Started in 1919 by Jack Cohen, Tesco is the leading British retail chain; it also has outlets across the US, Europe, Asia and a few other places. Tesco has its headquarters in Cheshunt, UK and is a member of both the London and Irish Stock Exchanges. Globally, Tesco is ranked second in terms of revenues; it is, however, the third largest in terms of profits. With outlets spread across more than ten countries as well as an online presence throughout the globe, Tesco is arguably the most diversified retail chain in the world (Dillon, 2015). That said, operating in so many places across the globe requires a strong, effective, and efficient management structure; as such, just like many other organizations which have a similar global footprint, Tesco employ the hierarchical management structure. This structure has enabled Tesco to function efficiently and smoothly from top to bottom; because this type of management structure ensures that positions, responsibilities, and obligations are broken down into many parts, that is, the people at the top of the company bear the greatest authority and responsibility while those below them provide support and feedback; this ensures efficiency and clarity.
How Tesco is governed
At the top, Tesco is governed by a board which is headed by a Chief Executive Officer (CEO). The CEO is also the leader of all employees and makes all the important decisions regarding the company. Other members of the board include the Chief Finance Officer (CFO), the Chairman and several non-executive directors. Just below the board of directors is an executive committee; members of this committee represent heads of different departments in the company. Beneath the executive committee is another level; members of this level form a link between the staff on the ground and the board of directors at the top. In other words, they coordinate operations of the two levels. As such they undertake activities such as human resource management, advertising, marketing, and so forth. This group is largely made up of, managers, assistants to managers, and so forth. At the foot of the structure is the regional manager; this manager holds the highest managerial position at this level; this manager also makes all the important decisions concerning his/her region. Below this level are store manager; each store is further sub-divided into three sections, that is, non-food section, food section, and personal section each of which is headed by an assistant manager (Tesco plc, 2018)
Tesco’s board of directors consists of 5 executive directors and 8 non-executive directors, that is, the CEO, the board chairman, the CFO, just to name a few; and several non-executive directors. Tesco’s non-executive board chairman is Mr John Murray Allan; Mr Allan joined Tesco in 2015. Tesco’s CEO, on the other hand, is Mr David Lewis; Mr Lewis joined the company in 2014 (Tesco plc, 2018).
Stakeholders
Stakeholders are all the parties or all the people who have an interest in a company or an organization. In other words, stakeholders are all people who are directly or indirectly impacted by the actions or activities of the company. As regards Tesco, stakeholders are employees, shareholders, customers, and the community within which the company operates, just to name a few.
The relationship between the board of directors and stakeholders
The relationship between employees and Tesco’s board of directors’ can be described as more than that of just an employee and his/ her manager. Tesco’s board understands that even though, it supervises and approves decisions made by the various levels of management, their relationship with their employees is more than that. Tesco’s board understands that though their job is to monitor their employees; it believes that it should have confidence in them; as such, Tesco’s board relationship with employees can best be described as symbiotic or mutually beneficial. It is for that reason that Tesco board takes employee betterment very seriously. Tesco also encourages its employees to offer ideas about what can be improved through their feedback systems (Tescoplc., 2018).
With regards to Tesco’s board of directors’ relationship with Tesco’s shareholders; Tesco’s board tries its level best to have sincere and worthwhile engagements with its shareholders. Tesco’s board, for instance, consults shareholders widely on the subjects of strategy, governance, remuneration, succession, and so forth. To demonstrate this, the board has systems in place, that ensure that feedback from shareholders is effectively relayed to the board to guide in strategy (Tescoplc., 2018).
Regarding the board’s relationship with the community or the public; Tesco’s board of directors discusses the corporate social responsibility (CSR) policy of the company every year; similarly, every 3 months the performance of the strategy is assessed to see what has been achieved, what can be improved and so forth. Tesco has had a CSR committee since 2001; the committee consists of managers and executives from various departments. This just goes to show that Tesco’s board of directors takes the public and environment very seriously. As a matter of fact, Tesco supports initiatives like contributing to charity, fundraisings to support education, and so forth (Tescoplc., 2018).
