By understanding the environment in which you operate (external to your company or department), you can take advantage of the opportunities and minimize the threats. (RAPIDBI)
Specifically the PEST or PESTLE analysis is a useful tool for understanding risks associated with market growth or decline, and as such the position, potential and direction for a business or organization.
Political Environment: Political forces influence the legislations and government rules and regulations under which the firm operates. Every company faces political constraints in the form of antitrust laws, fair trade decisions, and tax programs, minimum usage legislations, pollution and pricing policies, administrative activities and many other actions, aimed at protecting the consumers and the local environment. In 2001, The Department of Trade and Industry (DTI) introduced a Supermarkets' Code of Practice to regulate trading relationships between the four largest UK supermarkets and their suppliers.
Economic Environment: Economic factors clearly indicate the nature and direction of the economy in which a firm operates. Every market is unique and consumption patterns change along with the wealth of the consumers in various market segments. For strategic planning all the economic trends at national and international levels have to be considered.
Tesco makes a significant contribution to economic activity in all the places in which it operates. Every week over 400,000 staff serves over 30 million customers in 13 countries. The company has to its credit a track record of providing value for customers, creating jobs and training, providing opportunities for suppliers and regenerating deprived areas. The business relationship of Tesco is with nearly 2,000 own-brand primary suppliers in 98 countries.
Social Environment: The social environment is an important factor as changes in the values, beliefs, attitudes, opinions and lifestyles in society create potential opportunities for an organization. For a company to grow, it is necessary to take advantage of societal changes. The cultural, demographic, religious, educational and ethnic conditioning of individuals in society affects the social environment.
One of the most important values in which Tesco believes is to treat people how it would like to be treated. The company strives hard to achieve this by being a good employer and by playing its part in local communities. People believe that they the company can use its size and success to be a force for good. This challenge is indeed accepted by Tesco with enthusiasm and commitment.
Technological Environment: Technological environment means the trends and developments in the technological field that might: improve production, create new product opportunities, and render the existing ones.