Evaluating Tesco's Business Environment: PESTLE and Porter's Model

This report provides a comprehensive analysis of Tesco's business environment, beginning with an introduction to the company's legal structure as a public limited company and its operational objectives, such as providing affordable and healthy products. It examines Tesco's market structure, identifying it as an oligopoly within the UK, and discusses how this impacts its competitive strategies. The report includes a briefing on shareholders and stakeholders, detailing the process of stakeholder analysis to prioritize engagement. Furthermore, it explores the importance of analyzing the business environment for Tesco, utilizing the PESTLE framework to identify and explain five critical macro-environmental factors affecting the company. The application of Porter's Five Forces model is discussed in relation to Tesco's competitive behavior, followed by a review of key performance indicators from Tesco's annual report, highlighting business development strategies. The analysis concludes by emphasizing the importance of environmental awareness and strategic adaptation for sustained success in the dynamic retail landscape.

Understanding the business
environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Introduction of the legal structure and the operations and objectives of the organization..........3
Market structure and how it impacts the behaviour of the organization in looking for
competitive advantage.................................................................................................................4
Briefing about shareholder, stakeholder and stakeholder analysis and process of stakeholder
analysis.........................................................................................................................................4
Discussing three reasons why it is important for Tesco to analyse the business environment it
is face. Using the PESTLE identifying and explaining 5 important macro environment factors
affecting Tesco.............................................................................................................................6
Importance of the Porter's five force model, and current behaviour of Tesco ............................8
Key performance indicators in annual report of organization, development of business............9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Providing the information about the organization Tesco, as in the report identifying the legal
structure which is performed in the organization. All the objectives like: healthy supply of the
products etc. Discuss the market structure of the Tesco and how it sees themselves different from
others. There are four types of market structure monopolistic competition, perfect competition,
monopoly and oligopoly. Tesco uses the oligopoly structure in UK. Tesco is the biggest
supermarket company which is leading in multinational retailer in UK and it is at one of the
fastest growing company. It has more than 360000 colleagues working together in the aim to
serve customer the everyday products at affordable price, which are healthy and with good
quality. Defining the Shareholders, stakeholders and briefly continued the stakeholder analysis
that which are low important or high important. Further will know that why analysing the
business environment is important for Tesco. PESTLE\PESTEL analysis is discussed as it is
much important for the business to identify as it consider external factors and along with that will
explain the five macro environmental influence from PESTEL which affecting Tesco. Porter's
five force model and how those 5 major influences of the organization arising form the
competitive market environment.
MAIN BODY
Introduction of the legal structure and the operations and objectives of the organization
Tesco Plc. Is an organization that operates in the retailing industry within the markets of
the United Kingdom. The company was founded by Jack Cohen in the year 1919 i.e., 103 years
ago. Basically, Tesco Plc. Has several supermarkets, hypermarkets, super stores and convenience
shops which provides its customers with a range of products that includes food, beverages,
clothing, fuel, toys, games, health and beauty products and many more of such products.
The legal structure of the Tesco Plc. Is that it is a public limited company. A public
limited company can be defined as a company that offers its shares to the general public in
exchange for a particular sum of money (Cott, 2021). According to the company law of the
United Kingdom, a Public Limited Company can sell its shares freely among the public and it
has a minimum share capital of 50,000 pounds. The Tesco plc is a listed company and is listed
on the London Stock Exchange.
The objectives of Tesco Plc includes availing the products to the customers at affordable
prices, providing the customers with healthy supply of products , engage the customer towards

