Global Business Environment Assignment
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Introduction to Globalisation, Business Environment, Decision Making and Sustainability at Tesco
Continuous development of technology and Globalization has enabled businesses to open a corridor of massive opportunities (Martin et al., 2021). To function efficiently within a different global environment, it is crucial to have a clear understanding of the related aspect of operating business in a global environment. Basically, the global business environment is related to the different environments situated in different countries with factors relating to exogenous to the home environment of the organisation which impact the decision making of resource capability and usage (Peng, 2016). Operating in a global business environment on the one hand beneficiary again on other hand it has multiple risks too but understanding the circumstantial aspects of the global environment benefits businesses to take an adequate strategic decision in order to sustainably thrive in a marketplace. Tesco is the dominating and the biggest supermarket chain in the UK with more than 4000 stores around the world. In 2020, the company has gained revenue of 53 billion British pounds in UK and Ireland (Statista, 2021).
This particular report will be throwing light upon the multiple factors and aspects associated with the global business environment. In the first section, the report will be analysing the main factors, which drive globalization. The following section will notify about highlight multiple tactical complexities associated with functioning a business within a global environment. The third section of the report will discuss the influence of the global market on organizational structure, culture and activities. Lastly, in the concluding chapter, the report brings a focus on analysing the impacts of globalisation on organizational decision-making and strategy formation
1. Investigation of The Major Factors that drive Globalisation
1.1 Concept and Theory of Globalisation in Terms of Cultural, Economic, Political and Social Dimensions
- Economic dimension: In terms of economic globalisation, the breaching of beyond the national economic barriers such as financial and manufacture proceedings and the increasing power of transnational corporations, the extending rate of international business and worldwide financial organisation (Goryakin et al., 2015). Over the past few decades, the possibility of economic globalisation has been visible in some urbanized countries including USA and Japan along with some big transnational firms such as McDonald's, Microsoft, Yamaha, etc, and global associations like World Bank and IMF.
- Cultural dimension: It has been observed recently that a range of features of globalization has endorsed upward contacts between dissimilar cultures, foremost partly to better indulgence along within cooperation and partially to the appearance of transnational societies and a mixture of identities (Burlacu, Gutu and Matei, 2018).
- Political dimension: In terms of political globalisation, it basically referred to the growing trend regarding multilateralism in which the United Nations have to play major responsibilities in the case of national non-governmental organisations that work as watchdogs above governments along within global NGOs enhancing their persuade and actions (Goryakin et al., 2015).
- Social dimension: In terms of social globalisation, the perception of social dimension comprises culture, security, identity, and, enclosure or omission and the cohesiveness of families and communities, etc. the impact of the foremost components on social globalisation are extraction of National Government from Social Sector, Labour modification and Deteriorating Labour Welfare, Migration, and Urbanisation, Commercialisation of Indigenous Knowledge, poverty and many others.
1.2 The Key Driving Factors of Globalisation
The economic factor is undoubtedly considered as the superlative form of globalisation. There are some major components of this particular globalisation which are discussed below in an efficient manner:
- International economic integration: International economic integration has been apprehensive along within the prejudiced elimination of the entire trade obstructions between the contributing countries and with the enterprise of convinced fundamentals of collaboration and harmonisation between them (Burlacu, Gutu and Matei, 2018). Therefore, the ultimate purpose of this factor is to assist in concentrating in worldwide operation in order to indicate a position of dealings or a particular procedure that engages within the incorporation of dissimilar economies into bigger areas.
- Foreign direct investment: The conception of Foreign Direct Investment basically is the investing of money by a foreign party rewarded within the part ownership. Therefore, it has been observed that an agreement steadily came out about internationally that the accurate exploitation of foreign capital might be accommodating in contributing drastically to economic expansion (Gygli et al., 2019). For an instant, a leading percentage of FDI approvals in India have been in the infrastructure and major industries including telecommunications, energy investigation, power, chemical, and metallurgical industries.
- International business and trade: In order to regulate world trade by proposing to set up an international trade organization (ITO) along within the lines of the International Monetary Fund (IMF) – a particular institution in order to assist the international liquidity (Gygli et al., 2019). In fact, during the time of not being able to materialising for multiple reasons, 23 nations around the world decided to help (ITO) along with maintaining trade consultations which were ultimately included in the General Agreement on Tariffs and Trade (GATT).
