Tesco SWOT Analysis 2024: In-Depth Analysis Report

From a humble East End London stall, Tesco became the UK’s largest grocery and a general goods retailer. Now, Tesco is the world’s 825th company by market cap, with $21.43 billion. To see how an industry giant can thrive despite adversity, let’s investigate through Tesco SWOT analysis.

Tesco: Company Overview

In 1919, Jack Cohen bought his 1st stock of surplus groceries with his demob money and made £1 profit from £4. By 1924, Cohen sold his branded tea, taking “Tes” from supplier TE Stockwell and “Co” from his surname and forming Tesco. In 1947, Tesco was listed on the stock exchange for 25 pence per stock. Tesco went global in 1995 by opening stores in Hungary and proceeded to expand into the Czech Republic, Slovakia, Poland, Ireland, Thailand and Malaysia, and India within the decade.

In 2023, Tesco is a multinational conglomerate investing in groceries, general goods, printing, banking, and more. It’s the leading UK groceries retailing giant, with a TTM revenue of $82.08 billion in 2022. The company operates from Welwyn Garden City, Hertfordshire, England, with a global staff number of 354,744.

Product & Services of Tesco
Groceries | Books | Clothing | Electronics | Furniture | Toys | Petrol | Software | Financial services | Telecoms | Internet Services

Tesco Competitors
Sainsbury’s | ASDA | Morrison’s | Aldi | Waitrose | Target | Walmart | Argos

Did You Know?

In 2016, Walkden’s Tesco Extra was considered to be the largest store in England by floor space. Measured at 185,500 square feet or 17,230 square meters, the store is a little more than 3 times larger than a standard rugby field.

Strengths – Tesco SWOT Analysis

Powerful Supply Chain: The core reason behind Tesco’s success, growth, and resilience is its supply chain. The company uses lean thinking principles to create B2B relationships that provide value for the consumers. It’s optimized for low-cost input and connected to every key supplier down to the individual level. Using scorecarding and other performance-checking methods, Tesco has made and maintained a supply chain that is sustainable and long-lasting.

High Resistance To Adversity: Tesco’ is one of the rare few British companies that largely resisted the effects of the pandemic. In fact, by 2021 Q1, the company reported a generated revenue of $36,326,480,000, a staggering 5.9% rise compared to 2019 Q1. Even in the height of the pandemic, Tesco managed to earn a 107.4% profit before tax thanks to its resourcing and logistics strategies. Tesco achieves its high resilience to any form of adversity from its 65,000 container-strong rail-based supply system and willingness to automate home delivery.

Profitable Business Model: Although Tesco’s business model is horizontal, it is a result of backwards vertical integration, which produces a complex dynamic chain of supermarkets that has many verticals in the background. By reaching out and forming B2B connections with manufacturers and suppliers, Tesco can reduce its costs, purchase more in bulk, reduce competition, and serve a larger consumer base. By increasing its reach and sales and lowering overall costs, Tesco can generate more profit the more it grows. Its business model is the sole reason why Tesco can sell over $1.2 billion worth of products in a single week.

Native Market Dominance: In the UK, Tesco stands as the uncontested market leader in the grocers giant industry. From January 2017 till December 2022, Tesco has maintained its dominance by always cornering over 26% of the UK’s market share. By December 25, 2022, it had claimed a market share of over 27.5%, giving Tesco the ability to control and influence market trends and lead consumer preferences. Its closest competitors are Sainsbury’s, Asda, and Morrisons, which respectively had only 15.5%, 14%, and 9.1% of the market share by the end of December.

Gigantic Company Size: Tesco is a conglomerate, monolithic in size and scale of operations. In the 2021-2022 fiscal year, the company made $58,701,330 from UK store sales and ROI, $4,641,019 from central Europe sales, $883,259,865 from the Tesco Bank, and $533,8014,046 from selling fuel. In 2022, Tesco had 4,752 stores globally, and its highest number of stores worldwide was 7,305 in 2014, making its reach and dominance unquestionable. Operating at such large scales allows Tesco room to recoup from mistakes and losses, including the $7.69 billion loss in 2015.

