SWOT Analysis for Tesco

tesco-swot-analysisIn 2013, Tesco plc was named the UK’s top retailer (Retail Economics, 2014) and continues to maintain a presence in 12 countries in Europe and Asia. In order for Tesco to sustain its position and maintain profitability, Tesco must assess its strengths, weaknesses, opportunities and threats (SWOT). Below is a Tesco SWOT Analysis.

Strengths:

  • Tesco is a powerful retail brand globally, in the top 100 of the world’s most valued brands, slightly below Ikea and well above eBay (Brand Finance, 2014). It is known as a company that offers value for money, convenience, a wide range of products, and locally-sensitive management (Wood and McCarthy, 2014). Worldwide, Tesco has 6,784 stores, an increase of 433 stores since 2012, despite the disposal of their US venture, Fresh & Easy (Tesco, 2012, 2014).
  • Tesco has utilised innovative business methods in its rise, including the creation of stores like Tesco Metro and Tesco Express, which are small stores in local neighbourhoods to make shopping more convenient for the customers (Schiraldi, Smith and Takahashi, 2012).
  • Other strengths in their global operations include online shopping, joint ventures, such as in China, and local recruitment, including in senior management positions (Koen, Bertels and Elsum, 2011).
  • Because of their size and facilities, Tesco can buy in bulk, benefiting from economies of scale (Blythman, 2012). This permits the company to lower prices to keep prices attractive and be competitive with UK retailers such as Asda or Sainsbury’s.
  • Additionally, by creating loyalty packages such as the Clubcard, they retain customers, creating long-term relationships (Felgate, Fearne and Di Falco, 2011).

Weaknesses:

  • Tesco has grown to be a very big company with a very wide range of products, diversified into food, books, clothing, furniture, insurance, petrol, and financial services. This model has its weaknesses.
  • Tesco’s profit has been impacted by bad debt from credit cards and high levels of household insurance claims (Ruddick, 2014).
  • Another issue is Tesco’s lack of experience in some markets that it intends to enter, such as its own brand smartphones and tablets (Wood and Gibbs, 2014).
  • Finally, Tesco needs to invest a lot of cash in new web technologies and IT, as well as store refurbishment, diverting cash from price reduction strategies (Ruddick, 2014). This is likely to have an adverse effect on sales (Bunn and Ellis, 2012).

Opportunities:

  • There are many opportunities for Tesco, including expansion into markets such as digital entertainment, through their 80% investment in Blinkbox (Hall, 2011). The move by Tesco to offer own-brand tablets and smartphones can intersect with this investment, particularly in foreign markets such as Malaysia, South Korea, Thailand, and China (Piercy, Cravens and Lane, 2010).
  • Online shopping can offer greater flexibility to customers who are leading busy family lives or have mobility issues; Tesco is trying to meet the needs of the customers by expanding operations in this sector (Ma, Ding and Hong, 2010).
  • The ongoing effects of the recession, where families and individuals may be struggling financially, or too busy working to cook (Thompson et al., 2012), can be accommodated through wider ‘value’ and Tesco’s Finest branding.
  • In addition, further overseas expansion could occur in markets such as Australia, where the grocery retail market faces relatively limited competition yet is fiercely price-sensitive (Clarke, 2012).

Threats:

  • Tesco is confronted by many threats in the market. Their current position as number one in the UK grocery retail sector means that they are the target of consistent competition from Sainsbury’s, Asda, Morrison’s, and, increasingly, Lidl and Aldi (Stevenson, 2014). One threat that Tesco continues to resist is the takeover of Asda by Wal-Mart. Branding of stores as Asda Wal-Mart has been increasing in the UK, demonstrating a weakening in the consumer disdain for Wal-Mart. The ninth most-valued brand in the world, Wal-Mart is Tesco’s largest global competitor and therefore has the necessary skills, resources, experience and funds to cause Tesco problems (Brand Finance, 2014).
  • The effect of town planning and consumer intolerance for out-of-town stores, as well as concern for the livelihood of small shops, can also imperil Tesco’s expansion plans (Stevenson, 2014).

References:

Brand Finance (2014). Global 500 2014: The world’s most valuable brands. Available at: http://brandirectory.com/league_tables/table/global-500-2014 [accessed 1 September 2014].

Blythman, J. (2012). Shopped: The shocking power of British supermarkets. London: HarperCollins.

Bunn, P. and Ellis, C. (2012). Examining the behaviour of individual UK consumer prices. The Economic Journal, 122(558), F35-F55.

Clarke, I. (2012). Consumer satisfaction with local retail diversity in the UK: Effects of supermarket access, brand variety and social deprivation. Doctoral dissertation, Department of Marketing, Faculty of Business and Economics, Monash University, Australia.

Collins, R. (2010). A graphical method for exploring the business environment. Oxford University Working Paper 956.

Felgate, M., Fearne, A. and Di Falco, S. (2011). Analysing the impact of supermarket promotions: A case study using Tesco Clubcard data in the UK. Kent Business School. Working Paper 234.

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