Tesco PLC, there headquarters are based in Welwyn Garden City and has 4811 stores worldwide and
employees 472,000 staff worldwide. They offer many different services such as
the Tesco bank and Tesco mobile network however the majority of their business
is the selling of groceries. They are the largest retail grocery supplier currently
the first in terms of the top 10 retail grocery in the United Kingdom. It was
the first UK business to make £2 billion in profits early in 2005, (Review, 2005) and the third
largest global retailer based on revenue. Over the years, retail grocery sector
represents the largest industry in UK providing employment for millions of
people in UK either in manufacturing or in retailing. The mission statement of Tesco is “Creating value for customers, to earn their lifetime loyalty”. There are many Stakeholders within Tesco such as shareholders,
customers, employees, employers, local communities. (Tesco, 2018)
External Macro Environment
The constant change in market demands has made the economy very
complex. Therefore, when analysing Tesco, we must use the following to evaluate
whether Tesco can meet the changing external market environment.
The PESTLE tool
This is the political factors that are likely to have a small or big impact on
the business in this case Tesco.
Economic- This relates to economic policies, economic structures and how the economy
as a whole impacts Tesco.
This relates to the social and cultural aspects
such as the media view of the industry, beliefs and religion beliefs that will
affect the demand for a company’s products and how Tesco must adapt to these
Technological- This relates
to the technological aspects such as new innovations that will affect the
industry, emerging technology and competitor’s development of new technologies
therefore Tesco must constantly develop new technologies and adapt emerging
technologies to stay ahead of its competition.
Legal- This relates to the new laws that are in
the process of being made of have been recently passed such as consumer laws
and employment laws with which Tesco must comply.
Environmental- This relates mainly to the changes in
Global warming and climate change.
This factor highlights the government and the factors
involved with its decision making. The decision making y the government is
influenced depending on which party is running parliament for example, the
Conservatives when in power focus on cutting the amount business have to pay in
tax in order to hopefully boost the competitiveness of the companies in the UK
and hopefully attract new companies which will lower the UK’s unemployment
rate. Compared to the Labour party who will focus on increasing the amount
businesses are taxed and use this extra funding to pay for welfare spending.
Depending on which party is in power affects Tesco differently, take for
instance if the conservatives lower corporation tax this will boost Tesco’s
profit margin whereas if labour where in power they might increase the minimum
wage which could increase the amount Tesco’s will have to pay their workers and
could diminish profits. Another example of a political factor which effected
Tesco was in 2008 when the business environment was hit by credit crunch which
lead to huge unemployment. This trend actually helped Tesco because they had
more applicants for there positions and where able to select higher skilled
workers for the roles in the business. Also, due to their products being
focused on affordable goods and necessities the credit crunch had little effect
om Tesco compared to other competitors such as M who focus more on
luxuries. Another political factor is the strong government restriction against
monopoly which is one of the threats Tesco’s are faced with because within the
consumer law there must not be one organisation who controls most of the market
share and that new businesses can join the industry with relative ease, however
the supermarket industry Tesco control over 28% of the market share, hence they
are at risk of being broken up by the government however this is unlikely.
Another recent political factor that could affect Tesco is the recent vote for
the UK to leave the EU, the issue of government policies on trade restriction
and the possibility of losing the free trade agreement with the rest of the EU
could drive the prices of goods sold up and hurting sales in Tesco’s.
This is another environmental factor which can have a huge
impact on Tesco. Take for instance the economic down turn in UK which lead to
large numbers of unemployed this actually would have benefited Tesco in some
cases due to the increase availability of labour hence Tesco where able to hire
better skilled workers and still be able to pay them lower wages as the supply
of labour outstripped the demand driving labour costs down. Another current
economic factor to consider is the possibility of losing the free trade agreement
with the rest of the EU with could have serious ramifications for Tesco’s as
they will buy a lot of goods from other EU countries and the loss of the free
trade agreement will mean Tesco’s will have to pay import and export duties.
Social/ Cultural Factors
Tesco is one of the
retail groceries in UK who have successfully addressed people’s social and
cultural needs due to the increase in the amount of non-food items for sale and
this has sort of encouraged customer to move towards bulk shopping as they will
go if for other services that Tesco offer and then may go for a shop afterwards.
The changing customers’ beliefs and attitudes towards making the Tesco brand a
part of your lifestyle has made Tesco concentrate on added-value products and
services. Another factor is the recent shift in consumer wanting to know
exactly where their product was made and what is in the product this was after
the horse meat scandal which has forced Tesco to have more interest in
customers increased demand for organic products. This has made Tesco go
directly to the source for most of their food products, in the short term this
may be more expensive however in the long term will benefit both Tesco’s
customers and Tesco.
