TESCO Case Study

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TESCO Introduction

The success rate of any business organisation can be determined with the help of two factors. This includes the strengths and weaknesses of the company and the factors that have the ability to create an impact on the organisation. This study discusses the areas of strengths and weaknesses of the organisation Tesco, by performing SWOT analysis and evaluates the factors which can create impacts on the company by doing a PESTEL analysis. As per the case study of Tesco, it has been observed that the organisation has been in the business since the year 1919 and is currently the largest UK retail sector company.

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Company Name

Tesco Plc

Type of industry

Retailing

Headquarters

United Kingdom

Sales/Revenue

 £63,911 million (2019)

Area served

United Kingdom, Ireland, India, Malaysia, Thailand, Czech Republic, Hungary, Poland

Number of stores

6,800

Competition

Sainsbury, Asda, Waitrose

USP

Leading retail sector organisation of the UK

Target Group

Customer of both higher and low fashion marketing

Products

Fashion goods for both men and women, Electrical equipment,

Website

https://www.tescoplc.com/

TESCO Swot Analysis

STRENGTHS

  • Currently the largest retail sector organisation of UK
  • Largest market share
  • Diversified location
  • Large product range
  • Effective supply chain

WEAKNESSES

  • Failed to capitalize in Japan and US
  • Decreasing operational profits
  • Poor performances in specific areas
  • Inefficient strategies to increase profit

OPPORTUNITIES

  • Aligning with other organisations strategically
  • Developing online portals
  • Market emergence due to globalisation

THREATS

  • Impact of Brexit
  • Increase in competition with different supermarket organisations
  • Economic crisis
  • Christmas controversy

TESCO Analysis

Strengths

The main area of strength of the organisation Tesco is its current position within the UK retail sector. As per the case study of Tesco, it has been identified that the company is currently the leading retail sector organisation of the United Kingdom, with impactful sales revenue. It has been observed that in the year 2018, the percentage of profit of the company was close to 28% and currently it holds nearly 4% of the total market share (Tescoplc.com, 2018). As per the case study of Tesco, the organisation is operating across 14 countries and has over 6000 stores across the world. Moreover, the company has an effective supply chain network due to which the operational cost is decreasing.

Weaknesses

The main issue with the organisation Tesco, which can also be highlighted as its crucial area of weakness, is its failure in exporting business. As per the case study of Tesco, it has been figured out that the organisation has failed to capitalize in Japan and the US, due to which the stores were being closed in those areas. As commented by Prajogo (2016), in the modern world, business organisations need to create an equal amount of impact, across all the continents. In this context, the company has failed miserably. Due to the failure of exporting business, the operational profit of Tesco fell more than 9% (Tradingeconomics.com, 2018). On the other hand, the operational profit is also decreasing due to inefficient strategies, like lack of knowledge about governmental policies of different countries outside the United Kingdom.

Opportunities

As per the case study of Tesco, the organisation has opened a new discount store named Jacks, which in return can help the company to resolve financial crisis. Moreover, due to its current position in the retail sector, other organisations are willing to align themselves with Tesco, which can be an effective solution in terms of expanding the business. On the other hand, developing official websites for customers across the globe is another opportunity for the organisation.

Threats

As per the case study of Tesco, it has been observed that the organisation faced controversy in the year 2017, due to a Christmas advertisement, which certainly has created an impact on its customer base. Moreover, due to Brexit, a large number of European employees have left the United Kingdom, thus the organisation can suffer from the threat of less number of employees.

