TESCO SWOT 2024 | SWOT Analysis of TESCO

Company: Tesco
CEO: Dave Lewis
Year founded: 1919
Headquarter: Welwyn Garden City, Hertfordshire, UK
Number of Employees (2021): 361,771
Public or Private: Public
Ticker Symbol: TSCO
Market Cap (March 2022): £ 21.57 Billion
Annual Revenue (2021): £ 57.8 Billion
Profit | Net income (2021): £ 721 Million

Products & Services: Groceries | F&F Clothing | Tesco Club card | Tesco Bank | Tesco Mobile
Competitors: Argos | Waitrose | Aldi | Iceland | InstaCart | Safeway | Sainsbury | Morrisons | Giant Eagle | Carrefour | Lidl | Costco | Walmart | Target | Amazon | Whole Foods

Fun Fact:

Did you know that Tesco has a grocery retail market share of 27.4% in the United Kingdom?

An Overview of Tesco

Jack Cohen founded Tesco in 1919 as a group of market stalls. The business expanded rapidly, and within only a few years, Tesco became the largest retailer in UK and second-largest in the world. Dave Lewis is the current CEO Tesco PLC.  

Tesco experiences around 80 million shopping trips per week, serving 66 shoppers every second and earning about £141,000 sales per minute

UK’s favorite and biggest supermarket, Tesco has established itself excellently since its inception.

Explore more about the company in this article and learn facts and figures through its SWOT analysis.

SWOT Analysis of Tesco

The SWOT analysis of Tesco is demonstrated below:

Tesco’s Strengths

1. Biggest grocery retailer in the UK – Tesco is the leading grocery retailer and No.1 supermarket in the UK. It has higher sales and revenue as compared to other supermarket chains in Great Britain. According to Tesco annual report, its revenue is £ 57.8 Billion in fiscal year 2021.

2. Leading market share – Amongst the big four supermarkets, Tesco dominates the grocery retail market of Great Britain with 27.9% of market share. It has been among the most popular supermarket in Ireland.

3. Geographically diversified – Tesco has a thriving global presence with more than 4673 stores in 14 countries. Apart from Europe and North America, it has a huge market share in Asian markets as well.

4. A growing number of stores – From 3,751 stores in 2008, Tesco now operates 4673 grocery retail stores worldwide. Its revenue is increasing every year because of the addition of new stores in its operational chain.

5. Diversified stores – Tesco has launched different forms of stores. Its diversified divisions of stores include Tesco Homeplus, Tesco Metro, Tesco Extra, Tesco Express, One stop, and Tesco Superstores.

6. Diversified market and product range – Tesco’s diversification strategy has proven to be quite successful for the company. It has clothing range, home-ware items, mobile phones business, music downloads and DVD rentals, school uniforms, financial and telecom services, and cotton fair-trading across the globe.

7. Europe’s largest private employer – With a workforce of 361,771 people in fiscal year 2021, Tesco provides job opportunities worldwide.  It has been acclaimed as the largest opportunity builder in entire Europe.

8. Obtained several international awards – Due to its successful commercial performance, Tesco has achieved several awards. These include British’s Favourite Supermarket (among BIG FOUR), The Grocer’s Own Label Food and Drink Awards (25 awards), The Grocer of the Year, ‘Waste Not Want Not‘ Award, and Best Grocer Award.

9. Superior technology usage – Tesco uses technology in the best optimal way to enhance the shopping experience of its customers. It has introduced a new RFID-enabled barcode system to count the products automatically. It also has advanced M-commerce facility and mobile payment app.

10. Efficient supply chain network – With a simplified business model, reduced incurring costs, and efficient waste management policies, it has created a reliable and efficient supply chain network. Tesco bears profitable relationships with suppliers.

11. Online shopping – Tesco has seen over 60% growth in its online sales compared to pre-covid.
    Tesco is doubling down on a great online shopping experience and will hire over 16,000 employees to support the online boom.

