PESTLE analysis for Tesco's

What is a PESTLE analysis?

PESTLE stands for Political, Economic, Sociological, Technological, Legal and Environmental factors.  Examples of each are:

  • Political - tax policies, trade restrictions, tariffs
  • Economic - economic growth, interest rates, inflation rates
  • Sociological - culture, health consciousness, age distribution
  • Technological - ecological aspects, research and development, rate of technological change
  • Legal - health and safety laws, consumer laws and regulations  
  • Environmental - recycling policies, pollution
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Why use a PESTLE analysis?

The purpose of the PESTLE analysis to assess the industry which an organisation is in.  The PESTLE analysis is used in conjunction with the SWOT analysis which assesses the Strengths, Weaknesses, Opportunities and Threats to an organisation.  The PESTLE analysis is also seen to assess the Opportunities and Threats to the organisation.

How is PESTLE analysis used as a strategic tool?

Strategic management is about formulating and implementing decisions which allow an organisation to achieve its long term objectives.  This can be done ad-hoc, regularly or continuously scanning.  Whether the scanning is of TESCO as an entire organisation or individual store, a PESTLE analysis should be undertaken.

Strategies are formulated by Chief Executive Officers, approved by the Board of Directors and implemented by Senior Management.  The PESTLE analysis is part of the environmental scanning branch of strategic management.

PESTLE ANALYSIS OF TESCO

Why do a PESTLE analysis of TESCO?

Tesco is the giant of all supermarkets due to its UK dominance.  Retail analysts have identified three main reasons for this.
  1. Tesco’s are everywhere;
  2. sell to everyone;
  3. sell everything

Due to the nature of the TESCO organisation with particular reference to how it has branded and marketed itself, and the current economic climate, the assessment of external factors by a PESTLE analysis has been crucial in TESCO’s success.  This is because TESCO has taken into account the implications for consumers, employees, stakeholders, associated organisations and the company’s mission statement.  Each external factor would have been and continues to be examined and categorised in terms of whether its implication is negative or positive, large or minor significance, intermittent or continuous impact and so on.

PESTLE analysis factors examined:

Politically, the credit crunch may lead to higher numbers of unemployment.  As one of the largest and fastest growing retailers more jobs will be available with TESCO therefore helping to reduce the levels of unemployment.  A PESTLE analysis is therefore useful in keeping TESCO up to date with their environmental surroundings, for example, realising in advance that we were heading for a recession would have helped them to plan ahead.

Whilst one of TESCO’s competitive advantages at present relates to their overwhelming physical presence, there are issues about TESCO driving out the competition from other retailers.  There are policies as well as laws and regulations governing monopolies and competition which would be identified though a PESTLE analysis.  This is potentially one of the main issues that TESCO’s are faced with.  Protecting consumers and ensuring that entrepreneurs have the opportunity to compete in the market economy are important within consumer law.  Due to the current state of the economy, many small businesses are failing and many unable to enter the market.  A PESTLE analysis helps to assess where location wise there is a demand for expansion.  The situation is in no way being assisted by the ever expanding TESCO’s chains of store.  Under EU law, there is presumption that an organisation with a large market share is dominant.  The concerns with this are that quality of products and services will slip and there is a risk of paying higher prices.  TESCO to date has not been assessed as posing a risk of exploitation but should bear this in mind.  This is the reason why regular or continuous scans making use of the PESTLE analysis will lead to continuous assessments which can ensure that TESCO’s dominance is not in any way exploitative.

In addition, planning permission is an issue that TESCO seriously need to be aware of due to their continued expansion.  Planning permission is heavily regulated in the UK.  A thorough PESTLE analysis would help to identify the relevant laws on planning permission and whether any resistance to planning was on lawful grounds or merely local people’s dissent.  The PESTLE analysis would therefore initially assess the potential success of a store in a new area.

With the economy being as it is at present, TESCO are fortunate that they have not been as badly affected as some retailers by the recession.  TESCO have branded themselves as selling to everyone and therefore offer a range of products and services from Value to Finest prices thus appealing to all segments of the market.

The Sociological aspect of the PESTLE analysis involves considerations such as the increase in immigration of Eastern Europeans or increase in young professionals.  Naturally there is therefore a demand for new goods for example, the career minded professional who is a single person.  This has seen a rise in the meals for one or quick microwaveable meals to make cooking quick and easy for those always on the go.

Technological factors which have perhaps had the most impact on TESCO has been the growth in the use of the internet.  They have capitalised on the use of online shopping and provide a delivery service through their website at www.tesco.com.

TESCO’s are also instrumental as a retailer in supporting carbon reductions and have created a £100 million Sustainable Technology Fund for this purpose.  They also encourage their customers to make low carbon choices.  Yet if TESCO’s did not take their corporate responsibilities seriously in relation to environmental issues it could have dire consequences for TESCO’s reputation.

A PESTLE analysis is therefore vital to the development and the success of TESCO’s in addition to the day to day management of each store in line with strategic decisions.  Without knowing what external factors affect the organisation, it is difficult to manage the business in an efficient manner.

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