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  1. 1. SWAPNIL MALI GINNY KATHARINA PEST Analysis Of TESCOPEST Analysis for TESCO entering Singapore Page 1
  2. 2. 1. Introduction1.1 TESCO Business StrategyTESCO is one of the largest retailers world-wide (TESCO PLC., 2012). It was founded in1919 in the East End of London and developed to one of the largest retailers since then.Originally, the company focused on retailing groceries but it has expanded its assortment ofgoods to clothing, electronics, furniture, software, financial service, telecoms, etc. TESCOspread rapidly over the United Kingdom and is at present operating in 14 countries acrossEurope, North America, Asia, Malaysia, the Republic of Ireland and Thailand (TESCO PLC.,2012).According to its annual report of 2011, TESCO is the market leader of grocery stores in theUK and the largest business in the Group. Meanwhile, two-thirds of its profits come fromoutside the UK and TESCO is now „either number one or number two in eight of 13 marketsoutside the UK‟. This reflects TESCO‟s business strategy of becoming „an outstandinginternational retailer in stores and online‟ next to „growing the UK core‟.If TESCO wants to follow its strategy it needs to expand into further countries. TESCOyielded „sharp economic improvements‟ in Asia during the recent years (TESCO, 2011).Therefore, for example Singapore could be considered as one possible future market.1.2 Introduction to SingaporeThe independent Republic of Singapore is located in Southeast Asia. The city-state is found atthe southern tip of the Malay Peninsula and consists of one main island and about 50 smallneighboring islands. Singapore has a high population density with a population of 5,183,700in 2011 (Government of Singapore, 2011). The population is diverse: three-fourths of theSingaporeans are Chinese, Malays build the second largest ethnic group, and Indians the third(Singapore, 2011).Singapore has a parliamentary democracy and became independent in 1965. Since then it hassustained political stability and high economic growth. The seaport of Singapore is the mostimportant one of Southeast Asia (Ulack R, 2009). Singapore is a charter member of thePEST Analysis for TESCO entering Singapore Page 2
  3. 3. Association of Southeast Asian Nations (ASEAN) and became a member of the World TradeOrganization in 1995.The high average life expectancy of 81.8 years (Government of Singapore, 2011), and the lowinfant mortality indicate the high living standard. (Source: Fig 1.1 Average Life Expectancy2. Purpose of a PEST analysisIn order to analyse if Singapore could be a profitable future market for TESCO, a PESTanalysis could be conducted. It is the investigation of political, economic, social/cultural, andtechnological influences on a company (Griffiths, A. & Wall, S., 2005).It therefore concerns the macro-environmental factors that affect the company which affectthe profitability within a potential market (Oxford University Press, 2007). A PEST analysisis useful for examining the market, and also the target costumers and other influences on acompany. It is an instrument which is used in order to gain understanding for market growthas well as market decline. It helps to understand the potential and direction for a business andis also beneficial when planning marketing activities. The PEST analysis is therefore acommon used tool used for the assessment of the business development and influencesdecision-making.In the following, the PEST analysis will be conducted step by step in order to assess if itwould be profitable for TESCO to expand to Singapore.PEST Analysis for TESCO entering Singapore Page 3
  4. 4. 2.1 Political AnalysisIn this segment, the analysis is done from a political point of view. It covers the points relatedto the ruling party, the stability of government and the laws which must be taken intoconsideration when entering the Singaporean market.2.1.1 Government, ruling party and ideologySingapore has a parliamentary democracy which is based on the Westminster model(Singapore, 2011). The president is the head of state and builds the government together withthe 84 members of the Parliament. The prime minister and the cabinet are appointed by theparliamentary majority. Here out of 84 members, 17 are female (Lee S. H., 2009).Since 1956, the politics of the country have been dominated by the Peoples Action Party(PAP) (Singapore, 2011). The opposition is led by the Workers