The International Grocery Industry - Term Paper Example

Introduction For any company to succeed in attaining its objectives and goals, it is very important for it to have information on the internal and external factors that affect its achievements. These will enable the company to be aware of the immediate changes like technology and thus be ready to face the problems. There are various ways in which companies can perform such analyses to ensure that they have information on how to deal with the factors. They are: SWOT, PEST and LE-PEST C analysis. The paper will use the LE-PEST C analysis to show how the TESCO grocery company has been affected by the various influences in attaining its goals. TESCO is an international grocery based industry that is based in the United Kingdom. It has various expansions such as garden centres, personal finance systems, telecoms and selling fuel. LE-PEST C analysis on Tesco Company LE-PEST C analysis is an abbreviation of legal, environmental, political, economical, social, technological and competitive analysis. The paper will mainly focus on the analysing how Tesco is influenced by the LE-PEST C external factors to find out how it manages to be competitive and open more branches world wide. Tesco has proved that it is ready to ensure that its customers receive the best services and acquire the products they need at the right time and place. It is also interested in making super profits that will enable its shareholders to benefit in earning higher dividends every year. In addition, it ensures that it follows the current human resource strategies that allow its employees to develop their careers thus improving their performance within the organisation. Over the years, Tesco has maximised in building a very strong relationship with its suppliers to ensure that they do not have problems of delivery. Tesco is characterised by having very many stores world wide and thus has employed very many people as compared to other grocery stores. This is due to its expansion and diversification of offering services to its customers (Nash, 2006, pp. 23-56). Legal factors In every economy there has to be a government that makes up laws that definitely affect the way an entity sets its way of business. The legal entity is concerned in setting marketing standards like prices, distribution strategies of particular goods, how to treat employees and sometimes where to set up a market or an enterprise. The legal sector can either reduce or increase the competitive nature of a company. The British government has set strict rules on how different entities can deal with food and drinks products which highly affects the Tesco supermarket. The laws that have been set affect the packaging and labelling of the products. This is so because the products are perishable and they are consumed by very many people thus a small mistake in packaging and labelling can lead to numerous deaths which are against the objectives of the government; to protect the general public. It is right for the goods to be packaged well to avoid contamination and moreover, the labelling will allow the consumer to know the expiring date of a product, the ingredients of a product and if it is a counterfeit good or an original good. The laws have made the production costs to increase thus the price of the products have to increase. It has posed a great challenge to Tesco as it had to increase the retail prices thus threatened consumers to look for other options. Moreover, the banking sector of Tesco has been able to deal with the strict government laws made to protect the general public from being exploited by the banks. Royal bank of Scotland had a joint venture with the Tesco Personal Finance system thus it has enabled the Tesco company to deal with the strict banking laws as the have a half-half share. The share in costs makes Tesco to half the burden thus enable it to make more profit and to be stable. This has seen the company making a profit of 130 million in February 2007. By making such profits, the Tesco Company is expected to have bought the Royal Bank of Scotland (Nash, 2006, pp. 23-56). Environmental factors The environment has become a concern to everyone globally. There have been campaigns on how to increase the conservation methods of the environment to prevent the depletion and misuse of the resources. For this reasons, many companies have been forced to change their modes of production and service provision to ensure that they help in preserving the environment. Tesco has not been left behind as it is an international company it has an obligation to ensure that it helps in preserving the environment. The environmental preservation methods are very expensive and this has seen the production costs raising thus the prices of goods and services being supplied by Tesco to be expensive. The packaging of the supermarket ensures that it uses the bio-degradable plastic bags to ensure that they do not pollute the environment. More so, the products they sell must be label how a consumer is expected to deposit the packages like cans and boxes. The production of bio-degradable goods is very expensive thus the supermarket had to raise the prices of its services to ensure that it meats the costs for it to make profits (Bream, 2008, pp.120-150). Political factors Politics determine the state of the country. It contributes to the stability of a nation in terms of maintaining peace within and without it. The political nature of the United Kingdom has been very stable over the years creating conducive environment for the Tesco Company to advance in its business. The only political influence to its business is globalisation that has led to very many companies competing in the same service provision methods. Very many supermarkets can now expand freely in different countries thus Tesco is at a risk of losing its identity due to the vast competition being brought about by globalisation. Tesco however, stands the chance to bit the