D2: Evaluate the extent to which the business environment affects a given business, using a
variety of situational analysis techniques.
By Ayshe Osman
I am now going to evaluate how the business environment has effected Tesco’s using a variety of
situational analysis techniques. Situational analysis includes using PESTLE, SWOT, Porters 5 Forces
and 5 Cs model to look at Tesco’s external and internal environment. These tools can help
management assess the position, capabilities and areas that need further improvement.
PESTLE Analysis for Tesco
All businesses are affected by a number of factors day to day. I am going to explain how the external
environment affects Tesco PLC and its day to day operations. I will be using PESTLE analysis to
evaluate the external environment.
Political Factors for Tesco
Political factors are how a government intervenes in the economy. Political factors can impact
businesses in various ways. A political factor that can affect many businesses like Tesco is changes in
taxes. Tesco PLC has to pay corporation tax, which will have an impact on their annual profit. From
my research corporation tax was set at 19% for 2017, 2018 and 2019 and for the year starting 1 April
2020 it has been lowered to 18%.
The advantage of this political change is that Tesco will be paying less corporation tax leaving them
with more profit. The impact of this is Tesco can reinvest the money into the company for instance
store improvements and advertising. In addition, it can allow Tesco to provide better benefits to
their employees, which would in return lead to higher motivation levels.
The drawback of lower corporation tax is that shareholders who have access to Tesco’s annual
reports may expect to be paid higher dividends. If, however Tesco decide to not pay out higher
dividends this may disgruntle some shareholders and their loyalty to the company. If corporation tax
however was to increase, a disadvantage of this is that Tesco’s profits would be reduced. This would
leave less to invest back into the company or on employee benefits.
Economic Factors for Tesco
Economic factors are determined by a certain economy’s performance. Economic factors can impact
businesses in various ways. Labour costs is an important economic factor that affects UK
supermarkets like Tesco. In April 2020, the UKs minimum wage rate for 25 year olds and onwards
rose from £8.21 to £8.72, which is an increase off 6.2% increase from last year.
The advantage of increasing the minimum wage is that the employees are better paid and therefore
more likely to be more motivated to work. In addition, Tesco’s will have to be more competitive
which will as a result provide a better employment package for potential employees.
The drawback of increasing the minimum wage is that Tesco’s will have to pay out more than
before, especially if they want to attract employees. This will have an impact on Tesco’s profits as an
increase in minimum wage will lead to more outgoings.
Social Factors for Tesco
, Social factors are any variable which arises from culture, environment, community, family, society,
government, the media, technology, religion, language, communication and which influences the
individual to think and act in a certain way. A social factor that can affect many businesses like Tesco
is social media- online shopping app.
The advantage of Tesco using social media is that the supermarket will get more exposure. Also,
social media is one of the few marketing strategies that allow a business to connect directly with
their audience. There are millions of people using social media platforms and it’s a great opportunity
for businesses to reach a large pool of people that are interested in your products or services.
People use social media to post content they love, but they also use it to share experiences they
didn’t love. Therefore, the drawbacks are that if someone had a poor experience with your business,
it opens a door of opportunity for them to share their poor experience with others. To get people to
appreciate and share your posts may take time. For this reason, resources in terms of money and
time must be allocated to ensure frequent publishing of aesthetic posts.
Technological Factors for Tesco
Technological factors are the ways new practices and equipment can affect businesses. A
technological factor that affects Tesco is technological advancements. Such as customers are now
able to use various methods of payment and Tesco has developed its own online mobile payment
system called PayQwid. In the UK 524 Tesco stores use this app. Customers can download the app
and link it with Clubcard and NFC technology. Customers can pay for shopping and get loyalty points.
For those who love convenience shopping, they also introduced “scan as you shop” check points.
Customers shop and tag products, which saves them time.
The advantage of
more convenient, not waiting in queue, less need for staff
The disadvantage of
keep up with the technological changes, costly for machines to be fitted, if they break down, not be
competitive
Environmental Factors for Tesco
Environmental factors are referring to variables regarding the physical environment. This can include
things like consumer health, climate change or the availability of energy. An environmental factor
that affects Tesco is
Many companies are facing immense pressure from government agencies to address environmental
issues. Companies are liable to respond to these issues to benefit society. Tesco now encourages its
consumers to shop at tesco.com. Their van drivers not only use fuel-saving routes but also collect
unwanted plastic bags from customers and recycle them. Tesco is also committed to use renewable
sources and generate 100% of its electricity by 2030. The company promises to minimize up to 50%
carbon footprint by 2020.
