D2. Evaluate the extent to which the business environment affects a given
business, using a variety of situational analysis techniques.
In this assignment I’m going to evaluate the extent to which the business environment affects
Tesco, using a variety of situational analysis techniques such as PESTEL analysis, SWOT
analysis, 5Cs analysis and Porter’s Five Forces.
TESCO
Tesco plc, trading as Tesco, is a British multinational groceries and general merchandise
retailer with headquarters in Welwyn Garden City, Hertfordshire, England, and United
Kingdom. Tesco is the largest grocery retailer with outlets across Europe, the USA, and Asia.
In the UK Tesco now has over 2,200 stores ranging from the large Extra hypermarket style
stores to small Tesco Express high street outlets.
PESTEL ANALYSIS
This detailed PESTEL analysis of Tesco aims to explore some of the political, economic, social,
technological, environmental, and legal factors that affect Tesco today. Tesco is the market
leader in the UK supermarket industry. It is in fact, one of the largest and leading retailers in
the world.
Political
As one of the largest retailers in the world, the company must follow various regulations
that ensure compliance and safety of its products. As the company operates across various
countries, it needs to keep a tab on the changing political circumstances, in all the
countries it operates in. a major point is the political stability. Tesco’s home market is the
UK where the political environment is stable though Brexit has created a lot of uncertainty.
Like the home market, all of its overseas markets are politically stable as well. Another
issue that has affected Tesco, is the US-China trade war. The companies have been battling
to gain a proper ground of sale since the tampering of markets by the trade wars between
the two countries have become so intense, that regulations related to retail with China of
American products are frowned upon. The change in tax policies, among the various supply
countries will affect the profitability of the company. For employment legislation, the
government encourages retailers to provide a mix of job opportunities from flexible, lower-
paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs. Also to
meet the demand from population categories such as students, working parents and senior
citizens. Tesco understands that retailing has a great impact on jobs and people factors
(new store developments are often seen as destroying other jobs in the retail sector as
traditional stores go out of business or are forced to cut costs to compete), being an
inherently local and labour-intensive sector. Tesco employs large numbers of; students,
disabled and elderly workers, often paying them lower rates. In an industry with a typically
high staff turnover, these workers offer a higher level of loyalty and therefore represent
desirable employees.
Economic
Tesco encompasses a range of products and economic factors play a major role in the
consumption of this wide array of products. Tesco needs to have a keen eye for any
economic changes that occur in the countries, it operates, since these are the factors that
, will affect its revenue, sales, distribution, and profit. The company should be aware of the
various taxation policies, in order to leverage the same, for its own benefits. Even though
the markets around the world are expanding, its major share of revenue is still generated
from the United Kingdom. Any changes in the policies in UK may lead to a major change in
the delivery model of the company, and additional cost associated with redesigning the
company may be massive. Tesco also needs to keep in mind that pricing of the product will
influence the sale. In case the economy is under pressure, or inflation exists, products of
daily need, must be priced accordingly. Only increase in the prices, with lower rise in the
disposable income will cause a reduction in the sale of the products. Another influential
factor on the economy is high unemployment levels, which decreases the effective demand
for many goods, adversely affecting the demand required to produce such goods. These
economic factors are largely outside the control of the company, but their effects on
performance and the marketing mix can be profound. Also, as the global economies have
been severely affected by Covid-19, it is expected that many people’s earnings are likely to
go down, and many may lose their jobs. This may result in less spending by customers or
switching to cheaper brands. This may severely affect the operations and profits of Tesco.
Social
Due to the fast pace of life, people prefer buying everything in one go, and based on these
trends, of bulk buying, Tesco has planned out its stores to facilitate these needs. The
company has switched from major food products to a food cum non-food model. The
products that are demanded by its various customers, depend on their social influence, or
the societal influence. The choice of products may also depend on the various cultural
factors with which the individual has lived all his life. These trends in changing culture, and
societal influence among the upcoming generations needs to be assessed by Tesco, and the
consumers need to be provided with sufficient products to choose from. With the attitude
of customers, shifting towards, organic products, and Tesco has managed to capture its
consumer base by shifting its attitude towards promoting organic, to satisfy its customers.
Tesco believes in benefiting the society, by local hiring, and thus has generated
employment in various countries. Demographic changes such as the aging population, an
increase in female workers and a decline in home meal preparation mean that UK retailers
are also focusing on added-value products and services. In addition, the focus is now
towards; the own-label share of the business mix, the supply chain, and other operational
improvements, which can drive costs out of the business. National retailers are increasingly
reticent to take on new suppliers
Technological
Technology is a major macro-environmental variable which has influenced the
development of many of the Tesco products. The new technologies benefit both customers
and the company: customer satisfaction rises because goods are readily available, services
can become more personalised and shopping more convenient. The launch of the Efficient
Consumer Response (ECR) initiative provided the shift that is now apparent in the
management of food supply chains. Tesco stores utilise the following technologies: wireless
devices, intelligent scale, electronic shelf labelling, self-check-out machine, and radio
frequency identification. Also, the adoption of Electronic Point of Sale (EPoS), Electronic
Funds Transfer Systems (EFTPoS) and electronic scanners have greatly improved the
efficiency of distribution and stocking activities, with needs being communicated almost in
