Tesco: Analyzing the Business Environment and Company Overview

This report offers a comprehensive analysis of Tesco, a leading British grocery company. It begins with an introduction to the company, including its history, organizational structure, and governance, detailing the roles of stakeholders, shareholders, employees, and the public. The report then delves into a PESTEL analysis, examining the political, economic, social, technological, environmental, and legal factors impacting Tesco's operations. The PESTEL analysis explores how external factors like Brexit, economic fluctuations, changing consumer preferences, technological advancements, and environmental regulations influence the company's strategies and performance. The report concludes by summarizing the key findings and implications of the analysis, providing insights into Tesco's business environment and strategic considerations.

BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TESCO.............................................................................................................................................1
Question 1 A company overview................................................................................................1
History.........................................................................................................................................1
Organizational structure...............................................................................................................2
QUESTIONS B HOW TESCO IS GOVERNED............................................................................2
3.1 stakeholders...........................................................................................................................3
3.2 shareholders...........................................................................................................................3
3.3 B Employees..........................................................................................................................3
3.4 C Public.................................................................................................................................3
QUESTION 2 PURPOSE OF PESTEL ANALYSIS......................................................................4
PESTEL ANALYSIS......................................................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Businesses are impacted due to change in internal or external factors within which they
operate. It is because they are directly related to these factors and dependent on them for growth
and development. Therefore, it becomes very important for business to analyze macro factors so
that strategies can be developed to minimize the impact (Bah and Fang, 2015). Moreover,
stakeholders are involved in this so that precise data and information can be collected through
them. The main aim of conducting this is to determine how fluctuation will impact growth.
Likewise, how business is related to it and whether it will effect for long or short term. This
assignment will describe the history and organizational structure of Tesco. It will show how
company is governed, who are their stakeholder, employees, etc.
TESCO
Question 1 A company overview
Tesco is British grocery company headquartered Welwyn garden city, Hertfordshire, UK.
It is world third largest retailer in terms of revenue that operates in different countries. they are
the market leader in grocery sector in UK having market share of around 28.4%. There are total
6553 stores of Tesco till 2017. There are variety of goods and services provided by company. It
serves areas such as books, clothing, electronics, financial and internet services, etc.
The company is basically engaged in retail sector but also provided various other
services. It targets middle class people and offer grocery items are the necessity of life (Botha,
Kourie and Snyman, 2014). The mission and vision of Tesco is stated below :-
Mission- Creating value for customers, to earn their lifetime loyalty
Vision - We make what matters better together
Goals –
 To help customer to live better every day.
 To provide high quality products at low prices.
History
The history of company is as follows :
Date/ year History
1919 Jack Cohen founded Tesco in Hackney.
1924 Tesco first brand name was appeared.
September 1931 First shop was opened at 54 Watling street,
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Middlesex.
1947 Company was listed on London stock
Exchange as Tesco stores limited.
1961 Largest Tesco shop was recorded in Guinness
book of records in Europe.
22 April 2015 Tesco market capital was recorded as 18.1
billion Euros at LSE.
Organizational structure
Tesco is having hierarchical structure in which authority flows from top to bottom. There
are three levels in this that are top, middle and bottom level. they follow hierarchical structure.
Organizational structure means that how activities will be supervised, allocated to attain goals
and objectives of organization (Virglerová, Dobeš and Vojtovič, 2016 ). Also, it shows who
will report to whom at a particular level. they are divided into two types:-
Tall- It is a long chain of commands in which there are many levels. This type of structure is
followed in small and medium size companies. Here, levels are added with growth of
organization.
Hierarchical – As name reflects, in this every single level will contain a single entity. In this
people at top contains more power than at low level. it is commonly followed in large
corporation, governments, etc.
Organizational chart – it shows the organization structure followed with help of diagram or
chart. In displays the rank, position, relationship, etc. between different post or jobs.
Tesco manages their operation and structure in similar way in different country. they are
having same number of people at every level (Moroni, Arruda and Araujo, 2015). each of them
reports to top level in same way.
QUESTIONS B HOW TESCO IS GOVERNED
Tesco is a public limited company so it is governed by government who appoints
responsible person to regulate and control the company operations. the overall operations are
controlled by Chairman. The executive directors are responsible for development of strategies
and monitoring them.
Dave Lewis – Executive director (CEO) was elected and appointed in September 2014.
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John Allan – Chairman of Tesco elected and appointed on 1 March 2015.
There are five executive and eight non executive directors in Tesco
3.1 stakeholders
They are the group, individual, etc. who are directly or indirectly connected with
organization. They are affected by organization goals, objectives, etc. They can also own share
or invest in company. Tesco stakeholders include government, customers, directors, employees,
etc.
