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Unit 11 Business Environment Level 4 Regent College

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Business Environment of Tesco

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INTRODUCTION

Business organization is a group of individuals who are working together to attain a common objective. It is made up of employees working at different levels to ensure the roles and responsibilities are fulfilled to achieve the final goal for the business. The role of management is to ensure that effective planning is done, making strategies and supervising and the employee’s role is to ensure the execution is done smoothly and coordination is there within each department. The environment in which a business has to perform its activities is impacted by external factors such as socio-economic factors, political, local regulations etc.

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LO1: EXPLAIN DIFFERENT TYPES AND PURPOSES OF ORGANISATIONS; PUBLIC, PRIVATE AND VOLUNTARY SECTORS AND LEGAL STRUCTURES.

There are various types of organizations which perform their respective function in the market and work towards their vision and mission. These organizations can be broadly categorized into Public Sector, Private Sector, public and private corporative, charitable organizations and Non-Government/Non-Profit Organizations. A private organization is one which is owned by the individuals and are following the laws of the land where they are having their operations. They can be further classified into three types i.e. Proprietorship, partnership and cooperative society or units. A private organization which is owned by single individual who is operating the entire operations of the firm and is also responsible for the probable liabilities and any legislations which might be coming towards the firm. In United Kingdom for any individual to start their business first they have to register themselves with HM revenue and customs department. The individual will be responsible for the payment of the tax to the government. A partnership firm is an organization where there are two or more individuals or firms which come together to form a company. In case of a partnership firm it is the responsibility of both or all the partners to get the necessary registration done and also are responsible for the payment of taxes to the government. A Public organization is one where the full ownership or part ownership is with the government. The government is responsible for the functioning of the activities in the company. The main purpose of the organization is towards serving the community and not solely making profits. The working of a public organization is very transparent and there is a decision making body selected by the employee and they make the plans whereas the rest of the employees are working on the execution of those plans. Charitable organizations are which are working for a specific area towards the betterment of the society, they do not have interference from the government on their working, organizations which are working for the treatment of HIV can be classified as the charitable organization.

LO2: EXPLAIN THE SIZE AND SCOPE OF A RANGE OF DIFFERENT TYPES OF ORGANIZATIONS

All the organizations are working towards achieving the goals and objectives for which they come into existence. The size of a private organization is generally small and its scope is small and not spread widely. A partnership firm is also of a small size and has a limited scope of range. A public enterprise is big in its scale and the size of the organization is also big.

Every organization has a vision and mission for which are working and striving to achieve. For the purpose of this paper we have selected Tesco as the organization. It is the biggest retain chain of the United Kingdom. Not only United Kingdom they have expanded their operations into different parts of the world such as China, Hungry, Malaysia and India. All the employees are working in this organization towards a single goal. The employees are clear of the company’s vision, mission and objectives. The organization is known for giving world class services to their consumers who are linked to the company either directly by visiting the store or shopping on the digital platforms. The focus on collection of feedback from most of the customers so that they can improve and able to provide even better services to their customers.

INTRODUCTION TO TESCO

Tesco started its operations in the year 1919 in Welwyn Garden City located at Hertfordshire, United Kingdom as a public enterprise. The company has now almost 100 outlets around the world. The company follows the laws of the land wherever they have established their operations (Coe and Lee, 2013). The company has been able to meet the needs and requirements of its customers in an efficient manner since its inception. The company is very much dedicated and has been working towards the society and also improvement of the environment. They have also opened an outlet which is a Zero-Carbon store that means the store is providing all the services to its customers without any pollution into the environment.

PRODUCT ANS SERVICES OF TESCO

Tesco is known for their super markets and mega stores which deals in a variety of products ranging from groceries, electronic gadgets, clothing segments designed for men, women, children belonging to all age groups. They have a in house brand where they provide these products at better prices to their customers and also have a home delivery services. They have also entered into the insurance sector and have a wide range of products there as well from sectors such as automobiles, life insurance, health, and travel insurance. Tesco has recently moved into lending sector and is providing loan, mortgage services into the market. For small children, they have a saving account product to promote savings. They have a tourism arm as well which is providing tour packages to its customers.

