Tesco's Business in Context: PESTLE Analysis, Challenges, and Strategy

This report provides a comprehensive analysis of Tesco's business environment using the PESTLE framework, examining the political, economic, social, technological, legal, and environmental factors impacting the company. It identifies key challenges faced by Tesco, including the impact of Brexit, the COVID-19 pandemic, and legal troubles, and details how the organization is responding to these challenges through modifications in its marketing, human resources, financial management, and information systems strategies. The report also offers recommendations for Tesco to mitigate the impacts of these challenges and ensure smooth business operations, focusing on areas such as supply chain management, risk mitigation, and environmental sustainability.

Business In Context

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
The positive and negative impacts of the PESTLE environmental factors............................3
Some key challenges faced by organisation...........................................................................6
How organisation is responding to such challenges in relation to its business strategy........7
RECOMMENDATIONS.................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business refers to the efforts and actions taken by companies to manufacture and sell
their products or services in the market for enhancing their profitability. Business could be
operated by profit making organisation or non-profit companies (Chi and et. al., 2019). There are
various internal and external environmental factors that could influence the schemes and
decisions of companies. For the purpose of this report, Tesco which is a UK based retailer
company and has its headquarter in Welwyn Garden City, England. The report mainly focuses on
positive and negative impacts of environmental factors on the company. The next section covers
some challenges faced by organisation and how it is responding to such challenges in relation to
its business strategy.
MAIN BODY
The positive and negative impacts of the PESTLE environmental factors
PESTLE analysis is a marketing tool used to identify external environmental factors
impacting the strategies and decisions of companies. PESTLE stands for Political, Economic,
Social, Technological, Legal and Environmental factors. It helps management department of a
company with situational information about the direction in which an organisation is going, its
positioning, targets, growth and any risks involved which could decrease its productivity (López
López, 2017). In context of Tesco, the positive and negative impacts of PESTLE environmental
factors are as follows:
Political factors:
Government schemes and laws such as tax policies, trade reforms, political stability and
businesses regulations of a country that influences the working of companies comes under this
factor. In respect to Tesco, as the company operates its business on global level it has to follow
rules and regulations implemented by government of different countries. Political stability of a
country provides better opportunities for company to trade.
Positive impacts: The company keeps a transparent environment in its political actions
and do not engage itself in any governmental activities which might sabotage its consumers and
colleagues.
Negative impacts: Even though the political environment of UK is stable but Brexit has
developed lot of uncertainty for the company like it faces some interruptions to supplies,

especially to the island of Ireland. This disruption was for certain categories of food such as
ready made meals.
Economic factors:
The financial situations of a country which could impact the strategic planning of
businesses comes under this factor of PESTLE analysis. Elements such as unemployment rate,
economic growth or decline, exchange rates, credit availability and cost of living are economic
factors that influences the working of companies (Kesseli, 2017). In case of Tesco, these factors
mostly supports costs, prices, demands and profits. Therefore, it must keep itself aware of any
modifications in these schemes such as in taxation or any other element which might impact the
approachability of finance.
Positive impacts: Tesco created a great employment for people even in COVID-19
pandemic. For instance, it employed almost 16,000 extra workers in the pandemic to support
online grocery shopping (Tesco gives permanent jobs to 16,000 staff taken on in Covid crisis,
2020.).
Negative impacts: Even though the company is becoming popular in international
market, it is still dependent on the market of UK where its market share is almost 27.7% in the
grocery market (PESTLE Analysis of Tesco, 2018.).
Social factors:
These elements consist of cultural standards, age distribution, customers' buying patterns
and population growth rates which might change the working environment of company (García
Gimeno, 2021). In relation to Tesco, the people of UK have shifted towards bulk purchasing and
one-stop buying which resulted in increasing number of food products offered by the company
for sale. The services that are needed by its consumers depends on their cultural factors with
which a person has lived. According to PWC (Price waterhouse Coopers) reports about 65% of
people in UK are loyal buyers, the company must utilize this opportunity by building one to one
relations with them (PESTLE Analysis of Tesco, 2018.).
Positive impacts: The changes in demands of costumers motivate company to produce
new products or services for them. It also helps in opening of new market such as the birth rate is
increasing which will allow company to sell toys for children in upcoming years.

