Introduction
This SWOT analysis assesses the TESCO Group, a global retailing powerhouse and portfolio of retail brands that offer food and non-food items in countries all over the world in different formats, including a large online retail store. The retailer has had to face numerous external forces and an increased competitive environment as well as stakeholder pressures that have it rethinking its strategy going forward. In this analysis, the company’s strengths, weaknesses, opportunities and threats will be examined in detail to assess what TESCO can do going forward with its business strategy and brand engagement.
Strengths
● TESCO has won numerous awards for its retail excellence, customer service, and overall shopping experience.
● It is considered one of the largest and most profitable supermarket and retail formats in the world, which many competitors have tried to emulate.
● The company has significant cash reserves and a wide range of property in its portfolio yet undeveloped, which provides a strong financial position to weather all types of economic cycles.
● It has considerable brand equity in its name with global recognition and respect for what it stands for in terms of quality, selection, and service.
● The retailer has a long-standing history in the UK, giving it credibility and assurance that it will continue to operate long into the future.
● Its various store formats appeal to local and cultural needs, helping it offer a more personalised service experience.
● It has improved the use of technology throughout its operations, creating greater cost efficiencies and enhanced service experiences.
Weaknesses
● Some of TESCO’s subsidiaries are not operating as well as they are more vulnerable to certain external factors. For example, TESCO Finance profit levels were adversely impacted during the recent credit crisis and have yet to rebound from this global event.
● Competitive pressures have led to price wars that have eroded some of the retailer’s profit margin when TESCO should have been focused on other ways to gain the competitive advantage.
● Some of the retail formats in certain countries have not performed as well as expected, suggesting that TESCO might not have done as much market research as they should have done.
● Consumers may not be buying as many items related to having less disposable income and the retailer has not adjusted its inventory and selection, leaving it with a high cost of inventory.
● The retailer is highly dependent on the UK and Europe for its sales and has not spent the time and resources on developing the other markets where it operates. It also may be trying to serve too many markets many of which may not be financially feasible or align with their strategic intent.
Opportunities
● There are opportunities for strategic alliances with other brands and admired companies to offer more products or attract more consumers in certain target markets.
● In countries where TESCO may be underperforming, there could be opportunities for joint ventures in which the local company can help with market research and market intelligence to improve performance in those areas.
● There is significant opportunity to grow online shopping for TESCO as well as offer its home delivery service to more areas.
● There are opportunities in the private label market.
● Emerging markets still hold numerous opportunities for certain retail formats that TESCO already offers but that can provide better access to the western goods these areas demand.
Threats
● Economic recessions and credit crunches will continue to threaten market share and profitability in areas around the world, reducing the number and size of purchases made by consumers.
● Competitive threats are coming from other global retail giants who that may be able to offer lower prices and greater variety as well as have more established global supply networks to move the goods faster than TESCO because they are more innovative and know how to use technology more effectively.
more on competition:
● Food prices are on the rise around the world, which also reduces what consumers can buy and how much disposable income they have available.
● Labour threats in terms of increased wages and benefits around the world add to TESCO’s cost basis, which further puts pressure on its pricing strategy.
● Rising raw material costs are also threatening TESCO’s profitability and causing it to expand its supplier network in order to get better pricing on raw materials.
● Government regulations and the political landscape is also putting pressure on TESCO to adhere to new regulations that require them to make significant changes to their operating structure for additional expense.
● Greater stakeholder pressures related to the environment and social responsibility also adversely impact TESCO’s cost basis.
