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EBWO3001 Effectiveness in the Business World Assignment
This assignment is aimed at understanding the significance and impact of external environment in which an organization operates along with recognizing & evaluating the operations and responsibilities of an organization. Further, the requirements and needs of the consumers and employees in a business would be discussed and a business issue would be highlighted to show its impact on overall business and its current position.
To accomplish this task, Tesco PLC, the grocery market leader of UK has been chosen. The company has more than 6500 stores across world and is the third largest global retailer (Tesco plc, 2016). The environment in which a company operates have major impact over its business and thus it is essential to analyze the Political, Economic, Socio cultural and Technological changes of environment and accordingly design business strategies to optimally use opportunities, gain competitive advantage over others and achieve leading positions in market.
PEST of Tesco:
The political environment and government policies of the country have major impact on business. Currently, the political environment in UK is quite stable and favorable for business for Tesco. Due to Brexit, an ambiguous situation have been created but still the business of Tesco is not much affected as the company already has its strong presence in UK and other European countries. Moreover, the policies in UK are also conducive for business growth, and thus the company may take growth and investment decisions and move forward to achieve its organizational objectives.
Economic factors have major impact over the costs, profits, demand and prices and thus, exert huge impact on the overall business of Tesco. Although the economic growth of UK is not much rising but has huge base and is stable. Additionally, the disposable income and household income of people is increasing in the area which is a major opportunity for the company to further enhance its business. The company is also considering new potential market of Asia as European markets have become quite saturated (Mukerjee, 2013).
Socio cultural factors:
The social and cultural factors of UK people are such that they prefer bulk shopping from trustworthy organization and usually believe in one stop shopping. Thus, Tesco has always focused on availing people with daily usage products including food and non food items under one roof. The company has ensured to provide their customers with quality products at competitive prices to build a loyal customer base. Moreover, the changing priorities and needs of customers are also well considered at Tesco as they are now focusing on availing organic food products for the growing health conscious population of UK (Schultz and Dev, 2012).
Tesco has well used the latest technologies by rapidly identifying people’s inclination towards online shopping, introducing online availability of their products along with home delivery facilities. Further, the company has used self service check points that have enhanced the customer convenience and have also reduced labor costs. Moreover, the company is investing in and using latest technology to become greener and reduce carbon footprint.
Tesco is a public limited company since company’s shares are publicly traded on stock exchange. The company has limited liability and general public can acquire the shares either directly from trading on stock market or privately from public offerings. Further, the company is regulatd in a vert strict manner and reveals its true financial position by publishing a public annual report. This report helps investors to analyze actual market position of the company and worth of its shares (Peeroo, et al.2016)
Organizational structure is the way power and responsibilities are controlled, assigned, and coordinated in a company and the flow of information between different management levels. It depends upon the objectives and strategy of the company. Tesco has huge business and therefore for its effective management, the structure is strictly vertical or divisional. The corporate governance structure of Tesco is depicted in fig. 1.2 and structure at store level is shown in fig. 1.3 (it is not rigid for all and may vary from store to store). Company’s structure is such that each organizational function corresponding to its different products have been grouped as divisions and these divisions are autonomous having their own top executive who managing budgeting, advertising, etc.
Advantages of divisional structure of Tesco:
1. It allows a division or team to do a more focused job and the leadership also supports strategic objectives.
2. All major decisions regarding buying, hiring, advertising, required resources, etc is taken independently, so are more effective and quick.
3. Since, every division carries out their activities with independence, their divisional profit/loss can be easily assessed.
4. Very easy and feasible to expand business and introduce new product without interfering existing divisions (Murray, 2014).
For this task, iPhone has been selected which has high consumer demand. Apple Inc. has adopted various innovative and effective tactics to promote this product in the market and it would be analyzed by doing a marketing mix (4Ps)
High quality and performance
Operates on high speed and very effective iOS operating system
High processing speed of the phone as high quality and updated hardware has been used to be compatible with the advanced software.
Exclusive itunes, apple store and exclusive apps are available (Lowe, et al. 2012)
As the target of company is premium customers, the product is available to people on Apple I stores which are usually present in A grade cities of many countries.
Available online on online Apple store and other well known websites like Amazon
Corporate tie ups: Apple has done tie ups with many corporate and thus, is available to executive and managers of those companies.