Party, which made significantgains during the last election in 2011 (Channel News Asia, 2011).All parties believe that politicians should be given high salaries to make them corruption free.The parliament members in Singapore are the highest paid politicians in the world (The NewYork Times, 2007). This has proven to be a successful strategy as Singapore is rated to beamong the least corrupt countries (Transparency International, 2009). The main ideology ofthe ruling party includes pragmatism, meritocracy, multiracialism, and Asianvalues or communitarianism (Tremewan, C., 1996).2.1.2 No foreign worker policySingapore laws are strictly against the forced labors and slavery. Laws also provide businessfair and equal protection. There is no minimum wage policy in the country. But the policy inSingapore says that no one can hire foreign employee (Migration news, 1994).Due to thisretail market claim, they are facing shortage of workers. Therefore, in order to appealworkers, a company needs to pay attractive wages (Minium Wages n.d.).2.2 Economical AnalysisPEST Analysis for TESCO entering Singapore Page 4
  5. 5. This section is about the analysis from the economical point of view. Here, details about theeconomical condition of the country, foreign direct investments, and retail sector sales aretaken into consideration.2.2.1 Easy application systemOne advantage about starting a business in Singapore is their user-friendly computerizedsystem. To start a business in this country you need to apply online through the online form.After the approval of the online application you can register your company and taxesinformation. Also the property (i.e. land, building), can be stated through this onlineprocedure. This reduces time and saves the transit cost before setting up business inSingapore.2.2.2 Economic conditionSingapore has very high per capita income. People here can easily afford to do their shoppingin supermarkets. Also improved transportation and infrastructure has become a milestone forSingapore. It has the best air transport in the world (Foreign policy globalization index, 2006).Noticeable are the reduced interest rates. This allows TESCO to borrow money cheaply incomparison to any other country (Doing Business, n. d.). The graph below shows that theinterest rates are almost null in Singapore. Interest rate was lastly reported at 0.01 percent(Trading Economics, n.d.). It is good for TESCO to operate their business by raising moneyfrom local financial institutes. Fig. 2.2.1 Interest rates in SingaporePEST Analysis for TESCO entering Singapore Page 5
  6. 6. The monetary system in Singapore does not control through interest rates, but rather itcontrols through its currency weighted value (Trading Economics, n.d.).2.2.3 Foreign Direct InvestmentsA 100% FDI is allowed in Singapore. So there is no issue in the laws and rules while settingup business in country.2.2.4 Overall retail sales and foreign players.Talking about retail super market sales over previous years (Government of Singapore, 2012). Retail Sales Index(2010 as base) 105 98.7 100 100.8 100 95.2 95 90 85.7 85 % sale of 2010 80 75 2007 2008 2009 2010 2011 (Source: Business statistics: Department of statistics Singapore, Feb 2012) Fig 2.2.2 Retail Sales Index in SingaporeThis shows that the retail market in Singapore is growing every year and TESCO has a verygood market to capture. Also it is important to assess, if people are interested in a supermarket operated by a foreign player. The graph below shows that people in Singapore arewilling to shop in foreign super markets. So there is no opposing from the people of country. Foreign Sales Index (2007 as base) 150 114 109.2 100 100 87.8 Foreign Sales Index 50 (2007 as base) 0 2007 2008 2009 2010PEST Analysis for TESCO entering Singapore Page 6
