Unit 1 Business Environment Assignment Solution – Tesco

Introduction

In this unit 1 business environment assignment solution – Tesco it is required to do the analysis of business in respect of TESCO which is one of the largest multinational retail organisations in UK having its branches all over the world. It is having approx. 2,318 stores as well as employing more than 326,000 individuals. It is also providing online services with the help of its subsidiary named Tesco.com. The organisation is selling around 40,000 food products which take into consideration apparels as well as other non-food lines.

Task 1

1. Analyse the internal environment of the selected business. Identify and explain 5 strengths and 5 weaknesses of the selected organisation.

For analysing the  business strategy of TESCO,  let us consider the PESTEL framework for the organisation which is mentioned as under,

• Political (P) – The performance of TESCO is greatly affected by the political and legislative conditions of the countries where it is functioning. In regard of employment legislations, the retailers are encouraged by the government for offering a mix of employment opportunities from jobs that are flexible, lower-paid and locally-based to jobs that are higher-skilled, higher-paid and located centrally. TESCO acknowledges the fact that retailing is having a huge influence in respect of factors related with jobs and people and, is an innately domestic as well as labour-intensive sector. TESCO does the employment of huge number of students as well as workers that are disabled and elderly by paying them lower rates. These workers provide an increased loyalty level in the retail industry that has a high employee turnover and as a result does the representation of desirable staffs.
• Economic (E) – TESCO is concerned with economic factors since they will be influencing demand, costs, prices as well as profits. A major influential economical factor is the levels of high unemployment that reduces the efficient demand in respect of various products, negatively influencing the demand that is needed for producing such products. Such economic factors are mostly beyond the organisational control, but they have a profound influence on the performance as well as the marketing mix. TESCO is still increasingly reliant on the UK market, even though the global business is continuously developing and has the expectation of contributing higher amounts towards the profitability of TESCO in the coming years. Therefore, any slowdown in the food market of UK will adversely influence TESCO and will expose it to risks related with market concentration. (McDonald, 2012)
• Social (S) – The recent trends are indicating that the customers in Britain are moving towards ‘one-stop’ and ‘bulk’ shopping because of different social changes. TESCO, as a result, increased the availability of the amount of non-food products in respect of sale. The kind of products and services that the customers are demanding is the functional outcome of their social conditioning and their subsequent attitudes as well as beliefs. For instance, TESCO has adopted its product mix for accommodating a growing demand towards organic products.
• Technological (T) – Technology plays a significant role in influencing the development of different products at TESCO. Both the customers and the organisation are getting benefitted by the new technologies.  The technologies that are used by the TESCO stores are wireless devices, electronic shelf labelling, intelligent scale, self check-out machine and radio frequency identification aka RFID. The effectiveness of distribution as well as stocking activities has developed immensely by adopting Electronic Point of Sale, Electronic Funds Transfer Systems as well as electronic scanners. (Miles, 2011)
• Environmental (E) – Environmental issues, which are an essential area for organisations towards acting in a socially responsible manner, are considered to be significant societal issues that are creating a threat amongst the food retailers. Therefore, through the recognition of this trend within the wide ethical standpoint, the corporate social responsibility of TESCO is having concern with the processes by which the company will be exceeding the smallest compulsions to stakeholders specified with the help of regulation as well as corporate governance. (Buchanan, 2010)
• Legislative (L) – Different  safety legislations  of the government as well as policies are having a direct influence on TESCO’s performance. For example, it was suggested by the Food Retailing Commission aka FRC for setting up an enforceable Code of Practice to ban many of the present practices like demanding payments from suppliers as well as changing agreed prices without notice. For implementing pricing policies that are politically correct, TESCO is offering a reduction in prices to the customers in respect of purchasing fuel depending on the amount spent for buying groceries.

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Strengths and Weaknesses of TESCO

Strengths

• Increase in market share – TESCO is holding a 13% share of the retail market in UK. Its multi-format potential states that it will continue developing share in food while growing the contribution of space from hypermarkets will be allowing it for driving an increased share in non-food. (Lind, 2014)
• Brand value – Profits coming from TESCO’s operations in Europe, Asia as well as Ireland grew by 78% during the last financial year. The organisation is having a strong image of the brand and is having association with better quality, reliable products that is representing outstanding worth. The innovative methods of TESCO to improve the shopping experience of customers and its efforts for branching out into insurance as well as finance have benefitted from this as well.
• TESCO online – The world’s largest online supermarket is Tesco.com and in the current year the group had sales of over £577 million which is having a 29% growth from the previous year. Tesco online is currently functioning in more than 270 stores throughout the country, which covers 96% of the UK. Having more than a million households throughout the nation using the online services of the organisation, it is having a firm platform for developing this stream of revenue further. (Kitchin, 2010)
• Reinforcing UK market leadership – From the time of acquiring the top position in 1996, TESCO did the development of an efficient multi-format strategic aspect that assisted in accelerating its beneficial aspects. The company’s sales in UK are presently 71% bigger than Sainsbury’s. Therefore, the company is having a massively firm position in its local market.
• Insurance – The Personal Finance of TESCO reached the target of 1 million motor insurance policies that made it the fastest developing motor insurance provider till date. The instant travel insurance of the group permits Clubcard holders in buying their holiday insurance with convenience at the checkout. The life insurance policy was voted as ‘The Most Competitive Life Insurance Provider’ in the MoneyFacts Awards.

