The present business world is becoming complex day by day and as a result of it the businesses are facing issues and it had become difficult for them to solve the issues in an effective manner. In this report, the researcher is focusing on explaining the international business issues and practices and for explaining all these concepts in detail the researcher is focusing on taken Tesco as a case company. Tesco is a multinational retailer in the UK which is operating in the retail industry and offering high-quality products and services across the globe.
With the increasing globalization, the business world is becoming more complex and the issues for the businesses are increasing to a greater extent. Surviving in the present business world is not easy and especially the business operating at an international level are facing more issues with the businesses (Aithal, 2017). This report will focus on exploring the different business issues which are being faced by the case company which is Tesco, the multinational company operating at the international level in the retail industry. According to the World Economic Forum’s Risks, there are different risk factors which are having the potential to develop issues for the businesses while operating at the international level. In this report, the researcher would explain the WEF risk such as failure of national governance, energy price shocks, unemployment, and fiscal crises (Evans, et. al., 2017). In this report, the researcher will analyze the internal and external business environment in an effective manner by using better analysis tools so that the issues which are being faced by the company are being analyzed. In this report, the researcher would also develop the strategies on the basis of the analysis.
ANALYSIS AND FINDINGS
Analyzing the business environment is important for evaluating that what are the different business risks and issues which are being faced by the businesses (Barnard, et. al., 2019). In the present research, the researcher would focus on analyzing the business environment of the case company by using the different business environment analysis tools such as PESTLE analysis, PORTER five forces, and competition analysis. These analyses would help in analyzing that want are the changes that are required to be made in the organization and on the basis of the report will develop better strategies for the company. The internal analysis of Tesco would also be conducted so that the strengths and weakness of the company can be analyzed and the on the basis of it better strategic direction can be recommended for the company. The report will recommend the strategic changes which would help the company in managing and reducing the impact of the WEF risks on which this report is focusing on the case company Tesco.
PESTLE analysis is one of the effective analysis tools which is widely used by businesses for analyzing the external business environment of the company in which they are operating (Perera, 2017). This analysis focuses on the six factors of the external business environment which are political factors, social factors, economic factors, cultural factors, technological factors, and environmental factors. PESTLE analysis ss of the case company would help in analyzing that how the different factors of the external business environment are affecting the case company. PESTLE analysis for Tesco is mentioned below such as:
Political Factors: the political condition of the place in which the company is operating is having an higher influence on the company. Tesco is operating at the international level and because of this, the company needs to follow the rules and regulations related to retailing of the products and services offered by the company. If the country is having a stable political environment then it would offer better opportunities for the company to survive. The great political event Brexit is having a negative impact on the case company and its business activities as well. Along with this, the trade war between China and the US is also affecting Tesco in doing business in these countries. The changes in the trade policies, taxation policies, and tax rates are also having an impact on the organization as they are having an impact on the profitability of the company (Guo, and Wang, 2019). Although Tesco gets better support from the political organization because they are generating better job opportunities and also adding value to the economy.
Economic Factors: the economic factors of the country in which the company is operating are having an higher influence on the organization and its profitability. The economic condition of all the different nations in which the company is operating is having an influence on the revenues, sales, and overall profitability of the retail company. The employment rate of the country is also an important factor that affects the organization as if the employment rate is low then the organization can get the employees at low pay but if the employment rate is high then the company have to pay more to the employees. The organizations need to focus on the economic condition of the nation and then on the basis of they have to decide the price for different products. The current economic condition of the world is worst due to the situation of lockdown as a result of the pandemic situation of the world and this is having a negative impact on all the businesses and especially on the businesses which are operating at the international level.
Social Factors: social factors are important for businesses as the social factors of the location of a country are having a significant impact on the sales of the company. Tesco focuses on making changes in their product range as per the shifting preference and choices of the customers which helps them in satisfying the needs of the customers and doing business in an effective manner. The case company needs to understand the buying patterns of customers because due to cultural differences the choices vary. Tesco is focusing on developing the organic product range because the customers are having a positive attitude towards the organic products. The UK customers are more attracted towards the one-store shopping and as a result of it, the company focuses on offering all the products to the customer under one roof which is helping them in increasing their sales (Jonah, 2018). The case company focuses on supporting the society in which they are operating and for this, they focus on local hiring and supporting the society by investing in the CSR activities as well.
