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BUS4001 Understanding the Business Environment

Living In The Environment (American University (USA))

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Table of Contents
Task One (LO2)...................................................................................................................3

Brief introduction of Tesco...........................................................................................................3

Outline of the Operations............................................................................................................3

Purpose and Main Objectives of Tesco.........................................................................................3

Market structure of Tesco............................................................................................................4

Task Two (LOs 3 & 5)..........................................................................................................4

Task Three (LOs 4 & 5).......................................................................................................6

a) PESTEL Analysis of Tesco..........................................................................................................6

b) Porter’s Five (5)-Forces model on Tesco...................................................................................7

Task Four (LO1)..................................................................................................................9

References.......................................................................................................................11

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Task One (LO2)

Brief introduction of Tesco
Tesco plc is regarded to be one of the biggest British multinational that is dealing as
groceries and general merchandise retailer. It has its headquarters located in Welwyn Garden
City, Hertfordshire, England, United Kingdom (Barnes, 2011). As far as revenue is
concerned, it is regarded to be one of the third-largest retailer that is trading in the world
market. The company has its stores located all over in seven countries. The major are seen in
Asia and Europe (Yüksel, 2012). The market share of in UK is 28.4% as it compared to the
other competitors of UK market. The company has also established its stores not only in
Ireland, Hungary but also in Thailand. By the end of 2018, there has been a huge growth in
the business operations of Tesco Plc ("Tesco leads the way in the loyalty program stakes",
2007).
Outline of the Operations
The company is indulged in groceries market and providing all sort of necessity to the
customers associated with the brand. The brand has been dealing in various other items as
well such as home décor, furniture and other electronic items necessary as home essentials
("Tesco leads the way in the loyalty program stakes", 2007). The company has been
operating its business in fresh vegetables and fruits as well as there is huge demand
everywhere in UK. Considering the market share of 28.4%, company is also planning to
expand its business by entering in restaurant and other electronic manufacturing business as
well. This will bring more revenue which can be invested in the expansion plan of core
business unit of groceries and general merchandise (Boothby, 2007).
Purpose and Main Objectives of Tesco
The main purpose of Tesco is to bring a loyal brand in the market that can satisfy all
the needs of the customers starting from head to toe ("Tesco leads the way in the loyalty
program stakes", 2007). The company has the major objectives of Tesco is considered below:
 The company plan to increase the sales and profit of the company by bringing new
products as per the requirement of the customers (Yüksel, 2012).
 The company aim at reducing the price of the products so that the customers can increase
their scale of purchase (Lloyd, 2016).
 The company also aim at focusing on the products that are more health conscious so that
it matches the current market trend, taste and preferences.

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 The company aim at making internet shopping experience better for the customers. With
this, the customers are able to save time and money and shop with more comfort anytime
anywhere (Pumfrey, 2002).
 The company plan for providing equal employment to the society and local communities.
This make sure that the brand is contributing towards corporate social responsibility.
Market structure of Tesco
The market structure of Tesco is more of an oligopoly. There are many market players
dealing in the similar business model (Roberts, 2003). The major advantage of this market is
that there are less chances of loosing customers. This is because the stores are dealing in the
products who price are similar in most of the other competitor stores and hence there is more
chances of dealing with a set of customers who become regular customers for the stores
(Rowley, 2005). There are more variety of products that are available for the customers under
one roof and hence it become the key factor to achieve competitive advantage. The company
is able to bring more business only by bringing exclusive deals and managing best customer
services (Rowley, 2005). This is what Tesco follow and make sure the customers feels the
shopping a pleasant experience.

Task Two (LOs 3 & 5)

In case of Tesco, there is equal importance of internal as well as external stakeholders
of the company. Both leads the business operations and influence the business decisions as
well ("Tesco leads the way in the loyalty program stakes", 2007). With the successful
management of these stakeholders, the company will be able to get profit and enhance sales
in the market.
Internal Stakeholders:
 Employees: Being a customer driven company, the employees are the one who are face
of company and represent the brand value. Hence, there is huge influence of the
employees on the business. The performance of the company depends on how the
employees of the company performed and satisfied the customers. The employees share
most of the time with the customers and hence, the suggestions of the employees are
best source of information in Tesco ("Tesco leads the way in the loyalty program
stakes", 2007).
 Board members and executive committee: The management is the pillar of the
company as all the final decisions on the favour of the company are taken by board.
Hence, the board are more of the decision makers in Tesco and put their maximum

