Understanding the Business Environment of TESCO: A PESTLE Analysis

This report provides an in-depth analysis of TESCO's business environment through a PESTLE analysis and stakeholder analysis. It covers TESCO's market structure, objectives, and operations, as well as how it manages its stakeholders. The report also discusses the factors that affect TESCO's performance and provides recommendations for meeting its long and short-term goals.

Understanding the Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
TASK 1............................................................................................................................................3
Introduction on TESCO...............................................................................................................3
Operations of Tesco.....................................................................................................................3
Objective of company..................................................................................................................3
Market Structure..........................................................................................................................3
Legal structure of companies.......................................................................................................4
Task 2...............................................................................................................................................4
Analysis of stakeholder................................................................................................................4
TASK 3............................................................................................................................................6
PESTLE Analysis........................................................................................................................6
TASK 4............................................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Business environment is known as area where organization conduct their operation for
running their firm. The present report is based on TESCO which is largest grocery retailer of
UK. The study will discuss about market structure and its operation which is used by it. Lastly
it will discuss on the long and short term goals and provide them with recommendation to meet
them.
MAIN BODY
TASK 1
Introduction on TESCO
It is one of the famous multinational retail company that deals in groceries and general
merchandise. The headquarter of the company is located in England, UK and it sells its product
internationally. It is one of the third largest retailer in terms of revenue that is trading in
international market. The organization has large market share in UK and it has open various
stores in international and local are of UK in order to increase their sales.
Operations of Tesco
The company majorly deals in groceries market and it provide for all sort of customer needs
which are related with brand. Along with this, it deals in items like furniture, décor and
electronics as well as home essentials. TESCO is operating in sector of vegetable and it has
recorded high sales in market area of UK (Jusufi and Lubeniqi, 2019). Although the
organization is trying to excel the electronics business so that it can in increase their growth.
However, it will bring more revenue that can be used for investing in business unit of
groceries.
Objective of company
One of the main motive of TESCO is to increase there brand loyalty in the market area so that
it can attract more customer and fulfil there needs. Another objective of company is to increase
their sales in the competitive market by digital technology as it is new way of doing the
business in the time of pandemic(Abu-Rumman, 2021). Along with this, it also aims at
increasing the range of customer by lowering down the purchasing price of the products. In

addition to this, the company is trying to meet up the new market trends and taste so that it can
attract large customer and reduce competition.
Market Structure
The market structure of company is oligopoly as there is high competition in the market who
are making make use of same method of doing similar business model. Along with this, the
major advantage of such market structure is that are very low chance of loosing customers.
Although there is high competition in the market so due to that customer preference get change
when the price of the product is low or high so it is important for the organization to make use
of innovative strategy in order to keep their customer loyal (Yaklai, Suwunnamek and Srinuan,
2018). Along with this, Tesco can bring more business by making of strategy and deals to
reduce competition. The organization is trying to provide variety of quality product in their
company so that customer can have choice while purchasing. Thus, this type of market structure
has been followed by TESCO in order to make sure that their customer are satisfied and they
sustain in the market area.
Legal structure of companies
Public sector: This organization is run by state government and all the finance and decision are
handle by government authority. Along with this, the main aim of such organization is to utilize
the resources efficiently so that it can benefit community (Zhu and et.al., 2018). For instant
ESPO is UK government sector organization which provide variety of goods and service to
public. All the revenue of the company is invested on public services.
Private sector: This is control and run by private individual and its main aim is to earn profit for
the organization. In this there is a little or no involvement of government and it provide
essential services to customer. Such company make use of innovative idea in order to run their
company as well as to attract customer.
Voluntary sector organization:
Its main objective is to provide social services to customer instead of earning profit as its
main purpose is to develop society.

