The Influence of Variables on the Retail Firm TESCO of the UK - Case Study Example

PEST Analysis Introduction An organization’s business operations depend on some macro economic variables, which in turn greatly influence the demandand supply functions in the concern’s operational framework. The macro-economic variables also influence the cost of operation of the firm together with its pricing mechanisms. The diversified base of macro-economic variables affecting a firm’s operations is grouped under certain sub-heads. One of the major frameworks governing the macro-economic variables is the PEST Analysis. The different sub-heads under which the macro-economic elements are grouped are the Political, Economic, Social and Technical variables. Further extension to the framework will include the economic and legal variables. (What is PEST Analysis?, n.d.; Brooks, Weatherston & Wilkinson, 2004: 6; Brooks & Weatherston , 1997: 6). The paper endeavors to focus on the influence of such variables on the retail firm, TESCO operating in United Kingdom. In regards to the plans for making a huge reduction in the UK’s budget deficit made by the government of United Kingdom Tesco is among the other 5000 organizations, which is greatly affected. The firm along with other concerns is forced to pay in the form of fees an amount of 3.5 billion pounds. The government acquired the money from the firms through the sale of Carbon Reduction Commitment permits. The list of firms of firms ranged from supermarkets like Tesco to other concerns like hospitals and universities. (Morales & Airlie, 2010) Political Environment and Tesco The range of political activities in a nation’s landscape greatly affects the level of business operation of the Business Corporations. The political systems and institutions together with the level of state intervention in the trade and economic system of the country is the main reason behind the effect of politics on an organization’s operation. It is further found that the level of political intervention also affects the industrial dynamism in which the concern belongs to. Moreover the growth of international trade bodies like the World Trade Organization owing to the globalization of the business atmosphere makes the firms susceptible to such economical and political influence. The large-scale public awareness has also made the concerns more socially responsible. In turn, the above fact has made the government of the country extend its governance to the business firms. Moreover, it is found that the political institutions of a country gain control over the business and trade atmosphere of a country through the passing of legislations. It is further found that to any business concern the political environment of a country stands out to be the most unpredictable in nature. To this end, the business enterprises must put a continuous eye to the political changes in the country. The relation between business and politics gain ground because of the fact that key foreign investors before making investments in any country look into the nation’s political stability. The company must also put an eye on the legislative practices of the government. It is because the business activities of a firm are greatly affected on passing of legislation like those on consumer rights. Further, it is the actions taken by the government of the day, which helps in increasing the economic growth of a nation. The government also finalizes the distribution of economic wealth among the consumer and business groups. Government intervention becomes much more predominant on the issues of public interest protection. The legislations passed by the state relating to environmental issues like pollution also affect the business operations. (Palmer & Hartley, 2006:7-8; Worthington & Britton, 2009:7). In regards to the above discussion it is found that the operations of Tesco in the United Kingdom had been seriously affected for the supermarket chains carbon emission reasons. The government of United Kingdom issued a permit, which regulated a commitment from organizations to reduce carbon emissions. This permit was forcefully imposed upon several organizations, which contained hospitals, supermarkets and universities. To this extent, the government imposed monetary charges on firms like Tesco, which amounted to 3.5 billion pounds. (Morales & Airlie, 2010) Economic Environment and Tesco It is found that the macro-economic variables grouped under the political environment head also influence the economic and legal environment. They are mostly found interrelated with each other. However, the changes in the economic environment of a nation as a whole render influence on the demand and supply functions of a concern. In fact, the external economic environment influences the demand for goods and services of a firm to its procurement of raw materials all. The economic variables also render influence on the structures of market and industry thereby changing them. (Worthington & Britton, 2009:7; Case & Fair, 2008) In regards to the effect of economic environment on the business operation in a country it is found that in the United Kingdom the cost of retail property was continuously increasing. The rise in the costs associated with energy consumption and rental values was attributed to the changes in market conditions. A survey conducted by the British Retail Consortium on the performance of its retail firms reflected that the profits of the firm were considerably declining. It is further inferred that the pattern of funding the local government factions in the United Kingdom resulted in the rise of cost of retail operations. The British Retail Consortium to this end, is found to observe that the government in the spree of rising costs is not concerned about the current market scenario which the retail firms are facing. British Retail Consortium further held that the rise in the energy and rental costs would have been unmanageable in a positive operational environment. It observed that in the current operational scenario where the retail firms are facing losses the managing of such costs is not only difficult but also impracticable. Hence, the retail firms in United Kingdom are facing a financial downturn. (British Retail Consortium, 2005: 28). Social and Cultural Environment and Tesco The Cultural Environment of a country is constructed depending on a set of values, which percolate from one generation to the other through the activity of sharing. In this regard, the business organizations are expected to honor the cultural mix of any nation in which they are found to operate in. the honoring of the cultural heritage of a country earns more importance in the context where the business shares a different outlook to the nation. This happens especially when the business is operating in a foreign soil. The cultural environment of a nation is built up through the effect of different social groups. It is observed that perceptions of the social groups in regards to any product or service earn difference if surveyed at a certain point of time. However, the same applies for the business firms in operation in their home soil. The business