PEST Analysis of TESCO Company - Business Plan Example

PEST ANALYSIS OF TESCO Analysis of Tesco Tesco is one of largest supermarket chains in the world. It has been operating for along time now in the market and has been able to establish an outlet in all the major towns in the world. Tesco has grown to be one of the major players in the retail business dealing with foods and drinks and other consumer goods. It is a retail outlet but has been able to diversify the range of product that it deals with. The company has been able to compete with other major players in the industry like Sainsbury and Asda but its growth policy has been the leading competitive edge in the industry. With competition in the food and drinks retail market becoming stiffer in the UK market, the company has come up with strategy of increasing its retail outlet in other parts of the world as a way of maintaining growth in the market. The company has set out four manning goals which have been a source of it strong in the market n and also source of growth. (T-online, 2008) Tesco is one of the largest retail chains in the industry holding more than 30% of the market share in the UK which has been seen as dominance in the sector. The supermarket accounts for 1 of every 8 pounds that are spent by UK shoppers in food and drinks industry. Currently the store has more than 400,000 employees in all its retail outlets. It has integrated the interest of different stakeholders in its goals and objective which have been the growth point. The company and an initial goal of becoming a strong UK core business. In this regard the company had set out a goal of growing in the external world but with a special focus of the UK market. In the last few years the industry had been record marginal growth but Tesco had been recording massive growth in its operation. This has been through given customers value for their money and offering cheaper products. Since it was established the company set out goals of becoming strong food and nonfood earlier in the UK market. These were two industrial sectors that were growing very fast in the consumer world and therefore the initial targets were aimed at reaching to all the market segments that dealt with these goods. Since then it has grown to be the largest online retailer in the world with more that 1 millions customer in the word. The company also set goal of diversifying its operations in the external market and a 30% of the stores are found out side the UK and the company has been having a plan of increasing it to 45% of their markets by investing in Central Europe and Asia. The company also set out a goal of having the more loyal a committed staff in all its operation. This was in recognition of the need to have customer satisfaction in the business which was one of the sources of competitive edge in the market. Stakeholders interest in the chain There are different stakeholders in the retail chain who have different interest. The customers are looking at buying a range of products under one roof at affordable prices. Their interest is to buy quality products at competitive prices. Suppliers who supply the stock for the business have an interest of retaining their contract with Tesco. Therefore they look forward to supply quality products that satisfy the needs of the consumer in order to retain their contract. The employees who are the other stakeholder want an increase in their pay. They have a big interest in Tesco since they have helped it to cut an edge in the market. They need to be trained to be more competitive. Owners of the business have an interest of making maximum profit from the operation. They expect to repeat business profit and have respected customers. PEST analysis This is an analysis o f the environmental factors that has been influencing the performance of a business. These are factors which most of the time are beyond the control of the business. This means that they are factors that are controlled by the environment and the best that a business can do is to come up with strategies that are aimed at adapting to these factors. Most the time an organization is forced to changes it course of operation or its mode of operate in order to adapt to the change environment. Pest analysis gives us an insight of the way in which the business has been performing in relation to the factors that are prevailing in the market. It helps us to understand the viability of the business in the future in consideration of the way in which it is responding to the changes in the environment. Therefore the way in which a business comes up with strategies to cope with changes in the environment will help to determine how it will be operating in the same environment in the future. In management it is an important tool since it helps the management to come up with strategies which are aimed at taking the business over the time of those environment factors. (Armstrong 2006, p. 343) Pest analysis involves the analysis of Political, Legal, environmental, social and technological factors that is taking place in the environment and which affects the operation of the business. They show the external factors that are affecting the operations of the business. It is a framework of the analysis of the macro environment factors that are affecting the operation of the business. (QuickMBA, 2008) Food and drink industry Food and drink industry is one for the industries that have been changing very fast in the world. Compared to other industry, it is one of the oldest industries in the world and through time it has changed with the changes that are taking place in the market. Through history the industry has been affected by the technological and legal changes that are taking place in the world. The level of technology has come with new ways of handling and processing foods and drinks which has changed the way the industry operated before. For example change in processing, canning and bottling technology has had changes in the industry. There have also been legal changes that have been taking place as far as the regulation of the industry is concerned. Legal changes have been meant to protecting the welfare of the consumers amid the technological changes that have been taking place. The industry has also been affected by environmental changes. Recently there has been an issue of food miles which has affected the supply chain in the industry. PEST analysis of Tesco There have been many changes that have been taking place in the environment of the food and drinks industry that have been affecting the operation of the company. Let us look at specific factors and how they have been changing and how the company has been respond to these changes. Political factors Political factors at these factors which takes place in the political environment. These include the government polices and regulations and the legal issue that comes with formal and informal rules that affects the operation of the business. They include the tax police, employment laws, environmental regulations, tariffs and restricts and political stability in general. There have been many political factors that have taken place in the UK and the whole of Europe that have affected the operation of the company. Notable among these changes was the formation of EU which is a trading bloc unifying the whole of Europe. Under this arranges there has been removal of trade barrier and regulation that could restrict the cross border movement of capital and other resources. Sine the formation of the EU, the company has been able to expand its operation in to other areas in Europe and other Asian cities. This has been through the arrangement that has been going on regarding the interrogation of the Asian and European trade blocs. The removal trade tariffs and regulating has been one of the factors that