Tesco Marketing Case Study

Q1. Analyse Tesco's external environment and identify the challenges it faces in scanning its environment as a multinational company.

The assessment of external factors has been crucial in TESCO's success. This is because TESCO has taken into account the implications for consumers, employees, stakeholders, associated organisations and the company's mission statement.

2.0 INDUSTRY ANALYSIS: PESTEL FRAMEWORK

2.1 Political Factors

Operating in a globalised environment with stores around the globe, Tesco's performance is highly influenced by the political and legislative conditions of Europe, North America and Asia.

For employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs (Balchin, 1994). Tesco understands that retailing has a great impact on jobs and people factors (new store developments are often seen as destroying other jobs in the retail sector as traditional stores go out of business or are forced to cut costs to compete), being an inherently local and labour-intensive sector. Tesco employs large numbers of; student, disabled and elderly workers, often paying them lower rates. In an industry with a typically high staff turnover, these workers offer a higher level of loyalty and therefore represent desirable employees.

Political challenges

In recent years UK supermarkets have come under increased scrutiny over their treatment of suppliers, particularly of own-label products, yet the development of strategic supply networks has been an integral part of most supermarket strategies for the past decade.

Under EU law, there is presumption that an organisation with a large market share is dominant. The concerns with this are that quality of products and services will slip and there is a risk of paying higher prices. TESCO to date has not been assessed as posing a risk of exploitation but should bear this in mind due to increasing pressure to use its dominant position and power to ensure that a fair farm-gate price is paid to farmers in the UK.

In addition, planning permission is an issue that TESCO seriously need to be aware of due to their continued expansion. Planning permission is heavily regulated in the UK. Tesco will need to identify the relevant laws on planning permission and assess the initial potential success of a store in a new area.

2.2 Economical Factors

Economic factors are of concern to Tesco, because they are likely to influence demand, costs, prices and profits. One of the most influential factors on the economy is high unemployment levels, which decreases the effective demand for many goods, adversely affecting the demand required to produce such goods.

As one of the largest and fastest growing retailers more jobs will be available with TESCO therefore helping to reduce the levels of unemployment. Although international business is still growing (Appendix A), and is expected to contribute greater amounts to Tesco's profits over the next few years, the company is still highly dependent on the UK market. Hence, Tesco would be badly affected by any slowdown in the UK food market and are exposed to market concentration risks.

For employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs (Balchin, 1994). Also to meet the demand from population categories such as students, working parents and senior citizens. Tesco understands that retailing has a great impact on jobs and people factors (new store developments are often seen as destroying other jobs in the retail sector as traditional stores go out of business or are forced to cut costs to compete), being an inherently local and labour-intensive sector. Tesco employs large numbers of; student, disabled and elderly workers, often paying them lower rates. In an industry with a typically high staff turnover, these workers offer a higher level of loyalty and therefore represent desirable employees. Protecting consumers and ensuring that entrepreneurs have the opportunity to compete in the market economy are important within consumer law.

2.3 Social/Cultural Factors

TESCO have branded themselves as selling to everyone and therefore offer a range of products and services from Value to Finest prices thus appealing to all segments of the market Current trends indicate that British customers have moved towards ‘one-stop' and ‘bulk' shopping, which is due to a variety of social changes. Tesco have,