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effort in bringing the best decisions that will never hamper the perceptions of anyone
associated with the firm ("Tesco leads the way in the loyalty program stakes", 2007).
 Shareholders: The shareholders are the investors of the company. The firm like Tesco
are closely influenced by the behaviour of the shareholders as the complete fund
invested in the business operations are the valuables of the shareholders. Hence, they are
included in most of the management decision making process. In Tesco, there are equal
rights provided to all the shareholders based on the investment. Hence, the decision
making process is quite depended on shareholders of Tesco ("Tesco leads the way in the
loyalty program stakes", 2007).
External Stakeholders:
 Customers: The company is customer driven as all the revenue that is generated is from
the customers only. There is huge influence of customers on the business operations.
The complete range of products that are maintained in the stores of Tesco are based on
the taste and preference of the customers. Hence, the complete planning of product
listing and delivering it to the stores for display depends on the preference of the
customers ("Tesco leads the way in the loyalty program stakes", 2007).
 Suppliers: The company deal in various products that are actually not manufactured by
Tesco. However, these are supplied from various companies to be sold under a single
shed. The company has an influence of the suppliers as well as the business relation
with the suppliers decide the future goods range that can be provided to the customers.
Hence, Tesco make sure that the company provide an equal importance to the suppliers
in framing the business model of the company ("Tesco leads the way in the loyalty
program stakes", 2007).
 Competitors: The competitors are those that provide the similar products in the market
and use the similar business model. Tesco also get influenced by the competitors as they
are influencer of the market share. The way the competitor perform influence indirectly
the business of the customers ("Tesco leads the way in the loyalty program stakes",
2007).
 Local Communities: The acceptance to the business comes from the surroundings as the
business exist within that boundaries. Hence, there is more influence of society on the
business of Tesco as the business is responsible for performing corporate social
responsibility and provide opportunities to grow along with products and services
("Tesco leads the way in the loyalty program stakes", 2007).

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Task Three (LOs 4 & 5)

a) PESTEL Analysis of Tesco
Political Factors
The company is operational in multiple countries such as Europe, the Republic of
Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland ("Tesco scales the
hypermarket league", 2002). The company also include some major countries is Asia as well.
Due to this sort of vast expanded business and having 2,318 stores, the company is influenced
by a huge political and legislative conditions. There is a support to the organisation as it bring
lots of job opportunities and scope to enhance the careers in different field. Hence, there is
much influence of political change such as government ruling in a particular countries. With
the retail business, there are tax rates, acts of legislation that has to be taken care for
managing the retail business ("Tesco scales the hypermarket league", 2002). The government
promote these business as this provide more scope for financial investment to enter the
country.
Economic Factors
These factors play a vital role in the business operations of Tesco. The factor bring
change to the costs incurred by the company along with demand of the customers ("Tesco
scales the hypermarket league", 2002). The factor is also responsible for managing the profits
and price of the products. With the change in the policies of the economy, there will be a
major impact on the products of the company. The company’s tax liability is completely
dependent on economy of the country operating in. Hence, the company has to keep an eye
on this factor and make corrective measures to save itself from adverse effect. With the
decrease in the income level of the customers, there is a huge decrease in the sales of Tesco
("Tesco scales the hypermarket league", 2002).
Social Factors
The social factor such as change in the taste and preference of the customers influence
the sale of the company. For example, customers located in the areas such as UK are more
interested now a days to do bulk shopping and one-stop shopping ("Tesco scales the
hypermarket league", 2002). Hence, this clearly indicates that Tesco would be getting better
sales as customers are depend on these sales. The company will be able to bring out more
sales in the non-food items as well as the customers find it better to shop under one shed.
Therefore, there are factors of society that influence the performance of Tesco in the market.