Technological Factors: the technological advancement of the country in which the company is operating is having a significant impact on the businesses operating in the country. Technological advancement is creating better opportunities. In the technological era, it had become important for businesses to keep up with the changing technologies which can help them in delivering better products and services to their customers. Tesco is investing better capital in their research and development department and the technological advancement of the UK is also supporting them in using the latest technologies. With the increasing trend of online shopping, Tesco had also developed its online shopping platform and now offering the products through both the online and offline shopping modes (Alexander, 2020). The case company is also looking forward to pairing up with Amazon for creating a new technology that would be based on the concept of cashier-less billing and this technology would help the company in offering more convenient service to the case company.
Legal Factors: the legal factors are having a direct and higher impact on the businesses as it affects the business operations in a number of ways. Tesco needs to focus on all the legal rules made for the local and internal market for the smooth functioning of the business operations. The case company needs to focus on all the rules related to the sales of the products, employment, and production of certain products. It is important for the company to focus on the government policies and on the legislations as they are having a direct impact on the performance and reputation of the company. For example, in the present era of the COVID-19 pandemic, it is important for the company to focus on following all the rules and regulations made by the government as precautions for COVID-19. If the organization fails in following any of the legal rules that the company had to pay the penalties and had to follow the reputational loss as well.
Environmental Factors: with the increasing concern of the government and the peoples towards the environment the environmental factors had become more important for the organization as they need to follow the environmental laws made by the government. Tesco had taken initiatives for reducing its carbon footprints and to reduce the negative impact of the business operations on the environment. The company is having an effective plan for removing, reusing, reducing, and recycling. These initiatives taken by the company are helping them in reducing the negative impact of the company on the environment (Fadeyi, 2020). Along with this, the company is focusing on reducing their energy conservation for conserving the environment.
From the above analysis, it can be said that the different factors of the external business environment are having a significant impact on the businesses and it is important for organizations to develop better strategies for dealing with these issues in an effective manner. All the factors of the external business environment are having an influence on the businesses but the economic, political, and legal factors are having a higher impact on the organizations. These factors are important because these factors increase the risk of some of the WEF risks such as fiscal crises, failure of the national government and increases unemployment rates. For example, if the economic stability of the UK is affected then it might lead to fiscal crises if the situations get worst and this would have a significant impact on the businesses. Now if we take the example of the COVID-19 pandemic and then due to COVID the economic stability is highly affected and as a result of it, the unemployment rate is also increased which is having an impact on the case company (Islam, et. al., 2021). So it can be said that these factors need to be taken into consideration while making better strategies for the company.
PORTER’S FIVE FORCES ANALYSIS
Porter's five forces is an effective model which is being used by the businesses for analyzing that how the different forces of the business environment are affecting them and how the company can develop their strategies for gaining competitive analysis over others. This model is considered an effective model for analyzing the impact of competitive forces on the organization (Adelakun, 2020). The porter five force analysis for the case company Tesco is mentioned below such as:
- Bargain power of Suppliers: the case company is operating at an international level and because of this, the company is having a large number of suppliers from different parts of the world due to this reason the suppliers cannot exert more power on the organization. Along with this in the retail industry-wide range of suppliers are available so the company does not face many issues if they want to switch the supplier of any of the product. It can be said that for Tesco the bargaining power of suppliers is low. Tesco usually negotiates with their suppliers so that they can increase their profit margins by getting the raw material and products at low prices.
- Bargain power of Buyers: Tesco is having millions of customers across the globe who are making a purchase from both the online platform and the stores and due to this reason the bargaining power of buyers is low for the case company (Martin-Neuninger, and Ruby, 2020). Tesco is offering high-quality products to their customers due to which the chances of brand switching are also low and thus bargain power of buyers is low.
- The threat of new entrance: the threat from the new entrance in the retail industry is comparatively low because entering into the retail industry requires high capital. The case company is having its own core competencies and is also having economies of scale and as a result it the company does not need to afraid of the new entrance. Along with this the great market presence and resources of Tesco are hard to acquire.