1.3 Globalisation Factors in Relation to Cost, Market, Environment and Competition
- Cost: The liberalization of business along within streaming of investment, which basically appeared during the time of the 80s of the last century, that inescapably stimulated further, has been considered as an incentive in case of globalisation of the businesses (Pegoraro, Propris and Chidlow, 2020). It has been measured that the ultimate requirement of initiating innovative products and investment in research, accomplishing economies of scale, diminish costs and admittance to cheaper raw types of equipment; companies are enforced to intend actions that have been taken on deliberation to the international market. As cost reduction and economies of scale are the major components of management, companies are taking initials to set up productions in countries where the cost of increasing and manufacturing are lesser.
- Development of markets: Information and communication technologies, the continuous expansion of worldwide tourism, extensive cultural switching, and enhancement of living standards, in various urbanised countries have donated to the appearance of a group of customers in dissimilar regions and areas of the world along with within comparable buying power, educational outlines, lifestyle and in terms of high-quality products, along with within objectives for elevated quality. This particular circumstance, in amalgamation within the liberalization of global business and the accessibility of worldwide allocation controls, unlocks immense chances for firms that desire to present their products to the international markets (Pegoraro, Propris and Chidlow, 2020).
- Environment: The development of communication and information technologies have contributed to the process of globalization, but also provided instruments that facilitated the processes of globalization.
- Competition: The ultimate purpose of the companies to join the global strategies is the requirement of sustaining a competitive advantage on foreign marketplaces and evading competition in the domestic market (Burlacu, Gutu and Matei, 2018). In fact, the companies advance their competitive place through contrasting opponents in global markets into the domestic market of the opponents to undermine the expansion process.
1.4 The Significant Impact of The Digital Revolution
- Creation of enhanced products: Tesco had launched an online website which basically the internet revolution of shopping online within the company. The purpose of this particular website is to facilitate every customer to fulfil their requirements. Tesco.com had made an exceptional move for the company in order to distribute its grocery goods and several other services to clients in the console to their own homes and without the required to go to the stores (Soltanifar and Smailhod?i?, 2021).
- Implementation of a digitalized in-store experience: In order to progress the effectiveness of the operating models, Tesco has spent in digital in-store enterprises. Therefore, according to the perception of business and operation model, this consequences incompetence cost savings as smaller amount employees are obligatory to execute manual check-out. The lack of employee administration has a guide to major levels of fraud for Tesco and thus Tesco is skirmishing this burglary by implementing digital receipt technology and expert cameras in terms of self-checkout stations in order to attentive staff real-time to ‘irregular’ purchaser examining movements.
- The utilisation of social media: The Company has done an exceptional job by covering up its Facebook timeline with the association of visual content (Soltanifar and Smailhod?i?, 2021). Tesco also often incentivizes consumer comments by providing Clubcard points in return for allocating descriptions on the subject matter of a variety of subjects. In fact, the ultimate way of cheering conversation is considered as the live chats it frequently hosts along with assorted health experts.
2. Analysis of The Strategic Complexities Related to Functioning in The Global Environment
2.1 Influence of International Trade Law
Globalization has advanced the degree of functional integration and economic activities, which denotes that the activities relating to an economic transaction, has achieved more freedom. Internal business law basically set the standard and decides the fundamental business practices internationally. Since World War 2, various governments have come forward to decide the basis of standard practices of a business. These laws facilitate businesses to create tactical plans and provide basic ideas relating to market entry intellectual property protection policy and deliver licenses. This type of law includes local, international laws, which needs to be followed by a firm strictly to operate in a global marketplace. Presently, businesses are truly international and international laws offer required regulations for the international transaction within a nation. Hence, business conduction needs to have adhered with legal structures, which help inefficiently, conduct a business.
The main source of these international trade laws is GATT, NAFTA treaties and the European Union (Chow and Schoenbaum, 2017). These global organizations are responsible for reviewing and setting the standard and legal codes to conduct a business in a certain nation. In the business environment, these laws put a great emphasis on both the public and private sectors (DANIELS, RADEBAUGH and SULLIVAN, 2013). The private laws focus on an international business transaction, which includes international sales law, multiple governing laws and business agreements. The public business international laws focus on the business treaties, agreements and convections among various nations.
