Impacts of External and Internal Factors on TESCO

This presentation discusses the impacts of external and internal factors on the operations of TESCO, one of the largest retailers in the world. It includes a PESTLE analysis of political, economic, social, technological, environmental, and legal factors, as well as a SWOT analysis of the company.

BUSINESS AND BUSINESS
ENVIRONMENT

TESCO is a public limited company which is one of
the largest retailer in whole world. It is generally focus on
selling food and non food products but today it has expanded
its business and also provides goods and services like
electronics, clothing, furniture, finance, insurance, hardware
services and many more. There are some internal as well as
external factors which influence the function of a business and
have both positive and negative impacts on operations of an
enterprise (Halbert and Ingulli, 2011). Here, PESTLE analysis
is to be done to know the impacts of external factors on
working of TESCO. These are discussed as under:
TASK 3

 Political factors: As TESCO is a retailing company that
operates in whole world, the political factors have a great
impact on the performance of it. These include various types
of rules and regulations, provisions of government, tax rates,
acts of legislation, etc. All these laws and legal regulations
become hurdle while operating any business activity. The
various activities of trade unions is one of the most common
political factor which affects retail sector. These have both
positive and negative impacts on operations of an enterprise
(Elliot, 2011). There are certain factors which have negative
implications on functions of lower level management of
TESCO.
 Economic factors: There are several macro economic factors
that affect TESCO to a grand level. At present, UK is going
through financial crises and a growth in economy creates a
positive indication for TESCO, as it helps in growth of retail
industry.

At the time of recession, the rate of unemployed people
increases which results in lower disposable income of citizens
of UK. These factors include economic growth, inflation rate,
interest rates, leverage costs, demands, profits, etc. Therefore,
management of this company should be aware about various
changes in any policies and regulations of UK government like
changes in the rates of taxes and factors that affects the
financial condition of enterprise.
 Social factors: These comprise of culture, changes in
consumer behavior and attitude, health consciousness, age
distribution, etc. It has direct effect on working of business.
TESCO supply a number of tasty and healthy food products to
its customers (Commander and Svejnar, 2011). Today, due to
the changes in the taste, behavior and preferences of users, the
company also offers non food items in market which attracts
more customers. Therefore, TESCO is adapting changes and
supplying such goods which have more demand in market.

 Technological factors: Today, this factor has a great influence
in the functioning of TESCO. It contains ecological aspects,
changes in technology, research and development, etc.
Adapting new and latest technology may affect working of
employees within the organization (Aterido, Hallward-
Driemeier and Pagés, 2011). It is beneficial for both company
as well as customers. TESCO is using advanced technologies
to improve satisfaction level of customers and functioning of
enterprise. At present time, online shopping become vary
popular among new and old generations because people do not
have much time to shop from the retail stores so, they prefer to
buy it from online shops which is cost and time effective.
 Environmental factors: While offering a number of goods
and services to public, an organization should take some social
responsibilities towards the society.

TESCO is minimizing the wastage which is generated from its
manufacturing unit and stores. It should also follow some
important specifications like cutting wastage while
production, reducing environmental damages, decreasing the
usage of resources, recycling procedure, etc. TESCO has
adopted a number of measures which protects environment.
 Legal factors: There are a number of laws which affects the
operations of enterprise like TESCO (Carroll and Shabana,
2010). It directly affects the performance of employees in
TESCO. It is quite similar to political factors. It includes
national and international employment laws, trade regulations,
restrictions, law relating to consumer protection, etc.
Government of UK make several changes time to time related
to rules and regulations, policies, procedures, laws, etc. These
policies or laws sometime forces companies to use standard
pricing of their products.

There are so many corporations which changes prices of their
products on regular basis to attract the customers. But this
factor restricts those entities to do so. To maintain balance in
the pricing, TESCO reduces price of some goods and on other
side, increases the costs of other products.

