, the company is generating healthy shares with 6.4 billion in 2015.
They all are moving to healthy return but cannot be able to remain constant their growth because
it was still weak.
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(Sources: Roy Morgan, 2018)
From the above chart, it has been showing various companies those are responsible for
generating sufficient amount of shares from the different organisation in same segment. The
growth rate for other supermarkets is indicating more opportunity to the particular nations.
CONCLUSION
From the above project report, it has been concluded that business is one of the effective
aspects for every company. TESCO need to make analysis of their factors those are affecting
overall operation while expanding their units in different nations. All the important benefits and
limitations those are associated with Tesco is needed to be taken into account in proper manner.
This will make easy for the Tesco company to open new supermarket chain in New Zealand.
Issues related with expansion of business in other nations is needed to be taken into account
before making any planning. External environment factors must be analysed before making any
decision for expansion. Some vital data regarding corporate tax, policies and competitors that are
already running their business must be evaluated properly so that chances of getting maximum
growth opportunity can be enhanced. This all analysis would be helpful for organisation to get
more reliable outcome in terms of setting new business over New Zealand market.
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REFERENCES
Books and Journal:
Briscoe, D., Tarique, I. and Schuler, R., 2012. International human resource management:
Policies and practices for multinational enterprises. Routledge.
Crystal, D., 2013. A global language. In English in the World (pp. 163-208). Routledge.
Ferraro, G. P. and Briody, E. K., 2013. The cultural dimension of global business. Upper Saddle
River: Pearson.
Kirton, J. J. and Trebilcock, M. J., 2017. Hard choices, soft law: Voluntary standards in global
trade, environment and social governance. Routledge.
Voegtlin, C., Patzer, M. and Scherer, A.G., 2012. Responsible leadership in global business: A
new approach to leadership and its multi-level outcomes. Journal of Business
Ethics. 105(1). pp.1-16.
Lindberg, P., Voss, C.A. and Blackmon, K.L. eds., 2013. International manufacturing strategies:
context, content and change. Springer Science & Business Media.
Bansal, P. and Hoffman, A. J. eds., 2012. The Oxford handbook of business and the natural
environment. Oxford University Press.
Black, J.S., Morrison, A. J. and Gregersen, H. B., 2013. Global explorers: The next generation of
leaders. Routledge.
Murray, A., Skene, K. and Haynes, K., 2017. The circular economy: An interdisciplinary
exploration of the concept and application in a global context. Journal of Business Ethics.
140(3). pp.369-380.
Scullion, H. and Collings, D., 2011. Global talent management. Routledge.
Online
Luke Patterson, 2018. [Online]. Available through: < https://www.statista.com/chart/5594/global-
corporation-tax-levels-in-perspective/>.
Company accounts, Digital Look, consensus analysts’ forecasts. Financial year to January,
2018. [Online]. Available through: < https://www.bbc.com/news/business-43722494>.
Daniel Thomas, 2018. [Online]. Available through: < https://www.bbc.com/news/business-
43722494>.
Roy Morgan, 2018. [Online]. Available through: < http://www.bandt.com.au/marketing/woolies-
still-number-one-australias-100-billion-grocery-war>.
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