Let’s explore the SWOT Analysis of Tesco by understanding its strengths, weaknesses, opportunities, and threats.
Tesco, a giant in the retail industry, has a vast global footprint and a solid foundation in the UK market. With a wide range of products to choose from, including electronics and groceries, it is a shining example of retail innovation. The company’s dedication to cost-effectiveness, customer support, and environmental responsibility has made it a household name.
Tesco keeps evolving as it negotiates the challenges of the twenty-first century, utilizing data analytics and technology to improve the shopping experience and operations. Despite difficulties like rivalry in the industry and shifting consumer preferences, Tesco’s strength and flexibility in strategy give it an edge in the dynamic retail sector.
Overview of Tesco
- Industry: Retail
- Founded: 1919; 105 years ago, Hackney, London, England, UK
- Founder: Jack Cohen
- Headquarters: Tesco House, Shire Park, Kestrel Way, Welwyn Garden City, Hertfordshire, England, UK
- Number of locations: 4,673 (2021)
- Key people: John Allan (Chairman), Ken Murphy (CEO)
- Revenue: £65.762 billion (2023)
- Operating income: £2.630 billion (2023)
- Net income: £0.744 billion (2023)
- Number of employees: 330,000 (2024)
- Website: tescoplc.com
Table of Contents
SWOT Analysis of Tesco
Tesco’s Strengths
1. Leading Market Share
One of Tesco’s key competitive advantages is its critical market share. Tesco is the largest of the “big four” supermarkets in the UK, with 27.4% of the grocery retail market. This leadership is felt strongly by Irish customers and those in the UK, solidifying Tesco’s position as their go-to place for shopping.
2. Financial Turnaround
Dave Lewis has overseen a spectacular turnaround in Tesco’s financial health. By 2023, the corporation had a revenue of £65.762 billion and an operating profit of £2.630 billion. This turnaround restores stakeholder and investor trust in Tesco’s operational abilities while serving as an example of financial stability.
3. Adaptability
Tesco’s response to the recent widespread flooding demonstrated its operational adaptability and tested the adaptability of retailers. Tesco’s flexibility highlights its operational effectiveness and customer-centric strategy.
4. Geographical Diversification
Tesco is a significant strength due to its geographical growth, with 4859 outlets throughout 5 markets. Tesco’s worldwide reach, particularly in important Asian regions, increases its market share and insulates it from local market fluctuations, guaranteeing a stable growth path.
5. A Growing Number of Stores
Tesco’s growing network of stores—from 3,751 in 2008 to 4859 in 2023—indicates a practical expansion approach that increases revenue sources and expands the company’s market reach. Tesco’s goal of providing better customer service and being closer to its consumers aligns with its expansion strategy.
6. Strong Private Label Brands
The success of Tesco’s private label brands, which include Tesco Finest and Everyday Value, demonstrates that it can offer high-quality goods at competitive prices. Tesco’s house brands set the company apart in a crowded industry and increased profit margins by encouraging consumer loyalty.
7. Broad Product Range
Tesco is a one-stop shop because of its wide range of products, which includes gadgets and everyday supplies. Tesco’s competitive advantage remains intact through its ability to adapt to changing consumer demands and explore new market sectors.
8. International Awards
Tesco’s retail achievements are demonstrated by its numerous Grocer’s Own Label Food and Drink Awards and Britain’s Favorite Supermarket titles. These awards strengthen Tesco’s brand reputation, drawing in new business and keeping current customers. Tesco Business Solutions Wins World’s Best GBS Award 2023 by SSON Research and Analytics.
9. Sustainability Initiatives
Tesco’s commitment to sustainability through initiatives like reducing food waste and switching to renewable energy is an example of its corporate responsibility. These initiatives support an eco-aware consumer base by promoting a favorable brand image and connecting with stakeholder values.
10. Customer Loyalty Program
The Clubcard loyalty program strategically fosters consumer loyalty. Tesco ensures customer retention and continuous revenue by personalizing shopping experiences, providing distinct incentives, and understanding consumer preferences.
11. Experienced Leadership Team
Tesco skillfully and strategically negotiates challenging market conditions, supported by a seasoned executive team of 330,000. Their ability to successfully navigate regulatory environments and drive business growth inspires trust in stakeholders and maintains Tesco’s market leadership.
12. Superior Technology Usage
Tesco improves the shopping experience by creatively utilizing technology, such as RFID-enabled barcode systems and advanced mobile commerce capabilities. In the tech-forward retail sector, Tesco stands out with technological adoptions that streamline operations from inventory management to customer checkout.
