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Environmental Analysis Of Tesco Plc Add in library

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Question:

Describe the Environmental Analysis of Tesco Plc.

 

Answer:

Introduction

Different types of businesses operate for different important purposes and their goals and processes are also determined based on their purpose of existence. The goals and objectives also vary depending on the overall purpose and nature of business. It is therefore essential to understand the purpose of businesses in order to analyse their environmental factor affecting their performance. The nature of the environment in which businesses operates is highly dynamic and for the purpose of achieving success, it is highly essential to critically assess the nature of the national environment in which businesses operate. The national environment can impact the performance of businesses in the form of fiscal and monetary policies by the government and appropriate regulatory authorities. The performance of businesses can be better assessed by way of evaluating the type of behaviour as adopted by them in reflecting the external environment conditions. This can be evaluated by way of examining the impact of market structures in determining the pricing and output decisions, and also the ways in which cultural environment affects its performance. The increasing globalised environment condition also has a direct level of impact over the performance of businesses, and this requires an analysis of the significance of international trade and global forces on the performance of businesses (Fox, 2006).

This essay is aimed at performing an analysis of Tesco Plc’s business environment by way of assessing the main purpose of Tesco Plc. The national environment faced by Tesco Plc is also analysed in detail by way of assessing the impact of fiscal and monetary policy on the performance of Tesco Plc, and also the impact of competition policy on the activity of Tesco. The analysis of Tesco also includes an assessment of behaviour of Tesco in their market environment and finally, an analysis of the significance of global factors on the performance of Tesco Plc is assessed.

 

1: Understanding the Organisational Purposes of Business

1.1: Purpose of Tesco Plc: There are different purposes for which different types of organisation cease to exist. Some organisations have the purpose of achieving higher profitability from their operations while others aim at societal improvements and developments or operate for the welfare of the society. An analysis of the case of Tesco Plc indicates that the main purpose of Tesco is identified as “We make what matters better, together”. This core purpose of Tesco implies that the company aims at working together with its customers with a view to efficiently meet out their needs and requirements. The company aims at understanding the customer’s need so that it can efficiently meet out their needs and act in a responsible manner towards the community in which it operates. The people are treated in a manner in which they want them to be, and it helps millions of people by creating opportunities for them. Overall, the purpose of Tesco Plc as identified is mainly to satisfy its customers through its wide range of products and services, and at the same time, it aims at meeting out its community needs in a positive manner (Core Purpose and Values of Tesco Plc, 2015).

1.2: Meeting Objectives of Different Stakeholders: There are different stakeholders of an organisation and they are primarily affected by the organisation’s performance. Stakeholders are the interested parties that are affected by the activities and decisions undertaken within an organisation and for each major stakeholder, there are certain major objectives and strategies (Rosam and Peddle, 2004). An analysis of Tesco Plc indicates that the company has large range of stakeholders, and their different needs are met in an efficient manner by the organisation. As for instance, customers are the most important stakeholder at Tesco Plc, and their analysis indicates that their expectations are to get high quality products at reasonable rates. Tesco has the objective of understanding its customers and satisfying their needs, and this is primarily achieved by them by way of providing nutritional and high quality food items, healthy eating opportunities, and also offering best quality foods. The objective of Tesco towards its employees is to provide them high class working environment conditions, and they are also provided with reasonable pay based on their performance. The work responsibility as provided to employees at Tesco indicates that they are highly satisfied with their job titles. Trainings are also provided to employees at Tesco in allowing them in performing their responsibilities efficiently (Tesco Annual Report, 2014). In these ways, Tesco meets out the objectives towards its employees and customers.

1.3: Responsibilities of Tesco and Strategies Employed: Tesco being a largest chain of supermarket store has the responsibility of efficiently meeting out the needs and expectations of its customers for wide range of grocery products and services. It is not only the need towards the customers of the organisation, but at the same time, being such a large organisation, it has the responsibility towards the community and society at large. An analysis of Tesco indicates that the company has specific strategies employed in meeting out the needs and requirements of customers and also the community at large. As for instance, the responsibility towards its customers for high quality foods and services is met out by way of both the convenience stores in the form of Tesco outlets, and also through online medium whereby company listed its products and services on its website. There has been continuous product testing program that has been carried out at Tesco which is aimed at providing quality products and services to its customers. With respect to its responsibilities towards community, the company has specific strategy whereby it helps in tacking climate change through encouraging green consumption. The company has specific policy aimed at achieve zero carbon rates, and this is achieved through improved level of efficiency in respect to all the business processes that are carried out (Tesco Annual Report, 2014).