The purpose of pestle analysis for companies
PESTLE analysis is a technique that is used to assess and pinpoint key factors that influence the growth of a company or an organization. Senior executives often use this tool to guide their decision making. PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental factors (Marmol, Feys, and Probert, 2015).
Companies are increasingly operating in environments that are very complex; environments that are rife with forces that companies can hardly control; but forces that companies or organizations must nevertheless adapt to. For that reason, it has become absolutely crucial for every company to assess its business environment, therefore, Pestle analysis (Kotter and Schlesinger, 1991). Pestle analysis serves a number of purposes; for example, a company planning to expand into a global market can use this analysis to evaluate and assess the viability of the market they wish to expand to. The main reason Pestle analysis is done, however, is that it enables companies to identify and assess the key factors or forces that can affect or alter a company’s production costs, demand, supply, and so forth. Pestle analysis enables organizations to evaluate the effect each of these factors has on the company. The company then uses the results of these analyses to make important decisions (Marmol, Feys, and Probert, 2015). Pestle, therefore, helps companies to identify the political, social, economic, legal, and environmental changes that may impact the business in future. By breaking down these crucial factors into the six distinct classes, a manager or a CEO can better understand whether they are making a good decision or otherwise.
Pestle factors
Political: Every organization has internal and external politics. Internal politics often take the form of unhealthy competitions, jealousies, selfishness, and so forth. Often times, these are predictable and can be easily addressed by the company. External politics, however, is beyond the company’s control; for example, new tariffs, political instability, tax reforms, environment reforms, labor reforms, and so forth.
Economic: This factor takes into account all the events that impact the micro and macroeconomic situation of a company. The micro-economic events are to do with the business’s internal soundness and viability. External and macroeconomic events are events like a recession, economic growth, inflation, exchange rates, minimum wages, working hours, and so forth.
Social Factors: Also called socio-cultural factors are the aspects that relate to common attitudes, beliefs, and so forth. For example, age distribution, population growth, health attitudes, and so on. These factors are very important because they enable a company to understand what drives the customers.
Technological Factors: These factors relate to changes in technology that might impact on the functioning of a company either positively or negatively. For example, research and development (R&D), automation, innovation, technological improvements, and so forth; this factors can determine whether a company enters a certain market or not. By understanding the trends in technology a company can, for example, avoid investing in a technology that would be overtaken by other technologies soon.
Environmental Factors: these factors have only gained importance recently largely because of the worsening pollution, stricter government carbon footprint targets, and so forth. Environmental factors include aspects such as climate change, environmental offsets, weather, and so on. That said, better awareness among people about climate change has forced many companies to change they operate and the products they sell.
Legal Factors: These factors have some similarities with political factors; they are, however, not the same. Examples of legal factors are employment laws, consumer protection regulations, patent and copyright laws; health and safety laws; just to name a few. For better outcomes, a company entering a new market or planning to launch a new product must know what is and what is not against the law. This can especially be challenging for companies which have a global presence because virtually every in the world has its own set of laws, rules, and regulations.
Political Factors
The following are political factors that can impact Tesco both directly and indirectly; firstly, the UK has been struggling with political stability in recent times, that is, frequent changes in the Conservative government. As a matter fact, the UK is in the process of exiting from the EU common market; this may be detrimental to Tesco’s operations. In addition to that the phenomenon of nationalism has not only affected the UK but other countries as well. The United States, for example, is increasingly closing its market to foreign participation this may negatively affect Tesco’s operations outside the UK. Furthermore, interference by trade unions both at home and overseas is one of the potential factors that can also impact the retail chain. Nevertheless, Tesco’s Chairman John Allan has been particularly concerned about Britain’s exit from the EU. He has been quoted as saying that Brexit will not only discourage investors from investing in the chain but will also cause uncertainties in the market (Hartley-Brewer and Merrick, 2015). That said, China’s joining of the World Trade Organization (WTO) will likely boost Tesco’s operations in the country. In fact, Tesco is already engaged in a number of joint ventures with its Chinese partners; these ventures have led to Tesco setting up a number of shopping outlets across China. China is increasingly opening up its market to foreign companies this will be very beneficial to Tesco (Abeysinghe and Ding, 2010).
