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PESTEL and five forces analysis of Tesco

Paper Type: Free Essay Subject: Marketing
Wordcount: 4455 words Published: 1st Jan 2015

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Tesco is one of the retailers in food largest in the world, with revenues of over £ 54 billion in 2009 and employs more than 470,000 people. They operate approximately 4,331 stores in 14 countries worldwide. The company operates primarily in the United States, Europe and Asia, and its headquarters is based in Hertfordshire, England .The portfolio of the commercial network of Tesco consists of: more than 960 shops Express, that sells approximately 7.000 products, including the fresh food in the suitable places and 170 shops of Meter that sell a variety of foodstuff in the centres of villages and cities, and 450 large supermarkets that sell food and nutritive not articles, including books and DVDs. Tesco also offers services of selling retail in line across his web site and tesco.com direct Tesco. Also, they provide connections of wide band to Internet and financial services across Tesco Personal Finance (TPF). Tesco was founded in 1919 and it threw his first shop in Edgware, London, United Kingdom in 1929 (Tesco, 2010), nevertheless, during the decades in which it has evolved to turn into the leader of the market into the food segment retail of the United Kingdom (Data monitor, 2010). The comparative position of quota of market of Tesco with regard to other company’s leaders on the market has learnt of the following way (Euromonitor, 2010):

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Tesco opened its first store in Edgware, North of London in 1929. It is named after the founder of Tesco, Sir Jack Cohen and a partner of a firm tea Cohen worked with TE Stockwell vendors merge. Since then, the company has grown and has been reflected changes in trade retailer. Before the Second World War, most grocery stores serves customers, but self-service shops were on their way, and once introduced, allows shops more grow to become large surfaces that we know today.

The company is listed on the stock exchange in 1947 with a price of 25 p initial action. Tesco became a household name in the high streets of Spain, and it was able to take advantage of economies of scale shopping by purchasing bulk supplies, the existence of resale prices restricted the ability of Tesco to be as competitive as the trade conditions now permit. The system allows vendors insist on retailers to sell their products for a fixed price. Tesco use other strategies for loyal customers, including the use of labels that can be redeemed for cash or goods.

Tesco to this strategy time was encapsulated by the title of the autobiography of Cohen, ‘ stack high and sell it cheap “, but more and more customers flows and change meant needs that Tesco changed its approach and moved at the opening of stores in the city with more than a very elegant interior.” This renovation was carried out in existing stores and with the start of the sale of gasoline in some of its stores broke the £ 1000000000 level turnover in 1979.

The 1980s saw the continued growth of new stores and the development of new initiatives. In 1985, Tesco announced its restoration with the nutritional information and advice on some of their own-brand food service. In the 1990s, the transfer to overcome major supermarkets another way. The emphasis was on the search for new ways to meet the needs of consumers and building customer loyalty. A range of facilities and new services were introduced, including Tesco Metro, a concept store destined for customers in the main street, but which offers the advantages of a large supermarket. In some respects, this fact was Tesco return to street after many shops selling in the 1960s and 1970s at the step to join the trend of buying out of town.

A similar movement saw the advent of Tesco Express, a supermarket petrol station provide local buyers not only with gasoline at competitive prices, but also a number of essential food items. Such an approach also extends to Tesco Extra, where food and non food products were sold shops. This proved to be a direct challenge to some larger supermarket Asda which had sold non-food items like white line products (washing machines, refrigerators, etc), gardening, cooking, clothing, CDs, etc for some time. Sainsbury’s while maintaining their food and non-food services separately with the development of the chain of home base.


The frame PESTEL next analyzes the dynamic and unpredictable ambience in that Tesco operates by means of the identification of the forces that have the biggest impact in the yield of Tesco


Adherence of China to the OMC has promoted the free flow of exterior commerce by means of the elimination of all the barriers to encourage the western companies, as Tesco, to pass in the world that includes the market more profitably of more than 1.3 million persons. In 2009 an agreement was signed by Tesco to establish a series premeditated of joint companies for the development of commercial canters in China. This joint company included three commercial centres: Anshan, Fushan and Qinhuangdao. Also, 18 new large supermarkets it hopes to open in China in 2010 (Tesco, 2009).  The growth of the business segment international of Tesco is in increase and it is foreseen that they represent the fourth part of the benefits of the company. Promotion of the blocks of free commerce for the governments to benefit from the globalization has appeared in the literature .  The immersion of 10 more countries in the European Union (EU) was carried out in 2004 to promote the commerce between Western Europe and countries of Eastern Europe (BBC, 2009).  This has provided Tesco with a platform to expand his commercial network in the whole EU.