The price of the iPhone is higher as compared to other phones in market as the company uses premium pricing strategy and maintains the high end image of the products. Further, this strategy targets only a small part of market comprising of middle and upper class people but the profitability is not compromised as the profit margins are high in premium pricing.
iPhone is promoted as a premium and luxury product. The company uses almost every platform of Above the Line promotion like social networking sites, company’s website, newspapers, TV, etc when a new iPhone is launched. Thus, the company has huge marketing budget and strong promotion strategies (Liu, et al.2016)
Influences Affecting Product Demand:
There are various internal and external influences that affect the demand for iphone. People are internally influenced to buy an iPhone as they have the perception that it is the best phone of high quality having latest features in the market. Marketing and promotion has help in building this perception of iPhone being an innovative, unique and luxury product to own.
Consumers are externally influenced to buy an iPhone when their primary reference group including friends, coworkers, relatives, etc or secondary group like professionals or trade union members own iphone, consider it a high quality luxury product and keep on boasting it in one or other way (Chen, et al.2016)
Unethical behavior in business:
Many a times, companies engage in unethical practices and behavior to enhance their business and profitability like Volkswagen group’s emission scandal. The company intentionally programmed such diesel engines in its model which emitted Nitrogen Oxide as per Government standards in laboratory but were actually emitting 40 times higher NOx (Burki, 2015). This scandal not only hampered the company’s business, but affected its brand image and broke their customer’s trust.
The organization must not have involved in such a practice for little more profits as it has done more harm to them than any benefit. They could have hired a third party to audit their products to assess the actual performance and quality of their products without any bias. Further, the management should have taken steps to use diesel technology after knowing that their engines are not meeting the emission standards. The vehicles could have been equipped with certain emission reducing systems to meet Government’s emission norms at an extra cost.
Impact On Employee And Customer Loyalty:
It was very surprising and shocking news for public and consumers and seriously damaged company’s market image. The business of Volkswagen was seriously affected, a sharp decrease in stock market value was seen and the whole German economy was hampered as major part of economy is based on automotive industries. The trust and loyalty of customers was broken and they felt cheated (Cooren, et al.2011) Even the employees of the company lost their trust and became insecure of their job. Their motivation level decreased as company decided to suspend large number of engineers involved in the scam and also, was planning for more cost cutting actions.
It can be concluded that external environment of a company must always be effectively analyzed to grab the available opportunities, take appropriate actions against threats and gain competitive advantage for achieving leading potions in market. It has also become evident that to grow and succeed, consumers needs and requirements must be analyzed and products/services must be designed accordingly. Finally, the business must not engage in unethical practices for short term benefit as it would eventually cause serious damage to their brand image and overall business.
Burki, T.K., 2015. Diesel cars and health: the Volkswagen emissions scandal. The Lancet Respiratory Medicine, 3(11), pp.838-839.
Chen, C.M. and Ann, B.Y., 2016. Efficiencies vs. importance-performance analysis for the leading smartphone brands of Apple, Samsung and HTC. Total Quality Management & Business Excellence, 27(3-4), pp.
Cooren, F., Kuhn, T., Cornelissen, J.P. and Clark, T., 2011. Communication, organizing and organization: An overview and introduction to the special issue. Organization Studies, 32(9), pp.1149-1170.
Liu, Y., Li, K.J., Chen, H. and Balachander, S., 2016. The Effects of a Product's Aesthetic Design on Demand and Marketing Mix Effectiveness: The Role of Segment Prototypicality and Brand Consistency. Journal of Marketing.
Lowe, M., George, G. and Alexy, O., 2012. Organizational identity and capability development in internationalization: transference, splicing and enhanced imitation in Tesco’s US market entry. Journal of Economic Geography, p.lbs016.
Mukerjee, K., 2013. Customer-oriented organizations: a framework for innovation. Journal of Business Strategy, 34(3), pp.49-56.
Murray, P.A., 2014. Organisational structure and strategic control.
Peeroo, S., Samy, M. and Jones, B., 2016,. Generating Customer Engagement and Customer Enragement on Facebook Pages of Tesco and Walmart. In Conference on e-Business, e-Services and e-Society(pp. 146-156). Springer International Publishing.
Schultz, D.E. and Dev, C., 2012. MARKETING FORUM-Idea Exchange-Revisiting the Marketing Mix-The Apple Store experience typifies a new vision for marketing. Marketing Management, 21(2), p.45.
Tesco plc (2016). "Tesco Results" (PDF). Tesco plc Income Statement. Tesco plc.