To maximize their effectiveness, color cases should be printed in color.In 2010, the world's third largest retailer created a new centralized sourcing department for fresh food and store-brand grocery products in response to changes in global supply and to better meet the needs of a new multi-channel retail environment. The case, set in late 2013, covers the development of Tesco Group Food and identifies future opportunities and challenges.
Authors :: Jose B. Alvarez, Damien P. McLoughlin, Mary Shelman
Swot Analysis of "Tesco Group Food" written by Jose B. Alvarez, Damien P. McLoughlin, Mary Shelman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tesco Food facing as an external strategic factors. Some of the topics covered in Tesco Group Food case study are - Strategic Management Strategies, Supply chain, Sustainability and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Tesco Group Food casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China,
challanges to central banks by blockchain based private currencies, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tesco Group Food case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tesco Food, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tesco Food operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Tesco Group Food can be done for the following purposes –
1. Strategic planning using facts provided in Tesco Group Food case study
2. Improving business portfolio management of Tesco Food
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tesco Food
Strengths Tesco Group Food | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tesco Food in Tesco Group Food Harvard Business Review case study are -
Strong track record of project management
– Tesco Food is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Tesco Food
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tesco Food does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Tesco Food in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Sales & Marketing industry
– Tesco Group Food firm has clearly differentiated products in the market place. This has enabled Tesco Food to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Tesco Food to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Tesco Food in the sector have low bargaining power. Tesco Group Food has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tesco Food to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Tesco Food has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tesco Food has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Learning organization
- Tesco Food is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Tesco Food is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tesco Group Food Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Tesco Food has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Tesco Group Food - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Tesco Food digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Tesco Food has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Diverse revenue streams
– Tesco Food is present in almost all the verticals within the industry. This has provided firm in Tesco Group Food case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy in the Tesco Group Food Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Tesco Food is one of the most innovative firm in sector. Manager in Tesco Group Food Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Tesco Group Food | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesco Group Food are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Tesco Group Food HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Tesco Food has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tesco Group Food, in the dynamic environment Tesco Food has struggled to respond to the nimble upstart competition. Tesco Food has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Tesco Group Food HBR case study mentions - Tesco Food takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High cash cycle compare to competitors
Tesco Food has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– It come across in the case study Tesco Group Food that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Tesco Group Food can leverage the sales team experience to cultivate customer relationships as Tesco Food is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study Tesco Group Food has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Tesco Food 's lucrative customers.
Lack of clear differentiation of Tesco Food products
– To increase the profitability and margins on the products, Tesco Food needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Jose B. Alvarez, Damien P. McLoughlin, Mary Shelman suggests that, Tesco Food is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Skills based hiring
– The stress on hiring functional specialists at Tesco Food has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Increasing silos among functional specialists
– The organizational structure of Tesco Food is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Tesco Food needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tesco Food to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Tesco Food has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Tesco Group Food | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Tesco Group Food are -
Building a culture of innovation
– managers at Tesco Food can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Creating value in data economy
– The success of analytics program of Tesco Food has opened avenues for new revenue streams for the organization in the industry. This can help Tesco Food to build a more holistic ecosystem as suggested in the Tesco Group Food case study. Tesco Food can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tesco Food to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Tesco Food to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Tesco Food can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tesco Food can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Tesco Food can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Tesco Food can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tesco Group Food suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Tesco Food can use these opportunities to build new business models that can help the communities that Tesco Food operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Loyalty marketing
– Tesco Food has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Leveraging digital technologies
– Tesco Food can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Learning at scale
– Online learning technologies has now opened space for Tesco Food to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Tesco Food has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Tesco Group Food - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tesco Food to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tesco Food is facing challenges because of the dominance of functional experts in the organization. Tesco Group Food case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Tesco Food to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Threats Tesco Group Food External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tesco Group Food are -
Environmental challenges
– Tesco Food needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Tesco Food can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tesco Food can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Tesco Group Food, Tesco Food may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tesco Food with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tesco Food in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– Tesco Food high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Tesco Food needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Tesco Food is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Tesco Food demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Tesco Food in the Sales & Marketing sector and impact the bottomline of the organization.
Increasing wage structure of Tesco Food
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Tesco Food.
Regulatory challenges
– Tesco Food needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Weighted SWOT Analysis of Tesco Group Food Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Tesco Group Food needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Tesco Group Food is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Tesco Group Food is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Tesco Group Food is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Tesco Food needs to make to build a sustainable competitive advantage.