- The threat of substitutes: Tesco is offering a wide range of products and along with this the company is also offering substitutes for the different products offered by them and this decreases the threat of substitutes for Tesco. Also, the low-cost strategy of the company and high-quality products offered by the company reduces the threat of substitutes for the case company.
- Competitive rivalry: the case company is having a large number of competitors in the UK which is affecting the sales and profitability of the company. Aldi, ASDA, Walmart are the major competitors of Tesco which are affecting the profit margin of the case company. It can be said that the competitive rivalry for the case company is higher as the company is facing competition in the UK as well as in the international retail market as well.
The competitors are having a significant impact on the success of the company and it is important for the businesses to focus on analyzing the competition which is being faced by them in the industry (Weatherston, 2020). Competitive analysis is an effective strategy that helps the businesses in identifying their key competitors and comparing the business practices of the company with their competitors and this can help the company in improving their business strategies and gaining a competitive advantage over others.
The major competitors of Tesco are Sainsbury, ASDA, and Morrison’s. These businesses are offering the same products as that of the case company and due to which they are having an impact on the profitability of the company. Tesco is having a higher market share as the statistics show that in December 2020 the market share of Tesco was 27% followed by Sainsbury and ASDA respectively (Fatricia, 2017). Both ASDA and Sainsbury are affecting the sales of the case company in a significant manner. Sainsbury is the second-largest grocery chain operating in the UK and they are having a large number of retail stores in the UK and they are having both supermarkets and convenience stores. In the grocery market of the UK Sainsbury is considered as a high-quality grocer and because of this reason the customers are willing to pay the high price for the grocery. Sainsbury focuses on price reduction strategy for gaining a competitive advantage over others. The product differentiation strategy of the company is an important strength for them as it offers them a better competitive advantage over others. Along with this the highly educated human resource and strong market share of Sainsbury are also important to the strength of the company. But the low margin business of the company is a weakness for the company (Bentham, 2018).
ASDA is the other largest grocery retailer in the UK and it is owned subsidiary of Walmart. ASDA is having 635 retail locations among which 584 are supermarkets and the company is also having a better market share. ASDA focuses on a low-cost strategy and tries to offer the products at prices lower than that of Sainsbury, Morrisons, and Tesco. The wide product range offered by ASDA and the extensive distribution network of the company is a strength for the company. Along with this the sustainability strategies of the company and the effective marketing strategies and campaigns of the company are also offering better competitive advantages to the company. But the limited global presence of the company and the critics faced by the company are the weaknesses of the company which are affecting the firm in a negative manner.
Morrison is also one of the largest grocery retailers in the UK which is having both supermarkets and convenience stores and offering high-quality products to the customers. Morrisons is working effectively for improving their businesses by offering better products and services to their customers and along with this the company also focuses on its promotional pricing strategy (Haleem, and Jehangir, 2017). Morrisons is offering high quality and fresh products at a low price which is an important strength for the company and this is also offering a competitive advantage to the company over others. But the company is having limited geographical expansion which is an important weakness for the company.
The top four market leaders of the grocery retail market of the UK, Tesco, Sainsbury, ASDA, and Morrisons focuses on each other strategies and then focus on reacting to those strategies so that they can get a competitive advantage over one another. These companies are having effective strategies but the WEF risks would affect the entire industry and all the businesses need to develop better strategies for reducing the impact on these risk factors otherwise the company would face issues (Adamyk, 2019). For example, if the businesses operating in the UK face issues due to failure of the national governance then they have to develop better strategies and need to take effective steps for dealing with the issue.
Businesses need to focus on developing better and effective strategies which can help them in operating in an appropriate manner and gaining a competitive advantage over others. From the above analysis, it can be said that the case company Tesco is having an effective market presence and holds a better market share as well but facing high competition from the competitors. While developing the strategies or making improvements in the existing strategies it is important for the company to focus on analyzing the strength and weaknesses of the company which can help them in deciding the best strategic direction for the firm. For analyzing the strengths and weaknesses of Tesco, SWOT analysis is being conducted which is mentioned below as:
SWOT analysis is an effective tool that is being used to analyze the internal business environment of the company. This analysis helps the businesses in identifying the strengths, weaknesses, threats, and opportunities for the company which can help the business in developing effective strategies for the businesses (Gürel, and Tat, 2017). Different strengths and weakness of Tesco are mentioned below such as:
- The great market share of Tesco in the grocery retail industry is an important strength of the company.
