Business Environment Analysis: A Report on Tesco's Strategic Position

This report provides a comprehensive analysis of Tesco's business environment, examining the various factors influencing its operations and strategic decisions. It begins with an introduction to the changing business landscape and highlights the importance of adapting to environmental changes. The core of the report involves a PESTLE analysis, meticulously dissecting the political, economic, social, technological, legal, and environmental factors impacting Tesco. This is followed by an internal analysis of Tesco, utilizing a SWOT framework to evaluate the company's strengths, weaknesses, opportunities, and threats. The report further explores how both internal and external environments affect the company's decision-making processes. The conclusion summarizes the key findings and emphasizes the need for Tesco to proactively address the challenges and leverage the opportunities presented by the dynamic business environment. The report also includes a list of references.

BUSINESS
ENVIRONMENT
ANALYSIS

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Contents
INTRODUCTION.................................................................................................................................1
PESTLE analysis of TESCO.................................................................................................................1
Internal analysis of Tesco......................................................................................................................2
Influence of internal and external environment on decision making process.........................................3
Conclusion.............................................................................................................................................4
References.............................................................................................................................................4

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INTRODUCTION
Business environment has changed considerably and hence it has become essential for the
firms to manage their operations as per this changing business environment. TESCO being
one of the biggest super market firms in United Kingdom had to face lot of challenges due to
the change in the factors affecting their business (Pearson, et al 2011). Tesco is having lots of
resources and are highly capable of dealing with the changing business environment. All
these resources and the changing business environment are having impact on the decisions
that is made by the firm. This report will highlight the change in the business environment of
Tesco by analysing different factors.
PESTLE analysis of TESCO
Today’s business environment has become very much dynamic hence it has become essential
for the organizations to understand the factors that are affecting their business. Some of the
factors that need to be analyzed are specified by the PESTLE strategic tool:
 Political: There is significant change in the political environment of UK and these
changes can be reflected back in the decisions that are made by the government. The
decision such as Brexit will have long term impact on the big retailers like Tesco.
This is because they have lot of suppliers from the other parts of the EU and hence
maintaining same kind of relations with them (Kew and Stredwick, 2017). Apart from
this there were no trade barriers among the countries in the EU previously but after
the enforcement of Brexit Tesco might face challenges in doing cross border trades.
 Economical: The biggest challenge for the company is posed by this factor. There is
significant downfall in the economic growth of the whole European region and hence
it is reducing the purchasing power of the people. It has also affected the demand in
the market. It was one of the most significant reasons for British Government
enforcing Brexit. The reduction in the purchasing behavior of the people will have
direct impact on the sales of the company. Even after being high per-capita income
people are reducing their expenditure (Hamilton and Webster, 2018). Investors are
also not willing to invest in new projects and hence could be a challenge to the growth
of Tesco.
 Social: Society has changed and so are their demands. After a decade of bad phase
after 2009’s recession, significant changes can be noticed in the purchasing capacity
of the people. They are restricting themselves from opening their pockets for
expenditure (Hoskin, 2011). Apart from this, there is increase in the number of
unemployed people which is reducing their target segment’s intention to purchase.

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 Technological: Higher numbers of technological advancements are going on in the
retail industry especially in terms of the way in which people are making the
purchase. People are moving towards online shopping and hence the brick and mortar
type of business is facing challenges. In the coming time, Tesco will have to invest
more on the e-commerce platforms so as to remain in the competition (Dauvergne and
Lister, 2012). Technology is also giving the advantage to the small business
enterprises and hence they are also challenging the business of Tesco at the local
levels.
 Legal: Legalities in UK has changed considerably and these changes had an impact
not only on the ways of doing business but also on the performance of the firms. The
consumer and employee related laws have strengthened and this has made the firms to
rethink about the quality of the products and service they deliver to their customers as
well as the ways in which they manage their human resource management. Tesco
needs to comply with all these rules and regulations so as to ensure that they may not
face any legal challenges.
 Environmental: The rules and regulations regarding the environmental concerns have
increased. Tesco needs to manage their business in an environment-friendly manner.
Green supply chain has become the necessity of Tesco. They also need to focus more
on the way waste is management as government has become very much strict on the
waste management of different organizations.
Internal analysis of Tesco
In the changing business environment, it has become very much essential for Tesco to
understand the internal environment. This must be done on the basis of analyzing the
resources and capabilities of the firm. It is crucial that company analyses their strengths so as
to grab the opportunities available with them. Apart from this weaknesses needs to be
analyzed so as to find the threats that they can face in the future. SWOT analysis for the firm
is as follows:
Strengths
 Recently, Tesco has won many prizes in the retail excellence, customer satisfaction as
well as other shopping experience.
 It is one of the largest and most successful supermarkets in the world.
 They have a high amount of cash reserves as well as other type of infrastructure
which gives them support in all the type economic cycle (Christopher and Peck,
2012).
 It is a big brand name having global recognition especially in terms of quality
products that it offers.
 They have used technologically advanced mediums so as to improve their operational
efficiency.
All these strengths are helpful in balancing their business in the changing political, legal and
technological environment.

