Business Environment of Tesco - Essay Example

?Business Environment Introduction The Business Environment of an Organization is studied in regards to Tesco located in United Kingdom. The Tesco isa large departmental store having its presence both in United Kingdom and as well as on a global sphere. In the retail industry, Tesco occupies a sense of pride in ranking third after firms like Wal-Mart and Carrefour in the international scale. Tesco which has its stores spread along fourteen countries along a global sphere earns a significant position in the grocery market in United Kingdom. Along with grocery products the company also markets several other products in categories relating to general merchandise like books, garments, and other consumer durable products in both electronic and non-electronic fields. (Tesco, 2011). 1. Mission, Objectives and Responsibilities of an Organization (a) The Core Mission of Tesco deals with creation of value for its customers through the rendering of quality products and services. Through the rendering of quality products and services the company aims at enhancing the loyalty parameter of the customers. Further the company also sets a mission of caring for its people in both the external and internal sphere. The internal groups of people consist of the employees of the company who by dint of their hard work makes the company succeed in a competitive business environment. External group of people are the customers and other stakeholders like suppliers and government who render due support in making the company succeed in its operations. The company believes that helping the customers in getting the right products caters to the event of repeat purchases by them. Similarly the company also works to motivate its internal people to work in a devoted manner to fulfill customer delights. Moreover the customers and the staff are regularly contacted by the management team of Tesco to get fruitful suggestions in developing its service and product qualities. (Tesco, n.d.). The above mission of Tesco helps the company in fulfilling its stated objectives which can be underlined as follows. Tesco fulfills the needs of the customers by rendering quality products at reasonable market prices. The customers of Tesco are regularly contacted by the company for getting suggestions which would help in both product and service enhancement. Tesco also satisfies the needs of its stake holders like investors and shareholders by producing high returns on the investments made. The company also helps in quality enhancement of its employees through effective training and management policies. Tesco also maintains a strong supplier environment which aims to deliver to the company quality products at effective price ranges. Finally in total Tesco works tightly in fulfilling the responsibilities of the company to the society in a complete manner by satisfying all legal and environmental obligations. (Corporate Objectives, n.d.). (b) The giant departmental store Tesco has large group of stakeholders starting from customers, supplier groups, investors and shareholders, the different levels of staffs and the union groups to which these people belong to, the community of people who sponsor the company and whom the company sponsors and finally those who render influences on the government of the region and on the business as a whole. Tesco in a bid to cater to the customer groups have helped in creating stores which would remain open for full 24 hours every day. These stores help in catering for the buying community who fail to avail time to conduct shopping during the day owing to their busy schedules. The company also encourages the customers to conduct transactions online through their membership card which helps enhancing customer loyalty. While maintaining a relation with the supplier groups Tesco acts in a strict manner through administering, monitoring and evaluating their demands. If in turn a supplier group of the company demands an increase upon the agreed amounts and thereby tries to disturb the operations, Tesco does not wait from altering such supplier groups for sustaining its profits and revenue. The company has also to satisfy the needs of the shareholders and investors by catering to the needs of enhancing its profits and revenue parameters. Investors also demand the creation of value on the amount of investments made. Tesco also caters to the needs of its employees through the creation of a competitive and secured job environment. The company works on creating employee satisfaction through rendering better pay scales, better and safe job environments and motivational and training factors. Tesco also conducts frequent negotiations with the trade union groups in order to avoid conflicts and create a harmonious environment. Tesco through the event of sponsoring of events helps both itself and as well as the event groups in drawing large amount of customers which help thereby in augmenting the revenue of the firm. (Haidar, 2007). (c) The retail giant Tesco located in United Kingdom caters to the responsibility paradigm towards the society in a comprehensive manner. During the 2006-07 periods the company had worked harder to conserve electricity by reducing its consumption by around 12 percent in every square foot. However the company which also worked hard enough to save the consumption of water in every square foot failed to achieve its stated objective of reducing the level of consumption of such by around 5 percent. Tesco earned success in being able to recycle a large mass of the amount of waste products generated by the operational activities by around 71 percent. The company has also successfully reduced the consumption of plastic carry bags during 2007 by around 400 million from that during 2006. Further the company also looks forward in reducing the level of carbon dioxide emissions both from its outlet and factories. The company by the end of the 2020 period aims to reduce the level of carbon dioxide emissions from its operation activities by around 50 percent. (Tesco Releases Corporate Responsibility Report, 2007). The company also has designed a footprint or plan for reduction of carbon dioxide emissions by its operational units and other stakeholder groups like customers and suppliers. Supplying units are asked to check and monitor the level of carbon emissions from their factories. Further the supplying and the consumer vehicles are also checked for helping in reducing the flow of carbon into the atmosphere. (Tesco, 2011). 