Tesco’s Weaknesses

1. Failed operations in the US and Japan – Tesco had to exit from the American and Japanese markets in 2012. Its failed export operations forced the company to close stores in Japan after nine years and the US after 5 years.

2. Fraud Trial and Accounting Scandal – In 2017, Tesco was charged with fines due to the false accounting declaration and misrepresentation of profits.

3. Decrease in operating profits – In the fiscal year 2021, the company’s operating profit fell 21.3% (£1.7 billion); as a result, its share price has struggled. Its share price is down 8% in the first quarter of 2022.

4. Fined for selling expired food – Tesco was recently fined £7.5 million for selling 67 expired food items, such as pizza, flavored milk, soup, etc., in 3 stores between 2015-2017. The company was pleaded guilty for undermining consumer safety.

5. Low-cost strategy – Although Tesco is the price leader in the UK market, its low-cost strategy can lead to reduced profit margins.

6. Poor operational performance in specific markets – Few stores and grocery outlets of Tesco are not performing well in certain countries. Experts suggest that Tesco didn’t carry out sufficient market research before entering into these markets.

7. Clubcard controversy – In January 2018, Tesco switched up its Clubcard scheme (in which points could be doubled or quadrupled) without giving prior notice to customers. It faced a massive backlash from angry customers.

8. Unfair business practices – It recently emerged that Tesco has been preventing landlords from renting their properties to other supermarkets if it was located close to its stores. Restricting rivals is not only unlawful but also unethical since it goes against the spirit of fair competition.

9. Retreat from the global arena – Tesco’s global expansion was poorly planned and failed miserably. In 2020, Tesco exited the international marketplace and retreated to a European retailer. It sold its operations in China, Thailand, Malaysia. Tesco now operates only in the UK, Ireland, Czech Republic, Hungary, and Slovakia. 

10. Exploitative labor – A review of Tesco’s operations in Malaysia and Thailand revealed widespread exploitation and abuse against migrant workers at its distribution centers.

11. Negative publicity – Consumers hate companies with greedy executives, particularly in trying times. In June 2020, Tesco’s shareholders voted against a greedy decision to inflate the bonuses paid to a departing chief executive by $1.98 million to over $2.8 million.

12. Emergency Recall of its In-Demand Pastries and Snacks – The retail giant issued a country-wide recall of some of its popular snacks and pastry items with specific use-by dates. Tesco says that the items may contain salmonella. The products that are recalled include Tesco Pizza Dough 400G, (UK-only) Tesco Rolled Puff Pastry (320G), and Tesco Ready Rolled Puff Pastry 375G. The recall date of all the items was 11^th January 2022. Tesco has urged its customers to return these items at any Tesco location and to completely refrain from using them. The customers will be fully refunded for the items.

Tesco’s Opportunities

1. Expanding Jacks’ business – Tesco has recently introduced Jacks, a new discount store which has shown significant growth. It has an opportunity to grow this business and can successfully compete as a low-cost rival with Aldi and Lidl.

2. Strategic alliances with other brands – Developing strategic partnerships with reputed companies can offer an excellent opportunity for Tesco. It will enable Tesco to offer more products and attract more customers.

3. Joint ventures – There is an opportunity for joint ventures in the regions where Tesco stores are underperforming. The local companies can provide profound market knowledge which can help in improving performance in such regions.

4. Emerging markets – Although Tesco has stores in many developing countries but expanding its business to emerging countries like South Korea, Turkey, and Indonesia can be a profitable opportunity for the company.

5. Cashless stores – Recent events have highlighted the health risks posed by touching things that are randomly circulated like coins and notes. Most consumers are seeking cashless transaction options. Tesco opened its first cashless store and seeks to open more soon. 

6. Price matching – Tesco announced recently that it would start matching the prices offered by its rival Aldi on hundreds of items. This strategy offers Tesco an opportunity to stop and reverse the loss of market share to Aldi.

