An organization is a structural arrangement of human resources, and other essential resources to accomplish certain specific tasks, or to attain certain objectives. The term organization may refer to a company, business firm or any other institutions. Ethics and discipline are very important factors of organizational process (Wheelen et al., 2017). These factor the quality and values of a particular organization. No matter how big an organization is, without specific principles and a friendly business environment, it may fail to achieve its goals (Prajogo, 2016).
The business procedures of British multinational company Tesco can be analyze here in this context. Discussion is done on the work process of Tesco, and the factors that determine the work procedures, including related business environment. Several factors can affect and shape the business of an organization. It can be the present economical situation, or the governmental policies and norm, or may be the present political situation (Babajana and Hughes, 2015).
LO 1: Understand how the organization is structured, governed and managed
Tesco is British multinational retailer firm. It has its headquarters in Hertfordshire, UK. Tesco is one of the leading multinational retail firms all over the world. Jack Cohen founded it, in the year 1919. Initially, it was just a small grocery store in the Wall Street. In the year, 1924, Tesco got its registered brand name, after they did business with Thomas Edward Stockwell, a tea company. With that, Jack Cohen added first two letters of his surname. This is how the name Tesco came into market.
In 1950s and 1960s, the company expanded a lot, in comparison to the previous years. Almost within twenty years, the company has owned more than 800 stores. With a vision and mission to enlarge, the firm Jack Cohen was determined to do business with associated companies. One of the biggest takeovers by Tesco, until that period was, Hillards chain of 40 supermarkets for 220 million Euros. Until then the company has take over many a big companies, including William Low (Clark and Chan, 2014).
Tesco is a big organization with more than 6000 shops. According to the report of 2017, net income of the company was million. More than 400, 000 employees work at the Tesco. According to the reports of 2017, Tesco has more than 476,000 employees. Therefore, one has to understand that an analytic understanding and application of work culture is very important, in order to fulfil the objectives.
Organizational Structure of Tesco
Tesco follows a traditional hierarchical structure for running their business. A hierarchical structure can be visualised as a pyramid shaped structure, where the owner or the author stands at the top, and they will do the whole work process, including critical decision-making. The people below then are committed to take instructions and executing them. The organizational structure of Tesco consists of five committed, that are controlled by Tesco PLC Board. Tesco PLC Board has consists of total eleven member. Among these members, Dave Lewis is the Chief Executive of the company. In the 2015, Dave Lewis took the responsibility as the CEO of the company, and John Allan was appointed as the Chairperson. Among other personnel, Alan Steward was appointed as the Chief Financial Officer, Deanna Oppenheimer as the Senior Independent Director. Other members of the board were appointed as Non-executive Directors.
This typical hierarchical structure of the company helps the organization to achieve bigger objectives. The authoritative structure is still functioning in the organization, which suggests the more large-scale goals and objectives of Tesco.
Role of Stakeholders
Legal structure of most of the large-scale private firm is associate business. The main motive of these business companies is gaining profit by generating more and more revenue, for both the company and the associates, and enlarging the organization by employing more employees or by applies new advanced tools and technology.
Associate, in the context of business or organization can be a person, company or a group of persons that owns shares of the main company. Like every other big companies, the business of Tesco is very much dependant on its relation with the shareholders and the amount they invest in the business (Boatright, 2017). The major shareholders of Tesco are, Black rock Inc, holding 6.64% of the total market share of Tesco. Among other major shareholders of Tesco are, Norges bank and Schroders plc. They hold 3.998 percent and 4.99 percent of total market shares respectively.
Any unethical practice in the organizational context may create a massive negative impact on the customer base, and this may lead the financial base to a drastic downfall. Moreover, this will affect the brand value severely. Naturally, the shareholders would tend to stop doing business, in order to retain their own market reputation, and thus the main organization would face situations that are more difficult (Houben and Straetmans, 2016).
