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Pestle Analysis of Tesco

In: Business and Management

Submitted By joshoo
Words 1433
Pages 6
Introduction
The strategic plan developed by organisations must be responsive to the business environment and to the strengths and weaknesses of the organisation. In this paper two techniques that are often used for environmental scanning are applied on Tesco PLC. These techniques consist of the PESTEL analysis and the SWOT analysis.

Environmental Scanning in the Strategic Planning Process
Hunger and Wheelen (2002) divide the strategic planning process into four key stages, which comprise the following: scanning of the external and internal environment, development of strategies, implementation of strategies, and evaluation of actual results in line to the strategic targets set. The scanning of the external and internal environment is important in order to identify key factors that help in the development of sound strategies (Hunger and Wheelen, 2002, p. 12). For example, an examination of the business environment can help in the identification of opportunities and threats that affect the organisation.

PESTEL Analysis

Political
The UK government has recently adopted a tax measure that affected Tesco. In 2011 the UK government increased the VAT rate from 17.5% to 20% with the aim to increase government revenue by £13 billion per year (BBC, 2011, n. p.). Crossley et al. (2009, p. 3) contend that an increase in the VAT rate leads to lower customer spending. Therefore, an increase in the VAT rate negatively affected the sales revenue generated by Tesco. Sales revenue is the key source of income of the organisation and thus it holds a substantial effect on profits (Atrill, 2009, p. 33).

The UK government has also proposed to adopt a fat tax with the aim to control obesity and limit the medical problems associated with it (The Guardian, 2011, n. p.). Such measure can adversely affect the sales revenue of certain products retailed by Tesco. Tesco is...

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