PESTLE And SWOT Analysis Of TESCO Plc

Background

The prior aim of the report is to analyze the micro and macro environment of the organization chosen for the report. Here the chosen organization is TESCO Plc. This report will analyze the PESTLE and SWOT of TESCO plc. to get an understanding of the business environment and demographic condition of the country, the United Kingdom. Environment analysis can be considered as the strategic management framework that helps to identify each of the external and internal elements that will affect the performance of the organization. This element analysis will entail a detailed observation of the threat and opportunity for the business.

Here the chosen organization is TESCO Plc. It is one of the biggest multinational food retail organizations and the headquarters of the organization is situated at Welwyn Garden City, England. TESCO is considered the third-largest retail organization from the perception of gross revenue earnings. The CEO of the organization is Ken Murphy and the organization has been founded in the year 1919. According to the data for 2021, the total revenue of TESCO is 5,788.7 crores GBP (Schmit 2016). The organization is having 4,673 shops around the globe (Awadari and Kanwal 2019). The mission of the organization is to assist and become the champion of the customers. The main focus of the organization is to make a better shopping experience for the customers and provide value addition to the customers. The vision of the organization is to provide satisfaction to the stakeholders by attaining their needs and demand and providing them with proper solutions.

This part of the study will briefly discuss the internal and external environmental factors that might affect the operational factors of the organization. Business environment analysis can be of two types micro and macro analysis (Camilleri 2018). The internal environment analysis will cover the 7P’s factor of the marketing mix and the PESTLE analysis will be covered to undertake the external factor analysis of TESCO Plc.

The 7P’s of marketing mix stands for product, price, place, promotion, people, process, and physical evidence. These are the prime factors that can affect the business operation and therefore needs to be controlled and measured.

TESCO Plc. has a wide range of products that extensively comprises food products, clothing, stationery accessories, cosmetics products, financial services, and many more. TESCO Plc. is focusing on the vivid product line extension to satisfy the needs of the customers. TESCO caters to various products of different brands including their brand such as Tesco Lotus, Tesco Value, and F&F Clothing (Basari, Yazid and Shamsudin 2020). By finding out the product issues, TESCO has focused on the extensive program for NPD (New Product Development) for the improvement of product quality to hold a good brand reputation in the existing market.

Environmental Analysis

TESCO Plc. usually follows the cost leadership strategy and for that, they try to produce low-cost products but of good quality. Tesco has the benefits of economies of scale and works simultaneously with the suppliers to improve the supply chain efficiency for reducing the market price of the products. There are other food retail brands such as Aldi and Lidl in the UK food retail market that give fierce competition to marketing issues of the market pricing strategies of TESCO. Other marketing issues can be stated here. Tesco Plc. operates in two types of marketing channels such as offline and online. TESCO is having 7000 offline stores around the globe and their offline stores are of six types such as Tesco Compact, Tesco Homeplus, Tesco Express, Tesco Metro, Tesco Extra, and Tesco Superstore (Moodley et al. 2020). And their online distribution channel is known as Tesco Direct. They have maintained an exclusive distribution channel for resolving the marketing issues. Tesco has high organizational brand value thus it creates additional promotional activities for the brand. Tesco spends the highest amount on the traditional approach of promotion. Tesco generally uses television, newspapers, and various multimedia outlets to reach out to its potential customers. The organization has spent over £80.8m in 2019 which is far higher than the amount spent on advertising in the year 2018.

Tesco has tactfully maintained its management issues. Tesco plc. has almost 420,000 people working in the system (Ren 2021). Tesco has tactfully managed its customer service department to achieve success for the organization. Tesco has spent huge investment for the training and development program for the employees in the organization and this process has made them competent and highly proficient. Tesco provides high rates of reward and appraisal for their employees. However, several researchers had commented that Tesco lacks in motivating their manpower in the organization.

