Pest Tesco Pakistan

grocery storeing Planning in a world-wide Environment Group Assignment No 1 Topic What is the direct of a Political, Economic, Social and Technical (PEST) environsal analysis for companies in relative to their global (marketing) st esteemgy? Present a PEST analysis for wizard of the keeping four companies the computer chip manufacturer Intel the train m over Scotrail the victuals etc. retailer Tesco the book shop retailer lav Smiths draw contour Group Members Bushra Yaseen Naureen Ruftaj Mahmood Ali Suhaib Hussain BaluchSubmitted to Sushil Mohan Dated 26/February/2010 pcutparagraph_to_cut Introduction The appointment aims to apply the PEST analysis for TESCO (a British international grocery and customary merchandising retail chain) if they were to project the stores in Pakistan. The assignment takes into consideration altogether the factors (Political, scotch, Social & proficient) which mogul affect Tesco when it starts operating in Pakistan. drawframe drawcustom-shape drawframe What is PEST? Why Pest is apply?PEST is an abbreviation of political, economical, well-disposed and technological analysis which describes the macro environment factors used to conduct a strategic analysis or do market research. Political psychoanalysis includes political stability, legal framework for hire enforcement, intellectual property protection, trade regulations & tariffs, pricing regulations, assessation tax judge and incentives, wage legislation minimum wage and overtime, product labelling requirements, environmental regulations.Economical Analysis includes type of economic system in countries of operation, government interposition in the free market, exchange order & stability of host bucolic currency, efficiency of financial markets, infrastructure quality, skill level of workforce, labour apostrophizes, production line cycle stage, economic growth rate, unemployment rate, inflation rate, interest rates. Social Analysis includes demographics, cl ass structure, education, culture (gender roles, etc. ), entrepreneurial spirit, attitudes (health, environmental consciousness, etc. Technological Analysis includes recent technological growths, technologys daze on product offering, impact on be structure, impact on value chain Structure, rate of Technological Diffusion, technological K this instanthow. Advantages of PEST Analysis It serves an understanding of the wider calling environment. It encourages the development of external thinking and strategic thinking. It can change an organization to preclude the future business threats and take action to avoid or downplay their impact.It can enable the organization to spot the impertinent business opportunities and cultivate use of them fully. drawframe Introduction of TESCO Tesco, the leading Britain retailer commenced its business in 1919 in East London by Jack Cohen. Tesco now has 4308 stores with approx 440,000 employees. It is basically a retail service countenancer but it has modify itself in telecom sector, health sector, c the great unwashedhing sector, hosieries, dental plans, DVDs, Internet services, financial services, pharmacy, car insurance, music down freights and softwargon.Tesco is providing the products and services as per changing consumers needfully and demands thus Tesco wants to facilitate its customers as visions as it can. Mission Creating value for customers, to take in their lifetime loyalty. Vision and Values Our core purpose is to bring forth value for customers to earn their lifetime loyalty. We do this through our values and cipher of conduct, the dash we choose to work at Tesco. Our values be summed up in two phrases no-one tries sturdyer for customers and treat people how we standardized to be case-hardened.Tescos stores are divided into the six following types Tesco extra stores are larger in size (located outside from main urban center centres) and bear all Tescos product range. Tesco superstores are main ly having grocery items and a small range of non-food items. Tesco Metro stores are located in city centres and juicy streets. These stores are medium in size and offer check range of items. Tesco Express stores are smaller in size to facilitate the customers on Esso petrol stations and small shopping places located in residential field of battles.One Stop stores are smallest in size and are part of Tesco Express. Tesco Homeplus stores offer all of Tescos ranges except food in warehouse-style units in retail parks. * marketing Objectives* Increased Profitability Growth in Market share Emergence in new markets Customer advocacy prize comp all/ brand awareness. Employees growth and motivation Emerging in new markets is the main focus of Tescos future planning. Initially the global elaboration plan of Tesco was non successful but later on Tesco started the fixing of its products and stores as per global markets.The global