Negative impacts: As people are becoming more aware about the benefits of organic
foods and are shifting towards it, the company has to manage these changes as well as should try
to capture large customer base by fulfilling this demand.
Technological factors:
New technologies such as artificial intelligence or robotics that are continuously
emerging in the world which influence strategies and planning of organisations comes under this
factor (Singh, 2017). In case of Tesco, these progression in technology have bought different
opportunities for it such as the company launched RFID (Radio Frequency Identification)
technology to enhance in-shop experience for buyers. This technology mechanically counts stock
and withdraw it after sales.
Positive impacts: It saves labour cost and time of the company. Customers could also
save time and does not have to stand in lines as they can order products through online portals as
well as pay their money on PayQwid an online mobile app created by company.
Negative impacts: As the whole process from product ordering to payment by customers
through online portals is technology dependent, the failure or technical issues in it could result in
severe losses for the company.
Legal factors:
These elements include all the laws related to businesses such as employment laws,
labour laws and trading laws which are implemented by the government in a country that could
cause legal trouble for companies if not followed properly. In context to Tesco, in order to run its
business smoothly the company has to follow both domestic and international market laws. The
company cannot pay its workers less than nominal wages set by the government in UK and also
can not trade alcohol to underage children.
Positive impacts: The company is working in legalized manner which allows it to run its
business efficiently in different countries.
Negative impacts: Sometimes not following legal matters properly could cause trouble
for the company such as in year 2016, employees of Tesco took action against employer on the
ground of gender and age discrimination (PESTLE Analysis of Tesco, 2018.).
Environmental factors:
The elements responsible for conserving environment and pressure companies to address
issues related to it as well as choose ways to decrease their impacts which could benefit world.

In case of Tesco, it is bound to utilize renewable resources and by 2030 create 100% of its
electricity (PESTLE Analysis of Tesco, 2018.).
Positive impacts: The company takes responsibility of conserving environment and
makes itself aware about environmental situations. For instance, Tesco ensured to reduce its
carbon footprint up to 50% (PESTLE Analysis of Tesco, 2018) .
Negative impacts: As people are becoming more aware about conserving environment,
if the company does not take initiative towards reducing carbon footprints it might reduce its
profitability.
Some key challenges faced by organisation
Through PESTLE analyses of Tesco, it has been observed that the company faced some
challenges while operating business. Some of these challenges are explained below:
 Due to Brexit deal, Tesco had to cut their partnership with Unilever which was its main
supplier and because of this there was rise in prices of all products offered by the
company. As the prices rose company started to loose its potential customers to other
inexpensive retailers.
 Even though sales increases during COVID-19 but the company faces a sharp down fall
in overall profit after investing about £900m to keep going trading continuously at the
time of pandemic. The company also encountered a big loss of almost £175m at Tesco
bank. The share price also reduced by 2.65% to 225.96p in primal trading (Tesco counts
cost of Covid trading as profits drop, 2021).
 Tesco also have to face a legal trouble for accounting crime and also for misleading their
investors and to settle this matter, the paid around GBP 12 million (PESTLE Analysis of
Tesco, 2018). The company must take care of its actions according to the laws to ignore
any further troubles related to legal matters.
 The company is also being pressurised by government authorities to implement
environmental friendly policies. Therefore, the company must react to these problems to
benefit society.
 More utilization of technology leads to many cyber threats. The whole information about
customers is online available which could be used in wrong manner by criminals.
Therefore, the company must take care of these cyber-attacks in order to secure details
about buyers.

How organisation is responding to such challenges in relation to its business strategy
While doing business, many challenges have come along in the way of Tesco, the
company has made many changes in response to these challenges in its business strategies. The
modification made by the organisation has been discussed below:
Marketing Department: The company launched new series of farm products such as
fish, fruit, beef and pork which helped it to attract cost-conscious buyers who did not earlier
valued offerings of Tesco. It shifted from traditional marketing to digital marketing and spend
almost 30% of its marketing revenue on it which resulted into achieving business targets more
easily (How Tesco refreshed their marketing strategy to get back on track, 2017.).
Human Resources: This department works effectively in the times of crisis such as
during COVID-19, it employed around 45,000 employees in just two weeks after outbreak of
pandemic (Redden, 2020). The HR team make sure that people within the company does not feel
discriminated and assure equal employment opportunities for all the employees. The company
believes that diversification in organisation will assist them in keeping their brand image which
will result in achieving good customer base. This division support in examine the present
human resources with HR classification and work according to political, technological, social
and economic pressure. It ensures that all the employees within the organisation use their full
potential and give their best work to accomplish goals set by company.
Financial Management: This department plays a major role at the time of crisis as it
manages finances of company and ensure that it does not face any losses. For instance, during
COVID-19 the finance team played important role in contiguous response of company to the
crisis by working with employees to assist in implementing of wide functional changes. In April
2020, the online business of grocery rise more than double of its capability and became first
retailer in UK to complete around 1 million online food orders within a week (Scherer, Marell
and Wenzl, 2021). The finance department also helps in providing the correct perception about
the shopping patterns of its customers which in turn assist the company in taking better decisions
in business.
Information Systems: This department supports in implementing strategies and also
improves the collaboration of company with key shareholders. They collect important
information required to implement functional strategies such as demand of particular product or
service, customer's number and inventory management. The developers from this division

