Free Analyzing The Basic Legal, Social, And Economic Environment In Which The Organizations Operate Essay Example
Businesses operations are subject to various factors that influence their performance and strategies. The factors include both internal and external forces capable of influencing the operations and decision-making. In that view, this report seeks to demonstrate the effects of market factors to business operations and how they in turn respond with suitable strategies. To achieve the objective, the analysis uses the case of Tesco and Walmart as companies in the same industry but operating in different markets. Thus, the unique environment for each is described, and the factors effects on their businesses strategies analyze.
Tesco and Wall Mart
With revenue in excess of £54 billion in 2009 and over 470,000 employees, Tesco is among the largest retailers in the world. They have approximately 4331 stores in 14 countries, and it primarily operates in USA, Asia, and Europe with its head office based in Hertfordshire, UK. Is portfolio commercial network comprises of over 960 Express stores selling approximate of 7,000 products including fresh food; 170 metro stores in towns and city centers selling varieties of food and 450 superstores selling foods and on food items. The company also provides products through their website tesco.com and Tesco Direct retailing services online. The company was founded in 1919 launching its first store in London, UK in 1929 (Tesco, 2015). However, the company have grown over the decades to be the market leader in the food retailer within UK. On the other hand, Wallmart is based in US and have extensive global coverage with retail businesses across he world. (Wall Mart, 2015)
The two businesses are subject o macro factors ah influences their operations summarized as follows.
Tesco’s international business segment is growing and is estimated to account for one-quarter of the company profit. Free trading blocs promotion by the government benefits the company while globalization has presented more expansion opportunities. That has created a platform for Tesco to expand its retailing network across the EU. In addition, Wall Mart also benefits from the free trade policies in the US market.
Economic factors have a direct impact on customers buying behaviors. The UK government’s interest rate reduction helped minimize unemployment further rise in 2009 although the economy was officially declared under recession in 2008. On the other hand, the low-interest rate in US enhances the consumption hence increase in demand for Wall Mart’s products. The customer power is on a steady rise in both markets as a result of the suitable economic conditions that increases customers’ confidence about their financial situation. However, it is likely that customers spending on premium products including ready-prepared and organic meals with some economic uncertainty. That could adversely affect sales value and the retailers margin.
UK population shows that retired people are more than children hence representing the generation of the aged. The older generation tends to eat less and are discouraging for food retailers such as Tesco compared to the young generation in US that enhances Wall Mart’s sales. In addition, Tesco has a challenge reaching the aged population with adc]vanced technologies such as social media marketing platforms compared o Wall Mar that can easily reach the youthful segment with advanced technology. Further, Tesco is the online shopping platforms would not be found convenient by aging the population, unlike the WallMar’s target market that would prefer and effectively utilize it. Considering the online’s platform, it would be ineffective and expensive in making small deliveries for he aged customers as consumers are becoming increasingly health conscious and their attitude incessantly changing. To address the change in demand, Tesco has had to accommodate the increasing demand for organic foods. In addition, Tesco was the first to accept payment by cheques and cash at the checkout.
