Megan Oakley
Assignment 2 Unit 1
Issue date- 07.01.22
Hand in date- 09.02.22
This report will be looking at the internal and external business environment of
the international business Tesco.
Tesco can use situational analysis to enable them to perform market research
and analyse predicted growth, determine possible clients, evaluate competitors,
and assess the status of the company.
External environment
Political
Tesco presently has stores in six European nations, in addition to the United
Kingdom: the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey,
and Poland. Tesco's performance is heavily influenced by the political and
legislative conditions of these countries, including the European Union. It also
operates in Asia: in South Korea, Thailand, Malaysia, Japan, and Taiwan. Tesco
has been impacted politically by a number of factors in the UK, including COVID
and Brexit in recent years. Tesco, like any other firm in the UK, is subject to a
variety of rules relating to employment, legislation, consumer rights, and taxes.
They exist to protect businesses by laying out their responsibility to their
employees as well as their rights as business owners. They make sure that both
parties are treated fairly in the workplace.
The EU's goal is to facilitate free movement of people, goods, and services
between its member countries. The EU's population was predicted to be
739,207,742 in April 2017. Tesco, has access to the European market, which
connects economies, and this has an influence on them because they do not
have to pay customs or excise fees to other member states. Tesco benefits from
the EU because they incur fewer costs and will be able to trade more freely. This
free circulation of commodities has cut prices for firms within the EU as well as
those that trade with it outside of the EU. The EU countries are part of the Single
European Market. However, on the 1 of January 2020 the UK began the process
of leaving the EU.
This has had a significant impact on businesses in the UK including Tesco. The
challenge of transporting goods over the English Channel has become more
complicated as a result of Brexit. Because approximately 80% of food imports to
the UK come from the EU, this has a significant impact on the food and beverage
business. In many situations, this has increased costs and delays in the time-
sensitive food and beverage trade, with implications for pricing and supply flows
for the industry. Tesco also faces the difficulty of a significant impact on their
staff. According to reports, 300,000 EU citizens work in the UK's retail sector,
and all of them must register for the government's settlement scheme by June
,Megan Oakley
Assignment 2 Unit 1
Issue date- 07.01.22
Hand in date- 09.02.22
30. During the second half of 2021, this may cause a temporary disruption in
employee availability. (5)
Tesco is a responsible taxpayer and is one of the most significant contributors of
tax in the UK. In the financial year to 27 February 2021 the group paid £5.2
billion of tax; taxes borne by the Group were £1.7 billion, which includes £535
million in respect of Tesco’s voluntary repayment of business rates relief, as well
as taxes they collect that are generated from their operations of £3.5billion.
Tesco values the opportunity to engage with governments, either directly or
through representative bodies. Where appropriate, Tesco will share views with
the government on the development of tax policy and legislation. (4)
Economical
Tesco is most concerned with economic problems because they are most likely
to cause changes to costs, demand, profits, and price too. Any policy changes,
such as tax adjustments or other factors that could affect finance accessibility,
should be communicated to the organisation. Despite its international expansion,
the company remains primarily reliant on the UK market, where it has a 30%
market share. With that in mind, internationalisation and diversification have
been two of the organisation's primary strategies over the years, and they've
played a significant role in its development. As a result of the decrease in
disposable money and household incomes, Tesco has shifted its priority to
advertising.
To set monetary policy, the UK government adjusts the funds rate. This affects a
variety of short- and long-term rates, including credit card and mortgage rates.
To define fiscal policy, governments set taxes levels and write legislation and
regulations for everything from health care to the environment. Fiscal and
monetary policy changes can have direct and indirect effects on Tesco, but
competitive pressures and management performance are also important. Tesco
benefits from deficit funding because it lowers taxes, which means people have
less to pay and more discretionary cash. Individuals may buy more when they
shop at Tesco as a result of this, resulting in increased sales and profits for the
store.
There are a variety of government policies that have an impact on Tesco in a
variety of ways. Tesco must respond to such policies when they are introduced
by the government in order to ensure that they operate legally. In addition, if a
policy changes, Tesco must adjust as well. The following are some instances of
these policies:
Economic- The government takes a variety of steps to improve the economic
climate in which companies like Tesco operate. These policies include policies to
, Megan Oakley
Assignment 2 Unit 1
Issue date- 07.01.22
Hand in date- 09.02.22
control inflation, such as changing taxes and interest rates, to increase
employment, to encourage new businesses by providing more money to help
them start up, such as Invest Northern Ireland, and to assist businesses in
growing their exports and improving the exchange rate.
