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SWOT analysis and PESTEL analysis OF Tesco

INTRODUCTION:

An environment is complex where the forces and the changes involving them are difficult to understand. Rapid technology change involving product, process or uses will mean that changes are likely to occur quickly and that organizations must stay aware of the activities of their supplier, customer and competitors.

In globalization era there are lots of multinational company in the world who are compete with each other all the time .To find out SWOT and PESTEL analysis of an organisation of my choice is TESCO Plc. The easy provides information about information about supermarket Tesco which emphasis on its external environment analysis and industry’s analysis of resource, competencies and culture.

TESCO OVERVIEW:

Tesco is leading retailers in the UK and largest food retailer in the world. Tesco is one of the three retailers in the world. They are operating over 4331 stores globally and employing over 470,000 people, in 14 countries include the UK, Republic of Ireland ,Hungary, Czech Republic, Slovakia, Turkey and Poland in Europe and Japan, China, Malaysia, South Korea And India in Asia and the U.S. Tesco has five types stores such as extra, superstore, Metro ,Express and Home plus in the UK. The company sells mainly food product as well as non food product such as clothing and electrical appliance. It provides the service such as Tesco finance, telecom service and gas or petrol.

ENVIRONMENTAL INFLUENCES:

Though Tesco is leading retailer in the world but they are continuously compete with their rivals. Tesco make a biggest retailer by supporting of the customer and their staff.

Tesco do the business successfully 13 countries only because of their strategy.

The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco's success in recent years. [1] 

The key external forces and the organisation are:

Competitors

Suppliers

Distributors

Creditors

Customers

Employees

Communities

Managers

Stockholders

Labor Unions

Special Interest Groups

Products

Services

Key

External

Forces

Opportunities

&

Threats

Tesco is one of the biggest retailers in UK market. It has a well- established strategic for growth which has allowed them to strengthen their core UK business. The company’s strategy is to broaden their scope of the business to enable the long –term strategy.

Though Tesco provides product and service world wide so supplier plays an important role for their business.

2They have high expectations of their suppliers wherever they are in the world. Their aim to:

build strong relationships with the suppliers

get the best value for the customers

give their customers confidence that they maintain good standards throughout their supply chain

At Tesco, their aim is to buy and sell their product continuously. They have big supplier group and try to make good relationship with their supplier. Because without good relationship with the suppliers, it would be impossible to make strong supply chain.

Only Tesco can buy a large number of products from the supplier.

They said that we are proud of the progress we have made in improving labour standards in our supply chain. We act not simply through audits and enforcement, but by working with suppliers, to help them improve their standards.

However, we cannot act alone. If we change our practices unilaterally without influencing others to do the same, hard-pressed customers will go elsewhere. Instead we play a leadership role, using our long reach to make a difference.

Through our knowledge, reputation, size and network we are uniquely placed to bring together others in the sector to seek a common understanding of problems, and find effective solutions.

As a biggest retailer Tesco has a large number of customers. In business customer plays a vital role for them. To achieve the customer trust it not so easy. That’s why they create a value to earn customer loyalty. They arrange a tesco clubcard for their customer. Though ASDA also has provides their customer club car as well cheaper products. In this case their strategy is to provide the discount and double point’s bonus for the clubcard holders after few days.

INDUSTRIAL ANALYSIS: PESTEL FRAMEWORK

Political Factors:

Tesco is a global brand operating 13 countries outside the UK. Their business diversified in the world. So Tesco’s performance is influenced by the political factors. This includes the legislation, tax rate political stability.

In credit crunch situation unemployment is common problem in everywhere. The governments encourage the retailer to create job opportunity for the local people. Tesco gives the opportunity for the people and also the government to reduce the level unemployment. It creates the opportunity from lower-paid, flexible hour, highly skilled, and higher paid which meet the demand form population categories such as student, citizens and disabled person.

Economical Factors:

Many political changes result in changes in economy. Suppose tax rate or interest is decides by the politician. But their effect on performance In the UK, Tesco could not expand their business. Because of, they have had already expand one third of their business in the UK.

In credit crunch situation, many people are unemployed. So the effective demand of the product is decreased. This is another type of factor. Though companies still growing outside the UK but they are still depend on the UK business. Hence, Tesco would be affected by the any slowdown in the UK.

Social/Cultural Factors:

Nowadays, everyone is very busy. Basically the British people who are working. So they have moved to the one-stop service. Tesco provides the food item as well as non food item such as electrical product, clothing, baby product etc and also the finance service. Customer can save their time and energy.

Customers are aware of health and the demand of food is changing day by day .For the reason Tesco launch the organic product. Most of the customers are mixed origin. So Tesco try to meet all type of customer demand.

The Sociological features analyze that the increase in young professionals.  Obviously there is a demand for new trends for the young generation. Demographic changes such as an increase in women worker that leads to reduce the main meal preparation in the UK.  This has seen an increase in the meals for one or quick microwaveable meals to make cooking quick and easy.

