Pest of TescoJoin now to read essay Pest of TescoFor the purpose of this essay, I will be examining Tesco and the external factors that influence it and its products. I will also be looking at two of Tesco’s key competitors, those being Sainsburys and Asda to see how they try and gain a competitive advantage.
Tesco is a retailer of a multitude of products and services, although it primarily focuses on food and groceries. Initially based within the UK it now has stores in twelve different countries, five of which they are market leaders. Tesco’s Core Purpose, as shown by their website is ‘to create value for customers and to earn their lifetime loyalty.’ They also put a lot of emphasis on people, those that shop with Tesco and those that work for them.
Sainsburys is a leading UK food retailer with interests in financial services and is one of Tesco’s largest competitors. Their current Goal is to make Sainsburys ‘great again’, there focus being on healthy fresh food.
Asda is again primarily a food retailer and their mission statement, taken from Asda’s website, “To be the UK’s best value retailer exceeding customer needs. Always.”
In the following paragraphs I will be conducting a PEST analysis of Tesco.Political/legalAs stated by Kotler And Armstrong (2006), “Marketing decisions are strongly affected by developments in the political environment’ and so Tesco and its rivals need to be aware of any new legislation that comes into play. A key issue that affects Tesco quite predominantly is that of Planning Permission, a heavily regulated law in the UK. With Tesco opening more and more super-stores across the UK, they now take up a total of 27.8 million square feet of space on sales area alone. This does not count in the stockrooms and car parks that come with each store. With such large stores it isn’t surprising that Tesco can find the planning permission stage a difficult one to overcome. In May 2004, as shown on the BBC Action Network website, new legislation was introduced regarding planning laws. This was titled The Planning and Compulsory Purchase Act and with it came the biggest change to the English and Welsh planning laws in over a decade. The new laws were designed to:
Make the whole process faster by simplifying the process of making decisions.Allow every day people to get involved with making decisions regarding new plans.Create sustainable development, meaning to protect the local environment.While these changes seem to benefit the community generally, it does present a new problem for companies such as Tesco that wish to build large stores, often drastically changing the surrounding area. An example of this would be, as shown by Challands ( 2004) when Tesco built a 80,000 square foot store in the town of Stockport, they invested over 6 million to alter the roundabout and surrounding highways to allow better access and transport. This resulted in major changes to the transport networks in that area and created road works that lasted for several months.
Because of this, Tesco often face a lot of opposition when it comes to applying for planning permission for their larger stores. This is perfectly illustrated by a group that was organised after Tesco applied for permission to build in Glasgow a 24-hour Tesco superstore, 580 car parking spaces and a one-way system around Partick Cross. The group, as stated by Bagaeen (2007), is called STOP and are lobbying to have the planning permission refused, with over 1000 objections raised already. With opposition such as this Tesco face a difficult time getting the permission they require, having to spend larger amounts of money to get the permission required and arguably more importantly, the negative press generated by this type of issue could seriously affect their image.
EconomicAs shown by BPP (1997), The rate of inflation is both a measure of how the economy is doing and an important factor for most businesses: A business must raise its own prices or save on costs in order to maintain profit.” The economic situation, on the whole does not affect Tesco to a great degree. As their primary market is groceries, people will always need to eat regardless of the state of the economy. Following this reasoning, should there be a drop in income, Tesco, as a food retailer, would not be too much affected. It is however, worth noting that Tesco do try and target all markets by producing different product lines. As shown on Tesco’s Corporate webpage, Tesco’s Finest was introduced in 1999 to target the people who had a little more disposable income and were willing to spend more for “something that extra bit special” Tesco (2006). The line was such a success
to the rest of the food chain that they also produced a new line a year later
The most important factor to consider is not purchasing in the retail store as often. Retail and a general increase in the purchasing power of consumers are not simply indicators of good living. With the end of the 1980s, however, a shift in emphasis away from buying in the retail store has taken place and that shift is clearly manifested in Tesco.
In January 2010, they announced that it was making the move away from the e-commerce retail system which is based in its current location in Hong Kong. They stated that:
“We will be supporting the e-commerce system by increasing its capacity to help store owners meet a growing number of customers in both retail and online spaces. We will also offer an e-commerce system that offers high-quality customers a choice in terms of online selection and our new service model. We have committed to ensure that this is a top priority and we know the current consumer spending patterns are not conducive to such a system.”
What is different about the Tesco-based e-commerce system is that they offer new ways to store and buy goods. They were also the first company to launch such a new service in December 2010.
Since 2007 Tesco has launched e-commerce products as they did in 2000. Their main product line-up is simple, simple and affordable. The products offer a fast shipping option when purchased from other retailers, offers a value proposition, and include a range of eco-friendly products for home use and environmental sustainability. Consumers will have to decide which items to put back out of reach for them.
This is an important step in the right direction and will bring consumers more confidence in buying in retail. With the market for small and midsize houses now more than doubled since the beginning of the financial quarter of 2007, such a move in this manner will prove a significant success.
This plan is only effective in London and in other European cities where people are already using Tesco products which are not available in grocery stores. However, it will be difficult for those in London to change the way they purchase, so it will not be for the long-term stability of the whole Tesco-led business. Tesco will now move towards a new business model whereby its customers have to pay in terms of wholesale prices.
In October 2009 it announced that it would build a new factory in the city to supply Tesco’s services using private industry capital. Initially, this will include the hiring of 1,000 new staff to provide services to the city and the surrounding area, as well as an additional 450 staff who are expected to be hired in 2015 to be the first to replace the initial hires. Since 2007, the company has now moved to a lower cost, smaller manufacturing facility to keep prices low, although the company is currently looking into other areas in terms of technology. The site and the technology used to produce this new facility will now be upgraded for safety, sustainability and to provide better customer service.
Despite the fact that Tesco has not opened any new locations, and the presence of a huge number of people at its factories that will create a good environment for Tesco to grow its business from a low level to a highly successful one, there are some key reasons why people will still be looking for the Tesco logo.