Impact of PESTEL Factors on Tesco's Global Business Operations

This report provides a comprehensive analysis of Tesco's global business environment, focusing on the application of the PESTEL framework. It examines the political, economic, social, technological, environmental, and legal factors impacting Tesco's operations and performance. The political section discusses legislation, tax rates, and political instability, including the impact of import duties and proposed taxes. Economic factors analyzed include labor costs, borrowing costs, and the need for brand advertisement. The social aspect covers changing consumer trends, including demand for fast delivery, flexible return policies, and health concerns. Technological advancements, such as RFID technology and online payment systems, are also addressed. Environmental considerations include pressure from government agencies and Tesco's commitment to renewable energy and reducing its carbon footprint. Finally, the legal environment explores changes in laws and legal actions, emphasizing the importance of operational conduct. The report references key sources to support its findings.

Global Business Environment
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In the retail industry, Tesco is a British multinational company based in England, United
Kingdom (UK). Tesco is one of the largest retail supermarkets in terms of revenue across the
globe with high profits (Aiello, et al., 2020). It is essential to analyse the unpredictable
external environmental factors affecting the operations and performance of the company
through PESTEL Analysis used as a tool which consists of political, economic, social,
technological, environmental and legal factors.
Political
In the UK, Tesco’s operations are affected by the current and impending legislation,
unemployment rate, tax rates, economic condition and political instability. For instance, there
is an impact of import duty on Tesco’s goods due to importing some of them outside the UK
such as East Asia and China. The “Tesco Tax” was proposed for implying tax on large
supermarkets by the local council but was refused as an initiative by the UK government for
avoiding price hike in future (Simpson, 2014). The key driver of change is creation of new
employment opportunities which will help in increasing products demand and diversifying
workforce.
Economic
In the UK, labour cost affects the supermarkets due to increase in the UK “Minimum Wage
Rate” which might cost millions of pounds to Tesco. Other than this, factors affecting Tesco
in the UK are prices, cost and profits where it is essential to focus on borrowing cost for the
company which is increasing. This will lead to decreasing profits and increasing prices and
costs affecting cost leadership strategy and brand reputation with the presence of
diversification (Rodionova, 2017). The key driver of change is to shift the focus towards
valuable brands advertisement.
Social
There is change in consumers shopping trend consistently where individuals are having tough
schedules expecting to have fast delivery along with flexible goods return policy. In the UK,
Tesco is relied on its customers and requires understanding and providing services to them
for dealing with such issues that is consumer attitudes and beliefs. Other than this, obesity is
another concern for customers and the society while thinking about their health along with
their demand for organic food and changing behaviour considered by Tesco (Doward, 2017).
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The key driver of change for Tesco is to avail the opportunity by close ties development
along with customers connection with one another.
Technological
In the UK, Tesco faces the issue of horsemeat scandal and poor customer experiences which
requires technological advancement to bring new opportunities for regaining the trust of
customer. It is possible by adopting retrial technologies as available such as introducing
RFID (radio frequency identification) Technology for customers to increase the experience
in-store. Tesco also created its own “online mobile payment system” named as PayQwid for
customers to pay whenever they want (Neate & Moulds, 2013). The key driver of change is
using new technology in the working conditions and production process such as
telecommuting along with impacting skills employees use.
Environmental
There is an immense pressure on the company faced from the government agencies while
addressing environmental issues where Tesco is liable to respond on such issues for
benefiting society. Tesco encourages the consumers to shop online and collect plastic bags
which are unwanted from customers for recycling as to create a sustainable environment and
future. The key drivers of change is the company’s commitment of using renewable sources
along with generating its electricity overall. Also, Tesco took decision of minimizing the
carbon footprint by 50 per cent (Johnston, 2017).
Legal
In business legal environment, there are changes in laws affecting the performance while
achieving the objective of the company. There were legal action taken against the employer
by 17 workers in Tesco for discriminating them on the basis of gender and age along with
their frustration level due to low pay rates (Garrett, 2016). The key driver of change is
operational conduct by Tesco based on FRC (Food Retailing Commission) with strict code of
practice.
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References
Aiello, L. M., Quercia, D., Schifanella, R. & Del Prete, L., 2020. Tesco Grocery 1.0, a large-
scale dataset of grocery purchases in London.. Scientific Data, 7(1), pp. 1-11.
Doward, J., 2017. Organic food sales soar as shoppers put quality before price. [Online]
Available at: https://www.theguardian.com/environment/2017/feb/19/sales-of-organic-food-
soar-fruit-vegetables-supermarkets
[Accessed 14 March 2020].
Garrett, M. T., 2016. Tesco faces age and gender discrimination claim in employment case.
[Online]
Available at: https://www.lexology.com/library/detail.aspx?g=376a55dc-c5c4-40d2-a6b1-
fc652b0144df
[Accessed 14 March 2020].
Johnston, I., 2017. Tesco to switch to 100% renewable electricity this year in UK and by
2030 worldwide. [Online]
Available at: https://www.independent.co.uk/environment/tesco-switch-renewable-lectricity-
energy-uk-2017-by-2030-worldwide-supermarket-a7739076.html
[Accessed 14 March 2020].
Neate, R. & Moulds, J., 2013. Tesco sales tumble on horsemeat scandal. [Online]
Available at: https://www.theguardian.com/business/2013/jun/05/tesco-sales-fall-horsemeat-
scandal
[Accessed 14 March 2020].
Rodionova, Z., 2017. UK retailers have cut 'nearly 4,000 staff' ahead of new national
minimum wage rate. [Online]
Available at: https://www.independent.co.uk/news/business/news/uk-retailers-cut-4000-staff-
national-minimum-wage-john-lewis-sainsburys-tesco-new-effect-employees-a7641261.html
[Accessed 14 March 2020].
Simpson, E., 2014. English councils propose 'Tesco tax'. [Online]
Available at: https://www.bbc.com/news/business-28495631
[Accessed 14 March 2020].
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