Overview of TESCO’s Fashion Retail Industry
In ongoing economy, the retail market is one of the emerging sectors that need to be considered in a broader sense. The concept of the retrial industry is not only restricted in selling goods but also supporting the e-commerce and online revolution. In globally economy, retail sector already able to make his mark and in all the countries government now supporting the retail industry to collect a large amount of revenue (Brenes et al., 2015: 244). Revolution started when ATM, debit card, credit card, plastic money was introduced in the market and people started to taste the branded products as much as possible (Burt & Sparks, 2003). The possible outcome of the revolution in the retail industry has been noticed as the increase of the employment in this sector and for the economy (Frontczak et al., 2015: 45).
Fashion retail industry is one of the demanding industries in the retail market. Expanding hand of the internet enables the people to interact with the fashion retail market easily, and this is the reason behind the emergence of the fashion retail (Wood, 2010). Numbers of big branded fashion companies are now availing the glory of this fashion market and collected the profit more than earlier (Hesping & Schiele, 2015). Detail description of the retail theory and fashion retail market will be described in this paper and influence of the micro and macro environment over the retail industry will be defined for better understanding.
TESCO, one of the biggest retail brands in the UK has been chosen for this paper. Jack Cohen founded TESCO in the year of 1919 with the headquarters situated in Welwyn Garden City, Hertfordshire, England, and United Kingdom (Brenes et al., 2015: 246). TESCO is the third largest multinational grocery retail shop and the ninth largest retailer by his revenue. Size of the company is also appreciable as they have multiple stores in 12 countries and 6553 stores in all over the UK (Kotler , 2015). Product variety of the TESCO has been promising since from the establishment, which makes them the third biggest retail industry in the UK (Cavender & Kincade, 2015). Net revenue collected by the company was £55,917 million in 2017 and net income calculated as £54 million in last year (De Saulles, 2015). Employees, who have been connected with the TESCO, are more than 480,000 in numbers (tesco.com, 2018). Not only in the stores, but online subscribers of the TESCO Company are also huge in number, and online revenue collection is also satisfying for the company. In fashion market, TESCO is one of the promising brands who offer a number of brand new collections every day to the customers. Facebook, YouTube, Twitter and many more sites are used by the TESCO where teenagers can buy their products easily (Calderon-Monge & Pastor-Sanz, 2017). Besides this, mobile application and websites are also available to attract more customers. The customers because of their fast and advanced technology have appreciated all the services provided by the TESCO (Frontczak et al., 2015: 44). Technology is another factor that pushes the TESCO one-step ahead than other retailers. Variety of offers, discounts and many more services are there in every store to make the shopping more interesting. TESCO value card is also presented which is one of the advanced service provided by the company to their customers where every customer can collect various offers or cash back after the shopping every time (De Saulles, 2015).
PESTLE Analysis of TESCO’s Fashion Retail Industry
Changes in the fashion industry can be measured by PESTLE analysis where political, economic, social, technological, legal and environmental analysis has been considered to determine the changes in the macro- environment. All these factors are important in the development of the company because macro environment is the only factor that can help the company to facilitate the business properly (Ramanathan et al., 2017: 480).
Political condition in the UK is unstable for the fashion industry, and numbers of factors are there which are playing the major role. UK government recently increased the VAT rate, which is much higher than earlier, VAT rates increased 3% from earlier, and now it becomes 20% (Kotler , 2015). This increased rate obviously affects the TESCO in a large manner because the price of the products has been increased (Frontczak et al., 2015: 46). Due to this increased rate price of the every fashion products is now nearly out of range and sales go down considerably. Sales revenue is the main source of the income for the TESCO and due to implementation of the VAT 4.38% sales decreased. Another major political issue that affects the TESCO is the multinational operation (Calderon-Monge & Pastor-Sanz, 2017). TESCO has been situated near about 12 countries and due to these changes in the government and laws affect the TESCO severely (tesco.com 2018). Increased labor rate in the textile industry also forces the TESCO to make their products cost higher. Political changes in the UK can also affect the company because new export or import law seems to be rigorous for the TESCO.
