Tesco's External Factors and Strategy

Introduction

In this assessment detailed analysis of the external environments of businesses would be critically in the organizational contest of UK-based large retail chain, Tesco Plc. Tesco Plc. has been serving more than millions of customers for over 100 years and holding its service standards meticulously (Tesco Plc. Annual Report-2020, 2020). This retail chain is headquartered in United Kingdom at Welwyn Garden City, Hertfordshire. External elements like political features, economic condition, legal aspects, socio-cultural factors, and technological advancement have aided this multinational British retail service providing organization to become successful.

In this study how diversified external environments impact the strategic framework as well business surroundings have been comprehended in the context of Tesco Plc. Starting from historical background to present day circumstances, hierarchical structure of the company, organizational behavior, organizational structure, and how it is governed. The organizational structure of TESCO is based on simple hierarchical framework, making it increasingly important for the employees at all level of management to ensure that the strategic decisions are rightly undertaken to meet the organizational structure.

Task 1

Governing and managing aspects of Tesco Plc.

Historical aspects of Tesco

Early in 1919, Jack Kohen started this company at Hackney, England. Primarily this company used to serve to serve in domestic market areas, later the company ventured into other markets. Presently the company provides retail services to more than eight international markets.

Core values and mission

Main mission of the company is ‘Serving shoppers a little better every day’ and core values include ‘harder tries for customers, customer would be treated the way they can ever be treated, and offer direct help wherever possible’. In fact, the company has linked these values to strategy through vision of the Board members. Mission statement as referred by Tesco Plc. ‘to be the champion for customers’.

Organizational structure

Tesco has 14 Board members on the Board, and all of them are qualified and experienced in their own professional field and have diversified standpoints (Tesco Plc. Annual Report-2020, 2020). The Board of Tesco Plc. is comprised of Group Chief Executive, a number of independent Non-executive Directors Chief Financial Officer, Senior Independent Director and the Chairman. As per the data taken from Tesco Plc. Annual Report-2020, one among them is executive director and ten individuals are posted as non-executive directors.

Presently, John Allan is the Non-executive Chairman at Tesco. Dave Lewis is designated as Chief Executive, and Alan Stewart is the Chief Financial Officer at Tesco. John Allan had been appointed on March 2015 as the Non-executive Chairman at Tesco with tenure of 5 years (Tesco Plc. Annual Report-2020, 2020).

His significant leadership experience, commercial skills and financial knowledge has helped him to run the corporate governance effectively and generate flexible business ideas. Group Chief Executive, Dave Lewis mentioned that the company has strong funding positions, well-composed balance sheet, robust liquidity, and strong networking among the shareholders (Tesco Plc. Annual Report-2020, 2020). Strongly bonded communities, suppliers, shareholders, colleagues, distributors and mostly customers have aided the company to reach its present position.

Decentralized hierarchical framework has helped this large multi-functional retail service chain to provide quality services and products to all their market places and maintain strong relationship with all their internal-external stakeholders. Stakeholders like employees, executive-level managers, workers, distributors, suppliers to retail store operators-all are essential part of this large human resource (ole Narikae, Namada and Katuse, 2017). The company has taken this networking issue very seriously and certain steps and ways have been presented by the organization to motivate their employees to perform their tasks efficiently (Our history, 2020).

Operational framework

Tesco has mentioned ‘Serving shoppers a little better every day’ as their motto in the Annual report of 2020. In that strategic report of Tesco, principal risks and opportunities, viability status, corporate governance and its success, audit reports, parent company balance sheet, key performance indicators (KPIs), and supplementary unaudited information are reviewed and published with detailed information and figures (Tesco Plc. Annual Report 2020, 2020).

Attaining of objectives and corporate goals is dependent on the proper functioning network of a company (Lawless, and Morgenroth, 2019). Business leaders and senior managers are responsible for generating ideas and implementing orders on the employees and workers (Lasserre, 2017). Business managers of Tesco Plc must have been interpreting their functional and operational elements of the external environment for sustainable business growth. A consistent assessment of the operational situation is necessary for developing strategies and maintaining corporate growth (Christodoulou, and Cullinane, 2019).

As mentioned in the Annual report-2020 of Tesco Plc. the company has ensured that sufficient amount food must be available in the retail stores. Availability of food would ensure even running of demand and supply chain. To support the existing employees in these difficult times additional 40,000 colleagues have been recruited. Apart from this, to aid the people in these tough times, safety standards, hygiene issues, quality service measures are checked regularly. To protect customers and retail workers, the company has taken steps, like financial support to the ones with long-term sickness, food donation and social distancing. As per the Maslow’s theory, the organization needs to meet the basic needs of the employees, fostering motivation among the employees. The employees need to be well versed with the organizational structures to keep in touch with the mission of the company and align their professional goals in a right manner. The operational framework is highly succinct in nature, producing a clear expected outcome from the company.

Task 2

PESTEL analysis and its importance

PESTEL analysis is considered as an information-driven fact–based business tool for interpreting the impact of external environment over the operational business circumstances of an organization. As stated before, Political, Environmental, Socio-cultural, Technological, Economic and Legal aspects are essential calculating the limitations and opportunities of a business in the market scenario (ole Narikae, Namada and Katuse, 2017). All these terms are abbreviated as PETEL analysis.

