Tesco Case Study

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Added on 2021/03/15

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The assignment is an in-depth examination of Tesco, a leading grocery store chain in the UK. It discusses the company's commitment to using 100% renewable electricity by 2030, its market share, and its attempts to expand globally. Additionally, it looks at Tesco's customer loyalty programs, such as Clubcard, and its efforts to address marketing scandals and legal threats.

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HIGHER NATIONAL CERTIFICATE IN BUSINESS
BUSINESS ENVIRONMENTAL ANALYSIS
FABIO PELLIZZON
LIVERPOOL CITY COLLEGE
DECEMBER 19, 2019

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Introduction
The purpose of this assignment is to identify external factors that are outside the control of
the organisation using the framework called PESTLE and analyse how the organisation can be
affected by these factors. Once gathered, all information will then be combined with another
framework called SWOT analysis to identify the current and future potential of the
organisation. The company that will be examined is called Tesco.
History
Tesco is a multinational company which currently has 3.961 stores in UK (Statista 2019) and
operates in 13 countries (Tescopoly 2019) which according to Tescopoly website, was the first
British supermarket that expanded overseas (Tescopoly 2019).
Tesco was originally created a little grocery shop in London in 1919 by Jack Cohen, but the
brand did not acquire its name until about five years later. Within time Tesco began to expand
rapidly, opening other shops across England. In 1930 Tesco built its own headquarters in
London and in 1932 became a limited company. In 1961 one of its stores based in Leicester
became the largest in all Europe, and then after only another 7 years the first Superstore was
opened in Sussex. In 1974 with the opening of the first petrol station Tesco also became the
first autonomous petrol retailer. With time Tesco initiated a strong campaign to overtake
other competitors such as Sainsbury’s, which at that time was the leading grocery store in the
market. One of the strategies that Tesco also used was the introduction of the slogan ‘’every
little helps’’ in 1992.
PESTLE ANALYSIS
Political Factors
Tesco operates in many countries, therefore the political decisions that are made in each of
these countries can have an impact on the organisation, for example the changing of policies
and the increases of taxes. Tesco's financial performance also depends on British political
stability. It is a fact that the United Kingdom has opted to leave the European Union, and
delaying the exit several times, due to political instabilities. It is known that a hard Brexit could
potentially have a negative impact related to the waiting time of transportation of goods
between the United Kingdom and the rest of the world, which in turn will impact on the life
of fresh food such as vegetables. Another issue in relation to this will be the introduction of
the customs duty which will unequivocally increase the cost of goods and food that are
considered essential for human consumption.
Impacts:
A possible taxation on the custom duty might well discourage investors on the UK market.
The current uncertain situation and constant extension of Brexit could negatively affect the
whole market share, including big and small retailers.

Government policies can influence the interest rates of the economy, so the lower the
interest rate is kept, and more investors are willing to invest money, and vice versa, the higher
the interest rate is, and in turn the less customers are willing to spend.
The changing of policies can be beneficial for companies that are using renewable energy like
Tesco.
Economic Factors
This factor is one of the main points of the company, and therefore Tesco should be kept
constantly updated when it comes to changes in policies such as Employment Regulation, or
National Minimum Wage. With wages increasing every year Tesco needs to be able to access
its own finances.
According to the Statista website, from 2015 to 2019, it is shown that Tesco has maintained
the level of sales market share only in Great Britain, around 30%, which is the highest
compared to all the supermarkets in the market. However straight after the Brexit
referendum in 2016 Sterling fell 14% against the Euro, and if that continues Tesco will have
no other option than to increase their prices (The Guardian 2019). Furthermore, due to the
ongoing instability of the economy this could affect the Gross Domestic Product (GDP) of the
UK.
Impacts:
The increase in National Minimum Wage lead Tesco to raise the cost of their products. On the
other hand, the employees that work for Tesco benefit from the salary increase.
The constant loss of power of Sterling could trigger a recession causing loss of jobs, slowdown
of manufacturing production and decreasing of customer spending. On the other ha nd, this
could lead to the birth of other companies.
Sociological and Cultural Factors
One of the factors that can be relevant in our society is the changing trends regarding food
ranges, with people being more aware of the advantages of keeping a healthy life style.
According to the Food Manufacture website an article written by Matt Atherton says that
Tesco’s organic sales in 2016 increased by 15% (Food Manufacture 2017). Another aspect that
impacts on the sociological factor is the awareness of vegetarianism and veganism. According
to a graphic report conducted by Google trends, between 2014 and 2019 just in UK, there is
an increase interest towards plant -based food. (Google Trends 2019)
Impacts:
Choosing organic food that is produced on farms where pesticides and hormones are not used
and also adopting working procedures that respect the environment, can have a positive
impact for the environment. However, it is more expensive because of the extra time required
for production, and because farmers cannot produce enough.
Technological Factors
With the developments in technology Tesco empowered its customers by providing an easier
way for shopping by introducing online shopping in 1996 (Campaign 1999). According to

