Exploring Global Business: Internal and External Environment of Tesco - Case Study Example

Tesco Introduction and Company Overview Businesses cannot exist in isolation. They are exposed to anenvironment which is impacted by both, internal and external factors. The internal business environment consists of factors that impact the success of the company’s operations. Such factors include a company’s human resources, management, leadership, organizational culture, and organizational direction (Koekmuller, n.pag.). The external factors include political, economic, socio-cultural, technological, and the global environment (Jain, Trehan and Trehan, 3). Although businesses do have a certain form of control over their internal factors, the external factors are mostly beyond the business’ control. Following phenomenon such as globalization, businesses have expanded their presence far across the world thereby exposing their companies to a very competitive external environment. In such cases, the internal environment has to be regulated efficiently in order to meet the global challenges, while the external environment has to be carefully predicted or anticipated so that possible threats can be avoided. Among the large international superstore chains, there is Tesco PLC. With its primary base in the United Kingdom, Tesco PLC operates in over 12 countries serving millions of its customers across the different continents (Tesco PLC a, n.pag.). The large multi-national retailer has more than 5.3 hundred thousand colleagues and employees, so as to serve its growing numbers of customers well. The company has a strong hold throughout the countries where it operates and currently stands as the third largest global superstore giant after the American company, Wal-Mart and the French, Carrefour. The company hopes to penetrate further markets across many other countries so as to increase its global presence in the international arena. However, it is also faced with the challenge of picking up its company performance, especially after the sudden exit of the former Tesco CEO, Richard Brasher. Internal Environment The top management of Tesco PLC is the most important internal element of the company as it handles and directs all the business operations. Tesco has a board comprising of the chairman, 2 executive directors, and 9 independent non-executive directors. The executive committee, on the other hand, comprises of the executive directors working for Tesco PLC and other senior executive professionals. Only recently, Tesco was joined in by a new CEO for the company, Philip Clarke, who hopes to bring the slow performance of the company back on its track (Baker, n.pag.). Since Tesco is operating across Asia and Europe, its management is constantly faced with global challenges that pertain to its sustenance in the coming future. As of yet, its stores have managed to earn huge profits worldwide due to its flexible business model that has enabled the company to operate successfully across diverse cultures. However, recently company performance has declined thereby triggering its management to take critical steps for its recovery. The new CEO for the company, Philip Clarke, is determined to pull the company out of its ailing conditions with a powerful recovery strategy and his leadership. Tesco operates in compositionally varied regions. Thus, its leadership is an important force in the success or failure of the company’s international operations. Undoubtedly, there are individual and organizational differences across cultures that sometimes inhibit a coherent working, but Tesco PLC has employed a common operating model underlying all its operations across the different regions (Micro Focus, 1). However, other internal challenges pertaining to operations still remain. After long periods of quite lucrative profit making, the company has recently been experiencing a sluggish performance that does not seem very positive. With the presence of Tesco’s other competitors, both within the UK and beyond, Tesco struggles to retain its customers and their loyalty so as to keep up their profits and performance. The current decline in Tesco’s performance is said to be linked with its plummeting quality and service, which its management is now determined to take ahead. Tesco’s CEO, Philip Clarke, has taken the direct leadership of the company and its global operations. He has acknowledged the shortcomings and is willing to address the issues through some critical or rather radical steps. The leadership can indeed help Tesco to strategically devise plans that will helps the company shift away from its focus on profit margins and cost cutting to provide greater value to its customers. External Environment: PESTEL Analysis Political Governmental policies have played an important role in regulating Tesco’s presence across the world. Governmental policies vary across countries and they impact the way Tesco operates in each of them. Several governments may impose policies that may value chain of the company thereby reducing their profit margin or place regulations that may inhibit their growth within the region. In certain cases, the result is a closure or exit of the company. France, Taiwan, and Japan are among the few countries from where Tesco has withdrawn. Thus, political considerations are also important in determining Tesco’s success or failure. Economic Worldwide economic trends are critical as they impact both the consumers as well as businesses as it increases uncertainty and risks. The economic recession of 2008 and the financial collapse had a profound effect on consumer behavior and their buying habits. Customer spending is curbed during periods of recession and so is the company profit. Since Tesco is a global business, recession has impacted the company quite strongly in the various regions it is operating thereby reducing its revenues. Moreover, the company’s growth rate has also been affected triggering the company to devise strategies to stimulate consumer purchases through promotional discounts and other price cuts. Social Indeed, since Tesco operates in several different countries, it