Pestle analysis of Tesco. TESCO is a British multinational grocery retail and general merchandising company. Jack Cohen was the founder of Tesco and he established the company in Hackney, London, in 1919. The headquarter of the company is situated in Welwyn Garden City, England.
Tesco is one of the leading retailers in the British market. The brand has a network of 7005 retail stores globally in 2021. The company has employed roundabout 423092 employees to manage various operations of its stores worldwide.
Some of the major products and services of Tesco are supermarkets, hypermarkets, Superstores, Convenience Shops, Club Cards, F&F clothing, Tesco Bank, Grocery Items, Tesco Mobile, Rental DVDs, and Music Downloads.
According to a financial report by Statista, Tesco’s annual revenue was roundabout 53 billion pounds by the end of 2020 and improved by 1.3 billion pounds. The net income of Tesco after minimizing all the expenses was 2.2 billion pounds, and it improved by 360 million pounds since 2019.
Some of the major competitors of Tesco are Safeway, Sainsbury, Morrisons, Insta Cart, Giant Eagle, Iceland, Carrefour, Waitrose, Lidl, Argos, ASDA, and Walmart.
Today, we’ll study the pestle analysis of Tesco. Here we’re going to focus on the macro-environmental factors that impact the growth of the top store in the British market. If you want to study the internal factors, check out the swot analysis of Tesco. Here’s the pestle analysis of Tesco as follows;
Political factors affecting TESCO
Tesco is a multinational brand and operating its business in different countries across the world. The government and political regulations vary from country to country. Therefore, the brand should keep be careful about them and make decisions accordingly. The company follows the safety regulations in different countries to offer safe products.
Tesco is operating its business in countries like the Czech Republic, China, Malaysia, Slovakia, Poland, Hungry, Ireland, and many others. The political environments of all of these countries are different. A stable political is key for running a successful business in any country. Britain has got a very stable political environment and it has helped to become top retail in the local market.
The Brexit deal (exit of Britain from the EU) has created an environment of uncertainty in the business community. The chairman of Tesco, John Alan, said in an interview with BBC that Brexit would increase the prices by approximately 3% to 5%. The British Prime minister said that deal would include tariff-free trade. But it’s not as simple, because there’s administration cost is involved.
According to an estimate, approximately 80% of the food items of the company come from the EU. A little increase in tariff would increase the retail price.
US/China Trade Conflict
The trade conflict between the Chinese government and Trump has been all over the media for 4 years. The US is the major market of Tesco. It’s a British brand and it doesn’t have any direct connection between the US and China.
The Trump administration was following the protectionist policies and it was imposing high on the Chinese made products and all other imports. High taxation on imports and exports impacted the profitability of all the companies that are doing business with the US.
Economical factors Impacting TESCO
Pandemic of Covid-19
The pandemic of covid-19 has impacted very badly businesses and companies. It was due to the restriction on physical contacts, social-distancing, lockdown, and shutdown of businesses. The e-commerce platform and online shopping saved Tesco from becoming the victim of the pandemic.
In fact, the pandemic increased the sale and profitability of the company. According to an estimate, the annual revenue and net income of Tesco have increased by 1.3 billion pounds and 360 million pounds in 2020 during the pandemic year.
Although Tesco survived the blow of pandemic and months of lockdown and shutdown of business, not many other people did. The lockdown permanently shut down many small businesses and many became unemployed as a result.
The higher unemployment rate creates an atmosphere of financial instability and social unrest among the public. When the buying power drops, they start decreasing their spending to meet the basic need. The lower spending would impact the growth and profitability of all the business. The economists are predicting such changes in the post-pandemic world.
Trade Tariff by Brexit Deal
The chairman of Tesco, John Allan, said in an interview with Guardian that without any Brexit deal would have caused more increase in tariff. A deal is better than no deal at all. He said in an interview that people don’t need to panic and worry about the impact of the Brexit deal. The land of the UK still produces enough food to cater to the needs of many. There’ll be a temporary shortage of fresh food for some time, but things would go back to normal.
The market in developing countries is expanding. But Tesco still relies on the British home market for the majority of its revenue. If the local government introduces new laws on e-commerce, online shopping, and delivery model business. It would directly increase the cost, retail price, sale, and profitability of the company.
