Business Strategy: PESTLE Analysis of Tesco Plc and Key Challenges

This report provides a comprehensive analysis of Tesco Plc's business environment using the PESTLE framework to evaluate the political, economic, social, technological, environmental, and legal factors influencing its operations. It identifies key challenges such as adapting to e-commerce trends and addressing social responsibilities, and it explores strategic responses in human resources, marketing, financial management, and information systems. The report concludes with recommendations for Tesco to leverage its strengths, monitor market trends, and invest in technology to enhance its competitive advantage and ensure long-term success while emphasizing the importance of understanding both positive and negative influences within a dynamic business environment. Desklib offers a wealth of similar solved assignments and study resources for students.

Business in Context

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
PESTLE Analysis........................................................................................................................3
Main challenges..........................................................................................................................5
Responses to challenges..............................................................................................................6
CONCLUSION AND RECOMMENDATIONS............................................................................7
REFERNCES:..................................................................................................................................9
Books and Journals:....................................................................................................................9

INTRODUCTION
Business Strategy is very important for any company which is seeking growth to its
business in a strategic way. In simple words, business strategy can be understood as the clear
established plans, goals and actions that outlines how an organisation will compete in its target
market, or markets in relation with its offerings i.e. goods or services (Cao, Lee and Harakeh,
2021). A business strategy must take into consideration a range of factors such as business
environment, including both macro and micro factors, market competitors, organisational
structure, strengths and weaknesses. It is important for any company to make strategies flexible
in order to tackle any changes takes place in the environment. Tesco Plc is chosen to prepare this
report. It is a British multinational retailing company with headquarters in Welwyn Garden City,
London. It has established its business into five countries and became the market leader of
groceries in UK. In 1919, it was established by Jack Cohen. It retails products such as clothing,
books, petrol, toys, internet services and many more. The current report analyses different macro
environmental factors with its positive and negative influences on chosen company. It also
analyses main challenges faced by the company and applies relevant strategies to it.
TASK
PESTLE Analysis.
Pestle analysis is an useful model that helps to get a detailed overview of the external
environment of business (Yang and et.al., 2021). This tool helps Tesco Plc to analyse the
unpredictable environment in which its functions and operate a range of activities. These factors
can provide a significant impact on the operations and performance of business. The positive and
negative impact of different macro environment factors is discussed below:
 Political factors: It involves factors such as taxation rates, political stabilities, current and
impending legislations, economic conditions, unemployment rates and and many more.
◦ Positive impact: Tesco Plc operates their business in various countries and needs to
keep an eye on the changing political conditions, a key point is stability of political
conditions in the country where it operates business. The political condition of UK is
stable and company is operating its business effectively. These stable condition also
provides numerous growth opportunities to carry out trading activities.

◦ Negative impact: Due to Brexit, there are several new regulations have been
imposed and cause a significant decline and rise in sales (Zahari and Romli, 2019.
The company faced various trade restrictions after the end of freedom to carry out
trade activities between UK and EU.
 Economic factors: It involves inflation, labour costs, economic conditions, tax policies
and so on . These factors are the main consideration for the chosen brand as they are most
likely to leverage the demand, costs, prices and profits. Hence, Tesco Plc is needed to
keep eye on changes in taxation policies or any variable that could influence the
accessibility of funds. For Tesco, the labour cost is the key factor that influences the UK
supermarkets.
◦ Positive impact: Tesco encourage diversity in its business and employs people from
different backgrounds, religion, different markets and so on. These diversification and
existence in the global market are quite effective strategies in past years and becomes
the reason for the growth and success of the Tesco Plc.
◦ Negative impact: Unemployment factor affects the profitability of the business as
these factors are uncontrollable by the business. It hinders the overall performance of
the business in domestic and international markets. Increasing labour cost is also one
of the major concern for Tesco.
 Social factors: It is involved with cultural norms, tastes and preferences, health
consciousness, beliefs and expectations, societal influences and many more.
◦ Positive impact: The changing needs among customers affects the business of Tesco.
As the customers are more like to go where they can find everything in one place and
based upon such trends, Tesco Plc has planned out its shopping stores to fulfil these
needs.
◦ Negative impact: The changing needs and demands for products and services is one
the major issue that is faced by the company (Bhattacharya and et.al., 2020). Obesity
is the challenge in society and consumers are becoming health conscious. Hence, the
brand must consider the changing attitude and behaviour as well as demand for
organic products.

