Task 4- (DI) Read the case and critically evaluate the global business environme

Question

Task 4- (DI) Read the case and critically evaluate the global business environment, including the opportunities and challenges faced by the organizations by using PESTEL analysis. A few large super markets have for many years dominate food retailing in the UK. In recent years many of these companies have also expanded into other areas of business, selling large number of non-food items in heir sectors. The market is dominated by Tesco. Tesco claim their success belongs to many factors. Thei 2009 annual project states that "good financial management and leading market positions have served us wel this year in the face of a challenging customer environment. We will continue to pursue our long term strategy which will put us in an even stronger position once our markets emerge from the economic downturn. The company operates some 4,331 stores in 14 countries around the world and employs more than 4,70,000 people It is the third largest grocery retailer in the world.

Explanation / Answer

PURPOSE OF PESTEL ANALYSIS

PESTEL Analysis is an analysis of the external factors affecting the organisation. PESTEL stands for Political, Economical, Social, Technological, Environmental and Legal analysis .It highlights the impact of external (uncontrollable) factors on the day-to-day working of an organisation. PESTEL analysis is also helpful in highlighting the opportunities and threats pertaining to the organisation.

PESTEL ANALYSIS OF TESCO

TESCO is the third largest supermarket retailer in the world.

The giant retailer enjoys i a lion’s share of the market in UK, having twice market as its largest competitor.

It operates 4331 stores across 14 countries around the world

Political Factors

The political environment plays a key role in success of businesses in any country. TESCO needs to be cautious of the changing political landscape in UK as it can lead to impeding consequences. The instability caused by BREXIT can lead to change in laws pertain to foreign investments as well as adversely impact vendor relations. If there are any strikes, agitations etc in support or against certain political changes, they can also affect the demand and supply both.

Economical factors

With the global economy in a downturn and increasing inflation, the supermart is also to face the brunt. The concentration of competition also affects the vendor relationships and may increase vendor margins, in turn lowering the firm’s profitability. The increasing rental costs will also hamper the margins as the rentals form 6-7% of a retailer’s costs.

Social Factors

With the big supermarkets taking the leap, the smaller retailers, grocery store owners will face the heat. This will adversely impact the society in general. TESCO has to be focussed on changing customer’s behavioural patterns and making itself as a one stop solution for all the needs of the customer.

Technological Factors

The leap forging technological evolution is a single most important factos impacting the business of TESCO. The use of technology for billing through cards, Security through CC TV cameras, Computers for billing and Data Analytics for analysing customer buying patterns will govern the success of the retailer in the future. The exponential growth in sales of online retailers also poses a significant challenge to the supermarkets.

Environmental Factors

The strategic location of the supermarkets outside the towns brings the pollution as a serious ill effect. Moreover, the solid and liquid wastes have to be disposed by the retailer on the day to day basis for cleaner store operations TESCO will have to become eco-friendly by utilizing solar lighting systems etc.

Legal Factors

The legal ramifications of a change in tax regime or any laws negatively impacting the retailers could be dampening. TESCO will have to keep itself secure and adhere to the rules and regulations of the state.

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