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Essay: TESCO analysis with PESTEL

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  • TESCO analysis with PESTEL
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Introduction

In this assignment, I will be writing about Tesco. I will be including a PESTEL analysis. I will be going through all the different factors of Tesco and how it affects the company in various ways whether its cultural factors or economic factors. I will be mentioning the history for Tesco to give a brief idea.

Tesco history

In 1919 Jack Cohen made profit of £1 by the end of the day when he started off by selling surplus. In 1929 Jack Cohen decided to open Tesco which is now a fast growing supermarket. The store started off with selling “dry goods” which was Tesco’s tea. Later on during the 1990’s they came up with the label of “every little helps”. In 1992 they started selling computers for school, they raised “£185 million worth of equipment for schools around the UK” (Tesco plc, n.d.). going fast forward now in this current year 2018 tesco completed merging with the wholesaler booker group. By having this two company joined together they will bring retail and wholesale to make tesco a fast leading company in the UK. Tesco now has all kind of foods whether its microwaved food or normal food such as vegetables and fruits. It includes many varieties of food whether its children’s food or adult’s food. Tesco now has joined with F&F clothing. F&F clothing is out in tesco to help their customers have affordable and trendy clothing. Tesco has to say that “both reducing our social and environmental impact and confronting head on the challenges facing the fashion industry now and in the future”. (Tesco plc, n.d.)

Organisational structure

Tesco follows a hierarchical organisational structure. Tesco is a company that has all sorts of food which makes the company multi-cultural as in includes products from different countries. Therefore, tesco has its own structure to make sure that the company is running smoothly and everyone has their part to play for this company. For example, there are 11 members of Tesco as Executive Committee who are led by Group Chief Executive Dave Lewis. Below is the structure.

(Meng,2018)

Tesco is a worldwide supermarket, nationally they have managed to have “ Over 6,800 shops around the world” ( Tesco PLC, n.d.) for example, in Malaysia they have a network of 50 hypermakerts, they have opened up many tesco stores in Malaysia. The store is offering “3,000 own brand products – 80% of which are sourced in Malaysia…include Tesco Finest, Fred and Flo and F&F.” Furthermore, the company included India where they “provide 80% of the stock sold by Star Bazaar, both food and non-food”. The company has tesco banking which opened up in 2008 and owned by Tesco PLC and has more than 3,000 people working towards it. They serve 7 millions of customer accounts through the product ranges.

There are very important people who are running this company. For example, there are 10 members of board directors as shown below. However, there has been some adjustments where John Allan became the chairman of the board.

(Meng, 2018)

Tesco Business Hierarchy

The company includes the Chairman, Group Chief Executive, Chief Financial Officer and a number of Non-Executive Directors.

At the very top of the list is the CEO of Tesco. The current CEO is Dave Lewis. As being the CEO of a very successful growing company it comes with a lot of responsibility. He has the maximum say in the governance of Tesco.

Next is the chairman. John Allan Non-Executive Chairman John was “appointed to the Board as Non-Executive Chairman on 1 March 2015.” (Tesco,2016)

Then, Alan Stewart who is the Chief Financial Officer from 23rd September 2014. He has joined the board of directors. He is someone who brings corporate finance and accounting experience competitive industries.

Lastly, the senior independent director. Deanna Oppenheimer also joined the Board of Tesco PLC as a Non-Executive Director from 1 March 2012. She is in charge of the consumer’s knowledge and experience.

Corporate Governance- it is a system where companies are controlled and directed. Members of the board directors have responsibility for the governance of the company they manage. In corporate governance shareholders have their own roles where they choose the auditors and directors to impress themselves that Corporate governance is there to help them. It also has responsibility to set the company’s strategic aims. Hence, the corporate governance is needed in a company because it sets out the rules and values of the company. however, it is acclaimed “day to day operational management of the company by full-time executives.” (Icaew.com, 2018)

Stakeholder

Stakeholders are known to be individuals or a group that are involved with a company e.g. Tesco. They are there to have an interest to form a project or a programme. However, most projects have many different stakeholders. They can have a greater influence over the success or loss of the workplace. For example, stakeholders have management techniques as they can trap the positive influences and minimises negative influences. It includes four main steps (amp,2018):

Identify stakeholders;

Assess their interest and influence;

Develop communication management plans;

Engage and influence stakeholders.

The relationship between the stakeholders and the board of directors is that when the board of directors have something planned the companies have formal or informal competitive intelligence system which they collect and interpret information. The Directors job is to ensure that this includes information about the key stakeholders. The purpose of having stakeholders is so that board of directors improve their decision making and evaluate problems and opportunities for early action. Also, capable of evaluating the cost and benefit of managing or mismanaging such relations. (Icaew.com, 2018) Considering Stakeholders’ interests the board of directors need to take notice of the legitimate interests and expectations of its stakeholders in its decision making in the best interests of the company. Identification of stakeholders the board should ensure that the company identifies the stakeholders that are relevant to its operations. (Code of corporate governance, 2010)

Stakeholders, shareholders and corporate social responsibility (CSR) – this is where the shareholders, stakeholders, the public and board of managers are all involved. CSR is out there to inspire such companies as Tesco’s to have stakeholders being there when making decisions instead of making it by themselves. general public is known to be the external stakeholders which is now put under the CSR governance. for example, when tesco raises the environmental pollution the public is then affected because they wont be getting fresh food, the public relies on the company to provide them with natural product and from a good environment. therefore, shareholders profit might be increased but that will affect the stakeholders because they could be affected badly. this then leads to CSR making a climate for corporations to protect the social welfare.