 

2: Understanding the Nature of National Environment in Which Tesco Operates

The national environment directly affects the performance of an organisation, and in respect to Tesco Plc, the ways in which national environment impacts its operations are analysed as follows:

2.1: Economic Systems Allocating Resources: The economic systems have a significant role to play in performing the allocation of resources. Economic systems can be of different types including free market economies, command economies, mixed economies etc. The allocation of resources in an economic system is greatly dependent on the nature of market economy. As in respect to grocery retailing in UK, it has been assessed that the market forces mainly account for the allocation of resources. This implies that the market condition determines the resource allocation to a greater level and the pricing and demand for groceries are set up through the application of market forces to a greater level (Economic Systems, 2014).

2.2: Impact of Fiscal and Monetary Policy: Fiscal and monetary policies are the important ways in which the management of the entire economy is performed by the government. These are important external environment factors that have a direct level of impact over the performance of an organisation. An analysis of the case of Tesco Plc also indicates that the company’s operation is directly affected by external environment conditions such as fiscal and monetary policy. Fiscal policy is utilised by Federal Government in UK in the form of taxation policy and government spending so as to control the economy in the right direction. Fiscal policy is utilised in creating jobs which in turn increases the overall level of spending on the part of consumers. This increase in the spending benefits the retailers such as Tesco Plc in terms of higher demands for their products and services. Fiscal policy also affects the ability of Tesco in taking risks, as the government policy of tax credits for investing in business expansion is a positive way in which businesses are encouraged to perform expansion. Apart from fiscal policy, the role of monetary policy is also quite significant in the sense that monetary policy by central bank in the form of flow of credit into the economy encourages or discourages consumers to buy their products and services. Thus, the impact of fiscal and monetary policy is significant in terms of its overall influence on the performance of Tesco Plc. The business strategies are determined based on the external environment influences such as fiscal and monetary policy across UK (Brunot, 2014).

2.3: Impact of Competition Policy and Other Regulatory Mechanism: As Tesco is operating at such a larger scale, it is highly affected by the competition policy as prevalent across the UK retail industry and also the other regulatory mechanisms as applicable to its performance. An analysis of the UK retail industry indicates that the company is faced with tough level of competition with significant number of large players operating within it. The major players that accounts for heating up the competition level in the industry includes Tesco, Asda, Sainsbury, Morrisons, Aldi & Lidl, Waitrose and Co-operative. These players are the major retailers operating in UK and they pose significant level of competition within each other. An analysis of the case of Tesco Plc in particular indicates that the company has made significant level of investment in its retail store format, and this has resulted into significant cost being already borne by it. However, there has been rise in the online retail format whereby consumer prefers to buy their products and services online. This has heavily enhanced the overall cost of operations to the company and the resulting impact is evident in terms of decreased level of profitability. Apart from this, there have also been price wars between the major retailers in UK and this competitive environment condition has a negative overall impact on Tesco’s performance. The competitive conditions along with huge investment of Tesco in traditional retail format have adversely affected the performance of the company. Apart from competitive conditions, the regulatory mechanism also has a direct level of impact on Tesco’s performance conditions (Butler, 2014). The regulatory mechanism in the form of Food Safety Act 1990 is applicable to Tesco and it needs to make it sure that there is adequate level of compliance being achieved with respect to such applicable regulations on food safety.

 

3: Understand the Behaviour of Organisations in their Market Environment

The external environment condition has a direct level of impact on the performance of an organisation. It is essential that businesses are required to adapt specific behaviour aimed at addressing the external environment conditions efficiently. The important aspects in relation to Tesco Plc’s behaviour in its market environment are analysed below:

3.1: Market Structures Determining the Pricing and Output Decisions: The role of market structure is crucial in determining the pricing and output decisions and in respect to the retail UK market, its analysis indicate that market structure of UK retail is highly competitive. This is evident from the availability of large number of players including Tesco Plc, Asda, Sainsbury Plc, Morrison, Aldi and Lidl, cooperative and Waitrose. These players increasingly create a competitive environment condition and as a result, the prices for the products and services are determined on the basis of competitive factor as prevalent in respect to all these players in the industry. The market structure of UK retail industry can therefore be classified as perfectly competitive market whereby the industry players are competing against each other for achieving higher market share.

3.2: Market Forces Shaping Organisational Responses: An organisation is directly affected by the external environment conditions in which it operates. In order to ensure better performance, it is essential that businesses should adapt appropriate behaviour aimed at addressing the needs and requirement of external market conditions. As in respect to Tesco Plc, its analysis indicates that the market forces also affects the organisational performance, and in turn demand specific responses on the part of organisation. As for example, the market performance condition indicates that Tesco is facing a massive decline in its performance recently. The decline has been highly severe as faced by Tesco over the last decade, and this market condition as faced by the company is addressed through undertaking certain major initiatives. The analysis about Tesco indicates that the organisation has undertaken responses in terms of closing down some of its unprofitable store and also its head office that is not working appropriately. This signifies that the external market condition has affected the performance of Tesco adversely, and the resulting impact is decisions undertaken in the form of closing down some of its stores that are not performing positively (Bennett, 2015).