13. Efficient Supply Chain Network
Tesco’s waste management procedures and straightforward business model promote its efficient supply chain. This effectiveness guarantees prompt delivery, product availability, and positive supplier relations, resulting in satisfied customers and lower operating expenses.
14. Employee Benefits
Tesco provides possibilities for career advancement, complete medical care, and mental health support because it views its people as essential resources. Benefits like these keep employees engaged and attract talent, boosting Tesco’s innovation and operational performance.
15. Innovative Marketing
Tesco’s marketing initiatives use data-driven personalization to engage customers on multiple platforms. This creative thinking improves consumer experiences and puts Tesco ahead of rivals in an industry that is changing quickly.
16. Robust Online Platform
Tesco’s strong internet presence and expertise in e-commerce support the growing trend of online purchasing. After COVID-19, Tesco’s online sales increased by nearly 60%, demonstrating its capacity to adjust to shifting consumer preferences and strengthen its market position.
17. Financial Services
By branching into financial services, Tesco can increase convenience while generating new revenue sources. By strategically diversifying, Tesco may use its reputable brand image while reducing its reliance on the retail industry.
Tesco’s Weaknesses
1. Over-reliance on the UK Market
Tesco’s heavy reliance on the UK market limits its expansion options, especially given international markets’ volatility. This becomes a major issue when UK retail changes, like internet shopping, occur.
This era’s severe competition and change of retail formats may hurt Tesco’s profitability. Tesco may gain market share by exploring new markets, extending its product line, and improving its digital infrastructure.
2. Failed Operations in the US and Japan
Tesco’s foreign efforts have encountered significant obstacles, as evidenced by its 2012 withdrawal from the American and Japanese markets following years of loss-making operations. This withdrawal highlights the difficulties Tesco encountered while adjusting to these varied regions, potentially due to a lack of market research or an underestimate of regional rivalry and customer preferences.
3. Fraud Trial and Accounting Scandal
Tesco was hit with penalties and other legal costs 2017 for engaging in dishonest accounting procedures and misleading its profits. A controversy of this nature destroys stakeholder trust, which affects investor confidence and brand reputation—two factors critical to a corporation’s long-term survival.
On 19 April 2021, Tesco Stores Limited was fined £7.56 million at Birmingham Magistrates’ Court after pleading guilty to 22 out-of-date food offenses that occurred at three of its stores in 2016 and 2017.
4. Decrease in Operating Profits
Operating earnings dropped in the financial year 2023, a 7.1% decrease. Tesco’s share price declined by 8% in the first quarter of 2022 due to this downturn, indicating investor fears and possible issues with the company’s financial stability.
5. Fined for Selling Expired Food
Tesco’s sale of expired food goods violates consumer trust and safety standards, which resulted in a £7.5 million fine, highlighting shortcomings in quality control and operational management. These kinds of things can damage customer confidence and draw intense regulatory attention.
6. Low-cost Strategy
Thanks to its price leadership, Tesco is competitively positioned in the UK market, but this cost-cutting approach has drawbacks, most notably in narrowing profit margins. Although this strategy appeals to price-conscious consumers, it requires large volume sales to remain profitable.
7. Poor Online Delivery Service
Tesco has come under fire for its online delivery service, which frequently has cancellations and delays. These difficulties are made worse by the logistical difficulties involved in handling fresh vegetables. Significant expenditures in cutting-edge delivery methods, effective customer service procedures, and efficient supply chains are necessary to close this gap and raise customer satisfaction.
8. Adverse Effects of Cost-Cutting Measures
Tesco’s cost-cutting measures have resulted in fewer employees and lower-quality services, impacting consumer satisfaction and employee morale. To address this, a balanced cost-management strategy that considers the long-term effects on employee well-being and service standards on the business model is needed.
9. Poor Operational Performance in Specific Markets
Inadequate market research or mismatched strategy may cause Tesco’s poor success in some geographic markets, highlighting the need for improved market entrance and operation plans.
10. Inventory Management
Tesco was fined £175,000 for showing products past their expiration dates, highlighting issues with inventory control. Quick decisions and enhanced procedures were put in place in response, yet incidents of this nature highlight the significance of careful stock management.
11. Clubcard Controversy
Unannounced changes to the Clubcard program caused a great deal of unhappiness among customers, underscoring the need of open communication and how sensitively devoted customers view value propositions.
12. Unfair Business Practices
If verified, claims that Tesco has stopped landlords from renting out neighboring assumptions to rival companies put doubt on the retailer’s commitment to fair market principles and may expose it to legal and reputational issues.