3.2 shareholders
A shareholder can be an individual or other business that owns a single or multiple share
of public or private company (Savrul, Incekara and Sener, 2014). They can be employees,
customers, etc. there can be two types of shareholder that are preference and equity. Both of
them get dividend as return on investment. There is direct relationship between shareholders
and board of directors of Tesco. It is because the members are elected by shareholders through
voting. Furthermore, the decision taken by BOD are in favor of them. They take several types of
decision like share price, dividend provided, etc. thus, any change in these decisions will directly
impact om shareholders. The growth of Tesco depends on share value or price in market. Any
change in share price result in decrease or increase in market value.
3.3 B Employees
In Tesco there are more than 476000 employees working in their stores in different
countries. they are responsible for performing operations at various levels and achieving goals
and objectives. Also, Tesco overall growth and productivity depends on employee performance.
The relationship between BOD and employees is indirect as members do not interact with them
(Kljucnikov and et.al., 2016). BOD takes decision regarding rise in pay, working hours,
benefits, etc. according to different countries employment laws. Thus, it is important for
members to take effective decisions.
3.4 C Public
It refers to general people of a nation. In this customer can also be included that
consumes Tesco goods and services. The relationship between BOD and public is that decisions
are to be taken with regards to CSR. Also, they have to communicate their decision and strategy
taken by them to public. Besides this, public feedback is taken into consideration while taking
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decision. Tesco is public limited company so it is entirely governed by them. They contribution
made towards society are in welfare of public.
QUESTION 2 PURPOSE OF PESTEL ANALYSIS
The external environment of business is represented by PESTEL. It is an acronym which
P is for political, E for Economic, S for Socio cultural, T for ttechnological, E for eenvironmental
and L for Legal. It is used by business to analyses external factors that can impact on its growth.
Any change in these factors can not be controlled by organization.
It is important for company to do this because it gives an insight on what changes might
occur. This is done by collecting data and information (Calabrese and et.al., 2018). The
advantage are as follows:-
Advantages
 It helps in taking any decision whether to expand in particular country or not. Moreover,
it gives analysis of market conditions that are prevailing.
 Furthermore, management can identify what information should be collected and which
factor should be focused on first.
 It also supports in determining change in taste and preference of customers. besides this,
fluctuations in technology or economic conditions can be identified and strategies are
developed accordingly.
 It benefits in taking cost effective decisions and better allocation of funds that improves
the way of doing business (Huang-Horowitz, 2015).
Disadvantages
 It requires a high level and effective planning to conduct analysis. Also, a lot of time and
cost is incurred in it.
 Sometimes, the analysis conducted results in poor decision due to unpredictable future
conditions.
PESTEL ANALYSIS
It is referred as macro factors in which data and information is gathered related other
markets where business is operating. It is a very wide concept that allows business to analyze
market situation precisely.
5.1Political – it reflects the political situation of any nation. It is because entire nation is run by
government by developing laws and regulations. Government is responsible for developing tariff
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and trade policies to supply chain network (Pestel analysis of Tesco. 2018). Thus, any change in
this will result in political disturbance. Also, it reflects the relation with neighboring countries.
change in government and or poor trade relations with other countries can highly impact on
company operation. The new laws will be formed and company has to follow them. Also, new
government may ban import export of certain goods or rise tax rate. the business growth will be
affected (Maula and Murray, 2017). For example - Due to Brexit Tesco is not able to operate
freely in European countries. this is because UK and EU trade policies differ. Many countries do
not want to trade with UK companies. UK relation with countries like France, Spain, etc. are
interrupted. It will affect Tesco growth and development. Globalization is also a major example
that has affected Tesco expansion.
5.2 Economic this is most important factors that consists of currency rate, tax rate, etc. the
government with help of central bank regulates and controls economic situation. Retail sector is
directly related to this as they are strong pillar of country economic condition. Fluctuations in
economic condition can lead to increase or decrease in supply or demand of products. The factor
such as high rate of inflation or decrease in value of currency rate can affect growth of industry
(Bah and Fang, 2015). Tesco will have to reduce price of goods and the profits margin will be
very low. It can lead to loss as well. It will create extra burden on company capital. For example-
in UK there is increase in labor wage bill by 4.4%. it will result in rise in cost of Tesco. Due to
this their profits will be reduced. Besides this, Tesco is still dependent on UK market for sales
and profits.
5.3 Socio cultural it is related to society and culture of country. In includes living standard,
income level, class, needs, etc. the change in taste and preference of customer forces business to
modify product features or develop new ones. Socio cultural forces has changed habits of people.
The rise in number of immigrant’s force company to develop new products and services to fulfil
their needs. Another factor is change in shopping trend and consumer preference will impact
business operations. In both cases Tesco has to modify product features so that people need are
fulfilled. For example – in present era people are more concerned about their health. So, they
only prefer those goods are organic and good for health (Apăvăloaie, 2014). Therefore, it has
forced Tesco to identify their needs so that goods are produced. It is ensured that quality is
maintained as per standards set by agencies.