The economic crisis is the major point that must need to consider. The global economic crisis affects the TESCO in a regular manner as they operated globally. In different countries and continents like Asia, Africa everywhere their sales goes down due to the economic recession (Lewrick et al., 2015: 240). The fashion industry is not much popular in the developing country like India, Hong Kong, Nigeria and recession affects the fashion retail market more. Recently the UK has been recovering from this crisis and their gross domestic product estimated as 2.8% higher than earlier. This economic growth allows the TESCO to regain in the market. In the time of economic crisis rate of unemployment increases and buying power of the customers also decreases in a systematic manner (Lewrick et al., 2015; 244). Beside this government, also take the initiative to uplift the fashion industry as well as the textile industry by releasing the high tax rate.
Political Factors affecting TESCO
Social issues in the UK are also high because in the past year in UK life expectancy rate increases and birth rate was decreased and this cause the generation gap in the fashion industry. Different people have different choices and to meet the demand, requirement of the evolution in the style of the fashion industry swallows the whole scenario (Kotler, 2015). Besides this online emergence, also cause the problems in the age group above 65. They are not able to get the online services properly due to lack of proper knowledge, but a recent report revealed that elderly people are willing to join this online revolution (Lewrick et al., 2015; 263). This can be a good report for the TESCO as they are operating most of their services by online. Another issue in fashion retail industry is the change in the trends, and people demanded new dresses and other fashion products every day, which is impossible for the company to produce (Erkip & Ozuduru, 2015). Generation gap also reflects the difference in the choices. Beside this TESCO was accused by low quality cosmetic products, which were harmful to the skin (tesco.com, 2018). This issue also decreases the reputation to some extent but still, they have the potentiality to produce the good products in the market, but generation gap and current trends are playing a major role for the TESCO.
Technological advancement is much needed for the company like TESCO because to gain the competitive advantages, development of the technology is essential. Technology is needed in the supply chain management, logistic and also in the production. High technology logistic will help the TESCO to supply a large number of products in their stores (Brenes et al., 2015: 220). Competition in the oligopoly market is high, and many other companies like Marks and Spencer, ASDA, ALDI are using the technology of online marketing to gain in the business (marksandspencer.com, 2018). Furthermore, TESCO has already launched few applications named as TESCO Pay+, TESCO Club card and few more. Use of technology in supply chain management also allows the company to gain in the business (tesco.com, 2018). They are also going to introduce Just walk technology in the retail store to provide the better experience of the shopping. The technological factor is in favor of the TESCO Company and due to this their customers enjoying the fast and smooth shopping experience (Erkip & Ozuduru, 2015).
Economic Factors affecting TESCO
Legal factors are very important for the TESCO because they are operating globally and changes in the legal factors create several problems for the company. As discussed earlier increased labor tax forces the company to increase their products price and sales also goes down (Erkip & Ozuduru, 2015). Beside this BREXIT is another issue that can affect the company while dealing internationally (Evans, 2011). Several taxes on textile industry and fashion industry make the situation bitter. As TESCO has several other businesses like TESCO bank, TESCO retail stores, the imposition of the taxes make the condition unfavorable for the company (Zentes et al., 2017:11). Not only that, cost of the raw materials are also increased due to the increase of the transportation taxes. Al these taxes create a suffocating situation for the TESCO as well as the fashion industry (Frontczak et al., 2015: 41).
The environmental issue is the most rated issue faced by the TESCO because the government now becomes more environmentally conscious. To support the environment, they introduced 25years environmental plan named as “Green Future” (Cavender & Kincade , 2015). The main objective according to this plan is to introduce the biodegradable packaging system (Angell et al., 2012: 263). Every company now need to support the environment as much as possible and cannot spoil the Environment with their precipitated products. TESCO is also now going to launch the biodegradable packaging system to support the environment and also organized several events to promote the environment (Erkip & Ozuduru, 2015).
Micro Environment is one of the valuable factors for the TESCO because microenvironment allows the company to make their all the sectors strong (Cavender & Kincade, 2015). In the oligopoly market competition is high and all the companies are introducing new products, new technologies to expand their business. Competitors in the market of fashion retail industry are Marks and Spencer (M&S), Hennes and Mauritz(H&M) ((Zentes et al., 2017:30). Not only the TESCO all the above-mentioned companies are also dealing in the fashion market, and they are very famous for their products and services.
