Tesco (TSCO) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Grocery)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Tesco (Germany)
Based on various researches at Oak Spring University , Tesco is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion,
there is backlash against globalization, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Tesco can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tesco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 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 can be done for the following purposes –
1. Strategic planning of Tesco
2. Improving business portfolio management of Tesco
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tesco
Strengths of Tesco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tesco are -
Ability to recruit top talent
– Tesco is one of the leading players in the Retail (Grocery) industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- 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 Tesco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Tesco emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Retail (Grocery) industry
– 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.
Training and development
– Tesco has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Tesco is one of the most innovative firm in Retail (Grocery) sector.
Superior customer experience
– The customer experience strategy of Tesco in Retail (Grocery) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Tesco is present in almost all the verticals within the Retail (Grocery) industry. This has provided Tesco 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.
Analytics focus
– 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 Retail (Grocery) industry. The technology infrastructure of Germany is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Tesco in the Services sector have low bargaining power. Tesco has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Tesco to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Tesco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tesco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Tesco has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Grocery) industry. Secondly the value chain collaborators of Tesco have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Tesco has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. 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.
Weaknesses of Tesco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tesco are -
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 Tesco supply chain. Even after few cautionary changes, Tesco is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Tesco vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Tesco products
– To increase the profitability and margins on the products, Tesco needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Tesco has a high cash cycle compare to other players in the Retail (Grocery) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– 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.
Increasing silos among functional specialists
– The organizational structure of Tesco is dominated by functional specialists. It is not different from other players in the Retail (Grocery) industry, but Tesco needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tesco to focus more on services in the Retail (Grocery) industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that Tesco needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Grocery) industry have deep experience in developing customer relationships. Marketing department at Tesco can leverage the sales team experience to cultivate customer relationships as Tesco is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Tesco is just above the Retail (Grocery) industry average. It 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 to strategic competitive environment developments
– As Tesco is one of the leading players in the Retail (Grocery) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Grocery) industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at Tesco, in the dynamic environment of Retail (Grocery) industry it has struggled to respond to the nimble upstart competition. 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 in Retail (Grocery) industry
– because of the regulatory requirements in Germany, 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 Retail (Grocery) industry.
No frontier risks strategy
– From the 10K / annual statement of Tesco, it seems that company is thinking out the frontier risks that can impact Retail (Grocery) industry. 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.
Tesco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Tesco are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tesco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Tesco 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.
Creating value in data economy
– The success of analytics program of Tesco has opened avenues for new revenue streams for the organization in Retail (Grocery) industry. This can help Tesco to build a more holistic ecosystem for Tesco products in the Retail (Grocery) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 can use these opportunities to build new business models that can help the communities that Tesco operates in. Secondly it can use opportunities from government spending in Retail (Grocery) sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, 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.
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 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Tesco can use the latest technology developments to improve its manufacturing and designing process in Retail (Grocery) sector. 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Tesco is facing challenges because of the dominance of functional experts in the organization. Tesco can utilize new technology in the field of Retail (Grocery) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Grocery) industry, but it has also influenced the consumer preferences. Tesco can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for 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 Retail (Grocery) industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Retail (Grocery) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Tesco in the Retail (Grocery) industry. Now Tesco can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Tesco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Tesco are -
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 Tesco business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– 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. Tesco can take advantage of this fund but it will also bring new competitors in the Retail (Grocery) industry.
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 needs to understand the core reasons impacting the Retail (Grocery) industry. This will help it in building a better workplace.
High dependence on third party suppliers
– 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.
Shortening product life cycle
– it is one of the major threat that Tesco is facing in Retail (Grocery) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Retail (Grocery) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Tesco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, 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 Tesco prominent markets.
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. 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, 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 Retail (Grocery) sector.
Technology acceleration in Forth Industrial Revolution
– Tesco has witnessed rapid integration of technology during Covid-19 in the Retail (Grocery) industry. As one of the leading players in the industry, Tesco needs to keep up with the evolution of technology in the Retail (Grocery) 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.
Regulatory challenges
– Tesco 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 Retail (Grocery) industry regulations.
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.
Weighted SWOT Analysis of Tesco Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Tesco 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 Tesco 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 Tesco 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 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 needs to make to build a sustainable competitive advantage.