Tesco Swot

Tesco Swot

Before performing a specific SWOT analysis it is often useful to perform a SCAN (strategic creative analysis), or similar objective setting analysis. Objectives vary between companies. For instance, many companies would want to increase market share. But Tesco is under investigation by the monopolies commission, therefore they might be better concentrating on objectives like "increase sales revenue".

The following discussion provides a general overview of the strengths, weaknesses, opportunities and threats surrounding Tesco. Use it as a basis for conducting your own, specific, SWOT analysis of Tesco (or similar companies.) It is a teaching resource for students or managers that can be used to provide inspiration for any specific SWOT analysis.

Threats to Tesco

First, let's take the T in SWOT and look at possible threats to Tesco. Examples of possible financial threats are fluctuations in the stock market and tax increases. Remember, if the objectives of Tesco are not threatened by these factors then they are not threats. But, as most companies would be worried about a tax increase, a general, continuing objective might be to decrease the tax burden. Other objectives may take precedence, and make the tax threat insignificant (for a period).

The biggest, most obvious, threat is:

* Online and offline innovation by other supermarkets aimed directly at taking customers from Tesco.

Examples of specific threats that might affect Tesco in the future, are shown in the left margin. The biggest threat is probably that of takeover, like the Morrison group purchasing the Safeway chain or Asda being taken over by Walmart.

Opportunities for Tesco

Now consider the O in SWOT. There are many great opportunities in the online arena, so many that Tesco needs to decide its main objectives before pursuing particular opportunities. Tesco has already had many online successes. For instance, it has turned the Amazon threat into an opportunity by selling best-selling books more cheaply (and advertising this.)

Tesco has many possibilities for increasing opportunities in the future. The list of areas of opportunity in the left margin indicates where the most fruitful areas might reside. Its main problem is, certainly, choosing which objective to pursue from these many possibilities.

Tesco Weaknesses

Next take a look at the W in SWOT. An example of a weakness is that Tesco uses vast amounts of fossil fuel in its transport network and supermarket heating systems. This is expensive, and might alienate green consumers. With oil prices rising and, green taxes looming, Tesco might see an opportunity to invest in energy economy. This might lead to cost savings and better public relations.

The long list of weaknesses, or possible weaknesses, in the left margin indicate that Tesco could benefit from SWOT analysis in many areas. Many of these weaknesses come from the still being highly dependent on the UK market (73.8% of 2003 revenues.) Although, foreign retail is expected to contribute more to Tesco's profits over the next few years.

By moving into marketplaces selling books, flowers, CDs, etc, it is losing the battle against established, focused groups. For instance, although Tesco is (for now) doing a good trade in bestselling books, Amazon has far greater knowledge of the books market and is using it in pursuing the long tail. Tesco lacks experience and expertise in several areas, personal finance is another example. Any company is bound to have teething troubles in new markets

The biggest threat to Tesco comes from companies that are only found in cyberspace. Like may companies with large infrastructure demands, Tesco has less free cash for innovation than internet companies. This means that internet companies may have more free cash for investing in the latest web technologies, and less bureaucracy to hold up innovation.

The Tesco petrol problem in early 2007 highlighted a weakness due to Tesco's size and diversity of products. With a diversity of products it is difficult to keep quality checks up to standard, and with a large size any company becomes vulnerable to massive losses and negative media reporting.

Tesco Strengths

Tesco's strengths are many, allowing it to compete easily with competitors in the retail trade, like Sainsbury, ASDA, and M&S. A list of strengths is shown below. In particular, they include its brand name and substantial financial power--the company has a value of £23 billion. Its strength is reflected in an incredible rate of expansion--from 692 stores in the UK in 2001 to 1780 stores in 2005. The introduction of Tesco Express and Tesco metro show that flexibility is also a Tesco strength. By taking on board the complaints that supermarkets were causing corner shops to close down, it created its own corner shops! It can now match customer demand in many different locations. Tesco's corner shops work because they can partake of Tesco's ability to buy in bulk, thereby keeping prices low and competitiveness high. In summary its strengths include:

* Powerful retail brand

* Tesco has substantial financial power.

* Well-established customer base.

* Loyal and trusting customers.

* Reputation for value for money.

* Great store locations.

* Superb warehousing and logistic capabilities.

* A well established internet presence.

* A Clubcard scheme for enhancing customer loyalty.

* Quick to expand

* Different store types

* Economies of scale

* International business is growing