Analysis of Tesco's Current Position, Competitors, and Key Issues

This presentation offers a comprehensive analysis of Tesco's current market position within the food retail industry, focusing on its competitive landscape and the key challenges it faces. The analysis includes both internal and external environmental factors, utilizing frameworks such as PESTLE to assess the impact of political, economic, social, technological, legal, and environmental factors. The internal analysis explores product offerings, marketing strategies, and management issues, while the external analysis examines the competitive dynamics through Porter's Five Forces. A SWOT analysis synthesizes the findings, identifying Tesco's strengths, weaknesses, opportunities, and threats. The presentation concludes with strategic recommendations based on these insights. The analysis also touches upon the application of the McKinsey 7S model to analyze internal factors.

The Current Position of Tesco in
relation to the competitors and the key
issues that is impacting on the
organisation

Table of Contents
The Current Position of Tesco in relation to the competitors and the key issues that is impacting on
the organisation.....................................................................................................................................1
INTRODUCTION.................................................................................................................................3
Environment Analysis of Tesco.............................................................................................................3
SWOT Analysis of Tesco......................................................................................................................8
CONCLUSION...................................................................................................................................12
RECOMMANDATION......................................................................................................................12
REFERENCES....................................................................................................................................14

INTRODUCTION
Tesco is a multinational retail organisation based in UK. This British organisation was
founded in 1919 and is headquartered at Welwyn Garden City Hertfordshire, England. This
study includes analysis of current position of Tesco in relation with its competitors. The key
competitors of Tesco are Marks and Spenser and Sainsbury’s. These organisation are also
multinational retail organisation are based in UK. This study for the analysis includes internal
and external analysis of Tesco and which includes its PESTLE analysis to determine the
impact of external factors on position of Tesco and another is SWOT analysis to determine
strength and weaknesses of Tesco. For the purpose of internal analysis of Tesco this study
includes analysis of factors like Product, Marketing and Management issues this analysis will
contribute in analysing the condition internal environment of Tesco. Later on the basis on
internal and external analysis of PESTLE factors this study summarise by SWOT analysis
which includes determination of Strength and Weaknesses and what opportunities and threats
can be presented in front of Tesco on the basis of external analysis of the company.
Environment Analysis of Tesco
Environment analysis refers to identification and analysis of the factors of internal and
external environment of the organisation. Internal environment refers to factors which exist
inside organisation and affect the organisation and on the other hand external analysis refers
to analysis of the factors which are not part of organisation neither are inside the organisation
but affect the operations of organisation. It is very important to analyse internal and external
environment analysis so that condition of Tesco in relation with competitors can be
determined.
External Environment Analysis
External environment consist of two types of environment which are Macro Environment and
Micro Environment.
Macro Environment of Tesco can be analysed through the framework which is known as
PESTLE. This provides information on following factors related to Tesco-
Political Factor

This includes effect of political factor and political environment on the operation of
Tesco. This includes what impact political rules and regulation make on Tesco, impact of
political ideologies of different countries. Tesco being a multinational organization have to
consider impact of political environment of all the countries in which it functions to
determine its condition. The company operates in around 12 countries and that is why
political factors of 12 countries affect the company. These factors are political instability,
impact of political relation of other countries with UK, Laws and regulations for companies
from other countries. For example if relations of UK are good with other countries in such
case it will be easy for Tesco to function in that country with less restrictions and business
difficulties.
Economical Factor
Economic factor refers to economic condition of a country and its impact on the
operations of Tesco. These factors are unemployment rate, cost of labour, and economic
condition of people and citizen of that country. For example in 2018 minimum wage rate in
UK increased to 4.4% and this cost Tesco millions of pounds in UK. There are other factors
as well like profit and cost, prices in various countries and cost of operations in all the
countries which may vary from one another. Other important factors are tax rates, rate of
interest and borrowings. If these are high eventually either cost of the product increase or
profit of Tesco decrease and both situation are not favourable.
Social Factor
This factor does not consist any of regulations and rules but is rather affected by the
customers of the Tesco. This includes customer buying trend. Taste and preference of the
customers and what customers prefer and want with their retail shopping affect this factor. In
relation with this fast delivery, effective and attractive offers and discounts and goods return
policy. Tesco if is able to follow all these consumers norms then it is able to secure a
favourable condition in competitive market. Consumers also seek to buy high quality
products at reasonable and affordable price. In this situation Tesco needs to ensure that it is
able to provide high quality goods at reasonable and affordable price.
Technological Factor
Some issues affected Tesco and its market position and Tesco lost its trust and
goodwill in the market. This trust and goodwill of Tesco returned through its technological