Youth unemployment- Approximately 40% of the unemployed in the United
Kingdom are under the age of 25. Tesco's initial reaction to a downturn is to stop
hiring new employees rather than lay off their existing, skilled, and
knowledgeable personnel. Tesco generally only makes workers redundant when
the business is experiencing financial difficulties. The young people who are
transitioning from school to work are the ones who are most affected by the lack
of fresh job openings. The government's effort to combat rising youth
unemployment is well-intentioned, but it may be badly implemented and
scaled.Given that the majority of youth unemployment occurs during the
transition from full-time education to finding work, the government must not
only increase education and training participation as part of its economic policy,
but also try to increase recruitment of the young into jobs by providing work
experience or apprenticeships if they are not making successful transitions
quickly. Tesco may have to hire less competent individuals who the government
has placed in working schemes alongside Tesco as a result of this. Tesco's
productivity may suffer as a result of under-qualified employees, and the
corporation may respond by eliminating apprenticeship programmes and forcing
all new employees to go through the same application process as everyone else.
Corporation tax- This is a government policy that could be changed at any
time by the government. A rise in corporation tax (which is a tax on a company's
profits) has the same effect on Tesco as an increase in costs. Tesco's costs will
rise if the government increases corporation tax. They can respond by passing
some of the tax on to consumers in the form of higher pricing for products and
services, but this will have a negative impact on their bottom line.
The Group is exposed to foreign exchange risk principally via:
● Transactional exposure arising from the cost of future purchases of
products denominated in a currency different from the purchasing
company's functional currency. Hedged transactional currency exposures
that could have a significant impact on the Group's income statement The
policy is to have a minimum (20%) and maximum (80%) hedge level of
predicted uncommitted exposure for the following 12 months, and these
exposures are hedged by forward foreign currency options, which are
defined as cash flow hedges.
● Changes in the value of net investments denominated in currencies other
than Pounds Sterling cause net investment exposure. The Group's policy is
to use foreign currency derivatives and borrowings in matching currencies
to hedge a portion of its investments in its international subsidiaries,
Assignment 2 Unit 1
Issue date- 07.01.22
Hand in date- 09.02.22
This report will be looking at the internal and external business environment of
the international business Tesco.
Tesco can use situational analysis to enable them to perform market research
and analyse predicted growth, determine possible clients, evaluate competitors,
and assess the status of the company.
External environment
Political
Tesco presently has stores in six European nations, in addition to the United
Kingdom: the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey,
and Poland. Tesco's performance is heavily influenced by the political and
legislative conditions of these countries, including the European Union. It also
operates in Asia: in South Korea, Thailand, Malaysia, Japan, and Taiwan. Tesco
has been impacted politically by a number of factors in the UK, including COVID
and Brexit in recent years. Tesco, like any other firm in the UK, is subject to a
variety of rules relating to employment, legislation, consumer rights, and taxes.
They exist to protect businesses by laying out their responsibility to their
employees as well as their rights as business owners. They make sure that both
parties are treated fairly in the workplace.
The EU's goal is to facilitate free movement of people, goods, and services
between its member countries. The EU's population was predicted to be
739,207,742 in April 2017. Tesco, has access to the European market, which
connects economies, and this has an influence on them because they do not
have to pay customs or excise fees to other member states. Tesco benefits from
the EU because they incur fewer costs and will be able to trade more freely. This
free circulation of commodities has cut prices for firms within the EU as well as
those that trade with it outside of the EU. The EU countries are part of the Single
European Market. However, on the 1 of January 2020 the UK began the process
of leaving the EU.
This has had a significant impact on businesses in the UK including Tesco. The
challenge of transporting goods over the English Channel has become more
complicated as a result of Brexit. Because approximately 80% of food imports to
the UK come from the EU, this has a significant impact on the food and beverage
business. In many situations, this has increased costs and delays in the time-
sensitive food and beverage trade, with implications for pricing and supply flows
for the industry. Tesco also faces the difficulty of a significant impact on their
staff. According to reports, 300,000 EU citizens work in the UK's retail sector,
and all of them must register for the government's settlement scheme by June
,Megan Oakley
Assignment 2 Unit 1
Issue date- 07.01.22
Hand in date- 09.02.22
30. During the second half of 2021, this may cause a temporary disruption in
employee availability. (5)
Tesco is a responsible taxpayer and is one of the most significant contributors of
tax in the UK. In the financial year to 27 February 2021 the group paid £5.2
billion of tax; taxes borne by the Group were £1.7 billion, which includes £535
million in respect of Tesco’s voluntary repayment of business rates relief, as well
as taxes they collect that are generated from their operations of £3.5billion.