Task 2
Analysis of stakeholder
Tesco give equal importance to both internal and external stakeholders of the company in
order to maintain success. Along with this, it need to be maintained as it influence business
decision as well as contributes in operation of company . However, Tesco will be able to earn
huge revenue if successfully manage stakeholders.
Internal Stakeholders:
Shareholders: They are known as investor of the organization and it influence the business
operation and decision. Along with this, in Tesco has given their shareholders right to take
decision for the company.
Employees: It is one of the most important source of the organization which helps in running
business effectively and represent the company in external market (Toth and et.al., 2020). Along
with this, it is crucial for the organization to maintain as it helps in keeping the customer satisfied
and there suggestion also helps the company in making important decision. In addition to this,
Tesco satisfy their employees through appreciating their work by making use of monetary and
non monetary incentives.
Board members and executive committee: The management is essential for company as it has
major contribution in taking relevant decision for business. In Tesco all the decision are taken
by higher authority and board and it put their maximum effort in finding the right business plan
for the company and best decision for firm operation.
External stakeholder
Local communities: The external environment influence business and some of its factor can
positively and negatively affect the growth of firm. However, if local communities are not
involved in business then organization will not be able to sustain in market as business exist
within that boundaries (Korcsmáros and Šimova, 2020). Although Tesco perform activities like
CSR in order to contribute toward the welfare of communities and development of society.
Supplier: Tesco make sure that suppliers are taken into consideration while making business
model of the company as it play important role in organization. Along with this, most of the p
raw material for manufacturing are been taken by Tesco through various suppliers. Thus, it
allow the company to sell their quality product to customer. Thus, it is crucial for Tesco to

maintain healthy relation with them in order to produce best quality product. It also improve
stability and mange supply chain as well as contribute in supporting long term goals through
building trusting relationship.
Customer: Tesco is customer driven company as it all revenue generate through purchasing of
consumer. Along with this, they have huge impact on business operations as they are main
source of company. The complete range of products Tesco sell is based on taste and preference
of customer. Moreover, Tesco take care of their customer by providing them consumer services
and extra value such as loyalty programme. It give them discount on big festivals or sales in
order to attract them as well as to increase the sales.
Competitor: They influence the market area by providing similar kind of products and
services. Although TESCO before launching new conduct market research so that it can
identify the area of competition (Luiz, Ganson and Wennmann, 2019). Thus, it is important to
look at them as it directly influence the business and the customer. So for meeting the
competition TESCO is making use of various marketing techniques like digital marketing tools
and techniques in order to reduce competitive advantage. So it is important for the company to
manage them closely and provide them with information about company new products.
TASK 3
PESTLE Analysis
It is known as strategic framework that allow organization to identify external factor which can
affect performance of firm in both negative and positive form. Along with this, it is acronym of
Political, economical, Social, Technology, Legal and Environmental. Moreover firm has to
conduct this so that it can identify factor which are influencing business.
Political : This include factor such as policies made by government which need to be followed
by organization in order to sustain in market. Along with this, currently made the policy of
lockdown and COVID guideline which has affect the growth of TESCO as it was not able to
expand their business due to restriction on trade. Although company deals in various country
and each of them have different tax policy in retail sector so it need to be manage by the
organization and affect the overall financial sector.
Economic: This is one of the most important factor for the organization as it is responsible for
managing the profit of the company and it impact of the product of organization. Along with
this, if TESCO deals in country with Good GDP rate then it will be able to earn more revenue as

customer usually spend more on their living(Miftari, 2018). However, TESCO has to keep an
eye on this factor and take corrective action in order to avoid it impact as change in economy
rate will directly impact on the income level of customer. Thus, if there income will be low then
sales of the company will decrease. So it play vital role in business operation and it change
the cost and demand of the organization .
Social: This factor mainly deals with taste and preference of customer as well as new market
trend going on. Although it also influence the business because if company is not able to make
product according to market and customer demand then it will not be able to increase the overall
growth of the company as well as sales(Kiseľáková and et.al., 2019). Moreover, Tesco has to
bring new marketing schemes in order to increase the sales as well as to increase the range of
customer. Thus, it clearly indicates that social factor influence the performance of Tesco in the
market and it important for company to focus on all such fact and find appropriate solution to
the same.
Technological: This is one of the crucial factor which has influence the business in the time of
pandemic in positive way. Along with this, TESCO is making use of digital marketing in order
to increase their sales and to maintain smooth flow of business within the organization.
Moreover, the technological development is very helpful to attract customer for long term as I
contributes in knowing their taste and preferences. Along with this, it has been found that with
help of digital marketing company can also increase their brand awareness in the market area as
well as improve their performance.
Environmental factor: It has huge impact on the operation of the business as company as
sustain in external area. Although TESCO has to adopted eco friendly management for
organization so that it can protect environment from hazardous chemical (Nam and Bao Tram,
2021). It also conduct CSR activities for giving the contribution in developing the society and
uplifting the rural areas people. The organization make use of paper bag and it all its
processing functions are related to environment.
Legal: This factor is consist of laws and regulation made by government in order to maintain
peace in the society. Along with this, it has been found that TESCO is following rules like
company act and employment law in order to avoid intervention of government. Moreover,
TESCO before entering the food production has taken licensing that represent that organization
is legal and register under act.

