Tesco is probably one of the largest food retailers in the UK and generally one of the largest in the world. Tesco operates around 2,318 stores and employs over than 360,000 people. It gives the ability to the consumers to make shopping online, through its subsidiary Tesco. om. Tesco has a wide range of services and is not limited as a normal supermarket. Originally, it is specializing in food and drink, but also it is spread into many other areas. Some of these areas could be clothing, financial services, home and car insurance.
PEST analysis is a powerful tool for understanding the external environment which surrounds the business. To be more specific, what it is meant to be the expression PEST is the Political, Economic, Social and Technological factors that a firm’s operation can be expressed.
Before starting a new business, in the running time of an organization and basically to monitor the future of the organization, it is essential to be carried out a PEST analysis.
The aim of the report for Pest analysis of Tesco’s is to monitor the present and to keep an eye on the future. However, the reason of doing the Pest analysis is for checking any changes that could be done in the future and might influence the firm’s behavior, in political, economic, social and technological issues.
When there is an economic growth of the country, people will continue shop from Tesco and the profits of it will increase because more money will be in a daily transaction between people and Tesco or any firm.
However, when people’s wealth(income) growths might be a negative effect on Tesco sales, because people will switch to more expensive food retailers. People with the global crisis started to think more conservatory and they just buy necessary products. That might stay as a characteristic of them self and even if their income will be increased they will not change their habits.
However, as the rate of the unemployment of the country increases Tesco is earning customers and making more profits. People who have low income or are unemployment they turn to shop from Tesco because it has low price products. People try to find ways to save some money when there is so much of unemployment in the country and Tesco provides such solutions. Also as the inflation in UK and generally rises, there is a general rise in prices. People are more careful of where and what they spend their money. They do not buy unnecessary products but only for basic needs.
This will affect Tesco positive, because it sells products in low price and there you can find products for basic need cheapest. Immigration can be considered as a social factor of PEST analysis. A huge number of people emigrate and come to UK to live and find a job. As the graph shows above on 2006 and 2008 was the highest record of people who arrived in UK. According to that fact Tesco’s customers becoming more and more year by year. When people come to UK and search for a job, it is true that they do not have a high standard income, and they turn to shop from Tesco.
Of course they will not shop from food retailers which are expensive but they will try to find the cheapest one, without that is worse than any other food retailer shop. About technological factors, which internet is included, Tesco should consider that many people do not know how to use internet and should try to simplify the procedure of doing shop online. Furthermore, with that impressive movement of Tesco to offer to the customers the opportunity to shop online and then to deliver to them the products is still quite complicated for some people to do it, because they do not meet the requirements.
Such requirements are to have a Tesco club card and also they have to sign up in specific data base. That might be a reason for Tesco not being able to expand market share in the future. In addition, if Tesco will promote specific software which record any export or import of its products might gain more customers, because customers sometimes when they go for shopping and search for a specific product and it is not available at the moment are dissatisfied and might start a word of mouth negative promotion.
Conclusion and Recommendations In this part of the report the PEST analysis has come to an end and it is essential to refer to the fact that even of the governmental intervention the economic environment remains unstable. However, Tesco has to relate its operation according to some laws which has to be taken under consideration if it wants to make more profits and to expand market share at the present and to keep an eye in the future.
In the economic factor of PEST analysis, I recommend for the business to be more carefully with the recruitment staff. Tesco should recruitment younger people and should have an equally balance between the staff to skip some costs depending on the employment law, for instance to pay paternity leave and to recruitment new staff to recover the space that will be if some people of its staff have to be away from the business for a period of time according to the law. It is a waste of money for Tesco.
Basically when there is inflation in the country the prices go up. In fact there are numbers of people who will prefer Tesco for shopping in such cases. In some cases, businesses are able to set prices, so a good recommended solution for Tesco, to make more profits and to gain more customers in the future is to set lower prices. In fact it sells products in lower price than others food retailers but because it is also spread into others areas like clothing or financial services that would be a good recommendation.
In addition, when the rate of unemployment is high, if Tesco wants to be more profitable I recommend the business to also set lower price to be more competitive but because it is also has low price to find the best price which will still give to it profit and to attract the customers. That can be done also when the rate of immigration is also high. However, an also good recommendation for gaining customers and making more profit is that Tesco should provide some promotional offers. For instance, buy one product and get another one free or buy one and get another in half price.
In technological factor, would be good if Tesco take under consideration in the future specific software to record all the import and export products. It is essential for customers when they search for a specific product to can find it easily and to be available at any time. And finally, I recommend Tesco to make easier the access on its website and the procedure for the online shop. That would be a reason for gaining customers and its online sales will be much more, because some people prefer to do shopping online than going to the store and if they are more close to another food retailer, probably they will shop from there. By doing that Tesco will just rise its profits.