Swot analysis of Tesco. TESCO is a British general merchandise and grocery retail multinational company. Jack Cohen laid the foundation of Tesco in 1919 in Hackney, London. The headquarter of the company is in Welwyn Garden City, England, UK.
Tesco Mobiles, Grocery items, Tesco Bank, F&F Clothing, and Club Card, Convenience Shops, Superstore, Hypermarket, and Supermarket are some of the main products/services of Tesco.
The company is one of the largest grocery retailers in the UK’s market, and it falls under the category of top 10 world’s largest retailers. Tesco has got approximately 7005 retail stores at the beginning of 2021. Approximately 423,092 people are working for the company in 2021.
According to an estimate by Statista, the annual revenue of Tesco in 2020 was approximately 53 billion pounds. It has increased roundabout by 1.3 billion pounds since 2019. Out of which the net profit of the company was 2.2 billion pounds and it has increased by 360 million pounds.
Walmart, Argos, Lidl, Waitrose, Carrefour, Iceland, Giant Eagle, Insta Cart, Morrisons, Sainsbury, and Safeway are some of the main competitors of Tesco.
Today, we’ll discuss the swot analysis of Tesco. How internal strengths are driving the growth of the company and its weaknesses that are holding Tesco back. What opportunities the retail company should utilize to avoid threats. If you want to learn about the macro-environment of the retail brand, check out the pestle analysis of Tesco. Here’s the swot analysis of Tesco as follows;
Strengths of TESCO
Performance in Pandemic
The pandemic of covid-19 has affected a lot of small businesses. Surprisingly, Tesco performed well during the pandemic. The growth rate of the brand in the last quarter of 2020 was 10.5%. The online sale of the company is booming.
Tesco is hiring 16000 more employees to meet the growing demand and volume of sales. The net income of the company in 2020 was 2.2 billion pounds compared to the last year.
Accepting the Change
The government imposed restrictions on physical gather and other social activities during the pandemic. Tesco quickly responded to the circumstance and speed-up its online ordering and home delivery service. The company doubled its workforce of approximately 1.5 million for the delivery of products. The brand improved its profit by approximately 551 million pounds and it has increased by approximately 28.7%.
Tesco won the NoSQL architecture in the EMEA region. The purpose of this award is to recognize and appreciate the effort of the company during the pandemic month. When there was a shortage of products, Tesco managed to meet the demands of people. According to an estimate by Couchbase, the company performed roundabout 2 million iterations for the quick delivery service.
One of the main reasons behind the success of Tesco’s growth was the strong leadership of Dave Lewis. He left a strong legacy in the hands of Ken Murphy. Hopefully, he’ll make smart decisions and continues the same legacy.
When Dave Lewis took charge of the company, it was in a loss of 6.4 billion pounds back in 2015. The company made a net profit of 2.2 billion pounds in 2020.
Diverse Product Portfolio
Tesco offers a diverse range of products and services to the customers. They comprise of cotton fair, clothing range, telecom and financial services, home-ware items, school uniforms, rental DVD, music downloads, and mobile smartphones business.
Variety of Stores
Tesco has different types of stores to target a different audience. For instance, Tesco Superstore, Tesco Homeplus, One Shop, Tesco Metro, Tesco Express, and Tesco Extra. It shows the diversified business strategy of the company.
Tesco had 3751 retail stores back in 2008. Now, the total numbers of Tesco’s stores are 7005 in 2021 across the world. It shows the worldwide growth and progress of the company in the past decade.
Tesco is operating its business in more than 14 countries across the globe. The brand is operating its business in Asia, North-America, and Europe.
High Market Share
According to a study by Kantar, the market share of Tesco in Great Britain was 27%. Sainsbury is the closest competitor of Tesco with a market share of 15.7%. The difference in the market share shows the dominance of the brand in the UK’s market.
Leading Retailer in the UK
Tesco is the top retailer in the UK’s market. The market share, annual revenue, and net profit of the brand are higher than any other brand and chain of the supermarket.
Advanced Supply Chain System
Tesco follows a simple business model by developing a better relationship with its suppliers. It helps the brand to reduce waste management costs.
Tesco uses the latest technology like the barcode system, mobile applications for payment, and m-commerce. The goal is to provide a better customer experience at its stores with an efficient system.
Won International Awards
Tesco has won many awards because of its best commercial performance over the years. For instance, Best Grocer Award in 2018, Waste Not Want Not Award, Grocer of the Year, The Grocer’s Label Food and Drink Award (won it 25 times), and the company won the British’s favorite supermarket 4 times.