Technology is one of the key variables that directly influences supply chains operations and food retailers as well as grocery processes. Internet use through online retailer is affecting the two brands’ operations resulting in steady growth. Having grown by over 50% internet subscription, it is estimated that internet is being used by 70% of UK population. Through information technology there is an introduction of loyalty programs; that discourages customers switch over to their competitors. Food retailers have adopted mobile platform technology as a distribution platform. Ctortexica Vision System has developed a new Wine App that Tesco has used since 2009 in which customers are directed to Tesco Wines enabling them to buy directly from their mobile phones. Considerable popularity has been gained by online retail shopping due to the UK and US broadband internet access increase. The countries have a significant population using broadband internet. (Wall, Mart, 2015)
Promotion of environmentally friendly and reduced packaging by environment regulators influences the two companies operations and performance. (Keller, 2013) That is helping in overall cost reduction and is good for corporate social responsibility image for both Tesco and Wall Mart. On dairy products, orange juice and potatoes Tesco has added data of their carbon footprint and the company is aiming to extend it to non-food items and breads (Tesco, 2010). Wall Mar is also subject o he regulations and needs to adopt environment-friendly operations that reduce its carbon footprint. Reusing of the bugs, mobile phone, and aluminum can recycle, as well as bag-less deliveries are practices ha marks Tesco is through its green Clubcard point are being rewarded. (Tesco, 2015)
There have been predictions of up to 20% VAT rise as huge budget deficit in UK has to be financed by the government taxes. This will have effects ton Tesco’s on-food sectors such as clothing. Minimum wage increases of 15.5% have resulted to increase in supermarkets operation costs. On the other hand, legal requirements affect businesses such as Wall Mart with regulation on minimum wages that has resulted in conflicts between the business and regulators in various US states. (Wall, Mart, 2015)
Factors impacting the organizations
Tesco operates in 12 markets with a team of over 500,000 people who are dedicated to providing service to its customers. The business is driven by is three big ambitions including Leading to global food waste reduction, To help in tackling to obesity crises through improving health, as well as to, create for millions of young people new job opportunities. The company also has strategies that seek to improve the impact on the environment targeting to reduce carbon footprint to zero by 2050 and to use the scarce resources responsibly in its supply chain. (Tesco, 2015)
Wall Mart has a concept of stores for every community in which it have expanded to over 26 countries outside the US. In that respect, it has over 6,100 stores in its international operations that leverages is resources for meeting local needs. Wall Mart International has been marked as the fastest growing segment of the business. The business leadership has been marked by people who inspires and elevates the teams for greater success through innovation. (Wall, Mart, 2015)
The businesses have varying strengths and weaknesses as well as opportunities and threats based on their environment. In that respect, Wall Mart’s extensive global coverage makes it a well-known brand and has a significant market reach that enhances is performance. However, the business has weaknesses in terms of its policies such as the labor policies and practices that subjects it to conflict with minimum wage regulations. (Wall Mart, 2015) On the other hand, Tesco has a strength in its financial performance that provides adequate capital for further development. However, the business faces high competition from Multinationals entering the UK market owing to its attractiveness. In respect to opportunities, the two businesses have opportunities ranging from emerging markets that can be tapped to advanced technologies that can enhance operations’ efficiency and marketing. (Tesco, 2015)
Impact of potential change in factors as they relate to the functions of management for both organizations
Change in external factors has an effect on the two businesses strategies depending on the extent of change. That requires businesses to respond with suitable strategies to take up the availed opportunities of address any posed threats.
Technology is a major player in changing the way the retail businesses goes on with their company as it results in the creation of new products for sale by the retailers. It also provides additional shopping options, as well as new markets, for the retail companies such as web-based retails and home shopping networks like the point-of-sale systems. Tha increases retailer's sales as they allow more customers and ease processing of cheques, cash, credit card as well debit-card payments. In addition, the two businesses have adapted the technological advance to enhance their market through new communication means such as the social media where the youthful segment can be easily reached. (Sengupta, 2005)
Economic environment drives retail sales. A thriving economy correlates disposable income increase thence increasing retail sales and allowing them to sell more valuable goods like high-end electronics. On the other hand, a weak economy can cause less spending by consumers as their confidence decreases forcing retailers to lower the prices. Government and economic factors have effects on various aspects. Such areas include import and export while corporate taxation and inflation can lead to a decrease in consumers’ purchasing power hence a need for businesses to reconsider their pricing strategies (Cateora, Graham & Gilly, 2012)
Retailers’ relation to customers is also impacted by changes in social trends and values. The increasing pressure ton retail industries to develop, implement and practice social business responsibilities, such as selling of products that are environmental-friendly, placing warnings ton potentially harmful products and removing controversial products from their shelves. In addition, the increasing concerns over the health effects of various products require businesses to adjust their supplies to feature more health conscious products. (Sengupta, 2005)
In view of the analysis, it is clear that the two businesses operating in two different countries are subject o macro-factors ha are dependent on their countries’ economies, social and development factors. The factors affect their strategies, structures and performance as well as the strategies that are adopted.
Cateora, P., Graham, J. & Gilly, M., (2012). International Marketing. New York:
Keller, K. L. (2013). Strategic Brand Management, 4th ed. Upper Saddle River, New Jersey:
Sengupta, S. (2005). Brand Positioning: Strategies for Competitive Advantage. Lake Town:
Tata McGraw-Hill Publishers.
Tesco. (2015a). Performance. Retrieved from,
Tesco. (2015b). Tesco and Society. Retrieved from,
Wall Mart. (2015). Our Story. Retrieved from, http://corporate.walmart.com/our-story/