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Hence, it is essential for the company to focus on all these facts and influences and bring
solutions to the same ("Tesco scales the hypermarket league", 2002).
Technological Factors
There are lot of technological development that has been analysed in the market.
These are mostly shifting of offline to online shopping, customer feedback system, robotics
shopping system etc. These all changes in the technology are having an impact on the sales of
Tesco. With more better technology introduced in the stores, there will be more footfall
expected in the stores. Hence, this clear indicates that the sales of the company is connected
with the technological changes of the market. The company has to make sure all the possible
technological development should be adopted to attract customers to the company for long
term ("Tesco scales the hypermarket league", 2002).
Environmental Factors
There is a huge pressure on the business operations of the company due to the
environment factor. The process adopted in the management of the business need to be
environmental friendly. Tesco has been active about enhancing the environment and this will
automatically enhance the brand name in the market. Hence, the company has to make sure
that all the processing functions should be more important to the environment ("Tesco scales
the hypermarket league", 2002).
Legislative Factors
The policies of the government is also one of the major factor that influence the
performance of the company like Tesco. There are lots of licensing that need to be taken by
the company before entering the food industry. Any change in the policies can ban a product
to be marketed through the store and vice versa can provide an entrance to the product as
well. Hence, Tesco should keep a track of all changes that happen in the policies of the
government at equal interval of time ("Tesco scales the hypermarket league", 2002).
b) Porter’s Five (5)-Forces model on Tesco
Bargaining power of buyers
There customers that are visiting the Tesco store have a huge bargaining power as
they know that there other brands that are offering the similar products. The products in
return become more reasonable than before so that it can become the preference of the
customers. This bring a change in the offerings of the company as well. Tesco started
offering more offers to the customers seeing that customers demand high quality products at a

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low cost. This is beneficial for the management of the market structure ("The success of the
Tesco Clubcard in winning customer loyalty", 2004).
Bargaining power of suppliers
As far as Tesco suppliers are not able to bargain much as there are ample number of
suppliers in the market. With a slight change in the price of the product, the suppliers are
switched from one to other. Hence, with such business model, Tesco is able to bring out the
exact similar product that is demanded by the customers and that too at a very reasonable
price. The products are also of high quality which make the customers happy at Tesco ("The
success of the Tesco Clubcard in winning customer loyalty", 2004).
Threat of substitutes
Being in the supermarket segment, there are lots of competitors in the market and
hence, the customers get an chance to switch from on to other supermarket. The customers
are more focused on getting high quality products at a reasonable price and that too for a long
time. In case, Tesco is able to provide that, the customers will remain with the brand else will
move to the other competitors ("The success of the Tesco Clubcard in winning customer
loyalty", 2004). Hence, Tesco try to bring out lots of new innovative offers for the customers
so that the footfall can constantly increasing.
Competitive rivalry
Being in the grocery store section, there are heaps of rivals in the market and
subsequently, the clients get an opportunity to change from on to other general store. The
clients are progressively centered around getting excellent items at a sensible cost and that
too for quite a while. In the event that, Tesco can give that, the clients will stay with the brand
else will move to different contenders ("The accomplishment of the Tesco Clubcard in
winning client reliability", 2004). Consequently, Tesco attempt to bring out bunches of new
imaginative proposals for the clients with the goal that the footfall can continually expanding.
With the better marketing strategies, Tesco can make sure that the products are marketed in
right direction at right time and right manner. This will make sure that the customers will
provide a single visit in a month to know the update in the product list (Yüksel, 2012).
Threat of entry/Barriers to entry
There are more chances for the new stores and competitors to be in the market as the
norms and conditions are quite flexible (Yüksel, 2012). The prices and the products can be
used by competitors without any legal permission as it is open to all. Hence, there is a huge
treat with Tesco to lose the market share. The new competitors try to margin their profits by
giving up the initial profits and bring a huge earnings at the later stage. Hence, Tesco need to
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make sure that the profits should be balanced at some point of time when there is bigger
competition in the market (Yüksel, 2012).

Task Four (LO1)

For being successful in the short term and long term, it is essential for the supermarket
to be more proactive towards the market trends and bring better products to the customers
(Yüksel, 2012). The financial stability of Tesco has a hit due to the major competitors playing
with better products in the market at reasonable price. The marketing strategies adopted by
Tesco are also quite traditional and hence there is no major impact seen on the customer
numbers. For managing the business in better way and overcome the issues challenges of the
short term and long term, the recommendations are marked below:
 The company should introduced all new technologies that can better the customer
shopping experience. This should be the major focus on the stores and make sure each
customers visiting stores are doing a bulk shopping even when not planned for it ("Zino
davidoff sa v. a & g imports ltd levi strauss & co. and levi strauss (uk) ltd v. tesco stores,
tesco plc and costco wholesale uk ltd (joined cases c-414/99, c-415/99 and c-416/99)",
2001).
 The second thing that need to be focused is the online store management. For this, the
company should hire best technical experts who can flow more promotions on the website
and make the customers aware about the new launches available on the store. The experts
will be able to drag more attention to the products that are getting less sold in the store.
 The interaction with the customers need to be improved as this can bring more clarity on
the actual requirement of the customers. This sort of interaction bring out the perception
that the customers feel after shopping or before preferring Tesco as an option for
supermarket. The trend of the market are closely related to the taste and preference of the

