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 - – increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies,
increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
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.
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.
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.
Strong track record of project management
– Fresh Tesco is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Analytics focus
– Fresh Tesco is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Christopher Williams, Chandra Sekhar Ramasastry can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
High switching costs
– The high switching costs that Fresh Tesco has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of Fresh Tesco in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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 -
Skills based hiring
– The stress on hiring functional specialists at Fresh Tesco 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.
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.
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.
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.
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.
Need for greater diversity
– Fresh Tesco has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Tesco's Fresh & Easy: Learning from U.S. Exit, it seems that the employees of Fresh Tesco don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Fresh Tesco supply chain. Even after few cautionary changes mentioned in the HBR case study - Tesco's Fresh & Easy: Learning from U.S. Exit, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fresh Tesco vulnerable to further global disruptions in South East Asia.
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.
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.
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 -
Leveraging digital technologies
– Fresh Tesco 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Fresh Tesco can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fresh Tesco 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. Fresh Tesco 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.
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fresh Tesco 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 Fresh Tesco to hire the very best people irrespective of their geographical location.
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.
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.
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.
Manufacturing automation
– Fresh Tesco can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Fresh Tesco has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Fresh Tesco needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
Consumer confidence and its impact on Fresh Tesco 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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Fresh Tesco.
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 .
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.
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's Fresh & Easy: Learning from U.S. Exit, Fresh Tesco may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Fresh Tesco business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.