Political	Factors: · Political stability in the home market of Tesco Plc. · The Brexit deal has created a lot of trouble for the organization. Effects: · Being a British retailer, Tesco has its operational set in countries like Hungary, Ireland, Malaysia, Slovakia, and many more (Adamyk 2019). · Tesco can shape its marketing strategy as per the political condition of the market. · Brexit has created a lot of trouble for the import and export business.
Economic	Factors: · Covid-19 and the worldwide lockdown have impacted the business. · The higher rate of labor cost. Effects: · Due to Covid-19 and lockdown, customers’ perception has become changed and they tend to spend less money and switch to cheaper brands (Monte 2021). · The labor cost is rising in UK and Ireland market which causes higher investment for Tesco plc.
Social	Factors: · Launch of branded halal meat and kosher product for particular ethnic background customers. · Different customer preferences. Effects: · Tesco has initiated different counters for Muslim and Jewish customers for respective products halal meat and kosher product to satisfy their needs (Adamyk 2019). · Tesco failed to understand the customer behavior of the Japanese customer, thus they had to pull back their business from the Japanese market.
Technological	Factors: · Technological advancement in terms of Clubcard innovation. · Initiation of self-service checkout points and launching of Website. Effects: · Club cards concepts and loyalty card has made a huge success for Tesco and customer can avail of the offer any of the store of Tesco even outside the UK (KUREISHI 2019). · Self-service checkout points help in enhancing customers satisfaction and reduce their manpower costs.
Legal	Factors: · UK and EU competition law makes prohibition anti-competitive activities. · Legal claws for selling alcoholic products. Effects: · The UK and EU law has restricted them to merge with other supermarkets to create a higher competition level in the UK market (Upadhyay, Kumar and Akter 2021). · Tesco cannot sell alcoholic products in the UK as per the government rules.
Environmental	Factors: · The CSR activities and government rules adhere to environmental factors. Effects: · Tesco Plc. has taken a few initiatives to promote the brand reputation and maintain sustainable values. They have removed billions of plastic from their UK business hub in 2020 (Awadari and Kanwal 2019).

SWOT analysis has been done for Tesco Plc. as it briefs about the internal strength, weaknesses, opportunities, and threats (Benzaghta et al. 2021). This will help to understand the internal conditions of the organization.

Strengths · Biggest food retail brand in British market from point of revenue earning. According to the data of 2019, the total revenue earned 63,911 million pounds both in the UK and Ireland jointly (Moura 2021). · Efficiency in making good networking with the suppliers. · The dominancy in the UK market by holding the highest market share around 27%. · Diversified product portfolio in 14 countries and has 6800 stores worldwide.

Weaknesses · Tesco has made sudden changes in their club cards without any prior information to the customers in 2018. · The Brexit referendum has affected the growth of the organization and share price fall by 9% (Matysek-J?drych and Mroczek-D?browska 2020). · Cost leadership strategy and low-cost business model hampers the costing part of the organization. · The sheer loss by the expansion plan in Japan and the US market.

Opportunities · The inauguration of a new discount store called Jack Store to give a higher level of competition to Lidl and Aldi. · There is the availability of potential markets in Turkey, Indonesia, and South Korea for further growth. · Tesco needs to upgrade its online application and provide home delivery services to its customers. · Tesco can tie up with some of the local brands to promote and capture a particular market.

Threats · National taxation policies, government rules, and restrictions can be a major concern for Tesco. · In the year 2017, the incident of promoting products in the name of Woodside Farms did not exist. This misleading has created a bad impact on the organization’s reputation. · The Brexit deal can seriously impact the business performance of Tesco (Matysek-J?drych and Mroczek-D?browska 2020).

There is a certain recommendation that will help them to identify the gaps in the internal and external factors and helps in reducing their impacts.

• Before developing the marketing plan and further business expansion in other countries, they need to understand customer perception and their purchasing behavior.
• Tesco needs to inform their customers about the sudden change in Clubcard as it was there since 1995. And can provide certain extra benefits as compensation and for gaining customer attraction.
• Tesco can adopt a product differentiation strategy to offer customers a varieties range of products that are too sustainable and healthy in quality.

Conclusion

Thus, the assignment has fulfilled the requirement of the task and the recommendation will provide an insight to the organization to operate their business in a different market. The internal and external analysis has provided the existing business outlook of the organization and the current gaps in their organizational system of Tesco Plc.

References

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Camilleri, M.A., 2018. The marketing environment. In Travel marketing, tourism economics and the airline product (pp. 51-68). Springer, Cham.

Adamyk, K., 2019. PESTLE Analysis on Tesco PLC.

Monte, A., 2021. A study of value chain reconfiguration processes under Covid-19 pressures: the case of Tesco PLC in the United Kingdom.

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Ren, J., 2021, December. The Research of Tesco’s Current Investment Portfolio and Some Recommendations. In 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021) (pp. 1461-1465). Atlantis Press.

Moodley, R., Chiclana, F., Caraffini, F. and Carter, J., 2020. A product-centric data mining algorithm for targeted promotions. Journal of Retailing and Consumer Services, 54, p.101940.

Basari, M.A.M.D., Yazid, M.F. and Shamsudin, M.F., 2020. Suggestion for retailers during and post covid-19 downturn. Journal of Postgraduate Current Business Research, 1(1).