Unit 1 Business Environment Assignment - Tesco Plc

Introduction

The assignment primarily discusses various responsibilities and purposes of different types of organisations, and Tesco PLC, a leading retail supermarket in the UK, is used as an example to highlight such circumstances. The assignment explains various roles and responsibilities of Tesco Plc in satisfying the needs and requirements of different stakeholders (Palmer & Hartley, 2008). The assignment also shed light on the role of national environment and the impact of the fiscal policy, monetary policy, competition policy, and regulatory mechanism on the business activities of an organisation has been discussed in this section. In the last segment of this assignment, the various global factors that have a huge impact on the trading activities of Tesco and the impact of the EU regulations on the trading activities of Tesco have been discussed

 

Task 1

1.1 Describe the aims and objectives of various sorts of organisations

The purposes of different organisations are separate in accordance with their structure, business policies, strategies and various other factors. North Highland Consulting is a leading consultancy organisation in UK, and we, as members of the team, primarily research into the particular purposes of different sorts of organisations.

Tesco PLC: Tesco is identified as a leading public limited organisation in UK, but initially it was formed as a sole proprietorship firm (Worthington & Britton, 2015).  Initially, when the organisation was a sole proprietorship firm, the scope of the organisation was small, so the prime focus of the organisation was to enhance its profit margin. By the advent of time, as the organisation is formed into a public limited organisation, the main purpose of the organisation is to enhance its funds by issuing more shares to the stockholders in the capital market.

National Health Services (NHS): NHS is a highly recognised nonprofit seeking organisation in UK funded by the public and government. The main purpose of the organisation is to provide free health facilities and services to the citizens of UK.

ICICI Prudential: It is a leading private organisation that deals with various types of insurance all across the globe. The purpose of the organisation is to enhance its volume of profit in the market of insurance sector market (Hazlina Ahmad et al, 2010). The organisation enhances its profit margin by providing various sorts of insurance to the customers.     

Beehive giving. Org: It is a leading government charitable organisation in UK. The main purpose of the organisation is to carry out various sorts of social services for different sorts of individuals. Profit earning is not the motive of the organisation.

 

1.2 Explain the degree to which the goals of various stakeholders are fulfilled by Tesco Plc

The growth and development of an organisation are primarily based on its stakeholders. It is highly required for an organisation to fulfil the needs and requirements of stakeholders, as we see in the case of Tesco. Tesco is highly particular about paying proper dividends to the shareholders, who are considered significant stakeholders of the organisation. The customers identified as the primary and most significant stakeholders are provided quality products at a proper price along with excellent customer service by the organisation (Muhammad et al, 2010). The organisation has employed an internal marketing system for the betterment of the employees, who are considered the internal customers. Proper care is provided to each of the employees for their betterment and career growth. Tesco also maintain all the rules and regulations framed by the government in order to carry out its business in an ethical way. The organisation is also very particular about paying all the dues to the supplier and creditors at the proper time.

 

1.3 Describe the accountabilities of Tesco along with the strategies implemented by the organisation to fulfil them

Initially, Tesco is significantly responsible to the customers who determine the profit margin of the organisation. The organisation emphasises satisfying the customers at maximum volume by providing quality products and excellent customer service. Secondly, the organisation is highly accountable to the employees because their daily performance determines the overall operational activities of the organisation (Klapper et al, 2011). The organisation emphasises improving and innovating the working culture of the organisation in order to extract maximum output from individual employees and reduce the cost of employee turnover. The organisation places huge significance on the shareholders because they are highly crucial regarding raising funds and capital. The organisation maintains all the responsibilities towards the government by maintaining all the rules and regulations framed by the government in order to carry out its business activities. 

 

Task 2

2.1 Describe the procedure of an effective allocation of resources by an economic system

The economic system is generally categorised into the Planned Economic System, the Free Enterprise Economic System and the Mixed Economic System. In the planned economic system, the government holds full authority over the allocation of resources. In a planned economic system, various sorts of boundaries have been made by the government regarding allocation of resources by the business enterprise (Xue et al, 2010). In this sort of economic setup, it proves very critical and difficult for organisations like Tesco to carry out their business in an effective manner since the organisation has to face various sorts of severe circumstances like shortage and surplus of resources like labour, soil, capital and various other things while utilising resources. In this sort of economic system, it is not possible for the authority to keep full knowledge of the various sorts of resources, so there is a huge possibility of misutilization of resources.