advancement. This is an important factor not just for effective customer service and cost
effective operations. This is important for securing a strong position in competitive
environment. Tesco have developed online payment system through which customers can pay
online and payments are easy for customers. Tesco have also introduced Scan as you shop
this have reduced labour cost and also saves time.
Legal Factor
This is one of the most important factor. This factor gets less affected by Tesco and
Tesco significantly affected through this factor. This factor and legal environment of Tesco
consist all those elements which govern business and its functions. These consist of all the
laws which have to be followed by the so that it can smoothly operate. Tesco have to change
its functioning as the law gets change. Not following these can lead Tesco into trouble.
Environmental Factor
This is one of the most important factor and many organisations are facing immense
pressure from various national and international organisations to operate their organisations
in an environment friendly manner. Tesco also have to ensure that its practices are
environment friendly manner so that they do not face any type of trouble.
Competitive position of the Tesco can be determined through these factors like Tesco
need to ensure that its political factors are favourable in all the countries. Economical factors
are favourable when Tesco earns high return on investment and its profit margin is high and
cost is lower. Positive and favourable attitude of people towards Tesco and technological
advancement and when legal factors are favourable and it can follow all these with ease.
To analyse its competitive position and Micro Analysis the model which can be used is
Porter’s Five Forces Model.
This model includes analysis of Tesco on the five factors of its Micro environment which are-
 Competition in the Industry
 Potential threats of new entry
 Power of Suppliers
 Power of Buyers
 Threat of substitute products
Competition in the Industry- This refers to competition in the existing firms in the industry.
This competition is strong when number of existing firms is high in number and weak in case

number of existing firms is less. In relation with Tesco its competition in the industry is
strong and has strong competition from M&S, Sainsbury’s. Tesco have managed to stand
strong in the industry through its technological advancement and operational effectiveness.
Potential Threat of New Entry- This threat of entry is high and strong in case the barriers of
entry like resources and capital required for establishing new business in the industry are
high. Tesco operates in retail industry and threat in new entry are less and along with that it
have to face competition from small and local retail organisations as well.
Power of Suppliers- Bargaining Power of suppliers is high when there are less suppliers and
the resources required for business and products are rare and valuable. In case resources are
easily available then bargaining power of suppliers is less in this situation of Tesco is strong.
Power of Customers- Power of customers is high when customers are less in number or they
can easily switch to another seller. Tesco have weak position in this as there are various other
retailers and customers can easily switch to another retailer and seller.
Threat of Substitute Product- this refers to threat in which customers can switch to
substitute product. In this customers can use and buy product which can be used at the place
of another product. There are various products in retail stores for which other products can be
bought by the customers.
For determination of its competitive position analysis on internal environment is also equally
important.
Product Issue of the Tesco-
Tesco is a retail organisation and that is why there are various products which are sold
by Tesco. The products of Tesco are able to cater all the needs and preference of all type of
customers from various segments. Key products of Tesco are Food, Frozen Food, Bakery
Products, Technology and Gaming Products, Beverages, baby products, gift products, and
clothing and jewellery products. In this product mix of the products Tesco has its brand as
well. Products availability of the Tesco depends on the stores and their location.
Marketing Issue of the Tesco
This includes activities of promotion of Tesco and its products. This is an important
factor and competitive advantage for the Tesco. Tesco has strong brand image this relies on
low prices of Tesco. Tesco’s promotional activities are based on its low prices. Promotion

channel of Tesco includes hoardings, television ads and charitable events. For its promotion
and marketing this also uses discounts and attractive offers. Tesco uses loyalty programme as
well to attract people and reward their loyalty with Tesco Clubcard.
Management Issues of Tesco
Tesco employs a lot of people as being one of the biggest retailing brand. All the
employees of Tesco undergo a selection process held by Tesco. Tesco employs around
480000 employees across the globe. In the management of Tesco they encourage diversity
and people are valued so that they can perform better. Management encourage its people to
be supportive for others and work together. Those who are identified to have greater potential
these people are promoted.
Tesco employs highly qualified people in the organisation and these people are
important reason for the success of Tesco. Marketing programme of Tesco is very effective
and this is more attractive because of its central theme of low price products. Product Mix
and issues of Tesco are also in favour of it and are able to give competitive advantage to
Tesco as they can cater need and taste of everyone and every type of customer segment.
For internal analysis McKinsey’s 7S Model can be applied. These model analyse 7 factors
which are-
Hard Elements Soft Elements
 Structure
 Strategy
 System
 Staff
 Style
 Skills
 Shared Value
Structure- Strategy of Tesco includes many layers in its management and range from store
level employees to managers and to CEO. This structure is highly hierarchical. This structure
includes highly skilled and competent people and has started working as whole.
System- This refers to systems which are used in Tesco for its daily operations. An ideal system of
organisation should be one which is simple and after facing many issues Tesco developed a system
which is simple and easy and which has simple its regular and daily operations. Tesco reduced its
performance measures to 6 which were earlier 40. This has simplified performance measures.
Strategy- These are plans of Tesco which aim to achieve its objectives. These strategies also guide all
the activities of the organisation. For example strategy for cost leadership which will increase profit of

