Tesco And Its Business Environment Commerce Essay
Tesco is a public limited company (plc) and has a number of different stakeholders. Identify these stakeholders and their interests and find out how Tesco tries to address their interests and perform its responsibilities.
Tesco is one of the largest retailers of the world that operates its operations in 14 countries over the world, employing over 500,000 people and serving millions of customers every week. (Tesco, 2012) This company was founded in 1919 by Jack Cohen as a group of market stalls and the name was introduced first in 1924. Tesco is listed on the London Stock Exchange and have a market capitalization of approximately £24.4 billion as of 15 January 2012. But in January 2012 its market share have been fallen 30% for the first time between last 7 years. I am hired as a research analyst by the Office of Fair Trading (OFT) to solve the further problems of the organization. This paper will lead an effective research to overcome the financial problems of the organization.
The main purposes of different types of organization are to satisfy its customers as well as to satisfy its stakeholders and people involved in the organization. Organization’s vision statement provides information to general public what they are going to do for better financial improvement. Tesco serves the customers the most valued customer services, the community is very powerful, and the staffs are committed and loyal. Tesco wants to introduce its skills and qualified services all over the world. According to (Tesco, 2012) it launched its four part vision for the future of the business. Tesco is the most highly valued business in the world, it will remain a growth company, it will be a modern and innovative company and it will win locally by applying skills globally.
Tesco created the innovative objectives and plans that will maximize the value of stakeholders. For example, as a market leader it will benefit all stakeholders because customers would get high quality of products, shareholders will receive high dividends, and employees will get good salary. According to the annual report of Tesco (2011/12) the group revenue is £64,539m, underlying diluted earnings per share is 37.41p and Dividend per share is 14.76p and group profit before tax is £3.8bn. As Tesco maximize its profit the shareholders will get more dividends.
Each and every business organizations have different kind of stakeholders. They can be the owners of the business, workers, managers, consumers, the government, and the community. Each has the individual interest from the organizations. Owners want the profit and growth of the business, workers need job security and job satisfactions, managers need high salary and status, consumers want safe and reliable products, the government want successful businesses, more tax , employment opportunity etc. the community want more job and environmental protection. As Tesco is the most highly valued business in the world it provides these facilities to the different class of people.
As an organization Tesco is very much responsible for the communities in which it works. It is also to the responsible to the environment and to animal welfare. It tries to reduce significantly the amount of packaging that is used for its products. In 2000 a large amount of Tesco packaging will be recyclable. It also committed to using the least packaging as possible. To protect air pollution Tesco launched low benzene petrol in filling stations in the south- east and is trying to plan to make this available across the rest of the UK. It also provides information and products to allow consumers to care for their personal health.
In 2011, Philip Clarke put a seven-part strategy for its five business segments – the UK, the United States, Europe, Asia, and Tesco Bank. The strategies are as follows:
To grow the UK core: Tesco is making £1 billion commitment to progress the shopping trip and driving a strong pace of progress that involve with customers, significant revenue and capital investment.
outstanding international retailers in stores and online: in 1997 Tesco generated 1.8% of the group’s profits and in recent year 30% so the Tesco is either number one or two in eight among 12 market outside the UK.
Food items: Tesco is a large retailer of food items as same as the other items of products.
Strong retail services: it provides strong retail services to customers. Now a day’s Tesco Bank generating £1 billion in revenue.
Responsibilities to communities: Tesco is responsible to the communities and the environment.
Brand image: it has a good brand image that appeals to diverse customer needs and wants and provide quality products they are looking for at competitive prices.
Skilled team to create value: Tesco’s most significant asset will at all times be its people that they serve the customers.
As in January 2012 its market share have been fallen 30% for the first time between last 7 years. Though it is the big price drop for the organization it will be recover by providing further improvement of shopping trip for customers. (Andrew Trotman, 2012) the problem would be solved by arranging campaign to aware the shareholders and general public. The cost of everyday products can be cut down to minimize the loss and it will help Tesco’s business environment.
Tesco is a business leader in the supermarket industry of UK and the economic environment is changing day by day. Consumers buying behavior and consumption pattern are changing so the organization will give priority to customers buying behavior and pattern and will consider the external environment of the organization.
