Pestle Analysis: Tesco PLC - Assignment Example

Pestle Analysis-Tesco PLC, UK Pestle Analysis-Tesco PLC, UK Question Background of Tesco Tesco PLC is an U.K. multinational grocery plus a general merchandise retailer based in Cheshunt, Hertfordshire (Tesco n.d, p. 1). It is considered to be the second largest retailer (after Wal-Mart) the world over judged by the profit it makes and the third-largest retailer worldwide judged by the revenues where Wal-Mart and Carrefour came first and second, respectively. Tesco PLC has stores in over 14 nations across Europe, Asia and North America and is the leader in the grocery market in the United Kingdom, the Republic of Ireland, Malaysia, as well as Thailand (Tesco n.d, p. 1). The organisation was founded as a group of market stalls by Jack Cohen in 1919 (Tesco n.d, p. 1). The name Tesco first emerged in 1924, when Cohen bought a tea shipment from T. E. Stockwell and joint these initials with his surname’s first two letters, and the first Tesco retail store was opened five years later, in Burnt Oak, Middlesex (Tesco n.d, p. 1). The business grew swiftly, and a decade later he had more than 100 Tesco retail stores all over the United Kingdom (Drejer 2010, p. 206). Initially a UK-centered grocery retailer, as from the early 90s Tesco has more and more expanded geographically and into areas such as the retailing of clothing, books, furniture, electronics, software and petrol, financial services, internet services and telecoms, music downloads and DVD rental (Finch 2004, p. 184). The 90s witnessed Tesco revolutionise itself, from its position as a downmarket retailer, to one that appeals across a broader social group, from its Tesco Value philosophy to its Tesco Finest varieties (Graiser & Scott 2004, p. 10). This was overly successful, and witnessed the chain rise from 500 stores in the 90s to over 2,500 stores 15 years later. Today, Tesco enjoys a lot of stakeholders, from its shareholders, to its customers; from its employees to the government; from its local community to its suppliers; and finally from its financers to its pressure groups (Clarke et al. 2012, p. 12). All these groups play an important role to ensure that the firm is properly managed. Tesco is listed on the LSE (London Stock Exchange) and also constituents to the FTSE 100 Index (De Toni & Tonchia 2013, p. 947). It had a marketplace capitalisation of roughly £24.4 billion as of January 15th, 2012, the 15th-largest of any firm with a listing on the LSE. In 2003, retail in the United Kingdom aided to 9% of GDP – gross domestic product (Graiser & Scott 2004, p. 10). Of late, United Kingdom retail stores have been under enhanced criticism over their handling of suppliers, especially of own-label goods, and the enhancement of strategic supply networks has been a vital part of most retail stores’ strategies for the last 10 years (De Toni & Tonchia 2013, p. 947). This paper will provide an insight into the retail store organisation, Tesco, with stress on its external environment analysis and organisation’s assessment of competence, resources and culture. The paper will discuss the environmental factors that have the most impact on this industry and the organisation. It will also identify what the organisation should focus on right now to respond to the above selected factors. Finally, the paper will discuss how Tesco PLC will perform in the future by debating at least three of the PESTLE factors. Question 2: PEST Analysis of Tesco Political Factors Working in a globalised surrounding with stores around the world, Tesco’s performance is highly persuaded by the legislative and political conditions of the counties that they have established stores and also in the European Union (EU) (Balchin 2008, p. 43). For work legislations, the government supports retailers to offer many job opportunities from flexible, low-income and locally-based employment opportunities to skillful, high-income and centrally-based employment opportunities (Johnson & Scholes 2003, p. 67). Also, to fulfill the needs from population categories like working parents, students and senior people. Tesco comprehends that retailing has a big impact on employment and people factors (Lindgreen & Hingley 2003, p. 329). Fresh store developments are normally considered as harming other employments in the retail field as small stores lose their customers or are persuaded to cut costs to rival with the large retail stores, being an essentially local, as well as labour-intensive sector (Balchin 2008, p. 44). Tesco a wide variety of student, elderly and disabled workers often paying them slightly lower income. In a field with a normally high staff turnover, these employees offer a greater level of loyalty and