 Technological factors: It is involved with adoption of new technologies and solutions to
business. The social media promotions, online shopping are some of the influences to the
business.
◦ Positive impact: Tesco has been dealing very well with these factors and
experimenting with different aspects of retailing. It achieved a good amount of
success among competitors. Tesco provide online services, home deliveries, cashless
payments and many more.
◦ Negative impact: Although advancement in technologies provides convenience to
customers but it makes company to conduct an extensive research and needs a good
of investment to adopt new technologies.
 Environmental laws: Besides making revenue for the business, a company needs to
consider several ecological and environmental aspects such as waste disposal laws,
consumption laws, environment protection laws.
◦ Positive impact: The firm has undertaken different initiatives to improve the
surroundings and develops a more sustainable community. Tesco has introduced
phase 2 of remove, reuse, reduce and recycle plan (Vijayaraghavan and et.al., 2020).
◦ Negative impact: Although, the company tries to keep environment safe and green,
but it is not cost effective at all to use the process which is eco-friendly. It also needs
time product these sort of products.
 Legal factors: The changes in government policies, laws and legislations, including both
domestic and international markets and many more.
◦ Positive impact: It benefits both employee and employer to work under certain
legislations and needs to be followed in the company. By working under legal terms,
it generates goodwill to the company.
◦ Negative impact: Tesco has been affected and faced certain legal allegations
regarding gender and age bias that exists in its organisational culture.
Main challenges
There are several challenges that have been faced by the Tesco Company. With the help
of Pestle framework, the main two challenges are discussed underneath: Technological factor: With a significant rise in the globalisation and the augmented
exploitation of internet, E-commerce is regards as the future for retail organisations

(Spencer, Johnson and Long, 2019). Hence, it is found that retailers such as Tesco Plc is
required to incorporate this tool into their strategic model of business in order gain
competitive edge and safeguards their survival in the booming retain sector. However,
companies face a range of challenges in their integration of E-commerce into their model
of business. Some of the issues include formulation of plans and strategies, developing
customer loyalty, trust building and the integration of mobile platforms for transactions
into their official websites among others. The use of internet facilitated companies one on
one communication with consumers, promotion of services and commodities, collection
of statistical data, helping online ordering of commodities from the retailers and many
more. As the technologies delivers a significant impact and benefits on the business, it is
essential for the business to go for new technologies that can be used to gain more
customer base and to cope up with the latest trends.
 Social factors: Social factors is one of the key challenges that is faced by the company.
Now a days, social responsibilities and booming value are being given to driving
marketing activities with regards of social responsibilities (Robu and et.al., 2019). This
makes Tesco Plc paying a great attention towards the social responsibilities which they
have towards consumers. Regulations and control from different pressure societies as
such as social workers, social activists, consumer activists, oblige the company to go for
their plans restrictively and conveying the clear image about the pros and cons of the
commodities. Convincing the consumer is also a challenge that they must spend their
money in the purchasing. But the real task is getting back that customer towards brand.
The loyalty is the main aspect of Tesco. It makes business to take time and patience to
build customer loyalty.
Responses to challenges Human Resources: The Tesco Company has a range of departments in which different
employees work together and collaborate with each other to complete the task effectively
and efficiently. Employees are hired in the business based upon their knowledge and
qualifications so that they can work for the business (Li, Zhao and et.al., 2021). Tesco
also provide relevant training and development equipments to improve the skills of their
employees. Employees are work for the better productivity of the business. Most

importantly, the firm encourages diversity and invite employees from different sections
of the world. Marketing: Marketing department also plays an essential role in the promotion and
advertising of goods and services of the company. The firm uses effective marketing
techniques and tools to let know their customers about the company's latest offerings.
This department also deals in the identification of latest trends in the market so that Tesco
Plc can offer their customers as per their tastes and preferences. Financial management: It involves the activities such as budgeting, planning for
revenue, forecasting, leverage management, managing assets and liabilities and most
importantly overcome the challenges of using maximum exploitation of resources (Ai
and et.al., 2019). This department also helps to provide a certain budget so that
companies such as Tesco can invest in the adoption of new technologies which
simultaneously helps the business to serve better to their potential customers.
 Information System: IT system plays an essential role in the retailing sector. It helps
companies to attain huge success in the dynamic business environment. This section in
the Tesco Plc helps to provide the knowledge of latest technologies that can boost up the
processes of manufacturing in the business. It also facilitate to deliver cost effective
benefits to the organisation.
CONCLUSION AND RECOMMENDATIONS
On the basis of above report, it has been summarised that business strategies is very
useful for the businesses as it helps them to gain competitive benefits and long-term success in
the business. Organisation deals in dynamic work environment in which it is essential for them to
analyse each factor and variable that can affect the performance and profitability of the business.
In this report, the pestle analysis is used to know the influences and effects of different macro
environment factors such as political, social, legal and many more. All such factors have positive
and negative influences on the business. Later, the report identified the main challenges that have
been faced by the chosen company. Different functions and strategies implement to overcome
such challenges in the business.
It is recommended that organisation must identify its strengths and weaknesses in order
to overcome the negative influences delivered to the business. As the business works in the
dynamic environment, strengths of the business helps to overcome the challenges and

formulating relevant strategies helps business to grow and enhance its market share. Company
must keep their eye on the latest trends so that they can offer commodities that can satisfy the
demands of consumer. Also, adoption of new technologies helps company to serve better and
conveniently. But, it must consciously invest money into it.

REFERNCES:
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