The economic factors are a motive of worry for Tesco since they affect directly in the behaviour of buy of the clients. Although the economy of the United Kingdom declared itself officially in recession in 2008, the substantial reduction of the government in the valuations of interest helped to limit to the minimum deep piece of news of the unemployment during the year 2009 (Euromonitor, 2010). As result of this, the purchasing power of the consumers is again in a constant increase, since they have more confidence on his financial current situation. Nevertheless, there is still great financial suspense that means that the consumers tend to spend less in products of the first quality, which it includes organic and prepared dishes, which they affect negatively so much in value of the selling and the margins .

Nevertheless, the positive aspect of the recession is that the clients to eat less and to eat more in house that offer opportunities for the retailers of eatables as Tesco to increase his production (Guardian, 2010).  It is necessary to point out that the meal is the last thing that the clients to reduce. The percentage of expense of the consumers in general on the food has increased considerably in the last years, like appears next (Euromonitor, 2010)


An analysis of the population of the United Kingdom shows that there are more pensioners that the children represent the generation of the baby boom (Herald of Scotland, 2010). The aging of the population is discouraging for the food retailers to the biggest persons they tend to eat less. They are less inclined to travel to the supermarkets to do buys compared to the youngest generation. Although the level of Internet literacy drops on the age of 65 years inside the population , it has been nevertheless it predicted that the aging of the population is of buys in more suitable line. Nevertheless, the deliveries of small are considered to be ineffective and costly. Attitude of the consumers towards the meal is incessantly changing as they have become more conscious of the health. An increase in the demand of organic food has been accommodated by Tesco to reflect this change in the demand. The payments of checks and cash in the box one made possible first time for Tesco.


One of the principal macro-environmental variables that have influenced directly the chain of supply, operations and processes of the retailers of eatables and food is the technology. The operation of the supermarkets is turning out to be affected by the use of the Ist internet across selling retail of eatables in line, which is showing a constant growth. The subscriptions to the internet I have grown in more than 50 % and it has been believed that the internet that is being used by 70 % of the population in the United Kingdom. The programs of allegiance, they are interfering across technology of the information that they dissuade to the clients from changing to his competitors .

The mobile technology has arisen as a platform for the distribution inside selling retail from food. New wine of the application developed by Cortexica Vision Systems, for example, has been used by Tesco from 2009 across which the clients direct for themselves to Tesco wine that allows them to buy the wine chosen directly from his mobile phone . Buys online retail there has reached great popularity due to major access to Internet of wide band in the United Kingdom. One has emphasized for the Magisterial Conference (2010) that the number of users of wide band in the country is 15,5 millions, which there represents 70 % of the entire market.


Respectful of the environment, to reduce the packing is being promoted for Government. One has found for the National Office of Statistics (2010) that the percentage of the consumers has raised the use of reusable bags from 71 % to 74 % and that those who try to reduce the number of plastic bags that they extract of the shops it has increased from 65 % to 68 %. This helps to reduce the entire cost and it is good for the companies of Tesco, the image of social responsibility. Tesco has added the information of the trace of carbon in the milk products, you swallow and juice of orange, and his target is to extend it to the elements of bread and it would not feed in 2010 (Tesco, 2010). Tesco has presented his plan of green life to give advices to the consumers on the environmental questions, included the way of reducing the waste of food and his trace of carbon in the preparation of the meal.The consumers to re-use the bags, the recycling of mobile phones and the canisters of aluminium and to prefer the deliveries without bag are rewarded across green points of Tesco card client (Tesco, 2010 ; Data monitor, 2010)


It has predicted that the VAT would have to increase 20 % since the Government has to finance an enormous budget deficit (HM Treasury, 2010). This will affect to not food sectors of Tesco, such as pledges of dressing.Being Based on the fall of Formless payment of the Commission (National of Minimal Salary, 2009), 2008 and together 2009 appraisals have been translated in an increase in the minimal salary of 15,5 %. This will result in an increase of the operating costs of the supermarkets.


Threat of substitute products and services

The threat of entry of new competitors in the food industry retail is low.

one needs from big investments of capital in order to be competitive and to establish a mark. The principal marks that have already captured the food market retail are Tesco, Asda, Sainsbury’s and Morrison and that there represents 80 % of all the buys in the United Kingdom (Mintel, 2010). Therefore, the new operators have to produce something at an exceptionally low price and / or of high quality to establish his value of market. To obtain authorization of the planning of the local government takes a considerable quantity of time and resources to establish new supermarkets and this is therefore a considerable obstacle for the new inlets.