VISION AND MISSION OF TESCO

Tesco has very clearly defined its vision for the company and their vision can be summed up as, a company which is entirely customer based and is working towards grabbing all the opportunities which are there for the growth of the organization. A company which wants to be innovative to ensure they have an edge over their competitors. A company which want to be known for their brand loyalty in their customers and has been able to involve global talent for this purpose. Company also wants to build a very strong customer base that is connected to them and always looks for Tesco to meet their needs. Finally, the company wants to be the one which is giving its customers best of the products and with top notch quality.

The mission statement of Tesco is to provide the best quality of product and services at best possible prices to their customers so that they are connected strongly to the company.

OBJECTIVES OF TESCO

The Objectives which Tesco has stated are as below:

  1. They want to increase their overall sales from all outlets and for that they want to increase the demand for their product in the market by approaching the right market segment. Tesco is currently focusing on opening more outlets and also is sourcing their products in bulk to enjoy cost leadership.
  2. They want to be the cost leader in their industry and thus cutting unnecessary costs is one of their objectives. And this will further lead to providing products to their customers at much lower prices. When a product is placed at a lower price than market then the demand for the product also goes up.
  3. They want to introduce Health product line in their outlets, the reason for this is that the customers are getting conscious of what they eat and thus the company wants to take the first mover advantage by placing products which are healthier and are organic in nature.
  4. They want to be make them available on the digital platforms as well as the times are changing and more and more customers are opting for online shopping means thus they want to be there to be the number one choice of their customers.
  5. Tesco is very much inclined towards betterment of the society and they want to be the company who is positively contributing to the society and environment.

LO3 EXPLAIN THE RELATIONSHIP BETWEEN DIFFERENT ORGANIZATIONAL FUNCTIONS AND HOW THEY LINK TO ORGANIZATIONAL OBJECTIVES AND STRUCTURE.

Tesco has their organization based on hierarchy wherein the decision making is top to down that means the top management holds the control on decision making of the organization (Son, Baek, Park and Kim, 2018). However, to make the decision making faster and smoother they have designed a set of rules which helps to run the working of the organizations in a smooth way and also in case there is any dispute between the workers or departments. That’s said the company also gives due care to the local laws of the place where they are working.

ORGANIZATION STRUCTURE IN TESCO

The structure of TESCO is divided into three levels the Top-Level management, Middle level management and lower level management.

The top-levelmanagement is made up of the directors in the company. There is a total of 9 directors in TESCO who are responsible for the overall decision making for the company. They are mainly the Managing Director or Chairman, the Chief Executive Offer, Chief Finance Officer, some non-executive director and other directors who jointly take decision for the company in present market.

The Middle level management consists of those who makes the plan for execution for the direction they have received from the top management, the act as an interface between the board of directors and the lower level management. The vice presidents, general managers and team leaders are considered in this level. Their job is to effectively communicate to the employees as to what is required from them to achieve the objectives of the company.

TheLower level management are the one who are executing the ideas and direction of the company. The employees and store managers who are tasked to perform a specific job for running the day to day working smoothly are part of this level. An outlet in Tesco is mainly divided into three sections i.e. food items, non-food items and the personal products. This level is in direct touch with their customers thus their feedback should always be listen to and actioned for effective decision making for the company and to continue to be market leaders.

LO4: DEMONSTRATE BOTH THE POSITIVE AND NEGATIVE INFLUENCE/IMPACT THE MACRO ENVIRONMENT HAS ON BUSINESS OPERATIONS

PESTLE ANALYSIS WITH REGARDS TO TESCO

Tesco is the largest retail store in United Kingdom and is also spread over 12 countries other than UK. Due to their global presence, they are impacted by a lot of external factors as they have to adhere to the guidelines, rule and regulations and local traditions of all these counties where they have operations. They cannot have standard working guidelines for each country as with that they will not be able to perform their functions in those countries. The PESTLE analysis helps to ascertain the impact of the macro environment on TESCO’s business operations and deals with Political factors, Economic factors, the social factors, Technological impacts, Legal impacts, and Environmental factors. Let us understand each one of them separately.

