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Table of
Contents
2
01
Introduction
02
Current Trends
03
Performance
04
SWOT Analysis
05
PESTEL Analysis
06
Recommendations
Intro
3
Introduction
Tesco plc is one of British largest retail grocery
currently the first in terms of the top 10 retail
grocery in the United Kingdom. It was the first UK
business to make £2 billion in profits when it
announced the feat early in 2005, (Tesco Annual
Review, 2005) and the third largest global retailer
based on revenue. Over the years, retail grocery
sector represents the largest industry in UK
providing employment for millions of people in UK
either in manufacturing or in retailing.
Current
Trends
4
In the three months leading up to November 3, 2019, the grocery market in Great
Britain grew by one percent compared to the same period a year earlier. Compared to
the growth during the last three years this constitutes a moderate increase. The entire
grocery market amounted to 193.6 billion British pounds in 2019. Compared to the
Current Trends
prior year it had increased by over three billion pounds. (Statistica, 2020)
As of May 2020, the four most important players on the grocery market were
Tesco, Sainsbury’s, Morrisons, and Asda. While Morrisons share of the market was
just over ten percent, both Asda as well as Sainsbury’s were able to claim around
fifteen percent. The market leader Tesco had a share of over a quarter of the
market, despite the companies’ market share falling since 2015. The next big
company, Aldi was still over two percent away from overtaking Morrisons. Market shares
of grocery stores
(Statistica, 2020)
Current
Trends
5
The most relevant grocery sales channels measured by generated monetary value are
supermarkets and convenience stores. Hypermarkets and discounters, smaller channels
in comparison, still surpass online sales. However, the number of people who tried
ordering groceries online had reached thirty percent in 2019. It is very likely that the
Sales Channels
online channel will grow in relevance.
The supermarket industry size of the UK is £200bn which is one of the biggest in the globe.
The latest study shows that by 2023 the UK supermarket will be increased by 23% which is
the fastest-growing sector in the country. To make the purchase ease for the customers,
supermarket firms have digitalized their retail stores. Online purchase is getting popular in Overall Scenario
the UK rapidly that has brought 26% sales in the 2018 of the total expenditure in grocery
selling (Warner, 2019).
Current Trends
Market Shares UK 6
TESCO 27%
Sainsbury’s 15.4%
Asda 14.9%
Aldi 8.1%
Lidl 5.9%
(Sources: 2018)
Performance
TESCO Performance 7
In its 2019/2020 financial year, Tesco’s annual revenue amounted to
almost 53 billion British pounds in the United Kingdom and the
Republic of Ireland. This was an increase of approximately 1.3 billion
pounds compared to the prior financial year. The company’s profit in
the UK and the ROI rose by over 360 million pounds and came to 2.2
billion in 2019/2020.
(Brtiannica, 2020)
Tesco PLC was the leading grocer on the UK market in 2020 and has been since the
start of the millennium. The company, which originated in Hertfordshire employed 423
thousand people worldwide in 2019. Almost one quarter of the company’s revenue
stems from international markets, notably other European and Asian countries. Tesco
operated the second most stores in Thailand with almost two thousand in 2019/2020.
Only the UK had a higher store presence. Between January 2015 and May 2020, the
company has lost about 2.1 percent of its market share and now stands at 26.9 percent.
Winners on the market were the German discounters Lidl and Aldi as well as the
Cooperative. (Statistica, 2020)
Performance
TESCO Performance (Cont.) 8
Performance
TESCO Performance (Cont.) 9
The current performance of Aldi and Lidl
● Aldi and Lidl are two small but powerful players in UK’s grocery industry. In the UK supermarket industry, Aldi and
Lidl are jointly capturing 14% market share (BBC, 2019).
● Both companies are offering low price with good quality of products to the UK people.
Aldi
● Aldi has 7.6% market share in the grocery business of the UK (Burton, 2019).
● The company has gained 4.6% market share in last four years.
● In 2018, the total revenue of Aldi was £750 million (Stefan, 2019).
Lidl
● Lidl has 6.4% market share in the grocery business of the UK.
● The company had gained 3.4% market share in last four years. (Burton, 2019)
● In 2018, the total revenue of Lidl was £580 million (Stefan, 2019)
SWOT
SWOT Analysis Infographics 10
Strengths Weaknesses
● The biggest strength is good brand image of Tesco ● Tesco has low present in international markets.
in the grocery industry of the United Kingdom.
High quality products. ● UK market is generating the maximum revenue
for Tesco.
