Ladies and gentlemen I salute you. As the Chairman of Tesco, it is my pleasure and honor to welcome you to this important shareholders meeting today as I will be informing you of some of the external factors that have been affecting this organization as well as give you the impact they have on this business. But before were proceed to that I would wish to give you a brief history of the organization; I know a good number of you are aware about this, but I just want to refresh your minds on this. Tesco is an international merchandising and grocery retail chain that is based in British. It was established in 1919 by Jack Cohen when he was selling groceries that were treated as surplus from the stalls in East End, London. The business did not have a specific name until in 1924 when Jack purchased a shipment of tea from his suppliers which identified themselves as T.E. Stockwell. Thus with the three initials of these supplies, (TES) together with the two leading letters of his family name, (CO), Jack named the company TESCO (Raab, et al., 2008, p. 173). Since that time on, the company has grown through acquisitions and today it owns more than eight hundred stores. Initially, the company specialized in drinks and foods; currently it has diversified its products into electronics, clothing, telecoms and financial services, insurance services such as health, car and home insurance. The company also sells CDs, DVDs and internet and software services as well as music downloads (Raab, et al., 2008).
Having reminded ourselves about the history of this organization, I would like to introduce you to the topic of discussion today. As I said earlier that I am going to inform you about the external influences that affect Tesco, I will start off by giving you the definition of external influences. External influences can be described as those factors which affect the smooth running of the business in one way or the other but the business has no control over them (Wall, 2002, p. 9). There are four main external influences that affect businesses and Tesco being one of them. These influences include; the economic influences, the legal influences, the environmental influences and finally the technological influences (Wall, 2002, p. 12). Discussing these influences one by one let me take you through the legal influences first.
Legal influences are those factors which relate to adjustments in regulations and laws. Tesco, like all other businesses must be careful in keeping within the law and expect the ways in which the laws will affect the operations of this organization. Such factors may include the adaptability and flexibility of the laws and other legislative regulations that may affect the business (Wall, 2002, p. 76). The may also involve the exact declarations and decisions made by the court. These factors have affected the operations of Tesco to a great extent. There are three key areas in legal influences that affect our organization. These include; the consumer legislation, data protection and employment (Wall, 2002, p. 78). Economical influences on the other hand can be defined as all the economic systems of a country, ranging from the economic policies established by the government, business cycles to socio-economic infrastructure. Some of the economic influences that affect Tesco include; the business cycles, the rates on inflation, levels of unemployment, consumers’ fear of borrowing excess funds as well as the highly increasing rates on lending interests. Under the economical influences also fall the following factors; shortage of skills, the expansion of the United Nations, war and its consequential threat, fear of terrorism and finally the transfer of jobs from one country to another (Wall, 2002, p. 40).
Environmental influences include all the environmental factors that influence the functioning of the business organization. The environmental aspects include pollution control, reduction of waste and environmental policies (Wall, 2002, p. 100). Lastly are the technological influences which can be described as the all the opportunities that a business can adopt in order to update its innovations, breakthroughs, and inventions for the key purpose of cutting on costs and introducing new commodities. Technological factors that affect businesses include; the availability of powerful and affordable computer hardware, the exchange of human resources with computers, the integration of computer packages into businesses as well as the improved communication technology coupled with the elegant software packages (Wall, 2002, p. 55).
Having discussed what it means by these four external influences, I now want to inform you how each one of them apply to our organization. Starting with the legal influences, the consumer legislation law states that businesses should act moderately towards their customers. This is because the customers are known to be sometimes in low financial positions thus unable to purchase the products they need. Following this, the government has imposed acts such as the supply and sale of goods act which suggests that organizations and businesses must supply and sale commodities that are of acceptably standards and qualities (Wall, 2002, p. 77). There is also the trade description act which states that goods and services must serve in accordance to what the company advertises them and not the other way round. The last act that protects the consumers is the consumer credit act which states that consumers should be handled appropriately when borrowing funds or purchasing goods on credit. Therefore the consumer legislation imposes unnecessarily extra costs on businesses since they must comply with these laws failure to which they may be fined or even being ultimately put out of operation by the court (Wall, 2002, p. 78).
Next is the data protection legislation which states that the companies’ information should be made confidential and be open only to the top staff (Wall, 2002, p. 79). However with the improved technology, competing companies have been hacking data and information from other companies thus depriving the privacy of these companies. The also demand that personal information should not be made public. And finally on the legal influences is the employment law whose main aim is to protect the safety, health and rights of the employees. Some of the employment acts that Tesco has to consider include; the safety and health while at work. This act states that the health of the workers must not be affected, in anyway whatsoever, by their duties. Therefore for us to avoid being fined or subjected to any other penalties, we must ensure that the working environments and machineries are safe for working (Wall, 2002, p. 80). Under the employment law is also the equal pay law which declares that all workers who work for equal number of hours or yield the same value of work must be given equal payment regardless of their gender. This act goes hand in hand with the gender discrimination act which states that all employees must be given equally opportunities in terms of training, recruitment or employment without discrimination on gender (Wall, 2002, p. 82). There is also the race discrimination act which states that it is unlawful to discriminate workers on the basis of their skin colors, ethical group or race. Finally is the employment protection which states that all workers must be given written contracts which informs them of their duties and rights in the company so as to avoid inequitable dismissal. This law also imposes unnecessary costs to the business since workers have to be adequately trained, recruited and paid fairly (Wall, 2002, p. 87).