Weaknesses

• Reliance upon the UK market – Even though, there is growth occurring in the global business, and there is anticipated for contributing increased amounts towards the profits of TESCO in the coming years, the organisation is still having strong dependency on the UK market. Although, this might not be considered as a significant weakness in the short period, any changes occurring in the supermarket industry in UK during the next year might change the balance of power of the UK supermarket as well as influence share.
• Reduction in debt – TESCO will not be doing the reduction in its debt for few years at least. The company is having a huge program of capital expenditure majorly because of its massive investment in space for new stores. As because, it is having such aggressive expansion, there is little free cash in respect of any other functioning for TESCO. (Edgar, 2010)
• Signs point to serial acquisitions – Having an enterprise worth of £23 billion, TESCO is clearly having massive effectiveness. Moreover, it is having an extensive range of product and there will be justification of any acquisition especially in the UK. While it is effective for the organisation to use the ‘fill the gap’ strategy, there is the risk of TESCO becoming a serial acquirer since this has a propensity to decrease the visibility of earnings as well as quality.
• Weak presence in other countries – The company although having a strong presence in the UK market do not have a strong presence in other countries as a result, it needs to have a cut-throat competition with other global retail brands for having its presence more strongly felt in those countries. (Miles, 2011)
• Recent controversies that resulted in negative media coverage and public image – There had occurred Profit Overstatement Controversy at TESCO in which although, the company suspended four senior level executives, this whole matter resulted in receiving negative media coverage and public image. Also, certain other areas of controversy were treatment of employees, trading deals with suppliers as well as customers.

2. Define and discuss to what extent you regard the following as key factors in your selected organisation’s performance over the last 20 years:

• Leadership
• Corporate Culture
• Corporate Governance

Leadership – It is the ability of the management of an organisation to make effective decisions and encourage others in giving better performance. Efficient leaders have the ability in setting as well as achieving objectives that are challenging, for taking fast as well as crucial action even in challenging circumstances, for outperforming their competition, for taking calculated risks as well as for persevering at the time of crisis.  Role of leadership  traits also include effective skills of communication, self-confidence, ability for managing others as well as the readiness for embracing change. (Lind, 2014). Tesco is considered to be a customer-oriented business. It focuses on offering products that will be delivering effective service to the customers having correct pricing. For sustaining the leading position in the market, the organisation requires skilful employees at every level as well as in every role. Tesco focuses on developing the qualities of leadership of its staffs all through the company that ranges from administrators and customer assistants to the board of directors. The leadership structure of Tesco not just focuses on the abilities as well as competencies but on the individual traits and behavioural aspects which it is expecting from its leaders. Tesco tries to recruit managers who are positive, confident as well as genuine, with the capability for inspiring as well as encouraging their teams. An important aspect of Tesco’s programme to build leaders is to encourage personal reassessment as well as reflection. This assists the staffs for assessing their strengths as well as finding approaches to demonstrate the traits that are crucial for the lasting business development. (Lind, 2014)

Corporate Culture – This is considered to be the persistent values, beliefs as well as approaches that personifies an organisation as well as directs its practices. An organisation’s internal culture can be expressed in its mission or vision statement. Corporate culture components take into consideration the physical environment of an organisation, the practices of human resource as well as the employees itself.  There is the reflection of corporate culture also in the degree of importance placed on different essential components like hierarchy, method, association, competition, involvement of community as well as social commitment. (McDaniel, 2011)

For TESCO, corporate culture is regarded as the key factor in respect of organisational performance due to the following components which are,

• Vision – A brilliant culture commences with a vision statement. This assists in guiding the values of TESCO as well as providing it with purpose. This purpose as a result does the orientation of all the decisional aspects made by the staffs at TESCO.
• Values – TESCO’s values are the mainstay of its cultural aspect. TESCO is having a clearly expressed set of values that are clearly communicated to every staff and takes into consideration the manner in which the organisation is trying to serve the customers as well as do the upholding of professional standards.
• Practices – The values are of no significance if they are not put into the practice of the organisation. Therefore, in TESCO reinforces the organisational values and pit them into practice in the company for receiving an effective outcome.
• People – TESCO, without its people would not have been successful in building a consistent culture who either did the sharing of its core values or possessing the eagerness as well as capability for embracing those values. (McCalman, 2015)

Corporate Governance – This is the method of rules, practices as well as methods through which an organisation is directed as well as controlled. It generally takes into consideration the assessing the interests of an organisation’s various stakeholders like shareholder’s, management, customers, suppliers, government and so on. (Lind, 2014). For TESCO, corporate governance is regarded as the key factor in respect of organisational performance due to the following components which are,

• Changing structure of ownership
• Significance of social responsibility
• Rising number of scams
• Lack of concern on the part of shareholders
• Globalisation
• Takeovers and Mergers

Conclusion

This assignment delves with the functioning of TESCO which is a large business organisation which is having an international presence and it’s headquarter is in UK. The internal environment of TESCO has been analysed as well as strengths and weaknesses of the company is identified as well as explained. Also, certain key factors have been defined and discussed regarding the performance of TESCO viz. Leadership, Corporate Culture and Corporate Governance.

References

Buchanan, D.A. and Huczynski, A.A., (2010).  Organizational behaviour  (p. 794).
Edgar H., S. (2010). Organisational Culture and Leadership. John Wiley and Sons
Kitchin, D., (2010). An introduction to organisational behaviour for managers and engineers. Routledge.
Lind, P. (2014). Monitoring Business Performance. Routledge
McCalman, J. (2015). Change Management: A Guide to Effective Implementation. SAGE.
McDaniel, C. (2011).  Essentials of Marketing. Cengage Learning.
McDonald, M. (2012). Market Segmentation. John Wiley & Sons.
Miles., R. and Snow c., C. (2011). Organizational strategy, Structure and Process. Mc Graw Hill.