LO 2: Appreciate the key external environmental constraints on a business
Several internal and external factors can affect and shape the overall business of an organization. Among these important factors, politics, economy, society, governmental norms and regulations everything can be included. Changes in any of these factors may create an impact on the organizational activities of a company or firm.
Importance of PESTEL analysis
The term ‘PESTEL’ is an acronym that stands for all the external factors that functions to an organization. It consists of Political, Economic, Social, Technological, Environmental and Legal aspects of the place, where the organization is running its business. Therefore, it is a complete framework that helps and organization to evaluate or understand these factors and implementing new business principles and structures, in order to cover all the issues related to any of them. Without a complete analysis of the external factors, it is utterly difficult for any organization to chalk down its strength, weakness or objectives (Jensen, Malesky et al., 2015).
Factors of PESTEL
Present political stability and scenario of a place, determines the business process and objectives of an organization. Political context determines the domestic and international business policies and terms. For example, if a country is having problems like political instability or the ruling political party is less interested in industrial investment, ten it will naturally create a negative impact on the business companies.
Economy is one of the vital factors of business. The market trend, market stability is determined by the economical situation. Even the choices of the customers and purchase ability are determined by economical situation. Therefore, if the country is facing massive economical instability then this will harm the business of an organization (Bell et al., 2018).
Economy and Society are two correlated factors. The requirements and choices of a particular society are reflected on the gross demand and supply rates of that particular place. For example, if the inflation is, then the citizen will lose their purchase power. In that case, that particular society will move backwards from business investment. Moreover, this affects and shapes the employment policies of the organizations too (Carroll, and Buchholtz, 2014).
Technological advanced compel organizations to evaluate their traditional approach of business or marketing, and implementing new strategies, as well as skill development programmes. In this case, the Human resource management should be focusing on assessing and evaluating the competency level of the employees, and the ability to handle and operate new advanced tools.
On the other hand, technology has radically changed the customers’ choices and tendency. Internet, websites, mobile application etc has changed the mentality of the customers. Therefore, changes in any of this will be reflected in the organizational activity.
Environment is very important a factors, not only for organizational purpose, but also for society in general. Business activities of a particular organization must not interrupt the environmental stability of a place (Wheelen et al., 2017). Therefore, the company needs to analyse its work process, so that it can stand in harmony with the environment.
Several governmental bodies and regulator invest the activity and policies of companies and organization. There are specific norms and acts, that have been regulated by the government, in order to maintain the ethical stability of the society. Both the individual citizens and institutions are liable to maintain or follow those norms (Steen, 2017). Therefore, they play a major role in the marketing strategy and inter-cultural activity of a particular company.
Role of PESTEL in Tesco
Tesco is one of the leading retail companies all over the world. It runs its business in 12 countries. Therefore, analysing and considering multiple external factors is very essential for sketching the business structure and policies for the company.
Since Tesco operates in multiple countries, therefore several political factors, like political agendas of the country, legislation acts, political situations, internal instability etc is very essential in this context. In addition to that, economy shapes the business structure of Tesco radically. For example, 30% of the total market of Tesco belongs to UK market. Therefore, supply and demand ratio, inflation, changes in taxation in the UK will naturally affect the business of Tesco, including marketing plan, costing, production, branding and sales (Rahman, 2016).
Social factors are also very important for Tesco’s business context. Nowadays, the customers tend to get the products services from one-stop shopping. Realizing this tendency of bulk shopping Tesco has introduced multiple new products, in order to meet customers’ requirement. Moreover, they have introduced several technical applications and portals, so that the customers can get easy and quick services.
Being a reliable and trustworthy organization Tesco should be aiming at spreading social principles among people. It is fact of appreciation that the company looking forward to help spreading social and environmental awareness as well. Tesco have been reducing the uses of carbon footprints almost by 50%, which is a complimentary example for other organizations.
