Analysis of TESCO PLC's External Environment: A PESTLE Approach

This report provides a detailed PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis of TESCO PLC, a leading global grocery retailer. The report examines the hierarchical organizational structure of TESCO PLC, including the roles of the board of directors, committees, and regional managers. It explores how various external factors, such as political stability, economic conditions (inflation, exchange rates, and employment), social trends (consumer behavior and demographics), technological advancements (online shopping, self-checkouts, and data analytics), and legal regulations (labor laws, consumer protection, and competition laws), impact TESCO's operations and strategic decisions. The analysis highlights how TESCO adapts to these factors, emphasizing the importance of understanding and responding to changes in the external environment to minimize risks and maximize opportunities. The report includes examples such as TESCO's expansion in China, the impact of economic uncertainty, and the adoption of new technologies. The conclusion summarizes the key findings and the overall impact of the external environment on TESCO PLC's performance and strategic planning.

PESTLE ANALYSIS OF
TESCO

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1 Structure of TESCO PLC........................................................................................................3
2 Effects of external environmental factors on Tesco Plc...........................................................5
CONCLUSION .............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
PESTLE analysis is a tool which used to know about external factors that affect a
business directly or indirectly. An organisation can not avoid these factor it can only minimise
the impact by taking precautionary actions. Organisation avail deeper understanding about
environment. PESTLE help in taking strategic and tactical decision both. TESCO PLC is the one
the largest grocery retailer company in the world. Present study will conduct PESTLE of TESCO
PLC. Study will enhance the deeper knowledge of businesses environment which affect the
decision making of organisation. It will also analyse the way TESCO handle its external
environment to minimise the risk.
TASK
1 Structure of TESCO PLC
TESCO PLC obtain hierarchical organisational structure. Its corporate governance structure
consist 10 board of directors. Chairman manage effectiveness of board. He insures interest of all

stakeholder while making policy also communicate benefit and interest of all stakeholder and
shareholder attached with decision taken by board. Chief executive are responsible for planning
and making action plans aligns with organisational goal. He is responsible to find new
opportunities, making strategies, team building, provide updates to stakeholder regarding
performance of strategic decision and policy adopted by board of members. Non executive
directors helps executive in making policies. Senior independent direct help organisation to solve
issues relate to shareholders. SID is authorised to access the performance and effectiveness of
chairman and give appraisal to him. TESCO PLC has five committees to maintain governance
functions as audit committee, nomination committee, disclosure committee, corporate social
committee and remuneration committee. Regional manager is next higher authority of store
manager. Different department manager comes under the store manager (Hartmann. and
Schwieger, 2016)
TESCO PLC has huge human capital and wide span of business function. To isure good
governance practice in organisation it has five governance committees which handle issue
relation to business function. Remuneration committee deals with arrangement of remuneration
to senior employees of organisation. It defines pension plan to executive also monitor their
performance. Remuneration committee ensure that Fair and unbiased remuneration must be
given to them. Nomination committee seek for most suitable candidate must be placed in board
of direct position. Nomination committee also help in getting the best CEO for their organisation.
Disclosure committee check that all the information which must be given to all stakeholders are
timely provide to them. These committee check accuracy and fairness of information. Its prtact

right to information right of stakeholder. Corporate social responsibility committee make policy
and decision regarding welfare of society and public interest apart from business activities. social
responsibility of business can be education, awareness programme ,environmental efforts, free
vocational courses etc. audit committee insure unethical practice and accuracy of financial
reports. it audits the account and manage financial risk. Audit committee communicate all the
issues regarding financial reports. This committee meet on ad-hoc basis. Good governance and
suitable organisational structure help TESCO in handling this big elephant company. Code of
conduct of TESCO PLC insure legal practice for supplier, product, competition law and. TESCO
PLC do not allow cheating, fraud, workplace harassments, bribery and mental and physical abuse
in organisation(Green , 2016)
2 Effects of external environmental factors on Tesco Plc
TESCO PLC is the leading brand that has branches across the world. There are various
external elements that affect overall operation of business unit to great extent. PESTLE
framework is the tool that assist firm in analyzing effects of macro factors of organization.
Political factor
TESCO PLC is operating its business worldwide, it has many stores in other location. It
is essential for firm that to follow rules and regulation of each country in order to run operations
smoothly. Each nation has its own norms and Tesco’s performance influenced by these laws
greatly. Unstable political condition increases risk for the TESCO PLC For example: China
promotes free flow foreign trades. This impacts positively on overall operational performance of
TESCO PLC because it gets opportunity to run its business and enhance export activities
significantly. In the year 2009 Tesco has made agreement and have cam into joint venture to
develop shopping mall in China. It has opened three stores there that has helped the firm in
increasing its sales volume to great extent(Knoke, 2018)
Bureaucracy, corruption negatively affects performance of Tesco. In the year 2014,
government has increased tax rates for supermarkets and has refused retailers to increase their p
product prices. This has negatively impact on revenues of Tesco and its net profit has been
decreased to great extent. On other hand Position changes in laws such as flexibility in
employment legislation has helped the firm in hiring more people and providing them income