market strategy of Tesco is the growth in grocery items, n on-food items, international expansion and some other(a) services offered by it. Tescos Global Presence (Appendix C) Political Factors The following are the Political factors regarding the Pakistani government which are likely to influence the operations of Tesco when they decide to launch its store chain in Pakistan. Political Instability The political dissymmetry is the major factor of low foreign investment in the Pakistan. It creates precariousness in the minds of investors.Because political uncertainty refers to the reaction by people to any change in the political scenario. The reaction can be in the form of protests or rallies in which the properties of government along with others take for been unmake in the past by the angry mob of people. This has resulted into the loss of millions and billions of Dollars to the companies. Tesco needs to keep in mind that in Pakistan if there is any mental unsoundness politically, foreign companies get affected the most. It is ver y(prenominal)(prenominal) difficult for the government to offer foolproof warrantor to their stores.Threat of change in authorities The rules and policies (Tax rates) accustomed by the government likewise changes by the change of the authority or government. Bargaining Power on Taxing Since the Government is encouraging the contradictory Investments and new entrants in the field of departmental stores (Cash & Carry) therefore, Tesco can use its supply of being a long foreign investor to have tax rates which are lesser than others. Keeping in mind the current stake of foreign investments (very low) the government might offer a lesser tax rate to Tesco.Fluctuation in Trade policy There is very high frequency of changing trade policies in Pakistan. The fluctuation in trade policy results into an imbalance between exports and imports. Economic Factors Inflation valuate The inflation rates flips an idea about the price increase over the past hardly a(prenominal) years and it tells that at the moment in Pakistan it stands at 10. 3% approximately which is quite high. For a country that has such high inflation rates, it gets really difficult to operate at lower prices. live of SecurityTesco would have to spend a lot of money on the certification because as Tesco is a foreign brand a lot of security threats would be hardihoodd by Tesco. Since the government is unable to provide foolproof so Tesco would have to engage a private bon ton for its stores which would increase cost. Fluctuating Exchange Rates Devaluation of money (Cost of Capital goes down) and change magnitude exchange rate discourages the investors to invest in Pakistans market. Cost on Energy The country is also suffering from Energy crisis (Electricity) so this would give rise to a trouble of Electricity in Stores.There is load shedding of electricity of minimum of 6-8 hours in urban areas. Therefore, an alternative consultation of generators would have to be used by Tesco for their sto res. Which would result into an increase in cost of Tesco and since Tesco stores remain opened for 24 hours, therefore, their charges for electricity (which would be on generators) would be doubled Intense Competition Tesco is likely to face a very intense competition from all areas. There are bullion and carry stores already located in the major cities of Pakistan (one in each) like Makro and Hyper star.Apart from that there are a very huge scrap of retailers present in every town (almost in every other street). For consumers, switching costs might increase if they plan to purchase a product from Tesco. The switching cost can be higher in terms of time and the distance. Purchasing Power Tesco might need to serve into the purchasing power of consumers in Pakistan. The purchasing power would help Tesco to recover the size of the potential market (grosss). Socio-Cultural Environment Behaviour of Pakistani Consumers basic of all society and the culture of Pakistan and its markets a re not as much adaptive to changes. So it would be difficult for Tesco to get sales. Convenience of cartridge holder & Distance The habit of Pakistanis is to cloud goods from the nearest market on the daytime to day basis in order to save time and cost of travelling to a megastore which might be located further away from them. The Power of Credit Sales** Another problem which Tesco might face is that there is a trend in Pakistan of consumers that they buy groceries from local retailers on credit and pay them back after they get their salaries.Bulk shop Most Pakistani consumers lack the concept of bulk shopping. It is not in their culture to shop in high quantities. Since the purchasing power of bulk of people is not very high so they prefer to buy items day by day (as and when needed). Creating Demand for ready cooked Tescos food products It has been observed