3.3: Cultural Environment Shaping Tesco’s Performance: The cultural environment condition also affects the performance of an organisation in a direct manner. The cultural conditions are identified as crucial because they have their implication in respect to every types of organisation because of highly globalised business conditions (Schneider and Barbera, 2014).  An analysis of the cultural environment conditions at Tesco Plc indicates that it is adversely affecting the organisation’s performance conditions to recover from the adverse conditions as faced by it. As for instance, Tesco has become the largest retailer based in UK, and this position of being the largest retailer is achieved through following a specific cultural throughout the organisation. But the changes in the external environment have made such successful cultural condition as irrelevant and depending on the same culture are not going to prove successful to the organisation. Customer’s preference for grocery consumption has changed significantly as they highly prefers to make their purchases online. As a result, there is a need for change in the organisation’s culture in ensuring that it can cope up with changes in the external environment efficiently (Black, 2014).

 

4: Significance of Global Factors Shaping National Business Activities

The global factors have a significant level of impact on the performance of an organisation and the ways in which they affect Tesco Plc are analysed as follows:

4.1: Significance of International Trade to Tesco Plc: An analysis of Tesco Plc indicates that the company has its operations at the global level and similarly, the UK retail industry is also comprised of large number of international retailers that are operating in the country. The international trade as conducted by the international retailers in the UK retail industry have a direct level of impact on Tesco’s performance. As for instance, Asda which has been a subsidiary of Wal-Mart has achieved significant level of reputation in the UK retail industry and it has been competing positive with other retailers including Tesco. This implies that international retailers have significant level of effect on the performance of Tesco.

4.2: Impact of Global Forces on Tesco Plc:  The global forces directly affect the performance of Tesco Plc as evaluated from analysing its performance. As for instance, the analysis of the global forces affecting Tesco’s performance signifies that it affects in the form of requiring the company to take initiatives aimed at achieving food waste reduction at the global level. Tesco pays adequate level of attention with respect to reducing its overall food waste at global level and these initiatives are mainly undertaken with a view to comply with global reputation as being the most sustainable performance of business operations (Tesco Announces Goal to Reduce Food Waste Globally, 2013).

4.3: Impact of European Union Policies on Tesco Plc: In terms of the impact of European Union policy is concerned, there is little impact of European Union over the performance of Tesco Plc. This impact is evident in terms of the international financial reporting standards (IFRS) which has been carried out at Tesco Plc as endorsed by European Union. This gives an indication of the fact that European Union impacts the performance of Tesco in terms of requiring it to adapt IFRS principles as endorsed by such European Union (Tesco Plc Annual Report, 2014).

Conclusion

This report involved the performance of a critical assessment of Tesco Plc in respect to the external environment conditions affecting its performance. The performance of analysis revealed significant level of findings, as it has been evaluated that the main purpose of Tesco has been to satisfy its customers by way of understanding their needs and expectations. This is achieved at Tesco by way of its management working with customers so as to satisfy their needs and expectations. There are a wide range of strategies that are considered by Tesco in order to meet out the requirements. The analysis also leads to identification that the national environment also affects the performance of Tesco Plc in terms of monetary and fiscal policy affecting the business activities of the company. The competitive policy including the regulatory mechanism have a direct level of impact over the organisation’s performance as Tesco is faced with stiff level of competition from large number of retailers in UK. The analysis also indicated the behaviour of Tesco plc in respect to external market environment, and it has been assessed that there are wide range of strategies that are considered by Tesco for the purpose of addressing the external environment conditions. The market structure is highly competitive as the international retailers that are competing against each other. The role of cultural environment condition is also identified as significant over the performance of Tesco Plc. The assessment also leads to identification that there has been the greater significance of international trade on the performance of Tesco Plc as international retailers are directly affecting the performance of the company. Overall, the assessment indicates that Tesco Plc is directly affected by the performance of external environment conditions.

 

References

Brunot, T. (2014). How Do Fiscal Policies Impact the Retail Business.

Black, O. (2014). The bottom line is Tesco's culture needs to change.

Bennett, A. (2015). Tesco Closes Stores And HQ In Drastic Bid To Stop Sales Decline.

Butler, S. (2014). How Aldi’s price plan shook up Tesco, Morrison’s, Asda and Sainsbury’s.

Core Purpose and Values of Tesco Plc, (2015). 

Economic Systems, (2014). 

Fox, W. (2006), ‘Managing Organisational Behaviour’, Juta and Company Ltd.

Rosam, I. and Peddle, R. (2004), ‘Implementing Effective Corporate Social Responsibility and Corporate Governance’, BSI British Standards Institution.

Schneider, B. and Barbera, K.M. (2014), ‘The Oxford Handbook of Organizational Climate and Culture’, Oxford University Press.

Tesco Annual Report, (2014). 

Tesco Announces Goal to Reduce Food Waste Globally.

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