In an Enterprise Economic System, the interference of government is very limited regarding the allocation of resources. In this sort of economic setup, the business organisations get the full freedom regarding the utilisation of resources, so the competition is very high in the market. The mixed economic system is highly beneficial for both the small-scale entrepreneur and the large-scale entrepreneur to effectively utilise the resources like land, capital, labour and various other factors, which in return enhance the creativity and output of the organisation (Hajkova et al, 2006). But in certain circumstances, this sort of economic setup is not beneficial for the nation since there is a huge possibility of unethical utilisation of resources.  

The mixed economic system is highly beneficial for both the small business enterprise and the overall nation since it includes the facilities of the free enterprise economic system along with the intervention of the government regarding fiscal policy and monetary policy. In this sort of economic setup, the resources are properly allocated since various sorts of rules and regulations have been framed by the government for the benefit of both the business enterprise and the overall nation. In this sort of economic setup, the possibility of fraud and misutilization of resources is very less.

 

2.2 Evaluate how Tesco and the activities of Tesco are influenced by monetary and fiscal policy

In UK various sorts of fiscal and monetary policies have been made by the government so that the economy and the business organisations are being operated in a proper manner. It enables the government to solidify the economic strength of the nation and to control the various business activities of different business enterprises (Chi et al, 2009). Change of interest rate is categorised as one of the most significant monetary policies made by the government, according to the requirement. It has been found that the profit margin of Tesco reduces when the interest rate is increased by the government. It is because the cost of capital has increased and the purchasing power of the customer has decreased. On the other hand, when the rate of interest is decreased, the volume of profit of the organisation increases. Change of exchange rate is another significant monetary policy which has a deep impact on the business activities of Tesco since it has to carry out various sorts of international trade. It is found that when there is a fluctuation in the exchange rate, it proves very difficult for the organisation to carry out overseas trade since the organisation does not get the exact value of the pound. Change in the requirement of reserve is another significant monetary policy by which the business activities of Tesco get deeply impacted since the rate of interest gets enhanced and consumers prefer to make more deposits instead of consuming the products of the organisation (Botha et al, 2014).  Change of tax is categorised as one of the most significant fiscal policies by which the business activities of Tesco are deeply impacted. Reduction of tax enables the organisation to improve its quality of products and spend more amounts over advertising and marketing essentials without bringing any changes in the price of the product. The spending of the government is highly significant for the growth and development of the organisation. The sales volume of the private sector organisation is inversely proportional to the spending of the government.

 

2.3 Assess how the activities of Tesco are influenced by the competition policy and other regulatory mechanisms

In UK there is huge competition in the retail supermarket. The prime competitors of Tesco are Sainsbury, Asda, and various other small-scale retail organisations. While competing with the large-scale retail organisations like Asda and Sainsbury, the organisation has to emphasise various completion policies like price minimisation, diversification of brands and products, effective customer relationship management, innovation in marketing and advertisement and various other tools (Wu, 2009). It has been found that the organisation has to adopt various sorts of innovative competitive policies while dealing with the small-scale business organisation, since the prime focus of the small-scale retail organisations is to earn maximum profit at a very small scale of time by providing various sorts of fascinating offers to the customers. Tesco is highly vigilant regarding the competition policies of its rival organisation since it enables the organisation to enhance its customer base and profit margin of the organisation.

Regulatory policy of UK has a deep impact on the business activities of Tesco, and it is highly obligatory for Tesco to follow all the rules and regulations framed by the government in order to carry out its business. The government of UK primarily emphasises accomplishing the economic goals of the nation, so various regulatory mechanisms have been framed by the government, like regional policies, companies act, industrial policies, training and skill policies, enterprise strategies (Unit, 2009). Tesco has to comply with the various sorts of laws while carrying out its business in a nation. According to the industrial policy, Tesco has to emphasise the ethical employment of manpower and maintain proper work culture in the workplace. Training and skill policy is highly beneficial for Tesco in the proper utilisation of human resources.

 

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3.1 Describe how the pricing and output decisions of businesses are determined by market structures