thus represent advantageous employees (Myers 2004, p. 2). Economic Factors Tesco also considers economic factors to be important business environmental factors as they are likely to persuade demand, prices, costs, as well as profits (Palmer 2004, p. 1076). One of the most significant aspects on the economy is high joblessness levels, which drops the effective demand for a lot of products, unfavourably influencing the demand needed to generate such products (Porter 2010, p. 44). These economic aspects can barely be controlled by the organisation, but their impacts on performance and marketing mix can be overly severe. Even though, global business is still rising and is anticipated to bring in greater sums to Tesco’s profits over the coming few years, the organisation is still overly reliant on the United Kingdom market (Veliyath & Fitzgerald 2010, p. 59). Therefore, Tesco would be negatively persuaded by any hold up in the United Kingdom food market and are at risk of market concentration risks. Cultural/Social Factors Recent trends show that U.K. clients have shifted towards a ‘bulk’ and ‘one-stop’ shopping, which is because of a couple of social amendments (Dennis et al. 2010, p. 193). Therefore, Tesco have raised the quantity of non-food items sold in their stores. Demographic transformation like the aging populace, a rise in female employees and a drop in home meal preparation imply that United Kingdom retailers are also centering on added- value products (Acur & Bititci 2004, p. 392). Furthermore, the attraction is now in line with the supply chain, the own-label share of the business mix and other operational enhancements that can take costs out of the business (Anon 2004, p. 68). State retailers are more and more reserved to endorsed new suppliers. The kind of products wanted by people is a role of their social conditioning, as well as their consequent beliefs and attitudes (Desjardins 2012, p. 4). Clients are becoming more and more aware of health concerns, plus their views towards food are continually transforming. One case of Tesco implementing its product mix is to endorse a higher demand for organic goods. The firm was the first to permit clients to pay in cheques, as well as cash, at the checkout (Guy 2009, p. 4). Technological Factors Technology is a key macro-environmental variable that has greatly impacts the growth of a number of the Tesco goods and services (Hammett & McMeikan 2004, p. 5). The fresh technologies help both clients and the retail stores: client satisfaction increases since goods are readily available, services are more individualised and shopping well-situated (Flavián et al. 2002, p. 127). The launch of its ECR – Efficient Consumer Response – initiative influenced the change that is now clear in the managing of food supply. Tesco stores use the following technologies (1) intelligent scale, (2) wireless devices, (3) electronic shelf labelling, (4) radio frequency identification and (5) self check-out machine (Leathy 2004, p. 15). Also, the endorsement of Electronic Funds Transfer Systems (EFTPoS), Electronic Point of Sale (EPoS), as well as electronic scanners, have overly enhanced the efficiency of stocking and distribution activities, with require being communicated to the supplier virtually in real time (Ogbonna & Whipp 2012, p. 79). Question 3: The Environmental Factor that Most Affects Tesco The environmental factor that has the most impact on an organisation depends on the type of organisation (Rolfe et al. 2001, p. 45). Some organisations need to tap more into the political aspects of their environment and others need to tap in more to the social aspects of their environment (Martinell & Sparks 2003, p. 559). Others need to tap in more into the economic aspects of their environment in order to succeed and others need to tap in more to the technological aspects of their environment (Rolfe et al. 2001, p. 45). As for Tesco and any other retail store out there, tapping more into the technological environment can be of great influence to them. Technological factors comprise of technological aspects like automation, R&D activity, the rate of technological change and technology incentives (Okumus 2003, p. 875). They can influence challenges to market entry, influence outsourcing decisions and least efficient production level. In addition, technological changes can affect quality, costs, as well as lead to innovation. Over the past decade, there have been an increasing number of clients whose shopping has mostly been influenced by the internet (Palmer 2005, p. 28). This is done either through conducting online shopping or basically using technology to know more about their goods. Organisations, mostly retail stores, have enjoyed