Tesco SWOT Analysis | Tesco Business Strategy Analysis

Tesco SWOT Analysis

Tesco PLC is a multinational grocery and general merchandising company headquartered in the UK. Tesco operates in 16 countries around the world.

Tesco is a well-known and large British retailer that ranks third in the world for grocery retailers. It has a range of locations in the United States, Asia, and Europe. Tesco began in 1919 as a one-person operation, Jack Cohen, selling groceries from a store in London.

According to Statistica Tesco Brand Report 2019, Tesco has approximately 450,000 employees, 6,800 locations, and a revenue of £63,9 billion (2019).

Since then, Tesco has continued to grow through a combination of different retail offerings, acquisition of new outlets, and adaptation to consumer needs. The company’s primary goal is to serve the consumer. The organization prioritizes customer satisfaction, so they are more likely to relate to the brand again and again. Instead of acquiring new clients, this will be more cost-effective for the company.

Tesco has about 2,200 stores in the United Kingdom, ranging from large hypermarkets to small shops. Tesco’s product line has extended beyond groceries and general merchandise to include banking, electronic goods, insurance services, and telecommunications equipment.

Besides, the company operates several other businesses, such as the UK chain of Tesco Express petrol stations, which operates under the Texaco brand. The UK chain of Tesco Clubs, sold through its main stores and online sites, offers non-food merchandise for children.

They also embraced the one-stop-shopping model, which means that consumers can buy all of their shopping needs in one place. Tesco has also expanded its client base through its website Tesco.com, which has over one million users.

Tesco’s SWOT review distinguishes all of the company’s major strengths, shortcomings, opportunities, and risks. It allows the brand to investigate it and analyze ways to improve performance. Check out this post to find out where Tesco stands.

To ensure Tesco’s long-term competitive advantage, it must resolve the multiple issues outlined in Tesco’s SWOT analysis.

Tesco SWOT Analysis

Tesco Strengths

What are some of Tesco’s Strengths?

Tesco has a vast network of stores in the UK, and it has been able to keep its costs down by leveraging its advantages in terms of scale and negotiating power. The company has also been able to negotiate favorable contracts with suppliers, and it keeps a close watch on its own costs through continuous efficiency improvements.

Tesco has a unique profit model in which it collects sales taxes and VAT from its buyers and then pays them directly to each government tax authority. As a result of this system, international business accounts for only 1% of net sales revenue.
The company’s strategy to expand its operations into developing countries has proven to be effective. In addition to this, Tesco has developed a presence in the online retail market, operating an online store on the Chinese portal, Taobao.com.

Tesco has a sizable market share. With a 27 percent market share, it dominates the grocery retail industry in the United Kingdom.

Tesco supermarkets are the supermarkets of the future due to the incorporation of technology. To improve the shopping experience of its customers, the business employs automated barcode stocktake systems and has created an app.

Tesco has been in business in the United Kingdom for over a century. This increases the company’s brand value and gives buyers trust that it will continue to function for a long time.

Tesco provides a wide range of products, including clothes, homewares, school supplies, mobile phones, and financial services.

The company is also praised among its employees, who can offer a competitive salary package, numerous benefits such as healthcare, pension, and even training programs.

Tesco has also started using its technology to enhance its service and increase the efficiency of its operations. For example, the company is implementing an automated parking system in some of the stores.

The company has made major investments in things like technology and systems, and it also keeps experimenting with new ideas to attract customers.

Tesco Weaknesses

What are some of Tesco’s Weaknesses?

While international business is still increasing and is expected to contribute more to Tesco’s income in the coming years, the company remains heavily reliant on the UK market.  Such focused operations will affect the business if the region’s economy slows.

Although this is not a significant short-term weakness, any improvements in the UK supermarket industry over the next year, such as Morrison’s group successfully buying the Safeway chain, could alter the balance of UK supermarket power and affect share.

Tesco has been involved in several legal battles with firms such as Varco and Weatherford for infringing on some of their patents. Tesco’s legal fees for fighting the violation charges have risen. Any of the statements that are proved to be true can affect Tesco’s company and reputation.

Tesco also needs to work on its online sales operations on a global level. The company has been slow in catching up to its competitors, such as Wal-Mart Stores, Inc. (NYSE: WMT) and Amazon, Inc (NASDAQ: AMZN).

Tesco Opportunities

What are Tesco Opportunities

The organization has spent a significant amount of money on the online platform over the last few years. Tesco now has a new distribution platform thanks to this investment. In the coming years, the organization will capitalize on this opportunity by better understanding its customers and meeting their needs through big data analytics.

The market’s growth would result in a dilution of competitors’ advantages, allowing Tesco to improve its competitiveness compared to its competitors.

Opening of new markets as a result of government agreement – Tesco has been given the ability to reach a newly developing market due to the introduction of new technology standards and a government free trade agreement.

The low inflation rate increases market stability and allows Tesco customers to obtain credit at lower interest rates.

New environmental policies are being implemented. The new opportunities will level the playing field for all business participants. It is a fantastic opportunity for Tesco to capitalize on its edge in emerging technologies and gain market share in the new product segment.

Tesco will use the latest technologies to implement a differentiated pricing strategy in the new market. It will enable the company to retain its existing customers by providing excellent service while also attracting new customers through other value-added offerings.

Lowering the cost of transportation due to lower shipping costs will also lower the cost of Tesco’s goods, creating an incentive for the company to either increase its profitability or pass on the benefits to consumers in order to gain market share.

Tesco Threats: Threats Tesco Facing

The United Kingdom’s current pursuit of a no-deal Brexit could result in the suspension of the EU’s free trade agreement. Following the suspension, the UK will be forced to trade with the EU in accordance with WTO regulations. Adoption of new rules would result in increased tariffs, customs inspections, and quotas.

Brexit would have an effect on 80 percent of imported food sold in supermarkets. The stymied movement of imported goods from the EU to the UK would have a negative effect on Tesco’s supply chain as a result of Brexit implementing restrictions at the ports of entry.

Tesco’s current CEO, Ken Murphy, predicts difficult times during the holiday season. The key source of concern is the economic downturn and the resulting decline in buying power. Additionally, increasing unemployment creates a layer of financial uncertainty for Tesco customers.

Tesco’s fast transition to online service saved the company at a time when several other large corporations were failing. Corona virus-related costs, on the other hand, totaled £533 million. Besides, Ocado has surpassed Tesco as the most valuable UK retailer. This may indicate an industry-wide transition.

Asda’s ownership recently shifted from Walmart to the billionaire Issa brothers. The new owners want to add Asda to their 6000 forecourts spread over ten nations. Asda’s resurgence presents a significant threat to Tesco’s market share.

Tesco Business Strategy Analysis

The company is highly focused on growth. However, it looks for profitable growth that makes good use of each and every dollar it spends. The company wants to achieve profitable growth in terms of revenue generation as well as in terms of market share.

In order to maintain its growth momentum, the company also keeps expanding its product offerings by introducing new ones or developing different flavors of existing products.

Tesco is a highly cash generative company, and it has a wide range of options available to it for increasing liquidity. The company has been able to increase its free cash flows over the years. In fact, this is one of the reasons why the company has been able to reinvest in its operations and continue to build its market share.

The company has also been able to generate substantial free cash flows from its operations with negligible capital expenditure.