PESTLE Analysis of Tesco Plc: Understanding the External Environment

Running head: INTRODUCTION TO BUSINESS MANAGEMENT
Introduction to business management
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1INTRODUCTION TO BUSINESS MANAGEMENT
Introduction:
In order to enhance as well as maintain the revenue and performance of an organization,
it is highly crucial for the management to assess both external as well as internal performance of
the organization. The chief purpose of assessing the external environment of the organization is
to understand the rate of changes that are happening in the industry and the degree of complexity
associate with it. Clearly understanding the external environment helps the management to
understand the specific needs of the consumers and develop strategies keeping accordance with
it. In this report, the PESTLE Analysis of the Tesco Plc has been conducted. The Tesco Public
Limited Company is referred to a highly reputed British multinational groceries and general
merchandise retailer. The company has its headquarter at England UK. Apart from conducting
the Pestle analysis, three questions related to the mentioned analysis will be answered in this
report.
Pestle analysis of Tesco
In the following paragraphs the Political, Economical, Socio-cultural, Technological and
Legal environment of Tesco performing in the UK retail market will be performed.
Political Environment
Considering the fact that the mentioned company operates in 12countries across the
world, global political factors highly influences the performance of Tesco. The company has to
consider the tax rates, rules and regulations and the political stability of the countries in which it
operates. The political condition of UK is currently unstable. As a matter of fact, the UK
government has enhanced their VAT rate from 17.5 percent to 20 percent that has imposed a
negative impact on the business of the organization (Hammad 2015). The chief purpose of the

2INTRODUCTION TO BUSINESS MANAGEMENT
government is to enhance the annual revenue by 13 billion dollars. However, enhanced tax rate
have decreased the spending of the consumers. Thus it can be clearly understood that the
increment in tax rate in UK have depreciated the overall revenue of the company. Moreover, in
order to control obesity and medical issues associated with it, The UK government have
implemented the fat tax. This act have further decreased the sale of a good number of fast foods
retailed by Tesco.
Economical Environment
The government of UK is still recovering from the financial crisis that happened to the
country due to recession. According to the researchers, the economic growth rate of UK in the
year 2018 is 2.3 percent higher compared to that of the previous year (Rahman 2015). This factor
has imposed a positive impact on the company since higher per capita income will ensure higher
purchasing power of the consumers. Recession had enhanced unemployment in UK which in
turn had decreased the spending power of the organization. However, unemployment has
lowered the labor cost in the nation that has positively affected the company.
Socio-cultural Environment
Like other developed countries like USA and Australia, the population of UK is an aging
population. Decrement in the birth rate and increment in the life expectancy of individual can be
considered as two of the major reasons behind this. This factor has imposed a negative impact on
the supermarket chain of the company. Considering the fact that elderly citizens suffers from
several mobility issues and are thus unable to visit the supermarket on a daily basis, have
adversely affected the sales and revenue of the company. In order to cope up with this threat,
Tesco have implemented online shopping for grocery and household items. This approach have