Strategic Management: Tesco PESTLE Analysis and Competitive Advantage

This report provides a PESTLE analysis of Tesco, including an analysis of the market environment, industry analysis, and the company's competitive advantage. It also discusses critical success factors, opportunities, and threats in the market.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
Q1 Brief Introduction of the selected organization................................................................3
Q2 Explain the Analysis of the market environment.............................................................3
Q3 Explain the Company industry and the Competitive Advantage of the company............4
Q4 Explain the Critical Success Factor, Opportunities And Threat Of The Market..............5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic management is the process of setting the strategy and guiding the organization
to go on the same direction. Tesco, is a British company well-known for the groceries and
general merchandise retailer store chain. This report highlights the PESTLE report of
organization. Further this report highlight the Analysis of Industry and sector and in the end it
highlights the critical success factor by the help of porters five model.
Q1 Brief Introduction of the selected organization
Tesco Plc. trading as Tesco, is a British company headquartered in Welwyn garden city,
Hertfordshire, England, UK. Tesco is well-known for the groceries and general merchandise
retailer store chain all across the globe. Tesco has their shop in seven countries including Asia,
Europe and ranked first in the UK with the market share of 28.4% (Tesco Market Share, 2019).
Tesco now looking to grow globally by investing highly in the developing country at initial stage
itself which has proven beneficial for the organization in past also as Ireland, hungry and
Thailand are the country where company enter at the initial stage itself and now they are the
market leader over their, but it has always been difficult for the company to adopt the culture of
the new country which follow the different culture than UK countries like Us and India and try it
difficult to grow the business as a region they have to shut down their business from the US in
the past.
Q2 Explain the Analysis of the market environment
PESTLE
Political factor: As the Tesco operates in the global market business is very much
affected with the political factor as they have to dealt with the flexibility of the Political rules
depending upon the country. Tax rates, acts of legislation and of course, the stability of the
country it operates in are the few factors which impact the organization as a region they have to
reduce the profit margin as increasing the price will eventually hurt the company in competitive
market (Ansoff And et.al., 2018). One of the biggest example of same is Brexit as the UK
decision to come out of the Union has eventually created many obstacles like tax rate, free flow
of good to Brexit countries etc.
Economic factor: Economic factor are the factor which relates to the economic
performance of the country. Factor include inflation rate, demand and supply, labour rate etc.

Tesco is affected by the labour rate as Tesco mainly operated in the UK and the labour rate of the
country is too high which eventually has risen the cost of the organization (Breugelmans and
Campo, 2016.). Brexit has also affected the economic condition of the company as Brexit has
increased the interest rate and also impacted the inflation rate of the UK.
Social factor: Social factor includes the factor related to the society trend, culture and
population Analytics. As in the rapidly changing environment consumer need used to change on
regular basis. Tesco used to use the technology to develop the new product to be offered in the
organization.
Technology factor: It is the factor which was successfully defended and applied by the
organization in their operation which has helped the business in growing as it has increased the
efficiency of work in the organization. The changes which has been brought by the Tesco that
they are looking to introduce and has introduced in some of the outlet 'scan your own shopping'
in some of their stores. (Breugelmans and Campo, 2016).
Environmental factor: Factor related to the environment nature of the country are
included in it includes tourism, farming, agriculture types of factor. Tesco is also trying to defend
the same by taking into the motive or goal that the Tesco will be reducing the carbon footprint
with the extent of 50% till the end of the 2020. Tesco also uses the environment friendly
packaging material in the packaging of their product.
Legal Factor: Factor related to the government policies and legislation has impacted the
business as they have to follow the code of conduct in producing the good which eventually
hampers the work, but at the same time good relationship with the government has helped the
organization in defending the legal factor comfortably. For example all the organization has to
compile with the employment law in the organization which used to slow down variety of
process in the organization. (PESTLE, 2016).
Q3 Explain the Company industry and the Competitive Advantage of the company
The retail industry of the UK is known as a back bone of the UK economy as this is the
industry which generated 381 billion pound sales at the end of the year 2018 (Retail industry,
2019) and not only that the retail industry of the UK is the largest sector of the UK which
employee maximum number of the employee. Retail requirement industry has seen a good
growth in the UK market in the past and continuing the growth in the current market also as This
is the industry which is had attracted larger number of a business. Retail industry in UK has seen