Technological Factor:

Technology gives new trends for the Tesco. Tesco is now most leading company only because of internet. The customer and company both are benefited by the new technology. Customer satisfaction rises products are available, easy to online shopping; service can be more personalized by delivering the product through the website www.tesco.com.

The company setup the self checkout point which more easily for the customer and convenient for them.Tesco opens the UK’s most energy capable stores. Since 2000, Tesco has spent considerably in progressing energy effectiveness and it has succeeded in dividing the amount of energy its UK stores necessitate for each square foot of room (2006 baselines). The Cheetham Hill store is a major development for Tesco in meeting its long term environmental objective to dramatically reduce its carbon footprint.

Environmental Factors

There has been increased pressure on many companies and management acknowledges their responsibility to society and takes steps in a way which benefits overall society.

As a global business their strategy could to minimize the climate changes. In Tesco, the corporate governance responsibility to becoming zero- carbon business at 2050 and helping the customer to reduce the carbon foot print 50% by 2020. [3] 

A core tesco value is that they reduce them minimizing their waste which produces every store. Their strategy is to generate waste to energy by reducing, reusing and recycling it.

Legislative Factors

The performance of tesco is directly affected by government legislation and policy. The food retailing commission suggested setting up banning many current policies such as, demanding payment from supplier and changes the price without notice. The government tries to stop the monopoly controls.

Tesco plc is a large food retailer in the UK market that operates 2,200 stores .The company offers financial product and service such as tesco banking, home insurance, dental insurance, car insurance telecoms service as well as electrical appliance, clothing, home appliance.

ENVIRONMENTAL CHANGES:

Environmental opportunities are only potentials opportunities unless the organization can utilize resource to take advantage of them and until the strategic leader decides that it is appropriate to pursue the opportunity. An evaluation of an organisation’s strength and weaknesses in relation to environmental opportunities and threat is generally referred to as a SWOT. A modern environment it is difficult to forecast. Tesco are strategically tackling the environmental changes. The following are showed how tesco might forcast it.

Economic changes:

The economic changes might be assessed by economic growth, inflation, interest rate. The retailers analyzed that tesco total international sales grew by 12%, opportunities new stores across Asia and enlarged customers’ number in the US. By international market growth the long- term recovery is happening although the pace and strength of economic

Tesco provides the travel money where exchange rate 0% commission and over£500 is free delivery and customer get it from 130 stores around the countries. (http://www.tescofinance.com/personal/finance/finance/travelmoney/index.jsp)

Demographic influence:

For employment, Tesco create an employment categories mixer of populations such as student, working parents, and citizen and disable person.

Political Influence:

Due to the recession levels of unemployment increase. By opening new stores, tesco create a job sectors for the people.

Technological Forecasting:

Technologically tesco is much updated. Through tesco.com they are becoming a world’s biggest retailer. By opening a zero carbon shop they proved that technologically very strong.

INDUSTRY ANALYSIS: PORTER’S FIVE FORCES

Threat of New Entrance:

The UK retail market there is some competitors such as TESCO, ASDA, J Sainsbury, and Safeway. They are acquired 70% of market share in the UK market. They are operating their business in different ways like supermarket, one-stop service, online service etc and make them powerful competitors. This supermarket chain put a barrier to entry for new entrance. It is very difficult for them to collect enough funds for continuing their business. Economic scale is another barrier which is achieved by TESCO or ASDA or Sainsbury by providing the cheap products and good service.

Suppliers Power:

Supplier power is another important force which effect on the business. They are related to drive up the price. Their power is influence by the large grocery supermarket. They are bargaining with sellers to increase the price.

Buyer Power:

Satisfying the buyer needs is the core success of the business. Buyers can go any shop where they get the cheaper price. Suppose if customer saw that price high in Tesco may be they will go to the Sainsbury. So, every company’s are main intension to keep their customer providing the goods and service. Tesco’s clubcard strategy retains their loyal customer which helps to increase the profit. Tesco provides the customer cheaper petrol and Tesco finance and cheaper car insurance.

Threat of Substitution:

This is a great threat of consumers where they drive to the alternatives choice. Generally substitutions are able to reduce the demand of product. There is a threat of shopper switching to another. For instance, Tesco has competition from Sainsbury, ASDA that can provide substitutes for their goods. This forces the prices of groceries down of that company. 

Competitive Rivalry:

This is the very important forces for the company. The market leaders are dominated by innovating new technology or products. Mature or flat market it is very difficult to growth and customer are rising demanding. In this situation only innovation is the way to build market share. Mainly it is central forces, which involved the other forces.

PORTER’S DIAMOND THEORY:

Factor conditions:

Tesco has achieved competitive advantages through the resources capability such as skilled labor, product innovation, and technological competence. For example these are clothing to customer electronics product, and health and beauty to media product. Tesco also sells the food and non food product their own brands. Tesco provides the finest and organic brand. They are increasing their profit in non-food product and service.

Demand conditions:

A demand condition is major factor in porter’s theory. The production range depends on product demands. Tesco has a good demand in finest food that provides to the customer at low prices. Tesco non food service clothing and Tesco finance is very popular.