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TESCO Pestel Analysis

Political

  • Tax and Economic Policies
  • Political Stability
  • Regulations of foreign trade
  • Brexit Issue

Economical

  • Inflation Rate has dropped by 2.4%
  • Interest Rate has risen by 0.75%
  • GDP Rate has increased by 1.4%
  • Minimum Wages
  • Labour Cost
  • Borrowing Cost

Social

  • Customer shopping trend
  • Customer beliefs and attitude
  • Obesity
  • Consumer feedback

Technological

  • Retrial Technologies
  • In-store experience of customers
  • Improved Payment Methods
  • Convenience Shopping

Environmental

  • Sustainable development
  • Waste Disposal Methods
  • Recycling
  • Renewable Sources

Legal

  • Governmental Rules and Regulations
  • Employment Laws
  • Employee pay rate
  • Consumer Protection Law

Political

As per the case study of Tesco, it has been analyzed that the organisation is currently operating across 14 countries. Therefore, the company needs to gather a relevant amount of knowledge about the political factors of all the countries. Since the organisation imports raw materials from East Asia and China, the governmental legislation of these two continents can affect the company (Visnjic et al. 2016). Similarly, Brexit is another important political factor for the organisation. After Brexit issue, nearly 30,000 European employees have left the United Kingdom. Therefore, the organisation has the chances of suffering from a lack of employees, which might affect the factor of productivity. 

Economical

The most important economical factor for Tesco is the labour cost. As per the case study of Tesco, the organisation faced a loss of millions of pounds due to the sudden increase in minimum wage rate by 4% in the United Kingdom. The inflation rate in the UK has dropped by 2.4%, whereas the GDP rate has increased by 1.4% (Ons.gov.uk, 2018). This certainly is a threat for the company, because due to lower inflation rate the price range of the products can decrease, thus estimated annual profit might not be achieved.

Social

The shopping trend of customers is changing over time, so organisations need to develop products by gathering customer feedback (Alvi et al. 2016). This remains the same for the organisation Tesco. Although, it is currently at the top of retail sector organisations, the factor of customer trend has the ability to drop down the level of sales revenue.

Technological

In terms of increasing the factor of customer satisfaction, implementing technological tools is an effective solution (Kohtamäki and Partanen, 2016). That is why the organisation Tesco, as per the case study of Tesco, it has implemented RFID technological tools, to improve customer experience within the stores and payment systems like PayQwid to make the transaction methods much easier for the customers.

Environmental

Since the company comes under the retail sector, it needs to give a relevant amount of importance to the factor of waste disposal. This can help to develop the business in a sustainable manner. As per the opinion of Schmidt et al. (2015), organisations need to recycle or reuse the waste materials like plastic bottles, so that the negative impacts on the environment can be reduced. As per the case study of Tesco, the organisation has committed to use renewable sources to generate 100% of its electricity by the year 2030. 

Legal

One of the most important legal factors, for the company is to offer minimum wages to the employees. As per the case study of Tesco, the employees of the company took legal actions against Tesco, for not offering wages, which in return forced the company to pay 12 million GBP to the government of the United Kingdom. 

References

Alvi, M., Mirza, M.H., Khan, M.M.Q., Aqeel, B. and Ikram, M., (2016). Analyzing the Factors for Creating Competition among Products.

Kohtamäki, M. and Partanen, J., (2016). Co-creating value from knowledge-intensive business services in manufacturing firms: The moderating role of relationship learning in supplier–customer interactions. Journal of Business Research69(7), pp.2498-2506.

Ons.gov.uk (2018), Office for National Statistics. Available at: https://www.ons.gov.uk/economy/inflationandpriceindices [Accessed on 29 July, 2019]

Prajogo, D.I., (2016). The strategic fit between innovation strategies and business environment in delivering business performance. International Journal of Production Economics171, pp.241-249.

Schmidt, R., Möhring, M., Härting, R.C., Reichstein, C., Neumaier, P. and Jozinović, P., (2015), June. Industry 4.0-potentials for creating smart products: empirical research results. In International Conference on Business Information Systems (pp. 16-27). Springer, Cham.

Tescoplc.com (2018), Tesco to simplify store operations. Available at: https://www.tescoplc.com/ [Accessed on 27 July, 2019]

Tradingeconomics.com (2018) Trading Economic in the UK. Available at: https://tradingeconomics.com/united-kingdom/ [Accessed on 29 July, 2019]

Visnjic, I., Wiengarten, F. and Neely, A., (2016). Only the brave: Product innovation, service business model innovation, and their impact on performance. Journal of Product Innovation Management33(1), pp.36-52.

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