External Environment Analysis of Tesco plc

This essay provides an in-depth analysis of the external environment of Tesco plc, a leading retail chain in the UK. The essay uses the PESTLE framework to analyze the impact of political, economic, social, technological, legal, and environmental factors on Tesco's business operations. The essay also discusses the opportunities and threats for Tesco in the changing business environment.

Business in the 21st
Century

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................4
References:.......................................................................................................................................5

INTRODUCTION
Business in the 21st century is full of competition and is changing rapidly with the
changing technology, globalisation and internationalisation. In order to sustain and remain
competitive the business opt different strategic plans for which different frameworks and theories
are used to analyse the external environment that bring major impact on the business
(Samusenko, Plaskova and Prodanova, 2020). In current business environment the business
researchers and marketing managers thoroughly analyse the external environment in order to
exploit market opportunities and to mitigate the threat. The present report is study of British
leading retail chain “Tesco plc”. It is the multinational groceries and general merchandise retailer
of the UK and is headquartered at the Welwyn Garden City, England, UK. The present essay is
the deep analysis if the external environment of the Tesco plc and what changes are incurred due
to external environment. It also aims to define the opportunities and threat due to the changes
and how successfully company has deal with such changes.
MAIN BODY
Tesco plc is the third largest retailer of the world in terms of the gross profit and revenues
earned by the company. The Tesco Plc is the public limited company and was established in year
1919 by Jack Cohen. The company is highly diversified in its product line into the different areas
such as clothing, furnitures, toys, books, food and beverages, telecoms, internet services etc. the
company in the years of growth has repositioned itself as the downmarket high volume low cost
retailer in order to attract the all type of customers. The company has overall strength 423,092
employees. The net revenue earned by the company in year 2020 is £64.760 billion and net
income is £0.973 billion. The net assets of the company are £12.897 billion. The company has
been growing in all its operations explicitly and also manages to garb the market opportunities
and mitigate the threats through its strengths.
The external environment of the Tesco plc is full of rivalry and is also changing rapidly
with emergence of new technology. The micro business environment constitutes of several factor
that brings both positive and negative impact on the business operations. The most suitable
framework to analyse the external environment is the Pestle analysis- a analytical framework to
analyse and identify the key external environment factor i.e. political, economic, social,
technological, legal and environmental that has a potential to influence the business operations
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from the outside. This provides the business consultant and researcher of the organisation an
insight of the external environment that impact the business to great extent. This strategic
framework is also useful to the company in decision making related to developing strategy to
meet market opportunities (Matovic, 2020).
When observing at political factors like tax policy, political stability, trade restrictions
etc. it is analysed that policies and actions derived by the government cause intervention in the
business. Brexit (UK exit from EU) is one of the political instability factor has caused decrease
in sales of the company because wit this the company experienced the disruption in delivery of
fresh fruits and ready to eat meals. This change in political condition between EU and UK has
caused major threat for the business of Tesco as the both ready to eat meal and fresh fruit has
very low shelf life and decrease of sale with cause extra wastage and increase cost. To deal with
this the company utilized its modest strategy of changing food price which in turn increased the
sales.
The economic factors like economic growth rate, foreign exchange rate, unemployment
rates et. brings major influence on the business of the organisations economical performance.
Tesco is the large size supermarket store and has huge number of labours and employees. The
company is the major contributor to the economy of UK by creating large number of
employment. In Covid-19 when the economy was falling rapidly the company has a major
opportunity to increase the employment rate and gain the sustainable growth (Putra and Muzakir,
2020). The company operates with essential products which allowed the company to open its
store in pandemic and by this company created the employment which was good for the
company to increase its talented workforce. But the increase in labour cost as the part of the
minimum wage act is threat to company as this has raised the cost of wages and salary in Tesco
plc.
The social factors like customer trends, population growth rate, age distribution etc. re the
factors that influence the business activities. The highly changing customer trend for health
conscious food and drinks has bring the huge change in the product portfolio of the Tesco plc.
