Tesco Case Study

Tesco has become one of the largest retailers in the world, as well as being the market leader in the UK supermarket industry, Tesco has operations in 12 countries across Europe and Asia. Like any global organisation, Tesco is exposed to many factors that impact its operations. These range from who is in power to huge global events. To see what this means in real terms, we’re going to consider a PESTEL analysis of Tesco, looking at the Political, Economic, Social, Technological, Environmental and Legal factors that might impact on the success of the business, and how well Tesco is to withstand them.

The political environment in the UK is relatively stable, but there are some concerns surrounding the relationship with the European Union, as the UK leaves the EU because of BREXIT. Tesco relies on Europe for the supply of many products, so this has created a great deal of uncertainty. However, Tesco has always managed to adjust to political changes, and because of its vast resources, it’s in a strong position to do so again. Tesco also operates in several countries outside the UK, which are politically stable and favourable towards enterprise. The recent Covid-19 pandemic has affected many businesses and individuals.

Whilst Tesco has remained open throughout the pandemic, many of its customers have either lost their jobs through businesses being shut down, or have seen their incomes substantially reduced. The resulting reduction in their purchasing power has impacted on the demand for less essential items. Tesco responded to this by reducing its product range and concentrating on the products that are most likely to be in demand. As a result, although the price of basic goods has increased, Tesco has seen its sales rise during the pandemic. Tesco has had to respond to several social changes over the years. For example, it has introduced a larger range of Vegetarian and Vegan products as its customers’ tastes and preferences have evolved.

Tesco also sell some branded kosher and halal products in the UK, for Jewish and Muslim customers. There’s been an increase in demand across Europe for free range meat and poultry and ethically sourced fish. Whilst this presents challenges to Tesco, it is potentially a growth opportunity. Tesco has identified and made use of various technological developments. The Clubcard rewards scheme has enabled it to retain more customers, and the data gathered helps Tesco understand purchasing habits. Tesco has also made use of changes in point-of-sale technologies such as contactless payments, self- scan and self-checkout systems. Tesco’s ability to keep up with technological developments has allowed it to respond to customer behaviours and preferences and innovate to influence the ways in which customers shop.

Large businesses like Tesco are under considerable pressure to reduce their carbon footprint and impact on the environment. In particular, governments increasingly require companies like Tesco to reduce the amount of plastic they use. Tesco operates several initiatives to reduce its plastic use and has pledged to remove plastic from a number of its products. Tesco is also a signatory of the UK Plastics Pact and has committed to clean air initiatives. Tesco is required to follow legislation that affects its workforce, such as health and safety at work and the minimum wage. As a large company, Tesco is restricted in the type of expansion it can pursue.

For example, Tesco would not be allowed to take over another supermarket because that would be seen as creating a monopoly. As a result, the only legal way it can grow the business is by expanding through investing in new locations and ventures. Finally, an additional E for Ethical has recently been added to the PESTEL analysis. Tesco’s position on issues such as workers rights, modern slavery, irresponsible marketing and animal testing has been subject to scrutiny. What can Tesco do to improve their ethical standing? How can they mitigate against reputational damage in relation to ethical concerns?