the online portal of the company and generate a large portion of the revenue, enhance the
customer experience of the and engage more and more customers with the brand and developing
brand loyalty.
Market structure and how it impacts the behaviour of the organization in looking for competitive
advantage.
Market structure can be described as how the companies differentiate themselves from
their competitors and other organizations in the market on the basis of the types of products
offered by them. There are mainly four types of market structure which include, monopolistic
competition, perfect competition, monopoly and oligopoly. It has been determined that the Tesco
plc operates under the oligopoly structure of market within the United Kingdom.
Oligopoly is a market structure which includes a relatively small number of companies
and are not a single company can prevent the other companies from having an uncontrollable
influence on each other. Since, the competition in the oligopoly market structure is high, the firm
tries to provide their products to the customers at reasonable prices and attract them towards the
company (Steingold, and Steingold, 2021. ). Though, the companies under this kind of market
structure provides the products at competitive prices, however, it is not necessary that the
consumers will be having a range of options with them in order to purchase the required products
within the market as the there are only limited number of competitors in this sector which helps
the organization in increasing their profitability. The profits which is generated by the
organizations under the oligopoly market structure can be used by them for the purpose
developing innovative products and offering the same to the customers within the markets. This
helps the organization in attracting and targetting new customers towards the brand and
increasing the sale of the enterprise.
Briefing about shareholder, stakeholder and stakeholder analysis and process of stakeholder
analysis
Shareholder can be a company, individual, organization that holds or buy stocks in the
particular company. It helps the to be a particular owner of the business by allowing them to buy
minimum of one share whether in the company's stocks or mutual funds. Roles of shareholder in
the company, it is not only about investing and receiving profit it has some other responsibilities.
Like checking and making the approvals for financial statement of the company. There are

generally two types of shareholders: Preferred shareholders and Common shareholders
(Rădulescu, 2018).
Stakeholder define as individual or a group that has invested time or interest in any
activity or decision of a company and in the performance of the business. It is essential for
organization to build balanced and healthy relation with stakeholders. Stakeholder can be
investors, employees, creditors, shareholder or government. Different types of stakeholders:
Internal stakeholders which can be Employees, Shareholders, managers, Board of directors
(BOD) and external stakeholders: Customers, Suppliers, Government and communities.
Stakeholder analysis is a process of assessing, identifying and prioritizing who will be
affected by the activity of business (Rześny-Cieplińska, 2021). Some exercise that might help
are: First, identify individual and group who will get affect, Recognize and highly consider the
parties which are getting effected, Clear all the risk, issues or misunderstanding that could
disrupt the business or project.
For conducting analysis there are following steps:
Identify company stake holders: Stakeholder are individual, group or organization which exist
throughout the entire project and till the outcome of the project within the business. Identifying
the different stakeholders are so important in making stakeholder analysis success. If all the stake
holders are not identified then it may bring consequences for the outcome of the project. Existing
knowledge is required in identification of different types of stakeholders.
Illustration 1: Knowledge Base, 2022

Prioritize stakeholders: For managing the stakeholders the prioritization is important it helps to
generate decision-making and focused strategy. Matrix divides the stakeholders into four main
parts.
High importance, high influence: stakeholders have to be fully engaged and fell completely
safe with the project.
High importance, low influence: Stakeholder contribution is important for the completion of
project, and they need special embracing for be interested.
Low importance, high influence: Stakeholders must be carefully monitored and manage for
keeping them satisfied.
Low importance, low influence: They have low priority, minimum efforts are needed to keep
them engage.
Profile stakeholders: When stakeholders are identified by their values, needs, interest, feelings,
importance level, motivation etc. in relation to the project which is fully defined, understand
stakeholders and then manage them correct. Profile have to be credible, and give the true and
correct impression of how the stakeholders are. This could be tough to achieve the fully
sometimes opinions and values of the stakeholders (Muli, 2019). Here data and information are
collected from two approaches: primary and secondary.
Strategy of managing the stakeholders: The overall stakeholder management strategy overwrite
the strategy to approach for the purpose of managing and communicating with stakeholders.
Discussing three reasons why it is important for Tesco to analyse the business environment it is
face. Using the PESTLE identifying and explaining 5 important macro environment factors
affecting Tesco.
The purpose of analysing business environment is to find out and discuss the potential
influence of some aspects in business. It also considers some high-level factors like rate of
interest and how it helps in changing the company's business. This kind of informations
sometimes help the business to attract the market and grow the business with new ideas. So it has
to analyse it according to what it is facing as:
 Analysing helps managers to be aware of linkage between consumer's want, needs and
Tesco's team management and keeps them alert and informed about the situations and conditions.
Analysing help company about the opportunities and threats before or at time of company face. It

