BE JULY 2022 B - END OF

MODULE PROJECT

  
Tables

1. Introduction 2

2. About Tesco 3

3. Tesco’s Relationship with Hungary 4

4. PESTLE Analysis on Tesco 5-9

5. Greatest Potential Impact on Tesco in the Near Future 10-11

6. Conclusion 12

7. List of References 13-14

1
Introduction

The goal of this report is to analyse Tesco's connection with the European Union and

provide the results of an environmental scan conducted in the United Kingdom. An

analysis of the external business environment will also be included in the report. With

the data gleaned through environmental scanning, businesses are better able to plan

forward with confidence. These actions provide an in-depth analysis of their present

procedures and help pinpoint areas for improvement.

2
About Tesco

Tesco is the biggest store in Britain and the third biggest grocery store in the world. It

has stores in Europe, the United States, and Asia. In 1919, one man named Jack

Cohen sold groceries from a stall in the East End of London. On the first day, he

made £1 and made £4 in sales. Jack bought extra stocks of tea from a company

called T.E. Stockwell. T.E. Stockwell and Cohen came up with the name TESCO for

the tea that Cohen used to sell. In north London in 1929, Tesco opened its first store

(Tesco, 2022).

Tesco's core value is "Serving our customers, communities, and planet a little better

every day." They want to be the leading retail supermarket and offer good services

and products at low prices, making them cheaper than their competitors.

Since then, Tesco has grown by buying new stores, adding retail services, and

changing to meet customer needs. "To serve the customer" is Tesco's main goal. It's

important to keep your current customers happy, because they're more likely to

come back. This will save the company more money than buying new ones (Tesco,

2022).

Tesco now has more than 2,200 stores in the UK. These stores range from large

ones like Tesco Extra to smaller ones like Tesco Express. Tesco used to only sell

groceries and other general goods, but now it also sells banking and insurance

services, electrical goods, and phone equipment and airtime. With this move toward

"one-stop shopping," customers can get everything they need to buy in one place.

Tesco's website, Tesco.com, which has a million regular users, has also helped it get

more customers.

3
Tesco’s Relationship with Hungary

Tesco is now in three different European countries: Hungary, the Czech Republic,

and Slovakia. It also does business in South Korea, Thailand, Malaysia, Japan, and

Taiwan.

In 1994, Tesco paid $15 million for 57% of a grocery store chain that had 41 stores

in west Hungary. Tesco has more than 200 stores in Hungary. The most recent one

to open there is Tesco Extra (Radosevic & Yoruk, 2000).

Since 1994, when Tesco bought the majority of a 41-store supermarket chain in

Hungary called Global, it has opened more stores there. By 2008, Tesco had 13

supermarkets and 13 hypermarkets in Hungary, which gave jobs to more than 8,000

Hungarians (Radosevic & Yoruk, 2000). Tesco's main goal in taking over Global

Food Chain was to grow its business and make money in other countries.

In 2018, the UK was the sixth largest foreign investor in Hungary. Tesco, which has

20,000 employees, was Hungary's largest private employer. It gets its goods from

1,650 small and medium-sized suppliers in Hungary (Hands, 2018).

Tesco's move into Hungary meant that it would create jobs and bring in customers

who would help the company make money. Tesco would also be able to find

cheaper workers than in the UK.

Acquisitions make it easier for businesses to add new skills and expand their product

lines. Tesco's decision to buy Global Supermarket Chain may have been influenced

by Hungary's strong market position. Tesco bought the company to "get a foothold in

the market and learn from the local businesses so that it could later build a

hypermarket based on what it had learned from them."

4
PESTLE Analysis on Tesco

Political Factors

Tesco currently has operations in numerous countries, including the aforementioned

as well as the Czech Republic, China, Malaysia, Slovakia, Poland, Hungary, and

Ireland. Each of these countries has a unique political climate. The capacity to do

business in a country is greatly enhanced by a high level of political stability. The

political atmosphere in Britain is so stable that it has helped propel the country to the

top of the local retail business.

The political and legal climates of many nations, especially the European Union, also

have a significant bearing on Tesco's success.

Concerns have been raised in the business world as a result of the Brexit agreement

(Britain's withdrawal from the EU). In an interview with the BBC, Tesco's chairman

John Alan predicted a 3–5% price increase as a result of Brexit. There will be tariff-

free trade, according to the British prime minister. However, it's not quite that simple,

what with all the associated administrative overhead (BBC, 2022).

It's estimated that more than 80% of the firm's food goods come from the European

Union. With even a slight increase in tariff, retail prices would climb.

Economical Factors

The economic impact of the covid-19 pandemic is catastrophic. It happened because

to the ban on interaction between people, the lockdown, the lack of communication,

and the shutdown of businesses. Tesco was spared from the pandemic thanks to e-

commerce and online purchasing.

