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.
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.