sources. Free trade blocs give opportunities to Tesco to expand their business globally and make
connection with mass audience.
Economic factor
This is most essential factor that influence overall performance of Tesco . If economic
condition of nation is good then it impacts positive on business whereas if financial situation of
country is poor then it may adversely affect business operations. Inflation, deflation, exchange
rats etc, affect purchasing power of consumers. If there is lack of job opportunities and inflation
then in such condition consumers will not have adequate money to spend on large purchasing. In
such condition sales of supermarket industry gets down. This may affect negatively of Tesco plc
as well. Whereas if there is huge employment opportunities and population have adequate
income sources then people will be able to spend their money. This would enhance sales of the
organization significantly. It is very important for Tesco Plc that to be aware with economic
condition of each country in which it is operating its business. Changes in taxation affect
accessibility of funds. Furthermore, if exchange rates get increased or interest rate gets changed
then it may enhance cost of operation of entire industry. This will indirectly affect Tesco as well
and it will have to reduce its cost by increasing price or reducing quality of products. This may
make consumers negatively and will affect profitability of organization to great extent.
Tesco has high dependency on UK market thus, changes in economic situation of UK
badly affect Tesco Plc. Spending power of people is highly depended upon financial situation of
region. Economic uncertainty creates difficulty for people to spend much amount that adversely
affect sales and profit of Tesco. On other hand, economic stability positively affects overall
growth and operational performance of business unit. (Hamilton. and Webster, 2015)
Social factor
Over a period shopping trends have been changed significantly. Tesco is highly depended
upon UK thus, it is very important for organization that to understand needs of buyers and their
desires. This will help the firm in providing satisfactory products to consumers and retaining
them in business for longer duration. Otherwise, Tesco may face huge difficulties and may fail to
sustain in market. UK is facing issue of obesity that has become serious problem in UK. In such
condition it is very important for Tesco that to provide goods and services to buyers as per the
requirements of them so that they can become fit. Statistics show that 65% UK consumers are

very loyal and if they like some brand then they frequently buy that product (PESTLE Analysis of
Tesco, 2018).
Attitude of customers towards food products is frequently changing, Tesco has to ensure
offering them similar goods so that it can retain its potential buyers in firm for longer duration.
Demographic changes, cultural elements influence choice of person. Thus, it is essential to
consider all these factors in order to offer satisfactory services to customers. Tesco Plc always
adopt product mix strategy in order to increase demand for its products. This helps the min
increasing variety of goods and meeting with needs of consumers significantly. Young people
like to buy online, that find it more convenient. It is inexpensive way to enhance deamdn and
generate more sales in organisation.(Bousalem. and Aichouche, 2016)
Technological factor –
Technology help in maintain product and service innovative and interesting to customer.
Nowadays technology play very crucial role because its help in a business at each level like
production, distribution, marketing and customer relationship and research and development.
Building. If an organisation fail in maintain technical competency it affects business resulting
outdated product and loss of customer satisfaction. An organisation who use less technology than
it also loose expression among customer. Technical efficiency can because of decreases share
market like if customer do not have option of online shopping and payment option it makes
customer disappointed. . Technology change also have some negative side like when these
changes happens frequently I increase the cost of business to avail the latest technical machine
and software. Organisation has to arrange frequent training and development programme to
employee which also disturb organisational budget. More dependency on Technology give birth
to Data theft and privacy breach. Unethical hacker steals all the data of important data of
customer and organisation and demand ransom for access to it which is big can emerge as big
thereat to organisation. TESCO know the value of technology. TESCO try to acquire the latest
technical development in industry as soon as possible so it focuses on research and technical
need and risk assessment. Technical change can be seen in TESCO’s store for instance self-
check out app, augmented reality, sensor data. TESCO use facial reorganisation to permit entry
in store, by analysing facial expression TESCO also get to know which section of store is chosen
first by customer after enter in store(Bousalem. and Aichouche, 2016,) TESCO use radio
frequency identification in inventory management. TESCO share its RFID data with finance,

