Pestel Analysis -TESCO

BY NIKHIL BABU
What is PESTEL Analysis? And it’s
advantages
A PESTEL analysis isa framework or tool used by marketers to analyze and monitor
the macro-environmental (external marketing environment) factors that have an
impact on an organization

• Cost Effectiveness-Time and effort are the only cost of PESTEL analysis. In
addition, certain additional programs are also there which can help in
organizing inputs and feedback Political

• Deeper Understanding-makes it easy to understand the factors that affect

the business environment Environmental
Technological
Economic
Social
Legal
• Alertness Development-helps companies to get prepare for possible
threats, which arise time to time because of external factors PESTEL
• Exploit Opportunities-helps in exploiting opportunities that arise from
time to time due to external factors
Components

POLITICAL ECONIMICAL SOCIAL TECHNOLOGICAL ENVIRONMENTAL LEGAL

Tax Policies Interest rates Demographics Innovation Weather Regulations

Automation Energy
Stability of Inflation Distribution of Employment
R&D activity Consumption
Government Unemployment Wealth Environmental
laws
Technological
Social Policies Rate Educational level change policies Consumer
Trade Economic Cultural Barriers Technological Waste protection laws
Regulations Growth Workforce awareness Pressure from Tax regulations
Political Subsidy Credit Trends NGO’s Labour laws
Accessibility Corporate Social
Buyer’s Responsibility
disposable
income
Company Profile - TESCO
Name: Tesco Plc.
Industry area: Retailing goods and services
Overview: Founded in 1919 by Jack Cohen, Tesco is a British international grocery and general
merchandising retail chain. It is headquartered in Cheshunt, UK and is listed on the London Stock
Exchange. It also has a secondary listing on the Irish Stock Exchange with the name TESCO PLC.
Geographical presence: North America, Eastern Europe, Asia
Brands: Jack’s, One Stop, F&F, Booker, Makro, Premier
Revenue: £64.760 Billion(2020)
No. of Employees: 4,23,092(2020)
 PESTEL Analysis- Political
This company is operating in 12 countries including Asia and Europe. It is exposed to
many political factors that can affect the operations of Tesco. These factors include Tax
rates, current and impending legislation, political instability, unemployment rate, economic
condition of the countries where it is operating. The more the stable the political
environment, the better is the opportunity to carry out trade.

With Brexit, there is a dilemma related to the new regulations that might come up and cause a decrease or increase in sale

The tax on large supermarkets known as “Tesco Tax” was proposed by the local council but UK government refused this
initiative mainly to avoid price hike. Similar initiatives in the future can affect Tesco negatively

Change in trade rules

Change in tax policies, among the various supply countries will affect the profitability of the company.
Economical
• Labor cost is an important economic factor can affect UK supermarkets. For example, its annual
wage bill is amounting GBP 4.5 billion. In 2018 UK Minimum Wage Rate is increased by 4.4% for
25 years old and onward. This upward shift has cost Tesco millions of pounds in UK.
• There are many other factors that affect Tesco i.e. cost, prices and profits. The company should focus
on the increased borrowing cost in UK. eventually, it will increase costs and prices and decrease its
profits. It can affect the brand reputation and cost leadership strategy.
• Diversification and presence in the international market are the two important strategies in past years
and reasons for the success of the company. It is worth mentioning that Tesco is still dependent on
UK market with a 27.7% share in the UK grocery market.
Social Factors
• Consumers shopping trend are constantly changing over time. People have tough schedules and want same day and
fast delivery with a flexible goods return policy. They prefer one-stop shopping. Tesco is relying on UK customers
and must understand and provide the services to meet these issues.
• The demand for goods and services is related to the consumer beliefs and attitudes which is another focused issue.
• Obesity is another issue in society and customers are more concern about their health. Tesco must consider changing
behavior and demand for organic food.
• According to PWC report 65% UK shoppers are loyal shoppers. Tesco should avail this opportunity by developing
close ties and one to one connection with customers.
Technological Factors
• Tesco introduced RFID Technology to increase in-store experience for customers. It automatically counts stock and remove it
after sales. This information is also helpful for supplier of the store and replenish when required.
• Now customers can pay as they want, Tesco have developed its own online mobile payment system called PayQwid. From
London to Edinburgh 524 Tesco stores are using this app. Customer can download the app and link it with Clubcard and NFC
technology. Customers can pay for shopping and get loyalty points.
• For those who love convenience shopping, they introduced “scan as you shop” check points. Customers shop and tag products. It
saves time and labor cost as well.
• Technology is a major macro-environmental variable which has influenced the development of many of the Tesco products. The
new technologies benefit both customers and the company: customer satisfaction rises because goods are readily available,
services can become more personalized and shopping more convenient. The launch of the Efficient Consumer Response (ECR)
initiative provided the shift that is now apparent in the management of food supply chains (Datamonitor Report, 2003). Tesco
stores utilize the following technologies:
-Wireless devices
-Intelligent scale
-Electronic shelf labelling
-Self check-out machine
-Radio Frequency Identification (RFID).
Environmental Factors
• Tesco encourages its consumers to shop at tesco.com. Tesco Van Drivers will not only use fuel-saving routes but
also collect unwanted plastic bags from customers and recycle them.
• Tesco is committed to use renewable sources and generate 100% of its electricity by 2030. The company promises
to minimize up to 50% carbon footprint by 2020.
• Also, Tesco is minimizing the waste produced in their stores by increasing social conscience in customers.
• Graiser and Scott (2004) state that in 2003 the Government has intended to launch a new strategy for sustainable
consumption and production to cut waste, reduce consumption of resources and minimize environmental damage.
The latest legislation created a new tax on advertising highly processed and fatty foods. The so-called ‘fat tax’
directly affected the Tesco product ranges that have subsequently been adapted, affecting relationships with both
suppliers and customers
Legal Factors
• Government policies and legislations also directly impact the performance of Tesco. For example, the Food
Retailing Commission (FRC) in 2004 suggested a Code of Practice should be introduced which would ban
many current practices, such as changing prices without notice or demanding payments from suppliers. To
facilitate these policies, Tesco provides its customers price reductions on the fuel they purchase, in
accordance to the amount spent on their grocery stores. Also, there are several promotion offers where
prices are lowered.
• In 2016, Tesco 17 workers took legal action against the employer on the basis of age and gender
discrimination. Workers were extremely frustrated after noticed low pay rates for night, weekend and bank
holidays shifts.
• Tesco also faced legal action for accounting fraud and misleading the investors, lastly, agreed to pay GBP
12 million to settle the legal action.
• Tesco must conduct its operation in accordance with Food Retailing Commission (FRC) strict code of
practice.
• We performed Tesco pestle analysis, hope the discussion will give you a better understanding retail
industry external factors affecting their business environment.
 Key Takeaways

•Tesco is a multinational grocery and general merchandise retailer operating in 13 countries globally.

•The United Kingdom accounts for more than a quarter of Tesco scales. In this lucrative market, the
company faces complications with Brexit trade deals and the raising of the UK minimum wage.

•Tesco is a pioneer of RFID supply chain management. It is also taking steps to address climate change by
encouraging online shopping and promoting the sustainable sourcing of palm oil and seafood.
 References

•https://www.marketingtutor.net/tesco-pestle-analysis/
•https://pestleanalysis.com/pestel-framework/
•https://www.swotandpestle.com/tesco/
•https://www.brighthubpm.com/project-planning/51754-components-of-a-pestle-analysis/
•https://www.mbaskool.com/pestle-analysis/companies/18023-tesco.html
Thank You!