13. Emergency Recall of In-Demand Pastries and Snacks
Popular products have been recalled because of possible bacterial contamination, which emphasizes how crucial quality assurance is and how failures in product safety may affect a company’s finances and reputation.
14. Retreat from the Global Arena
Tesco’s reduced worldwide presence, demonstrated by its withdrawal from critical foreign markets, suggests a turnback to safer but possibly restricted local and European operations, casting doubt on its aspirations for a global strategy.
15. Exploitative Labor Practices
The claims of labor exploitation in Tesco’s Asian supply chains bring important CSR and ethical sourcing issues to light, requiring in-depth analyses and changes to respect labor rights and company responsibilities.
16. Weak CSR Initiative
Tesco’s CSR operations face opposition, especially from younger generations that value sustainability and corporate ethics. This demands a renewed strategy incorporating impact-driven and transparent CSR policies and real stakeholder interaction.
Tesco’s Opportunities
1. Expanding Jacks’ Business
In the discount grocery industry, Tesco’s latest initiative, Jacks, has created headlines by taking a risky stand against significant players like Aldi and Lidl. Jack’s explosive growth highlights a fantastic opportunity for Tesco to support this offshoot even more.
Tesco can establish Jacks as the preferred discount retailer by utilizing the trend of consumers making value-driven purchases, especially during economic crises. By growing its presence, Tesco may increase its market share and strengthen its hold on the cost-conscious market.
2. Partnerships and Collaborations
The retail industry is changing quickly, and strategic collaborations are now more important than ever. Tesco can transform the retail industry by developing partnerships and teamwork. Imagine Tesco partnering with a major tech company to create the first AI-powered shopping experience or working with specialty companies to expand its range of products.
These partnerships may inspire innovation, maintain Tesco’s competitive advantage, and place it at the forefront of retail growth.
3. Rise of Meat Alternatives
With a predicted £4.1 billion in demand for meat substitutes by 2020, the plant-based revolution is here. Tesco’s innovative promise to double its sales of meat alternatives by 2025 is not only relevant but also forward-thinking.
Tesco’s shift towards sustainability and health-conscious products may increase the company’s customer base by drawing in people interested in plant-based diets for health reasons and those who are environmentally conscious. This would demonstrate Tesco’s flexibility in responding to changing consumer trends worldwide.
4. International Expansion
The attraction of unexplored markets offers Tesco a profitable path for additional global expansion. Tesco has experienced international success, having established a presence in nations such as Thailand and Hungary. However, there is exponential growth potential.
Tesco might achieve a new level of global retail power by expanding into developing regions such as Asia, Africa, South America and even more developed areas like Europe and North America. In addition to providing a hedge against domestic market fluctuations, this expansion offers varied revenue streams.
5. Cashless Stores
Tesco’s move to build cashless outlets proves its flexibility in response to the growing consumer demand for safer, contactless transactions. This transformation marks a significant shift in the future of retail transactions since it addresses health and safety issues and aligns with modern consumers’ digital payment habits.
6. Price Matching
Tesco’s calculated decision to match Aldi’s prices on hundreds of products is a daring attempt to hold onto its customer base and stop bargain stores from losing market share. Tesco’s pricing strategy demonstrates its dedication to providing customers with unmatched value and has the potential to change competitive dynamics in the retail sector.
7. AI and Machine Learning
The retail industry has resisted the tsunami of digital transformation, with artificial intelligence and machine learning bringing a new era of simplified processes and customized shopping experiences. Tesco can learn from competitors like Morrisons and apply AI to improve its supply chain, predict demand more accurately, and customize its products to suit the needs of individual customers more accurately.
8. Tesco Clubcard Pay+
The launch of Tesco Clubcard Pay+, a cutting-edge payment option, demonstrates Tesco’s dedication to improving customer convenience. Customers can efficiently manage their spending through the Tesco banking app while encouraging loyalty and simplifying the shopping experience. These developments highlight Tesco’s superiority in integrating retail banking services.
9. High-Unemployment Rates
Due to the economic downturn and rising unemployment rates, particularly among young people, Tesco has a pool of potential talent. By providing employment opportunities, Tesco can demonstrate a socially conscious brand image and assist local livelihoods. This will also help Tesco develop its workforce and promote its growth ambitions.
10. One-Hour Delivery – Whoosh
Tesco has entered the fast delivery services market, which was previously controlled by specialty players, with the introduction of the Whoosh one-hour delivery service across several stores. By satisfying the rising need for immediate online purchasing and establishing a new standard for convenience in retail, Whoosh’s expansion into additional locations can significantly increase consumer happiness.