The use of technology in marketing is one of Tesco’s
expansion strategies. It has enabled customers to pay their bills
electronically thereby reducing long queues. Online shopping has also
influenced the development of many Tesco services such as click and collect and
home delivery. These services benefit both the company and its customers
through easier shopping. These personalised services make shopping more
convenient for the customer and has positively affected the growth of Tesco
through increased sales.
The changing trend towards a more environmentally way in
which we get and consume our goods has had a number of effects of the way in
which Tesco operates for example, Tesco is
committed to diminish the consumption of energy and utilisation of greenhouse
gases and they have introduced new packaging designs to help reduce
food waste and that can be recycled. This is costly in the short term as Tesco
will need to pay for new packaging to be designed as well as the costs involved
with changing the manufacturing process. However, in the long run these changes
will be beneficial to Tesco as they will have a better cooperate imagine which
could attract new customers to the business.
the legal domain, Tesco’s main concern is about monopoly and competition laws,
which is the primary basis of its competitive advantage and survival in the
increasingly competitive market. Tesco must also comply with employment laws
such as the minimum wage which is lowest amount a worker is allowed to be paid.
SWOT analysis is a tool which can be used to evaluate an
organisation and its internal and external environment. Tesco has an excellent
record in product and format innovation. And with the introduction of online
shopping, Tesco became the only food retailer to make online shopping
profitable which puts them ahead of other competitors.
The SWOT tool stands
One of Tesco’s strengths is their product range with several
kinds of products in the market. These products range from food, non-food
products, home appliances, medicines and so with different prices on all the
products. In Tesco you can get whatever product you want at an affordable
price. The prices vary anyway, the higher the quality, the higher the price and
vice versa however this up to the consumer.
Another one of Tesco’s strengths is in the growing
supermarket space, where Tesco in the grocery business has long witnessed a
significant growth in size since its establishment in 1924 and this is as a
result of their strong brand image. Tesco is a household name in UK known for
their market dominance in good quality and affordable goods. It is because of
Tesco strong brand image that most customers see great value in their services
and this has earned the company huge profits and market share.
Another strength of Tesco’s is their online market. Online
marketing has also influenced the development of many Tesco products and this
benefits both the company and its customers. This personalised easy to use service
makes shopping more convenient for the customers and this new market will have
been driven by technological factors which Tesco have taken full advantage of.
One of Tesco’s main weaknesses is setting prices, trying to
satisfy their customers’ needs by cutting cost of their products even their
services can lead to a reduced profit margin for their business.
Another major weakness of Tesco is their reliance on UK
market. Tesco’s reliance on UK market means that if at any time the economy
faces any challenges, this will definitely affects the business of Tesco, hence
Tesco must look to expand their business into foreign markets to spread risk
and increase profit.
One opportunity for Tesco is the emerging Internet market. Since
the introduction of Tesco online, the use of technology in shopping has grown
in quite a short space. Their website is so fully packaged totally different
from all other grocery site and since there are no matches in terms of
comparisons, it remains an advantage on the side of Tesco.
Another opportunity for Tesco is the growth of non-food
sales. Tesco is known as a large supermarket chain however they have branched
out into many other services such as Tesco Bank, Tesco Mobile and Tesco Club
One threat to Tesco is the economic instability in their
main markets the UK. The unstable, unpredictable nature of the economy and
political changes in UK pose lots of threats to Tesco and one example of these
changes is the credit crunch which happened in 2008. After the credit crunch
consumers only focused on the price which made Tesco redesign their pricing
strategies as consumers demanded lower prices.
Another threat to Tesco’s is competition. This has also been
a persistent threat and this one major reason why Tesco will keep up with the
price cuts so as not to lose their customers to major competitors like Asda and
One likely future impact that will affect Tesco is a big way
is the political factor of Brexit. How Tesco will have to operate and where
they get some goods may change depending upon the deal that can be reached
between Brussels. If we leave the EU, then there is no free movement of goods
and services between the EU and the UK hence Tesco may have to paid higher import
and export fees. However, this will depend upon the deal agreed as well as the
possibility of Tesco being able to find new sources elsewhere.
Another likely future impact that will affect Tesco is the
Technological factor of growing trend towards online shopping, as I already
stated this is one of Tesco’s strengths however I believe they must stay on top
of the online market to keep increasing sales.
One recommendation I
would make for Tesco following my investigation is to monitor the Brexit talks
closely as there is both threats and opportunities depending on how the deal is
brokered with the EU. They must keep a close eye because Tesco’s main market is
the UK market and the Brexit is likely to effect not only trading and politics
but the UK economy as a whole. Furthermore, I feel Tesco must do more to
penetrate foreign markets to spread their dependency on the UK market.