My assignment. Can be improvised.

1. 1.0 BACKGROUND
The largest industry in the UK is food and drink retail sector, which provide employment for more than 4 million people in primary production, retailing and manufacturing. In recent years UK supermarkets have come under increased surveillance over their treatment of suppliers, especially of any own-label products, still the development of strategic supply networks has been a necessary part of most supermarket strategies for the past decade.
This report provides a vision into the supermarket company, Tesco, with prominence on its external environment analysis and company’s analysis of resources, culture and ability.
Tesco was founded in 1919 by Jack Cohen from a market stall in London’s East End. The business has grown over the years as one of the largest food retailers in the world and now operating in 12 countries worldwide, employing over 530,000 people and serve tens of millions of customers every week. It provides online services through its subsidiary, Tesco.com. It operates under four flags of Extra, Superstore, Metro and Express. The company sells almost 70,000 products including its own-label products (about 50% of sales) which are at three levels, value, normal and finest. Tesco also has
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2. becoming one of Britain’s largest independent petrol retailers. Another retailing services offered include Tesco Personal Finance.
Tesco Bank, established in 1997, wholly owned by Tesco PLC since 2008, has over 6.5 million customer accounts and policies. It employs over 3,000 staff based in Glasgow, Newcastle and Edinburgh.
The bank aims to be the financial services provider of choice for Tesco customers by offering them great service and good value while rewarding their loyalty for shopping at Tesco. It offers a popular range of simple personal banking products such as mortgages, credit cards, personal loans and savings. The Clubcard Credit Card rewards customers with Clubcard points on all usage of the card, while customers receive Clubcard points as a ‘thank you’ on mortgage repayments.
Tesco rank in the worldwide to five retailers list
Worldwide Top 3 Retailers
Sales Rank
Company
Country of Origin
Group Revenue in 2012 (US M$)
1
Walmart
US
469,162
2
Tesco
UK
101,269
3
Costco
US
99,137
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3. 2.0 COMPONENTS OF THE GENERAL ENVIRONMENT
2.1 Political Factors
Political has a strong impact on the business control and the consumer capability of expenditures. Its factors include government regulations and legal issues that define both formal and informal rules under which the company should operate. Some examples include:
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tax policy
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environmental regulation
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laws of employment
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political stability
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trade tariffs and restrictions
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influence of government policies
2.2
Economic Factors
Economic factors affect the purchasing power of potential customers and the company’s cost of capital. Market analytics should examine the short and long term state of the business. This is important while forecasting international markets. Examples of factors in the macroeconomy are:
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4. 
Inflation state
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Interest rate

Per capita income

Exchange rate

Gross Domestic Product

Production level
2.3
Social Factors
Social factors include the demographic and cultural aspects of the external macroenvironment. These affect customers needs and the size of potential market. These also influence the business at various levels, and need to be carefully examined. Some of the factors are:
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Emphasis on safety
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Career attitudes
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Population growth rate
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Age distribution
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Health consciousness
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5. 
Religion
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Attitude/acceptance towards foreign goods and services
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Influence of language
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Lifestyle, fashion trends, education, earning capacity
2.4
Technology Factors
Technology factors can lower obstructions to entry, reduce minimum efficient production levels and influence outsourcing decisions. It is commonly identified as an essential element of the organization since it is a useful tool for the attainment of market advantage. Technology can be utilised, and this is affected by government support. Technological improvement can produce new industries, and provides valuable input to manufacturing and service industries. Some technological factors include:
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Technological change rate
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Automation