Legal framework and governmental acts are very essential for sketching effective business strategy. In 2004, Food Retailing Commission (FRC) has conducted certain rules regarding product services. For example, the retailer must not apply any charges for the delivery of products. In order to follow this, Tesco has reduced the cost of its fuel product, so that in can balance the cost of other products like food and groceries (Jenkins and Williamson, 2015).
LO 3: Identify the financial and ICT issues for key business functions
Capital is one of the key foundations of any organization and it is the most important determiner of the financial growth, as well as overall sustainability of that organization. A company can generate revenue either by providing product or services to the customers, or from share markets. Profitability:-
One of the main financial issues that a company may face is profitability. For example, if the production cost is in accordance with the required ratio, but still the company compels to cut its budget short, then it needs to examine the costing of other essential factors like, marketing, promotion, utilities.
Cash flow: -
Profit is not the only matter that determines the growth of the company. If the cash flow is not swift and fast then the company will not be able to pay its debts and bills in time. Therefore, profit will be useless in that case.
Without a proper and effective tax plan, an organization may have issues at annual tax payment. Methodical employment, qualitative assessment of the services may help the organization reducing its tax amounts.
Innovation, Information and Communication Technology (ICT)
In today’s advanced life style, technology is talking charges in every aspects, whether in education, or in banking, healthcare or in retail marketing. That is why, an innovative application of technology is essential, because only innovative ideas will be able to solve contemporary social and cultural problems. A static approach will put an end to the organization (Laudon, and Laudon, 2016). For example, the approach of companies likes Blackberry or Kodak was static and orthodox. That is why they are almost lost in the competitive market.
ICT refers to the process of collection and analysis of data that has been collected via telecommunication. It is similar to information technology (IT). However, information technology contributes to the completely organizational purpose, whereas Information and Communication Technology focuses mainly at improving communication. Information and quality communication with the customers, as well with the shareholders and other associates is very important for any big organization like Tesco (Luo and Bu, 2016). As already have been discussed, the business of large-scale business firms is very much dependant on the stockholders. Therefore, a strong communication is very important.
With the advance uses of internet, websites and other applications, customers expect a more user-friendly service. Therefore, introduction of chat bots, blogs, threads etc will help the company to keep up-to-date with the customers’ requirements. Moreover, this will help the organization to gain trust and capturing new customers as well.
LO 4: Appraise and recognize use of corporate governance and ethics within business context
The primary objective of an organization is profit-gain and increase shareholder value. However, every individual citizen and the organizations are responsible and should be committed to maintain and follow the laws and order, related to ethical principles of the society.
In the last two-decade the world have seen various incident of scandals and ethical obligations. For example, the ‘defeat device’ scandal of Volkswagen had created a drastic negative impact in people’s mind. In order to abolish such problems, the government has implemented several regulations, like the Environmental Protection Agency (EPA). These governing bodies ensure that any organizational activity must not violate the moral and ethical guidelines set by the government (Mason, and Simmons, 2014).
According to Arrow-Debreu model (Duan, and Mehlhorn, 2015), the primary objective of an organization is to maximize profit for the shareholders and for the individuals. This model is considered as one of the standard theorem of economics. However, scholars like Sir Adrian Cadbury (Veldman and Willmott, 2016) have opined an alternative proposition. According to him (Sir Adrian Cadbury), corporate governance is the director and controller of organizational activity.
Tesco’s Corporate Responsibility Committee has opined that:
However, the authority of Tesco has accepted the fact that it still needs to reform its corporate governance policies, and must strive to spread this awareness among the employees and shareholders. In order to meet these objectives, the following steps have been taken by Tesco:
This assignment has been focusing on the importance of business environment in the context of organizational practices. In order to explain the role of business environment, the assignment has illustrated the role of key functioning factors of business. These internal and external factors are very essential to meet the objectives of the organization. Discussion has been done in the context of Tesco’s business policies and structure. It is expected that this assignment will help to understand and relate business environment and effective communication in the context of organizational practices.
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