Weaknesses – Tesco SWOT Analysis

Lapsing Service Quality: Tesco has had issues with its customer service since the very beginning, getting complaints about rude, unhelpful, and inattentive staff. There have been complaints about staff holding up checkout lines due to personal reasons, yelling at customers, blaming customers for their mistakes, and possibly using store goods and re-packaging them. This happens mostly due to Tesco’s high staff turnover of 29.9%, which can be blamed on bad employee retention policies and people seeking temporary jobs or job sampling. Without trained, experienced, and dedicated staff, Tesco can’t improve its customer service quality.

Failing Food Safety: Tesco’s star product is groceries, but it has had many infamous cases of selling products that have failed the mandatory safety margin. In March 2020, a customer found bright green-tinged meat in a chicken he bought and then cooked from Tesco, and in October another found partially digested bird feed in hers. And in 2021, Tesco was fined $9.1 million by Birmingham Magistrates Court after pleading guilty to 22 charges of selling expired food in 3 of its stores in Birmingham. Tesco has been criticized for compromising on product quality for lowering the price from as far back as 2013, and this issue has reached a new extreme in recent years.

Lacking Website Security: Much of Tesco’s current sales come from its virtual marketplace, yet Tesco has had little security in place to protect its platform and consumer data. In October 2021, the company’s website was hit by hackers, and it resulted in the site staying shut down for 2 whole days. Consumers could not place or change their orders, causing more frustration when Tesco took a long time to address the issue. While Tesco claimed that this attack did not impact consumer data, over 2000 consumers’ digital data was leaked online from a 2014 hacking, and Tesco’s bank lost over $2.8 million from another hacking attempt in 2016.

Selling Fake Farm Labels: Tesco prides itself on selling farm-fresh products and chooses to sell branded farm products for assured quality. However, Tesco was found selling its pork and beef under the labels Woodside Farms and Boswell Farms, both of which did not have any B2B relationships with the company. Tesco had been using these brand names since 2016 and did not ask for any approval for their use, nor did it purchase their produce. Both farm owners accused Tesco of tarnishing their reputation, and consumers accused Tesco of potentially selling unethically farmed and unsafe meat products.

Opportunities – Tesco SWOT Analysis

Offering Subscription-based Meal Services: Tesco can offer door-to-door MRE-style meals or preprocessed groceries with recipes for a monthly subscription fee. It can utilize its virtual platform to allow its consumers to pre-plan their meals, check caloric intake, and upsell healthier or more flavorful meals this way.

Offering Bank Client Discounts: Tesco can offer any consumer discount on purchases if they are a client of their bank. This will motivate Tesco Bank’s clients to shop at Tesco, while some consumers may open accounts in the bank for discounts.

Offering Training Programs: As an employee retention measure, Tesco can offer training programs for employees to pursue and reward them if they do. Training improves loyalty and performance, and the rewards give Tesco a positive employer image.

Threats – Tesco SWOT Analysis

Subscription Services: Subscription-based meal services such as Hello Fresh, Mindful Chef, Able & Cole, and Allplants have become popular due to their low cost, convenience, and doorstep service. These services can take away a significant chunk of Tesco’s customers.

Investing In Low ROI Ventures: Tesco has been investing in low ROI ventures such as photo printing, which have little room for growth. Investing in such dated business models can cause losses in the future.

Data Conscious Consumers: Consumers are now more informed about big data and aware of the threat a security breach can pose. Based on Tesco’s abysmal web security, consumers can refuse to use its virtual platform.

[Bonus Infographic] SWOT Analysis of Tesco

Recommendations for Tesco

To secure its market dominance, Tesco can try these solutions.

• Tesco can use CSP, VPN, and IDPS to tighten information access, secure any wireless ports, and frequently change passwords to tighten data security
• The company should consider purging outdated business models and practices, such as its image printing venture and dated banking practices.
• It should invest more in talent management and recruitment to improve service and performance.
• It can arrange random assessments by external experts to ensure food and service quality are consistent across stores.

Frequently Asked Questions (FAQs)

Final Words on Tesco SWOT Analysis

Tesco has been struggling since 2013, recovering from massive losses, B2B deal fallouts, the pandemic, and then talent and resource management. Despite its struggle, the company has managed to hold on to the largest UK market share for years, but it can’t keep this up forever. To ensure stable growth and sales, the company has to update its security and focus on improving online service quality.

References

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