The market structure is of dissimilar types in different nations, so Tesco has to adopt strategic measures regarding making pricing and output decisions while carrying out its business in overseas nations. The different sorts of market structure include monopoly market, perfect competition market, monopolistic market, duopoly market, and oligopoly market. In a monopoly market, one or two organisations dominate the overall market. In this market structure, the price is generally fixed by the organisation in accordance with its own willingness and profit maximisation is the prime aim of the organisation (Aterido et al, 2011). In this sort of market structure, it is found that the marginal cost of the product and the marginal revenue remain the same, and the customer’s preference about price is given no significance. A perfectly competitive market symbolises a huge competition among several sorts of organisations in the same industry. In UK there is a huge competition in the supermarket, so Tesco has to operate its business in a perfectly competitive market. Tesco does not have the option to structure the price of its products, so the output strategy is the only choice of the organisation in order to minimise opportunity cost over its capital investment and to maximise the volume of profit.  In this sort of market structure, the demand and willingness of the customer for a product play a very significant role in undertaking any pricing strategy and output decision (Klapper & Love, 2010). Monopolistic market structure is described as a market structure where the products are highly different from one another, and the business organisations selling such products have command over that product on the basis of their brand.  In this market, there is no substitute, so the pricing strategy and output decision have to be made by the organisation in accordance with the uniqueness of the product and the demand for the product in the market. A duopoly market is nearly the same as a monopoly market. In a duopoly market, the consumers’ preference for price is not given any significance by the organisation while implementing a price strategy. The output decision is made by the organisation on the basis of profit maximisation. In an oligopoly market structure, the market is dominated by a small number of organisations and top-level competitive pricing strategies are implemented by the organisation in accordance with the demand of the market (Beck & Demirguc-Kunt, 2006).

 

3.2 Demonstrate the approach in which Tesco Plc responses are shaped by market forces using a range of examples

Before undertaking any strategic decision, an organisation has to come across various sorts of market forces which include demand and supply, demand and supply elasticity, actions and perceptions of the consumers, decisions regarding pricing, economies of scale, decisions regarding output and cost and various other factors. Tesco, as a leading retail supermarket, has to primarily emphasise the demand for its products in the market. If the demand for the product is high in the market, then the organisation has to enhance the rate of supply of its products in the market in order to enhance its margin of profit. Secondly, the buying behaviour and perception of the customer about a product are highly significant for Tesco in undertaking various sorts of strategies for its market growth. It has been observed that consumers become loyal to the organisation due to its quality products and its excellent customer service (Lambsdorff, 2007). This approach enables the organisation to develop its pricing strategy since the customers are willing to pay more for the maximum satisfaction derived from its products. Elasticity of demand enables the organisation to determine the ratio of change in demand for its products in the market in accordance with the change in price. It is highly beneficial for the organisation to undertake a pricing strategy. The elasticity of supply enables the organisation to determine and undertake output decisions regarding any products and services. The price and demand of the product in the market determine the supply elasticity of a product in the market. The economies of scale are highly beneficial for the organisation to maximise its profit by investing a smaller amount of money. It has been observed that Tesco emphasises the quality of the products instead of quantity in order to attract high-profile customers. It enables the organisation to cut down its cost of production and earn more revenue (Weismann, 2009). Business environment is another significant market force that structures the responses of Tesco. It includes both the internal and external environment. The stakeholders constituting the external environment comprise customers, while the internal environment comprises employees, shareholders, suppliers and creditors. The organisation structure and culture enable the business organisation to combat the various sorts of marketing forces in order to maximise profit.

 

3.3 Give your opinion about how the behaviour of Tesco is shaped by the cultural and business environment

The growth and development of Tesco are significantly reliant on its business and cultural environment. Business environment is highly significant in the process of an assessment of political factors, social factors, economic factors and technological factors. In UK, Tesco has to face various sorts of critical situations like labour problems, allocation of resources and various other problems while carrying out its business due to various sorts of laws and regulations framed by the government in carrying out business activities (Ayyagari et al, 2007). The economic factors that impact the business environment of Tesco include the employment rate, Gross Domestic Product, inflation rate, fluctuation in National Income and various other factors. The social factors comprise the perception, expectation and approach of the customers to the organisation along with the relation of the organisation with other stakeholders like employees, suppliers, shareholders, creditors and the government. The technological factors are highly beneficial for the organisation in maximising the quality and quantity of its output by investing a smaller amount over a very short span of time. It reduces the cost of production by a huge margin.

The business environment of Tesco largely depends on the culture of the organisation. The culture of the organisation is totally based on effective coordination between the management and the workforce of the organisation (Ferreira et al, 2009). The internal culture enables the organisation to undertake various sorts of critical challenges while accomplishing various sorts of goals of the organisation.  