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Surprisingly, the outbreak actually helped the business' bottom line. It is predicted

that Tesco's annual sales and net income have increased by 1.3 billion and 360

million pound, respectively, in the pandemic year of 2020. (Shaw, N.D.).

Tesco was one of the few businesses to make it through the epidemic, months of

lockdown, and economic halt alive and well. Several small businesses had to close

their doors for good because of the lockout, and as a result, many people lost their

employment.

The rising unemployment rate has created an atmosphere of economic uncertainty

and widespread discontent. When people have less money, they prioritise meeting

their basic necessities over other wants. A decrease in costs would have an impact

on the expansion and profitability of the entire business. Economists' predictions for

the years following a pandemic entail these shifts.

In an interview with the Guardian, Tesco's chairman, John Allan, stated that tariffs

would have gone up even further in the absence of a Brexit agreement. It is better to

have some sort of agreement in place than none at all. During an interview, he

reassured the public that they need not worry about the outcomes of the Brexit deal.

The United Kingdom is still able to produce enough food for its citizens. For a while,

fresh food won't be readily available, but eventually, life will get back to normal

(Partridge, 2020).

Social Factors

Tesco provides meals to a wide variety of communities that reflects the local social

and cultural norms for those communities. The company provides Muslim customers

in the United Kingdom with Halal-labeled meat. The company is also the owner of

6
the halal meat badge and brand in both Thailand and Malaysia. In order to

accommodate its Jewish customers, Tesco stocks kosher food options.

Over the past few years, there has been a widespread trend away from meat toward

vegetarianism. There has been a rise in the number of vegan restaurants in recent

years, especially in Western and European countries. The market for vegan products

and plant-based diets increased by 4.1 billion pounds in 2020. (Smithers, 2020).

Tesco is aware of the growing popularity of plant-based diets. The company plans to

triple its vegan food sales by 2025. (Smithers, 2020).

The level of interest in a product varies by culture, and this interest is reflected in the

market. So, consumers' purchasing potential is influenced by the surrounding social

and cultural context. With each new generation, they improve upon the previous one

by around 5-10 years. Customers expect to have enough options to choose from.

Tesco keeps an eye on the way people are thinking and acting generally. It satisfies

people's wants by giving them things they need.

Technological Factors

The present international climate promotes the application of cutting-edge

technology to all industries and business procedures. Britain, the United States,

Japan, and China are at the forefront of this field as the creators of innovative new

technologies. Since these countries invest large amounts of their GDP in R&D, there

is greater room for creativity in the food and retail industries.

By increasing its investment in R&D, the United Kingdom plans to establish itself as

a global technology leader by 2025. Currently, the UK invests roughly 1.8% of its

GDP in research and development. The United States, China, and Japan all invest

more than 3% of their GDP in research and development. This is according to

7
UNESCO (2022). Since new technologies are always being developed, the retail

industry may optimise its scalability, sustainability, and efficiency.

Legal Factors

In practically all of the world's top economies, the retail business is governed by

antitrust and anticompetitive laws that inhibit the establishment of cartels by large

retailers. Moreover, the anti-competitive rules seek to encourage fair competition in

the business and safeguard suppliers from abuse. According to the WEF directive,

beginning in May 2021, all merchants in the United Kingdom must charge at least 10

pence for single-use carrier bags. If stores do not charge consumers for carrying

bags, they may be subject to penalties (Department for Environment, Food & Rural

Affairs, 2022).

Moreover, the Food Safety Act of 1990 is broadly applicable in the supermarket and

retail sectors. In addition, the country's labelling and packaging regulations compel

businesses to give consumers with information about ingredients, allergies, storage

conditions, date labelling, and nutritional information. With more consumer

transparency, businesses may attract new customers more efficiently.

Environmental Factors

The international community is working together more and more on sustainable

development initiatives and goals. The United Kingdom, the United States, China,

and India, among others, have all committed to zero-emissions goals over the

coming decades; these sustainability targets will also need profound shifts in the

retail sector. Carbon footprint, waste creation, pollution, toxic chemical pollutants,

and supply chain sustainability issues are major environmental challenges in the

retail industry. The government of Great Britain is exploring a ban on single-use

8
plastics as a means of reducing plastic pollution. There are further laws such as the

Hazardous Waste Regulations Act of 2005, the Environment Act of 1990, and the

Waste Regulations Act of 2011 that have an impact on the retail industry in the

United Kingdom.

9
Greatest Potential Impact on Tesco in the Near Future

Tesco might be more affected in the short-term by political considerations than any

other part of the external business environment. Tesco, as the biggest supermarket

chain in the United Kingdom, will feel the effects of Brexit.

Due to Brexit, the euro has become very unstable, making it difficult for firms to

make long-term plans and conduct trade. Businesses like Tesco were hurt by the

decline in the value of the pound after the referendum's outcome. When making

purchases from other EU nations in the euro zone, they would have discovered that

their costs had increased. Immediately, this would have reduced Tesco's earnings by

raising the company's expenses.

