This assessment will cover the following questions:
- Evaluate how the market economy functions and what is the role of government in it.
- Evaluate the global business environment in the context of Tesco.
- Tesco is a retail supermarket in the UK. Generate the growing impact of the European Union in the business operating environment.
Business environment basically refers to all the forces which have an influence on business. Forces which are in this environment are political, social, economic and technological factors and these factors are not in control of the business. Analysis of this for a start-up organization needs to be done so that when they are entering the market it is easier for them. These factors make it easier for organizations to detect the SWOT and PESTLE factors of the company easily. There are changes which are required in businesses and also improvement so that they can meet the demands of customers which will be very helpful in gaining more revenue. Decisions which are taken hypothetically will not be helpful in the long run in the market therefore decisions should be taken after analysing the business environment. In the UK there is a lot of opportunities for businesses to grow but the right strategies and tools have to be used so that the right decisions can be taken. Long-term growth and survival of business are easily present after understanding the business environment so that they can have a better functioning in market. The business environment is dynamic in nature and can change according to situations which is a very strong point for using this force to understand the market better.
Tesco is a multinational grocery retailer organization and they have expanded themselves around 13 countries. Tesco is a public limited company and they are dealing in products like clothing, electronics, toys, petrol, software, furniture, etc. As of 2019, number of employees working in company are 450,000 and revenue which company generated was 63,911 euros (Tesco, 2020). Headquarters of Tesco is in England, United kingdom and there are more than 100 stores across country. Tesco is listed in London Stock Exchange and is place by gross revenues as the third largest retailer in the world.
The report would be discussing the internal and external factors which are impacting businesses in market. There are factors which have an influence on business, nature and culture environment in a very specific manner which would help the organizations to make decisions and planning of the future accordingly. This would help the organization to e shaped in a better way and the report would also consist of SWOT and PESTLE factors of Tesco so that the business environment of the organization can be well understood.
Business, cultural and natural environment shape behaviour
Businesses have a lot of forces which needs to consider and then make decisions for a long run in market. For having a strong market base there has to be a shape of behaviour which is needed to be present in organization so that the functioning can take place in a better way. In shaping the behaviour of organization culture, nature and business environment play a very important role.
Culture environment are beliefs, practices, customs and behaviours of business which will make the functioning of the organization better. These factors have an impact on organization which makes organization form policies or rules accordingly will make the working environment better (The cultural environment, 2019). Culture does shape the behaviour of an organization since there is a sense of working within the organization which impacts on the external factors. This will make the employees have a better atmosphere in Tesco be better and work as team which will improve the productivity. Tesco is following market oriented and hierarchy oriented cultures so that they can make a better functioning in market for themselves. Market oriented helps Tesco to focus on competition in market and achieve the objectives and goals they have set for the future. This helps business to have a direction of functioning which would have employees have clarity as to what the organization is expecting out of them. Hierarchy oriented there is no communication gap in Tesco because of the managers and leaders who are providing clarity to the employees which impacts as efficient functioning of Tesco. Cultural environment is not just creating a life balance amongst employees of Tesco but it is also creating a sense of interpersonal community between employees. To create a healthy environment in organization Tesco gives the employees incentives, rewards and extra privileges so that employees are motivated all times. Since the employees not just do their work but fill in a lot of gaps in organization, so they are very talented and there are events which are held in Tesco so that employees get a platform to show their talent (Tesco controls, Inc., 2020).
There are employees working in Tesco who do not share their language, culture, rural background, etc. but Tesco makes sure that they do not differentiate and treat all of them the same so that the functioning of business is not affected. Technological changes is one of that factor which is developing in Tesco very frequently and that would help in making the organization have a better functioning for themselves (Ivančić and et.al., 2017). Tesco is using democratic style of management so that they can get more ideas and innovations in organization which would help in making working environment stronger and get a competitive advantage. Attitude of employees towards changes and functioning of organization is positive since the management style that is being followed is very adequate.
Business environment is defined as total sum of all external and internal factors that have an influence on business. This includes the customers, employees, management, suppliers, demand and business regulations.
Economic environment is defined as the external factors in business market which are influencing a business. Understanding the economic conditions of country and company is very important for Tesco only then they will be able to make decisions accordingly for the future and the present strategies which the company should use for the competitive advantage. Economic environment can be divided into three divisions which are policies, system and conditions of economy (Phillips and Moutinho, 2018). Tesco has to be very careful while making decisions for the development of company. In UK there is an increase of GDP and Tesco is having a very good growth opportunities for future. Exchange of current can also affect the behaviour of the company because the rates of currency differ. That is one of the reasons why Tesco will have to make decisions accordingly if they need to invest their revenue in other strategies. Technological factors are improving which is providing advancement and that can provide development of Tesco as a competitive company (Cori, 2017).