To avoid trade risks, it is crucial for Tesco to entail strategies related to management and international business transaction and mechanical implementation should also be focused. Furthermore, cultural, economic, social and political factors influence international businesses, which in terms affect the trade relationship between countries. The custom and tariff laws benefit businesses to enhance their operation from the international level to overseas markets which means it helps firms to expand globally. Moreover, it needs to be highlighted that there are multiple risks relating to cultural differences, language and political influence which Tesco is subjected to face. Another concern is these legal actions and practices that controls and restricts investment, which affects businesses majorly.
2.2 Analysis of The Economic and The Environmental Impacts of Globalization Throwing Challenges in Terms of Risk and Diversification Strategies
Internalization of a business has become a common and most sought-after trend in the business world. Economic is a considerable factor, which is directly impactful for a business. In a new country and new environment price setting and payment, the method is a major concern for businesses. In a new country currency rate, fluctuation is among the topmost danger for businesses that international businesses need to navigate (Zwilling, 2016). While expanding into a new market, Tesco needs to give a major apprehension to this factor in order to make a strategic decision. The volatility of a market has made it difficult for businesses to forecast the rate of fluctuations at an unpredictable level.
Environmental aspects help a business to maintain a suitable brand image and also help an organisation to maintain a good relationship with the government (Strazovska and Sulikova, 2019). All over the globe, rising environmental concern has become a red alarm for businesses as well as for the governments. Governments are making policies and putting pressure upon the organizations to pay close attention to reduce environmental turbulences. Trade expansion directly impacts the various environmental resources and increase pollution-intensive activities. Tesco in this regard should effectively adhere to the environmental policies and frameworks provided by the regional, local, international and national levels (OECD, 2019). Along with this, the company should also be aware of the environmental risk knowledge as environmental risks directly affect the organizational profit. Along with this, further related environmental-friendly practice culture should be seeded inside the organisation for gaining competitive advantage and gain an ethically well-established image in the market.
2.3 Complications within the International Supply Chain
Supply chain management plays an utmost significant role inside a business operation. The modern economy is totally dependent upon the sophisticated, smooth yet complex operation of the supply chain. Supply chain management is related to the fact of handling the entire production and maintaining the flow of service and goods, from raw materials to delivering the end product to the final consumer. Supply chain activities include, manufacturing, transporting, farming packaging, and designing. The modern supply chain is vulnerable and is easily impacted by natural disasters, cyberattacks, and weather that in result delays the cargo flow, adds additional cost and adds multiple delivery challenges.
At present looking at the growing demand, companies are more focused on expanding their product portfolio, which is increasing supply chains complexity day by day (Juan and Lin, 2019). As per a report published by the APICS and Michigan State University, there are mainly three sources of complexity in the global supply chain, such include,
- Globalisation: With the growing supply chain globalisation trend, complexity in this procedure of Tesco is doubling gradually. Apart from juggling with transportation logistics, global chain adoption also includes modifying and stacking company products with the purpose of accommodating different cultures of different markets (O’Handley, 2017). Along with this, multiple legal and regulatory issues arise while working in different countries. It takes a lot of time and effort in order to develop a relationship with the suppliers in an unknown country with a lot of uncertainty in it.
- Customer Accommodation: The biggest challenge faced by the global supply chain management team of Tesco is in meeting the demands and needs of the consumers. The tremendous expansion of technology has increased the level of expectation of consumers to the next level (O’Handley, 2017). Customers now prefer their products to be delivered at their doorsteps and also, they want to have choice preferences regarding when and where the ordered products are to be delivered and meeting these demands are relatively daunting.
- Internal Pressure and Supply Chain Trends: All the complexity of supply chain management does not always come from external sources. Multiple issues within supply chain management derive from the ways in which a business works. In this regard, organizations necessitate custom procedures with suppliers; which in turn can make the supply chain of Tesco less responsive.
3. Explanation of The Way Working in A Global Market Impacts an Organisation’s Structure, Culture and Functions
The definitive purpose of the McKinsey 7s model is a strategic framework that facilitates managers and businesses in order to appraise their performance.
3.1 The Impact of the McKinsey 7S Model and Its Relation to Globalisation
- Strategy: Tesco follows a cost leadership approach in relation to its marketing communication message ‘Every Little Helps’. Consequently, the supermarket chain of the company has been capable of maintaining its strategy for the widespread operation of economies of scale. Therefore, it has also been competent to maintain the implementation of negotiating supremacy in order to trade with traders to protect little purchasing expenses (Bismark et al., 2018).
