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TESCO PESTEL ANALYSIS
Transcript of TESCO PESTEL ANALYSIS
Economic factors are of concern to Tesco, because they are likely to influence demand, costs, prices and profits. One of the most influential factors on the economy is high unemployment levels, which decreases the effective demand for many goods, adversely affecting the demand required to produce such goods.
These economic factors are largely outside the control of the company, but their effects on performance and the marketing mix can be profound. Although international business is still growing (Appendix A), and is expected to contribute greater amounts to Tesco’s profits over the next few years, the company is still highly dependent on the UK market. Hence, Tesco would be badly affected by any slowdown in the UK food market and are exposed to market concentration risks.
Importing new technologies into business can be an advantage for organization as well as customer. In Tesco, using of advanced technologies improved customer satisfaction.
Technologies used in most of the Tesco stores are:
•Electronic shelf labelling
•Electronic Point of Sale
•Radio Frequency Identification,
•Electronic Fund transfer system
•Self check-out machines
Customer can feel more convenient as product is readily available to them. The above mentioned technologies helped Tesco in improving the stocking and distribution processes
Environmentally friendly, reduced packaging is being promoted by the government. It has been found by the Office for National Statistics (2010) that the percentage of consumers using reusable bags has risen from 71% to 74% and that those trying to cut down the number of plastic bags they take from the shops has risen from 65% to 68%. This assists in reducing the overall cost and is good for Tesco’s corporate social responsibility image.
Due to the consumer awareness of the carbon footprint of the firm (Wood, 2009), Tesco has added carbon footprint data on dairy products, potatoes and orange juice, and aims at expanding it to bread and non-food items in 2010 (Tesco, 2010).
Tesco has introduced its Greener Living Scheme to give consumers advice on environmental issues, including how to reduce food waste and their carbon footprint when preparing meals (Yuthas, 2009 ).
Consumers reusing bags, recycling mobile phones and aluminium cans and preferring bagless deliveries are being rewarded through Tesco’s green Clubcard points (Tesco, 2009; Datamonitor, 2010)
Operating in a globalized environment with stores around the globe (Tesco now operates in six countries in Europe in addition to the UK; the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland. It also operates in Asia: in South Korea, Thailand, Malaysia, Japan and Taiwan), Tesco’s performance is highly influenced by the political and legislative conditions of these countries, including the European Union (EU).
For employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs (Balchin, 1994). Also to meet the demand from population categories such as students, working parents and senior citizens. Tesco understands that retailing has a great impact on jobs and people factors (new store developments are often seen as destroying other jobs in the retail sector as traditional stores go out of business or are forced to cut costs to compete), being an inherently local and labour-intensive sector. Tesco employs large numbers of; student, disabled and elderly workers, often paying them lower rates. In an industry with a typically high staff turnover, these workers offer a higher level of loyalty and therefore represent desirable employees.
As we have covered on previous pages they can be many factors affecting Tesco's activities. Another one of these is social factors. These could include lifestyle changes, education, living conditions, death rates etc
INCREASED BIRTH RATE: Tesco may start to look at selling children's toys or products to open a new market which in the long run will eventually create more profit because they'll have an extra market that parents and children are interested in.
EDUCATION: Tesco will also focus on education. As seen on adverts they already sell school uniform for children that are a certain age which is mostly primary school. They will also sell school equipment for all ages from primary to secondary and even to college. This opens a whole new market.
DEATH RATES: It can also focus on death rates. Tesco's itself have a funeral service that is open to any family that wish to organise a funeral for a loved one. The higher the death rate goes the more money Tesco's will most likely make if family's choose Tesco's funeral service.
Horsemeat scandal – People had to change their diets and were cautious with what they purchased.
Electronic goods have become apart of peoples lives
Selling more home items and clothes, fashion trends have to be taken into account
Various government legislations and policies have a direct impact on the performance of Tesco. For instance, the Food Retailing Commission (FRC) suggested an enforceable Code of Practice should be set up banning many of the current practices, such as demanding payments from suppliers and changing agreed prices retrospectively or without notice (Mintel Report, 2004). The presence of powerful competitors with established brands creates a threat of intense price wars and strong requirements for product differentiation. The government’s policies for monopoly controls and reduction of buyers’ power can limit entry to this sector with such controls as license requirements and limits on access to raw materials (Mintel Report, 2004; Myers, 2004). In order to implement politically correct pricing policies, Tesco offers consumers a price reduction on fuel purchases based on the amount spent on groceries at its stores. While prices are lowered on promoted goods, prices elsewhere in the store are raised to compensate