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HIGHER NATIONAL CERTIFICATE IN BUSINESSBUSINESS ENVIRONMENTAL ANALYSISFABIO PELLIZZONLIVERPOOL CITY COLLEGEDECEMBER 19, 2019
IntroductionThe purpose of this assignment is to identify external factors that are outside the control ofthe organisation using the framework called PESTLE and analyse how the organisation can beaffected by these factors. Once gathered, all information will then be combined with anotherframeworkcalled SWOTanalysis toidentify the currentand future potential oftheorganisation. The company that will be examined is called Tesco.HistoryTesco is a multinational company which currently has 3.961 stores in UK (Statista 2019) andoperates in 13 countries (Tescopoly 2019) which according to Tescopoly website, was the firstBritish supermarket that expanded overseas (Tescopoly 2019).Tesco was originally created a little grocery shop in London in 1919 by Jack Cohen, but thebrand did not acquire its name until about five years later. Within time Tesco began to expandrapidly, opening other shops across England. In 1930 Tesco built its own headquarters inLondon and in 1932 became a limited company. In 1961 one of its stores based in Leicesterbecame the largest in all Europe, and then after only another 7 years the first Superstore wasopened in Sussex. In 1974 with the opening of the first petrol station Tesco also became thefirst autonomous petrol retailer. With time Tesco initiated a strong campaign to overtakeother competitors such as Sainsbury’s, which at that time was the leading grocery store in themarket. One of the strategies that Tesco also used was the introduction of the slogan ‘’everylittle helps’’ in 1992.PESTLE ANALYSISPolitical FactorsTesco operates in many countries, therefore the political decisions that are made in each ofthese countries can have an impact on the organisation, for example the changing of policiesand the increases of taxes. Tesco's financial performance also depends on British politicalstability. It is a fact that the United Kingdom has opted to leave the European Union, anddelaying the exit several times, due to political instabilities. It is known that a hard Brexit couldpotentially have a negative impact related to the waiting time of transportation of goodsbetween the United Kingdom and the rest of the world, which in turn will impact on the lifeof fresh food such as vegetables. Another issue in relation to this will be the introduction ofthe customs duty which will unequivocally increase the cost of goods and food that areconsidered 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 thewhole market share, including big and small retailers.
Government policies can influence the interest rates of the economy, so the lower theinterest rate is kept, and more investors are willing to invest money, and vice versa, the higherthe 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 likeTesco.Economic FactorsThis factor is one of the main points of the company, and therefore Tesco should be keptconstantly updated when it comes to changes in policies such as Employment Regulation, orNational Minimum Wage. With wages increasing every year Tesco needs to be able to accessits own finances.According to the Statista website, from 2015 to 2019, it is shown that Tesco has maintainedthe level of sales market share only in Great Britain, around 30%, which is the highestcompared toall thesupermarkets inthemarket.Howeverstraight aftertheBrexitreferendum in 2016 Sterling fell 14% against the Euro, and if that continues Tesco will haveno other option than to increase their prices (The Guardian 2019). Furthermore, due to theongoing instability of the economy this could affect the Gross Domestic Product (GDP) of theUK.Impacts:The increase in National Minimum Wage lead Tesco to raise the cost of their products. On theother 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, slowdownof manufacturing production and decreasing of customer spending. On the other hand, thiscould lead to the birth of other companies.Sociological and Cultural FactorsOne of the factors that can be relevant in our society is the changing trends regarding foodranges, 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 thatTesco’s organic sales in 2016 increased by 15% (Food Manufacture 2017). Another aspect thatimpacts on the sociological factor is the awareness of vegetarianism and veganism. Accordingto a graphic report conducted by Google trends, between 2014 and 2019 just in UK, there isan increase interest towards plant -based food. (Google Trends 2019)Impacts:Choosing organic food that is produced on farms where pesticides and hormones are not usedand also adopting working procedures that respect the environment, can have a positiveimpact for the environment. However, it is more expensive because of the extra time requiredfor production, and because farmers cannot produce enough.Technological FactorsWith the developments in technology Tesco empowered its customers by providing an easierway for shopping by introducing online shopping in 1996 (Campaign 1999). According to