Importance of PESTEL Analysis for Organisations

This report discusses the importance of conducting PESTEL analysis for organisations. It explains how PESTEL analysis helps in cost-effective decision making, deeper understanding of the external environment, identifying opportunities, developing alertness, strategic planning, and strong decision making. It also provides a PESTEL analysis of Tesco, focusing on political, economic, social, technological, environmental, and legal factors.

Business environment

Table of Contents
INTRODUCTION......................................................................................................................3
TASK 1......................................................................................................................................3
Examine how your chosen company is governed and structured..........................................3
TASK 2......................................................................................................................................5
Evaluate the importance of carrying out PESTEL analysis for an organisation....................5
TASK 3......................................................................................................................................6
Use the PESTEL framework to analyse the external environment of your chosen company6
CONCLUSION..........................................................................................................................9
REFERENCES.........................................................................................................................10
Books and journals...............................................................................................................10

INTRODUCTION
Business environment can be defined as an environment where the organisation is
trading and surrounded by different internal and external factors which have direct impact on
the performance of the firm and can lead to profitability in success as well as failure within
the operations of the organisation (Hamilton and Webster, 2018). In this present report the
chosen organisation is Tesco, it is a global organisation which is operating in grocery and
general merchandise business within UK a and a global platform. Company is famous for its
fashion food and other kinds of product which are directly related to the grocery items. In this
report there is a proper overview of the Tesco as well as discussion about the structure of
Tesco which it is follow.in the middle of this report, there is revaluation about the importance
of pestle analysis for an organisation. In end of this report there is discussion about the pestle
analysis on Tesco which will identify different aspects of the organisation and of micro
environment which can be used to formulate effective policies and making decisions
stronger.
TASK 1
Examine how your chosen company is governed and structured
Overview of Tesco
Tesco PLC is a British multinational grocery and general merchandise retailer and
headquarter of this organisation is situated in 12 in garden city, Hertfordshire in England. It is
operating as a third largest retailer in UK and ninth largest retailer in groceries within whole
world (Prajogo, 2016). Tesco was first founded by jack Cohen as a group of market stall in
1999 where the first name of test was appear in 1924 after Cohen purchased a shipment of
tea. Company is increasing its operations since 1990 where it is operating in 11 countries
worldwide. The current stores of the company all over the world are around 6800. Company
is also known for its employee and their well training and development program where it is
operating with more than 450000 employees all over the world on its stores. It provides
different kind of goods and services to its customer where the main business of the company
is in groceries it provide fashion and food products.
Organisational structure of Tesco
Tesco is a larger operation which has its operations in global world. For fulfilling the
needs of different role as well as the global requirement organisation is using hierarchical

structure. It is mainly functional structure as it focuses on different departments within the
organisation and the reason they are used in oracle structure is because the organisation is
larger and has multiple layer with it so it is impossible for other kind of structure to maintain
this hierarchy as well as functions. Tesco structure is also based on the function as opposed to
the location (Kozubikova, Homolka and Kristala, 2017). Tesco employees hundreds and
thousands of the people around the world and it would be impossible for one person to keep
an eye on all of them that is why Tesco use a hierarchical structure to manage different
countries different department’s different stores and different peoples. Some of the key
benefit of this structure is that it is easy to use for the organisation, this structure will provide
the clarity of people roles within the organisation without increasing the confusion, and this
will also facilitate each department where they can focus on their work not on the politics
within the firm.
In context of Tesco, company follow the historical structure where the Dave Lewis is
current CEO of Tesco and he is serving organisation from 1st September 2014. Joanne Kay is
current head of marketing at Tesco. Peter darker is the current head of supply and logistics
department in Tesco where he sees the all work of supply and chain department. Andrew
Margo is serving as a head of group property and finance department within the Tesco where
it's the different legal authorities and structure related to development of Tesco (Eling and
Schaper, 2017).