the most benefit as these technologies can allow a client to have his or her product specifically catered to his or her needs more effortlessly. For large retail stores such as Wal-Mart, mobile technologies constitute to nearly 30% of the daily sales (Rowley 2013, p. 275). Also, 50% of the daily customer traffic in most of the Wal-Mart stores are attributed to mobile technologies, thus this is a big indicator that the success of retail stores these days is mostly influenced by their endorsement of technology (Rowley 2010 p. 196). As far as technology goes, it will continue impact every stage of the client’s shopping journey from individualised promotions encouraged by in-store research to geo-targeting to price checks, and also to payment capabilities, which provide checkout alternatives rather than waiting in line (Walters 2008, p. 25). Another environmental factor that comes second to technology when it comes to retail stores is the cultural/social factors (Rolfe et al. 2001, p. 47). Social factors comprise of the cultural elements and incorporate population growth rate, health consciousness, career attitudes, age distribution and stress on safety (Thomsen 2004, p. 37). Trends in social elements influence the demand for a retail store’s products and how that the retail store function. For instance, an aging population might mean a smaller and less-willing labour force (therefore, raising the cost of labor). In addition, companies might incorporate a variety of management techniques in order to adjust to these social trends (such as employing older workers) (Warnaby & Woodruffe 2009, p. 260). Question 4: Focus The retailing industry is facing congestion and innovative products and services being the main competitive advantage (Wrigley 2010, p. 895). Therefore, innovation has to be a key driver for Tesco’s goods and services development. Tesco is already a technologically developed retail store. Nearly all the services in their retail store can be conducted technologically and also manually. Therefore, they need to tap more into their cultural environment in order to attract a wide culturally diverse audience. The retail store can consider starting departments that sell specific products that appeal to certain cultures and others that appeal to others (Yip 2004, p. 23). They should also maintain their universal products that appeal to every culture in order to maintain their wide clientele. Tesco can establish a portfolio of diverse store formats in the United Kingdom, each planned to offer a unique shopping experience. Whereas most of the Eastern European, as well as the Far Eastern stores are hypermarkets, Tesco can also establish diverse store types in the U.K. markets (Humby et al. 2006, p. 102). This will add value through uniqueness and can eventually lead the retail store to command a top price. Question 5: Future Performance In a fast changing business world with many competitors, if Tesco, in the future, decides to implement innovative expansion methods or diversified themselves, then they will be able to sustain its top market position (Leahy 2012, p. 98). The retail giant is constantly accepting the fast transforming circumstances. Strategy formulation relying on the constant business environment situation must hence be considered as a process of constant learning about the objectives, the impact of likely actions towards these objectives and how to plan and execute these objectives (Desjardins 2012, p. 6). The value of a though strategy, as well as the speed of its execution will thus directly rely on the quality of Tesco’s behavioural and cognitive learning processes. Incorporating diversity through enhancing the cultural aspects of Tesco will help it grow and attract a much wider audience (Dennis et al. 2010, p. 189). Because the organisation is already technologically developed, it is important for it to also focus on another environmental factor that will allow it to succeed more. Building ties with the government can also be an important factor, which will positively influence the retail store (Dennis et al. 2010, p. 189). Conclusion This paper has presented a PESTLE analysis of Tesco PLC. As a final recommendation, in such multinational firms as Tesco PLC, strategy must be analysed and executed at a number of levels in the hierarchy. The organisation’s strategy at a corporate level should define the areas in which Tesco will compete, in a manner, which uses resources to transform distinctive skills into competitive advantage. References Acur, N & Bititci, U 2004, A balanced approach to strategy process, International Journal of Operations & Production Management vol. 24, no. 4, pp. 388-408. 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