research conducted by Statista website in 2015 Tesco was the leading retailer in UK with the
highest score of online sales, totalling 4.24 billion of US Dollars (Statista 2016).
Another milestone was the introduction of the self-checkout, or also known as ‘’Scan as you
shop’’ (Tesco 2019) which has enabled customers to speed up the whole transaction of
shopping in the store and has also reduced labour costs for Tesco by customers using a
handset device and selecting the item that they wish to buy by scanning the barcode on the
package and paying at check out. (Tesco2019)
Impacts:
Technology can bring an immense value to Tesco, especially for those people who work or
study and do not have enough time to go out to a store. With the introduction of online
shopping, customers can shop from anywhere with the use of a computer or even a
smartphone and get food delivered directly to their home. The negative impact is that
customers must rely on a technical device every time they wish to use Tesco online.
Legal Factors
The Introduction of legislation and policies set by government can affect the internal
operations of a big chain and its relationship with suppliers and customers.
In fact, in 2008 an action by the government was made discovering that large market chains
used to alter their terms of conditions to farmers, forcing them to reduce their prices or even
‘’ fund promotions such as two-for-one deals’’ (BBC 2010). This situation improved for the
farmers and suppliers with the introduction of the code of practice, also known as Consumer
Protection Act, which came into force on 26th May 2008 (Office of Fair Trading 2008).
Impacts:
The missing code of practice between suppliers and big supermarket chains can create
contractual problems which would be modified by large companies to the detriment of small
suppliers.
The introduction of codes of practice by the Office of Fair Trading protects small
entrepreneurs, such in this case farmers and suppliers, by ensuring no impositions by large
multinationals to modify their terms and conditions.
Environmental Factors
Thanks to a landmark law that came into force on the 5th October 2015 all stores in England
must charge 0.5p for every plastic bag handed out. (The Sun 2019) What is Tesco doing to
help the environment? Tesco understands the challenge of climate change, so much so that
in 2015 Tesco set up a science-based target which consisted of reducing its greenhouse gas
emissions by 60% by 2025 and 17% by 2030, using the 2015 based-year (Science Based Targets
2019). ‘’Tesco commits to use 100% renewable electricity by 2030’’ (Tesco Plc. 2017)
Impact:
While people do their shopping many of these do not notice the waste of plastic that is reused
and is thrown in the garbage, increasing the consumption of plastic more and more. With the