- Structure: The organisational structure of Tesco is extremely hierarchical and encompasses numerous levels of management from store sales supporters to the CEO. In terms of globalisation, the company should focus on sustaining its structure during the time of operating in a different region.
- Systems: The exceptional supermarket chain is dependent on an extensive variety of systems on regular basis in order to continue its manoeuvres. Therefore, the reform of the Steering Wheel performance appraisal system which basically possessed 40 dissimilar procedures can be illustrated as a suitable example for maintaining service in dissimilar countries.
- Shared values: It is indeed observed that Tesco persuades a comprehensive culture that observes diversity. As a matter of fact, The Company has a worldwide attendance and production units which are fundamentally extend across different regions. The ultimate intention of its organisation culture is to make certain the fact of diversity along within the implementation of global policies in order to decrease the rate of discrimination in workplaces (Bismark et al., 2018).
- Style: The Company fundamentally encompasses a participative leadership style and through this style, Tesco has been competent to engage its employee in the process of the decision-making process (Bismark et al., 2018). As a result, the participative leadership style is extremely valuable in accomplishing business objectives and it will be exceedingly accommodating if the company tries to operate in a foreign country.
- Staff: In terms of globalisation, the company requires to recruit more employees of the operated country in order to evolve within their culture.
- Skills: the workforce of this company has to be extremely efficient and the recruitment process of the company has to be more proficient in case of the company engages within operating in a different country.
3.2 The Governance of a Multi-National Organisation and Leadership Within an International Context
The flatter organisational hierarchy of Tesco permits superior visibility to the organisation along with effortless access in terms of management. Due to the implementation of this significant organisational structure, the employees and managers of Tesco have been able to pursue their decision in a rapid manner (Liu and Jung, 2021). The leader of Tesco believes in motivating the employees through instilling in them intelligence of self-appreciation and self-belief. Furthermore, the leadership style of this firm is visible and accessible that facilitates the employees to fulfil their requirements. This organisational structure and leadership style of Tesco has been proved to be exceedingly accommodating in terms of globalisation.
3.3 Hofstede Dimensions of Cultural
In order to modify business and marketing strategies as per the need of the company, companies basically implement Hofstede Cultural Model to investigate certain things.
- Power Distance Index: It has been observed that the organisational decision-making accomplished of Tesco is additionally decentralized. It basically illustrates regional teams have the power to confine an international strategy in order to convene the necessity and burdens of local culture (Cheah, Diong and Yap, 2018).
- Individualism versus Collectivism: unusual organisations keep a closer look more on entity accomplishments and staff favors to occupation competitively along with each other in terms of demanding responsibilities towards comparable ambitions. The company has to motivate the employees in order to sustain organisation culture in terms of globalisation (Abhishek, 2020).
- Masculinity versus Femininity: In terms of globalisation, Tesco does not support differentiation and racism in their workplaces. The maintenances of equality and stereotyping are not concerning variables for Tesco. As a result, the company will be competent to function internationally as supports workplace correspondence between men and women.
- Uncertainty Avoidance Index: The Company has been considered as sustaining its flexibility during the process of accomplishing its strategies in order to congregate the indispensable requirements (Cheah, Diong and Yap, 2018). In fact, it will be extremely accommodating to engage with different regions or countries because of its versatility.
- Long Term Orientation versus Short Term Normative Orientation: Tesco delivers elevated importance regarding values and rights of the employees and a range of groups in societies and communities and these values should not be changed in terms of operating at the international level.
- Indulgence versus Restraint: The optimistic culture of Tesco basically demonstrates respect and indulgence towards the employees of this company. The company ensures the fact of satisfying each and every employee through fulfilling their desires which will be accommodating to operate in a different region (Abhishek, 2020).
3.4 The Influence of Ethical and Sustainable Globalisation
Business ethics has been measured as the major component if a company tries to operate in a different region and to maintain globalisation (Abhishek, 2020). As a matter of fact, the company continues multiple ethical policies in order to create sustainability in terms of globalisation. The company implements ethics such as Fair Dealing, Public Disclosure of Material Information, maintenance of proper Financial Records, Antitrust and Competition, Gratuities and Business Courtesies, Money Laundering, Product Integrity, and many other ethical considerations in terms of globalisation (Liu and Jung, 2021). The ethics of this company is comparatively stronger than any other international venture but has to face enormous difficulties during the time of operating in the different regions due to its complexity.
