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Unit 1 - Exploring Business
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Business BTEC level 3
Unit 1 - Assignment 2
Learning Aim C&D
Learning Aim C - The Business Environment
Introduction
In this document I will be compiling research about the business environment and the market that
Tesco operates in, including all the factors that affect Tesco’s internal, external and competitive
environment alongside the reasons why Tesco’s demand and supply might change overtime. By using
situational analysis I will be able to identify the factors and their effect on Tesco and the wider market
and apply these factors into the evaluation of Tesco’s responses to market changes later on.
The internal environment: (C.P4)
In this section I will firstly describe all aspects of the internal environment and look at the environment
that TESCO operates in.
The internal environment of a business refers to the elements/influences within the business that play
a major role in how the business operates. As these influences are internal it means that the business
will have full control over the internal environment and can change it to suit the external environment
and make the business stronger. Within the internal environment there are internal influences which
can greatly hinder or facilitate success so it is important for businesses to use the correct analysis and
situational tools to determine what their internal environment/influences are and how they can harness
them to improve the overall business further, giving them a higher chance of success and reducing
risk when making strategic business decisions.
The 3 internal influences of Tesco:
The first internal influence is corporate culture. Corporate culture is the collective standards, beliefs
and values within a business. This will impact the way customers/the public perceives the business
and can possibly harm reputation and getting attacked by pressure groups if the corporate culture is
deemed socially unacceptable. The corporate culture will also affect how the business communicates
with its stakeholders and how their relationship is maintained. Some examples of corporate culture
are;
● Market culture - where the business is prioritising profit over anything else which gives the
business focus to external and internal success rather than satisfaction. Some drawbacks of
this culture is that there is low employee retention because this culture is not orientated to
cover the satisfaction of employees.
● Clan culture - this is an employee focused culture, making sure that employees are involved
and made to feel valued and respected, which makes a largely collaborative structure. This
culture is not suitable for the long-term as it becomes harder to maintain as the business
grows.
● Adhocracy culture - this business culture values innovation and creativity, encouraging
employees to be creative and to think outside the box. One major disadvantage to this culture
is that it carries a lot of risk because there are so many different ideas that many will often fail.
● Hierarchy culture (organisational culture) - this is where the business is highly focused on
organisation of the internal environment which makes sure that there are clear lines of
, communication, authority and chains of commands. One drawback of this is that it leaves the
business inflexible as the structure is organised for maximum efficiency.
● Task - commonly adopted by matrix structure businesses as many departments will work
together and therefore need to adopt a ‘team work’ mindset. This makes the business as a
whole more responsive and interconnected.
● Roles - hierarchical structure where there are clear chains of commands, high supervision and
lines of authority but high bureaucracy and slow decision making because communication is
delegated down the structure then back up again and takes time to flow through each
hierarchical layer.
● Power - centralised decision making where everything is controlled and regulated by the
individuals at the top of the business
● Entrepreneurial - often seen in competitive markets and small businesses where the culture
is all about taking informed risks but pushing innovation and out-doing competitors. Risk is
high but the rewards are higher. Decentralised decision making and more people focused.
The corporate culture of Tescos is that they are very people-oriented but also structured hierarchically,
similar to the ‘clan culture’ and the ‘roles’ values. Their main values are that they strive to serve their
customers better everyday and give back to communities. To support this culture Tesco has initiated a
plan named ‘little helps plan’ which focuses on the people within Tesco and its supply chain, serving
customers the highest quality and healthy food for an affordable but fair price, giving to and supporting
communities through fundraisers and events, becoming more environmentally friendly. It is clear that
Tescos corporate culture is to strengthen the relationship between every person involved in the
business, whether it be the customers, employees or anyone involved in the supply chain. It is also
clear that their culture is focused on being more environmentally friendly and sustainable in the
long-run which may improve their reputation and strengthen public relations (PR) and possibly lead to
‘positive word of mouth’ as society is becoming more focused on becoming environmentally friendly
and it is crucial that Tescos culture supports this as there are many environmental pressure groups
which could harm their reputation. Tesco also have clear lines of authority therefore they also fit into
the ‘role’ category. Authority is clearly established which makes it easier for employees to
communicate with managers and the managers can reward or punish the employees.
Corporate culture is very important for a wide range of reasons. One reason is that it can improve
employee motivation, productivity and retention. This is important because it means that employees
are willing to work harder and as Tesco is a retailer it means that the employees will offer a better
shopping experience to customers and their stores will be organised. It also could mean that costs are
lower as employees are retained, and human resources does not have to spend money on job
advertisements, requirements and training. And with this money Tesco can reinvest it back into their
business to fund developments or pay it to their shareholders through dividends as they are a Public
limited company and are limited by shares. Corporate culture has an impact on brand image and how
customers perceive the business. And in a highly competitive environment such as the retail industry
that Tesco operates in, it is important for them to have a good corporate culture so that customers
perceive them as good, ethical and caring which has the ability to encourage repeat purchases,
customer loyalty and an increased market share as customers are more likely to purchase from them.