11. Private Label Brands
Tesco gains from investing in premium private-label goods in two ways: better margins and an improved customer value proposition. This approach encourages a sense of brand loyalty and uniqueness in a congested market by serving a varied consumer base that includes budget shoppers and those looking for luxury alternatives. It also allows for greater control over the supply chain.
12. Joint Ventures
One potential strategic solution for areas where Tesco’s performance has been poor is to develop joint ventures with local businesses. These collaborations have the potential to provide Tesco with significant market intelligence and operational flexibility, customized to local consumer preferences and market conditions, thereby updating Tesco’s position in difficult areas.
Tesco’s Threats
1. ‘Fake Farm’ Legal Threat
Tesco faced legal challenges in 2017 after being charged with misleading its customers. The shop created criticism regarding authenticity and reliability by marketing its food products under made-up farm names like “Woodside Farms.” This experience highlighted the possible legal issues and harm to a company’s reputation that can arise from diminished openness.
2. Brexit Referendum
Brexit, a major political event, has brought Tesco new trade challenges. Long-standing trade agreements have been upset by leaving the European Union, increasing import costs and adding to the complexity of logistics. The dynamic trading landscape following Brexit is an example of how multinational merchants are sensitive to changes in geopolitics and the need for flexible strategic planning.
3. Competition with Supermarket Giants
In the highly competitive retail sector, Tesco faces off against major players like Walmart (after its takeover of ASDA), Carrefour, and Aldi. Tesco’s dominant position in the market is being threatened by the increased growth and performance of these competitors. This situation perfectly exemplifies the retail industry’s intense competitiveness and ongoing demand for innovation and uniqueness.
4. Store Size and Format Challenges
Tesco, which is well-known for its Superstores and Extra stores, faces a logistical challenge as consumer tastes shift toward internet shopping and smaller, local businesses. The need of flexibility in retail success is underscored by the necessity of strategically rethinking store formats to adapt to these developments and placing a greater emphasis on the online shopping experience.
5. Rising Costs
Tesco’s operational costs have increased dramatically due to recent worldwide events, particularly health issues; extra charges are estimated to have cost between $830 million and $1.18 billion. This increase highlights the necessity of sound financial preparation and the financial impact that unexpected worldwide crises might have on retailers.
6. Supply Chain Issues
Recent health issues have made delays in supply chains worse, forcing Tesco to restrict purchases of necessities. The riskiness of global supply networks is highlighted by this circumstance, stressing the need for flexible and robust operating plans to minimize interruptions.
7. Faces Hygiene Investigation
Investigations have been prompted by incidents at Tesco stores, including finding a cracked popcorn bag and concerns about food security and hygiene standards. These problems highlight the significance of strict quality control procedures and the possible harm to one’s reputation from neglecting food safety and shop hygiene.
8. Economic Downturns
Tesco’s financial health is in danger during recessions and economic downturns since they lower consumer spending and raise operating costs. These difficulties show how important it is for merchants to have financial flexibility and modify their marketing plans to keep customers loyal during hard times.
9. Changing Shopping Habits
The e-commerce trend and the desire for shorter, more frequent shopping trips challenge established brick-and-mortar business models. To meet changing customer expectations, Tesco must improve its online and delivery services, highlighting the importance of digital transformation in the retail industry.
10. Technological Disruption
Modern on-demand delivery services and internet marketplaces have the potential to shake up established retail business structures. Tesco must constantly invest in cutting-edge technologies and creative solutions to succeed and adapt to changing customer needs.
11. Currency Fluctuations
As a global company, Tesco must face the risk of currency changes, which might affect its financial performance. This danger highlights how difficult it is to manage global operations and how important it is to have advanced financial risk management techniques.
12. Cybersecurity Threats
Tesco’s dependence on digital networks puts it at risk for hacking and data breaches. Handling these cybersecurity risks is an important component of modern company risk management, as it secures the company’s financial resources, consumer data, and reputation.
Conclusion
In summary, Tesco’s path within the retail industry is characterized by a unique combination of significant benefits and operational advantages, offset by natural weaknesses and external risks requiring alertness and flexibility. It provides a robust platform for growth with its leadership in market share, stable finances, and dedication to innovation. However, Tesco must continue to be flexible and forward-thinking given the UK market saturation, operational difficulties in overseas projects, and changing consumer behavior.
Tesco’s capacity to use technology, reach emerging regions, and improve its customer experience will be essential as it navigates the complex landscape of international retail. Tesco is well-positioned to maintain its position as a retail titan, capable of satisfying the needs of modern consumers by mitigating its weaknesses and maximizing its advantages.
Liked this post? Check out the complete series on SWOT