  7. 7. (Source: Business statistics: Department of statistics Singapore, Feb 2012) Fig 2.2.3 Foreign Sales Index in Singapore2.3. Social AnalysisSingapore is a multinational country with a diversified culture and religion which make it tobe a more probably open-minded country to new influences.2.3.1 Population and WorkforceSingapore has a population of 5 million people which are mixed mostly among Chinese(74%), Malaysians (14%) and Indians (9%) (Government of Singapore, 2011). Differentethnic groups all consider themselves important parts of the diverse society of Singapore,which creates a cosmopolitan culture of Singapore. Singapore Total Population Singapore YEAR Total Population Growth Residents Residents Growth (thousand) (thousand) (percent) (percent)2008 4,839.4 3,642.7 5.5 1.72009 4,987.6 3,733.9 3.1 2.52010 (census) 5,076.7 3,771.7 1.8 1.0 (Source: Singapore in Figures 2011) Table 2.3.1: Singapore Population and Growth RateIn 2010, the total labour force was 3,135.9 thousand people with the number of Singaporeansin the labour force grew by 1.8% per annum from 2001. This reflected the rise in citizenlabour force participation rate from 63.7% in 2001 to 64.7% in 2010. Singaporeans have oneof the highest employment rates internationally with 78% of the resident population aged 25to 64 were employed in 2011, surpassing the previous high of 77.1% in 2010 (Ministry ofManpower, 2011).2.3.2 Society Values and PrinciplesSingaporeans value the hierarchical relationship in society, which means that there must bespecial treatments with respect and courtesy in the relationship between employers andemployees, teachers and students, parents and children, the elders and the youngsters. In thePEST Analysis for TESCO entering Singapore Page 7
  8. 8. society, family is the core and also the most important unit. Family has a remarkable effect onthe kids and leads them to be collectivism. (Qiang, L., n.d.)2.3.3 Living standardSingapore has one of the highest living standards in Asia. The median monthly income amonghouseholds with at least one working person (also known as employed households) increasedfrom $6,340 in 2010 to $7,040 in 2011, an 11 percent growth in nominal terms. The averagemonthly household expenditure (excluding imputed rental) in 2007/08 was $3,764, rising2.7% compared to that in 2002/03. Housing and related expenditure, food and food servingservices and transport accounted for the largest share (60%) of the monthly householdexpenditure. (Department of Statistics Singapore, 2011).2.3.4 EducationThe literacy rate in 2011 (among residents aged 15 years & over) stands at 96.1% (up from93% in 2000) whilst secondary or higher qualification holders (among resident non-studentsaged 25-39) are 92.2%. English is the primary language used in Singapore‟s education system(80% of the literate residents aged 15 and over were literate in English) (Government ofSingapore, 2011).Recently, more of Singaporean citizens are holding higher skilled jobs. 28% of residents inthe labour force in 2011 were degree holders, up from 17% in 2001. Including those withdiploma & professional qualifications, the share was 47% in 2011 compared with 30% in2001 (Ministry of Manpower, 2011). 2010 2011 32.8 27.8 28.3 21.5 20.2 18.2 17 11.8 13.4 9.1 Below Secondary Post-Secondary Diploma & Degree Secondary (Non-Tertiary) Professional Qualification (Source: Report on Labour Force in Singapore, 2011)PEST Analysis for TESCO entering Singapore Page 8
  9. 9. Fig 2.3.1 Distribution of Resident Labour Force by Education, 2010 and 2011 (As at June) (Note: Data for each year may not add up to 100% due to rounding)2.4 Technological AnalysisSingapore “has become one of the forerunners in the race towards innovation andadvancement” (Qureshi, S., 2010). This is an advantage which TESCO can exploit to developtechnologies (self check-out machines, electronic shelf labeling,...) in its merchandising inSingapore.2.4.1 Research and Development Activity (R&D)R&D has been identified to be at the crux of Singapore‟s long-term economic developmentpolicy. In September 2010, Prime Minister Lee Hsien Loong announced that the Governmentwould spend S$16.1 billion over 2011-2015 on research, innovation and enterprise. The newallocation was a 20% increase over the S$13.55 billion committed from 2006 to 2010(Government of Singapore, 2010). This reflects the growing importance of R&D inSingapore‟s development as a knowledge-based, innovation-driven economy.Besides, Singapore has developed the cooperation with European Partners in the areas ofR&D by its involvement in projects organized by the European Commission started more than10 years ago in 1994 with the 4th Framework Programme.2.4.2 E-commerceIn 2011, Singapore has more than 3.37 million internet users. Shopping for groceries onlinetook off in a big way in the last year, although the service has been around for nearly adecade. In 2010 Singapores online shopping landscape hit S$1.1 billion and is set to hit S$4.4billion in the next 4 years, according to research done by PayPal. Those over the age of 18(1.2 million online shoppers) spent an average of S$1492 each on online shopping (DigitalMedia in Singapore).PEST Analysis for TESCO entering Singapore Page 9