created CRM system which helps in interaction with customers. All the queries related to the
products could be posted here by buyers. This department also helps in maintaining relationship
with suppliers which provides the company a sustainable competitive advantage. Company's
information systems for employees are easy to access which improves their work efficiency and
they doest not face any difficulties in operating this system (Giannikas and McFarlane, 2021).
This department helps the employees and management department to interact smoothly at the
time of crisis as they both have clear information about availability of stock, decision by
company, tactical strategies and other details that are required to run business efficiently.
RECOMMENDATIONS
To reduce the impacts of various challenges faced by Tesco, the company must take
some steps. Here are some recommendations which the company could implement in order to
run business smoothly:
 Tesco could make better online services for customers by offering them good added
values and modify its return policies.
 The company must implement Artificial Intelligence (AI) to observe carefully the
purchasing habits of customers and could deliver better services to them. The company
must also install some strong technology to protect against cyber-attacks.
 To grasp new opportunities and identify threats, the company needs to continuously plan
and adopt advanced techniques which might help in providing excellent services to
customers.
 As political policies have power to change the working style and might impact the
businesses, the selected organisation must be always ready to deal with domestic and
global political changes.
 As company operated its businesses in various countries, their government policies might
impact Tesco, so it must understand the schemes and laws of different nations that the
selected organisation needs to stay in each country.
CONCLUSION
Business is a procedure of making money through producing, selling and distributing
products or services in the marketplace. From the above report, it could be observed that
businesses could be affected by several macro environmental factors which might also decrease

their growth and profitability. As in the report, it has been seen that the selected organisation has
faced many challenges while running its business in various countries and took several steps to
overcome these challenges. The external environmental factors also impacted the organisation in
positive and negative ways. In the end it could be concluded that while operating a business
companies must evaluate all the surrounding factors in which they are willing to do their
businesses.

REFERENCES
Books and Journals
Chi, T. and et. al., 2019. Real options theory in international business. Journal of International
Business Studies. 50(4). pp.525-553.
García Gimeno, D. V., 2021. Business plan to implement a Formula Student
Academy (Bachelor's thesis, Universitat Politècnica de Catalunya).
Giannikas, V. and McFarlane, D., 2021. Examining the value of flexible logistics
offerings. European Journal of Operational Research. 290(3). pp.968-981.
Kesseli, T., 2017. The business environment and culture of Mexico from the perspective of
Finnish companies.
López López, N., 2017. Different ways to assure the continuity of the business.
Redden, G., 2020. Human capital at work: performance measurement, prospective valuation and
labour inequality. Distinktion: Journal of Social Theory, pp.1-17.
Scherer, J., Marell, S. and Wenzl, J., 2021. Building a Sustainable Brand in Specialty Chemicals
(Carve Out from a Big Corporate). Organization and Leadership in Disruptive Times:
Design and Implementation Using the 3-P-Model, pp.253-265.
Singh, T. P., 2017. Organized Retailing-A SWOC Analysis. International Journal of Research in
Management & Business Studies. 5.
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Tesco gives permanent jobs to 16,000 staff taken on in Covid crisis. 2020. [Online] Available
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jobs-to-16000-staff-taken-on-in-covid-crisis>./
PESTLE Analysis of Tesco. 2018. [Online] Available through:
<https://www.marketingtutor.net/tesco-pestle-analysis/>./
How Tesco refreshed their marketing strategy to get back on track. 2017. [Online] Available
through: <https://www.smartinsights.com/online-pr/reputation-management-online-pr/
tesco-turned-marketing-strategy-around/>./
Tesco counts cost of Covid trading as profits drop. 2021. [Online] Available through:
<https://www.bbc.com/news/business-56742832>./