Impact of External Environment on Tesco: Opportunities and Threats

This report evaluates the impact of changes in the external environment on Tesco over the last three years, identifying the opportunities and threats faced by the company. It discusses the company's response to these changes and how it has adapted to maintain its competitive position.

Assessment

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Introduction of company.............................................................................................................3
Discuss how changes in its external environment over the last three years have affected the
company......................................................................................................................................3
Linkage between the changes in the external environment over the last three years and the
opportunities and threats faced by the company.........................................................................7
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business practices are evolving bringing revolutionary changes in industry and in
marketplace (Coe, Lee and Wood, 2017). These evolving and changing business practices are the
result of changing market conditions that is the factors existing in internal and external
environment of organisations. Tesco is the chosen company for the assignment which was
founded in 1919 by Jack Cohen and headquartered in England, United Kingdom. The report
consist a thorough evaluation of external environment of Tesco for identifying the impacts over
the last three years on company of the changing conditions and how company have reacted in
order to gain benefits form those changes.
MAIN BODY
Introduction of company
Tesco Plc. which is commonly known as Tesco founded in 1919 by Jack Cohen as a
small grocery shop and within years the company have earned success and reach to the level on
which not other brand render any harm to its competitive position. Tesco is known to be the
worlds largest grocery retailer of food and non-food products. It has operations in United
Kingdom, India, South Korea, Ireland and many other large potential countries with developed
and developing economies. The diversified portfolio of Tesco have exposed it to several markets
and to huge risky changing environments (Johnson and et. al., 2018).
Discuss how changes in its external environment over the last three years have affected the
company
EXTERNAL ANALYSIS
SWOT Analysis of Tesco Plc.:
Strengths Weaknesses
Biggest grocery retailing store in the UK, is
Tesco. The organisation is known to be one of
the best supermarkets. According to past
figures and financial reports annual operating
profits of Tesoc was increased by 28%.
Europe's largest private employer, is Tesco
Failed operations in Japan and USA, is the
biggest weaknesses of Tesco as the company
have lost huge resources and money in past
five years.
Low cost strategy, can lead the firm to
reduced profit margins as the competition is

offering regular job opportunities to people in
worldwide locations by spreading and
increasing their operations.
increasing and company is losing its
competitiveness.
Opportunities Threats
Jack's a new discount store. Which is
introduced by Tesco and the opportunity lies in
expanding its business and making it
international for regaining the competitive
edge.
Strategic alliance with other brand, is also
an efficient opportunity for the brand by
engaging with reputed businesses which will
assist in increase the product portfolio of
Tesco.
Brexit Referendum, as now Britain is no
longer a part of European Union (EU) trade
deals are going to be bringing in huge coast
which imposes a threat on Tesco.
Moreover, Competition with supermarket
giants, such as walmart and others have
potential threat over the market position of
Tesco as company can see itself going down
(Rosnizam and et. al., 2020).
PESTLE Analysis of Tesco Plc.:
PESTLE DESCRIPTION
Political/Legal The competitive position of Tesco Plc. is affected and influenced by the
current factor and that is Brexit deal. As now Britain is not longer a part of
European Union the import and export of food and non-food products will be
more costly for Tesco. Exit of the UK resulted in higher import duties and
other taxes is going to affects the low cost pricing strategy of Tesco Plc (Rippa
and et. al., 2016).
Economic Economy of the United Kingdom is known to be one of the most stable and
strong in the world for businesses. United Kingdom is a country which
develops and maintains the most favourable business environment so the
organisations can flourish and develop further.

Illustration 1: Tesco Supermarket: PESTLE, 2020
(Source: Tesco Supermarket: PESTLE, 2020)
Tesco's domestic market is United Kingdom and the firm is well supported by
the economy have strong currency which renders it upper hand in doing
business in international markets and with international brands.
Social The population of United Kingdom is known to be the loyal customer base.
That is the people are committed to domestic brands and stay loyal to
company by choosing them before other international or new company. But
social trends in UK are fluctuating a that are imposing negative impacts on the
competitive position of Tesco (Vu, 2016). Organic and vegan food products
sales have been increasing and continuously increasing which is changing the
trend and offerings.
Technological The most dynamic and influencing factor that exist in external environment of
Tesco is Technological revolution and evolution. Technology is bringing huge
positive changes for businesses rendering ease and comfort to business owners
as implementation of new technologies provides them more efficient and
productive results. Tesco Plc. is a techno friendly organisation which is
continuously engaging new technologies in operations as the changing taking
place in the market.
Environmental Tesco Plc. have made changes in favour of the environment and nature for
which company have reduced it carbon footprint in comparison to past years