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introduction of the mandatory payment of plastic bags, people no longer throw bags in the
waste, but reuse them for subsequent purchases and this is excellent for the environment.
SWOT ANALYSIS
Strengths
Biggest grocery in UK: Tesco is the biggest supermarket company in UK with the largest
market share. Research conducted by Statista website shows an average of a 27% share over
a period from 2015 to 2019 for Tesco (Statista 2019).
Diverse Stores: Tesco has different types of stores which include: Tesco Superstore, One Stop,
Tesco Express, Tesco Extra, Tesco Metro and Tesco Home-plus.
Europe’s largest supermarket employer: Tesco has 6,550 shops across the Eurozone, with
476,000 employees, and its revenue is 86 billion Pounds Sterling (Business Chief 2017).
Weaknesses
Accounting Scandal: Tesco was fined millions of pounds by the Financial Conduct Authority
due to providing false accounting figures on a trading statement which affected many
investors (The Guardian 2017).
Closing Operations abroad: In USA due to unexpected circumstances such as the recession,
the high cost of products and changing consumer habits, Fresh and Easy, the brand acquired
by Tesco in 2007 had to close (CBS NEWS 2013).
In Japan, due to the high cost of struggling to meet customer demands, Tesco was not able to
establish itself in the market (Wolfestone 2012).
Club card: Without giving any notice to the public, Tesco has changed the Club Card scheme
by altering the value of the points when swapping them for vouchers with Tesco’s pa rtners.
This negligence has given rise to many complaints by their customers (This is Money.co.uk
2018).
Opportunities
Strategic alliances: Tesco could establish partnership with other companies, to increase
different types of products. John Lewis & Waitrose can be used as an example.
Expanding Jack’s shops. As part of the Tesco family, Jack’s promise to be the cheapest store
in town, with at the present time only 10 shops, could be an occasion to expand this business
and compete with its low-cost rivals Aldi and Lidl (Jack’s 2019).
Threats
Fake brand names: Tesco was accused of purposely using fake brand names on meat, and
misleading customers (The Guardian 2017).

Brexit: Brexit could increase the cost of certain types of food that cannot be sourced in UK,
and it could also cause delays in deliveries from European countries to UK, or indeed even
stop them (BBC News 2019).
FINAL REFLECTION
We are all aware that the choices we make result in consequences that may favour or
otherwise the life of our society. The two analytical techniques have brought to light, factors
that must be considered for a good functioning of Tesco. One of the most imminent problem,
is the current situation concerning Brexit and the new political movement that will bri ng the
UK out of the European Union. The situation at present time is still uncertain but it is believed
that Brexit will be better off with a deal that can protect mutual economic relationship with
the EU. In this case Tesco and other big Supermarkets will continue to operate without
increasing the costs or limiting availability of goods.
Reference
Statista. 2019. Tesco's number of stores worldwide from 2008 to 2019. [ONLINE] Available at:
https://www.statista.com/statistics/238667/tesco-plc-number-of-outlets-worldwide/. [Accessed 11
November 2019].

