TESCO SWOT Analysis

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TESCO Group

Strengths

  • TESCO have secured commercial standing within the global market place winning Retailer of the Year 2008 at the “World Retail Awards”. This can be used for marketing campaigns to drive advantage towards the demographic base for future growth and sustainability.
  • In an environment where global retail sales are showing decline or level performance on a like for like basis TESCO Group have published sales gain of 13% for UK markets and 26% growth in international markets.
  • As a business looking for continued expansion TESCO have reserve funds of credit coupled with income derived from property portfolio development funds.

Weaknesses

  • TESCO Finance profit levels were impacted through bad debt, credit card arrears and household insurance claims.
  • TESCOs position as a price leader in UK markets can lead to reduced profit margins in order to retain the key price points on must have commercial items.
  • Grocer outlets are not set up to operate as specialist retailers in specific areas of product which can be capitalised on by other smaller bespoke retailers.
  • Whilst current economic conditions suggest TESCOs key value message will succeed there is a weakness in non-essential, mid to high ticket price items which will suffer from the rising cost of living and lower disposable incomes.

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Opportunities

  • Statistics suggest TESCO is the third largest global grocer which indicates a level of buying power to ensure mainstream economies of scale.
  • The acquisition of Homever provides the opportunity to develop the brand through Asia, specifically South Korea and further grow International markets for the group.
  • The development of Tesco Direct through online and catalogue shopping will grow the use of technology, providing the launch pad for larger non food based products with moderate to high margin returns and less focus on sales and margin per foot return to space.
  • TESCO mobile have grown ¼ million customers in 2008 and moved into profitable status suggesting further growth and development within this technological area can be developed.

Threats

  • UK and American markets have been affected by economic concerns through the “credit crunch”. Lower available income will impact and strategic focus may need to change to lower priced basic products with less focus on higher priced brands suggesting a switch in price architecture.
  • Rising raw material costs from both food and non food will impact profit margins overall.
  • Sourcing changes to Far East locations with regards exporting restrictions on some non food product areas will reduce margin rates on products with already low margins.
  • Changes to consumer buying behaviours require further analysis - as technology develops consumer buying patterns change which will result in product areas requiring evaluation.
  • For TESCO there is a persistent threat of takeover from the market leader Wal-Mart who has both means and motive to pursue such action.

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