The effects on decision making is that it can reduce bureaucracy and increase the level of
involvement from the business as a whole, this is because in some corporate cultures like Tescos they
are very people oriented meaning that they keep their employees valued and involved, this then
engages employees to send feedback which can be used to make business decisions.
Some features of a strong culture:
2
, ● Collective goals between employees
● Increased productivity and motivation of employees
● Strong work ethic
● Abides by regulations and policies
● Efficient
● Structured
● Responsibilities are understood
Some features of a weak culture:
● Tasks are forced onto employees
● Employee feedback are not taken seriously
● Many conflicts
● Very top heavy where all decisions are made at the top of the business without considering the
opinions and feedback of those at the bottom of the hierarchy in a business
● Treating all operations as though they are to maximise revenue
● Very focused on profit and shareholder satisfaction only
● Inflexible and very strict structure
--------------------
Another internal influence is corporate social responsibility (CSR) which is the commitments of a
business beyond legal duty (not legally compulsory) for the sole purpose of achieving societal goals.
The first step for businesses to build their CSR is to accept responsibility for how they treat their
stakeholders and their environmental effects. A Corporate Social Report is made to set targets to help
the business meet its ethical, environmental and social responsibilities, which also allows the business
to analyse and measure their progress, helping them to construct SMART objectives and other aims.
Advantages:
● Improves public relations (PR) which can change how customers perceive the business, if the
business is acting socially, ethically and environmentally responsible then more people may be
attracted to the business (potentially higher sales and profit)
● Reduction in environmental tax due to one of the main focuses of CSR is to reduce negative
environmental impact
● Better customer loyalty and increased repeat purchases
● Higher employee retention and a wider pool skills
● Employees are more motivated and productive
● CSR can be used as a Unique Selling Point (USP) which can give businesses a competitive
advantage, taking customers away from their competitors
● Positive relationships with stakeholders
Disadvantages:
● CSR focuses on employees as well so this may increase training costs, wage/salaries and
maintenance on the work environment
● Also relates to ethicality so businesses may look for ethical suppliers but they will be more
expensive
● New staff, managers and directors to manage the CSR
● May be hard to meet short-term goals regarding shareholders as they will receive lower
dividends due to more profit being reinvested
3
, ● Opportunity cost (benefit foregone of the next best alternative), the business could use that
capital reinvested in other areas of the business that need improving or using that time and
effort developing new products
CSR at Tesco:
Health - Environment -
● Corporate partners with many charities ● Tesco was the first UK retailer to join the
including Cancer Research UK Sustainable Agriculture Initiative (SAI)
● Aiming to cut sugar contents of UK soft which actively supports the sustainability
drinks by 5% each year and innovation of agriculture
● Offering free fruit to children in UK stores ● Using fair trade so farmers are paid a fair
● Tesco has raised nearly £14 million for amount for their products
their National Charity Partnership ● Actively reducing plastic waste and
carbon emissions
Human rights - Food Waste -
● Social programmes that support nearly ● In 2017 Tesco had the commitment to not
450,000 people let any food that was safe to eat to be
● Tesco have won many awards for their wasted from UK stores, instead this food
efforts of human and labour rights would be donated to food banks.
● 42 local based sourcing specialists ● Food surpluses also given to various
worldwide charities
● Tesco are the only UK supermarket
retailer to release data on food waste
Business ethics - Supplier relationships -
● Adapted their Code of Business Conduct ● In 2008 Tesco was exposed to be
● Refreshing training programmes underpaying and not paying their
● encouraging diversity and creativity suppliers and since then they have
within the workplace strived to improve the relationship and
trust, they have done this by ensuring
that they pay suppliers on time and in full
amount but have also launched supplier
networks to hear any feedback and
suggestions from their suppliers
● Made a supplier helpline
● Constantly trying to improve the
relationship and trust
It is clear that Tesco invests a lot of time, effort and money into CSR because they support a wide
range of charities and have developed many targets such as making their packaging fully recyclable
and compostable by 2025, clearly showing that they are focused on reducing the environmental
impact from their operations. Their CSR have improved public relations and have greatly increased
their reputation and have persuaded many to start shopping with Tesco because it gives them a
competitive advantage, Tesco have received countless awards for their CSR efforts.
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