With Brexit, the United Kingdom will no longer be a member of the European Union

and must thus abide by its legislation and those of the European Council. This might

mean that Tesco has to obey fewer rules, allowing the company to operate more

efficiently and at a lower cost. In order to avoid erecting trade barriers that would hurt

companies like Tesco, the UK has to remain in the European Union (EU). As a result

of the United Kingdom's impending departure from the European Union, Tesco may

find it simpler to establish trading relationships with non-EU nations.

Rather, Tesco would have had access to a larger market of more than 550 million

people if the UK had stayed in the EU. With a wider customer base, the firm would

have been able to expand its operations and generate more revenue and profits.

Access to the single market would have facilitated Tesco's establishment and

operation throughout the European Union. Tesco would have benefited from free

mobility of labour and money because they would have had easier access to a larger

pool of qualified workers and investors (Conrad, 2017). They might have expanded

10
their operations and expanded their company with this. Unfortunately for Tesco, the

UK's decision to exit the EU means that they must now contend with a more

competitive market than ever before.

11
Conclusion

Britain's gasoline, pig, chicken, and bottled water supply chains have been crippled

by a lack of employees after Brexit, exacerbating the worldwide pressures of the

COVID-19 issue and jeopardising any recovery from the epidemic. As a result,

Tesco has to take precautions to safeguard its supply chain from the potential

negative effects of Brexit, and it should also strive to use its size to work with the

British government to establish the most favourable regulatory climate for the

country's food merchants. Moreover, the EU is crucial to firms like Tesco and the

economy as a whole since it serves as a connector for the various economies in

Europe. While the European economy is certainly intertwined with others, the global

economy as a whole is increasingly reliant on stock markets and the global monetary

supply. Due to the magnitude of cross-border investment, global economic ties may

have both good and negative consequences for the UK economy and businesses

like Tesco.

12
References

Tesco. (2022) Our history. Available from: https://www.tescoplc.com/about/our-

history/ [Accessed N.D.].

Tesco. (2022) Core Purpose and Values. Available from:

https://www.tescoplc.com/about/how-we-do-business/core-purpose-and-values/

[Accessed N.D.].

Radosevic, S. & Yoruk, D. (2000) International expansion and buyer-driven

Commodity chain: the case of Tesco. Available from:

https://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=1E26A91A43C5F019FBB

4F2A67E0156B3?doi=10.1.1.497.7706&rep=rep1&type=pdf [20 November 2000].

Hands, G. (2018) ‘The UK’s trading partnership with Hungary’, The UK’s trading

partnership with Hungary. Széll Kálmán Foundation, Budapest, 22 February.

Budapest: Department for International Trade.

BBC. (27 December 2020) Tesco: Brexit impact on food prices 'very modest'. BBC.

Available from: https://www.bbc.com/news/uk-55460948 [Accessed 27 December

2020].

Shaw, AA. (N.D.) PESTLE Analysis of COVID-19. Available from:

https://swotandpestleanalysis.com/pestle-analysis-of-covid-19/ [Accessed N.D.]

Partridge, J. (9 December 2020) Tesco warns of higher prices if UK and EU fail to

agree Brexit deal. The Guardian. Available from:

https://www.theguardian.com/business/2020/dec/09/tesco-prices-uk-eu-fail-agree-

brexit-no-deal-shortages-tariffs [Accessed 9 December 2020].

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Smithers, R. (25 July 2020) UK demand for new vegan food products soars in

lockdown. The Guardian. Available from:

https://www.theguardian.com/lifeandstyle/2020/jul/25/uk-demand-for-new-vegan-

food-products-soars-in-lockdown [Accessed 25 July 2020].

Smithers, R. (29 September 2020) Tesco sets 300% sales target for plant-based

alternatives to meat. The Guardian. Available from:

https://www.theguardian.com/business/2020/sep/29/tesco-sets-300-per-cent-sales-

target-for-plant-based-alternatives-to-meat [Accessed 29 September 2020].

Conrad, A. (2017) To go or not Tesco? Brexit’s Potential Impact on the UK Food

Industry. Available from: https://digital.hbs.edu/platform-rctom/submission/to-go-or-

not-tesco-brexits-potential-impact-on-the-uk-food-industry/ [Accessed 15 November

2017].

UNESCO. (2022) How much does your country invest in R&D?. Available from:

http://uis.unesco.org/apps/visualisations/research-and-development-spending/

[Accessed N.D.].

Department for Environment, Food & Rural Affairs. (2022) Carrier bag charges:

retailers' responsibilities. Available from: https://www.gov.uk/guidance/carrier-bag-

charges-retailers-responsibilities [Accessed 15 June 2022].

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