There are some internal factors which have direct
impact on business operations of TESCO. It can be studied
through SWOT analysis of the company. This is consists of
strengths, weaknesses, opportunities and treats. The following
are the element of SWOT analysis:
 Strengths: TESCO is one of the largest retail company in the
world so, it has a strong brand name in the worldwide market.
The strongest point of this enterprise is that it offers quality
products to its customers on reasonable prices (Chavis,
Klapper and Love, 2011). It facilitates online services and that
is one of the best method to revenue generate. It is the best
grocery retailer of UK, so it plays a role of leader in the
market.
TASK 4

Sometime the strength of a company may be affected by
external factors like political, social and economical. It is
interrelated with macro factors. For example, if TESCO is
internally strong then any changes made in policies and laws
by government can be easily adapted by the firm. These
factors affect the decision making process of TESCO. It
becomes difficult for management at TESCO to make
decisions while changes in the policies and legislation.
 Weaknesses: A company on a large scale has some weak
points also along with its strengths. TESCO is completely
depended on the market of UK which is one of the main
weakness of it. As TESCO is one of the leading corporation of
UK, which may reduce the profit margin of the firm in order
to maintain standard pricing policies (Craig and Campbell,
2012).

Due to the lack of experience in manufacturing and selling its
own smart phones and tablets, it needs to adopt new and latest
technologies to overcome from such weaknesses. An
enterprise with lots of weaknesses has negative impact on the
process of decision making.
 Opportunities: Every organization has some opportunities
through which it can expand its business at large scale.
Through the PESTEL analysis so many opportunities are
identified. The economic recovery in UK reflects retail
industry is growing. Management at TESCO needs to focus on
it and achieve profits from this opportunity (Meiners, Ringleb
and Edwards, 2014). Today, people are more attracted towards
non food products, so management at this entity need to
concentrate more on demanded goods and services. It can
expand its business as a health and beauty care retailer which
is highly demandable in current market. It needs to focus on
international growth also.

 Threats: TESCO faces many threats in the market. In grocery
retail sector it stands at number one position in UK market. Its
major competitors are ASDA and Sainsbury which is the
biggest threat for its business operations. Expanding business
of this company in the international market could be very
expensive. Due to lack of knowledge of oversea markets, the
profits of it may fall that create a huge problem for it. Another
threat is that, there is a price war between the retailers of UK.
It has direct impact on the objectives and decision making of
UK. The company cannot afford the low prices of its products
which are engaged in retail business (Turban, Sharda and
Delen, 2011). Sometimes the lower prices may force that firm
to generate losses. TESCO has an advantage among the all
retail firms because its profit margin rate is higher than others.
Therefore, it can afford lower prices but up to the limited
extent.

Aterido, R., Hallward-Driemeier, M. and Pagés, C., 2011. Big
constraints to small firms’ growth? Business environment and
employment growth across firms. Economic Development and
Cultural Change. 59(3). pp.609-647.
Carroll, A.B. and Shabana, K.M., 2010. The business case for
corporate social responsibility: A review of concepts, research
and practice. International journal of management
reviews. 12(1). pp.85-105.
Chavis, L.W., Klapper, L.F. and Love, I., 2011. The impact of
the business environment on young firm financing. The world
bank economic review. 25(3). pp.486-507.
Commander, S. and Svejnar, J., 2011. Business environment,
exports, ownership, and firm performance. The Review of
Economics and Statistics. 93(1). pp.309-337.
REFERENCES
Books and Journal

Craig, T. and Campbell, D., 2012. Organisations and the
business environment. Routledge.
Elliot, S., 2011. Transdisciplinary perspectives on environmental
sustainability: a resource base and framework for IT-enabled
business transformation. Mis quarterly. 35(1). pp.197-236.
Halbert, T. and Ingulli, E., 2011. Law and ethics in the business
environment. Cengage Learning.
Meiners, R.E., Ringleb, A.H. and Edwards, F.L., 2014. The legal
environment of business. Cengage Learning.
Turban, E., Sharda, R. and Delen, D., 2011. Decision support
and business intelligence systems. Pearson Education India.

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