It’s important to conduct pestle analysis for an organisation because it helps understand the company in many different ways. You get a wider view of how the company runs, the people who are making this a successful growing business. It examines the company in much more detail. It allows individuals to identify possible difficulties so that they can be dodged or removed out of the way. Additionally, the political side shows how political parties can have an influence on the obdurate business development and growth. Economic side shows the effects of taxes,interest rates, the stock market, and more. Social side shows changes in lifestyles, advertising targets, cultures, ethics and demographics. Technology shows current and new technology. Legal side introduces laws and regulations that can impact operations. Lastly, environmental shows the pollution and current situations.

PESTEL

Political – Tesco is now worldwide It has grown very successfully and now they are in 12 countries including Asia and Europe. This means that since it’s in different countries it has to follow different rules such as the policies and legislation, this affects several factors such as unemployment rate, pending legislations, economic conditions and more. For example, tax was proposed to tesco but the UK government refused the tax because it will make Tesco’s products at much higher prices. This could lead to a lot of loss in the financial status of Tesco. Tesco Chairman John Allan mentioned that political factors can affect the business because the products are being made from other countries such as china and being imported to the United Kingdom. it was said that EU referendum created some problems for the investors and the British Economy.

Economic – With the economic side there’s cost of labour that affects the company because they are the people who are making sure the company is running smoothly and representing the brand. It is being said that “national living wage will cost it £500m by 2020, putting further pressure on profitability at Britain’s biggest supermarket” (Butler, 2015). Furthermore, there are other factors such as costs and prices. For example, the company has an increase on the costs and prices but that it decreasing its profits and this will put the brand at risk. Tesco has grown a lot over the years. They have now made “best UK quarterly sales growth for seven years.” (Guardian, 2017)Tesco has reported the sales that has been made for seven years in April. This is believed to be the reasons for lower prices in their products and having excellent customer service which impacted Tesco in a positive way.

Social- as the generations are changing people tend to be busier with their work and their busy schedule. Which leads less time for cooking, therefore, supermarket food is something people rely on as there are ready made meals which are very affordable. Although, they are not healthy as its frozen and its mostly junk food. However, there are frozen vegetables and fruits that could be brought. Furthermore, there are older and younger generation difference. For example, older people are less likely to go buy a lot of things because as their aging they tend to eat less. However, the younger generation tend to buy more food and more likely to travel every week to do grocery shopping. According to research it shows that people who are “aged 50 to 69 made online purchases more often…than those 70…rarely made internet purchases but they did seek online information on products and services” which means that not everyone in the society are going to know how to use technology therefore, less purchases from tesco which then leads to less profit in the industry. Moreover, consumer’s attitude on food is always changing and developing as they keep an eye on the unhealthy food they are consuming. Which then leads to tesco bringing out organic supplements to help their customers purchase more products.

Technology – one of the biggest supermarket is tesco therefore, a lot of people rely on this company. Especially during special seasons such as Christmas, customers are expected to spend a lot of money on their groceries. Therefore, tesco decided to come up with ‘Tesco Bank’. This is where the customers are given a store card which customers could use to purchase products from tesco and pay it off later. They put no interest up to 28 days. However, they are considering to give individuals more time to pay off the money back by giving them a 0 percent interest free period between 16 to 22 months.

Nowadays, everyone has online devices which they use, therefore, online shopping is a must. People tend to be busy and not have enough time to go grocery shopping, hence the reason why they rely on online shopping which is more convenient for them as its less time confusing and a fast process. Also with the 24-hour delivery option being available, it’s no question that people would prefer online shopping, although it may come with a cost of the delivery charge. Lastly, tesco made sure customers get a choice of how they can make payments. For example, they are allowing customers to make their payment by cheques, cards and cash at the checkout or online shopping.

Environmental Factors- there’s known be pressure on tesco as they need to be aware of the environment around them. For example, using paper bags that can be recyclable which is good for the environment. Tesco is planning to reduce carbon footprint by 50% by 2020. Moreover, Tesco is limiting waste produced in the store by increasing social conscience in customers. Tesco is protecting their environment because they get fresh fruits, vegetables, meat and fish from the natural environment therefore, they play a part to make sure they are doing something to help the environment. They have come up with an approach as they’ve been working with experts to make sure they are reducing the impacts on the environment. Tesco has joined the Sustainable Agriculture Initiative (SAI) Platform to apply environmental practices in agricultural supply chains, both through growing standards / guidance and on-the-ground collaboration. (Tesco PLC)

Legislative Factors

Tesco provides price reductions for customers who usually spend a lot and have loyalty cards which give them discounts and offers promotions to help customers spend more for less money. Tesco is a big supermarket and they have billions of people working for them. However, having a lot of people working for this company will come with some issues. In a BBC article, it has shown that tesco faces some legal actions “from staff who say they lost out on pay for working anti-social hours.” there was 17 complaints from staff who were not keen on their pay rates that changed for weekends, night shifts and bank holidays. People who have worked for this company are outraged as they felt deceived. One of the staff has to said that “loyalty was being taken advantage of”. (BBC News, 2016) changes in law

15.11.2018

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