Intensity of competitive rivalry

The intensity of the competitive rivalry in the industry of food and groceries retail is very high. Tesco faces the intense competition of his direct competitors, including Asda, Sainsbury’s, Waitrose and Morrison, who compete between yes on the price, products and promotions of intermittent form. Therefore, it is necessary to emphasize that Asda is one of the principal competitors in this segment with an increase of quota of market of 16,6 % to 16,8 % during the fiscal year 2010 / 09, whereas Sainsbury’s has demonstrated an increase of 16,1 % from 15,8 % and Morrisons to 11,6 % of 11,3 % across the same period (Euromonitor, 2010). The slow growth of the market means essentially that these quotas of every time major market of the competition there has been intensified the rivalry of the market, which is threatening the position of leadership on the market of Tesco. • In the rural zones, where the most nearby supermarket can be a certain distance, some primary consumers are attracted by the retailers like Somerfield and Co-op. shops of hard discount as Aldi and Lidl have taken possession of the market in times of recession. During 2008 there registered a growth of the selling of more than 25 % .

Bargaining power of buyers

The power of negotiation of the buyers is quite high.In the cases in which the products have a differentiation set sail and they are standardized more, the cost of change is very low and the buyers can change easily one mark to other one. It has been proposed that the clients feel attracted towards the low prices, and with the availability of buys retail in line, the prices of the products are easy to compare and to select this way.

Bargaining power of suppliers

The power of negotiation of the providers is quite low. Fits to point out that the providers incline towards the most important and retail food of food and the fear of losing his commercial contracts with the big supermarkets. Therefore, the position of the retailers as Tesco, Asda and Sainsbury’s becomes stronger moreover and the negotiations are positive in order to obtain the price as low as possible of the providers.

SWOT Analysis


Being based on Datamonitor (2010), Tesco is the biggest third company of feeding retail in the world, which produces more than 4,331 shops principally inside the USA, Europe and Asia. The company celebrated 30,7 % of quota of the market of retail eatables of the United Kingdom in 2010 (Euromonitor, 2010).

A strong financial performance has been demonstrated by the company in the last years, which underlines his strategic capacity. According to Datamonitor (2010), Tesco is a company £ business volume 54billion registering an increase of 14,9 % compared to 2008. The most important strategy that has been adopted as the company is the personalization of products and services in accordance with the requirements of the market. The efficiency in the performance of the company in the last decade can be summed up by the help of a growth in the pursuit of key indicators. The strategy of Tesco takes as a target to centre on the accessibility of the product that it guarantees that the client receives the product to adapt itself to his budget without compromising the quality. During 2009 the selling of line not nutritive retail company Tesco Direct has increased in more than 50 % (Tesco, 2010). Tesco is provided with a strategy of clients’ retention demonstrated with the help of his program of so called fidelización “card client of Tesco. Basing in dunnhumby (2008), the company uses the information gathered in this program of fidelización in his systems powerful CRM so-called crucible and the Zodiac, and this information is used for the direct and effective commercialization of the diverse skills of promotion.


Tesco has not been capable of getting out of debt well in the last year compared to his competitors. According to Mintel (2010), a series of products were withdrawn from the market by Tesco in 2009 that has resulted in a financial loss, as well as damages to his image of mark. These companies include lines of value, which have been commercialized like from high quality of the cheapest alternatives to the key marks. The key operations of the company concentrate on the retail sector of the United Kingdom, where they register more than 75 % of his income during the fiscal year 2009 (Tesco, 2010). This absence of geographical diversification can be seen like a key weakness for the company since it is subject to the systemic risks of the British market.


The portfolio of the commercial network of Tesco is in increase. They opened more than 620 shops in 2009 of which 435 were international . This geographical diversification will help the company in the improvisation of his economy of scale, limiting to the minimum his exhibition to the systemic risk.The popularity of Tesco.com is growing rapidly, which more than 1 million clients represents in 2010 (The Guardian, 2010), which has provided an opportunity to the company to attract new clients and to reduce the global cost that results in major profit.The approach of the company is in global expansion as it is clear for his entry in the Indian market. This entry is going to reinforce his position on the world market. An agreement of limited exemption has been signed by Tesco with Trent, retailer of the group Tata, who is one of the biggest industrial companies of the India (Daily Mail, 2010).


The beginning of a financial global crisis has led to a contraction of the economy of the United Kingdom 2,4 % in 2009, which is estimated contracts moreover 4,2 % for the International Monetary Fund . Concentration of Tesco on the market of the United Kingdom therefore can have a negative impact in his financial capacity. The decrease of the income and the increase of the unemployment have affected the behaviour of optional buy of the consumers that has reverberated negatively in the selling of the company, in particular not food articles. There has been a strong competition on the market of the supermarkets of the United Kingdom. Tesco, although he has been a leader in this sector for 15 years .But it faces now an intense competition of his competitors, who are gaining quota of market. These include the rest of the ‘ four big ones ‘, that is to say, Asda, Sainsbury’s and Morrison, respectively.

Tesco International Strategy

Tesco had learned some lessons on the globalization of his bitter experiences in France and also of other companies like Marks and Spencer, the retailer of clothes of the United Kingdom. His experience in France gave him an idea on the functioning of the different markets. Tesco realized of that the business strategies that had success in the United Kingdom that work on other markets only if one was giving them a local flavour. The company also found out that it was important to hire to local and personal personnel of using in the United Kingdom to spread the knowledge on the company.

