Tesco is a multinational retailer with its headquarters in the UK. The company has a strong presence in many nations such as the UK and many European nations. The total store count is more than 5000 with close to 4000 just in the UK itself. Apart from the retail services, the company is also diversified into retail banking and insurance services. Besides, with a market capitalization of more than 23 billion USD, Tesco is among the 1000 most valuable brands in the world by market capitalization.
This article features an amazingly meticulous SWOT analysis of Tesco delving deep into the strengths of weaknesses of the company along with opportunities and threats in the external environment. To explain, SWOT analysis is an efficient strategic analysis and tool that is applied to assess the internal capabilities of an organization. Besides, as an individual too, you can apply the SWOT analysis to yourself as well for individual assessment. In case you want to learn about SWOT analysis in detail, you can go through our exclusive SWOT Analysis Guide.
For now, let us get started with TESCO SWOT Analysis.
Table of Contents
An intelligible SWOT analysis of Tesco
Strengths of Tesco
Largest grocery retailer in the UK- Tesco leads in terms of the number of stores in the UK, as per Statista, it had close to 4000 stores by the end of 2021 and has control over 25% market in the United Kingdom trailing the other three strong players Asda, Sainsbury's and Morrisons by a close margin.
Presence in various markets- Tesco has its operations in various other countries alongside the UK such as the Czech Republic, Hungary, Slovakia, Malaysia, and Thailand among others. A multinational presence across the top economies of the world is certainly a competitive advantage for the company.
Diversified business operations– Tesco’s supermarket business consists of different types of stores like Tesco Homeplus, Tesco Extra, Tesco Express, One-stop, and Tesco Superstores. The Homeplus category was specially formulated for the Korean market.
The company also experimented with virtual stores wherein the company set up posters in the subways that resembled the actual aisles and shelves of a regular Tesco store and the customers just needed to have the Homeplus app and scan the QR code of the products which got stored in the shopping basket and the customer paid online for the orders.
This provided great convenience to the customers in South Korea as people there are mostly busy and do not have time to shop but for now, the Homeplus is sold by Tesco (Meurville, Pham, Trine, 2015). Further, Tesco has a concept named Tesco Extra that consists of large hypermarkets and has all the product range along with extra facilities like pharmacies, opticians, and key cutters.
Besides, Tesco has diversified businesses that include retail stores, digital banking, and data science,
Use of advanced technology- Tesco uses various technologies for enhancing efficiency in its operations. Tesco has launched a facility wherein the customer can order the goods online and pick them up from the stores. Further, the customers are provided with self-check-out options wherein they can scan their items themselves at the scanning devices and payment can also be made through a digital card or e-wallet.
For effective integration of technological advancements, the company will need an effective change management approach. The Bridges Change Model can be one of the best strategies to inculcate the changes successfully.
To ensure the shelves are appropriately stocked, the company uses ceiling cameras also known as broccoli cameras to keep track of the empty trays and even the price labels used by the company are electronic which reduces the need for manual operations.
In addition, the employees are provided with smart badges that assist them in checking item availability by scanning its bar-code. Moreover, the company uses augmented reality in its app to let the customers know the exact location of the product at the stores.
Increase in digital sales- The emergence of COVID has been a blessing for the company as its digital sales of the company have boomed by 74% in the last 2 years (Skeldon, 2021). This can be a positive sign for the company as if in case the cases surge up in the future and there is a lockdown, then Tesco would still be able to maintain stability in the business.
Weaknesses of Tesco
Failure in a few markets- Tesco has not been able to gain success in some of the international markets like Japan and one of the largest consumer markets in the world, the US. The failure in Japan was because of the inability of the company to understand the local culture which is totally different from its home market UK. It lost $2 billion worth of investment when it pulled out of the US.
As per a few analysts, the company committed the mistake of opening more stores in low-income areas where the consumption was not much and the second mistake was related to not opening stores near the fulfillment centers which resulted in a long time for the products to reach store and as a result, the shelves remain empty for a long period of time (Onikoyi, 2019).
Scandals and controversies- Tesco was found to have befooled investors and government agencies by overstating its profits to the tune of 250 million euros. The disclosure of this accounting ethical issue resulted in huge monetary losses for the company as it lost around 2 billion euros in just a single day because of a decline in stock price and had to pay millions of euros to investors afterward to investors in penalty and even three of the company’s directors were charged with fraud (Belfast Telegraph, 2019).
