SWOT analysis of Tesco (Tesco SWOT)

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SWOT analysis of Tesco (Tesco SWOT)  

This is a detailed SWOT analysis of Tesco. It aims to examine the strengths and the weaknesses of Tesco. It also aims to explore the opportunities the company should pay attention to and the threats it should build resilient walls against.

Strengths of Tesco

Tesco is a leading retailer in the world. It is No.1 in the UK and has 27.2% of the market share in the UK grocery market (Kantar, 2021). It has been in operation since 1919. Such a market experience is certainly one of its biggest strengths.

Tesco operates in several countries. It has operations in countries such as the UK, India, China, Hungary, Ireland, and others. There are over 4000 Tesco stores in the UK and the Republic of Ireland. Tesco serves millions of customers every week in its stores and online (Tesco, 2021). It made sales worth of £53.4 billion in 2020 and won Grocer of the Year 2020 at Grocer Gold Awards.

Tesco was early in the loyalty card market. It introduced Clubcard in 1994. Since then, it has been using the device as a precious marketing and promotional tool. Many analysts argue that Clubcard has helped the company understand customer behaviour better and grow enormously, particularly in the UK. Clubcard has approximately 19 million users in the UK (Tesco, 2021).

Tesco has different store formats i.e. Express, Metro, and Extra to serve different types of customers and do not shy away from bringing about changes when necessary. For instance, it has decided to convert its Metro stores in the UK into Express and Extra stores as it understands that customers are using them as convenience stores to buy daily food instead of bigger and weekly shopping for which Metro stores were originally introduced (Gruffydd, 2021).

Weaknesses of Tesco

Weakness is an important area of discussion in the SWOT analysis of Tesco. Although the company has global success stories to share, it also has witnessed some failures over the years. It failed in the USA and Japan. After trading 9 years, it had to close its operations in Japan in 2012 (BBC, 2012).

Similarly, its American dream was also over with the closure of the US Fresh & Easy chain in 2012. These failures clearly demonstrate that Tesco has certain weaknesses in understanding overseas markets. It is worth noting that in June 2020, Tesco announced the sale of its operations in Poland.

Tesco witnessed failures in the UK as well. In January 2015, the company named 43 stores it decided to close across the country. The move put approximately 2000 jobs at risk. The company admitted that it was a very difficult decision to make. Similarly, its market share in the UK has recent gone down as well.

Tesco has been fined by the Serious Fraud Office in the UK. It has agreed to pay SFO £129 million for overrating its profits in 2014. It had to reach the deal to avoid prosecution. Although it has avoided prosecution, the whole scandal has negatively impacted on the company’s image.

Lack in quality control in some stores has also affected the image of Tesco. It was fined £7.5 million for selling several food items past their use-by date at three stores in Birmingham, UK (Clark, 2021).

Opportunities for Tesco

There are several emerging economies Tesco can explore. Countries such as Indonesia, Turkey, Mexico, South Africa, Brazil and many others are worth exploring. Further growth within the UK is also possible even though the company is making cautious steps due to changes in consumer behaviour and an uncertain post Brexit climate.

Strategic alliance with other companies is another opportunity worth exploring. This will help Tesco attract more customers and enjoy other benefits. It is worth mentioning that Tesco is already considering a shop-in-shop tie-up with fashion giant Next to make efficient use of excess store space. Tesco’s decision to introduce its new discount chain called Jack’s to tackle the rising threat posed by German rivals Aldi and Lidl also has potentials in the discount market.

Threats to Tesco

The last element to address in the SWOT analysis of Tesco is the issue of threats facing the company. The grocery market is very competitive in the UK. While Tesco is the market leader in the UK with 27.2% market share, the nearest rivals such as ASDA and Sainsbury’s are trying vigorously to close the gaps.

Tesco faces other threats e.g. price war from Aldi and Lidl. These two competitors are well-known as discounters, and therefore, it is very difficult for Tesco to compete with them on price. Pricing policies of these two companies have a significant impact on Tesco’s profits. Similarly, if it incurs more fines as a result of lawsuits, it may impact on its finance badly as well.

We hope the article SWOT analysis of Tesco has been helpful. You may also like reading Marketing mix of Tesco. Other relevant articles for you are:

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SWOT analysis of Sainsbury’s

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Advantages and disadvantages of franchising

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Last update: 26 August 2021

References/further reading

Clark, M. (2021) Tesco fined £7.5 million for out-of-date food sales, available at: https://www.foodsafetynews.com/2021/04/tesco-fined-7-5-million-for-out-of-date-food-sales/ (accessed 01 August 2021)

Gruffydd, M. (2021) Tesco to change and rebrand all 147 Metro stores in major supermarket overhaul, available at: https://www.express.co.uk/life-style/life/1438159/tesco-metro-stores-removal-supermarket-overhaul-change (accessed 25 August 2021)

Kantar (2021) Great Britain: Grocery market share, available at: https://www.kantarworldpanel.com/en/grocery-market-share/great-britain (accessed 26 August 2021)

Tesco (2021) About us, available at https://www.tescoplc.com/about-us/ (accessed 25 August 2021)

Photo credit: www.tescoplc.com

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.