Employ rates of the country is getting better which means that the GDP of the country is improving and in 2019 it was 61% (United Kingdom Employment Rate, 2020). Tesco can use that as an advantage by increasing the price of products so that they can make profits. Tesco is expanding itself in a lot of countries and it already has in a lot of countries in the past. The company wants to expand themselves over all so that they can have a profit in market. There is a lot of scope for Tesco to improve themselves and have a better standards for themselves. There is a lot of drawbacks which the company is having because they are not being able to have a stable employment in company, but they have improved a lot.
Non- Economic Environment
Non- economic environment are the surroundings in which the business operated or in other words those factors which have an influence in the functioning of organization. Factors which are involved in this environment are political, legal, technical, social, cultural, physical, etc. It is very important for Tesco to understand the functioning of society of countries which Tesco is expanding into (Kuzmanova, 2016). Culture of society will make an impact on the company and the products which the company is dealing in. Socio cultural environment is including the language issues which the companies have therefore it is very important for the company to have a better functioning strategy for themselves. Tesco has already made transportation for suppliers and customers very cheaper strategy so that the company can save on a lot of cost-cutting for themselves.
Ecological environment of Tesco is very good and they have reduced the foot print of carbon of company so that they can contribute for improving the environment. The population in UK is increasing and the company can make a lot of profit because demands will increase as well which is a very good factor (Sharma and Gupta, 2017). Productivity of the products and company has to improve so that they can reach the customers from time to time. Weather, climate, geographical environment of countries which Tesco is spread in are having a limitation on Tesco from reach to their customers from time to time.
The environment which includes the interference of living species, climate, weather and natural sources that affect human survival and economic activity of world. Natural factors plays vital role in the country because they change quality of human life. The natural factors are geographical and ecological factors which can influence the organizational behaviour in the country (Cori, 2017). Natural factor encompasses availability of natural resources, weather and climatic condition, location aspect and topographical factors. These factors directly gives impact on the business environment. For example climate change is natural factor which plays vital role in the organization. Tesco is multinational company in UK which retails groceries in the business market. In winter season, organization gets positive aspect because they store large productivity of groceries in their warehouse, as result organization fulfils customers demand by providing required quantity groceries. Winter season improves economical scale and retains large number of customers in company. UK has lots of manufacturing industry which leads fluctuation in the climate because manufacturing industries produces pollution (Farooq, 2016). As result climate is not stable in country which directly gives impact on organization performance. i.e. in summer season, organization can't keep high productivity of groceries at grocery store which gives impact on customer purchasing behaviour. Due to lack of productivity unable to fulfil customer demand that directly gives impact on sale scale. Both example of Tesco shows that climate condition leads change in business environment.
Location aspect also includes into natural factor which also give impact on organization environment. For example Tesco company is the third largest company on the basis of revenue. Organization has lots of stores which operates in various countries. It is the strength of the Tesco which helps them to reach each customer and offers their services well-formed. Organization trades their groceries into various market i.e. hypermarket, supermarket, conventional stores etc. the big firm of the Tesco is established in UK which is more famous for groceries in the country. UK has high requirement of the groceries which is golden opportunity for the Tesco because it offers green groceries to customers. Location aspect gives negative impact because organization have to pay high taxes during trading with other countries. Even organization have to face political issues i.e. government instability, taxes etc. because they have to change their policies by and by which leads economic loss in the company. Therefore, location aspect also give impact on business environment. Ecological factors are rainfall, humidity etc. which also give impact on Tesco environment. Raining climate of UK, give impact on organization environment. For example supplier of Tesco gets problem in transportation during rainy season because they unable to supply groceries various places (Yang and et.al., 2018). Rainy season reduces performance of supplier which is negative aspect for the company. In humidity, weather organization have to face loss because groceries are rotten in warehouse, that leads wastage of money. Thus, ecological factors give negative impact on organization performance as well and change environment of the company.
Pestle Analysis it is analytical tool that helps to identify various macro environment that impact on the functioning of company. Company used pestle analysis to analysis market situation in order to gain competitive advantages in the industry. It is especially done by company when it is planning to enter into new market in order to understand market situation of new market. Tesco company has done pestle analysis in order to understand external factors that impact on the functioning of Tesco.
Political Factor: Political factor impact adversely on the functioning of company as it includes policies of government rule and regulation in the country. Due to political instability and Brexit import and export of company have been reduced as UK was main trading partner of European Union (Schyns, 2016). Company is able to grow and survive because it operates its business across the globe. Thus, political situation of UK has adversely impact on sales and profitability of the Tesco in the industry.
Economical Factor: Economic condition in which Tesco operates its business is suffering situation of recessiondue to Brexit. High debt of government, high employment rate and low disposable income of customers has lead to decrease in demand of products and services of Tesco. Company is able to cope with such situation by introducing promotion offers or expanding its business across various nation. Thus, economic condition of UK has impact on cost of production and sales of the company.
