Report: Introduction to Business Management - Tesco PESTEL Analysis

This report presents a PESTEL analysis of Tesco, a multinational retailer. The analysis examines the external macro-environmental factors impacting Tesco's operations. It delves into political factors, such as tax rates and legislations, and economic factors, including inflation and labor costs. Social factors, like changing consumer trends and health concerns, are also considered, along with technological advancements like online payment systems and RFID technology. The report addresses environmental factors, such as Tesco's sustainability initiatives and legal issues, including employment regulations and accounting practices. It concludes that a comprehensive understanding of these factors is crucial for Tesco's growth and market positioning, emphasizing the importance of managing environmental factors. The report references various academic journals and online resources to support its findings, providing a well-rounded overview of Tesco's business environment and strategic considerations.

Introduction to Business
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
PESTEL analysis for Tesco........................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Business management is the management and coordination of responsibilities to achieve
desired goals and objectives of the business. Business management consists of different
interconnected functions to run the company such as organising, analysing, controlling, staffing,
planning, and directing to perform operations to fulfil all needs and requirements to achieve
goals (Franz and Kirchmer2012). Business management is the act for operating available
resources effectively and efficiently to accomplish target and objectives.
PESTEL analysis for Tesco
PESTEL is an analytical tool which is used to analyse unpredictable external
environment factors affecting to organisation. PESTEL is a framework used by business
marketers to monitor macro-environmental factors that have an impact on an organisation.
Tesco is a multinational retailer company of UK, which has 14 stores across the world (Song,
Sun and Jin 2017). PESTEL analysis is used in Tesco to emphasize on external factors affecting
to organisation and know how company utilise its resources to gain objectives for surviving in
the business market.
Political:
Since organisation is operating in 14 different countries political factors greatly affect the
performance of Tesco. These Factors include tax rates, legislations, unemployment rate, political
instability, economic condition of countries where, Tesco is operating the business. For Example,
import tax on goods can affect the performance of Tesco because goods are imported from
outside UK. Due to the instability in financial in the world, many government forces to the retail
business to provide the employment opportunities to the local people. Tesco plays a vital role in
providing employment to local people and follow the employment legislation of government.
Tesco affected the new tax measure by the UK government. The VAT rate was increased by
17.5% to 20% to increase government revenue by 13 billion pound per year (Rahman,
Saharuddin and Rasdi, 2014). Therefore, increase in the VAT rate decreased sales revenue
generated by the Tesco.
Economic:

Economic factors cannot be controlled by any organisation, but it adversely effect on its
performance. Tesco is affected by economic factors of the country i.e. cost, price, profits,
inflation rate. Tesco highly focuses on economic factors because it directly effects the buying
behaviour of customers. Tesco business is operating worldwide but company still depends on the
UK market, means if the market is collapsed or affected by the economic factors, the greater will
be the risk for Tesco. Tesco is still dependent on the UK market where its market share of
around 30%. Labour cost is an important economic factor that can affect UK supermarkets.
Annual wage bill is GBP 4.5 billion and in 2018 is increased by 4.4% in UK. This increasing in
annual wage is directly shifted Tesco million of pounds in UK.
Social:
Social factors include the lifestyle changes, education, living conditions, death rates etc.
Consumer shopping trends are changing constantly over the time. People tight schedules want
same day and fast delivery with easy return policy. Tesco is adopting online shopping approach
and positively responded to the social change. The costumers prefer one-stop shopping, as their
customer needs or requirements, Tesco provided large sale of non-food products, and
understanding the change's requirement of people. Another factor introduced nowadays in people
is obesity or more concern on health issues towards the food and increasing the demand of
organic food. Tesco increases the amount of organic food in the stores. The payment made by
cheques and cash at the checkout was firstly made by Tesco.
Technical:
Tesco importing new technologies into the business can be advantage for operating the
company as well as customer. As Tesco uses the high technologies into the company improved
the customer satisfaction. Tesco has developed its own online mobile payment application i.e.
PayQwid (Metzger, 2014). Customer can pay online for shopping by downloading the app and
link to club-card and NFC technology to get customer loyalty points. Tesco introduced the RFID
technology for customer to increase the in-store experience that count stock and remove it after
sales automatically. The advance technologies used in most of the store of Tesco are: Electronic