2. The Economic, Global and Social Environment (a) The emerging economy is characterized to be an economy bearing a low level to middle level income on a per capita basis. These economies are found to encompass around 80 percent of the total population of the world and accrue the income of around 20 percent of the economies measured on a global scale. These poor economies are known as the emerging economies on account of the large amount of developmental activities that are taken from time to time to improve the plight of the people living in there. The emerging economies spread along the world vary from very big to smaller sizes. An example of a big emerging economy is China which hosts the largest amount of people in the world and yet developing into a powerful economy through the optimal utilization of its resources. As along China another small emerging economy that comes to light is Tunisia. The region of Tunisia though geographically small is also endeavoring to bring about development in its economic status. (Heakal, 2011). In contrast to the emerging economies the command economic system is that where the total resource base of the country is owned and governed by the government and administrative power ruling the country. Production and labor resources of the country being totally governed by the government authority gives full supremacy to the state run enterprises which operates free of any competition. The produced commodities are rendered to the household units through the rationing systems which also sets prices for the products. However such economies like practiced in Nazi Germany takes less care of consumer desires and demands. Rather it thrusts the goods to the public who are bound to purchase it failing to hunt for options. Further the total resource base being set in the government hands often amounts to be misused and remains unaccountable to public eyes. (McEachern, 2006, pp.37-38). (b) The business cycle model in any economy is measured along two axis viz. measure of output in the country on the one axes and time period on the other. Along the axes of time the output of the economy varies along different cycles like a major slump of the economy causing a huge downturn which lets the economy to suffer a huge recession. After such a recessionary downfall the economy of the country aims to conduct a huge recovery to help the economy go for an economic boom. Thus the various steps which the economy takes along different periods while operating based on its resource base is configured as the business cycle of the country. (Business and Trade Cycle, n.d.,). The above information can also be represented in a graphical manner as follows. Economic Slump Boom Economic Output Recession Recovery Time Period (Business and Trade Cycle, n.d.) The climate of the United Kingdom based on the business cycle model is observed to revive from its recessionary position through huge amount of developmental works. The economic recession which happened during the 2008 period shook the nation of its economic potential which the country is gradually reviving through continuous developmental activities. United Kingdom is surely taking some steps to counter the recessionary stage through which it is passing by taking resort to some policy changes. Prime Minister of United Kingdom had suggested the ceasing of the policy of protectionism to help in the economic development of the country. Policy changes also embarked on the growth of employment avenues to help in the increase of employment within the country. Government of United Kingdom is working to help the country come out of depression through the maximization of industrial output. Further to counter the impacts of economic recession the government has also rendered huge financial help to the banks and financial institutions revive out of their plight. United Kingdom government also encourages the growth of open market economy to help revive the economic position of the country. (Croft, 2009). (c) The United Kingdom in its bid to promote a welfare state works basically on three main pillars. Firstly the government of United Kingdom desires to guarantee a basic level of income for all the people living in the country. Secondly the government of the country also enhances on the policy of protecting the people even in times of turbulence. Thirdly the government of the country also promises to the society to render the best possible service through the optimal utilization of the present resources. These social policies practiced in United Kingdom help in the restoration of the basic rights of the citizens of the country in terms of right to pay, right to live in a secured environment and right to obtaining the services rendered by the government. However unfortunately the government of United Kingdom in a bid to work upon the pillars of the welfare state fails to render true practice of the standards taken. It is observed that though the extent of the services