Political Factors: Today the global economy is not in a stable state and due to which the focus has been on how the domestic market can be boosted and the employment can be generated. TESCO generates a lot employment with setting up of its stores and thus has been in focus of the political parties and faces a challenge to setup more stores in United Kingdom than in other parts of the world. The company also wants to diversify their work force and thus hires employees from different background and cultures. The government in United Kingdom has also imposed additional tax in the form of VAT which has impacted the company negatively. The reason is that the consumers power of buying has gone down and thus sales of the company also gets impacted. However, to ensure the company is able to be first choice of its customers and is working on plans how they can reduce the prices of their products to maintain their sales. The government is also coming up with a tax on the food products which will again hamper their sales as costs of their products will go up. The tax is specifically on the products which are not good for the health of the citizens (Burt, Johansson and Dawson, 2015). To lower the impact of this change TESCO has already started to work on setting up a food line which is catering to only healthy products for its customers.

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Economic Factors: The Gross Domestic Product GDP of United Kingdom has been improving and thereby providing favorable economic environment to TESCO to operate and providing opportunities to grow their business. If the GDP of a country is rising then it means that the purchasing power of its citizen will also go up thereby the sales of the companies will have a positive impact on it. Contradict to that in case of poor economic situation of the company the power of spending of its citizens deteriorates and thus have a negative impact on sales and profits of a company. TESCO has set their targets for sales and profits based on the economic situation of United Kingdom and the countries where it has operations (Wood, Coe, and Wrigley, 2016).

Social Factors: The concern for United Kingdom is that the rate of birth is going down and the average age of living is going up. This has a direct impact on increase in sales of the products designed for old generation and with respect to young generation is far much higher. This change in the buying pattern has led TESCO to also make changes in their procurement patterns as well as the digital means which are assisting to the targeted audience in that age group. As the old age people prefer more to get the products delivered at their home and like to get the products more comfortably. Thus, they have also invested more on digitalizing their stores and also online purchasing is promoted. They are also ensuring that their loyal customers are delivered the products at their home.

Technology Factor: TESCO has been using a more advanced technology than compared to its competition. The technology has also enabled Tesco to save costs for the company. It has helped them to manage their distribution channels as well as they procurement of products are organized. The technology has also helped them make improvement in their supply chain and further shorten the time for delivery of products to their stores as well as ensuring timely receipt of products in their distribution center. The digital technologies have helped Tesco to increase their sales and more channels of making the revenues. The company is constantly making changes in their products and services to serve the end customer and their demands in the best possible manner, thus an effective feedback mechanism has also helped them to improve on certain parameters. Online medium for shopping is one example of digital technology that has been remarkable. Tesco has faced challenges with implementation of the online shopping module for its customers as they did not anticipate the demand from its customers and thus having a negative impact on customer experience.

Environmental Factors: The environment is changing at a very fast pace and thus it is impacting the businesses as well and they also need to keep changing their setup accordingly. The impact of global warming is increasing and has also led to rise in temperature in the arctic circle. This is led to melting of the ice and increasing the overall temperature of the globe. Considering that Tesco has promised as part of their corporate social responsibility that they will make changes to their outlets so that minimum resources get wasted and also the amount of waste generated is reduced and is also recycled in a correct manner (Wood, Coe, and Wrigley, 2016). Company has also opened a Zero carbon store which has no pollution impact on the environment.

Legal Factor:Tesco has to follow regulations of the countries where they have their operations. They have also made changes in their policies to suit better to the laws of the land and also has been contributing to the society as per the regulations. They have been supporting families of the farmers from whom they are procuring their vegetables and other products.Tesco wants to comply to the laws of the land and wants to ensure that there is no violation in any of the outlet with regards to local laws.

LO 5: DETERMINE THE INTERNAL STRENGTHS AND WEAKNESSES OF SPECIFIC BUSINESSES AND EXPLAIN THEIR INTERRELATIONSHIP WITH EXTERNAL MACRO FACTORS

SWOT ANLYSIS OF TESCO

The scope of operations for Tesco is spread to over 12 countries and that is why it is very important for Tesco. They need to ensure that keep focusing on their strength and working on to improve their weak areas. Further they should also be varying of the opportunities that come towards them and meantime be aware of the threats around them.

