Tesco's Fresh & Easy: Learning from U.S. Exit SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Tesco's Fresh & Easy: Learning from U.S. Exit
In mid-April 2013, the chief executive officer of Tesco PLC, the world's third largest global retailer headquartered in London, United Kingdom, must explain to shareholders his decision to close down the operations of the fully owned subsidiary, Fresh & Easy Neighborhoods Market Inc., in the United States. Following a December 2012 strategic review that reported that the subsidiary was not delivering acceptable returns, operations have already been discontinued and a buyer is being sought. Although the focus on fresh food to ameliorate the health care costs of obesity in the United States was a driver for establishing the subsidiary, the effects of the 2008 recession discouraged consumers from paying the higher costs of fresh food. Is exiting the United States the right decision for Tesco? How should the process of exit be managed? Are there any takeaways from the U.S. operations that Tesco can apply elsewhere in its global strategy?
Authors :: Christopher Williams, Chandra Sekhar Ramasastry
Swot Analysis of "Tesco's Fresh & Easy: Learning from U.S. Exit" written by Christopher Williams, Chandra Sekhar Ramasastry includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fresh Tesco facing as an external strategic factors. Some of the topics covered in Tesco's Fresh & Easy: Learning from U.S. Exit case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Tesco's Fresh & Easy: Learning from U.S. Exit casestudy better are - – geopolitical disruptions, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs,
wage bills are increasing, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tesco's Fresh & Easy: Learning from U.S. Exit case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fresh Tesco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fresh Tesco 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's Fresh & Easy: Learning from U.S. Exit can be done for the following purposes –
1. Strategic planning using facts provided in Tesco's Fresh & Easy: Learning from U.S. Exit case study
2. Improving business portfolio management of Fresh Tesco
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fresh Tesco
Strengths Tesco's Fresh & Easy: Learning from U.S. Exit | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fresh Tesco in Tesco's Fresh & Easy: Learning from U.S. Exit Harvard Business Review case study are -
Highly skilled collaborators
– Fresh Tesco has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Tesco's Fresh & Easy: Learning from U.S. Exit HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Fresh Tesco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fresh Tesco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the Tesco's Fresh & Easy: Learning from U.S. Exit 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.
Low bargaining power of suppliers
– Suppliers of Fresh Tesco in the sector have low bargaining power. Tesco's Fresh & Easy: Learning from U.S. Exit has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fresh Tesco to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Strategy & Execution industry
– Tesco's Fresh & Easy: Learning from U.S. Exit firm has clearly differentiated products in the market place. This has enabled Fresh Tesco to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Fresh Tesco to invest into research and development (R&D) and innovation.
Ability to lead change in Strategy & Execution field
– Fresh Tesco is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Fresh Tesco in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Fresh Tesco 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 Fresh Tesco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tesco's Fresh & Easy: Learning from U.S. Exit Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Fresh Tesco 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's Fresh & Easy: Learning from U.S. Exit - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Fresh Tesco has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fresh Tesco 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.
Training and development
– Fresh Tesco has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tesco's Fresh & Easy: Learning from U.S. Exit Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Fresh Tesco is present in almost all the verticals within the industry. This has provided firm in Tesco's Fresh & Easy: Learning from U.S. Exit 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.
Ability to recruit top talent
– Fresh Tesco is one of the leading recruiters in the industry. Managers in the Tesco's Fresh & Easy: Learning from U.S. Exit are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Tesco's Fresh & Easy: Learning from U.S. Exit | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesco's Fresh & Easy: Learning from U.S. Exit are -
Low market penetration in new markets
– Outside its home market of Fresh Tesco, firm in the HBR case study Tesco's Fresh & Easy: Learning from U.S. Exit needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Tesco's Fresh & Easy: Learning from U.S. Exit, is just above the industry average. Fresh Tesco needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow decision making process
– As mentioned earlier in the report, Fresh Tesco has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Fresh Tesco even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Tesco's Fresh & Easy: Learning from U.S. Exit 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's Fresh & Easy: Learning from U.S. Exit can leverage the sales team experience to cultivate customer relationships as Fresh Tesco is planning to shift buying processes online.
Interest costs
– Compare to the competition, Fresh Tesco 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tesco's Fresh & Easy: Learning from U.S. Exit, in the dynamic environment Fresh Tesco has struggled to respond to the nimble upstart competition. Fresh Tesco has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Christopher Williams, Chandra Sekhar Ramasastry suggests that, Fresh Tesco 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fresh Tesco is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tesco's Fresh & Easy: Learning from U.S. Exit can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Tesco's Fresh & Easy: Learning from U.S. Exit, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to strategic competitive environment developments
– As Tesco's Fresh & Easy: Learning from U.S. Exit HBR case study mentions - Fresh Tesco 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.
Products dominated business model
– Even though Fresh Tesco has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Tesco's Fresh & Easy: Learning from U.S. Exit should strive to include more intangible value offerings along with its core products and services.
Opportunities Tesco's Fresh & Easy: Learning from U.S. Exit | 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's Fresh & Easy: Learning from U.S. Exit are -
Better consumer reach
– The expansion of the 5G network will help Fresh Tesco to increase its market reach. Fresh Tesco will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fresh Tesco can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Tesco's Fresh & Easy: Learning from U.S. Exit, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Fresh Tesco can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Fresh Tesco 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's Fresh & Easy: Learning from U.S. Exit - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fresh Tesco to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Fresh Tesco has opened avenues for new revenue streams for the organization in the industry. This can help Fresh Tesco to build a more holistic ecosystem as suggested in the Tesco's Fresh & Easy: Learning from U.S. Exit case study. Fresh Tesco can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Fresh Tesco 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.
Buying journey improvements
– Fresh Tesco can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tesco's Fresh & Easy: Learning from U.S. Exit 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.
Building a culture of innovation
– managers at Fresh Tesco 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 Strategy & Execution segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fresh Tesco is facing challenges because of the dominance of functional experts in the organization. Tesco's Fresh & Easy: Learning from U.S. Exit 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fresh Tesco in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Fresh Tesco in the consumer business. Now Fresh Tesco can target international markets with far fewer capital restrictions requirements than the existing system.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fresh Tesco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fresh Tesco can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Tesco's Fresh & Easy: Learning from U.S. Exit External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tesco's Fresh & Easy: Learning from U.S. Exit are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Fresh Tesco with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Fresh Tesco needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fresh Tesco in the Strategy & Execution industry. The Strategy & Execution 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.
High dependence on third party suppliers
– Fresh Tesco 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.
Stagnating economy with rate increase
– Fresh Tesco can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fresh Tesco can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Tesco's Fresh & Easy: Learning from U.S. Exit .
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Fresh Tesco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Shortening product life cycle
– it is one of the major threat that Fresh Tesco is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Environmental challenges
– Fresh Tesco 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. Fresh Tesco can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Fresh Tesco will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 Fresh Tesco in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit 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's Fresh & Easy: Learning from U.S. Exit 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's Fresh & Easy: Learning from U.S. Exit 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's Fresh & Easy: Learning from U.S. Exit 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's Fresh & Easy: Learning from U.S. Exit 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 Fresh Tesco needs to make to build a sustainable competitive advantage.