brings aware and warns the company in developing and providing appropriate response for the
further goals.
 Nowadays environment is changing very fast, So understanding how environment of
industry is changing and at what pace is very important. It helps the Tesco's managing team to
analyse and clear out the unwanted options which are available and use the alternative and
eliminate the options which are unwanted for the organization. It helps in using the correct
alternative which could be more useful (Jelassi, 2020).
 Analyse of environment is essential for the organization as to use the right strategies
which is useful for the company Tesco (Monte, 2021). Taking decision for changes or
modifications in current strategies when it is necessary for organization.
Explaining 5 important macro environmental factors affecting Unilever are:
Political Factor: This factor affects the performance of Tesco as, This factor helps in identifying
the impact of Government in the organization. Political stability of United Kingdom, Issue
related to political factor and growing free trade relations. Tesco should clarify the challenges
linked to the political condition and situation of the country.
Economic Factors: Performance of Tesco is depended on the situation of the economy.
Economic external factors that is affecting Tesco are: interest rate, employment/unemployment,
inflation and more in the way that opportunity could be grab and use it in bringing the positivity
in economy. Thus, this analyses the opportunities for the Tesco and measure the growth.
Social or Socio cultures Factors: These factor use in scrutinize the social factors of the market.
Socially driven, demographic and behavioural aspect is considered here. Socio culture external
factor significance in Tesco's business which is consumer based: Increasing in health
consciousness, increasing in environmentalist behaviours, bringing the focus towards Gender
equality. It directly addresses the consumer's choice and superiority toward the healthy products.
Technological factors: As there is lot of update in technology because of being supermarket
company it should always look towards bringing innovation in organization (Adamyk, 2019). To
support the consumer's need and full fill their wants to be updated technology. Some following
factors related to this factor are: rising in the automation industry. Increase investment in new
innovated technology.

Environmental Factors: It is uncertain factor. The factor of natural environment issue to the
Tesco are global changes in climate, weather (Rosnizam, 2020). Tesco is focusing on putting
minimum negative effect to the environment and initiating towards keeping environment clean.
Importance of the Porter's five force model, and current behaviour of Tesco
Porter's five force is a model that it helps to explain the question of why various
industries sustaining the different level of profitability. The main purpose of using this model is
to analyse the industry structure of the company along with it the corporate strategy (Bruijl,
2018). These five models helps in measuring the attractiveness, competition intensity, market
profitability.
Five force of porter:
Intensity of Competitive landscape: the foremost thing to understanding that how is the
competition in the field company is working. By the help of: the level of competition in the
market place, how are the key competitors, clearly understanding the competitive strategy.
Ability to undercut the companies. There will be less power if their will be larger number of the
competitors with number of equivalent products and services offering. Buyers and suppliers do
Illustration 2: Understanding Porter's Five Forces Model,
2021

seek out the competition of company if they are in position to offer the better deal or at the lower
price range.
Level of supplier power: Whether it is online or offline business are relevant on the operations of
other businesses. This shows that power of the supplier might affect or hold up to the business.
As, Tesco deals with more than 2500 suppliers in UK. Tesco has a power of negotiating with the
suppliers on very high level to increase its profit margin. Suppliers can not exert any significant
power of Tesco as there are many of them in the market.
Buyers entry\exit cost: This is totally a customer centric factor (Sadqs, 2018). They may have
some bargaining power because they know the market and business both in better manner. For
getting the buyer's entry\exit cost should again go and take a look towards the competitive
landscape. The size of market, number of competitors are in this field, pricing technique, and
factor of quality also matters. Just by: Analysing competitor's overall online performance,
competitors online advertising strategies, pointing towards the SEO, SMM strategies, analysing
the competitor's Social media channel.
Threat of substitute products: While keeping eye on competitors and understanding the
competitor's marketing strategy, business should also should be in the mind that there could be
other substitute product in the market too, that are known as indirect competitors which
indirectly put impact on profitability and customer switching like on different product or
services. It is easy to say that threat of substitute product and services for Tesco is irrelevant as it
sells wide range of variety of products and majority of their substitute too.
Treat of new entrance: Because of capital requirement entering of new business is very
minimum chances. Entering the supermarket in UK is very low chances as it needs very high in
investment for continuing the business and operate it. It needs lot of capital requirement in
establishing new business. Tesco does not need to worry as it have potential of handling and
enjoys the economies of sale and its competitions (Moura, 2021). It is the big brand so it is
possible that their competitors don't have enough money in hand to run the business and have
access to network of distribution and expertise in exploring the supermarket industry.
Key performance indicators in annual report of organization, development of business.
Key performance indicators helps organization to know their success, between industries
and countries in simple words KPI helps in measuring performance of the company. For

