Business and Business Environment

Introduction:

Generally there is certain surrounding or conditions in which the businesses are operated those are known as business environment. Basically, business environment is the combination of some external and internal factors that affect each other and work together to influence the business. Here the selected organization is Tesco. It is a famous British multinational grocery and general merchandise retailer. On the basis of its profits, Tesco is regarded as the world third largest retailer. In this assignment basically about positive and negative impact on macro environment, internal and external analysis, strengths and weakness of Tesco will be discussed in details.

1.1 Identification of the positive and negative impacts the macro environment has upon business operations supported by specific examples:

 According to Marmol, Feys and Probert (2015) In order to identify the positive and negative impacts of the macro environment on the business operation such as Tesco, PESTLE analysis is must. The strategic decision makers use this technique for the purpose of understanding the benefits and the threats from macro environment to the business organizations. Generally, PESTLE analysis shows the elements associated with the business like Tesco directly or indirectly. The things are described below:

Figure: PESTLE analysis

Source: (Marmol, Feys and Probert, 2015).

Political: Political environment influences the business organization both directly and indirectly. The factors of political environment consist of several of kinds of government actions in the country concerned with the business organizations such as: quota, tariff, governmental policy, rules and regulations available to the country. In UK recently there have been some distinct changes which are affecting Tesco greatly. The recent incident, Brexit is one of them. Due to this thing UK has been exited from EU. So, it is influencing Tesco in its operation. This is the sign of negative impact on Tesco (Marmol, Feys and Probert, 2015).

In addition to UK government has taken new format of fiscal policy in order to recover the recession of 2008. This is positively influencing Tesco in many extents. It is leading to the increase of the net profitability of Tesco as the corporate tax reduced from 30% to 28%.

Economic: There are some kinds of distinct elements associated with the economic environment in case of any kind of organization. The elements of economic environment include inflation, deflation, GDP growth, unemployment rate etc. Recently, UK is in the position of recovery of economic recession. Tesco has been able to take the advantage of this economic situation well. But in UK there has been huge unemployment rate. Tesco has also taken advantage of this situation such as Tesco has gathered the demanding employee easily from the easy labor market (Alexander, (2009).

But with the passing the national minimum wage act of UK, government has set the amount of wage to pay the employees. For this reason Tesco are to pay to the employees comparatively more than before.

Social: There are some kinds of elements which consist of the social environment. The elements include various types of groups, ethnicity, religious belief, customs, habits etc. Recently, most of the people of UK are professional. They are inclined to the outside work. Now they cannot give time to the household’s chores. So they often seek the fast food to meet the daily food needs. In these regards, they take food from Tesco which is ultimately increasing the net sale of the Tesco products.

There is increasing the buying behavior of the customers in UK. So, they go often to Tesco for their daily needs. This is influencing both directly and indirectly to Tesco.

Technology: Technological environment influences business organizations in many ways. In the present age the people of UK are very accustomed to using the vast amount of technology which both positively and negatively influences Tesco. There are various types of components of technological environment such as new innovation, information, communication system, availability of data etc (Alexander, (2009).

UK is so advanced country with technological usage. The people of UK are doing their day to day works almost by means of technology. Newly broadened communication system is permitting them to capture everything at the few seconds. For the result of these the UK people is often seeking the opportunity of online shopping. They are using various ways of social networks through which they do online order and pay through online payment system.

At first Tesco had no enough provision of online shopping so, they faced loss in many extents. They could not respond the customers smoothly so the profit was supposed to minimize. But now-a-days Tesco is investing a lot in technological environment. This has developed a strong website through which the customers can easily visit company’s profile and get the products in details. In addition to, Tesco is using technology in its production purposes competing with the other companies to produce more and more.

Legal: There are some kinds of laws and legal actions through which the business organizations are operated. The legal environment generally involves acts, legal basis, employment laws, wage acts, corporate government issues, corporate social responsibility issues etc (Alexander, (2009).

There have been acted many rules regarding employment act, minimum wage act in UK which is influencing Tesco. The employment act in UK is suited for Tesco which is assisting Tesco to capture more and more employees.

But the more and more rules and regulations, laws, legal procedures are creating hazardous in Tesco. In addition to, the strict legal environment in UK is very embarrassing to Tesco.

Environment: Among all the elements of PESTLE analysis the environment issue is one of the important components. There are some factors associated with the environment such as, infrastructure, ecological matter, negative impact on natural environment, waste management, carbon management, fume emission etc.

At the present age the people of all classes of UK and the civil society are very much conscious about the impacts on the environment create by the business organization. They are raising their voice to protest the evil activities against environment which is creating some challenges to Tesco and ultimately increasing the cost of the production. In responding these matters, Tesco is taking many vital attempts such as it is taking program of        recycling, environment suited energy, good waste management, new environment suited technology etc (Tesco plc, 2016).

In some extents, though the production and maintenance cost of Tesco are increasing but it is enabling to attract the government attention to Tesco as the environment suited business organization. That is obviously good sign of branding and making popular of Tesco.

These are overall discussion that shows both negative and positive impact of macro environment on Tesco. By making PESTLE analysis it has been able to discuss and identify the effects on Tesco relating to Tesco’s overall activities.

