Business Integration: External Analysis of Tesco PLC in UK

This report provides a comprehensive analysis of Tesco PLC, a British multinational grocery and merchandise retailer, focusing on its external environment and competitive factors within the UK retail industry. It emphasizes the importance of understanding the external environment and competitive dynamics for a company's success. The report employs the PESTLE framework to dissect political, economic, social, technological, legal, and environmental factors influencing Tesco's operations, including the impact of Brexit, changing consumer trends, and technological advancements. Furthermore, it utilizes Porter's Five Forces analysis to evaluate the competitive intensity, bargaining power of customers and suppliers, the threat of new entrants and substitutes, and competitive rivalry within the UK retail market. The study concludes that continuous monitoring and adaptation to the external environment and competitive forces are crucial for Tesco PLC to maintain its market share and competitiveness.

Business Integration

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
The importance of understanding the external environment and the competitive factors of the
industry for the success of the company.................................................................................1
TASK 2............................................................................................................................................2
PESTLE ANALYSIS.............................................................................................................2
TASK 3............................................................................................................................................4
PORTER’S FIVE FORCE ANALYSIS.................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6
Books and Journals.................................................................................................................6
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INTRODUCTION
In the competitive business environment, for the business organisations it is very important to
deeply analyse their external environment in order to remain competitive (Capobianco and et. al.,
2021). The business is commercial enterprise that operates in particular external environment
which contains of several factors that influence the business operations. In order to gain deep
insight of the external environment factors the Pestle analysis is the effective framework that
comprises of six factors that wholly defines the movement and effect of external environment on
the business operations. The competitive business analysis is also important for the business
organisation in order to understand the strategies and tactics of the competitors and to measure
the level of Competition Company is currently facing. The present report on business integration
is the discussion on the multinational organisation “Tesco plc”. The company is the British
multinational grocery and other merchandise retailer. The company was founded in 1918 by Jack
Cohen and is headquartered at Welwyn Garden City, England. The report will highlight the
importance of understanding the external environment and competitive factors of the industry.
The report contains a deep external environment analysis using pestle framework and
competitive factors using five force analyses.
TASK 1
The importance of understanding the external environment and the competitive factors of the
industry for the success of the company
The external environment factors are the elements that occur outside of the company but
have a power to impact the internal environment and the operations of the company. Regular
understanding of the external environment of the industry in which company operate is important
because they can create director in direct impact on the business operations, revenue and
profitability. External business environment changes frequently and therefore a regular
consideration of the external factors changing in the environment are essential during the
planning and management of the business operations (Michaud and et. al., 2021). Business
manager’s has a key duty and responsibility to regularly examine the external factors that may
influence company's business decision making. Tesco PLC operates in retail industry which is
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highly diversified and vast and has multiple factors in the external environment that can either
act as challenge or benefit for the company. Therefore it is important for the company to monitor
and examine the external environment factors that affect their business functions in order to
develop effective strategies and methods in order to overcome those challenges.
Competitive factors of very critical factors for the management of the organisation. Every
business faces competition with the increasing globalisation and technological advancements.
For a business it is very important to analyse the cooperative practice at which provides a
competitive advantage which is an attribute that allows the company to outperform its
competitors. The effective understanding of the competitive factors is important and useful in
order to measure the intensity of competitive rivalry and their impact on the business success in
the marketplace. Also this helps the business in competitive decision making thereby encourage
business towards innovation and discourage the unnecessary price increases for the customers.
Tesco operates in the retail industry of the UK which is extremely competitive with the
competitors like Sainsbury, Morrison’s, and M&S etc. In order to maintain the market shares and
competitiveness the Tesco plc must analyse and interpret the external environment effectively.
TASK 2
PESTLE ANALYSIS
The pestle analysis is the analytical framework to analyse the external environmental factors
that are happening and changing outside the business internal boundaries. This framework
comprises of six external environment factors that is political, economic, social, technological,
legal and environmental (Fengyi, 2021). The Pestle analysis is the tool that provides the
company an impression about these factors that may impact the business and its operations.
 Political factors: These are the factors that help an organisation like Tesco to determine
which factors of government can influence the industry for instance new tax policies, trade
tariffs, fiscal policy, travelling restrictions or any other political instability. Tesco is one of
the largest retailer in the world and company has to follow various regulations in the
government it applications to ensure there is the full compliance in the safety of its products
by operating in different countries. With the recent example of Brexit the company has to
face use dilemma in operating its business operations into EU as the political instability
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between the UK and EU might result in to the decrease or increase in the sales of the
products and services of the Tesco PLC.
 Economic factors: These are the factors that are related with the economic performance of
the country which can directly in the industry for the long term. Rise in inflation rate change
in demand and supply foreign direct investment economic recession etc. are the elements of
economic factors. In context of Tesco PLC operating in UK retail industry the company has
faced the huge amount of decline in the disposable income of the consumers which has
decreased the household and other products sales. Tesco PLC major revenue is still
generated from the UK therefore lower price in the disposable income as causing reduction
in the cells of the company therefore company under the pressure of decreasing price to
increase the sales.