Porter five force
Bargaining power of buyers: The customer of TESCO has high bargaining power due to
huge competition in retail sector and there is high chance of aviability of similar products as
well as alternative. The taste and preference of customer are also changing from time to time so
company in order to sustain has to fulfil and satisfy them (You and et.al., 2019). In addition to
this, TESCO has started offering their customer with high quality of products at low price.
Bargaining power of suppliers: There large number of suppliers have been available in the
market area and due to that suppliers do not have high bargaining power. Along with this, if
there is change in price of the products suppliers will switch from one to another. Thus, Tesco
has made use of effective business model in which it provide good quality of products and
service to their customer at reasonable price.
Threat of substitute: With high competition in the market customer have variety of products
and services available so it get chance have switching the product in super market area. Along
with this, customer are more focused on getting high quality of products at reasonable price so
TESCO is providing them. Although the organization is trying to give innovative offers to their
customer in order increase their loyalty with brand.
Competitive rivalry: There is huge competition in retail sector and customer have various option
to choose between them. Along with this, the clients only focus on getting excellent food
products that too at low price so that it can get excellent items at sensible cost. Tesco follow
low price strategy so that customer can remain with brand for longer period of time and for that
it make innovative proposal for them. The company is focused on selling the product at right
direction and in right manner as well as make sure that customer do not stop their purchasing
form them.
Threat if entry: Due to flexible norms and condition there are high chances that new stores
can be open up and competition will increase. Along with this, the price and products should
not be similar to competitor but with help of legal permission it can be used by them. Hence,
Tesco can loose there market share and it need to manage their profit(Gogokhia and Berulava,
2021). As the new competition try to margin their profit by giving up the initial profits and
bring a huge earning at the later stage. Thus, company to expand their business in other field
also so that it can meet up with changing business environment.

TASK 4
For being the successful in long and short term it is very necessary for business to meet up
with the changing needs of the supermarket and to bring better products in the market area.
Along with this, due to pandemic financial stability of company has been hit hard as it was close
for several months due to restriction on trade and there has been shift in taste of customer.
Although the marketing strategy adopted by company is also traditional so it is not able to
attract large customer and sales were also not enhance. The organization also face huge
competition so it is important that company to make use of innovative marketing techniques.
Thus, some recommendation has been mentioned below which will help organization to deal
with long and short term issues.
It is to be recommended to company that it should make use of advance technology in order to
improve their functional unit and to give their customer quality standard product. Along with
this, better technology will contribute in improving the shopping experience of customer.
Although the company should also follow the current guideline of pandemic in order to attract
customer and make them feel that shopping from TESCO is safe and secure.
 It is to be recommended to company that it should make use of online store management
through digital marketing as it will allow the organization to expand their business in
other market area. Along with this, this type of marketing will allow the TESCO to
create brand awareness in the market area by allowing to share information about newly
launch product on various social site (Abu-Rumman, 2021). Although the online
marketing will help the organization in identifying the taste and preference of the
customer and their purchasing cycle. Thus, there are various advantage a company will
have it make efficient use of digital technology.
 It is to be suggested to firm that it can take feedback from the customer as it will help in
knowing the developing areas which need to be improved by company. In addition to
this, feedback from employees are also necessary as they can up with innovative idea
to satisfy the need of customer in effective manner. Moreover a healthy relation need be
managed by company in order stay competitive in long run.
 Furthermore, company can make use of KPI tools in order to measure success of firm
so that performance of organization can be improved (Sołoducho-Pelc and Sulich, 2020)