TESCO is the new company than their competitors who are operating in the fashion market from earlier. In order to attract the customers and to make the brand image in the cloth sector they need to improve their marketing and the product quality (Hesping & Schiele, 2015). Quality product at an affordable range can uplift the TESCO in the fashion market against the competitors. Macro environment factors are different and affect the different companies differently. Distributor, customers, suppliers, investors are some major macro-environmental factors that can affect the TESCO differently (Zentes et al., 2017:27). Two major competitors of the TESCO, M&S and H&M have been discussed with different macro environmental factors (Cavender & Kincade, 2015). For example, supply chain management of the M&S is quite strong among the other companies in the fashion market (Frontczak et al., 2015: 45). Suppliers of the M&S have been satisfactory because they supply the raw materials in low cost and relation with the company is good. M&S is taking the advantages of this and suppliers also provide good material because the amount of the orders are high and suppliers can make the profit easily (marksandspencer.com, 2018). M&S also have numbers of the stakeholders who support the company in recession and provide the financial backup to develop the business. Besides this lack of information technology expert created a gap in the company and as a result, several websites are closed down in last year (Lewrick et al., 2015: 263). Additionally, M&S also faced some employee issue due to lack of effective management system. On the other hand, H&M depends on the third party suppliers for their raw material, which costs a lot to the company and their products and variety is not up to the mark to facilitate the business properly.
Social Factors affecting TESCO
Some of the macro environmental factors influence the organization, and these two factors are economic and political factors. These two factors influence the business of the TESCO in a different manner, and the company need to set proper strategy to overcome the impact (Gummesson, 2014). Economical crisis all over the world makes a negative impact on the business as well as the fashion industry. Economic crisis forces the company to lower the product price, and for this, the company was not able to get the desired profit (Betts & McGoldrick, 1996). The economic crisis also results in the unemployment and buying power of the customers also decreased due to the crisis. UK government is now recovering from this situation slowly, and TESCO company need to take the advantages as much as possible (Burt & Sparks , 2003). They can set their product price at a moderate level to attract the customer again and can further recruit the employees to support the economy.
TESCO Company is also facing the issues regarding the imposition of the taxes by the government. Increased labor tax is the main issue, for this, the product price become higher and this affects on the sales of the company (Calderon-Monge & Pastor-Sanz, 2017). Increased in the transportation cost also allows the suppliers to increase the cost of the raw materials (Varley & Rafiq, 2014). BREXIT is another issue that can affect the TESCO most because TESCO have numerous stores in several European counties and withdrawing support from the European countries by the British government can make the thing worse for the TESCO. In this tough situation, the company can take the support from their stakeholders, investors to maintain the product price. TESCO can also take the support from the government regarding the legal rules and regulation (Burt & Sparks, 2003). Due to the large financial support, they can maintain the situation, but they need to develop a more comprehensive plan, which can provide the value to the customer.
The success of the company depends on the various factors, which operates the company from outside. Micro environmental factors involve the internal factors that are employees, suppliers, logistic, production, stakeholders and much more that can make the marks over the business of the company ((Lewrick et al., 2015: 245). In order to avoid the negative impact of the microenvironment numbers of decision has been taken by the TESCO Company (tesco.com, 2018). In order to reduce the extra cost, TESCO is now trying to set their stores near the source of the raw materials. This is the best decision to reduce the cost of the transportation and also can maintain the supply chain management smoothly (Frontczak et al., 2015: 47). Evaluating market to understand the trends of the clothes and developing products to meet the demand is another tactic that can be used by the TESCO (Ramanathan et al., 2017: 480). Increase in the production and implementation of the technology in the production can help the company to cope up with the diverse micro environmental factors.
Technological Factors affecting TESCO
Choosing the proper strategy for the business is very important to expand the business and to make the profit. Some recommendations for the TESCO Company are:
- There should be facilitation of proper distribution strategy to supply the products in every store.
- Evaluating the market and analysis of the current trends properly will help the company to understand the demand of the current trends.
- Facilitating proper technology in the production and also in the outlets can attract the customers.
- Proper marketing with fast and smooth website and development of the mobile application in advanced way will be the good strategy to attract the customers.
- TESCO can facilitate exiting offers, discounts and many events to create the good connection with the customers.
Conclusion:
From the above discussion, it can be concluded that TESCO is a third largest retail company in the UK market and probably new in the fashion market. Development of the proper strategy will help the company to fight against the rivalry company. Different factors affect the company in a different way and to understand the factors PESTLE analysis is done in this paper. Impact of the microenvironment over the company and strategy to avoid the negative impact are also described in this paper. Strengths of the rivalry companies in contrast with the TESCO have also described in this paper. Some recommendations are also recommended for the company to facilitate the business properly.
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