This is major opportunity for the Tesco to increase the product portfolio and by this company can
gain competitive edge by accomplishing the needs and wants of the customers. Therefore the
Tesco has come up with new gluten free, vegan and organic food and drinks which will increase
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the sales of the company. This action of tesco is really successful for the company's growth
(Rosnizam and et. al., 2020).
The technology is the glooming factor for the every industry the increasing automation,
artificial intelligence has eased the business operations. The technology has bring the huge
change in Tesco by installing the online delivery system, e-commerce shopping app, digital
payments which is opportunity for the company in taking the leverage of the technology in
speeding up its customer service. The Tesco to meet this change has installed new digital
business model and has also started the drone delivery system to have contactless fast delivery
(Brannen, Mughanand Moore, 2020). But there is one demerit of this factor which has caused the
major threat of data loss and theft in Tesco. To deal with this company has made its encryption
of data more stronger and also has made all its protected with passwords in order to avoid threat
of data stealing.
The legal rules and regulations are the forces that binds the business in the boundaries
and make them run ethically and legally correct (Crovini, Schaper and Simoni, 2021). The
factors like intellectual property rights, food safety act, internet protocols, employment laws etc.
has some influence on the business of the Tesco plc. As Tesco plc is the multinational
organisation therefore. it becomes difficult for the company to say aligned with each laws of
each country. Which is major issue for the company as any misconduct can lead the company
into jeopardy. The changes in the minimum wage act and employment law of the UK has caused
the major disadvantage for Tesco by restricting the company pay signifiant amount causing
higher extra expenses and cost of the firm. Therefore, diversification and internationalization of
Tesco saves the other additional cost such as reduction in manufacturing cost of some countries.
The environment is the huge concern for the shareholders of the firm. Therefore with the
growing concern for the environment and its safety in the customers and business owners itself
the company has come up with huge changes in its operations. The Tesco plc has taken an
initiative to become zero carbon free business enterprise for which company has replaced its
traditional production methods and converted them into sustainable operations (Trewern and et.
al., 2021). This change is major opportunity for the company to increase is sustainable approach
in business. The company has also adopted the formula of recycle, reuse and reduce to avoid
wastage which is useful in reducing extra wastage cost. Tesco, has also taken an initiative of
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going plastic free which is useful in making contribution tot he environment and expand as a
sustainable organisation.
Thus, it evaluated that the all the external environment factors are useful to the Tesco in
creating some opportunities and threats that has increased the potential of the company's business
operations to deal with those changes in order to stay competitive to maintain its market position.
CONCLUSION
From the above study it is concluded that the businesses must regularly evaluate their external
environment in order to stay aware of the factors that brings the opportunity for the company to
gain competitive edge. Also this helps the organisations to become aware of the market threats
which must be mitigated in order to stay away from negative impacts on the business growth and
prosperity. Technology is one of the factor that is bringing huge amount of opportunities for the
retail counters by increasing the efficiency of the business and reducing the workload. Thus,
every organisation is suggested to conduct external environment research to sustain in business
environment of 21st century.
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References:
Books and Journals
Brannen, M.Y., Mughan, T. and Moore, F., 2020. The creative use of insider ethnography as a
means for organizational self investigation: The “Essence of Tesco” project. In The
Routledge companion to anthropology and business (pp. 132-154). Routledge.
Crovini, C., Schaper, S. and Simoni, L., 2021. Dynamic accountability and the role of risk
reporting during a global pandemic. Accounting, Auditing & Accountability Journal.
Matovic, I.M., 2020. PESTEL Analysis of External Environment as a Success Factor of Startup
Business. ConScienS, p.96.
Putra, Z. and Muzakir, M., 2020. Competitive Environment Analysis in Global Retail Companies
Operation Strategy: A Data Envelopment Analysis (DEA) Based Approach. AFEBI
Management and Business Review, 5(1), pp.16-36.
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 (JCDA), 3(2), pp.18-27.
Samusenko, A.S., Plaskova, N.S. and Prodanova, N.A., 2020. The Analysis of the External
Environment to Determine the Practical Focus of Applied Research and Development in
the Framework of Innovation. In Complex Systems: Innovation and Sustainability in the
Digital Age (pp. 245-255). Springer, Cham.
Trewern, J and et. al., 2021. Are UK retailers well placed to deliver ‘less and better’meat and
dairy to consumers?. Sustainable Production and Consumption, 28, pp.154-163.
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