Next are the aspects of economic influences that affect our business. The business cycle, that involves all the fluctuations in economic activities and production that the economy experiences (Wall, 2002, p. 42). These changes usually occur in the long-standing growth of the business and Tesco has been experiencing these fluctuations. As a result, the growth of the company has been retarding in the past few years thus making the company not performing to its expectations. The other aspect of economic factors that affect Tesco is inflation. Prices of our commodities have been going high in the recent years because of the high production costs due to the expenses that the company has incurred. For instance the company had to increase the number of staffs working in its chains and stores; it also purchased some advanced equipment so as to replace the older ones and there is also the constant increase of prices for raw materials for our products. These therefore raised the expenditure for this year and as a result, the products had to be sold at relatively higher prices so as to cover for these expenses. Following this, the company has lost most of the consumers since the demand for these products has decreased with the increase of their prices. The next aspect is unemployment levels (Wall, 2002, p. 46). As we all are aware that the levels of unemployment have gone high over the past years, its weight has dropped heavily on the shoulders of producing companies like Tesco. With the high rates of unemployment, it implies that very few people are not in a position to meet even the basic needs. Since the commodities we are specialized in are luxurious goods such as electronics, DVDs, music and fast foods, most of these people invest their hard earned money on only the basic needs and not luxurious goods. This has therefore reduced the demand for our products and as a result, the company has not been making profits as expected. The fear of consumer to borrow excess funds has also been an issue of concern to Tesco. Consumers struggle to budget for the little income that they get because they fear to borrow more money from banks and other lending companies. This is because they fear debts and they think that they can survive with the little they have (Wall, 2002, p. 47). Thus with tight budgets, consumers are not able to buy most of our products thus making this company poor as well.
Still on the economic influences, there is the issue of increasing interest rates. Banks and other lending agencies have been increasing the rates of interests for loans lent to the customers. This has therefore made customers shrink away from borrowing loans because of the costs that these loans come with. Therefore most of our customers have learnt to live within the limits of their abilities so as to avoid unnecessary spending (Wall, 2002, p. 49). As a result, they have reduced the market for our products as the demand reduces. Another aspect is the shortage of skills. Most of the employees that are recruited to serve in the various departments in this company do not have the appropriate skills to serve. This is because our education systems have not been preparing students professionally and as a result, we have to train these new recruits afresh. This has cost the company a lot of money since every time a new staff is added then a trainer has to be hired. The company wants to avoid unnecessary loses because if we do not train them then we might end up loosing more that the training expenses (Wall, 2002, p. 49). In addition to these, there is the expansion of the United Nations. As the UN expands, tesco may be required to enter into new market and as a result it may need to introduce new brands for its products. This will require intensive marketing and investment which may be very expensive to the company. War and the threats it poses to the economy is also one of the factors that affect the growth and efficiency of Tesco. While it is clear that Tesco is handling its operations in most of the countries worldwide, some of these countries’ economy is not stable due to the uncertainty of war. In such cases, citizens do not go to work due to insecurities while others abandon work so as to go fighting. As a result, the gross domestic income of the affected country reduces. War also contributes greatly on price inflations due to the low supply of commodities followed by high demands. When the prices have gone high and the income has gone down then it means that very few products will be purchased resulting to reduced market for our products.
Apart from this, we have had several instances of terrorism and terrorist attempts experienced within some of the countries in which we operate. In such a scenario, our stores and chains are forced to close for a while since most of them are based in the major towns which are also the targets for terrorism (Wall, 2002, p. 50). As a result, we incur great loses since some goods are not delivered to the intended consumers on time and other such as food may spoil before delivery. The last aspect on the economic influences that affect this organization is the movement of our employees from one job to another in different countries. As I have explained to you earlier, every recruit that is employed in this company must go through a series of training due to the mismatch of skills. After we have trained them, some of them work just for a while and look for better jobs in other companies and/ or countries (Wall, 2002, p. 50). This has posed a great challenge to Tesco since it has to employ and train another set of workers, something that has been costing the organization year in year out.