 . Along with this, it will help the organization in understanding the position of company
in market area which will allow TESCO to make adjustment in the business case. Thus,
using KPI tool will allow in meeting the strategic goals in effective manner by giving the
overview of business or any department.
However, this suggestion will not only help in long run but it will be beneficial for the
company in short as it will enhance the sales of the customer through brand value and product
services offered by TESCO. Also if sales will increase so will financial stability of firm that will
allow the organization to invest in new business opportunity. During the time of pandemic
online business was the main reason for boosting sales of company so this will allow TESCO to
meet with the new changes in coming year and to setup new goals. With help of online
marketing it will be easy for the company to beat the competition as compare to traditional way.
The company can also open 24/7 available store on high streets with extra service facilities so
that market sales can be increased (Möller, Nenonen and Storbacka, 2020)
. The promotion of the company will help in boosting the sales and it should also lower down the
price of premium quality product in order to increase revenue. The company can also provide
free medical check up for old age and health services in order to attract customer as it will
benefit the organization in positive manner. For improving the market position it is important for
TESCO to add new products in their company.
CONCLUSION
From the above report it has been concluded that TESCO keep their external and internal
stakeholders satisfy. It has been summarized that in order to be successful it is crucial for
company to analysis the external market area as it impact on the business operation. The study
has analysed PESTEL and Porter five force in order to identified the factors which will
influence the company growth.

REFERENCES
Books and journals
Möller, K., Nenonen, S. and Storbacka, K., 2020. Networks, ecosystems, fields, market
systems? Making sense of the business environment. Industrial Marketing Management. 90.
pp.380-399.
Sołoducho-Pelc, L. and Sulich, A., 2020. Between sustainable and temporary competitive
advantages in the unstable business environment. Sustainability. 12(21). p.8832.
Abu-Rumman, A., 2021. Transformational leadership and human capital within the
disruptive business environment of academia. World Journal on Educational Technology:
Current Issues. 13(2). pp.178-187.
Gogokhia, T. and Berulava, G., 2021. Business environment reforms, innovation and firm
productivity in transition economies. Eurasian Business Review.11(2). pp.221-245.
You, K. and et.al., 2019. Bridging technology divide to improve business environment:
Insights from African nations. Journal of Business Research. 97. pp.268-280.
Nam, V.H. and Bao Tram, H., 2021. Business environment and innovation persistence: The
case of small-and medium-sized enterprises in Vietnam. Economics of Innovation and New
Technology. 30(3). pp.239-261.
Kiseľáková, D. and et.al., 2019. Competitiveness and its impact on sustainability, business
environment, and human development of EU (28) countries in terms of global multi-criteria
indices. Sustainability. 11(12). p.3365.
Miftari, V., 2018. Transformational leadership communication in developing countries’
business environment. Journal of History Culture and Art Research. 7(2). pp.259-264.
Luiz, J.M., Ganson, B. and Wennmann, A., 2019. Business environment reforms in fragile
and conflict-affected states: From a transactions towards a systems approach. Journal of
International Business Policy. 2(3). pp.217-236.
Korcsmáros, E. and Šimova, M., 2018. Factors affecting the business environment of SMEs
in Nitra region in Slovakia. OeconomiaCopernicana. 9(2). pp.309-331.
Toth, Z. and et.al., 2020. Becoming a more attractive supplier by managing references–The
case of small and medium-sized enterprises in a digitally enhanced business
environment. Industrial Marketing Management. 84. pp.312-327.
1

Zhu, J. and et.al., 2018. Retailer–consumer sustainable business environment: how
consumers’ perceived benefits are translated by the addition of new retail
channels. Sustainability. 10(9). p.2959.
Yaklai, P., Suwunnamek, O. and Srinuan, C., 2018. How Intellectual Capital, Knowledge
Management, and the Business Environment Affect Thailand's Food Industry
Innovation. Asia-Pacific Social Science Review. 18(2).
Jusufi, G. and Lubeniqi, G., 2019. An overview of Doing business in Western Balkan: The
analysis of advantages of Doing Business in Kosovo and North Macedonia. ILIRIA
International Review. 9(2). pp.168-169.
Online
A, B., 2018. [Online]. Available through <>
2