Strengths: Tesco is a market leader in their segment whose biggest strength is that the quality of products they provide at an affordable price. Tesco has been making progress towards digitalizing and providing online mediums of shopping for their customers and able to bring them comforts. Customers are able to shop at their home and also get delivery of the products at their door steps. Their strength lies in their bulk procurement and thus taking their overall costs down.

Weaknesses: Tesco is associated with different businesses with different balance sheets and some are not performing well due to which their overall profits get reduced. Businesses such as lending, mortgaging and smart phone are not doing well and are making losses. The reason for these businesses not performing is that Tesco does not have experience and expertise with regards to smart phone and crediting. Further the smart phone trends are continuously changing and this adds more pressure on the company to continue to invest more money into their research and development department.

Opportunities: Tesco is good in venturing into new businesses further they have to make good use of their existing businesses to promote their core business of retail. They should make good use of their smart phone division to promote the retail outlets. There are greater opportunities with regards to expansion on the technological front where with their online shopping they can further grow and create more customer base there. (Wood, Coe, and Wrigley, 2016).TESCO has also opened up fresh outlets in Australia and these outlets are being supported by the government due to working model of Tesco thus there is huge scope of further expansion in this country. Tesco can even collaborate with the existing local players in new markets thereby getting advantage of a set customer base and giving benefits of their working techniques to the other player.

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Threats: There is a constant threat to Tesco with regards to losing their customers to competition which is increasing day by day and also large players are entering the market which pose a threat to Tesco. One of the biggest competitor to Tesco is Walmart which is expanding at a much faster pace into the new markets. One of the problem for Tesco is that as their stores are huge thus they are situated at distant areas and thus the customers have difficulties in approaching and commuting from the stores. With the increase in online shopping trends the customers do not want to make efforts to travel and go this far for getting the groceries and other products which they do not want to buy in bulk. The customer footfall has gone down for Tesco thus impacting their overall sales negatively. Tesco has to adhere to the local laws of the land thus getting cheap and quality labor has been a big concern for them, they want to keep their costs lower and thus need lower labor costs as well (Son, Baek, Park and Kim, 2018).

CONCLUSION

Tesco is one of the world’s leading retail chain and is the leading chain for United Kingdom. Tesco has a clear vision to provide services and products to its customers at a affordable prices. They are impacted very much by all the external business factors as their scope of operation is beyond United Kingdom and has to comply to different situation differently, rather different situation can have a variable impact on their different outlets situated across globe (Coe and Lee, 2013). The PESTLE analysis conducted on Tesco has helped us to understand that all the factors have anequal impact on the company. Though economic and social factors have a scope of opportunity in them and they company at their end is also devoted to contributing to the society and its well-being. Technology has also been a strength for Tesco and has helped them grow their business. SWOT analysis helps us to understand that for Tesco their biggest strength is their Brand value and the loyalty of the customers towards it. Whereas the weakest point for Tesco is their inability to use all the available resources to them. Tesco has also participated into business of lending and mortgaging, for this business they lack in the experience thus faces a challenge with making progress. The success of Tesco depends on how well they procure their products in order to take down their costs.

REFERENCES

  • Coe, N.M. and Lee, Y.S., 2013. ‘We’ve learnt how to be local’: the deepening territorial embeddedness of Samsung–Tesco in South Korea.Journal of Economic Geography,13(2), pp.327-356.
  • Wood, S., Coe, N.M. and Wrigley, N., 2016. Multi-scalar localization and capability transference: exploring embeddedness in the Asian retail expansion of Tesco.Regional Studies,50(3), pp.475-495.
  • Burt, S., Johansson, U. and Dawson, J., 2015. International retailing as embedded business models.Journal of Economic Geography,16(3), pp.715-747
  • Loonam, J., Eaves, S., Kumar, V. and Parry, G., 2018. Towards digital transformation: Lessons learned from traditional organizations.Strategic Change,27(2), pp.101-109
  • Son, J., Baek, J., Park, H. and Kim, C., 2018. The localized merchandising for international retailers: A study of Tesco’s failure in Japan.The Ritsumeikan Business Review,56(5), pp.1-20.
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