Global Business Environment: PESTLE Analysis of Tesco and Key Drivers

This report provides a PESTLE analysis of Tesco, a British multinational retail organization. It examines the political, economic, social, technological, legal, and environmental factors impacting Tesco's operations. The analysis highlights the influence of political instability, economic conditions, changing consumer expectations, technological advancements, legal regulations, and environmental concerns. The report identifies key drivers of change, such as the need to focus on the domestic market, adapt to health and hygiene trends, prioritize product quality, leverage social media marketing, optimize online sales, embrace technological advancements, and promote sustainable development. The conclusion emphasizes the importance of continuous environmental analysis and adaptability for achieving profit maximization and customer satisfaction.

GLOBAL BUSINESS ENVIRONMENT
BM461

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Background..................................................................................................................................3
PESTLE Analysis........................................................................................................................3
Key drivers of change for future direction...................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Global business environment refers to the environment in the various countries having
the exogenous factors that are impacting the decision-making in the home country. It involves
certain factors that are shaping the nature of the global business environment. The project shall
be highlighting the factors in the external environment which are Impacting the business of
Tesco company through the PESTLE analysis. Further it shall be reflecting the key drivers of
change that the management shall undertake for directing the future of the company.
MAIN BODY
Background
Tesco Plc is a British multinational retail organization that is involved in the business of
grocery and merchandise products. It is one of the largest supermarket chains and the market
leader in grocery products operating across the world in several countries (Kokodey, Gnezdova
and Lomachenko, 2018). It was founded in 1919 and the headquarters are established in London.
It serves 11 different countries through differently sized departmental stores.
PESTLE Analysis
PESTLE analysis is the tool that is used for monitoring and analysis of the macro-
environmental factors lying in the external environment of the organization. They help in
ascertaining the various opportunities and threats that can influence the process of decision-
making.
Political Environment: - The changing circumstances in the political environment to which the
company is exposed is one of the major reasons impacting its business performance. Since,
Tesco operates in various countries across the globe, it has to stay updated with the different
legislations and regulations formulated by the government in respect of the tax rates,
employment and trade policies. Political instability is one of the major factors that shall influence
the profitability of the company. For example, the Brexit policy that has been adopted and the
referendum of European Union is a major threat to the business. Apart from that the US-China
trade wars have also affected the business of the company from several dimensions (Tallman,
Luo and Buckley, 2018). Currently there is higher level of political instability round the world so
it's better to focus upon the domestic markets more as compared to the international markets.
Economic Environment: - The economic environment in which the company is conducting its
business operations is also one of the major factors that has ever affected the profitability and
future growth prospects of the company. The economic conditions are one of the major concerns
for Tesco in order to leverage the costs, demand, profits and prices of the goods and services that
are offered. The rates of taxation, interest, foreign currency, employment, GDP growth, income
levels, wage rates and the personal disposable income of the customers are some important
dimensions in the economic environment that are to be planned for the business. The
supermarkets of Tesco are established globally but still the major portion of its revenue is
extracted from UK, so it has to be regularly updated with the conditions of its own economy
(PESTLE Analysis for Tesco discusses its Business Environment, 2021). For example, if the
interest rates increase then the borrowing cost for the company shall increase making it difficult