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5.4 Technological this force plays a vital role in auto mobile industry. Many companies are
dependent on using technological tools and equipment’s in machines. AI has been a major
technological advancement that has affected retail industry. The factors like use of latest
technology, available of resources, etc. can restrict company growth. It can enforce them to
install or implement new technological tools and equipment’s. due to this operation are affected.
For it more funds are required and overall production process will get modified. Employees have
to b given proper training. For example Tesco has introduce RFID system through which stock is
automatically checked. It has also developed their own payment app Payqwid that allows
customers to pay online in any store of Tesco (Prajogo, 2016). Furthermore, a website is been
developed from where customers can shop 24/7 anytime, anywhere.
5.5 Environmental - it refers to protection of environment due to change in laws and
regulations. Here, certain agencies work with government and industries to monitor their
practices. Companies are bounded to implement and work with boundaries of different policies
set by government. In retail sector there is a lot of waste that is generated from plastics and use
of other materials. The change in climate or any implementation of new laws. Due to this it can
restrict use of resources (Botha, Kourie and Snyman, 2014). Tesco operates in different
countries. they have to follow some laws. For example – Tesco has taken initiative to generate
100% renewable electricity till 2030. They have developed strategy to minimize carbon footprint
up to 50% by 2020. Company are working on strategy of reduce, reuse and recycle of plastic
bags.
5.6 Legal – the legal framework plays a crucial role. Legal force includes rules and regulations
related to employment, labor laws, working hours, wages, etc. they have to followed by
organization while developing their policies. also, local authorities are responsible for regulating
and monitoring of these laws. If there is any change in laws and regulations, company operations
are affected. Also, impose of new law related to wages or working hours has to followed. In
every country national and local law differs. So, both are to be taken into consideration. For
example Tesco follows FRC code of practices. This was imposed on them as they faced legal
issue. these practices ensure that goods are according to set standards. They quality is maintained
while manufacturing it. there is also change in labor minimum wage act. The minimum wages
are increased up to 4.4%. Tesco is bounded to impose it.
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from above it can be stated that in recent time there is downfall in Tesco growth and
development (Virglerová, Dobeš and Vojtovič, 2016). This is due to change in external factors.
it has forced them to modify their strategies and goals and objectives. Due to frequent change in
factors Tesco also have to take initiatives to respond to factors. they have developed effective
strategies on how to deal with change. Moreover, retail sector is also getting impacted as it has
transformed the way of doing business at global level. in future it is expected that there will be
more changes occurs. The companies will have to focus on determining needs and developing
organic products.
CONCLUSION
This assignment conclude that Tesco is a leading grocery store in UK. The company is
basically engaged in retail sector but also provided various other services. It is important to
conduct pestle analyses to identify external factors that can impact on its growth. Moreover, it
helps in gathering data and information on basis of which decisions are taken. Through this,
business can be done in better way. Tesco is impacted due to change in different macro factors
like change in government, rise in inflation, latest technology, etc. for it several strategies are
developed to maintain growth and minimize impact of change. Many initiatives are taken by
them in order to sustain in market for long term. Some of them are implemented with expansion
in other country.
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REFERENCES
Books and journals
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productivity in Africa. Journal of Development Economics. 114. pp.159-171.
Botha, A., Kourie, D. and Snyman, R., 2014. Coping with continuous change in the business
environment: Knowledge management and knowledge management technology. Elsevier.
Calabrese, M. and et.al., 2018. From mechanical to cognitive view: The changes of decision
making in business environment. In Social Dynamics in a Systems Perspective (pp. 223-240).
Springer, Cham.
Huang-Horowitz, N.C., 2015. Public relations in the small business environment: Creating
identity and building reputation. Public Relations Review. 41(3). pp.345-353.
Kljucnikov, A. and et.al., 2016. The entreprenurial perception of SME business
environment quality in the Czech Republic. Journal of Competitiveness. 8(1).
Maula, M. and Murray, G., 2017. Corporate venture capital and the creation of US public
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Moroni, I., Arruda, A. and Araujo, K., 2015. The design and technological innovation: how
to understand the growth of startups companies in competitive business environment. Procedia
Manufacturing. 3. pp.2199-2204.
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environment in delivering business performance. International Journal of Production
Economics. 171. pp.241-249.
Savrul, M., Incekara, A. and Sener, S., 2014. The potential of e-commerce for SMEs in a
globalizing business environment. Procedia-Social and Behavioral Sciences. 150. pp.35-45.
Virglerová, Z., Dobeš, K. and Vojtovič, S., 2016. The perception of the state’s influence on
its business environment in the SMEs from Czech Republic. Administratie si Management
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