marketing department as well with supplier. TESCO also face some issue after implementation
the technology as over dependency on technology, its reduce human touch in stores. Employees
also feel like machine which loses their interest and efficacy. Maintain cost of this technology is
very high. Interpersonal relation and communication between customer and staff is reduced.
Apart from stores TESCO use the latest customer relationship software to quick resolution of
customer complaint. Technology reduce marketing cost, TESCO use internet for give
information about discount, offers, coupons and latest launch product to customer buy using
email, phone and social media.(Bagley, 2015)
Legal factor-
Legal factor have huge impact on business policy. Legal factor are the rule and
regulation which have to follow by every organisation in its every activity. This legal framework
is formulated by government for public interest and society welfare. An organisation has to
changes its current policy and make new plan accordance with change happened in legal
structure. TESCO is must effect change in government policy regarding labour, customer
behaviour , competitor practices, license law, pricing policy restriction and law for market
practice. If this law are followed by organisational obediently it enhances the trust of customer
and employee. Legal compliance also improve brand image and goodwill. Where avoidance of
these legal practice result huge fine and penalty on organisation even sometime government
cancel trade licence of company. TESCO PLC conduct its business under law make by food
retailing commission (FRC). TESCO has to carefully follow lobar low and consumer protection
law. According to sale and purchase act TESCO can has to maintain its price fair. TESCO can
not sell its product which is not accepted by customers and it also maintains quality and
packaging of product. Another law regarding labelling and packaging bind TESCO to put all the
information about product like ingredients, allergic effect, caution and warning. TESCO has to
insure safety and interest of it employee and customer both. Employee has to get good working
environment, minimum wages, physical and financial protection to employee, pension and
benefit. According to company low TESCO PLC can not use unfair marketing practice to grab
market share from competitors. Recently change in government policy regarding food industry
affect TESCO PLC, because of it TESCO has to changes its traditional suppy chain. According
to new food industry low every organisation providing eating product has to check quality of raw
material they procure from supplier even they also have to maintain log term freshness of it so

TESCO apply FRID in its logistics. a raw material receive by TESCO PLC it’s quality is
checked before even enter in production department. According to labour law TESCO now
improve work condition for its employee. Now employee get best work condition environment
and financial and physical safety both. Consumer protection law force TESCO PLC to its low
regarding return policy, earlier only company follow 12 days return policy but now it give 20
days’ more so that consumer get extra time to understand the product. These legal factor also
increases operating cost as increases cost in establishing more employee friendly work
environmental and safety equipment frequency changes. Business has to pay huge panlty and
compensation to customer. Sometimes customer take advantage of legal facility provided to
them , they file wrong allegation to organisation so that they can get compensation.(Knoke,
2018)
Environmental factor-
Environmental factor affect TESCO PLC in getting in raw material on time. Climate
change demand more value addition in food product so that they can be store for long time
government’s policy regarding environment affect TESCO to avail environment friendly
refrigerator in stores. According to environmental investigators, retail grocery store are
responsible for large emission of HFC gas. TESCO also now use paper bag rather than plastic
bag. TESCO motivate people to shop online rather than store shopping . It also launches TESCO
van which use bio fuel to distribute orders. This van also collect plastic bag form customer to
save environment. TESCO also promise to reduce its carbon footprint. TESCO use electricity
produce by renuable sources. As TESCO use agro product as its raw material so adverse
environmental hamper its supply quantity as well as quality. Government now more serious for
environment so every retail company take initiative to protect the environment. If a company
give its effort for environmental safety, it also helps its expression among customer. TESCO
PLC also give emphatic on recycling and rain water storage . Environmental also play a huge
role when taking decision for technology adoption. An organisation can not adopt any practice
and technology which harm earth health. Environmental factor of organisation also include
external and internal environment of organisation which can be measure by PESTLE, PORTER
5 p and SWOT analysis. Only environment safety is no more concern of government. Now
government make policies for sustainable environmental growth. Environmental factors greatly

affect the business and its related activities. Every activity of business must reflect effort of
environmental protection effort. Although safety work is not only responsibility of organisation ,
it also a accountability of customer so , TESCO PLC also provide awareness to its customer by
education programme, website and by phone massage. Green trade is new concept which is
emerging in industry. In this concept an organisation voluntary try to make its strategic and
tactical decisions which also have element of environment safety and protection.(Epstein, 2018)
CONCLUSION
From the above study it has been concluded that external forces play a very crucial role
in business. a business cannot avoid these factor. It must consider all the external factor while
making policies and decision making, it will help company to minimise its risk and adverse
consequences. Government provide law framework and basic infrastructure to organisation so
that it can run its function smoothly. Technical factor help an organisation to increase its market
share and customer loyalty. A technical healthy organisation can sustain itself for long time with
more efficiency. Legal factor help organisation to avail human resources and other input which
required for organisation. An organisation must follow legal and environment factor voluntary it
will help in brand image and goodwill.

REFERENCES
Books and Journals
Hartmann, M. and Schwieger, W., 2016. Hierarchically-structured porous materials: from
basic understanding to applications. Chemical Society Reviews. 45(12), pp.3311-
3312.
Green, M., 2016. Organisational Governance and Accountability: Do We Have Anything to
Learn from Studying African Traditional Societies?. In Accountability and Social
Responsibility: International Perspectives (pp. 75-100). Emerald Group Publishing
Limited.
Knoke, D., 2018. Changing organizations: Business networks in the new political economy.
Routledge.
Bousalem, R. and Aichouche, K., 2016, April. Presenting a model of critical success factors
for organizational innovation in Algerian Pharmaceutical Company. In Digital
Economy (ICDEc), International Conference on (pp. 45-52). IEEE.
Epstein, M.J., 2018. Making sustainability work: Best practices in managing and measuring
corporate social, environmental and economic impacts. Routledge.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford
University Press, USA.
Bagley, C.E., 2015. Managers and the legal environment: Strategies for the 21st century.
Cengage Learning.
Online
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