PESTEL ANALYSIS THEORY IN THE RETAIL SECTOR
How PESTEL analysis theory work in the retail sector
PESTEL Analysis includes six major macro-level components that affect the business and its decisions. Tesco is selected for understanding PESTEL analysis and how this theory provides benefit to the retail sector.
The retail sector entails goods and service sales through a set location, such as boutique, departmental stores, supermarket chains, or mail, in small quantities, which are directly purchased and consumed by customers. Besides that, it is important to analyse that retailing also covers up subordinated services such as delivery. The customers might be businesses or individuals based on the items sold by the company. The PESTEL analysis includes factors like political, economic, social, technological, environment, and legal (Cadle, Paul and Turner 2010).
There are different types of political factors ongoing within the retail industry. These factors might affect the present and future of the industry. Few of the macro-level components within retail industry are expected to analyse tax rate, which is levied by the government, political stability, interest rate, foreign exchange for the retail business, which operate on the global platform.
The economic environment is a different aspect of PESTEL analysis, which is important for the retail sector. All businesses that are covered under the retail sector need to be updated about the economic situation of the country, for the purpose of making profits, when the economy is going bad. It can positively affect the demand and supply of retail products (Johnson, Whittington and Scholes 2009).
Social changes, which go within a country are also significant for retail industry players. These factors impact the retail sector's performance. For example, in the UK, where there is a culturally diversified population, retailers are expected to supply products and services, which met the different requirements of buyers, to have good performance. Tesco is particular about the social and cultural changes, because, through that, it manages cultural diversity among customers, and gain benefit from the market (Graiser and Scott 2004).
In the present time, technology is taking center stage in the retail industry. For example, many customers opt for online shopping, and therefore, Tesco is offering online sales of its products. It’s important that retail industry players should adapt to technological changes and fulfill the demands of customers. Through technology, Tesco is also working towards building better relations with their customers (Johnson, Whittington and Scholes 2009).
As retailers work in set locations, it is crucial to refer to the physical environment. Tesco always focuses on selecting an environment, which is highly conducive for the customers. It is important that an ideal location is selected, which help in determining customers that can be attracted to the business. Retailers are usually keen on the effect that business holds on the environment because the same can affect their performance (Graiser and Scott 2004).
For any business, certain legal standards are required to be fulfilled. Different laws are made for the purpose of controlling the way, in which retailers are doing their business (Graiser and Scott 2004). It’s significant to work according to laws so that one can avoid setting on the wrong side.
References
Cadle, J., Paul, D. and Turner, P. 2010. Business Analysis Techniques, 72 Essential Tools for Success. BCS the Chartered Institute for IT.
Graiser, A. and Scott, T. 2004. Understanding the Dynamics of the Supermarket Sector. The Secured Lender, 60(6), pp.10-14;
Johnson, G., Whittington, R. and Scholes, K. 2009. Exploring Corporate Strategy with MyStrategyLab. Financial Times.