The national environment in the UK has its own characteristics. The economic system operational in the UK and the government economic policies have a significant impact on all organisations within the country including Tesco. Competition Commission is a regulatory body that controls and closely monitors all industries and organisations in the UK to ensure that there is a fair competition.
Economic system can attempt to allocate resources in the national economy of a country. Allocating resources are the vital factor to start a business as well as to lead an effective business organization. There are three kinds of economic system named market economy, planned economy and mixed economy that help the business to allocate resources.
Market economy: in market economy investment, production and distribution are based on supply and demand as well as the price of goods and services are considered in a free price system.
Planned economy: it is another economic system that decisions regarding production and investment are fixed by a central authority like government agency. It can be either centralized or decentralised. Planned economic system help the planners to achieve their goal more perfectly.
Mixed economy: it is another economic system that both the state and private sector together control the economy. It can be described as market economies that have strong rules and regulations.
The allocation of resources is one kind of economic theory that is concerned with the discovery of how a nations or companies or individuals can distribute economic resources or inputs in the economic marketplace. The most traditional business inputs are land, labor and capital. Land is the most effective source of allocating resources. On the other hand the labor is another vital factor of business inputs. The country that have chief labor price they can produce products at a lower price and at last capital is another important factor of allocating resources. Tesco is one of the largest retailers of UK. For example, In 1995 Tesco have introduced Tesco Clubcard and Tesco have become the number one retailer in the UK market of economy that earns revenues of over £32 billion. It is the most successful Internet supermarket and one of Europe’s fastest growing financial service companies. (Pearson Education , 1995 – 2013)
Fiscal policy is the practice of government revenue collection and expenditure to influence the economy. The policy affects the following variables in the economy:
The aggregate demand and the level of economic system
The distribution of income and
The pattern of resource allocation;
On the other hand monetary policy controls the supply of money and a rate of interest for the use of promoting economic growth and strength. It helps to stable the price and unemployment. Monetary policy is controlled by the government of the country to overcome the financial problem. When the inflation rate is high then the government tries to control the money supply in the market. On the other hand when the inflation rate is lower than the expectation the Government Issue new notes. In the retail and supermarket industry Tesco is a well known name in UK and this organization has an effective impact on fiscal and monetary policy that helps the economic system and support the government to maximize the revenue.
Tesco is a supermarket chain shop and its operations in 14 countries all over the world. Every business organizations have their own business strategies to run the business in a smooth manner. So the Tesco have their own strategies to serve the customers valuable services, skilled employees, online services, brand image, responsibilities to communities etc. They lead different types of business such as:
Tesco: it has shops and supermarkets.
Tesco.com: it is the major online shopping service of them.
Tesco Bank: it is mainly a joint venture with Royal Bank of Scotland that offer customers insurance, credit cards and saving accounts etc.
Tesco Direct: it is an online shopping service that provides electrical appliances and homeware and serve groceries.
Tesco Telecoms: it is a telephone service that provides landline and mobile.
Understanding thorough various business models, all companies need several business strategies to run their business in a smooth manner. They follow various methods to do so. Tesco has supermarket shops, online shopping services, Tesco bank, Tesco direct, Tesco telecom etc. so in the relative sector competition is an essential factor to consider. Tesco has skilled employees, committed to the organization and nature that they provide the latest service to customers that help their business to grow fast.
PESTLE analysis will consider the important external factors of Tesco. PESTLE means political, economic, sociological, technological, legal or environmental dimensions. The external environment largely affects the environment of the organization. It also changes the financial operations that hit financial position of the company.
Political: it is the main spectrums that are currently affecting all the countries of the world which may lead to higher numbers of unemployment. Tesco is one of the largest and fastest growing retailers so that jobs will be available with TESCO.
Economic: one of the Tesco’s competitive advantage in the market are competition with other retailers that give the people qualified product at a lower price and protecting customers and ensuring that entrepreneurs have the chance to compete in the market financial system are important within consumer law.
Social: social environment of Tesco consider lifestyle trends, consumer buying patterns, demographics consumer attitudes and opinions etc. Tesco change the buying pattern of the community and give them opportunity to choose exact products from their shops.
Technological: Technological factors had the most impact on TESCO that has been the growth in the use of the internet. TESCO have created a £100 million Sustainable Technology Fund for reducing carbon that is committed to the nature of their business.( UK Essays, 2003-2012)
Markets within which organizations operate are constantly changing. The products offered and prices set by the organizations are shaped by the market forces operational in the given market. Culture (social environment) also evolves and impacts organizational choices, strategies and operations.
