EXTERNAL ANALYSIS

Johnson et al. (2006, p. 65) refer to this proposal by the acronym of

PESTEL analysis, based on the initials of the considered dimensions:

1) The political dimension relates to governmental stability and the

general policies carried out by public administrations in
aspects such as taxation, foreign trade or social welfare.

The economic dimension affects nature and the direction of the system.
economic environment in which the company operates and is determined by its
main economic indicators.

The sociocultural dimension encompasses both beliefs, values, attitudes and

ways of life of the people who are part of the society in which they
frame the company as the cultural, ecological conditions,
demographic, religious, educational, and ethnic aspects of the social system in its
set.

The scientific and technological framework that characterizes the situation of a system
it is the content of the technological dimension.

5) The ecological dimension, which has taken great relevance in recent times.
times, refers to the environmental conservation policy of the
administrative authorities.

The legal dimension integrates the administrative and legal factors.

regulators within which the company must operate.

Each of the previous dimensions is embodied through a set of

variables or key factors that highlight the most important aspects
that should be considered for your analysis. This analysis can be carried out through
a simple but very useful instrument such as the strategic profile
of the environment.

The strategic profile of the environment is a simple technique that summarizes and assesses the
key environmental factors that affect the company and help the manager to detect
opportunities and threats in a graphic way.

The elaboration of this profile consists of two phases:

1) In the first, a list of what we have called factors is drawn up.

key factors of the environment, or significant variables of it. These key factors
they are usually grouped according to the dimensions of the environment analysis before
cited.
The second part consists of evaluating the behavior of each one of the
key factors on a scale that is usually from one (1) to five (5) or,
what is the same: very negative, negative, balanced, positive and very positive
(Likert, 1967). This assessment is carried out subjectively by the part
from the company's management, as it reflects the way in which it perceives the
different variables of the environment.

Figure 2 shows an example of a strategic profile. It can be observed in it

and easily discover opportunities (peaks to the right, regarding the
equilibrium situation) and the threats (peaks to the left).

The strategic profile of the environment is a simple tool to interpret, which puts
the influences that the general environment offers to the performance of the
company. However, it is subjective and qualitative regarding identification
Of such influences, which could lead different analysts to reach results
different.
Furthermore, for the correct use of this tool, it is necessary to consider
three important issues in the measurement of such effects in order to make a decision
adequately

Similar characteristics of the general environment can have different effects on

different industries (Dess and Lumpkin, 2003, p. 60-61).

The impact of the general environment varies significantly even among companies.
located within the same sector.

Not all variables of the general environment affect a relevance.

a specific sector or company, so an identification will need to be made.
The relevant factors will have to be addressed for each case.
EXAMPLE:

2. Analysis of the external environment

Tesco retail market in the United Kingdom.

2.1.2 Description of the general environment (PESTEL methodology)

Politics

The United Kingdom is established as a monarchy where Queen Elizabeth II is

the head of state, but has a prime minister, Boris Johnson, who is the head
of government. The country is made up of 4 regions called constituent countries:
England, Scotland, Wales, Northern Ireland. The country's constitution is not
codified, it is an accumulation of statutes and laws. And the parliament is
made up of two chambers.

The United Kingdom is the sixth largest economy in the world, but due to the whole issue
Since Brexit, investment has been seen to be affected in 2018. The unemployment rate affects the
4.1% of the workforce, especially among the youth workforce (1 in every 5 people)
under 24 years old are unemployed.)

In the United Kingdom, there are no restrictions on foreign investment, foreigners and
residents must comply with the same regimes. But if there are benefits that
It depends on the size of the business and the number of jobs it expects to generate. For
to avoid legal tax evasion, a new tax of 25% is introduced on the
benefits generated by multinationals in their activities in the United Kingdom.

In a group of 190 countries, the United Kingdom ranks as the 9th country where it is easy.
doing business.