- The growth of the company and the strong performance of the company even in the pandemic situation of COVID-19 is an important strength of the company (Ivanov, 2020).
- Better technological advancement of the company is also an important strength of the company.
- Diversified product range and market of the company.
- Effective and efficient supply chain network of the company.
- The great market presence of Tesco in the international retail industry and the position of being the leading grocery retailer is also a strength for the company.
- The decreasing operating profit of the company.
- The low-cost strategy of the company is reducing the profit margin of the company and this is a weakness of the firm.
- Poor operational performance of Tesco in some of the markets and failure of operations in Japan and the US had affected the reputation of the company so this can be considered a weakness for the company.
- Lack of proper quality control is a weakness for the company.
- Issues related to food safety issues.
- The accounting scandals occur in the company had affected the reputation of the company.
- Changes in the trade rules as a result of Brexit and negative impact on Brexit and COVID-19 on the supply chain of Tesco (Fonseca, and Azevedo, 2020).
- Competition faced by the supermarket giants such as Sainsbury, Morrisons, and ASDA.
- Economic instability is having a negative impact on the sales of the company.
- Shifting of the customers to online purchase due to COVID-19 pandemic.
- A high unemployment rate would make the availability of human resources at low pay.
- The increasing online sales through the online platform of Tesco due to the COVID-19 pandemic situation.
- Making the use of AI in operation management can help the company in increasing productivity and profitability of the company.
- Expanding the businesses in the emerging markets.
- Forming joint ventures for improving the performance in the markets in which the company is facing issues in operating in an effective manner.
On the basis of the analysis, it can be said that the company needs to take better strategic directions which can help them in managing the business as an effective manager and using their strengths in an appropriate manner for gaining a competitive advantage over others. The case company should focus on expanding their online business as in the present era it will help the company in generating higher profits and leading the firm towards success (Baldwin, and Di Mauro, 2020). Now if we consider this analysis in the context of the WEF risks which we have considered in this report then the increased unemployment is a strength for the company. Tesco should consider this as an opportunity for them and should develop the strategy for recruiting the employees which can help them in improving their market position and business operations in an effective manner. Along with this if UK faces fiscal crises due to the COVID-19 pandemic or due to the adverse effect of Brexit or any other reason then the company should focus on generating high profit from other markets which can help them in managing this WEF risk in an effective manner (Ramelli, and Wagner, 2020).
CONCLUSION AND RECOMMENDATION
Operating the business at an international level is not an easy task as the different factors of the external business environment affect the organizations to a greater extent. Analyzing the business environment for all the businesses helps them make a better strategic decision for leading the company towards success and development. In the above-mentioned report, the researcher had used effective tools for analyzing the business environment in which the case company Tesco is operating. The researcher had identified the different issues which are having an impact on the businesses while operating at the international level. In this report, the researcher had focused on analyzing that what are the different WEF risks and how they affect the businesses.
In this research, it is being found that the case company is having a better market position but needs to take strategic directions which can help them in improving their business operations and gaining a competitive advantage over others. In the present era of the COVID-19 pandemic the world is facing economic crises and in this situation, the fiscal crises are more common for which the company needs to focus on developing the strategies which can help them in increasing their sales.
It can be recommended that Tesco should focus on using their online service to the fullest and using this opportunity of increasing the sales by the online platform. The company should focus on developing effective marketing strategies which can help them in promoting their online services and increasing their sales. Along with this, it is also recommended that the company should make better use of their technological advancement and should bringing technological transformation which can help them in offering better products and services to the customers by following the COVID-guidelines in an appropriate and effective manner. It can be concluded that the businesses operating at an international level are facing issues due to the present era of COVID-19 and the WEF risks had also increased for the businesses but the companies should focus on making effective use of their strengths and should develop better strategies which can help them in maintaining the better performance of the company even in the pandemic situation.
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