Weaknesses of TESCO
Tesco offers a great variety of food products and other services to the customers. The brand claims to follow the standard food safety protocol. But some instances have proven to be otherwise. For instance, some of Tesco’s products turned out to be unsafe that jeopardize customers’ lives. The brand had no choice but to recall the defective products.
Inventory Expiration Cost
Some of the products at Tesco’s stores passed the expiration date and the staff didn’t replace them. Resultantly, the brand had to pay a heavy fine of 175000 pounds. The company learned from its mistake and replaced the expired items at its other stores.
The pandemic of covid-19 made the people panic in the early month. They were uncertain how long it would last. Tesco controlled the distribution of scarce resources and the brand kept assuring the customers that they enough stock to meet the needs of customers. In other words, the company was giving false hope to the customers.
Tesco takes great pride in the quality control system of the company. Many customers have complained that the company’s products didn’t have the required quality standards and it needed improvements. For instance, Tesco sent an apology for selling chicken when the feed wasn’t properly digested. If the company checked it first, it would have happened.
Change in Leadership
As we’re familiar with the fact that Dave Lewis has been a very successful leader of Tesco and he played the role very. Ken Murphy replaced him in September 2020. According to the report by Retail Gazette, the change in leadership would write a new story. It won’t be an easy task to maintain the company’s position and to boost online sales.
Tesco has the reputation of offering the products at a low cost in the British market. It’s a good strategy to attract price-conscious customers market. The pandemic and the increasing cost would decrease the company’s profitability.
Opportunities of TESCO
Machine Learning & AI
A leading UK chain supermarket, Morrison’s, has recently partnered up with the IT firm, TCS (Tata Consulting Service Company). It shows the growth and tech intentions of the competitors. Now, Tesco should also use machine learning and artificial intelligence to forecast upcoming trends. It would help the company to plan it accordingly.
The social supermarket is a marketing and selling technique when businesses stockpile their unsold inventory and offer it at a lower price. It helps the company to reduce the waste and food poverty level. Tesco has got a great interest in both of these initiatives. Therefore, the company should launch social supermarket offers.
According to an estimate, the demand for vegetarian (plant-based) products has increased by 4.1 billion pounds in 2020. It shows that people are adapting to meat alternatives and sustainable food. Tesco is aware of this trend. That’s why the company plans to increase the sale of meat alternative food roundabout 300% by the end of 2025.
Employing the Unemployed
According to a report by Guardian, the rate of unemployment is increasing among the demographic of aging from 16 to 24. Tesco is a very good place to use young talent and offer them a job. In other words, increasing unemployment would be helpful for the company to hire the workforce.
Online Shopping Growth
The pandemic of covid-19 and social-distancing have made people cautious about physical contacts. It has increased the trend of online shopping among people worldwide. Now people even purchase their groceries online to avoid the spread of the virus. Tesco has increased its workforce and the company is planning to hire 16000 more. The brand should exploit the trend as much as it can.
Alliance & Partnerships
Alliance and partnership with other tech firms would help Tesco to take advantage of the current online shopping and e-commerce trends. Many tech businesses and companies have had exponential growth during the pandemic months.
If some of the department of the company isn’t performing well in some countries. Tesco should consider hiring local expertise and use their knowledge and skill to improve its performance.
Indonesia, South Korea, and Turkey are the growing market and have great growth potential. Tesco should start opening its stores in those markets and exploit the opportunity before any of the competitors does.
Threats TESCO has to face
Tesco has been an alone competitor in the British market. ASDA is back into play after Walmart has left its ownership and sold it to Mohsin and Zubair Issa. The British billionaire brother would expand their business across the UK and 10 other countries. The return of ASDA back to life is a great threat to Tesco.
Pandemic of Covid-19
The pandemic of covid-19 has permanently shut down many businesses. The online shift and e-commerce saved Tesco. The company has had a covid-19 precautionary expense of 533 million pounds. The whole scenario suggests a major shift in the business.
The lockdown and shutdown of businesses and companies have unemployed many people. It has decreased the purchasing power of people. Tight finances create an atmosphere of uncertainty and people become cautious about their spending. It impacts all the businesses consequently.
According to an estimate, Tesco imports 80% of the supermarket sold food items from the EU. When Britain is out of the Europe via Brexit deal, it would increase the taxes. More taxes would increase the cost and retail price.
Trade Relations with the EU
If the Brexit deal remains actives and the UK would be out of Europe. When new trade rules and regulations would be in play. It would increase additional quotas, custom checks, and tariffs. All of these factors would increase the basic cost.
After a careful study of the swot analysis of Tesco, we have concluded that Tesco is indeed a leading retailer in the UK’s market. But the Brexit deal and the new competitors are real threats to the company. Tesco should capitalize on e-commerce and tech opportunities to overcome lingering threats.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.