Social Factor: It includes belief, attitude and value of people living in the society as people preferences changes continuously so the company in order to gain competitive advantages has to identify such factors. Nowadays people are more concerned about their health in UK due to rising issue of obesity so it forces company to introduce organic products in its product range (Malackanicova, 2016). Thus, company by including organic food in its product range is able to satisfied needs of customers beyond their expectancy and expand its market share.
Technological Factors: It had impact positively as it provide opportunity to company to expand its share, increase its sales and customers satisfaction by advancement in technology. Company in order to provide customer satisfaction has introduced online shopping that provides ease to customers to shop from home. Thus, it results in increase of sales by satisfying needs of customers beyond their expectancy.
Legal Factor: There are certain law and rules that company need to abided from smooth operation of its business. It has adversely impact on company image and profit margin of Tesco as company was found fraud for misrepresenting its profit to investors (Baker and et.al., 2018). Thus, legal factor impact on profit and brand image of the company in the industry.
Environmental Factor: There is immense pressure from government and consumer to protect environment for health and safety of people. Thus, it impacts on company functioning as it has to abided to various environmental factor in order to satisfy needs of customers and to expand its market share.
Swot analysis is done by company to identify strength and weakness of company and various opportunities and threat available in the industry for smooth functioning of business.
Strength: Tesco strength lies in its brand image as it is third largest leading retailer in the world in terms of gross revenue and dominate retail market of UK. It also provides wide varieties of product and maintain its quality in order to satisfy needs of customers.
Weaknesses: Company has failed in certain countries and had to close its operation in US and Japan due to ineffective marketing strategies. Misrepresentation of profit adversely impact on its brand image and profitability.
Opportunities: Company has opportunities to expands its business by joint venture with other company in the countries where the store are underperforming (Ahuja and Khan, 2016 ). Company can market its product through social media or its website to attract large number of customers.
Threats: Political instability and increase in competition in retail industry are the two threat Tesco company is facing in the industry. Thus, expansion of business across globe protect company from various threats.
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From the above report it can be concluded that business environment adversely impact on the functioning of business. It helps in shaping organization environment as it is consists of internal and external factors such as customers, employees management supplier and government. Therefore, business environment is divided into two economic and non-economical environment. Economic environment includes economic system, policies and condition of the country whereas non-economic includes demographic, technological, legal and political environment. It can also be concluded that this report explains key elements of internal environment of Tesco and the interaction with external environment. For example increase in demand of company product leads to change in its price and increases profit margin and sales of the company. Economic condition and political instability of UK has adversely impact on sales and profitability of the company. It has decreases company import and export as UK was main trading partner with European Union. High employment rate, reduction in disposable income of customers, rise in cost of material also impact on company sales and productivity. But on the contrary Tesco is able to survive and grow its business by expanding its operations in other countries where economic condition are good. Company by considering business environment is able to gain competitive advantages in the market. It can also be concluded that culture environment also helps in shaping organization work environment as it includes belief value and attribute of people living in the society. Company by evaluating and analysis culture of particular society is able to satisfied needs of customers and employees. Culture environment helps Tesco in retention and maintenance of customer loyalty by satisfying their needs beyond their expectancy. It also helps in recruit of employees and deciding various technique to motivate employees for achievement of organisational goals. It can also be concluded that Natural environment such as geographical and ecological factors impact on smooth functioning of business. Company has considered such factors in its operations as they are in limited amount and need to be preserved in order to ensure health and safety of people. Tesco is able to expands its business across various nation and build its brand image by analysing various internal and external factors that impact smooth functioning of company. Pestle is an analytical tool that helps in identifying various external factor such as up gradation in technology has enhanced sales of company. Company is able to gain competitive advantage by identifying that customers are more concerned about their health thus introducing organic food in its product range. Whereas swot analysis helps in using available opportunities by identifying its strength lies in brand image of the company. It also protects company from threat of high competition and political instability in UK by expanding business across the globe. Thus, it can be concluded that business environment, cultural and natural environment shape the behaviour of Tesco and helps in achievement of company goals.
Related Sample: Discussion On Business Culture & Natural Environment
- Ahuja, K. and Khan, M. S., 2016. Retail sector: An emerging and happening sector for the sustainable growth of Indian economy. IJAR. 2(5). pp.802-805.
- Baker, L. M. And et.al., 2018. Online opportunities: A quantitative content analysis benchmark study of online retail plant sales. HortTechnology. 28(4). pp.516-523.
- Cori, C., 2017. How work environment influence on morale ofemployees of employee cooperative. South East Asia Journal of Contemporary Business and Law. 13(2). pp.87-90.
- Ivančić, V and et.al., 2017. Strategy implementation–external environment alignment. Management: journal of contemporary management issues, 22(Special Issue), pp.51-67.
- Kuzmanova, M., 2016. Contemporary problems related to crisis management of organizations. Trakia Journal of Sciences. 14(3). p.257.