Shelf Labelling, E- Point of Sale, Radio Frequency Identification, E-Fund Transfer, Self-Check-
out machines.
Environmental:
Government forces organisation to address the environmental issues and adopt the
various operations which benefits society. Tesco launched its scheme “Greener Living Scheme”,
which is minimizing the waste produced in stores and committed to reducing carbon footprints
up to 50% by 2020. Tesco also promises to use renewable resources and utilisation of
greenhouse gases and generated 100% electricity by using these renewable source by 2030.
Tesco also took a pride step towards the environmental pollution by reducing the packaging of
plastic bags and uses the reusable bags. This approach of using reusable bags has reduce of
plastic bag by 65% to 68% and risen the reusable bags up to 70% to 75%.
Legal:
Legislations and government policies also directly impact on organisation. Tesco faces
many legal issues throughout the periods which influence the performance growth of the
company. In 2016, workers of Tesco file the legal action against discrimination in employees on
the basis of age and gender. Worker were highly disappointed by the low pay rates for night,
weekend and bank holidays (Sivalingam, 2015). Tesco was also affected by legal action of fraud
accounting and misleading investors. As Tesco lastly agreed to pay the GBP 12 million as
penalty to settle legal action. Food Retailing Commission is forcing to use the standard pricing
for goods, means the retailers cannot change the price of goods and services without any
noticing. This action also affect the Tesco in pricing of products and Tesco facilitate these
policies by providing its customer price reduction on purchasing of fuel.
 As mentioned above, many factors affect the business of Tesco positively and negatively.
Political factor plays important role in business regulating. The government laws and
legislation affect the Tesco such UK government, the European Union and the World
Trade Organization. European Union allows free moving of goods and services between
the countries, this helps Tesco to expanding market at international level. The social
factors also affect Tesco as increasing birth rate which means increase in purchase of

products. The social factor influencing Tesco business by providing good sales on
products and maximize the profits.
 As government changes the policies, such as changes in taxation or any other factor
which is affect the finance. According to government policies, Tesco is increasing and
decreasing the prices of products. In 2204 FRC (Food Retailing Commission), introduce
the Code of Practice in which no one can change the prices without noticing government,
to facilitate these policies Tesco reduce fuel price on purchasing of the grocery products
to customers.
 All the external factors affected organizations which are important to handle by team of
organization. But, the most important factor for management team to attend
environmental factor. In this Manager should attend the conferences and awareness
meeting related to organization. In Tesco, the awareness of reducing the plastic bags
packaging is also decided by the management department. The scheme “Greener Living
Scheme” is also given by Tesco.
CONCLUSION
From this report, it is concluded that PESTEL analysis on Tesco many factors that affect
growth and opportunities of the company. By focusing on all the factors (political, social,
economic, technical and legal) of the company, offers healthy marketing environment and future
growth to the company. This arises interest of stakeholder in the company.

REFERENCES
Books and Journals
Franz, P. and Kirchmer, M., 2012. Value-driven business process management: The value-
switch for lasting competitive advantage (Vol. 234). New York: McGraw-Hill.
Metzger, K., 2014. Business analysis of UK supermarket industry.
Rahman, N.A., Saharuddin, A.H. and Rasdi, R., 2014. Effect of the northern sea route opening
to the shipping activities at Malacca straits. International Journal of e-Navigation and
Maritime Economy.1. pp. 85-98.
Sivalingam, R., 2015. Strategic Management. Industry Analysis, Strategic Drift and Re-
Strategizing.
Song, J., Sun, Y. and Jin, L., 2017. PESTEL analysis of the development of the waste-to-energy
incineration industry in China. Renewable and Sustainable Energy Reviews.80. pp. 276-
289.
Online
PESTLE Analysis of Tesco, 2018. UMAR FAROOQ. [Online}.Accessed through:
<https://www.marketingtutor.net/tesco-pestle-analysis/>