Tesco SWOT Analysis

SWOT analysis

First, let's define each element of the SWOT analysis and understand how SWOT can assist Tesco in analyzing the company's strategic positioning and internal and external decision making.

Strengths

To analyse strengths, a company should examine what it does well, especially what makes business better than its competitors.

Weaknesses

Organizations should pay a lot of attention to identifying what areas within their business are the weakest and require further improvements.

Opportunities

The company should identify potential external opportunities that could give the organization a competitive advantage.

Threats

Businesses should identify external factors that potentially can be harmful for the organization, as once identified certain actions could be taken to minimize the threats.

SWOT Analysis, StudySmarter

SWOT analysis of Tesco

So far we have examined Tesco and its role in the market. Additionally, we have analyzed each element in SWOT analysis. These foundations will help us to conduct Tesco's SWOT analysis.

First, let's examine Tesco's strategic positioning using the internal elements of the SWOT analysis, which are strengths and weaknesses.

Strengths of Tesco

• One of Tesco's biggest strengths is having the largest market share in the UK. According to Statista, Tesco's market share was at 27% in May 2021.

• Tesco has the ability to increase its growth even during the pandemic. This surge in growth was mainly due to online sales. During the pandemic, in the three summer months, Tesco grew by 10.5% and this led to employing 16,000 additional people due to its expansions.

• Tesco is highly adaptable, as has been shown during the pandemic. For example, Tesco quickly adapted to changes in people's habits during the pandemic and increased its delivery capacity to meet the increased demand for online shopping.

• Tesco is able to adopt new technology to enhance people's shopping experiences. For example, Tesco implemented a new system of using radio-frequency identification (RFID) tags instead of standard barcodes, which allows Tesco to count the items automatically once they are scanned. This saves the effort of employees as stock is counted automatically and suppliers are informed of any additional items that need to be supplied.

• Tesco holds the title as the largest private employer in Europe and it gives more than 500,000 job opportunities to people globally.

Weakness of Tesco

• Tesco fails to adapt and operate in markets outside of Europe. For example, Tesco failed its operations in the Japanese and US markets. This was due to the failure of exports. As a result, in Japan, Tesco closed after nine years and in the US after five years.

• Tesco has been involved in major food safety and quality issues in the past. These events had a negative impact on brand image.

  For example, the 'horsemeat scandal' occurred when Tesco included some horse meat into products that were being sold as beef without informing consumers.

  This has affected the company's image and its sales. To be exact, Tesco's market value fell by £ 300 million.

  Another example, in regards to food scandals, is when Tesco had to pay a £ 175,000 fine for placing products that were more than 15 days past their expiry date on shelves.

Opportunities of Tesco

• Opportunities in the external analysis will assist Tesco in making a decision about how the company can take advantage of the surrounding environment.

• Tesco has an opportunity to continue to increase its investments, especially in regard to online shopping. Due to COVID-19, many people have a preference to do grocery shopping online rather than in physical stores.

• Tesco could take an opportunity in regards to increase youth employment rates. Tesco holds the title of the biggest employer in Europe. Especially during the pandemic, Tesco was one of the few employers that increased its staff capacity. Tesco could take advantage of unemployment and invest more in expansions and the hiring of more staff that can assist the company to grow and optimize its services.

• Growing its plant-based products rage. Tesco should take advantage of the growing market in regards to meat alternatives, and invest more to produce plant-based products.

Threats of Tesco

• Threats are the external environment factors that may be disadvantageous to the business. For Tesco, threats are important to analyze and to be aware of, as they may lead to decisions that help prevent the identified threats from occurring.

• New post-Brexit rules can result in negative effects on the supply chain meaning shortages in stock for certain products may occur.

• Competition, especially from companies like Asda, which was acquired by the US mega-retailer Walmart. This event may raise certain threats for Tesco, such as losing market share to Asda.

• Government regulations can be one of the biggest threats to Tesco. These may include increased taxation and other legal requirements or regulations on certain products or advertising.

• The prices for necessities such as food are constantly rising. This can be a threat to Tesco as due to increased prices people may reduce their spending levels which may have an impact on Tesco's revenues.

Tesco market analysis

In addition to SWOT analysis, it is important for businesses to conduct market analyzes to understand the market that their business is operating in, in more depth. In regards to Tesco, market analysis will allow Tesco to fully understand its market and see the company's position among competitors. Additionally, market analysis can help Tesco to identify further internal or external elements that can be included as part of the SWOT analysis.

Market analysis in this section will be concentrated in regards to Tesco's operations in the UK.

The fundamentals that Tesco needs to take into consideration when conducting market analysis are listed here:

The market size, (sales value and sold volume): according to Statista in 2020 the value of the grocery retail market was worth 205 billion GBP and supermarkets were in the lead with a market value worth 90.2 billion GBP.

The PESTLE analysis - These include:

• Political - tax, financial stability, changes in legislations
• Economic - economic growth, rates of employment
• Social - demographic influences, lifestyle factors
• Technological - technology innovations
• Legal employment laws, regulations
• Environmental - laws in regards to regulations of pollution, customers attitudes

Competitors and the share that they have in the market: the biggest Tesco competitor supermarkets in the UK are Sainsbury's, Asda and Morrisons.

Customer loyalty in the market: according to Statista, half of the customers in the UK are neither loyal nor disloyal to grocery retailers. Therefore, there is no clear loyalty to providers in this market. However, other providers including Tesco are aiming to increase customers' loyalty by offering various loyalty programs.

Market segmentation: grocery retail market consumers can be segmented based on different factors, including Geographics, Demographics, Psychographics and Behavioral.

Consumer's decision making within the market: using market research, Tesco can analyze what process is involved in consumers' buying journey that leads to making a transaction of Tesco's products. This can assist in making effective strategies that optimize a consumers' buying journey.

Overview of Tesco SWOT analysis

Overall, the Tesco SWOT analysis that we have explored in this case study examined Tesco's current positioning in terms of the business's strengths and weaknesses. We have also outlined the company's external environment which includes the opportunities and threats that the company can either take advantage of or be cautious of.

Tesco's key strengths include being a UK grocery retail market leader, being highly adaptable and innovative. The biggest weakness of Tesco is adapting to markets outside of Europe and being involved in various food scandals. The key takeaways in regards to the internal analysis are that Tesco should continue working on its strengths to further increase customer loyalty. On the other hand, to turn weaknesses into strengths, Tesco must conduct sufficient market research before entering new markets and pay attention to food quality to avoid instances, such as food quality scandals, from occurring.

Additionally, the external environment and factors are crucial for analysis by Tesco as they can help the company see what next steps can be taken to take advantage of opportunities. On the other hand, analyzing threats assists Tesco in knowing what they should be cautious about.

Reference List:

1. National Retail Federation, Top 50 Global Retailers , 2021.

2. Andrea Blázquez, Market share of grocery stores in Great Britain from January 2017 to May 2021, 2021.

3. Statista, Consumers' level of loyalty towards the supermarket they currently shop at in the United Kingdom (UK) in 2014, 2014.

4. Sarah Butler, Tesco gives permanent jobs to 16,000 staff taken on in Covid crisis, 2020

5. Nick Fletcher, Horse meat scandal wipes £ 300m off Tesco's market value , 2013.

6. Nicole Vassell, Tesco fined £ 175,000 for out-of-date baguettes and two-week-old yoghurts, 2020

7. Andrea Blázquez, Market value of grocery retail in the United Kingdom (UK) in 2020 with a forecast for 2022, by channel, 2021

8. Adrian Holliday, Tesco Europe's biggest private employer, 2011