● The company has strong financial condition.Tesco
is captured 27% market share solely. In the UK, S W ● Dependency to the EU suppliers provides
suppliers high bargaining ability.
the company has physical stores in every cities
Opportunities Threats
● The demand of supermarket business
will be increased in the coming years.
O T ● Presence of many competitors creates
threat to keep current market share.
● The many number of rivals creates price
● 26% increase of online sales will
war that affect Tesco’s pricing strategy.
happen by 2022 so Tesco can focus in
● Brexit will make threats to manage
this. (McKevitt, 2019)
operations in the EU countries.
● UK’s wage policy increases salary
● The product line can be extended by
expenditure of Tesco.
Tesco to boost sales.
PESTEL
PESTEL Analysis 11
Political Factors: Since the retailing company operates worldwide, global political factors greatly
influence the performance of Tesco. These include, tax rates, acts of legislation and of course, the
stability of the country it operates in. Due to ongoing financial instability in the world, many
governments encourage retailers to create jobs for the domestic population. As Tesco plays its part
in creating employment opportunities, it also, in turn, increases the demand for its products and
diversifies its workforce.
Economic Factors: These factors are the main point of concern for Tesco, as they are most likely to
leverage costs, demand, profits and prices. Therefore, the company should be aware of any changes
in policies, such as changes in taxation or any other factors which could affect the accessibility of
finance. It is important to mention that although the business is growing internationally, the
company is still quite dependent on the UK market where it has a market share of around 30%.
Social Factors: Due to variety of social changes, trends indicate that customers in the UK have
moved towards bulk shopping and one-stop shopping. Therefore, Tesco has increased the number of
non-food items offered for sale. The type of goods and services demanded by consumers is mostly
influenced by their beliefs and attitudes which, in turn, are influenced by social conditioning.
Because customers are becoming more aware of health issues, due to which their approach towards
foods is changing constantly, Tesco is adapting to these changes by accommodating the demand for
organic products.
PESTEL
PESTEL Analysis 12
Technological Factors: The advancements in technology have brought various new opportunities
for Tesco. Two of the most distinct ones include, firstly, the development and introduction of
online shopping with facilities for home delivery. Secondly, self-service checkout points have
provided convenience and ease for customers, which in turn have reduced labor costs.
Furthermore, Tesco has also invested a significant amount on energy efficiency projects to fulfill
its long-term objective to reduce its carbon footprint.
Environmental Factors: With increased pressure on companies to address environmental issues and
to adopt ways of operations which what would benefit society, Tesco is clearly committed to
reducing its carbon footprint by 50% by 2020. Also, Tesco is minimizing the waste produced in
their stores by increasing social conscience in customers.
Legislative factors: Government policies and legislations also directly impact the performance of
Tesco. For example, the Food Retailing Commission (FRC) in 2004 suggested a Code of Practice
should be introduced which would ban many current practices, such as changing prices without
notice or demanding payments from suppliers. To facilitate these policies, Tesco provides its
customers price reductions on the fuel they purchase, in accordance to the amount spent on their
grocery stores. Also, there are several promotion offers where prices are lowered.
Recommendations
Recommendations 13
There are some recommendations are provided to develop business
performance of Tesco:
● Tesco should extend its product lines to attract more customers.
● Tesco should extend its business in Emerging countries such as
Brazil, Russia, Indonesia, Turkey etc.
● Tesco should not decline quality of products due to price cut.
● Tesco should reduce expenditure to increase profit margin.
References
14
● Contributor, P., 2020. PESTLE Analysis For Tesco Discusses Its Business Environment. [online]
PESTLE Analysis. Available at: <https://pestleanalysis.com/pestle-analysis-tesco/> [Accessed 5
December 2020].
● Annualreports.com. 2020. Tesco Plc - Annualreports.Com. [online] Available at:
<https://www.annualreports.com/Company/tesco-plc> [Accessed 6 December 2020].
● Statista. 2020. Tesco: Revenue 2019 | Statista. [online] Available at:
<https://www.statista.com/statistics/490931/tesco-group-finance-revenue-united-kingdom-uk/>
[Accessed 7 December 2020].
● BBC News. 2020. Tesco - BBC News. [online] Available at:
<https://www.bbc.co.uk/news/topics/c77jz3mdmlvt/tesco> [Accessed 7 December 2020].
● Encyclopedia Britannica. 2020. Supermarket | Retail Store. [online] Available at:
<https://www.britannica.com/topic/supermarket> [Accessed 7 December 2020].
Thanks
15
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