Business Performance

Business performance is affected significantly by the business and external environment that it operates in. This report is an analysis of the environment with regards to Tesco. The report evaluates the structure of the industry that Tesco operates in and the business organization. It also includes a STEEPLE analysis of the social, technological, economic, environmental, political and ethical environment. The macroeconomic factors that affect the organization have also been discussed and the determinants of demand or supply of the goods that Tesco trades in. Market factors such as competitiveness and the random shocks that could affect UKs fiscal policy, as well as the as well as the challenges in the external environment.

Tesco is a retail chain that operates primarily in the United Kingdom. Tesco stocks a wide variety of goods and services such as foodstuff, clothing and apparel, home gardening, cleaning, lighting equipment, and home appliances and electronics.

Industry structure

Tesco’s competitors in the United Kingdom retain industry are Sainsbury’s, Asda Stores Limited and Morrisons. These four organizations are regarded as the big four in the UK. The organizations have a similar business model incorporating physical and online retailing activities. Their distribution models are also similar; the store layout follows classification of different sections of products. The customer base is primarily in the United Kingdom though Tesco has branches outside the UK.  

STEEPLE Analysis

This section analyses the social, technological, economic, environmental, political, legal and ethical environment.

Social

The social factors that affect Tesco include the changing feeding habits in the UK population. There has been an increased emphasis on healthier feeding habits. In response, Tesco has increased the variety of groceries available in its stores and supported the sale of groceries on online platforms. Due to the increased racial and population diversity, Tesco has changed its product offering to include and serve the Muslim community, such as the sale of Halal meat, increasing the number of attendants to serve the increasing ageing population and the disabled.

Technological

The retail business relies heavily on technology to ensure critical activities. Tesco has adopted a n e-commerce platform where it sells a variety of products especially food and groceries. Technology is also essential in managing stock. In a business model that incorporates foods which must be kept in certain humidity and temperature conditions to keep it fresh, Tesco fulfills such needs by technology. Tesco also uses technology for queue and till management, to provide customers with multiple payment systems, and to manage customer loyalty points system. Technology is also essential in managing the stock levels to ensure that customers always have products.

Economic environment

The global economy has been recovering from the effects of the COVID-19 pandemic. The United States particularly was under several lock downs which affected the organization’s revenues as shown in the reduced sales in the 2020 financial year. The imposition of social distancing also affected its performance. The slow economic recovery characterized by unemployment rates have affected populations income levels, and purchasing power and consequently Tesco’s return to optimal performance.

Environmental

Tesco PLC has to consider several environmental factors in its business model. One key issue is waste management especially from food. However, Tesco has an elaborate environmental sustainability program it has partnered with its suppliers in environmental conservation initiatives. Initiatives include removing plastics from its network to reduce plastic waste, installation of waste collection centers in its stores to support recycling, commitment to reduce greenhouse emissions from its facilities, using renewable energy, sustainable sourcing of sea food and working with World Wide Fund for Nature in preserving global resources.

Political

Tesco has had to restructure its business to since the onset of Brexit. For instance, Tesco needed to amend modalities for the flow of goods and services between Northern Ireland and the Republic of Ireland.  

Tesco has a

Legal

Tesco is required to conform to certain law by the government. For example, since Tesco sells food, it is required to conform to food safety and hygienic standards set in the law. Other operational issues in law include observing labor laws such minimum working age, and minimum wage. Some of the products that Tesco sells have age restrictions. For example, alcohol is not supposed to be sold to individuals below 18 years in the UK.

Ethical

Tesco has a code of conduct that it uses to ensure that its dealings with stakeholders are straightforward and ethical. The code of conduct touches on many areas of operations. For example, the code guarantees that Tesco marketing communication will always be above board, and honest. The code also guarantees customers that Tesco will always take due care when handling food and protecting customer data. Externally, the code also details interactions with suppliers, fair trade with competitors, intellectual property rights, and the need for upholding the law with regards to bribes and gifts, conflict of interest, fraud and accounting practices. Internally, the code details how employees should relate among each other, employee integrity and safety, equal opportunity and inclusion and human rights.

Determinants of demand for Tesco’s products

Tesco operates in a market that has 4 other major organizations signifying that it operates in an oligopolistic market. In an oligopolistic market, the firms may easily set prices because the size of the organizations provide barriers to entry of the market.

Determinants of supply for Tesco’s products

One of the issues that Tesco has now to contend with is the increase in the price of oil prices. The global increase in oil prices has an effect on the generation of energy which directly affects manufacturing processes and overheads. Manufacturers often transfer the cost to customers and the overall effect is the increase of prices. Additionally, fuel prices can affect the logistical plans that

Additionally, Tesco also has to consider the forex rate. The primary currency in United Kingdom is the Great Britain Pound (GBP). The resilience of the GBP in comparison with other currencies is an important factor to consider especially for forex transactions for the goods that it pays for outside the UK borders. Suppliers of such goods may be unwilling to provide goods and services if they do not get value for the goods they provide. Therefore, Tesco’s international and local supply chain may therefore be significantly affected by inflation.

Market competitive

The big four retail and supermarket chains take up a majority of the market share in UK. Other small-scale retailers and online retailers who share the e-commerce space. The organizations also have similar strategies to attract and maintain customers. They focus on customer service and offering the best price for customers to remain more competitive.

Fiscal policy

The government is the primary developer and implementor of fiscal policy in the UK. The actions of the government determine the interest rates, and the circulation of the currency in the economy. This therefore matters because it affects the manner that Tesco accesses credit, and how actions of the government affect the value of Tesco’s assets which are held in Great Britain Pounds. Fiscal policy also affects the level of circulation of currency in the economy

Government activities to simulate the economy affect employment. In the aftermath of the COVID-19 pandemic, the UK government-initiated measures to cushion individuals and businesses from the adverse effects of the pandemic. These initiatives were essential in ensuring that citizens maintained their employment opportunities.

Government actions also takes actions to control inflation. Inflation affects the value of currency, causing the rise in the cost of goods and services. Inflation could affect Tesco significantly because Tesco operates in a cash intensive business and therefore would be significantly affected by currency devaluation.

External challenges

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