Economic:

The United Kingdom is a manufacturing nation; the agricultural sector represents 0.5%
of GDP but is very productive and supplies 60% of the food demand. London
it is the financial market of Europe and the services sector is the one that contributes the most to GDP
from the country with 78.8% of the total.

Retail industry companies generate £17 trillion of

taxes and moves 5% of the entire economy of the United Kingdom. Furthermore, it is the
largest private employer in the country with more than 4 million direct jobs.
The country has a very high development index and although it belongs to the European Union
its currency is not the Euro, it is the Pound Sterling. In 2018 there was a reduction in
85,000 jobs due to the country's economic problems.

2019 has not been a year of exponential growth for retailers in the
United Kingdom, however, online sales are expected to in December
increase. This has been a year of many discount campaigns in order to
to activate trade.

Sociocultural:

In the ranking of quality of life among 196 countries, the United Kingdom ranks
position 23.

In general, the population is decreasing and aging.

The English value themes such as discipline and good manners.

El Reunido has implemented a policy to reduce salt levels.

sugar and fat in their products in order to reduce the number of people
with overweight and type 2 diabetes

Technology

British technology competes with technological powers like China and the USA.
UU in the fields of microelectronics (used in mobile phones and
microprocessors of CPUs), biotechnology, and software design. Although
its major weakness for 2015 lay in the low public investment and
private.

By 2019, according to a report from EL IBÉRICO, the country already has more than
45 Unicorns (technology companies that reach a valuation of trillions of)
dollars in any of the stages of their capital raising process.
In addition, the government has committed to investing more than one billion
pounds in global technology and 153 million in quantum technology.

The technology for communication processes between must be improved.

state and private entities.

There is a market trend towards online sales. This is an advantage.

for Tesco, which has a coverage of 99% in the United Kingdom.
Ecology:

Global policies have existed since the very declaration of the SDGs of the United Nations.
Units for the conservation and protection of the environment. Even the kingdom itself.
The UN has launched a war against plastic, banning the use of plastics.
disposables and straws. At the same time, it issues a government ban on micro
plastic spheres, very common in cosmetics and soaps.

Companies like Iceland have a strategy that requires packaging made of paper and
food pulp, as well as paper bags.

In the same line, the country has an environmental monitoring plan in order to
protect wildlife, the land, water, and air in Great Britain once he leaves
of the European Union.

All this topic aligns with Tesco's policies and its interest in reducing the
carbon dioxide emissions, reduce deforestation and their plan to remove
by 2020, 1 billion pieces of plastic from its products, as part of its
4Rs strategy: remove–reduce–reuse and recycle.

Legal:

It should be taken into account that the United Kingdom is made up of 4 countries with 3
different legal jurisdictions, each with its legal system.

These are some of the regulations to consider.

Exit from the European Union–Brexit: a topic related to the decline

in sales and that would impact the applicability of certain laws.

Special care with the protection of your consumers' data (according to

General Data Protection Regulations require consent.
of consumers to use their information. This is an aspect to
evaluate since through the TESCO card the company knows the
purchase behavior trends of your consumers, data
personal and even financial.

Every year, the minimum wage in the United Kingdom increases by certain percentages.
growth according to age. Companies that do not comply with what is stipulated
the law should be fined.
 Since April 2018, companies must publish the differences between the
salaries of men and women. This is in order to reduce the gap
of gender.

2.1.3 Strategic profile of the environment

Key environmental factors affecting TESCO

Strategic profile of the environment

Key factors Muy negativo Negativo Equilibrado Positivo Muy Positivo

Political Dimension
Foreign investment policy x
Stability (Consequences of BREXIT) x
Economic Dimension
Negotiation skills with suppliers x
Strong competition in the retail market x
Economies of scale x
Sociocultural dimension
Aging of the population x
Population concerned about their health x
Ecological dimension
Sustainable Development Goals x
Reduction of plastic consumption x
Legal dimension
Consumer data protection x
Ease of access for foreign companies x
Technological Dimension
Investment in technological innovation processes x
Rapid innovation in products x