Management tools SWOT and PEST are used by managers to inform decisions regarding business strategies. Discuss the usefulness and limitations of these tools in relation to a chosen organisation, providing commentary on how managers may overcome/minimise - Essay Example

SWOT and PEST of Tesco plc Introduction Over the years, organisations and business managers have come to understand the effectiveness of applying management tools such as SWOT analysis and the PEST framework in order for their enterprises to experience the desired growth. Essentially, SWOT analysis refers to the strengths, opportunities, weaknesses, and threats that a business would need to explore in order for them to attain success (Griffin 2007, p. 67). On the other hand, PEST analysis denotes the political, social, economic, and technological aspects that a business has to handle within the environment that it operates in (Fullen & Podroff 2006, p. 77). For this essay, the focus will be on Tesco Stores PLC by discussing the usefulness and limitations of the SWOT and PEST tools as applied by this organisation, and also suggesting how managers can use them in their operations.

Company overview The Tesco Public limited company is a multinational British grocery and general retailer of merchandise headquartered in Chestnut, Great Britain. The company is the third largest retailer after Walmart and Carrefour in terms of revenues and the second largest after Walmart in profit measures. Remarkably, Tesco has a thirty percent market share in Britain and has stores in fourteen nations across the Asian, European, and North American continents. Since the establishment of the grocery retail store in 1919, Tesco has been on a steady diversification path as it has evolved into the inclusion of selling books, electronic devices, clothes, furniture, and a number of other internet related services (Cunningham & Harney 2012, p. 678). SWOT Analysis Strengths Tesco plc is one the globally recognised brands as it is placed among the top a hundred brands because of its known practice where they deliver value to their customers for the money they spend at their stores (The Economist UK 2013).

The other strength that Tesco has is that this company offers an array of products for its target market, hence explaining why it has remained relevant to the market over the years (Butler 2014). Other strengths that Tesco managers enjoy include Tesco’s application of innovative tools such as online shopping options that influence customer convenient shopping, engaging in local ventures (Brignall 2011). Opportunities Tesco has many opportunities that can influence the business to grow such as investing in its online shopping facility for its customers can influence flexibility especially with the current busy lifestyles for families.

Further, Tesco has opportunities in expanding its market share to include Australia in which this side of the globe, there is little competition in the retail grocery market (The Observer 2013). Weaknesses One of the key weaknesses that Tesco has experienced is the high rates debts resulting from credit cards based on the many products that they have to offer as this influences their customers to shop beyond their means. According to Rudrick (2014), the provision of a wider variety of products serves as strength for the retail store, but it also serves as a weakness as the bad debts have affected Tesco’s profit margins.

Threats Tesco being the top most retail store in the UK makes the company to be vulnerable to competition from other stores meaning that they have to work harder to maintain their market positioning (Observer Writers 2014). This influences the need for Tesco managers to also invest in training its staff so that the organisation can be able to compete effectively with its emerging rival Walmart (Smith 2014). The company’s failure to pay its suppliers has also been a subject of debate as this has influenced a loss in the number of shoppers (Wood 2014).

PEST analysis Political The areas that affect Tesco politically include legislations, political stability and the tax rates of the countries that Tesco has established retail stores in, in which tend this tends to have an influence on its profit margins (BBC News 2014). Economic As much as Tesco operates on the global market, it is still heavily reliant on the UK market because its market presence is high despite heavy competition making this to be one economic factor for this retail company (Ranklin 2013).

However, Tesco has over the years focused on operating on an international scale and also in diversifying in the products that it offers hence explaining the success that it enjoys (The Intelligence unit 2013). For Tesco managers, economic factors such as profits, prices, demand, and the leverage costs are ones that are of concern as these are likely to influence the performance level for the company either positively or negatively (Balch 2014). Social factors Tesco now offers more non-perishable goods so as to be able to meet the ever changing demands of its target market (Harrison 2013, p. 23). Further, Tesco has had to make changes to the products and services that they offer because their consumers have become more aware of health related issues, hence explaining their desire to eat healthy.

Technological Many organisations, Tesco included attribute most of their success to innovative technology tools such as online shopping and point of sales that have made the customer experience to be more than satisfying and influencing customer loyalty at the same time (Suomi 2006, p. 154). Lastly, Tesco has also invested in energy efficiency products that aim at reducing the rate of carbon emission to the atmosphere, hence influencing environmental sustainability and the application of these practices (Wells 2013, p. 262). Limitations a) SWOT analysis One key limitation of this analysis can be that it can oversimplify the four elements for Tesco meaning that this might not be able to capture all the details necessary for making an effective desicion (O’Connor 2010, p. 59). Another limitation for SWOT analysis is that it does not factor in the external elements that might not be under the jurisdiction of the management, such as government legislation, taxation, inflation, fluctuating prices of raw materials among a list of several other factors meaning that it might somehow influence ineffectiveness. b) PEST analysis The limitations for applying the PEST analysis for Tesco include the fact that the external factors used in this process are not constant meaning that it might become difficult for this company to come up with an effective strategy because of the changes (Thakur, 2010).

Lastly, conducting a PEST analysis can also be ineffective to Tesco especially when it comes to strategic planning because its main focus tends to be on the external forces and not on the internal ones. Bibliography Balch, O 2014, ‘The supermarket price wars are not a long term solution to food affordability’, The Guardian UK 2 May. Available from http://www.theguardian.com/sustainable-business/supermarket-price-wars-morrisons-tesco-food-affordability [17 November 2014] BBC News 2014, ‘Tesco and Morrisons see sales slide’, BBC News Business 9 January.

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