Related and supporting Industries:

The third element of national advantages is to Tesco is related internationally completive industries like Wal Mart, through the resource capability.

Firm strategy, structure, and rivalry:

Strategy: Last two decades Tesco growth increase successfully because of its strategy. Tesco strategy focuses on the customer demand and qualities product in cheaper prices. Tesco emphasize on four strategies for instance UK core business, retail service, Non-food business and International.

Structure: Tesco operates in five categories of stores such as Hypermarket, Tesco Express, Tesco Extra, Metro and Home plus.

Rivalry: Tesco main rival competitors are Asda, Sainsbury, Morisons, and Safeway in domestic market. Which leads them to expand their business is international market.

PURPOSES OF SWOT ANALYSIS:

SWOT analysis is used to strategic fit between company’s internal environment such as resource and capabilities and external environment such as opportunities and threats. And Tesco is the biggest retailer in the UK and worlds third retailer. Tesco operates world wide.Tesco find out where there is opportunities and how to expand their business. SWOT gives the company’s overview and makes a strategy for the business change. Tesco is strategically capable not only sustain in the market but also strengthen their brand value.

Tesco, well-known in the world as a food retailer, and continuously they are in constant competition with other retailers such as Sainsbury and Asda.They are the leading food retailer as well as lead the online grocery.

SWOT ANALYSIS FOR TESCO:

STENGTH:

1. Tesco Brand: Tesco is a well known brand in the world. Tesco have 30%of their stores outside the UK and they are planning to make it 45% through EU and Asia. Tesco operates 14 countries and 78% of profit earned from this countries.

2. Loyal customer: Tesco has a large number of loyal customers which continually support to them. Their main purpose is to earn lifetime loyalty, creating value for the customer.

3. Tesco online: Tesco is the world’s largest grocery shop through tesco.com. Tesco operates 270 online shops around the UK. The Tesco has a strong platform for development of their revenue.

4. Loyal staff: To have the most loyal and committed staff.

WEAKNESS:

1. Though international business is still growing and Company expected to earn more profit from the next year. But still they are highly depended on the UK market (78%). It could be grate affect on latter.

2. Too much diversification is the other weakness.

3. Sometimes city market center they are failure to dominate the market place where the Sainsbury create a monopoly.

OPPORTUNITY:

1. Non-food Retail: New opportunities for Tesco in their non food area. The sales growths of hypermarket share are expected to growth 13% share of retail sales. Their UK business delivered a solid performance in completive market situation. Tesco trying to reach in high sells at non-food sector like food sector.

Tesco sales growth comparison is very little. Their comparative performance was stronger than before. Accomplishing their aim of opening new stores during the year ended that made a good contribution of total sales (excluding petrol and adjusted for VAT). [4] Tesco telecom service has good progress and they have planned to open 105 at the year ended and next100 end of this year. In 2009, broadband concord with Cable and Wireless was signed by Tesco and offer the high speed broadband offer this year.

2. International Growth: Tesco now operates 13 countries outside the UK. They have great opportunity for growth in overseas countries. Their Asian markets offer a significant long-term profitability opportunity. Tesco has continually working through the recession to ensure their stronger position. This year they have plan to open 5.1m square feet of new space across the region, an increase of more than10% and next year plan to open 4.5m square of new space and 8.5m new space in china. They are trying to make a progress towards developing strong brand in the most developed Asian markets. This progress make the pledge strengthen the confidence in international strategy and long-term growth prospect.

3. Health and Beauty: Tesco has good opportunity in health and beauty sector. Continuous growing demand for health and beauty, Tesco invest in this sector.

THREAT:

Price war: Not only Tesco but also ASDA provides the cheaper price. This could consequences in a step down in profitability .Because of new management in Sainsbury price goes up. So they are bound to seeking the lower price to drive its recovery.

Wal-Mart and Asda challenge: In the UK supermarket Tesco’s rank has been threatened when the Wal-mart purchased Asda. Now Asda can easily compete on price and wide range of goods. For the moment, Asda is the third largest supermarket in the UK, just behind the Tesco. So ASDA is great threat for the Tesco.

TESCO GENERIC STRATEGY:

Company’s position based on its strength and strength is measured by its economic structure. As a biggest retailer Tesco also follow the generic strategic options. Generic strategy options categorizes as cost leadership, differentiation and focuses. The cost leadership strategy is that Tesco deliver the lowest price product and service at broad market. This kind of strategy is followed to sale the product at low prices and gain the profits compared to rivals and another advantages is that company achieved the big market share. Tesco provides the low price and gains the large market share. Tesco uses another strategy of differentiation, where they supply the unique product and service to achieve the customer loyalty. Customer service, technology, convenient online shopping and club card offers is the way of differentiation strategy. Focus strategy is used as broad categories for cost leadership or differentiation strategy as focused market. Tesco focuses on the establishment of internal competencies that support them to survive external pressure. Tesco has an interaction with government and supplier, in this situation cost leadership and differentiation both strategies are used to pursue the specific market. [5] 

ENVIRONMENTAL TURBULENCE:

CONCLUSION:

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