The main idea of PESTEL analysis comes from macro and micro environment of a business. Although based on the involvement of internal and external stakeholders is the basic reason behind the differentiation of macro and micro environment (ole Narikae, Namada and Katuse, 2017). These aspects are different angles that are necessary for envisioning the business situations promptly. Companies can use this analysis for entering a new market such that they can target new customers with their new service and products (Grossman, 2018).

Otherwise companies can embed this tool in their market research for targeting more number of customers with their existing goods and services (Yankah, Aigbavboa, and Thwala, 2018).

Political aspects

As the name implies, political factors are mostly influenced by the political scenario of a nation. Governing body and political powers play an important role as they are responsible for imposing and regulating taxes and incentives (Grossman, 2018). Taxes are essential for generating revenue and development of national infrastructure. Fiscal policy, monetary changes in tax policies, tariffs, trading taxes etc. are part of Political factors. In fact, capital growth for next few years of a company and future opportunities in the global market is also heavily dependent on these aspects.

Environmental aspects

Environmental aspects is about maintaining and managing trading by maintaining sustainable environment-friendly practices. Agriculture, manufacturing, farming-based trading industries must abide by the environment related laws, legislations, and regulations. As climatic conditions, weather, demographical positioning, geographical features of nations put severe over the trading conditions of a company (Christodoulou, and Cullinane, 2019). For instance, a place with severe climatic conditions would hamper the transportation of the produced goods to other places.

Socio-cultural aspects

Social behavior among the natives of a nation and cultural influence are other aspects that must be reviewed before trading. Socio-cultural environment include demographics, population growth, styling trends, buying behavior, cultural trends, such that these element overrule the social atmosphere of the marketplace (Portes and Forte, 2017).

Technological aspects

To survive in the modern age of digitalization, implementation of technological advancement is essential, as these would enable an organization to compete with other existing and new companies. Technological aspects include sales and marketing promotion over digital and social media platform to auditing performance of the companies in terms of fiscal growth across the global marketplace. Innovative product designs, ergonomically apt goods, and automation, are part of this strategic and flexible cutting edge technology (Mukhezakule and Tefera, 2019).

Economic aspects

Economic conditions of a nation are major determinants of the capital health of that nation (Mukhezakule and Tefera, 2019). Economic aspects are essential indicators that signs the cost-effective performance of that in the future. These aspects are clear signs of sustainable capital growth of that company in that particular nation (Busch, and Matthes, 2016). Inflation-deflation like conditions, foreign direct investments (FDI), purchasing capability of the consumers, property taxes, intangible-tangible property, net asset value (NAV), etc. are important metrics of economy of a nation. Based on such metrics, the prices of the gods and services of a company are decided. Economic growth patterns are part of Economic aspects.

Legal aspects

Among all these factors, Legal factors have both facets; one is internal and another one is external. As discussed in the Political factors, political scenario puts impact over the import and export behaviors of the company (Bonelli, 2017).

Apart from the tax policies and fiscal benefits, the human resource law, working conditions, customer’s safety standards, consumer laws, employee related laws, etc. fall under Legal factors (Gupta, Gupta, and Gupta, 2019). Companies have to regulate certain business environment-friendly conditions and legislations that will not impede the growth of the company as well as will fulfill the sustainability conditions (Yankah, Aigbavboa, and Thwala, 2018).

Task 3

PESTEL framework in the context of Tesco Plc.

In case of PESTEL analysis, understanding of external environment of a particular business is very essential. Unlike SWOT, PESTEL aids to understand the macro-environment with the external aspects.

The PESTLE provides a clear understanding of the retail industry. The analysis further provided a clear understanding about the possible strategies that needs to be implemented while ensuring better business outcomes for Tesco PLC. The changing political scenario makes it increasing difficult to make changes in the tax policies and adjust to the same (Wheelen et al. 2017). The social and possible cultural factors make it increasingly difficult for Tesco to meet the existing demands of the customers. The customers are highly sensitive to the economic conditions and so is the business operating in Tesco. In case of economic recession the customers are more likely to purchase things that they need and not make unnecessary expenditures. Hence, it can be conclusively stated that the changing scenario of the retail sector acts as a precursor for making changes within the existing business strategy being practiced within the chosen company (Wheelen et al. 2017).

The aspect of strategic marketing has gained immense pace in the recent times. The pace of the customers in making purchase from the retail sector is changing dramatically. The change can be attributed as one of the prime factors of bringing together the customer needs and business values on the same plane. Hence, it can be conclusively stated the business needs to implement the right kind of strategies to ensure better business performance. TESCO needs to understand the dynamic nature of the retail industry and strategize their organizational plan accordingly.

Conclusion

Finally, it can be concluded that this study has been very much helpful for comprehending the basic structure of Tesco Plc. and the way the external elements put impact over the business environment. To interpret the importance of the external elements over the company surroundings, strategic analytical tools like PESTEL has been implied in the context of the mentioned organization. Tesco Plc. Along with the positive aspects the critical areas and limitation have also been defined with the tool. In the concluding the statement it can be clearly stated, the organizational structure plays an important role in managing the daily official activities. The implementation of suitable theory helped in understanding the possible ways that can be implemented for reducing the stress on individual employee while enhancing the level of productivity. The employees need the right kind of motivation such as, the most suitable communication channel allowing free flow of ideas among the employees. Finally, it can be concluded the employees need to be open to changes allowing better organizational performance.

References

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