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Weakness
 Some of their subsidiaries are not performing well like their finance profits have
lowered down to significant levels.
 They lacked in terms of research and hence due to this they have lost their business in
some of the countries.
 They have not adjusted their inventory and hence cost of inventory is high which is
not suitable in the modern day business (Dowling and Moran, 2012).
 Company has major part of their business in European region and they not spent
money on increasing their business in the new developing nations.
All these weaknesses are dangerous in terms of changing social, economic and environmental
factors.
Opportunities
 They have opportunity to make strategic bounds with other suppliers or big brands so
as to offer more numbers of products to the consumers.
 The European countries where they are not performing well, they can easily go into
the joint ventures (Beaumont, WHITAKER and PEDERSEN, 2013).
 They have chance to improve their business in online markets.
 They also have opportunities in the private level markets.
 They can expand their business in the emerging markets.
Threats
 Credit crisis and economic recession has threatened the market share of Tesco.
 Many retail giants are coming up which will further increase price war as well as they
also have innovative technology to make their business model more efficient (Page,
2014).
 Rising cost of raw materials along with increasing labour cost is a threat to their
profitability.
Influence of internal and external environment on decision making process
All these factors have effect on the decision making process of the company. The changing
political and economic environment within the country is going to impact on the investment
decisions made by the firm. The changing technological environment will have impact on the
way decisions are made. For example decisions will be made based on the data that is
collected through different online mediums by taking the help of data analytics. Reduction in
the purchasing capacity of the people will make the decision makers to think about the
focusing on increasing the product range as well as reducing the prices (Peck, et al., 2013).
Legal and environmental factors are going to make the decision making process more ethical
and consumer oriented. Their higher cash reserve will help them in making decision process
more innovative so that innovative decisions could be made. Citing their weakness, they will
have to think about the investing in new countries hence decisions will be taken involving

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more numbers of people from the developing nations also. Their threats have forced them to
make more decision making process more democratic.
Conclusion
From the above based report, it can be concluded that externals environment of Tesco is now
becoming full of challenges especially in terms of political, economic and social terms. Their
strengths are helpful for dealing with the challenges that are external environment is forcing.
It is going to have effect on the decision making process as company will try to bring more
number of people in the decision making body so as to make innovative decisions.

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References
Beaumont, J.R., WHITAKER, B. and PEDERSEN, L., 2013. Managing the environment:
Business opportunity and responsibility. Elsevier.
Christopher, M. and Peck, H., 2012. Marketing logistics. Routledge.
Dauvergne, P. and Lister, J., 2012. Big brand sustainability: Governance prospects and
environmental limits. Global Environmental Change, 22(1), pp.36-45.
Dowling, G. and Moran, P., 2012. Corporate reputations: Built in or bolted on?. California
Management Review, 54(2), pp.25-42.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford
University Press.
Hoskin, P., 2011. Why business needs to green the supply chain. University of Auckland
Business Review, 13(1), p.16.
Kew, J. and Stredwick, J., 2017. Business environment: managing in a strategic context.
Kogan Page Publishers.
Page, M., 2014. Business models as a basis for regulation of financial reporting. Journal of
Management & Governance, 18(3), pp.683-695.
Pearson, D., Henryks, J., Trott, A., Jones, P., Parker, G., Dumaresq, D. and Dyball, R., 2011.
Local food: understanding consumer motivations in innovative retail formats. British Food
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Peck, H., Christopher, M., Clark, M. and Payne, A., 2013. Relationship marketing.
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