4. Analysis of The Impact of Globalization On Decision and Strategy Creation of An Organisation
4.1 Description of The Leadership Change and Processes Related to Internalization
In any organization, leaders play the most vital role which helps an organisation to utilize their resources efficiently and help to achieve organizational goals. Only a good leader is able to bring out the best possibilities from the employees, which help the workforce to become more productive, and helps to achieve organizational objectives more swiftly. Hence, the success of an organisation is determined by a leader.
The leadership change requires a certain transformation in order to work in a different global environment. It is crucial to understand the environment in which a leader will operate. In this regard, an organisation must pay attention to developing a number of leaders who will have the capability of operating in different environments stated by Bill George, professor of Harvard Business School. Apart from these, leaders should also focus on the enhancement of collaboration skills, critical thinking, communication skill and emotional intelligence in order to adapt to the continuous changes occurring in the global environment. Hence, Tesco should focus upon the fact that, in terms of global expansion, Tesco need to make the leaders aware of the global perspective demands of different abilities required developing in a global leader for functioning in a different region.
4.2 Global Expansion Strategy and Tactical Decision in Terms of Risks and Diversification
An international strategic plan is a multi-level strategic plan, which firms use to penetrate into a new foreign market in order to develop a strong presence and to become profitable. Foreign expansion strategies help an organisation to establish itself in a more structured way and become more sustainable in the new market. The concept of globalization is undoubtedly fruitful for businesses as it offers a business a new market, new opportunities and gives a potential source of growth. The World Economic Forum has recently released a report stating the risks associated with business expansion overseas which are not limited to a certain region. As per the article of Velocity Global 83% of UK and US businesses are planning to expand business in overseas markets (The Global Risks Report, 2020.) There is a certain risk that needs to be calculated before making the ultimate decision, such include,
- Fiscal Crisis: The global economic recession and its impact has given a serious concern for the future to businesses all over the globe. The Global Risk report put stress upon the high debt of governments and slight economic stimulus as a concern for global businesses. Again, political and social instability all over the world brings ambiguity for businesses planning to move into new markets. Companies are dubious in terms of their long-term sustainability in the international market.
- Cyber Security: In the second spot of these risks, a cybersecurity threat comes. Technology has become an integral part of contemporary business operations. Simultaneously, server and system protection has become a concern for businesses. Before the foreign expansion, Tesco should explore the safety and international infrastructure providing cybersecurity.Japan and Singapore are Asia's top cybersecurity providers (The Global Risks Report, 2020).
4.3 The Influence of Barrier of International Trade on Decision-Making and Strategy Creation
Economists support the fact that trade barriers decrease economic efficiency. Trade barriers are highly criticized when it comes to understanding the impact of trade barriers on developing countries. It is because; developed countries set trade barriers upon the products, which are well, produced in developing countries that impact the developing countries. Apart from trading businesses also, face issues relating to ethical challenges and business practices. International trade is all about trading behind national borders.
Globalisation, the industrial revolution has increased the significance of international trade which has increased, on the other hand, the importance of ethical practices which facilitate businesses and governments to make mutual cooperation together. Nevertheless, many countries face issues reading business practices and ethical trading relating to human right violation and economic inequality. Along with all these, cultural barriers are one of the most considerable aspects when it comes to businesses operating in a foreign land. It is crucial for Tesco to identify and understand in-depth knowledge about the existing market, consumer preferences and suppliers. Language and cultural barriers deliver a significant amount of challenges to businesses operating in a global environment.
This context basically describes the diverse aspects and impacts of globalisation. The exploration of the major factors of globalisation basically illustrates that multiple factors have been responsible for globalisation and operating in a foreign country. As a matter of fact, Tesco has the ability to manage various problematic situations along with accomplishing in various areas. The strategic complexities in association with operating in a global environment have been able to mitigate the risk related to globalisation and diversification. The Hofstede Dimensions of Cultural model and McKinsey 7S model have been proved to be extremely accommodating in identifying various aspects of globalisation in context to the retail sector.
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