The objective of this tutorial is to provide you a detailed external environmental analysis of Tesco a retail supermarket company. The PESTEL analysis tool will analyze the unpredictable environment in which Tesco Plc operates by discussing the factors affect the Tesco performance and operation.
Tesco is a British multinational retailer company. It Headquarter is situated in Hertfordshire, England. In terms of profit. It is third largest and in terms of revenue ninth largest retail supermarket in the world. Founded in 1919, it is currently operating in 12 countries with over 6553 stores.
Tesco PLC is not only providing retail products but also dealing in broadband, mobile networks and insurance services.
Here we will discuss in detail the PESTLE analysis of Tesco.
Table of Contents
Political factors
This company is operating in 12 countries including Asia and Europe. It is exposed to many political factors that can affect the operations of Tesco. These factors include Tax rates, current and impending legislation, political instability, unemployment rate, economic condition of the countries where it is operating.
For example, import duty on goods can affect Tesco because it imports some inventory from outside UK like China and East Asia.
Tesco Chairman Johan Allan an outspoken person and business leader told that what political factors can affect the business. He added that EU referendum is greatly creating a risk factor for investors and the British Economy is passing through hard times.
The tax on large supermarkets known as “Tesco Tax” was proposed by the local council but UK government refused this initiative mainly to avoid price hike. Similar initiatives in the future can affect Tesco negatively.
Economic Factors
Labor cost is an important economic factor that can affect UK supermarkets. For example, its annual wage bill is amounting GBP 4.5 billion. In 2018 UK Minimum Wage Rate is increased by 4.4% for 25 years old and onward. This upward shift has cost Tesco millions of pounds in UK.
There are many other factors that affect Tesco i.e. cost, prices and profits. The company should focus on the increased borrowing cost in UK. eventually, it will increase costs and prices and decrease its profits. It can affect the brand reputation and cost leadership strategy.
Diversification and presence in the international market are the two important strategies in past years and reasons for the success of the company. It is worth mentioning that Tesco is still dependent on UK market with a 27.7% share in the UK grocery market.
Social Factors
Consumers shopping trend are constantly changing over time. People have tough schedules and want same day and fast delivery with a flexible goods return policy. They prefer one-stop shopping. Tesco is relying on UK customers and must understand and provide the services to meet these issues.
The demand for goods and services is related to the consumer beliefs and attitudes which is another focused issue.
Obesity is another issue in society and customers are more concern about their health. Tesco must consider changing behavior and demand for organic food.
According to PWC report 65% UK shoppers are loyal shoppers. Tesco should avail this opportunity by developing close ties and one to one connection with customers.
Technological Factors
Few years back Tesco was facing issues like poor customer experience and horsemeat scandal. Technological advancement brought new opportunities to Tesco to regain the customer trust.
Tesco embrace advancement in technological as opportunity by adopting available retrial technologies.
They introduced RFID Technology to increase in-store experience for customers. It automatically counts stock and remove it after sales. This information is also helpful for supplier of the store and replenish when required.
Now customers can pay as they want, Tesco have developed its own online mobile payment system called PayQwid. From London to Edinburgh 524 Tesco stores are using this app. Customer can download the app and link it with Clubcard and NFC technology. Customers can pay for shopping and get loyalty points.
For those who love convivence shopping, they introduced “scan as you shop” check points. Customers shop and tag products. It saves time and labor cost as well.
Environmental Issues
Many companies are facing immense pressure from government agencies to address environmental issues. companies are liable to respond to these issues to benefit society.
Now Tesco encourages its consumers to shop at tesco.com. Tesco Van Drivers will not only use fuel-saving routes but also collect unwanted plastic bags from customers and recycle them.
Also, Tesco is committed to use renewable sources and generate 100% of its electricity by 2030. The company promises to minimize up to 50% carbon footprint by 2020.
Taken from environmental factors affecting business.
Legal Factors
In a business legal environment, don’t undermine key areas where law changes that can affect your business performance to achieve your objectives.
In 2016, Tesco 17 workers took legal action against the employer on the basis of age and gender discrimination. Workers were extremely frustrated after noticed low pay rates for night, weekend and bank holidays shifts.
Tesco also faced legal action for accounting fraud and misleading the investors, lastly, agreed to pay GBP 12 million to settle the legal action.
Tesco must conduct its operation in accordance with Food Retailing Commission (FRC) strict code of practice.
We performed Tesco pestle analysis, hope the discussion will give you a better understanding retail industry external factors affecting their business environment.