Social factors affecting TESCO
Local Social trends
Tesco follows the local social and cultural trends of different communities and serves them food accordingly. For instance, the company uses the label of Halal meat in the UK for Muslim customers. The brand also owns the halal meat label and brand in Thailand and Malaysia. Tesco also offers kosher products for Jewish customers in the UK.
People have been switching from meat-based food towards plant-based vegetarian food for the past few years. The vegan trend is growing among people in the western and European markets. The customer demand for vegan products and plant-based food improved by 4.1 billion pounds in 2020.
Tesco is aware of the changing vegetarian trend. The company would amplify the sale of vegan food products by approximately 300% in 2025.
The market demand for certain products in different cultures depends on cultural influence. In other words, the socio-cultural environment influences the purchasing power of customers. They keep on changing gradually from generation to generation every 5 to 10 years. The customers want a sufficient variety of products to choose from. Tesco keeps an eye on the cultural trends and changing attitudes and behavior of customers. It offers them the products according to their requirements.
The social supermarket is a new concept of marketing where the businesses and companies offer the unsold inventory at lower prices. It serves two important social functions. First, it decreases the waste and recycling cost, and secondly, the lower-price range serves the needy and decreases the food poverty level. Tesco cares about the society and social welfare of the people. Therefore, the brand should introduce such offers.
According to a study by Guardian, the unemployment rate among the youth of the age of 16 to 24 is boosting. The most important function Tesco performs is to provide employment opportunities to young people.
Technological factors affecting TESCO
Usage of Technology
The usage of technology is increasing among businesses and companies. It helps them to be efficient in various processes and provides a better customer experience. Tesco has also adapted to the latest technology and it’s one of the main reasons for the company’s success. Payment through the mobile application, m-commerce, and barcode scanning system are some of the main examples.
The pandemic of covid-19 has boosted the trend of online shopping and e-commerce. People started ordering groceries online to avoid getting infected with the virus. Tesco survived the pandemic and lockdown of businesses because of staying on the e-commerce platform and delivering the products on time. The company plans to recruit 16000 more people to provide a better delivery service.
Technology from Amazon Go
Amazon is one of the top 5 tech companies like Google, Facebook, Microsoft, and Apple. Tesco partnered up with Amazon Go for the creation of cashier-less billing technology. It revolutionized the retail shopping process by saving customers’ time and provided trouble-free billing.
Legal factors Impacting TESCO
Laws & Regulations
The legal structure and government rules and regulations of different governments are different. Therefore, the brand must follow local and international laws.
For instance, according to a report by Davis in 2018, the European Union introduced laws that restrict companies to perform any anti-competitive activity. It means that Tesco can’t acquire and merge with a big company of its size in Europe. Now Britain is out of Europe. This law won’t be applicable in the UK, but active in the EU.
The brand can’t hire employees and provide them less than required wages. The company also can’t sell alcoholic drinks to young underage teenagers. The courts imposed heavy fines on Tesco for violating these laws in the past.
Gender Bias Allegations
There was a report in 2016 and it claimed that the workplace culture is highly biased. It discriminates against people based on age and gender.
Tesco failed to provide the exact picture of its finances and the company’s profitability in 2017. The courts imposed a heavy penalty on the brand for providing misleading information. The company agreed on a settlement to pay 12 million dollars.
Some of the employees filed a lawsuit against Tesco for providing unequal pay to the male and female employees. Such lawsuits are jeopardizing the credibility of the company.
Environmental factors affecting TESCO
Tesco has recently launched phase 2 of the recycling plan and it comprises of remove, reduce, reuse, and recycle the plastic. It would help the company to decrease and remove the non-recyclable plastic. Most importantly, it works in a loop and keeps reducing waste. It’s a very good step for cleaning up the environment.
Tesco is also working on the project of recognizing the illegal fishing boats that are endangering sea life by doing over and non-seasonal hunting. These steps are working towards building a sustainable environment.
After an in-study of the pestle analysis of Tesco, we have realized that Tesco is true of the top retail supermarkets in the UK and worldwide. The lawsuits, controversies, and the uncertain economic environment are serious threats to the company. The company should keep its eyes open to the changing laws and regulations.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.