 Social factors: Among the social factors like changing customer trends, cultural restrictions
demographics as per the UK's retail industry in which Tesco PLC operates the consumer
shopping trends are one of the key factor that organisation is required to consider constantly.
The is huge evolution in the shopping trends of the customers over the time as people are
more flexible in online shopping with fast delivery that has a good return policy. As Tesco
PLC highly relies on the UK customer therefore company must understand the customer
trend in order to provide them with the required so as to meet their satisfaction level. There
is one more factor in the social external environment of the UK industry that is regarding the
customers changing preference to would be healthy and organic vegan food (Phan, 2021).
The change in the social factor has forced the Tesco to consider the changing behaviour and
demand for the organic food in order to make connection with the customers.
 Technological factors: The technological advancements and innovations in the technology
are the elements in this factor of technology induced with environment as they may affect
positively or negatively to the retail industry of the UK. With the changing trends it is very
important for the Tesco to stay updated with the changing technology. For instance the
change of delivery and management system with the technology as there is more trend of
online delivery, online payments etc. the Tesco plc has been effectively adapting all these
new trends in order to improve the customer service for better experience at the store of
Tesco plc. The company has effectively managed to transfer and transform the trends of
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shopping at stores to online one, with 43% of its shoppers today, shopping from the online
site and getting their goods home delivered.
 Legal factors: with the increasing globalisation and internationalisation the organisations of
the retail industry has to be more aware of the legal factors like employment laws, consumer
laws, food safety standards etc. Tesco plc is the multinational organisation operates in much
country but most importantly the company earns highest revenue from UK and therefore, the
legal compliance of the company with the legal considerations of UK is must. The Tesco has
the best law suits to comply with the legal employment laws and other changing legal rules
and regulations (Kardes, Flynn and Dugan, 2020).
 Environmental factors: The environmental safety is considered as the key practice for
every organisation of the retail industry as use influence of the business activities over the
environment as well of the environmental changes over the business of the retail industry. In
context of Tesco PLC the company has been effectively addressing the immense pressure of
the government agencies regarding the environmental issues there for Tesco has been
increased to initiate a drive of zero usage of plastic in the company.
TASK 3
PORTER’S FIVE FORCE ANALYSIS
The porter’s five force analysis is the framework that helps Tesco plc to have in-depth
analysis and understanding of the competitive factors of the retail industry of the UK. The
Porter’s five force framework comprises of the five factors all which them are useful in
understanding the complete competitive market of the UK in which Tesco plc operates. The five
forces to analyse the competitive factors are discussed below:
Bargaining power of customers: it is the factor that defines to which extent the customers holds
a power over an organisation. Tesco PLC is the largest retail organisation of the UK with
customers has a very low bargaining power of the company as company is already selling all its
products as the low prices. Millions of customers over a week buy from Tesco plc therefore
people are unlikely to get a better option in the market this makes company go strong and
powerful for their customers (Upadhyay, Kumar and Akter, 2021).
Bargaining power of suppliers: Tesco has over 3600 suppliers in the UK and many other
thousands of India all over the world this makes the suppliers cannot create high pressure over
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the test go as company has a option to switch and you supplies very easily. This lowers the
bargaining power of the supplier and therefore making it easy for the Tesco to negotiate with
their suppliers in terms of increasing the profit margin.
Threat to new entrants:
Threat of substitutes: Tesco operates in the retail industry of the UK which is extremely
competitive with the competitors like Sainsbury, Morrison’s, and M&S etc. In order to maintain
the market shares and competitiveness the Tesco plc must analyse and interpret the external
environment effectively.
Competitive rivalry: Tesco plc is operating in highly competitive business environment. Tesco
has been operating with the highly powerful competitors of the UK such as Sainsbury's, lidl and
Aldi, Morrison etc. Call this competitors are highly powerful and are having highly practical and
a strong strategy to beat the other competitors in the market therefore to stay competitive and to
maintain the competitiveness the company has been using great advertising and marketing
techniques and the pricing was to maintain margins their profit (Crick and Crick, 2020).
CONCLUSION
It is concluded from the above study that for every organisation it is very important to
understand the external environment of its industry in which it operates. The external
environment fluctuates rapidly for which regular analysis of the environment is important in
order to make business decisions accordingly. Technology is key external environment factor
that has not only provided the advantage to the business but also disadvantage and competition to
the business. The competitive factors like competitive rivalry, threat of new entrants, bargaining
power of suppliers and buyers are important factors to be considered while developing
competitive business strategy.
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REFERENCES
Books and Journals
Capobianco, N and et. al., 2021. Toward a Sustainable Decommissioning of Offshore Platforms
in the Oil and Gas Industry: A PESTLE Analysis. Sustainability, 13(11), p.6266.
Michaud, J.P and et. al., 2021. " In The Final Analysis": The Utilization of PESTLE Analysis in
the Nuclear Medicine Workplace.
Fengyi, Z., 2021. The Analysis of Asda-Sainsbury’s Merger/Acquisition. Journal of Finance
Research, 5(1), pp.1-6.
Phan, S., 2021. The effect of PESTLE factors on development of e-commerce. International
Journal of Data and Network Science, 5(1), pp.37-42.
Kardes, I., Flynn, L.R. and Dugan, M., 2020. Online retailing: determinants of competition
between multinationals and local firms in emerging markets. International Journal of
Retail & Distribution Management.
Upadhyay, A., Kumar, A. and Akter, S., 2021. An analysis of UK retailers’ initiatives towards
circular economy transition and policy-driven directions. Clean Technologies and
Environmental Policy, pp.1-9.
Pantano, E., Pizzi, G., Scarpi, D. and Dennis, C., 2020. Competing during a pandemic? Retailers’
ups and downs during the COVID-19 outbreak. Journal of Business Research, 116,
pp.209-213.
Ghadge, A and et. al., 2021. Sustainability implementation challenges in food supply chains: A
case of UK artisan cheese producers. Production Planning & Control, 32(14), pp.1191-
1206.
Crick, J.M. and Crick, D., 2020. Coopetition and COVID-19: Collaborative business-to-business
marketing strategies in a pandemic crisis. Industrial Marketing Management, 88, pp.206-
213.
Kim, Y.R and et. al., 2021. Spatial spillovers of agglomeration economies and productivity in the
tourism industry: The case of the UK. Tourism Management, 82, p.104201.
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