tesco-pestel-analysis

Tesco PESTEL Analysis

Background

Tesco is a multinational grocery and general merchandise retailer headquartered in the United Kingdom.

Operating in 13 countries across the world, the once supermarket retailer has now expanded into other products such as finance, insurance, and mobile phones.

Tesco has a simple mission: to be a champion for its customers. Let’s examine the factors that may affect this mission by undertaking a PESTLE analysis.

Understanding the Tesco PESTLE analysis

Political

While Tesco does not have the global reach of Coca-Cola or Amazon, the company does have to deal with Brexit. New trade rules are continuing to cause disruptions to the food supply chain, with Northern Ireland operations one of the worst hit.

Local government in the UK has also proposed a so-called “Tesco Tax” on large supermarkets. This was conceived as a way to keep money circulating in the local community and help small businesses survive. Negative community sentiment over the dominating presence of Tesco in some areas is likely to continue.

Economic

The UK minimum wage was subject to a 4.4% increase in 2018, causing a subsequent increase in Tesco’s labor costs. With a good chunk of the retail market share in the United Kingdom, the business must find other ways to increase profit margins.

The company is also facing increasing competition from discount retailers Aldi and Lidl.

Social

Tesco is one of many retailers to take advantage of the trend toward convenience. Consumers now expect supermarkets to be a one-stop-shop. In other words, they expect to be able to get everything they want in one place.

To a lesser extent, the Tesco range of organic products has created a loyal base of new customers.

Technological

Tesco is at the forefront of retail technology. In its retail outlets, the company uses self-checkout machines, electronic shelf labeling, and intelligent scales.

Tesco was also a pioneer of end-to-end supply chain RFID (radio frequency identification) management. This technology is being used to monitor products as they move through the supply chain. Distribution centers also use RFID to monitor the flow of goods and automatically re-stock stores where necessary.

Legal

In more recent years, revised UK and EU legislation around anti-competitive activities has prohibited Tesco from certain mergers and acquisitions.

Environmental

To reduce greenhouse gas emissions, Tesco encourages its customers to shop online. Delivery drivers are then shown the most fuel-efficient route and will also collect and recycle unwanted plastic bags from customers.

Tesco has also been working with suppliers to ensure environmentally damaging palm oil is at least sourced sustainably. Similar initiatives are also being undertaken to encourage sustainable fishing practices.

Key takeaways

  • Tesco is a multinational grocery and general merchandise retailer operating in 13 countries globally.
  • The United Kingdom accounts for more than a quarter of Tesco scales. In this lucrative market, the company faces complications with Brexit trade deals and the raising of the UK minimum wage.
  • Tesco is a pioneer of RFID supply chain management. It is also taking steps to address climate change by encouraging online shopping and promoting the sustainable sourcing of palm oil and seafood.

Read Also: Tesco SWOT Analysis.

Read Next: Pestel Analysis, SWOT Analysis, Porter’s Five Forces, STEEP Analysis, SOAR Analysis, BCG Matrix, Ansoff Matrix.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"