Situational Analysis: Exploring Tesco Company Using Pestle

What is a situational analysis? The essay explores the concept of situational analysis through pestle analysis. A situational analysis is mainly an investigation into the internal and external factors that may affect a business they are usually used to determine plans. An example of a situational analysis would be a pestle analysis that underlines external factors that may affect a business and a swot analysis that underlines internal and external factors that may affect a business.

A pestle analysis is an internal analysis that is used to provide all factors that could affect a business internally. In the next paragraphs Tesco company is analysed with the help of pestle analysis.

• Political factors

Tesco is a multinational company that specializes in retail products mainly food. Tesco is a large company which means that the amount of tax that a company like Tesco would have to pay would be little because they provide job opportunities. The UK is now going through new political factors such as Brexit which is likely to affect Tesco’s s ability to import and export products. It is said that Tesco operates in ‘12 countries including Asia and Europe’. This may be to help with the growth of Tesco socially and that also different governments have different sets of rules regarding issues such as tax. However, having Tesco spread across these counties could result in issues with management and innovation because of the amount of communication and marketing techniques between countries. Brexit is being put into play which stands for the UK leaving the European Union. Especially for a retailer such as Tesco, this may harm trade meaning suppliers outside of the UK will have trouble supplying anything to the UK.

• Economical factors

As Tesco is a large company it will likely have a variety of economic factors to overcome mainly to do with tax. It is said that ‘ In 2018 UK Minimum Wage Rate is increased by 4.4% for 25 years old and onward’ in conclusion, this would mean that Tesco would have a lot more money now spent on other people's wages which has the potential to waste millions of pounds in the process. However, an increased wage for an employee could increase productivity. The ‘national minimum wages in the UK cost Tesco GBP 495 million’ this shows that because Tesco lost thousands because of a change in the law that also would have decreased profit. This also shows us how Tesco will need to think of more innovative ways to make a sufficient amount of money above the breakeven point.

• Social factors

It is said that ‘trends indicate that customers in the UK have moved towards bulk shopping and one-stop shopping’. This may be seen as one of the many trends that Tesco has to overcome as Tesco is a retailing company and overcoming trends such as one-stop shopping is a great way to improve Tesco’s profit in the long term. It is now said that Tesco because of this has ‘increased the number of non-food items offered for sale’. This is a great way to maximize products and also peak customer’s interests towards Tesco because it offers customers a diverse range of products. This is important because it gives customers less of a reason to purchase from other businesses and especially Tesco’s competitors.

• Technological factors

Tesco now has a website that will enable people to purchase items online which may help to increase profits. The disadvantage of this may be that more people are going to need to be employed in a department that deals with the delivery which may or may not cost Tesco money later on. Customer service should be seen as a big priority but Tesco has this covered as they have a customer service number that you can call if you may have any inquiries. This may be seen as an advantage socially as this would be giving a customer a sense of trust when you decide to purchase a product from Tesco as you know that you can call if there are any issues. On the other hand, you may end up losing money purchasing mobile phones and paying staff members.

• Legal factors

Legal factors can for most businesses be seen as big problems that businesses have to overcome. As Tesco is quite a large business there will always be legal issues that Tesco has to overcome and this can be very impactful to the way a business operates. An example of this can be seen when 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’. This ban may have been seen as problematic to Tesco’s profits as this would mean that prices Tesco made previously would be final which may over time result in a decrease in revenue for Tesco. On the other hand, this could be seen as quite beneficial socially as it makes products more affordable towards customers which may increase the number of new customers visiting your store. Tesco may also have to deal with legal issues within their business for example ‘In 2016 Tesco 17 workers took legal action against the employer based on age and gender discrimination’,this can be very damaging to Tesco as a company because it paints Tesco as being a company that does not respect its employees and their genders.

• Environmental factors

Environmental factors are very important for any business because it is one of the best ways to improve your business's image and if environmental factors of your business are ignored it could destroy your business's reputation and could also lead to protests which is likely to give your business a bad image. It is said that ‘Tesco is committed to use renewable sources and generate 100% of its electricity by 2030’. This is a good way for Tesco to boost their image as it gives the impression that Tesco's business is very driven to being more eco friendly. The disadvantage of this would be that this may be quite cost-effective in the future. Tesco has also boosted the image of Tesco employees by stating that ‘Tesco Van Drivers will not only use fuel-saving routes but also collect unwanted plastic bags from customers and recycle them’. This may be more beneficial when recruiting employees because of the positive publicity that employees are getting and also increase the number of people using a Tesco delivery service. Ethics also has a huge impact on the environment because everything for where the products are made to who makes them.

References

1. Ritchie, J., & Lewis, J. (Eds.). (2003). Qualitative research practice: A guide for social science students and researchers. Sage Publications.

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3. McLellan, E., MacQueen, K. M., & Neidig, J. L. (2003). Beyond the qualitative interview: Data preparation and transcription. Field methods, 15(1), 63-84.

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4. Bryman, A. (2006). Integrating quantitative and qualitative research: How is it done?. Qualitative Research, 6(1), 97-113.