Tesco is an international food retail and supermarket distribution network based primarily in the UK, Asia and Ireland. As of July 2008, Tesco had a capitalization of 34.84 billion and a turnover of over 80 billion Euros in 2008. Despite the huge capitalization and turnover, the British distribution group is placed 3rd in the world in terms of retail and distribution. The reason for the group to be placed in third position rather than the first position is influenced by a number of external factors incorporated in the macro economic environment of Tesco (Carnall, 2007, p 67).
Tesco macro environment
The macro environment of Tesco Group consists of factors that may manipulate the organization externally usually through outside the control of Tesco. For example, alterations in interest rates, cultural trends and tastes, government regulation, change in technology, economic situation and demographic change in relation to Tesco products are not within the power of Tesco (Johnson & Whittington, 2009, p 123). However, Tesco can be able to adapt to the changes by introduction of efficient and reliable system such as the company third generation ERPsytem that saw increased profitability of £550 million during 2009(Johnson & Whittington, 2009).The mode that the organization reacts to such alternations determines how well the organization is able to adapt and make profits despite alteration of external factors. The mode in question is reflected in the company strategies in approaching such conflict. PESTLE analysis is an appropriate model which is used reviews the political, environmental, sociological, technological, legal, and ethical issues revolving around the functioning of an organization (Grant, 2010). Over the last five years, Tesco has experience mixed in the macro environment.
Over the last five years, Tesco has faced significant challenges arising from political conflict, decision and interest. For example, recent discussion and laws tackling the debate of food safety production and sale of genetically modified foods (G.M.O) has adversely affected the activity of the giant retail outlet (Johnson & Whittington, 2009). Political interest has also interfered with the number of countries that can supply the food giant based on chemicals used for spraying crops, competition policies and planning systems
The economic factor is influenced through the consumer purchasing power dependant on the economic consumer level of income and inflation impact on consumer spending. Tesco has had challenging times especially with the international recession era felt in the ages of 2008 and 2009 (Johnson & Whittington, 2009, p. 48) and the 'double dip' recession in 2010s.
Social and Cultural Factors
Major revolutions in social trends have had an impact on the demand for the company’s products and availability and desire of employees to work in the organization (Carnall, 2007). There has been an increasing demand for fair and organic products, which Tesco has not been able to meet. A number of consumers have moved towards healthier and convenience foods. However, Tesco was able to merge with changes in trends by introduction of payment through cheques and cash at the checkout.
Recent development in technology has forced Tesco to invest heavily in technology in order to remain relevant, trendy and efficient. For example, the investment towards Electronic Point of Scale, ERP and mobile technology as a distribution and marketing platform. In 2008, Tesco invested £76 million towards the ERP. Without such investment in technology, Tesco would not have made the historical 2009 profits.
In the scope of legal activities, Tesco has found it hard to deal with the government rising of VAT and increase of the national minimum wage. These are aspects that Tesco had not planned for and considering that Tesco employee runs in thousands, it acted as a huge challenge, especially in the case of contract employees.
Tesco was forced to package it products with environmental friendly packages and at the same time consider the safety of the foods it buys from various farmers across the continent. On the same note, Tesco was forced to adhere to consumer awareness and responsibility through programs such as Greener Living Scheme consumer awareness of the carbon footprint of the firm.