Tesco is a British based supermarket engaged in retailing of food and non-food products. The company operates in 12 markets worldwide, having a team of 500,000 employees (Tesco.com, 2014). Tesco was founded in 1919 by Jack Cohen from a market stall in London’s East end. Tesco is one of the world’s largest retailers, serving millions of customers every week (Tesco.com, 2014). It operates via various store formats such as express, metro, extra and superstores. In 2013, Tesco recorded revenue of £43.6 bn and trading profit of £2,191m in the UK (Tesco Annual report, 2014). In the next section, the report will make use of the PEST framework and Porter’s five forces to analyse the external business environment in which Tesco operates. To analyse the internal business environment, the SWOT tool will be used.
“ A business firm does not operate in a vacuum but in a given environment, and has to interact and transact its business within this environment” (Fernando, 2011, p33). The two types of business environment are external (macro and micro environment) and internal.
As Tesco operates globally, it has to obey various government regulation and laws where they are operating. In terms of employment, the UK government encourages retail organisations to offer various types of job opportunities ranging from flexible, low wage and locally based jobs to high skilled, high wage and centrally located jobs to cater to the demands of groups such as students and senior citizens (Balchin, 1994). Most governments encourage businesses to employ local people for the development of the local economy. Many laws, regulations, codes of practice and guidance control the manufacturing, processing, distribution, packaging and labeling of food products (FSA, 2014). The Food and safety act provides food legislations acts in areas like hygiene, false description of food, low quality and unsafe food. Various environmental organisations encourage companies to reduce carbon emission in different stages of their supply chain. Tesco is working to achieve its 2020 target to reduce carbon emission throughout its supply chain. For example: using sea and rail modes of transport instead of doing so by road, opening new distribution centres to reduce transportation and hence reduce carbon emissions (Tesco.com, Tesco and society, 2014).
Economic factors like recession, unemployment and GDP are important for Tesco as they influence demand of products in the market. People tend to spend less on goods in times of recession. Due to recession and unemployment, as the disposable income decreases, customers switch to discount stores such as Aldi and Lidl. According to the Office For National Statistics (2014), the number of people out of work declined to a five year low of 6.8 % (BBC News, 2014). Also, the youth unemployment rate declined with 283,000 people finding jobs in the early months of 2014, which is the highest since 1971 (BBC News,
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