This paper explores external and internal environment of Tesco as its success factors. It also presents strengths and weaknesses of Tesco internal environment. Check it out if you need to write an environmental analysis.
Introduction
Tesco is one of the leading corporations in the UK as well as the global retail market. The organization’s group sales constitute over ÂŁ48 billion with almost 7 thousand shops across the globe (Key facts 2016). Such remarkable results have been achieved due to various factors. The internal environment is one of the contributing factors that led to the success of Tesco. The internal factors include corporate governance, corporate culture, resources, and so on (Henry 2011). It is possible to consider the strengths and weaknesses of the company’s internal environment to estimate its potential.
Tesco Internal Environment Strengths
One of its strengths is linked to its potent corporate governance. This strength is efficient in strategic management. Dawson and Mukoyama (2013) note that the organization’s decision to expand internationally in the 1990s was beneficial for its development. Since then, the company has paid much attention to its global operations, and its policies are consistent with the decision made several decades ago. The second strength is the company’s pricing strategy.
Tesco employs a cost-based and differentiation-based strategy, which makes it appeal to different types of customers (Capon 2009). The retailer manages to remain attractive to price-sensitive customers, but it is also successful among those with high income. The third strength is the availability of a significant bulk of resources (Henry 2011). The fourth strength is the use of research-based practices (Dunne, Lusch & Carver 2010).
Thus, the company implemented a study to identify the products bought by price-sensitive customers, which allowed the retailer to remain attractive to this group. Finally, the focus on corporate responsibility and sustainability can be regarded as another strength. For instance, the company responded effectively during the meat crisis through apologizing, the introduction of extensive audit, and “reduction in the complexity of its supply chains” (Giles 2015, p. 194).
Tesco Internal Environment Weaknesses
As for the weaknesses, it is possible to note that the company has quite weak audit practices as it has been involved in a number of bribery scandals. For instance, it purchased land from people who were later accused of giving bribes to local officials (Capon 2009). Another weakness is the company’s insufficiently effective strategies aimed at diversification as the company faces significant difficulties with some segments, which is especially manifested in the developing countries (Capon 2009).
The organization’s corporate culture should also be improved as Tesco’s policies and practices related to employees and partners are inappropriate (Creevy, 2014). Tesco often forces partners to accept rules that benefit the retailer and often negatively affect partners’ development (Black 2014).
Tesco’s business operations are often doubtful. For example, the introduction of credit cards and insurance led to an increase in the company’s debt (Dunne, Lusch & Carver 2010). Finally, the retailer adheres to the cost-reduction tactics, but they are inapplicable since may lead to significant losses (Capon 2009). In conclusion, it is possible to note that Tesco has been one of the leaders due to effective corporate governance, but some of its business operations and corporate culture should be changed in order to ensure the organizations’ further growth.
Internal Environment of Tesco: Success Factors
Leadership, corporate governance, and corporate culture are seen as important components of the internal environment of any organization. It is necessary to note that these factors interact and may differently affect the development of a company (Henry 2011). As far as Tesco is concerned, the three factors also had a slightly different influence on the development of the company at different times. Thus, leadership and corporate governance were central during the second half of the 20th century while corporate culture had a slight effect. At the same time, it is possible to note that there is a vivid shift in society and the business world as corporate culture starts playing a vital role at present.
Leadership and Corporate Governance
It is necessary to note that the three factors mentioned above are closely interconnected as leadership often defines corporate governance and culture, although these components often affect leadership. Creevy (2014) states that the age of Sir Terry Leahy made the company one of the leading retailers in the UK in the 1990s. His strong leadership was associated with rigidity and a focus on development. Leahy made the corporation competitive through the use of quite strict rules and conventions that were a norm at the end of the 20th century. Partners had to comply with the rules as the company was one of the largest retailers with stores in many countries. It is possible to note that such a rigid approach enabled the company to succeed in the highly competitive environment of the 1990s and 2000s.
Corporate governance was also based on similar principles, but the focus on development was central to it. The organization aimed at expanding and concentrated on developing countries (Dawson & Mukoyama 2013). Rigid rules accepted in the company were quite appropriate as well since they allowed the company to adopt top-to-bottom governance. Again, responsibility and sustainability were principles that only paved their way in the corporate world, so companies often violated some ethical norms to achieve their corporate goals.
Corporate Culture
These two components of the internal environment played a crucial role in the success of the organization that became a leader in the UK retail market and expanded globally. The focus on development and quite rigid business practices that favored Tesco and could have detrimental or less favorable effects on partners allowed the company to achieve major business goals. However, in the 2000s, external factors came into play, and people started paying more attention to ethical issues, corporate responsibility, and sustainability (Capon 2009).
At present, it is clear that corporate culture can have a negative effect on the development of the organization that may lose its customers and partners. Black (2014) stresses that Tesco’s partners have often been dissatisfied with the retailer, but had to comply with the rules set as the corporation is a “vital customer” for many (para. 5). Nonetheless, numerous retailers start being more responsible and provide attractive partnerships (Dunne, Lusch & Carver 2010).
The changing trend and the focus on sustainability put the corporation into quite a difficult position. Clearly, Tesco proclaims its commitment to sustainability and corporate responsibility, but employees and partners have a very different view on their experiences (Black 2014).
Therefore, it is possible to note that corporate culture starts playing an important role in the development of the organization. Thus, Dave Lewis, Tesco’s new chief executive, has announced an extensive transformation as regards the organization’s corporate culture (Lawson 2015). Of course, the changes will address mainly the policies concerning employees and partners. This will allow the corporation to develop a favorable image in the society, which is crucial in the contemporary business environment.
The Central Factor
As has been mentioned above, leadership, corporate governance, and corporate culture are closely related and have affected the development of Tesco. At that, the 1990-2000s were characterized by the major influence of corporate governance and leadership that shaped the corporate culture. In the 2010s, the appropriate corporate culture became vital for the organization that had to remain competitive in the environment where sustainable practices started being seen as a norm (Capon 2009).
At that point, corporate culture started shaping the company’s corporate governance and leadership as the organization was to develop a favorable image. The retailer is becoming more transparent and aimed at the development of effective partnerships (Giles 2015). It is hard to say whether the retailer’s announcements will have a positive effect on the organization’s performance and overall development, but it is clear that sustainability and responsibility are seen as vital characteristics of the modern business world.
Conclusion
In conclusion, it is possible to note that corporate governance, leadership, and corporate culture have had different effects on the development of the organization at different periods. It is also clear that the role of these internal factors has been shaped by the external environment. For instance, the shift in society’s attitude towards ethical issues in the business world has made Tesco reconsider its corporate culture as well as leadership and corporate governance. Therefore, when developing their strategies, companies should take into account all the factors within the internal and external environment. It is also essential to understand the way these factors interact.
Reference List
Black, O 2014, ‘The bottom line is Tesco’s culture needs to change‘, Telegraph.
Capon, C 2009, Understanding the business environment: inside and outside the organisation, Pearson Education, Essex.
Creevy, J 2014, ‘Tesco warned it must address damaging company culture’, RetailWeek. Web.
Dunne, PM, Lusch, RF & Carver, JR 2010, Retailing, Cengage Learning, Mason.
Giles, S 2015, Embedding ethics in corporate culture: a practical guide to minimizing reputational risk, john Wiley & Sons, West Essex.
Henry, A 2011, Understanding strategic management, OUP Oxford, Oxford.
Key facts. 2016. Web.
Lawson, A 2015, ‘What difference has a year under new leadership made for Tesco?‘, Independent.