7. Tesco Offers Opportunity to Pay without a Card or any Cash: Millions of Tesco customers can now pay without credit card or cash. The retail giant has introduced an innovative and enticing way for its 20 million shoppers to pay for their items. Tesco has launched its Tesco Clubcard Pay+, which can only be used by Clubcard members. The Clubcard Pay+ is a type of a debit card that offers pre-payment features thanks to the Tesco Bank. Clubcard members will now be able to top-up the card using any UK bank account via the Tesco banking application. Customer will also be able to use their debit card to make online purchases. However, you will only be able to spend money that you’ve transferred to the card.

8. One Hour Delivery – Tesco has introduced a one-hour home delivery service (Whoosh) to over 100 stores. It plans to expand to at least 600 stores by the end of 2023. 

Tesco’s Threats

1. Christmas ad controversy – Tesco faced social media backlash when it launched its Christmas ad in 2017. People boycotted the store claiming a disrespectful act from Tesco against Christian faith.

2. ‘Fake Farm’ legal threat – Tesco was accused of misleading customers with fake farm brand names and marketing its food products under fake name of “Woodside Farms.” It faced severe legal threat proceedings over the issue in 2017.

3. Brexit Referendum – With Britain no longer in the European Union, the trade deals and cost matters have posed a threat for Tesco.

4. Competition with supermarket giants – With rising growth and performance of WalMart (with ASDA acquisition), Carrefour, and Aldi, Tesco’s biggest competitors, Tesco’s market position can be threatened

5. Economic crisis and credit crunches – Government regulations, legal and tax matters, credit crunches, and economic upheavals can affect the operational efficiency and performance of Tesco stores in critical regions.

6. Rising costs – Recent events have increased the cost of doing business and affected the bottom line of many companies. Tesco estimated that the extra costs attributed to the recent health crisis to be between $830 million and $1.18 billion. 

7. Supply chain issues – Tesco’s operations and profitability are threatened by shortages due to supply chain issues. The retailer was forced to limit essential items a customer could buy after its supply chain was disrupted by a recent health crisis. 

8. Faces Hygiene Investigation – Tesco was the subject of a hygiene investigation after someone found a gnawed bag of popcorn sparking all sorts of food security and handling questions. That particular store location was ordered to immediately carry out an investigation into the matter. Moreover, there was also a secondary complaint that warranted another investigation into Tesco’s East London outlet. The environmental health and hygiene investigators from the WFC (Waltham Forest Council) claimed that Tesco had a very bad cleaning standard across the store where the gnawed popcorn bag was found.

Recommendations

Tesco has a huge market potential in the grocery industry. With strategic decision-making and effective marketing tools, Tesco can increase its revenues and compete effectively with its rivals. Here are some recommendations for Tesco:

1. Explore the emerging markets and expand its stores in Asian and African countries.
2. Resolve the controversial crisis by addressing the issues quickly.
3. Perform in-depth market research and market analysis before entering a new market to avoid failure and losses.
4. Upgrade its online business and e-commerce sites to provide a pleasant shopping experience for customers.
5. Take customer feedback regarding the launches of new ads and schemes. It can prevent any potential disapproval from the public.
6. Resolve legal and financial matters including high debts, tax payments, and credit card crunches.
7. Boost its marketing and advertising activities to grab more customers than its competitors.

 References & more information

• Wood, Z. (2020, February 14). Tesco stopped rivals opening nearby stores, watchdog finds. The Guardian
• Davey, J. (2020, February 25). Tesco completes China exit with a $357 million stake sale. Reuters
• Lee, L. (2020, May 16). British grocer Tesco’s slavery review reports abuse in Malaysia. Reuters
• Jahshan, E. (2020, May 31). Tesco faces shareholder revolt over CEO’s bonus hike. Retail Gazette
• Davey, J. (2020, February 25). Britain’s Tesco tests a cashless store in London. Reuters
• Vizard, S. (2020, March 5). Tesco becomes the first supermarket to directly price match with Aldi. Marketing Week
• Davey, J. (2020, April 8). Tesco defends dividend payout as warns coronavirus costs could top $1 billion. Reuters
• Wilson, B. (2020, March 8). Tesco limits sales of essential items. BBC News

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