and still working upon developing better and more environment friendly
operations which leads it to making more contribution towards the society and
the world. Moreover, Tesco has a mission of changing its operations to work
with 100% renewable energy and electricity for which company is making
plans to make appropriate changes.
COMPETITIVE ANALYSIS
Porters Five Forces Model:
FIVE
FORCES
DESCRIPTION
Existing
rivalry
One of the threat which is being faced by Tesco over its competitive position
is due to increasing competition with giant supermarkets that are already
existing in market. Therefore, the competitive rivalry is high. Moreover, the
market is saturated and rivals are competing over price, products, promotional
plans and other factors.
Bargaining
power of
customers
This refers to the power consumer have over the decision-making and position
of the firm in market and in case of Tesco it is moderate as there are other
supermarket stores in market offering similar goods and services. That is
rendering consumers very low switching cost fr customers of Tesco but the
consumers are known to be loyal which is resulting in moderate effects over
bargaining power (Amankwah-Amoah and Osabutey, 2020).
Bargaining
power of
suppliers
The bargaining power of supplier in case of Tesco is very low as the firm is
self dependent and also it has the policy of no depending upon single
supplier. Therefore, suppliers have low power over the decision-makings.
Threat of
substitutes
The threats of substitutes goods is also low as Tesco is renowned brand
holding operations in several markets in the world with a very high
competitive position. Therefore, the small new emerging retail stores have
very low power or threat for Tesco as the brand is strong and efficient.
Threats of new The threat of new entrant is low for several reasons and major one is high

entrant barriers to entry and the domination of exiting large companies in the market.
The market is saturated that is another barriers for new entrants which affects
them and their operations.
Linkage between the changes in the external environment over the last three years and the
opportunities and threats faced by the company
The markets and specifically retail industry have gone through multiple changes and
development which have caused numerous opportunities for businesses and even put them into
risky situation that lead them towards failure and dissolution. Tesco is the leading brand in the
world belonging to retail sector and have been facing business and market changes from several
decades. The company have developed and worked accordingly for maintaining its
competitiveness and increase its market share continuously. The Linkage between the changes in
the external environment over the last three years and the opportunities and threats faced by the
company and adopted them efficiently are as follows:
 At first the most recent changes which took place is of Brexit deal being finalised and
Britain exiting European Union (EU) (Blythe and Martin, 2019). This have brought huge
changes in political environment within UK and over businesses as tax and other legal
regulation changed and become uncertain. In order to be competent Tesco made
temporary changes in its policies as well and lead the business to reduce the threat of
Brexit Referendum.
 Moreover, the opportunity of developing, diversifying and expanding is also explored by
Tesco and company introduced Jack's a new discount retail store. Introducing Jack in
marketplace rendered the competitive edge back of Tesco of being the low cost retailer as
the firm again became competitive to the strategies of stores like Aldi and also acquired a
market share of small discount retailers.
CONCLUSION
The discussion conducted in the report above concludes the influence and changes
external environmental factors brings in the operations of the organisations operating in the
industry. The external environment is evaluated and relevant opportunities and threats are
identified for knowing their impact over the respective business entity and how its adapted
accordingly. The firm holds enormous market share but due to few weaknesses and threats its

competitive position was reduced. In order to regain the competitive power and command over
the market the firm expanded and diversified acquiring a new customer base by increased market
share.

REFERENCES
Books and Journals
Amankwah-Amoah, J. and Osabutey, E. L., 2020. New challenges and opportunities in the
global marketplace: learning from developed-country multinationals’
failures. International Studies of Management & Organization, 50(1), pp.43-56.
Blythe, J. and Martin, J., 2019. Essentials of marketing. Pearson UK.
Coe, N. M., Lee, Y. S. and Wood, S., 2017. Conceptualising contemporary retail divestment:
Tesco's departure from South Korea. Environment and Planning A: Economy and
Space, 49(12), pp.2739-2761.
Johnson, S. and et. al., 2018. Tesco Bank Wellbeing Case Study. In WELL-BEING (pp. 179-
188). Palgrave Macmillan, Cham.
Rippa, P. and et. al., 2016. Role of innovation intermediaries in open innovation practices:
differences between micro-small and medium-large firms. International Journal of
Business Innovation and Research, 11(3), pp.377-396.
Rosnizam, M. R. A. B. and et. al., 2020. Market Opportunities and Challenges: A Case Study of
Tesco. Journal of the community development in Asia, 3(2), pp.18-27.
Vu, M., 2016. IS THE BALANCED SCORECARD USEFUL IN A COMPETITIVE
INDUSTRY?: Using Tesco PLC as a case study in the UK grocery retail industry.
Online:
TESCO SWOT Analysis, 2019. [Online] Available Through: <https://bstrategyhub.com/tesco-
swot-analysis-2019swot-analysis-of-tesco/>