covers a larger group of the society yet the quality and standard of service rendered is quite low. Rendering of proper services by the government is also of restrictive nature. (Spicker, n.d.). In the trade hemisphere Government of United Kingdom encourages the role of reduced tariff rates among a variety of products and services pertaining to different sectors. Further the United Kingdom government also seeks to eliminate the tariff rates applied on products and services at less than 2 percent of the value. Working on trade and industrial development, United Kingdom government also encourages the governance of international labour bodies like International Labor Organization to help in the development and protection of the labor force. The government of the country also favors the growth of liberal trade and industrial policies with the growth of open market economy. United Kingdom aims to bring about development of the community and the labor force through the trade and industrial expansions. (Global Trade Negotiations, 2004). 3. The Behavior of the Organizations and the Market (a) Speaking about barriers in entering the domain of retail in United Kingdom it is found that the potency of barriers are too low in restricting the entry of firms and individuals in the market. Observations suggest that someone having a small capital of around 40,000 Pounds is compatible enough to set a small retail outlet around a street in United Kingdom. Retail industry in United Kingdom has become the home of a large number of small retailers who have set small shops in various regions and are largely competing against each other. Moreover the small retail owners spread along United Kingdom also largely cater to expansionary activities through market specialization depending on enhancing the product and service qualities and targeting a niche consumer group. However such expansionary drives of the small retailers in the retail market of United Kingdom pose increased stress on the availability of resources. New retailers desiring to foray in the existing markets get obstructed owing to the unavailability of potential resources which are usurped by the existing retailers whether big or small. Furthermore the economic system of the country which was quite loose previously is gradually becoming constricted enough to discourage the entry of new retailers in the markets of United Kingdom. (Knight, n.d.). (b) A market to be defined as a Perfectly Competitive one is required to satisfy some basic points which can be underlined as follows. Firstly a perfectly competitive market is characterized by a huge number of suppliers. These suppliers spread along the market in large numbers fail to influence the prices of products in the larger market through manipulating the supply mechanism. Secondly the industries operating in a perfectly competitive market are also featured through the production of same type of products. These products produced by the several industries operate as substitutes to each other in satisfying the needs of the customers. Thirdly the consumer groups of a perfectly competitive market gain huge advantage in being able to acquire potential information as to the prices of the products produced by different manufacturers. Hence the consumer model in a perfectly competitive market is also perfectly elastic with minor changes whether increase or decrease in the existing price structure by any manufacturer or seller. Fourthly the industries and the firms operating in the market whether old or new have equal accessibility to the large number of resources thus imposing perfect competition among them. Thus these units can compete in the development of products and services using the resource potential. In the fifth case the perfectly competitive market does not render obstruction to the entry of new firms. Thus firms in a perfectly competitive market can make an entry or exit at any point of time in the long run and can compete freely amongst each other. (Perfect Competition-The Economics of Competitive Markets, n.d.). The retail industry in United Kingdom pertaining to the grocery sector in the light of the pillars of perfect competition cannot be stated as a perfectly competitive market. It is because the retail industry of United Kingdom though composed of many retail firms operating and competing against each other yet the prerogative of the market forces lies in the hand of major retail firms. Further the retail stores in United Kingdom offer commodities pertaining to different brands and thus cannot be termed as fully homogeneous. Thus the retail stores in United Kingdom offering to the customer different types of brands also start dictating different prices which in itself destroy the fabric of perfect competition. (Griffith & Harmgart, 2007, pp. 2-5). (c) The regulatory mechanisms in force in United Kingdom do not render significant impact in producing obstacles that would hinder the growth of innovation in retail industry. However the government of United Kingdom looks forward in rendering regulations which would act as a cushion to the society in the light of threats imposed due to innovation. Moreover the following of the regulatory practices as imposed by the government acts as a growing economic burden for the smaller retail firms than the larger. Regulations imposed by the government helped the retail firms of United Kingdom to improve on the segment of rendering services to the customers. (Hristov & Reynolds, 2007, pp. 5, 11, 41). 