the organisation. To increase its customers and profit Tesco employs many strategies which are its
marketing strategy, product strategy and its promotional strategy.
Staff- this is one of the most important elements which contribute to the success of the organisation
and Tesco employs most skilled and competent employees available in market of job. This is one of
the favourable elements for Tesco.
Skill- This refers to capabilities of organisation and its employees to complete particular task and
achieve its objectives. Tesco ensures that all its employees are completely efficient and effective so
that they are able to complete all the tasks which can lead organisation to achieve all its objectives.
Style- This is the style of management of Tesco in which they complete all their tasks and achieve
objectives of Tesco. Tesco considers four areas in its style these areas are performance of employees,
customers, operations and customers.
Shared Value- These are values and beliefs of Tesco which becomes basis for all its activities and
strategies. These are the value which is shared among all the employees and people of the Tesco.
Values of Tesco are that no one tries harder for customers. They treat people as they want to be
treated and they believe that every little help can make a change.
This was internal and external analysis of Tesco and shows that current position of Tesco is very
strong in relation with its competitors and its internal environment is very capable and competent to
deal with all the changes and difficulties in its external environment.
SWOT Analysis of Tesco
On the basis of above discussion which included internal and external environment
analysis of the Tesco. In this internal analysis suggest and include what are the Strength and
weaknesses available to Tesco. These both factors are actual and reliable. On the other hand
External analysis suggests and guide for determination of potential opportunities and threats
which are available in the external environment of Tesco. Through its strength Tesco can
utilize its opportunities or can reduce and eliminate impact of threats over success and
operations of the Tesco. In relation with weakness these can resist Tesco to utilize available
opportunities or can increase the impact of threats. This is why Tesco needs to increase and
enhance its strengths and reduce impact of the weaknesses so that it can effectively utilize
opportunities and can reduce the impact of threats.
SWOT of Tesco is as follows-
Strength

 Highly skilled workforce (through effective training and learning programme).
 Innovation and innovative practices (this is one of the strength of Tesco that it is
active in innovation and innovative practices and through this innovation it is able to
offer its customers variety of products).
 High level of customer satisfaction (effective practices for customer’s services and
effective products portfolio able to cater everyone’s needs).
 Strong Brand Portfolio (effective brand portfolio refers to effective products which
are ready to cater everyone’s needs and products are available at reasonable and
affordable price so that everyone is also able to buy the products of Tesco).
 Reliable Suppliers (this is also strength for Tesco that its suppliers are reliable and can
supply the resources whenever required this can avoid Tesco from advantage if
products and also can supply material when required at short notice).
 Strong network for distribution.
 Good return on capital investment.
 Technological advancement (this is a strength of Tesco and this have managed to
build trust of Tesco in its customers after Tesco faced some issues which affected and
reduced its goodwill).
 Geographically diversified (it is very important that Tesco is geographically
diversified because needs and requirements and preferences of people of different
geographical areas are different and this diversification can lead Tesco to cater needs
of all those people who are of different geographical areas).
 Biggest Grocery Retailer.
 Largest private employer.
 Efficient network of supply chain.
Weaknesses
 Not highly successful in integrating companies which have different culture of work.
 Profitability ratio of Tesco is less than other firms of this industry.
 Investment in R&D activities is less than its competitors (research and development
investment of Tesco is less than its competitors which reduce its new innovations and
newly developed products which limits options for its customers).
 Failed operations in Japan and US (Japan and US are one of the biggest markets in
which Tesco can operate but its failed operations are weakness of the Tesco).

