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Unit 1 - Exploring Business
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The Ioteroal, Exteroal aod Cimpettve Eoviriomeot if a Busioess
Io this task I will be expliriog aod discussiog the Ioteroal, Exteroal aod Cimpettve
Eoviriomeot if a PLC: Public Limited Cimpaoy. I will be Cimprisiog a repirt examioiog
these eoviriomeot factirs io a Busioess aod hiw the Busioess respiods.
Tesci PLC
Tesco PLC is a Public Limited Company
(PLC). Being traded under the name
Tesco, Tesco PLC is a Britsh ultnaton
Grocery and erchandising Retailing
Chain. They are a arket Leader in
United Kingdom’s Grocery arket, as
well as being a well-known Grocery
Chain found across 12 countries, Figure 1 – Tesco PLC Logo
including: Ireland, Poland and Thailand.
Founded in 1919 by John Edward Cohen, the Organisaton had humble beginnings, startng
of as a set of arket Stalls. By 1924, Tesco had made its frst appearance as a Brand, selling
Tea from T.E Stockwell. The name Tesco came from the frst 3 leters of the tea they sold
and the frst 2 leters of his surname, forming what we know today as Tesco. The frst Tesco
store opened in 1931, in Burnt Oak, Barnet, UK. His store expanded extremely and within
the next decade, he had over 100 stores across the country.
Tesco is currently listed on the London Stock Exchange and is also a consttuent of the FTSE
100 Index. Started from its humble arket Stall beginnings, Tesco currently has a arket
Capitalisaton of $19.2bn (£14.3bn) as of ay 2017, in accordance to Forbes.com, making
Tesco PLC the 26th Largest Company on the London Stock Exchange, 77th Largest Company in
terms of its sales and has the 632nd Biggest arket Value in the World.
Exteroal Eoviriomeot
The External Environment has a great impact on businesses and is comprised of multple
factors. These factors are ofen used by businesses to help analyse how and why they will be
successful. This analysis is known as PESTLE which stands for:
Politcal: e.g. Tax Policies, Trade Restrictons, Tarifs
Economic: e.g. Economy, Interest Rates, Economic Growth, Infaton Rates
Social: e.g. Culture, Health, Age Distributon, Demographic Trends
Technological: e.g. Research and Development, Technological Advancement
Legal: e.g. Health and Safety, Laws, Consumer Regulatons
Environment: e.g. Recycling, Policies, Ecology, Polluton
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Pilitcal
With its operatons being within a
globalised environment, with stores
all over the globe, operatng in
Hungary, Poland, Turkey and so on,
Tesco PLC’s performance is extremely
highly infuenced by the politcal and
legislatve conditons of the countries
of which it operates within.
The UK Government adopted a tax
measure a few years ago that heavily
afected Tesco. In 2011, the UK Figure 2 – A Branch of Tesco’s in Thailand: Tesco Lotus
government increased VAT from
17.5% to 20% with the aim to increase government revenue by £13bn every year. This
increase in VAT will negatvely afect Tesco, this is because the higher prices that the
increase in VAT will cause, thus resultng in higher prices for the majority of goods Tesco sell.
All of this will afect Tesco’s revenue, and efects to revenue can have a substantal efect on
the company’s profts.
Another major efect on Tesco’s by the UK government is the UK government’s proposal to
adopt what will be known as a Fat Tax. The ultmate objectve of the Fat Tax is to help
reduce and grab a control on obesity, in an atempt to help limit health problems associated
with obesity. Such measures by the UK Government can adversely afect the revenue of
certain products sold by Tesco’s. One of the responses from Tesco’s was introducing the
‘Healthy Food Range’ which was introduced by Tesco’s in late 2014.
Within the majority of the Commonwealth countries of which Tesco’s operates within, there
is an Employment Legislaton, encouraging retailers to provide a mix of job opportunites for
‘lower-paid tme based tasks; to ‘highly-paid skill based tasks’. The government also
encourage populaton categorisaton for certain job, for example: student, disabled and
elderly worker.
Ecioimic
Economic Factors are of great concern to Tesco PLC, this is because they are likely infuence
the following:
Demand of Product
Cost of Employment
Pricing of Goods
Overall Profts
These economic factors are largely outside of the control of the company, and can have
adverse efects on certain parts of the company, which can be profound. Although the
internatonal appendix to Tesco PLC’s business is set to grow bigger and bigger every year
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and is to contribute greater to Tesco PLC’s profts over the next few years, the company is
stll highly dependent on the United Kingdom’s market. Hence why Tesco would be badly
efected by any slowdown in the UK food market.
The United Kingdom’s economy have recently provided us with positve signs with is
recovery from the fnancial crisis. Higher economic growth rates are forecasted and the
gross domestc product is estmate to be higher than the peak pre-crisis.
A growth in the economy is a positve sign for Tesco PLC. A reason for this is because it
results in a growth in the Supermarket Industry, which Tesco PLC is the market leader of.
When there is an economic recession, which is the opposing situaton to economic growth,
the rate of unemployment increases. This increase in unemployment results in a decrease in
individual with access to a disposable income. Fewer individuals with disposable income
results in a decrease in spending, which will force organizatons such as Tesco to lower
prices or make lower quality foods and sell at lower prices, which ends hurtng the overall
proft potental of the company, thus no only devaluing the company but also lowering the
company’s profts, which then puts the company in a situaton where it will need to shif
some of the employees because they cannot pay for all of them. The decrease in workforce
then ultmately hurts profts and lowers the amount the Shareholders receive as dividends
at the end of each fnancial pay out for Tesco PLC. However, recovery from such an
economic recession stmulates revenue growth for Tesco’s.
Sicial
In the United Kingdom, the number of elderly individuals is on a massive increase due to the
baby boom generaton. In past years, there used to be a decrease in the birth-rate and an
increase in the life expectancy of people. This led to a shif of tastes of people which is
required to be taken in to an account by companies such as Tesco.
Demographic changes such as the UK’s aging populaton, increases in the UK’s female
workforce and the decline in home preparaton meals, means that UK retailers are also
focusing on added-value products and services.
A great example of this is the adopton of online retailing by Tesco’s for peoples everyday
grocery shopping as it atempts to provide a soluton for the elderly’s mobility issue. The
elderly are willing to use to internet to order their groceries to get around the need to go to
their closest supermarket to acquire the goods during their grocery shop. Therefore, Tesco
have positvely responded to this Social change.
There are a variety of social changes that have caused trends to indicate that customers in
the United Kingdom are seeming to move towards bulk shopping or one-tme shopping for
their groceries. A response to this social change by Tesco’s is an increase in the non-food
items on sale within stores as well as on Tesco’s Online Store Platorm.
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