Pestle Analysis Of Tesco

2. Q1 – Analyses of the external environment

2.1. PESTEL Analyses

Political:

According to University of St. Gallen's case study, Tesco began its expansion to international markets in 1990s by buying into successful companies in the emerging economies. These included : Hungary, the Check Republic and South Korea. Since the expansion strategy succeeded, the company was looking for more opportunities for international enlargement. This opportunities have been presented in light of relatively recent political events.

First of all, encouragement of free trading blocks. As stated by Lynch (2003) government is highly interested in promotion of easier trade in order to benefit from globalization. So the expansion of European Union presented many opportunities for Tesco's international plans. A good example would be the acceptance of 10 new countries of Western and Eastern Europe in 2004 (BBC,2009). This allowed easier access to new markets with relatively law competition and high growth potential which is exactly what the company was looking for in foreign markets.

Another opportunity was seized in 2009, where Tesco have signed several joint venture accords with Chinese companies, thus making a move to enter a market with 1.4 billion people, which makes it the worlds largest consumer market (BBC,2013). This became possible as the result of China joining WTO in 2001, which opened the market for Western companies by removing the trade barriers.

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Economic:

Economic factors are crucial to Tesco since they are directly related to profits, costs, prices and demand. One of such factors is unemployment rates. Following the economic downturn the percentage of unemployed people have grown rapidly in the UK as well a...

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...ntering the new market is always risky, however Tesco have managed to minimize that risk in the past by entering into partnerships and strategic alliances with local companies. By further expansion in Asia, Tesco could generate more profits from demographically high opportunity markets. Asian markets, in particular China and India, have shown a dramatic increase in consumer spending. Needless to say that they one of the biggest market economies in the world.

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Of course company will face many difficulties while adapting to the culture and overall consumer behavior in those markets. That is why entering into partnerships and joint ventures may greatly benefit the company. Tesco can enjoy economy of scale by,in a way exchanging operating expertise and knowledge of the market from its partners, for its own supply chain and operational skills.

6.Conclusion