 Scandals which affected the goodwill and image of Tesco (Tesco got into some
scandals and these scandals reduced its goodwill and affected trust its customers had
on Tesco this is its weakness).
 Financial errors.
 Poor operational performance in specific market.
Opportunities
 Economic uptick and increase in spending of customers is an opportunity for the
Tesco.
 Generation of customers from online channels (Online channels are increasing and
this is increasing customers from online channels this is a opportunity and through
effective operation of online business Tesco can utilize this opportunity).
 Lower inflation rate.
 Opportunity in emerging economies (because of government agreements and
relations).
 Decrease in shipping prices leading to decrease in the price of transportation
 Advanced technology (though technology of Tesco is already advanced but it can
develop it further and can secure its strong position in competitive market).
 Alliances with other international companies in international market (this is a
successful strategy that many organisations have applied and Tesco can also apply
this opportunity and become more strong. This requires that Tesco establish alliances
with other big organisations so that big organisations can advantage of each others’
strength).
Threats
 International firms have risk of legal issues which can be faced by Tesco ion
international market (Tesco operates in various markets and changes in their law and
functioning of Tesco which is not according to that law can pose legal threat for
Tesco, legal threats are in no case are favourable for the company).
 Increasing concern of various national and international organisations and all the
customers about environmental policies (all the national and international agencies
have increased concern for environment and not just organisations but all the people
have concern for environment which requires that Tesco is aware about impact of its

operation on nature and environment any small impact of its operations on nature can
lead Tesco to a big trouble).
 Frequent changes in consumer preferences and taste which can be difficult to adopt by
the company (taste and preferences of customers are changing frequently and this
changes consumers buying behaviour and this is a threat for Tesco that its operations
can be negatively affected from that. Other aspect of this is that in changing
environment Tesco always needs to be ready for accepting and adopting change and
in case it fails this may cause loss of customers and profit to Tesco).
 Intense competition (especially from organisation like M&S and Sainsbury’s which
are major organisations in this industry, competition is definitely not a positive factor
for any organisation and this also requires these to be ready for frequent changes and
for ensuring that it is able to get most of the customers in the industry).
 Liability laws and increase in cost of operations in different countries is a threat for
profit and profitability of the organisation.
 Brexit Referendum. (In this British is no longer a part of European Union, this can
increase the cost of the products and have a threats for Tesco).
For collection of information in this section secondary data sources which have been used are
Internet and sources where information of Tesco was available and review of journals.
This information was also collected from conclusion of internal and external analysis of the
Tesco which suggested its strength and weaknesses and what are the potential opportunities
which can be utilized by Tesco and what the potential threats which Tesco can face are.
There are opportunities which Tesco can utilize through its Strength and these strengths can
also reduce the impact of potential threats.
For example increase spending of customers which is an opportunity for Tesco and this
opportunity can be capitalized by Tesco through its strength which is Strong brand portfolio
and variety of products available for all types of customers.
Another opportunity which is opportunity in emerging economies can be capitalized through
its strength which is strong supply chain and distribution network.
Through its effective brand portfolio this can also reduce the impact of the threat od changing
customers’ taste and changing customers’ buying trend.

CONCLUSION
On the basis of the above study it can be concluded that internal and external factors
of Tesco which affect its competitive strength and position in the market. This study analysed
Tesco’s environment internal environment of Tesco is favourable in various terms which are
its employees, its operational efficiency and its strategy like marketing and promotional
strategy. Its low cost strategy which attracts most of the customers is also a successful
strategy which Tesco have employed. After analysis it has been found that changes that
Tesco have made in its system are also very effective and changes like changes in its
performance measurement system have simplified and show effective results. External
analysis of Tesco also suggested various potential opportunities which are available for Tesco
to utilize and also pose various threats in front of Tesco which can harm its operations and its
functioning.
RECOMMANDATION
Here it can be recommended that Tesco should get into alliances which it can do
through merger and acquisition and other various methods like licensing and franchising.
These are effective methods to enter in new markets and specially emerging market.
In this methods like franchising and licensing are most suitable in case of entering new
markets of developed economies. This possesses high risk but risk can be shared and most of
the risk are on the people who gets Franchise and License of Tesco and chances of
succeeding in these are high.
In developing and emerging economies Tesco can adopt the method of mergers and joint
ventures. The reason is that this shares the risk equally in two organisations which get into
alliances and this also requires high capital and resources. In emerging economy these
resources are cheap and available at lower rate. This can give benefit to Tesco.
Another recommendation is that Tesco should invest more in its research and development
activities and practices. Reason for this is that research and development have become key
factors for success in present business environment and this is more important for Tesco
because all its competitors are investing more in these activities. Research and development
enable firm to produce high quality product at low cost. This also enable firms to bring
something new which customers cannot even expect and this enable firms to utilize the scope