Economic Factors
There are a number of economic factors that can affect Tesco; nevertheless, the most serious of them is the cost of labor. Tesco spends about 4.5 billion pounds on wages and salaries for its employees every year. As such, a slight increase in wages impacts the company’s revenues considerably. For example, in 2015, the government raised the minimum wage to 7.2 pounds per hour; this was an 11% increase; this cost the company about 495 million pounds (National Minimum Wage, 2016). Clearly, an increase in wages can be very disruptive to Tesco’s operations (Farrell, 2015). Another serious economic factor is a recession; in 2008, for example, the UK economy was officially declared to be in recession. However, the government acted speedily and put in place measures that have helped improve the situation. Although people are back to buying more, the level of buying is not yet back to the pre-recession levels. The effects of the recession are still present and will likely continue to affect Tesco’s revenues well into the future. Tesco’s operations can also be impacted by a range of other external economic factors like the rate of inflation; UK’s economic and fiscal policies, availability of capital, and so forth.
Social
An assessment of UK’s society shows that there are increasingly more pensioners than young people (Herald Scotland, 2005). Older people shop and eat less and this is very concerning to retail chains that sell foodstuffs like Tesco. In addition to that, retirees, unlike young people, are less likely to make trips to the supermarkets to buy commodities. A society that has more older people than young people is, therefore, worrying to many retailers including Tesco. Research shows that internet literacy and use declines with age (Turban, Rainer, and Potter, 2005). Nevertheless, many retailers are hoping that older people would find internet shopping more convenient. The challenge, however, might be the size and quantity of their orders; that is, older people tend to buy goods in quantities that are uneconomical, expensive, and inefficient to deliver. That said, many people’s food preferences and attitudes are continuously changing. People are becoming more health conscious; as such, they are increasingly opting for healthier foods and this may affect the operations of many food retailers like Tesco.
Technological
Technology is perhaps the one factor that has influenced the processes, systems, and operations of retail chains the most. The internet has, for example, altered significantly the way goods and services are retailed by supermarkets. That being said, it is projected that more and more people will shop online in future. In addition to that, smartphones apps have become very popular shopping platforms; in fact, Tesco has been using the New Wine App since 2009. This app, for instance, enables Tesco customers to buy wine from Tesco using their smartphones. Technology has been so influential that many retail chains including Tesco have been forced to start online loyalty programs to prevent their customers from choosing their rivals (Tomlinson & Evans, 2010). With ever increasing access to the internet; online shopping will only grow more influential; and if used properly, it will help Tesco reach more customers, improve its supply chains, and improve customer experience.
Environmental
Tesco must be socially and environmentally responsible while developing, marketing or distributing its products. It should, for instance, reduce wastage, use of resources, and overall impact on the environment. As a matter of fact, the UK government has been encouraging people to use plastic bags less for packaging. In fact, in October 2015, the government introduced a 5p levy on all plastic bags. As such, the number of plastics that are used once by shoppers in England especially has reduced by over 85% (GOV.UK, 2018). In other words, people are increasingly reusing their plastic bags. This has been very beneficial to Tesco in the sense that it now spends less on the packaging. It has also improved the retail chain’s green credentials, reduced its carbon footprint and enhanced its CSR image. Furthermore, the increased awareness among the people about environmental issues has forced Tesco to share the details about its impact on the environment or carbon footprint data on commodities such as potatoes, bread, dairy products, fruits, and so forth (Wood, 2009). Additionally, Tesco has programs that guide their customers on how to reduce waste, live green, recycle electronics, reuse plastic bags, and so forth. Tesco also rewards customers who adopt green lifestyles with through awarding them points which they can use to shop (Tesco, 2010).
Legal
Tesco’s operations can be directly impacted by laws, policies, and regulations that are set by the government. For example, if the government puts in a place a law that standardizes the prices of products; it can be difficult for Tesco to alter the prices without notifying the government even in cases where adjusting the prices would help it to attract more customers or beat competitors. As such, companies hoping to operate without problems with the government should always know and understand what is expected of them by the law of where they operate.
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