corporations should have strong observance on the changing socio-economic patterns and must produce goods and services accordingly. The goods and services produced should focus on satisfying the needs and desires of the population. It is observed, that Business Enterprises thriving in the Western European countries focus on the manufacture of leisure-oriented products owing to the increased demand for such. Moreover, it is also observed that for a firm specializing on the sale of formal wear its sales got hugely affected for customers changing their style patterns to casual wear at the workplace. The increased role of women at the workplace also triggered a change in the production scenario of the country. Business enterprises involved in the manufacturing of automobiles had to shift to the production of women driven cars. Moreover, the ready to eat food segment of the economy started growing to help the workingwomen cater to the domestic needs. Again, the mortality rate deceasing also indicated the development of products and services catering to the needs of the older generation. The production of greener products was a step taken by the business firms to render a pollution free society. (Palmer & Hartley, 2006:8; Griffin & Pustay, 2006) To this end, it is found that the retail enterprise Tesco had to pay a huge amount as fees in regards to the permit bought for Commitment to Reduced Emissions. The government had to take a step in this direction for the retail house was found emitting huge amount of carbon to the atmosphere damaging the environment. (Morales & Airlie, 2010; Baron, 2000:18) Technological Environment and Tesco The technology factor is considered as a key macro-economic variable, which not only renders it s influence on the sales and marketing activities of the company but in turn affects the major linkages the firm has with the society. Thereby changes in the use technology used by the firm also are found to impart influence on the customers. In the modern period it is found that there is a huge amount of technological innovations, which is rapidly changing the patterns of consumerism. Major innovations have rendered to the society, sophisticated products like improved television and mobile sets, compact disc and different types of aerosol sprays. Further, it is observed that manufacturing industries like steel and copper are being increasingly replaced by scientific and research oriented enterprises like bio-technological firms. The advent of information technology has changed the face of the communication industry. Moreover, it is helping the business enterprises to gather and store large amount of data in machines rather than piling files. The retail industries have also been greatly influenced by the increased use of information technology. The emergence of the system of Electronic Point of Sale has helped the retail enterprises in making bills for customers at a much faster rate. The scanner by reading the bar code through laser light stores important data. The data can be used at later period for reordering of stocks and making analysis of sales and stock. (Lancaster & Reynolds, 2002:39-40). To this end, it is found that the level of information technology usage is rapidly increasing in regards to the retail firms like Tesco. Information Technology has evolved its position from the support services to occupying the frontline of everyday’s business operation. Tesco, in regards to the above cause has expanded the use of Information Technology from its purchase and sales parameters to encompassing the marketing activities. Tesco is found to be encouraging the increased use of technology in its retail operations based on addressing the needs of its customers. However, in this regard it must be stated that merely having access to proper technological mechanism does not only solve the game. Rather the technology in place must be properly enacted to earn success. It is this case, which matches with Tesco. The proper implementation of the technology is earning cultural obstacles. It is found that though the Corporate Strategy of Tesco supports the introduction of technology in the company it is the internal structure, which is highly faltering. The internal structure of the retail firm Tesco is still found to be disagreeing with its corporate structure. Thus, the technological innovation sought remains an unused mass. (Targett, Grimshaw & Powell, 1999:41-42). Conclusion The government of the United Kingdom in order to cover the nation’s budget deficit resorted to forcible practices. It is found that in order to draw money from the business enterprises and other institutions the government issued a permit on gaining commitment in regards to reduction of carbon emissions. The government forcibly made certain organizations like supermarkets, hospitals and universities adhere to such norms. They had to purchase the permit issued by the government in exchange for a fee. The fee amounted to a huge figure of 3.5 billion pounds. To this end, it is observed that how political and legislator changes brought about can affect the business performance of any organization. Moreover, the focus rendered on reducing the carbon emissions also tantamount to level of social responsibility to be shared by the business enterprises likes Tesco. Reduction in the carbon emissions would certainly help in giving the society a greener environment. The government of the day should also look after the needs and position of the business enterprises before making any legislation. Finally, Tesco is found to share an internal conflict in being flexible to the changing technological environment. Business enterprises must readily adapt themselves to the changing external environment to be the enterprises of the future. References 1. “What is PEST Analysis?”(n.d.). PAPERS4U.COM. Retrieved on November 11, 2010 from: http://www.coursework4you.co.uk/essays-and-dissertations/pest-analysis.php 2. Brooks, I. , Weatherston, J. & G. Wilkinson. (2004). The International Business Environment. London: Pearson Education Limited. 3. Brooks, I. & J. Weatherston. (1997). The Business Environment :Challenges and Changes. London: Pearson Education Limited. 4. Morales, A. & C. Airlie. (2010). Tesco, Cambridge, Face 3.5 Billion Pound Tax on Carbon in U.K. Retrieved on November 11, 2010 from: http://www.bloomberg.com/news/2010-10-20/carbon-tax-in-u-k-will-cost-tesco-plc-cambridge-university-5-5-billion.html 5. Palmer, A. & B. Hartley. (2006). The Business Environment. United Kingdom: McGraw-Hill Education. 6. Griffin, R. & M. Pustay. (2006). Principles of Economics. 7. Baron, D. (2000). Business and Its Environment. New Jersey: Prentice Hall Inc. 8. Worthington, I. & C. Britton. (2009). The Business Environment. London: Pearson Education Limited. 9. Case, K. & C, Fair. (2008). Principles of Economics. 10. British Retail Consortium. (2005). British Retail Consortium 2006. The Stationery Office. 11. Lancaster, G. & P. Reynolds. (2002). Marketing: the one-semester introduction. Butterworth-Heinemann. 12. Targett, D., Grimshaw, D. & P. Powell. (1999). IT in business: a managers casebook. Butterworth-Heinemann Read More