also has the responsibility to give back to the communities in which they thrive. Such efforts have previously involved community involvement in terms of charities and providing food, water, and other items in developing countries. The Tesco slogan “every little helps” also helps explains its socially responsible practices that helps its consumers as well as the communities in which they live so that they enjoy a better life. Technological Tesco has come a long way technologically since when it was initiated. Since technology is a dynamic sphere, businesses constantly find themselves to be amidst of technological temporariness. This implies that companies often need constant innovation in their processes and procedures so as to be able to compete well in the global market. Initially, Tesco ran on the now obsolete computer programming language COBOL. However, the need for a standardized platform for a smoother operation across its worldwide stores spurred it to acquire server softwares and developers (Micro Focus, 1). Such applications have helped Tesco to make efficient deliveries, provide superior customer service, and to regulate its supply chain. Tesco’s geographically dispersed presence calls for effectiveness in the operating model. Thus, the company has encouraged the adoption of its standardized operating model across its vast geographically located stores. So as to promote its international growth, Tesco acknowledged the need for more efficient collaboration tools that would allow greater employee interactions and hence, improvements in productivity. Cisco Tele-Presence is one example of the solutions it currently employs (Cisco Systems, 2). Tesco has integrated its systems in order to bring its UK best practices to other locations where it operates. By doing so, Tesco hopes to improve productivity and customer service. Environmental Tesco PLC has been a responsible company in its recognition of the environmental impacts of its operations. Tesco has shown its commitment to its efforts to introduce sustainable use of rainwater and reduce the emission of carbon dioxide gas and all emissions across its supply chain and all its delivery networks. Tesco has also addressed the environmental sustainability planning policies and has shown commitment to its outlines (Scott Wilson, 1). Legal Legal factors also apply as Tesco operates, particularly relating to its human resources. Several legalities apply in its management of its human resources and all the employees without any workplace discrimination. But beyond this, legalities also apply when global companies such as Tesco are operating in geographically diverse locations. Financial Performance Since the past few years, Tesco’s performance has declined. The sluggish performance coincided with the exit of the company’s former CEO with Philip Clarke taking over as the leader and CEO, hoping to bring the company back up to its previous performance levels. Any company’s performance is an important concerns for stakeholders and major investors. Tesco’s financial performance for the year 2012-2013 suggests a statuary profit of £1960 million before tax (Tesco PLC b, n.pag.). When comparing the financial statistics with previous years, the data suggest a decline in profits and the growth. The company is currently struggling to turn around its profits to its previous trends with many hopes attached to its new management. Competitor Analysis Tesco recently shut down its stores in the US that went by the name of ‘Fresh and Easy’ grocery stores. The shut-down cost the company millions of dollars as it laid down its staff and closed down its stores in country where Wal-Mart seems to be dominating. Yet Tesco is one of the fastest growing grocery retailers in the international stage occupying its place among other worldwide giants like Wal-Mart and Carrefour. Wal-Mart, on the other hand, still has a lot of markets to penetrate and expand as it does well in the local market, while Carrefour is determined to brush up its performance back at home. With a pull-back from the American market, Tesco launched its clothing brand F&F into the US market in franchise partnership with Retail Group of America, hoping to earn a suitable share of the consumers’ wallet. Conclusion and Relevance Tesco provides a lot of useful lessons to the novice entrepreneur in terms of its decision making. Having started a media management business of my own, Tesco can act as a guide as it provides useful insight into expanding operations internationally. Although some of its endeavors failed in the US, the company is doing very well in the Asian and Eastern European market. One thing to consider is the relevance of speculation which can provide helpful information regarding the state of the external environment and the feasibility of starting new business endeavors. Its decision to launch its stores in the US during the economic collapse did not prove to be a rational decision as the event had drastically changed consumer buying behavior. The internal working of Tesco which operates on a standardized integrated system also helps the company coordinate tasks and efficiently collaborate within the organization. This can help my company in its operations through seamless interconnectedness implying greater efficiency in our projects. Works Cited About Us: Board And Executive Committee. Tesco PLC. N. p., 2014. Web. 18 Apr. 2014. . Baker, Rosie. New Tesco Leadership, New Marketing Opportunity. Marketing Week. N. p., 2012. Web. 18 Apr. 2014. . Cisco Success Story: Tesco PLC. Cisco Systems Inc., 2009. Web. 18 Apr. 2014. . Investors - Financial Performance. Tesco PLC b. N. p., 2013. Web. 18 Apr. 2014. . Jain, T. R., Mukesh Trehan, and Ranju Trehan. Business Environment. New Delhi: VK Publications, 2010. Print. Kokemuller, Neil. What Are Internal & External Environmental Factors That Affect Business?. Chron. Demand Media, 2013. Web. 18 Apr. 2014. . Micro Focus Customer Success: Tesco. Micro Focus, 2014. Web. 18 Apr. 2014. . ‘Tesco Stores Ltd.: Environmental Sustainability Statement.’ Redcar & Cleveland Hampshire: Scott Wilson Ltd, 2014. Web. 18 Apr. 2014. Read More