global competition in the sector of retail services as it has highly expanded over the years. The only challenge it is facing is the global price setting and laws that are being made to ensure global development is attained equally. The table below shows that Tesco supermarket is becoming competitive globally by ensuring that it has extended its services to countries whose entry in their market was previously very strict like Japan (Nash, 2006, pp. 23-56). Table showing the current country of entry and the number of stores More so, it has been able to open numerous stores within those countries showing that it is adhering to the global conditions that are set to all international companies. It is also very competitive as it is able to have numerous stores to capture the international market (Nash, 2006, pp. 23-56). Economic factors Economic factors can either create or limit a business from expanding the provision of its services. There has been extreme rise in the fuel and food prices globally. These two factors have highly affected the Tesco Company as it is a retail company that deals with food stuffs and it needs to transport the goods from its suppliers to its stores. The fuel pries have made the suppliers to increase their charges to meet the high fuel costs. For Tesco to maintain its high profit margin, it has increased its prices on its products. This is a great discouragement for its customers as they will try to look for other alternatives or reduce their purchase of the goods and services. The high food prices have also made the cost of such products to increase in this grocery retail company leading to the same implications as the rise in fuel prices (Tony, 2000, pp.34-54). Social factors Social factors such as norms, culture and basic beliefs of a community highly affect the purchase of certain services and products of a company. Tesco being in several countries has proved to use the factor to its advantage as it has been able to survive in different cultural backgrounds by making outstanding profits. It identifies the particular staple food of a country and maximises on selling the product in that specific country. It also helps the different communities to have an overview of different cultures. It sells different products from different countries to ensure that the people who migrated from their mother country have access to their cultural products. The table in page 6 shows how Tesco Company has been making profits since 2004 to 2008. It has been increasing its profit margin because of its vast expansion and consideration of culture globally (Jan, 2002, pp.270-273). Profits for the company Technological factors Technology has been known to change very quickly in the resent years. Every company has to change its technology to increase its provision of services and products to be efficient. This reduces the necessary costs by not implementing the technology. Tesco is one of the retail companies that use the RFID technology to improve its supply strategies. It is faster and proves to be cheaper. Moreover, it allows its retail process to take place via the internet thus customers can order for goods and services using the internet (Dorner, 2004, pp.79-90). Competitive factors It is important for any company to know what its competitors are up to so that it can have differentiated ways of providing its services and products to customers. In addition, it can come up with new strategies before its competitors thus winning it more customers than its competitors. Retail companies focus on grocery and food products only but Tesco has been able to bit its competitors by ensuring that it has diversified its service provision sector. It has opened a financial institution that offers insurance services, mortgages services, loans, depositing and withdrawing money. It also has a petrol station in the United Kingdom. Tesco offers telecom services by operating ISP, mobile phones and VoIP businesses (Harry, 2001, pp.125-130). LE-PEST C factors in the extract The extract mainly focuses on the economic factors that are affecting businesses entities not only in the United Kingdom and America but also the whole world. This is because of the financial crisis that the AIG company being the biggest insurance company in the world. American government gave out $85 billion to rescue it. It has had a financial crisis due to the problem about by mortgages. This has highly affected other banking sectors not living out Tesco's financial sector that offers insurance and mortgage services. The fact that people are now losing their faith in the banking sector is a great loss to the financial sector of Tesco. Tesco Company is not very worried as the United Kingdom government is ready to solve the problem of liquidity that has been brought about by poor strategies in the mortgage finance sector. Solutions Since Tesco has expanded, it has new challenges to meet so that to ensure it is still in the fore font in the retail sector internationally. It is hard for it to deal with some of the external factors but the continuity of assessing the probabilities of encountering a problem should continue. It has been using the current technology which is a very motivating factor as it is not rigid in adapting to change. References Bream R., 2008. Less power to cut emissions: LE-PEST C analysis of supermarkets. Pp.120-150. Dorner J., 2004. One step ahead, LE-PEST C analysis: Bids and funding applications, oxford university press. Pp. 79-90. Harry C., 2001. Political, economic, social and technological factors: Business skills for engineers and Technologists. Pp. 125-130. Jan Y., 2002. The strategic marketing plan using the three-step matrix: implementations of LE-PEST C analysis. Vol. 21, pp. 270-273. Nash B., 2006. Fair-trade and growth of ethical consumerism: investigating Tesco consumer needs. University of Leeds, Vol. 3, pp. 23-56. Tony G., 2000. LE-PEST C and the SWOT analysis: studies in Economics and Business. Pp34-54. Read More