TASK 2
Evaluate the importance of carrying out PESTEL analysis for an organisation
There are various kinds of the importance of the Western and essays for an organisation
which are mentioned below:
Cost effective: Fashion analysis the cost effective techniques which directly help the
organisation to decrease its cost as while adding the programs it can help the organisation
input as well as identifying different feedbacks of systems to arrange a proper method.
Deeper understanding: There are various kinds of factors which can impact the
business from the external point of view. It has both direct and indirect impact on the
business which must be identified by the organisation to eliminate their negative impact. if it
is used the first and then it will evaluate both indirect and direct impact of the environment
and identify that it is negative for the firm of positive for the organisation and take decision
according to it (Strydom and Rudansky-Kloppers, 2016).
Identify opportunities: PESTEL analysis also help the organisation identify different
opportunities within the environment where it analyse and scan different external
environment factors which will help the organisation in identifying the social trends and
technology within the environment where it is working. This will help the organisation in
leading the firm by identifying different environment and changing its policy according to
changes within the environment.
Alertness development: Pestle analysis is also useful to develop alertness within the
different department of the organisation by scanning the external environment factors. This is
because it identifies different things which can impact negatively on the organisation in
future business. This can be identified by the organisation and a concept of alertness can be
developed between different departments for reducing the negative impact of this.
Strategic planning: Analysis is the analysis of different factors related to
development of the business as well as identified different opportunities within the market to
make effective decisions. All these decisions are directly related to the strategic planning
within the organisation so it directly help in strategic planning for different functions and
goals and objectives of the organisation to achieve them in an appropriate manner as well as
by allocating resources in proper manner so that the wastage can be minimised and the
productivity can be increased for achievement of these goals and objectives (Lee, 2017).

Strong decision making: Analysis also promote a strong decision making within the
organisation as it identify the impact of different factors within the firm and enable the
organisation to take decision according to all the fact and findings. Also make available
different sources in front of the organisation so that it can easily locate is resources and make
decisions more productive so that the goals and objectives can be achieved.
TASK 3
Use the PESTEL framework to analyse the external environment of your chosen company
PESTEL analysis of Tesco
Political factors: Political factors are those which are directly related to the rules
regulations and policies of the government which are operating within where the organisation
is working. Tesco organisation has to deal with different kind of rules and regulation of
different governments in various Nations. It is Important for the organisation to do the
appropriate pastel for identifying the political factors and making it usable for the
organisation to achieve its goals and objective (Saleh and Watson, 2017). The major political
factors which impacting the performance of Tesco in different country is the policy of
BREXIT and terrorism. policy of BREXIT impacting both positively and negatively to the
organisation because it help the organisation in dragging the different opportunities but on the
other hand it also restricted form to start new function because of unknown guidance and
rules and regulations which have to be met by the firm in near future. This will Impact
negatively on the organisation because it reduces the chances of global expansion in some
countries like Iraq and Iran Because of heavy impact of terrorism in the countries. for this
company have to clearly identify the rules and regulations of different nations so that it can
start its business in an effective manner by achieving the goals and objective as well as
combining with rules and regulations of different government.
Economic: Economic factors are those which are related to different aspects of the
economy which are consists of GDP ratio, employment rate, growth of GDP and many more
things. In context of Tesco, there is various kind of economic factor which are impacting the
business of Tesco within the UK as well as at global level. The major negative impact of this
economic factor on it is because of low demand within the global economy. It impacting
negatively on the organisation as low demand will bring depression within the economy and
can also lead to recession which will decline the revenue of the firm (Abdullahi and Zainol,
2016). The positive impact of economic factor is growing GDP of UK, this is impacting

positively on the organisation because continuous growth within the GDP of UK will
increase the sales of product. It will Impact positively on the revenue of the organisation as it
can now increase its revenue because of continue market of UK.
Social: Social trends, culture and Diversity awesome functions which are included
within the social factors and have great impact on the functioning of the organisation in the
market or the society where it is trading. In context of the organisation Tesco, company have
to identify different factors trends and cultures within the environment where it is raining
because UK full of different cultures (Fabus, 2018). These social trends and culture impact on
the organisation positively because as TESCO follow all the social culture as well as friends
within the society which will help organisation in attracting large number of customer. This
also make loyal customer to the organisation and fulfil the need of profitability and
productivity for longer period of time.
Technical: These are those which are directly related to changes within the
technology is used by the organisation to do its business smoothly. Tesco is a global
organisation so it requires a proper technology which can be used for doing the business in an
effective manner and achieving the goals and objectives so that form can perform at global.
Company also use this factor for increasing its market opportunities. This is the reason that it
used a new technology within its checkout system which is known as self-checkout system.
This will help the organisation in reducing the time taken within the completion of the
transaction. Company also changed upgrading its system so that they can run fast and provide
fastest facilities to its customer for saving their time as well as company’s time to increase
more opportunities. Company also upgraded to different technology where it use social media
platform for marketing it's different products by which it can attract large number of
customer and this technological up gradation also bring sustainability within the firm.
Environment: Environment factor or also those factors which are covered under the
pestle analysis and have great impact on performance and profitability of the organisation in
current time. Include different kind of things related to the environment like climate change
pollution geographical location of the business and many more which have a great impact on
the performance of the firm in the market where it is going to trade or trading currently. In
reference to Tesco, this environment has both positive and negative impact on the
performance of the organisation. negative impact of environment factor is that because of
continuous increment within the pollution and climate change the market opportunities are