R&D activity

Technology incentives
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Modern communication channels
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6. 3.0 IMPACT OF MACRO ENVIRONMENT EFFECTS ON TESCO 3.1 Political Factors Operating in a globalized environment with stores in 12 countries (Tesco now operates in seven countries in Europe – UK, Hungary, Ireland, Slovakia, Czech Republic, Poland and Turkey. It also operates in Asia - South Korea, Thailand, Malaysia, India and China), Tesco’s performance is highly influenced by the political and legislative conditions of these countries.
For employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, locally-based jobs, and lower-paid to highly-skilled, centrally-located jobs and higher-paid. This is also to meet the demand from population categories such as students, working adults and senior citizens. Tesco understands that retailing has a strong impact on jobs and people factors being an inherently local and labour-intensive sector. New store developments are often seen as ruining other jobs in the retail sector as traditional stores run out of business or are forced to reduce costs to compete. Tesco employs large numbers of student, elderly and disabled workers, often paying them lower rates. In an industry with a usually high staff turnover, these category of workers, however, offer a higher level of loyalty and therefore represent desirable employees.
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7. 3.2 Economical Factors Economic factors are important to Tesco. They are likely to influence demand, profits, costs and prices. One of the most powerful factors on the economy is high unemployment levels, which decreases the demand for many goods, negatively affecting the demand required to produce such goods.
These economic factors are largely outside the control of the company, but their influences on performance and the marketing mix can be weighty. Even though international business is growing, and is expected to contribute bigger amounts to Tesco’s profits over the coming years, the company is still very much dependent on the UK market. Therefore, Tesco would be badly affected by any slowdown in the UK food market and are exposed to market concentration risks.
3.3 Social Factors Current trends show that customers have moved towards ‘one-stop’ and ‘bulk’ shopping due to a variety of social changes. Therefore, Tesco have increased the amount of non- food items available for sale.
Statistical changes such as the maturing population, an increase in female workers and a decline in home meal preparation mean that retailers are also concentrating on added- value products and services. Additionally, the focus is now towards; the own-label share of the business mix, the supply chain and other operational enhancement, which can drive costs out of the business.
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8. The type of goods and services demanded by consumers is an indication of their social conditioning and their consequent attitudes and beliefs. Consumers are becoming more aware of health issues. Their views and attitudes towards food are regularly changing.
3.4 Technological Factors Technology is the main macro-environmental variable which has affected the development of many of the Tesco products. The new technologies benefit both company and the customers. Customer satisfaction increases because goods are readily available, services become more personalised and shopping more convenient. Tesco stores use the following technologies:
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Wireless devices
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Intelligent scale
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Electronic shelf labelling
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Radio Frequency Identification (RFID).
The choosing of Electronic Point of Sale (EPoS), Electronic Funds Transfer Systems (EFTPoS) and electronic scanners have indeed improved the efficiency of stocking and distribution activities.
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9. 4.0 INDUSTRY ANALYSIS: PORTER’S FIVE FORCES 4.1 New Market Entrants The UK grocery market is mainly dominated by few competitors. This includes four major brands of Tesco, Asda, Safeway and Sainsbury’s that possess a market share of 70% and small chains of Budgens, Somerfield and Waitrose with a further 10%. Over the years, the grocery market has been changed into the supermarket-dominated business. Majority of large chains have developed their power due to operating effectiveness, one- stop shopping and main marketing-mix expenditure. This strong force had a powerful impact on the small traditional shops, such as hardware stores, clothing shops, bakers, butchers and etc. Therefore, nowadays it requires a strong barrier for new companies who want to enter the grocery market. It becomes rather difficult for new entrants to raise enough capital because of large fixed costs and highly developed supply chains. This is also evident in large investments done by large chains, such as Tesco, excellent technology for checkouts and stock control systems that impact new entrants and the existing ones.
4.2 Suppliers Power Suppliers power can be influenced by major grocery chains and that fear of losing their business to the larger supermarkets. Therefore, this combines further leading positions of stores like Tesco and Asda in negotiating better promotional prices from suppliers that small individual chains are unable to match. At the same time, UK based suppliers are also threatened by the increasing ability of large retailers to source their products supply from abroad at better deals. The relationship with sellers can be similar effects in forcing the strategic freedom of the company and in influencing its margins. The forces of
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10. competitive competition have reduced the profit margins for supermarket chains and suppliers.
4.3 Buyers Power Porter theorized that the more products that become standardized or undifferentiated, the lower the switching cost. Therefore, more power is offered to buyers. The famous Tesco’s loyalty card – Clubcard remains the most successful customer retention strategy that significantly increases the profitability of Tesco’s business. In satisfying customers need, customizing services, ensure low prices, better choices of goods, regular in-store promotions, enable brand like Tesco to control and retain their customer base. A crucial change in food retailing has occurred recently due to a large demand of consumers doing the most of their shopping in supermarkets that shows a significant need for supermarkets to sell non-food items. This provided supermarkets with a new strategic expansion into new markets of banking, clothing, pharmacies, etc. Consumers also have become more aware of the current issues around the world and the influence of western consumers on the expectations and aspirations of Third World producers.
5.0 Conclusion
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