Tesco values the opportunity to engage with governments, either directly or
through representative bodies. Where appropriate, Tesco will share views with
the government on the development of tax policy and legislation. (4)
Economical
Tesco is most concerned with economic problems because they are most likely
to cause changes to costs, demand, profits, and price too. Any policy changes,
such as tax adjustments or other factors that could affect finance accessibility,
should be communicated to the organisation. Despite its international expansion,
the company remains primarily reliant on the UK market, where it has a 30%
market share. With that in mind, internationalisation and diversification have
been two of the organisation's primary strategies over the years, and they've
played a significant role in its development. As a result of the decrease in
disposable money and household incomes, Tesco has shifted its priority to
advertising.
To set monetary policy, the UK government adjusts the funds rate. This affects a
variety of short- and long-term rates, including credit card and mortgage rates.
To define fiscal policy, governments set taxes levels and write legislation and
regulations for everything from health care to the environment. Fiscal and
monetary policy changes can have direct and indirect effects on Tesco, but
competitive pressures and management performance are also important. Tesco
benefits from deficit funding because it lowers taxes, which means people have
less to pay and more discretionary cash. Individuals may buy more when they
shop at Tesco as a result of this, resulting in increased sales and profits for the
store.
There are a variety of government policies that have an impact on Tesco in a
variety of ways. Tesco must respond to such policies when they are introduced
by the government in order to ensure that they operate legally. In addition, if a
policy changes, Tesco must adjust as well. The following are some instances of
these policies:
Economic- The government takes a variety of steps to improve the economic
climate in which companies like Tesco operate. These policies include policies to
, Megan Oakley
Assignment 2 Unit 1
Issue date- 07.01.22
Hand in date- 09.02.22
control inflation, such as changing taxes and interest rates, to increase
employment, to encourage new businesses by providing more money to help
them start up, such as Invest Northern Ireland, and to assist businesses in
growing their exports and improving the exchange rate.
Youth unemployment- Approximately 40% of the unemployed in the United
Kingdom are under the age of 25. Tesco's initial reaction to a downturn is to stop
hiring new employees rather than lay off their existing, skilled, and
knowledgeable personnel. Tesco generally only makes workers redundant when
the business is experiencing financial difficulties. The young people who are
transitioning from school to work are the ones who are most affected by the lack
of fresh job openings. The government's effort to combat rising youth
unemployment is well-intentioned, but it may be badly implemented and
scaled.Given that the majority of youth unemployment occurs during the
transition from full-time education to finding work, the government must not
only increase education and training participation as part of its economic policy,
but also try to increase recruitment of the young into jobs by providing work
experience or apprenticeships if they are not making successful transitions
quickly. Tesco may have to hire less competent individuals who the government
has placed in working schemes alongside Tesco as a result of this. Tesco's
productivity may suffer as a result of under-qualified employees, and the
corporation may respond by eliminating apprenticeship programmes and forcing
all new employees to go through the same application process as everyone else.
Corporation tax- This is a government policy that could be changed at any
time by the government. A rise in corporation tax (which is a tax on a company's
profits) has the same effect on Tesco as an increase in costs. Tesco's costs will
rise if the government increases corporation tax. They can respond by passing
some of the tax on to consumers in the form of higher pricing for products and
services, but this will have a negative impact on their bottom line.
The Group is exposed to foreign exchange risk principally via:
● Transactional exposure arising from the cost of future purchases of
products denominated in a currency different from the purchasing
company's functional currency. Hedged transactional currency exposures
that could have a significant impact on the Group's income statement The
policy is to have a minimum (20%) and maximum (80%) hedge level of
predicted uncommitted exposure for the following 12 months, and these
exposures are hedged by forward foreign currency options, which are
defined as cash flow hedges.
● Changes in the value of net investments denominated in currencies other
than Pounds Sterling cause net investment exposure. The Group's policy is
to use foreign currency derivatives and borrowings in matching currencies
to hedge a portion of its investments in its international subsidiaries,