  10. 10. (Source: Fig 2.4.1 Singapore Internet User by Gender (Source: Fig 2.4.2 Singaporeans – Top 3 Online Purchases3. ConclusionsPEST Analysis for TESCO entering Singapore Page 10
  11. 11. The result of the political analysis shows that the country is politically stable. Singapore isdeveloping, but traditional values are still very important and need to be taken into account. IfTESCO decides to expand to Singapore it must be aware that it is only allowed employinglocal workers. When looking at the economic analysis, it can be said that Singapore‟s onlineapplication system is advantageous as it allows setting up a business within a short timeperiod. Also, the cheap local fund borrowing has the benefit over taxes and the goodinfrastructure is to be seen positively. In addition to that, the analyses showed thatSingaporeans are open-minded towards foreign operated supermarkets. The analysis of socialfactors shows that Singapore is influenced by various cultures. The high living standards inthe country are advantageous for TESCO as they allow people to spend a large amount oftheir income on groceries etc. Looking at the technological analysis it can be seen, thatSingapore puts a high emphasis on research and development and has high technologicalstandards. Also, Singapore has a high potential market for online shopping.Concluding from the current PEST analysis and macro-environmental factors which werebeing assessed in this analysis, Singapore appears to be suitable potential market for TESCO.PEST Analysis for TESCO entering Singapore Page 11
  12. 12. ReferencesChannel News Asia, 2011, Singapore PAP returned to power, viewed on 15th Feb 2012,<>.Department of Statistics Singapore, 2007, Report on the household expenditure survey,viewed at 15 February 2012, <>.Department of Statistics Singapore, 2011, Key Household Characteristics and HouseholdIncome Trends, viewed 15 February 2012,<>.Digital Media in Singapore, viewed 17 February 2012,<>Doing Business, n. d., Business reforms in Singapore, viewed on 15th Feb 2012,<>.Foreign policy globalization index, 2006, Singapore ranked best air transport infrastructurein the world, viewed on 18th Feb 2012,<>.Government of Singapore, 2010, Singapore Invests $16.1 Billion For Research AndDevelopment, media release, 19 September, viewed 16 February 2012,<>.PEST Analysis for TESCO entering Singapore Page 12
  13. 13. Government of Singapore, 2011, Department of Statistics Singapore, viewed 16 February2012, <>.Government of Singapore, 2011, Singapore in Figures, viewed 15 February 2012,<>.Government of Singapore, 2012, Business statistics: Department of statistics Singapore,viewed on 15th Feb 2012, <>.Griffiths, A. & Wall, S., 2005, Economics for Business and Management, Harlow: PearsonEducation LimitedLee S. H., 2009, A hope for more woman MPs, Viewed on 15th Feb, 2012,<>.Migration news, 1994, No foreigner workers in Singapore, viewed on 15th Feb 2012,<>.Ministry of Manpower, 2011, Report on Labour Force, viewed 15 February 2012,<>.Minium Wages, n. d., Singapore Minimum Wage, Labor Law, and Employment Data Sheet,viewed on 16th Feb 2012, <>.Oxford University Press, 2007. PESTEL analysis of the macro-environment, viewed 15February 2012,<>.Qiang, L., n.d. Singapore (Section II: Core Culture Values and Beliefs of Singapore), viewedat 15 February 2012, <>Qureshi, S., 2010, Why Singapore? Technology and Development, media release, 14 May,viewed 16 February 2012, <>.PEST Analysis for TESCO entering Singapore Page 13
  14. 14. Singapore, 2011. Encyclopædia Britannica. Encyclopædia Britannica Ultimate ReferenceSuite. Chicago: Encyclopædia Britannica.TESCO, 2011. Annual report and Financial Stements 2011, viewed 16 February 2012,<>.TESCO, PLC., 2012. TESCO PLC.2012 , viewed 16 February 2012,<>.The New York Times, 2007, Singapore announces 60 percent pay raise for ministers, viewedon 15th Feb 2012 <>.Trading economics, n. d., Singapore interest rates, viewed on 15th Feb 2012,<>.Transparency International, 2009, CPI sources by country, Viewed on 15th Feb 2012,<>.Tremewan, C., 1996 The Political Economy of Social Control in Singapore (St. AnthonysSeries), Palgrave Macmillan. p. 105, viewed on 16th Feb 2012.Ulack, R 2009. Singapore. Microsoft ® Encarta ® 2009 CD-Rom. © 1993-2008 MicrosoftCorporation.PEST Analysis for TESCO entering Singapore Page 14