that in UK and other European countries there is a huge demand of Tescos ready cooked meals. But if we look at the social behaviour (taste) of Pakistani consumers it still reflects the conventional ways of food consumptions (3 sinister meals / day).Consumers like to cook themselves at their homes. The existing culture as out-of-the-way(prenominal) as the consumption of food items is concerned might pose few problems for Tesco. *Culture for *24 hour* shopping* Tesco might find it hard to attract consumers at night because it is not in the culture of Pakistani people to shop late at night. They shop during the day timings or evenings and prefer to stay home take rest at night so Tesco would certainly need to do something to change this habit of Pakistani Consumers. Technological Environment Online ShoppingTesco would have to invest a lot of money if they decide to serve customers through online shopping. The reason being that it is very difficult (Costly) for them to set up an Information Technology infrastructure which would enable them to serve customers through internet. Payments through Debit Car d Another area in which they might need to focus on is payments through calculate cards like they have this facility in their stores in other countries. Since megastores generate a lot of revenue through impulse get as well so the consumers might not carry cash in for such purchases.In order to avoid losing customers, Tesco would have to create an emplacement with the banks in a way that it enables the customers to use their debit card sequence making purchases at Tesco. Installation of Security Equipment By considering the current security situation of the country, Tesco would be required to install latest expensive security equipments such as Closed Circuit Television (CCTV), scanners, metal detectors. Etc solar Energy as source of Electricity Since electricity is a problem in Pakistan, what Tesco can do is that they can install the solar postal code lit appliances to utilize solar energy to generate electricity.Since the weather of Pakistan is by and large sunny, we call b ack Tesco can make use of this technology to benefit itself. Conclusions & Recommendations afterwards carrying out the PEST analysis for Tesco on Pakistan we came up to few recommendations. It is rede that Tesco should launch its retail chain in Pakistan because Pakistan like other ontogenesis countries is a high potential market (in terms of revenues) for the investors. We have also observed that Carrefour has launched Hyperstar which is doing very well in terms of revenue generation and profits.Since it is not a good time as far as the political environment is concerned and foreign investors are not willing to invest in Pakistan so this might help Tesco to have tax rates lower than others or they might negotiate with the Government of Pakistan to raise a barrier for new retail store entrants for item years so that Tesco establishes itself properly and achieves economies of scale (which would serve as a barrier to new entrants) Since Tesco is open 24 hours a day so they would ne ed double resources (in terms of Technological & Human Capital) but it might not be a good option in Pakistan because in general consumers in Pakistan do not prefer to shop late at night because issues like security and others. So we suggest Tesco to operate 12-16 hours per day. This way Tesco would be able save a huge arrive of cost which would have been incurred by just operating 24 hours a day.We believe Tesco should launch its operations into Pakistani market in order to follow their growth strategy through international expansion. We are very accredited that Tesco will be able to gain a decisive amount of market share in order to show its dominance in Pakistan. APPENDIX A drawframe APPENDIX B use of PEST Business planning , textbooklist-item Marketing planning, textlist-item fruit development, textlist-item textlist-item Organizational change, textlist-item Research reports. textlist-item textlist-item textlist-item APPENDIX C drawframe This table is taken from Tesco Pre liminary Results 2008/09 Additional Information REFERENCES Websites http//www. tescocorporate. om/plc/ir/pres_results/analyst_packs/ap2009/prelim09/prelim09. pdf http//en. wikipedia. org/wiki/PEST_analysis http//www. mindtools. com/pages/article/newTMC_09. htm http//www. cbr. gov. pk/ *Author & Textbooks* Kotler, P. , and Keller, K. L. (2006) Marketing Management, 12th ed, Prentice Hall, London. AGUILAR, F. J. (1967) Scanning the business environment. New York Macmillan. Johnson, G. , Scholes, K. , and Whittington R. (2008) Exploring Corporate strategy Text Cases, 8th ed, Prentice Hall, London. Narayanan, V. K, and Fahey, L. (2001) Macro environmental_ Analysis_ Understanding the Environment outback(a) the Industry, in The Portable MBA in Strategy, 2nd ed, John Wiley & Sons, New York.