Tesco Business Strategic Report 第三部分
4.1 PESTEL Analysis
4.1.1 Political factors
Tesco operates in a global market environment, in which its stores can be found around the globe, particularly in Europe and Asia. The company’s performance is largely influenced by the legislative and political conditions in all the countries it has its operations.
Tesco has over the years been committed to seeking to understand the political environments within its target markets, especially in the area of competition and employment. Due to the employment legalisation reasons, governments encourage large companies to promote representation of various kinds of labour demand, including offering flexible work schedules and sufficient compensation.
Most governments have also put in place measures to control competition and promote fair competition in the marketplace. Tesco has favourable relations with most governments and policy makers, wh ich has been actualized through giving high emphasis on aligning its business policies with the existing legislation and political will (Geuens, Brengman & SʼJegers 2003, p. 246).
4.1.2 Economic factors
Economic aspects are of great concern to Tesco since they are potential of influencing demand, cost, prices, and profits. Factors like inflation rate, disposable income among consumers, the rate of unemployment, as well as the national economic growth rate.
During the times when a country is experiencing high inflation rate or increased unemployment levels, such unfavourable economic situations decrease the effective demand of the company’s products. Worth noting, economic factors are mostly beyond the company’s control, and their effects on the marketing mix and organisational performance can be profound.
Although its global business is still growing, the recent global economic crisis affected the company’s sales performance adversely. Besides, Tesco would be significantly hurt b y the Eurozone economic slowdown, which has characterised most European nations as a result of the debt crisis (Geuens, Brengman & SʼJegers 2003, p. 247).
4.1.3 Socio-cultural factors
The current trends in the global market indicate that customers are increasingly moving towards bulk shopping and one-stop shop, which is as a result of lifestyle changes. In response, Tesco has increased the range of non-food products available for sale.
Also, there have been demographic changes in the marketplace, such as the elderly population, the increase in female workers, as well as a remarkable decline in residence meal preparation. This means that retailers have to focus on products with value addition.
Moreover, the focus in Tesco has largely been toward the own label market share and the supply chain improvements so as to drive costs out. The types of products demanded by consumers is a function of social conditioning, as well as their consequent beliefs and attitudes.
In addition, customers are becoming increasingly aware of health and safety issues, and their perceptions towards food are rapidly changing. In this context, Tesco has keenly focused on adapting its product mix so as to accommodate the increased need for organic food items. The company also allows its customers to make payment in cash or checks (Geuens, Brengman & SʼJegers 2003, p. 248).
4.1.4 Technological aspects
Technology is a key macroeconomic factor that has enabled the development of numerous Tesco products. New technologies provide benefits to both the customers and the company through enhancing better customer satisfaction, enabling product customization, and ensuring efficient operations.
Tesco stores utilise various technologies, including self-check-out machine, wireless devices, electronic shelf labelling, intelligence scale, radio frequency identification, as well as efficient consumer response (Shields, 2010).
In addition, the company also adopted the electronic point of sale, electronic funds transfer system, and electronic scanners so as to improve communication and distribution efficiencies.
4.1.5 Environmental factors
In the recent years, there has been an increased pressure for companies to embrace their responsibility to social welfare through acting in a manner that benefits the entire society. The main societal issue that threatens food retailers are the environmental issues, which is a key area that requires all companies to operate in a communally responsible manner.
In this context, Tesco established a corporate social responsibility initiative that is aimed at promoting sustainability in all the firm’s operations. This initiative emphasises on setting up strategies to promote sustainable production and consumption to reduce waste, minimise environmental damage, as well as reduce consumption of resources (Shields, 2010).
4.1.6 Legislative factors
- The overall market performance of Tesco is also affected by various government policies and legislation. For instance, the government legislation of monopoly controls and decrement of buyer’s power can potentially limit new entrants to new markets due to constraints of limits of accessing raw materials and strict license requisites.
- In order to execute legally correct pricing policies, the company offers its customers a price decrement on fuel purchases on the basis of the amount spent on its grocery stores.
- The company is also keen on observing all legal procedures in all of its operations and also involves legal consultants in contentious areas (Shields, 2010).
5.0 Internal Environment
5.1 SWOT Analysis
5.1.1 Opportunities
- The main business opportunities lying at the company’s disposal include non-retail food, health and beauty, and further international growth.
- Tesco should use its low-cost structure along with improved merchandising experience to add another support to growth.
- It should progress venturing in nonfood items so as to create one-stop shops for better customer satisfaction through promoting the tenets of convenience, value and choice.
- In addition, the industry of beauty and health are increasingly growing, which creates new opportunities for the company.
- Although Tesco operates only in Asia, Europe and the US, the company should consider venturing into other emerging markets like China, South Africa, Brazil, and India, among others that also offers an enormous, yet to be exploited market size (Marketline 2011, p. 11).
5.1.2 Threats
- Some of the threats attributed to the company include the decline of overseas returns and competition.
- The heightening competition could spark an intense rivalry and price war. This could possibly bring down Tesco’s profitability.
- Furthermore, as the company eyes on global investments, international retail giants like Wal-Mart might pose a great challenge to the Tesco’s brand dominance.
5.1.3 Strengths
- Among the company’s strengths include its increasing market share, steady growth, Tesco online, and brand value.
- The company holds a 14% market share in the UK retail industry. This is a remarkable market share taking into account the intensity of competition in the market, and with the company’s focus on innovation and market expansion, this market share is projected to grow.
- In addition, Tesco’s general growth and market performance indicate no sign of abating. Tesco has also grown its nonfood product lines to the extent that their total revenues total 25% of the company’s overall earnings.
- Furthermore, Tesco’s global market segment is increasing steadily and is anticipated to contribute almost 25% of the overall company profits in the next 5 years.
- The company has also a strong brand equity that is associated with trustworthy goods, high quality and excellent value.
- Tesco.com has also become the biggest online supermarket in the world, with sales of over £570 million (Marketline 2011, p. 12).
5.1.4 Weaknesses
- The main weaknesses attributed to the company include the high reliance of the UK market and debt reduction.
- Despite that the global market is increasingly growing and is anticipated to contribute higher amounts of Tesco profits in the near future, the company is still very reliant on the Britain market, holding 73% of its total revenues.
- Although at the moment this might not look as a weakness, any adverse changes in the UK market would gravely affect the company’s market performance.
- Furthermore, Tesco has a huge capital expenditure program as a result of its immense investment in new stores. Since its market expansion is very aggressive, the company has the little-liberated cash for other operations.
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