shrinking rapidly this is because the change in climate bring different trends which are
impacting negatively on the firm's performance as well as profitability. This also impacted
positively on some function of the organisation because it initiates the action of the
organisation towards sustainability and protection of environment where Tesco started
different kinds of facilities. It started a function where the organisation will use the solar
bulbs instead of electric bulbs so that it can save energy and contribute towards the
environment. company also started initiative of zero carbon emission and no use of plastic
within the organisation by which it can in cataract the customers because of changing in
trends as well as save the climate and environment from being rubbish (Nguimkeu, 2016).
Legal: These are those factors which are formulas for every organisation to achieve
the goals and objectives in smoothly without legal liability. It includes those rules and
regulations which are formulated by different legal authorities and government of the nation
where the organisation is going to run its business or running its business currently. in
reference to Tesco, it is operating at global level and this impacted directly on the
organisation that it have to formulate and identify different rules and regulations according to
the nation's where the organisation is working. This will help the organisation in managing
the different workers within the organisation as well as attracting large number of customer
by fulfilling these rules and regulations within the economy. This will build image of the
organisation in front of different customers within the market as firm is now fulfilling all the
rules and regulations. This also impacted negatively on the organisation because some time
organisation has to formulate flexible policies for changing rules within the nation. more
flexibility in the structure can lead to this management of the work as well as arrival of
conflicts within the market where it is trading. It can also lead to dissatisfaction among the
employees because of continuous changes within the policy and lead to reduction in the
quality of the product which is offered by the firm.
It can be seen that is operating at global level and there are various factors and pestle
analysis like political economic and social which have the great impact on the organisation
and can be effective if the organisation formulate a proper policy for them. technological
environmental and legal factor are the strongest part of the Tesco which will help for men
getting future opportunities and reducing the chances of failure.

CONCLUSION
It can be concluded from the above-mentioned report that it is important for the
organisation to identify the different factors within the environment so that it can formulate a
proper policy and make the decision stronger related to different aspects and departments of
the business. This is only possible with the help of identification of proper micro analysis and
a Framework which will use to do this is pestle analysis. In the end, it can be concluded the
test was a stronger organisation and pestle analysis will help the firm in dealing with different
factors in the market for achieving the goals and objectives in a timely manner.

REFERENCES
Books and journals
Abdullahi, A.I. and Zainol, F.A., 2016. The impact of socio-cultural business environment on
entrepreneurial intention: A conceptual approach. International Journal of Academic
Research in Business and Social Sciences, 6(2), pp.80-94.
Eling, M. and Schaper, P., 2017. Under pressure: how the business environment affects
productivity and efficiency of European life insurance companies. European Journal
of Operational Research, 258(3), pp.1082-1094.
Fabus, M., 2018. BUSINESS ENVIRONMENT ANALYSIS BASED ON THE GLOBAL
COMPETITIVENESS INDEX (GCI) AND DOING BUSINESS (DB): CASE
STUDY SLOVAKIA. Journal of Security & Sustainability Issues, 7(4).
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford
University Press.
Kozubikova, L., Homolka, L. and Kristalas, D., 2017. The effect of business environment and
entrepreneurs’ gender on perception of financial risk in the smes sector. Journal of
Competitiveness.
Lee, I. ed., 2017. The Internet of Things in the Modern Business Environment. IGI Global.
Nguimkeu, P., 2016. Some effects of business environment on retail firms. Applied
Economics, 48(18), pp.1647-1654.
Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment
in delivering business performance. International journal of production
Economics, 171, pp.241-249.
Saleh, A. and Watson, R., 2017. Business excellence in a volatile, uncertain, complex and
ambiguous environment (BEVUCA). The TQM Journal.
Strydom, J.W. and Rudansky-Kloppers, S. eds., 2016. Introduction to business management.
Oxford University Press Southern Africa.