SWOT analysis of Tesco

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SWOT analysis of Tesco

This is a detailed SWOT analysis of Tesco. It aims to examine the strengths and the weaknesses of Tesco. Likewise, it aims to explore the opportunities and the threats facing the company. If you are interested, please read our article on SWOT analysis to learn more about SWOT analysis in general.

Strengths of Tesco

Tesco is a leading retailer in the world. It is No.1 in the UK and as of March 2019, has 27.7% of the market share in the UK grocery market. Tesco has been in operation since 1919. Such experience is certainly one of the biggest strengths of the company.

Tesco operates in a number of countries. It has operations in countries such as India, China, Hungary, Poland, Ireland, and others. As of December 2017, there are 6,809 Tesco shops around the world. Tesco serves millions of customers every week in its stores and online (Tesco, 2017). There are over 3400 Tesco stores in the UK.

Tesco was early in the loyalty card market. It introduced Clubcard in 1994. Since then, Tesco has been using it as a precious marketing and promotional tool. Many analysts argue that Clubcard has helped the company understand customer behaviour and grow enormously, particularly in the UK. As of 2017, Clubcard has approximately 17 million users in the UK.

Weaknesses of Tesco

Although Tesco has global success stories to share, it also has witnessed some failures over the years. Tesco failed in the USA and Japan. After trading 9 years, Tesco 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.

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.

Tesco has been fined by the Serious Fraud Office in the UK. The company has agreed to pay SFO £129 million for overrating its profits in 2014. The company had to reach the deal to avoid prosecution (The Independent, 2017). Although Tesco has avoided prosecution, the whole scandal has negatively impacted on the company’s image.

Opportunities for Tesco

There are a number of 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. Likewise, 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 offers the company growth opportunities 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 27.8% market share, the nearest rivals such as ASDA and Sainsbury’s are trying vigorously to close the gaps. With 15.8% market share, Sainsbury’s is in the second place while ASDA is in the third place with 15.3% marker share in the UK grocery market (BBC, 2017).

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.

We hope the article on the 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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PESTEL analysis of the USA

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Advantages and disadvantages of franchising

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Last update: 21 April 2019 (First published on 09 December 2017)

References/further reading

BBC (2017) Lidl tops Waitrose to become UK’s seventh biggest grocer, available at http://www.bbc.co.uk/news/business-41011259 (accessed 05 December 2017)

Tesco Plc (2017) About us, available at https://www.tescoplc.com/about-us/ (accessed 06 December 2017)

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 is a graduate of Leeds Metropolitan University and London South Bank University.