2.1 Conduct internal and external analysis of Tesco in order to identify its strengths and weaknesses:

SWOT analysis is indentified the process of strengths, weakness, opportunities and threats of any organization. It helps any organizations to assess the issues within and outside the organization. The internal analysis refers to separate with strengths and weakness as well as the external analysis refers to separate with opportunities and threats. In this below, conducting internal and external analysis of Tesco in order to identify its strengths and weakness:

Strengths:  in the recent year, Tesco the top ten retail shop in UK and their grocery market share of 27.9 percent. Sainsbury is the closest competitor with Tesco (Tesco plc, 2016). The biggest share is the strengths value is an organization. Also Tesco is the powerful retail brand across the worldwide market. Tesco is the first retail shop who successfully completes the online implementation of sales channel, currency, revenue by internet. CLUBCARD is one of the strengths of Tesco. There are 38 million CLUBCARD customers shopping in 7300 stores across the total Tesco’s shop (Tesco plc, 2016). It gives the unrivaled insight into consumer trends, attitudes and performance. Tesco has winning the World Retail Award in 2008 by their best performance in global market.

Weakness: At the present global market, there are huge competitors in the whole world. There are many services manages Tesco such as food, cloth, insurance, furniture, petrol financial services etc. to operates all the services is very big problem for Tesco. Tesco had loss GBP 6.4 billion and this had a great impact the amount of its net debt GBP 8.5 billion in 2015 (Butler, 2016). Tesco sells goods at the fewer prices and this make the big problem for its total amount. Tesco bank gives loans from many householders and they do not pay the loans in right time.  On the other hand, Tesco cannot adapt some markets and the impact goes to the loss for this company (Hartley and Brewer, 2016).

Opportunities: there are a big opportunities for Tesco by making the new product for the customers. Tesco is the third biggest global grocer in the world which shows a figure of buying power to make sure mainstream economics of scale. Tesco’s opportunities depend on the internet. Tesco can provide the best service for the customer where no others grocery shop cannot do this. For example, Tesco make an offer for their own branded Smartphone’s and tablets in the subcontinent of Asia. The improvement of Tesco direct through online and catalogue shopping will grow the use of IT. As well as non-food product and health service can other opportunity for Tesco

Threats:  There are many threats faced by Tesco. In the current retail market position, Tesco is the top 10 position in UK grocery retail shop and that is the main threats for Tesco. The rising retail company such as Morrison’s, ASDA, Salisbury, LIDL and ALDI makes the competition for Tesco. UK and USA markets have been affected by economics disquiets through the credit crunch. On the other hand, increasing raw material costs from both food and non food will make great effect profit margins overall business in Tesco. Wal-Mart is the main competitor for Tesco. It’s the global brand and makes the impact in Tesco worldwide business (Hartley and Brewer, 2016).

2.2 Explain how Strengths and weaknesses interrelate with external macro factors of the business environment it operates:

The social factors affected in Tesco Company by making good product for the different types of customer. The customer behavior is the main theme of business strategy in Tesco. Tesco has conscious about the healthy food and adopted by environment in the customer place. By the social environment strategy, Tesco takes the advantage from their competitors shop and give the best service for the customers.

 The social environment strategy decisions makers effect on the while business environment of Tesco and make the perfect strategy survey for Tesco. On the other hand this strategy response to the customer’s life style and lifelong. The technological environment analysis makes the biggest facilities in the business environment of Tesco. The customers make sure their choice by internet and order through the online system. Tesco gives their service on the online process and get the review from the customer. It’s make the loyalty and right thinking of Tesco Company. The positive attitude from the customer gets the advantage in the world market in Tesco. Technological environment helps to give the right information from the consumer about Tesco Company. This strategies decision helps in Tesco to make sure the customers purchasing behavior and reaction consequently (BBC News, 2016).

Tesco cannot increase their business due to the low economy and politics. Economical and political environment are the main culprit for the weakness in Tesco. The business contraction strategy has influenced the business rise of retail shop. The retail shop cannot take the advantage from political environment. On the other hand, economical environment is different in various type countries. So, Tesco cannot get the advantage from economical environment. But Tesco get the opportunities from the free global market in political and economical environment (Tugby, Waller-Davies and Tugby, 2016).

Conclusion: PESTLE and SWOT analysis are very important tools for any business strategy. At the end of this assignment, it has been said that, Tesco has make the perfect PESPLE analysis for its own business development by avoiding political and economical environment. SWOT analysis identifies the risks of environment of Tesco. Tesco need to provide the best service in their marketplace and understand the customer buying behavior due the increase of product sell. To develop the product selling service, Tesco must increase their customer reliance about internet based shopping, digital product and discount price.

 Reference:

Alexander, R. (2009). Human Behavior in the Social Environment. 1st ed. Thousand Oaks: SAGE Publications.

Hartley, J., and Brewer, J. (2016). Tesco chairman John Allan slams Tory plan for EU referendum. [Online] The Independent. Available at|http://www.independent.co.uk/news/uk/politics/generalelection/general-election-2015-tesco-chairman-john-allan-slams-tory-plan-for-eu-referendum-10187367.html [Accessed 30 Nov. 2016].

Marmol, T., Feys, B. and Probert, C. (2015). PESTLE analysis. 1st ed. [Place of publication not identified]: 50Minutes.

Tesco plc. (2016). Our businesses. [online] Available at: https://www.tescoplc.com/about-us/our-businesses/  [Accessed 30 Nov. 2016].

Tugby, L., Waller-Davies, B. and Tugby, L. (2016). Profile: Tesco - the UK’s largest retailer. [online] Retail Week. Available at: https://www.retail-week.com/home/profile-tesco-the-uks-largest-retailer/5046179.article  [Accessed 30 Nov. 2016].

Butler, S. (2016). Tesco increases grocery market share for first time in five years. [online] the Guardian. Available at: https://www.theguardian.com/business/2016/oct/18/tesco-increases-grocery-market-share-sales-rise  [Accessed 30 Nov. 2016].

BBC News. (2016). Tesco sees first market share rise since 2011 - BBC News. [online] Available at: http://www.bbc.com/news/business-37682262 [Accessed 30 Nov. 2016].