The next external influence that I have also been looking closer at is the environmental influence and its aspects. Some of the aspects that fall under this factor include pollution control. It is mandatory for companies to control and minimize environmental pollutions (Wall, 2002, p. 102). This is only possible if companies avoid damping waste anyhow as well as to join in campaigns against damping. Tesco has been involved in several campaigns so as to make the other companies aware of the effects of environmental pollution. The next aspect is reduction of waste that most companies including ours produce. Industrial waste such fumes and other harmful gases that are hazardous to the environment should be minimized. Companies are therefore required to check on this and as result, Tesco, which has always maintained the reputation of a good leader, has warmly embraced this law. In the recent, the organization has adopted new ways of production with minimum waste using the new technology. Other environmental regulations such as sustainable consumption on high fat content foods have also been introduced. These regulations require that companies that deal with preparation and supply of fatty foods to reduce the amount of fat in them. The law also demands that such companies will have to pay extra fees when advertising high fat content foods (Wall, 2002, p. 114). This has placed Tesco on the edge not sure whether to continue producing high fat foods and pay the extra advertisement fees or it should reduce the fat content and loose its customers.
The last external influence that I want to bring to your attention is the technological influence. Since the advancement of technology was introduced, most companies, Tesco being one of them, have benefited a lot from it. Technology has brought about efficiency and effectiveness in the operations of our business (Wall, 2002, p. 56). For instance, the introduction of powerful and affordable computer hardware has enabled faster and on time communication and transactions. Online purchasing services have also been introduced to our consumers therefore they can order our products from any location. The human-computer interchange has also improved on the services offered by this company in addition to cutting off some expenses (Wall, 2002, p. 59). With the introduction of computers, Tesco has reduced the number of man power hired since computers can work faster and accurately than man thus reducing of the labor expenses. Technology has also brought about packages that can be integrated and command a computer to perform multiple of tasks at the same time. Following this, organizations do not need to purchase a whole room of machines since one computer can work on behalf of a number of computers given the appropriate packages. There is also the aspect of advanced software and communication technology which has made communication within and without the company easy. Communication within departments and between retailers and consumers has greatly improved (Wall, 2002, p. 60).
In may own analysis and assessment, I have discovered that operating in a worldwide market with stores and retails all over the world the performance of Tesco is highly affected by legislative and political conditions of these member countries as well as the European Union (EU). On the employment law, the government has encouraged business retailers to provide a wide range of job opportunities so as to absorb all kinds of skills and wages. For instance, companies are encouraged to employ people in all positions from locally based low paying jobs to centrally based jobs that demand higher skills and wages (Wall, 2002, p. 97). As a result, Tesco has been employing a wide range of workers from disabled, students to elderly people and has often been paying them lower wages thus reducing on the employment expenses. Given that Tesco is an industry with a high turnover of workers, the lowly paid workers display a high level of allegiance to the company thus representing a group of pleasing employees.
Another point of concern is on the economic influences. I have realized that these factors are of great apprehension to Tesco. This is because; they have a high tendency on influencing the costs of production, prices of finished products and raw materials, demand for these products, as well as the profits made. Among the economical aspects, high level of unemployment is the most influential factor (Wall, 2002, p. 52. This is because it reduces the demand for most of the products thus consequently affecting the demand to produce them. Since these factors are principally out of the business’ control, their effects on the market mix and performance are exorbitantly profound. Following this, Tesco, which highly depends on the UK market, will be greatly affected if any slowdowns in this food market occur.
Over the past years, there has been an augmented pressure on companies and managements to recognize and accept their responsibilities in the society and to behave in a manner that will benefit the entire society. The key societal concerns that have been threatening food companies such as Tesco have been the environmental aspects. Thus, Tesco like all other food companies must act in a responsible manner as expected by the society. Consequently, by acknowledging this tendency within this wide ethical deportment, the companies’ social responsibilities are concerned with how it surpasses the minimum requirements of the stakeholders as specified in the corporate and regulation governance (Wall, 2002, p. 93). Since the government introduced new strategies for sustainable production and consumption so as to minimize on waste, cut on the utilization of resources and reduce environmental damages, this strategy introduced a new levy on advertising products that are highly processed and/or with high fat contents. This supposed tax on fatty foods affected Tesco directly on the range of the products that were already in high demand on the market thus disconnecting the relationships that existed between the consumers and the suppliers.
I also investigated on the technological influences and from my findings; I discovered that technology is one of the factors that has positively influenced the advancement of the most of the products produced by Tesco. The new and improved technologies have benefited both the company and its consumers (Wall, 2002, p. 69). For instance, the satisfaction of consumers has greatly risen because technology has made the availability and accessibility of commodities easy. Besides, shopping has been made more convenient through e-commerce and online shopping services in addition to the fact that services have been personalized. Tesco launched the Efficient Consumer Response (ECR) which has made the supervision of food distribution chains easy. Some of the technologies that Tesco chains and stores make use of include; intelligent scales, wireless communication devices, electronic labeling devices, check-out machines and Radio Frequency Identification. The implementation of services such as Electronic Point of Scale (EPoS), electronic scanners as well as electronic money transfer systems have to a great extent improved the efficiency and effectiveness of Tesco in stocking and distribution activities (Wall, 2002, p. 70).