Market structures consists of the business orientated characteristics of a market that all the businesses have to focus on these characteristics of the market as these have an effect on the degree of contest in the industry and control the business product or service pricing decisions. (Market Structures & Tesco, 2003 – 2012)
The market that Tesco operates is supermarkets and it is a highly competitive one Tesco holds a disproportionate amount of power. The figure bellow will indicate that Tesco holds over a third of the market share and it is double the amount of Asda's market share. It is the percentage of the whole market segment that is served by the company.
Figure-1: Sources: Tesco Analysis, 2007.
Tesco holds the maximize market share among the companies in the supermarket industry so that they can offer the customers the effective products or services. The price is relatively low between the competitors of supermarket as well as other business.
Market forces are the interaction between the supply and demand that create a market economy and its impacts are very much essential in a free economic market. Supply and demand are interrelated because when the supply is limited then the price of the product or services is high on the other hand when the demand is high then the price of the product or services is also high. Market forces explain the interaction between supply and demand inside a market and the organizational response is the effect given by business to an economical or business condition. An organization’s response to market forces has a direct impact on the company’s profits and reputation. For example Tesco lead market research to meet the need of the demand of the customers and ensure the available supply of their products. Tesco is followed by the decentralized structure company. It is very helpful because it is able for store manager to make the decision. The manager of Tesco can make decisions as he is more aware of the environment of the market. Tesco give power to the managers to make decisions that motivate the employee to work. Tesco sells food products and non food products and services to customers. For example, Tesco Clubcard is one kind of services provided by Tesco to attract more customers.
Business and cultural environment of an organization represents the overall working environment of the company. Different organization has different cultures and structures. They practice the culture that are appropriate to their business and can more profit for the organization. The cultural environment affects the basic values, behaviors, and preferences of the society and it has an effect on consumer marketing decisions. Tesco is a supermarket chain shop and its operations in 14 countries all over the world. So the company practice a good culture to feedback the customers. Employees of Tesco share their information and knowledge each other, they work as a team, enjoy the work, celebrate their time. It is a good place for work. Employees cooperate with customers and try to serve them the best services. (Tesco-graduates, 2012)Three cultures are practiced by the Tesco:
Better: to help the customers and give better services that customers come back to them again.
Simpler: staffs work more efficiently and less stress
Cheaper: Customers get products and services at lower price than others.
The United Kingdom is a country that actively participates in international trade which contributes significantly to the UK economy. The UK is also a member of the EU. The UK and the organisations within the country are influenced by the EU policies and legislation (directives) as well as changing global factors.
International trade is very much essential for the UK economy and it is vital for the UK so that it can be able to sustain its economics strengths and development in an increasingly competitive worldwide economy. International Trade is the exchange of goods and services to international borders. Without international trade no one can think bigger sales of their products. The importance of international trade is differing from country to country. Nations export basically to expand their market or to aid economically miserable sectors within the home financial system. International trade is based upon the idea of specialization and exchange that will lead to a general increase in world living standards. For international trade different products of different country can get.
Tesco is one of the United Kingdom based supermarket chain international company that expand its business into the European, North American, and Asian markets with success. All facets of TESCO operation is affected by this expansion that include business structure, corporate customs, organizational structures and financial status of the business. Tesco expand its business in the United States in late 2007 that provided the effective opportunity to them. (ItchyBrainsCentral, 2011)
Tesco is one of the largest retailers of the world that operates its operations in 14 countries over the world, employing over 500,000 people and serving millions of customers every week. Tesco operates in 14 markets across Asia, Europe and North America. Countries where it operates its operations are given below:
Tesco in India
Tesco Check Republic
Fresh and Easy
The European Union (EU) is consists of 15 original member countries and it have effective policies on the UK business organizations. The European Union supports the consumer’s health and safety as well as ensures the qualified products. The union created rules and regulations for the organizations especially for the retail industry. As Tesco is one of the largest retail industries of UK, it follows the rules and regulations. Tesco provide the consumers safely product and nature friendly products to customers. Tesco will overcome the fall of 30% market share by providing the qualified products and services, their committed employees support the organization, their brand image is very powerful that help the stakeholders to rely on the organization.
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