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customers. Hence, the company should be more focused on the demand of the customers
as that can only build a healthy relationship between the company and the customers for
the long term ("Tesco scales the hypermarket league", 2002).
The complete above recommendations are focused on the short term and long term
performance improvement. In case of short term performance, the company will be able to do
more sales as customers will be known about the brand value and products and services
offered by the brand ("The success of the Tesco Clubcard in winning customer loyalty",
2004). The financial enhancement can be seen as the sales will bring more investment for the
organisation to meet up the current requirement. Also, in case of long term, the company will
be able to meet up the objectives of the company and build new milestones for the new
future. The company with these moving steps will be able to bring more focus on the
expansion to various other countries in the future. This can be supported with the online sales
as well as it will cover the boundaries where the stores are not physically present at the
current situation ("The success of the Tesco Clubcard in winning customer loyalty", 2004).
Hence, it can be stated that focusing on the current research, the organisation will be able to
mark its presence in the upcoming years.

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References
Barnes, R. (2011). The great Tesco beauty gamble (the Tesco supermarket chain’s marketing
strategy for breaking into the UK beauty services market). Strategic Direction, 27(7).
doi: 10.1108/sd.2011.05627gad.006
Boothby, K. (2007). Tesco Stores Limited: The IDM Business Performance Awards 2006,
Silver Award Winner and Innovation Winner Campaign: Tesco Clubcard — Simpler
and more rewarding. Journal Of Direct, Data And Digital Marketing Practice, 9(2),
191-197. doi: 10.1057/palgrave.dddmp.4350078
Kim, W., & Hallsworth, A. (2015). Tesco in Korea: Regulation and Retail
Change. Tijdschrift Voor Economische En Sociale Geografie, 107(3), 270-281. doi:
10.1111/tesg.12145
Lloyd, I. (2016). UK: Digital Monitoring for Insurance Premium, Cyber Warfare and the
Tesco Bank Hack. Computer Law Review International, 17(6). doi: 10.9785/cri-2016-
0606
Pumfrey, J. (2002). (1) LEVI STRAUSS & CO. (2) LEVI STRAUSS (UK) LTD v TESCO
STORES LIMITED (2) TESCO STORES PLC (3) COSTCO WHOLESALE UK
LIMITED. European Law Reports, 6(5), 610-634. doi: 10.5235/elr.65.610
Roberts, B. (2003). Ahold and Tesco – a marriage made in heaven?. International Journal Of
Retail & Distribution Management, 31(7). doi: 10.1108/ijrdm.2003.08931gab.003
Rowley, J. (2005). Building brand webs. International Journal Of Retail & Distribution
Management, 33(3), 194-206. doi: 10.1108/09590550510588361
Tesco leads the way in the loyalty program stakes. (2007). Strategic Direction, 23(2), 18-21.
doi: 10.1108/02580540710724456
Tesco scales the hypermarket league. (2002). International Journal Of Retail & Distribution
Management, 30(3). doi: 10.1108/ijrdm.2002.08930cab.004
The success of the Tesco Clubcard in winning customer loyalty. (2004). International
Journal Of Retail & Distribution Management, 32(7). doi:
10.1108/ijrdm.2004.08932gab.001
Yüksel, I. (2012). Developing a Multi-Criteria Decision Making Model for PESTEL
Analysis. International Journal Of Business And Management, 7(24). doi:
10.5539/ijbm.v7n24p52
ZINO DAVIDOFF SA v. A & G IMPORTS LTD LEVI STRAUSS & CO. AND LEVI
STRAUSS (UK) LTD v. TESCO STORES, TESCO PLC AND COSTCO

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WHOLESALE UK LTD (JOINED CASES C-414/99, C-415/99 and C-416/99).

(2001). Reports Of Patent, Design And Trade Mark Cases, 118(24), 881-912. doi:
10.1093/rpc/2001rpc44

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