have promoted the easy expansion of the company. Under the umbrella of EU, the company has been taking the advantage of various trade agreements that have been negotiated by the bloc and therefore it has been venturing in all the markets that have been open to the bloc. The company has also been enjoying a relative good political atmosphere that has enabled it to expand to other countries in Europe. There has has been a period political serenity that has been cordial for the expose of the business. In the whole of Europe and most of other countries where the company has been operating, there has been a period of relative calm in all areas. However there have been calms of political influence that the retail chain has been using in order to achieve producdts at low price. Fro example there have been complain that the company has used it political connection to influence the price of milk which has been set so low that most famers have been discouraging from producing. It has also been accused of overstepping the political arranges and importing cheap products from countries like china which do not meet he standards of the UK market. However the company has been enjoying relative good political climate which has been crucial for its past expansion. (Dale, 2006; Food and Drink Insight, 2008) Economic factors These are factors that are affecting the purchasing power of the customers and the cost of capital for the company. Economic factor are useful when analyzing the operation environment since they help us to understand how the company is fairing given the current economic condition. Economic factors like economic growth, interest rates, exchange rates and the inflation rates are important in analyzing the economic nature of the operation environment. There has been a period of relative economic growth for in all the areas the company has been operative particularly in Europe. For the last few decades, there have been increased economic growth in most countries which has helped to increase the purchasing power of consumers and therefore the company has been enjoying a relative period of growth due to increased consumer power. In the UK there has been a chaining consumer perception for the market and the spending culture has been crawling into the market. As a result there has been increased consumer spending. The rate of interest and inflation rate in the UK has remained low since skyrocketing in the 1980s. Although there has been raising interest rates in the recent past, the condition has not affected the performance of the company since this has been compensated by stable inflation in other European countries where it has been operating. There has been a period of economic growth in Europe which has been prompted by the formation of the EU which has increased trading activities in the region. The formation of the EU has brought about increased trading activities in the whole of Europe and other new countries that have been joining. There has been increased customer base in the region which means as the stores expand there has been increasing growth on the number of customer that it is serving. This has spurred the growth in the activity of the business. The economic environment can be well reflected in the performance of the company. It has been able to achieve total revenue of 42,016 million pounds and has been able to increase its stores to 2,318 in few years that have passed. This is a god indication that the economic environment has been cordial for the operation of the company. Social factors Social factors are important factors in the environment hat are concerned with the demographic and cultural aspects of the macro environment. They are factors that define n the needs of the consumer and the size of the market. They include factors like health consciousness, population growth rate, age distribution, career distribution and others. The company has been taking several initiatives that have been aimed at adapting to the social changes that have been taking place in the environment. In this regard there have been many changes that have taken place in the environment which has been linked to the changing social values. There has been an increasing rise of environment conscious consumers. There have also been public campaigns that have created health conscious consumers. The loyalty of consumer has also been changing and the current consumer evaluates a store by the value that they get from the goods that are offered rather than from what other are saying about the store. In order to adopt to these changes the company has taken a lot of initiative that are aimed at addressing these concerns what are genuine consumer concerns. On the issue of health the company has launched www.tescodiets.com which is supposed to give consumers advice on how to take care of her health. It has also been offering quality foods that have been source from reliable source to ensure that they don’t have adverse effects on the health. In order to reach all the consumer in the growing large market, the company has been opening various shops in order to reach all consumers. In order to respond to the need to have an eco-friendly environment, the company has been carrying out various corporate social responsibility activities in order to work with the community to promote a clean environment. It has stated various community projects which are a part of its CSR activities. It has stared the greener living program which is aimed at encouraging people to cut down their carbon foot print. (Tesco Greener Living, 2008) Technological factors There are factor that relate to the changes in the technology which affect the operating environment. There have been many changes in the operation environment in the food and drinks industry. One of the changes that have taken place is the rise of e-marketing where customer are able to buy their goods online or to shop through the internet. The company has come up with an effective e-marketing program which ensures that consumers can purchase all what they want from their outlets through the internet. This has been enabled through the introduction for tesco.com which allows consumer to view various products and purchase them online. E-marketing has been the current technological revolution that has affected the operation of many businesses. The company has been able to respond well to this concept and has become the largest retail in the UK to use e-marketing tool. In all is operation the company has been involve in the research and development which has been aimed at coming up with superior foods and drink that meet the demand of the consumers. This has been in the areas of drinks where it has been making and bottling superior wines. In this regard is has also automated all its operation in order to enhance communication between all the branches especially when it comes to the issue of management and control of the branches. It ahs been taking the right steps towards ensuring that it keep up with the changes in the technological environment. References Armstrong, M 2006, A handbook of human resource management practice, Kogan Page, London Dale, I 2006, Tesco: Every Little Shop closure helps, Retrieved from http://iaindale.blogspot.com/2006/11/tesco-every-little-shop-closure-helps.htmlon 10th May 2008 Food and Drink Insight, 2008, Tesco Dairy move aims to avoid Backlash, Retrieved from http://www.foodanddrinkinsight.com/file/44508/tesco-dairy-move-aims-to-avoid-backlash.html on 10th May 2008 QuickMBA, 2008, PEST Analysis, Retrieved from http://www.quickmba.com/strategy/pest/ on 10th May 2008 Tesco Greener Living, 2008, Cut your carbon footprint with Greener Living, Retrieved from http://www.tesco.com/greenerliving/ on 10th May 2008 T-online, 2008, Tesco, Retrieved from http://www.tesco.com/on 10th May 2008 Read More