measuring satisfaction level Tesco use Sales, Profit, Cash flow, customer's feedback and
recommendation, employees recommend that this place is great to work and having amazing
environment, building trusted partnership. If customers are satisfied then its good for Tesco but if
it fails in meeting the requirement or needs of customers then it will be the negative impact of the
company. So by using such KPI company measure their performance and then take corrective
action if needed. By measuring the performance of employees in proper manner and achieve
their objective or not. Because if company not measure their performance then company have
high staff turnover, low productivity which affects organization very badly. So Tesco designed
some training programmes which helps in reducing turnover rate and make employees
comfortable. By good managing of time KPI help to measuring how employee manage their time
in a particular task. Training programmes help them in developing skills which help then in
future also and skills related to their task. By giving them rewards they feel motivated and work
in proper manner reward like commission, promotion, leaves, etc. (Armitage and et.al ., 2021).
This improves performance of employee which indirectly improve company performance. Tesco
provide products and supplementary products that give more satisfaction to the customers and
give them offers and discount to retain them and also provide quality products. Tesco plc is in
balanced position there KPI indicates that their financial position is strong, and they increase
their revenues. It uses revenue KPI which result in knowing the revenues of the company are
increase from good past years. By this KPI they know there position in the market and their
competitors position and also know the success rate of the Tesco. If, their performance is not
match with the standard one then managers should take action to correct it but here it is positive.
Financial ratio helps in analysis organization performance and improve if needed. By these KPI
company can easily measure there performance. Budget key performance indicators to make sure
that budget is in acceptance range, so it helps in making more new strategies (Mohapatra, 2021).
Many KPI like profitability, solvency, valuation, efficiency, liquidity helps in measuring
organization success in terms of finance. Tesco use such KPI to measure their performance in
long term. If performance is not appropriate or up-to the mark which company forecast earlier
than company have to manage their finances and focus on reducing extra expenses. So key
performance indicators helps organization in measuring the failures and successes of their
business.

CONCLUSION
In this above report, discussed organization as its introduction and classified according to the
many types of criteria and identifying the legal structure (public, private, voluntary, charity,
public sector etc.) along with the purpose and objective of the company towards the market.
Then explained the market structure under which organization operates. Including the behaviour
of the organization to achieve the competitive advantage. Further, discussed some terms
shareholders, stakeholders and stakeholder analysis, how it is applied in the organization and
process of identifying the company's shareholder groups and their needs. Along with that
elaborated three reasons why it is important for the companies to analyse the business
environment with the help of PESTLE\PESTEL analysis as it is external factor so with help of
that explained important macro environment that are currently affecting the company. In the
another part of it explained the porter's five force model which are intensity of competitive
landscape, level of supplier power, Buyer's entry\exits, Threat of substitute products and Treat of
new entrance with using it examined current behaviour of the organization and totally influenced
the arising from competitive market environment. At last referred the KPI which might help the
organization and understood the current KPI that are been used by them in force of believe the
current growth of the company.

REFERENCES
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Macro-environment and on the Industry Structure of e-Business Companies.
In Strategies for e-Business (pp. 49-95). Springer, Cham.
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Online
Understanding Porter's Five Forces Model, 2021 available through
<https://www.semrush.com/blog/understanding-porters-five-forces-model/>
Knowledge Base, 2022 available through
<https://projectvictor.com/knowledge-base/stakeholder-analysis/>