The advantage of
By making changes to be greener
The disadvantage of
variety of situational analysis techniques.
By Ayshe Osman
I am now going to evaluate how the business environment has effected Tesco’s using a variety of
situational analysis techniques. Situational analysis includes using PESTLE, SWOT, Porters 5 Forces
and 5 Cs model to look at Tesco’s external and internal environment. These tools can help
management assess the position, capabilities and areas that need further improvement.
PESTLE Analysis for Tesco
All businesses are affected by a number of factors day to day. I am going to explain how the external
environment affects Tesco PLC and its day to day operations. I will be using PESTLE analysis to
evaluate the external environment.
Political Factors for Tesco
Political factors are how a government intervenes in the economy. Political factors can impact
businesses in various ways. A political factor that can affect many businesses like Tesco is changes in
taxes. Tesco PLC has to pay corporation tax, which will have an impact on their annual profit. From
my research corporation tax was set at 19% for 2017, 2018 and 2019 and for the year starting 1 April
2020 it has been lowered to 18%.
The advantage of this political change is that Tesco will be paying less corporation tax leaving them
with more profit. The impact of this is Tesco can reinvest the money into the company for instance
store improvements and advertising. In addition, it can allow Tesco to provide better benefits to
their employees, which would in return lead to higher motivation levels.
The drawback of lower corporation tax is that shareholders who have access to Tesco’s annual
reports may expect to be paid higher dividends. If, however Tesco decide to not pay out higher
dividends this may disgruntle some shareholders and their loyalty to the company. If corporation tax
however was to increase, a disadvantage of this is that Tesco’s profits would be reduced. This would
leave less to invest back into the company or on employee benefits.
Economic Factors for Tesco
Economic factors are determined by a certain economy’s performance. Economic factors can impact
businesses in various ways. Labour costs is an important economic factor that affects UK
supermarkets like Tesco. In April 2020, the UKs minimum wage rate for 25 year olds and onwards
rose from £8.21 to £8.72, which is an increase off 6.2% increase from last year.
The advantage of increasing the minimum wage is that the employees are better paid and therefore
more likely to be more motivated to work. In addition, Tesco’s will have to be more competitive
which will as a result provide a better employment package for potential employees.
The drawback of increasing the minimum wage is that Tesco’s will have to pay out more than
before, especially if they want to attract employees. This will have an impact on Tesco’s profits as an
increase in minimum wage will lead to more outgoings.
Social Factors for Tesco
, Social factors are any variable which arises from culture, environment, community, family, society,
government, the media, technology, religion, language, communication and which influences the
individual to think and act in a certain way. A social factor that can affect many businesses like Tesco
is social media- online shopping app.
The advantage of Tesco using social media is that the supermarket will get more exposure. Also,
social media is one of the few marketing strategies that allow a business to connect directly with
their audience. There are millions of people using social media platforms and it’s a great opportunity
for businesses to reach a large pool of people that are interested in your products or services.
People use social media to post content they love, but they also use it to share experiences they
didn’t love. Therefore, the drawbacks are that if someone had a poor experience with your business,
it opens a door of opportunity for them to share their poor experience with others. To get people to
appreciate and share your posts may take time. For this reason, resources in terms of money and
time must be allocated to ensure frequent publishing of aesthetic posts.
Technological Factors for Tesco
Technological factors are the ways new practices and equipment can affect businesses. A
technological factor that affects Tesco is technological advancements. Such as customers are now
able to use various methods of payment and Tesco has developed its own online mobile payment
system called PayQwid. In the UK 524 Tesco stores use this app. Customers can download the app
and link it with Clubcard and NFC technology. Customers can pay for shopping and get loyalty points.
For those who love convenience shopping, they also introduced “scan as you shop” check points.
Customers shop and tag products, which saves them time.
The advantage of
more convenient, not waiting in queue, less need for staff
The disadvantage of
keep up with the technological changes, costly for machines to be fitted, if they break down, not be
competitive
Environmental Factors for Tesco
Environmental factors are referring to variables regarding the physical environment. This can include
things like consumer health, climate change or the availability of energy. An environmental factor
that affects Tesco is
Many companies are facing immense pressure from government agencies to address environmental
issues. Companies are liable to respond to these issues to benefit society. Tesco now encourages its
consumers to shop at tesco.com. Their van drivers not only use fuel-saving routes but also collect
unwanted plastic bags from customers and recycle them. Tesco is also committed to use renewable
sources and generate 100% of its electricity by 2030. The company promises to minimize up to 50%
carbon footprint by 2020.
The advantage of
By making changes to be greener
The disadvantage of