4. The significance of international trade and the European dimension for UK businesses (a) The Foreign Direct Investment is observed to be a triggering factor for the globalization in the world economy. Ushering of Foreign Direct Investment in the economy has helped in the mobilization of resources along the global scale. Further the incorporation of such has also helped in the expansion of the industrial base of the countries along with development and enhancement of both technical and human expertise. Foreign Direct Investment has also helped in attracting large groups of investors to countries for the expansion of its trade and industrial activities. The economy of a nation grows with the flow of investment opportunities coming from foreign or international sphere. This growth in the trade and economic activity of the region helps in the enhancement of employment opportunities in such region which thereby also caters for the social development. (Role of FDI Stressed in Economic Globalization, 2002). (b) The agricultural policy of the European Union also works on settling the right price of the agricultural products. The most important price mechanism outlined by the price policy of the European Union consists of setting a target price which would enable the producers or farmers to get a minimum amount of the investments made. A second set of price known as the intervention price is also fixed. This is generally less than 10 to 20 percent above the target price, which has been settled at the previous stage. This second level of price is that through which the produce is bought from the farmers. However the actual price is determined by mediating between the two price levels viz. target and intervention. Again the actual price of the agricultural products is determined mainly by two factors viz. the level of interventions involved and the regulatory mechanisms involved pertaining to the levy of import duties on agricultural products from other nations. (Laursen, 1995, p.114). The agricultural price mechanism followed by the European Union is found to suffer from some distinct disadvantages. Firstly the policy of the European Union taken to this end is observed to have failed to grant a better economic condition to the famers. The income of the farmers after being protected by the price doctrines of the European Union is still estimated to stand at around 50 percent of the non-farming population. Economic and price policies taken by the European Union is found to have helped the wealthier farmers to become richer at the cost of the poorer people. Again the cost of the policies taken by the European Union in the light of such price mechanisms rose to such heights that it paralyzed the work of other policy measures taken by the body. (The Common Agricultural Policy, and market failure, the price support mechanism, n.d.). (c) The membership of the European Union taken by United Kingdom has greatly helped the industries flourishing in the region in a significant manner. It has helped in the inception of several regulatory measures which controls the operational mechanisms of the industrial units. Again the mechanisms of the European Union have also helped in reducing the economic burden of the several industries by focusing on reduction of production costs. Another major advantage posed by the membership of United Kingdom in European Union is in helping the easy transportation of goods and services along several nations of Europe. This practice helped United Kingdom in extending its trade and economic practices along international borders thus augmenting its global revenue. Further the people of United Kingdom have also earned the benefits of such industrial policies through the obtaining of better quality products by the several industries. (European Union Membership-The Benefits, n.d.). However the industries in United Kingdom also suffer from certain disadvantages. Firstly the main problem associated with the industries of United Kingdom is related with the exchange rate mechanisms of the European Union. Secondly the large amount of benefits expected out of trade activities with the European Union nations proved to be futile. Rather the amount of benefit accrued was much less than the expectation made. Thirdly the industries of the United Kingdom suffered from being deprived of their independent position being taken by the European Union. Moreover the nations of United Kingdom also suffered from deflationary tendencies being subjected to the realms of the European Union. The European Union nations suffered greatly from the effect of economic recession. Thus countries belonging to United Kingdom in their trading activities with the European Union nations also suffered from the recessionary moves of such activities. European countries suffering from recession started transferring large amount of funds between them which affected the trade and economic activities with other countries and regions like that of United Kingdom. This rise of financial transfers done along region to region also amounted to increasing the level of unemployment in countries of United Kingdom. Thus United Kingdom’s ascension to European Union both had positive and negative effects in changing the sphere of economic activities. (Advantages & Disadvantages, n.d.). References 1. “Tesco” (2011), tesco.com, available at (accessed on March 18, 2011). 2. “Tesco” (n.d.), csrglobe.com, available at (accessed on March 18, 2011). 3. “Corporate Objectives” (n.d.), tesco.com, available at (accessed on March 18, 2011). 4. Haidar, A. (2007), Tesco, available at (accessed on March 18, 2011). 5. “Tesco Releases Corporate Responsibility Report” (2007), environmentalleader.com, available at < http://www.environmentalleader.com/2007/06/05/tesco-releases-corporate-responsibility-report/> (accessed on March 18, 2011). 6. “Tesco” (2011), ukintaiwan.fco.gov.uk, available at (accessed on March 18, 2011). 7. Heakal, R. 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