Critically Exploring Tesco External Environment
Task: Select one organisation listed on the London Stock Exchange FTSE250 index and write an essay which analyses the core functions of a business and describes their importance in the context of the organisation current inter-relationship with its external environment.
This assignment is exploring the Tesco external environment which is a public company that has been listed on the London stock exchange and has been performing its business operations quite well. It has paid equal attention to its internal as well as external stakeholders in maintaining its dignity and integrity of performance. The organization is Tesco Plc. It is engaged in grocery services as well as items of general merchandise.
Tesco plc. Is one of the leading multinational groceries and general merchandise retailer that is listed on the London stock exchange? With its headquarters in Welwyn Garden city, England it is known as the third largest retailer worldwide on the basis of the gross revenues it generates. It has several shops across seven countries around the world and is considered to have a global market share of approximately 28.4%. Hence, it has emerged as the market leader of groceries. Founded in 1919 by Jack Cohen, it has a total number of 6800 shops worldwide as per the reports revealed in the year 2019. As per investigation and its annual report, it is not to generate total revenue of £ 63,911 million in the financial year 2019. Its jobs can be divided into four major categories-supermarket, hypermarket, super store and convenient shops. Tesco started its global expansion strategy from the early 1990s by invading into 11 countries across the world. (Venkat, 2019) The organization is known to have moved out of the United States in the year 2013 due to several reasons. Its growth has been tremendous and its diversification is an example for all its peer competitors. The organization is known to have expanded into areas including clothing, electronics, and retailing of books, petrol, financial services, internet services, furniture and several other services since 1960s.
Business operations and strategies
Considering the result of company’s investigation on Tesco external environment in the United Kingdom as on 2017, is shop portfolio consists of the following. It also mentions how each shop caters to the need of a specific good or service with a differential pricing mechanism.
- Tesco extra –The shops on the financial organisation a comparatively larger than the others. It is known to stock almost all of its products ranging from low to high prices. While most of the Tesco extra shops are located admist the city, it has some intercity sites as well. One of its biggest shops acquires an area of 13,000 m² at Warrington. This is named as the St. Helens Shop.
- Tesco superstore – these of standardised supermarket that are known for stalking groceries and small range of non-food items then the ones mentioned above. The brand is known to function in many in house cafes, but of lately it is known to have started serving in some renowned restaurants as well.
- Tesco Metro–The size of these shops very between those of the Tesco superstore and of Tesco express shots. Thus, it has an average area of 11,000 square feet. These are located on the inner city areas, High Street of several towns and in city locations beside the railway stations(Jefferson, 2017).
- Tesco express – The shops of the brand are usually neighbourhood convenient shops that acquired an area of about 2200 square feet. It is not to stop those goods that have a higher margin than the rest. Such production include chips, chocolates, fizzy drinks, sweets and those processed foods which are usually higher in demand and have a lower price volatility. Because of the smaller size, the shops aim to accelerate their revenues earned. Because if I demand they are located in busy district especially in residential areas, villages and small towns. The brand is known to have inculcated and expressed pricing strategy through which these express shops charged a higher price than the regular stores.
- One stop–one-stop comprises of the smallest shops of all the mentioned above. It is much smaller than the express shop as well. As a matter of fact it is the only brand under the image of Tesco that fails to bear its name on any of its shops. Observing the Tesco external environment, it is stated that in the year 2010 it was attracted to a controversial statement that it had put the business under many questionable claims by its customers. The statement raised on the aspect of Tesco external environment revealed that this particular sort of shop is continuously charging from its customers a price that is 14% higher than those charged at its usual stores. This was retaliated by the group as they confirmed that this particular shop has different line of products to offer with a completely different supply chain management(Arnott, et al., 2017).
- Tesco Dot Com only - These types of shops are also known as dark stores and work particularly towards fulfilling the requirements of its customers through an online mode. They provide delivery options such as pick up from stores with and without mechanised delivery marshalling. Some provide a combination of store and zone pick up services with marshalling delivery.
Tesco external environment
There are several business tools such as what analysis, Porters five forces and PESTEL analysis that can allow an organization to have a clear picture of the forces acting in Tesco external environment. Tesco plc. Is one such organization that has been conforming to implementation of CSR policies within its business functions so that it meets the needs of its external stakeholders such as the government, its local community and the environment in particular?