Further, the company was also accused of selling horse meat that was labeled as beef, and its couple of stores in the UK were found to be selling expired food items for which the company was also fined 7.5 million euros. These types of incidents can result in serious reputational loss and trust among the customers and investors.
Low operating profit- Tesco runs on a low-cost strategy wherein the prices are kept as low as possible each day. This is having a toll on the operating profit of the company and in 2020 as per its annual report, the operating profit declined by 4.3% and there was a further downfall in 2021 as well wherein it dropped by 21.3% (Tesco, 2021).
Labour exploitation- Tesco has been accused of several wrongdoings with respect to its employees wherein the company has been accused by the company of discriminating against the employees while paying salaries and further in countries like Thailand and Malaysia the company has been involved in manhandling the migrant workers and the workers are subject to other abuses as well.
Opportunities for Tesco
Joint ventures for entering various markets- Tesco can enhance its market share by venturing into more markets through partnerships. Walmart has been really successful in this thing and Tesco can learn from it. In order to expand its operations in India Walmart initially tied-up with the Bharti group which didn’t last long for some reasons, and in order to compete in the online segment against the likes of Amazon, Walmart has acquired a major stake in successful Indian e-retailer Flipkart
Cashless stores- Tesco can enhance the customer experience at the stores by fully integrating the stores with technology and just like Amazon Go, Tesco can launch cashier-less stores where the customers wouldn’t need to line up in queues for payments.
Threats for Tesco
Brexit- Brexit has increased the worries of the company with regards to bringing efficiency in the supply chain and now the company is facing huge difficulties importing meat, fruits, and ready-to-eat meals from the European nations because of changes in import mechanisms and related regulations like new certification and checking rules at ports (BBC, 2021). Further, the supply chain in the whole world has been disrupted due to COVID and Tesco is also facing difficulties keeping its shelves stocked.
The threat of substitutes- The customers throughout the countries where Tesco have enormous options for purchasing, for example, if they do not get a good experience at any of Tesco’s stores then they can shift to other supermarket and also further, there are lots of substitutes for the products as well, for example, the person who wants to stop consuming meat would shift to plant-based meat and if Tesco fails to provide the customers with choice then that can act as a barrier to its long term growth.
To conclude, Tesco has a strong hold over the UK retail market but it can expand its footprints in several markets that would enable it to be competitive on a global scale. It has the advantage of a strong technological infrastructure. But, however, the low operational profits and controversies attached to it can harm the image. Besides, if you want to analyze how the external business factors affect Tesco, you can go through our Tesco PESTLE Analysis. This all-inclusive PESTLE Analysis of Tesco will help you to delve deeper into the influence of various factors in the external business environment. From the strategic analysis perspective, this PESTLE Analysis will come across as a great source of reliable information.
BBC. (2021). Tesco: Brexit disruption 'is a challenge not a crisis'. www.bbc.com. Retrieved 22 April 2022, from https://www.bbc.com/news/business-55658645.
Onikoyi, O. (2019). The Failure of Tesco in the USA. medium.com. Retrieved 22 April 2022, from https://medium.com/swlh/the-failure-of-tesco-in-the-usa-d2823842ffbb.
Simpson, E. (2021). Tesco staff win legal argument in equal pay fight. www.bbc.com. Retrieved 22 April 2022, from Simpson, E. (2021). Tesco staff win legal argument in equal pay fight. www.bbc.com. Retrieved 22 April 2022, from https://www.bbc.com/news/business-57343892.
Skeldon, P. (2021). Tesco sees digital sales up 74% in two years as profits climb, but HGV and fuel problems could offer ‘perfect storm’. internetretailing.net. Retrieved 22 April 2022, from https://internetretailing.net/industry/industry/tesco-sees-digital-sales-up-74-in-two-years-as-profits-climb-but-hgv-and-fuel-problems-could-offer-perfect-storm-23812.
Tesco. (2021). Annual Report and Financial Statements 2021. www.tescoplc.com. Retrieved 22 April 2022, from https://www.tescoplc.com/media/757589/tesco_annual_report_2021.pdf.