BTEC Business Level 3 - Unit 1 Exploring Business Assignment 2 Distinction* Assignment on Tescos. "The Effects of the Environment on a Business" P4: Discuss the internal, external and competitive environment on a given organisation. P5: Select a variety of techniques to undertake a situational anal...
Introduction:
In this assignment, I will be analysing how the external, internal and competitive environment
affects business, in this case I have chosen Tesco. To do this I will need to look at the
environment in which the business operates, and then gather enough information to be able
to consider how Tesco has responded to past changes, and evaluate how it may react to
future changes. In this assignment, my research will include information about many factors,
such as the external environment that affects the business and a PESTLE analysis, I will
then do some research on the internal environment to include corporate culture and
corporate Social Responsibility (CSR), next we will look at the competitive environment to
include competition, competitive advantage and the factors that influence competitive
advantage, then we’ll research about the influences on the chosen business’ demand,
supply and price, including elasticity of demand and lastly the different market structures that
the business operates in, their impact on pricing and output decisions and the business’
response to these.
Tesco’s Background:
Tesco PLC is a retail company that is a British multinational groceries and general
merchandise retailer with headquarters in Welwyn Garden City, Hertfordshire, England.
Tesco was founded in 1919 by Jack Cohen as a group of market stalls, in the East End of
London. The Tesco name got created and first appeared in 1924, after Cohen purchased a
shipment of tea from T. E. Stockwell and they then combined those initials with the first two
letters of his surname, and that is where the first Tesco shop opened in 1931 in Burnt Oak,
Barnet. Originally, Tesco’s started off with selling multinational groceries and then later on
diversified by 1960 into areas such as the retailing of clothing, electronics, books, furniture,
toys, software, petrol, financial services, telecoms, and internet services. The main purpose
of Tesco’s is to make a profit and expand their business. Their second purpose is to help
customers save money by selling their product cheaper compared to other supermarket
stores, and provide its customers with the best service possible while ensuring that they
have the products required. This would mainly maximize profits for its shareholders, whilst
having a good reputation and relationship with its customers and stakeholders. As a huge
retailer, Tesco’s PLC is under the tertiary sector because they buy all their products directly
from manufacturers except bakery products which they make themselves. Tesco’s buys lots
of different ranges of products from different manufacturers this is to cater to everybody’s
needs, and this is one of the ways in which they are so successful. Tesco’s PLC is an
international scope business that has almost 7000 stores worldwide. They have the majority
of their stores in Europe, with over 5000 in Europe alone and the remaining few hundred
stores in Asia, specifically in India and the Middle East. Tesco’s growth over the last two or
three decades has involved a transformation of its strategy and image. In the UK, they
provide about six different store formats to their customers which vary in size and range of
products. Tesco Superstores, for example, are standard large supermarkets that sell mostly
food products and a much smaller range of non-food products in comparison to Extra stores.
Tesco’s has around 450,000 employees across the world and has a revenue of 63.91 billion
GBP (2019).
, The External Environment:
The business environment is variable and unexpected as everything can change in a matter
of seconds. As a big organisation, Tesco will have to be aware of the external factors in the
business environment as they can have a great impact on business activities. This impact
can be positive or negative; a positive impact might be, for example, an increase in
government grants as it will help start-up businesses to start off well, on the other hand, a
negative impact on business might be an increase in income tax. However, with the PESTLE
and SWOT analysis businesses look to reduce and prevent the damage these changes can
cause. One of the analysis is known as the PESTLE which stands for:
Political: e.g, Tax policies, Trade Restrictions, Tariffs
Economic: e.g. Economy, Interest rates, Economic growth, Inflation rates
Social Environment: e.g. Demographic size, Migration, Age distribution, Gender, Health,
Income, Education, Occupation and Family structure
Technological: e.g. Research and Development, Technological Advancement
Legal: e.g. Health and Safety, Laws, Consumers regulations
Environmental: e.g. Recycling, CSR, Policies, Ecology, Pollution
Political
With Tesco’s operations being within a globalised environment, with stores all over the
globe, operating in Hungary, Poland, Turkey and so on, Tesco’s PLC performance is
extremely highly influenced by the political and legislative conditions of the countries in
which it operates within.
The UK government adopted a tax measure a few years ago that heavily affected Tesco’s.
In 2011, the UK government increased VAT from 17.5% to 20% with the aim to increase
government revenue by £13 billion every year. This increase in VAT will negatively affect
Tesco, this is because the higher prices that the increase in VAT will cause, thus resulting in
higher prices for the majority of goods Tesco sells. All of this will affect Tesco’s revenue, and
effects to revenue can have a substantial effect on the company’s profits.
Another major effect on Tesco’s by the UK government is the UK government’s proposal to
adopt what will be known as a Fat Tax. The ultimate objective of the Fat Tax is to help
reduce and grab control on obesity, in an attempt to help limit health problems associated
with obesity. Such measures by the UK government can adversely affect 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 operates within, there is
an Employment Legislation, encouraging retailers to provide a mix of job opportunities for
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