Published by MBA Skool Team, Last Updated: January 26, 2020
PESTLE Analysis of Tesco analyses the brand on its business tactics. Tesco PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as Tesco, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
The political factors in the Tesco PESTLE Analysis can be explained as follows:
With head quarters in UK, Tesco operates across various countries. 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. The more the stable the political environment, the better is the opportunity to carry out trade. With a recent example being Brexit. With Brexit, there is a dilemma related to the new regulations that might come up and cause a decrease or increase in sale. 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 two countries have become so intense, that regulations related to retail with China of the American products is frowned upon. The change in tax policies, among the various supply countries will affect the profitability of the company.
Below are the economic factors in the PESTLE Analysis of Tesco:
Tesco encompasses a range of products and economic factors play a major role in the consumption of this wide array of products.
The company needs to have a keen eye for any economic changes that occur in the countries, it operates in, since these are the factors that will affect its revenue, sales, distribution, profit. The company should be aware of the various taxation policies, in order to leverage the same, for its own benefits. Even thought 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.
Following are the social factors impacting Tesco PESTLE Analysis:
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.
The technological factors in the PESTLE Analysis of Tesco are mentioned below:
The trends have been changing at a fast pace, and to stay relevant in todays times, it is important for a company to keep up with changing technology. Tesco has been experimenting with various aspects of retailing and has achieved some amount of success in a few endeavors. The online shopping, the social media promotions etc. are all a part of influencing the customer, by providing various technical benefits. The company has managed to shift the trends of shopping to online one, with 43% of its shoppers today, shopping from the online site and getting their goods home delivered. The recent announcement by Tesco, regarding its pair-up with Amazon Go to create new technology for cashier less billing is an update that will revolutionize the way retail shopping is undertaken. This will help consumers evade the long queues and help them save time, with hassle free billing.
Tesco has invested in some energy efficiency projects to reduce it s carbon footprint.
Following are the legal factors in the Tesco PESTLE Analysis:
The change in government policies, directly affect the operations of the company. It needs to follow both the local as well as the international market laws, in order to continue with smooth operations. For example, the Food Retailing Commission has laid down certain rules and regulations that need to follow by all the members in the retail segment. In 2016, there were certain allegations imposed on Tesco, regarding the age and gender bias that prevailed in the work culture. Tesco has also been under the purview of media, for a fraud case, where the legal settlement of $12 million was the result. The recent update is the company being sued for unequal pay, among the men and women working in the company. These legalities should be considered and followed religiously in order to maintain its reputation. Once the company has lost its credibility, it is quite expensive, for the company to get back to the same position.
In the Tesco PESTLE Analysis, the environmental elements affecting its business are as below:
Tesco has undertaken various initiatives in order to help improve the environment and create a more sustainable society. Recently Tesco has launched its phase 2 of Remove, Reduce, Reuse and Recycle plan. The company has undertaken various initiatives to remove and reduce all the non-recyclable plastic to the minimal level and explore new opportunities to use the residual plastic that is still being used. This will lead to development of a closed loop system and reduce the amount of waste that might get accumulated in the landfills. Over the past years the company has changed 800 product and helped in reducing the waste of 4000 tons of plastic waste, that is hard to recycle.
Working in a retail chain involves major responsibilities of sustainable sourcing, and at Tesco, all its marine products are sustainable sourced and certified. He company is also trying to work on creating a system to identify the boat on which the fishes were caught in order to establish a zero-tolerance policy towards illegal sourcing. With these changes undertaken, the company is trying to do its part towards a more sustainable environment.
To conclude, the above Tesco PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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