Be flexible

Be flexible every market is only and it needs a different approach.

In Japan, the clients like to buy small quantities of very fresh food, every day. Formats of existing large supermarkets do not expire with the needs of the local clients, from what the entry of Tesco in the Japanese market across the acquisition of an operator of discount supermarkets.

Local action

Local actionThe local clients, the local cultures, the local chains of supply and local regulations need an offer to measurement dictated by the local personnel.

In Thailand, the clients are used to buying on the traditional markets of wetted, the interaction with the providers and poking in the heaps of products to choose what they want. Instead of adopting the western approach of packed, portions suitably, our shop of Branch IV in Bangkok tries to satisfy the expectations of the local clients “.

To support the approach –

To support the approach Tesco understand that the clients want a big service, big variety and of big value. To become established as the local mark that it takes it is an effort in the long term and it is not a question of planting flags on the map.

The use of multiple formats

The use of multiple formats not alone format can come to the totality of the market. A wide bogey of the expediency of large supermarkets is essential and he has to adopt an approach tend of discount everywhere.

Tesco experience in the commerce of a miscellany of shops means that now Tesco can go on to rapid multi-format and recently Tesco has opened shops Express in Hungary and the Czech Republic.

To develop the capacity

To develop the capacity does not talk each other about scale, it is a question of the skill – so Tesco insure customer of having the capacity across persons, processes and systems. Tesco believe that the investment in our people is the correct way of living ours.

Tesco competitors

To the executive director of Tesco, Terry Leahy, he announced today his results for the whole year of the company on Wednesday, it will be seen that his position as king of the supermarkets of the United Kingdom is sure. It is reckoned to announce enormous profit, increase of the selling and the biggest quota of market of his rivals. Tesco has reigned supreme since it took the previous number, J Sainsbury, sleeping in the work in 1995, and cruelly executed a coup d’état in terms of quota of market and benefits. Nevertheless, some observers have begun to say that the crown might be the slide. The problem for the supermarkets Tesco is rivals that it is much forward. At present, according to TNS, which has a quota of market of about 25,4 per cent opposite to Sainsbury’s 17,7 per cent. Adjustment in the heels of Sir Peter is Asda with 15,9 per cent and to win rapidly. Executive director of Safeway, Carlos Criado-Pérez, is executed in the fourth position with 10,2 per cent of the market. The battle for the supremacy seems as an inevitable conclusion that even Sir Peter has admitted Sainsbury’s it is slightly probable that a number increasingly. But that has not prevented that the supermarkets to obtain vicious in his efforts to gain quota of market. Tesco, Asda, Sainsbury’s and Safeway jazzing all his shops and trying to sell more not food products, like the CDs, toasters of bread and clothes. But the bloodiest joust is the cost. “The price is to replace the serviceability as the principal field of battle “, says Sally Bain, an analyst of specializing retailers Verdict of Investigation. All the big supermarkets, with the exception of Sainsbury’s, say to be the cheapest. Tesco seems to go too much far, and his announced pretensions are often deceitful. Last year was said in the announcements that it was a question as 13 per cent more bargain sales than those of Sainsbury’s, 14 per cent cheaper than the boots of any products, and also cheaper than Amazon.co.uk in the music and the books. Advertising Standards Authority said that the announcements it had to be changed. Then, in February, when Tesco said that the reduction of the prices of 1.500 products, one does not notice so clearly of 1750 the prices that one had raised from the Christmas. Actually, say the experts, it is impossible to say who is cheaper. ” There is a heap of threats PR happening “, says Mrs. Bain in the verdict. ” In general, it is very difficult to do a comparison on an equal footing, because [the prices of some] are changed by it once for week. At least Tesco is provided with an international program, none of the companies of supermarkets other Spanish can compete in this ambience, unless you count Asda and his parent company, Wal-Mart. This marks Tesco as the leader and, if the international program does not fail, it will turn out to be unassailable. “Unless Tesco suffers a strong attack of sufficiency, it will be very difficult to beat “, says an observer of the industry. But this is not impossible. Sufficiency in Sainsbury’s that allow Tesco who won in the first place.

(http://www.independent.co.uk/news/business/analysis-and-features/every-little-helps-tesco-keep-its-competitors-at-arms-length-656616.htm l)


In view of the previous analysis, it is possible to conclude that Tesco keeps on supporting his position of leadership in the highly turbulent retail segment, where the companies are forced to chase the leadership in costs and strategies of differentiation. Tesco has been capable of obtaining simultaneously with the help of a management of the chain of flexible and agile supply, together with the strategic use of technologies of the information. The basic competences of Tesco have seen that lines up with the managerial environment, therefore to emphasize a positive perspective for the future of the company.


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