The diagrams and the tables that are used in this report are the below: Economic growth diagram Inflation diagram Unemployment diagram Immigration diagram Acknowledgements I would like to thank all the people who are behind these sites and all the web sites that I used, which were very helpful for me to finish my report. Summary
In the PEST analysis below is given a description of the environment of the chosen firm in which the firm operates. Also are given some reasons of the importance of the PEST analysis and in the end is provided the influence of political, economical, social and technological factors in the firm’s operation. Introduction 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 (internet source 1). 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. Methodology
Using internet as main source of the report, information about employment law, economic growth, inflation, unemployment, immigration, internet, innovation and technological advances will be taken under consideration. It will be helpful to understand how all these factors influence the firm at present and have an eye on the future. Findings – Results In this section of the report are mentioned the main macroeconomic objectives that government tries to support in order to keep up stability of the economy. These objectives are economic growth, inflation, unemployment and immigration.
PATERNITY LEAVE AND PAY IS EXTENTED If the mother of the child returns to work before the maternity leave period ends to which she is entitled and then fathers will be able to benefit from up to 26 weeks’ additional leave. This may be paid and will be available when the child goes over the first six months of his life, if the taken during the mother’s statutory maternity pay period. The legislation of this law is to come into force in April 2010, with effect for parents of babies due from 3 April 2011. (Internet source 1) ECONOMIC GROWTH
Since the summer of 2007 and the till nowadays, the economy of many countries round the word, suffers from the global crisis, one of these countries is also UK and it is to be expected the negative affection on the economic growth of the country. However, as Davison (2007:270) states, “In some years there is a high rate of economic and in other years, economic growth is low or even negative”. This rising and falling of the economic growth is not something unusual. In addition, Davison (2007) argues, that it is a continuous cycle, which has four stages, the upturn, the rapid expansion, the peaking out and the slowdown.
At the moment we are experiencing the slowdown stage. (Internet source 2) The above table shows the economy growth in the UK in quarters. During the year 2005 and 2007 the economy showed a stability that does not occur in 2006 and 2008. Especially in 2008 the progress is negative INFLATION Davison (2007:268) argues that, “By inflation we mean a general rise in prices throughout the economy”. Government policy seeks to stabilize and to keep inflation low. An important reason of this is that it will aid the process of economic decision making as Davison (2007) states. UK inflation rate starts to rise, as shown from the national statistics. Internet source 3) Many people because of the crisis that many countries suffer of it, including UK, do not spend their money to unnecessary products but on products first needs for their living. Due to the increase of inflation as shown the graph above, if firms want to be competitive again, have to reduce the prices of their products. UNEMPLOYMENT Unemployment is a common problem for many countries, so UK as well. They aim to reduce unemployment because it is a negative figure on government resources as Davison (2007) argues. In addition Davison (2007:268) states that, “Also unemployment represents a waste of human resources”.
The graph below shows the increase of unemployment in the UK. (Internet sources 4) The increase of unemployment shows us that in the 3rd quarter almost 140,000 people lost their job. However, that means the government will lose incomes coming for instance from taxes and insurances that the unemployment people were going to pay if they have a normal monthly income as they used to have. IMMIGRATION Many people leave their county hopefully to find another place to live, searching something better which will give them a meaning to their life and for so many others reasons.
UK is an attractive country for immigrants, offering many jobs and better life for them. The majority of the immigrants are not educated with a result not to get a good job but the appropriate one to live normally. However, there is a number of people who come to UK searching for a job and because they are educated enough they get a well paid job. The figure above shows the increase of immigration in UK. Every year immigrants come to country more and more. An estimated 590,000 people arrived to live in UK in 2008 which is the second highest figure on record after 596,000 in 2006. Internet source 5) INTERNET Internet is included in technological factor of Pest analysis. Tesco gives the ability to its customers to do shopping online but still is a quite difficult for its customers for the fact that some people do not find easy the order that they have to follow for online shopping. However, to do online shopping you have to meet specific requirements. For instance, to have a Tesco club card is one of the requirements. INNOVATION AND TECHNOLOGICAL ADVANCES Technological advance for Tesco would be more specific software which will record all the import and export product of Tesco.
It is an advantage for a firm to know what stock has or what products sells for a better organized procedure of it. For instance, sometime some firms like Tesco, when a product that it sells, has been sold and is not available any more for the customers, is a bad image of the firm with a result to lose customers. Discussion Tesco is a food retailer and operates in UK. The PEST analysis will be carried out will point out some of the main factors that influence Tesco. Such factors could be political, economic, social and technological. In the first section political factors are on discussion.
Tesco, according to employment law “Paternity leave and pay is extended”, which will be legally approved on the 3rd of April 2010, should take under consideration the staff recruitment. If Tesco wants to be as less as impossible affected by this law its staff should be equally share in men and women. According to this law Tesco will have to pay the percentage of men who are not going to work probably but legally during their absence and then it will have to recruitment more staff to cover the space that is going to exist. The consequence would be that Tesco will have more costs which could be avoided.
The second section is the economic factors. 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.
References Book: -Davison, L. (2007) The Business Environment 3rd Edition, Pearson Custom Publications -Internet web pages all accessed on the 13th and 14th of December 2009: 1)Personneltoday. com