 

Task 4

4.1 Explain the importance of international trade to Tesco Plc

It has been found that the economic development of UK is significantly based on international trade. Tesco, as a significant globally recognised retail organisation, plays a very important role in strengthening the economic development of UK by carrying out overseas trade. The market opportunities are very high regarding international trade since Tesco gets the opportunity to carry out business deals with organisations from different types of nations (Morrison, 2006). It not only enables the organisation to enhance its margin of profit but also enables the organisation to increase its customer base. It has been observed that the government has undertaken necessary steps like increasing taxes and duties on imports in order to secure domestic organisation, but foreign trade is highly necessary for the enhancement of Gross Domestic Product in UK. International Trade is highly beneficial for Tesco in getting the facility of economies of scale by operating in various nations. It enables the organisation to operate its business over a large market at a very high margin of profit. In certain circumstances, international trade reduces the cost of production since the organisation gets the facility of cheap labour and low-cost resources in a different nation in comparison to the nation where it belongs (Kang & Han, 2008). The organisation gets the facility to take part in the competition of the global market, by which the scope and development of the organisation are enhanced on a large scale.

 

4.2 Investigate how Tesco Plc gets impacted by global factors

Tesco, while carrying out international trade, has come across various sorts of global factors that hinder the smooth growth of the organisation in the global market. Initially, there are various sorts of restrictions made by the World Trade Organisation regarding international trade. For instance, the import duties and the export duties in some nations are very high, for which Tesco has to incur a huge sum of money in this process by which the margin of profit gets badly deteriorated. Secondly, the emerging markets like BRIC Economies, where developing nations like Brazil, India, Russia and China are emphasising the economic development of the developing nation, it proves very critical for Tesco to carry out trade in such economies (Palmer & Hartley, 2008). It is because BRIC Economies primarily emphasise the development of small-scale organisations and adopt severe measures against employing labour at a very low cost. Thirdly, it is very critical for Tesco to carry out its business in different nations due to the strict global business environment. The global business environment comprises economic factors, legal factors, political factors, social factors and environmental factors. The political disputes among the nations sometimes create a very bad impact on the brand image of the organisation. The Exchange Rate is one of the most significant global factors that restrict the growth of Tesco in the global market. Due to the economic crisis, various nations like Europe, France, Germany, India, and Bangladesh have increased the Exchange Rate to restrict foreign trade and uplift the local nations. It has a very bad impact on UK retail organisations like Sainsbury, Asda, Walmart, and Tesco in carrying out their overseas operations (Worthington & Britton, 2015). The EU policies and regulations play a very significant role in the growth and development of international trade of retail organisations like Tesco, but several restrictions are also being imposed on the retail organisations regarding international trade regarding employment, inflation, training and development of the employees, taxation and several other factors

 

4.3 Assess how Tesco Plc is impacted by the policies of the European Union

The organisations in UK have to comply with various rules and regulations formulated by the European Union while carrying out international trade. Initially, the employment policy made by the European Union was very strict. An organisation has to pay minimum remuneration to its employees as fixed by the European Union in accordance with the skill and experience of the candidate. The employment of cheap labour is totally restricted by the guidelines of the European Union. Secondly European Union has stated various guidelines in its Regional Policy (Hazlina Ahmad et al, 2010). According to the regional policy of the European Union, the candidates of the nation will be given first preference in the process of employment and necessary measures have to be undertaken by the organisation regarding any regional or cultural disputes in the workplace. The European Union has formulated various guidelines regarding inflation. During inflation, the bank rates are generally increased, and the purchasing power of consumers is reduced. In such circumstances, the European Union emphasises enhancing the exchange rate in order to bring control over international trade. By this approach, the local organisations get the opportunity to carry out trade and maximise their growth.  The European Union emphasises the Education and Training Policy to enhance the skills and competencies of the local candidates. It has been observed that by the impact of globalisation and intermix of different cultures, the local candidates are being neglected and the candidates of different nations and different cultures are being appointed for the best job (Muhammad et al, 2010). This policy has been formulated by the organisation for the economic development and the growth of the local candidates. The European Union has imposed taxation policies in order to restrict international trade and enhance domestic business. Most of the organisations, in order to enhance their business volume, carry out international trade by which the local traders and suppliers suffering. The enhancement of import duties and tariffs restricts the growth of international trade and provides an opportunity for small traders and suppliers to carry out their growth in the business sector. The several policies of the European Union have both positive and negative impacts on the business activities of Tesco (Klapper et al, 2011).  It enables Tesco to carry out overseas trade in several nations, along with providing the organisation the opportunity to move forward towards the economic development of the nation.

 

Conclusion

The assignment provides information about the business environment of an organisation. It sheds light on various purposes of an organisation, the role of national environment over business activities, organisational behaviour in the market environment and the global factors influencing international trade of an organisation (Xue et al, 2010). In this assignment, Tesco Plc is used as an example to comprehend the impact of the above factors on the business environment of an organisation.

 

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