Tescopoly. 2019. Tesco Worldwide. [ONLINE] Available at: http://tescopoly.org/worldwide. [Accessed
11 November 2019].
Tescopoly. 2019. Tesco Worldwide. [ONLINE] Available at: http://tescopoly.org/worldwide. [Accessed
11 November 2019].
The Guardian. 2019. Tesco has it tough enough already without a no-deal Brexit. [ONLINE] Available
at: https://www.theguardian.com/business/2019/sep/28/tesco-no-deal-brexit-supermarkets-ha rd-
border-uk-eu. [Accessed 12 November 2019].
Food Manufacture. 2017. Tesco's organic sales climb 15%. [ONLINE] Available at:
https://www.foodmanufacture.co.uk/Article/2017/02/20/Tesco-organic-food-sales-rise-15.
[Accessed 12 November 2019].
Google Trends. 2019. Google. [ONLINE] Available at:
https://trends.google.com/trends/explore?date=2014-10-12%202019-11-
12&geo=GB&q=%2Fm%2F07_hy,%2Fm%2F07_jd,%2Fm%2F034n2g. [Accessed 13 November 2019].
Campaing. 1999. Tesco launches campaign for online shopping service. [ONLINE] Available at:
https://www.campaignlive.co.uk/article/tesco-launches-campaign-online-shopping-service/43494.
[Accessed 18 November 2019].
Statista. 2016. Leading online grocery retailers in the United Kingdom (UK) in 2015, by edible grocery
sales (in million US dollars). [ONLINE] Available at:
https://www.statista.com/statistics/630462/leading-online-grocery-retailers-united-kingdom-uk/.
[Accessed 18 November 2019].
Tesco. 2019. Scan as you shop. [ONLINE] Available at: https://secure.tesco.com/clubcard/scan-as-you-
shop. [Accessed 18 November 2019].
Tesco. 2019. Scan as you shop. [ONLINE] Available at: https://secure.tesco.com/clubcard/scan-as-you-
shop. [Accessed 18 November 2019].
BBC. 2010. Supermarkets face tougher suppliers' code of practice. [ONLINE] Available at:
http://news.bbc.co.uk/1/hi/business/8497417.stm. [Accessed 18 November 2019].
Office of Fair Trading. 2008. Unfair contract terms guidance. [ONLINE] Available at:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file
/284426/oft311.pdf. [Accessed 22 November 2019].
Science Based Targets. 2019. Case Study: Tesco. [ONLINE] Available at:
https://sciencebasedtargets.org/case-studies-2/case-study-tesco/. [Accessed 22 November 2019].
Tesco Plc. 2017. Tesco commits to use 100% renewable electricity by 2030. [ONLINE] Available at:
https://www.tescoplc.com/blog/carbon-renewable-electricity-tesco/. [Accessed 22 November 2019].
The Sun. 2019. BAG-UP When was the Plastic bag charge introduced and has it helped the
environment?. [ONLINE] Available at: https://www.thesun.co.uk/news/7099722/plastic-bag-charge-
introduced-increase-10p-environment/. [Accessed 23 November 2019].
Statista. 2019. Market share of grocery stores in Great Britain from January 2015 to September 2019.
[ONLINE] Available at: https://www.statista.com/statistics/280208/grocery-market-share-in-the-
united-kingdom-uk/. [Accessed 23 November 2019].
Business Chief. 2017. Top 10 biggest supermarket chains in Europe. [ONLINE] Available at:
https://europe.businesschief.com/top10/1436/Top-10-biggest-supermarket-chains-in-Europe.
[Accessed 23 November 2019]

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The Guardian. 2017. Tesco to pay £129m fine over accounting scandal. [ONLINE] Available at:
https://www.theguardian.com/business/2017/mar/28/tesco-agrees-fine-serious-fraud-office-
accounting-scandal. [Accessed 25 November 2019].
CBS NEWS. 2013. Why did Tesco fail in the U.S.?. [ONLINE] Available at:
https://www.cbsnews.com/news/why-did-tesco-fail-in-the-us/. [Accessed 25 November 2019].
Wolfestone. 2012. Tesco: International Marketing Gone Wrong. [ONLINE] Available at:
https://www.wolfestone.co.uk/blog/tesco-international-marketing-gone-wrong/. [Accessed 25
November 2019].
This is Money.co.uk. 2018. Tesco hacks Clubcard Boost rewards: Everything you need to know and the
tricks to make up the shortfall. [ONLINE] Available at:
https://www.thisismoney.co.uk/money/cardsloans/article-5274251/Everything-need-know-Tescos-
Clubcard-shakeup.html. [Accessed 25 November 2019].
Jack's. 2019. Jack's. [ONLINE] Available at: https://www.jacks-uk.com/stores. [Accessed 25 November
2019].
BBC News. 2019. Tesco faces Brexit deadline headache. [ONLINE] Available at:
https://www.bbc.co.uk/news/business-48844351. [Accessed 4 December 2019].
The Guardian. 2017. Tesco faces legal threat over marketing its food with 'fake farm' names. [ONLINE]
Available at: https://www.theguardian.com/environment/2017/dec/13/tesco-faces-legal-threat-
over-marketing-its-food-with-fake-farm-names. [Accessed 4 December 2019].

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