to plan expansions and access the finance. Also, due to the spread of corona pandemic the
disposable income is low and so Tesco has shifted its focus from the luxurious goods towards the
value products.
Social Environment: - The social factors that are forming the part of business environment of
Tesco are major concerns determining the success of the company. The change in the
expectations of the customers based on the market trends and current lifestyle influences the
market share of the company and so they have to adapt to the changed situations in order to
retain the market share of the company (Brenner, 2018). Apart from that the societal influences
and the cultural background of the individual also impacts the choices made and the purchasing
decision in respect of the products and services. The beliefs, attitude and the value system of the
potential customers play major role in the positioning of the brand of the organization. For
example, the concerns for the health and hygiene have increased these days which has forced
Tesco to enter the market of organic products and publicize it in the minds of people. Alo, the
UK consumers prefer bulk buying or in one stop which has led to the company moving to the
non-food segment and making all the necessary items accessible at one place.
Technological Environment: - The current era belongs to technology which has certainly
impacted the businesses and its performance in different ways and has imposed huge impact on
its development. The advancement in the technology, automation of the processes and
modernization in equipment used for the production has improved the overall efficiency of
production and reduced the cost of operations. The digitalization of the marketing of various
products and services through social media applications and the optimized website of the
company have increased the market share of the company. For example, the online purchasing of
the goods, digitalized payment and home delivery has led to ease and convenience for its
customers. Also, the ads through digitalized channels have covered large markets and thereby
have generated brand awareness. The self-service check points that have been discovered is also
a huge opportunity for the markets.
Legal Environment: - The company is operating globally and so has to work in accordance with
the laws and legislations that are framed by the legal bodies in the various countries around the
world. The rules and regulations that are framed in respect of the health, hygiene, ethical code of
conduct, environmental protection, safety measures, safeguarding the employees and quality of
the products that are offered. For example, the Food Retailing Commission that is established
regulates the operations of the retail companies. The other legal bodies working for the welfare
of the employees looks after the fair treatment and proper remuneration. Many laws are
regarding the quality standards of the goods that are produced (Keivanpour, Ait Kadi and
Mascle, 2017.). Tesco has faced legal actions several times due to the misleading of the investors
or in employee discrimination which has caused negative publicity for the company.
Environmental Environment: - Recently corporate social responsibility is the major objective of
the company due to the growing environmental pressures that are developed in the society.
Several actions like the reducing the carbon footprint, waste disposable, clean and green
environment, sustainable development, using the 4R policy and maintaining the quality of
products and services are undertaken for the growth and development of the society. Tesco has

taken several initiatives in respect of safeguarding the environment like renewable energy
sources, reducing carbon footprint, proper waste disposable, recycling of goods etc. This helps
generating reputation for the brand and positively publicizing the company in the minds of the
people.
Key drivers of change for future direction
With the analysis of the external environment of the company the management shall
know the changes that are taking place and the key drivers behind the incorporation of such
changes. In order to survive in the market, the company has to adapt to the changing
environment and implement the same in the business. This shall help in drawing the attention of
the potential customers as well as generate competitive advantage in the industry among the
different competitors of the business (Aithal, 2017).
The management must take strict notice of these changes and take the first mover
advantage in the business by capitalizing on the opportunities, so that long term success and
profitability of the business is ensured. One of such changes that shall give future direction to the
business is that of focusing on the domestic market rather than the international market because
of the growing political instability round the world. Apart from that since maximum revenues of
Tesco are generated by the operations in native country so the efforts must be conducted in UK.
The trends in the market are constantly changing due to the increased awareness of the
health and hygiene so the company must aggressively market the organic products that they are
offering and develop its brand awareness (Hacioglu and Sevgilioglu, 2019). Also, the consumers
these days focus on the quality of the products that are offered by the company so the increased
concern must be quality rather than the price.
Social media marketing is in trend and also gives wide reach in terms of customers which
should be efficiently adopted to ensure that the ads are influencing the buying decision of the
customers. Apart from that the website of the company must be optimized such that conveniently
the goods are sold through online means.
The future of the company can be secured by ensuring that the necessary technological
change shall be undertaken and modern equipment are used for the production such that
operational efficiency can be maximized. Sustainable development must be one of the major
motives of the company so that legal actions, charges can be avoided and the environment is also
protected simultaneously.
CONCLUSION
It can be summarized from the project that in order to shape the future of the company it
shall regularly analyze its external environment and the threats and opportunities that it is
imposing on the operations of the business. With the changing market conditions the company
must adopt with newer policies such that it can fulfil its dual objectives, one is profit
maximization and the other is customer satisfaction.

REFERENCES
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Tallman, S., Luo, Y. and Buckley, P. J., 2018. Business models in global competition. Global
Strategy Journal. 8(4). pp.517-535.
Brenner, B., 2018. Transformative sustainable business models in the light of the digital
imperative—A global business economics perspective. Sustainability. 10(12). p.4428.
Keivanpour, S., Ait Kadi, D. and Mascle, C., 2017. End-of-life aircraft treatment in the context
of sustainable development, lean management, and global business. International Journal of
Sustainable Transportation. 11(5). pp.357-380.
Aithal, P. S., 2017. Impact of Domestic, Foreign, and Global Environments on International
Business Decisions of Multinational Firms: A Systematic Study. International Journal of
Management, Technology, and Social Sciences (IJMTS). 2(2). pp.93-104.
Hacioglu, U. and Sevgilioglu, G., 2019. The evolving role of automated systems and its cyber-
security issue for global business operations in Industry 4.0. International Journal of Business
Ecosystem & Strategy (2687-2293). 1(1). pp.01-11.
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