Here, PESTEL analysis is undertaken to gain an apprehensive knowledge about Tesco external environment and stakeholders and how Tesco establishes a constant relationship of growth and contribution with them. The details of these extrinsic forces are mentioned as below-
Political: Since the organization has been undertaking conscious efforts to expand globally, it has managed to sign many international treaties that have resulted in opening up of many hyper markets in China. This political decision has raised the standard of international business for Tesco by bullfighting its profit only for one quarter. This has also encouraged trading between several western and eastern European countries and affects Tesco external environment. (Michelle Lowe, 1021-1054)
Economical: economic recession in the year 2008 gave rise to several economic factors such as unemployment, reduction in interest rates, etc. As food is considered to be a basic necessity, the overall percentage of consumer spending on such groceries and food items remain stagnant and these retailers could still benefit in such difficult times (Heminway, 2017).
Social: The section of customers the organization caters to is large and doesn’t discriminate between gender and ages which has a significant impact on Tesco external environment. Its online facilities allows the older generation who cannot visit the supermarkets at all times, to order food on the click of a button and enjoy the shopping effortlessly. It provides convenient and cost-effective method through online shopping mechanisms. Also, the organization has been consistent in donating a significant amount of its pre-taxation profits to several charitable organizations in the year 2006. It has been offering its customers with several vouchers in the form of computers and similar equipment and allows them to the need the same to several schools and hospitals in return. (Palmer, 2005)
Technology: Innovation and technology is the need of the hour. In the organization has been critically undertaking measures to improve its supply chain management constantly to gain a competitive edge in the market. It has employed youth in its organization to manage their data analytics and online retailing services to provide their creative ideas for increasing sales and cutting down on costs (Choy, 2018).
Environmental: Considering the Tesco external environment, it has been offering those products and services under its own label that is considered to be not only environmentally friendly but also animal friendly. It has also established its business connections with the 2° network in the year 2011. This is known to significantly reduce its carbon footprint through its supply chain operations by significant 30% by the year 2020. This collaboration shall work as an online hub providing the organization within competitive advantage as against the competitors in its industry. It has also been putting up several campaigns such as its Green Living Scheme that aims to influence its customers in acting wisely through minimizing food wastage. It aims to always protect the Tesco external environment through adoption of sustainable measures such as recycling and reuse of bags and similar supplies products.
Legal: The organization has been consistent in paying of its taxation dues within the stipulated time so as to avoid any government intervention. Also it has been active in performing its legal duties for the government and the local community. It has always been an active member in ensuring that the wage rate of its employees remains at par with the market and workplace safety standards are maintained. Value added taxation, Income taxation, Goods and service taxation, etc. are cleared on time and any confrontation is dealt with proper notification and systematic procedures (Hammad, 2019)
In this era of rapid industrialization and development, it is very obvious that no organization can function in isolation. Hence it has to interact with this Tesco external environment it off to attain success and goodwill. It becomes quintessential for every organization to incorporate corporate social responsibility activities within its operational and financial performances. Hence, the way an organization functions within the organization and also with its external drivers is significant for its reputation and financial gains. Tesco has been continuously focusing on its business operations while making equal efforts to augment its relationship with the Tesco external environment and stakeholders through its significant contribution.
Arnott, D., Lizama, F. & Song, Y., 2017. Patterns of business intelligence systems use in organizations. Decision Support Systems, Volume 97, pp. 58-68.
Choy, Y. K., 2018. Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis. Ecological Economics, 3(1), p. 145.
Hammad, M., 2019. Tesco Strategic Marketing. Research Gate, 1(1), pp. 1-12.
Heminway, J., 2017. Shareholder Wealth Maximization as a Function of Statutes, Decisional Law, and Organic Documents. Tesco external environment SSRN, pp. 1-35.
Jefferson, M., 2017. Energy, Complexity and Wealth Maximization, R. Ayres. Springer, Switzerland. Technological Forecasting and Social Change, pp. 353-354.
Michelle Lowe, O. A., 1021-1054. Organizational identity and capability development in internationalization: Transference, splicing and enhanced imitation in Tesco's US market entry. Journal of Economic Geography, 2(1), p. 2012.
Palmer, M. J., 2005. Retail Multinational Learning: A Case Study of Tesco. International Journal of Retail & Distribution Management, 16(2), pp. 23-48.
Venkat, P., 2019. Tesco Weighs Sale of Supermarkets in Thailand and Malaysia. The Wall Street Journal, 1(1), pp. 1-25.