a good growth but it will be wrong to say that all the product has contributed same in the growth
as the non-food product of the retail store is not able to attract the customer toward the store and
the same is seen in the Tesco also has more than 60% of their product which are sold are the food
product. Retail industry is the industry in the UK which need to be flexible in their working as
the product which are sold by the industry always see a change in trend and demand of the
consumer (Rastogi and Trivedi, 2016.).
As already explained in the above para that the number of the business in the retail
industry is high company dealing in the retail industry has to survive the good amount of the
competition as a result company has to have a good strategy to have a competitive advantage.
TESCO, ASDA, Walmart and Sainsbury are the company who rules the retail market in the UK
and offers a good competition for new entrant in the markets.
Poter's five forces of Tesco explain that there is very less amount of threat of substitute
product as company used to sell the wide range of product which include the substitute of same.
There is high level of competition in the industry for the Tesco. Tesco has hundreds of suppliers
and there is a minimum or no supplier switching cost for the supermarket chain. As there is huge
number of option in front of the customer there is high level of power in buyer hand. There is
good level of threat from new entrant as they used to bring the innovative product at low cost to
attract the customer.
Q4 Explain the Critical Success Factor, Opportunities And Threat Of The Market
Critical success factor and the of the market can be studied well with the understanding of the
Porters Five model.
Competition in the Industry: Competition in the industry is the factor which is
impacting the organization in the Industry as organization has to bring the variety of change in
their operation as competitor also try to attract the customer. There are more than 201,915 retailer
in the UK industry.
New entrant in the industry: New entrant always bring the new and innovative thought
to the industry which helps the market to grow but at the same it hampers the growth of the other
company in the industry which eventually affect the business. Some of the example of new
entrant are the seller who used to sell the product with the help of social media marketing, this
help them in saving the different operational cost which are paid by the Tesco. (Hill, 2017).

Power of customer: It is one of the biggest success factor for the business to understand
and satisfy need of the customer but at the same time as number of competitor is high it proves
difficult for the organization to attract customer.
Power of Supplier: It is not that big success factor for the market as the Supplier used to
supply the raw material to more than one company in the industry at some price but some big
leader purchase the good in bulk which help them in getting discount.
Threat of Substitute product: This is the factor which is not affect the market as there is
no fix product line of the Tesco. Tesco used to sell the product of the different company in the
store. Tesco also used to sell the product in the own name also.
When we analysed the market on basis of opportunity and threat it can be said that the
market offers a good opportunity for the organization if they are having innovative idea to bring
in the market otherwise threat of the market always proves difficult for the business to survive
some threats are High competition, Less profit margin, regular changing technology (Mathooko
and Ogutu, 2015).
CONCLUSION
After going through it has been summarized retail sector is a very good and mature sector
in the UK as offers a good opportunity to the business to grow but at the same time it offers a
variety of the challenges to the new entrant in the market which makes difficult for the new
entrant to survive as there are some market leaders who rule the market and proves as a tough
competitor to beat.

REFERENCES
Books and journals
Ansoff, H.I. And et.al., 2018. Implanting strategic management. Springer.
Breugelmans, E. and Campo, K., 2016. Cross-channel effects of price promotions: An empirical
analysis of the multi-channel grocery retail sector. Journal of Retailing. 92(3). pp.333-351.
Carraher, S.M., 2018. An examination of an instrument to measure Porter’s Five Forces Model.
In International Journal of Arts & Sciences Conference at Harvard University.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management.29(3). pp.334-354.
Rastogi, N.I.T.A.N.K. and Trivedi, M.K., 2016. PESTLE technique–a tool to identify external
risks in construction projects. International Research Journal of Engineering and
Technology (IRJET). 3(1). pp.384-388.
Online
PESTLE, 2016 [ONLINE] Available through <https://pestleanalysis.com/what-is-pestle-
analysis/>
Tesco Market Share. 2019 .[ONLINE] .Available through
https://www.investopedia.com/articles/markets/092315/who-are-tescos-main-competitors.asp
Retail industry. 2019 .[ONLINE] .Available through
<https://www.retaileconomics.co.uk/library-retail-stats-and-facts>