Reference: Business Teacher (2018) Tesco SWOT analysis[Online] Available at: https://businessteacher.org.uk/swot/tesco.php Accessed Date:17/02/2019
Financial Analysis
3Q & Christmas Trading Statement 2018/19
Like-for-like sales performance
(A) + (B) = (C)
1Q
2018/19 2Q
2018/19 3Q
2018/19 Christmas period 2018/19 19 Week period 2018/19
UK & ROI 3.5% 4.2% 1.9% 2.6% 2.1%
Tesco UK 2.1% 2.5% 0.7% 2.2% 1.2%
ROI 3.0% 3.1% (0.2)% 0.3% (0.0)%
Booker 14.3% 15.1% 11.0% 6.7% 9.6%
Central Europe (1.0)% (2.0)% (3.0)% (2.4)% (2.8)%
Asia (9.0)% (4.8)% (8.0)% (2.8)% (6.2)%
Group 1.8% 2.7% 0.5% 1.5% 0.8%
Headlines (3Q: 13 weeks to 24 November 2018; Christmas period: 6 weeks to 5 January 2019)
● UK & ROI: Strong Christmas benefiting from an increasingly competitive offer for customers
○ UK & ROI Christmas LFL sales +2.6%, outperforming market in UK in both volume and value terms
- Quality and value perception1 both up significantly year-on-year: +3.5pts and +4.5pts respectively
- Market outperformance in all key categories: food, clothing and general merchandise
○ UK & ROI 3Q LFL sales +1.9% reflecting transition to new own brands and subsequent resetting of mix in UK - ‘Exclusively at Tesco’ roll-out 95% complete by end-3Q, with 82% of customers buying into the range
○ Booker delivering strong growth (LFL excl. tobacco: 3Q 10.7%; Christmas 8.2%); contract wins last year annualise early in Christmas period
● Central Europe: Continuing to improve the quality of our business
○ Excluding Poland, LFL sales increased in 19-week period, with +1.1% LFL for Christmas
○ 19-week LFL performance is after impact of reducing unprofitable general merchandise (c. (1.8)% impact) and fewer trading days in Poland due to Sunday trading regulations (c. (1.2)%)
○ Polish store portfolio reshaping continuing with 14 stores closed during the period and 32 more planned
● Asia: Stronger underlying performance
○ LFL performance reflects further changes to pricing, promotions and couponing in Thailand
○ Good progress made with suppliers towards new commercial approach
○ Restructured store operations, reducing costs and underpinning profit recovery
Reference : Tesco PLC (2018) 3Q & Christmas Trading Statement 2018/19 [Online] Available at: https://www.tescoplc.com/news/news-releases/2019/third-quarter-and-christmas-trading-statement-201819/ Accessed Date:17/02/2019
More Financial Analysis Data
Tesco Annual Report (2018)
Products
Sourcing
Our customers should have peace of mind that the products that they buy at Tesco are sourced with respect for both the environment and the people who make or grow them. Building strong, trusted relationships with our suppliers plays a key role in achieving this.
Health
Our customers and colleagues tell us that they want to make healthier choices, but sometimes it can be difficult. We want to make it easier to lead a healthier life and we are focused on offering simple, practical actions that lead to sustainable changes.
Packaging
We know packaging plays an important role in preserving and protecting products but we are taking action to reduce its overall impact on the environment. We are working with the industry to develop a closed loop system which can be applied to all key packaging materials.
Food waste
We have a responsibility and commitment to lead reduction of food waste from farm to fork. Through our Group Chief Executive’s Chairmanship of the international Champions 12.3 coalition, we are committed to accelerating progress towards the UN Sustainable Development Goal target to halve per capita global food waste by 2030.
Places
We are proud to be a valued part of over 6,000 communities around the world and want to help them thrive. We bring social and economic benefits through the local people we employ, the local businesses we work with and the local projects we support. We support causes important to colleagues and customers. We deliver this through our community donation programmes, strategic partnerships with charities and support for food banks.
Foundations
Underpinning all the pillars of the Little Helps Plan are a number of areas where it is vital to do the right thing. It remains a priority for us to ensure our products are safe, that we have a strong health and safety culture for customers and colleagues, and that we stay on track with our ambitious plan to become a zero-carbon business. We recognise that these areas and strong corporate governance are equally important to ensuring our business is having a positive impact on society. They are core expectations and are embedded in the way we do business.
CSR POSITION:
Public profile /ethical
Reference: Tesco PLC (2018) Tesco Annual Report [Online] Available at:https://www.tescoplc.com/media/474793/tesco_ar_2018.pdf Accessed date: 17/02/2019
Sample Solution
